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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-6402-1
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SERVICE CORPORATION INTERNATIONAL
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TEXAS 74-1488375
(State or other jurisdiction of (I.R.S. Employer identification no.)
incorporation or organization)
</TABLE>
<TABLE>
<S> <C>
1929 ALLEN PARKWAY
HOUSTON, TEXAS 77019
(Address of principal executive offices) (Zip code)
</TABLE>
Registrant's telephone number, including area code: 713/522-5141
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Common Stock ($1 par value) New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
</TABLE>
Securities registered pursuant to section 12(g) of the Act: NONE
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the common stock held by non-affiliates of
the registrant (assuming that the registrant's only affiliates are its officers
and directors) is $838,791,831 based upon a closing market price of $3.1250 on
March 24, 2000 of a share of common stock as reported on the New York Stock
Exchange -- Composite Transactions Tape.
The number of shares outstanding of the registrant's common stock as of
March 24, 2000 was 272,064,618 (excluding treasury shares).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement in connection with its 2000
Annual Meeting of Shareholders (Part III)
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PART I
ITEM 1. BUSINESS.
Service Corporation International was incorporated in Texas on July 5,
1962. The term "Company" or "SCI" includes the registrant and its subsidiaries,
unless the context indicates otherwise.
The Company is the largest provider of funeral and cemetery services in the
world. As of December 31, 1999, the Company operated 3,823 funeral service
locations, 525 cemeteries, 198 crematoria and two insurance operations located
in 20 countries on five continents. The Company conducts funeral service
operations in all of the 20 countries mentioned above, cemetery operations in
North America, South America, Australia and certain countries within Europe, and
financial services operations in North America and France. As of December 31,
1999, the Company's largest markets were North America and France, which when
combined represent approximately 86% of the Company's consolidated revenues, 73%
of the Company's consolidated income from operations and 78% of the Company's
total operating locations. For financial information about the Company's
reportable segments, see note fifteen to the consolidated financial statements
in Item 8 of this Form 10-K.
Historically, the Company's growth has been largely attributable to
acquiring funeral service locations and cemeteries. This resulted in the Company
creating the world's largest network of funeral service locations and
cemeteries. The Company believes this network forms the foundation of its
business plan going forward. During the mid-1990's, the market to acquire
funeral service locations and cemeteries became more competitive than ever
before and resulted in increasing prices which lowered returns on invested
capital. As a result, the Company suspended its acquisition program in 1999 and
is in transition from an acquisition company to an operating company.
FUNERAL AND CEMETERY OPERATIONS
The funeral and cemetery operations consist of the Company's funeral
service locations, cemeteries and related businesses. The operations are
organized into a North American division covering the United States and Canada
and an international division responsible for all operations in Europe, the
Pacific Rim and South America. Each division is under the direction of
divisional executive management with substantial industry experience. Local
funeral service location and cemetery managers, under the direction of the
divisional management, receive support and resources from the Company's
headquarters in Houston, Texas and have substantial autonomy with respect to the
manner in which services are conducted.
The majority of the Company's funeral service locations and cemeteries are
managed in groups called clusters. Clusters are geographical groups of funeral
service locations and cemeteries that lower their individual overhead costs by
sharing common resources such as operating personnel, preparation services,
clerical and accounting staff, limousines, hearses and preneed sales personnel.
Personnel costs, the largest operating expense for the Company, are the cost
components most beneficially affected by clustering. The sharing of employees,
as well as the other costs mentioned, allows the Company to more efficiently
utilize its operating facilities due to the traditional fluctuation in the
number of funeral services and cemetery interments performed in a given period.
The Company has multiple funeral service locations and cemeteries in a
number of metropolitan areas. Within individual metropolitan areas, the funeral
service locations and cemeteries operate under various names because most
operations were acquired as existing businesses and generally continue to be
operated under the same name as before acquisition.
Funeral Service Locations. The funeral service locations provide all
professional services relating to funerals, including the use of funeral
facilities and motor vehicles. Funeral service locations sell caskets, coffins,
burial vaults, cremation receptacles, flowers and burial garments, and certain
funeral service locations also operate crematoria. At December 31, 1999, the
Company owned 200 funeral service location/cemetery combinations and operated 48
flower shops engaged principally in the design and sale of funeral floral
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arrangements. These flower shops provide floral arrangements to most of the
Company's funeral homes and cemeteries.
In addition to selling its services and products to client families at the
time of need, the Company also sells prearranged funeral services in most of its
service markets, including several foreign markets. Funeral prearrangement is a
means through which a customer contractually agrees to the terms of a funeral to
be performed in the future. The funds collected from prearranged funeral
contracts are placed in trust accounts (pursuant to applicable law) or are used
to pay premiums on life insurance policies from third party insurers or the
Company's wholly owned insurance operations. At December 31, 1999, the total
value of the Company's unperformed prearranged funeral contracts was $4.287
billion, of which approximately $392 million is estimated to be fulfilled in
2000. For additional information concerning prearranged funeral activities, see
"Prearranged Funeral Services" in Management's Discussion and Analysis of
Financial Condition and Results of Operations in Item 7 of this Form 10-K and
note four to the consolidated financial statements in Item 8 of this Form 10-K.
The death rate tends to be somewhat higher in the winter months and the
Company's funeral service locations generally experience a higher volume of
business during those months.
Since 1984, the Company has operated under the Federal Trade Commission's
(FTC) comprehensive trade regulation rule for the funeral industry. The rule
contains minimum guidelines for funeral industry practices, requires extensive
price and other affirmative disclosures and imposes mandatory itemization of
funeral goods and services. From time to time in connection with acquisitions,
the Company has entered into consent orders with the FTC that have required the
Company to dispose of certain operations to proceed with acquisitions or have
limited the Company's ability to make acquisitions in specified areas. The trade
regulation rule and the various consent orders have not had a materially adverse
effect on the Company's operations.
Cemeteries. The Company's cemeteries sell cemetery interment rights
(including mausoleum spaces, lots and lawn crypts) and certain merchandise,
including stone and bronze memorials, caskets and burial vaults. The Company's
cemeteries also perform interment services and provide management and
maintenance of cemetery grounds. Certain cemeteries also operate crematoria.
Cemetery sales are often made on a preneed basis pursuant to installment
contracts providing for monthly payments. A portion of the proceeds from
cemetery sales is generally required by law to be paid into perpetual care trust
funds. Earnings of perpetual care trust funds are used to defray the maintenance
cost of cemeteries. In addition, all or a portion of the proceeds from the sale
of preneed cemetery merchandise and services may be required by law to be paid
into trust until the merchandise is purchased or the service is provided on
behalf of the customer. For additional information regarding cemetery trust
funds, see notes two and six to the consolidated financial statements in Item 8
of this Form 10-K.
Death Care Industry. The funeral industry is characterized by a large
number of locally owned independent operations. The Company believes that, based
on the total number of funeral services performed in 1999, the Company,
including acquired operations, performed approximately 13%, 28%, 13% and 24% of
the funeral services in North America, France, the United Kingdom and Australia,
respectively.
To compete successfully, the Company's funeral service locations must
maintain competitive prices, attractive, well-maintained and conveniently
located facilities, a good reputation and high professional standards. In
addition, heritage and tradition can provide an established funeral home with
the opportunity for repeat business from client families. Furthermore, an
established firm can generate future volume and revenues by marketing
prearranged funeral services.
The cemetery industry is also characterized by a large number of locally
owned, independent, municipal or church affiliated operations. The Company's
cemetery properties compete with other cemeteries in the same general area. To
compete successfully, the Company's cemeteries must maintain competitive prices,
attractive and well-maintained properties, a good reputation, an effective sales
force and high professional standards.
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FINANCIAL SERVICES OPERATIONS
The financial services operations represent a combination of the Company's
insurance operations primarily related to the funding of prearranged funeral
contracts and a lending subsidiary, which previously provided capital financing
for independent funeral home and cemetery operations.
The Company's insurance operations include ownership of a French life
insurance company (Auxia) and a U.S. life insurance company (American Memorial
Life Insurance Company or AML). These insurance operations assist in funding
contracts written by Company owned or operated funeral service locations. For
additional information concerning the Company's financial services operations,
see "Financial Services" in Management's Discussion and Analysis of Financial
Condition and Results of Operations in Item 7 of this Form 10-K and notes two,
four and five to the consolidated financial statements in Item 8 of this Form
10-K.
Since 1988, the Company's lending subsidiary provided secured financing to
independent funeral home and cemetery operators. The majority of these loans
were made to clients seeking to finance funeral home or cemetery acquisitions.
Additionally, the lending subsidiary provided construction loans for funeral
home or cemetery improvement and expansion. Loan packages took traditional forms
of secured financing comparable to arrangements offered by leading commercial
banks. The loans were generally made at interest rates which float with the
prime lending rate. At December 31, 1999, the lending subsidiary had
approximately $247 million in loans outstanding ($191 million net of the
provision for loan losses and impairment charges) and approximately $47 million
of unfunded loan commitments. At December 31, 1998, the lending subsidiary had
approximately $270 million in loans outstanding and approximately $31 million of
unfunded loan commitments. The lending subsidiary obtained its funds primarily
from the Company's variable interest rate credit facilities. As part of its cost
rationalization programs initiated in 1999, the Company decided to indefinitely
suspend the operations of the lending subsidiary by selling a portion of the
loan portfolio and acquiring by deed in lieu of foreclosure the collateral
underlying certain other loans in its portfolio. For further discussion, see
"Financial Services" in Management's Discussion and Analysis of Financial
Condition and Results of Operations in Item 7 of this Form 10-K and note
eighteen to the consolidated financial statements in Item 8 of this Form 10-K.
EMPLOYEES
At December 31, 1999, the Company employed 30,693 (18,341 in the United
States) persons on a full time basis and 11,326 (8,624 in the United States)
persons on a part time basis. Of the full time employees, 29,663 were in funeral
and cemetery operations, 311 were in financial services operations and 719 were
in corporate services. All of the Company's eligible United States employees who
so elect are covered by the Company's group health and life insurance plans.
Eligible United States employees are participants in retirement plans of the
Company or various subsidiaries, while foreign employees are covered by other
Company defined or government mandated benefit plans. Although labor disputes
are experienced from time to time, relations with employees are generally
considered satisfactory.
REGULATION
The Company's various operations are subject to regulations, supervision
and licensing under various U.S. federal, state and foreign statutes, ordinances
and regulations. The Company believes that it is in substantial compliance with
the significant provisions of such statutes, ordinances and regulations. See the
discussion of FTC funeral industry trade regulation and consent orders in
"Funeral Service Locations" above.
The French funeral services industry has undergone significant regulatory
change in recent years. Historically, the French funeral services industry had
been controlled, as provided by national legislation, either (i) directly by
municipalities through municipality-operated funeral establishments (Municipal
Monopoly), or (ii) indirectly by the remaining municipalities that have
contracted for funeral service activities with third party providers, such as
the Company's French funeral operations (Exclusive Municipal Authority).
Legislation was passed that ended municipal control of the French funeral
service business and allows the public to choose their funeral service provider.
Under such legislation, the Exclusive Municipal Authority was abolished in
January 1996, and the Municipal Monopoly was eliminated in January 1998.
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Cemeteries in France, however, are controlled by municipalities and religious
organizations, with third parties, including the Company, providing cemetery
merchandise such as markers and monuments to consumers.
ITEM 2. PROPERTIES.
The Company's executive headquarters are located at 1929 Allen Parkway,
Houston, Texas 77019, in a 12-story office building. A wholly owned subsidiary
of the Company owns an undivided one-half interest in the building and its
parking garage. The other undivided one-half interest is owned by an unrelated
third party. The Company holds an option to acquire such interest for $2,000,000
in July 2005 and, at the option of the unrelated third party, is obligated to
make such acquisition. The property consists of approximately 1.3 acres, 250,000
square feet of office space in the building and 160,000 square feet of parking
space in the garage. The Company leases all of the office space in the building
pursuant to a lease that expires June 30, 2005 providing for monthly rent of
$43,000 through July 2000 and $59,000 thereafter. The Company pays all operating
expenses. One half of the rent is paid to the wholly owned subsidiary and the
other half is paid to the owners of the remaining undivided one-half interest.
The Company owns and utilizes two additional office buildings located in
Houston, Texas containing a total of approximately 167,000 square feet of office
space.
At December 31, 1999, the Company owned approximately 76% of the real
estate and buildings of its 4,546 funeral service locations, cemeteries and
crematoria and two insurance locations and leased facilities in connection with
approximately 24% of such operations. In addition, the Company leased two
aircraft pursuant to cancelable leases. At December 31, 1999, the Company
operated 14,830 vehicles, of which 5,369 were owned and 9,461 were leased. For
additional information regarding leases, see note eleven to the consolidated
financial statements in Item 8 of this Form 10-K.
At December 31, 1999, the Company's 525 cemeteries contain a total of
approximately 35,901 acres, of which approximately 54% are developed.
The specialized nature of the Company's businesses requires that its
facilities be well-maintained and kept in good condition. Management believes
that these standards are met.
ITEM 3. LEGAL PROCEEDINGS.
The following discussion describes certain litigation as of March 28, 2000,
which was previously reported:
Civil Action H-99-280; In Re Service Corporation International; In the
United States District Court for the Southern District of Texas, Houston
Division (the Consolidated Lawsuit). The Consolidated Lawsuit is pending before
Judge Lynn N. Hughes and includes all 21 class action lawsuits that were filed
in the Southern District of Texas and two class action lawsuits that were
originally brought in the United States District Court for the Eastern District
of Texas, Lufkin Division. The Consolidated Lawsuit names as defendants the
Company and three of the Company's current or former executive officers or
directors: Robert L. Waltrip, L. William Heiligbrodt and George R. Champagne
(the Individual Defendants). The plaintiffs have filed a Consolidated Class
Action Complaint in the Consolidated Lawsuit alleging that defendants violated
federal securities laws by making materially false and misleading statements and
failing to disclose material information concerning the Company's prearranged
funeral business. The Consolidated Lawsuit seeks to recover an unspecified
amount of monetary damages. Since the litigation is in its preliminary stages,
no discovery has occurred, and the Company cannot quantify its ultimate
liability, if any, for the payment of damages. However, the Company believes
that the allegations in the Consolidated Lawsuit do not provide a basis for the
recovery of damages because the Company has made all required disclosures on a
timely basis. The Company and the Individual Defendants have filed an Answer to
the Consolidated Class Action Complaint, and the Company intends to aggressively
defend this lawsuit.
The Consolidated Lawsuit has been brought on behalf of all persons and
entities who (i) acquired shares of Company common stock in the merger of a
wholly owned subsidiary of the Company into Equity Corporation International
(ECI); (ii) purchased shares of Company common stock during the period from July
17, 1998 through January 26, 1999 (the Class Period); (iii) purchased Company
call options in the open market during the Class Period; (iv) sold Company put
options in the open market during the Class Period; (v) held employee stock
options in ECI; and (vi) held Company employee stock options granted during the
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Class Period. Excluded from the foregoing categories are the Individual
Defendants, the members of their immediate families and all other persons who
were directors or executive officers of the Company or its affiliated entities
at any time during the Class Period. Judge Hughes has certified the Consolidated
Lawsuit as a class action.
The Company and the Individual Defendants have filed a Motion to Dismiss
the Consolidated Lawsuit; the plaintiffs have filed their Opposition to
Defendants' Motion to Dismiss the Consolidated Lawsuit; and the Company and the
Individual Defendants have filed a Reply to Plaintiffs' Opposition to
Defendants' Motion to Dismiss the Consolidated Lawsuit. The foregoing pleadings
will be considered by Judge Hughes in due course.
Copies of the complaint in the Consolidated Lawsuit and the pleadings that
have been filed in response thereto and that are referred to herein are filed as
exhibits to this Form 10-K.
9-99-CV58; Charles Fredrick v. Service Corporation International; In the
United States District Court for the Eastern District of Texas, Lufkin
Division. This additional securities fraud case has been brought against the
Company by a former shareholder of ECI alleging causes of action exclusively
under Texas statutory and common law. The Company has requested that the case be
transferred to the Southern District of Texas to be consolidated with the
Consolidated Lawsuit. The Plaintiff has requested that the case be remanded to
state court for further proceedings, and oral argument on the issue has been
scheduled for March 29, 2000.
Cause No. 32548-99-11, James P. Hunter, III et al v. Service Corporation
International et al. On November 10, 1999, James P. Hunter, III and a related
family trust filed a lawsuit against the Company, the Individual Defendants, two
other officers, an employee of the Company and PricewaterhouseCoopers LLP, the
Company's independent accountants, in state District Court in Angelina County,
Texas (State Litigation). The plaintiffs allege, among other things, violations
of Texas securities law and statutory and common law fraud, and seek unspecified
compensatory and exemplary damages. Mr. Hunter was Chairman, President and Chief
Executive Officer of ECI at the time of its merger with a wholly owned
subsidiary of the Company. The Company and the other defendants filed an answer
in the State Litigation denying the plaintiffs' allegations. Since the
litigation is in its very preliminary stages, the Company cannot quantify its
ultimate liability, if any, for the payment of damages. However, the Company
believes that the allegations in the State Litigation, like those in the
Consolidated Lawsuit, do not provide a basis for the recovery of damages because
all required disclosures were made on a timely basis. The Company intends to
aggressively defend this litigation.
A copy of the Plaintiff's Original Petition in the State Litigation and the
Defendants' Original Answer in that proceeding are filed as exhibits to this
Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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EXECUTIVE OFFICERS OF THE COMPANY
Pursuant to General Instruction G to Form 10-K, the information regarding
executive officers of the Company called for by Item 401 of Regulation S-K is
hereby included in Part I of this report.
The following table sets forth as of March 24, 2000 the name and age of
each executive officer of the Company, the office held, and the date first
elected an officer.
<TABLE>
<CAPTION>
YEAR FIRST
BECAME
OFFICER NAME AGE POSITION OFFICER(1)
------------ ---- -------- ----------
<S> <C> <C> <C>
R. L. Waltrip........................ (69) Chairman of the Board and Chief 1962
Executive Officer
B. D. Hunter......................... (70) Vice Chairman of the Board 2000
Jerald L. Pullins.................... (58) President and Chief Operating Officer 1992
Jeffrey E. Curtiss................... (51) Senior Vice President and Chief 2000
Financial Officer
James M. Shelger..................... (50) Senior Vice President General Counsel 1987
and Secretary
T. Craig Benson...................... (38) Vice President Corporate Alliances 1990
and Marketing
J. Daniel Garrison................... (48) Vice President International 1998
Operations
W. Cardon Gerner..................... (45) Vice President Corporate Controller 1999
W. Mark Hamilton..................... (35) Vice President Prearranged Sales 1996
Frank T. Hundley..................... (40) Vice President Treasurer 2000
Lowell A. Kirkpatrick, Jr. .......... (41) Vice President Operational Management 1994
Systems
Stephen M. Mack...................... (48) Vice President Domestic Operations 1998
Thomas L. Ryan....................... (34) Vice President Operational Accounting 1999
and Analysis
Eric D. Tanzberger................... (31) Vice President Investor Relations and 2000
Assistant Corporate Controller
Stephen J. Uthoff.................... (48) Vice President Chief Information 2000
Officer
Vincent L. Visosky................... (52) Vice President Trust Administration 1989
Michael R. Webb...................... (42) Vice President Corporate Development 1998
</TABLE>
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(1) Indicates the year a person was first elected as an officer although there
were subsequent periods when certain persons ceased being officers of the
Company.
Unless otherwise indicated below, the persons listed above have been
executive officers or employees for more than five years.
Mr. Curtiss joined the Company as Senior Vice President and Chief Financial
Officer in January 2000. From January 1992 until July 1999, Mr. Curtiss served
as Senior Vice President and Chief Financial Officer of Browning-Ferris
Industries, Inc., a waste services company.
Mr. Gerner joined the Company in January 1999 in connection with the
acquisition of ECI and in March 1999 was promoted to Vice President Corporate
Controller. Before the acquisition, Mr. Gerner had been Senior Vice President
and Chief Financial Officer of ECI since March 1995. Prior thereto, Mr. Gerner
was a partner with Ernst & Young LLP.
Mr. Hundley joined the Company as Vice President Treasurer in March 2000.
Prior thereto, Mr. Hundley served for more than five years in various capacities
at Banc of America Securities, LLC, its predecessors and affiliates, including
as Managing Director.
Mr. Hunter was appointed Vice Chairman of the Board in January 2000. Mr.
Hunter is the Chairman and Chief Executive Officer of Huntco, Inc., an
intermediate steel processor. Mr. Hunter has been a director
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of the Company since 1986 and also served as Vice Chairman of the Board of the
Company from September 1986 to May 1989.
Mr. Ryan joined the Company in June 1996 as Director of Financial
Reporting. Since then, Mr. Ryan has served as Director of Investor Relations and
Managing Director and Chief Financial Officer of International Operations. Mr.
Ryan was promoted to Vice President International Finance in February 1999 and
appointed Vice President Operational Accounting and Analysis in February 2000.
Prior to joining the Company, Mr. Ryan was a certified public accountant with
Coopers & Lybrand L.L.P. for more than five years.
Mr. Tanzberger joined the Company in August 1996 as Manager of Budgets &
Financial Analysis. Since then, Mr. Tanzberger has served as Vice President of
Operations/Western Division, Director of Investor Relations and Assistant
Corporate Controller. Mr. Tanzberger was promoted to Vice President Investor
Relations and Assistant Corporate Controller in January 2000. Prior to joining
the Company, Mr. Tanzberger was Assistant Corporate Controller at Kirby Marine
Transportation Corporation, an inland waterway barge and tanker company, from
January through August 1996. Prior thereto, he was a certified public accountant
with Coopers & Lybrand L.L.P. for more than five years.
Mr. Uthoff joined the Company as Vice President Chief Information Officer
in January 2000. From June 1994 through July 1999, Mr. Uthoff served as Vice
President-Planning & Analysis of Browning-Ferris Industries, Inc., a waste
services company.
Each officer of the Company is elected by the Board of Directors and holds
his office until his successor is elected and qualified or until his earlier
death, resignation or removal in the manner prescribed in the Bylaws of the
Company. Each officer of a subsidiary of the Company is elected by the
subsidiary's board of directors and holds his office until his successor is
elected and qualified or until his earlier death, resignation or removal in the
manner prescribed in the bylaws of the subsidiary.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock has been traded on the New York Stock Exchange
since May 14, 1974. On December 31, 1999, there were 7,957 holders of record of
the Company's common stock.
Through October 1999, the Company had declared 106 consecutive quarterly
dividends on its common stock since it began paying dividends in 1974. For the
three years ended December 31, 1999, 1998 and 1997, dividends per share were
$.27, $.36 and $.30, respectively. In October 1999, the Company suspended
payment of regular quarterly cash dividends on its quarterly outstanding stock
in order to focus on improving cash flow and reducing existing debt.
The table below shows the Company's quarterly high and low common stock
prices for the three years ended December 31, 1999:
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- ---------------
HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
First............................. $38.50 $14.25 $43.69 $35.69 $33.88 $26.88
Second............................ 21.19 13.31 44.63 38.94 36.00 29.63
Third............................. 18.88 10.56 45.88 31.88 35.75 29.81
Fourth............................ 10.31 6.44 39.25 29.81 38.00 27.88
</TABLE>
SRV is the New York Stock Exchange ticker symbol for the common stock of
the Company. Options in the Company's common stock are traded on the
Philadelphia Stock Exchange under the symbol SRV.
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ITEM 6. SELECTED FINANCIAL DATA.
The table below shows the selected financial data of the Company for the
five years ended December 31, 1999:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
----------- ----------- ----------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues................... $ 3,321,813 $ 2,875,090 $ 2,535,865 $2,355,342 $1,652,126
Income (loss) before
extraordinary gain
(loss)................... (34,297) 342,142 374,552 265,298 183,588
Net income (loss).......... (32,412) 342,142 333,750 265,298 183,588
Earnings per share:
Income (loss) before
extraordinary gain
(loss)
Basic................. (.13) 1.34 1.53 1.13 .92
Diluted............... (.13) 1.31 1.47 1.08 .86
Net income (loss)
Basic................. (.12) 1.34 1.36 1.13 .92
Diluted............... (.12) 1.31 1.31 1.08 .86
Dividends per share........ .27 .36 .30 .24 .22
Total assets............... 14,601,601 13,266,158 10,514,930 9,020,778 7,768,982
Long-term debt............. 3,636,067 3,764,590 2,634,699 2,048,737 1,712,464
Convertible preferred
securities of SCI Finance
LLC...................... -- -- -- 172,500 172,500
Stockholders' equity....... 3,495,273 3,154,102 2,726,004 2,235,317 1,975,345
Shares outstanding......... 272,064 259,201 252,924 236,193 234,542
Ratio of earnings to fixed
charges*................. 0.85 3.42 4.29 3.24 2.84
</TABLE>
* For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes and extraordinary gain (loss) on early
extinguishment of debt, less undistributed income of equity investees which
are less than 50% owned, plus the minority interest of majority owned
subsidiaries with fixed charges and fixed charges (excluding capitalized
interest). Fixed charges consist of interest expense, whether capitalized or
expensed, amortization of debt costs, dividends on preferred securities of SCI
Finance LLC and one-third of rental expense which the Company considers
representative of the interest factor in the rentals. The decrease in the
Company's ratio of earnings to fixed charges in 1999 compared to earlier
levels is primarily attributable to the $362,428 pretax restructuring and
nonrecurring charges recorded during the first and fourth quarters of 1999
(see note eighteen to the consolidated financial statements in Item 8 of this
Form 10-K) and increased interest expense related to additional indebtedness
primarily attributable to the merger with ECI. Without the above mentioned
restructuring and nonrecurring charges, the ratio of earnings to fixed charges
would have been 2.16 for the year ended 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE SALES PRICES, PER SHARE DATA AND
RATIO AMOUNTS)
The Company is the largest provider of funeral and cemetery services in the
world. As of December 31, 1999, the Company operated 3,823 funeral service
locations, 525 cemeteries, 198 crematoria and two insurance operations located
in 20 countries on five continents. The Company conducts funeral service
operations in all of the 20 countries mentioned above, cemetery operations in
North America, South America, Australia and certain countries within Europe, and
financial services operations in North America and France. As of December 31,
1999, the Company's largest markets were North America and France, which when
combined represent approximately 86% of the Company's consolidated revenues, 73%
of the Company's consolidated income from operations and 78% of the Company's
total operating locations.
8
<PAGE> 10
The majority of the Company's funeral service locations and cemeteries are
managed in groups called clusters. Clusters are geographical groups of funeral
service locations and cemeteries that lower their individual overhead costs by
sharing common resources such as operating personnel, preparation services,
clerical and accounting staff, limousines, hearses and preneed sales personnel.
Personnel costs, the largest operating expense for the Company, are the cost
components most beneficially affected by clustering. The sharing of employees,
as well as the other costs mentioned, allows the Company to more efficiently
utilize its operating facilities due to the traditional fluctuation in the
number of funeral services and cemetery interments performed in a given period.
Historically, the Company's growth has been largely attributable to
acquiring funeral service locations and cemeteries. This resulted in the Company
creating the world's largest network of funeral service locations and
cemeteries. The Company believes this network forms the foundation of its
business plan going forward. During the mid-1990's, the market to acquire
funeral service locations and cemeteries became more competitive than ever
before and resulted in increasing prices which lowered returns on invested
capital. As a result, the Company suspended its acquisition program in 1999 and
is in transition from an acquisition company to an operating company.
This transition focuses on reducing overhead, streamlining operational
functions and processes, increasing cash flow, providing better returns on the
Company's invested capital and reducing the Company's debt. The transition to an
operating company will continue in 2000. The Company's primary goals in 2000 are
as follows:
- Continue to reduce overhead and streamline management structures.
- Improve business processes and information systems.
- Increase cash flow by continuing certain initiatives such as the
reduction of capital expenditures compared to historical levels, the
elimination of the Company's quarterly dividend, the suspension of the
acquisition program, the realignment of preneed cemetery and prearranged
funeral sales structures and other working capital initiatives.
- Continue the development of third party consumer financing programs.
- Continue the sale of certain assets and non-core businesses that are (i)
not meeting the Company's return on invested capital criteria and (ii)
can provide a better return to the Company from sales proceeds rather
than from future projected operating cash flows.
- Continue the reduction of the Company's debt levels to create a sound
capital structure for the Company and to reduce cash paid for interest
costs.
- Continue the implementation of the Company's long-term strategic revenue
and marketing initiatives intended to provide internal revenue growth
without the outlay of significant additional capital. Such initiatives
include implementation of Dignity(TM) Memorial Plan funeral packages and
the associated branding of many of the Company's or affiliated locations,
continued development of global affinity relationships and continued
growth in the sale of prearranged funeral contracts in all jurisdictions.
- Continue to improve customer satisfaction throughout the Company's global
network while monitoring such customer satisfaction through new client
family surveys tied to certain employees' compensation.
The Company believes the execution of the above initiatives will allow the
Company to maintain its position as the industry leader, as well as to provide
long-term value to our shareholders.
RESULTS OF OPERATIONS
The following is a discussion of the Company's results of operations for
the years ended December 31, 1999, 1998 and 1997. For purposes of discussions
between the years 1999 and 1998, funeral homes, cemeteries and crematoria owned
and operated before January 1, 1998, are referred to as 1999 comparable
operations, and for discussions between the years 1998 and 1997, funeral homes,
cemeteries and crematoria owned and
9
<PAGE> 11
operated before January 1, 1997 are referred to as 1998 comparable operations.
Correspondingly, for discussions between the years 1999 and 1998, operations
acquired or opened after January 1, 1998, are referred to as 1999 acquired
operations and for discussions with respect to the years 1998 and 1997,
operations acquired or opened after January 1, 1997, are referred to as 1998
acquired operations.
The following table represents revenues and gross profit for the three
years ended December 31, 1999:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Funeral..................... $ 2,039,348 $ 1,829,136 $ 1,720,291
Cemetery.................... 947,852 846,601 724,862
Financial services.......... 334,613 199,353 90,712
----------- ----------- -----------
$ 3,321,813 $ 2,875,090 $ 2,535,865
=========== =========== ===========
Gross profit and margin
percentage:
Funeral..................... $ 366,494 18.0% $ 384,607 21.0% $ 401,371 23.3%
Cemetery.................... 247,719 26.1 306,161 36.2 271,897 37.5
Financial services.......... (454) (0.1) 28,002 14.0 14,344 15.8
----------- ---- ----------- ---- ----------- ----
$ 613,759 18.5% $ 718,770 25.0% $ 687,612 27.1%
=========== ==== =========== ==== =========== ====
</TABLE>
The Company's results of operations for 1999 from a gross profit margin and
percentage standpoint were below 1998 and 1997 levels. The primary reason for
this was the difficult transition in 1999 to an operating company focused on
cash flow and returns on invested capital from a company previously focused in
1998 and 1997 on growth through acquisitions. More specifically, the results of
operations in 1999 were negatively affected by: (i) the reduction of net
cemetery trust earnings, (ii) a reduction in gains on sales of businesses, (iii)
a reduction of operating earnings related to the sale of excess undeveloped
cemetery property, (iv) the downward pressure on operating margins related to
the January 1999 acquisition of ECI which historically had lower volume
operations, (v) a delay in the realization of expected cost savings from cost
rationalization programs primarily related to finalization of labor negotiations
in the Company's funeral operations in France, (vi) inefficiencies in the
standardization of the Company's cemetery sales cost structure, (vii) the focus
on preneed sales of heritage cemetery property which generate higher commission
and have higher property costs and (viii) loan loss provisions related to
certain loans held by the Company's lending subsidiary.
In 1999, the Company realigned its management of geographic segments to
focus on total European operations. Although total amounts reported have not
changed, the Company has made certain reclassifications in all years in order to
reflect the results of these geographic segments.
Funeral
Funeral revenues for the three years ended December 31, 1999, were as
follows:
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE INCREASE
1999 INCREASE 1998 (DECREASE) 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
North America.................... $1,183,829 17.5% $1,007,462 3.6% $ 972,670
European......................... 780,206 1.9 765,532 11.9 683,951
Other foreign.................... 75,313 34.1 56,142 (11.8) 63,670
---------- ---- ---------- ----- ----------
Total funeral
revenues............. $2,039,348 11.5% $1,829,136 6.3% $1,720,291
========== ==== ========== ===== ==========
</TABLE>
The $176,367 increase in 1999 funeral revenues from North American
operations was primarily the result of the ECI acquisition with revenues from
comparable operations remaining relatively flat compared to 1998. The $34,792
increase in 1998 revenue over 1997 was primarily the result of a $60,044
increase in revenues from 1998 acquired locations offset by a $27,069 decrease
from 1998 comparable locations. The
10
<PAGE> 12
number of funeral services performed in 1999 comparable locations in North
America increased 0.7% over 1998 while the number of funeral services performed
in 1998 comparable locations in North America decreased 2.0% from 1997. The
increase in volume for 1999 comparable locations in North America were slightly
offset in 1999 by a 0.5% decrease in average sales prices while the 1998
comparable locations in North America also experienced a decrease in average
sales price of 0.8% compared to 1997. The comparable average sales prices in
North America for the years ended 1999, 1998 and 1997, respectively, were
$3,807, $3,827 and $3,859. The average sales price decreases have occurred
because of continuing changes in the Company's sales mix resulting from a higher
proportion of funerals from prearranged contracts being serviced and an increase
in the number of cremations performed, which typically carry lower sales price
averages than traditional atneed funeral services. The sales average related to
prearranged funeral contracts turning atneed has historically been lower than
the current atneed sales average primarily due to the servicing of prearranged
contracts inherited by the Company through acquisitions. North America 1999
acquired locations performed 50,731 funeral services in 1999 and 6,650 in 1998,
while 1998 acquired locations in North America performed 28,864 funeral services
in 1998 and 11,663 in 1997.
Government data indicates the number of deaths in the United States has
increased over the last three years. The Center for Disease Control and
Prevention (CDC) tracks deaths in 122 cities (120 in 1997) across the United
States and in those cities total deaths have increased 0.81% in 1999 from 1998
and 0.39% in 1998 from 1997. The Company has comparable locations in 83 (73 in
1997) of those 122 cities and CDC statistics from these 83 cities indicate the
Company increased market share in those 83 cities during 1999 compared to 1998.
Revenues from the Company's European operations increased $14,674 in 1999
compared to 1998 and $81,581 in 1998 compared to 1997, primarily as a result of
acquisitions. These acquisitions were primarily in Spain, Norway and the
Netherlands in 1999 and France, Spain, Portugal, Norway and the Netherlands in
1998. Revenues from comparable locations decreased 2.7% in 1999 compared to 1998
due to decreases in the average sales price of approximately 2.0% while volumes
were relatively consistent with the prior year. Revenues from comparable
locations in 1998 increased 1.1% over 1997.
Revenues from Other foreign operations increased $19,171 in 1999 as a
result of acquisitions in Chile and Argentina and growth in comparable locations
in the Pacific Rim of 5.0% over 1998. While volume declined in the Pacific Rim
by 3.9%, the average sales price increased 9.2% partially as a result of
favorable exchange rate variances between the Australian dollar and the U.S.
dollar. Revenues from other foreign operations decreased $7,528 in 1998 from
1997 primarily due to a 15.4% decline in the Australian dollar versus the U.S.
dollar, partially offset by increased revenues from Argentinian acquisitions.
During the year ended December 31, 1999, the Company sold $578,263 of
prearranged funeral contracts compared to approximately $490,289 in 1998 and
$526,919 in 1997. The obligations are funded through both trust and insurance
backed contracts. Of those prearranged sales, approximately $364,737 in 1999 and
$197,317 in 1998 will be funded by Company insurance operations. The revenues
associated with these prearranged funeral services are deferred and will be
reflected in funeral revenues in the periods that the funeral services are
performed. The Company expects to continue the emphasis on selling prearranged
funerals as a means of protecting current market share and sales mix, as well as
to expand market share in certain markets.
11
<PAGE> 13
Funeral gross profit and margin percentage for the three years ended
December 31, 1999, were as follows:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
1999 OF REVENUE 1998 OF REVENUE 1997 OF REVENUE
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
North America.............. $274,199 23.2% $287,012 28.5% $297,586 30.6%
European................... 79,270 10.2 88,541 11.6 86,717 12.7
Other foreign.............. 13,025 17.3 9,054 16.1 17,068 26.8
-------- ---- -------- ---- -------- ----
Total funeral
gross profit... $366,494 18.0% $384,607 21.0% $401,371 23.3%
======== ==== ======== ==== ======== ====
</TABLE>
The decreases in gross margin percentage in North America in 1999 and 1998
were due to increased costs and expenses of 26.3% and 6.7%, respectively, while
revenues increased 17.5% and 3.6%, respectively, as discussed above. The
increased costs and expenses were primarily due to higher costs at acquired
locations, specifically related to the Company's merger with ECI in January
1999. Typically, acquisitions will temporarily exhibit lower gross profit
margins than those experienced by the Company's comparable locations until these
locations have been fully assimilated into the Company's clusters. Further, the
gross margin percentage at ECI locations had been historically lower than the
Company's gross margin percentages and this has negatively affected the total
gross margin percentage in North America. Comparable locations experienced a
3.6% increase in operating expenses in 1999 compared to 1998 primarily related
to increases in promotional and advertising expenses as part of the transition
to an operating company from one previously focused on growth through
acquisitions. In 1998 such comparable costs were relatively flat as compared to
1997.
The decrease in European gross profit and margin percentage in 1999 was
primarily the result of less funeral services performed causing reduced profit
due to the Company's fixed cost structure, coupled with delays in labor
negotiations in France related to cost rationalization programs. The decrease in
European gross profit and margin percentage in 1998 was primarily the result of
a disproportionate increase in total costs and expenses of 13.7% primarily
related to acquisitions.
The decrease in Other foreign gross margin percentage in 1999 was primarily
due to increased costs and expenses in Australia coupled with the addition of
lower operating margin funeral businesses from the Chilean acquisitions,
partially offset by improved margins in Argentina. The decrease in Other foreign
gross profit and margin percentage in 1998 was primarily due to increased costs
and expenses in Australia and lower operating margins in Argentinean
acquisitions. In 1998, Australian costs and expenses increased approximately
6.0% more than the change in revenue.
Cemetery
Cemetery revenues for the three years ended December 31, 1999, were as
follows:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
1999 INCREASE 1998 INCREASE 1997
-------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
North America........................ $816,695 6.3% $768,229 14.5% $671,112
European............................. 34,363 34.4 25,564 18.3 21,609
Other foreign........................ 96,794 83.3 52,808 64.3 32,141
-------- ---- -------- ---- --------
Total cemetery revenues.... $947,852 12.0% $846,601 16.8% $724,862
======== ==== ======== ==== ========
</TABLE>
The increase of $48,466 in 1999 North American cemetery revenues was
primarily the result of the $82,345 increase in acquisitions as a result of the
January 1999 merger with ECI, partially offset by the decrease of net cemetery
trust earnings of 32.3% and a reduction of operating earnings related to the
sale of excess undeveloped cemetery property. Comparable atneed and preneed
revenue in 1999 remained stable compared to the prior year. The 1998 increase in
revenue from North American cemetery operations of $97,117 was primarily due to
an increase in revenue from acquisitions, increased trust earnings of 29.8% and
12
<PAGE> 14
increased revenue from sales of excess undeveloped cemetery property compared to
1997. Comparable preneed and atneed sales in 1998 were relatively flat as
compared to 1997.
The increases in revenue from European operations were the result of
acquisitions in the United Kingdom and Belgium in 1999 and in the United Kingdom
and the Netherlands in 1998.
The $43,986 increase in 1999 revenues from Other foreign operations was the
result of acquisitions in Chile, Argentina and Uruguay and a 13.7% increase in
revenue in Australian operations. The $20,667 increase in 1998 revenues was the
result of the inclusion of new Argentina operations for the full year offset by
a decline in Australia cemetery revenue.
Cemetery gross profit and margin percentage for the three years ended
December 31, 1999, were as follows:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
1999 OF REVENUE 1998 OF REVENUE 1997 OF REVENUE
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
North America............... $205,040 25.1% $282,754 36.8% $251,993 37.5%
European.................... 10,823 31.5 7,936 31.0 8,275 38.3
Other foreign............... 31,856 32.9 15,471 29.3 11,629 36.2
-------- ---- -------- ---- -------- ----
Total cemetery
gross profit.... $247,719 26.1% $306,161 36.2% $271,897 37.5%
======== ==== ======== ==== ======== ====
</TABLE>
North America 1999 cemetery gross profit declined $77,714 primarily due to
increased costs of 12.9% at 1999 comparable locations. These increased costs
were primarily the result of increases in property costs and commission expenses
related to the sale of heritage cemetery property sales initiatives. The
decrease in the North America cemetery gross profit margin percentage in 1999
was primarily the result of these increased costs coupled with the reductions in
net cemetery trust earnings and operating earnings related to the sale of excess
undeveloped cemetery property. The 1998 North America cemetery gross profit
increased $30,761 primarily due to the corresponding growth in revenue discussed
above. Costs of services at comparable locations remained flat in 1998 from 1997
and, while costs from acquired locations increased $43,509, these increases were
offset by increases in net cemetery trust earnings and operating earnings
related to sales of excess undeveloped cemetery property.
The increase of $2,887 in 1999 European gross profit was the result of
increases due to acquisitions in Belgium and the United Kingdom. The decrease in
the 1998 gross margin percentage was the result of increased costs in
anticipation of growth associated with comparable locations in the United
Kingdom.
The 1999 increase of $16,385 in Other foreign gross profit and the
corresponding increase in the margin percentage was the result of increases in
the gross profit and margin percentage from the Company's acquired South
American operations. The margin percentage in Argentina has improved to 24.0% in
1999 from 19.4% in 1998. The decline in Other foreign margin percentage in 1998
was due to the inclusion of a full year of cemetery operations in Argentina
during 1998 which reduced gross margin percentage when combined with the higher
margin Australian operations. Argentina has significantly lower gross margin
percentages than Chile or Australia; however, these margin percentages are in
line with the Company's expectations.
Financial Services
Financial services represents a combination of the Company's insurance
operations and a lending subsidiary.
13
<PAGE> 15
Financial services revenues for the three years ended December 31, 1999,
were as follows:
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE PERCENTAGE
1999 (DECREASE) 1998 INCREASE 1997
-------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Insurance:
North America.................. $244,506 198.8% $ 81,832 --% $ --
France......................... 69,349 (28.5) 96,941 30.7 74,175
-------- ----- -------- ----- -------
Total insurance............. 313,855 75.6 178,773 141.0 74,175
Lending subsidiary............... 20,758 0.8 20,580 24.4 16,537
-------- ----- -------- ----- -------
Total financial
services revenues.... $334,613 67.8% $199,353 119.8% $90,712
======== ===== ======== ===== =======
</TABLE>
The increase in insurance revenues in 1999 and 1998 was due to the North
American acquisition of AML effective July 1998. Further, a portion of the
increase in revenue in 1999 is related to the Company's initiatives to fund a
higher percentage of prearranged funeral contracts through AML as opposed to
third party insurance or trust funded contracts. Insurance revenues from the
Company's French operations decreased due to decreased investment income related
to a repositioning of the investment portfolio. Although the average outstanding
loan portfolio associated with the lending subsidiary increased in 1999 from
1998, revenues remained relatively flat between the two years due to the
non-performing status of certain loans subsequent to September 30, 1999. Growth
from the lending subsidiary in 1998 is attributable to the increasing loan
portfolio. The average outstanding loan portfolio was $248,807 in 1999, $228,279
in 1998 and $182,375 in 1997.
Financial services gross profit and margin percentage for the three years
ended December 31, 1999, were as follows:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
1999 OF REVENUE 1998 OF REVENUE 1997 OF REVENUE
-------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Insurance:
North America.......... $ 16,084 6.6% $ 7,872 9.6% $ -- --%
France................. 12,929 18.6 10,689 11.0 6,712 9.0
-------- ------ ------- ---- ------- ----
Total insurance..... 29,013 9.2 18,561 10.4 6,712 9.0
Lending subsidiary....... (29,467) (141.9) 9,441 45.9 7,632 46.2
-------- ------ ------- ---- ------- ----
Total financial
services
gross profit
(loss)....... $ (454) (0.1)% $28,002 14.0% $14,344 15.8%
======== ====== ======= ==== ======= ====
</TABLE>
The 1999 decrease in the North American insurance gross margin percentage
was the result of increased production. While revenue and gross profit have both
increased during this period of growth, benefits and expenses have also
increased, thereby reducing the gross margin percentage. Although French
insurance revenues in 1999 were negatively affected by decreased investment
income related to the repositioning of their investment portfolio, gross profit
was negatively impacted only slightly due to a corresponding reduction in
expense and the margin percentages were positively affected due to the lower
revenue used to calculate the margin percentage.
The Company's lending subsidiary reported a gross loss of $29,467 for the
year ended December 31, 1999, compared to gross profit of $9,441 and $7,632 for
the same periods in 1998 and 1997, respectively. As part of its cost
rationalization programs initiated in 1999, the Company decided to indefinitely
suspend the operations of the lending subsidiary by selling a portion of the
loan portfolio and acquiring by deed in lieu of foreclosure the collateral
underlying other certain loans in its portfolio. The Company recorded a
provision for loan losses of $38,608 in the fourth quarter of 1999 associated
with the lending subsidiary's loans that are not
14
<PAGE> 16
being held for sale. See note eighteen to the consolidated financial statements
in Item 8 of this Form 10-K for further discussion of these nonrecurring charges
related to the Company's lending subsidiary.
The lending subsidiary's gross profit was affected in 1999 by a decrease in
the average interest rate spread for the year, primarily as a result of the
non-performing status of certain loans discussed above. For the three years
ended December 31, 1999, the average interest rate spread was 2.48%, 3.14% and
3.18%, respectively.
Other Income and Expenses
The Company's general and administrative expenses increased in 1999 to
$82,585 compared to $66,839 in 1998 and $66,781 in 1997. Expressed as a
percentage of revenues, these expenses were 2.5%, 2.3% and 2.6% in 1999, 1998
and 1997, respectively. The increase in general and administrative expenses in
1999 compared to 1998 and 1997 levels is primarily related to non-recurring cost
items such as information technology costs related to the Company's year 2000
preparation and professional costs associated with process improvement
initiatives and implementation of EVA(R) based incentive compensation models.
Interest expense increased $61,142 or 34.5% in 1999 compared to 1998 and
increased $40,333 or 29.5% in 1998 compared to 1997. This increased interest
expense was primarily reflective of increased indebtedness assumed due to
acquisitions, specifically as it relates to the ECI merger in January 1999. The
average borrowings during 1999 were $4,131,833 compared to $3,340,708 in 1998
and $2,434,808 in 1997. The average interest rates for each of these years were
5.99%, 6.15% and 6.03% for 1999, 1998 and 1997, respectively. The Company
expects interest expense to increase to approximately $265,000 to $270,000 for
the year ended December 31, 2000, primarily as a result of the Company's lower
credit rating.
Other income primarily consists of gains and losses from the sales of
businesses that are disposed of for strategic or government mandated purposes.
In 1999, other income was $31,759 compared to $43,649 in 1998 and $100,244 in
1997. The fluctuation between $100,244 of other income in 1997 and $43,649 of
other income in 1998 reflects the gain on the sale in 1997 of the Company's
equity interest in ECI of $68,077.
The provision (benefit) for income taxes reflects a (9.0%) effective tax
rate for 1999, compared to a 34.0% effective tax rate in 1998 and a 35.4%
effective tax rate in 1997. The decrease in the effective tax rate was primarily
due to the nondeductible losses recorded in the fourth quarter of 1999 as a
result of the Company's 1999 restructuring charges. The 1998 reduction in the
effective tax rate is primarily due to a larger relative profit contribution
from international operations which are taxed at lower rates. Included in the
provisions for all years were tax benefits relating to enacted tax rate changes
in certain foreign tax jurisdictions.
FINANCIAL CONDITION AND LIQUIDITY
General
Historically, the Company has funded its working capital needs and capital
expenditures primarily through cash provided by operating activities and
borrowings under bank revolving credit agreements and commercial paper. Funding
required for the Company's acquisition program historically has been generated
through public and private offerings of debt and the issuance of equity
securities supplemented by the Company's revolving credit agreements.
During 1999, the Company's liquidity needs and capital funding requirements
changed as the Company transitioned away from an acquisition company to an
operating company focused on increasing cash flow, reducing overhead costs and
paying down debt. The Company developed a series of cash flow initiatives in
1999 related to ongoing operations of the Company, the sale of certain assets
and non-core businesses and sources of cash flow from providing third party
financing to consumers. These cash flow initiatives were developed in late 1999
and will not effect the Company's cash flow until 2000 and beyond.
Cash flow initiatives related to the ongoing operations of the Company
include: (i) the suspension of the acquisition program, (ii) the reduction of
capital expenditures compared to historical levels, (iii) the suspension of the
quarterly cash dividend, (iv) the obtaining of funds available from certain of
the Company's trusts more efficiently, and (v) the realignment of preneed
cemetery and prearranged funeral sales structures
15
<PAGE> 17
to become more cash flow positive. The Company believes the above cash flow
initiatives, coupled with other working capital initiatives, will produce
operating free cash flow on an after tax basis in the range of $100,000 to
$200,000 in 2000. The Company defines operating free cash flow as cash flow from
operating activities determined by generally accepted accounting principles,
less capital expenditures, dividends paid, the net effect of prearranged funeral
production and maturities. The operating free cash flow projections above do not
include approximately $75,000 of projected net cash outflow in 2000 associated
with the Company's 1999 first and fourth quarter restructuring and nonrecurring
charges.
The Company developed cash flow initiatives in 1999 to sell certain assets
and non-core businesses that are either not meeting the Company's criteria for
returns on invested capital or are more valuable to parties outside the Company.
The Company expects after tax proceeds of $200,000 to $300,000 from these sales
of non-core financial or operational assets in 2000.
In 2000, the above cash flow initiatives developed in 1999 are expected to
produce approximately $300,000 to $500,000 of funds available for reducing debt
on an after tax basis. This projection again does not include approximately
$75,000 of net cash outflows in 2000 associated with the Company's 1999
restructuring charges. These funds available for debt reduction also do not
include any possible effect on cash flows associated with the development of a
consumer financing program in North America for the Company's atneed funeral and
cemetery and preneed cemetery client families, which could improve or generate
cash flow for the Company and enhance the Company's ability to further pay down
debt.
The Company had total debt of $4,060,016 at December 31, 1999 versus
$3,860,657 at December 31, 1998. The largest component of this debt relates to
the Company's primary revolving credit agreements. The Company's primary
revolving credit agreements provide for borrowings up to $1,600,000 and consists
of two 364-day facilities and a five-year, multi-currency facility due in 2002.
One of the 364-day facilities permits borrowings up to $300,000 and the
outstanding balance at maturity (June 25, 2000) may be converted into a two-year
term loan at the Company's option. The second 364-day facility permits
borrowings up to $600,000 and expires November 1, 2000. As of December 31, 1999,
approximately $412,000 was available under these three facilities. These
facilities have financial compliance provisions that contain certain
restrictions, including a maximum debt-to-capitalization ratio of 60%, a minimum
interest coverage of 2.75, a minimum net worth requirement defined in the
facility agreements, and limitations on cash disbursements, subsidiary
borrowings, liens and guarantees. See note eight to the consolidated financial
statements in Item 8 of this Form 10-K for further information on the Company's
primary revolving credit facilities.
Historically, the Company has classified borrowings under these facilities
as long-term debt since it has been the Company's intent to refinance such
borrowings with long-term debt or equity. In 1999, however, the Company's
downgraded credit ratings, both short-term and long-term, have limited its
access to the capital markets. As such, borrowings (primarily commercial paper)
of approximately $179,704 backed by the $600,000 facility have been classified
as current maturities of long-term debt. As of December 31, 1999, the Company
had a total of $423,949 of current maturities of long-term debt. As mentioned
above, the Company believes it will generate funds available for reducing debt
on an after tax basis of $300,000 to $500,000 not including the projected net
cash outflow of $75,000 related to the Company's 1999 restructuring charges.
Based on these funds available, coupled with banking relationships that the
Company would characterize as positive, the Company believes it will meet all of
its financial obligations and requirements in 2000.
Sources and Uses of Cash
Cash Flows from Operating Activities: Net cash provided by operating
activities was $432,850 for the year ended December 31, 1999, compared to
$328,620 for the same period in 1998, an improvement of $104,230. Significant
components of cash flow provided by operating activities for the year ended
December 31, 1999 include: (1) net loss of $32,412 adjusted for normal non-cash
items such as $252,145 of depreciation and amortization, (2) restructuring and
nonrecurring charge provisions of $362,428, reduced by cash paid of $37,553
related to the charges, (3) an increase in receivables of $223,405 primarily
related to the sales of preneed cemetery products and services which are usually
financed on an installment basis in excess of twelve months and (4) an increase
in other liabilities of $138,448 primarily related to the non-cash add-back
16
<PAGE> 18
associated with the actuarially determined liability recorded by the Company's
insurance operations.
Cash Flows from Investing Activities: Net cash used in investing activities
was $423,982 for the year ended December 31, 1999, compared to $1,059,875 for
the same period in 1998, an improvement of $635,893. Significant components of
cash used in investing activities for the year ended December 31, 1999, include:
(1) capital expenditures of $216,208, (2) $120,573 of proceeds from the sales of
property and equipment, (3) $102,647 of cash used in acquisitions and (4)
$199,879 of purchases in excess of sales of securities associated with the
Company's insurance operations. One of the insurance operations had an
approximate $80,000 cash position at December 31, 1998, of which a significant
portion of the cash was used to purchase securities during 1999. The remaining
amount of cash used to purchase securities in excess of the sales of securities
represents the investment of net cash generated by insurance premiums received
from customers after payment of cash expenses which is included within net cash
provided by operating activities.
Cash Flows from Financing Activities: Net cash used in financing activities
was $266,756 for the year ended December 31, 1999, compared to net cash provided
by financing activities of $1,041,561 for the same period in 1998. The Company
issued approximately $1,100,000 of long-term debt in 1998, which is included in
the $1,041,561 amount above. Significant components of cash used in financing
activities for the year ended December 31, 1999, include: (1) increases in
borrowings of $504,279 from the Company's revolving credit facilities offset by
$365,936 for the early extinguishment of certain floating rate debt and ECI
convertible debentures, (2) payments of debt of $259,004 and (3) payments of
cash dividends of $96,779.
At December 31, 1999, the Company had a working capital deficit of $61,714
compared to working capital surplus of $578,755 as of December 31, 1998. The
working capital deficit of $61,714 is primarily a result of the current
liability of $89,812 at December 31, 1999 related to the Company's 1999
restructuring charges as well as related to $423,949 of current maturities of
long-term debt, of which $179,704 relates to the Company's revolving credit
facilities. As discussed earlier, certain balances outstanding on the Company's
revolving credit facilities cannot be classified as long-term at December 31,
1999, due to the Company's current lack of access to the capital markets.
As part of the Company's ongoing cash flow initiatives, the Company
terminated or assigned certain interest rate swaps and all cross-currency
interest rate swaps subsequent to year end and received approximately $110,658
in net pretax proceeds. These proceeds were primarily used to purchase certain
of the Company's bonds, of which approximately $59,000 of these bonds were due
in 2000.
The Company had a current ratio 0.94:1 at December 31, 1999, compared to a
current ratio of 1.92:1 at December 31, 1998. The Company had a cash balance of
$88,221 at December 31, 1999 compared to a cash balance of $358,210 at December
31, 1998. Approximately $160,000 of the December 31, 1998 cash balance was
contemplated to be used to repay ECI's revolving credit facility and AML had an
approximate $80,000 cash balance at December 31, 1998 which was used to purchase
securities in 1999. As of December 31, 1999, the Company's debt to
capitalization ratio was 53.7% compared to 55.0% at December 31, 1998. Excluding
the $362,428 of 1999 restructuring and nonrecurring charges, the interest
coverage ratio for the year ended December 31, 1999 was 2.30:1, compared to
3.72:1 for the same period of 1998. At December 31, 1999, the Company had the
ability to issue $900,000 in securities registered with the Securities and
Exchange Commission (the Commission) under a shelf registration. In addition,
12,865 shares of common stock and a total of $187,000 of guaranteed promissory
notes and convertible debentures are registered under a separate shelf
registration to be used exclusively for acquisitions. The Company has suspended
its acquisition program and does not anticipate these acquisition shelf
registrations to be drawn upon in the near future.
PREARRANGED FUNERAL SERVICES
The Company sells prearranged funeral contracts in most of its service
markets, including its major foreign markets. The Company has a marketing
program to sell price guaranteed prearranged funeral contracts and the funds
collected are generally held in trust or are used to purchase life insurance or
annuity contracts. The amounts paid into trust funds or premiums paid on
insurance contracts will be received in cash by a Company funeral service
location at the time the funeral is performed. Earnings on trust funds and
17
<PAGE> 19
increasing benefits under insurance and annuity funded contracts also increase
the amount of cash to be received upon performance of the funeral service.
Direct costs incurred with the sale of prearranged funeral contracts are a
current use of cash which is partially offset with cash retained, pursuant to
state laws, from amounts trusted and certain general agency commissions earned
by the Company for sales of insurance products.
The Company has an investment program which entails the ongoing
consolidation of multiple trustees, the use of institutional managers with
differing investment styles and consolidated performance monitoring and
tracking. This program targets a real return in excess of the amount necessary
to cover future increases in the cost of providing a price guaranteed funeral
service as well as any selling costs. This is accomplished by allocating the
portfolio mix to investments that match the anticipated maturity of the
contracts. The Company targets an asset allocation for prearranged funeral
trusts of approximately 60% equity, 30% fixed income and 10% alternative
investments. The Company's North American prearranged funeral trust portfolio
earned a return of 17.6%, 18.0% and 12.5% in 1999, 1998 and 1997, respectively
(including realized and unrealized gains and net of investment expenses).
AML, which was acquired by the Company in 1998, has been a provider of
insurance products used to fund Company prearranged funerals in North America
for several years. During 1999, the Company began a strategic initiative to fund
a higher percentage of its North American prearranged funeral sales through AML
as opposed to third party insurance or trust funded contracts. Auxia primarily
sells insurance and annuity products used to fund prearranged funerals to be
performed by the Company's French funeral service locations. Prearranged funeral
sales afford the Company the opportunity to protect both current market share
and mix as well as expand market share in certain markets. The Company believes
this will stimulate future revenue growth. Prearranged funeral services
fulfilled as a percent of the total funerals performed at comparable North
America funeral service locations approximates 28.9% in 1999 and 26.7% in 1998.
This percentage is expected to grow, thereby making the number of funerals
performed and related revenues, which will be recognized in future periods, more
predictable.
The total value of unperformed prearranged funeral contracts includes both
trust funded and insurance funded contracts and represents the original contract
value plus any accumulated trust earnings or increasing insurance benefits. The
total value of unperformed prearranged funeral contracts consists of two
components: (i) contracts funded by trust or third party insurance companies and
(ii) contracts funded by the Company's insurance operations. The value of
unperformed prearranged funeral contracts to be funded by trust or third party
insurance companies are included in Deferred prearranged funeral contract
revenues in the consolidated balance sheet. A portion of the value of
unperformed prearranged funeral contracts to be funded by the Company's
insurance operations is included as a component of Reserves and annuity
benefits -- insurance operations in the consolidated balance sheet and reflects
only the actuarially determined amounts to be funded in accordance with
generally accepted accounting principles for life insurance companies. The
remaining component of Reserves and annuity benefits -- insurance operations
represents the actuarially determined amounts to be funded for non-SCI
unperformed prearranged funeral contracts. As of December 31, 1999 and 1998, the
total value of unperformed prearranged funeral contracts was as follows
(assuming the Company's contracts only, at face value, plus accrued earnings or
increasing death benefits):
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Deferred prearranged funeral contract revenues.............. $3,186,081 $2,819,794
Contracts funded by the Company's insurance operations...... 1,101,371 932,056
---------- ----------
$4,287,452 $3,751,850
========== ==========
</TABLE>
18
<PAGE> 20
The following table summarizes the changes in the total value of
unperformed prearranged funeral contracts for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Beginning balance........................................... $3,751,850 $3,371,424
Net sales................................................. 578,263 490,289
Acquisitions/dispositions................................. 288,099 138,976
Realized earnings and increasing insurance benefits....... 128,251 129,484
Maturities................................................ (331,031) (274,107)
Change in cancellation reserve............................ (80,020) (16,608)
Effect of foreign currency and other...................... (47,960) (87,608)
---------- ----------
Ending balance.............................................. $4,287,452 $3,751,850
========== ==========
</TABLE>
The increase in net sales was due to the Company's revenue initiative to
increase prearranged funeral sales. Acquisitions and dispositions has increased
primarily due to the merger with ECI in January 1999. The increase in the
cancellation reserve is due to adjustments made to better reflect the Company's
historical experience.
The recognition of the total value of unperformed prearranged funeral
revenues is estimated to occur in the subsequent years as follows:
<TABLE>
<S> <C>
2000.................................................... $ 392,110
2001.................................................... 361,880
2002.................................................... 294,126
2003.................................................... 299,799
2004.................................................... 270,186
2005 through 2008....................................... 1,027,623
2010 and thereafter..................................... 1,641,728
----------
$4,287,452
==========
</TABLE>
CREMATIONS
In recent years there has been a steady growth trend in the number of
cremations in North America that have been chosen as an alternative to
traditional funeral service dispositions. Outside of North America, the
cremation rate is much more stable. In 1999, 35.4% (34.6% in 1998) of all
families served by the Company's comparable North America funeral service
locations selected cremation, substantially more than the 25% national average
according to industry studies. The Company has a significant number of operating
locations in Florida and the west coast of North America where cremation rates
have been historically higher than the national average. Though a cremation
typically results in fewer sales dollars than a traditional funeral service, the
Company believes funeral service locations which are predominantly cremation
businesses typically have higher gross profit margin percentages than those
exhibited at traditional funeral service locations. The Company has expanded its
product alternatives in high cremation markets in North America which has
resulted in higher average sales. The Company continues to believe there are
markets in select areas within North America where products and services related
to the memorialization of cremated remains represent a source of revenue and
margin growth. Cremation memorialization has long been a tradition in Australia
and the United Kingdom. Based on industry studies, approximately 60-70% of all
dispositions in Australia and the United Kingdom were cremations. It is
estimated that approximately 17% of all dispositions in France are cremations.
The Company also operates the only nationally branded cremation society
with the largest membership in North America called National Cremation Society
(NCS). NCS currently operates in four high cremation states and has plans to
expand into nine additional high cremation states and Canadian provinces in
2000. NCS locations are predominately store-front locations with little capital
investment and have a prearranged
19
<PAGE> 21
backlog of approximately 43,000 contracts as of December 31, 1999. While the
average sale of NCS contracts is approximately $1,000 to $1,200, gross profit
margins are in the 40% to 45% range.
OTHER MATTERS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is required to be implemented in the Company's
first quarter of 2001. This statement establishes accounting and reporting
standards for derivative instruments and requires recognition of all derivatives
as assets or liabilities in the statement of financial position and measurement
of those instruments at fair value. Changes in the fair value of derivatives
will be recorded either in earnings or in other comprehensive income, based on
the type of risk for which the instrument is determined to be an effective
hedge. Any change in fair value of an instrument that is not designated as a
hedge, or any portion of a change in fair value of a hedging instrument that is
deemed ineffective, will be immediately recognized in earnings. The Company is
currently assessing the impact that adoption will have on its consolidated
financial statements.
In December 1999, the Commission issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" (SAB No. 101). SAB No. 101, as
amended, is required to be applied beginning with the Company's second quarter
of 2000. The Company, together with other members of the death care industry,
are currently discussing directly with the Commission the application of SAB No.
101. Final resolution of the discussions will not have an impact on the
Company's consolidated cash flows, but may have a material impact on the
Company's consolidated financial condition and on the manner in which the
Company records preneed sales activities.
YEAR 2000 ISSUE
The Year 2000 issue, also known as "Y2K," refers to the inability of some
computer programs and computer-based microprocessors to correctly interpret the
century from a date in which the year is represented by only two digits (e.g.,
98). As previously reported, the Company developed and implemented a plan to
address the anticipated effects of Y2K issues related to the Company's
production systems, networks, desktops, user-developed applications,
vendor-supplied software, facilities and telecommunications and the supply
chain.
The Company established Y2K Program Offices at its corporate offices in
Houston, Texas and Birmingham, England. These program offices were responsible
for advising and monitoring the numerous facets of the Company's Y2K
preparations and for promoting Y2K awareness. In addition, the program offices
monitored the development of contingency plans that specified what would be done
if the Company or key third parties experienced disruptions to critical business
activities as a result of Y2K problems.
The Company's Y2K plan was completed in all material respects prior to the
anticipated Y2K failure dates. As of March 28, 2000, the Company has not
experienced any significant business disruptions or system failures as a result
of Y2K issues, nor is it aware of any Y2K issues that have affected its key
suppliers or other significant third parties to an extent significant to the
Company. However, Y2K compliance has many facets and potential consequences,
some of which may not be foreseeable or may not be realized until future
periods. Consequently, there can be no assurance that unforeseen circumstances
may not arise, or that the Company will not in the future identify equipment or
systems that are not Y2K-compliant. Because of this uncertainty, the Company's
contingency plans outline a course of action should a date-related problem occur
in the future.
The aggregate costs for the Company to achieve Y2K readiness were
approximately $33,715 of which $3,725 represents operating lease payments
related to desktops and servers that will be incurred from 2000-2002. All costs
associated with Y2K readiness are expected to be funded from cash flows from
operations. The Company's actual costs incurred associated with Y2K readiness
through December 31, 1999, were approximately $29,990, of which approximately
$10,433 has been expensed and approximately $19,557 has been capitalized. The
capitalized expenditures represent new hardware and new enterprise software that
introduced new functionality to the Company. All of the estimated remaining
$3,725 expenditures will be expensed over the course of the related lease term.
20
<PAGE> 22
In an effort to report material costs related to the Company's Y2K effort,
the Company has adopted a policy of capturing all costs of one thousand dollars
or more, all contractor expenses, and internal costs for dedicated resources
(those working exclusively on Y2K issues). As such, the Company acknowledges
that many internal resources worked part-time on Y2K-related issues for which no
payroll or overhead costs are being reported.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
The statements contained in this Form 10-K that are not historical facts
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements may be accompanied by words such
as "believe," "estimate," "project," "expect," "anticipate," or "predict," that
convey the uncertainty of future events or outcomes. These statements are based
on assumptions that the Company believes are reasonable; however, many important
factors could cause the Company's actual results in the future to differ
materially from the forward-looking statements made herein and in any other
documents or oral presentations made by, or on behalf of, the Company. Important
factors, which could cause actual results to differ materially from those in
forward-looking statements, include, among others, the following:
1) Changes in general economic conditions, both domestically and
internationally, impacting financial markets (e.g. marketable security
values, as well as currency and interest rate fluctuations) that could
negatively affect the Company, particularly but not limited to, the
Company's cemetery trust revenues, levels of interest expense; and changes
in the Company's specific credit relationships impacting the availability
of credit.
2) Changes in domestic and international political and/or regulatory
environments in which the Company operates, including tax and accounting
policies.
3) Changes in consumer demand and/or pricing for the Company's
products and services caused by several factors, such as changes in local
death rates, cremation rates, competitive pressures and local economic
conditions.
4) The Company's ability to sell preneed heritage cemetery property
which is usually associated with new customers of the Company's cemeteries.
5) The Company's ability to successfully integrate prior acquisitions
into the Company's business and to realize expected cost savings in
connection with such acquisitions.
6) The Company's ability to successfully implement ongoing cost
reduction initiatives, as well as changes in domestic and international
economic, political and/or regulatory environments, which could negatively
effect the implementation of the Company's cost reduction initiatives.
7) The Company's ability to successfully realize the estimated
savings associated with the Company's cost reduction initiatives announced
in 1999.
8) The Company's ability to successfully implement certain strategic
revenue and marketing initiatives resulting in increased volume through its
existing facilities.
9) The Company's ability to successfully implement certain strategic
cash flow initiatives, including but not limited to the sale of non-core
assets, the previously announced funeral and cemetery consumer financing
program, which could improve or generate cash flow for the Company and
enhance the Company's ability to reduce debt.
10) The Company's ability to successfully exploit its substantial
purchasing power with certain of the Company's vendors.
The Company assumes no obligation to publicly update or revise any
forward-looking statements made herein or any other forward-looking statements
made by the Company.
21
<PAGE> 23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information presented below should be read in conjunction with notes
nine and ten to the consolidated financial statements in Item 8 of this Form
10-K.
The Company uses derivatives primarily in the form of interest rate swaps
and cross-currency interest rate swaps in combination with local currency
borrowings in order to manage its mix of fixed and floating rate debt and to
hedge the Company's net investment in foreign assets. The derivative instruments
held by the Company are for hedging purposes and are neither leveraged nor
speculative in nature.
Movements in interest rates that impact the fair value of the interest rate
swaps generally offset corresponding movements in the value of the underlying
debt being hedged. Likewise, movements in currency rates that impact swaps
generally offset corresponding movements in the value of the underlying foreign
assets being hedged. In addition, currency movements that impact foreign
interest expense due under the cross-currency interest rate swaps generally
offset corresponding movements in the earnings of the foreign operation.
At December 31, 1999, after giving consideration to the interest rate
swaps, the Company's total debt consisted of approximately 61% of fixed interest
rate debt at a weighted average rate of 6.36% and approximately 39% of floating
interest rate debt at a weighted average rate of 6.49%. At December 31, 1998,
the Company's total debt consisted of approximately 74% of fixed interest rate
debt at a weighted average rate of 6.17% and approximately 26% of floating
interest rate debt at a weighted average rate of 6.15%. The Company's overall
sensitivity to floating interest rates is diversified in that approximately 28%
of the Company's floating rate exposure, as of December 31, 1999, is based in
eight markets other than the United States (47% at December 31, 1998).
In general, the Company has hedged up to 100% of its net investment in
foreign assets when such investment is considered significant and when it is
reasonably cost efficient to do so. In addition, the Company does not have a
significant investment in foreign operations that are in highly inflationary
economies. Approximately 32% of the Company's net investment and 32% of its
income from operations are denominated in foreign currencies at December 31,
1999. Due to the cross-currency hedges described above, approximately 13% of the
Company's net assets and approximately 16% of the Company's income from
operations are subject to translation risk at December 31, 1999.
In January 2000, the Company materially modified its participation in
derivative transactions by terminating or assigning away certain interest rate
swaps and all cross-currency interest rate swaps as mentioned in note nine to
the consolidated financial statements in Item 8 of this Form 10-K, thereby
removing the Company's hedges of foreign exchange rate exposure and the
diversification of floating rate exposure mentioned above.
Marketable Equity and Debt Securities -- Price Risk
In connection with the Company's insurance operations, prearranged funeral
operations and preneed cemetery merchandise and services sales, the Company owns
investments in equity securities and mutual funds which are sensitive to current
market prices. Cost and market values as of December 31, 1999 and 1998, are
presented in notes four, five and six to the consolidated financial statements
in Item 8 of this Form 10-K.
Market-Rate Sensitive Instruments -- Interest Rate and Currency Risk
The Company's financial instruments that were subject to interest rate and
currency exchange rate risk at December 31, 1999, include debt instruments, U.S.
dollar interest rate swaps, and cross-currency interest rate swaps. The Company
performs sensitivity analyses to assess the impact of these risks on earnings.
This analysis reflects the impact of a hypothetical 10% adverse change in market
rates. In actuality, market rate volatility is dependent on many factors that
are impossible to forecast. Therefore, the adverse changes described below could
differ substantially from the hypothetical 10% impact. The analysis conducted
below excludes the assets of both the lending subsidiary and the Company's
insurance operations. Instead, these are referenced separately in tabular format
below.
22
<PAGE> 24
A sensitivity analysis of those instruments with variable interest rate
components was modeled to assess the impact that changing interest rates could
have on pretax earnings. The sensitivity analysis assumed an instantaneous 10%
adverse change to the then prevailing interest rates with all other variables
held constant. Given this model, the Company's pretax earnings, on an annual
basis, would have been negatively impacted by approximately $9,402 on December
31, 1999, and $5,657 on December 31, 1998. Had the Company terminated certain
interest rate swaps in December 1999, as discussed in note nine to the
consolidated financial statements in Item 8 of this Form 10-K, this same
sensitivity analysis indicates that the Company's pretax annual earnings would
have been negatively impacted by approximately $11,664 on December 31, 1999.
A similar model was used to assess the impact of changes in foreign
exchange rates on interest expense. At December 31, 1999, the Company's debt and
derivative exposure was primarily associated with the Euro, British pound,
Canadian dollar, Australian dollar, Chilean peso, Swiss franc, and Norwegian
krone. A 10% adverse change in the strength of the U.S. dollar would have
negatively impacted the Company's interest expense on an annual basis by
approximately $11,451 on December 31, 1999, and $12,229 on December 31, 1998.
Had the Company terminated the cross-currency interest rate swaps in December
1999, as discussed in note nine to the consolidated financial statements in Item
8 of this Form 10-K, this same sensitivity analysis indicates that the Company's
annual interest expense would have been negatively impacted by approximately
$2,176 on December 31, 1999.
23
<PAGE> 25
For certain assets associated with the Company's lending subsidiary and
insurance operations, the tables below present principal cash flows that exist
by maturity date and the related average interest rates:
AS OF DECEMBER 31, 1999:
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 THEREAFTER FAIR VALUE
------- ------- ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Lending subsidiary receivables......... $16,545 $32,601 $40,239 $55,553 $33,854 $32,234 $211,026
Average rate........................... 5.96% 7.68% 6.20% 9.15% 9.63% 8.59%
Insurance subsidiaries investments in
debt securities...................... 26,075 5,073 7,098 15,166 44,417 861,894 959,723
Average rate........................... 3.96% 5.92% 5.77% 5.81% 5.14% 6.51%
</TABLE>
AS OF DECEMBER 31, 1998:
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 THEREAFTER FAIR VALUE
------- ------- ------- -------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Lending subsidiary receivables........ $33,007 $14,369 $44,501 $107,117 $27,238 $43,297 $269,529
Average rate.......................... 7.70% 9.24% 8.54% 8.12% 8.97% 8.38%
Insurance subsidiaries investments in
debt securities..................... 85,316 70,369 76,233 108,416 74,231 503,804 918,369
Average rate.......................... 5.85% 5.38% 5.84% 5.42% 5.90% 4.93%
</TABLE>
To reduce exposure to interest rate changes, portfolio investments are
selected so the weighted average duration of the investments approximates the
duration of associated policyholder liabilities. The insurance companies are
subject to reinvestment risk upon either sale or maturity of the debt
securities. Management believes that absence of any material amounts of
"high-yield" or "non-investment grade" investments in the portfolios of the
Company's insurance operations enhances the ability of the insurance companies
to provide security to their policyholders.
24
<PAGE> 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS AND RELATED SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... 26
Consolidated Statement of Operations for the three years
ended December 31, 1999................................... 27
Consolidated Balance Sheet as of December 31, 1999 and
1998...................................................... 28
Consolidated Statement of Cash Flows for the three years
ended December 31, 1999................................... 29
Consolidated Statement of Stockholders' Equity for the three
years ended December 31, 1999............................. 30
Notes to Consolidated Financial Statements.................. 31
Financial Statement Schedule:
II -- Valuation and Qualifying Accounts..................... 64
</TABLE>
All other schedules have been omitted because the required information is
not applicable or because the information required is included in the
consolidated financial statements or the related notes thereto.
25
<PAGE> 27
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Service Corporation International
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Service Corporation International at December 31, 1999 and 1998, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States. In addition, in our opinion, the
financial statement schedule listed in the accompanying index presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Houston, Texas
March 29, 2000
26
<PAGE> 28
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues................................................. $3,321,813 $2,875,090 $2,535,865
Costs and expenses....................................... (2,708,054) (2,156,320) (1,848,253)
---------- ---------- ----------
Gross profit............................................. 613,759 718,770 687,612
General and administrative expenses...................... (82,585) (66,839) (66,781)
Restructuring and nonrecurring charges................... (362,428) -- --
---------- ---------- ----------
Income from operations................................... 168,746 651,931 620,831
Interest expense......................................... (238,195) (177,053) (136,720)
Dividends on preferred securities of SCI Finance LLC..... -- -- (4,382)
Other income............................................. 31,759 43,649 100,244
---------- ---------- ----------
Income (loss) before income taxes and extraordinary gain
(loss)................................................. (37,690) 518,527 579,973
(Provision) benefit for income taxes..................... 3,393 (176,385) (205,421)
---------- ---------- ----------
Income (loss) before extraordinary gain (loss)........... (34,297) 342,142 374,552
Extraordinary gain (loss) on early extinguishment of debt
(net of income taxes of $1,071 and $23,383)............ 1,885 -- (40,802)
---------- ---------- ----------
Net income (loss).............................. $ (32,412) $ 342,142 $ 333,750
========== ========== ==========
Earnings per share:
Basic:
Income (loss) before extraordinary gain (loss)......... $ (.13) $ 1.34 $ 1.53
Extraordinary gain (loss) on early extinguishment of
debt................................................ .01 -- (0.17)
---------- ---------- ----------
Net income (loss).............................. $ (.12) $ 1.34 $ 1.36
========== ========== ==========
Diluted:
Income (loss) before extraordinary gain (loss)......... $ (.13) $ 1.31 $ 1.47
Extraordinary gain (loss) on early extinguishment of
debt................................................ .01 -- (0.16)
---------- ---------- ----------
Net income (loss).............................. $ (.12) $ 1.31 $ 1.31
========== ========== ==========
Basic weighted average number of shares.................. 272,281 256,271 245,470
========== ========== ==========
Diluted weighted average number of shares................ 273,792 262,520 257,781
========== ========== ==========
</TABLE>
(See notes to consolidated financial statements)
27
<PAGE> 29
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1999 1998
------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 88,221 $ 358,210
Receivables, net of allowances............................ 605,127 565,552
Inventories............................................... 190,343 189,070
Other..................................................... 112,460 96,248
----------- -----------
Total current assets.............................. 996,151 1,209,080
----------- -----------
Investments -- insurance operations......................... 1,318,635 1,234,678
Prearranged funeral contracts............................... 2,898,139 2,588,806
Long-term receivables....................................... 1,562,418 1,408,076
Cemetery property, at cost.................................. 2,182,410 2,035,897
Property, plant and equipment, at cost (net)................ 1,881,525 1,824,979
Deferred charges and other assets........................... 1,286,967 1,151,430
Names and reputations (net)................................. 2,475,356 1,813,212
----------- -----------
$14,601,601 $13,266,158
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 589,847 $ 452,354
Current maturities of long-term debt...................... 423,949 96,067
Income taxes.............................................. 44,069 81,904
----------- -----------
Total current liabilities......................... 1,057,865 630,325
----------- -----------
Long-term debt.............................................. 3,636,067 3,764,590
Reserves and annuity benefits -- insurance operations....... 1,313,328 1,207,169
Deferred prearranged funeral contract revenues.............. 3,186,081 2,819,794
Deferred income taxes....................................... 873,023 797,086
Other liabilities........................................... 1,039,964 893,092
Stockholders' equity:
Common stock, $1 per share par value, 500,000,000 shares
authorized, 272,064,618 and 259,201,104 issued and
outstanding net of 2,792,503 and 68,373 treasury shares
at par................................................. 272,064 259,201
Capital in excess of par value............................ 2,156,301 1,646,765
Retained earnings......................................... 1,126,898 1,232,758
Accumulated other comprehensive income (loss)............. (59,990) 15,378
----------- -----------
Total stockholders' equity........................ 3,495,273 3,154,102
----------- -----------
$14,601,601 $13,266,158
=========== ===========
</TABLE>
(See notes to consolidated financial statements)
28
<PAGE> 30
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................... $ (32,412) $ 342,142 $ 333,750
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization..................... 252,145 202,277 157,550
Provision (benefit) for deferred income taxes..... (46,071) 56,308 19,212
Restructuring and nonrecurring charges............ 362,428 -- --
Cash paid related to restructuring and
nonrecurring charges............................ (37,553) -- --
Extraordinary (gain) loss on early extinguishment
of debt, net of income taxes.................... (1,885) -- 40,802
Gains from dispositions (net)..................... (19,752) (30,627) (89,252)
Provision for loan losses......................... 38,608 -- --
Realized gains on sale of investments............. (33,675) (65,313) --
Realized losses on sale of investments............ 32,465 42,026 --
Change in assets and liabilities net of effects
from acquisitions:
Increase in receivables......................... (223,405) (228,325) (174,429)
Increase in other assets........................ (3,416) (71,824) (24,904)
Increase in other liabilities................... 138,448 86,501 36,045
Other........................................... 6,925 (4,545) 3,160
----------- ----------- -----------
Net cash provided by operating activities.............. 432,850 328,620 301,934
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures................................. (211,481) (253,224) (230,532)
Net effect of prearranged funeral production and
maturities........................................ (39,239) (35,521) (5,537)
Purchases of securities -- insurance operations...... (1,916,015) (1,225,955) (1,407,588)
Sales of securities -- insurance operations.......... 1,716,136 1,200,334 1,383,934
Proceeds from sales of property and equipment........ 115,846 43,793 46,908
Acquisitions, net of cash acquired................... (102,647) (719,768) (409,731)
Loans issued by lending subsidiary................... (76,110) (142,017) (98,446)
Principal payments received on loans by lending
subsidiary........................................ 97,569 70,178 45,915
Proceeds from sale of equity investment.............. -- -- 147,700
Purchases of equity investments...................... (1,400) (6,968) (87,643)
Other................................................ (6,641) 9,273 (18,424)
----------- ----------- -----------
Net cash used in investing activities.................. (423,982) (1,059,875) (633,444)
----------- ----------- -----------
Cash flows from financing activities:
Increase in borrowings under revolving credit
agreements........................................ 504,279 100,294 304,505
Long-term debt issued................................ -- 1,100,000 650,000
Early extinguishment of debt......................... (365,935) -- (449,998)
Payments of debt..................................... (259,004) (76,329) (91,464)
Repurchase of common stock........................... (45,750) -- --
Dividends paid....................................... (96,779) (88,360) (69,888)
Bank overdrafts and other............................ (3,567) 5,956 (6,401)
----------- ----------- -----------
Net cash (used in) provided by financing activities.... (266,756) 1,041,561 336,754
----------- ----------- -----------
Effect of foreign currency............................. (12,101) 1,027 (2,498)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents... (269,989) 311,333 2,746
Cash and cash equivalents at beginning of year......... 358,210 46,877 44,131
----------- ----------- -----------
Cash and cash equivalents at end of year............... $ 88,221 $ 358,210 $ 46,877
=========== =========== ===========
</TABLE>
(See notes to consolidated financial statements)
29
<PAGE> 31
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
CAPITAL IN OTHER
COMMON EXCESS OF RETAINED COMPREHENSIVE
STOCK PAR VALUE EARNINGS INCOME (LOSS) TOTAL
-------- ---------- ---------- ------------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996.......................... $236,193 $1,237,783 $ 728,108 $ 33,233 $2,235,317
Comprehensive income:
Net income.......................................... 333,750 333,750
Other comprehensive loss:
Foreign currency translation........................ (29,795) (29,795)
Unrealized loss on securities, net.................. (6,957) (6,957)
----------
Total other comprehensive loss................ (36,752)
----------
Comprehensive income.................................. 296,998
Common Stock issued:
Stock option exercises and stock grants............. 820 9,296 10,116
Acquisitions........................................ 3,958 79,215 (3,832) 79,341
Debenture conversions............................... 492 5,925 6,417
Conversion of convertible preferred securities of
SCI Finance LLC................................... 11,461 161,027 172,488
Dividends on common stock ($.30 per share)............ (74,673) (74,673)
-------- ---------- ---------- -------- ----------
Balance at December 31, 1997.......................... 252,924 1,493,246 983,353 (3,519) 2,726,004
Comprehensive income:
Net income.......................................... 342,142 342,142
Other comprehensive income:
Foreign currency translation........................ 8,748 8,748
Unrealized gain on securities, net.................. 10,149 10,149
----------
Total other comprehensive income.............. 18,897
----------
Comprehensive income.................................. 361,039
Common Stock issued:
Stock option exercises and stock grants............. 3,593 56,485 60,078
Acquisitions........................................ 2,499 94,625 97,124
Debenture conversions............................... 185 2,409 2,594
Dividends on common stock ($.36 per share)............ (92,737) (92,737)
-------- ---------- ---------- -------- ----------
Balance at December 31, 1998.......................... 259,201 1,646,765 1,232,758 15,378 3,154,102
Comprehensive loss:
Net loss............................................ (32,412) (32,412)
Other comprehensive loss:
Foreign currency translation........................ (39,036) (39,036)
Unrealized loss on securities, net.................. (36,332) (36,332)
----------
Total other comprehensive loss................ (75,368)
----------
Comprehensive loss.................................... (107,780)
Common Stock issued:
Stock option exercises and stock grants............. 170 1,382 1,552
Acquisitions........................................ 15,506 550,325 565,831
Debenture conversions............................... 48 718 766
Repurchase of common stock............................ (2,861) (42,889) (45,750)
Dividends on common stock ($.27 per share)............ (73,448) (73,448)
-------- ---------- ---------- -------- ----------
Balance at December 31, 1999.......................... $272,064 $2,156,301 $1,126,898 $(59,990) $3,495,273
======== ========== ========== ======== ==========
</TABLE>
(See notes to consolidated financial statements)
30
<PAGE> 32
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE ONE
NATURE OF OPERATIONS
The Company is the largest provider of death care services in the world
through its funeral service, cemetery and financial services operations. At
December 31, 1999, the Company operated 3,823 funeral service locations, 525
cemeteries, 198 crematoria and two insurance operations located in 20 countries
on five continents.
The funeral service locations and cemetery operations consist of the
Company's funeral homes, cemeteries, crematoria and related businesses. Company
personnel at the funeral service locations provide all professional services
relating to funerals, including the use of funeral facilities and motor
vehicles. Funeral related merchandise is sold at funeral service locations and
certain funeral service locations contain crematoria. The Company sells
prearranged funeral services whereby a customer contractually agrees to the
terms of a funeral to be performed in the future. The Company's cemeteries
provide cemetery interment rights (including mausoleum spaces, lots and lawn
crypts) and sell cemetery related merchandise. Cemetery items are sold on an
atneed or preneed basis. Company personnel at cemeteries perform interment
services and provide management and maintenance of cemetery grounds. Certain
cemeteries also operate crematoria. There are 200 combination locations that
contain a funeral service location within a Company owned cemetery.
The financial services operations represent a combination of the Company's
insurance operations primarily related to the funding of prearranged funeral
contracts and a lending subsidiary which previously provided capital financing
for independent funeral home and cemetery operations.
NOTE TWO
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of Service Corporation International and all majority-owned
subsidiaries (the Company). Intercompany balances and transactions have been
eliminated in consolidation. Certain reclassifications have been made to prior
years to conform to current period presentation with no effect on the
consolidated financial position, results of operations or cash flows.
Use of Estimates in the Preparation of Financial Statements: The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Cash Equivalents: The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
Inventories and Cemetery Property: Funeral merchandise and cemetery
property and merchandise are stated at the lower of average cost or market.
Depreciation and Amortization: Depreciation of property, plant and
equipment is provided using the straight line method over the estimated useful
lives of the various classes of assets. Property and plant are depreciated over
a period ranging from seven to fifty years, equipment is depreciated over a
period from five to twenty years and leasehold improvements are depreciated over
a range of five to fifty years. For the three years ended December 31, 1999,
depreciation expense was $127,974, $115,195, and $87,571, respectively.
Maintenance and repairs are charged to expense whereas renewals and major
replacements are capitalized.
31
<PAGE> 33
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Prepaid management, consultative and non-competition agreements, primarily
with former owners and key employees of businesses acquired, are amortized on a
straight-line basis over the lives (generally from five to ten years) of the
respective contracts. Amortization expense associated with these agreements for
the three years ended December 31, 1999, 1998 and 1997 was $26,659, $25,403 and
$19,233, respectively. Net obtaining costs incurred pursuant to the sales of
trust funded and third party insurance funded prearranged funeral contracts are
deferred and amortized over 20 years, a period representing the estimated life
of the prearranged funeral contracts. Amortization associated with these net
obtaining costs for the three years ended December 31, 1999, 1998 and 1997 were
$21,904, $12,930 and $11,198, respectively. Other miscellaneous amortization for
the three years ended December 31, 1999, 1998 and 1997 was $8,233, $3,399 and
$1,899, respectively.
Names and Reputations: The excess of purchase price over the fair value of
identifiable net assets acquired in transactions accounted for as purchases are
included in Names and reputations and generally amortized on a straight line
basis over 40 years which, in the opinion of management, is not necessarily the
maximum period benefited. Fair values determined at the date of acquisition are
determined by management or independent appraisals. Many of the Company's
acquired funeral service locations have been providing high quality service to
client families for many years. Such loyalty often forms the basic valuation of
the funeral business. Additionally, the death care industry has historically
exhibited stable cash flows. The Company monitors the recoverability of names
and reputations based on projections of future undiscounted cash flows of the
acquired businesses. For the three years ended December 31, 1999, 1998 and 1997,
amortization expense was $67,375, $45,350, and $37,649, respectively.
Accumulated amortization of names and reputations as of December 31, 1999 and
1998 was $247,933 and $179,803, respectively.
Foreign Currency Translation: All assets and liabilities of the Company's
foreign subsidiaries are translated into U.S. dollars at exchange rates in
effect as of the end of the reporting period. Revenue and expense items are
translated at the average exchange rates for the reporting period. The resulting
translation adjustments are included as a component of accumulated other
comprehensive income (loss) in the consolidated statement of stockholders'
equity.
Funeral Operations: Funeral revenue is recognized when the funeral service
is performed. The Company's trade receivables consist primarily of funeral
services already performed. An allowance for doubtful accounts has been provided
based on historical experience. The Company sells price guaranteed prearranged
funeral contracts through various programs providing for future funeral services
at prices prevailing when the agreements are signed. Revenues associated with
sales of prearranged funeral contracts (which include accumulated trust earnings
and increasing insurance benefits) are deferred until such time that the funeral
services are performed (see note four to the consolidated financial statements).
Cemetery Operations: All cemetery interment right sales, together with
associated merchandise and services, are recorded as income at the time
contracts are signed. Costs related to the sales of interment rights include
property and other costs related to cemetery development activities and are
charged to operations using the specific identification method. Costs related to
merchandise and services are based on actual costs incurred or estimates of
future costs necessary, including provisions for inflation when required.
Allowances for customer cancellations are provided at the date of sale based
upon historical experience. Pursuant to state law, all or a portion of the
proceeds from cemetery merchandise or services sold on a preneed basis may be
required to be paid into trust funds. Merchandise and services funds trusted at
December 31, 1999 and 1998 were $822,829 and $662,564, respectively (see note
six to the consolidated financial statements). The Company recognizes realized
trust income on these merchandise and services trusts in current cemetery
revenues as trust earnings accrue to defray inflation costs recognized related
to merchandise and services that have not yet been provided. Additionally, a
portion of the proceeds from the sale of cemetery property is required by state
law to be paid into perpetual care trust funds. Earnings from these trusts are
recognized in current cemetery revenues and are intended to defray cemetery
maintenance costs, which are expensed as incurred. Perpetual
32
<PAGE> 34
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
care funds trusted at December 31, 1999 and 1998 were $519,538 and $418,109,
respectively, (see note six to the consolidated financial statements). The
principal of such perpetual care trust funds generally cannot be withdrawn by
the Company and therefore is not included in the consolidated balance sheet.
Insurance Operations: The Company accounts for its two life insurance
operations under generally accepted accounting principles for life insurance
companies.
For traditional and participating life products, premiums are recognized as
revenue when due from policyholders. Benefits and acquisition expenses are
recognized as a constant percentage of earned premiums. Computations of life
insurance reserves are based on anticipated investment yields (primarily 3.0%
for the French insurance company and 5.8% for the U.S. insurance companies),
mortality, surrenders, and provisions for unfavorable deviations.
For annuity products, premiums are recorded in a policyholder account which
is recorded to Reserves and annuity benefits -- insurance operations. Amounts
assessed against the policyholder account for contract expenses and mortality
coverage are recorded as revenue in proportion to estimated gross profits of the
annuity contracts.
To the extent recoverable, certain costs incurred related to the
acquisition of new business are deferred. Such costs consist primarily of
commissions, underwriting, policy issuance and direct marketing. Such expenses
are referred to as deferred policy acquisition costs (DPAC). DPAC related to
different products is amortized at a constant percentage over the life of the
book of contracts as follows: over the expected premium paying period for
traditional life insurance; based on the present value of the estimated gross
margin amounts, with interest at the percentage used to calculate the assumed
investment yield, for participating life insurance; and based on the present
value of estimated gross profit amounts, with interest at the rate of interest
that accrues to the policyholder balances, for annuities. DPAC is included as
part of Deferred charges and other assets in the consolidated balance sheet.
Also included as part of Deferred charges and other assets is the present
value of future profits (PVP) on business in force of acquired insurance
companies. Such amount represents the portion of costs to acquire such companies
that is allocated to the value of the right to receive future cash flows from
insurance contracts existing at the date of acquisition. PVP is amortized as
follows: over the expected premium paying period for traditional life insurance;
and over the estimated remaining life for annuities and participating life
insurance.
Investment income, net of investment expenses, and realized gains and
losses related to Investments -- insurance operations are included within
Revenues (see note five to the consolidated financial statements). Debt
securities and marketable equity securities are classified as available-for-sale
and are carried at quoted market value, if readily marketable, or at
management's estimated fair value, if not readily marketable. The change in the
unrealized gain or loss, net of deferred income tax, is recorded as a component
of other comprehensive income (loss) in the consolidated statement of
stockholders' equity. Realized gains and losses on investment transactions are
determined on the specific identification basis. When a decline in the value of
a specific investment is considered to be other than temporary, a provision for
impairment is charged to earnings and the carrying value of the investment is
reduced. Premiums and discounts on fixed debt securities are amortized over
their expected average lives using the interest method. Mortgage loans and real
estate are generally carried at amortized cost. Policy loans are stated at the
aggregate unpaid balance.
Derivatives: Amounts to be paid or received under interest rate swaps,
including the interest rate provisions of the cross-currency swaps, are recorded
on the accrual basis over the life of the swap agreements as an adjustment to
interest expense. The related net amounts payable to, or receivable from, the
counterparties are included in accrued liabilities or current receivables,
respectively. Gains and losses resulting from currency movements on the
cross-currency swaps that hedge the Company's net foreign investments are
reflected as a part of foreign currency translation in other comprehensive
income (loss) in the consolidated statement of stockholders' equity, with the
related net amounts due to, or from, the counterparties included in
33
<PAGE> 35
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other liabilities, or Deferred charges and other assets, respectively. Net
deferred gains and losses on early termination of interest rate swaps are
amortized into interest expense over the remaining lives of the original
agreements.
Recent Accounting Pronouncements: In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
required to be implemented in the Company's first quarter of 2001. This
statement establishes accounting and reporting standards for derivative
instruments and requires recognition of all derivatives as assets or liabilities
in the statement of financial position and measurement of those instruments at
fair value. Changes in the fair value of derivatives will be recorded either in
earnings or in other comprehensive income, based on the type of risk for which
the instrument is determined to be an effective hedge. Any change in fair value
of an instrument that is not designated as a hedge, or any portion of a change
in fair value of a hedging instrument that is deemed ineffective, will be
immediately recognized in earnings. The Company is currently assessing the
impact that adoption will have on its consolidated financial statements.
In December 1999, the Securities and Exchange Commission (the Commission)
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" (SAB No. 101). SAB No. 101, as amended, is required to be applied
beginning with the Company's second quarter of 2000. The Company, together with
other members of the death care industry, are currently discussing directly with
the Commission the application of SAB No. 101. Final resolution of the
discussions will not have an impact on the Company's consolidated cash flows,
but may have a material impact on the Company's consolidated financial condition
and on the manner in which the Company records preneed sales activities.
NOTE THREE
ACQUISITIONS
In January 1999, a wholly owned subsidiary of the Company merged with ECI
in a stock-for-stock transaction in which ECI shareholders received
approximately 15,501 shares of Company common stock valued at approximately
$557,000 and approximately 1,200 options to purchase Company common stock valued
at approximately $8,628. At the time of the merger, ECI owned 359 funeral
service locations and 80 cemeteries in North America.
The Company also acquired certain other funeral, cemetery, crematoria and
insurance operations both domestically and internationally during the years
ended December 31, 1999 and 1998. The following table is a summary of all the
acquisitions made during the two years ended December 31:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Number acquired (unaudited):
Funeral service locations................................. 434 308
Cemeteries................................................ 95 47
Crematoria................................................ 9 18
Insurance operations...................................... -- 2
Purchase price.............................................. $658,500 $784,000
</TABLE>
The consideration for these acquisitions consisted of combinations of cash,
Company common stock and issued debt. All acquisitions have been accounted for
under the purchase method of accounting; therefore, operating results of these
acquisitions have been included since their respective dates of acquisitions.
34
<PAGE> 36
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effect of the above acquisitions on the consolidated balance sheet at
December 31 was as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Current assets.............................................. $ 112,803 $ 52,339
Investments -- insurance operations......................... -- 622,379
Prearranged funeral contracts............................... 316,150 51,990
Long-term receivables....................................... 38,203 91,299
Cemetery property........................................... 202,164 266,591
Property, plant and equipment............................... 175,114 108,152
Deferred charges and other assets........................... 1,869 422,299
Names and reputations....................................... 782,651 354,772
Current liabilities......................................... (127,887) (84,562)
Long-term debt.............................................. (338,308) (53,609)
Deferred income taxes and other liabilities................. (171,330) (365,692)
Reserves and annuity benefits -- insurance operations....... -- (594,848)
Deferred prearranged funeral contract revenues.............. (322,951) (54,218)
Stockholders' equity........................................ (565,831) (97,124)
--------- ---------
Cash used for acquisitions........................ $ 102,647 $ 719,768
========= =========
</TABLE>
NOTE FOUR
PREARRANGED FUNERAL ACTIVITIES
The Company sells price guaranteed prearranged funeral contracts through
various programs providing for future funeral services at prices prevailing when
the agreements are signed. Payments under these contracts are placed in trust
accounts (pursuant to applicable law) or are used to pay premiums on life
insurance or annuity contracts.
Unperformed price guaranteed prearranged funeral contracts that are not
funded through Company insurance operations are included in the consolidated
balance sheet as Prearranged funeral contracts. This balance represents amounts
due from trust funds, customer receivables, or third party insurance companies.
A corresponding credit is recorded to Deferred prearranged funeral contract
revenues. Funeral revenue is recognized on prearranged funeral contracts at the
time the funeral service is performed. Trust earnings and increasing insurance
benefits are accrued and deferred until the services are performed, at which
time these funds are also recognized in funeral revenues. Such amounts are
intended to cover future increases in the cost of providing a price guaranteed
funeral service. Net obtaining costs incurred pursuant to the sales of trust
funded and third party insurance funded prearrangements are included in Deferred
charges and other assets. These obtaining costs include sales commissions and
certain other direct costs which are deferred and amortized over 20 years, a
period representing the estimated life of the prearranged contracts. The
aggregate net costs deferred as of December 31, 1999 and 1998 were $345,383 and
$263,429, respectively.
Prearranged funeral contracts may also be funded by insurance policies
written by the Company's insurance operations. Policy acquisition costs incurred
by the Company's insurance operations are deferred as part of Deferred charges
and other assets and amortized as prescribed by generally accepted accounting
principles for life insurance companies (see note two to the consolidated
financial statements). The aggregate net costs deferred as of December 31, 1999
and 1998 were $44,091 and $13,832, respectively.
35
<PAGE> 37
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Prearranged Funeral Contracts
The components of prearranged funeral contracts in the consolidated balance
sheet at December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Trusts:
Receivables from trusts................................... $1,405,273 $1,173,905
Receivables from customers................................ 290,997 280,005
Allowance for cancellation................................ (148,523) (115,206)
---------- ----------
Net trust related assets.......................... 1,547,747 1,338,704
Third Party Insurance:
Receivables from third party insurance companies.......... 1,463,029 1,349,674
Allowance for cancellation................................ (112,637) (99,572)
---------- ----------
Net third party insurance related assets.......... 1,350,392 1,250,102
---------- ----------
Prearranged funeral contracts............................... $2,898,139 $2,588,806
========== ==========
</TABLE>
The allowance for cancellation is based on historical experience and is
equivalent to approximately 9.0% of the total balance at December 31, 1999 and
8.3% at December 31, 1998. Accumulated earnings from trust funds and increasing
insurance benefits of third party insurance companies have been included to the
extent that they have accrued through December 31, 1999 and 1998, respectively.
The cumulative trust funded total has been reduced by allowable cash withdrawals
for trust earnings and amounts retained by the Company pursuant to various state
laws.
The activity in prearranged funeral contracts for the years ended December
31 is as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Beginning balance........................................... $2,588,806 $2,628,104
Net sales................................................. 216,754 285,931
Acquisitions/dispositions................................. 267,754 142,808
Realized earnings and increasing insurance benefits for
third party insurance companies........................ 113,902 105,866
Maturities................................................ (199,693) (196,960)
Change in cancellation reserve............................ (46,382) (6,848)
1998 reclassification of Company insurance operations..... -- (232,209)
Distributed earnings, effect of foreign currency and
other.................................................. (43,002) (137,886)
---------- ----------
Ending balance.............................................. $2,898,139 $2,588,806
========== ==========
</TABLE>
The cost and market value associated with the assets held in the trust
funds underlying the Company's prearranged funeral contracts at December 31 are
as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------- -----------------------
COST MARKET COST MARKET
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Debt securities:
Government......................... $ 420,219 $ 407,450 $ 323,831 $ 356,853
Corporate.......................... 123,406 118,783 103,835 106,190
Equity securities.................... 656,161 775,691 503,821 554,256
Money market/other................... 205,487 208,155 242,418 228,085
---------- ---------- ---------- ----------
$1,405,273 $1,510,079 $1,173,905 $1,245,384
========== ========== ========== ==========
</TABLE>
36
<PAGE> 38
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred Prearranged Funeral Contract Revenues
Deferred prearranged funeral contract revenues represents the original
contract price, trust earnings and increasing insurance benefits on unperformed
funeral contracts funded by trust or third party insurance companies. The total
value of unperformed prearranged funeral contracts consists of two components:
(i) contracts funded by trust or third party insurance companies and (ii)
contracts funded by the Company's insurance operations. The value of unperformed
prearranged funeral contracts to be funded by trust or third party insurance
companies are included in Deferred prearranged funeral contract revenues in the
consolidated balance sheet. A portion of the value of unperformed prearranged
funeral contracts to be funded by the Company's insurance operations is included
as a component of Reserves and annuity benefits -- insurance operations in the
consolidated balance sheet and reflects only the actuarially determined amounts
to be funded in accordance with generally accepted accounting principles for
life insurance subsidiaries. The remaining component of Reserves and annuity
benefits -- insurance operations represents the actuarially determined amounts
to be funded for non-SCI unperformed prearranged funeral contracts.
The following table summarizes for the years ended December 31 the activity
in deferred prearranged funeral contract revenues as well as reflects the
Company's unperformed prearranged funeral contracts to be funded through the
Company's life insurance operations as if they were valued at original contract
values plus increasing insurance benefits:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Beginning balance -- Deferred prearranged funeral contract
revenues.................................................. $2,819,794 $2,805,429
Net sales................................................. 213,526 292,972
Acquisitions/dispositions................................. 272,295 138,422
Realized earnings and increasing insurance benefits from
third party insurance companies........................ 113,705 106,353
Maturities................................................ (227,871) (192,817)
Change in cancellation reserve............................ (46,381) (6,848)
1998 reclassification of Company insurance operations..... -- (232,209)
Effect of foreign currency and other...................... 41,013 (91,508)
---------- ----------
Ending balance -- Deferred prearranged funeral contract
revenues.................................................. 3,186,081 2,819,794
---------- ----------
Unperformed contracts funded by Company insurance
operations................................................ 1,101,371 932,056
---------- ----------
Total value of unperformed prearranged funeral contracts.... $4,287,452 $3,751,850
========== ==========
</TABLE>
NOTE FIVE
INSURANCE OPERATIONS
The Company acquired AML effective July, 1998. In addition, the Company has
owned a French life insurance company (Auxia) since 1995. The primary purpose of
these life insurance operations is to assist in funding the Company's
prearranged funeral program.
37
<PAGE> 39
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Investments
As part of the Company's funding of prearranged funeral contracts, the
Company's life insurance operations invest in securities which are classified as
"available-for-sale." The cost, market value and unrealized gains and losses
related to investments at December 31 were as follows:
<TABLE>
<CAPTION>
1999
---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED
COST MARKET VALUE GAINS LOSSES
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Debt securities:
U.S. treasury......................... $ 29,054 $ 27,528 $ -- $ (1,526)
U.S. state and political
subdivisions....................... 76,726 70,930 30 (5,826)
French government..................... 87,893 85,938 261 (2,216)
Other foreign government (primarily
European).......................... 63,503 62,394 155 (1,264)
Corporate............................. 571,560 534,110 676 (38,126)
Mortgage-backed....................... 126,825 121,714 313 (5,424)
Asset-backed.......................... 55,583 53,455 132 (2,260)
Redeemable preferred stock............ 4,028 3,654 22 (396)
Equity securities:
Nonredeemable preferred stock......... 1,040 870 -- (170)
Common stock.......................... 65,587 113,004 47,689 (272)
Mutual funds:
Equity................................ 96,621 136,243 39,622 --
Debt.................................. 54,515 57,166 2,651 --
Mortgage loans.......................... 914 914 -- --
Real estate, net of accumulated
depreciation and amortization......... 32,547 32,547 -- --
Policy loans............................ 18,168 18,168 -- --
---------- ---------- ------- --------
$1,284,564 $1,318,635 $91,551 $(57,480)
========== ========== ======= ========
</TABLE>
38
<PAGE> 40
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1998
---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED
COST MARKET VALUE GAINS LOSSES
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Debt securities:
U.S. treasury......................... $ 8,841 $ 9,137 $ 296 $ --
French government..................... 241,033 251,187 10,545 (391)
Other foreign government (primarily
European).......................... 131,151 132,876 1,725 --
Corporate............................. 338,181 341,191 5,895 (2,885)
Mortgage-backed....................... 145,790 147,254 1,757 (293)
Asset-backed.......................... 32,340 32,925 704 (119)
Redeemable preferred stock............ 3,879 3,799 4 (84)
Equity securities:
Nonredeemable preferred stock......... 1,246 1,335 89 --
Common stock.......................... 85,439 117,493 33,483 (1,429)
Mutual funds:
Equity................................ 74,707 81,998 7,291 --
Debt.................................. 59,058 60,783 1,725 --
Mortgage loans.......................... 1,301 1,301 -- --
Real estate, net of accumulated
depreciation and amortization......... 34,636 34,636 -- --
Policy loans............................ 18,763 18,763 -- --
---------- ---------- ------- -------
$1,176,365 $1,234,678 $63,514 $(5,201)
========== ========== ======= =======
</TABLE>
The contractual maturities of debt securities as of December 31, 1999 were
as follows:
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
---------- --------
<S> <C> <C>
Within one year............................................. $ 26,312 $ 26,075
After one year through five years........................... 73,187 71,752
After five years through ten years.......................... 357,929 343,986
After ten years............................................. 375,336 342,740
---------- --------
Subtotal.......................................... 832,764 784,553
Mortgage and asset-backed securities........................ 182,408 175,170
---------- --------
$1,015,172 $959,723
========== ========
</TABLE>
Net investment income for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Debt securities......................................... $57,322 $35,941 $14,247
Equity securities....................................... 1,749 4,717 3,539
Other................................................... 5,510 2,066 --
------- ------- -------
Total investment income....................... 64,581 42,724 17,786
Investment expenses..................................... (5,344) (4,131) (3,053)
------- ------- -------
Net investment income......................... $59,237 $38,593 $14,733
======= ======= =======
</TABLE>
39
<PAGE> 41
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The gross realized gains and gross realized losses from sales of securities
for the years ended December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------- ---------------------------- ---------------------------
GAIN LOSS NET GAIN LOSS NET GAIN LOSS NET
------- -------- -------- ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Debt securities...... $11,651 $(31,746) $(20,095) $42,493 $(27,391) $15,102 $20,192 $(3,617) $16,575
Equity securities.... 22,024 (719) 21,305 22,820 (14,635) 8,185 17,516 (3,755) 13,761
------- -------- -------- ------- -------- ------- ------- ------- -------
Realized gain
(loss)............. $33,675 $(32,465) $ 1,210 $65,313 $(42,026) $23,287 $37,708 $(7,372) $30,336
======= ======== ======== ======= ======== ======= ======= ======= =======
</TABLE>
The amount of net investment income and realized gain (loss) which are
allocable to policyholders but included above is $12,412, $21,800 and $19,015
for the three years ended December 31, 1999, 1998 and 1997, respectively, and
are included in Costs and expenses in the consolidated statement of operations.
Changes in unrealized gain/loss on investments for the years ended December
31 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Fixed income securities................................ $(72,646) $13,930 $ 3,744
Equity securities...................................... 48,404 20,147 21,172
-------- ------- -------
Change in unrealized gain (loss) on investments........ $(24,242) $34,077 $24,916
======== ======= =======
</TABLE>
Present Value of Future Profits
An analysis of PVP for the years ended December 31 is provided as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Balance at beginning of year................................ $45,182 $12,222
Additions due to acquisitions............................... 945 36,630
Amortization, net of interest accrued....................... (5,785) (4,476)
Effect of foreign currency.................................. (1,630) 806
------- -------
Balance at end of year...................................... $38,712 $45,182
======= =======
</TABLE>
It is anticipated that PVP will be reduced by the following amounts in
future years:
<TABLE>
<S> <C>
2000...................................................... $ 5,122
2001...................................................... 4,596
2002...................................................... 3,582
2003...................................................... 3,117
2004...................................................... 2,302
Thereafter................................................ 19,993
-------
$38,712
=======
</TABLE>
Statutory Financial Information
The Company's insurance operations are required to file financial
statements with state (for U.S. companies) or national (for the French company)
insurance regulatory authorities prepared on an
40
<PAGE> 42
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accounting basis prescribed or permitted by such authorities (statutory basis).
Certain statutory amounts were as follows as of and for the year ended December
31, 1999:
<TABLE>
<CAPTION>
UNITED STATES FRANCE
------------- -------
<S> <C> <C>
Capital and surplus......................................... $61,539 $63,606
Net income.................................................. 8,107 7,226
</TABLE>
Under statutory regulations, AML must maintain certain minimum amounts of
statutory capital and statutory surplus. AML is also regulated by state
regulatory authorities as to amounts of dividends which can be paid without
prior approval of regulatory authorities. In 2000, AML can distribute dividends
to the Company of up to $5,904 without prior approval.
Participating Life Insurance
Participating policies represented approximately 29% and 33% of total life
insurance in force at December 31, 1999 and 1998, respectively. Participating
policies represented approximately 22% and 51% of premium income for 1999 and
1998, respectively. Dividends on participating policies amounted to $7,790 in
1999 and $25,548 in 1998. The amount of dividends is determined through contract
provision (within French legal requirements) for all life insurance policies
issued by Auxia and by the contract provisions of any participating policies
issued by AML.
NOTE SIX
CEMETERY TRUST FUNDS
Merchandise and Services
Amounts paid into cemetery merchandise and services trusts are included in
long-term receivables, at cost. The cost and market values associated with the
assets held in the cemetery merchandise and services trust funds underlying the
Company's long-term receivables at December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
COST MARKET COST MARKET
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Debt securities:
Government............................... $267,357 $255,494 $204,277 $201,399
Corporate................................ 87,422 82,357 83,845 84,503
Equity securities.......................... 357,451 362,747 295,210 291,222
Money market/other......................... 110,599 111,463 79,232 79,284
-------- -------- -------- --------
$822,829 $812,061 $662,564 $656,408
======== ======== ======== ========
</TABLE>
The realized investment earnings related to these cemetery merchandise and
services trust funds were $39,930, $69,466 and $49,305 for the three years ended
December 31, 1999, 1998 and 1997, respectively.
Perpetual Care
The cost and market values associated with the assets held in perpetual
care trust funds at December 31 were as follows:
41
<PAGE> 43
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
COST MARKET COST MARKET
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Debt securities:
Government............................... $ 75,040 $ 67,011 $ 33,530 $ 33,473
Corporate................................ 266,325 254,926 230,798 233,599
Equity securities.......................... 98,820 105,856 134,555 126,853
Money market/other......................... 79,353 79,865 19,226 19,206
-------- -------- -------- --------
$519,538 $507,658 $418,109 $413,131
======== ======== ======== ========
</TABLE>
The realized investment earnings related to these perpetual care trust
funds were $25,950, $27,814 and $25,666 for the three years ended December 31,
1999, 1998 and 1997, respectively.
NOTE SEVEN
INCOME TAXES
The provision or benefit for income taxes includes United States income
taxes, determined on a consolidated return basis, foreign, state and local
income taxes.
Income (loss) before income taxes and extraordinary gain (loss) related to
the early extinguishment of debt for the years ended December 31 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
United States........................................ $(61,230) $419,450 $474,478
Foreign.............................................. 23,540 99,077 105,495
-------- -------- --------
$(37,690) $518,527 $579,973
======== ======== ========
</TABLE>
Income tax provision (benefit) for the years ended December 31 consisted of
the following:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Current:
United States...................................... $ 24,194 $100,110 $157,450
Foreign............................................ 13,141 10,881 7,022
State and local.................................... 5,343 9,086 21,737
-------- -------- --------
42,678 120,077 186,209
-------- -------- --------
Deferred:
United States...................................... (17,670) 48,861 15,045
Foreign............................................ (24,670) (697) 1,432
State and local.................................... (3,731) 8,144 2,735
-------- -------- --------
(46,071) 56,308 19,212
-------- -------- --------
Total provision (benefit).................. $ (3,393) $176,385 $205,421
======== ======== ========
</TABLE>
The Company made income tax payments of approximately $30,300, $126,000,
and $155,400, for the three years ended December 31, 1999, 1998 and 1997,
respectively.
42
<PAGE> 44
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The differences between the U.S. federal statutory tax rate and the
Company's effective rate for the years ended December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Computed tax provision (benefit) at the applicable
federal statutory income tax rate................. $(13,191) $181,485 $202,991
State and local taxes, net of federal income tax
benefits.......................................... 1,048 11,199 15,906
Dividends received deduction and tax exempt
interest.......................................... (210) (1,178) (1,618)
Amortization of names and reputations............... 11,844 6,423 5,622
Enacted tax rate change............................. -- (2,218) (5,491)
Foreign jurisdiction tax rate difference............ (15,166) (18,576) (12,909)
Write down of names and reputations................. 11,528 (260) 1,319
Nondeductible expenses.............................. 2,315 1,718 1,301
Other............................................... (1,561) (2,208) (1,700)
-------- -------- --------
Provision (benefit) for income taxes...... $ (3,393) $176,385 $205,421
======== ======== ========
Total effective tax rate.................. (9.0)% 34.0% 35.4%
======== ======== ========
</TABLE>
Deferred taxes are determined based on differences between the financial
reporting and tax bases of assets and liabilities and are measured using the
enacted marginal tax rates. The tax effects of temporary differences and
carry-forwards that give rise to significant portions of deferred tax assets and
liabilities as of December 31 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Receivables, principally due to sales of cemetery interment
rights and related products............................... $ 279,153 $224,614
Inventories and cemetery property, principally due to
purchase accounting adjustments........................... 541,063 501,974
Property, plant and equipment, principally due to
depreciation and to purchase accounting adjustments....... 78,496 91,831
Other....................................................... 141,203 99,744
---------- --------
Deferred tax liabilities.................................. 1,039,915 918,163
---------- --------
Deferred revenue on prearranged funeral contracts,
principally due to earnings from trust funds.............. (46,051) (27,270)
Accrued liabilities......................................... (93,443) (2,927)
Carry-forwards and foreign tax credits...................... (73,851) (36,789)
---------- --------
Deferred tax assets....................................... (213,345) (66,986)
---------- --------
Valuation allowance......................................... 27,278 13,058
---------- --------
Net deferred income taxes................................. $ 853,848 $864,235
========== ========
</TABLE>
During the three years ended December 31, 1999, 1998 and 1997, tax expense
resulting from allocating certain tax benefits directly to capital in excess of
par value totaled $113, $42,794, and $3,799, respectively.
Current refundable income taxes and foreign current deferred tax assets are
included in Other current assets, long-term deferred tax assets associated with
AML are included in Deferred charges and other assets, with current taxes
payable and current deferred tax liabilities being reflected as Income taxes in
the consolidated balance sheet.
43
<PAGE> 45
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1999 and 1998, United States income taxes had not been
provided on $397,443 and $333,890, respectively, of undistributed earnings of
foreign subsidiaries since it is the Company's intention to permanently reinvest
such earnings. Although it is not practicable to determine the deferred tax
liability on the unremitted earnings, credits for income taxes paid by the
Company's foreign subsidiaries will be available to significantly reduce any
U.S. tax if these foreign earnings are remitted.
As of December 31, 1999 the Company had United States foreign tax credit
carry-forwards of $2,800 which will expire in the years 2000 through 2001.
Various subsidiaries have international, federal, and state operating loss
carry-forwards of $431,696 with expiration dates through 2014. The Company
believes that some uncertainty exists with respect to future realization of
these tax credit and loss carry-forwards, therefore a valuation allowance has
been established for the carry-forwards not expected to be realized. The
increase in the valuation allowance is primarily attributable to net operating
losses.
NOTE EIGHT
DEBT
Debt as of December 31 was as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Bank revolving credit agreements and commercial paper....... $1,179,704 $ 650,596
6.375% notes due in 2000.................................... 150,000 150,000
6.75% notes due in 2001..................................... 150,000 150,000
8.72% amortizing notes due in 2002.......................... 71,174 114,259
8.375% notes due in 2004.................................... 51,840 51,840
7.375% notes due in 2004.................................... 250,000 250,000
6.0% notes due in 2005...................................... 600,000 600,000
7.2% notes due in 2006...................................... 150,000 150,000
6.875% notes due in 2007.................................... 150,000 150,000
6.5% notes due in 2008...................................... 200,000 200,000
7.7% notes due in 2009...................................... 200,000 200,000
6.95% amortizing notes due in 2010.......................... 52,557 55,691
Floating rate notes due in 2011 (putable in 1999)........... -- 200,000
7.875% debentures due in 2013............................... 55,627 55,627
7.0% notes due in 2015 (putable in 2002).................... 300,000 300,000
6.3% notes due in 2020 (putable in 2003).................... 300,000 300,000
Medium term notes, maturities through 2019, fixed average
interest rate of 9.32%.................................... 35,720 35,720
Convertible debentures, interest rates range from
4.75%-5.5%, due through 2008, conversion price ranges from
$11.25-$50.00............................................. 49,213 49,979
Mortgage and other notes payable with maturities through
2050...................................................... 136,368 216,833
Deferred loan costs......................................... (22,187) (19,888)
---------- ----------
Total debt.................................................. 4,060,016 3,860,657
Less current maturities..................................... (423,949) (96,067)
---------- ----------
Total long-term debt.............................. $3,636,067 $3,764,590
========== ==========
</TABLE>
The Company's primary revolving credit agreements provide for borrowings up
to $1,600,000 and consists of three committed facilities -- two 364-day
facilities and a 5-year, multi-currency facility. These facilities are primarily
used to support the previous issuance of commercial paper and for general
corporate purposes.
44
<PAGE> 46
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
One 364-day facility, which expires June 25, 2000, allows for borrowings up
to $300,000 and contains provisions that permit the Company to convert the
outstanding balance into a two-year term loan upon maturity. The second 364-day
facility allows for borrowings up to $600,000 and expires November 1, 2000. The
5-year, multi-currency facility permits borrowings up to $700,000, including
$500,000 in various foreign currencies, and expires June 27, 2002.
Interest rates for these facilities are based on various indices as
determined by the Company. For each facility, a quarterly fee is paid on the
total commitment amount ranging from 0.25% to 0.50% depending on the Company's
senior debt ratings. This fee for each facility was 0.25% at December 31, 1999,
however, the fees were increased to 0.50% in January 2000 as a result of the
Company's senior debt rating downgrade. Additionally, these credit facilities
have financial compliance provisions, including a maximum debt-to-
capitalization ratio of 60%, a minimum interest coverage ratio of 2.75, a
minimum net worth requirement defined in the facility agreements, and
limitations on cash distributions, subsidiary borrowings, liens and guarantees.
Approximately $870,545 was outstanding under the above facilities at
December 31, 1999, with a weighted average rate of 6.97% ($217,345 at December
31, 1998, with a weighted average interest rate of 5.65%). Approximately
$295,545 of these borrowings was denominated in various foreign currencies under
the 5-year facility at December 31, 1999 ($217,345 at December 31, 1998).
The Company's commercial paper program is backed by the above facilities.
At December 31, 1999, $309,159 of commercial paper was outstanding with a
weighted average interest rate of 6.58% ($433,251 with a weighted average
interest rate of 6.68% at December 31, 1998). The commercial paper borrowings
and revolving notes generally have maturities ranging from 1 to 180 days.
Historically, the Company has classified borrowings under these facilities
as long-term debt since it has been the Company's intent to refinance such
borrowings with long-term debt or equity. In 1999, however, the Company's
downgraded credit ratings, both short-term and long-term, have limited its
access to the capital markets. As a result, borrowings of $179,704 which are
either funded or backed by the credit facilities which are in excess of
$1,000,000 have been classified as current at December 31, 1999.
In March 1999, the Company repurchased two issues of debt. On March 26,
1999, the Company repurchased the $200,000 floating-rate notes, which were
originally due April 2011. These notes were to be remarketed in April 1999 as
fixed-rate notes. The Company chose to refinance with commercial paper to
maintain floating-rate exposure. The purchase price was $200,000 plus accrued
interest and a premium of approximately $22,185 resulting in an extraordinary
loss of $14,148, net of tax. On March 31, 1999, the Company repurchased $143,750
ECI convertible debentures, which were originally due December 2004. This
repurchase was effected by a change-of-control clause allowing the holders to
put the bonds back to the Company after the acquisition of ECI. The purchase
price was $143,750 plus accrued interest and resulted in an extraordinary gain
of $16,033 net of tax relating to the unamortized premium reflecting the market
valuation of the debentures at the date ECI merged with the Company. These
debentures were refinanced with commercial paper.
At December 31, 1999, approximately $29,869 of the Company's assets were
pledged as collateral for the mortgage and other notes payable.
The stated coupons described in the above table have been substantially
modified through the use of interest rate and cross-currency interest rate swaps
used in the management of interest rates within defined targets for fixed and
floating interest rate exposure. Approximately $1,521,743 of the Company's debt
was converted from U.S. dollars using cross-currency interest rate swaps,
resulting in approximately $1,931,119 of debt being denominated in foreign
currencies at December 31, 1999 (see note nine to the consolidated financial
statements).
45
<PAGE> 47
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cash interest payments for the three years ended December 31, 1999, totaled
$237,682, $165,788 and $141,572, respectively.
The aggregate maturities on debt for the five years subsequent to December
31, 1999, are as follows: 2000 -- $423,949; 2001 -- $196,543;
2002 -- $1,316,573; 2003 -- $323,865; 2004 -- $322,405.
Subsequent to year end, the Company repurchased certain bonds in the open
market with a face value aggregating $94,400 as follows: $58,950 of the 6.375%
notes due 2000, $27,000 of the 6.75% notes due 2001 and $8,450 of the 6.00%
notes due 2005. Funds used to repurchase the debt were obtained from terminating
certain swap agreements (see note nine to the consolidated financial
statements). The repurchase resulted in an extraordinary gain on early
extinguishment of debt totaling $10,200 on a pretax basis.
NOTE NINE
DERIVATIVES
The Company enters into derivative transactions primarily in the form of
interest rate swaps and cross-currency interest rate swaps in combination with
local currency borrowings to manage its mix of fixed and floating rate debt and
to hedge the Company's net investments in foreign assets. The Company has
procedures in place to monitor and control the use of derivatives and only
enters into transactions with a limited group of creditworthy financial
institutions. The Company does not engage in derivative transactions for
speculative or trading purposes, nor is it a party to leveraged derivatives.
In general, cross-currency swaps convert U.S. dollar debt into the
respective foreign currency of the Company's various foreign operations. Such
cross-currency swaps are used in combination with local currency borrowings to
substantially hedge the Company's net investment in foreign operations. The
cross-currency swaps have generally included interest rate provisions to enable
the Company to additionally hedge a portion of the earnings of its foreign
operations. Accordingly, movements in currency rates that impact the swap
generally offset a corresponding movement in the value of the underlying assets
being hedged. Similarly, currency movements that impact foreign expense due
under the cross-currency interest rate swaps generally offset a corresponding
movement in the earnings of the foreign operation.
46
<PAGE> 48
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following tables present information at December 31 about the Company's
derivatives:
<TABLE>
<CAPTION>
1999
-------------------------------------------------------------------
WEIGHTED
AVERAGE
CARRYING INTEREST RATE
NOTIONAL AMOUNT ASSET --------------
AMOUNT (LIABILITY) MATURITY RECEIVE PAY FAIR VALUE
---------- ------------ --------- ------- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps:
US dollar fixed to US dollar floating...................... $ 300,000 $ -- 2001-2002 6.40% 6.13% $ (2,361)
US dollar fixed to US dollar floating...................... 550,000 -- 2003-2004 6.49% 6.15% (6,776)
US dollar fixed to US dollar floating...................... 350,000 -- 2006-2009 6.60% 6.03% (17,237)
US dollar floating to US dollar fixed...................... 240,000 -- 2000 6.21% 5.83% 378
Canadian dollar floating to Canadian dollar fixed.......... 209,043 -- 2007-2008 5.05% 6.27% (6,333)
Australian dollar floating to Australian dollar fixed...... 42,686 -- 2006 5.93% 7.81% (1,019)
British pound floating to British pound fixed.............. 282,521 -- 2008 6.21% 6.83% (3,609)
French franc floating to German mark floating.............. 151,252 -- 2006 3.27% 3.50% (2,058)
German mark floating to French franc fixed................. 75,780 -- 2003 3.32% 5.66% (2,726)
Cross-Currency Interest Rate Swaps:
US dollar fixed to Canadian dollar floating................ 100,000 6,267 2010 6.95% 5.65% 947
US dollar floating to Canadian dollar fixed................ 193,901 (1,860) 2003 6.12% 5.53% 4,128
US dollar floating to Australian dollar fixed.............. 184,841 5,749 2000-2003 6.18% 6.09% 9,792
US dollar floating to Australian dollar floating........... 59,196 4,033 2000-2003 6.18% 5.92% 4,180
US dollar fixed to British pound fixed..................... 63,763 (3,585) 2002 8.72% 9.64% (4,117)
US dollar fixed to British pound floating.................. 293,754 (11,216) 2002-2004 8.38% 6.57% (1,204)
US dollar fixed to French franc fixed...................... 300,000 72,815 2000-2007 6.29% 6.21% 66,124
US dollar fixed to French franc floating................... 150,000 34,091 2000-2007 6.90% 3.56% 35,323
US dollar floating to French franc fixed................... 117,833 5,276 2000 6.11% 4.23% 5,293
US dollar fixed to German mark floating.................... 150,000 34,188 2003-2006 5.98% 2.94% 41,780
US dollar floating to Spanish peseta fixed................. 98,214 8,416 2003 6.11% 4.84% 8,200
US dollar floating to Norwegian krone fixed................ 22,815 1,267 2003 6.11% 5.80% 1,678
Australian dollar fixed to US dollar floating.............. 64,728 (7,595) 2000 5.97% 6.18% (7,802)
---------- -------- --------
$4,000,327 $147,846 $122,581
========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1998
-------------------------------------------------------------------
WEIGHTED
AVERAGE
CARRYING INTEREST RATE
NOTIONAL AMOUNT ASSET --------------
AMOUNT (LIABILITY) MATURITY RECEIVE PAY FAIR VALUE
---------- ------------ --------- ------- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps:
US dollar fixed to US dollar floating...................... $ 250,000 $ -- 1999-2001 7.35% 5.32% $ 7,931
US dollar fixed to US dollar floating...................... 600,000 -- 2002-2003 6.24% 5.24% 15,093
US dollar fixed to US dollar floating...................... 300,000 -- 2004-2006 7.02% 5.33% 25,082
US dollar fixed to US dollar floating...................... 300,000 -- 2008-2009 6.61% 5.39% 24,552
US dollar floating to US dollar fixed...................... 420,000 -- 2000-2001 5.22% 5.84% (5,751)
US dollar floating to US dollar fixed...................... 380,000 -- 2003-2004 5.03% 5.54% (10,425)
Canadian dollar floating to Canadian dollar fixed.......... 196,528 -- 2007-2008 5.23% 5.92% (18,873)
Australian dollar floating to Australian dollar fixed...... 39,670 -- 2006 4.75% 7.81% (5,981)
British pound floating to British pound fixed.............. 289,819 -- 2008 6.04% 6.83% (32,083)
French franc floating to German mark floating.............. 175,311 -- 2006 3.56% 3.84% (2,815)
German mark floating to French franc fixed................. 87,833 -- 2003 3.79% 5.66% (7,566)
Cross-Currency Interest Rate Swaps:
US dollar fixed to Canadian dollar floating................ 181,728 20,955 1999-2010 6.82% 5.58% 29,476
US dollar floating to Canadian dollar fixed................ 193,901 9,861 2003 5.22% 5.53% 8,163
US dollar floating to Australian dollar fixed.............. 208,255 21,851 1999-2003 5.25% 6.14% 18,057
US dollar floating to Australian dollar floating........... 59,196 7,931 2000-2003 5.22% 4.80% 7,217
US dollar fixed to British pound fixed..................... 91,407 (7,238) 2002 8.72% 9.64% (7,636)
US dollar fixed to British pound floating.................. 295,352 (19,129) 2002-2004 8.38% 6.59% 15,587
US dollar fixed to French franc fixed...................... 300,000 36,678 2000-2007 6.29% 6.21% 22,465
US dollar fixed to French franc floating................... 150,000 15,654 2000-2007 6.90% 3.90% 26,956
US dollar floating to French franc fixed................... 117,833 (12,628) 2000 5.26% 4.23% (15,005)
US dollar fixed to German mark floating.................... 150,000 15,766 2003-2006 5.98% 3.48% 28,414
US dollar floating to Spanish peseta fixed................. 98,214 (5,899) 2003 5.26% 4.84% (11,106)
US dollar floating to Norwegian krone fixed................ 22,815 (64) 2003 5.26% 5.80% 72
Australian dollar fixed to US dollar floating.............. 88,141 (15,079) 1999-2000 6.14% 5.30% (13,880)
---------- -------- --------
$4,996,003 $ 68,659 $ 97,944
========== ======== ========
</TABLE>
47
<PAGE> 49
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's consolidated debt totaled $4,060,016 at a weighted average
rate of 6.83% at December 31, 1999, ($3,860,657 at a weighted average rate of
6.77% at December 31, 1998) excluding $188,123 of the lending subsidiary's debt.
After giving consideration to the interest rate and cross-currency interest rate
swaps, the weighted average rate of debt was 6.41% at December 31, 1999, and
6.16% at December 31, 1998, excluding the lending subsidiary's debt.
At December 31, 1999, the Company's debt and derivative instruments,
excluding the lending subsidiary's debt, consisted of approximately 61% of fixed
interest rate debt at a weighted average rate of 6.36% and approximately 39% of
floating interest rate debt at a weighted average rate of 6.49%. At December 31,
1998, the Company's total debt consisted of approximately 74% of fixed interest
rate debt at a weighted average rate of 6.17% and approximately 26% of floating
interest rate debt at a weighted average rate of 6.15%.
Approximately $1,931,119 and $2,112,526 of the Company's indebtedness was
denominated in foreign currencies after consideration of the derivative
instruments at December 31, 1999 and 1998, respectively. Interest rate swap
settlements are generally semi-annual and match the payment dates of the
underlying debt or related intercompany loans for the foreign operations being
hedged. The notional amounts of the cross-currency swaps are exchangeable in
accordance with the terms of the swap agreements: either at maturity for
non-amortizing swaps or according to defined amortization tables.
As of December 31, 1999 and 1998, $115,311 and $558,407, respectively, of
the interest rate swaps contained provisions that either terminate the swap or
convert the rate paid to a new index if certain interest rate conditions are
met. Maturities of notional amounts relating to derivative financial instruments
held on December 31, 1999, are as follows: 2000 -- $710,879; 2001 -- $150,000;
2002 -- $355,775; 2003 -- $875,671; 2004 -- $522,500; and
thereafter -- $1,385,502.
Subsequent to year end, the Company materially modified its participation
in derivative transactions by terminating or assigning away certain interest
rate swaps and all cross-currency rate swaps noted in the tables, thereby
removing the Company's hedges of foreign exchange rate exposure. A total
notional value of $2,860,327 was eliminated in this process. The net proceeds
from these terminations and assignments totaled approximately $110,658, which
was primarily used to extinguish debt. These proceeds are classified according
to the following components: approximately $21,849 was due to the Company as
accrued interest receivable, approximately $143,498 resulted from foreign
exchange rate gains and approximately $54,689 resulted from interest rate
losses. The amount associated with the foreign exchange rate gains reduced the
corresponding amount due from counter parties recorded in Deferred charges and
other assets. The amount associated with the interest rate losses will be
amortized into interest expense over the remaining term of the swap agreements
and will have a net effect of approximately $12,368 during the year ended
December 31, 2000.
NOTE TEN
CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments has been determined using available market information and
appropriate valuation methodologies. The carrying amounts of cash and cash
equivalents, trade receivables and accounts payable approximate fair values due
to the short-term maturities of these instruments. It is not practicable to
estimate the fair value of receivables due on cemetery contracts or prearranged
funeral contracts (other than cemetery merchandise trust funds and prearranged
funeral trust funds, see notes four and six to the consolidated financial
statements) without incurring excessive costs because of the large number of
individual contracts with varying terms. The investments of the Company's
insurance subsidiaries are reported at fair value in the consolidated balance
sheet. Due to the decision by the Company to indefinitely suspend the operations
of the lending subsidiary, impairment charges have been recorded to reduce the
carrying value of certain loans to their fair value. Additionally, a provision
for loan
48
<PAGE> 50
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
losses has been recorded against certain other loans (see note eighteen to the
consolidated financial statements).
The Company has entered into various derivative financial instruments
(primarily swap agreements) with major financial institutions to hedge potential
exposures to interest rate and foreign exchange rate fluctuations. Fair values
were obtained from counterparties to the agreements, representing their
estimates of the amount the Company would pay or receive to terminate each swap
agreement based upon existing terms and current market conditions. The net fair
value of the Company's various swap agreements was an asset of $122,581 and
$97,944 at December 31, 1999 and 1998, respectively (see note nine to the
consolidated financial statements). The fair value of the Company's swap
agreements may vary substantially with changes in interest and currency exchange
rates. The Company's credit exposure is limited to the sum of the fair value of
positions that have become favorable to the Company and any accrued interest
receivable due from counterparties. Potential credit exposure is dependent upon
the maximum adverse impact of interest and currency movement. Such potential
credit exposure is minimized by selection of counterparties from a limited group
of high quality institutions and inclusion of certain contract provisions.
Management believes that any credit exposure with respect to its favorable
positions at December 31, 1999 is minimal (see note nine to the consolidated
financial statements).
The fair market value of the Company's debt at December 31 was as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Bank revolving credit agreements and commercial paper....... $1,179,704 $ 650,596
6.375% notes due in 2000.................................... 140,550 151,598
6.75% notes due in 2001..................................... 133,050 153,196
8.72% amortizing notes due in 2002.......................... 70,944 123,344
8.375% notes due in 2004.................................... 42,872 58,093
7.375% notes due in 2004.................................... 203,500 266,397
6.0% notes due in 2005...................................... 441,600 596,618
7.2% notes due in 2006...................................... 114,300 159,900
6.875% notes due in 2007.................................... 107,400 157,774
6.5% notes due in 2008...................................... 137,200 204,842
7.7% notes due in 2009...................................... 143,400 222,220
6.95% amortizing notes due in 2010.......................... 38,104 60,392
Floating rate notes due in 2011 (putable in 1999)........... -- 200,000
7.875% debentures due in 2013............................... 32,152 62,885
7.0% notes due in 2015 (putable in 2002).................... 254,100 333,037
6.3% notes due in 2020 (putable in 2003).................... 244,800 302,826
Medium term notes, maturities through 2019, fixed average
interest rate of 9.32%.................................... 24,152 42,711
Convertible debentures...................................... 59,672 65,828
Mortgage notes and other debt............................... 136,368 218,863
---------- ----------
Total debt........................................ $3,503,868 $4,031,120
========== ==========
</TABLE>
The fair value of the fixed rate long-term borrowings was estimated by
discounting the future cash flows, including interest payments, using rates
currently available for debt of similar terms and maturity, based on the
Company's credit standing and other market factors. The carrying value of
convertible securities has been estimated based on the respective shares of
Company common stock into which such securities may be converted. The carrying
value of the Company's revolving credit agreements approximate fair value
because the rates on such agreements are variable, based on current market
conditions.
49
<PAGE> 51
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company grants credit in the normal course of business, and the credit
risk with respect to these funeral, cemetery and prearranged funeral receivables
due from customers is generally considered minimal because of the wide
dispersion of the customers served. Procedures are in effect to monitor the
creditworthiness of customers, and bad debts have not been significant in
relation to the volume of revenues.
Customer payments on prearranged funeral contracts that are placed into
state regulated trusts or used to pay premiums on life insurance contracts
generally do not subject the Company to collection risk. Insurance funded
contracts are subject to supervision by state insurance departments and are
protected in the majority of states by insurance guaranty acts.
The Company's lending subsidiary is a party to financial instruments with
potential credit risk. The financial instruments result from loans made in the
normal course of business to meet the financing needs of borrowers who are
principally independent funeral home and cemetery operators. These financial
instruments also include loan commitments of approximately $46,885 at December
31, 1999 ($31,449 at December 31, 1998) to extend credit. The face value of the
lending subsidiary's total loans receivable at December 31, 1999 was
approximately $246,818 ($191,373 net of the provision for loan losses and
impairment charges) and $269,529 at December 31, 1998. The lending subsidiary
evaluates each borrower's creditworthiness, and the amount loaned and collateral
obtained, if any, is determined by this evaluation (see note eighteen to the
consolidated financial statements).
NOTE ELEVEN
COMMITMENTS
The annual payments for operating leases (primarily for funeral home
facilities and transportation equipment) are as follows:
<TABLE>
<S> <C>
2000...................................................... $ 57,112
2001...................................................... 50,459
2002...................................................... 43,225
2003...................................................... 29,479
2004...................................................... 22,532
Thereafter................................................ 96,615
--------
Subtotal........................................ 299,422
Less:
Subleases............................................... (2,306)
--------
Total........................................... $297,116
========
</TABLE>
The majority of these operating leases contain one of the following
options: (a) purchase the property at the fair value at date of exercise, (b)
purchase the property for a value determined at the inception of the lease or
(c) renew for the fair rental value at the end of the primary term of the lease.
Some of the equipment leases contain residual value exposures. Rental expense
was $88,437, $69,196, and $71,225 for the three years ended December 31, 1999,
1998 and 1997, respectively.
The Company has entered into management, consultative and noncompetition
agreements (generally for five to ten years) with certain officers and employees
of the Company and former owners of businesses acquired. During the three years
ended December 31, 1999, 1998 and 1997, respectively, $104,650, $74,578, and
$68,667 were charged to expense. At December 31, 1999, the maximum estimated
future commitment under all agreements with a remaining term in excess of one
year is $182,122, including $7,518 with certain officers of the Company. In
December 1999, the Company modified several of the above agreements as part of a
restructuring plan (see note eighteen to the consolidated financial statements).
50
<PAGE> 52
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has a minimum purchase agreement with a major casket
manufacturer for its North American operations with an original commitment of
$750,000 over six years. The agreement contains provisions to increase the
minimum annual purchases for normal price increases and for the maintenance of
product quality. In addition, the contract provides for a one-year extension
period in which the Company is required to purchase any remaining commitment
that exists at the end of the original term. The remaining commitment over the
next five years is $660,000 (2000 -- $105,000; 2001 -- $115,000;
2002 -- $130,000; 2003 -- $145,000; 2004 -- $165,000).
The Company had $30,042 in unsecured letters of credit outstanding at
December 31, 1999. These letters of credit are primarily to guarantee funding of
certain insurance claims and a Company-sponsored retirement plan.
Subsequent to year end, the Company was required to place cash on deposit
in restricted accounts at financial institutions as security for various credit
instruments. The first restricted account is related to two embedded options
associated with the Company's 6.30% senior notes (see note eight to the
consolidated financial statements). The second restricted account is related to
a letter of credit. The combined value of these restricted investments was
$18,707 at March 15, 2000.
NOTE TWELVE
CONVERTIBLE PREFERRED SECURITIES OF SCI FINANCE LLC
During 1997, the Company redeemed all the outstanding shares of its
convertible preferred shares into 11,178,522 shares of Company common stock and
cash.
NOTE THIRTEEN
STOCKHOLDERS' EQUITY
The Company is authorized to issue 1,000,000 shares of preferred stock, $1
per share par value. No shares were issued as of December 31, 1999. At December
31, 1999, 500,000,000 common shares of $1 par value were authorized, 272,064,618
shares were issued and outstanding (259,201,104 at December 31, 1998), net of
2,792,503 shares held, at cost, in treasury (68,373 at December 31, 1998).
The Company has benefit plans whereby shares of the Company's common stock
may be issued pursuant to the exercise of stock options granted to officers and
key employees. The Company's Amended 1996 Incentive Plan reserves 24,000,000
shares of common stock for outstanding and future awards of stock options,
restricted stock and other stock based awards to officers and key employees of
the Company. The Company's 1996 Nonqualified Incentive Plan reserves 6,700,000
shares of common stock for outstanding and future awards of nonqualified stock
options to employees who are not officers of the Company. Under the Company's
1995 Stock Plan for Non-Employee Directors, non-employee directors automatically
receive yearly awards of restricted stock through the year 2000. Each award is
for 3,000 shares of common stock and vests after one year of service.
The plans allow for options to be granted as either non-qualified or
incentive stock options. The options are granted with an exercise price equal to
the then current market price of the Company's common stock. The options are
generally exercisable at a rate of 33 1/3% each year unless, at the discretion
of the Company's Compensation Committee of the Board of Directors, alternative
vesting methods are allowed. At December 31, 1999 and 1998, 15,713,000 options
had been granted to officers and key employees of the Company which contain
alternative vesting methods. Under the alternative vesting methods, partial or
full accelerated vesting will occur when the price of Company common stock
reaches pre-determined prices. If the pre-determined stock prices are not met in
the required time period, the options will fully vest in periods ranging
51
<PAGE> 53
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
from eight to ten years from date of grant. At December 31, 1999 and 1998,
16,903,290 and 4,783,558 shares, respectively, were reserved for future option
grants under all stock option plans.
The following tables set forth certain stock option information:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
---------- ----------------
<S> <C> <C>
Outstanding at December 31, 1996........................... 13,049,269 $15.09
---------- ------
Granted.................................................. 7,144,150 30.37
Exercised................................................ (775,716) 12.51
Cancelled................................................ (104,252) 22.85
---------- ------
Outstanding at December 31, 1997........................... 19,313,451 20.81
---------- ------
Granted.................................................. 2,953,553 36.66
Exercised................................................ (4,785,496) 13.50
Cancelled................................................ (102,992) 26.62
---------- ------
Outstanding at December 31, 1998........................... 17,378,516 25.48
---------- ------
Granted.................................................. 5,080,339 17.06
Assumed.................................................. 1,199,273 23.65
Exercised................................................ (73,181) 14.74
Cancelled................................................ (3,691,837) 24.94
---------- ------
Outstanding at December 31, 1999........................... 19,893,110 $23.36
========== ======
Exercisable at December 31, 1999........................... 8,575,226 $20.42
========== ======
Exercisable at December 31, 1998........................... 6,435,679 $17.23
========== ======
Exercisable at December 31, 1997........................... 9,488,214 $14.07
========== ======
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ -----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
NUMBER AVERAGE AVERAGE NUMBER AVERAGE
RANGE OF OUTSTANDING REMAINING EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICE AT 12/31/99 CONTRACTUAL LIFE PRICE AT 12/31/99 PRICE
- -------------- ----------- ---------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 9.41 91,684 0.1 $ 9.41 91,684 $ 9.41
9.41 -- 20.00 9,651,896 6.7 15.83 4,676,675 14.49
20.00 -- 30.00 3,866,367 4.1 25.77 2,618,480 24.76
30.00 -- 40.00 6,220,663 5.5 33.57 1,180,226 34.98
40.00 -- 50.00 62,500 4.6 41.53 8,161 41.96
---------- --- ------ --------- ------
$ 9.41 -- 50.00 19,893,110 5.8 $23.36 8,575,226 $20.42
========== === ====== ========= ======
</TABLE>
For the three years ended December 31, 1999, 30,000, 30,000, and 73,000
shares of restricted stock were awarded at average fair values of $19.06, $40.88
and $33.35, respectively.
The Board of Directors has adopted a preferred share purchase rights plan
and has declared a dividend of one preferred share purchase right for each share
of common stock outstanding. The rights become exercisable in the event of
certain attempts to acquire 20% or more of the common stock of the Company and
entitle the rights holders to purchase certain securities of the Company or the
acquiring company. The rights, which are redeemable by the Company for $.01 per
right, expire in July 2008 unless extended.
52
<PAGE> 54
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
If the Company had elected to recognize compensation cost for its option
plans based on the fair value at the grant dates for awards under those plans,
net income and earnings per share would have been changed for the years ended
December 31 to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net income (loss):
As reported...................................... $(32,412) $342,142 $333,750
Pro forma........................................ (64,015) 318,057 315,733
Basic earnings per share:
As reported...................................... $ (.12) $ 1.34 $ 1.36
Pro forma........................................ (.23) 1.24 1.30
Diluted earnings per share:
As reported...................................... $ (.12) $ 1.31 $ 1.31
Pro forma........................................ (.23) 1.22 1.25
</TABLE>
The fair value of the Company's stock options used to compute pro forma net
income (loss) and earnings per share disclosures is the estimated present value
at grant date using the Black-Scholes option-pricing model with the following
weighted average assumptions for 1999, 1998 and 1997, respectively: dividend
yield of 0%, 1%, and 1%; expected volatility of 41.6%, 28.3% and 26.6%; a risk
free interest rate of 5.5%, 5.5% and 6.5%; and an expected holding period of 7,
7, and 8 years.
NOTE FOURTEEN
RETIREMENT PLANS
The Company has a defined benefit pension plan covering substantially all
United States employees, a supplemental retirement plan for certain current and
former key employees (SERP), a supplemental retirement plan for officers and
certain key employees (Senior SERP), and a retirement plan for non-employee
directors (Directors' Plan).
For the United States noncontributory pension plan, retirement benefits are
generally based on years of service and compensation. The Company annually
contributes to the pension plan an actuarially determined amount consistent with
the funding requirements of the Employee Retirement Income Security Act of 1974.
Assets of the pension plan consist primarily of bank money market funds, fixed
income investments, and marketable equity securities. The marketable equity
securities include shares of Company common stock with a value of $2,292 and
$12,575 at December 31, 1999 and 1998, respectively.
Retirement benefits under the SERP are based on years of service and
average monthly compensation, reduced by benefits under the pension plan and
Social Security. The Senior SERP provides retirement benefits based on years of
service and position. The Directors' Plan will provide an annual benefit to
directors following their retirement, based on a vesting schedule. The Company
purchased various life insurance policies on the participants in the SERP,
Senior SERP and Directors' Plan with the intent to use the proceeds or any cash
value buildup from such policies to assist in funding, at least to the extent of
such assets, the plans' funding requirements. The funding status of the SERP,
Senior SERP, and Directors' Plan requires the Company to recognize an additional
liability in accordance with SFAS No. 87, "Employers' Accounting for Pensions."
At December 31, 1999 and 1998, the additional minimum liability was $9,999 and
$14,513, respectively.
The Company's United Kingdom operation has a defined benefit pension plan.
The Company and employees contribute to the plan consistent with United Kingdom
funding requirements. Most other foreign employees are covered by various
foreign government mandated or defined contribution plans which are adequately
funded and are not considered material to the financial condition or results of
operations of the
53
<PAGE> 55
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company. The plans' liabilities and their related costs are computed in
accordance with the laws of the individual countries and appropriate actuarial
practices.
The components of net periodic benefit cost for the years ended December 31
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Service cost -- benefits earned during the period....... $16,378 $14,595 $10,837
Interest cost on projected benefit obligation........... 12,962 13,039 12,144
Return on plan assets................................... (13,576) (14,035) (12,359)
Settlement charge....................................... 1,073 -- --
Amortization of unrecognized transition asset........... (469) (481) (475)
Amortization of prior service cost...................... 1,115 1,106 1,096
Recognized net loss..................................... 390 215 2,333
------- ------- -------
$17,873 $14,439 $13,576
======= ======= =======
</TABLE>
The Plans' funded status at December 31 were as follows (funded plan based
on valuations as of September 30):
<TABLE>
<CAPTION>
1999 1998
--------------------- ---------------------
FUNDED NON-FUNDED FUNDED NON-FUNDED
PLAN PLANS PLAN PLANS
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of
year................................... $150,320 $ 43,508 $129,974 $ 39,840
Service cost............................. 15,613 765 13,690 905
Contributions paid by participants....... 1,373 -- 1,182 --
Interest cost............................ 10,441 2,521 10,196 2,843
Plan amendments.......................... 157 -- 177 --
Actuarial (gain) loss.................... (5,578) (1,795) 9,051 2,055
Benefits paid............................ (14,464) (8,493) (14,123) (2,135)
Effect of foreign currency............... (953) -- 173 --
-------- -------- -------- --------
Benefit obligation at end of year........ $156,909 $ 36,506 $150,320 $ 43,508
======== ======== ======== ========
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of
year................................... $151,381 $ -- $160,115 $ --
Actual return on plan assets............. 9,766 -- 1,451 --
Employer contributions................... 11,816 8,493 2,555 2,135
Contributions paid by participants....... 1,373 -- 1,182 --
Benefits paid............................ (14,464) (8,493) (14,123) (2,135)
Effect of foreign currency............... (980) -- 201 --
-------- -------- -------- --------
Fair value of plan assets at end of
year................................... $158,892 $ -- $151,381 $ --
======== ======== ======== ========
Funded status of plan.................... $ 1,983 $(36,506) $ 1,061 $(43,508)
Fourth quarter contributions............. 474 -- 9,538 --
Unrecognized actuarial loss.............. 11,107 4,621 13,162 7,695
Unrecognized prior service cost.......... (495) 5,451 (984) 6,907
Unrecognized net transition asset........ (2,346) -- (2,884) --
Effect of foreign currency............... (3) -- 2 --
-------- -------- -------- --------
Prepaid (accrued) benefit cost........... $ 10,720 $(26,434) $ 19,895 $(28,906)
======== ======== ======== ========
</TABLE>
54
<PAGE> 56
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The plans' weighted-average assumptions were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
FUNDED NON-FUNDED FUNDED NON-FUNDED
PLAN PLANS PLAN PLANS
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Discount rate used to determine obligations... 7.43% 7.75% 6.56% 6.75%
Assumed rate of compensation increase......... 4.91 5.50 5.06 5.50
Assumed rate of return on plan assets......... 8.94 -- 8.94 --
</TABLE>
NOTE FIFTEEN
SEGMENT REPORTING
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
Company's chief decision making group. This group is comprised of senior
management who are responsible for the allocation of resources and assessment of
operating performance.
Because the Company's operations are product based and geographically
based, the Company's primary reportable operating segments presented below are
based on products or services and include funeral, cemetery, and insurance
operations. The Company's geographic segments include North America, Europe and
other foreign. The Company conducts funeral and cemetery operations in all
geographical regions and insurance operations in North America and Europe (see
note two to the consolidated financial statements).
55
<PAGE> 57
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's reportable segment information is as follows:
<TABLE>
<CAPTION>
REPORTABLE
FUNERAL CEMETERY INSURANCE SEGMENTS
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues from external customers:
1999.............................. $2,039,348 $ 947,852 $ 313,855 $ 3,301,055
1998.............................. 1,829,136 846,601 178,773 2,854,510
1997.............................. 1,720,291 724,862 74,175 2,519,328
Depreciation and amortization:
1999.............................. $ 174,150 $ 56,725 $ 6,055 $ 236,930
1998.............................. 152,396 28,584 4,947 185,927
1997.............................. 123,652 21,611 3,707 148,970
Income from operations:
1999.............................. $ 366,494 $ 247,719 $ 29,013 $ 643,226
1998.............................. 384,607 306,161 18,561 709,329
1997.............................. 401,371 271,897 6,712 679,980
Total assets:
1999.............................. $7,546,186 $4,661,780 $1,834,957 $14,042,923
1998.............................. 6,944,480 4,012,685 1,750,840 12,708,005
1997.............................. 6,124,463 3,309,431 637,312 10,071,206
Capital expenditures (1):
1999.............................. $ 905,790 $ 432,083 $ 4,350 $ 1,342,223
1998.............................. 590,065 369,212 2,029 961,306
1997.............................. 487,802 404,100 592 892,494
Operating locations at year end
(unaudited):
1999.............................. 3,961 585 -- 4,546
1998.............................. 3,578 488 -- 4,066
1997.............................. 3,244 441 -- 3,685
</TABLE>
- ---------------
(1) Capital expenditures include $1,159,929, $729,515 and $676,662 for the three
years ended December 31, 1999, 1998 and 1997, respectively, for purchases of
property, plant and equipment, cemetery property, and names and reputations
of acquired businesses.
56
<PAGE> 58
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reconciles certain reportable segment amounts to the
Company's corresponding consolidated amounts:
<TABLE>
<CAPTION>
REPORTABLE LENDING
SEGMENTS SUBSIDIARY CORPORATE CONSOLIDATED
----------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Revenues from external customers:
1999................................ $ 3,301,055 $ 20,758 $ -- $ 3,321,813
1998................................ 2,854,510 20,580 -- 2,875,090
1997................................ 2,519,328 16,537 -- 2,535,865
Depreciation and amortization:
1999................................ $ 236,930 $ -- $ 15,215 $ 252,145
1998................................ 185,927 7 16,343 202,277
1997................................ 148,970 5 8,575 157,550
Total assets:
1999................................ $14,042,923 $193,784 $364,894 $14,601,601
1998................................ 12,708,005 271,448 286,705 13,266,158
1997................................ 10,071,206 200,562 243,162 10,514,930
Capital expenditures (1):
1999................................ $ 1,342,223 -- $ 29,187 $ 1,371,410
1998................................ 961,306 180 21,253 982,739
1997................................ 892,494 2 14,698 907,194
</TABLE>
- ---------------
(1) Capital expenditures include $1,159,929, $729,515 and $676,662 for the three
years ended December 31, 1999, 1998 and 1997, respectively, for purchases of
property, plant and equipment, cemetery property, and names and reputations
of acquired businesses.
The following table reconciles reportable segment income (loss) from
operations shown above to the Company's consolidated income (loss) before income
taxes and extraordinary items:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Income from operations:
Reportable segments............................. $ 643,226 $ 709,329 $ 679,980
Lending subsidiary income (loss) from
operations................................... (29,467) 9,441 7,632
General and administrative expenses............. (82,585) (66,839) (66,781)
Restructuring charges........................... (362,428)
--------- --------- ---------
Consolidated income from operations............... 168,746 651,931 620,831
Interest expense................................ (238,195) (177,053) (136,720)
Dividends on preferred securities of SCI Finance
LLC.......................................... -- -- (4,382)
Other income.................................... 31,759 43,649 100,244
--------- --------- ---------
Income (loss) before income taxes and
extraordinary items............................. $ (37,690) $ 518,527 $ 579,973
========= ========= =========
</TABLE>
In 1999, the Company realigned its management of geographic segments to
focus on total European operations. Although total amounts reported have not
changed, the Company has made certain reclassifications in all years in order to
reflect the results of these geographic segments.
57
<PAGE> 59
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company geographic segment information was as follows:
<TABLE>
<CAPTION>
NORTH OTHER
AMERICA EUROPE FOREIGN TOTAL
---------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Revenues from external customers:
1999.................................. $2,265,788 $ 883,918 $172,107 $3,321,813
1998.................................. 1,878,103 888,037 108,950 2,875,090
1997.................................. 1,660,319 779,735 95,811 2,535,865
Income from operations:
1999.................................. $ 112,605 $ 27,124 $ 29,017 $ 168,746
1998.................................. 529,158 107,165 15,608 651,931
1997.................................. 492,945 101,703 26,183 620,831
Long-lived assets:
1999.................................. $5,816,477 $1,453,547 $556,234 $7,826,258
1998.................................. 4,846,151 1,557,882 421,485 6,825,518
1997.................................. 3,979,614 1,343,298 196,656 5,519,568
Operating locations at year end
(unaudited):
1999.................................. 2,291 2,071 184 4,546
1998.................................. 1,843 2,054 169 4,066
1997.................................. 1,720 1,813 152 3,685
</TABLE>
Income from operations includes $362,428 in restructuring and nonrecurring
charges in 1999 of which $279,078 relates to North America, $75,898 relates to
Europe and $7,452 relates to other foreign.
Included in the North American figures above are the following United
States amounts:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues from external customers................. $2,185,146 $1,800,605 $1,588,831
Income from operations........................... 98,018 512,463 471,337
Long-lived assets................................ 5,450,461 4,513,827 3,664,194
Operating locations at year end (unaudited)...... 2,137 1,686 1,574
</TABLE>
Included in the European figures above are the following French amounts:
<TABLE>
<CAPTION>
1999 1998 1997
-------- ---------- --------
<S> <C> <C> <C>
Revenues from external customers.................... $574,979 $ 621,359 $554,648
Income from operations.............................. 11,069 71,499 55,332
Long-lived assets................................... 480,966 497,477 440,744
Operating locations at year end (unaudited)......... 1,236 1,214 1,101
</TABLE>
58
<PAGE> 60
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE SIXTEEN
SUPPLEMENTARY INFORMATION
The detail of certain balance sheet accounts was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash and cash equivalents:
Cash...................................................... $ 43,422 $ 80,782
Commercial paper and temporary investments................ 44,799 277,428
---------- ----------
$ 88,221 $ 358,210
========== ==========
Receivables and allowances:
Current:
Trade accounts......................................... $ 329,104 $ 336,213
Cemetery contracts..................................... 294,893 225,449
Loans and other........................................ 93,368 101,444
---------- ----------
717,365 663,106
---------- ----------
Less:
Allowance for contract cancellations and doubtful
accounts............................................. 77,080 53,292
Unearned finance charges............................... 35,158 44,262
---------- ----------
112,238 97,554
---------- ----------
$ 605,127 $ 565,552
========== ==========
Long-term:
Cemetery contracts..................................... $ 591,489 $ 534,801
Trusted cemetery merchandise sales..................... 800,306 613,917
Loans and other........................................ 355,517 360,776
---------- ----------
1,747,312 1,509,494
---------- ----------
Less:
Allowance for contract cancellations and doubtful
accounts............................................. 97,285 38,707
Unearned finance charges............................... 87,609 62,711
---------- ----------
184,894 101,418
---------- ----------
$1,562,418 $1,408,076
========== ==========
</TABLE>
59
<PAGE> 61
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest rates on cemetery contracts and loans and other notes receivable
range from 7.0% to 14.5% at December 31, 1999 (3.2% to 15.7% at December 31,
1998). Included in long-term loans and other notes receivable at December 31,
1999, are $10,392 in notes with officers, employees and former employees of the
Company ($15,054 at December 31, 1998), the majority of which are collateralized
by real estate, and $19,796 in notes with other related parties ($28,323 at
December 31, 1998).
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Cemetery property:
Undeveloped land.......................................... $1,913,904 $1,512,198
Developed land, lawn crypts and mausoleums................ 268,506 523,699
---------- ----------
$2,182,410 $2,035,897
========== ==========
Property, plant and equipment:
Land...................................................... $ 446,668 $ 441,897
Buildings and improvements................................ 1,408,424 1,304,426
Operating equipment....................................... 552,162 514,865
Leasehold improvements.................................... 61,237 52,613
---------- ----------
2,468,491 2,313,801
Less: accumulated depreciation............................ (586,966) (488,822)
---------- ----------
$1,881,525 $1,824,979
========== ==========
Accounts payable and accrued liabilities:
Trade payables............................................ $ 103,242 $ 111,518
Dividends................................................. -- 24,333
Payroll................................................... 95,633 75,085
Interest.................................................. 61,881 44,414
Insurance................................................. 46,940 70,432
Bank overdraft............................................ 24,566 19,759
Restructuring reserve..................................... 89,812 --
Other..................................................... 167,773 106,813
---------- ----------
$ 589,847 $ 452,354
========== ==========
</TABLE>
NON-CASH TRANSACTIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1999 1998 1997
-------- ------ --------
<S> <C> <C> <C>
Common stock issued under restricted stock plans............ $ 410 $1,196 $ 2,405
Minimum liability under retirement plans.................... -- (535) (4,097)
Debenture conversions to common stock....................... 766 2,594 6,417
Common stock issued in acquisitions......................... 565,831 97,124 83,173
Debt issued in acquisitions................................. -- 28,560 21,325
Conversion of preferred securities of SCI Finance LLC....... -- -- 167,911
</TABLE>
60
<PAGE> 62
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE SEVENTEEN
EARNINGS PER SHARE
The basic and diluted per share computations for income (loss) before
extraordinary item were for the years ended December 31 as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Income (numerator):
Income (loss) before extraordinary
items -- basic.................................. $(34,297) $342,142 $374,552
After tax interest on convertible debentures....... 408 1,368 4,611
-------- -------- --------
Income (loss) before extraordinary
item -- diluted................................. $(33,889) $343,510 $379,163
======== ======== ========
Shares (denominator):
Shares -- basic.................................... 272,281 256,271 245,470
Stock options and warrants...................... 673 4,290 4,827
Convertible debentures.......................... 838 1,959 2,212
Convertible preferred securities of SCI Finance
LLC........................................... -- -- 5,272
-------- -------- --------
Shares -- diluted.................................. 273,792 262,520 257,781
======== ======== ========
Earnings per share before extraordinary items:
Basic.............................................. $ (.13) $ 1.34 $ 1.53
Diluted............................................ $ (.13) $ 1.31 $ 1.47
</TABLE>
NOTE EIGHTEEN
NONRECURRING CHARGES
The Company recorded restructuring and nonrecurring charges in the first
quarter (First Quarter Charge) and the fourth quarter (Fourth Quarter Charge) of
1999, as well as established a provision for loan losses (Loan Provision) in the
fourth quarter of 1999 related to certain loans previously made by the Company's
lending subsidiary.
The First Quarter Charge totaled $89,884 relating to a cost rationalization
program initiated in 1999 and consisted of the following: (1) severance costs of
$56,757; (2) a charge of $19,123 for terminated projects representing costs
associated with certain construction projects that have been cancelled ($2,153)
and costs associated with acquisition due diligence which will no longer be
pursued ($16,970); (3) a $7,245 charge for business and facility closures,
primarily in the Company's European operations; and (4) a remaining charge of
$6,759 consisting of various other cost initiatives.
The $56,757 for severance costs is related to the termination of five
executive contractual relationships and the involuntary termination of
approximately 100 employees in North America (of which approximately 20 were
located in the corporate office), 600 employees in France, 85 employees in other
European operations and 10 employees in other foreign operations. The positions
terminated were both operational and administrative in nature and the remaining
severance costs are expected to be paid out in 2000. The severance costs related
to the executive contractual relationships will be paid out according to the
terms of the respective agreements and will extend through 2005.
At December 31, 1999, approximately $25,245 remained in the reserve
associated with the First Quarter Charge, of which $22,782 related to severance
costs and $2,463 related to cancellation fees and remaining non-cancellable
payments on operating leases.
The Fourth Quarter Charge totaled $272,544 relating to additional cost
rationalization programs, as well as initiatives required to enhance cash flow
and reduce debt. The Fourth Quarter Charge consisted of the
61
<PAGE> 63
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
following: (1) severance costs of $150,675; (2) asset impairment of $73,728
associated with assets held for sale which were written down to estimated fair
value; (3) asset impairment of $18,245 associated with loans made by the
Company's lending subsidiary held for sale which were written down to estimated
fair value; (4) $12,719 of informational technology costs associated with
projects that will no longer be pursued by the Company; (5) $6,554 of costs to
terminate certain lease obligations related to facility closures; and (6)
$10,623 of various other items.
The $150,675 of severance costs is related to the involuntary termination
of 1,141 employees of the Company. Included in this total are 715 employees in
the Company's international operations, 385 employees in North America, 33
employees in the Company's corporate home office and 8 executive officers of the
Company. Of the 715 employees in the Company's international operations, 290 are
additional involuntary terminations in France pursuant to the Company's First
Quarter Charge. In the North America total, 316 individuals were former owners
of independent funeral homes and cemeteries that were purchased by the Company
and represent approximately $92,180 of the $150,675 of severance costs. These
individuals were under employment, consultant and/or covenant-not-to-compete
contractual agreements and have been relieved from their obligations or
restrictions under their agreements. Such individuals will continue to be paid
by the Company pursuant to such contractual terms, the majority of which will be
paid by 2007. The other positions terminated were both operational and
administrative in nature and the severance costs are expected to be paid out
over the next 24 months. The severance costs associated with the executive
officers will be paid in accordance with the terms of the respective agreements
and will extend through 2005.
The $73,728 of charges related to assets held for sale consist of
approximately $59,655 in the Company's North American operations, approximately
$11,645 in the Company's international operations and approximately $2,428 of
corporate assets. The $59,655 of charges in North America include approximately
50 funeral homes or cemeteries and approximately 45 individual parcels of
undeveloped cemetery property or excess land that are held for sale and being
reduced to their estimated fair values. The Company believes it is a prudent
strategy to hold these underperforming assets for sale and redeploy the proceeds
from such sales to reduce debt.
The asset impairment associated with the lending subsidiary's loans
represents the estimated amount necessary to sell 205 loans with a face value of
$176,272. The Company has decided to indefinitely suspend the operations of the
lending subsidiary.
At December 31, 1999, approximately $135,944 remained in the reserve
associated with the Fourth Quarter Charge, of which $126,816 related to
severance costs and $9,128 related to other restructuring costs.
Of the $161,189 of reserves remaining at December 31, 1999 relating to the
First Quarter and Fourth Quarter Charges, $89,812 is included in Accounts
Payable and Accrued Liabilities and $71,377 is included in Other Liabilities in
the Consolidated Balance Sheet based on the expected timing of payment.
The Loan Provision totaled $38,608 and relates to certain loans and accrued
interest receivable of $1,408 not being held for sale by the Company's lending
subsidiary. The face value of the 47 loans subject to the reserve was $61,315 at
December 31, 1999.
Since the loans associated with the Loan Provision are collateral dependent
and acquiring the collateral by deed in lieu of foreclosure is probable, the
provision was determined by comparing the Company's bases in the loans to the
fair value of the underlying collateral. Interest income recognized from these
loans during the year ended December 31, 1999 totaled $3,618 of which payment of
$2,210 was received during the year and $1,408 was included in the reserve. No
interest income has been recorded subsequent to September 30, 1999 related to
these loans.
62
<PAGE> 64
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE NINETEEN
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH YEAR
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
1999......................... $904,056 $830,236 $776,845 $810,676 $3,321,813
1998......................... 698,844 690,230 712,520 773,496 2,875,090
Gross profit:
1999......................... 218,871 179,585 128,645 86,658 613,759
1998......................... 216,128 187,690 173,706 141,246 718,770
Net income (loss) before
extraordinary gain:
1999......................... 41,883 76,013 32,055 (184,248) (34,297)
1998......................... 108,786 90,948 83,213 59,195 342,142
Net income (loss):
1999......................... 43,768 76,013 32,055 (184,248) (32,412)
1998......................... 108,786 90,948 83,213 59,195 342,142
Basic earnings per share before
extraordinary gain:
1999......................... .15 .28 .12 (.68) (.13)
1998......................... .43 .36 .32 .23 (1.34)
Diluted earnings per share
before extraordinary gain:
1999......................... .15 .28 .12 (.68) (.13)
1998......................... .42 .35 .32 .23 1.31
</TABLE>
Gross profit includes a provision for loan losses of $38,608 in the fourth
quarter of 1999 related to loans held by the Company's lending subsidiary. Net
income (loss) before extraordinary gain includes restructuring and nonrecurring
charges of $89,884 in the first quarter of 1999 and $272,544 in the fourth
quarter of 1999.
63
<PAGE> 65
SERVICE CORPORATION INTERNATIONAL
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(2) DEDUCTIONS(1) PERIOD
- ----------- ---------- ---------- ----------- ------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current --
Allowance for contract cancellations
and doubtful accounts:
Year Ended December 31, 1999..... $53,292 $22,585 $11,498 $(10,295) $77,080
Year Ended December 31, 1998..... 52,597 27,190 2,327 (28,822) 53,292
Year Ended December 31, 1997..... 45,155 23,400 5,333 (21,291) 52,597
Due After One Year --
Allowance for contract cancellations
and doubtful accounts:
Year Ended December 31, 1999..... $38,707 $47,418 $11,169 $ (9) $97,285
Year Ended December 31, 1998..... 35,964 3,650 (499) (408) 38,707
Year Ended December 31, 1997..... 29,951 6,202 1,123 (1,312) 35,964
Deferred Tax Valuation Allowance:
Year Ended December 31, 1999..... $13,058 $14,220 $ -- $ -- $27,278
Year Ended December 31, 1998..... 15,327 (2,269) -- -- 13,058
Year Ended December 31, 1997..... 6,128 9,199 -- -- 15,327
</TABLE>
- ---------------
(1) Uncollected receivables written off, net of recoveries.
(2) Primarily acquisitions and dispositions of operations.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
64
<PAGE> 66
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information called for by PART III (Items 10, 11, 12 and 13) has been
omitted as the Company intends to file with the Commission not later than 120
days after the close of its fiscal year a definitive Proxy Statement pursuant to
Regulation 14A. Such information is set forth in such Proxy Statement (i) with
respect to Item 10 under the captions "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance", (ii) with respect to Items 11 and 13
under the captions "Certain Information with Respect to Officers and Directors",
"Compensation Committee Interlocks and Insider Participation" and "Certain
Transactions" and (iii) with respect to Item 12 under the caption "Voting
Securities and Principal Holders." The information as specified in the preceding
sentence is incorporated herein by reference. Notwithstanding anything set forth
in this Form 10-K, the information under the captions "Compensation Committee
Report on Executive Compensation" and "Performance Graph" in such Proxy
Statement are not incorporated by reference into this Form 10-K.
The information regarding the Company's executive officers called for by
Item 401 of Regulation S-K has been included in PART I of this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1)-(2) Financial Statements and Schedule:
The financial statements and schedule are listed in the accompanying Index
to Financial Statements and Related Schedule on page 25 of this report.
(3) Exhibits:
The exhibits listed on the accompanying Exhibit Index on pages 68-71 are
filed as part of this report.
(b) Reports on Form 8-K
During the quarter ended December 31, 1999, the Company filed a Form 8-K
dated November 23, 1999 reporting under "Item 5. Other Events" (i) that George
R. Champagne, Executive Vice President and Chief Financial Officer, was leaving
the Company, (ii) that the Company formed a special committee of the Board of
Directors to expedite cost reduction, cash flow enhancement and debt reduction
initiatives, and (iii) certain factors which may adversely impact results for
2000. The Form 8-K also reported under "Item 7. Exhibits" the press releases
relating to the matters described in the preceding sentence.
(c) Included in (a) above.
(d) Included in (a) above.
65
<PAGE> 67
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, Service Corporation International, has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
SERVICE CORPORATION INTERNATIONAL
By: /s/ JAMES M. SHELGER
-----------------------------------
(James M. Shelger,
Senior Vice President, General
Counsel and Secretary)
Dated: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
R. L. WALTRIP* Chairman of the Board and March 30, 2000
- ----------------------------------------------------- Chief Executive Officer
(R. L. Waltrip)
JEFFREY E. CURTISS* Senior Vice President, Chief March 30, 2000
- ----------------------------------------------------- Financial Officer (Principal
(Jeffrey E. Curtiss) Financial Officer)
/s/ W. CARDON GERNER Vice President Corporate March 30, 2000
- ----------------------------------------------------- Controller (Principal
(W. Cardon Gerner) Accounting Officer)
ANTHONY L. COELHO* Director March 30, 2000
- -----------------------------------------------------
(Anthony L. Coelho)
JACK FINKELSTEIN* Director March 30, 2000
- -----------------------------------------------------
(Jack Finkelstein)
A. J. FOYT, JR.* Director March 30, 2000
- -----------------------------------------------------
(A. J. Foyt, Jr.)
JAMES H. GREER* Director March 30, 2000
- -----------------------------------------------------
(James H. Greer)
B. D. HUNTER* Director March 30, 2000
- -----------------------------------------------------
(B. D. Hunter)
</TABLE>
66
<PAGE> 68
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
VICTOR L. LUND* Director March 30, 2000
- -----------------------------------------------------
(Victor L. Lund)
JOHN W. MECOM, JR.* Director March 30, 2000
- -----------------------------------------------------
(John W. Mecom, Jr.)
CLIFTON H. MORRIS, JR.* Director March 30, 2000
- -----------------------------------------------------
(Clifton H. Morris, Jr.)
E. H. THORNTON, JR.* Director March 30, 2000
- -----------------------------------------------------
(E. H. Thornton, Jr.)
W. BLAIR WALTRIP* Director March 30, 2000
- -----------------------------------------------------
(W. Blair Waltrip)
EDWARD E. WILLIAMS* Director March 30, 2000
- -----------------------------------------------------
(Edward E. Williams)
*By: /s/ JAMES M. SHELGER
-----------------------------------------------
(James M. Shelger, as Attorney-In-Fact
For each of the Persons indicated)
</TABLE>
67
<PAGE> 69
EXHIBIT INDEX
PURSUANT TO ITEM 601 OF REG. S-K
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 -- Restated Articles of Incorporation. (Incorporated by
reference to Exhibit 3.1 to Registration Statement No.
333-10867 on Form S-3).
3.2 -- Articles of Amendment to Restated Articles of
Incorporation. (Incorporated by reference to Exhibit 3.1
to Form 10-Q for the fiscal quarter ended September 30,
1996).
3.3 -- Statement of Resolution Establishing Series of Shares of
Series D Junior Participating Preferred Stock, dated July
27, 1998. (Incorporated by reference to Exhibit 3.2 to
Form 10-Q for the fiscal quarter ended June 30, 1998).
3.4 -- Bylaws, as amended. (Incorporated by reference to Exhibit
3.1 to Form 10-Q for the fiscal quarter ended September
30, 1999).
4.1 -- Rights Agreement dated as of May 14, 1998 between the
Company and Harris Trust and Savings Bank. (Incorporated
by reference to Exhibit 99.1 to Form 8-K dated May 14,
1998).
4.2 -- Agreement Appointing a Successor Rights Agent Under
Rights Agreement, dated June 1, 1999, by the Company,
Harris Trust and Savings Bank and The Bank of New York.
(Incorporated by reference to Exhibit 4.1 to Form 10-Q
for the fiscal quarter ended June 30, 1999).
10.1 -- Retirement Plan For Non-Employee Directors. (Incorporated
by reference to Exhibit 10.1 to Form 10-K for the fiscal
year ended December 31, 1991).
10.2 -- Agreement dated May 14, 1992 between the Company, R. L.
Waltrip and related parties relating to life insurance.
(Incorporated by reference to Exhibit 10.4 to Form 10-K
for the fiscal year ended December 31, 1992).
10.3 -- Employment Agreement, dated January 1, 1998, between SCI
Executive Services, Inc. and R.L. Waltrip. (Incorporated
by reference to Exhibit 10.3 to Form 10-K for the fiscal
year ended December 31, 1998).
10.4 -- Non-Competition Agreement and Amendment to Employment
Agreement, dated November 11, 1991, among the Company, R.
L. Waltrip and Claire Waltrip. (Incorporated by reference
to Exhibit 10.9 to Form 10-K for the fiscal year ended
December 31, 1992).
10.5 -- Employment Agreement, dated January 1, 1999, between SCI
Executive Services, Inc. and W. Blair Waltrip.
(Incorporated by reference to Exhibit 10.2 to Form 10-Q
for the fiscal quarter ended March 31, 1999).
10.6 -- Separation and Release Agreement, dated January 18, 2000,
among the Company, SCI Executive Services, Inc. and W.
Blair Waltrip.
10.7 -- Employment Agreement, dated January 1, 1998, between SCI
Executive Services, Inc. and Jerald L. Pullins.
(Incorporated by reference to Exhibit 10.1 to Form 10-Q
for the fiscal quarter ended June 30, 1998).
10.8 -- Employment Agreement, dated March 10, 1999, between SCI
Executive Services, Inc. and George R. Champagne.
(Incorporated by reference to Exhibit 10.1 to Form 10-Q
for the fiscal quarter ended March 31, 1999).
10.9 -- Separation and Release Agreement, dated November 18,
1999, among the Company, Executive Services, Inc. and
George R. Champagne.
</TABLE>
68
<PAGE> 70
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.10 -- Independent Contractor/Consultative Agreement, dated
November 18, 1999, between SCI Management Corporation and
George R. Champagne.
10.11 -- Employment Agreement, dated February 11, 1999, between
SCI Executive Services, Inc. and John W. Morrow, Jr.
10.12 -- Separation and Release Agreement, dated January 21, 2000,
among the Company, SCI Executive Services, Inc. and John
W. Morrow, Jr.
10.13 -- Employment Agreement, dated January 1, 1999, between SCI
Executive Services, Inc. and James M. Shelger.
10.14 -- Form of Employment Agreement pertaining to officers
(other than the officers identified in the preceding
exhibits). (Incorporated by reference to Exhibit 10.9 to
Form 10-K for the fiscal year ended December 31, 1997).
10.15 -- Form of 1986 Stock Option Plan. (Incorporated by
reference to Exhibit 10.21 to Form 10-K for the fiscal
year ended December 31, 1991).
10.16 -- Amendment to 1986 Stock Option Plan, dated February 12,
1997. (Incorporated by reference to Exhibit 10.11 to Form
10-K for the fiscal year ended December 31, 1996).
10.17 -- Amendment to 1986 Stock Option Plan, dated November 13,
1997. (Incorporated by reference to Exhibit 10.12 to Form
10-K for the fiscal year ended December 31, 1997).
10.18 -- Amended 1987 Stock Plan. (Incorporated by reference to
Appendix A to Proxy Statement dated April 1, 1991).
10.19 -- First Amendment to Amended 1987 Stock Plan. (Incorporated
by reference to Exhibit 10.23 to Form 10-K for the fiscal
year ended December 31, 1993).
10.20 -- 1993 Long-Term Incentive Stock Option Plan. (Incorporated
by reference to Exhibit 4.12 to Registration Statement
No. 333-00179 on Form S-8).
10.21 -- Amendment to 1993 Long-Term Incentive Stock Option Plan,
dated February 12, 1997. (Incorporated by reference to
Exhibit 10.15 to Form 10-K for the fiscal year ended
December 31, 1996).
10.22 -- Amendment to 1993 Long-Term Incentive Stock Option Plan,
dated November 13, 1997. (Incorporated by reference to
Exhibit 10.17 to Form 10-K for the fiscal year ended
December 31, 1997).
10.23 -- 1995 Incentive Equity Plan. (Incorporated by reference to
Annex B to Proxy Statement dated April 17, 1995).
10.24 -- Amendment to 1995 Incentive Equity Plan, dated February
12, 1997. (Incorporated by reference to Exhibit 10.18 to
Form 10-K for the fiscal year ended December 31, 1996).
10.25 -- Amendment to 1995 Incentive Equity Plan, dated November
13, 1997. (Incorporated by reference to Exhibit 10.21 to
Form 10-K for the fiscal year ended December 31, 1997).
10.26 -- 1995 Stock Plan for Non-Employee Directors. (Incorporated
by reference to Annex A to Proxy Statement dated April
17, 1995).
10.27 -- Amended 1996 Incentive Plan. (Incorporated by reference
to Annex A to Proxy Statement dated April 13, 1999).
10.28 -- Split Dollar Life Insurance Plan. (Incorporated by
reference to Exhibit 10.36 to Form 10-K for the fiscal
year ended December 31, 1995).
</TABLE>
69
<PAGE> 71
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.29 -- Supplemental Executive Retirement Plan for Senior
Officers (as Amended and Restated Effective as of January
1, 1998). (Incorporated by reference to Exhibit 10.28 to
Form 10-K for the fiscal year ended December 31, 1998).
10.30 -- Deferred Compensation Plan. (Incorporated by reference to
Exhibit 10.31 to Form 10-K for the fiscal year ended
December 31, 1997).
10.31 -- Amendment No. 5 to Service Corporation International
Employee Stock Purchase Plan.
10.32 -- Employment Agreement, dated January 1, 1998, between SCI
Executive Services, Inc. and L. William Heiligbrodt.
(Incorporated by reference to Exhibit 10.5 to Form 10-K
for the fiscal year ended December 31, 1997).
10.33 -- Separation and Release Agreement, dated March 15, 1999,
among the Company, SCI Executive Services, Inc. and L.
William Heiligbrodt. (Incorporated by reference to
Exhibit 10.6 to Form 10-K for the fiscal year ended
December 31, 1998).
10.34 -- Independent Contractor/Consultative Agreement, dated
March 15, 1999, between SCI Management Corporation and L.
William Heiligbrodt. (Incorporated by reference to
Exhibit 10.7 to Form 10-K for the fiscal year ended
December 31, 1998).
12.1 -- Ratio of Earnings to Fixed Charges.
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Independent Accountants
(PricewaterhouseCoopers LLP).
24.1 -- Powers of Attorney.
27.1 -- Financial Data Schedule.
99.1 -- Competitive Advance and Revolving Credit Facility
Agreement (Facility A), dated June 27, 1997, among the
Company, The Chase Manhattan Bank ("Chase") as
administrative agent and the banks and other financial
institutions named therein.
99.2 -- Agreement and First Amendment to Competitive Advance and
Revolving Credit Facility Agreement (Facility A), dated
June 26, 1998, among the Company, Chase as administrative
agent and the banks and other financial institutions
named therein.
99.3 -- Agreement and Second Amendment to Competitive Advance and
Revolving Credit Facility Agreement (Facility A), dated
June 25, 1999, among the Company, Chase as administrative
agent and the banks and other financial institutions
named therein.
99.4 -- Agreement and Third Amendment to Competitive Advance and
Revolving Credit Facility Agreement ((Facility A), dated
November 2, 1999, among the Company, Chase as
administrative agent and the banks and other financial
institutions named therein.
99.5 -- Competitive Advance and Revolving Credit Facility
Agreement (Facility B), dated June 27, 1997, among the
Company, subsidiaries of the Company named therein, Chase
as administrative agent and the banks and other financial
institutions named therein.
99.6 -- Agreement and First Amendment to Competitive Advance and
Revolving Credit Facility Agreement (Facility B), dated
November 2, 1999, among the Company, subsidiaries of the
Company named therein, Chase as administrative agent and
the banks and other financial institutions named therein.
99.7 -- Credit Agreement, dated November 2, 1999, among the
Company, Chase as administrative agent and the banks and
other financial institutions named therein.
</TABLE>
70
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
99.8 -- Consolidated Class Action Complaint filed September 3,
1999 in Civil Action No. H-99-280, In re Service
Corporation International. (Incorporated by reference to
Exhibit 99.1 to Form 10-Q for the fiscal quarter ended
September 30, 1999).
99.9 -- Defendants' Answer to the Consolidated Class Action
Complaint filed September 17, 1999 in Civil Action No.
H-99-280, In re Service Corporation International.
(Incorporated by reference to Exhibit 99.2 to Form 10-Q
for the fiscal quarter ended September 30, 1999).
99.10 -- Defendants' Motion to Dismiss the Consolidated Class
Action Complaint filed October 8, 1999 in Civil Action
No. H-99-280, In re Service Corporation International.
(Incorporated by reference to Exhibit 99.3 to Form 10-Q
for the fiscal quarter ended September 30, 1999).
99.11 -- Plaintiffs' Opposition to Defendants' Motion to Dismiss
the Consolidated Class Action Complaint filed November 5,
1999 in Civil Action No. H-99-280, In Re Service
Corporation International. (Incorporated by reference to
Exhibit 99.4 to Form 10-Q for the fiscal quarter ended
September 30, 1999).
99.12 -- Defendants' Reply to Plaintiffs' Opposition to
Defendants' Motion to Dismiss the Consolidated Class
Action Complaint filed November 24, 1999 in Civil Action
No. H-99-280, In re Service Corporation International.
99.13 -- Plaintiffs' Original Petition filed November 10, 1999 in
Cause No. 32548-99-11, James P. Hunter, III and James P.
Hunter, III Family Trust v. Service Corporation
International, Robert L. Waltrip, L. William Heiligbrodt,
George R. Champagne, W. Blair Waltrip, James M. Shelger,
Wesley T. McRae and PriceWaterhouse Coopers, L.L.P.; in
the Judicial District Court of Angelina County, Texas.
(Incorporated by reference to Exhibit 99.5 to Form 10-Q
for the fiscal quarter ended September 30, 1999).
99.14 -- Defendants' Original Answer in response to the Original
Petition referred to in Exhibit 99.13.
</TABLE>
In the above list, the management contracts or compensatory plans or
arrangements are set forth in Exhibits 10.1 through 10.34.
Pursuant to Item 601(b)(4) of Regulation S-K, there are not filed as
exhibits to this report certain instruments with respect to long-term debt under
which the total amount of securities authorized thereunder does not exceed 10
percent of the total assets of Registrant and its subsidiaries on a consolidated
basis. Registrant agrees to furnish a copy of any such instrument to the
Commission upon request.
71
<PAGE> 73
CORPORATE INFORMATION
CORPORATE OFFICES
Service Corporation International maintains corporate offices located at
1929 Allen Parkway, Houston, Texas 77019. The telephone number is 713/522-5141.
Additional information can be found at our web site: www.sci-corp.com.
Requests
Written requests for financial information, including the Annual Report on
Form 10-K as filed with the Securities and Exchange Commission, should be
directed to Investor Relations, P.O. Box 130548, Houston, Texas 77219-0548.
TRANSFER AGENT AND REGISTRAR
THE BANK OF NEW YORK
1-800-524-4458
<TABLE>
<CAPTION>
ADDRESS SHAREHOLDER INQUIRIES TO: SEND CERTIFICATES FOR TRANSFER AND ADDRESS CHANGES TO:
<S> <C>
Shareholder Relations Department -- 11E Receive and Deliver Department -- 11W
P.O. Box 11258 P. O. Box 11002
Church Street Station Church Street Station
New York, NY 10286 New York, NY 10286
E-Mail Address: The Bank of New York's Stock Transfer Website:
[email protected] http://stock.bankofny.com
</TABLE>
[SCI LOGO](R)
The SCI logo is a registered trademark.
<PAGE> 1
EXHIBIT 10.6
SEPARATION AND RELEASE AGREEMENT
This Separation and Release Agreement ("Agreement") is entered into as
of the 18th day of January, 2000, among Service Corporation International, a
Texas corporation ("SCI"), SCI Executive Services, Inc., a Delaware corporation
("Executive Services"), and W. Blair Waltrip ("Employee").
SCI, Executive Services and Employee agree as follows:
1. Effective as of the date hereof, Executive Services hereby
terminates Employee's employment other than for cause and Employee hereby
resigns as Executive Vice President of SCI, as a member of the Directors Stock
Committee of the Board of Directors of SCI and as a member of the 1996
Nonqualified Incentive Plan Stock Option Committee of the Board of Directors of
SCI, as well as all other positions he holds with SCI, its subsidiaries and
affiliates (collectively, the "SCI Group"), including without limitation all
positions as officer, director or committee member; provided however,
notwithstanding the foregoing, Employee does not resign as a director of SCI or
as a member of the following committees of the SCI Board of Directors: the
Strategic Alliance Committee, the Executive Committee or the Investment
Committee.
2. The Employment Agreement dated January 1, 1999 between SCI,
Executive Services and Employee shall remain in effect except as modified
herein. Although Employee's employment is hereby terminated, the Employment
Period as defined in the Employment Agreement shall continue until December 31,
2002 subject to the provisions of the Employment Agreement. During the
Employment Period, Employee will continue to receive salary of $475,000 per
year pursuant to Section 3(a) of the Employment Agreement. In lieu of bonuses
under Section 3(b) of the Employment Agreement, Executive Services shall pay to
Employee within 10 days of the date hereof the sum of $2,102,471. Payments made
pursuant to this numbered paragraph 2 shall be made net of applicable
withholding taxes. Except as set forth in this Agreement, Employee shall not be
entitled to any compensation or benefits set forth in Section 3 of the
Employment Agreement.
3. Employee shall be eligible to participate in the employee benefit
plans of the Group and the other benefits that are listed on Schedule A to this
Agreement during the Employment Period. Employee shall not be eligible to
participate in any of the other employee benefit plans of the Group or receive
any of the other benefits to which he was entitled while employed as an
executive of the Group pursuant to the Employment Agreement, including without
limitation those listed on Schedule B to this Agreement.
4. Employee will be eligible to receive his Supplemental Executive
Retirement Plan for Senior Officers ("SERP") benefit payments commencing upon
his attaining the age of 55. Through the remainder of the Employment Period,
Executive Services will pay Employee in cash (i) the equivalent of the cash
contributions to the Cash Balance Plan which Employee would have received if he
had remained as an employee during such period and (ii) the present value of
the benefit Employee would have accrued under the SERP if he had remained as an
employee during such period.
-1-
<PAGE> 2
5. Provided Employee continues to provide reasonably satisfactory
collateral to SCI, Executive Services shall continue to reimburse Employee for
the interest payments on his Promissory Note dated August 19, 1993 payable to
SCI in the original principal amount of Six Hundred Thousand and No/100 Dollars
($600,000.00), bearing interest at 6-1/2% per annum and maturing on August 10,
2003. Such reimbursements shall be made in accordance with prior practice,
shall include a gross-up for federal income taxes payable in respect thereof
and are expected to approximate a total of $70,000 per year.
6. All SCI stock options held by Employee will be governed by the
terms thereof based upon termination of employment without cause.
7. Executive Services hereby notifies Employee that Executive Services
exercises its option to extend Employee's post-employment non-competition
obligations under Section 12(a) of the Employment Agreement and Executive
Service's corresponding obligation to make the Non-Competition Payments (as
defined in the Employment Agreement). Accordingly, Employee's post-employment
non-competition obligations and Executive Service's obligation to make such
Non-Competition Payments will commence January 1, 2003 and terminate December
31, 2005. Such Non-Competition Payments will total $475,000 per year and will
be payable on a monthly or bi-weekly basis.
8. In consideration of the payments to Employee referred to in
numbered paragraph 2 above, the receipt and sufficiency of which Employee
hereby acknowledges, Employee discharges and releases SCI, Executive Services,
all other members of SCI Group, their successors, assigns, divisions,
representatives, agents, officers, directors, stockholders, and employees, from
any claims, demands, and/or causes of action whatsoever, presently known or
unknown, that are based upon facts occurring on or prior to the date of
execution of this Agreement, including but not limited to, the following: (a)
any statutory claims under the Age Discrimination in Employment Act of 1967,
the Americans with Disabilities Act of 1990, the Family and Medical Leave Act
of 1993, the Civil Rights Acts of 1964 and 1991, the Employee Retirement Income
Security Act, Chapter 451 of the Texas Labor Code and/or the Texas Commission
on Human Rights Act, (b) any tort or contract claims, and/or (c) any claims,
matters or actions related to Employee's employment and/or affiliation with, or
separation from SCI Group; provided, however, that the release set forth in
this numbered paragraph 8 shall not affect any claims, demands and/or causes of
action that Employee may have for indemnity, contribution or otherwise against
any member of the SCI Group arising from or relating to the pending shareholder
litigation and any additional lawsuits that are filed after the date hereof
arising from or relating to essentially the same factual matters ("Excepted
Litigation").
9. Pursuant to Section 7 of Article IV of SCI's Bylaws, the right of
indemnification provided for therein shall "continue as to a person who has
ceased to be a director, officer, or representative and shall inure to the
benefit of the heirs, executors and administrators of such a person." SCI
confirms that, Employee's rights to indemnification under Article IV of SCI's
Bylaws in respect of the Excepted Litigation and any other event occurring
prior to the time of his resignation as an officer or director of SCI and its
subsidiaries and affiliated companies will not be affected.
-2-
<PAGE> 3
10. Additionally, SCI and Executive Services discharge and release
Employee and his heirs, executors and administrators from any claims, demands,
and/or causes of action whatsoever, presently known or unknown, that are based
upon facts occurring on or prior to the date of execution of this Agreement,
including, but not limited to, any claim, matter or action related to
Employee's employment and/or affiliation with, or separation from SCI Group;
provided, however, that the release set forth in this numbered paragraph 10
shall not affect any claims, demands and/or causes of action that any member of
the SCI Group may have against Employee arising from or relating to the
Excepted Litigation or his position or actions as a director of SCI.
11. Employee agrees that he shall engage in no act which is intended,
or may be reasonably expected, to harm the reputation, business, prospects, or
operations of any members of SCI Group, their officers, directors, stockholders
or employees. Employee will not reveal to any third party any difference of
opinion that may exist at any time between Employee and any member of
management of SCI, Executive Services, or any other members of SCI Group.
12. The parties agree that they shall not disclose, or cause to be
disclosed, the terms of this Agreement, or the fact that this Agreement exists,
except to their respective attorneys, accountants and/or advisors, or to the
extent otherwise required by law. The parties further agree that this numbered
paragraph 12 is not applicable to discussions of this Agreement in the ordinary
course of business among representatives, agents, officers, directors,
stockholders and employees of any members of SCI Group.
13. The execution, validity, interpretation and performance of this
Agreement shall be determined and governed exclusively by the laws of the State
of Texas, without reference to the principles of conflict of laws.
14. This Agreement and the Employment Agreement as modified hereby
represent the complete agreement among Employee, SCI and Executive Services
concerning the subject matter hereof and supersede all prior agreements or
understandings, written or oral, between Employee and any member of the SCI
Group. No attempted modification or waiver of any of the provisions of this
Agreement shall be binding on any party hereto unless in writing and signed by
Employee, SCI and Executive Services.
15. Each of the numbered paragraphs contained in this Agreement shall
be enforceable independently of every other numbered paragraph in this
Agreement, and the invalidity or nonenforceability of any numbered paragraph
shall not invalidate or render nonenforceable any other numbered paragraph
contained in this Agreement.
16. It is further understood that for a period of seven (7) days
following the execution of this Agreement in duplicate originals, Employee may
revoke this Agreement, and this Agreement shall not become effective or
enforceable until the revocation period has expired.
17. This Agreement has been entered into voluntarily and not as a
result of coercion, duress, or undue influence. Employee acknowledges that he
has read and fully understands the terms
-3-
<PAGE> 4
of this Agreement and has consulted with an attorney before executing this
Agreement. Additionally, Employee acknowledges that he has been afforded the
opportunity to take twenty-one (21) days to consider this Agreement.
18. Except for the matters specifically excluded below, any and all
disputes between the parties to this Agreement arising out of or in connection
with the negotiation, execution, interpretation, performance or non-performance
of this Agreement and the covenants and obligations contemplated herein,
including but not limited to any claims against Executive Services, SCI, its
affiliates or their respective officers, directors, employees or agents, shall
be solely and finally settled by arbitration conducted pursuant to the Rules of
the American Arbitration Association, as now in effect or hereafter amended.
Judgment on the award of the arbitrator may be entered in any court having
jurisdiction over the party against whom enforcement of the award is being
sought, and the parties hereby irrevocably consent to the jurisdiction of any
such court for the purpose of enforcing any such award. The parties agree and
acknowledge that any arbitration proceedings between them, and the outcome of
such proceedings, shall be kept strictly confidential. It is expressly agreed
and understood that this paragraph shall not govern claims for workers'
compensation or unemployment benefits or claims for injunctive relief relating
to alleged violations of Sections 9, 11, 12 or 13 of the Employment Agreement.
19. It is agreed that Executive Services shall pay reasonable legal
fees of Employee incurred in the negotiation and execution of this Agreement.
The parties to this Agreement have executed this Agreement as of the
day and year first written above.
/s/ W. BLAIR WALTRIP
- -------------------- Service Corporation International
Employee
By: /s/ JAMES M. SHELGER
----------------------------------------
Authorized Officer
SCI Executive Services, Inc.
By: /s/ CURTIS G. BRIGGS
----------------------------------------
Authorized Officer
-4-
<PAGE> 1
EXHIBIT 10.9
SEPARATION AND RELEASE AGREEMENT
This Separation and Release Agreement ("Agreement") is entered into as
of the 18th day of November, 1999, among Service Corporation International, a
Texas corporation ("SCI"), SCI Executive Services, Inc., a Delaware corporation
("Executive Services"), and George R. Champagne ("Champagne").
SCI, Executive Services and Champagne agree as follows:
1. Effective as of the date hereof, the Company hereby terminates
Champagne's employment other than for cause and Champagne hereby resigns as
Executive Vice President and Chief Financial Officer of SCI as well as all
other positions he holds with SCI, its subsidiaries and affiliates
(collectively, the "SCI Group"), including without limitation all positions as
officer, director or committee member.
2. The Employment Agreement dated March 10, 1999 between SCI,
Executive Services and Champagne shall remain in effect except as modified
herein. Although Champagne's employment is hereby terminated, the Employment
Period as defined in the Employment Agreement shall continue until December 31,
2001 subject to the provisions of the Employment Agreement. During the
Employment Period, Champagne will continue to receive salary and benefits
pursuant to Sections 3(a) and 3(d) of the Employment Agreement except that the
Annual Base Salary shall be $450,000 per year. In lieu of bonuses under Section
3(b) of the Employment Agreement, Executive Services shall pay to Champagne
within 10 days of the date hereof the sum of $1,590,000, net of applicable
withholding taxes. Except as set forth above in this numbered paragraph 2,
Champagne shall not be entitled to any compensation or benefits set forth in
Section 3 of the Employment Agreement.
3. Champagne's participation in the Supplemental Executive Retirement
Plan for Senior Officers ("SERP") shall continue through the Employment Period.
Champagne will be eligible to receive his SERP benefit payments commencing upon
his attaining the age of 55.
4. Through the Employment Period, Executive Services will pay
Champagne in cash the equivalent of the cash contributions to the Cash Balance
Plan which Champagne would otherwise have received as an employee during such
period.
5. All SCI stock options held by Champagne will be governed by the
terms thereof.
6. The Provident Services, Inc. loan on Champagne's residence will
remain in place until maturity in accordance with the terms of the loan.
-1-
<PAGE> 2
7. Executive Services hereby notifies Champagne that, upon expiration
of the Employment Period, Executive Services exercises its option to cancel
Champagne's post-employment non-competition obligations under Section 12(a) of
the Employment Agreement and Executive Service's corresponding obligation to
make the Non-Competition Payments (as defined in the Employment Agreement).
Champagne and Executive Services agree that the notice provided in the
preceding sentence is satisfactory for all purposes under the Employment
Agreement.
8. In consideration of the payments to Champagne referred to in
numbered paragraph 2 above, the receipt and sufficiency of which Champagne
hereby acknowledges, Champagne discharges and releases SCI, Executive Services,
all other members of SCI Group, their successors, assigns, divisions,
representatives, agents, officers, directors, stockholders, and employees, from
any claims, demands, and/or causes of action whatsoever, presently known or
unknown, that are based upon facts occurring on or prior to the date of
execution of this Agreement, including but not limited to, the following: (a)
any statutory claims under the Age Discrimination in Employment Act of 1967,
the Americans with Disabilities Act of 1990, the Family and Medical Leave Act
of 1993, the Civil Rights Acts of 1964 and 1991, the Employee Retirement Income
Security Act, Chapter 451 of the Texas Labor Code and/or the Texas Commission
on Human Rights Act, (b) any tort or contract claims, and/or (c) any claims,
matters or actions related to Champagne's employment and/or affiliation with,
or separation from SCI Group; provided, however, that the release set forth in
this numbered paragraph 8 shall not affect any claims, demands and/or causes of
action that Champagne may have for indemnity, contribution or otherwise against
any member of the SCI Group arising from or relating to the pending shareholder
litigation and any additional lawsuits that are filed after the date hereof
arising from or relating to essentially the same factual matters ("Excepted
Litigation").
9. Pursuant to Section 7 of Article IV of SCI's Bylaws, the right of
indemnification provided for therein shall "continue as to a person who has
ceased to be a director, officer, or representative and shall inure to the
benefit of the heirs, executors and administrators of such a person." SCI
confirms that, Champagne's rights to indemnification under Article IV of SCI's
Bylaws in respect of the Excepted Litigation and any other event occurring
prior to the time of his resignation as an officer and director of SCI and its
subsidiaries and affiliated companies will not be affected.
10. Additionally, SCI and Executive Services discharge and release
Champagne and his heirs, executors and administrators from any claims, demands,
and/or causes of action whatsoever, presently known or unknown, that are based
upon facts occurring on or prior to the date of execution of this Agreement,
including, but not limited to, any claim, matter or action related to
Champagne's employment and/or affiliation with, or separation from SCI Group;
provided, however, that the release set forth in this numbered paragraph 10
shall not affect any claims, demands and/or causes of action that any member of
the SCI Group may have against Champagne arising from or relating to the
Excepted Litigation.
11. Champagne agrees that he shall engage in no act which is intended,
or may be reasonably expected, to harm the reputation, business, prospects, or
operations of any members of SCI Group, their officers, directors, stockholders
or employees. Champagne will not reveal to any
-2-
<PAGE> 3
third party any difference of opinion that may exist at any time between
Champagne and any member of management of SCI, Executive Services, or any other
members of SCI Group.
12. The parties agree that they shall not disclose, or cause to be
disclosed, the terms of this Agreement, or the fact that this Agreement exists,
except to their respective attorneys, accountants and/or tax advisors, or to
the extent otherwise required by law. The parties further agree that this
numbered paragraph 12 is not applicable to discussions of this Agreement in the
ordinary course of business among representatives, agents, officers, directors,
stockholders and employees of any members of SCI Group.
13. The execution, validity, interpretation and performance of this
Agreement shall be determined and governed exclusively by the laws of the State
of Texas, without reference to the principles of conflict of laws.
14. With the exception of the consulting agreement executed by SCI
Management Corporation and Champagne as of the date hereof (the "Consulting
Agreement"), this Agreement represents the complete agreement among Champagne,
SCI and Executive Services concerning the subject matter in this Agreement and
supersedes all prior agreements or understandings, written or oral, between
Champagne and any member of the SCI Group. No attempted modification or waiver
of any of the provisions of this Agreement shall be binding on any party hereto
unless in writing and signed by Champagne, SCI and Executive Services.
15. Each of the numbered paragraphs contained in this Agreement shall
be enforceable independently of every other numbered paragraph in this
Agreement, and the invalidity or nonenforceability of any numbered paragraph
shall not invalidate or render nonenforceable any other numbered paragraph
contained in this Agreement.
16. It is further understood that for a period of seven (7) days
following the execution of this Agreement in duplicate originals, Champagne may
revoke this Agreement, and this Agreement shall not become effective or
enforceable until the revocation period has expired.
17. This Agreement has been entered into voluntarily and not as a
result of coercion, duress, or undue influence. Champagne acknowledges that he
has read and fully understands the terms of this Agreement and has consulted
with an attorney before executing this Agreement. Additionally, Champagne
acknowledges that he has been afforded the opportunity to take twenty-one (21)
days to consider this Agreement.
18. The dispute resolution provisions set forth in Section 21 of the
Consulting Agreement are applicable to any dispute arising under this Agreement.
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The parties to this Agreement have executed this Agreement as of the
day and year first written above.
- ------------------------------ Service Corporation International
George R. Champagne
By:
---------------------------------
Authorized Officer
SCI Executive Services, Inc.
By:
---------------------------------
Authorized Officer
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<PAGE> 1
EXHIBIT 10.10
INDEPENDENT CONTRACTOR/CONSULTATIVE AGREEMENT
THIS AGREEMENT is made and entered into as of the 18th day of November,
1999 by and between SCI Management Corporation, a Delaware corporation
(hereinafter called the "Company"), and George R. Champagne (hereinafter called
"Consultant"):
In consideration of the performance and discharge of the respective
agreements herein contained, Company and Consultant agree as follows:
Section 1. Term of Agreement. Subject to the provisions for termination
hereinafter set forth and subject to all of the provisions of this Agreement,
the term of this Agreement ("Term") shall be for a period commencing on January
1, 2000 and terminating December 31, 2001.
Section 2. Consultant Services. By the use of Consultant's knowledge,
skills, expertise and goodwill, and acting at all times as an independent
contractor, independent of any supervision, reporting of hours, or control in
the performance of consulting duties by the Company, Consultant agrees to
provide consultative services for the Company upon the request of any member of
the Board of Directors of Service Corporation International ("SCI") or any
executive officer of SCI, and to perform such consultative services as follows:
A. During the Term hereof, Consultant shall furnish to the Company
his best advice, information, judgment, and knowledge with respect
to the affairs, business, business methods and practices, history,
patrons, customers, employees and suppliers of the Company, and
generally seek to preserve and increase the business and goodwill
of the Company.
B. Consultant shall not be required to maintain specific working
hours, but shall be available at all times during the Term hereof,
upon reasonable notice, when the Company requests such
consultative services.
C. During the time consultative services are to be provided
hereunder, same shall be discharged and performed under the
direction and subject to the control of the Board of Directors and
senior officers of the Company.
D. Consultant shall not be required to consult more then an average
of 20 hours per week during the first year of the Term and 10
hours per week during the second year.
Section 3. Consideration. As compensation for the consultative services
to be performed and rendered by Consultant hereunder, Company agrees to pay
Consultant, so long as this Agreement shall be in full force and effect, at the
rate of (i) Two Hundred Forty Thousand Dollars ($240,000.00) per year for the
first twelve months of the Term, payable $20,000 per month, and (ii) One Hundred
Twenty Thousand Dollars ($120,000.00) per year for the second twelve months of
the Term, payable $10,000 per month. Such payment shall not be subject to
withholding for income taxes or FICA; provided, however, that such monthly
consultative payments shall terminate on the date of the death of Consultant
or in the event this Agreement should be otherwise terminated as provided
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<PAGE> 2
herein. In the event of the death of Consultant or in the event this Agreement
should be terminated as provided herein, the Company shall have no further
obligation to Consultant or his estate under this Agreement except to pay all
compensation earned prior to his date of death or termination. The first
installment will be due and payable on January 1, 2000 and subsequent payments
shall be made on the same day of each succeeding month during the Term hereof.
Section 4. Inability to Perform. If for any reason during the Term of
this Agreement Consultant should be prevented from performing his duties, by
reason of illness or incapacity or for any other cause, for an aggregate of
thirty (30) days in any one calendar year during the period hereof, then the
Company shall have the right to terminate this Agreement by giving at least
fifteen (15) days' prior written notice thereof to Consultant.
Section 5. Reimbursement for Expenses. Consultant is authorized to
incur reasonable expenses for promoting the business of the Company, including
expenses for entertainment and travel. Consultant will be reimbursed by the
Company for all such reasonable business expenses upon presentation by him of an
itemized account of such expenditures and such receipts or other documents as
may be required by the Company.
Section 6. Miscellaneous Covenants. Consultant agrees that at all times
during the Term of this Agreement:
A. Consultant will not knowingly or intentionally do or say
any act or thing which will or may impair, damage, or
destroy the goodwill and esteem for the Company with its
suppliers, employees, patrons, customers, and others who
may at any time have or have had business relations with
the Company;
B. Consultant will not reveal to any third person any
differences of opinion, if there be such at any time,
between him and the management of the Company as to the
Company's personnel, policies or practices; and,
C. Consultant will not knowingly or intentionally do any act
or thing detrimental to the Company or its business.
Section 7. Confidentiality. Consultant understands that in the course
of discharging and performance of the consultative duties as herein provided,
Consultant will receive certain trade secrets, lists of customers, and other
confidential information concerning the business of the Company and its
affiliates which the Company desires to protect. Consultant understands that,
among other things, the management methods, operating techniques, procedures and
methods, customer lists, prospective acquisitions, employee lists, training
manuals and procedures, personnel evaluation procedures, collection
procedures, and financial reports of the Company and/or its affiliates are
confidential and are not at any time during or after the Term of this Agreement
to be revealed to anyone outside the Company without specific written
authorization by an officer of the Company. Consultant further agrees that he
will not divulge to anyone outside the Company any such confidential information
or trade secrets.
Section 8. Noncompetition. Consultant agrees that during the Term of
this Agreement he will not, directly or indirectly, be engaged in, interested in
or concerned with any business which conducts operations directly or indirectly
in competition with the business of the Company or any affiliate of the Company.
Section 9. Enforceability. The foregoing agreements not to use trade
secrets or confidential information or to compete or to do any other acts
prohibited by Sections 7 and 8 of this Agreement shall not be held invalid or
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<PAGE> 3
unenforceable because of the scope of the territory or actions subject thereto
or restricted thereby, or the period of time within which such agreements
respectively are operative, but the maximum territory and action subject to such
agreements respectively, and the period of time in which such agreements
respectively are enforceable, are subject to determination by a final judgment
of any court which has jurisdiction over the parties and subject matter.
Section 10. Termination. In the event that Consultant fails to observe
and comply fully with all of the terms and provisions of this Agreement, or if
he fails to perform fully all of his duties, obligations, and agreements herein
contained or as imposed by law, including his fiduciary duties, to the
satisfaction of the Board of Directors of the Company, the Company shall have
the right, to terminate this Agreement by giving Consultant not less than thirty
(30) days' prior written notice of such termination, and this Agreement (with
the exception of Sections 7 and 8 hereof) shall thereupon terminate and be of no
further force and effect.
Section 11. Merger, Etc. Consultant recognizes and acknowledges that at
a future date the Company may be merged with another corporation or the location
of its present business moved to another location, but it is expressly agreed
that any such change will not render the covenants and agreements herein
contained (or in any other instrument entered into by and between the parties
hereto) any less binding or unenforceable in any manner whatsoever.
Section 12. Severability. In case any term, phrase, clause, paragraph,
restriction, covenant, or agreement herein contained shall be held to be invalid
or unenforceable, same shall be deemed, and it is hereby agreed that same are
meant to be, severable, and same shall not defeat or impair the remaining
provisions hereof.
Section 13. Waiver. A waiver by the Company of any breach by Consultant
of this Agreement or of any duties imposed upon Consultant by law, or of any
other cause for discharge of Consultant, shall not be construed as a waiver by
the Company of its right to terminate this Agreement for any subsequent or
continuing breach of this Agreement by Consultant.
Section 14. Binding Effect. This Agreement shall bind and inure to the
benefit of the Company, its successors and assigns, and Consultant, his heirs
and personal representatives.
Section 15. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and sent registered mail with
return receipt requested, or hand delivered to the respective addresses as set
forth below, or to such address as may from time to time be designated by notice
in accordance herewith.
Section 16. Governing Law. It is agreed that this Agreement will be
interpreted and construed in accordance with the laws of the State of Texas.
Section 17. Headings. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
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<PAGE> 4
Section 19. Modification. This Agreement may be modified only by a
written instrument signed by each of the parties hereto.
Section 20. Entire Agreement. This agreement contains the entire
understanding of the parties relating to the subject matter hereof and
supersedes all previous written and verbal agreements between the parties hereto
relating to such subject matter. There are no agreements, representations or
warranties not set forth herein.
Section 21. Dispute Resolution. Except for the matters specifically
excluded below, any and all disputes between the parties to this Agreement
arising out of or in connection with the negotiation, execution, interpretation,
performance or non-performance of this Agreement and the covenants and
obligations contemplated herein, including but not limited to any claims against
the Company, its affiliates or their respective officers, directors, employees
or agents, shall be solely and finally settled by arbitration conducted pursuant
to the Rules of the American Arbitration Association, as now in effect or
hereafter amended. Judgment on the award of the arbitrator may be entered in
any court having jurisdiction over the party against whom enforcement of the
award is being sought, and the parties hereby irrevocably consent to the
jurisdiction of any such court for the purpose of enforcing any such award. The
parties agree and acknowledge that any arbitration proceedings between them, and
the outcome of such proceedings, shall be kept strictly confidential. It is
expressly agreed and understood that this paragraph shall not govern claims for
workers' compensation or unemployment benefits or claims for injunctive relief
relating to alleged violations of Section 7 or 8 hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Address for Notices: CONSULTANT:
George R. Champagne ----------------------------------
#10 Twin Greens Court George R. Champagne
Kingswood,TX 77339
COMPANY:
SCI Management Corporation
Attn:
President
P.O. Box 130548 By:
Houston, Texas 77219 ----------------------------------
Curtis G. Briggs
Vice President
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<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of this
11th day of February, 1999, by and between SCI EXECUTIVE SERVICES, INC., a
Delaware corporation (the "Company") wholly owned by SERVICE CORPORATION
INTERNATIONAL, a Texas corporation (the "Parent") and successor by assignment to
all of the rights, duties and obligations under this Agreement, and John W.
Morrow, Jr. (the "Employee").
1. Employment and Term. The Company agrees to employ the Employee and
the Employee agrees to remain in the employ of the Company, in accordance with
the terms and provisions of this Agreement, for the period beginning on the date
hereof and ending as of the close of business on December 31, 2001 (such period
together with all extensions thereof, is referred to hereinafter as the
"Employment Period"); provided, however, that commencing on the date one year
after the date hereof, and on each January 1 thereafter (each such date shall be
hereinafter referred to as a "Renewal Date") the Employment Period shall be
automatically extended so as to terminate three (3) year(s) from such Renewal
Date if (i) the Compensation Committee of the Board of Directors of the Parent
(hereinafter referred to as the "Compensation Committee") authorizes such
extension during the 60-day period preceding such Renewal Date and (ii) the
Employee has not previously given the Company written notice that the Employment
Period shall not be so extended. In the event that the Company gives the
Employee written notice at any time that the Compensation Committee has
determined not to authorize such extension, or if the Company fails to notify
the Employee of the Compensation Committee's determination prior to the Renewal
Date (the "Renewal Deadline"), the Employment Period shall be extended so as to
terminate three (3) year(s) after the date such notice is given (or, in case of
a failure to notify, three (3) year(s) after the Renewal Deadline) and shall not
thereafter be further extended.
2. Duties and Powers of Employee. During the Employment Period, the
Employee shall serve as the Executive Vice President of the Parent and the
Company and shall have the duties, powers and authority heretofore possessed by
the holder of such offices and such other powers consistent therewith as are
delegated to him in writing from time to time by the Board of Directors of the
Parent (the "Board"). The Employee's services shall be performed at the location
where the Employee is currently employed or any office which is the headquarters
of the Company and is less than 50 miles from such location. During the Change
of Control Period, the Employee's position (including status,
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<PAGE> 2
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned with or by the
Company or the Parent at any time during the 90-day period immediately preceding
the Change of Control Date (as defined in Section 15(a) below).
3. Compensation. The Employee shall receive the following compensation
for his services:
(a) Salary. During the Employment Period, he shall be paid an
annual base salary ("Annual Base Salary") at the rate of not less than
$350,000 per year, in substantially equal bi-weekly installments, and
subject to any and all required withholdings and deductions for Social
Security, income taxes and the like. The Compensation Committee may from
time to time direct such upward adjustments to Annual Base Salary as the
Compensation Committee deems to be appropriate or desirable; provided,
however, that during the Change of Control Period, the Annual Base Salary
shall be reviewed at least annually and shall be increased at any time and
from time to time as shall be substantially consistent with increases in
base salary awarded to Employee prior to the Change of Control Period.
Annual Base Salary shall not be reduced after any increase thereof pursuant
to this Section 3(a). Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation of the Company under this Agreement.
(b) Incentive Cash Compensation. During the Employment Period, he
shall be eligible annually for a cash bonus at the discretion of the
Compensation Committee (such aggregate awards for each year are hereinafter
referred to as the "Annual Bonus") and at the discretion of the
Compensation Committee to receive awards from any plan of the Company or
any of its affiliated companies (as defined in Section 15(d) below)
providing for the payment of bonuses in cash to senior management employees
of the Company or its affiliated companies (such plans being referred to
herein collectively as the "Cash Bonus Plans") in accordance with the terms
thereof; provided, however, that, during the Change of Control Period, the
Employee shall be awarded, for each fiscal year ending during the Change of
Control Period, an Annual Bonus at least equal to the Highest Recent Bonus
(as defined in Section 15(e) below). Each Annual Bonus shall be paid no
later than the end of the third month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless the Employee
shall elect to defer the receipt of such Annual Bonus.
(c) Incentive and Savings and Retirement Plans. During the
Employment Period, the Employee shall be entitled
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<PAGE> 3
to participate in all incentive and savings (in addition to the Cash Bonus
Plans) and retirement plans, practices, policies and programs applicable
generally to other senior management employees of the Company and its
affiliated companies.
(d) Welfare Benefit Plans. During the Employment Period, the
Employee and/or the Employee's family, as the case may be, shall be
eligible for participation in all welfare benefit plans, practices,
policies and programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally
to other senior management employees of the Company and its affiliated
companies.
(e) Expenses. During the Employment Period and for so long as the
Employee is employed by the Company, he shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Employee in
accordance with the policies, practices and procedures of the Company and
its affiliated companies from time to time in effect.
(f) Fringe Benefits. During the Employment Period, the Employee
shall be entitled to fringe benefits in accordance with the plans, past
practices, programs and policies of the Company and its affiliated
companies from time to time in effect.
(g) Office and Support Staff. During the Employment Period, the
Employee shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial
and other assistance, commensurate with his position.
(h) Vacation and Other Absences. During the Employment Period,
the Employee shall be entitled to paid vacation and such other paid
absences whether for holidays, illness, personal time or any similar
purposes, in accordance with the plans, policies, programs and practices of
the Company and its affiliated companies.
(i) Change of Control. During the Change of Control Period, the
Employee's benefits listed under Sections 3(c), 3(d), 3(e), 3(f), 3(g) and
3(h) above shall be at least commensurate in all material respects with the
most valuable and favorable of those received by the Employee at any time
during the one-year period immediately preceding the Change of Control
Date.
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4. Termination of Employment. (a) Death or Disability. The Employment
Period shall terminate automatically upon the Employee's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Employee has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Employee written
notice in accordance with Section 16(b) of its intention to terminate the
Employment Period. In such event, the Employment Period shall terminate
effective on the 30th day after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
inability of the Employee to perform the Employee's duties with the Company on a
full-time basis as a result of incapacity due to mental or physical illness
which continues for more than one year after the commencement of such
incapacity, such incapacity to be determined by a physician selected by the
Company or its insurers and acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Employment Period for
Cause. For purposes of this Agreement, "Cause" shall mean (i) the Employee's
deliberate and intentional continuing refusal to substantially perform his
duties and obligations under this Agreement (other than a breach of the
Employee's obligations under this Agreement arising from the failure of the
Employee to work as a result of incapacity due to physical or mental illness) if
he shall have either failed to remedy such alleged breach within 60 days from
his receipt of written notice from the Secretary of the Company demanding that
he remedy such alleged breach, or shall have failed to take reasonable steps in
good faith to that end during such 60 day period and thereafter, or (ii) the
conviction of the Employee of a felony involving malice which conviction has
been affirmed on appeal or as to which the period in which an appeal can be
taken has lapsed.
(c) Good Reason; Window Period. The Employee's employment may be
terminated (i) by the Employee for Good Reason (as defined below) or (ii) during
the Window Period (as defined below) by the Employee without any reason. For
purposes of this Agreement, the "Window Period" shall mean the 30-day period
immediately following the first anniversary of the Change of Control Date. For
purposes of this Agreement, "Good Reason" shall mean
(i) the assignment to the Employee of any duties inconsistent in
any respect with the Employee's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities prior to
the date of such assignment or any other action by the Company
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<PAGE> 5
or the Parent which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated and
insubstantial action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 3, other than an isolated and insubstantial failure
not occurring in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Employee;
(iii) the Company's requiring the Employee to be based at any
office or location other than that described in Section 2(a);
(iv) any purported termination by the Company of the Employee's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company or the Parent to comply with and
satisfy Section 14(c), provided that the successor referred to in Section
14(c) has received at least ten days prior written notice from the Company
or the Employee of the requirements of Section 14(c).
For purposes of this Section 4(c), during the Change of Control Period, any good
faith determination of "Good Reason" made by the Employee shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause or
by the Employee without any reason during the Window Period or for Good Reason
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 16(b). For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employment Period under the provision so indicated,
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than 15 days after the giving of such notice) and (iv) if the termination
is by the Company for Cause, indicates that the Board has determined that a
basis for termination for Cause exists, that the Employee has failed to take
reasonable steps in good faith to remedy the alleged basis for such termination,
and contains a certified copy of a resolution of the Board adopted by the
affirmative vote of not less than two-thirds of the entire membership of the
Board in a meeting called and held for that purpose in which the Employee was
given an opportunity to be heard, finding that a basis for
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<PAGE> 6
termination for Cause exists and that the Employee has failed to take reasonable
steps in good faith to remedy such alleged basis for termination. The failure by
the Employee or the Company to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Employee or the Company hereunder or preclude the
Employee or the Company from asserting such fact or circumstance in enforcing
the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Employee's employment is terminated by the Company for Cause, or by the Employee
during the Window Period or for Good Reason, the date of receipt of the Notice
of Termination or any later date specified therein, as the case may be, (ii) if
the Employee's employment is terminated by the Company other than for Cause or
Disability, or by the Employee other than for Good Reason or during the Window
Period, the Date of Termination shall be the date on which the Company or the
Employee, as the case may be, notifies the other of such termination and (iii)
if the Employee's employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Employee or the Disability
Effective Date, as the case may be. Notwithstanding the foregoing, if the
Company gives the Employee written notice pursuant to the second sentence of
Section 1 hereof, then "Date of Termination" shall mean the last day of the
three (3) year period for which the Employment Period is extended pursuant to
such sentence.
5. Obligations of the Company Upon Termination. (a) Certain
Terminations Prior to Change of Control Date. If, during the Employment Period
prior to any Change of Control Date, the employment of the Employee with the
Company shall be terminated (i) by the Company other than for Cause, death or
Disability or (ii) by the Employee for Good Reason, then, in lieu of the
obligations of the Company under Section 3, (i) the Company shall pay to the
Employee in a lump sum in cash within 30 days after the Date of Termination all
Unpaid Agreement Amounts (as defined in Section 5(b)(i)(A) below) and (ii)
notwithstanding any other provision hereunder, for the longer of (A) the
remainder of the Employment Period or (B) to the extent compensation and/or
benefits are provided under any plan, program, practice or policy, such longer
period, if any, as such plan, program, practice or policy may provide, the
Company shall continue to provide to the Employee the compensation and benefits
provided in Sections 3(a), 3(b)(based on the Highest Recent Bonus), 3(c) and
3(d) (it being understood that if the Company gives the Employee written notice
that the Compensation Committee has determined not to authorize an extension, or
fails to notify the Employee of the Compensation Committee's determination prior
to the Renewal Deadline, in either case as contemplated by the second sentence
of Section 1 hereof, the giving of such notice or the failure to so notify the
Employee
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shall not be deemed a termination of the employment of the Employee with the
Company during the Employment Period for purposes of this Section 5(a)).
(b) Certain Terminations After Change of Control Date. If, during the
Change of Control Period, the employment of the Employee with the Company shall
be terminated (i) by the Company other than for Cause, death or Disability or
(ii) by the Employee either for Good Reason or without any reason during the
Window Period, then, in lieu of the obligations of the Company under Section 3
and notwithstanding any other provision hereunder:
(i) the Company shall pay to the Employee in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
(A) the sum of (1) all unpaid amounts due to the Employee
under Section 3 through the Date of Termination, including without
limitation, the Employee's Annual Base Salary and any accrued vacation
pay, (2) the product of (x) the Highest Recent Bonus and (y) a
fraction, the numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the denominator of
which is 365 and (3) any compensation previously deferred by the
Employee (together with any accrued interest or earnings thereon) to
the extent not theretofore paid (the sum of the amounts described in
clauses (1), (2) and (3) shall be hereinafter referred to as the
"Accrued Obligations" and the sum of the amounts described in clauses
(1) and (3) shall be hereinafter referred to as the "Unpaid Agreement
Amounts"); and
(B) the amount (such amount shall be hereinafter referred to
as the "Severance Amount") equal to the sum of
(1) Three (3) multiplied by the Employee's Annual Base Salary,
plus
(2) Three (3) multiplied by the Employee's Highest Recent
Bonus;
(ii) for the longer of (A) the remainder of the Employment Period
or (B) to the extent benefits are provided under any plan, program,
practice or policy, such longer period as such plan, program, practice or
policy may provide, the Company shall continue benefits to the Employee
and/or the Employee's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 3(d) if the Employee's employment had not
been terminated, in
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accordance with the most favorable plans, practices, programs or policies
of the Company and its affiliated companies as in effect and applicable
generally to other employees of comparable rank and their families during
the 90-day period immediately preceding the Change of Control Date or, if
more favorable to the Employee, as in effect generally at any time
thereafter with respect to other employees of comparable rank with the
Company and its affiliated companies and their families; provided, however,
that if the Employee becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under another
employer provided plan, the medical and other welfare benefits described
herein shall be required only to the extent not provided under such other
plan during such applicable period of eligibility. For purposes of
determining eligibility of the Employee for retiree benefits pursuant to
such plans, practices, programs and policies, the Employee shall be
considered to have remained employed until the end of the Employment Period
and to have retired on the last day of such period; and
(iii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Employee and/or the Employee's family
for the remainder of the Employment Period any other amounts or benefits
required to be paid or provided or which the Employee and/or the Employee's
family is eligible to receive pursuant to this Agreement and under any
plan, program, policy or practice or contract or agreement of the Company
and its affiliated companies as in effect and applicable generally to other
employees of comparable rank with the Company and its affiliated companies
and their families during the 90-day period immediately preceding the
Change of Control Date or, if more favorable to the Employee, as in effect
generally thereafter with respect to other employees of comparable rank
with the Company and its affiliated companies and their families.
Such amounts received under this Section 5(b) shall be in lieu of any other
amount of severance relating to salary or bonus continuation to be received by
the Employee upon termination of employment of the Employee under any severance
plan, policy or arrangement of the Company.
(c) Termination as a Result of Death. If the Employee's employment is
terminated by reason of the Employee's death during the Employment Period, in
lieu of the obligations of the Company under Section 3, the Company shall pay or
provide to the Employee's estate (i) all Accrued Obligations (which shall be
paid in a lump sum in cash within 30 days after the Date of Termination) and the
timely payment or provision of the Welfare Benefit Continuation (as defined
below) and the Other Benefits (as defined below) and (ii) any cash amount to be
received by the
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Employee or the Employee's family as a death benefit pursuant to the terms of
any plan, policy or arrangement of the Company and its affiliated companies.
"Welfare Benefit Continuation" shall mean the continuation of benefits to the
Employee and/or the Employee's family for the longer of (i) three (3) year(s)
from the Date of Termination or (ii) the period provided by the plans, programs,
policies or practices described in Section 3(d) in which the Employee
participates as of the Date of Termination, such benefits to be at least equal
to those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 3(d) if the Employee's
employment had not been terminated, in accordance with the most favorable plans,
practices, programs or policies of the Company and its affiliated companies as
in effect and applicable generally to other employees of comparable rank and
their families on the Date of Termination or, if the Date of Termination occurs
after the Change of Control Date, during the 90-day period immediately preceding
the Change of Control Date or, if more favorable to the Employee, as in effect
generally at any time thereafter with respect to other employees of comparable
rank with the Company and its affiliated companies and their families. "Other
Benefits" shall mean the timely payment or provision to the Employee and/or the
Employee's family of any other amounts or benefits required to be paid or
provided or which the Employee and/or the Employee's family is eligible to
receive pursuant to this Agreement and under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated companies as
in effect and applicable generally to other employees of comparable rank and
their families on the Date of Termination or, if the Date of Termination occurs
after the Change of Control Date, during the 90-day period immediately preceding
the Change of Control Date or, if more favorable to the Employee, as in effect
generally thereafter with respect to other employees of comparable rank with the
Company and its affiliated companies and their families.
(d) Termination as a Result of Disability. If the Employee's
employment is terminated by reason of the Employee's Disability during the
Employment Period, in lieu of the obligations of the Company under Section 3,
the Company shall pay or provide to the Employee (i) all Accrued Obligations
which shall be paid in a lump sum in cash within 30 days after the Date of
Termination and the timely payment or provision of the Welfare Benefit
Continuation and the Other Benefits, provided, however, that if the Employee
becomes reemployed with another employer and is eligible to receive medical or
other welfare benefits under another employer provided plan, the Welfare Benefit
Continuation shall be required only to the extent not provided under such other
plan during such applicable period of eligibility, and (ii) any cash amount to
be received by the Employee as a disability benefit pursuant to the terms of any
plan, policy or arrangement of the Company and its affiliated companies.
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<PAGE> 10
(e) Cause; Other than for Good Reason. If the Employee's
employment shall be terminated during the Employment Period by the Company for
Cause or by the Employee other than during the Window Period and other than for
Good Reason, in lieu of the obligations of the Company under Section 3, the
Company shall pay to the Employee in a lump sum in cash within 30 days after the
Date of Termination all Unpaid Agreement Amounts.
6. Non-exclusivity of Rights. Except as provided in Sections 5(a),
5(b)(i)(B), 5(b)(ii), 5(c) and 5(d), nothing in this Agreement shall prevent or
limit the Employee's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Employee may qualify, nor shall anything herein limit or
otherwise affect such rights as the Employee may have under any contract or
agreement with the Company or any of its affiliated companies. Amounts which are
vested benefits or which the Employee is otherwise entitled to receive under any
plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
7. Full Settlement; Resolution of Disputes. (a) The Company's
obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Employee or others. In no event shall the Employee
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Employee under any of the provisions of
this Agreement and, except as provided in Sections 5(b)(ii) and 5(d), such
amounts shall not be reduced whether or not the Employee obtains other
employment. The Company agrees to pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which the Employee may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company, the Employee or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Employee about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
payment required to be made under this Agreement but not timely paid at the rate
provided for in Section 280G(d)(4) of the Internal Revenue Code of 1986, as
amended (the "Code").
(b) If there shall be any dispute between the Company and the
Employee (i) in the event of any termination of the Employee's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Employee, whether Good Reason existed, then,
unless and
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until there is a final, nonappealable judgment by a court of competent
jurisdiction declaring that such termination was for Cause or that the
determination by the Employee of the existence of Good Reason was not made in
good faith, the Company shall pay all amounts, and provide all benefits, to the
Employee and/or the Employee's family or other beneficiaries, as the case may
be, that the Company would be required to pay or provide pursuant to Section
5(a) or 5(b) as though such termination were by the Company without Cause or by
the Employee with Good Reason. The Employee hereby undertakes to repay to the
Company all such amounts to which the Employee is ultimately adjudged by such
court not to be entitled.
8. Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Company to or for the benefit of the
Employee (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 8) (a "Payment") would be
subject to the excise tax imposed by Section 4999 (or a successor provision of
like import) of the Code or any interest or penalties are incurred by the
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by an accounting
firm of national reputation selected by the Company (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the Employee that
there has been a Payment, or such earlier time as is requested by the Company.
In the event that the Accounting Firm is serving (or has served within the three
years preceding the Change of Control Date) as accountant or auditor for the
individual, entity or group effecting the Change of Control, or is unwilling or
unable to perform its obligations pursuant to this Section 8, the Employee shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm
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shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the
Company to the Employee within five days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Employee, it shall furnish the Employee with a written opinion that
failure to report the Excise Tax on the Employee's applicable federal income tax
return would not result in the imposition of a negligence or similar penalty.
Any determination by the Accounting Firm shall be binding upon the Company and
the Employee. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 8(c) and the Employee thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Employee.
(c) The Employee shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Employee is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Employee gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim, the Company,
subject to the provisions of this Section 8(c), shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its sole option,
either direct the Employee to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner. In this connection, the Employee
agrees, subject to the provisions of this Section 8(c), to (i) prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine, (ii) give the Company any information reasonably requested by the
Company relating to such claim, (iii) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation,
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accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company, (iv) cooperate with the Company in good
faith in order to effectively contest such claim and (v) permit the Company to
participate in any proceedings relating to such claim. The foregoing is subject,
however, to the following: (A) the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Employee harmless,
on an after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed in connection therewith and the payment
of costs and expenses in such connection, (B) if the Company directs the
Employee to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Employee, on an interest-free basis, and shall
indemnify and hold the Employee harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with respect thereto) imposed
with respect to such advance or with respect to any imputed income with respect
to such advance, (C) any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Employee with respect to which such
contested amount is claimed to be due shall be limited solely to such contested
amount and (D) the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Employee shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 8(c), the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Employee
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Employee shall not be entitled to any refund with respect to
such claim and the Company does not notify the Employee in writing of its intent
to contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Employee
during the Employee's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other
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<PAGE> 14
than by acts by the Employee or representatives of the Employee in violation of
this Agreement). After termination of the Employee's employment with the Company
or any of its affiliated companies, the Employee shall not, without the prior
written consent of the Company or as may otherwise be required by law or legal
process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Employee under
this Agreement. Subject to the previous sentence, nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
10. Employee's Obligation to Avoid Conflicts of Interest. (a) The
Employee shall comply with the conflict of interest policy of the Parent as in
effect from time to time.
11. Ownership of Information, Ideas, Concepts, Improvements,
Discoveries and Inventions and all Original Works of Authorship. (a) All
information, ideas, concepts, improvements, discoveries and inventions, whether
patentable or not, which are conceived, made, developed or acquired by Employee
or which are disclosed or made known to Employee, individually or in conjunction
with others, during Employee's employment by the Company or any of its
affiliated companies and which relate to the Company's or any of its affiliated
companies' business, products or services (including all such information
relating to corporate opportunities, research, financial and sales data, pricing
and trading terms, evaluations, opinions, interpretations, acquisition
prospects, the identity of customers or their requirements, the identity of key
contacts within the customer's organizations or within the organization of
acquisition prospects, or marketing and merchandising techniques, prospective
names and marks) are and shall be the sole and exclusive property of the
Company. Moreover, all drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, maps and all
other writings or materials of any type embodying any of such information,
ideas, concepts, improvements, discoveries and inventions are and shall be the
sole and exclusive property of the Company.
(b) In particular, Employee hereby specifically sells, assigns and
transfers to the Company all of his worldwide right, title and interest in and
to all such information, ideas, concepts, improvements, discoveries or
inventions, and any United States or foreign applications for patents,
inventor's certificates or other industrial rights that may be filed thereon,
including divisions, continuations, continuations-in-part, reissues and/or
extensions thereof, and applications for registration of such names and marks.
Both during the period of
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Employee's employment by the Company or any of its affiliated companies and
thereafter, Employee shall assist the Company and its nominee at all times in
the protection of such information, ideas, concepts, improvements, discoveries
or inventions, both in the United States and all foreign countries, including
but not limited to, the execution of all lawful oaths and all assignment
documents requested by the Company or its nominee in connection with the
preparation, prosecution, issuance or enforcement of any applications for United
States or foreign letters patent, including divisions, continuations,
continuations-in-part, reissues, and/or extensions thereof, and any application
for the registration of such names and marks.
(c) Moreover, if during Employee's employment by the Company or
any of its affiliated companies, Employee creates any original work of
authorship fixed in any tangible medium of expression which is the subject
matter of copyright (such as videotapes, written presentations on acquisitions,
computer programs, drawings, maps, architectural renditions, models, manuals,
brochures or the like) relating to the Company's or any of its affiliated
companies' business, products, or services, whether such work is created solely
by Employee or jointly with others, the Company shall be deemed the author of
such work if the work is prepared by Employee in the scope of his or her
employment; or, if the work is not prepared by Employee within the scope of his
or her employment but is specially ordered by the Company as a contribution to a
collective work, as a part of a motion picture or other audiovisual work, as a
translation, as a supplementary work, as a compilation or as an instrumental
text, then the work shall be considered to be work made for hire and the Company
shall be the author of the work. In the event such work is neither prepared by
the Employee within the scope of his or her employment or is not a work
specially ordered and deemed to be a work made for hire, then Employee hereby
agrees to assign, and by these presents does assign, to the Company all of
Employee's worldwide right, title and interest in and to such work and all
rights of copyright therein. Both during the period of Employee's employment by
the Company or any of its affiliated companies and thereafter, Employee agrees
to assist the Company and its nominee, at any time, in the protection of the
Company's worldwide right, title and interest in and to the work and all rights
of copyright therein, including but not limited to, the execution of all formal
assignment documents requested by the Company or its nominee and the execution
of all lawful oaths and applications for registration of copyright in the United
States and foreign countries.
12. Employee's Post-Employment Non-Competition Obligations. (a) During
the Employment Period and, subject to the conditions of Sections 12(b) and
12(c), for a period of three (3) year(s) thereafter (the "Non-Competition
Period"), Employee shall not, acting alone or in conjunction with others,
directly or
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indirectly, in any of the business territories in which the Company or any of
its affiliated companies is presently or at the time of termination of
employment conducting business, engage in any business in competition with the
business conducted by the Company or any of its affiliated companies at the time
of the termination of the employment relationship, whether for his own account
or by soliciting, canvassing or accepting any business or transaction for or
from any other company or business in competition with such business of the
Company or any of its affiliated companies.
(b) If Employee's employment is discontinued: (i) by Company for
Cause pursuant to Section 4(b); or (ii) by Employee because of any reason other
than for Good Reason or other than during the Window Period pursuant to Section
4(c), Employee shall be bound by the obligations of Section 12(a) and the
Company shall have no obligation to make the Non-Competition Payments (as
defined in Section 12(c) below). However, if the employment relationship is
terminated by any other circumstance or for any other reason, Employee's
post-employment non-competition obligations required by Section 12(a) shall be
subject to the Company's obligation to make the Non-Competition Payments
specified in Section 12(c).
(c) Notwithstanding the provisions of Section 4 of this Agreement,
whenever Employee's employment is terminated due to the expiration of the
Employment Period in accordance with the provisions of Section 1, or due to
Employee's Disability (Section 4(a)), or by the Company without Cause (Section
4(b)), or by Employee for Good Reason or during the Window Period pursuant to
Section 4(c) unless the Company exercises its option as hereinafter provided,
Employee shall be entitled to continue to receive payments (the "Non-Competition
Payments") equal to his then current Annual Base Salary (as of the Date of
Termination) during the Non-Competition Period. During the Non-Competition
Period, the Employee shall not, however, be deemed to be an employee of the
Company or be entitled to continue to receive any other employee benefits other
than as set forth in Section 5 or Section 8. Moreover, the Non-Competition
Payments shall be reduced to the extent Employee has already received lump-sum
payments in lieu of salary pursuant to Section 5. The Company shall have the
option, exercisable at any time on or within one (1) month after: (i) the date
the Company gives the Employee notice that the Employment Period will not be
extended (or in the case of failure to notify, on or within one month after the
Renewal Deadline), in accordance with Section 1; or (ii) in the case of
termination due to Employee's disability or by the Company without Cause, the
Date of Termination, to cancel Employee's post-employment non-competition
obligations under Section 12(a) and the Company's corresponding obligation to
make the Non-Competition Payments. Such option shall be exercised by the Company
mailing a written notice thereof to Employee in accordance
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with Section 16(b); if the Company does not send such notice within the
prescribed one-month period, the Company shall remain obligated to make the
Non-Competition Payments and Employee shall remain obligated to comply with the
provisions of Section 12(a). The amounts to be paid by the Company are not
intended to be liquidated damages or an estimate of the actual damages that
would be sustained by the Company if Employee breaches his post-employment
non-competition obligations. If Employee breaches his post-employment
non-competition obligations, the Company shall be entitled to cease making the
Non-Competition Payments and shall be entitled to all of its remedies at law or
in equity for damages and injunctive relief.
13. Obligations to Refrain From Competing Unfairly. In addition to the
other obligations agreed to by Employee in this Agreement, Employee agrees that
during the Employment Period and for three (3) year(s) following the Date of
Termination, he shall not at any time, directly or indirectly for the benefit of
any other party than the Company or any of its affiliated companies, (a) induce,
entice, or solicit any employee of the Company or any of its affiliated
companies to leave his employment, or (b) contact, communicate or solicit any
customer of the Company or any of its affiliated companies derived from any
customer list, customer lead, mail, printed matter or other information secured
from the Company or any of its affiliated companies or their present or past
employees, or (c) in any other manner use any customer lists or customer leads,
mail, telephone numbers, printed material or material of the Company or any of
its affiliated companies relating thereto.
14. Successors. (a) This Agreement is personal to the Employee and
without the prior written consent of the Company shall not be assignable by the
Employee otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Employee's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. The Parent will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of
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the business and/or assets of the Parent or the Parent to assume expressly and
agree to perform the Parent's obligations hereunder in the same manner and to
the same extent that the Parent would be required to perform them if no such
succession had taken place. As used in this Agreement, "Parent" shall mean the
Parent as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform the Parent's obligations
hereunder by operation of law, or otherwise.
15. Certain Definitions. The following defined terms used in this
Agreement shall have the meanings indicated:
(a) The "Change of Control Date" shall mean the first date on which
a Change of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Employee's employment
with the Company is terminated or there is a change in the circumstances of the
Employee's employment which constitutes Good Reason, and if it is reasonably
demonstrated by the Employee that such termination or change in circumstances:
(i) was at the request of a third party who has taken steps reasonably
calculated to effect the Change of Control; or (ii) otherwise arose in
connection with or anticipation of the Change of Control, then, for all purposes
of this Agreement, the "Change of Control Date" shall mean the date immediately
prior to the date of such termination or cessation.
(b) The "Change of Control Period" shall mean the period commencing
on the Change of Control Date and ending on the last day of the Employment
Period.
(c) "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended the "Exchange Act") (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then outstanding shares
of Common Stock of the Parent (the "Outstanding Parent Common Stock")
or (B) the combined voting power of the then outstanding voting
securities of the Parent entitled to vote generally in the election of
directors (the "Outstanding Parent Voting Securities"); provided,
however, that the following acquisitions shall not constitute a Change
of Control: (A) any acquisition directly from the Parent (excluding an
acquisition by virtue of the exercise of a conversion privilege), (B)
any acquisition by the Parent, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Parent
or any corporation controlled by the Parent or (D) any acquisition by
any corporation pursuant to a reorganization, merger or
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consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (A), (B) and (C) of
subsection (iii) of this definition of "Change of Control" are
satisfied; or
(ii) Individuals who, as of the effective date hereof,
constitute the Board of Directors of the Parent (the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board of
Directors of the Parent; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Parent's shareholders, was approved by
(A) a vote of at least a majority of the directors then constituting
the Incumbent Board of the Parent, or (B) a vote of at least a majority
of the directors then comprising the Executive Committee of the Board
of Directors of the Parent at a time when such committee consisted of
at least five members and all members of such committee were either
members of the Incumbent Board or considered as being members of the
Incumbent Board pursuant to clause (A) of this subsection (ii), shall
be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board of Directors of the Parent; or
(iii) Approval by the shareholders of the Parent of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (A) more than
60% of, respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Parent
Common Stock and Outstanding Parent Voting Securities immediately prior
to such organization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding Parent
Common Stock and Outstanding Parent Voting Securities, as the case may
be, (B) no Person (excluding the Parent, any employee benefit plan or
related trust of the Parent or such corporation resulting from such
reorganization, merger or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger or
consolidation,
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directly or indirectly, 20% or more of the Outstanding Parent Common
Stock or Outstanding Parent Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
or the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board of
directors of the corporation resulting from such reorganization, merger
or consolidation were members of the Incumbent Board at the time of the
execution of the initial agreement providing for such reorganization,
merger or consolidation; or
(iv) Approval by the shareholders of the Parent of (A) a
complete liquidation or dissolution of the Parent or (B) the sale or
other disposition of all or substantially all of the assets of the
Parent, other than to a corporation, with respect to which following
such sale or other disposition, (A) more than 60% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Parent Common Stock
and Outstanding Parent Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition, of the
Outstanding Parent Common Stock and Outstanding Parent Voting
Securities, as the case may be, (B) no Person (excluding the Parent and
any employee benefit plan or related trust of the Parent or such
corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 20% or more of
the Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares
of common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (C) at least a majority
of the members of the Board of Directors of such corporation were
members of the Incumbent Board at the time of the execution of the
initial agreement or action of the Board of Directors of the Parent
providing for such sale or other disposition of assets of the Parent.
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<PAGE> 21
(d) The term "affiliated company" shall mean any company
controlled by, controlling or under common control with the Company.
(e) The term "Highest Recent Bonus" shall mean the highest Annual
Bonus (annualized for any fiscal year consisting of less than twelve full
months) paid or payable, including by reason of any deferral, to the Employee by
the Company and its affiliated companies in respect of the three most recent
full fiscal years ending on or prior to, (i) if prior to a Change of Control,
the Date of Termination, or (ii) if after a Change of Control, the Change of
Control Date.
16. Miscellaneous. (a) This Agreement supersedes all previous
agreements and discussions relating to the same or similar subject matters
between Employee and the Company and shall be governed by and construed in
accordance with the laws of the State of Texas, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a duly authorized
committee thereof, shall have authority on behalf of the Company or the Parent
to agree to amend, modify, repeal, waive, extend or discharge any provision of
this Agreement or anything in reference thereto.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Employee:
John W. Morrow, Jr.
8615 Stable Crest
Houston, TX 77024
If to the Company:
SCI Executive Services, Inc.
1929 Allen Parkway
Houston, Texas 77019
Attention: Corporate Secretary
If to the Parent:
Service Corporation International
1929 Allen Parkway
Houston, Texas 77019
Attention: Corporate Secretary
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<PAGE> 22
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Employee's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Employee or the Company may have hereunder,
including, without limitation, the right of the Employee to terminate employment
for Good Reason pursuant to Section 4(c) of this Agreement, shall not be deemed
to be a waiver of such provision or right or any other provision or right of
this Agreement.
(f) No breach, whether actual or alleged, of this Agreement by the
Employee shall constitute grounds for the Company to withhold or offset any
payment or benefit due to the Employee under any other agreement, contract,
plan, program, policy or practice of the Company.
IN WITNESS WHEREOF, the Employee and, pursuant to due authorization
from the Board, the Company have caused this Agreement to be executed this 11th
day of February, 1999.
JOHN W. MORROW, JR.
/s/John W. Morrow, Jr.
--------------------------------
"EMPLOYEE"
SCI EXECUTIVE SERVICES, INC.
By: /s/Curtis G. Briggs
-----------------------------
Name: Curtis G. Briggs
Title: Vice President
"COMPANY"
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<PAGE> 23
Pursuant to due authorization from its Board of Directors, the Parent,
by its execution hereof, absolutely and unconditionally guarantees to Employee
the full and timely payment and performance of each obligation of the Company to
Employee under this Agreement, waives any and all rights that it may otherwise
have to require Employee to proceed against the Company for nonpayment or
nonperformance, waives any and all defenses that would otherwise be a defense to
this guarantee, and agrees to remain liable to Employee for all payment and
performance obligations of the Company under this Agreement, whether arising
before, on or after the date of this Agreement, until this Agreement shall
terminate pursuant to its terms.
SERVICE CORPORATION INTERNATIONAL
By: /s/James M. Shelger
----------------------------------
Name: James M. Shelger
Title: Senior Vice President
General Counsel
and Secretary
"PARENT"
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<PAGE> 1
EXHIBIT 10.12
SEPARATION AND RELEASE AGREEMENT
This Separation and Release Agreement ("Agreement") is entered into as
of the 21st day of January, 2000, among Service Corporation International, a
Texas corporation ("SCI"), SCI Executive Services, Inc., a Delaware corporation
("Executive Services"), and John W. Morrow, Jr. ("Employee").
SCI, Executive Services and Employee agree as follows:
1. Effective as of the date hereof, Executive Services hereby
terminates Employee's employment other than for cause and Employee hereby
resigns as Executive Vice President of SCI as well as all other positions he
holds with SCI, its subsidiaries and affiliates (collectively, the "SCI Group"),
including without limitation all positions as officer, director or committee
member.
2. The Employment Agreement dated February 11, 1999 between SCI,
Executive Services and Employee shall remain in effect except as modified
herein. Although Employee's employment is hereby terminated, the Employment
Period as defined in the Employment Agreement shall continue until December 31,
2001 subject to the provisions of the Employment Agreement. During the
Employment Period, Employee will continue to receive salary of $400,000 per year
pursuant to Section 3(a) of the Employment Agreement. Except as set forth in
this Agreement, Employee shall not be entitled to any compensation or benefits
set forth in Section 3 of the Employment Agreement.
3. Employee shall be eligible to participate in the employee benefit
plans of the Group and the other benefits that are listed on Schedule A to this
Agreement during the Employment Period. Employee shall not be eligible to
participate in any of the other employee benefit plans of the Group or receive
any of the other benefits to which he was entitled while employed as an
executive of the Group pursuant to the Employment Agreement, including without
limitation those listed on Schedule B to this Agreement.
4. Employee will be eligible to receive his Supplemental Executive
Retirement Plan for Senior Officers ("SERP") benefit payments commencing the
first of the month following the date hereof. Through the remainder of the
Employment Period, Executive Services will pay Employee in cash (i) the
equivalent of the cash contributions to the Cash Balance Plan which Employee
would have received if he had remained as an employee during such period and
(ii) the present value of the benefit Employee would have accrued under the SERP
if he had remained as an employee during such period, it being agreed that the
calculation of such present value shall be made based upon the discount rate
provided for in the SCI Cash Balance Plan and applied to a stream of 180
payments which would have been added to the regular SERP payments if the
Employee had remained an employee.
5. Provided Employee continues to provide reasonably satisfactory
collateral to SCI, Executive Services shall continue to reimburse Employee for
the interest payments on his Promissory Note dated August 19, 1993 payable to
SCI in the original principal amount of Five
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<PAGE> 2
Hundred Twenty Five Thousand and No/100 Dollars ($525,000.00), bearing interest
at 6-1/2% per annum and maturing on August 10, 2003. Such reimbursements shall
be made in accordance with prior practice, shall include a gross-up for federal
income taxes payable in respect thereof and are expected to approximate a total
of $60,000 per year.
6. All SCI stock options held by Employee will be governed by the terms
thereof based upon termination of employment without cause.
7. Executive Services hereby notifies Employee that Executive Services
exercises its option to cancel Employee's post-employment non-competition
obligations under Section 12(a) of the Employment Agreement and Executive
Service's corresponding obligation to make the Non-Competition Payments (as
defined in the Employment Agreement). Employee and Executive Services agree that
the notice provided in the preceding sentence is satisfactory for all purposes
under the Employment Agreement. Accordingly, Employee's post-employment
non-competition obligations and Executive Services' corresponding obligation to
make Non-Competition Payments are hereby cancelled
8. In consideration of the payments to Employee referred to in numbered
paragraph 2 above, the receipt and sufficiency of which Employee hereby
acknowledges, Employee discharges and releases SCI, Executive Services, all
other members of SCI Group, their successors, assigns, divisions,
representatives, agents, officers, directors, stockholders, and employees, from
any claims, demands, and/or causes of action whatsoever, presently known or
unknown, that are based upon facts occurring on or prior to the date of
execution of this Agreement, including but not limited to, the following: (a)
any statutory claims under the Age Discrimination in Employment Act of 1967, the
Americans with Disabilities Act of 1990, the Family and Medical Leave Act of
1993, the Civil Rights Acts of 1964 and 1991, the Employee Retirement Income
Security Act, Chapter 451 of the Texas Labor Code and/or the Texas Commission on
Human Rights Act, (b) any tort or contract claims, and/or (c) any claims,
matters or actions related to Employee's employment and/or affiliation with, or
separation from SCI Group; provided, however, that the release set forth in this
numbered paragraph 8 shall not affect (i) the obligations of SCI and Executive
Services, and the rights of Employee, expressly set forth in this Agreement, and
(ii) any claims, demands and/or causes of action that Employee may have for
indemnity, contribution or otherwise against any member of the SCI Group arising
from or relating to the Pending Shareholder Litigation and any additional
lawsuits that are filed after the date hereof arising from or relating to
essentially the same factual matters ("Excepted Litigation"). "Pending
Shareholder Litigation" shall mean the litigation referenced in Part II. Other
Information, Item 1. Legal Proceedings, of SCI's Form 10-Q for the quarter ended
September 30, 1999.
9. Pursuant to Section 7 of Article IV of SCI's Bylaws, the right of
indemnification provided for therein shall "continue as to a person who has
ceased to be a director, officer, or representative and shall inure to the
benefit of the heirs, executors and administrators of such a person." SCI
confirms that, Employee's rights to indemnification under Article IV of SCI's
Bylaws in respect of the Excepted Litigation and any other event occurring prior
to the time of his resignation as an officer and director of SCI and its
subsidiaries and affiliated companies will not be affected hereby.
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<PAGE> 3
10. Additionally, SCI and Executive Services, for themselves and all of
the SCI Group, discharge and release Employee and his heirs, executors and
administrators from any claims, demands, and/or causes of action whatsoever,
presently known or unknown, that are based upon facts occurring on or prior to
the date of execution of this Agreement, including, but not limited to, any
claim, matter or action related to Employee's employment and/or affiliation
with, or separation from SCI Group.
11. Employee agrees that he shall engage in no act which is intended,
or may be reasonably expected, to harm the reputation, business, prospects, or
operations of any members of SCI Group, their officers, directors, stockholders
or employees. Employee will not reveal to any third party any difference of
opinion that may exist at any time between Employee and any member of management
of SCI, Executive Services, or any other members of SCI Group.
12. The parties agree that they shall not disclose, or cause to be
disclosed, the terms of this Agreement, or the fact that this Agreement exists,
except to their respective attorneys, accountants and/or tax advisors, or as
necessary to enforce the terms hereof, or to the extent otherwise required by
law. The parties further agree that this numbered paragraph 12 is not applicable
to discussions of this Agreement in the ordinary course of business among
representatives, agents, officers, directors, stockholders and employees of any
members of SCI Group.
13. The execution, validity, interpretation and performance of this
Agreement shall be determined and governed exclusively by the laws of the State
of Texas, without reference to the principles of conflict of laws.
14. This Agreement and the Employment Agreement as modified hereby
represent the complete agreement among Employee, SCI and Executive Services
concerning the subject matter hereof and supersede all prior agreements or
understandings, written or oral, between Employee and any member of the SCI
Group. No attempted modification or waiver of any of the provisions of this
Agreement shall be binding on any party hereto unless in writing and signed by
Employee, SCI and Executive Services.
15. Each of the numbered paragraphs contained in this Agreement shall
be enforceable independently of every other numbered paragraph in this
Agreement, and the invalidity or nonenforceability of any numbered paragraph
shall not invalidate or render nonenforceable any other numbered paragraph
contained in this Agreement.
16. It is further understood that for a period of seven (7) days
following the execution of this Agreement in duplicate originals, Employee may
revoke this Agreement, and this Agreement shall not become effective or
enforceable until the revocation period has expired.
17. This Agreement has been entered into voluntarily and not as a
result of coercion, duress, or undue influence. Employee acknowledges that he
has read and fully understands the terms of this Agreement and has consulted
with an attorney before executing this Agreement.
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<PAGE> 4
Additionally, Employee acknowledges that he has been afforded the opportunity to
take twenty-one (21) days to consider this Agreement.
18. Except for the matters specifically excluded below, any and all
disputes between the parties to this Agreement arising out of or in connection
with the negotiation, execution, interpretation, performance or non-performance
of this Agreement and the covenants and obligations contemplated herein,
including but not limited to any claims against Executive Services, SCI, its
affiliates or their respective officers, directors, employees or agents, shall
be solely and finally settled by arbitration conducted pursuant to the Rules of
the American Arbitration Association, as now in effect or hereafter amended.
Judgment on the award of the arbitrator may be entered in any court having
jurisdiction over the party against whom enforcement of the award is being
sought, and the parties hereby irrevocably consent to the jurisdiction of any
such court for the purpose of enforcing any such award. The parties agree and
acknowledge that any arbitration proceedings between them, and the outcome of
such proceedings, shall be kept strictly confidential. It is expressly agreed
and understood that this paragraph shall not govern claims for workers'
compensation or unemployment benefits or claims for injunctive relief relating
to alleged violations of Sections 9, 11, 12 or 13 of the Employment Agreement.
19. Section 10 of the Employment Agreement is hereby terminated. Section
11 of the Employment Agreement shall apply only to matters arising or occurring
prior to the date hereof. Employee's obligations under Section 12 of the
Employment Agreement shall terminate as of December 31, 2000. Payments made
pursuant to this Agreement may be made net of applicable withholding taxes.
The parties to this Agreement have executed this Agreement as of the day
and year first written above.
/s/ JOHN W. MORROW, JR. Service Corporation International
- -----------------------------------
Employee
By: /s/ JAMES M. SHELGER
--------------------------------
Authorized Officer
SCI Executive Services, Inc.
By: /s/ CURTIS G. BRIGGS
--------------------------------
Authorized Officer
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<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of this
1st day of January, 1999, by and between SCI EXECUTIVE SERVICES, INC., a
Delaware corporation (the "Company") wholly owned by SERVICE CORPORATION
INTERNATIONAL, a Texas corporation (the "Parent") and successor by assignment to
all of the rights, duties and obligations under this Agreement, and James M.
Shelger (the "Employee").
1. Employment and Term. The Company agrees to employ the Employee and
the Employee agrees to remain in the employ of the Company, in accordance with
the terms and provisions of this Agreement, for the period beginning on the date
hereof and ending as of the close of business on December 31, 2000 (such period
together with all extensions thereof, is referred to hereinafter as the
"Employment Period"); provided, however, that commencing on the date one year
after the date hereof, and on each January 1 thereafter (each such date shall be
hereinafter referred to as a "Renewal Date") the Employment Period shall be
automatically extended so as to terminate two (2) year(s) from such Renewal Date
if (i) the Compensation Committee of the Board of Directors of the Parent
(hereinafter referred to as the "Compensation Committee") authorizes such
extension during the 60-day period preceding such Renewal Date and (ii) the
Employee has not previously given the Company written notice that the Employment
Period shall not be so extended. In the event that the Company gives the
Employee written notice at any time that the Compensation Committee has
determined not to authorize such extension, or if the Company fails to notify
the Employee of the Compensation Committee's determination prior to the Renewal
Date (the "Renewal Deadline"), the Employment Period shall be extended so as to
terminate two (2) year(s) after the date such notice is given (or, in case of a
failure to notify, two (2) year(s) after the Renewal Deadline) and shall not
thereafter be further extended.
2. Duties and Powers of Employee. During the Employment Period, the
Employee shall serve as the Senior Vice President General Counsel and Secretary
of the Parent and the Company and shall have the duties, powers and authority
heretofore possessed by the holder of such offices and such other powers
consistent therewith as are delegated to him in writing from time to time by
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<PAGE> 2
the Board of Directors of the Parent (the "Board"). The Employee's services
shall be performed at the location where the Employee is currently employed or
any office which is the headquarters of the Company and is less than 50 miles
from such location. During the Change of Control Period, the Employee's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned with or
by the Company or the Parent at any time during the 90-day period immediately
preceding the Change of Control Date (as defined in Section 15(a) below).
3. Compensation. The Employee shall receive the following compensation
for his services:
(a) Salary. During the Employment Period, he shall be paid an
annual base salary ("Annual Base Salary") at the rate of not less than
$330,000 per year, in substantially equal bi-weekly installments, and
subject to any and all required withholdings and deductions for Social
Security, income taxes and the like. The Compensation Committee may from
time to time direct such upward adjustments to Annual Base Salary as the
Compensation Committee deems to be appropriate or desirable; provided,
however, that during the Change of Control Period, the Annual Base Salary
shall be reviewed at least annually and shall be increased at any time and
from time to time as shall be substantially consistent with increases in
base salary awarded to Employee prior to the Change of Control Period.
Annual Base Salary shall not be reduced after any increase thereof pursuant
to this Section 3(a). Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation of the Company under this Agreement.
(b) Incentive Cash Compensation. During the Employment Period, he
shall be eligible annually for a cash bonus at the discretion of the
Compensation Committee (such aggregate awards for each year are hereinafter
referred to as the "Annual Bonus") and at the discretion of the
Compensation Committee to receive awards from any plan of the Company or
any of its affiliated companies (as defined in Section 15(d) below)
providing for the payment of bonuses in cash to senior management employees
of the Company or its affiliated companies (such plans being referred to
herein collectively as
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<PAGE> 3
the "Cash Bonus Plans") in accordance with the terms thereof; provided,
however, that, during the Change of Control Period, the Employee shall be
awarded, for each fiscal year ending during the Change of Control Period,
an Annual Bonus at least equal to the Highest Recent Bonus (as defined in
Section 15(e) below). Each Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Employee shall elect to defer
the receipt of such Annual Bonus.
(c) Incentive and Savings and Retirement Plans. During the
Employment Period, the Employee shall be entitled to participate in all
incentive and savings (in addition to the Cash Bonus Plans) and retirement
plans, practices, policies and programs applicable generally to other
senior management employees of the Company and its affiliated companies.
(d) Welfare Benefit Plans. During the Employment Period, the
Employee and/or the Employee's family, as the case may be, shall be
eligible for participation in all welfare benefit plans, practices,
policies and programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally
to other senior management employees of the Company and its affiliated
companies.
(e) Expenses. During the Employment Period and for so long as the
Employee is employed by the Company, he shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Employee in
accordance with the policies, practices and procedures of the Company and
its affiliated companies from time to time in effect.
(f) Fringe Benefits. During the Employment Period, the Employee
shall be entitled to fringe benefits in accordance with the plans, past
practices, programs and policies of the Company and its affiliated
companies from time to time in effect.
(g) Office and Support Staff. During the Employment Period, the
Employee shall be entitled to an office or offices of a size and with
furnishings and other appointments,
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<PAGE> 4
and to exclusive personal secretarial and other assistance, commensurate
with his position.
(h) Vacation and Other Absences. During the Employment Period,
the Employee shall be entitled to paid vacation and such other paid
absences whether for holidays, illness, personal time or any similar
purposes, in accordance with the plans, policies, programs and practices of
the Company and its affiliated companies.
(i) Change of Control. During the Change of Control Period, the
Employee's benefits listed under Sections 3(c), 3(d), 3(e), 3(f), 3(g) and
3(h) above shall be at least commensurate in all material respects with the
most valuable and favorable of those received by the Employee at any time
during the one-year period immediately preceding the Change of Control
Date.
4. Termination of Employment. (a) Death or Disability. The Employment
Period shall terminate automatically upon the Employee's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Employee has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Employee written
notice in accordance with Section 16(b) of its intention to terminate the
Employment Period. In such event, the Employment Period shall terminate
effective on the 30th day after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
inability of the Employee to perform the Employee's duties with the Company on a
full-time basis as a result of incapacity due to mental or physical illness
which continues for more than one year after the commencement of such
incapacity, such incapacity to be determined by a physician selected by the
Company or its insurers and acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Employment Period for
Cause. For purposes of this Agreement, "Cause" shall mean (i) the Employee's
deliberate and intentional continuing refusal to substantially perform his
duties and obligations under this Agreement (other than a breach of the
Employee's obligations under this Agreement arising from the
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<PAGE> 5
failure of the Employee to work as a result of incapacity due to physical or
mental illness) if he shall have either failed to remedy such alleged breach
within 60 days from his receipt of written notice from the Secretary of the
Company demanding that he remedy such alleged breach, or shall have failed to
take reasonable steps in good faith to that end during such 60 day period and
thereafter, or (ii) the conviction of the Employee of a felony involving malice
which conviction has been affirmed on appeal or as to which the period in which
an appeal can be taken has lapsed.
(c) Good Reason; Window Period. The Employee's employment may be
terminated (i) by the Employee for Good Reason (as defined below) or (ii) during
the Window Period (as defined below) by the Employee without any reason. For
purposes of this Agreement, the "Window Period" shall mean the 30-day period
immediately following the first anniversary of the Change of Control Date. For
purposes of this Agreement, "Good Reason" shall mean
(i) the assignment to the Employee of any duties inconsistent in
any respect with the Employee's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities prior to
the date of such assignment or any other action by the Company or the
Parent which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated and insubstantial
action not taken in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 3, other than an isolated and insubstantial failure
not occurring in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Employee;
(iii) the Company's requiring the Employee to be based at any
office or location other than that described in Section 2(a);
(iv) any purported termination by the Company of the Employee's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company or the Parent to comply with and
satisfy Section 14(c), provided that
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<PAGE> 6
the successor referred to in Section 14(c) has received at least ten days
prior written notice from the Company or the Employee of the requirements
of Section 14(c).
For purposes of this Section 4(c), during the Change of Control Period, any good
faith determination of "Good Reason" made by the Employee shall be conclusive.
(d) Notice of Termination. Any termination by the Company for
Cause or by the Employee without any reason during the Window Period or for Good
Reason shall be communicated by Notice of Termination to the other party hereto
given in accordance with Section 16(b). For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Employment Period under the provision
so indicated ,(iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date (which date
shall be not more than 15 days after the giving of such notice) and (iv) if the
termination is by the Company for Cause, indicates that the Board has determined
that a basis for termination for Cause exists, that the Employee has failed to
take reasonable steps in good faith to remedy the alleged basis for such
termination, and contains a certified copy of a resolution of the Board adopted
by the affirmative vote of not less than two-thirds of the entire membership of
the Board in a meeting called and held for that purpose in which the Employee
was given an opportunity to be heard, finding that a basis for termination for
Cause exists and that the Employee has failed to take reasonable steps in good
faith to remedy such alleged basis for termination. The failure by the Employee
or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Employee or the Company hereunder or preclude the
Employee or the Company from asserting such fact or circumstance in enforcing
the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Employee's employment is terminated by the Company for Cause, or by the Employee
during the Window Period or for Good Reason, the date of receipt of the Notice
of Termination or any later date specified therein, as the case may be, (ii) if
the Employee's employment is terminated by the Company other than
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<PAGE> 7
for Cause or Disability, or by the Employee other than for Good Reason or during
the Window Period, the Date of Termination shall be the date on which the
Company or the Employee, as the case may be, notifies the other of such
termination and (iii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Employee or the Disability Effective Date, as the case may be. Notwithstanding
the foregoing, if the Company gives the Employee written notice pursuant to the
second sentence of Section 1 hereof, then "Date of Termination" shall mean the
last day of the two (2) year period for which the Employment Period is extended
pursuant to such sentence.
5. Obligations of the Company Upon Termination. (a) Certain
Terminations Prior to Change of Control Date. If, during the Employment Period
prior to any Change of Control Date, the employment of the Employee with the
Company shall be terminated (i) by the Company other than for Cause, death or
Disability or (ii) by the Employee for Good Reason, then, in lieu of the
obligations of the Company under Section 3, (i) the Company shall pay to the
Employee in a lump sum in cash within 30 days after the Date of Termination all
Unpaid Agreement Amounts (as defined in Section 5(b)(i)(A) below) and (ii)
notwithstanding any other provision hereunder, for the longer of (A) the
remainder of the Employment Period or (B) to the extent compensation and/or
benefits are provided under any plan, program, practice or policy, such longer
period, if any, as such plan, program, practice or policy may provide, the
Company shall continue to provide to the Employee the compensation and benefits
provided in Sections 3(a), 3(b)(based on the Highest Recent Bonus), 3(c) and
3(d) (it being understood that if the Company gives the Employee written notice
that the Compensation Committee has determined not to authorize an extension, or
fails to notify the Employee of the Compensation Committee's determination prior
to the Renewal Deadline, in either case as contemplated by the second sentence
of Section 1 hereof, the giving of such notice or the failure to so notify the
Employee shall not be deemed a termination of the employment of the Employee
with the Company during the Employment Period for purposes of this Section
5(a)).
(b) Certain Terminations After Change of Control Date. If, during
the Change of Control Period, the employment of the Employee with the Company
shall be terminated (i) by the Company other than for Cause, death or Disability
or (ii) by the Employee either for Good Reason or without any reason during the
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Window Period, then, in lieu of the obligations of the Company under Section 3
and notwithstanding any other provision hereunder:
(i) the Company shall pay to the Employee in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
(A) the sum of (1) all unpaid amounts due to the Employee
under Section 3 through the Date of Termination, including without
limitation, the Employee's Annual Base Salary and any accrued vacation
pay, (2) the product of (x) the Highest Recent Bonus and (y) a
fraction, the numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the denominator of
which is 365 and (3) any compensation previously deferred by the
Employee (together with any accrued interest or earnings thereon) to
the extent not theretofore paid (the sum of the amounts described in
clauses (1), (2) and (3) shall be hereinafter referred to as the
"Accrued Obligations" and the sum of the amounts described in clauses
(1) and (3) shall be hereinafter referred to as the "Unpaid Agreement
Amounts"); and
(B) the amount (such amount shall be hereinafter referred to
as the "Severance Amount") equal to the sum of
(1) Two (2) multiplied by the Employee's Annual Base Salary,
plus
(2) Two (2) multiplied by the Employee's Highest Recent Bonus;
(ii) for the longer of (A) the remainder of the Employment Period
or (B) to the extent benefits are provided under any plan, program,
practice or policy, such longer period as such plan, program, practice or
policy may provide, the Company shall continue benefits to the Employee
and/or the Employee's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 3(d) if the Employee's employment had not
been terminated, in accordance with the most favorable plans, practices,
programs or policies of the Company and its affiliated companies as in
effect and applicable generally to other employees of
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comparable rank and their families during the 90-day period immediately
preceding the Change of Control Date or, if more favorable to the Employee,
as in effect generally at any time thereafter with respect to other
employees of comparable rank with the Company and its affiliated companies
and their families; provided, however, that if the Employee becomes
reemployed with another employer and is eligible to receive medical or
other welfare benefits under another employer provided plan, the medical
and other welfare benefits described herein shall be required only to the
extent not provided under such other plan during such applicable period of
eligibility. For purposes of determining eligibility of the Employee for
retiree benefits pursuant to such plans, practices, programs and policies,
the Employee shall be considered to have remained employed until the end of
the Employment Period and to have retired on the last day of such period;
and
(iii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Employee and/or the Employee's family
for the remainder of the Employment Period any other amounts or benefits
required to be paid or provided or which the Employee and/or the Employee's
family is eligible to receive pursuant to this Agreement and under any
plan, program, policy or practice or contract or agreement of the Company
and its affiliated companies as in effect and applicable generally to other
employees of comparable rank with the Company and its affiliated companies
and their families during the 90-day period immediately preceding the
Change of Control Date or, if more favorable to the Employee, as in effect
generally thereafter with respect to other employees of comparable rank
with the Company and its affiliated companies and their families.
Such amounts received under this Section 5(b) shall be in lieu of any other
amount of severance relating to salary or bonus continuation to be received by
the Employee upon termination of employment of the Employee under any severance
plan, policy or arrangement of the Company.
(c) Termination as a Result of Death. If the Employee's employment is
terminated by reason of the Employee's death during the Employment Period, in
lieu of the obligations of the Company under Section 3, the Company shall pay or
provide to the Employee's estate (i) all Accrued Obligations (which shall be
paid in a lump sum in cash within 30 days after the Date of
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<PAGE> 10
Termination) and the timely payment or provision of the Welfare Benefit
Continuation (as defined below) and the Other Benefits (as defined below) and
(ii) any cash amount to be received by the Employee or the Employee's family as
a death benefit pursuant to the terms of any plan, policy or arrangement of the
Company and its affiliated companies. "Welfare Benefit Continuation" shall mean
the continuation of benefits to the Employee and/or the Employee's family for
the longer of (i) two (2) year(s) from the Date of Termination or (ii) the
period provided by the plans, programs, policies or practices described in
Section 3(d) in which the Employee participates as of the Date of Termination,
such benefits to be at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 3(d) if the Employee's employment had not been terminated, in accordance
with the most favorable plans, practices, programs or policies of the Company
and its affiliated companies as in effect and applicable generally to other
employees of comparable rank and their families on the Date of Termination or,
if the Date of Termination occurs after the Change of Control Date, during the
90-day period immediately preceding the Change of Control Date or, if more
favorable to the Employee, as in effect generally at any time thereafter with
respect to other employees of comparable rank with the Company and its
affiliated companies and their families. "Other Benefits" shall mean the timely
payment or provision to the Employee and/or the Employee's family of any other
amounts or benefits required to be paid or provided or which the Employee and/or
the Employee's family is eligible to receive pursuant to this Agreement and
under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies as in effect and applicable generally to
other employees of comparable rank and their families on the Date of Termination
or, if the Date of Termination occurs after the Change of Control Date, during
the 90-day period immediately preceding the Change of Control Date or, if more
favorable to the Employee, as in effect generally thereafter with respect to
other employees of comparable rank with the Company and its affiliated companies
and their families.
(d) Termination as a Result of Disability. If the Employee's employment
is terminated by reason of the Employee's Disability during the Employment
Period, in lieu of the obligations of the Company under Section 3, the Company
shall pay or provide to the Employee (i) all Accrued Obligations which shall be
paid in a lump sum in cash within 30 days after the Date of Termination and the
timely payment or provision of the Welfare Benefit Continuation and the Other
Benefits, provided, however,
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that if the Employee becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer provided plan,
the Welfare Benefit Continuation shall be required only to the extent not
provided under such other plan during such applicable period of eligibility, and
(ii) any cash amount to be received by the Employee as a disability benefit
pursuant to the terms of any plan, policy or arrangement of the Company and its
affiliated companies.
(e) Cause; Other than for Good Reason. If the Employee's employment
shall be terminated during the Employment Period by the Company for Cause or by
the Employee other than during the Window Period and other than for Good Reason,
in lieu of the obligations of the Company under Section 3, the Company shall pay
to the Employee in a lump sum in cash within 30 days after the Date of
Termination all Unpaid Agreement Amounts.
6. Non-exclusivity of Rights. Except as provided in Sections 5(a),
5(b)(i)(B), 5(b)(ii), 5(c) and 5(d), nothing in this Agreement shall prevent or
limit the Employee's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Employee may qualify, nor shall anything herein limit or
otherwise affect such rights as the Employee may have under any contract or
agreement with the Company or any of its affiliated companies. Amounts which are
vested benefits or which the Employee is otherwise entitled to receive under any
plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
7. Full Settlement; Resolution of Disputes. (a) The Company's
obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Employee or others. In no event shall the Employee
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Employee under any of the provisions of
this Agreement and, except as provided in Sections 5(b)(ii) and 5(d), such
amounts shall not be reduced whether or not the Employee obtains other
employment. The Company agrees to pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which the Employee may reasonably
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<PAGE> 12
incur as a result of any contest (regardless of the outcome thereof) by the
Company, the Employee or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Employee about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
payment required to be made under this Agreement but not timely paid at the rate
provided for in Section 280G(d)(4) of the Internal Revenue Code of 1986, as
amended (the "Code").
(b) If there shall be any dispute between the Company and the
Employee (i) in the event of any termination of the Employee's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Employee, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that the
determination by the Employee of the existence of Good Reason was not made in
good faith, the Company shall pay all amounts, and provide all benefits, to the
Employee and/or the Employee's family or other beneficiaries, as the case may
be, that the Company would be required to pay or provide pursuant to Section
5(a) or 5(b) as though such termination were by the Company without Cause or by
the Employee with Good Reason. The Employee hereby undertakes to repay to the
Company all such amounts to which the Employee is ultimately adjudged by such
court not to be entitled.
8. Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Company to or for the benefit of the
Employee (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 8) (a "Payment") would be
subject to the excise tax imposed by Section 4999 (or a successor provision of
like import) of the Code or any interest or penalties are incurred by the
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed
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upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by an accounting
firm of national reputation selected by the Company (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the Employee that
there has been a Payment, or such earlier time as is requested by the Company.
In the event that the Accounting Firm is serving (or has served within the two
(2) years preceding the Change of Control Date) as accountant or auditor for the
individual, entity or group effecting the Change of Control, or is unwilling or
unable to perform its obligations pursuant to this Section 8, the Employee shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 8, shall be paid by the Company to the Employee within five days of
the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Employee, it shall furnish the
Employee with a written opinion that failure to report the Excise Tax on the
Employee's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Employee. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 8(c) and the Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee.
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<PAGE> 14
(c) The Employee shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Employee is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Employee gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim, the Company,
subject to the provisions of this Section 8(c), shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its sole option,
either direct the Employee to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner. In this connection, the Employee
agrees, subject to the provisions of this Section 8(c), to (i) prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine, (ii) give the Company any information reasonably requested by the
Company relating to such claim, (iii) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company, (iv)
cooperate with the Company in good faith in order to effectively contest such
claim and (v) permit the Company to participate in any proceedings relating to
such claim. The foregoing is subject, however, to the following: (A) the Company
shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall
indemnify and hold the Employee harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect thereto)
imposed in connection therewith and the payment of costs and expenses in such
connection, (B) if the Company directs the Employee to pay such claim and sue
for a refund, the Company shall advance the amount of such payment to the
Employee, on an interest-free basis, and shall indemnify and hold the Employee
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed
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with respect to such advance or with respect to any imputed income with respect
to such advance, (C) any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Employee with respect to which such
contested amount is claimed to be due shall be limited solely to such contested
amount and (D) the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Employee shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 8(c), the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Employee
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Employee shall not be entitled to any refund with respect to
such claim and the Company does not notify the Employee in writing of its intent
to contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Employee
during the Employee's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Employee or representatives of the Employee in violation of this
Agreement). After termination of the Employee's employment with the Company or
any of its affiliated companies, the Employee shall not, without the prior
written consent of the Company or as may otherwise be required by law or legal
process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Employee under
this Agreement. Subject to the previous sentence, nothing herein shall be
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construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
10. Employee's Obligation to Avoid Conflicts of Interest. (a) The
Employee shall comply with he conflict of interest policy of the Parent as in
effect from time to time.
11. Ownership of Information, Ideas, Concepts, Improvements,
Discoveries and Inventions and all Original Works of Authorship. (a) All
information, ideas, concepts, improvements, discoveries and inventions, whether
patentable or not, which are conceived, made, developed or acquired by Employee
or which are disclosed or made known to Employee, individually or in conjunction
with others, during Employee's employment by the Company or any of its
affiliated companies and which relate to the Company's or any of its affiliated
companies' business, products or services (including all such information
relating to corporate opportunities, research, financial and sales data, pricing
and trading terms, evaluations, opinions, interpretations, acquisition
prospects, the identity of customers or their requirements, the identity of key
contacts within the customer's organizations or within the organization of
acquisition prospects, or marketing and merchandising techniques, prospective
names and marks) are and shall be the sole and exclusive property of the
Company. Moreover, all drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, maps and all
other writings or materials of any type embodying any of such information,
ideas, concepts, improvements, discoveries and inventions are and shall be the
sole and exclusive property of the Company.
(b) In particular, Employee hereby specifically sells, assigns and
transfers to the Company all of his worldwide right, title and interest in and
to all such information, ideas, concepts, improvements, discoveries or
inventions, and any United States or foreign applications for patents,
inventor's certificates or other industrial rights that may be filed thereon,
including divisions, continuations, continuations-in-part, reissues and/or
extensions thereof, and applications for registration of such names and marks.
Both during the period of Employee's employment by the Company or any of its
affiliated companies and thereafter, Employee shall assist the Company and its
nominee at all times in the protection of such information, ideas, concepts,
improvements, discoveries or inventions, both in the United States and all
foreign countries, including but not
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limited to, the execution of all lawful oaths and all assignment documents
requested by the Company or its nominee in connection with the preparation,
prosecution, issuance or enforcement of any applications for United States or
foreign letters patent, including divisions, continuations,
continuations-in-part, reissues, and/or extensions thereof, and any application
for the registration of such names and marks.
(c) Moreover, if during Employee's employment by the Company or
any of its affiliated companies, Employee creates any original work of
authorship fixed in any tangible medium of expression which is the subject
matter of copyright (such as videotapes, written presentations on acquisitions,
computer programs, drawings, maps, architectural renditions, models, manuals,
brochures or the like) relating to the Company's or any of its affiliated
companies' business, products, or services, whether such work is created solely
by Employee or jointly with others, the Company shall be deemed the author of
such work if the work is prepared by Employee in the scope of his or her
employment; or, if the work is not prepared by Employee within the scope of his
or her employment but is specially ordered by the Company as a contribution to a
collective work, as a part of a motion picture or other audiovisual work, as a
translation, as a supplementary work, as a compilation or as an instrumental
text, then the work shall be considered to be work made for hire and the Company
shall be the author of the work. In the event such work is neither prepared by
the Employee within the scope of his or her employment or is not a work
specially ordered and deemed to be a work made for hire, then Employee hereby
agrees to assign, and by these presents does assign, to the Company all of
Employee's worldwide right, title and interest in and to such work and all
rights of copyright therein. Both during the period of Employee's employment by
the Company or any of its affiliated companies and thereafter, Employee agrees
to assist the Company and its nominee, at any time, in the protection of the
Company's worldwide right, title and interest in and to the work and all rights
of copyright therein, including but not limited to, the execution of all formal
assignment documents requested by the Company or its nominee and the execution
of all lawful oaths and applications for registration of copyright in the United
States and foreign countries.
12. Employee's Post-Employment Non-Competition Obligations. (a) During
the Employment Period and, subject to the conditions of Sections 12(b) and
12(c), for a period of two (2) year(s) thereafter (the "Non-Competition
Period"), Employee
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shall not, acting alone or in conjunction with others, directly or indirectly,
in any of the business territories in which the Company or any of its affiliated
companies is presently or at the time of termination of employment conducting
business, engage in any business in competition with the business conducted by
the Company or any of its affiliated companies at the time of the termination of
the employment relationship, whether for his own account or by soliciting,
canvassing or accepting any business or transaction for or from any other
company or business in competition with such business of the Company or any of
its affiliated companies.
(b) If Employee's employment is discontinued: (i) by Company for
Cause pursuant to Section 4(b); or (ii) by Employee because of any reason other
than for Good Reason or other than during the Window Period pursuant to Section
4(c), Employee shall be bound by the obligations of Section 12(a) and the
Company shall have no obligation to make the Non-Competition Payments (as
defined in Section 12(c) below). However, if the employment relationship is
terminated by any other circumstance or for any other reason, Employee's
post-employment non-competition obligations required by Section 12(a) shall be
subject to the Company's obligation to make the Non-Competition Payments
specified in Section 12(c).
(c) Notwithstanding the provisions of Section 4 of this Agreement,
whenever Employee's employment is terminated due to the expiration of the
Employment Period in accordance with the provisions of Section 1, or due to
Employee's Disability (Section 4(a)), or by the Company without Cause (Section
4(b)), or by Employee for Good Reason or during the Window Period pursuant to
Section 4(c) unless the Company exercises its option as hereinafter provided,
Employee shall be entitled to continue to receive payments (the "Non-Competition
Payments") equal to his then current Annual Base Salary (as of the Date of
Termination) during the Non-Competition Period. During the Non-Competition
Period, the Employee shall not, however, be deemed to be an employee of the
Company or be entitled to continue to receive any other employee benefits other
than as set forth in Section 5 or Section 8. Moreover, the Non-Competition
Payments shall be reduced to the extent Employee has already received lump-sum
payments in lieu of salary pursuant to Section 5. The Company shall have the
option, exercisable at any time on or within one (1) month after: (i) the date
the Company gives the Employee notice that the Employment Period will not be
extended (or in the case of failure to notify, on or within one month after the
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Renewal Deadline), in accordance with Section 1; or (ii) in the case of
termination due to Employee's disability or by the Company without Cause, the
Date of Termination, to cancel Employee's post-employment non-competition
obligations under Section 12(a) and the Company's corresponding obligation to
make the Non-Competition Payments. Such option shall be exercised by the Company
mailing a written notice thereof to Employee in accordance with Section 16(b);
if the Company does not send such notice within the prescribed one-month period,
the Company shall remain obligated to make the Non-Competition Payments and
Employee shall remain obligated to comply with the provisions of Section 12(a).
The amounts to be paid by the Company are not intended to be liquidated damages
or an estimate of the actual damages that would be sustained by the Company if
Employee breaches his post-employment non-competition obligations. If Employee
breaches his post-employment non-competition obligations, the Company shall be
entitled to cease making the Non-Competition Payments and shall be entitled to
all of its remedies at law or in equity for damages and injunctive relief.
13. Obligations to Refrain From Competing Unfairly. In addition to the
other obligations agreed to by Employee in this Agreement, Employee agrees that
during the Employment Period and for two (2) year(s) following the Date of
Termination, he shall not at any time, directly or indirectly for the benefit of
any other party than the Company or any of its affiliated companies, (a) induce,
entice, or solicit any employee of the Company or any of its affiliated
companies to leave his employment, or (b) contact, communicate or solicit any
customer of the Company or any of its affiliated companies derived from any
customer list, customer lead, mail, printed matter or other information secured
from the Company or any of its affiliated companies or their present or past
employees, or (c) in any other manner use any customer lists or customer leads,
mail, telephone numbers, printed material or material of the Company or any of
its affiliated companies relating thereto.
14. Successors. (a) This Agreement is personal to the Employee and
without the prior written consent of the Company shall not be assignable by the
Employee otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Employee's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
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(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. The Parent will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Parent or the Parent to
assume expressly and agree to perform the Parent's obligations hereunder in the
same manner and to the same extent that the Parent would be required to perform
them if no such succession had taken place. As used in this Agreement, "Parent"
shall mean the Parent as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform the Parent's
obligations hereunder by operation of law, or otherwise.
15. Certain Definitions. The following defined terms used in this
Agreement shall have the meanings indicated:
(a) The "Change of Control Date" shall mean the first date on
which a Change of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Employee's employment
with the Company is terminated or there is a change in the circumstances of the
Employee's employment which constitutes Good Reason, and if it is reasonably
demonstrated by the Employee that such termination or change in circumstances:
(i) was at the request of a third party who has taken steps reasonably
calculated to effect the Change of Control; or (ii) otherwise arose in
connection with or anticipation of the Change of Control, then, for all purposes
of this Agreement, the "Change of Control Date" shall mean the date immediately
prior to the date of such termination or cessation.
(b) The "Change of Control Period" shall mean the period
commencing on the Change of Control Date and ending on the last day of the
Employment Period.
(c) "Change of Control" shall mean:
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<PAGE> 21
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended the "Exchange Act") (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (A) the then outstanding shares of Common
Stock of the Parent (the "Outstanding Parent Common Stock") or (B) the
combined voting power of the then outstanding voting securities of the
Parent entitled to vote generally in the election of directors (the
"Outstanding Parent Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Parent (excluding an acquisition by virtue of
the exercise of a conversion privilege), (B) any acquisition by the Parent,
(C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Parent or any corporation controlled by the
Parent or (D) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses (A), (B) and
(C) of subsection (iii) of this definition of "Change of Control" are
satisfied; or
(ii) Individuals who, as of the effective date hereof, constitute
the Board of Directors of the Parent (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors of the
Parent; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Parent's shareholders, was approved by (A) a vote of at least a
majority of the directors then constituting the Incumbent Board of the
Parent, or (B) a vote of at least a majority of the directors then
comprising the Executive Committee of the Board of Directors of the Parent
at a time when such committee consisted of at least five members and all
members of such committee were either members of the Incumbent Board or
considered as being members of the Incumbent Board pursuant to clause (A)
of this subsection (ii), shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board of Directors of the Parent; or
-21-
<PAGE> 22
(iii) Approval by the shareholders of the Parent of a
reorganization, merger or consolidation, in each case, unless, following
such reorganization, merger or consolidation, (A) more than 60% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation and
the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Outstanding Parent Common Stock and Outstanding Parent Voting
Securities immediately prior to such organization, merger or consolidation
in substantially the same proportions as their ownership, immediately prior
to such reorganization, merger or consolidation, of the Outstanding Parent
Common Stock and Outstanding Parent Voting Securities, as the case may be,
(B) no Person (excluding the Parent, any employee benefit plan or related
trust of the Parent or such corporation resulting from such reorganization,
merger or consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 20% or more of the Outstanding Parent Common Stock or
Outstanding Parent Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation or the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (C) at least a majority of the
members of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent Board
at the time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(iv) Approval by the shareholders of the Parent of (A) a complete
liquidation or dissolution of the Parent or (B) the sale or other
disposition of all or substantially all of the assets of the Parent, other
than to a corporation, with respect to which following such sale or other
disposition, (A) more than 60% of, respectively, the
-22-
<PAGE> 23
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Outstanding Parent Common Stock and Outstanding Parent Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to
such sale or other disposition, of the Outstanding Parent Common Stock and
Outstanding Parent Voting Securities, as the case may be, (B) no Person
(excluding the Parent and any employee benefit plan or related trust of the
Parent or such corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly, 20% or
more of the Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or indirectly,
20% or more of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors and (C) at least a majority of the members of the
Board of Directors of such corporation were members of the Incumbent Board
at the time of the execution of the initial agreement or action of the
Board of Directors of the Parent providing for such sale or other
disposition of assets of the Parent.
(d) The term "affiliated company" shall mean any company
controlled by, controlling or under common control with the Company.
(e) The term "Highest Recent Bonus" shall mean the highest Annual
Bonus (annualized for any fiscal year consisting of less than twelve full
months) paid or payable, including by reason of any deferral, to the Employee by
the Company and its affiliated companies in respect of the three most recent
full fiscal years ending on or prior to, (i) if prior to a Change of Control,
the Date of Termination, or (ii) if after a Change of Control, the Change of
Control Date.
16. Miscellaneous. (a) This Agreement supersedes all previous
agreements and discussions relating to the same or similar subject matters
between Employee and the Company and shall be governed by and construed in
accordance with the laws of the
-23-
<PAGE> 24
State of Texas, without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof and shall have
no force or effect. This Agreement may not be amended, modified, repealed,
waived, extended or discharged except by an agreement in writing signed by the
party against whom enforcement of such amendment, modification, repeal, waiver,
extension or discharge is sought. No person, other than pursuant to a resolution
of the Board or a duly authorized committee thereof, shall have authority on
behalf of the Company or the Parent to agree to amend, modify, repeal, waive,
extend or discharge any provision of this Agreement or anything in reference
thereto.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Employee:
James M. Shelger
15 The Oval
Sugar Land, TX 77479
If to the Company:
SCI Executive Services, Inc.
1929 Allen Parkway
Houston, Texas 77019
Attention: Corporate Secretary
If to the Parent:
Service Corporation International
1929 Allen Parkway
Houston, Texas 77019
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
-24-
<PAGE> 25
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Employee's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Employee or the Company may have hereunder,
including, without limitation, the right of the Employee to terminate employment
for Good Reason pursuant to Section 4(c) of this Agreement, shall not be deemed
to be a waiver of such provision or right or any other provision or right of
this Agreement.
(f) No breach, whether actual or alleged, of this Agreement by the
Employee shall constitute grounds for the Company to withhold or offset any
payment or benefit due to the Employee under any other agreement, contract,
plan, program, policy or practice of the Company.
IN WITNESS WHEREOF, the Employee and, pursuant to due authorization
from the Board, the Company have caused this Agreement to be executed this 1st
day of January, 1999.
JAMES M. SHELGER
/s/ James M. Shelger
-------------------------------
"EMPLOYEE"
SCI EXECUTIVE SERVICES, INC.
By: /s/ Curtis G. Briggs
-----------------------------
Name: Curtis G. Briggs
Title: Vice President
"COMPANY"
-25-
<PAGE> 26
Pursuant to due authorization from its Board of Directors, the Parent,
by its execution hereof, absolutely and unconditionally guarantees to Employee
the full and timely payment and performance of each obligation of the Company to
Employee under this Agreement, waives any and all rights that it may otherwise
have to require Employee to proceed against the Company for nonpayment or
nonperformance, waives any and all defenses that would otherwise be a defense to
this guarantee, and agrees to remain liable to Employee for all payment and
performance obligations of the Company under this Agreement, whether arising
before, on or after the date of this Agreement, until this Agreement shall
terminate pursuant to its terms.
SERVICE CORPORATION INTERNATIONAL
By: /s/ Jack L. Stoner
---------------------------------
Name: Jack L. Stoner
Title: Senior Vice President
Administration
"PARENT"
-26-
<PAGE> 1
EXHIBIT 10.31
AMENDMENT NO. 5
SERVICE CORPORATION INTERNATIONAL
EMPLOYEE STOCK PURCHASE PLAN
This Amendment is executed by Service Corporation International
("Company") effective as of January 1, 2000.
W I T N E S S E T H
WHEREAS, the Company executed the Service Corporation International
Stock Purchase Plan on August 22, 1979, Amendment No. 1 thereto on June 5, 1981,
Amendment No. 2 thereto on October 19, 1988, Amendment No. 3 thereto on June 19,
1990 and Amendment No. 4 thereto on December 21, 1993 (as amended, the "Plan"),
which continues in force and effect, and is made a part hereof by reference; and
WHEREAS, the Company is desirous of eliminating the Company match under
the Plan commencing January 1, 2000;
NOW, THEREFORE, in consideration of the premises, the Company hereby
amends the Plan in the following respect:
1. The following paragraph shall be added as the last paragraph of
Subsection 3.02 effective as of January 1, 2000:
"Notwithstanding the above, effective as of January 1, 2000 the Company
shall terminate its Regular Contribution under the Plan for each Participant who
is an Employee of a U.S. Employing Company; provided, however, that the Regular
Contribution for the 1999 Plan Year shall be made."
IN WITNESS WHEREOF, the Company has executed this Amendment to the
Plan effective as of January 1, 2000.
SERVICE CORPORATION INTERNATIONAL
By: /s/ James M. Shelger
-------------------------------------
Title: Senior Vice President
----------------------------------
<PAGE> 1
EXHIBIT 12.1
SERVICE CORPORATION INTERNATIONAL
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
1999 1998
----------- -----------
(Thousands, except ratio amounts)
<S> <C> <C>
Pretax income from continuing operations ................................... $ (37,690) $ 518,527
Undistributed income of less than 50% owned equity investees ............... 267 (7,652)
Minority interest in income of majority owned subsidiaries with fixed
charges .................................................................... (1,490) 818
Add fixed charges as adjusted (from below) ................................. 276,419 207,475
----------- -----------
$ 237,506 $ 719,168
----------- -----------
Fixed charges:
Interest expense:
Corporate ............................................................. $ 236,241 $ 177,436
Financial services .................................................... 11,805 13,695
Capitalized ........................................................... 1,430 3,028
Amortization of debt cost .................................................. 1,954 (383)
1/3 of rental expense ...................................................... 26,419 16,727
Dividends on convertible preferred stock of subsidiary ..................... -- --
----------- -----------
Fixed charges .............................................................. 277,849 210,503
Less: Capitalized interest ................................................ (1,430) (3,028)
----------- -----------
Fixed charges as adjusted .................................................. $ 276,419 $ 207,475
=========== ===========
Ratio (earnings divided by fixed charges) .................................. 0.85 3.42
=========== ===========
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
March 15, 2000
OWNERSHIP
--------------
<S> <C>
ALABAMA
Equity Corporation International (DE Corp.) Alabama subsidiaries
ECI Cemetery Services, Inc. (DE Corp.) Alabama subsidiaries
ECI Alabama Cemetery Services, Inc....................100%
ECI Services, Inc. (DE Corp.) Alabama subsidiaries
ECI Agency, Inc.......................................100%
ECI Alabama Services, Inc.............................100%
SCI Funeral Services, Inc. (Iowa Corp) Alabama subsidiaries
SCI Alabama Funeral Services, Inc..............................100%
EC Land Company, Inc..................................100%
Memory Chapel Funeral Homes, Inc......................100%
ALASKA
SCI Funeral Services, Inc. (Iowa Corp.) Alaska subsidiaries
SCI Alaska Funeral Services, Inc...............................100%
ARIZONA
Equity Corporation International (DE Corp.) Arizona subsidiaries
ECI Services, Inc. (DE Corp.) Arizona subsidiaries
ECI Services of Arizona, Inc. (DE Corp.) Arizona
subsidiaries
Memory Chapel, Inc...........................100%
Parker Funeral Home, Inc.....................100%
SCI Funeral Services, Inc. (Iowa Corp.) Arizona subsidiaries
National Cremation Society, Inc................................100%
SCI Arizona Funeral Services, Inc..............................100%
Arizona Aftercare, Inc................................100%
Brown's Colonial Mortuary, Inc........................100%
ARKANSAS
Equity Corporation International (DE Corp.) Arkansas subsidiaries
ECI Services, Inc. (DE Corp.) Arkansas subsidiaries
ECI Services of Arkansas, Inc. (DE Corp.) Arkansas
subsidiaries
Huson Funeral Home, Inc......................100%
Nelson Acquisition Company...................100%
Steele Funeral Home, Inc.....................100%
SCI Funeral Services, Inc. (Iowa Corp) Arkansas subsidiaries
SCI Arkansas Funeral Services, Inc.............................100%
CALIFORNIA
SCI Financial Services, Inc. (DE Corp.) California subsidiary
Provident Services, Inc. (DE Corp.) California subsidiary
Provident Credit of California, Inc...................100%
SCI Funeral Services, Inc. (Iowa Corp.) California subsidiaries
Hong Kong Funeral Homes........................................100%
International Funeral Parlours.................................100%
SCI California Funeral Services, Inc...........................100%
CWFD, Inc.............................................100%
Ellis-Olson Mortuary..................................100%
Eric H. Ramsey Enterprises, Inc.......................100%
Lakeside Memorial Lawn................................100%
Mount Vernon Memorial Park............................100%
Oak Hill Improvement Company..........................100%
Pierce Brothers.......................................100%
World Funeral Home....................................100%
COLORADO
SCI Funeral Services, Inc. (Iowa Corp.) Colorado subsidiaries
SCI Colorado Funeral Services, Inc.............................100%
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
CONNECTICUT
SCI Funeral Services, Inc. (Iowa Corp.) Connecticut subsidiaries
SCI Connecticut Funeral Services, Inc..........................100%
DELAWARE
BestHalf.com, Inc.......................................................100%
Christian Funeral Services, Inc.........................................100%
Equity Corporation International........................................100%
ECI Capital Corporation........................................100%
ECI Cemetery Services, Inc.....................................100%
ECI Cemetery Management Services, Inc.................100%
ECI Cemetery Services of Arkansas, Inc................100%
ECI Cemetery Services of California, Inc..............100%
ECI Cemetery Services of Illinois, Inc................100%
ECI Cemetery Services of Iowa, Inc....................100%
ECI Cemetery Services of Maryland, Inc................100%
ECI Cemetery Services of Missouri, Inc................100%
ECI Cemetery Services of New Mexico, Inc..............100%
ECI Cemetery Services of Ohio, Inc....................100%
ECI Cemetery Services of Oklahoma, Inc................100%
ECI-Sunny Lane, Inc..........................100%
ECI Cemetery Services of Oregon, Inc..................100%
Lake View Management Company, Inc.....................100%
ECI Services, Inc..............................................100%
ECI Alabama Services, Inc. (AL Corp.) Delaware
subsidiaries
ECI-Chapel Hill, Inc.........................100%
ECI Management Services, Inc..........................100%
ECI-San Jose, Inc.....................................100%
ECI Services of Arizona, Inc..........................100%
ECI Services of Arkansas, Inc.........................100%
ECI Services of California, Inc.......................100%
ECI Services of Connecticut, Inc......................100%
ECI Services of Florida, Inc..........................100%
ECI Services of Georgia, Inc..........................100%
ECI Services of Illinois, Inc.........................100%
ECI Services of Indiana, Inc..........................100%
ECI Services of Iowa, Inc.............................100%
ECI Services of Louisiana, Inc........................100%
ECI Services of Maine, Inc............................100%
ECI Services of Massachusetts, Inc....................100%
ECI-Carr Funeral Home, Inc....................49%
ECI-Fay McCabe Funeral Home, Inc..............49%
ECI-Henderson Funeral Home, Inc...............49%
ECI-Rapino Memorial Home, Inc.................49%
ECI Services of Minnesota, Inc........................100%
ECI Services of Mississippi, Inc......................100%
ECI Services of Missouri, Inc.........................100%
ECI Services of New Hampshire, Inc....................100%
ECI Services of New Jersey, Inc.......................100%
ECI Services of New Mexico, Inc.......................100%
ECI Services of New York, Inc.........................100%
ECI-Conway, Inc..............................100%
ECI Services of North Carolina, Inc...................100%
ECI Services of North Dakota, Inc.....................100%
ECI Services of Ohio, Inc.............................100%
ECI Services of Oklahoma, Inc.........................100%
ECI Services of Pennsylvania, Inc.....................100%
ECI Services of South Carolina, Inc...................100%
ECI Services of South Dakota, Inc.....................100%
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
ECI Services of Texas, Inc............................100%
ECI Services of Vermont, Inc..........................100%
ECI Services of Virginia, Inc.........................100%
ECI Services of West Virginia, Inc....................100%
ECI Services of Wisconsin, Inc........................100%
Salvatore Air Transportation Corp.......................................100%
SCI Aviation, Inc.......................................................100%
SCI Executive Services, Inc.............................................100%
SCI Finance Management Inc..............................................100%
SCI Financial Services, Inc.............................................100%
Making Everlasting Memories, L.L.C..............................80%
Provident Services, Inc........................................100%
Provident Credit Corp.................................100%
Purple Cross Insurance Agency..................................100%
SCI Investment Services, Inc...................................100%
SCI Funeral Services, Inc. (Iowa Corp.) Delaware subsidiaries
First Memorial Funeral Services, Inc...........................100%
Gibraltar Mausoleum Construction Company, Inc..................100%
IFC-Boyertown, Inc.............................................100%
Memorial Guardian Plans, Inc...................................100%
SCI Funeral Services, Inc......................................100%
SCI Georgia Funeral Services, Inc..............................100%
SCI Missouri Funeral Services, Inc. (MO Corp.) Delaware
subsidiaries
IFC-York, Inc.........................................100%
SCI Ohio Funeral Services, Inc. (OH Corp.) Delaware
subsidiaries
Rose Hill Securities Company..........................100%
SCIT Holdings, Inc.............................................100%
SCI Texas Funeral Services, Inc.......................100%
PSI Funding, Inc.............................100%
SCI Iowa Funeral Services, Inc. (IA Corp.) Delaware
subsidiaries
SCI Iowa Finance Company..............................100%
SCI Pennsylvania Funeral Services, Inc. (PA Corp.) Delaware
subsidiaries
Gabauer Funeral Home, Inc.............................100%
SCI International Limited...............................................100%
Kenyon International Emergency Services, Inc...................100%
SCI Capital Holdings, Inc.......................................70%
SCI Financing Corporation......................................100%
SCI GP1, LLC-(DE limited liability company)....................100%
SCI GP2, LLC-(DE limited liability company)....................100%
TRA Acquisition Corporation....................................100%
SCI Special, Inc........................................................100%
Remembrance Memorial Traditions, LLC...........................100%
SCI Management L.P.....................................99%
SCI Administrative Services, LLC...............................100%
SCI Management L.P......................................1%
International Funeral Services, Inc..........100%
SCI European Aviation, Inc...................100%
SCI Management Finance Company...............100%
SCI Capital Corporation........................................100%
Investment Capital Corporation (Texas Corp.) Delaware
subsidiaries
IFC-YP, Inc..................................100%
DISTRICT OF COLUMBIA
SCI Funeral Services, Inc. (Iowa Corp.) DC subsidiaries
Witzke Funeral Homes, Inc......................................100%
FLORIDA
Equity Corporation International (DE Corp.) Florida subsidiaries
ECI Cemetery Services, Inc. (DE Corp.) Florida subsidiaries
ECI Cemetery Services of Florida, Inc. (GA Corp.) FL
subsidiaries
Beverly Hills Memorial Gardens, Inc..........100%
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
ECI Services, Inc. (DE Corp.) Florida subsidiaries
ECI Services of Florida, Inc. (DE Corp.) Florida
subsidiaries
San Jose Funeral Homes, Inc..................100%
SCI Funeral Services, Inc. (Iowa Corp) Florida subsidiaries
SCI Funeral Services of Florida, Inc...........................100%
Dorsey Funeral Home, Inc..............................100%
FM Cemetery, Inc......................................100%
Fountainhead Memorial Park, Inc.......................100%
Gibraltar Mausoleum of Florida, Inc...................100%
Hillsboro Memorial Gardens, Inc.......................100%
Lakeview Memorial Gardens, Inc........................100%
Memorial Plans, Inc...................................100%
SCI Georgia Funeral Services, Inc. (DE Corp.) Florida
subsidiaries
Preferred Funeral Services, Inc. (GA Corp.) Florida
subsidiaries
Marianna Chapel Funeral Home, Inc............100%
GEORGIA
Equity Corporation International (DE Corp.) Georgia subsidiaries
ECI Cemetery Services, Inc. (DE Corp.) Georgia subsidiaries
ECI Cemetery Services of Florida, Inc.................100%
ECI Cemetery Services of Georgia, Inc.................100%
ECI Cemetery Services of North Carolina, Inc..........100%
ECI Cemetery Services of South Carolina, Inc..........100%
ECI Services, Inc. (DE Corp.) Georgia subsidiaries
ECI Agency, Inc.......................................100%
ECI Services of Georgia, Inc. (DE Corp.) Georgia
subsidiaries
Ryan Funeral Home, Inc.......................100%
SCI Funeral Services, Inc. (Iowa corp.) Georgia subsidiaries
SCI Georgia Funeral Services, Inc. (Delaware Corp.) Georgia
subsidiaries
Clark Funeral Home, Inc...............................100%
Paulding Memorial Gardens, Inc........................100%
Preferred Funeral Services, Inc.......................100%
SCI Georgia Land, Inc.................................100%
HAWAII
SCI Funeral Services, Inc. (Iowa Corp.) Hawaii subsidiaries
SCI Hawaii Funeral Services, Inc...............................100%
*Hawaiian Memorial Park Cemetery...................... -0-
Garden Life Plan, Ltd........................ 50%
Hawaiian Memorial Life Plan, Ltd.............100%
IDAHO
NO SUBSIDIARIES
ILLINOIS
Equity Corporation International (DE Corp.) Illinois subsidiaries
ECI Cemetery Services, Inc. (DE Corp.) Illinois subsidiaries
ECI Cemetery Services of Illinois, Inc. (DE Corp.) IL
subsidiaries
Lake View Memorial Gardens, Inc..............100%
Lake View Funeral Home, Inc.........100%
ECI Services, Inc. (DE Corp.) Illinois subsidiaries
ECI Agency, Inc.......................................100%
ECI Services of Illinois, Inc. (DE Corp.) Illinois
subsidiaries
Marengo-Union Funeral Home, Ltd..............100%
Querhammer Funeral Home, Ltd.................100%
SCI Funeral Services, Inc. (Iowa Corp.) Illinois subsidiaries
SCI Illinois Services, Inc.....................................100%
IFS Illinois, Inc.....................................100%
Kolbus Funeral Home, Inc..............................100%
Vault Company of Illinois, Inc........................100%
Willwood Corporation..................................100%
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
INDIANA
Equity Corporation International (DE Corp.) Indiana subsidiaries
ECI Services, Inc. (DE Corp.) Indiana subsidiaries
ECI Services of Indiana, Inc. (DE Corp.) Indiana
subsidiaries
J & J Enterprises, Inc.......................100%
Little & Sons, Inc...........................100%
Myers Funeral Service, Inc...................100%
SCI Funeral Services, Inc. (Iowa Corp.) Indiana subsidiaries
SCI Indiana Funeral Services, Inc..............................100%
Gold Crusader Insurance Agency, Inc...................100%
Indiana Cemetery Services, Inc........................100%
Roselawn Memorial Association, Inc....................100%
IOWA
Equity Corporation International (DE Corp.) Iowa subsidiaries
ECI Services, Inc. (DE Corp.) Iowa subsidiaries
ECI Services of Iowa, Inc. (DE Corp.) Iowa
subsidiaries
Willim Funeral Homes, Ltd....................100%
SCI Funeral Services, Inc...............................................100%
Bunker's Eden Vale, Inc........................................100%
SCI Iowa Funeral Services, Inc.................................100%
Davenport Memorial Park Inc...........................100%
KANSAS
SCI Funeral Services, Inc. (Iowa Corp.) Kansas subsidiaries
SCI Kansas Funeral Services, Inc...............................100%
Services of Kansas, Inc........................................100%
KENTUCKY
SCI Funeral Services, Inc. (Iowa Corp) Kentucky subsidiaries
SCI Kentucky Funeral Services, Inc..............................99%
Kentucky Cemetery Services, Inc.......................100%
LOUISIANA
Equity Corporation International (DE Corp.) Louisiana subsidiaries
ECI Services, Inc. (DE Corp.) Louisiana subsidiaries
ECI Services of Louisiana, Inc. (DE Corp.) Louisiana
subsidiaries
Sibille Funeral Home, Inc....................100%
SCI Funeral Services, Inc. (Iowa Corp) Louisiana subsidiaries
SCI Louisiana Funeral Services, Inc............................100%
MAINE
Equity Corporation International (DE Corp.) Maine subsidiaries
ECI Services, Inc. (DE Corp.) Maine subsidiaries
ECI Services of Maine, Inc. (DE Corp.) Maine
subsidiaries
Birmingham Funeral Home......................100%
J. W. Raymond & Son Funeral Home.............100%
SCI Funeral Services, Inc. (Iowa Corp) Maine subsidiaries
SCI Maine Funeral Services, Inc................................100%
MARYLAND
SCI Funeral Services, Inc. (Iowa Corp.) Maryland subsidiaries
HFH, Inc.......................................................100%
Burgee-Henss-Seitz Funeral Home, Inc..................100%
Bradley-Ashton-Matthews Funeral Home, Inc.............100%
Charles S. Zeiler & Son, Inc..........................100%
Danzansky-Goldberg Memorial Chapels, Inc..............100%
Edward Sagel Funeral Direction, Inc...................100%
Fleck Funeral Home, Inc...............................100%
Gary L. Kaufman Funeral Home at
Meadowridge Memorial Park, Inc...............100%
Gary L. Kaufman Funeral Home Southwest, Inc...........100%
John C. Miller, Incorporated..........................100%
Lemmon Funeral Home of Dulaney Valley, Inc............100%
</TABLE>
5
<PAGE> 6
<TABLE>
<S> <C>
Loring Byers Funeral Directors, Inc...................100%
Moran-Ashton-Dabrowski Funeral Home, Inc..............100%
Sterling-Ashton-Schwab Funeral Home, Inc..............100%
The Dippel Funeral Homes, Incorporated................100%
Witzke Funeral Home of Catonsville, Inc...............100%
Witzke, Inc................................55.17%
SCI Maryland Funeral Services, Inc.............................100%
Cedar Lawn Memorial Park, Inc.........................100%
George Washington Cemetery Company, Inc...............100%
MASSACHUSETTS
Equity Corporation International (DE Corp.) Massachusetts subsidiaries
ECI Services, Inc. (DE Corp.) Massachusetts subsidiaries
ECI Life Insurance Agency, Inc........................100%
SCI Financial Services, Inc.(Delaware Corp.) Massachusetts subsidiaries
Provident Services, Inc. (Delaware Corp.) Massachusetts
subsidiaries
PSI Massachusetts, Inc................................100%
SCI Funeral Services, Inc. (Iowa Corp.) Massachusetts subsidiaries
Affiliated Family Funeral Service, Inc.........................100%
AFFS Boston, Inc.......................................40%
AFFS North, Inc........................................30%
AFFS Norwood, Inc......................................40%
AFFS Quincy, Inc.......................................40%
AFFS South Coast East, Inc.............................40%
AFFS South Coast West, Inc.............................10%
AFFS West, Inc.........................................30%
Arthur J. Brunelle Funeral Homes, Inc.................100%
Brunelle Funeral Home, Inc.............................40%
Langone Funeral Home, Inc..............................40%
Messier Funeral Home, Inc..............................40%
Perlman Funeral Home, Inc..............................40%
Pillsbury Funeral Homes, Inc...........................40%
Stanetsky Memorial Chapels, Inc........................40%
Sullivan Funeral Homes, Inc............................40%
MICHIGAN
SCI Funeral Services, Inc. (Iowa Corp) Michigan subsidiaries
SCI Michigan Funeral Services, Inc.............................100%
A.J. Desmond & Sons Funeral Directors, Inc.............42%
Cemetery/Funeral Warehouse Services, Inc..............100%
Christian Memorial Funeral Center, Inc................100%
MINNESOTA
Equity Corporation International (DE Corp.) Minnesota subsidiaries
ECI Services, Inc. (DE Corp.) Minnesota subsidiaries
ECI Services of Minnesota, Inc. (DE Corp.) Minnesota
subsidiaries
Bonnerup & Son Funeral Chapel, Inc...........100%
SCI Funeral Services, Inc. (Iowa Corp.) Minnesota subsidiaries
SCI Minnesota Funeral Services, Inc............................100%
Crystal Lake Cemetery Association.....................100%
MISSISSIPPI
Equity Corporation International (DE Corp.) Mississippi subsidiaries
ECI Services, Inc. (DE Corp.) Mississippi subsidiaries
ECI Services of Mississippi, Inc. (DE Corp.)
Mississippi subsidiaries
Nowell Funeral Homes, Inc....................100%
Nowell Funeral Services, Inc. of Kosciusko,
Mississippi..................................100%
Nowell-Robinson Funeral Home, Inc............100%
Waters Funeral Home, Inc.....................100%
SCI Funeral Services, Inc. (Iowa Corp.) Mississippi subsidiaries
SCI Mississippi Funeral Services, Inc..........................100%
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MISSOURI
Equity Corporation International (DE Corp.) Missouri subsidiaries
ECI Cemetery Services, Inc. (DE Corp.) Missouri subsidiaries
ECI Cemetery Services of Missouri, Inc. (DE Corp.) MO
subsidiaries
The Oak Hill Realty Company..................100%
SCI Funeral Services, Inc. (Iowa Corp) Missouri subsidiaries
SCI Missouri Funeral Services, Inc.............................100%
Memorial Guardian Plans, Inc..........................100%
MONTANA
NO SUBSIDIARIES
NEBRASKA
Equity Corporation International (DE Corp.) Nebraska subsidiaries
ECI Services, Inc. (DE Corp.) Nebraska subsidiaries
ECI Services of Nebraska, Inc.........................100%
A.R.C. Corporation...........................100%
Wherry Bros., Inc............................100%
SCI Funeral Services, Inc. (Iowa Corp) Nebraska subsidiaries
SCI Nebraska Funeral Services, Inc.............................100%
NEVADA
SCI Funeral Services, Inc. (Iowa Corp) Nevada subsidiaries
Ross, Burke & Knobel Mortuary..................................100%
SCIT Holdings, Inc. (Delaware Corp.) Texas subsidiaries
SCI Texas Funeral Services, Inc. (Texas Corp) Nevada
subsidiaries
SCI Texas Finance Company....................100%
NEW HAMPSHIRE
Equity Corporation International (DE Corp.) New Hampshire subsidiaries
ECI Services, Inc. (DE Corp.) New Hampshire subsidiaries
ECI Services of New Hampshire, Inc. (DE Corp.) NH
subsidiaries
Fleury & Patry Funeral Homes, Inc............100%
NEW JERSEY
Equity Corporation International (DE Corp.) New Jersey subsidiaries
ECI Services, Inc. (DE Corp.) New Jersey subsidiaries
ECI Services of New Jersey, Inc. (DE Corp.) NJ
subsidiaries
H.T. Layton & Son Home for Funerals..........100%
SCI Funeral Services, Inc. (Iowa Corp) New Jersey subsidiaries
SCIT Holdings, Inc. (Delaware Corp.) New Jersey subsidiaries
SCI New Jersey Funeral Services, Inc..................100%
Blake-Doyle Funeral Home, Inc................100%
Garden State Crematory, Inc..................100%
Wien & Wien, Inc.............................100%
NEW MEXICO
Equity Corporation International (DE Corp.) New Mexico subsidiaries
ECI Services, Inc. (DE Corp.) New Mexico subsidiaries
ECI Agency, Inc.......................................100%
SCI Funeral Services, Inc. (Iowa Corp) New Mexico subsidiaries
Memorial Guardian Plans, Inc. (DE Corp) New Mexico subsidiaries
Ensure Agency of New Mexico, Inc......................100%
SCI New Mexico Funeral Services, Inc...........................100%
Alameda Funeral Services, Inc.........................100%
NEW YORK
Equity Corporation International (DE Corp.) New York subsidiaries
ECI Services, Inc. (DE Corp.) New York subsidiaries
ECI Services of New York, Inc. (DE Corp.) NY
subsidiaries
Daniel J. Schaefer, Inc......................100%
Eldan Holding Corp...........................100%
James D. Barrett Funeral Home, Inc...........100%
Light's Funeral Home, Inc....................100%
North Shore Livery Service, Inc..............100%
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The Kenneth Howe Funeral Home, Inc...........100%
SCI Funeral Services, Inc. (Iowa Corp) New York subsidiaries
SCI Funeral Services of New York, Inc..........................100%
Beth David Memorial Chapel Ltd........................100%
Chas. Peter Nagel Inc.................................100%
I. J. Morris, Inc.....................................100%
Marsellus Casket Company, Inc.........................100%
New York Funeral Chapels, Inc.........................100%
Thomas M. Quinn & Sons, Inc...........................100%
Werst Realty Co. Inc.........................100%
SCI Services of New York, Inc..................................100%
NORTH CAROLINA
SCI Funeral Services, Inc. (Iowa Corp) North Carolina subsidiaries
SCI North Carolina Funeral Services, Inc.......................100%
NORTH DAKOTA
SCI Funeral Services, Inc. (Iowa Corp) North Dakota subsidiaries
Memorial Guardian Plans, Inc...................................100%
OHIO
Equity Corporation International (DE Corp.) Ohio subsidiaries
ECI Cemetery Services, Inc. (DE Corp.) Ohio subsidiaries
ECI Cemetery Services of Ohio, Inc. (DE Corp.) Ohio
subsidiaries
Green Hills Management, Inc..................100%
ECI Services, Inc. (DE Corp.) Ohio subsidiaries
ECI Agency, Inc. (IL Corp.) Ohio subsidiaries
ECI Agency, Inc...............................99%
ECI Services of Ohio, Inc. (DE Corp.) Ohio
subsidiaries
Allmon-Dugger and Hively Funeral Home, Inc...100%
Gattozzi and Sons Funeral Homes, Inc.........100%
Hahn Funeral Home, Inc.......................100%
Halteman-Fett & Dyer Funeral Home, Inc.......100%
SCI Funeral Services, Inc. (Iowa Corp.) Ohio subsidiaries
Memorial Guardian Plans, Inc. (Delaware Corp.) Ohio subsidiaries
Ensure Agency of Ohio, Inc............................100%
SCI Ohio Funeral Services, Inc..................................90%
Ohio Cemetery Services, Inc...........................100%
Pioneer of Ohio Insurance Agency, Inc.................100%
Selby-Cole Funeral Home, Inc..........................100%
STE Acquisition Corp..................................100%
Sunset Trust Estate..........................100%
The Knollwood Cemetery Company........................100%
OKLAHOMA
Equity Corporation International (DE Corp.) Oklahoma subsidiaries
ECI Services, Inc. (DE Corp.) Oklahoma subsidiaries
ECI Services of Oklahoma, Inc. (DE Corp.) Oklahoma
subsidiaries
Altebaumer Funeral Homes, Inc................100%
Anadarko Enterprises, Inc....................100%
Gragg & Gragg, Inc...........................100%
Ray Smith Funeral Home, Inc..................100%
SCI Funeral Services, Inc. (Iowa Corp.) Oklahoma subsidiaries
AED, Inc.......................................................100%
Memorial Gardens Association..........................100%
RMG Trust.............................................100%
Resthaven Memory Gardens of Oklahoma City
Trust........................................100%
Rose Hill Burial Park, a Trust.........................90%
IFC-YP, Inc. (Delaware Corp) Oklahoma subsidiaries
IFC-Amedco, Inc. .....................................100%
SCI Oklahoma Funeral Services, Inc.............................100%
Hillcrest Memorial Park Trust.........................100%
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Memorial Park Cemetery of Bartlesville, Oklahoma,
A Business Trust.............................100%
Memory Gardens, Inc...................................100%
Rose Hill Memorial Park Trust.........................100%
SSP Limited Liability Company..........................50%
SSP Insurance Agency, Inc....................100%
Sunset Memorial Park Cemetery Trust...................100%
Woodland Memorial Company.............................100%
Sentinel Security Plans, Inc.(VA Corp.) Oklahoma Subsidiaries
SSP Limited Liability Company..........................50%
OREGON
SCI Financial Services, Inc. (DE Corp.) Oregon subsidiary
Provident Services, Inc. (DE Corp.) Oregon subsidiary
PSI Oregon, Inc.......................................100%
SCI Funeral Services, Inc. (Iowa Corp) Oregon subsidiaries
SCI Oregon Funeral Services, Inc...............................100%
Uniservice Corporation................................100%
PENNSYLVANIA
Equity Corporation International (DE Corp.) Pennsylvania subsidiaries
ECI Services, Inc. (DE Corp.) Pennsylvania subsidiaries
ECI Services of Pennsylvania, Inc. (DE Corp.) PA
subsidiaries
Mohney-Yargar Funeral Chapel,
Inc.-(Old Corp.).............................100%
SCI Funeral Services, Inc. (Iowa Corp) Pennsylvania subsidiaries
Memorial Guardian Plans, Inc.( Delaware Corp) Pennsylvania
subsidiaries
Ensure Agency of Pennsylvania, Inc....................100%
SCI Pennsylvania Funeral Services, Inc.........................100%
Auman Funeral Home, Inc...............................100%
Ed Melenyzer Co.......................................100%
Forest Lawn Gardens, Inc...............................50%
Speer-Anthony Kaprive Funeral Home, Inc.......50%
Funeral Corporation Pennsylvania......................100%
Laughlin Funeral Home, Ltd...................100%
Luther M. Kniffen, Inc.......................100%
Rohland Funeral Home.........................100%
Grandview Cemetery Association........................100%
Harold B. Mulligan Co., Inc...........................100%
Remembrance Services, Inc.............................100%
Stephen R. Haky Funeral Home, Inc.....................100%
Theo. C. Auman, Inc...................................100%
Auman's, Inc.................................100%
Forest Hills Memorial Park, Inc..............100%
Francis F. Seidel, Inc.......................100%
Memorial Services Planning Corporation.......100%
RHODE ISLAND
SCI Funeral Services, Inc. (Iowa corp.) Rhode Island subsidiaries
SCI Rhode Island Funeral Services, Inc.........................100%
Max Sugarman Funeral Home, Inc........................100%
SOUTH CAROLINA
SCI Funeral Services, Inc. (Iowa corp.) South Carolina subsidiaries
SCI South Carolina Funeral Services, Inc.......................100%
Greenville Vault Co., Inc.............................100%
SOUTH DAKOTA
SCI Financial Services, Inc. (Delaware Corp) South Dakota subsidiaries
American Memorial Life Insurance Company.......................100%
Rushmore National Life Insurance Company..............100%
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TENNESSEE
Equity Corporation International (DE Corp.) Tennessee subsidiaries
ECI Cemetery Services, Inc. (DE Corp.) Tennessee subsidiaries
ECI Cemetery Services of Tennessee, Inc...............100%
Erwin Cemetery Company.......................100%
SCI Funeral Services, Inc. (Iowa Corp) Tennessee subsidiaries
SCI Tennessee Funeral Services, Inc............................100%
Collierville Funeral Home, Inc........................100%
Horner Funeral Home, Inc..............................100%
Lily of the Valley, Inc...............................100%
Lynnhurst Cemetery, Inc...............................100%
Memorial Guardian Plans, Inc..........................100%
Memphis Memory Gardens, Inc...........................100%
Sherwood Memorial Gardens, Inc........................100%
Woodlawn Memorial Park, Inc...........................100%
TEXAS
Equity Corporation International (DE Corp.) Texas subsidiaries
ECI Cemetery Services, Inc. (DE Corp.) Texas subsidiaries
ECI Cemetery Services of Texas, Inc...................100%
Gardens of Memories Memorial Park of
Lufkin, Inc..................................100%
ECI Services, Inc. (DE Corp.) Texas subsidiaries
ECI Services of Texas, Inc. (DE Corp.) Texas
subsidiaries
Gipson Funeral Home, Inc.....................100%
Equity Corporation International of Texas.............100%
Huntsville Funeral Home, Inc..........................100%
JPH Properties, Inc...................................100%
Professional Funeral Associates, Inc..................100%
Vandiver Funeral Home, Inc.....................................100%
SCI Funeral Services, Inc. (Iowa Corp) Texas subsidiaries
SCIT Holdings, Inc. (Delaware Corp.) Texas subsidiaries
SCI Texas Funeral Services, Inc. (DE Corp.) Texas
subsidiaries
EFH, Inc.....................................100%
Guadalupe Valley Memorial Park...............100%
SCI Holdings of Texas, Inc...................100%
West Oaks Funeral Home, Inc..................100%
SCI International Limited (Delaware Corp.)
Service Corporation International PLC (UK Corp.)
SCI Capital LLC-(TX limited liability company)........100%
SCI Special, Inc. (Delaware Corp.)
SCI Capital Corporation (Delaware Corp.) Texas subsidiaries
Great Lakes, Inc......................................100%
Investment Capital Corporation........................100%
UTAH
SCI Funeral Services, Inc. (Iowa Corp.) Utah subsidiaries
SCI Utah Funeral Services, Inc.................................100%
Wasatch Land and Improvement Company..................100%
Wasatch Lawn Cemetery Association.....................100%
VERMONT
Equity Corporation International (DE Corp.) Vermont subsidiaries
ECI Services, Inc. (DE Corp.) Vermont subsidiaries
ECI Life Insurance Agency, Inc........................100%
VIRGINIA
Equity Corporation International (DE Corp.) Virginia subsidiaries
ECI Cemetery Services, Inc. (DE Corp.) Virginia subsidiaries
ECI Cemetery Services of Virginia, Inc................100%
Sunset Cemetery, Inc.........................100%
SCI Funeral Services, Inc. (Iowa Corp.) Virginia subsidiaries
</TABLE>
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Memorial Guardian Plans, Inc. (Delaware Corp)
Sentinel Security Plans, Inc..........................100%
SCI Virginia Funeral Services, Inc.............................100%
The Stonewall Memory Gardens Incorporated.............100%
WASHINGTON
SCI Funeral Services, Inc. (Iowa Corp.) Washington subsidiaries
SCI Washington Funeral Services, Inc...........................100%
Ball & Dodd Funeral Home, Inc.........................100%
WEST VIRGINIA
SCI Funeral Services, Inc. (Iowa Corp.) West Virginia subsidiaries
SCI West Virginia Funeral Services, Inc........................100%
Rosedale Cemetery Company.............................100%
Rosedale Funeral Chapel, Inc..........................100%
Sunset Services, Inc..................................100%
WISCONSIN
Equity Corporation International (DE Corp.) Wisconsin subsidiaries
ECI Services, Inc. (DE Corp.) Wisconsin subsidiaries
ECI Services of Wisconsin, Inc. (DE Corp.) Wisconsin
subsidiaries
Fuller-Speckien Funeral Home, Inc............100%
Schramka Funeral Homes, Inc..................100%
Steinhaus Funeral Home, Inc..................100%
SCI Funeral Services, Inc. (Iowa Corp.) Wisconsin subsidiaries
SCI Wisconsin Funeral Services, Inc............................100%
ATK Corporation.......................................100%
WYOMING
SCI Funeral Services, Inc. (Iowa Corp.) Wyoming subsidiaries
Memorial Guardian Plans, Inc...................................100%
CANADA Equity Corporation International (DE Corp.) Ohio subsidiaries
ECI Capital Corporation (DE Corp.) Canadian subsidiaries
ECI Capital Corporation Limited-(Alberta).............100%
ECI Services of Canada Limited-(Saskatchewan).........100%
SCI International Limited (Delaware Corp.) Canada subsidiaries
Service Corporation International (Canada) Limited.............100%
1252973 Ontario Inc.-(Ontario)........................100%
Westside Cemeteries Limited-(Ontario)........100%
Westside Cemetery Holdings
Limited-(ON).......................100%
Can Ensure Group, Inc.-(Federal)......................100%
Centre Funeraire Cote-des-Neiges Inc.-(Quebec).........49%
CFCDN Holdings Inc.-(Quebec)..........................100%
Hong Kong Funeral Homes B.C. Ltd.(British Columbia)...100%
International Funeral Parlours B.C. Ltd.-(B.C.).......100%
Jerrett Funeral Chapels Corporation-(ON)..............100%
Maison Funeraire Daniel Brunet Inc.-(Quebec)..........100%
S.C.I.C. (Quebec) Holdings, Ltd.-(Quebec).............100%
SCI Holdings Canada, Inc.-(Federal)...................100%
SCI Northwest Region, Inc.-(B.C.).....................100%
World Funeral Home B.C. Ltd.-(British Columbia).......100%
Service Corporation International Capital Funding Ltd.-(AL)....100%
611102 Saskatchewan Ltd........................................100%
ARGENTINA
SCI International Limited (Delaware Corp.) Argentina subsidiaries
SCI Latin America Ltd. (Cayman Island Corp.) Argentina
subsidiaries
Jardine de Pilar SA...................................100%
Betti SACI...................................100%
Casa Cordoba 1800 SA.........................100%
Casa Lazro Costa SA..........................100%
Lazaro Costa SA..............................100%
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MI-TO-DO SA..................................100%
O'Higgins SA.................................100%
Principal SA.................................100%
SCI Argentina SA.............................100%
TRA Acquisition Corp.(Delaware Corp.) Argentina subsidiaries
Jardin de Paz SA......................................100%
Interparques SA............................33.33%
Parque del Campanario SA..............................100%
Interparques SA............................33.33%
Parque Lujan S.A...........................33.33%
Parque Lujan S.A....................................33.33%
Solaz S.A.............................................100%
Interparques SA............................33.33%
Parque Lujan S.A...........................33.33%
AUSTRALIA
SCI International Limited (Delaware Corp.) Australia subsidiaries
Service Corporation International Australia Pty., Ltd..........100%
Australian Cremation Society Pty Limited..............100%
Beresfield Funerals Pty Limited.......................100%
Cremations (Newcastle) Holdings Pty. Ltd..............100%
Kitleaf Pty Limited...................................100%
Labor Funerals Contribution Fund Pty Limited..........100%
Mead & Purslowe Pty. Ltd..............................100%
Mead & Purslowe Trading Trust.........................100%
Memorial Guardian Plan Pty Limited....................100%
Metro. Burial & Cremation Society Funeral Cont. Fund..100%
New South Wales Cremation Company Pty., Ltd...........100%
Pine Grove Forest Lawn Funeral Benefit Co. Pty
Limited...............................................100%
Purslowe Custodians Pty. Ltd..........................100%
BELGIUM
SCI International Limited (Delaware Corp.) Belgium subsidiaries
SCI Continental Europe SA (French Corp.) Belgium subsidiaries
RLC (French Corp.) Belgium subsidiaries
OGF SA (French Corp.)Belgium subsidiaries
SCI Belgium ..........................99%
B. & C. Nyutten B.V..............100%
Camilla Belgium N.V..............100%
Diana Belgium N.V................100%
Enterprises Dethier..............100%
Sophia Belgium N.V...............100%
Timmerman........................100%
Uitvaartverzorging Joosen BVBA...100%
Van Dooren.......................100%
CAYMAN ISLANDS
SCI International Limited (Delaware Corp.) Cayman Island subsidiaries
SCI Latin America Ltd.........................................100%
SCI Cayman II Ltd....................................100%
CHILE
SCI International Limited (Delaware Corp.) Chile subsidiaries
SCI Latin America Ltd. (Cayman Island Corp.) Chile
subsidiaries
Service Corporation International Chile Limitada.....100%
Administradora Los Parques SA................57%
Inversiones Austral SA......................100%
Administradora Los Parques SA........43%
Los Parques SA..............................100%
Cinerario Ltda.......................49%
Previsora SA................................100%
</TABLE>
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CZECH REPUBLIC
SCI International Limited (Delaware Corp.) Czech Republic subsidiaries
SCI Continental Europe SA (French Corp.) Czech Republic
subsidiaries
RLC (French Corp.) Czech Republic subsidiaries
OGF SA (French Corp.) Czech Republic
subsidiaries
PAX......................................54%
FRANCE
SCI International Limited (Delaware Corp.) French subsidiaries
SCI Continental Europe SA.........................................100%
RLC....................................................99.99%
OGF SA..........................................100%
AGIER...................................100%
ALLIO...................................100%
AS COLOMBE..............................100%
AUGIVAL...............................95.30%
AUXIA Groupe..........................99.96%
AUXIA Assistance.............99.95%
AUXIA Immobilier...............100%
CAF.....................................100%
CEDRONI.................................100%
CGPF..................................99.78%
CGSM..................................99.88%
CRELOR..................................100%
EDIL....................................100%
GARGAS................................97.60%
Cie Pradel...................99.58%
SARL Pompes Funebres...........100%
Montpellieraines A. Gines......100%
SARL SPFBN.....................100%
SA SPFCR.......................100%
GFPL..................................62.19%
GIE DIGNITE.............................100%
GIE GNEPF...............................100%
GIE THANATO.............................100%
GIMOSETH................................100%
GRAUGNARD...............................100%
MARTIN-CHAZEL...........................100%
Mie RENNAISE............................100%
Mries Lescarcelle.......................100%
PF Garonne............................99.99%
SEMAFEC.................................100%
S.E. Mbries Surget....................99.99%
Seuropras.............................99.20%
SOMOTHA...............................98.63%
SPPF Walter...........................57.61%
VIEUX MOULIN............................100%
GERMANY
SCI International Limited (Delaware Corp.) Germany subsidiaries
SCI D GmbH........................................................100%
Bremen...................................................100%
Jean Haas................................................100%
Suddeutsche Bestattungsgesellschaft......................100%
Thomas Amm GmbH..........................................100%
Westdeutsche Bestattungsgesellschaft.....................100%
IRELAND
SCI International Limited (Delaware Corp.) Ireland subsidiaries
SCI Holdings Ireland Ltd..........................................100%
Jennings & Company (Ireland) Limited..............................100%
</TABLE>
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Jennings & Company Limited......................................100%
Lemford Limited........................................100%
T Stafford & Son Limited..................................................25%
ITALY
SCI International Limited (Delaware Corp.) Italy subsidiaries
SCI Continental Europe SA (French Corp.) Italy subsidiaries
RLC (French Corp.) Italy subsidiaries
OGF SA (French Corp.) Italy subsidiaries
F.I.S. (Netherlands Corp.) Italy subsidiaries
OFISA.........................................100%
Franceschini.............................100%
OFT.......................................98%
MALAYSIA
SCI International Limited (Delaware Corp.) Malaysia subsidiaries
SCI Continental Europe SA (French Corp.) Malaysia subsidiaries
RLC (French Corp.) Malaysia subsidiaries
OGF SA (French Corp.) Malaysia subsidiaries
F.I.S. (Netherlands Corp.) Malaysia subsidiaries
Bahau Funeral Services SDN BHD..............33.33%
Bahau Memorial Park SDN BHD.................16.67%
Singapore Casket Company PLC(Singapore)
Malaysia subsidiaries
Bahau Funeral Services SDN BHD..............33.33%
Bahau Memorial Park SDN BHD.................16.67%
Bahau Funeral Services SDN BHD.........33.33%
Enlightened Transition Sdn Bhd...........................................100%
NETHERLANDS
SCI International Limited (Delaware Corp.) Netherlands subsidiaries
SCI Continental Europe SA (French Corp.) Netherlands subsidiaries
RLC (French Corp.) Netherlands subsidiaries
OGF SA (French Corp.) Netherlands subsidiaries
F.I.S..............................................95%
Libitina Groep B.V................................100%
SCI Nederland B.V.................................100%
Ad Sanctos B.V................................100%
Eenvoud B.V...................................100%
Exploitatiemaatschappij Nijenheim B.V.........100%
Centrale Uitvaartmij Nederland...........100%
BV Heerlen..........................100%
Goes BV.............................100%
Van Kerkvoorde BV...................100%
Crematorium Temeuzen BV.........100%
Uitvaartcentrum Heemskerk
Konig BV........................100%
Vink B.V............................100%
Noordveld BV.............................100%
Van Gestek B.V...........................100%
Via Nova BV..............................100%
Voomeveld BV.............................100%
H. Ogler B.V..................................100%
Oud Eik en Duinen B.V.........................100%
Rouw-en Condoleancecentrum B.V................100%
Soek & Zn B.V.................................100%
Tebbenhoff B.V................................100%
T. Statenhuys B.V.............................100%
Uitvaartverzorging W.P. VanDer Togt B.V.......100%
</TABLE>
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SCI Finance C.V...............................100%
Soek Uitvaartverzorging B.V...................100%
NORWAY
SCI International Limited (Delaware Corp.) Norway subsidiaries
SCI Norway...............................................................100%
Sorensen & Kristiansand Begravelsesbyra.........................100%
PANAMA
SCI International Limited (Delaware Corp.) Panama subsidiaries
SCI Latin America Ltd. (Cayman Island Corp.) Panama subsidiaries
Service Corporation International Chile Limitada (Chile Corp.)
Panama subsidiaries
Los Parques International SA...........................100%
PORTUGAL
SCI International Limited (Delaware Corp.) Portugal subsidiaries
J Salgado Figueira (Successores), SA.....................................100%
Afuneportugal-Acrividades Funerarias............................100%
A Funeraria Da Amoreira, Lda....................................100%
Agencia Funeraria da Penha de Franca, Lda.......................100%
Agencia Funeraria De Lourel Sintra..............................100%
Agencia Funeraria Melo, Lda.....................................100%
Agencia Funeraria Migueis, Lda..................................100%
Agencia Louis Duarte & Assis E. Sobreirol.......................100%
Agencia Nobel...................................................100%
Alfredo Magno & Jaime Gomes, Lda................................100%
SINGAPORE
SCI International Limited (Delaware Corp.) Singapore subsidiaries
SCI Continental Europe SA (French Corp.) Singapore subsidiaries
RLC (French Corp.) Singapore subsidiaries
OGF SA (French Corp.) Singapore subsidiaries
Singapore Casket Company PLC.................67.57%
Casket Palace Company PLC.............100%
SPAIN
SCI International Limited (Delaware Corp.) Spain subsidiaries
CIA Gral Servicios Funerarios, S.A.(Barna)...............................100%
Pompas Funebres Girona, S.L.....................................100%
Funeraria Poch, S.A....................................100%
Servei Comarcal de Pompes Funebres, S.A................100%
Pompas Funebres Sevilla, S.L....................................100%
Pompas Funebres La Nueva, S.L..........................100%
SCI Servicios Funerarios, S.A...................................100%
Virgen del Rosarios, S.L...............................100%
Funeraria Gaditanas Asociadas SA................49%
Servicios Funerarios Turia, S.A.................................100%
Funlis, S.L............................................100%
Servipublic, S.L................................90%
Funeraria La Fe Guadalajara, S.L.........................................100%
Ambulancias Herranz SA..........................................100%
Servicios Funerarios de Guadalajara, NSA, S.A..........100%
Funeraria Oromana........................................................100%
Funeraria Ruiz SL........................................................100%
Fupalsa..................................................................100%
SCI Continental Europe SA (French Corp.) Spain subsidiaries
RLC (French Corp.) Spain subsidiaries
OGF SA (French Corp.) Spain subsidiaries
Pompas Funebres Mediterraneas, S.L.............100%
Servicios Funerarios Barcelona, S.A...100%
SCIV Torrente............................................................100%
Servicios Funerarios Boix SL....................................100%
</TABLE>
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Servicios Funerarios de Fucasa..........................................100%
Servicios Funerarios de Zaragoza S.A....................................100%
Pompes Funebres de Zaragoza, S.A................................90%
Servicios Funerarios de Torrero SA.....................45%
Servicios Generales de Sevilla SL.......................................100%
SWITZERLAND
SCI International Limited (Delaware Corp.) Switzerland subsidiaries
SCI Continental Europe SA (French Corp.) Switzerland subsidiaries
RLC (French Corp.) Switzerland subsidiaries
OGF SA (French Corp.) Switzerland subsidiaries
Omnium de Services et de Financement SA........99%
PFG Lausanne SA........................95%
Alea Prevoyance Funeraire SA......100%
Allegemeine Bestattungs AG........100%
Bestattungsdienst Hedy
Linder-Walther AG.................100%
Bestattungsdienst Josef Mulhauser
AG................................100%
Bestattungsinstitut Willy Gerber
AG-Olten..........................100%
Cerba SA..........................100%
Pompes Funebres Amoos SA..........100%
Pompes Funebres de St. Laurent
SA................................100%
Pompes Funebres Gaillard
Et Pittet SA......................100%
Pompes Funebres Gavillet SA.......100%
Pompes Funebres Lemania SA........100%
Pompes Funebres Monney SA.........100%
Pompes Funebres Perusset SA.......100%
Pompes Funebres Voeffray SA.......100%
Pompes Funebres Wasserfallen SA...100%
Utiger & Ryf Bestattungs AG.......100%
UNITED KINGDOM
SCI International Limited (Delaware Corp.) United Kingdom subsidiaries
Service Corporation International PLC...................................100%
Birkbeck Securities Limited....................................100%
Management Europe Gen Limited.........................100%
SCI Funerals Limited..................................100%
SCI Pre-arrangements Limited..........................100%
Advanced Planning Limited......................75%
Dignity Limited.................................................95%
Lanecliff Limited..............................................100%
Pitcher and LeQuesne Limited...................................100%
Swift & Mildred Limited.........................................95%
URUGUAY
SCI International Limited (Delaware Corp.) Uruguay subsidiaries
SCI Latin America Ltd. (Cayman Island Corp.) Uruguay subsidiaries
Service Corporation International Chile Limitada (Chile Corp.)
Uruguay subsidiaries
Los Parques International SA (Panama Corp.)
Uruguay subsidiaries
Berkley SA..................................88.89%
Coral TreBol................................88.70%
Pidanol SA..................................91.17%
Rensolar SA.................................91.17%
Vigar SA....................................88.89%
</TABLE>
16
<PAGE> 1
EXHIBIT 23.1
SERVICE CORPORATION INTERNATIONAL
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Service Corporation International on Form S-3 (File No. 333-65711), Form S-4
(File No. 333-01857) and Form S-8 (File Nos. 333-33101, 333-00177, 333-00179,
33-9790, 33-17982, 333-68683, 333-82475, 333-70983, and 33-50987) of our report
dated March 29, 2000, on our audits of the consolidated financial statements and
financial statement schedule of Service Corporation International as of December
31, 1999 and 1998, and for each of the three years in the period ended December
31, 1999, which report is included in this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
March 29, 2000
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint Jeffrey E. Curtiss and James
M. Shelger his true and lawful attorneys and agents (each with authority to act
alone), with power and authority to sign for and on behalf of the undersigned
the name of the undersigned as officer or director, or both, of the Company to
the Company's Annual Report to the Securities and Exchange Commission on Form
10-K for the fiscal year of the Company ending December 31, 1999 and to any
amendments thereto filed with the Securities and Exchange Commission, and to any
instrument or document filed as a part of, as an exhibit to or in connection
with said Report or amendments; and the undersigned does hereby ratify and
confirm as his own act and deed all that said attorney and agent shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 2000.
/s/ R. L. Waltrip
-------------------------------
R. L. WALTRIP
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint James M. Shelger his true
and lawful attorney and agent with power and authority to sign for and on behalf
of the undersigned the name of the undersigned as officer or director, or both,
of the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1999 and to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 2000.
/s/ Jeffrey E. Curtiss
--------------------------------
JEFFREY E. CURTISS
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint Jeffrey E. Curtiss and James
M. Shelger his true and lawful attorney and agent with power and authority to
sign for and on behalf of the undersigned the name of the undersigned as officer
or director, or both, of the Company to the Company's Annual Report to the
Securities and Exchange Commission on Form 10-K for the fiscal year of the
Company ending December 31, 1999 and to any amendments thereto filed with the
Securities and Exchange Commission, and to any instrument or document filed as a
part of, as an exhibit to or in connection with said Report or amendments; and
the undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 2000.
/s/ W. Cardon Gerner
--------------------------------
W. CARDON GERNER
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint Jeffrey E. Curtiss and James
M. Shelger his true and lawful attorneys and agents (each with authority to act
alone), with power and authority to sign for and on behalf of the undersigned
the name of the undersigned as officer or director, or both, of the Company to
the Company's Annual Report to the Securities and Exchange Commission on Form
10-K for the fiscal year of the Company ending December 31, 1999 and to any
amendments thereto filed with the Securities and Exchange Commission, and to any
instrument or document filed as a part of, as an exhibit to or in connection
with said Report or amendments; and the undersigned does hereby ratify and
confirm as his own act and deed all that said attorney and agent shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 2000.
/s/ Anthony L. Coelho
--------------------------------
ANTHONY L. COELHO
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint Jeffrey E. Curtiss and James
M. Shelger his true and lawful attorneys and agents (each with authority to act
alone), with power and authority to sign for and on behalf of the undersigned
the name of the undersigned as officer or director, or both, of the Company to
the Company's Annual Report to the Securities and Exchange Commission on Form
10-K for the fiscal year of the Company ending December 31, 1999 and to any
amendments thereto filed with the Securities and Exchange Commission, and to any
instrument or document filed as a part of, as an exhibit to or in connection
with said Report or amendments; and the undersigned does hereby ratify and
confirm as his own act and deed all that said attorney and agent shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 2000.
/s/ Jack Finkelstein
--------------------------------
JACK FINKELSTEIN
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint Jeffrey E. Curtiss and James
M. Shelger his true and lawful attorneys and agents (each with authority to act
alone), with power and authority to sign for and on behalf of the undersigned
the name of the undersigned as officer or director, or both, of the Company to
the Company's Annual Report to the Securities and Exchange Commission on Form
10-K for the fiscal year of the Company ending December 31, 1999 and to any
amendments thereto filed with the Securities and Exchange Commission, and to any
instrument or document filed as a part of, as an exhibit to or in connection
with said Report or amendments; and the undersigned does hereby ratify and
confirm as his own act and deed all that said attorney and agent shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 2000.
/s/ A. J. Foyt, Jr.
--------------------------------
A. J. FOYT, JR.
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint Jeffrey E. Curtiss and James
M. Shelger his true and lawful attorneys and agents (each with authority to act
alone), with power and authority to sign for and on behalf of the undersigned
the name of the undersigned as officer or director, or both, of the Company to
the Company's Annual Report to the Securities and Exchange Commission on Form
10-K for the fiscal year of the Company ending December 31, 1999 and to any
amendments thereto filed with the Securities and Exchange Commission, and to any
instrument or document filed as a part of, as an exhibit to or in connection
with said Report or amendments; and the undersigned does hereby ratify and
confirm as his own act and deed all that said attorney and agent shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 2000.
/s/ James H. Greer
--------------------------------
JAMES H. GREER
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint Jeffrey E. Curtiss and James
M. Shelger his true and lawful attorneys and agents (each with authority to act
alone), with power and authority to sign for and on behalf of the undersigned
the name of the undersigned as officer or director, or both, of the Company to
the Company's Annual Report to the Securities and Exchange Commission on Form
10-K for the fiscal year of the Company ending December 31, 1999 and to any
amendments thereto filed with the Securities and Exchange Commission, and to any
instrument or document filed as a part of, as an exhibit to or in connection
with said Report or amendments; and the undersigned does hereby ratify and
confirm as his own act and deed all that said attorney and agent shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 2000.
/s/ B. D. Hunter
--------------------------------
B. D. HUNTER
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint Jeffrey E. Curtiss and James
M. Shelger his true and lawful attorneys and agents (each with authority to act
alone), with power and authority to sign for and on behalf of the undersigned
the name of the undersigned as officer or director, or both, of the Company to
the Company's Annual Report to the Securities and Exchange Commission on Form
10-K for the fiscal year of the Company ending December 31, 1999 and to any
amendments thereto filed with the Securities and Exchange Commission, and to any
instrument or document filed as a part of, as an exhibit to or in connection
with said Report or amendments; and the undersigned does hereby ratify and
confirm as his own act and deed all that said attorney and agent shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 2000.
/s/ Victor L. Lund
--------------------------------
VICTOR L. LUND
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint Jeffrey E. Curtiss and James
M. Shelger his true and lawful attorneys and agents (each with authority to act
alone), with power and authority to sign for and on behalf of the undersigned
the name of the undersigned as officer or director, or both, of the Company to
the Company's Annual Report to the Securities and Exchange Commission on Form
10-K for the fiscal year of the Company ending December 31, 1999 and to any
amendments thereto filed with the Securities and Exchange Commission, and to any
instrument or document filed as a part of, as an exhibit to or in connection
with said Report or amendments; and the undersigned does hereby ratify and
confirm as his own act and deed all that said attorney and agent shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 2000.
/s/ John W. Mecom, Jr.
--------------------------------
JOHN W. MECOM, JR.
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint Jeffrey E. Curtiss and James
M. Shelger his true and lawful attorneys and agents (each with authority to act
alone), with power and authority to sign for and on behalf of the undersigned
the name of the undersigned as officer or director, or both, of the Company to
the Company's Annual Report to the Securities and Exchange Commission on Form
10-K for the fiscal year of the Company ending December 31, 1999 and to any
amendments thereto filed with the Securities and Exchange Commission, and to any
instrument or document filed as a part of, as an exhibit to or in connection
with said Report or amendments; and the undersigned does hereby ratify and
confirm as his own act and deed all that said attorney and agent shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 2000.
/s/ Clifton H. Morris, Jr.
--------------------------------
CLIFTON H. MORRIS, JR.
<PAGE> 12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint Jeffrey E. Curtiss and James
M. Shelger his true and lawful attorneys and agents (each with authority to act
alone), with power and authority to sign for and on behalf of the undersigned
the name of the undersigned as officer or director, or both, of the Company to
the Company's Annual Report to the Securities and Exchange Commission on Form
10-K for the fiscal year of the Company ending December 31, 1999 and to any
amendments thereto filed with the Securities and Exchange Commission, and to any
instrument or document filed as a part of, as an exhibit to or in connection
with said Report or amendments; and the undersigned does hereby ratify and
confirm as his own act and deed all that said attorney and agent shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 2000.
/s/ E. H. Thornton, Jr.
--------------------------------
E. H. THORNTON, JR.
<PAGE> 13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint Jeffrey E. Curtiss and James
M. Shelger his true and lawful attorneys and agents (each with authority to act
alone), with power and authority to sign for and on behalf of the undersigned
the name of the undersigned as officer or director, or both, of the Company to
the Company's Annual Report to the Securities and Exchange Commission on Form
10-K for the fiscal year of the Company ending December 31, 1999 and to any
amendments thereto filed with the Securities and Exchange Commission, and to any
instrument or document filed as a part of, as an exhibit to or in connection
with said Report or amendments; and the undersigned does hereby ratify and
confirm as his own act and deed all that said attorney and agent shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 2000.
/s/ W. Blair Waltrip
--------------------------------
W. BLAIR WALTRIP
<PAGE> 14
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint Jeffrey E. Curtiss and James
M. Shelger his true and lawful attorneys and agents (each with authority to act
alone), with power and authority to sign for and on behalf of the undersigned
the name of the undersigned as officer or director, or both, of the Company to
the Company's Annual Report to the Securities and Exchange Commission on Form
10-K for the fiscal year of the Company ending December 31, 1999 and to any
amendments thereto filed with the Securities and Exchange Commission, and to any
instrument or document filed as a part of, as an exhibit to or in connection
with said Report or amendments; and the undersigned does hereby ratify and
confirm as his own act and deed all that said attorney and agent shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 2000.
/s/ Edward E. Williams
--------------------------------
EDWARD E. WILLIAMS
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF SERVICE CORPORATION INTERNATIONAL AS OF DECEMBER
31, 1999 AND THE RELATED STATEMENT OF INCOME FOR THE TWELVE MONTHS THEN ENDED
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 88,221
<SECURITIES> 1,267,008
<RECEIVABLES> 2,341,910
<ALLOWANCES> 174,365
<INVENTORY> 190,343
<CURRENT-ASSETS> 996,151
<PP&E> 2,468,491
<DEPRECIATION> 586,966
<TOTAL-ASSETS> 14,601,601
<CURRENT-LIABILITIES> 1,057,865
<BONDS> 3,636,067
0
0
<COMMON> 272,064
<OTHER-SE> 3,223,209
<TOTAL-LIABILITY-AND-EQUITY> 14,601,601
<SALES> 3,103,542
<TOTAL-REVENUES> 3,321,813
<CGS> 2,497,058
<TOTAL-COSTS> 2,708,054
<OTHER-EXPENSES> 644,204
<LOSS-PROVISION> 70,003
<INTEREST-EXPENSE> 250,000
<INCOME-PRETAX> (37,690)
<INCOME-TAX> (3,393)
<INCOME-CONTINUING> (34,297)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,885
<CHANGES> 0
<NET-INCOME> (32,412)
<EPS-BASIC> (.12)
<EPS-DILUTED> (.12)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY AGREEMENT (FACILITY A)
THIS COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY AGREEMENT
(FACILITY A) dated as of June 27, 1997, among:
(a) SERVICE CORPORATION INTERNATIONAL, a Texas corporation (the
"Company");
(b) the Borrowing Subsidiaries, as herein defined, that become party
hereto;
(c) the banks and other financial institutions named under the caption
"Banks" on the signature pages hereof (such banks together with each other
Person who becomes a Bank pursuant to Section 9.11, collectively, the "Banks");
(d) THE CHASE MANHATTAN BANK, a New York banking corporation, as
administrative agent for the Banks (in such capacity together with any other
Person who becomes the Administrative Agent pursuant to Section 7.06, the
"Administrative Agent"); and
(e) BANK OF AMERICA ILLINOIS, CITIBANK, N.A., NATIONSBANK, N.A., ROYAL
BANK OF CANADA, SOCIETE GENERALE, and UNION BANK OF SWITZERLAND (collectively
the "Co-Agents").
P R E L I M I N A R Y S T A T E M E N T
The Company has requested that the Banks extend a credit facility to
the Company and the Borrowing Subsidiaries in order to enable the Company and
the Borrowing Subsidiaries to borrow on a revolving credit basis on and after
the date hereof, on the terms and conditions set forth herein, a principal
amount not in excess of $300,000,000 at any time outstanding. The Company has
also requested that the Banks provide a procedure pursuant to which each Bank
may, on an uncommitted basis, bid up to the full amount of the Total Commitment
(as herein defined), regardless of such Bank's individual Commitment, on
borrowings by the Company and the Borrowing Subsidiaries thereunder. The
proceeds of all such borrowings are to be used for general corporate purposes of
the Borrowers including credit support for the Company's commercial paper
program. The Banks are willing to extend such credit to the Company and the
Borrowing Subsidiaries on the terms and subject to the conditions herein set
forth. Accordingly, the Company, the Borrowing Subsidiaries, the Banks and the
Administrative Agent agree as follows:
FACILITY A
<PAGE> 2
ARTICLE I
DEFINITIONS, ACCOUNTING TERMS AND CONSTRUCTION
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"ABR Borrowing" means a Borrowing comprised of ABR Loans.
"ABR Loan" means any Committed Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Acquisition" means the acquisition by the Company or any of its
Subsidiaries of a business, including any assets, leases and liabilities
(contingent or otherwise) related thereto, either by the cash purchase of stock
or assets or by an exchange or issuance of securities (including merger) or
assumption of liabilities or by a combination thereof.
"Administrative Agent" has the meaning specified in the introduction
to this Agreement.
"Administrative Questionnaire" means an Administrative Questionnaire
in the form of Exhibit 1.01A, which each Bank shall complete and provide to the
Administrative Agent and the Company.
"Affiliate" means, when used with respect to any Person, any other
Person which controls or is controlled by or is under common control with such
Person. As used in this definition, "control" means the possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or ownership interests,
by contract or otherwise).
"Agent's Fee Letter" means the fee letter agreement dated April 29,
1997 between the Company and the Administrative Agent.
"Agreement" means this Competitive Advance and Revolving Credit
Facility Agreement (Facility A).
"Alternate Base Rate" means, for any date, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. "Prime Rate" means, as of a particular date,
the prime rate most recently determined by the Administrative Agent at the
Principal Office, automatically fluctuating upward and downward with and at the
time specified in
FACILITY A
-2-
<PAGE> 3
each such announcement without notice to any Borrower or any other Person, which
prime rate may not necessarily represent the lowest or best rate actually
charged to a customer. "Federal Funds Effective Rate" means, for any day, the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Administrative
Agent from three federal funds brokers of recognized standing selected by it. If
for any reason the Administrative Agent shall have determined (which
determination, made in good faith, shall create a rebuttable presumption that
the same is accurate) that it is unable to ascertain the Federal Funds Effective
Rate for any reason, including the inability or failure of the Administrative
Agent to obtain sufficient quotations in accordance with the terms hereof, the
Alternate Base Rate shall be determined without regard to clause (b) of the
first sentence of this definition until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively.
"Applicable Creditor" has the meaning specified in Section 9.17.
"Applicable Lending Office" means, with respect to each Bank, such
Bank's Domestic Lending Office in the case of an ABR Loan or a Fixed Rate Loan
and such Bank's Eurodollar Lending Office in the case of a Eurodollar Loan.
"Assignment and Acceptance" has the meaning specified in Section
9.11(c).
"Assurance" means, as to any Person, any guaranty or other contingent
liability of such Person (other than any endorsement for collection or deposit
in the ordinary course of business) including, without limitation, contingent
liabilities as an account party in respect of letters of credit, direct or
indirect, with respect to any obligation of another Person, through an agreement
or otherwise, including (a) any endorsement or discount with recourse or other
undertaking substantially equivalent to or having economic effect similar to a
guarantee in respect of any such obligation and (b) any agreement (i) to
purchase, or to advance or supply funds for the payment or purchase of, any such
obligation, (ii) to purchase, sell or lease property, products, materials or
supplies, or transportation or services, in order to enable such other Person to
pay any such obligation or to assure the owner thereof against loss regardless
of the delivery or non-delivery of the property, products, materials or supplies
or transportation or services or (iii) to make any loan, advance or capital
contribution to or other investment in, or to otherwise provide funds to or for,
such other Person in order to enable such Person to satisfy any obligation
(including any liability for a dividend, stock liquidation payment or expense)
or to assure a minimum equity, working capital or other balance sheet condition
for the benefit of the holder of any such obligation. Notwithstanding the
foregoing, the term "Assurance" shall not include any guaranty or other
FACILITY A
-3-
<PAGE> 4
contingent liability, direct or indirect, with respect to (u) bonds, indemnity
agreements and similar arrangements which are provided to assure that the
Company and its Subsidiaries fully perform their obligations regarding
prearranged funeral services and goods and/or construction of burial facilities,
(v) obligations of a Person acquired, or of a business which has been acquired,
in an Acquisition, provided that such obligations arose prior to such
Acquisition and were not created, incurred or assumed in contemplation thereof,
(w) obligations of a Subsidiary arising from an Acquisition, (x) any duly
authorized registered guaranty of the Company of a promissory note of its
Subsidiary issued or to be issued with respect to an Acquisition in accordance
with an Indenture dated as of May 1, 1970, executed and delivered between the
Company and TCB, as Trustee, (y) Letters of Credit, or (z) obligations of the
Company under the Enhancement Agreements. In no event shall any unfunded
commitment extended by Provident in the ordinary course of its business of
extending financing to the death care industry be considered an Assurance and
the loans and advances made by Provident pursuant to any such commitment shall
constitute investments and not Assurances. The amount of any Assurance shall be
equal to the outstanding amount of the obligation directly or indirectly
guaranteed (to the full extent of the obligation in respect of which such
Assurance is given or the maximum liability in respect of such Assurance of the
Person giving the same, whichever shall be less).
"Assured Obligation" means, as to any Person, any amount guaranteed or
otherwise supported by such Person pursuant to an Assurance.
"Bank of America" means Bank of America National Trust and Savings
Association.
"Banks" has the meaning specified in the introduction to this
Agreement.
"Board" means the Board of Governors of the Federal Reserve System of
the United States.
"Borrowers" means the Company and the Borrowing Subsidiaries.
"Borrowing" means a Loan or group of Loans of a single Type made by
the Banks (or, in the case of a Competitive Borrowing, by the Bank or Banks
whose Competitive Bids have been accepted pursuant to Section 2.03) on a single
date and as to which a single Interest Period is in effect.
"Borrowing Date" means, with respect to each Borrowing made pursuant
to Section 2.03 or Section 2.04, the Business Day upon which the proceeds of
such Borrowing are to be made available to a Borrower.
FACILITY A
-4-
<PAGE> 5
"Borrowing Subsidiary" means any Wholly-owned Subsidiary of the
Company (other than an Inactive Subsidiary) designated as a Borrowing Subsidiary
by the Company pursuant to Section 2.22.
"Borrowing Subsidiary Counterpart" has the meaning specified in
Section 2.22.
"Business Day" means any day other than a Saturday, Sunday or legal
holiday in the State of New York or Texas or other day on which banks in New
York City or in Houston, Texas are required or authorized by law to close;
provided, however, that, when used in connection with a Eurodollar Loan, the
term "Business Day" shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Capital Lease" means, as to any Person, any lease in respect of which
the obligations of such Person constitute Capitalized Lease Obligations.
"Capitalized Lease Obligations" means, as to any Person, all lease
obligations which shall have been or should be, in accordance with GAAP,
capitalized on the books of such Person.
"Chase" means The Chase Manhattan Bank, a New York banking corporation
and the successor to Chemical Bank, a New York banking corporation.
"Co-Agents" has the meaning specified in the introduction to this
Agreement.
"Code" means the Internal Revenue Code of 1986 and the regulations
promulgated thereunder.
"Commitment" means, with respect to each Bank, the amount set forth
beneath the name of such Bank on the signature pages hereof (or, as to any
Person that becomes a Bank after the Execution Date, on the signature page of
the Assignment and Acceptance executed by such Person), as such amount may be
permanently terminated or reduced from time to time pursuant to Section 2.12,
Section 2.14, Section 2.15 or Section 9.11, and as such amount may be increased
from time to time by assignment or assumption pursuant to Section 2.14, Section
2.15 or Section 9.11. The Commitment of each Bank shall automatically and
permanently terminate on the Maturity Date.
"Committed Borrowing" means a borrowing consisting of concurrent
Committed Loans from each of the Banks pursuant to Section 2.04 distributed
ratably among the Banks in accordance with their respective Commitments or
resulting from a conversion or continuation of an existing Committed Borrowing
pursuant to Section 2.06.
"Committed Borrowing Request" has the meaning specified in Section
2.04.
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"Committed Loans" means the revolving loans made by the Banks to the
Company pursuant to Section 2.04. Each Committed Loan shall be a Eurodollar
Committed Loan or an ABR Loan.
"Communications" has the meaning specified in Section 9.02.
"Company" has the meaning specified in the introduction to this
Agreement.
"Company Financials" has the meaning specified in Section 4.07.
"Competitive Bid" means an offer by a Bank to make a Competitive Loan
pursuant to Section 2.03.
"Competitive Bid Rate" means, as to any Competitive Bid made by a Bank
pursuant to Section 2.03(b), (i) in the case of a Eurodollar Competitive Loan,
the Margin (which will be added to or subtracted from the IBO Rate), and (ii) in
the case of a Fixed Rate Loan, the fixed rate of interest, in each case, offered
by the Bank making such Competitive Bid.
"Competitive Bid Request" means a request for Competitive Bids made
pursuant to Section 2.03 in the form of Exhibit 2.03A.
"Competitive Borrowing" means a borrowing consisting of a Competitive
Loan or concurrent Competitive Loans from each Bank whose Competitive Bid as all
or as a part of such borrowing, as the case may be, has been accepted by a
Borrower under the bidding procedure described in Section 2.03.
"Competitive Loan" means a Loan from a Bank to a Borrower pursuant to
the bidding procedure described in Section 2.03, and shall be either a
Eurodollar Competitive Loan or a Fixed Rate Loan.
"Consolidated Assets" means, as to any Person, total consolidated
assets (including assets subject to Capital Leases) of such Person and of its
Consolidated Subsidiaries, as determined in accordance with GAAP.
"Consolidated Debt" means the Debt of the Company and its Consolidated
Subsidiaries.
"Consolidated Net Income" means consolidated net income (after taxes)
of the Company and its Consolidated Subsidiaries determined in accordance with
GAAP.
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"Consolidated Subsidiary" means, with respect to any Person, each
Subsidiary of such Person the accounts of which are or should be consolidated
with the accounts of such Person in reporting the consolidated financial
statements of such Person in accordance with GAAP.
"Debt" means, when used with respect to any Person, without
duplication, (a) all indebtedness of such Person for borrowed money (whether by
loan or the issuance and sale of debt securities) or for the deferred purchase
price of property or services (excluding, however, Letter of Credit Obligations
of such Person), (b) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property), (c) all Capitalized Lease Obligations of such Person, (d) all
obligations of such Person in respect of interest rate protection agreements,
foreign currency exchange agreements or other similar agreements and
arrangements (the amount of any such obligation to be the amount that would be
payable upon the acceleration, termination or liquidation thereof), (e)
liabilities in respect of unfunded vested benefits under Plans, and (f) all Debt
of such Person referred to in clause (a), (b) (c) or (d) above secured by (or
for which the holder of such Debt has an existing right, contingent or otherwise
to be secured by) any Lien upon or interest in property (including accounts and
general intangibles, as such terms are defined in the Uniform Commercial Code in
effect in the State of New York) owned by such Person, even though such Person
has not assumed or become liable for the payment of such Debt. For purposes of
this Agreement, the term "Debt" shall exclude (i) Operating Lease Obligations
and (ii) obligations in respect of agreements and arrangements described in
clause (d) above to the extent (and only to the extent) such agreements and
arrangements are entered into to protect such Person and its Subsidiaries
against interest rate and exchange rate risks related to their respective
businesses, and not for speculative purposes.
"Default" means the occurrence of any event which with the giving of
notice or the passage of time or both could become an Event of Default.
"Document" has the meaning specified in Section 8.02.
"Dollars","dollars" and the symbol "$", without more, mean the lawful
currency of the United States of America.
"Domestic Lending Office" means, with respect to any Bank, the office
of such Bank specified as its "Domestic Lending Office" on such Bank's signature
page to this Agreement or, as to any Person who becomes a Bank after the
Execution Date, on the signature page of the Assignment and Acceptance executed
by such Person or such other office of such Bank as such Bank may hereafter
designate from time to time as its "Domestic Lending Office" by notice to the
Company and the Administrative Agent.
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"Effective Date" means the date on which the conditions to borrowing
set forth in Article III are first met.
"Eligible Assignee" means (a) any Bank or any Affiliate of a Bank; (b)
a commercial bank organized or licensed under the laws of the United States, or
any state thereof, and having total assets in excess of $1,000,000,000; (c) a
commercial bank organized under the laws of any other country which is a member
of the OECD, or a political subdivision of any such country, and having total
assets in excess of $1,000,000,000; provided that such bank is acting through a
branch or agency located in the country in which it is organized or another
country which is also a member of the OECD; (d) the central bank of any country
which is a member of the OECD; and (e) any other lender approved by the
Administrative Agent and the Company (which approval shall not be unreasonably
withheld).
"Enforcement Subsidiary" means, as to Provident, any Wholly-owned
Subsidiary formed by Provident for the purpose of foreclosing or otherwise
realizing upon the assets securing obligations due to Provident pursuant to
investments made by Provident.
"Enhancement Agreements" means the Support Agreements, the Inducement
Agreement and all other similar agreements.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder.
"ERISA Group" means all corporations, trades or businesses (whether or
not incorporated) and other Persons which, together with the Company, are
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D.
"Eurodollar Borrowing" means a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Committed Borrowing" means any Committed Borrowing
comprised of Eurodollar Loans.
"Eurodollar Committed Loan" means any Committed Loan bearing interest
at a rate determined by reference to the IBO Rate in accordance with the
provisions of Article II.
"Eurodollar Competitive Loan" means any Competitive Loan bearing
interest at a rate determined by reference to the IBO Rate in accordance with
the provisions of Article II.
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"Eurodollar Lending Office" means, with respect to each Bank, the
branch or Affiliate of such Bank which such Bank has designated as its
"Eurodollar Lending Office" on such Bank's signature page to this Agreement or,
as to any Person who becomes a Bank after the Execution Date, on the signature
page of the Assignment and Acceptance executed by such Person or such other
office of such Bank as such Bank may hereafter designate from time to time as
its "Eurodollar Lending Office" by notice to the Company and the Administrative
Agent.
"Eurodollar Loan" means any Eurodollar Competitive Loan or any
Eurodollar Committed Loan.
"Event of Default" means any of the events described in Article VI.
"Execution Date" means the earliest date upon which all of the
following shall have occurred: counterparts of this Agreement shall have been
executed by the Company, each Bank and the Administrative Agent, and the
Administrative Agent shall have received counterparts hereof which taken
together, bear the signatures of the Company and each Bank.
"Existing Agreements" means (a) the Competitive Advance and Revolving
Credit Facility Agreement (Facility A) dated as of June 30, 1995 among the
Company, the banks and other financial institutions party thereto, Bank of
America and NationsBank, as co-agents, Chase, as auction administration agent,
and TCB, as administrative agent, as amended from time to time to the date
hereof, and (b) the Existing Facility B Credit Agreement.
"Existing Facility B Credit Agreement" means the Competitive Advance
and Revolving Credit Facility Agreement (Facility B) dated as of June 30, 1995
among the Company, the other Borrowers (as defined therein), the banks and other
financial institutions party thereto, Bank of America and NationsBank, as
co-agents, Chase, as auction administration agent, and TCB, as administrative
agent, together with (a) the Sterling Addendum dated as of July 13, 1995 among
the Company, Family Funeral Directors Limited, the local lenders party thereto
and Chemical Investment Bank Limited, as local currency agent for such local
lenders, (b) the Australian Addendum dated as of July 13, 1995 among the
Company, Service Corporation International Australia Pty Limited, the local
lenders party thereto and Westpac Banking Corporation, as local currency agent
for such local lenders and (c) the Canadian Addendum dated as of August 30, 1995
among the Company, 611102 Saskatchewan Ltd., the local lenders party thereto and
Royal Bank of Canada, as local currency agent for such local lenders.
"Existing Termination Date" has the meaning specified in Section 2.21.
"Extended Termination Date" means, as at any date, the date to which
the Termination Date has then most recently been extended pursuant to Section
2.21.
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"Facility B Credit Agreement" means the Competitive Advance and
Revolving Credit Facility Agreement (Facility B) dated as of the date hereof
among the Company, the Initial Borrowing Subsidiaries (as defined therein),
other Borrowing Subsidiaries that may become parties thereto, the banks and
other financial institutions party thereto, Chase, as administrative agent, and
the Co-Agents (as defined therein).
"Facility Fees" has the meaning specified in Section 2.07(a).
"FDIC" means the Federal Deposit Insurance Corporation (or any
successor thereto).
"Federal Funds Effective Rate" has the meaning specified in the
definition of the term Alternate Base Rate.
"Financial Provisions" has the meaning specified in Section 1.02(e).
"Fixed Rate Borrowing" means a Borrowing comprised of Fixed Rate
Loans.
"Fixed Rate Loan" means any Competitive Loan bearing interest at a
fixed percentage rate per annum specified by the Bank making such Loan in its
Competitive Bid.
"FST" means SCI Texas Funeral Services, Inc., a Texas corporation.
"Funded Debt" means any Debt of any Person (including any Capitalized
Lease Obligation of such Person, but not including any deferred taxes) payable
more than one year from the date of the creation thereof; provided, however, the
term Funded Debt shall include the principal amount of all Loans outstanding
under this Agreement and the principal amount of all loans outstanding under the
Facility B Credit Agreement. The interests of minority shareholders in such
Person's Consolidated Subsidiaries which are shown on the liability side of a
balance sheet as "minority interests" but which are not "obligations" are not
within the definition of "Funded Debt."
"GAAP" means generally accepted accounting principles as set forth in
the opinions, statements and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants, the Financial
Accounting Standards Board and such other Persons as shall be approved by a
significant segment of the accounting profession and concurred in by the
independent certified public accountants certifying any audited financial
statements of the Company, as such principles shall be in effect at the time of
any computation or determination or as of the date of the relevant financial
statements, as the case may be (the "Relevant Date"), subject to Section 1.02.
"Guaranteed Obligations" has the meaning specified in Section 8.01.
FACILITY A
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"Guaranty" means the guaranty of the Company contained in Article
VIII.
"Highest Lawful Rate" means, as to any Bank, at the particular time in
question, the maximum nonusurious rate of interest which, under applicable law,
such Bank is then permitted to charge the Borrowers on the Loans. If the maximum
rate of interest which, under applicable law, the Banks are permitted to charge
the Borrowers on the Loans shall change after the date hereof, to the extent
permitted by applicable law, the Highest Lawful Rate shall be automatically
increased or decreased, as the case may be, as of the effective time of such
change without notice to any Borrower or any other Person.
"IBO Rate" means, with respect to each date during each Interest
Period pertaining to a Eurodollar Borrowing (other than an Interest Period of 14
days), the rate appearing on page 3750 of the Dow Jones Markets (or on any
successor or substitute page, or any page of any successor to or substitute for
Dow Jones Markets, providing rate quotations comparable to those currently
provided on such page, as determined by the Administrative Agent from time to
time for purposes of providing quotations of interest rates applicable to
deposits in Dollars in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for deposits in Dollars approximately equal in principal
amount to such Eurodollar Borrowing and with a maturity equal to such Interest
Period. In the event that such rate is not available at such time for any
reason, and in the case of an Interest Period of 14 days, then the "IBO Rate"
with respect to such Eurodollar Borrowing for such Interest Period shall be the
rate (rounded to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%,
the next higher 1/16 of 1%) at which deposits in Dollars approximately equal in
principal amount to such Eurodollar Borrowing and with a maturity equal to such
Interest Period are offered in immediately available funds to the Administrative
Agent by leading banks in the London interbank market at approximately 11:00
a.m., London time (or as soon thereafter as possible), two Business Days prior
to the commencement of such Interest Period.
"Inactive Subsidiaries" means Subsidiaries of the Company which are
not actively engaged in the conduct of business and whose assets and/or
Liabilities are not material to the financial condition of the Company and its
Subsidiaries taken as a whole.
"Index Debt" means the Company's senior, unsecured, non-credit
enhanced Funded Debt.
"Inducement Agreement" means, collectively, the letter agreement dated
August 23, 1993 among the Company, PSI Funding, Inc. and FST and the letter
agreement dated April 5, 1993 among the Company, TCB and Provident.
FACILITY A
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"Intangibles" has the meaning normally ascribed thereto in accordance
with GAAP and shall include (a) excess cost over fair market value of tangible
assets acquired, (b) patents and patent rights, (c) trademarks, service marks
and trade names, (d) copyrights and (e) goodwill.
"Interest Payment Date" means (a) with respect to any Eurodollar Loan
or ABR Loan, the last day of the Interest Period applicable thereto and, in
addition, the date on which such Loan is repaid or prepaid and, in the case of a
Eurodollar Loan with an Interest Period of 6 months, the day that would have
been the Interest Payment Date for such Loan had an Interest Period of 3 months
been applicable to such Loan and (b) in the case of a Fixed Rate Loan, the last
day of the Interest Period applicable thereto.
"Interest Period" means:
(a) with respect to any Committed Borrowing:
(i) If such Committed Borrowing is a Eurodollar Committed
Borrowing, (A) the period commencing on the Borrowing Date of such
Borrowing or on the last day of the immediately preceding Interest
Period applicable to such Borrowing, as the case may be, and ending
(A) 14 days thereafter (subject to market availability) or (B) on the
numerically corresponding day (or if there is no corresponding day,
the last day) in the calendar month that is one, two, three or six
months thereafter, as a Borrower may elect; and
(ii) If such Committed Borrowing is an ABR Borrowing, the period
commencing on the Borrowing Date of such Borrowing and ending on the
earliest of (A) the next succeeding March 31, June 30, September 30 or
December 31, and (B) the Maturity Date.
(b) with respect to any Competitive Borrowing:
(i) If such Competitive Borrowing is a Fixed Rate Borrowing, the
period commencing on the Borrowing Date of such Borrowing and ending
on the date specified in the Competitive Bid in which the offer to
make such Fixed Rate Borrowing was extended; provided, however, that
each such period shall have a duration of not less than seven calendar
days nor more than 180 days; and
(ii) If such Competitive Borrowing is a Eurodollar Borrowing, the
period commencing on the Borrowing Date of such Borrowing and ending
on the numerically corresponding date (or if there is no corresponding
date, the last day ) in the calendar month that is one, two, three or
six months thereafter, as a Borrower may elect.
FACILITY A
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Notwithstanding the foregoing, (i) if any Interest Period would end on a day
which shall not be a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless, with respect to Eurodollar Loans only, such
next succeeding Business Day would fall in the next calendar month, in which
case such Interest Period shall end on the next preceding Business Day, (ii) no
Interest Period may be selected for any Competitive Borrowing that ends later
than the Existing Termination Date and (iii) no Interest Period may be selected
for any Committed Borrowing that ends later than the Maturity Date. Interest
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.
"Judgment Currency" has the meaning specified in Section 9.17.
"Letter of Credit Obligations" means, when used with respect to any
Person, the contingent obligations of such Person in respect of Letters of
Credit.
"Letters of Credit" means, as to any Person, letters of credit issued
for the account of such Person other than letters of credit issued to pay the
purchase price of goods or services acquired in the ordinary course of business
by such Person or any other Person.
"Liabilities" of any Person has the meaning normally ascribed thereto
in accordance with GAAP and shall include (a) Capitalized Lease Obligations of
such Person or any of its Subsidiaries, (b) the interests of minority
shareholders in Consolidated Subsidiaries of such Person, (c) indebtedness
secured by Liens against any property of such Person or any of its Subsidiaries
whether or not such Person or such Subsidiary is liable for the payment thereof,
(d) subordinated debt and (e) deferred liabilities.
"Lien" means, when used with respect to any Person, any mortgage,
lien, charge, pledge, security interest or encumbrance of any kind (whether
voluntary or involuntary and whether imposed or created by operation of law or
otherwise) upon, or pledge of, any of its property or assets, whether now owned
or hereafter acquired, or any lease intended as security, any conditional sale
agreement, or any other title retention agreement.
"Loan" means a Competitive Loan, a Committed Loan, a Eurodollar Loan,
a Fixed Rate Loan or an ABR Loan.
"Majority Banks" means, at any time, Banks holding at least 66 2/3% of
the Total Commitment or (if either the Total Commitment has been terminated or
"Majority Banks" is being determined for purposes of Article VI) Banks holding
at least 66 2/3% of the then aggregate unpaid principal amount of the
outstanding Loans.
"Margin" means, as to any Eurodollar Competitive Loan, the margin
(expressed as a percentage rate per annum in the form of a decimal to no more
than four decimal places) to be
FACILITY A
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added to or subtracted from the IBO Rate in order to determine the interest rate
applicable to such Loan, as specified in the Competitive Bid relating to such
Loan.
"Margin Stock" has the meaning specified in Section 4.13.
"Material Subsidiary" means, with respect to any Person, each
Subsidiary of such Person that would be a "significant subsidiary" as such term
is defined in Regulation S-X promulgated pursuant to the Securities Exchange Act
of 1934 as amended to the Effective Date; provided, however, for purposes of
determining whether any Subsidiary is a "Material Subsidiary," the reference to
"10 percent" in clauses (1), (2) and (3) of the definition of "significant
subsidiary" contained in said Regulation S-X shall be a reference to 5 percent;
and further provided, however, notwithstanding the foregoing, when used with
respect to the Company, each Borrowing Subsidiary shall be a Material Subsidiary
of the Company.
"Maturity Date" means the Existing Termination Date or, as to any
Committed Borrowing which shall be outstanding on such date, the second
anniversary of the Existing Termination Date.
"Maximum Permissible Rate" has the meaning specified in Section 9.08.
"Moody's" means Moody's Investors Service.
"NationsBank" means NationsBank, N.A., a national banking association.
"Net Worth" means, in relation to the Company and its Subsidiaries,
Consolidated Assets of the Company less total consolidated liabilities of the
Company and its Consolidated Subsidiaries, as determined in accordance with
GAAP.
"Notice of Extension" has the meaning specified in Section 2.21.
"Notice of Revocation" has the meaning specified in Section 2.21.
"OECD" means the Organization for Economic Cooperation and Development
(or any successor).
"Officer's Certificate" means, as to any Borrower, a certificate
signed in the name of such Borrower by its President, one of its Vice
Presidents, its Treasurer, its Secretary or one of its Assistant Treasurers or
Assistant Secretaries.
"Operating Lease Obligations" means obligations of a Person in respect
of any lease or agreement to lease other than Capitalized Lease Obligations of
such Person.
FACILITY A
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"Original Termination Date" means June 26, 1998.
"Other Activities" has the meaning specified in Section 7.03.
"Other Financings" has the meaning specified in Section 7.03.
"Other Taxes" has the meaning specified in Section 2.20.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a foreign state or
political subdivision thereof or any agency of such state or subdivision.
"Plan" means any employee pension benefit plan maintained or
contributed to by the Company or any of its Subsidiaries or by any trade or
business (whether or not incorporated) under common control (as defined in
Section 4001(a)(14) or 4001(b) of ERISA) with the Company and insured by the
PBGC under Title IV of ERISA.
"Prime Rate" has the meaning specified in the definition of the term
Alternate Base Rate.
"Principal Office" means the office of the Administrative Agent
located at 270 Park Avenue, New York, New York 10017, or such other office as
the Administrative Agent may hereafter designate in writing as such to the other
parties hereto.
"Provident" means Provident Services, Inc., a Delaware corporation.
"Register" has the meaning specified in Section 9.11(e).
"Regulation A" means Regulation A of the Board (respecting loans to
depository institutions), as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
"Regulation G" means Regulation G of the Board (respecting margin
credit extended by Persons other than banks or registered broker dealers), as
the same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
FACILITY A
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"Regulation D" means Regulation D of the Board (respecting reserve
requirements), as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof.
"Regulation U" means Regulation U of the Board (respecting margin
credit extended by banks), as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
"Regulation X" means Regulation X of the Board (respecting borrowers
who obtain margin credit), as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
"Relevant Date" has the meaning specified in the definition of the
term GAAP.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"Subsidiary" means, with respect to any Person, any corporation in
which more than 50% of the stock of each class having ordinary voting power
shall, at the time as of which any determination is being made, be owned of
record and beneficially by such Person directly and/or through one or more other
Subsidiaries.
"Substantially-owned Subsidiary" means a Subsidiary of the Company at
least 80% of the outstanding capital stock of which, at the time any
determination is being made, is owned of record and beneficially by the Company
directly and/or through one or more other Subsidiaries.
"Support Agreements" means (a) the Support Agreement dated as of
September 14, 1988 between the Company and Provident, (b) the Australian Support
Agreement dated as of November 1, 1993 between the Company and Service
Corporation International Australia Pty Limited and (c) the three Support
Agreements dated respectively as of January 28, 1994, September 30, 1994 and
November 14, 1994, each between the Company and FST.
"Tangible Consolidated Assets" means, as to any Person, Consolidated
Assets less all Intangibles of such Person and its Consolidated Subsidiaries.
"Taxes" has the meaning specified in Section 2.20.
"TCB" means Texas Commerce Bank National Association, a national
banking association.
"Termination Date" means, except as expressly provided in Section
2.21(d) and Section 2.21(e), at any time, the Original Termination Date or an
Extended Termination Date, as the
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case may be or, in either case, the earlier date of termination in whole of the
Total Commitment pursuant to Section 2.12 or Section 6.01.
"Total Capitalization" means, as of the date any determination is
made, the sum of Net Worth plus Consolidated Debt.
"Total Commitment" means, at any time, the aggregate amount of the
Banks' Commitments, as in effect at such time.
"Type" means, when used in respect of any Loan or Borrowing, each of
the following types of Loans or Borrowings as applicable: Eurodollar Loan or
Eurodollar Borrowing, ABR Loan or ABR Borrowing and Fixed Rate Loan or Fixed
Rate Borrowing.
"United States" and "U.S." each means United States of America.
"Wholly-owned Subsidiary" means, as to any Person, a Subsidiary, 100%
of the stock of every class of which (except for directors' qualifying shares)
at the time as of which any determination is being made, is owned of record and
beneficially by such Person directly and/or through one or more other
Subsidiaries.
SECTION 1.02. Accounting Terms and Determinations.
(a) Except as otherwise provided in this Agreement, all computations
and determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP.
(b) If any change in GAAP after the date of this Agreement shall be
required to be applied to transactions then or thereafter in existence, and a
violation of or default under one or more provisions of this Agreement shall
have occurred or in the opinion of the Company would likely occur which would
not have occurred or be likely to occur if no change in accounting principles
had taken place:
(i) the parties agree that such violation or default shall not
constitute an Event of Default or a Default for a period of 60 days from
the date the Company notifies the Administrative Agent of the application
of this Section 1.02(b) identifying such change and the provisions of this
Agreement affected thereby;
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(ii) the parties agree in such event to negotiate in good faith an
amendment of this Agreement which shall approximate to the extent possible
the economic effect of the original financial covenants after taking into
account such change in GAAP; and
(iii) if the parties are unable to agree on such an amendment within
such 60-day period, the Company shall have the option of (A) prepaying the
Loans (pursuant to Section 2.13 and the other applicable provisions hereof)
within 120 days from the date the Company notifies the Administrative Agent
of the application of this Section 1.02(b) or (B) making all future
calculations by application of GAAP applied on a basis consistent with
those in effect immediately prior to such change in GAAP. If the Company
does not exercise either such option within said period by written notice
to the Administrative Agent, then as used in this Agreement, "GAAP" shall
mean generally accepted accounting principles in effect at the Relevant
Date.
(c) If any change in GAAP after the date of this Agreement shall be
required to be applied to transactions or conditions then or thereafter in
existence, and the Administrative Agent shall assert that the effect of such
change is or shall likely be to distort materially the effect of any of the
definitions of financial terms in Article I or any of the financial covenants of
the Company in Article V (the "Financial Provisions"), so that the intended
economic effect of any of the Financial Provisions will not in fact be
accomplished:
(i) the Administrative Agent shall notify the Company of such
assertion, specifying the change in GAAP which is objected to, and until
otherwise determined as provided below, the specified change in GAAP shall
not be made by the Company in its financial statements for the purpose of
applying the Financial Provisions; and
(ii) the parties shall follow the procedures set forth in paragraph
(ii) and the first sentence of paragraph (iii) of subsection (b) of this
Section 1.02. If the parties are unable to agree on an amendment as
provided in said paragraph (ii) and if the Company does not exercise the
option set forth in the first sentence of said paragraph (iii) within the
specified period, then as used in this Agreement "GAAP" shall mean
generally accepted accounting principles in effect at the Relevant Date,
except that the specified change in GAAP which is objected to by the
Administrative Agent shall not be made in applying the Financial
Provisions.
SECTION 1.03. Interpretation. (a) In this Agreement, unless a clear
contrary intention appears:
(i) the singular number includes the plural number and vice versa;
(ii) reference to any gender includes each other gender;
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(iii) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision;
(iv) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or individually,
provided that nothing in this clause (iv) is intended to authorize any
assignment not otherwise permitted by this Agreement;
(v) reference to any agreement, document or instrument, including
this Agreement, means such agreement, document or instrument as amended,
supplemented or modified and in effect from time to time in accordance with
the terms thereof and, if applicable, the terms hereof;
(vi) unless the context indicates otherwise, reference to any
Article, Section, Schedule or Exhibit means such Article or Section hereof
or such Schedule or Exhibit hereto;
(vii) the word "including" (and with correlative meaning "include")
means including, without limiting the generality of any description
preceding such term;
(viii) with respect to the determination of any period of time, the
word "from" means "from and including" and the word "to" means "to but
excluding"; and
(ix) reference to any law means such as amended, modified, codified
or reenacted, in whole or in part, and in effect from time to time.
(b) The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
(c) No provision of this Agreement shall be interpreted or construed
against any Person solely because that Person or its legal representative
drafted such provision.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments. (a) Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Bank
agrees, severally and not jointly, to make Committed Loans to the Borrowers, at
any time and from time to time on and after the Effective Date and until the
Termination Date in an aggregate principal amount at any time
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outstanding not to exceed such Bank's Commitment minus the amount by which the
Competitive Loans outstanding at such time shall be deemed to have used such
Commitment pursuant to Section 2.17, subject, however, to the conditions that
(i) at no time shall (A) the sum of (x) the outstanding aggregate principal
amount of all Committed Loans plus (y) the outstanding aggregate principal
amount of all Competitive Loans exceed (B) the Total Commitment and (ii) at all
times the outstanding aggregate principal amount of all Committed Loans made by
each Bank shall equal the product of (A) the percentage which its Commitment
represents of the Total Commitment times (B) the outstanding aggregate principal
amount of all Committed Loans made pursuant to Section 2.04. Each Bank's
Commitment, as in effect on the Execution Date, is set forth opposite its name
on the signature page hereto for such Bank. Such Commitments may be terminated
or reduced from time to time pursuant to Section 2.12.
(b) Within the foregoing limits and subject to the terms, conditions
and limitations set forth herein, the Borrowers may borrow, pay or prepay and
reborrow hereunder, on and after the Effective Date and prior to the Termination
Date.
SECTION 2.02. Loans. (a) Each Committed Loan shall be made as part of
a Borrowing consisting of Loans made by the Banks ratably in accordance with
their Commitments; provided, however, that the failure of any Bank to make any
Committed Loan shall not in itself relieve any other Bank of its obligation to
lend hereunder (it being understood, however, that no Bank shall be responsible
for the failure of any other Bank to make any Loan required to be made by such
other Bank). Each Competitive Loan shall be made in accordance with the
procedures set forth in Section 2.03. The Committed Loans or Competitive Loans
comprising any Borrowing shall be (i) in the case of Competitive Loans, in an
aggregate principal amount which is an integral multiple of $1,000,000 and not
less than $5,000,000, subject to the proviso at the end of Section 2.03(d), and
(ii) in the case of Committed Loans, in an aggregate principal amount which is
an integral multiple of $1,000,000 and not less than $5,000,000 (or an aggregate
principal amount equal to the remaining balance of the available Commitments).
(b) Each Competitive Borrowing shall be comprised entirely of
Eurodollar Competitive Loans or Fixed Rate Loans, and each Committed Borrowing
shall be comprised entirely of Eurodollar Committed Loans or ABR Loans, as a
Borrower may request pursuant to Section 2.03 or 2.04, as applicable. Each Bank
may at its option make any Eurodollar Loan by causing its Eurodollar Lending
Office to make such Loan; provided that any exercise of such option shall not
affect the obligation of any Borrower to repay such Loan in accordance with the
terms of this Agreement. Borrowings of more than one Type may be outstanding at
the same time; provided, however, that no Borrower shall be entitled to request
any Borrowing which, if made, would result in an aggregate of more than ten
separate Committed Loans of any Bank to the Borrowers being outstanding
hereunder at any one time. For purposes of the foregoing, Loans having different
Interest Periods, regardless of whether they commence on the same date, shall be
considered separate Loans.
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(c) Subject to Section 2.05, each Bank shall make each Loan to be made
by it hereunder on the proposed date thereof by wire transfer of immediately
available funds to the Administrative Agent in New York City, not later than
12:30 p.m., New York City time, and the Administrative Agent shall by 3:00 p.m.,
New York City time, credit the amounts so received to the general deposit
account of the Company with the Administrative Agent or, if a Borrowing shall
not occur on such date because any condition precedent herein specified shall
not have been met, return the amounts so received to the respective Banks.
Competitive Loans shall be made by the Bank or Banks whose Competitive Bids
therefor are accepted pursuant to Section 2.03 in the amounts so accepted and
Committed Loans shall be made by the Banks pro rata in accordance with Section
2.17. Unless the Administrative Agent shall have received notice from a Bank
prior to the date of any Borrowing that such Bank will not make available to the
Administrative Agent such Bank's portion of such Borrowing, the Administrative
Agent may assume that such Bank has made such portion available to the
Administrative Agent on the date of such Borrowing in accordance with this
Section 2.02(c) and the Administrative Agent may, in reliance upon such
assumption, make available to the requesting Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have made
such portion available to the Administrative Agent, such Bank and the requesting
Borrower severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to such Borrower until the date such
amount is repaid to the Administrative Agent at (i) in the case of such
Borrower, the interest rate applicable at the time to the Loans comprising such
Borrowing and (ii) in the case of such Bank, the Federal Funds Effective Rate.
If such Bank shall repay to the Administrative Agent such corresponding amount,
such amount shall constitute such Bank's Loan as part of such Borrowing for
purposes of this Agreement.
(d) Notwithstanding any other provision of this Agreement, no Borrower
shall be entitled to request any Borrowing pursuant to Section 2.03 or Section
2.04 if the Interest Period requested with respect thereto would end after the
Termination Date (in the case of Competitive Loans) or the Maturity Date (in the
case of Committed Loans).
SECTION 2.03. Competitive Bid Procedure. (a) In order to request
Competitive Bids, a Borrower shall hand deliver or send by facsimile
transmission to the Administrative Agent a duly completed Competitive Bid
Request, to be received by the Administrative Agent (i) in the case of a
Eurodollar Competitive Borrowing, not later than 10:00 a.m., New York City time,
five Business Days before the Borrowing Date specified for a proposed
Competitive Borrowing, and (ii) in the case of a Fixed Rate Borrowing, not later
than 10:00 a.m., New York City time, one Business Day before the Borrowing Date
specified for a proposed Competitive Borrowing. No Committed Loan shall be
requested in or made pursuant to a Competitive Bid Request. A Competitive Bid
Request that does not conform substantially to the format of Exhibit 2.03(A) may
be rejected at the Administrative Agent's sole discretion (to the extent
permitted by law), and the Administrative Agent shall promptly notify the
Borrower requesting such Competitive Bid of such rejection by facsimile
transmission. Each Competitive Bid Request shall in each case refer to this
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Agreement and specify (x) whether the Competitive Borrowing then being requested
is to be a Eurodollar Competitive Borrowing or a Fixed Rate Borrowing, (y) the
Borrowing Date of such Competitive Borrowing (which shall be a Business Day) and
the aggregate principal amount thereof (which shall be in a minimum principal
amount of $5,000,000 and in an integral multiple of $1,000,000), and (z) the
Interest Period with respect thereto. Promptly after its receipt of a
Competitive Bid Request that is not rejected as aforesaid, the Administrative
Agent shall invite by facsimile transmission (in substantially the form set
forth in Exhibit 2.03(B)) the Banks to bid, on the terms and conditions of this
Agreement, to make Competitive Loans pursuant to such Competitive Bid Request.
Notwithstanding the foregoing, the Administrative Agent shall have no obligation
to invite any Bank to make a Competitive Bid pursuant to this Section 2.02(a)
until such Bank has delivered a properly completed Administrative Questionnaire
to the Administrative Agent.
(b) On and after the Effective Date, each Bank may, in its sole
discretion, make one or more Competitive Bids responsive to each Competitive Bid
Request of a Borrower. Each Competitive Bid by a Bank must be received by the
Administrative Agent via facsimile transmission, in the form of Exhibit 2.03(C),
(i) in the case of a Eurodollar Competitive Borrowing, not later than 2:00 p.m.,
New York City time, four Business Days before the Borrowing Date specified for a
proposed Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing,
not later than 10:00 a.m., New York City time, on the Borrowing Date specified
for a proposed Competitive Borrowing. Competitive Bids that do not conform
substantially to the format of Exhibit 2.03(C) may be rejected by the
Administrative Agent after conferring with, and upon the instruction of, the
Borrower requesting such Competitive Bid, and the Administrative Agent shall
notify the applicable Bank of such rejection as soon as practicable. Each
Competitive Bid shall refer to this Agreement and (x) specify the principal
amount (which shall be in a minimum principal amount of $5,000,000 and in an
integral multiple of $1,000,000 and which may equal the entire aggregate
principal amount of the Competitive Borrowing requested by the Borrower
requesting such Competitive Bid, irrespective of such Bank's Commitment) of the
Competitive Loan that the applicable Bank is willing to make to such Borrower,
(y) specify the Competitive Bid Rate or Rates at which such Bank is prepared to
make the Competitive Loan or Loans and (z) confirm the Interest Period with
respect thereto specified by such Borrower in its Competitive Bid Request. If
any Bank shall elect not to make a Competitive Bid, such Bank shall so notify
the Administrative Agent by facsimile transmission (A) in the case of Eurodollar
Competitive Loans, not later than 2:00 p.m., New York City time, four Business
Days before the Borrowing Date specified for a proposed Competitive Borrowing,
and (B) in the case of Fixed Rate Loans, not later than 10:00 a.m., New York
City time, on the Borrowing Date specified for a proposed Competitive Borrowing;
provided, however, that failure by any Bank to give such notice shall not cause
such Bank to be obligated to make any Competitive Loan as part of such
Competitive Borrowing or subject such Bank to any other liability hereunder. A
Competitive Bid submitted by a Bank pursuant to this paragraph (b) shall be
irrevocable.
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(c) The Administrative Agent shall promptly notify the Borrower
requesting such Competitive Bid by facsimile transmission of all the Competitive
Bids made, the Competitive Bid Rate and the maximum principal amount of each
Competitive Loan in respect of which a Competitive Bid was made and the identity
of the Bank that made each such Competitive Bid. The Administrative Agent shall
send a copy of all Competitive Bids to such Borrower for its records as soon as
practicable after completion of the bidding process set forth in this Section
2.03.
(d) A Borrower may in its sole and absolute discretion, subject only
to the provisions of this Section 2.03(d), accept or reject any Competitive Bid
referred to in Section 2.03(c). Such Borrower shall notify the Administrative
Agent by telephone, confirmed by facsimile transmission, whether and to what
extent it has decided to accept or reject any or all of the Competitive Bids
referred to in Section 2.03(c), (i) in the case of a Eurodollar Competitive
Borrowing, not later than 10:00 a.m., New York City time, three Business Days
before the Borrowing Date specified for a proposed Competitive Borrowing and
(ii) in the case of a Fixed Rate Borrowing, not later than noon, New York City
time, on the Borrowing Date specified for a proposed Competitive Borrowing,
provided, however, (A) the failure by a Borrower to accept or reject any
Competitive Bid referred to in Section 2.03(c) shall be deemed to be a rejection
of such Competitive Bid, (B) no Borrower shall accept a Competitive Bid made at
a particular Competitive Bid Rate if such Borrower has decided to reject a
Competitive Bid made at a lower Competitive Bid Rate, (C) the aggregate amount
of the Competitive Bids accepted by a Borrower shall not exceed the principal
amount specified in the related Competitive Bid Request, (D) if a Borrower shall
accept a Competitive Bid or Bids made at a particular Competitive Bid Rate but
the amount of such Competitive Bid or Bids shall cause the total amount of
Competitive Bids to be accepted by such Borrower to exceed the amount specified
in the Competitive Bid Request, then such Borrower shall accept a portion of
such Competitive Bid or Bids in an amount equal to the amount specified in the
Competitive Bid Request less the amount of all other Competitive Bids accepted
with respect to such Competitive Bid Request, which acceptance, in the case of
multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata
in accordance with the amount of each such Competitive Bid at such Competitive
Bid Rate, and (E) except pursuant to clause (D) above, no Competitive Bid shall
be accepted for a Competitive Loan unless such Competitive Loan is in a minimum
principal amount of $5,000,000 and an integral multiple of $1,000,000; provided
further, however, that if a Competitive Loan must be in an amount less than
$5,000,000 because of the provisions of clause (D) above, such Competitive Loan
may be for a minimum of $1,000,000 or any integral multiple thereof, and in
calculating the pro rata allocation of acceptances or portions of multiple
Competitive Bids at a particular Competitive Bid Rate pursuant to clause (D) the
amounts shall be rounded to integral multiples of $1,000,000 in a manner which
shall be in the discretion of such Borrower. A notice given by a Borrower
pursuant to this Section 2.03(d) shall be irrevocable.
(e) The Administrative Agent shall promptly notify each Bank making a
Competitive Bid whether or not its Competitive Bid or corresponding Competitive
Bids have been accepted (and if so, in what amount and at what Competitive Bid
Rate) by facsimile transmission
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sent by the Administrative Agent, and each successful bidder will thereupon
become bound, subject to the other applicable conditions hereof, to make the
Competitive Loan in respect of which its Competitive Bid has been accepted.
After completing the notifications referred to in the immediately preceding
sentence, the Administrative Agent shall notify each Bank of the aggregate
principal amount of all Competitive Bids accepted.
(f) The Administrative Agent shall notify each Bank of (i) the IBO
Rate applicable to any Eurodollar Competitive Loan to be made by such Bank
pursuant to a Competitive Bid that has been accepted by a Borrower pursuant to
Section 2.03(d), and (ii) the sum of the applicable IBO Rate plus the Margin bid
by such Bank.
(g) A Competitive Bid Request shall not be made within five Business
Days of the date after the date of any previous Competitive Bid Request, unless
the Company and the Administrative Agent shall mutually agree otherwise and
notice of such agreement shall have been given to the Banks.
(h) If the Administrative Agent or any Affiliate of the Administrative
Agent shall at any time be a Bank with a Commitment hereunder and shall elect to
submit a Competitive Bid in its capacity as a Bank, it shall submit such
Competitive Bid directly to the Borrower requesting such Competitive Bid one
quarter of an hour earlier than the latest time at which the other Banks are
required to submit their Competitive Bids to the Administrative Agent pursuant
to paragraph (b) above.
(i) All notices required by this Section 2.03 shall be given in
accordance with Section 9.02.
SECTION 2.04. Committed Borrowing Procedure. In order to effect a
Committed Borrowing, a Borrower shall give written notice (or telephone notice
promptly confirmed in writing) to the Administrative Agent, substantially in the
form of Exhibit 2.04 (a "Committed Borrowing Request"), (a) in the case of a
Eurodollar Committed Borrowing, not later than noon, New York City time, three
Business Days before the Borrowing Date specified for such proposed Committed
Borrowing, and (b) in the case of an ABR Borrowing, not later than 11:00 a.m.,
New York City time, on the Borrowing Date specified for such proposed Committed
Borrowing. No Fixed Rate Loan or Eurodollar Competitive Loan shall be requested
or made pursuant to a Committed Borrowing Request. Such Committed Borrowing
Request shall be irrevocable and shall in each case refer to this Agreement and
specify (x) whether the Borrowing then being requested is to be a Eurodollar
Committed Borrowing or an ABR Borrowing, (y) the Borrowing Date of such
Borrowing (which shall be a Business Day) and the aggregate amount thereof
(which shall not be less than $5,000,000 and shall be an integral multiple of
$1,000,000) and (z) the Interest Period with respect thereto. If no election as
to the Type of Committed Borrowing is specified in any such notice, then the
requested Committed Borrowing shall be an ABR Borrowing. If no Interest Period
with respect to
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any Eurodollar Committed Borrowing is specified in any such Committed Borrowing
Request, then the Borrower making such request shall be deemed to have selected
an Interest Period of one month's duration. If a Borrower shall not have given
notice in accordance with this Section 2.04 of its election to refinance a
Committed Borrowing prior to the end of the Interest Period in effect for such
Borrowing, then such Borrower shall (unless such Borrowing is repaid at the end
of such Interest Period) be deemed to have given notice of an election to
refinance such Borrowing with an ABR Borrowing. The Administrative Agent shall
promptly advise the Banks of any Committed Borrowing Request given pursuant to
this Section 2.04 and of each Bank's portion of the requested Committed
Borrowing by facsimile transmission.
SECTION 2.05. Refinancings. Each Borrower may refinance all or any
part of any of its Borrowings with a Borrowing of the same or a different Type
made pursuant to Section 2.03 or Section 2.04, subject to the conditions and
limitations set forth herein and elsewhere in this Agreement, including
refinancings of Competitive Borrowings with Committed Borrowings and of
Committed Borrowings with Competitive Borrowings. Any Borrowing or part thereof
so refinanced shall be deemed to be repaid in accordance with Section 2.08 with
the proceeds of a new Borrowing hereunder and the proceeds of the new Borrowing,
to the extent they do not exceed the principal amount of the Borrowing being
refinanced, shall not be paid by the Banks to the Administrative Agent or by the
Administrative Agent to the Borrower to which such Borrowing has been made
pursuant to Section 2.02(c); provided, however, that (a) if the principal amount
extended by a Bank in a refinancing is greater than the principal amount, if
any, extended by such Bank in the Borrowing being refinanced, then such Bank
shall pay such difference to the Administrative Agent for distribution to the
Banks described in clause (b) below, (b) if the principal amount extended by a
Bank in the Borrowing being refinanced is greater than the principal amount, if
any, being extended by such Bank in the refinancing, the Administrative Agent
shall return the difference to such Bank out of amounts received pursuant to
clause (a) above, (c) to the extent any Bank fails to pay the Administrative
Agent amounts due from it pursuant to clause (a) above, any Borrowing or portion
thereof being refinanced shall not be deemed repaid in accordance with Section
2.08 to the extent of such failure and such Borrower shall pay such amount to
the Administrative Agent pursuant to Section 2.08 and (d) to the extent such
Borrower fails to pay to the Administrative Agent any amounts due in accordance
with Section 2.08 as a result of the failure of a Bank to pay the Administrative
Agent any amounts due as described in clause (c) above, the portion of any
refinanced Borrowing deemed not repaid shall be deemed to be outstanding solely
to the Bank which has failed to pay the Administrative Agent amounts due from it
pursuant to clause (a) above to the full extent of such Bank's portion of such
refinanced Loan.
SECTION 2.06. Conversion and Continuation of Committed Borrowings.
Each Borrower shall have the right at any time upon prior irrevocable notice to
the Administrative Agent (a) not later than 8:30 a.m., New York City time, one
Business Day prior to conversion, to convert any Eurodollar Committed Borrowing
into an ABR Borrowing, (b) not later than noon, New York City time, three
Business Days prior to conversion or continuation, to convert any ABR Borrowing
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into a Eurodollar Committed Borrowing or to continue any Eurodollar Committed
Borrowing as a Eurodollar Committed Borrowing for an additional Interest Period
and (c) not later than 11:00 a.m., New York City time, three Business Days prior
to conversion, to convert the Interest Period with respect to any Eurodollar
Committed Borrowing to another permissible Interest Period, subject in each case
to the following:
(i) each conversion or continuation shall be made pro rata among the
Banks in accordance with the respective principal amounts of the Loans
comprising the converted or continued Committed Borrowing;
(ii) if less than all the outstanding principal amount of any
Committed Borrowing shall be converted or continued, the aggregate
principal amount of such Committed Borrowing converted or continued shall
be an integral multiple of $1,000,000 and not less than $5,000,000;
(iii) if any Eurodollar Committed Borrowing is converted at a time
other than the end of the Interest Period applicable thereto, such Borrower
shall pay, upon demand, any amounts due to the Banks pursuant to Section
2.16;
(iv) any portion of a Committed Borrowing maturing or required to be
repaid in less than one month (or 14 days, if such an Interest Period is
available) may not be converted into or continued as a Eurodollar Committed
Borrowing;
(v) any portion of a Committed Borrowing which cannot be continued
as or converted into a Eurodollar Committed Borrowing by reason of clause
(iv) above shall be automatically converted into or continued as an ABR
Borrowing at the end of the Interest Period in effect for such Borrowing;
and
(vi) no Interest Period may be selected for any Eurodollar Committed
Borrowing that would end later than the Maturity Date.
Each notice pursuant to this Section 2.06 shall be irrevocable and shall refer
to this Agreement and specify (w) the identity and amount of the Committed
Borrowing that a Borrower requests be converted or continued, (x) whether such
Committed Borrowing is to be converted to or continued as a Eurodollar Committed
Borrowing or an ABR Borrowing, (y) if such notice requests a conversion, the
date of such conversion (which shall be a Business Day) and (z) if such
Committed Borrowing is to be converted to or continued as a Eurodollar Committed
Borrowing, the Interest Period with respect thereto. If no Interest Period is
specified in any such notice with respect to any conversion to or continuation
as a Eurodollar Committed Borrowing, a Borrower shall be deemed to have selected
an Interest Period of one month's duration. The Administrative Agent shall
promptly advise the other Banks of any notice given pursuant to this Section
2.06 and of each Bank's
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portion of any converted or continued Committed Borrowing. If a Borrower shall
not have given notice in accordance with this Section 2.06 to continue any
Committed Borrowing into a subsequent Interest Period (and shall not otherwise
have given notice in accordance with this Section 2.06 to convert such Committed
Borrowing), such Committed Borrowing shall, at the end of the Interest Period
applicable thereto (unless repaid pursuant to the terms hereof), automatically
be converted into or continued as an ABR Borrowing.
SECTION 2.07. Fees. (a) The Company agrees to pay to each Bank,
through the Administrative Agent, (i) on each March 31, June 30, September 30
and December 31 from the Execution Date to the date on which the Commitment of
such Bank has been terminated and (ii) on the Maturity Date and on any other
date on which the Commitment of such Bank has been terminated, facility fees
(such facility fees being the "Facility Fees"), in immediately available funds,
equal to .06 of 1% of the amount of the Commitment of such Bank from time to
time outstanding, whether used, deemed used or unused, during the preceding
quarter (or shorter period commencing with the Execution Date and/or ending with
the Maturity Date).
(b) All Facility Fees shall be computed by the Administrative Agent on
the basis of the actual number of days elapsed in a year of 360 days, and such
computations, made in good faith, shall create rebuttable presumption that they
are accurate. The Facility Fees due to each Bank shall commence to accrue on the
Execution Date and shall cease to accrue on the earlier of the Maturity Date and
the termination of the Commitment of such Bank as provided herein.
(c) The Facility Fees due under this Section 2.07 shall be paid on the
date due, in immediately available funds, to the Administrative Agent for
distribution among the Banks.
(d) The Company agrees to pay to the Administrative Agent the fees as
provided in the Agent's Fee Letter.
(e) Notwithstanding the foregoing, in no event shall any Bank be
permitted to receive any compensation hereunder constituting interest in excess
of the Highest Lawful Rate.
SECTION 2.08. Repayment of Loans. (a) Each Borrower agrees to pay the
outstanding principal balance of each Loan (i) in the case of a Competitive
Loan, on the last day of the Interest Period applicable to such Loan and on the
Termination Date, and (ii) in the case of a Committed Loan, on the Maturity
Date. Each Loan shall bear interest from the date of the Borrowing of which such
Loan is a part on the outstanding principal balance thereof as set forth in
Section 2.09.
(b) Each Bank shall, and is hereby authorized by each Borrower to make
in its internal records relating to each Loan an appropriate notation evidencing
the date, amount and the Type of each Loan of such Bank to such Borrower, the
rate of interest applicable to such Loan and
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each payment or prepayment of principal of and interest on such Loan. The
aggregate unpaid principal amount so recorded shall be presumptive evidence of
the principal amount owing by such Borrower to such Bank in respect of such
Loan. The failure of any Bank to make such a notation or any error therein shall
not in any manner affect the obligation of such Borrower to repay the Loans made
by such Bank in accordance with the terms hereof.
SECTION 2.09. Interest on Loans. (a) Subject to the provisions of
Section 2.09(d) and Section 2.10, the Loans comprising each Eurodollar Borrowing
shall bear interest (computed on the basis of the actual number of days elapsed
over a year of 360 days) at a rate per annum equal to (i) in the case of each
Eurodollar Committed Loan, the lesser of (A) the IBO Rate for the Interest
Period in effect for such Borrowing plus .16 of 1% and (B) the Highest Lawful
Rate, and (ii) in the case of each Eurodollar Competitive Loan, the lesser of
(A) the IBO Rate for the Interest Period in effect for such Borrowing plus the
Margin offered by the Bank making such Loan and accepted by a Borrower pursuant
to Section 2.03 and (B) the Highest Lawful Rate.
(b) Subject to the provisions of Section 2.09(d) and Section 2.10, the
Loans comprising each ABR Borrowing shall bear interest (computed on the basis
of the actual number of days elapsed over a year of 365 or 366 days, as the case
may be, if the Alternate Base Rate shall be based on the Prime Rate, and a year
of 360 days otherwise) at a rate per annum equal to the Alternate Base Rate, but
not in excess of the Highest Lawful Rate.
(c) Subject to the provisions of Section 2.10, each Fixed Rate Loan
shall bear interest at a rate per annum (computed on the basis of the actual
number of days elapsed over a year of 360 days) equal to the fixed rate of
interest offered by the Bank making such Loan and accepted by a Borrower
pursuant to Section 2.03, but not in excess of the Highest Lawful Rate.
(d) Interest on each Loan shall be payable in arrears on each Interest
Payment Date applicable to such Loan except as otherwise provided in this
Agreement. The applicable IBO Rate or Alternate Base Rate for each Interest
Period or day within an Interest Period, as the case may be, shall be determined
by the Administrative Agent (which determination, made in good faith, shall
create a rebuttable presumption that the same is accurate). The Administrative
Agent shall promptly advise the Company and each Bank, as appropriate, of such
determination.
SECTION 2.10. Interest on Overdue Amounts. If any Borrower shall
default in the payment of the principal of or interest on any Loan or any other
amount becoming due hereunder, whether at scheduled maturity, by notice of
prepayment, acceleration or otherwise such Borrower shall on demand from time to
time pay interest, to the extent permitted by law, on such defaulted amount up
to (but not including) the date of actual payment (after as well as before
judgment) at a rate per annum equal to the lesser of (a) the Alternate Base Rate
plus 2% per annum (if the Alternate Base Rate is based on the Prime Rate,
computed on the basis of the actual number of days elapsed over a year of 365 or
366 days, as the case may be; if the Alternate Base Rate is based on the Federal
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Funds Effective Rate, computed on the basis of the actual number of days elapsed
over a year of 360 days) and (b) the Highest Lawful Rate.
SECTION 2.11. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing, (a) the Administrative Agent shall
have determined that dollar deposits in the principal amounts of the Loans
comprising such Borrowing are not generally available in the London interbank
market, or (b) the Majority Banks shall have determined (and notified the
Administrative Agent) that the rate at which such dollar deposits are being
offered will not adequately and fairly reflect the cost to any Bank of making or
maintaining its Eurodollar Loan during such Interest Period, the Administrative
Agent shall, as soon as practicable thereafter, give written notice of such
determination to the Borrowers and the Banks. In the event of any such
determination, any request by a Borrower for a Eurodollar Loan shall, until the
circumstances giving rise to such notice no longer exist, be deemed to be a
request for an ABR Loan. Each such determination by the Administrative Agent or
the Majority Banks hereunder, made in good faith, shall create a rebuttable
presumption that the same is accurate.
SECTION 2.12. Termination and Reduction of Commitments. (a) On any
Existing Termination Date on which Loans are outstanding, the Total Commitment
shall automatically reduce to the aggregate amount of such outstanding Loans and
the Total Commitment shall be automatically terminated on the Maturity Date.
(b) Subject to Section 2.13(b), upon at least ten Business Days' prior
irrevocable written or facsimile notice to the Administrative Agent, the Company
may at any time in whole permanently terminate, or from time to time in part
permanently reduce, the Total Commitment; provided, however, that (i) each
partial reduction of the Total Commitment shall be in an integral multiple of
$1,000,000 and in a minimum principal amount of $25,000,000 and (ii) no such
termination or reduction shall be permitted if, after giving effect thereto and
to any repayments of the Loans made on the effective date thereof, the Total
Commitment would be less than the aggregate outstanding principal amount of the
then outstanding Competitive Loans. Such notice shall specify the date and the
amount of the termination or reduction of the Total Commitment. The
Administrative Agent shall promptly notify the Banks of the amount of any such
termination or reduction of the Total Commitment.
(c) Except in the circumstances described in Section 2.14 or Section
2.15, each reduction in the Total Commitment hereunder shall be made ratably
among the Banks in accordance with their respective Commitments. The Company
shall pay to the Administrative Agent for the account of the Banks, on the date
of each termination or reduction, the Facility Fees on the amount of the
Commitments so terminated or reduced, accrued through the date of such
termination or reduction.
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SECTION 2.13. Prepayment. (a) Each Borrower shall have the right at
any time and from time to time to prepay any Committed Borrowing, in whole or in
part, upon written or facsimile notice (or telephone notice promptly confirmed
by written or facsimile notice) to the Administrative Agent: (i) before 10:00
a.m., New York City time, five Business Days prior to prepayment, in the case of
Eurodollar Committed Loans and (ii) before 10:00 a.m., New York City time, one
Business Day prior to prepayment, in the case of ABR Loans; provided, however,
that each partial prepayment shall be in an amount which is an integral multiple
of $1,000,000 and not less than $10,000,000. No Borrower shall have the right to
prepay any Competitive Borrowing.
(b) On the date of any termination or reduction of the Commitments
pursuant to Section 2.12(b), the Borrowers shall pay or prepay so much of the
Committed Borrowings as shall be necessary in order that the aggregate principal
amount of the Competitive Loans and Committed Loans outstanding will not exceed
the Total Commitment, after giving effect to such termination or reduction.
(c) Each notice of prepayment given by a Borrower shall specify the
prepayment date and the principal amount of each Borrowing (or portion thereof)
to be prepaid, shall be irrevocable and shall commit such Borrower to prepay
such Borrowing (or portion thereof) by the amount stated therein on the date
stated therein. All prepayments under this Section 2.13 shall be subject to
Section 2.16 and Section 2.17 but otherwise without premium or penalty. All
prepayments under this Section 2.13 shall be accompanied by accrued interest on
the principal amount being prepaid to the date of prepayment.
SECTION 2.14. Reserve Requirements; Change in Circumstances. (a) It is
understood that the cost to each Bank of making or maintaining any of the Loans
may fluctuate as a result of the applicability of, or changes in, reserve
requirements imposed by the Board, including reserve requirements under
Regulation D in connection with Eurocurrency Liabilities. Subject to Section
9.08, each Borrower agrees to pay to each Bank, as provided in Section 2.14(d),
at any time when such Bank shall be required to maintain reserves with respect
to liabilities or assets consisting of or including Eurocurrency Liabilities,
additional interest on the unpaid principal amount of each Eurodollar Loan of
such Bank from the date of such Loan until such principal amount is paid in
full, payable on each Interest Payment Date for such Eurodollar Loan, at an
interest rate per annum equal at all times during each Interest Period to the
excess of (i) the rate obtained by dividing the IBO Rate for such Interest
Period by a percentage equal to 100% minus the reserve percentage applicable
during such Interest Period under regulations issued from time to time by the
Board (or if more than one such percentage is so applicable, minus the daily
average of such percentages for those days in such Interest Period during which
any such percentage shall be so applicable) for determining the maximum
requirement (including any emergency, supplemental or other marginal reserve
requirement) for such Bank with respect to liabilities or assets consisting of
or including Eurocurrency Liabilities over (ii) the IBO Rate for such Interest
Period. It is understood by the parties hereto that the rates of interest
applicable to Eurodollar Loans have been determined on the
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assumption that no such reserve requirements exist or will exist and that such
rates do not reflect costs imposed on the Banks in connection with such reserve
requirements. It is agreed that for purposes of this Section 2.14(a) the
Eurodollar Loans made hereunder shall be deemed to constitute Eurocurrency
Liabilities and to be subject to the reserve requirements of Regulation D
without benefit of or credit for proration, exemptions or offsets which might
otherwise be available to the Banks from time to time under Regulation D.
(b) Notwithstanding any other provision herein, if after the Execution
Date the introduction of any applicable law or regulation or any change in
applicable law or regulation or in the interpretation or administration thereof
by any governmental authority charged with the interpretation or administration
thereof, or compliance by any Bank with any applicable guideline or request from
any central bank or governmental authority (whether or not having the force of
law) (i) shall change the basis of taxation of payments to any Bank of the
principal of or interest on any Eurodollar Loan or Fixed Rate Loan made by such
Bank or any other fees or amounts payable hereunder (other than (x) taxes
imposed on the overall net income of such Bank or its Applicable Lending Office
by the jurisdiction in which such Bank or its Applicable Lending Office has its
principal office or by any political subdivision or taxing authority therein (or
any tax which is enacted or adopted by such jurisdiction, political subdivision
or taxing authority as a direct substitute for any such taxes) or (y) any tax,
assessment or other governmental charge that would not have been imposed but for
the failure of any Bank to comply with any certification, information,
documentation or other reporting requirement), (ii) shall impose, modify or deem
applicable any reserve, special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by, such Bank, or
(iii) shall impose on such Bank or the London interbank market any other
condition affecting this Agreement or any Eurodollar Loan or Fixed Rate Loan
made by such Bank, and the result of any of the foregoing shall be to increase
the cost to such Bank of maintaining its Commitment or of making or maintaining
any Eurodollar Loan or Fixed Rate Loan or to reduce the amount of any sum
received or receivable by such Bank hereunder (whether of principal, interest or
otherwise) in respect thereof by an amount deemed in good faith by such Bank to
be material, then each Borrower shall pay to the Administrative Agent for the
account of such Bank such additional amount or amounts with respect to the
Eurodollar Loans and Fixed Rate Loans of such Borrower as will compensate such
Bank for such increase or reduction to such Bank upon demand by such Bank
(through the Administrative Agent).
(c) If any Bank shall have determined in good faith that the
applicability of any law, rule, regulation or guideline adopted pursuant to or
arising out of the July 1988 report of the Basle Committee on Banking
Regulations and Supervisory Practices entitled "International Convergence of
Capital Measurement and Capital Standards" or the adoption after the Execution
Date of any other law, rule, regulation or guideline regarding capital adequacy,
or any change in any of the foregoing or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or any lending office of such Bank) with any request or
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directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Bank's capital as a consequence of
this Agreement or the Loans made by such Bank pursuant hereto to a level below
that which such Bank could have achieved but for such applicability, adoption,
change or compliance (taking into consideration such Bank's policies with
respect to capital adequacy) by an amount deemed by such Bank to be material,
then from time to time, as provided in Section 2.14(d), each Borrower shall pay
to such Bank such additional amount or amounts as will compensate such Bank for
any such increased capital requirement.
(d) Each Bank will notify the Borrowers through the Administrative
Agent of any event occurring after the date of this Agreement which will entitle
such Bank to compensation pursuant to this Section 2.14, as promptly as
practicable, and in any event within 90 days after it becomes aware thereof and
determines to request compensation. A certificate of a Bank setting forth in
reasonable detail (i) such amount or amounts as shall be necessary to compensate
such Bank (or participating banks or other entities pursuant to Section 9.11) as
specified in paragraph (a), (b) or (c) above, as the case may be, and (ii) the
calculation of such amount or amounts under clause (a)(i), shall be delivered to
the Borrowers (with a copy to the Administrative Agent) and shall, to the extent
permitted by law, be conclusive absent manifest error. The Borrowers shall pay
to the Administrative Agent for the account of such Bank the amount shown as due
on any such certificate within 10 days after its receipt of the same.
(e) Except as expressly provided in Section 2.14(d), failure on the
part of any Bank to demand compensation for any increased costs or reduction in
amounts received or receivable or reduction in return on capital with respect to
any Interest Period or any other period shall not constitute a waiver of such
Bank's rights to demand compensation for any increased costs or reduction in
amounts received or receivable or reduction in return on capital with respect to
such Interest Period or any other period; provided that no Borrower shall be
required to compensate a Bank pursuant to this Section 2.14 for any increased
costs or reductions incurred more than 270 days prior to the date that such Bank
notifies such Borrower of the change in law giving rise to such increased costs
or reductions and of such Bank's intention to claim compensation therefor;
provided further that, if the change in law giving rise to such increased costs
or reductions is retroactive, then the 270-day period referred to above shall be
extended to include the period of retroactive effect thereof. The protection of
this Section 2.14 shall be available to each Bank regardless of any possible
contention of invalidity or inapplicability of law, regulation or condition
which shall have been imposed.
(f) In the event any Bank shall seek compensation pursuant to this
Section 2.14, the Company may give notice to such Bank (with copies to the
Administrative Agent) that it wishes to seek one or more Eligible Assignees
(which may be one or more of the Banks) to assume the Commitment of such Bank
and to purchase its outstanding Loans. Each Bank requesting compensation
pursuant to this Section 2.14 agrees to sell its Commitment, Loans and interest
in this
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Agreement pursuant to Section 9.11(c) to any such Eligible Assignee for an
amount equal to the sum of the outstanding unpaid principal of and accrued
interest on such Loans plus all other fees and amounts (including any
compensation claimed by such Bank under this Section 2.14 or Section 2.16) due
such Bank hereunder calculated, in each case, to the date such Commitment, Loans
and interest are purchased, whereupon such Bank shall have no further Commitment
or other obligation to any Borrower hereunder.
(g) Without prejudice to the survival of any other obligations of the
Borrowers hereunder, the obligations of the Borrower under this Section 2.14
shall survive the termination of this Agreement and the payment or assignment of
the Loans.
(h) Notwithstanding anything in this Section 2.14 to the contrary, in
no event shall any Bank be permitted to take or receive any compensation
hereunder constituting interest in excess of the Highest Lawful Rate.
SECTION 2.15. Change in Circumstances. (a) Notwithstanding any other
provision herein, if any change in any law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Bank or
its Eurodollar Lending Office to make or maintain any Eurodollar Loan or to give
effect to its obligations as contemplated hereby, then, by written notice to the
Borrower and to the Administrative Agent, such Bank may:
(i) declare that Eurodollar Loans will not thereafter be made by such
Bank hereunder, whereupon such Bank shall not submit a Competitive Bid in
response to a request for Eurodollar Competitive Loans and any request by a
Borrower for a Eurodollar Committed Borrowing shall, as to such Bank only
(unless such Borrower (x) shall have withdrawn such request, in which case
such request shall be of no force and effect, or (y) shall have made a new
request for a Borrowing of a different Type in accordance with the terms
hereof, which shall be deemed to supersede such request for a Eurodollar
Committed Borrowing), be deemed a request for an ABR Loan; and
(ii) require that all outstanding Eurodollar Loans made by it be
converted to ABR Loans, in which event all such Eurodollar Loans shall be
automatically converted to ABR Loans as of the effective date of such
notice as provided in Section 2.15(b).
In the event any Bank shall exercise its rights under clause (i) or (ii) above
with respect to Eurodollar Loans, all payments and prepayments of principal
which would otherwise have been applied to repay the Eurodollar Loans that would
have been made by such Bank or the converted Eurodollar Loans of such Bank shall
instead be applied to repay the ABR Loans made by such Bank or the Banks, as the
case may be, in lieu of, or resulting from the conversion of, such Eurodollar
Loans.
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(b) For purposes of this Section 2.15, a notice to any Borrower (with
a copy to the Administrative Agent) by any Bank pursuant to Section 2.15(a)
shall be effective as to each Eurodollar Loan, if lawful, on the last day of the
Interest Period currently applicable to such Eurodollar Loan; in all other cases
such notice shall be effective on the date of receipt by the Borrower.
(c) In the event any Bank shall give a notice to any Borrower pursuant
to this Section 2.15, the Company may give notice to such Bank (with a copy to
the Administrative Agent) that it wishes to seek one or more Eligible Assignees
(which may be one or more of the Banks) to assume the Commitment of such Bank
and to purchase its outstanding Loans. Each Bank giving a notice to any Borrower
pursuant to this Section 2.15 agrees to sell its Commitment, Loans and interest
in this Agreement pursuant to Section 9.11(c) to any such Eligible Assignee for
an amount equal to the sum of the outstanding unpaid principal of and accrued
interest on such Loans plus all other fees and amounts (including any
compensation claimed by such Bank under Section 2.14 or Section 2.16) due such
Bank hereunder calculated, in each case, to the date such Commitment, Loans,
interest and fees are purchased, whereupon such Bank shall have no further
Commitment or other obligation to any Borrower hereunder.
(d) None of the Banks shall be permitted to terminate availability of
Eurodollar Loans as provided in this Section 2.15 on a discriminatory basis
(i.e., availability of Eurodollar Loans is not also terminated by the applicable
Bank with respect to other customers of such Bank similarly situated where such
customer is subject to documents providing for such right of termination).
SECTION 2.16. Indemnity. The Company shall indemnify each Bank against
any loss or reasonable expense which such Bank may sustain or incur as a
consequence of (a) any failure by a Borrower to fulfill on the date of any
Borrowing hereunder the applicable conditions set forth in Article III, (b) any
failure by a Borrower to borrow or to refinance, convert (other than conversion
into an ABR Loan) or continue any Loan hereunder after a Committed Borrowing
Request pursuant to Article II has been given or after Competitive Bids have
been accepted or after a notice of conversion or continuation has been given
pursuant to Section 2.05, (c) any payment, prepayment or conversion of a
Eurodollar Loan or Fixed Rate Loan required or permitted by any provision of
this Agreement or otherwise made on a date other than the last day of the
applicable Interest Period, (d) any default in the payment or prepayment of the
principal amount of any Loan or any part thereof or interest accrued thereon, as
and when due and payable (at the due date thereof, by notice of prepayment or
otherwise), or (e) the occurrence of any Event of Default, including, in the
case of any of the events set forth in clauses (a) through (e) of this Section
2.16, any loss or reasonable expense sustained or incurred or to be sustained or
incurred in liquidating or employing deposits from third parties acquired to
effect or maintain such Loan or any part thereof as a Eurodollar Loan or Fixed
Rate Loan. Such loss or reasonable expense shall include an amount equal to the
excess, if any, as reasonably determined by each Bank of (y) its cost of
obtaining the funds for the Loan being paid,
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prepaid or converted or not borrowed, refinanced, converted or continued (based
on the IBO Rate or, in the case of a Fixed Rate Loan, the fixed rate of interest
applicable thereto) for the period from the date of such payment, prepayment or
conversion or failure to borrow, refinance, convert or continue to the last day
of the Interest Period for such Loan (or, in the case of a failure to borrow,
refinance, convert or continue, the Interest Period for the Loan which would
have commenced on the date of such failure to borrow, refinance, convert or
continue) over (z) the amount of interest (as reasonably determined by such
Bank) that would be realized by such Bank in reemploying the funds so paid,
prepaid or converted or not borrowed, refinanced, converted or continued for
such period or Interest Period, as the case may be. A certificate of each Bank
setting forth any amount or amounts which such Bank is entitled to receive
pursuant to this Section 2.16 together with either a calculation of such amount
or amounts or a statement of the basis on which such amount or amounts have been
determined shall be delivered to the Company (with a copy to the Administrative
Agent) and such calculation or statement, made in good faith, shall create a
rebuttable presumption that the same is accurate. The Company shall pay to the
Administrative Agent for the account of each Bank the amount shown as due on any
certificate within 30 days after its receipt of the same. Without prejudice to
the survival of any other obligations of the Company hereunder, the obligations
of the Company under this Section 2.16 shall survive the termination of this
Agreement and/or the payment or assignment of any of the Loans. Without
limitation of this Section 2.16, the provisions of this Section 2.16 shall be
enforceable against the Company with respect to the conditions described in
clauses (a) and (b) of this Section 2.16 with respect to any Committed Borrowing
Request or Competitive Bid Request given by a Borrower hereunder on or after the
Execution Date regardless of whether the Effective Date occurs. Notwithstanding
the foregoing, in no event shall any Bank be permitted to receive any
compensation hereunder constituting interest in excess of the Highest Lawful
Rate.
SECTION 2.17. Pro Rata Treatment. Except as required under clause (d)
of the proviso of Section 2.05, Section 2.14, Section 2.15, or Section 2.16, (a)
each Committed Borrowing and each refinancing of any Borrowing with a Committed
Borrowing shall be allocated pro rata among the Banks in accordance with their
respective available Commitments, (b) each payment of the Facility Fees and each
reduction of the Commitments shall be allocated pro rata among the Banks in
accordance with their respective Commitments and (c) each payment or prepayment
of principal of any Committed Borrowing and each payment of interest on the
Loans comprising part of a Committed Borrowing shall be allocated pro rata among
the Banks participating in such Borrowing in accordance with the respective
principal amounts of their outstanding Loans comprising such Borrowing. Except
as required under clause (d) of the proviso to Section 2.05, each payment of
principal of any Competitive Borrowing shall be allocated pro rata among the
Banks participating in such Borrowing in accordance with the respective
principal amounts of their outstanding Competitive Loans comprising such
Borrowing. Each payment of interest on any Competitive Borrowing shall be
allocated pro rata among the Banks participating in such Borrowing in accordance
with the respective amounts of accrued and unpaid interest on their outstanding
Competitive Loans comprising such Borrowing. For purposes of determining the
available
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Commitments of the Banks at any time, each outstanding Competitive Borrowing
shall be deemed to have utilized the Commitments of the Banks (including those
Banks which shall not have made Loans as part of such Competitive Borrowing) pro
rata in accordance with such respective Commitments. Each Bank agrees that in
computing such Bank's portion of any Borrowing to be made hereunder, the
Administrative Agent may, in its discretion, round each Bank's percentage of
such Borrowing to the next higher or lower whole dollar amount.
SECTION 2.18. Sharing of Setoffs. Each Bank agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrowers (pursuant to Section 9.06 or otherwise), including, but not
limited to, a secured claim under Section 506 of Title 11 of the United States
Code or other security or interest arising from, or in lieu of, such secured
claim, received by such Bank under any applicable bankruptcy, insolvency or
other similar law or otherwise, or by similar means, obtain payment (voluntary
or involuntary) (other than pursuant to Section 2.14, Section 2.15 or Section
2.16) of any Committed Loan or Loans as a result of which the unpaid principal
portion of the Committed Loans of such Bank shall be proportionately less than
the unpaid principal portion of the Committed Loans of any other Bank, it shall
be deemed simultaneously to have purchased from such other Bank at face value,
and shall promptly pay to such other Bank the purchase price for, a
participation in the Committed Loans of such other Bank, so that the aggregate
unpaid principal amount of the Committed Loans and participations in the
Committed Loans held by each Bank shall be in the same proportion to the
aggregate unpaid principal amount of all Committed Loans then outstanding as the
principal amount of its Committed Loans prior to such exercise of banker's lien,
setoff or counterclaim or other event was to the principal amount of all
Committed Loans outstanding prior to such exercise of banker's lien, setoff or
counterclaim or other event; provided, however, that, if any such purchase or
purchases or adjustments shall be made pursuant to this Section 2.18 and the
payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustment restored without interest. Each
Borrower expressly consents to the foregoing arrangements and agrees that any
Bank holding a participation in a Committed Loan deemed to have been so
purchased may, to the extent permitted by law, exercise any and all rights of
banker's lien, setoff or counterclaim with respect to any and all moneys owing
by such Borrower to such Bank by reason thereof as fully as if such Bank had
made a Committed Loan directly to such Borrower in the amount of such
participation.
SECTION 2.19. Payments. (a) Each Borrower shall make each payment
hereunder not later than noon, New York City time, on the day when due in lawful
money of the United States (in freely transferable dollars) to the
Administrative Agent at its address referred to in Section 9.02 for the account
of the Banks, in federal or other immediately available funds. The
Administrative Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal or interest on Committed Loans (other than
pursuant to Section 2.14, Section 2.15 and Section 2.16) or Facility Fees
ratably to the Banks and like funds relating to the payment of any other amount
(including payments of principal or interest on Competitive Loans which are not
made ratably to the
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Banks) payable to any Bank to such Bank for the account of its Applicable
Lending Office, in each case to be applied in accordance with the terms of this
Agreement. If the Administrative Agent fails to send to any Bank its portion of
any payment timely received by the Administrative Agent hereunder by the close
of business on the day such payment was received, the Administrative Agent shall
pay to such Bank interest on its portion of such payment from the day such
payment was timely received by the Administrative Agent until the date such
Bank's portion of such payment is sent to such Bank, at the Federal Funds
Effective Rate.
(b) Whenever any payment hereunder (including principal of or interest
on any Borrowing or any fees or other amounts), shall be stated to be due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest, fees or other amounts, as the case may be;
provided, however, if such extension would cause payment of interest on or
principal of a Eurodollar Loan to be made in the next following calendar month,
such payment shall be made on the next preceding Business Day.
(c) Unless the Administrative Agent shall have received notice from a
Borrower prior to the date on which any payment is due to the Banks hereunder
that such Borrower will not make such payment in full, the Administrative Agent
may assume that such Borrower has made such payment in full to the
Administrative Agent on such date and the Administrative Agent may, in reliance
upon such assumption, cause to be distributed to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent a Borrower
shall not have so made such payment in full to the Administrative Agent, each
Bank shall repay to the Administrative Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for each day from the
date such amount is distributed to such Bank until the date such Bank repays
such amount to the Administrative Agent, at the Federal Funds Effective Rate.
SECTION 2.20. Taxes. (a) Except as expressly provided in the last
sentence of Section 2.20(f), any and all payments by the Borrowers hereunder
shall be made, in accordance with Section 2.19, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding
taxes imposed on the Administrative Agent's or any Bank's income and franchise
taxes imposed on the Administrative Agent or any Bank, in each case by the
United States or any jurisdiction under the laws of which it is organized or any
political subdivision of such jurisdiction of organization (all such nonexcluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If any Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to the Banks or
the Administrative Agent (i) the sum payable shall be increased by the amount
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.20) such Bank or the
Administrative Agent (as the case may be) shall receive an amount equal to the
sum it would have received had no such deductions been made, (ii) such Borrower
shall make such deductions and
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(iii) such Borrower shall pay the full amount deducted to the relevant taxing
authority or other governmental authority in accordance with applicable law.
(b) In addition, each Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any Loan (hereinafter referred to as "Other Taxes").
(c) Each Borrower will indemnify each Bank and the Administrative
Agent for the full amount of Taxes and Other Taxes (including any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this Section 2.20)
paid by such Bank or the Administrative Agent, as the case may be, and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Such indemnification shall be made within 30 days after the
date any Bank or the Administrative Agent, as the case may be, makes written
demand therefor. If a Bank or the Administrative Agent shall become aware that
it is entitled to receive a refund in respect of Taxes or Other Taxes, it shall
promptly notify the applicable Borrower of the availability of such refund and
shall, within 30 days after receipt by such Borrower, apply for such refund at
such Borrower's expense. If any Bank or the Administrative Agent receives a
refund in respect of any Taxes or Other Taxes for which such Bank or the
Administrative Agent has received payment from a Borrower hereunder it shall
promptly notify such Borrower of such refund and shall, within 30 days after
receipt of a request by such Borrower (or promptly upon receipt, if such
Borrower has requested application for such refund pursuant hereto), repay such
refund to such Borrower without interest, provided that such Borrower, upon the
request of such Bank or the Administrative Agent, agrees to return such refund
(plus penalties, interest or other charges) to such Bank or the Administrative
Agent in the event such Bank or the Administrative Agent is required to repay
such refund.
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes withheld by a Borrower in respect of any payment to any Bank (or
transferee) or the Administrative Agent, such Borrower will furnish to the
Administrative Agent, at its address referred to in Section 9.02, the original
or a certified copy of a receipt evidencing payment thereof or, if such original
or copy of a receipt is not available from the relevant taxing authority, other
documentation of payment reasonably satisfactory to such Bank (or transferee) or
the Administrative Agent.
(e) Without prejudice to the survival of any other agreement contained
herein, the agreements and obligations contained in this Section 2.20 shall
survive the payment in full of principal and interest hereunder.
(f) Each Bank which is organized outside the United States shall
promptly notify the Borrowers of any change in its Applicable Lending Office and
upon written request of any Borrower shall, prior to the immediately following
due date of any payment by such Borrower
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hereunder, deliver to such Borrower such certificates, documents or other
evidence, as required by the Code or Treasury Regulations issued pursuant
thereto, including Internal Revenue Service Form 4224 or Form 1001 and any other
certificate or statement or exemption required by Treasury Regulation Section
1.1441-1(a) or Section 1.1441-6(c) or any subsequent version thereof, properly
completed and duly executed by such Bank establishing that such payment is (i)
not subject to withholding under the Code because such payment is effectively
connected with the conduct by such Bank of a trade or business in the United
States or (ii) totally exempt from United States tax under a provision of an
applicable tax treaty. Unless the Borrowers and the Administrative Agent have
received forms or other documents satisfactory to them indicating that payments
hereunder or under the Loans are not subject to United States withholding tax or
are subject to such tax at a rate reduced by an applicable tax treaty, the
Borrowers or the Administrative Agent shall withhold taxes from such payments at
the applicable statutory rate in the case of payments to or for any Bank or
assignee organized under the laws of a jurisdiction outside the United States.
(g) Any Bank claiming any additional amounts payable pursuant to this
Section 2.20 shall use reasonable efforts (consistent with legal and regulatory
restrictions) to file any certificate or document requested by a Borrower or to
change the jurisdiction of its Applicable Lending Office if the making of such a
filing or change would avoid the need for or reduce the amount of any such
additional amounts which may thereafter accrue and would not, in the sole
determination of such Bank, be otherwise disadvantageous to such Bank.
SECTION 2.21. Extensions of Termination Date. (a) The Company (for
itself and on behalf of the other Borrowers) may, by notice to the
Administrative Agent (a "Notice of Extension") given not less than 30 nor more
than 45 days prior to the then effective Termination Date (such then effective
Termination Date being an "Existing Termination Date"), advise the Banks that it
requests an extension of the Existing Termination Date by not more than 364
calendar days, effective on the Existing Termination Date. The Administrative
Agent will promptly, and in any event within five Business Days of the receipt
of each Notice of Extension, notify the Banks of the contents of each such
Notice of Extension.
(b) Each Notice of Extension shall be irrevocable upon the Company and
the other Borrowers and constitute a representation by the Borrowers that (i)
neither any Event of Default nor any Default has occurred and is continuing,
(ii) the representations and warranties contained in Article IV (other than
those which expressly relate to an earlier date) are correct on and as of the
date of such Notice of Extension, as though made on and as of such date and
(iii) no Loans shall be outstanding on the Existing Termination Date.
(c) In the event that a Notice of Extension is given to the
Administrative Agent as provided in Section 2.21(a), and the Administrative
Agent notifies a Bank of the contents thereof as provided in Section 2.21(a),
such Bank shall on or before the fifteenth day next preceding the Existing
Termination Date advise the Administrative Agent and the Company whether or not
such
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Bank consents to the extension requested thereby and if any Bank fails to so
advise the Administrative Agent and the Company, such Bank shall be deemed not
to have consented to such extension.
(d) Notwithstanding any provision of this Section 2.21 to the
contrary, each Bank that has expressly consented to an extension of the
Termination Date, may in its sole and absolute discretion at any time prior to
the Existing Termination Date give the Administrative Agent written notice that
such Bank has revoked its consent to such extension of the Existing Termination
Date (a "Notice of Revocation"). Each Notice of Revocation shall be irrevocable.
Upon receipt of any Notice of Revocation, the Administrative Agent will promptly
notify the Borrowers and the Banks of the content of each Notice of Revocation
and the Termination Date shall be the Existing Termination Date.
(e) In the event (i) an extension of the Termination Date is consented
to by all of the Banks and none of the Banks delivers a Notice of Revocation in
accordance with Section 2.21(d) and (ii) on the Existing Termination Date the
Borrowers deliver to the Administrative Agent and each of the Banks a
certificate to the effect that no Default or Event of Default has occurred and
is continuing on the Existing Termination Date and that the representations and
warranties contained in Article IV (other than those which expressly relate to
an earlier date) are correct on and as of the Existing Termination Date as
though made on and as of such date, the Termination Date for the Loans and the
Commitments of all of the Banks shall be automatically extended 364 calendar
days past the Existing Termination Date, effective on the Existing Termination
Date; provided, however, unless all outstanding Loans are repaid in full on the
Existing Termination Date, the Termination Date for the Loans and the
Commitments of the Banks shall be the Existing Termination Date.
SECTION 2.22. Borrowing Subsidiary. The Company may designate any
Wholly-owned Subsidiary (other than an Inactive Subsidiary) as a Borrowing
Subsidiary. Upon the acceptance by the Administrative Agent of a Borrowing
Subsidiary Counterpart of this Agreement in the form of Exhibit 2.22 (a
"Borrowing Subsidiary Counterpart") executed by such Wholly-owned Subsidiary
and the Company, such Wholly-owned Subsidiary shall be a Borrowing Subsidiary
and a party to this Agreement.
SECTION 2.23. Liability of Borrowing Subsidiaries. Notwithstanding
anything in this Agreement to the contrary, in no event shall any Borrowing
Subsidiary now or hereafter party to this Agreement be liable for the Loans or
any other obligations of the Company or any other Borrowing Subsidiary
hereunder; it being the intention of the parties hereto that each Borrowing
Subsidiary shall be liable only for the Loans made to it and its other
obligations hereunder.
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ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to the Initial Loans to the
Company. The obligation of each Bank to make its initial Loan to the Company is
subject to the condition precedent that the Administrative Agent shall have
received on or before the initial Borrowing Date the following, each dated
(unless otherwise indicated) such date and, with respect to all such documents
referred to in Section 3.01(a), Section 3.01(b), Section 3.01(c) and Section
3.01(d), in sufficient copies for each Bank and the Administrative Agent:
(a) A counterpart of this Agreement (to which all of the Exhibits and
Schedules have been attached) dated as of the date hereof executed by the
Company, the Administrative Agent, the Co-Agents and the Banks.
(b) (i) A copy of the articles of incorporation, as amended, of the
Company, certified by the Secretary of State of the State of Texas and a
certificate as to the good standing of the Company from the Comptroller of the
State of Texas; (ii) a certificate of the Secretary or an Assistant Secretary of
the Company certifying (A) that attached thereto is a true and complete copy of
the bylaws of the Company as in effect on the date of such certificate and at
all times since a date prior to the date of the resolutions described in (B)
below, (B) that attached thereto is a true and complete copy of resolutions (i)
duly adopted by the Executive Committee of the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement and the
Agent's Fee Letter, and (ii) duly adopted by the Board of Directors of the
Company, appointing said Executive Committee, and that such resolutions have not
been modified, rescinded or amended and are in full force and effect, (C) that
the articles of incorporation of the Company have not been amended since the
last amendment thereto shown on the good standing certificate furnished pursuant
to (i) above and (D) as to the incumbency and specimen signatures of each
officer of the Company executing this Agreement and the Agent's Fee Letter and
(iii) a certificate of another officer of the Company as to the incumbency and
specimen signatures of the Secretary or Assistant Secretary of the Company.
(c) A certificate of a Senior Vice President, an Executive Vice
President or a Vice President of the Company certifying (i) the truth of the
representations and warranties made by the Company in this Agreement and (ii)
the absence of the occurrence and continuance of any Default or Event of Default
and (iii) that on or prior to the initial Borrowing Date, the principal of and
interest on all loans, all accrued fees and all other amounts due under the
Existing Agreements shall have been paid in full and the commitments thereunder
shall have been terminated.
(d) The written opinions of (i) Liddell, Sapp, Zivley, Hill & LaBoon,
L.L.P., counsel to the Company, addressed to the Administrative Agent and the
Banks and in form and
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substance acceptable to the Administrative Agent and the Banks and (ii) James M.
Shelger, Senior Vice President, General Counsel and Secretary of the Company,
addressed to the Administrative Agent and the Banks and in form and substance
acceptable to the Administrative Agent and the Banks.
(e) An Administrative Questionnaire completed by each Bank.
In addition, on the Effective Date the Administrative Agent shall have received
all fees which it is entitled to receive on such date pursuant to the Agent's
Fee Letter.
SECTION 3.02. Conditions Precedent to the Initial Loan to each
Borrowing Subsidiary. The obligation of each Bank to make its initial Loan to
any Borrowing Subsidiary is subject to the further conditions precedent that the
Administrative Agent shall have received on or before the Borrowing Date for
such Loan the following, each dated such date, and in sufficient copies for each
Bank and the Administrative Agent:
(a) A Borrowing Subsidiary Counterpart executed by such Borrowing
Subsidiary and acknowledged by the Company.
(b) (i) A copy of the articles or certificate of incorporation (or
other similar evidence of organization) of such Borrowing Subsidiary,
together with all amendments, and a current certificate of good standing,
both certified by the appropriate governmental officer, in its jurisdiction
of organization; (ii) a certificate of the Secretary or Assistant Secretary
of such Borrowing Subsidiary certifying, inter alia, (A) true and correct
copies of the bylaws (or other similar document) of such Borrowing
Subsidiary as in effect on the date of such certificate and at all times
since a date prior to the date of the resolutions or other action described
in clause (B) below, (B) true and complete copies of resolutions duly
adopted by the Board of Directors of such Borrowing Subsidiary (or of the
taking of such other action as may be necessary and appropriate under
applicable law), authorizing such Borrowing Subsidiary to execute, deliver
and perform its obligations under its Borrowing Subsidiary Counterpart and
this Agreement, and to borrow and effect other transactions hereunder, and
that such resolutions or other action has not been modified, rescinded or
amended and is in full force and effect and (C) the incumbency and specimen
signatures of the Persons executing any documents on behalf of such
Borrowing Subsidiary; and (iii) a certificate of another officer of such
Borrowing Subsidiary as to the incumbency and specimen signature of the
Secretary or Assistant Secretary of such Borrowing Subsidiary.
(c) A certificate of a principal officer of such Borrowing Subsidiary
certifying (i) the truth of the representations and warranties set forth in
this Agreement with respect to such Borrowing Subsidiary and (ii) the
absence of the occurrence and continuance of any Default or Event of
Default with respect to such Borrowing Subsidiary.
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(d) One or more written opinions of counsel to such Borrowing
Subsidiaries, each in form and substance satisfactory to the Administrative
Agent and the Banks.
(e) A letter from Corporation Service Company, in form and substance
satisfactory to the Administrative Agent, evidencing the obligation of
Corporation Service Company to accept service of process in the State of
New York on behalf of such Borrowing Subsidiary.
(f) Such other documents as either the Administrative Agent or any
Bank through the Administrative Agent may have reasonably requested.
SECTION 3.03. Conditions Precedent to Each Committed Borrowing. The
obligation of each Bank to make a Committed Loan on the occasion of any
Committed Borrowing (including the initial Committed Borrowing) shall be subject
to the further conditions precedent that on the Borrowing Date of such Committed
Borrowing the following statements shall be true (and each of the giving of the
applicable Committed Borrowing Request and the acceptance by a Borrower of the
proceeds of such Committed Borrowing shall constitute a representation and
warranty by the Company and such Borrower (if not the Company) that on the date
of such Committed Borrowing such statements are true; provided, however, that to
the extent such representation and warranty is made by a Borrowing Subsidiary,
such representation and warranty shall (in the case of clauses (a) and (b) be
made only with respect to such Borrowing Subsidiary and its Subsidiaries):
(a) The representations and warranties contained in Article IV are
correct on and as of the date of such Committed Borrowing, before and after
giving effect to such Committed Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date; provided,
however, that for purposes of this clause (a), on and after any date on
which the Company delivers its consolidated financial statements to the
Administrative Agent and the Banks pursuant to Section 5.01(a)(i) or
5.01(a)(ii), as the case may be, (A) the reference in the first sentence of
Section 4.07 to the Company Financials shall be a reference to the
consolidated financial statements of the Company and its Subsidiaries most
recently delivered to the Administrative Agent and the Banks by the Company
pursuant to Section 5.01(a)(i) or 5.01(a)(ii), as the case may be, prior to
the date of such Committed Borrowing and (B) the reference in the last
sentence of Section 4.07 to December 31, 1996, shall be a reference to the
date of the audited consolidated financial statements most recently
delivered to the Administrative Agent and the Banks pursuant to Section
5.01(a)(i);
(b) No event has occurred and is continuing, or would result from such
Committed Borrowing or from the application of the proceeds therefrom,
which constitutes either a Default or an Event of Default; and
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(c) Following the making of such Committed Borrowing and all other
Borrowings to be made on the same day under this Agreement, the aggregate
principal amount of all Loans then outstanding shall not exceed the Total
Commitment.
SECTION 3.04. Conditions Precedent to Each Competitive Borrowing. The
obligation of each Bank which is to make a Competitive Loan on the occasion of a
Competitive Borrowing (including the initial Competitive Borrowing) to make such
Competitive Loan as part of such Competitive Borrowing is subject to the further
conditions precedent that:
(a) The Administrative Agent shall have received a Competitive Bid
Request with respect thereto; and
(b) On the Borrowing Date of such Competitive Borrowing the following
statements shall be true (and each of the giving of the applicable
Competitive Bid Request and the acceptance by a Borrower of the proceeds of
such Competitive Borrowing shall constitute a representation and warranty
by the Company and such Borrower (if not the Company) that on the date of
such Competitive Borrowing such statements are true; provided, however,
that to the extent such representation and warranty is made by a Borrowing
Subsidiary, such representation and warranty shall (in the case of clauses
(i) and (ii)) be made only with respect to such Borrowing Subsidiary and
its Subsidiaries):
(i) The representations and warranties contained in Article IV
are correct on and as of the date of such Competitive Borrowing,
before and after giving effect to such Competitive Borrowing and to
the application of the proceeds therefrom, as though made on and as of
such date; provided, however, that for purposes of this clause (i), on
and after any date on which the Company delivers its consolidated
financial statements to the Administrative Agent and the Banks
pursuant to Section 5.01(a)(i) or 5.01(a)(ii), as the case may be, (A)
the reference in the first sentence of Section 4.07 to the Company
Financials shall be a reference to the consolidated financial
statements of the Company and its Subsidiaries most recently delivered
to the Administrative Agent and the Banks by the Company pursuant to
Section 5.01(a)(i) or 5.01(a)(ii), as the case may be, prior to the
date of such Competitive Borrowing and (B) the reference in the last
sentence of Section 4.07 to December 31, 1996, shall be a reference to
the date of the audited consolidated financial statements most
recently delivered to the Administrative Agent and the Banks pursuant
to Section 5.01(a)(i);
(ii) No event has occurred and is continuing, or would result
from such Competitive Borrowing or from the application of the
proceeds therefrom, which constitutes either a Default or an Event of
Default; and
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(iii) Following the making of such Competitive Borrowing and all
other Borrowings to be made on the same day under this Agreement, the
aggregate principal amount of all Loans then outstanding shall not
exceed the Total Commitment.
SECTION 3.05. Conditions Precedent to Conversions and Continuations.
The obligation of the Banks to convert any existing Committed Borrowing into a
Eurodollar Committed Borrowing or to continue any existing Committed Borrowing
as a Eurodollar Committed Borrowing is subject to the condition precedent that
on the date of such conversion or continuation no Default or Event of Default
shall have occurred and be continuing or would result from the making of such
conversion or continuation. The acceptance of the benefits of each such
conversion and continuation shall constitute a representation and warranty by
the Company and each Borrowing Subsidiary to each of the Banks that no Default
or Event of Default shall have occurred and be continuing or would result from
the making of such conversion or continuation; provided, however, that to the
extent such representation and warranty is made by a Borrowing Subsidiary, such
representation and warranty shall be made only with respect to such Borrowing
Subsidiary and its Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Administrative Agent and
the Banks and, to the extent the following relates to any Borrowing Subsidiary
or its Subsidiaries, such Borrowing Subsidiary severally represents and warrants
to the Administrative Agent and the Banks as follows (all references in this
Article IV to "this Agreement" being deemed to include also, in the case of any
Borrowing Subsidiary, its Borrowing Subsidiary Counterpart):
SECTION 4.01. Organization and Qualification. The Company and each of
its Subsidiaries (except Inactive Subsidiaries) (a) are entities duly organized,
validly existing and in good standing under the laws of the respective
jurisdictions of their organization, (b) have the corporate or other power to
own their property and to carry on their businesses as now conducted and (c) are
duly qualified to do business as foreign corporations and are in good standing
in every jurisdiction in which the failure to be so qualified would have a
material adverse effect upon the business or properties of the Company and its
Subsidiaries taken as a whole or upon the ability of any Borrower to perform its
obligations under this Agreement or, in the case of the Company, the Guaranty.
The Company is a Texas corporation. The corporations named in Schedule 4.01 are
the only Subsidiaries of the Company on the date of this Agreement, and such
Schedule accurately reflects the percentage of (y) the issued and outstanding
capital stock and (z) the stock of each class having ordinary voting power, of
each Subsidiary owned by the Company on the date of this Agreement and
accurately identifies the Consolidated Subsidiaries, the Inactive Subsidiaries,
the Substantially-owned Subsidiaries and the Wholly-owned Subsidiaries on the
date of this Agreement.
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SECTION 4.02. Authorization, Validity, Etc. Each Borrower has the
corporate or other power and authority to make and carry out this Agreement
(and, in the case of the Company, the Guaranty), to make the Borrowings provided
for herein and to perform its obligations hereunder (and, in the case of the
Company, the Guaranty) and all such action has been duly authorized by all
necessary corporate proceedings on its part. This Agreement has been duly and
validly executed and delivered by the Borrowers and the Guaranty and the Agent's
Fee Letter have been duly and validly executed and delivered by the Company and
all such agreements constitute valid and legally binding agreements of the
Borrowers parties thereto enforceable in accordance with their respective terms,
except, in each case, as such enforceability may be limited by bankruptcy,
insolvency or other laws of general application relating to or affecting the
enforcement of creditors' rights.
SECTION 4.03. Governmental Consents, Etc. No authorization, consent,
approval, license or exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is necessary for the valid execution, delivery or
performance by any Borrower of this Agreement, or by the Company of the Guaranty
or the Agent's Fee Letter.
SECTION 4.04. Conflicting or Adverse Agreements or Restrictions.
Neither the Company nor any of its Subsidiaries is a party to any contract or
agreement or subject to any restriction which materially and adversely affects
the business or assets or financial condition of the Company and its
Subsidiaries taken as a whole. Neither the execution nor delivery of this
Agreement or the Guaranty nor compliance with the terms and provisions hereof or
thereof nor any Borrowing will be contrary to the provisions of, or constitute a
default under, (a) the charter or bylaws of the Company or any of its
Subsidiaries or (b) any applicable law or any applicable regulation, order,
writ, injunction or decree of any court or governmental instrumentality or (c)
any agreement to which the Company or any of its Subsidiaries is a party or by
which it is bound or to which it is subject, which default, in the case of
clause (b) or (c) of this Section 4.04 could, individually or together with all
other such defaults described in this Section 4.04, reasonably be expected to
result in a material adverse change in the business or condition of the Company
and its Subsidiaries taken as a whole or upon the ability of any Borrower to
perform its obligations under this Agreement and, in the case of the Company,
the Guaranty.
SECTION 4.05. Title to Assets. The Company and each Subsidiary (except
Inactive Subsidiaries) have good and indefeasible title to their respective
assets, subject to no Liens, except those permitted in Section 5.02(c).
SECTION 4.06. Actions Pending. There is no action or proceeding
pending or, to the knowledge of any Borrower, threatened against the Company or
any of its Subsidiaries before any court or administrative agency which could
reasonably be expected to result in a material adverse change in the business or
condition of the Company and its Subsidiaries taken as a whole
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or upon the ability of such Borrower to perform its obligations under this
Agreement and, in the case of the Company, the Guaranty.
SECTION 4.07. Financial Statements. The Company has furnished or has
caused to be furnished to each Bank (a) consolidated financial statements of the
Company as at and for the fiscal year ended December 31, 1996, included in the
Company's annual report for the fiscal year ended December 31, 1996 and
accompanied by the report and opinion of Coopers & Lybrand L.L.P., (b) the
Annual Report of the Company on Form 10-K for the fiscal year ended December 31,
1996 and (c) the Quarterly Report of the Company on Form 10-Q for the fiscal
quarter ended March 31, 1997 (the financial statements described in clauses (a)
through (c) being collectively, the "Company Financials"). The Company
Financials have been prepared in conformity with GAAP consistently followed
(except as otherwise disclosed in such financial statements) throughout the
periods involved and present fairly the consolidated financial condition of the
Company and its Consolidated Subsidiaries and the consolidated results of
operations of the Company and its Consolidated Subsidiaries as at the dates and
for the periods indicated. There has been no material adverse change in the
consolidated condition or operation, financial or otherwise, of the Company and
its Subsidiaries since December 31, 1996.
SECTION 4.08. Default. Neither the Company nor any of its Subsidiaries
is in default in any respect under the provisions of any instrument evidencing
any Debt or of any agreement relating thereto, or in default in any respect
under any order, writ, injunction or decree of any court, or in default in any
respect under or in violation of any law, order, regulation or demand of any
governmental instrumentality, which defaults or violations could reasonably be
expected to have a material adverse effect upon the business or properties of
the Company and its Subsidiaries taken as a whole or upon the ability of any
Borrower to perform its obligations under this Agreement and, in the case of the
Company, the Guaranty.
SECTION 4.09. Investment Company Act. Neither the Company nor any of
its Subsidiaries is, or is directly or indirectly controlled by or acting on
behalf of any Person which is, an "investment company," as such term is defined
in the Investment Company Act of 1940, as amended.
SECTION 4.10. Public Utility Holding Company Act. Neither the Company
nor any of its Subsidiaries is a non-exempt "holding company," or subject to
regulation as such, or, to the knowledge of the Company's officers, an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
SECTION 4.11 ERISA. Neither the Company nor any of its Subsidiaries
has incurred any accumulated funding deficiency, within the meaning of ERISA,
material to the
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Company and its Subsidiaries taken as a whole, whether or not waived, or any
liability material to the Company and its Subsidiaries, when taken as a whole,
under Title IV of ERISA.
SECTION 4.12. Payment of Taxes. The Company and each of its
Subsidiaries (except Inactive Subsidiaries) have filed all federal and state
income and franchise tax returns which, to the knowledge of the officers
thereof, are required to be filed and have paid all taxes shown on said returns
and all assessments which are due other than such taxes and assessments which
are being contested in good faith by appropriate proceedings diligently
conducted and for which reserves or other appropriate provisions, if any, as
shall be required by GAAP, have been made. The consolidated federal income tax
returns of the Company and its Consolidated Subsidiaries have been examined and
reported on by the Internal Revenue Service for all fiscal years to and
including the fiscal year ended December 31, 1992.
SECTION 4.13. Purpose of Loans. None of the proceeds of the Loans will
be used for the purpose of purchasing or carrying any "margin stock" within the
meaning of Regulation G or Regulation U (herein called "Margin Stock") or for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry Margin Stock, or for any other purpose which might
constitute a "purpose" credit within the meaning of Regulation G or Regulation
U, as now in effect or as they may hereafter be amended. Margin Stock did not on
December 31, 1996, and does not on the date hereof constitute more than 25% of
the assets of the Company or any of its Subsidiaries, and the Company and the
other Borrowers do not intend or foresee that Margin Stock will at any time
during the term of this Agreement constitute more than 25% of such assets.
SECTION 4.14. Patents, Etc. The Company and each of its Subsidiaries
have all patents, patent rights or licenses, trademarks, service marks,
trademark rights, trade names, trade name rights, and copyrights which are
required in order for it to conduct its business as now conducted without any
known material conflict with the rights of others.
SECTION 4.15. No Material Guarantees or Letters of Credit. Each
Assured Obligation and each Letter of Credit Obligation of the Company and its
Subsidiaries is listed in the Company Financials, in the most recently delivered
financial statements delivered pursuant to Section 5.01(a) or on Schedule 4.15,
other than any such Assured Obligation or Letter of Credit Obligation which
individually does not exceed $100,000 or which together with all such other
Assured Obligations and Letter of Credit Obligations does not exceed $1,000,000;
provided, however, after the Effective Date, Schedule 4.15 shall be deemed to
include all Assured Obligations and Letter of Credit Obligations of the Company
and its Subsidiaries incurred or issued in accordance with the provisions of
Section 5.02(g). Neither the Company nor any of its Subsidiaries has any
liability, contingent or otherwise, which either individually or collectively
with all such other liabilities could reasonably be expected to have a material
adverse effect upon the business or
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properties of the Company and its Subsidiaries taken as a whole or upon the
ability of any Borrower to perform its obligations under this Agreement and, in
the case of the Company, the Guaranty.
SECTION 4.16. Enhancement Agreements. Schedule 4.16 describes the
principal amount of all obligations, including all Debt, Letter of Credit
Obligations and unfunded commitments which are covered by any Enhancement
Agreement; provided, however, after the Execution Date, Schedule 4.16 shall be
deemed to include all such principal obligations described on the schedule most
recently delivered pursuant to the last sentence of Section 5.01(a).
ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants. So long as any Loan shall remain
unpaid or any Bank shall have any Commitment hereunder, unless the Majority
Banks shall otherwise agree in writing, each Borrower covenants and agrees for
itself and the Company covenants and agrees with respect to each other Borrower
as follows:
(a) Financial Statements and Other Information. The Company shall
deliver to each Bank:
(i) As soon as available, and in any event within 120 days after
the end of each fiscal year, a copy of the annual audit report of the
Company for such fiscal year containing a consolidated balance sheet,
a consolidated statement of income, a consolidated statement of
stockholders' equity and a consolidated statement of cash flows, all
in reasonable detail and accompanied by a report and opinion of
Coopers & Lybrand L.L.P. or another independent certified public
accountant of recognized standing satisfactory to the Majority Banks.
The Company will obtain from such accountants and deliver to each Bank
at the time said financial statements are delivered the written
statement of such accountants that in making the examination necessary
for said report and opinion they have obtained no knowledge of any
Event of Default or Default, or if such accountants shall have
obtained knowledge of any Event of Default or Default, they shall
state the nature and period of existence thereof in such statement;
provided, that such accountants shall not be liable directly or
indirectly to any such Bank for failure to obtain knowledge of any
Event of Default or Default;
(ii) As soon as available, and in any event within 60 days after
the end of each of the first three quarterly accounting periods in
each fiscal year, a consolidated statement of stockholders' equity and
the report of the Company to the Securities and Exchange Commission on
Form 10-Q;
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(iii) Promptly after sending or filing thereof, copies of all
statements and reports sent to stockholders and all effective
registration statements and regular or periodic reports filed with the
Securities and Exchange Commission;
(iv) Promptly upon request, such additional financial or other
information as any Bank may reasonably request;
(v) Promptly, and in any case within five days after the
President, the Senior Vice President and Chief Financial Officer, the
Vice President and Treasurer or the General Counsel of the Company
learns thereof, notice of (A) the occurrence of a Default or an Event
of Default, (B) any material default of the Company or any of its
Subsidiaries under any other borrowed money obligation, (C) any
monetary or other material default of the Company or any of its
Subsidiaries under any material contract or (D) receipt of any notice
from any federal or other governmental instrumentality of any
violation by the Company or any of its Subsidiaries of any legal
requirement, which violation together with all other such violations
by the Company and its Subsidiaries could reasonably be expected to
have a material adverse effect upon the business or properties of the
Company and its Subsidiaries taken as a whole or upon the ability of
any Borrower to perform its obligations under this Agreement and, in
the case of the Company, the Guaranty, describing the nature of such
Default, such Event of Default, such default or such violation and
what action the Company or such Subsidiary, as the case may be, has
taken or proposes to take with respect thereto; and
(vi) Promptly after each annual meeting of the Company's
shareholders, an Officer's Certificate of the election and incumbency
of the Company's officers and directors in form and substance
satisfactory to the Banks.
All financial statements specified in clauses (i) and (ii) above shall be
furnished in consolidated form for the Company and its Consolidated
Subsidiaries. Investments by the Company in its Subsidiaries other than its
Consolidated Subsidiaries shall be accounted for on the equity method.
Together with each delivery of financial statements required by clauses (i)
and (ii) above, the Company will deliver to each Bank (y) schedules and/or
computations demonstrating that the Company is in compliance with its
covenants in Sections 5.02(a), 5.02(b), 5.02(c) and 5.02(g) or reflecting
any noncompliance therewith as at the applicable date and (z) an Officer's
Certificate stating that there exists no Event of Default or Default, or,
if any Event of Default or Default exists, stating the nature thereof, the
period of existence thereof and what action the Company or any other
Borrower has taken or proposes to take with respect thereto. Together with
each delivery of financial statements required by clause (i) above, the
Company will deliver to each such Bank a
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schedule of the principal amount of all obligations of the Company covered
by any Enhancement Agreement.
(b) Books and Records. Each Borrower shall maintain, and cause each of
its Subsidiaries to maintain, proper books of record and account in
accordance with generally accepted accounting practices.
(c) Insurance. Each Borrower shall maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible companies (or by self
insurance to the extent authorized by law) in such amounts and against such
risks as is customarily carried on comparable business and properties, and
furnish to the Banks, upon request by the Administrative Agent or any Bank,
an Officer's Certificate containing full information as to the insurance
carried and self insurance levels maintained; and promptly after notice in
writing from the Administrative Agent obtain such additional insurance as
the Administrative Agent may reasonably request and which is customarily
carried on comparable businesses or properties.
(d) Maintenance of Property. Each Borrower shall cause its property
and the property of its Subsidiaries to be maintained, preserved, protected
and kept in good repair, working order and condition so that the business
carried on in connection therewith may be conducted properly and
efficiently.
(e) Inspection of Property and Records. Upon reasonable advance
notice, each Borrower shall permit any Person designated by the
Administrative Agent or any of the Banks in writing to visit and inspect
any of the properties, corporate books and financial records of such
Borrower and its Subsidiaries and discuss their respective affairs and
finances with their principal officers, all at such times as the
Administrative Agent or such Bank may reasonably request.
(f) Existence, Laws, Obligations. The Company shall maintain its
corporate existence, comply and cause its Subsidiaries (except Inactive
Subsidiaries) to comply with all applicable statutes and governmental
regulations, including all applicable environmental statutes and
regulations (except those the validity or applicability of which the
Company shall be contesting in good faith and by appropriate proceedings
diligently conducted for which such reserves or other appropriate
provisions, if any, as shall have been required by GAAP, have been made),
where the failure to so comply would have a material adverse effect on the
business, operations, property or condition of the Company and its
Subsidiaries taken as a whole or upon the ability of any Borrower to
perform its obligations under this Agreement and, in the case of the
Company, the Guaranty, and pay and cause its Subsidiaries (except Inactive
Subsidiaries) to pay all taxes, assessments, governmental charges, claims
for labor, supplies, rent and other obligations which if unpaid might
become a Lien against
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the property of the Company or such Subsidiary (except Inactive
Subsidiaries), and where the failure to make such payment or where the
creation of such Lien would have a material adverse effect on the business,
operations, property or condition of the Company and its Subsidiaries taken
as a whole or upon the ability of any Borrower to perform its obligations
under this Agreement and, in the case of the Company, the Guaranty, except
any of the foregoing liabilities being contested in good faith by
appropriate proceedings diligently conducted for which such reserves or
other appropriate provisions, if any, as shall have been required by GAAP,
have been made.
SECTION 5.02. Negative Covenants. So long as any Loan shall remain
unpaid or any Bank shall have any Commitment hereunder, without the written
consent of the Majority Banks:
(a) Net Worth. The Company will not permit Net Worth at any time to be
less than $1,100,000,000.
(b) Debt. The Company will not permit the ratio of Consolidated Debt
to Total Capitalization at any time to be greater than .65 to 1.0.
(c) Liens, Etc. The Company will not, and will not permit any of its
Subsidiaries to, incur any Liabilities secured by a Lien upon any of the
assets of the Company or any such Subsidiary or upon any shares of stock or
any long-term receivable of the Company due from any of its Subsidiaries
(whether such assets, shares of stock or long-term receivables are now
owned or hereafter acquired) without in any such case effectively providing
concurrently with the incurrence of any such Liability that all sums
payable at that time or thereafter under this Agreement and the Guaranty
(together with, if the Company shall so determine, any other Liabilities of
the Company or such Subsidiary then existing or thereafter created which is
not subordinate to such sums) shall be secured equally and ratably with (or
at the option of the Company, prior to) such Liability, so long as such
Liability shall be so secured; provided, however, that nothing in this
Section 5.02(c) shall prevent, restrict or apply to (and there shall be
excluded from secured Debt in any computation under this Section 5.02(c))
Liabilities secured by):
(i) Liens for taxes, assessments, or similar charges, incurred
in the ordinary course of business that are not yet past due or which
are being contested by the Company or such Subsidiary in good faith
and against which adequate reserves as required by GAAP have been
established by the Company or such Subsidiary, as the case may be;
(ii) Pledges or deposits made in the ordinary course of business
to secure payment of worker's compensation, or to participate in any
fund in connection with
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worker's compensation, unemployment insurance, old-age pensions or
other social security programs;
(iii) Liens of mechanics, materialmen, repairmen, warehousemen,
carriers or other like Liens, securing obligations incurred in the
ordinary course of business that are not yet past due or which are
being contested by the Company or such Subsidiary in good faith and
against which adequate reserves as required by GAAP have been
established by the Company or such Subsidiary, as the case may be;
(iv) Liens which secure Liabilities owing by a Subsidiary of the
Company to the Company or to another Subsidiary of the Company;
(v) Deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(vi) Easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Company or such Subsidiary; and
(vii) Liens not otherwise permitted under this Section 5.02(c)
which secure Liabilities permitted hereunder not exceeding, as to the
Company and its Consolidated Subsidiaries, 10% of Consolidated Assets
at any time outstanding.
(d) Stock of Subsidiaries, Merger, Sale of Assets, Etc. The Company
will not permit any of its Subsidiaries to issue or dispose of its stock
(other than directors' qualifying shares) except to the Company or to
another Subsidiary of the Company, and the Company will not and will not
permit any of its Subsidiaries to sell or otherwise dispose of any shares
of stock of, or obligation (howsoever evidenced) from, any Subsidiary of
the Company, or to merge or consolidate with any other corporation or sell,
lease or transfer or otherwise dispose of all or a substantial part of its
assets (as distinguished from sales of excess land and other assets in the
ordinary course of business which are permitted), whether in one
transaction or a series of transactions, provided, however, that so long as
after giving effect thereto no Default or Event of Default shall exist, the
following transactions shall be permitted pursuant to this Section 5.02(d):
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(i) Any corporation including any Subsidiary of the Company may
merge or consolidate with the Company provided that the Company shall
be the continuing or surviving corporation;
(ii) Any corporation may merge into or consolidate with any
Subsidiary of the Company provided that the continuing or surviving
corporation is a Subsidiary of the Company;
(iii) Any Subsidiary of the Company may sell, lease, transfer or
otherwise dispose of any of its assets to the Company or another
Subsidiary of the Company;
(iv) Provident may sell, lease, transfer or otherwise dispose of
the stock or any assets of any Enforcement Subsidiary in an
arm's-length transaction;
(v) The Company may, with respect to any Acquisition, effect a
disposition of stock or assets to the extent required pursuant to any
agreement or consent order entered into between the Company and the
Federal Trade Commission in connection with and as a condition to such
Acquisition; and
(vi) The Company or any of its Subsidiaries may sell or
otherwise dispose of the stock of, or all or substantially all of the
assets of, any of their respective Subsidiaries if, after giving
effect to such sale or other disposition the aggregate amount of all
such sales and dispositions by the Company and its Subsidiaries
(including all dispositions pursuant to clause (vi) above) occurring
on and after the Execution Date to the date of such sale or
disposition do not exceed 10% of Consolidated Assets on the date of
such sale or disposition.
Consensual Liens granted by the Company or any of its Subsidiaries
permitted pursuant to Section 5.02(c) shall not constitute a "disposition"
for purposes of this Section 5.02(d) until such time as holder of any such
Lien forecloses or otherwise enforces such Lien.
(e) Change in Accounting Method. The Company will not and will not
permit any of its Subsidiaries to make any change in the method of
computing depreciation for financial statement purposes or any other
material change in accounting methods other than such changes as may be
required by the Financial Accounting Standards Board or the Securities and
Exchange Commission or to conform newly acquired Subsidiaries to the
Company's accounting methods. Upon making any such change, the Company will
promptly give the Banks notice thereof.
(f) Change of Business. The Company will not and will not permit any
of its Subsidiaries to engage in a line or lines of business other than
those being engaged in by the
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Company or one or more of its existing Subsidiaries on the date of this
Agreement and lines of business related to the death care industry.
(g) Guaranties and Letters of Credit. The Company will not and will
not permit any Subsidiary of the Company to make or permit to remain
outstanding any Assurance or any Letter of Credit unless, after giving
effect thereto, the aggregate amount of all Assured Obligations and Letter
of Credit Obligations then outstanding shall not exceed 20% of Net Worth,
excluding, without duplication, the sum of the aggregate outstanding amount
of all Debt of the Company and its Subsidiaries guaranteed by any such
Assurances.
(h) ERISA. The Company will not at any time permit any Plan to:
(i) Engage in any "prohibited transaction" as such term is
defined in Section 4975 of the Code or in Section 406 of ERISA for
which there is no applicable exemption;
(ii) Incur any "accumulated funding deficiency" as such term is
defined in Section 302 of ERISA and Section 412 of the Code, whether
or not waived;
(iii) Be terminated under circumstances which are likely to
result in the imposition of a Lien on the property of the Company or
any member of the ERISA Group pursuant to Section 4068 of ERISA, if
and to the extent such termination is within the control of the
Company; or
(iv) Cease to comply in any material respect with the provisions
of the Code and ERISA applicable to such Plan,
if any event or condition described in clause (i), (ii), (iii) or (iv)
above is likely to subject the Company or any member of its ERISA Group to
a liability which, in the aggregate, is material in relation to the
business, operations, property or condition, financial or otherwise, of the
Company and the other members of its ERISA Group on a consolidated basis.
(i) Restriction on Use of Proceeds. No Borrower nor any agent acting
on behalf of any Borrower has taken or will take any action, or has
suffered to exist or will suffer to exist any condition, that might cause
this Agreement or any Loan to violate Regulation G, Regulation U,
Regulation X, or any other regulation of the Board or to violate the
Securities Exchange Act of 1934, as amended, in each case as in effect now
or as the same may hereafter be in effect. No Borrower will use, directly
or indirectly, the proceeds of any Loan hereunder to acquire any security
(within the meaning of the Securities Exchange Act of 1934, as amended), in
any tender offer subject to Section 13 or 14 of the Securities Exchange Act
of 1934, as amended, unless such tender offer has been approved by the
Board of
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Directors (or other analogous body) of the issuer of the securities that
are the subject of such tender offer, so long as a majority of the
directors (or members) constituting such Board (or such body) were
directors (or members) at least 30 days prior to the making of such tender
offer.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Failure to Pay the Loans or the Guaranty. The Company or any
Borrowing Subsidiary shall fail to pay or prepay (i) any principal of or
interest on any Loan or, in the case of the Company, any of the Guaranteed
Obligations, when due under this Agreement or (ii) any other amount due
hereunder within ten days following the date on which payment of such other
amount is due; or
(b) Failure to Pay Certain Other Indebtedness. The Company or any of
its Subsidiaries does not pay principal of or interest on any other Debt,
Assured Obligation or Letter of Credit Obligation, in an amount of
$10,000,000 or more, owed to a financial institution, when due or within
any grace period allowed by such Debt, Assured Obligation or Letter of
Credit Obligation, or if the holder of such other Debt, Assured Obligation
or Letter of Credit Obligation declares, or may declare, such other Debt,
Assured Obligation or Letter of Credit Obligation due prior to its stated
maturity because of the Company's or such Subsidiary's default thereunder
unless such default is waived or cured within one business day of its
discovery; or
(c) Failure to Pay Other Indebtedness. The Company or any of its
Subsidiaries does not pay principal of or interest on any Debt, Assured
Obligation or Letter of Credit Obligation, in an amount of $10,000,000 or
more (except those described in Sections 6.01(a) and 6.01(b)) within five
days after the date due (or within any longer period of grace that may be
allowed by the terms thereof) or if the holder or holders (or a trustee on
behalf of such holder or holders) of such other obligation declares such
Debt, Assured Obligation or Letter of Credit Obligation due (or such Debt,
Assured Obligation or Letter of Credit Obligation becomes due without such
declaration) prior to its stated maturity because of the Company's or such
Subsidiary's default thereunder, provided that if the holder of any such
Debt, Assured Obligation or Letter of Credit Obligation accelerates the
maturity thereof and the Company or such Subsidiary promptly (and in any
case within 30 days following such acceleration) pays such Debt, Assured
Obligation or Letter of Credit Obligation, it shall not be in default under
this Section 6.01(c) by reason of such acceleration; or
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(d) Misrepresentation. Any material representation or warranty made or
deemed made by or on behalf of the Company or any Borrowing Subsidiary
herein or in any writing furnished in connection with this Agreement shall
be false or misleading in any material respect when made or deemed made or
furnished; or
(e) Violation of Certain Covenants. The Company violates any covenant,
agreement or condition contained in Section 5.02; or
(f) Violation of Other Covenants. The Company or any Borrowing
Subsidiary violates any other covenant, agreement or condition contained
herein and such violation shall not have been remedied within 30 days after
written notice shall have been given to the Company or such Borrowing
Subsidiary by the Administrative Agent; or
(g) Assignment for Benefit of Creditors. The Company or any of its
Material Subsidiaries makes an assignment for the benefit of creditors; or
(h) Voluntary Bankruptcy. The Company or any of its Material
Subsidiaries applies to any tribunal for the appointment of a trustee or
receiver or custodian of any substantial part of the assets of the Company
or such Material Subsidiary, or commences any proceedings relating to the
Company or such Material Subsidiary under any bankruptcy, reorganization,
rearrangement, insolvency, readjustment of debt, dissolution or other
liquidation law of any jurisdiction; or
(i) Involuntary Bankruptcy. Any such application is filed, or any such
proceedings are commenced, against the Company or any of its Material
Subsidiaries, and the Company or such Material Subsidiary indicates its
approval, consent or acquiescence, or an order is entered appointing such
trustee or receiver or custodian, or adjudicating the Company or any of its
Material Subsidiaries bankrupt or insolvent, or approving the petition in
any such proceedings, and such order remains in effect for 60 days; or
(j) Dissolution or Split-Up. Any order is entered in any proceeding
against the Company or any of its Subsidiaries (i) which shall have
contributed more than 15% of Consolidated Net Income during the immediately
preceding fiscal year or (ii) the tangible assets of which shall have
constituted more than 15% of Tangible Consolidated Assets of the Company as
at the end of the immediately preceding fiscal year, decreeing the
dissolution or split-up of the Company or such Subsidiary, and such order
remains in effect for 60 days; or
(k) Failure to Pay Dividend. The Company does not pay any dividend on
any of its capital stock as declared or permits any dividend to accumulate
on any of its capital stock in respect of which cumulative dividends are
provided for; or
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(l) Undischarged Judgment. Final judgment for the payment of money in
excess of $10,000,000 shall be rendered against the Company or any of its
Subsidiaries and the same shall remain undischarged for a period of 30 days
during which execution shall not be effectively stayed; or
(m) ERISA Default. The actuarial present value of unfunded vested
benefits under all Plans (other than multiemployer plans, as defined in
Section 3(37) of ERISA) shall exceed $10,000,000 (excluding in such
computation any Plan with assets greater than benefit liabilities), or any
one or more of the following events shall occur with respect to a Plan or
Plans and such occurrence (or occurrences, in the aggregate) could result
in liability of the Company or any of its Subsidiaries to the PBGC or to
the Plan or Plans in the aggregate amount of $10,000,000 or more for the
Company and such Subsidiaries taken as a whole:
(i) Any finding or determination shall be made under Section
4041(c) or (e) of ERISA;
(ii) Any fact or circumstance shall occur which, in the
reasonable opinion of the Majority Banks, provides grounds for the
commencement of any proceeding under Section 4042 of ERISA;
(iii) Any proceeding shall be commenced under Section 4042 of
ERISA;
(iv) Any Plan termination; or
(v) Any full or partial withdrawal (as such terms are defined
in Title IV of ERISA);
then, (i) if any Event of Default described in Section 6.01(h) or Section
6.01(i) shall occur and be continuing, all Loans then outstanding hereunder
and interest accrued thereon and all other liabilities hereunder shall
thereupon become and be immediately due and payable without presentment,
demand, protest, notice of intent to accelerate, or other notice of any
kind to any Borrower or any other Person, all of which are hereby expressly
waived by each Borrower, the Commitments shall thereupon immediately
terminate and the Banks shall be under no further obligation to make Loans
hereunder, and (ii) if any other Event of Default shall occur and be
continuing, the Administrative Agent shall (A) if requested by the Majority
Banks, by notice to the Borrowers, terminate the Commitments and they shall
thereupon immediately terminate and (B) if requested by the Majority Banks,
by notice to the Borrowers, declare all Loans then outstanding hereunder
and interest accrued thereon and all other liabilities of the Borrowers
hereunder and under the Agent's Fee Letter to be immediately due and
payable, and the same shall thereupon become and be forthwith due and
payable without presentment, demand, protest, notice of intent to
accelerate, or other notice
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of any kind to any Borrower or any other Person, all of which are hereby
expressly waived by each Borrower.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action. Subject to Section 7.06, each
Bank hereby irrevocably appoints and authorizes the Administrative Agent to act
on its behalf and to exercise such powers under this Agreement and the Guaranty
as are specifically delegated to or required of the Administrative Agent by the
terms hereof or thereof, together with such powers as are reasonably incidental
thereto. As to any matters not expressly provided for by this Agreement
(including enforcement or collection of the Loans) or the Guaranty, the
Administrative Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Banks, and such instructions shall be binding upon all Banks;
provided, however, that the Administrative Agent shall not be required to take
any action which exposes the Administrative Agent to personal liability or which
is contrary to this Agreement, the Guaranty or applicable law.
SECTION 7.02. Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement or the Loans (a) with the consent or at the
request of the Majority Banks or (b) in the absence of its or their own gross
negligence or willful misconduct (IT BEING THE EXPRESS INTENTION OF THE PARTIES
THAT THE ADMINISTRATIVE AGENT AND ITS DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES
SHALL HAVE NO LIABILITY FOR ACTIONS AND OMISSIONS UNDER THIS SECTION 7.02
RESULTING FROM THEIR SOLE ORDINARY OR CONTRIBUTORY NEGLIGENCE). Without
limitation of the generality of the foregoing, the Administrative Agent: (i) may
treat the original holder, or the holder named in the most recent notice of
assignment received by it pursuant to this Section 7.02, as the case may be, of
each Loan as the holder thereof until the Administrative Agent receives written
notice of the assignment or transfer thereof signed by such holder and in form
satisfactory to the Administrative Agent; (ii) may consult with legal counsel
(including counsel for any Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Bank
and shall not be responsible to any Bank for any statements, warranties or
representations made in or in connection with this Agreement or any Loan; (iv)
except as otherwise expressly provided herein, shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or to inspect the property (including
the books and records) of any Borrower; (v) shall not be responsible to any Bank
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value
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of this Agreement or any instrument or document furnished pursuant hereto; and
(vi) shall incur no liability under or in respect of this Agreement or any Loan
by acting upon any notice, consent, certificate or other instrument or writing
(which may be by facsimile transmission) reasonably believed by it to be genuine
and signed or sent by the proper party or parties.
SECTION 7.03. Administrative Agent and Affiliates; Chase and
Affiliates. Without limiting the right of any other Bank to engage in any
business transactions with the Borrowers or any of its Affiliates, with respect
to their Commitments and the Loans, if any, made by them, Chase and each other
Bank that may become the Administrative Agent shall have the same rights and
powers under this Agreement and its Loans as any other Bank and may exercise the
same as though it were not the Administrative Agent; and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include Chase and any such
other Bank, in their individual capacities. Chase, each other Person who becomes
the Administrative Agent and their respective Affiliates may be engaged in, or
may hereafter engage in, one or more loans, letters of credit, leasing or other
financing activities not the subject of this Agreement (collectively, the "Other
Financings") with any Borrower or any of its Affiliates, or may act as trustee
on behalf of, or depositary for, or otherwise engage in other business
transactions with, any Borrower or any of its Affiliates (all Other Financings
and other such business transactions being collectively, the "Other Activities")
with no responsibility to account therefor to the Banks. Without limiting the
rights and remedies of the Banks specifically set forth herein, no other Bank by
virtue of being a Bank hereunder shall have any interest in (a) any Other
Activities, (b) any present or future guarantee by or for the account of any
Borrower not contemplated or included herein, (c) any present or future offset
exercised by the Administrative Agent in respect of any such Other Activities,
(d) any present or future property taken as security for any such Other
Activities or (e) any property now or hereafter in the possession or control of
the Administrative Agent which may be or become security for the obligations of
any Borrower or any of its Affiliates hereunder and under the Loans by reason of
the general description of indebtedness secured, or of property contained in any
other agreements, documents or instruments related to such Other Activities;
provided, however, that if any payment in respect of such guarantees or such
property or the proceeds thereof shall be applied to reduction of the
obligations hereunder, then each Bank shall be entitled to share in such
application according to its pro rata portion of such obligations.
SECTION 7.04. Bank Credit Decision. Each Bank acknowledges and agrees
that it has, independently and without reliance upon the Administrative Agent or
any other Bank and based on the financial statements referred to in Section 4.07
and such other documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges and agrees that it will, independently and without reliance upon
the Administrative Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
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SECTION 7.05. Administrative Agent's Indemnity. The Administrative
Agent shall not be required to take any action hereunder or to prosecute or
defend any suit in respect of this Agreement or the Loans unless indemnified to
the Administrative Agent's satisfaction by the Banks against loss, cost,
liability and expense. If any indemnity furnished to the Administrative Agent
shall become impaired, it may call for additional indemnity and cease to do the
acts indemnified against until such additional indemnity is given. In addition,
the Banks agree to indemnify the Administrative Agent (to the extent not
reimbursed by the Borrowers), ratably according to the respective aggregate
principal amounts of the Committed Loans then owing to each of them (or if no
Committed Loans are at the time outstanding, ratably according to the respective
aggregate amounts of their Commitments, or if no Commitments are outstanding,
the respective aggregate amounts of the Commitments immediately prior to the
time the Commitments ceased to be outstanding), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Administrative Agent under this Agreement (including any action taken or
omitted under Article II). Without limitation of the foregoing, each Bank agrees
to reimburse the Administrative Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including reasonable counsel fees) incurred by
the Administrative Agent in connection with the preparation, execution,
administration, or enforcement of, or legal advice in respect of rights or
responsibilities under, this Agreement to the extent that the Administrative
Agent is not reimbursed for such expenses by the Borrowers. The provisions of
this Section 7.05 shall survive the termination of this Agreement and/or the
payment or assignment of any of the Loans. NOTWITHSTANDING THE FOREGOING, NO
BANK SHALL BE LIABLE UNDER THIS SECTION 7.05 TO THE ADMINISTRATIVE AGENT FOR ANY
PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS DUE TO THE ADMINISTRATIVE
AGENT RESULTING FROM THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. EACH BANK AGREES, HOWEVER, THAT IT EXPRESSLY INTENDS, UNDER THIS
SECTION 7.05, TO INDEMNIFY THE ADMINISTRATIVE AGENT RATABLY AS AFORESAID FOR ALL
SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, COSTS, EXPENSES AND DISBURSEMENTS ARISING OUT OF OR RESULTING FROM THE
ADMINISTRATIVE AGENT'S SOLE, ORDINARY OR CONTRIBUTORY NEGLIGENCE.
SECTION 7.06. Successor Administrative Agent. The Administrative Agent
may resign at any time by giving written notice thereof to the Banks and the
Borrowers and may be removed as Administrative Agent under this Agreement at any
time, with or without cause, by the Majority Banks. Upon any such resignation or
removal, the Majority Banks shall have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Majority Banks, and shall have accepted such appointment,
within 30 calendar days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Banks' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Banks, appoint a successor Administrative Agent, which shall be a commercial
bank organized or licensed under the laws of the United States of America or of
any state thereof and
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having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations under this Agreement. After
any retiring Administrative Agent's resignation or removal as Administrative
Agent hereunder, the provisions of this Article VII shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Administrative
Agent under this Agreement.
SECTION 7.07. Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent shall have received notice
from a Bank or a Borrower referring to this Agreement, describing such Default
or Event of Default and stating that such notice is a "notice of default." If
the Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Banks; provided, however, if such notice is received
from a Bank, the Administrative Agent also shall give notice thereof to the
Company. The Administrative Agent shall be entitled to take action or refrain
from taking action with respect to such Default or Event of Default as provided
in Section 7.01 and Section 7.02.
SECTION 7.08. No Duty of Co-Agents. No Co-Agent shall have any duties,
responsibilities or liabilities in such capacity with respect to the
administration or enforcement of this Agreement.
ARTICLE VIII
GUARANTY
In consideration of the premises and in order to induce the Banks to
make Loans hereunder to the Borrowing Subsidiaries:
SECTION 8.01. Guaranty. The Company hereby unconditionally and
irrevocably guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all obligations of each Borrowing
Subsidiary to pay the principal of and interest on the Loans owed by such
Borrowing Subsidiary (including interest accruing or becoming owing both prior
to and subsequent to the commencement of any proceeding against or with respect
to such Borrowing Subsidiary under any chapter of the Bankruptcy Code of 1978
(11 U.S.C. Section 101 et seq.), as from time to time amended, or any similar
statute in any other jurisdiction, whether or not such interest may be the
subject of an allowable claim in such proceeding), and all other amounts from
time to time payable by such Borrowing Subsidiary under this Agreement (such
obligations with respect to the Borrowing Subsidiaries being herein called the
"Guaranteed Obligations"), and agrees to pay any and all reasonable costs and
expenses incurred by each Bank and the Administrative Agent in
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enforcing any rights under this guaranty (including the reasonable fees and
expenses of outside counsel or the reasonable allocated costs of in-house
counsel). This guaranty is an absolute, irrevocable, unconditional, present and
continuing guaranty of payment and not of collectibility and is in no way
conditioned or contingent upon any attempt to collect from any Borrowing
Subsidiary, or any other action, occurrence or circumstance whatsoever.
SECTION 8.02. Guaranty Absolute. The Company guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms of
this Agreement and the Loans owed by the Borrowing Subsidiaries. The Company
agrees that the Guaranteed Obligations, this Agreement and all other instruments
and agreements applicable to the Company and the Borrowing Subsidiaries (this
Agreement and all such other instruments and agreements being hereinafter
referred to in this Article VIII as the "Documents") may be extended or renewed,
and Loans repaid and reborrowed in whole or in part, without notice to or assent
by the Company, and that it will remain bound upon this guaranty notwithstanding
any extension, renewal or other alteration of any Guaranteed Obligations or
Documents, or any repayment and reborrowing of Loans. To the maximum extent
permitted by applicable law, except as expressly provided in this Agreement, the
obligations of the Company under this guaranty shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms
hereof under any circumstances whatsoever, including:
(a) any extension, renewal, modification, settlement, compromise,
waiver or release in respect of any Guaranteed Obligations;
(b) any extension, renewal, amendment, modification, rescission,
waiver or release in respect of any of the Documents;
(c) any release, exchange, substitution, non-perfection or invalidity
of, or failure to exercise rights or remedies with respect to, any direct
or indirect security for any Guaranteed Obligations, including the release
of any Borrowing Subsidiary or other Person liable on any Guaranteed
Obligations;
(d) any change in the corporate existence, structure or ownership of
the Company, any Borrowing Subsidiary or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Company, any
Borrowing Subsidiary or any of their respective assets;
(e) the existence of any claim, defense, set-off or other rights or
remedies which any Borrowing Subsidiary at any time may have against the
Company, or the Company or such Borrowing Subsidiary may have at any time
against the Administrative Agent, any Bank, any other Borrowing Subsidiary
or any other Person, whether in connection with this Agreement, the other
Documents, the transactions contemplated thereby or any other
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transaction other than by the payment in full by the Borrowing Subsidiaries
of the Guaranteed Obligations after the termination of the Commitments of
the Banks;
(f) any invalidity or unenforceability for any reason of this
Agreement or any other Document, or any provision of law purporting to
prohibit the payment or performance by the Company or any Borrowing
Subsidiary of the Guaranteed Obligations or the Documents, or of any other
obligation to the Administrative Agent or any Bank; or
(g) any other circumstances or happening whatsoever, whether or not
similar to any of the foregoing.
SECTION 8.03. Effect of Debtor Relief Laws. If after receipt of any
payment of, or proceeds of any security applied (or intended to be applied) to
the payment of all or any part of the Guaranteed Obligations, the Administrative
Agent or any Bank is for any reason compelled to surrender or voluntarily
surrenders, such payment or proceeds to any Person (a) because such payment or
application of proceeds is or may be avoided, invalidated, declared fraudulent,
set aside, determined to be void or voidable as a preference, fraudulent
conveyance, fraudulent transfer, impermissible set-off or a diversion of trust
funds or (b) for any other reason, including (i) any judgment, decree or order
of any court or administrative body having jurisdiction over the Administrative
Agent, any Bank or any of their respective properties or (ii) any settlement or
compromise of any such claim effected by the Administrative Agent or any Bank
with any such claimant (including any Borrowing Subsidiary), then the Guaranteed
Obligations or part thereof intended to be satisfied shall be reinstated and
continue, and this guaranty shall continue in full force as if such payment or
proceeds had not been received, notwithstanding any revocation thereof or the
cancellation of any instrument evidencing any Guaranteed Obligations or
otherwise; and the Company shall be liable to pay the Administrative Agent and
the Banks, and hereby does indemnify the Administrative Agent and the Banks and
hold them harmless for the amount of such payment or proceeds so surrendered and
all expenses (including reasonable attorneys' fees, court costs and expenses
attributable thereto) incurred by the Administrative Agent or any Bank in the
defense of any claim made against it that any payment or proceeds received by
the Administrative Agent or any Bank in respect of all or part of the Guaranteed
Obligations must be surrendered. The provisions of this paragraph shall survive
the termination of this Agreement, and any satisfaction and discharge of the
Borrowing Subsidiaries by virtue of any payment, court order or any federal or
state law.
SECTION 8.04. Subrogation. Notwithstanding any payment or payments
made by the Company hereunder, or any set-off or application by the
Administrative Agent or any Bank of any security or of any credits or claims,
the Company will not assert or exercise any rights of the Administrative Agent
or any Bank or of the Company against any Borrowing Subsidiary to recover the
amount of any payment made by the Company to the Administrative Agent or any
Bank hereunder by way of any claim, remedy or subrogation, reimbursement,
exoneration, contribution, indemnity, participation or otherwise arising by
contract, by statute, under common law or
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otherwise, and the Company shall not have any right of recourse to or any claim
against assets or property of any Borrowing Subsidiary, until all of the
obligations of the Company and the Borrowing Subsidiaries under the Documents
are paid in full. If any amount shall nevertheless be paid to the Company by a
Borrowing Subsidiary prior to payment in full of the obligations of the Company
and such Borrowing Subsidiary under the Documents, such amount shall be held in
trust for the benefit of the Administrative Agent and the Banks and shall
forthwith be paid to the Administrative Agent to be credited and applied to the
Guaranteed Obligations, whether matured or unmatured. The provisions of this
paragraph shall survive the termination of this Agreement, and any satisfaction
and discharge of the Borrowing Subsidiaries by virtue of any payment, court
order or any federal or state law.
SECTION 8.05. Subordination. If the Company becomes the holder of any
indebtedness payable by a Borrowing Subsidiary, the Company hereby subordinates
all indebtedness owing to it from such Borrowing Subsidiary to all indebtedness
of such Borrowing Subsidiary to the Administrative Agent and the Banks, and
agrees that during the continuance of any Default or Event of Default it shall
not accept any payment on the same until payment in full of the obligations of
such Borrowing Subsidiary under this Agreement and the other Documents after the
termination of the Commitments of the Banks, and shall in no circumstance
whatsoever attempt to set-off or reduce any obligations hereunder because of
such indebtedness. If any amount shall nevertheless be paid to the Company by a
Borrowing Subsidiary prior to payment in full of the Guaranteed Obligations,
such amount shall be held in trust for the benefit of the Administrative Agent
and the Banks and shall forthwith be paid to the Administrative Agent to be
credited and applied to the Guaranteed Obligations, whether matured or
unmatured.
SECTION 8.06. Waiver. The Company hereby waives promptness, diligence,
notice of acceptance and, to the extent permitted by law, any other notice with
respect to any of the Guaranteed Obligations and this guaranty and waives
presentment, demand of payment, notice of intent to accelerate, notice of
dishonor or nonpayment and any requirement that the Administrative Agent or any
Bank institute suit, collection proceedings or take any other action to collect
the Guaranteed Obligations, including any requirement that the Administrative
Agent or any Bank protect, secure, perfect or insure any Lien against any
property subject thereto or exhaust any right or take any action against any
Borrowing Subsidiary or any other Person or any collateral (it being the
intention of the Administrative Agent, the Banks and the Company that this
guaranty is to be a guaranty of payment and not of collection). It shall not be
necessary for the Administrative Agent or any Bank, in order to enforce any
payment by the Company hereunder, to institute suit or exhaust its rights and
remedies against any Borrowing Subsidiary or any other Person, including others
liable to pay any Guaranteed Obligations, or to enforce its rights against any
security ever given to secure payment thereof. The Company hereby expressly
waives to the maximum extent permitted by applicable law each and every right to
which it may be entitled by virtue of the suretyship laws of the State of Texas,
including any and all rights it may have pursuant to Rule 31, Texas Rules of
Civil Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code
and Chapter 34 of the
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Texas Business and Commerce Code. The Company hereby waives marshaling of assets
and liabilities, notice by the Administrative Agent or any Bank of any
indebtedness or liability to which such Bank applies or may apply any amounts
received by such Bank, and of the creation, advancement, increase, existence,
extension, renewal, rearrangement or modification of the Guaranteed Obligations.
The Company expressly waives, to the extent permitted by applicable law, the
benefit of any and all laws providing for exemption of property from execution
or for valuation and appraisal upon foreclosure.
SECTION 8.07. Full Force and Effect. This Guaranty is a continuing
guaranty and shall remain in full force and effect until all of the obligations
of the Company and the Borrowing Subsidiaries under this Agreement and the other
Documents and all other amounts payable under this guaranty have been paid in
full (after the termination of the Commitments of the Banks). All rights,
remedies and powers provided in this guaranty may be exercised, and all waivers
contained in this guaranty may be enforced, only to the extent that the exercise
or enforcement thereof does not violate any provisions of applicable law which
may not be waived.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by the Company herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Majority Banks in all cases, and then, in any case, such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no amendment, waiver or consent shall,
unless in writing and signed by each Bank affected thereby, do any of the
following: (a) change the definition of "Majority Banks" contained in Section
1.01, (b) except as expressly provided in Section 2.14(f) or Section 2.15(c),
reduce or increase the amount or alter the terms of the Commitments of any Banks
or subject any Banks to any additional obligations, (c) reduce or forgive the
principal of, or rate or amount of interest applicable to, any Loan other than
as provided in this Agreement, or any fees hereunder, (d) postpone any date
fixed for any payment of principal of, or interest on, the Loans or any fees
hereunder, (e) change Section 4.13, this Section 9.01, the last sentence of
Section 9.11(a) or Article VIII, (f) change the percentage of the Commitments or
of the aggregate unpaid principal amount of the Loans, or the number of Banks,
which shall be required for the Banks or any of them to take any action
hereunder or (g) release the Guaranty; and provided that no amendment, waiver or
consent shall, unless in writing and signed by the Administrative Agent in
addition to the Banks required above to take such action, affect the rights or
duties of the Administrative Agent under this Agreement.
SECTION 9.02. Notices, Etc. The Administrative Agent, any Bank, or the
holder of any Loan, giving consent or notice or making any request of any
Borrower provided for hereunder, shall
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notify each Bank and the Administrative Agent thereof. In the event that the
holder of any Loan (including any Bank) shall transfer such Loan, it shall
promptly so advise the Administrative Agent which shall be entitled to assume
conclusively that no transfer of any Loan has been made by any holder (including
any Bank) unless and until the Administrative Agent receives written notice to
the contrary. Notices, consents, requests, approvals, demands and other
communications (collectively "Communications") provided for or required herein
shall be in writing (including facsimile Communications) and mailed, sent by
facsimile transmission or delivered:
(a) If to any Borrower, to it:
c/o Service Corporation International
1929 Allen Parkway
P.O. Box 130548
Houston, Texas 77019-0548
Telecopy Number: (713) 525-9067
Attention: Secretary
(b) If to the Administrative Agent, to it at:
Chase Agent Services
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Telephone Number: (212) 552-7953
Telecopy Number: (212) 552-5658
Attention: Sandra Miklave
with a copy to:
Texas Commerce Bank National Association
707 Travis Street, 5TCBE 78
Houston, Texas 77002
Telephone Number: (713) 216-5319
Telecopy Number: (713) 216-7500
Attention: Jan Danvers
(c) If to any Bank, as specified on the signature page for such Bank
hereto or, in the case of any Person who becomes a Bank after the date hereof,
as specified on the signature page of the Assignment and Acceptance executed by
such Bank, or as to any party, such other address or facsimile number as such
party may hereafter specify for such purpose in a Communication to the other
parties hereto.
(d) All Communications shall, when mailed, sent by facsimile
transmission or delivered, be effective when deposited in the mails to any party
at its address specified above, on the
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signature page hereto, or on the signature page of such Assignment and
Acceptance (or other address designated by such party to the other parties
hereto) or sent by facsimile transmission to any party to the facsimile
transmission number as set forth herein or on the signature pages hereto, or on
the signature pages of such Assignment and Acceptance (or other facsimile number
designated by such party in a Communication to the other parties hereto) or
delivered personally to any party at its address specified above, on the
signature page hereof or on the signature page of such Assignment and Acceptance
(or other address designated by such party in a Communication to the other
parties hereto; provided, however, Communications to the Administrative Agent
pursuant to Article II or Article VII shall not be effective until received by
the Administrative Agent; and provided, further, that each Borrower shall
indemnify each of the Administrative Agent and the Banks against any costs,
claim, loss, expense (including legal fees) or liability which any of them may
sustain or incur as a consequence of any facsimile notice or communication
originating from such Borrower not being actually received by or delivered to
the intended recipient thereof or any facsimile communication purporting to
originate from such Borrower being made or delivered fraudulently.
SECTION 9.03. No Waiver; Remedies. No failure on the part of any Bank
or the Administrative Agent to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, or any abandonment or discontinuance of any steps to
enforce such right, preclude any other or further exercise thereof or the
exercise of any other right. No notice to or demand on any Borrower in any case
shall entitle such Borrower to any other or further notice or demand in similar
or other circumstances. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 9.04. Costs, Expenses and Taxes. The Company agrees to pay on
demand: (a) all reasonable costs and expenses of the Administrative Agent in
connection with the preparation, execution, delivery and administration of this
Agreement and the other documents to be delivered hereunder, including the
reasonable fees and out-of-pocket expenses of counsel for the Administrative
Agent with respect thereto and with respect to advising the Administrative Agent
as to its rights and responsibilities under this Agreement, and any
modification, supplement or waiver of any of the terms of this Agreement or any
modification or extension of the Loans, and (b) all reasonable costs and
expenses of each of the Banks and the Administrative Agent (including reasonable
counsel fees and expenses of outside counsel and the reasonable allocated costs
of in-house legal services) in connection with the enforcement of this Agreement
and the Loans. In addition, unless prohibited by applicable law, the Company
shall pay any and all stamp, mortgage and similar taxes payable or determined to
be payable in connection with the execution and delivery or enforcement of this
Agreement and the Loans and the other documents to be delivered hereunder, and
agrees to save the Administrative Agent and each Bank harmless from and against
any and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery or enforcement of this
Agreement. Without prejudice to the survival of any other obligations of the
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Company hereunder, the obligations of the Company under this Section 9.04 shall
survive the termination of this Agreement and the payment or assignment of the
Loans.
SECTION 9.05. Indemnity. (a) The Company shall indemnify the
Administrative Agent, the Banks and each Affiliate thereof and their respective
directors, officers, employees and agents from, and hold each of them harmless
against, any and all losses, liabilities, claims and damages to which any of
them may become subject, insofar as such losses, liabilities, claims and damages
arise out of or result from (i) any actual or proposed use by any Borrower of
the proceeds of any extension of credit by any Bank hereunder or (ii) any
investigation, litigation or other proceeding (including any threatened
investigation or proceeding) relating to the foregoing, and the Company shall
reimburse the Administrative Agent and each Bank, and each Affiliate thereof and
their respective directors, officers, employees and agents, upon demand for any
expenses (including legal fees) reasonably incurred in connection with any such
investigation or proceeding; but excluding any such losses, liabilities, claims,
damages or expenses incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified.
(b) WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT, IT IS THE
EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED
HEREUNDER OR THEREUNDER SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND
ALL LOSSES, LIABILITIES, CLAIMS AND DAMAGES ARISING OUT OF OR RESULTING FROM THE
ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON. Without prejudice to
the survival of any other obligations of the Company hereunder, the obligations
of the Company under this Section 9.05 shall survive the termination of this
Agreement and the payment or assignment of the Loans.
SECTION 9.06. Right of Setoff. If any Event of Default shall have
occurred and be continuing, each Bank is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Bank or any
branch, subsidiary or Affiliate of such Bank to or for the credit or the account
of the Company and each Borrowing Subsidiary against any of and all the
obligations of the Company or such Borrowing Subsidiary now or hereafter
existing under this Agreement and any Loan held by such Bank, irrespective of
whether or not such Bank or the Administrative Agent shall have made any demand
under this Agreement and although such obligations may be unmatured. Each Bank
agrees promptly to notify the Borrower as to which such setoff and application
was made after any such setoff and application made by such Bank, but the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Bank under this Section 9.06 are in addition to
other rights and remedies (including other rights of setoff) which such Bank may
have.
SECTION 9.07. Governing Law. This Agreement and all other documents
executed in connection herewith (including each Assignment and Acceptance and
each Borrowing Subsidiary Counterpart), shall be deemed to be contracts and
agreements executed by the Borrowers,
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the Administrative Agent and the Banks party thereto under the laws of the State
of New York and of the United States and for all purposes shall be construed in
accordance with, and governed by, the laws of said state and of the United
States. Without limitation of the foregoing, nothing in this Agreement or in any
such other agreement shall be deemed to constitute a waiver of any rights which
any Bank may have under applicable federal legislation relating to the amount of
interest which such Bank may contract for, take, receive, reserve or charge in
respect of any Loans, including any right to contract for, take, receive,
reserve and charge interest at the rate allowed by the law of the state where
such Bank is located.
SECTION 9.08. Interest. Anything in this Agreement to the contrary
notwithstanding, no Borrower shall ever be required to pay unearned interest on
any Loan and shall never be required to pay interest on such Loan at a rate in
excess of the Highest Lawful Rate, and if the effective rate of interest which
would otherwise be payable under this Agreement and such Loan would exceed the
Highest Lawful Rate, or if the holder of such Loan shall receive any unearned
interest or shall receive monies that are deemed to constitute interest which
would increase the effective rate of interest payable by such Borrower under
this Agreement and such Loan to a rate in excess of the Highest Lawful Rate,
then (a) the amount of interest which would otherwise be payable by such
Borrower under this Agreement and such Loan shall be reduced to the amount
allowed under applicable law; and (b) any unearned interest paid by such
Borrower or any interest paid by such Borrower in excess of the Highest Lawful
Rate shall be credited on the principal of such Loan. It is further agreed that
all calculations of the rate of interest contracted for, charged or received by
any Bank under the Loans made by it, or under this Agreement, which are made for
the purpose of determining whether such rate exceeds the Highest Lawful Rate
applicable to such Bank (such Highest Lawful Rate being such Bank's "Maximum
Permissible Rate"), shall be made, to the extent permitted by usury laws
applicable to such Bank (now or hereafter enacted), by amortizing, prorating and
spreading in equal parts during the period of the full stated term of the Loans
all interest at any time contracted for, charged or received by such Bank in
connection therewith. If at any time and from time to time (y) the amount of
interest payable to any Bank on any date shall be computed at such Bank's
Maximum Permissible Rate pursuant to this Section 9.08 and (z) in respect of any
subsequent interest computation period the amount of interest otherwise payable
to such Bank would be less than the amount of interest payable to such Bank
computed at such Bank's Maximum Permissible Rate, then the amount of interest
payable to such Bank in respect of such subsequent interest computation period
shall continue to be computed at such Bank's Maximum Permissible Rate until the
total amount of interest payable to such Bank shall equal the total amount of
interest which would have been payable to such Bank if the total amount of
interest had been computed without giving effect to this Section 9.08.
SECTION 9.09. Survival of Representations, Warranties and Covenants.
All representations, warranties and covenants contained herein or made in
writing by the Borrowers in connection herewith shall survive the execution and
delivery of this Agreement, and will bind and inure to the benefit of the
respective successors and assigns of the parties hereto, whether so
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expressed or not, provided, that the undertaking of the Banks to make Loans to
the Borrowers shall not inure to the benefit of any successor or assign of any
Borrower.
SECTION 9.10. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Company and the Administrative Agent and
when the Administrative Agent shall have been notified by each Bank that such
Bank has executed it and, except as provided in Section 9.09, thereafter shall
be binding upon and inure to the benefit of the Company, any Borrowing
Subsidiaries that may become party hereto, the Administrative Agent and each
Bank and their respective successors and assigns.
SECTION 9.11. Successors and Assigns; Participations. (a) Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and permitted assigns of such party; and all
covenants, promises and agreements by or on behalf of the Company, the
Administrative Agent or the Banks that are contained in this Agreement shall
bind and inure to the benefit of their respective successors and permitted
assigns. No Borrower may assign or transfer any of its rights or obligations
hereunder without the written consent of all the Banks.
(b) Each Bank, without the consent of the Company, may 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 and the Loans owing to it); provided, however,
that (i) the selling Bank's obligations under this Agreement shall remain
unchanged; (ii) such Bank shall remain solely responsible to the other parties
hereto for the performance of such obligations; (iii) the participating banks or
other entities shall be entitled to the cost protection provisions contained in
Article II and Section 9.04; and (iv) the Borrowers, the Administrative Agent
and the other Banks shall continue to deal solely and directly with the selling
Bank in connection with such Bank's rights and obligations under this Agreement;
provided, however, that each Bank shall retain the sole right and responsibility
to enforce the obligations of the Borrowers relating to the Loans including the
right to approve any amendment, modification or waiver of any provision of this
Agreement; and further provided, however, the selling Bank may grant a
participant voting rights with respect to (x) amendments, modifications or
waivers with respect to any fees payable hereunder (including the amount and the
dates fixed for the payment of any such fees) or the amount of principal or the
rate of interest payable on, or the dates fixed for any payment of principal of
or interest on, the Loans and (y) amendments, modifications or waivers to, or
release of, the Guaranty. Each Bank shall provide the Company with prompt notice
of the identity of each participating bank to which a participation in its
Commitment or any Committed Loan is sold and the amount of such participation.
(c) With the prior consent of the Company and the Administrative
Agent, such consent not to be unreasonably withheld, a Bank may assign to one or
more Eligible Assignees (provided, however, no such consent shall be required if
such Eligible Assignee is a Bank or an
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Affiliate of a Bank) and, without the consent of the Company or the
Administrative Agent, a Bank may assign to one of its Affiliates, all or a
portion of its interests, rights, and obligations under this Agreement
(including all or a portion of its Commitments and the same portion of the Loans
at the time owing to it); provided, however, that (i) each such assignment shall
be of a constant, and not a varying, percentage of all the assigning Bank's
rights and obligations under this Agreement and partial assignments shall
(except in the case of assignments to an Affiliate of such Bank or to other
Banks), be in a minimum principal amount of $5,000,000 and (ii) the parties to
each such assignment shall execute and deliver to the Administrative Agent, for
its acceptance and recording in the Register (as defined below), an Assignment
and Acceptance substantially in the form of Exhibit 9.11 (an "Assignment and
Acceptance"), together with a properly completed Administrative Questionnaire
from such Eligible Assignee and a processing and recordation fee of $2,000;
provided, however, no Borrower shall have any obligation to pay or reimburse any
Person for the payment of such processing and recordation fee, except for
assignments pursuant to Section 2.14 or Section 2.15. The Eligible Assignee
party to each Assignment and Acceptance also shall deliver a copy of its
Administrative Questionnaire to the Company. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least five Business
Days after the execution thereof (unless otherwise provided in such Assignment
and Acceptance) (x) the Eligible Assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Bank hereunder and (y) the assignor Bank thereunder shall,
to the extent provided in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the remaining portion of an assigning Bank's rights
and obligations under this Agreement, such Bank shall cease to be a party
hereto, provided, however, such Bank shall have the benefits of Section 2.14,
Section 2.20, Section 9.04 and Section 9.05).
(d) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the Eligible Assignee confirm to and agree with each
other and the other parties hereto as follows: (i) other than the representation
and warranty that it is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim known to such Bank
assignor, such Bank assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or any other instrument or document
furnished pursuant hereto or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other instrument or
document furnished pursuant hereto; (ii) such Bank assignor makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Borrower or the performance or observance of its
respective obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such Eligible Assignee confirms that it has
received a copy of this Agreement together with copies of the most recent
financial statements delivered pursuant to Section 4.07 or Section 5.01(a) and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment
FACILITY A
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and Acceptance; (iv) such Eligible Assignee will, independently and without
reliance upon the Administrative Agent, such Bank assignor or any other Bank and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such Eligible Assignee appoints and authorizes the
Administrative Agent to take such action on behalf of such Eligible Assignee and
to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; (vi) such Eligible Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Bank and (vii) such
Eligible Assignee confirms that it is an Eligible Assignee as defined herein.
(e) The Administrative Agent shall maintain at its office a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Banks and the Commitments of, and
principal amount of the Loans owing to, each Bank from time to time (the
"Register"). The entries in the Register shall, to the extent permitted by law,
be conclusive, in the absence of manifest error, and each Borrower, the
Administrative Agent and the Banks may treat each Person whose name is recorded
in the Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by any Borrower or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an Eligible Assignee and, if required, the written consent to
such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is substantially in the form of Exhibit 9.11,
(i) accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Banks and
the Borrowers.
(g) Notwithstanding any other provision herein, any Bank may, in
connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 9.11 disclose to the assignee or
participant or proposed assignee or participant, any information relating to the
Borrowers furnished to such Bank by or on behalf of any Borrower; provided, that
prior to any such disclosure, each such assignee or participant or proposed
assignee or participant shall agree to preserve the confidentiality, pursuant to
Section 9.12, of any confidential information relating to the Borrowers received
from such Bank.
(h) Anything in this Section 9.11 to the contrary notwithstanding, any
Bank may at any time, without the consent of any Borrower or the Administrative
Agent, assign and pledge all or any portion of its Commitment and the Loans
owing to it to any Federal Reserve Bank (and its transferees) as collateral
security pursuant to Regulation A and any Operating Circular issued by such
Federal Reserve Bank. No such assignment shall release the assigning Bank from
its obligations hereunder. Notwithstanding the foregoing, in connection with any
such pledge of such
FACILITY A
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Loans to the Federal Reserve Bank, any Bank may request that such Loans be
evidenced by a note or notes in form and substance satisfactory to such Bank and
the Company.
SECTION 9.12. Confidentiality. Each Bank agrees to exercise its best
efforts to keep any information delivered or made available by the Company or
any Borrowing Subsidiary to it (including any information obtained pursuant to
Section 5.01(e)) which is clearly indicated to be confidential information,
confidential from anyone other than Persons employed or retained by such Bank or
any of its Affiliates who are or are expected to become engaged in evaluating,
approving, structuring or administering the Loans; provided that nothing herein
shall prevent any Bank from disclosing such information (a) to any other Bank;
(b) pursuant to subpoena or upon the order of any court or administrative
agency; (c) upon the request or demand of any regulatory agency or authority
having jurisdiction over such Bank; (d) which has been publicly disclosed; (e)
to the extent reasonably required in connection with any litigation to which the
Administrative Agent, any Bank, any Borrower or their respective Affiliates may
be a party; (f) to the extent reasonably required in connection with the
exercise of any remedy hereunder; (g) to such Bank's legal counsel and
independent auditors; and (h) to any actual or proposed participant or assignee
of all or part of its rights hereunder which has agreed in writing to be bound
by the provisions of this Section 9.12.
SECTION 9.13. Separability. Should any clause, sentence, paragraph or
Section of this Agreement be judicially declared to be invalid, unenforceable or
void, such decision will not have the effect of invalidating or voiding the
remainder of this Agreement, and the parties hereto agree that the part or parts
of this Agreement so held to be invalid, unenforceable or void will be deemed to
have been stricken herefrom and the remainder will have the same force and
effectiveness as if such part or parts had never been included herein.
SECTION 9.14. Limitation by Law. All waivers, indemnities and rights
provided in this Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Agreement are intended to be subject to all applicable mandatory
provisions of law which may be controlling and to be limited to the extent
necessary so that they will not render this Agreement invalid or unenforceable,
in whole or in part.
SECTION 9.15. Independence of Covenants. All covenants contained in
this Agreement shall be given independent effect so that if a particular action
or condition is not permitted by any such covenant, the fact that such action or
condition would be permitted by an exception to, or otherwise be within the
limitations of, another covenant shall not avoid the occurrence of a Default or
Event of Default if such action is taken or condition exists.
SECTION 9.16. Appointment of Company as Agent for the Other Borrowers.
Each Borrowing Subsidiary hereby irrevocably appoints the Company as its agent
for the purpose of giving on its behalf any notice and taking any other action
provided for in this Agreement, and hereby agrees that it shall be bound by any
such notice or action given or taken by the Company
FACILITY A
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hereunder irrespective of whether or not any such notice shall have in fact been
authorized by such Borrowing Subsidiary and irrespective of whether or not the
agency provided for herein shall have theretofore been terminated.
SECTION 9.17. Judgment. The obligations of each Borrower in respect of
any sum due to any party hereto or any holder of the obligations owing hereunder
(the "Applicable Creditor") shall, notwithstanding any judgment in a currency
(the "Judgment Currency") other than the currency in which such sum is stated to
be due hereunder (the "Agreement Currency"), be discharged only to the extent
that, on the Business Day following receipt by the Applicable Creditor of any
sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may
in accordance with normal banking procedures in the relevant jurisdiction
purchase the Agreement Currency with the Judgment Currency; if the amount of the
Agreement Currency so purchased is less than the sum originally due to the
Applicable Creditor in the Agreement Currency, such Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Applicable Creditor against such loss. The obligations of the Borrowers
contained in this Section 9.17 shall survive the termination of this Agreement
and the payment of all other amounts owing hereunder.
SECTION 9.18. SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITIES. (a)
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE AGENT'S
FEE LETTER MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION
OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. EACH
BORROWING SUBSIDIARY HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS
CORPORATION SERVICE COMPANY, WITH OFFICES ON THE DATE HEREOF AT 80 STATE STREET,
ALBANY, NEW YORK 12201, AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT
AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE
OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED
IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND
AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH BORROWING SUBSIDIARY
AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN THE STATE OF NEW YORK
ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION SATISFACTORY TO THE
ADMINISTRATIVE AGENT. EACH BORROWING SUBSIDIARY FURTHER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS
FACILITY A
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PROVIDED IN SECTION 9.02, SUCH SERVICE TO BECOME EFFECTIVE THIRTY DAYS AFTER
SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT
OR ANY BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY BORROWING SUBSIDIARY IN ANY
OTHER JURISDICTION.
(b) TO THE EXTENT THAT ANY BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY (SOVEREIGN OR OTHERWISE) FROM ANY LEGAL ACTION, SUIT OR PROCEEDING,
FROM JURISDICTION OF ANY COURT OR FROM SET-OFF OR ANY LEGAL PROCESS (WHETHER
SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION
OF JUDGMENT, EXECUTION OF JUDGMENT OR OTHERWISE) WITH RESPECT TO ITSELF OR ANY
OF ITS PROPERTY, SUCH BORROWER HEREBY IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT. EACH
BORROWER HEREBY AGREES THAT THE WAIVERS SET FORTH IN THIS SECTION 9.18 SHALL
HAVE THE FULLEST EFFECT PERMITTED UNDER THE FOREIGN SOVEREIGN IMMUNITIES ACT OF
1976 OF THE UNITED STATES OF AMERICA AND ARE INTENDED TO BE IRREVOCABLE AND NOT
SUBJECT TO WITHDRAWAL FOR PURPOSES OF SUCH ACT.
SECTION 9.19. Entire Agreement. This Agreement (including the Exhibits
and Schedules hereto), the Borrowing Subsidiary Counterparts, if any, the
Assignment and Acceptances, if any, and the Agent's Fee Letter embody the entire
agreement and understanding among the Company, the Administrative Agent and the
Banks relating to the subject matter hereof and thereof and supersede all prior
proposals, agreements and understandings relating to such subject matter.
SECTION 9.20. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
FACILITY A
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
SERVICE CORPORATION INTERNATIONAL
By:
------------------------------------------
Name: Gregory L. Cauthen
Title: Vice President and Treasurer
FACILITY A
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THE CHASE MANHATTAN BANK,
as Administrative Agent
By:
------------------------------------------
Name:
Title:
FACILITY A
<PAGE> 79
CO-AGENTS:
BANK OF AMERICA ILLINOIS, as Co-Agent
By:
------------------------------------------
Name:
Title:
FACILITY A
<PAGE> 80
CITIBANK N.A., as Co-Agent
By:
------------------------------------------
Name:
Title:
FACILITY A
<PAGE> 81
NATIONSBANK, N.A., as Co-Agent
By:
------------------------------------------
Name:
Title:
FACILITY A
<PAGE> 82
ROYAL BANK OF CANADA, as Co-Agent
By:
------------------------------------------
Name:
Title:
FACILITY A
<PAGE> 83
SOCIETE GENERALE, as Co-Agent
By:
------------------------------------------
Name:
Title:
FACILITY A
<PAGE> 84
UNION BANK OF SWITZERLAND, as Co-Agent
By:
------------------------------------------
Name:
Title:
FACILITY A
<PAGE> 85
BANKS
ABN AMRO BANK N.V., HOUSTON AGENCY
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
Three Riverway, Suite 1700
Houston, Texas 77056
Telecopy No.: (713) 629-7533
Domestic Lending Office
ABN AMRO Bank N.V., Houston Agency
Three Riverway, Suite 1700
Houston, Texas 77056
Attn: Ms. Josephine Zozdorado
Telecopy No.: (713) 964-3331
Eurodollar Lending Office
ABN AMRO Bank N.V., Houston Agency
Three Riverway, Suite 1700
Houston, Texas 77056
Attn: Mr. David Orr
Telecopy No.: (713) 964-3323
Commitment: $15,000,000.00
<PAGE> 86
BANK OF AMERICA ILLINOIS
By:
------------------------------------
Name:
Title:
231 South LaSalle Street
Chicago, Illinois 60697
Telecopy No.: (312) 987-1276
Domestic Lending Office
Bank of America Illinois
1850 Gateway Boulevard
Concord, California 94520
Attn: Camille Gibby
Telecopy No.: (510) 675-7759
Eurodollar Lending Office
Bank of America Illinois
1850 Gateway Boulevard
Concord, California 94520
Attn: Camille Gibby
Telecopy No.: (510) 675-7759
Commitment: $25,500,000.00
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<PAGE> 87
THE BANK OF NEW YORK
By:
------------------------------------
Name:
Title:
One Wall Street, 22nd Floor
New York, New York 10286
Telecopy No.: (212) 635-6434
Domestic Lending Office
One Wall Street, 22nd Floor
New York, New York 10286
Attn: Larry Geter
Telecopy No.: (212) 635-6740
Eurodollar Lending Office
One Wall Street, 22nd Floor
New York, New York 10286
Attn: Larry Geter
Telecopy No.: (212) 635-6740
Commitment: $15,000,000.00
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<PAGE> 88
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By:
------------------------------------
Name:
Title:
333 Clay Street, Suite 3400
Houston, Texas 77002
Telecopy No.: (713) 659-1414
Domestic Lending Office
Banque Nationale De Paris, Houston Agency
333 Clay Street, Suite 3400
Houston, Texas 77002
Attn: Donna Rose
Telecopy No.: (713) 659-1414
Eurodollar Lending Office
Banque Nationale De Paris, Houston Agency
333 Clay Street, Suite 3400
Houston, Texas 77002
Attn: Donna Rose
Telecopy No.: (713) 659-1414
Commitment: $9,000,000.00
-4-
<PAGE> 89
THE BANK OF TOKYO-MITSUBISHI, LTD.,
HOUSTON AGENCY
By:
------------------------------------
Name:
Title:
1100 Louisiana Street, Suite 2800
Houston, Texas 77002-5216
Telecopy No.: (713) 658-0116
Domestic Lending Office
The Bank of Tokyo-Mitsubishi, Ltd.,
Houston Agency
1100 Louisiana Street, Suite 2800
Houston, Texas 77002-5216
Attn: David L. Denbina, P.E.
Telecopy No.: (713) 658-0116
Eurodollar Lending Office
The Bank of Tokyo-Mitsubishi, Ltd.,
Houston Agency
1100 Louisiana Street, Suite 2800
Houston, Texas 77002-5216
Attn: David L. Denbina, P.E.
Telecopy No.: (713) 658-0116
Commitment: $15,000,000.00
-5-
<PAGE> 90
CIBC, INC.
By:
------------------------------------
Name:
Title:
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Telecopy No.: (404) 319-4950
Domestic Lending Office
CIBC, Inc.
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Attn: Kelli Jones
Telecopy No.: (770) 319-4817
Eurodollar Lending Office
CIBC, Inc.
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Attn: Kelli Jones
Telecopy No.: (770) 319-4817
Commitment: $15,000,000.00
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<PAGE> 91
CITIBANK, N.A.
By:
------------------------------------
Name:
Title:
400 Perimeter Center Terrace
Suite 600
Atlanta, Georgia 30346
Telecopy No.: (770) 668-8137
Domestic Lending Office
Citibank, N.A.
1 Court Square, 7th Floor
Long Island City, New York 11120
Eurodollar Lending Office
Citibank, N.A.
1 Court Square, 7th Floor
Long Island City, New York 11120
Commitment: $25,500,000.00
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<PAGE> 92
COMMERZBANK AKTIENGESELLSCHAFT,
ATLANTA AGENCY
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
Promenade Two, Suite 3500
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Telecopy No.: (404) 888-6539
Domestic Lending Office
Commerzbank Aktiengesellschaft, Atlanta Agency
Promenade Two, Suite 3500
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attn: David Suttles - AVP
Telecopy No.: (404) 888-6539
Eurodollar Lending Office
Commerzbank Aktiengesellschaft, Atlanta Agency
Promenade Two, Suite 3500
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attn: David Suttles - AVP
Telecopy No.: (404) 888-6539
Commitment: $6,000,000.00
-8-
<PAGE> 93
CREDIT LYONNAIS NEW YORK BRANCH
By:
------------------------------------
Name:
Title:
1301 Avenue of the Americas
New York, New York 10019
Telecopy No.: (212) 954-3312
Domestic Lending Office
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Telecopy No.: (212) 954-3312
Eurodollar Lending Office
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Telecopy No.: (212) 954-3312
Commitment: $6,000,000.00
with notices to:
Credit Lyonnais
Dallas Representative Office
2200 Ross Avenue, Suite 4400W
Dallas, Texas 75201
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<PAGE> 94
THE FUJI BANK, LIMITED
By:
------------------------------------
Name:
Title:
One Houston Center
1221 McKinney, Suite 4100
Houston, Texas 77010
Telecopy No.: (713) 759-0048
Domestic Lending Office
The Fuji Bank, Limited
One Houston Center
1221 McKinney, Suite 4100
Houston, Texas 77010
Attn: Frances Flores
Telecopy No.: (713) 951-0590
Eurodollar Lending Office
The Fuji Bank, Limited
One Houston Center
1221 McKinney, Suite 4100
Houston, Texas 77010
Attn: Frances Flores
Telecopy No.: (713) 951-0590
Commitment: $6,000,000.00
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<PAGE> 95
NATIONSBANK N.A.
By:
------------------------------------
Name:
Title:
700 Louisiana, 8th Floor
Houston, Texas 77002
Telecopy No.: (713) 247-5719
Domestic Lending Office
NationsBank N.A.
101 North Tryon Street
Charlotte, NC 28255
Attn: Kerri Thompson
Telecopy No.: (704) 386-8694
Eurodollar Lending Office
NationsBank N.A.
101 North Tryon Street
Charlotte, NC 28255
Attn: Kerri Thompson
Telecopy No.: (704) 386-8694
Commitment: $25,500,000.00
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<PAGE> 96
ROYAL BANK OF CANADA
By:
------------------------------------
Name:
Title:
12450 Greenspoint Drive, Suite 1450
Houston, Texas 77060
Telecopy No.: (281) 874-0081
Domestic Lending Office
Royal Bank of Canada
c/o New York Branch
Financial Square, 32 Old Slip
New York, New York 10005
Telecopy No.: (212) 428-2372
Eurodollar Lending Office
Royal Bank of Canada
c/o New York Branch
Financial Square, 32 Old Slip
New York, New York 10005
Telecopy No.: (212) 428-2372
Commitment: $25,500,000.00
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<PAGE> 97
ISTITUTO BANCARIO SAN PAOLO DI TORINO
SPA
By:
-------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
245 Park Avenue, 35th Floor
New York, New York 10167
Telecopy No.: (212) 599-5303
Domestic Lending Office
Istituto Bancario San Paolo Di Torino S.P.A.
245 Park Avenue, 35th Floor
New York, New York 10167
Attn: Robert Wurster
Telecopy No.: (212) 599-5303
Eurodollar Lending Office
Istituto Bancario San Paolo Di Torino S.P.A.
245 Park Avenue, 35th Floor
New York, New York 10167
Attn: Robert Wurster
Telecopy No.: (212) 599-5303
Commitment: $6,000,000.00
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<PAGE> 98
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
------------------------------------
Name:
Title:
2001 Ross Avenue, Suite 4800
Dallas, Texas 75201
Telecopy No.: (214) 754-0171
Domestic Lending Office
Societe Generale, Southwest Agency
2001 Ross Avenue, Suite 4800
Dallas, Texas 75201
Telecopy No.: (214) 754-0171
Eurodollar Lending Office
Societe Generale, Southwest Agency
2001 Ross Avenue, Suite 4800
Dallas, Texas 75201
Telecopy No.: (214) 754-0171
Commitment: $25,500,000.00
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<PAGE> 99
SUNTRUST BANK, ATLANTA
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
Center 120
25 Park Place, NE
Atlanta, Georgia 30303
Telecopy No.: (404) 827-6270
Domestic Lending Office
Suntrust Bank, Atlanta
Center 120
25 Park Place, NE
Atlanta, Georgia 30303
Telecopy No.: (404) 827-6270
Eurodollar Lending Office
Suntrust Bank, Atlanta
Center 120
25 Park Place, NE
Atlanta, Georgia 30303
Telecopy No.: (404) 827-6270
Commitment: $15,000,000.00
-15-
<PAGE> 100
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By:
------------------------------------
Name:
Title:
712 Main Street
5TCB-E 78
Houston, Texas 77002
Telecopy No.: (713) 216-7500
Domestic Lending Office
Texas Commerce Bank National Association
712 Main Street
Houston, Texas 77002
Attn: Gloria Aguilar
Telecopy No.: (713) 216-7500
Eurodollar Lending Office
Texas Commerce Bank National Association
712 Main Street
Houston, Texas 77002
Attn: Gloria Aguilar
Telecopy No.: (713) 216-7500
Commitment: $30,000,000.00
-16-
<PAGE> 101
UNION BANK OF SWITZERLAND
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
299 Park Avenue
New York, New York 10171
Telecopy No.: (212) 821-5534
Domestic Lending Office
Union Bank of Switzerland
299 Park Avenue
New York, New York 10171
Telecopy No.: (212) 821-5534
Eurodollar Lending Office
Union Bank of Switzerland
299 Park Avenue
New York, New York 10171
Telecopy No.: (212) 821-5534
Commitment: $25,500,000.00
-17-
<PAGE> 102
WESTPAC BANKING CORPORATION
By:
------------------------------------
Name:
Title:
575 Fifth Avenue
New York, New York 10017
Telecopy No.: (212) 551-1995
Domestic Lending Office
Westpac Banking Corporation
575 Fifth Avenue
New York, New York 10017
Attn: Craig Jones
Telecopy No.: (212) 551-1995
Eurodollar Lending Office
Westpac Banking Corporation
575 Fifth Avenue
New York, New York 10017
Attn: Craig Jones
Telecopy No.: (212) 551-1995
Commitment: $9,000,000.00
-18-
<PAGE> 1
EXHIBIT 99.2
AGREEMENT AND FIRST AMENDMENT
TO
COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY AGREEMENT (FACILITY A)
THIS AGREEMENT AND FIRST AMENDMENT TO COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY AGREEMENT (FACILITY A) (this "Amendment") dated as of
June 26, 1998 is among:
(a) SERVICE CORPORATION INTERNATIONAL, a Texas corporation
(the "Company");
(b) the banks and other financial institutions listed on the
signature pages hereof, (collectively, the "Banks");
(c) THE CHASE MANHATTAN BANK, a New York banking corporation,
as administrative agent for the Banks (in such capacity, the "Administrative
Agent"); and
(d) BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION,
CITIBANK, N.A., NATIONSBANK, N.A., ROYAL BANK OF CANADA, SOCIETE GENERALE, and
UNION BANK OF SWITZERLAND (collectively, the "Co-Agents").
PRELIMINARY STATEMENT
The Company, the Banks, the Administrative Agent and the
Co-Agents have entered into a Competitive Advance and Revolving Credit Facility
Agreement (Facility A) dated as of June 27, 1997 (said Competitive Advance and
Revolving Credit Facility Agreement (Facility A) being the "Credit Agreement").
All capitalized terms defined in the Credit Agreement and not otherwise defined
herein shall have the same meanings herein as in the Credit Agreement. The
<PAGE> 2
Company, the Banks, the Administrative Agent and the Co-Agents have agreed, upon
the terms and conditions specified herein, to amend the Credit Agreement as
hereinafter set forth:
NOW THEREFORE, in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the Company, the Banks, the Administrative
Agent and the Co-Agents hereby agree as follows:
SECTION 1. Amendments to Section 1.01 of the Credit Agreement.
The definition of the term "Original Termination Date" contained in Section 1.01
of the Credit Agreement is hereby amended in its entirety to read as follows:
"'Original Termination Date' means June 25, 1999.".
SECTION 2. Amendment to Section 2.07(a) of the Credit
Agreement. Section 2.07(a) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(a) The Company agrees to pay to each Bank, through
the Administrative Agent, (i) on each March 31, June 30, September 30
and December 31 from the Execution Date to the date on which the
Commitment of such Bank has been terminated and (ii) on the Maturity
Date and on any other date on which the Commitment of such Bank has
been terminated, facility fees (such facility fees being the "Facility
Fees"), in immediately available funds, equal to .08 of 1% of the
amount of the Commitment of such Bank from time to time outstanding,
whether used, deemed used or unused, during the preceding quarter (or
shorter period commencing with the Execution Date and/or ending with
the Maturity Date).".
SECTION 3. Amendment to Section 2.09(a) of the Credit
Agreement. Section 2.09(a) of the Credit Agreement is hereby amended in its
entirety to read as follows:
-2-
<PAGE> 3
"(a) Subject to the provisions of Section 2.09(d) and
Section 2.10, the Loans comprising each Eurodollar Borrowing shall bear
interest (computed on the basis of the actual number of days elapsed
over a year of 360 days) at a rate per annum equal to (i) in the case
of each Eurodollar Committed Loan, the lesser of (A) the IBO Rate for
the Interest Period in effect for such Borrowing plus .14 of 1% and (B)
the Highest Lawful Rate, and (ii) in the case of each Eurodollar
Competitive Loan, the lesser of (A) the IBO Rate for the Interest
Period in effect for such Borrowing plus the Margin offered by the Bank
making such Loan and accepted by a Borrower pursuant to Section 2.03
and (B) the Highest Lawful Rate.".
SECTION 4. Conditions of Effectiveness. This Amendment shall
become effective when, and only when the following conditions shall have been
fulfilled:
(a) the Company, the Administrative Agent, the Co-Agents and
each Bank shall have executed a counterpart hereof and delivered the same to the
Administrative Agent or, in the case of any Bank as to which an executed
counterpart hereof shall not have been so delivered, the Administrative Agent
shall have received written confirmation by telecopy or other similar writing
from such Bank of execution of a counterpart hereof by such Bank; and
(b) the Administrative Agent shall have received from the
Company a certificate of the Secretary or Assistant Secretary of the Company
certifying that attached thereto is (i) a true and complete copy of the general
borrowing resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance of the Credit Agreement, as amended hereby,
and (ii) the incumbency and specimen signature of each officer of the Company
executing this Amendment.
-3-
<PAGE> 4
SECTION 5. Representations and Warranties True; No Default or
Event of Default. The Company hereby represents and warrants to the
Administrative Agent, the Co-Agents and the Banks that after giving effect to
the execution and delivery of this Amendment: (a) the representations and
warranties set forth in the Credit Agreement are true and correct on the date
hereof as though made on and as of such date; provided, however, that for
purposes of this Section 5, (i) the reference in the first sentence of Section
4.07 to the Company Financials shall be a reference to the consolidated
financial statements of the Company and its Subsidiaries most recently delivered
to the Administrative Agent and the Banks by the Company pursuant to Section
5.01(a)(i) or 5.01(a)(ii), as the case may be, and (ii) the reference in the
last sentence of Section 4.07 to December 31, 1996, shall be a reference to
December 31, 1997; and (b) no event has occurred and is continuing that
constitutes either a Default or an Event of Default.
SECTION 7. Reference to the Credit Agreement and Effect on the
Notes and Other Documents Executed Pursuant to the Credit Agreement.
(a) Upon the effectiveness of this Amendment, each reference
in the Credit Agreement to "this Agreement," "hereunder," "herein," "hereof" or
words of like import shall mean and be a reference to the Credit Agreement, as
amended hereby.
(b) Upon the effectiveness of this Amendment, each reference
in the Notes and the other documents and agreements delivered or to be delivered
pursuant to the Credit Agreement shall mean and be a reference to the Credit
Agreement, as amended hereby.
(c) The Credit Agreement and the Notes and other documents and
agreements delivered pursuant to the Credit Agreement, and modified by the
amendments referred to above, shall remain in full force and effect and are
hereby ratified and confirmed.
-4-
<PAGE> 5
SECTION 7. Execution in Counterparts. This Amendment 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 to be an original and all of which taken together shall constitute but
one and the same instrument.
SECTION 8. GOVERNING LAW; BINDING EFFECT. THIS AMENDMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
AND APPLICABLE FEDERAL LAW AND SHALL BE BINDING UPON THE COMPANY, THE
ADMINISTRATIVE AGENT, THE CO-AGENTS AND THE BANKS AND THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS.
SECTION 10. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.
SECTION 11. ENTIRE AGREEMENT. THE CREDIT AGREEMENT (INCLUDING
THE EXHIBITS AND SCHEDULES HERETO), AS AMENDED HEREBY, THE BORROWING SUBSIDIARY
COUNTERPARTS, IF ANY, THE ASSIGNMENT AND ACCEPTANCES, IF ANY, AND THE AGENT'S
FEE LETTER EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING AMONG THE COMPANY, THE
ADMINISTRATIVE AGENT, THE CO-AGENTS AND THE BANKS RELATING TO THE SUBJECT MATTER
HEREOF AND THEREOF AND SUPERSEDE ALL PRIOR PROPOSALS, AGREEMENTS AND
UNDERSTANDINGS RELATING TO SUCH SUBJECT MATTER.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed effective as of the date first stated herein, by their
respective officers thereunto duly authorized.
SERVICE CORPORATION INTERNATIONAL
By:
---------------------------------
Name: Gregory L. Cauthen
Title: Vice President and Treasurer
-6-
<PAGE> 7
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:
---------------------------------
Name:
Title:
<PAGE> 8
CO-AGENTS:
BANK OF AMERICA NATIONAL TRUST & SAVINGS
ASSOCIATION, as Co-Agent
By:
---------------------------------
Name:
Title:
<PAGE> 9
CITIBANK N.A., as Co-Agent
By:
---------------------------------
Name:
Title:
<PAGE> 10
NATIONSBANK, N.A., as Co-Agent
By:
---------------------------------
Name:
Title:
<PAGE> 11
ROYAL BANK OF CANADA, as Co-Agent
By:
---------------------------------
Name:
Title:
<PAGE> 12
SOCIETE GENERALE, as Co-Agent
By:
---------------------------------
Name:
Title:
<PAGE> 13
UNION BANK OF SWITZERLAND, as Co-Agent
By:
---------------------------------
Name:
Title:
<PAGE> 14
BANKS
ABN AMRO BANK N.V., HOUSTON AGENCY
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Commitment: $15,000,000.00
FACILITY A
<PAGE> 15
BANK OF AMERICA NATIONAL TRUST & SAVINGS
ASSOCIATION
By:
---------------------------------
Name:
Title:
Commitment: $25,500,000.00
FACILITY A
<PAGE> 16
THE BANK OF NEW YORK
By:
---------------------------------
Name:
Title:
Commitment: $15,000,000.00
FACILITY A
<PAGE> 17
THE BANK OF TOKYO-MITSUBISHI, LTD.,
HOUSTON AGENCY
By:
---------------------------------
Name:
Title:
Commitment: $15,000,000.00
FACILITY A
<PAGE> 18
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By:
---------------------------------
Name:
Title:
Commitment: $9,000,000.00
FACILITY A
<PAGE> 19
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By:
---------------------------------
Name:
Title:
Commitment: $30,000,000.00
FACILITY A
<PAGE> 20
CIBC, INC.
By:
---------------------------------
Name:
Title:
Commitment: $15,000,000.00
FACILITY A
<PAGE> 21
CITIBANK, N.A.
By:
---------------------------------
Name:
Title:
Commitment: $25,500,000.00
FACILITY A
<PAGE> 22
COMMERZBANK AKTIENGESELLSCHAFT,
ATLANTA AGENCY
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Commitment: $6,000,000.00
FACILITY A
<PAGE> 23
CREDIT LYONNAIS NEW YORK BRANCH
By:
---------------------------------
Name:
Title:
Commitment: $6,000,000.00
FACILITY A
<PAGE> 24
THE FUJI BANK, LIMITED
By:
---------------------------------
Name:
Title:
Commitment: $6,000,000.00
FACILITY A
<PAGE> 25
ISTITUTO BANCARIO SAN PAOLO DI
TORINO SPA
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Commitment: $6,000,000.00
FACILITY A
<PAGE> 26
NATIONSBANK N.A.
By:
---------------------------------
Name:
Title:
Commitment: $25,500,000.00
FACILITY A
<PAGE> 27
ROYAL BANK OF CANADA
By:
---------------------------------
Name:
Title:
Commitment: $25,500,000.00
FACILITY A
<PAGE> 28
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
---------------------------------
Name:
Title:
Commitment: $25,500,000.00
FACILITY A
<PAGE> 29
SUNTRUST BANK, ATLANTA
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Commitment: $15,000,000.00
FACILITY A
<PAGE> 30
UNION BANK OF SWITZERLAND
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Commitment: $25,500,000.00
FACILITY A
<PAGE> 31
WESTPAC BANKING CORPORATION
By:
---------------------------------
Name:
Title:
Commitment: $9,000,000.00
FACILITY A
<PAGE> 1
EXHIBIT 99.3
Execution Copy
AGREEMENT AND SECOND AMENDMENT
TO
COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY AGREEMENT (FACILITY A)
THIS AGREEMENT AND SECOND AMENDMENT TO COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY AGREEMENT (FACILITY A) (this "Amendment") dated as of
June 25, 1999 is among:
(a) SERVICE CORPORATION INTERNATIONAL, a Texas corporation (the
"Company");
(b) the banks and other financial institutions listed under the caption
"Continuing Bank" on the signature pages hereof, (collectively, the "Continuing
Banks");
(c) the banks listed under the caption "Retiring Bank" on the signature
pages hereof (collectively, the "Retiring Banks");
(d) the banks listed under the caption "New Bank" on the signature
pages hereof (collectively, the "New Banks") and together with the Continuing
Banks collectively, the "Banks");
(e) THE CHASE MANHATTAN BANK, a New York banking corporation, as
administrative agent for the Banks (in such capacity, the "Administrative
Agent"); and
(d) BANK OF AMERICA NT & SA, CITIBANK, N.A., ROYAL BANK OF CANADA,
SOCIETE GENERALE, SOUTHWEST AGENCY and UBS AG, STAMFORD BRANCH (collectively,
the "Co-Agents").
PRELIMINARY STATEMENT
The Company, the Administrative Agent and the Co-Agents, the Continuing
Banks and the Retiring Banks have entered into a Competitive Advance and
Revolving Credit Facility Agreement (Facility A) dated as of June 27, 1997, as
amended pursuant to an Agreement and First Amendment to Competitive Advance and
Revolving Credit Facility Agreement (Facility A) dated as of June 26, 1998 (said
Competitive Advance and Revolving Credit Facility Agreement (Facility A), as so
amended, being the "Credit Agreement"). All capitalized terms defined in the
Credit Agreement and not otherwise defined herein shall have the same meanings
herein as in the Credit Agreement. The Company, the Banks, the Retiring Banks
(as only to Section 11(b) hereof), the Administrative Agent and the Co-Agents
have agreed, upon the terms and conditions specified herein, to amend the Credit
Agreement as hereinafter set forth:
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the Company, the Banks, the Retiring Banks,
the Administrative Agent and the Co-Agents hereby agree as follows:
SECTION 1. Amendments to Section 1.01 of the Credit Agreement.
(a) The definition of the term "Commitment" contained in Section 1.01
of the Credit Agreement is hereby amended in its entirety to read as follows:
"'Commitment' means, (a) with respect to each Bank, the amount
specified for such Bank on such Bank's signature page to the Second Amendment
and (b) with respect to each Person who becomes a Bank after the Second
Amendment Execution Date, the amount specified for such Person on the signature
page of the Assignment and Acceptance, to which it is a party, in each case, as
such amount may be permanently terminated or reduced from time to time pursuant
to Section 2.12, Section 2.14, Section 2.15 or Section 9.11, and as such amount
may be increased from time to time pursuant to Section 2.14, Section 2.15 or
Section 9.11. The Commitment of each Bank shall automatically and permanently
terminate on the Maturity Date.".
(b) The definition of the term "Original Termination Date" contained in
Section 1.01 of the Credit Agreement is hereby amended in its entirety to read
as follows:
"'Original Termination Date' means June 23, 2000.".
(c) The following defined terms are hereby added to Section 1.01 of the
Credit Agreement:
(i) "Second Amendment" means the Agreement and Second Amendment to
Competitive Advance and Revolving Credit Facility Agreement (Facility A)
dated as of June 25, 1999 among the Company, the Banks party thereto, the
Administrative Agent, the Co- Agents and the Retiring Banks (as defined
therein).
(ii) "Second Amendment Execution Date" means the date the Second
Amendment has been executed by all the parties thereto.
(iii) "Utilization Fees" has the meaning specified in Section 2.07.
SECTION 2. Amendment to Section 2.07 of the Credit Agreement. Section
2.07 of the Credit Agreement is hereby amended in its entirety to read as
follows:
"SECTION 2.07. Fees.
-2-
<PAGE> 3
(a) The Company agrees to pay to each Bank, through the
Administrative Agent, (i) on each March 31, June 30, September 30 and
December 31 from the Execution Date to the date on which the Commitment
of such Bank has been terminated and (ii) on the Maturity Date and on
any other date on which the Commitment of such Bank has been
terminated, facility fees (such facility fees being the 'Facility
Fees'), in immediately available funds, at a rate per annum equal to
.125 of 1% of the amount of the Commitment of such Bank from time to
time outstanding, whether used, deemed used or unused, during the
preceding quarter (or shorter period commencing with the Execution Date
and/or ending with the Maturity Date).
(b) The Company agrees to pay to each Bank, through the
Administrative Agent a utilization fee (the 'Utilization Fee'), which
shall accrue at a rate per annum equal to .125 of 1% of each Bank's
Commitment for (i) each day during the period from and including the
Second Amendment Execution Date to but excluding the Termination Date
on which the outstanding Committed Loans of such Bank exceed 25% of
such Bank's Commitment, and (ii) each day on and after the Termination
Date on which the outstanding Committed Loans of such Bank exceed 25%
of such Bank's Commitment on the day immediately preceding the
Termination Date. All Utilization Fees shall be payable in arrears on
each September 30, December 31, March 31 and June 30 during the period
from and including the Second Amendment Effective Date to, but
excluding, the date the Committed Loans are paid in full.
(c) All Facility Fees and Utilization Fees shall be computed
by the Administrative Agent on the basis of the actual number of days
elapsed in a year of 360 days, and such computations, made in good
faith, shall create a rebuttable presumption that they are accurate.
The Facility Fees due to each Bank shall commence to accrue on the
Execution Date and shall cease to accrue on the earlier of the Maturity
Date and the termination of the Commitment of such Bank as provided
herein. The Utilization Fees due to each Bank shall commence to accrue
on the Second Amendment Execution Date and shall cease to accrue on the
earlier of the Maturity Date and the termination of the Commitment of
such Bank as provided herein.
(d) The Facility Fees and the Utilization Fees due under this
Section 2.07 shall be paid on the date due, in immediately available
funds, to the Administrative Agent for distribution among the Banks.
(e) The Company agrees to pay to the Administrative Agent the
fees as provided in the Agent's Fee Letter.
(f) Notwithstanding the foregoing, in no event shall any Bank
be permitted to receive any compensation hereunder constituting
interest in excess of the Highest Lawful Rate.".
-3-
<PAGE> 4
SECTION 3. Amendment to Section 2.09(a) of the Credit Agreement.
Section 2.09(a) of the Credit Agreement is hereby amended in its entirety to
read as follows:
"(a) Subject to the provisions of Section 2.09(d) and Section 2.10,
the Loans comprising each Eurodollar Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of
360 days) at a rate per annum equal to (i) in the case of each Eurodollar
Committed Loan, the lesser of (A) the IBO Rate for the Interest Period in
effect for such Borrowing plus .375 of 1% and (B) the Highest Lawful Rate,
and (ii) in the case of each Eurodollar Competitive Loan, the lesser of (A)
the IBO Rate for the Interest Period in effect for such Borrowing plus the
Margin offered by the Bank making such Loan and accepted by a Borrower
pursuant to Section 2.03 and (B) the Highest Lawful Rate.".
SECTION 4. Conditions of Effectiveness. This Amendment shall become
effective when, and only when the following conditions shall have been
fulfilled:
(a) the Company, the Administrative Agent, the Co-Agents, each Bank
and each Retiring Bank shall have executed a counterpart hereof and
delivered the same to the Administrative Agent or, in the case of any Bank
or Retiring Bank as to which an executed counterpart hereof shall not have
been so delivered, the Administrative Agent shall have received written
confirmation by telecopy or other similar writing from such Bank or
Retiring Bank of execution of a counterpart hereof by such Bank or Retiring
Bank; and
(b) the Administrative Agent shall have received from the Company a
certificate of the Secretary or Assistant Secretary of the Company
certifying that attached thereto is (i) a true and complete copy of the
general borrowing resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance of the Credit
Agreement, as amended hereby, and (ii) the incumbency and specimen
signature of each officer of the Company executing this Amendment.
SECTION 5. Representations and Warranties True; No Default or Event of
Default. The Company hereby represents and warrants to the Administrative Agent,
the Co-Agents and the Banks and the Retiring Banks that after giving effect to
the execution and delivery of this Amendment: (a) the representations and
warranties set forth in the Credit Agreement are true and correct on the date
hereof as though made on and as of such date; provided, however, that for
purposes of this Section 5, the reference in the first sentence of Section 4.07
to the Company Financials shall be a reference to the consolidated financial
statements of the Company and its Subsidiaries most recently delivered to the
Administrative Agent and the Banks by the Company pursuant to Section 5.01(a)(i)
or 5.01(a)(ii), as the case may be, and (b) no event has occurred and is
continuing that constitutes either a Default or an Event of Default.
-4-
<PAGE> 5
SECTION 6. Reference to the Credit Agreement and Effect on the Notes
and Other Documents Executed Pursuant to the Credit Agreement.
(a) Upon the effectiveness of this Amendment, each reference in the
Credit Agreement to "this Agreement," "hereunder," "herein," "hereof" or words
of like import shall mean and be a reference to the Credit Agreement, as amended
hereby.
(b) Upon the effectiveness of this Amendment, each reference in the
documents and agreements delivered or to be delivered pursuant to the Credit
Agreement shall mean and be a reference to the Credit Agreement, as amended
hereby.
(c) Upon the effectiveness of this Amendment, each reference in the
Credit Agreement to "Commitment" and "Termination Date" shall mean and be a
reference to each such term as amended hereby.
(d) The Credit Agreement and other documents and agreements delivered
pursuant to the Credit Agreement, and modified by the amendments referred to
above, shall remain in full force and effect and are hereby ratified and
confirmed.
SECTION 7. Execution in Counterparts. This Amendment 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 to be
an original and all of which taken together shall constitute but one and the
same instrument.
SECTION 8. GOVERNING LAW; BINDING EFFECT. THIS AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
APPLICABLE FEDERAL LAW AND SHALL BE BINDING UPON THE COMPANY, THE ADMINISTRATIVE
AGENT, THE CO-AGENTS, THE BANKS AND THE RETIRING BANKS AND THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS.
SECTION 9. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
SECTION 10. ENTIRE AGREEMENT. THE CREDIT AGREEMENT (INCLUDING THE
EXHIBITS AND SCHEDULES HERETO), AS AMENDED HEREBY, THE BORROWING SUBSIDIARY
COUNTERPARTS, IF ANY, THE ASSIGNMENT AND ACCEPTANCES, IF ANY, AND THE AGENT'S
FEE LETTER EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING AMONG THE COMPANY, THE
ADMINISTRATIVE AGENT, THE CO-AGENTS, THE BANKS AND THE RETIRING BANKS RELATING
TO THE SUBJECT MATTER HEREOF AND THEREOF AND
-5-
<PAGE> 6
SUPERSEDE ALL PRIOR PROPOSALS, AGREEMENTS AND UNDERSTANDINGS RELATING TO SUCH
SUBJECT MATTER.
SECTION 11. Execution by Retiring Banks. (a) Each of the Banks (as
defined in the Credit Agreement) is either a Continuing Bank or a Retiring Bank.
(b) Each of the Retiring Banks is executing this Amendment solely for
the purpose of acknowledging and agreeing that upon the effectiveness of this
Amendment and the payment to it of all principal, interest, fees and any other
amounts due and owing to it under the Credit Agreement and any related document
or instrument, such Retiring Bank shall not have any commitment or obligation to
the Company under the Credit Agreement or any related document or instrument and
shall cease to be a Bank thereunder, and the Company shall have no obligation to
any Retiring Bank under the Credit Agreement or this Amendment, except as
provided in Sections 2.14, 2.15, 2.16, 2.20, 9.04 and 9.05 of the Credit
Agreement.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed effective as of the date first stated herein, by their respective
officers thereunto duly authorized.
SERVICE CORPORATION INTERNATIONAL
By:
-------------------------------
Todd A. Matherne
Vice President and Treasurer
-7-
<PAGE> 8
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:
-------------------------------
Name:
Title:
<PAGE> 9
CO-AGENTS:
BANK OF AMERICA NT & SA,
as Co-Agent
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 10
CITIBANK, N.A., as Co-Agent
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 11
ROYAL BANK OF CANADA,
as Co-Agent
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 12
SOCIETE GENERALE, SOUTHWEST AGENCY,
as Co-Agent
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 13
UBS AG, STAMFORD BRANCH,
as Co-Agent
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 14
CONTINUING BANK:
ABN AMRO BANK N.V.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Commitment: $15,000,000
FACILITY A
<PAGE> 15
CONTINUING BANK:
BANK OF AMERICA NT & SA
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Commitment: $30,000,000
FACILITY A
<PAGE> 16
CONTINUING BANK:
THE BANK OF NEW YORK
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Commitment: $15,000,000
FACILITY A
<PAGE> 17
NEW BANK:
BANK ONE, TEXAS, N.A.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Commitment: $20,000,000
FACILITY A
<PAGE> 18
CONTINUING BANK:
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Commitment: $9,000,000
FACILITY A
<PAGE> 19
CONTINUING BANK:
CHASE BANK OF TEXAS
NATIONAL ASSOCATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Commitment: $44,000,000
FACILITY A
<PAGE> 20
RETIRING BANK:
CIBC, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
FACILITY A
<PAGE> 21
CONTINUING BANK:
CITIBANK, N.A.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Commitment: $25,500,000
FACILITY A
<PAGE> 22
CONTINUING BANK:
COMMERZBANK AKTIENGESELLSHAFT,
ATLANTA AGENCY
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Commitment: $21,000,000
FACILITY A
<PAGE> 23
CONTINUING BANK:
CREDIT LYONNAIS NEW YORK BRANCH
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Commitment: $20,000,000
FACILITY A
<PAGE> 24
RETIRING BANK:
THE FUJI BANK, LIMITED
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
FACILITY A
<PAGE> 25
RETIRING BANK:
ISTITUTO BANCARIO SAN PAOLO DI
TORINO ISTITUTO MOBILIARE ALIANO SPA
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
FACILITY A
<PAGE> 26
CONTINUING BANK:
ROYAL BANK OF CANADA
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Commitment: $25,500,000
FACILITY A
<PAGE> 27
CONTINUING BANK:
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Commitment: $25,500,000
FACILITY A
<PAGE> 28
CONTINUING BANK:
SUNTRUST BANK, ATLANTA
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Commitment: $15,000,000
FACILITY A
<PAGE> 29
CONTINUING BANK:
UBS AG, STAMFORD BRANCH
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Commitment: $25,500,000
FACILITY A
<PAGE> 30
CONTINUING BANK:
WESTPAC BANKING CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Commitment: $9,000,000
FACILITY A
<PAGE> 1
EXHIBIT 99.4
AGREEMENT AND THIRD AMENDMENT
TO COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY AGREEMENT (FACILITY A)
THIS AGREEMENT AND THIRD AMENDMENT TO COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY AGREEMENT (FACILITY A) (this "Amendment") dated as of
November 2, 1999 is among:
(a) SERVICE CORPORATION INTERNATIONAL, a Texas corporation
(the "Company");
(b) the banks and other financial institutions listed on the
signature pages hereof, (collectively, the "Banks"); and
(c) THE CHASE MANHATTAN BANK, a New York banking corporation,
as administrative agent for the Banks (in such capacity, the "Administrative
Agent").
PRELIMINARY STATEMENT
The Company, the Banks, the Administrative Agent and the
Co-Agents (defined therein), are parties to a Competitive Advance and Revolving
Credit Facility Agreement (Facility A) dated as of June 27, 1997, as amended
pursuant to an Agreement and First Amendment to Competitive Advance and
Revolving Credit Facility Agreement (Facility A) dated as of June 26, 1998 and
an Agreement and Second Amendment to Competitive Advance and Revolving Credit
Facility Agreement (Facility A) dated as of June 25, 1999 (said Competitive
Advance and Revolving Credit Facility Agreement (Facility A), as so amended,
being the "Credit Agreement"). All capitalized terms defined in the Credit
Agreement and not otherwise defined herein shall have the same meanings herein
as in the Credit Agreement. The Company, the Banks and the Administrative Agent
have agreed, upon the terms and conditions specified herein, to amend the Credit
Agreement as hereinafter set forth:
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the Company, the Banks and the
Administrative Agent hereby agree as follows:
SECTION 1. Amendments to Section 1.01 of the Credit Agreement.
(a) The definitions of the term "Consolidated Net Income" and
contained in Section 1.01 of the Credit Agreement is hereby amended in its
entirety to read as follows:
FACILITY A
<PAGE> 2
"'Consolidated Net Income' means, for any period, the net
income of the Company and its Subsidiaries for such period (taken as a
cumulative whole), determined on a consolidated basis in accordance
with GAAP and adjusted to exclude (a) net after-tax extraordinary gains
or losses, (b) restructuring charges, and (c) the cumulative effect of
any changes in accounting principles.
(b) The following defined terms are hereby added to Section
1.01 of the Credit Agreement:
(i) "Applicable Percentage" means, for any day, (a) with
respect to any Eurodollar Loan, the applicable percentage set
forth below under the caption "Eurodollar Spread" and (b) with
respect to the Facility Fee, the applicable percentage set
forth below under the caption "Facility Fee Rate", in each
case determined by reference to the highest level applicable
based upon the ratings by S&P and Moody's in effect on such
date for the Index Debt:
<TABLE>
<CAPTION>
Level 1 Level 2 Level 3 Level 4
------- ------- ------- -------
Ratings >=BBB and >=BBB- and >=BB+ and <BB+ or
(S&P/Moody's) >=Baa2 >=Baa3 >=Ba1 <Ba1
- ------------- -------- -------- ------- -----
<S> <C> <C> <C> <C>
Eurodollar Spread 1.00% 1.25% 1.375% 1.50%
Facility Fee Rate 0.25% 0.25% 0.375% 0.50%
</TABLE>
For purposes of the foregoing, (i) if either Moody's or S&P shall not
have in effect a rating for the Index Debt (other than by reason of the
circumstances referred to in the last sentence of this paragraph), then
such rating agency shall be deemed to have established a rating below
BB+ or Ba1, as the case may be; (ii) if the ratings established or
deemed to have been established by Moody's and S&P for the Index Debt
shall fall within different levels, the Applicable Percentage shall be
based on the lower of the two ratings; and (iii) if the ratings
established or deemed to have been established by Moody's or S&P for
the Index Debt shall be changed (other than as a result of a change in
the rating system of Moody's or S&P), such change shall be effective as
of the date on which it is first announced by the applicable rating
agency. Each change in the Applicable Percentage shall apply for
purposes of determining interest on the outstanding Eurodollar Loans
and the Facility Fee during the period commencing on the effective date
of such change and ending on the date immediately preceding the
effective date of the next such change. If the rating system of Moody's
or S&P shall change, or if either such rating agency shall cease to be
in the business of rating corporate debt obligations, the Company and
the Banks shall negotiate in good faith to amend this definition to
reflect such changed rating system or the absence of ratings from such
rating agency and, pending the
FACILITY A
-2-
<PAGE> 3
effectiveness of such amendment, the Applicable Percentage shall be
determined by reference to the rating most recently in effect prior to
such change or cessation.
(ii) "Consolidated EBITDA" means, in respect of any fiscal
quarter, the sum of (a) Consolidated Net Income for such fiscal quarter
and (b) the amount of all Interest Expense, taxes paid during such
fiscal quarter, depreciation and amortization allowances and other
non-cash expenses of the Company and its Subsidiaries, as determined on
a consolidated basis in accordance with GAAP, but in the case of clause
(b) only to the extent deducted in the determination of Consolidated
Net Income for such fiscal quarter.
(iii) "Interest Expense" means, with respect to any fiscal
quarter, without duplication, the following (in each case, eliminating
all offsetting debits and credits between the Company and its
Subsidiaries and all other items required to be eliminated in the
course of the preparation of consolidated financial statements of the
Company and its Subsidiaries in accordance with GAAP): all interest in
respect of Debt of the Company and its Subsidiaries (including imputed
interest on Capital Lease Obligations) paid in cash during, and
deducted in determining Consolidated Net Income for, such fiscal
quarter.
(iv) "Third Amendment" means the Agreement and Third Amendment
to Competitive Advance and Revolving Credit Facility Agreement
(Facility A) dated as of November 2, 1999 among the Company, the Banks
party thereto and the Administrative Agent.
(v) "Third Amendment Execution Date" means the date the Third
Amendment has been executed by all the parties thereto.
(c) The defined term "Utilization Fees" and the definition
thereof is hereby deleted from Section 1.01 of the Credit Agreement.
SECTION 2. Amendments to Article II of the Credit Agreement.
(a) Section 2.07 of the Credit Agreement is hereby amended in its entirety to
read as follows:
"SECTION 2.07. Fees.
(a) The Company agrees to pay in immediately available funds
to the Administrative Agent for the account of each Bank, through the
Administrative Agent, (i) on each March 31, June 30, September 30 and
December 31 commencing December 31, 1999 from the Third Amendment
Execution Date to the date on which the Commitment of such Bank has
been terminated and (ii) on the Maturity Date and on any other date on
which the Commitment of such Bank has been terminated, facility fees
(each a "Facility Fee" and collectively, the "Facility
FACILITY A
-3-
<PAGE> 4
Fees"), which shall accrue at the Applicable Percentage on the amount
of the Commitment of such Bank from time to time outstanding, whether
used, deemed used or unused, during the preceding quarter (or shorter
period commencing with the Third Amendment Execution Date and/or ending
with the Maturity Date); provided, however, if any Loans are
outstanding to any Bank after the Maturity Date then such Facility Fee
shall continue to accrue on the daily amount of such Bank's outstanding
Loans from and including the Maturity Date to but excluding the date
all such Loans are paid in full.
(b) Intentionally Omitted.
(c) All Facility Fees shall be computed by the Administrative
Agent on the basis of the actual number of days elapsed in a year of
360 days, and such computations, made in good faith, shall create a
rebuttable presumption that they are accurate. The Facility Fees due to
each Bank shall commence to accrue on the Execution Date and shall
cease to accrue on the earlier of the Maturity Date and the termination
of the Commitment of such Bank as provided herein.
(d) The Facility Fees due under this Section 2.07 shall be
paid on the date due, in immediately available funds, to the
Administrative Agent for distribution among the Banks.
(e) The Company agrees to pay to the Administrative Agent the
fees as provided in the Agent's Fee Letter.
(f) Notwithstanding the foregoing, in no event shall any Bank
be permitted to receive any compensation hereunder constituting
interest in excess of the Highest Lawful Rate.".
(b) Section 2.09(a) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(a) Subject to the provisions of Section 2.09(d) and Section
2.10, the Loans comprising each Eurodollar Borrowing shall bear
interest (computed on the basis of the actual number of days elapsed
over a year of 360 days) at a rate per annum equal to (i) in the case
of each Eurodollar Committed Loan, the lesser of (A) the IBO Rate for
the Interest Period in effect for such Borrowing plus the Applicable
Percentage in effect for such Loans from time to time and (B) the
Highest Lawful Rate, and (ii) in the case of each Eurodollar
Competitive Loan, the lesser of (A) the IBO Rate for the Interest
Period in effect for such Borrowing plus the Margin offered by the Bank
making such Loan and accepted by a Borrower pursuant to Section 2.03
and (B) the Highest Lawful Rate.".
FACILITY A
-4-
<PAGE> 5
SECTION 3. Amendments to Article V. Article V of the Credit
Agreement is hereby amended as follows:
(a) The penultimate sentence of Section 5.01(a) is hereby
amended in its entirety to read as follows:
"Together with each delivery of financial statements required
by clauses (i) and (ii) above, the Company will deliver to each Bank
(y) schedules and/or computations demonstrating that the Company is in
compliance with its covenants in Sections 5.02(a), 5.02(b), 5.02(c),
5.02(g) and 5.02(j) or reflecting any noncompliance therewith as at the
applicable date and (z) an Officer's Certificate stating that there
exists no Event of Default or Default, or, if any Event of Default or
Default, stating the nature thereof, the period of existence thereof
and what action the Company or any other Borrower has taken or proposes
to take with respect thereto.".
(b) Section 5.02(a) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(a) Net Worth. The Company will not permit Net Worth at any
time to be less than the sum of (a) $2,500,000,000, plus (b) 50% of
Consolidated Net Income (if positive) for each fiscal quarter ending
during the period from January 1, 1999 to the end of its most recently
completed fiscal quarter, plus (c) 100% of the net proceeds received by
the Company on or after January 1, 1999 from all shares, rights to
purchase, warrants, options, participations or other equivalents of the
Company's equity, including all common stock and preferred stock.".
(c) Section 5.02(b) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(b) Debt. (i) The Company will not permit the ratio of
Consolidated Debt to Total Capitalization at any time to be greater
than .60 to 1.0.
(ii) The Company will not permit the sum of (A) the
aggregate amount of Debt of its Subsidiaries (other than Debt
held by the Company) plus (B) Assured Obligations of its
Subsidiaries to exceed 20% of Net Worth.".
(d) Section 5.02 of the Credit Agreement is hereby amended to
add the following as Section 5.02(j):
"(j) EBITDA. The Company will not permit the ratio of
Consolidated EBITDA to Interest Expense at any time to be less than
2.75 to 1.0, calculated at the
FACILITY A
-5-
<PAGE> 6
end of each fiscal quarter for such fiscal quarter and the immediately
preceding three fiscal quarters.".
SECTION 4. The Credit Agreement is hereby amended to delete
all references to the term "Utilization Fees".
SECTION 5. Conditions of Effectiveness. This Amendment shall
become effective when, and only when the following conditions shall have been
fulfilled:
(a) the Company, the Administrative Agent and the Majority
Banks shall have executed a counterpart hereof and delivered the same to the
Administrative Agent or, in the case of any Bank as to which an executed
counterpart hereof shall not have been so delivered, the Administrative Agent
shall have received written confirmation by telecopy or other similar writing
from such Bank of execution of a counterpart hereof by such Bank; and
(b) the Administrative Agent shall have received from the
Company a certificate of the Secretary or Assistant Secretary of the Company
certifying that attached thereto is (i) a true and complete copy of the general
borrowing resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance of the Credit Agreement, as amended hereby,
and (ii) the incumbency and specimen signature of each officer of the Company
executing this Amendment.
SECTION 6. Representations and Warranties True; No Default or
Event of Default. The Company hereby represents and warrants to the
Administrative Agent, the Co-Agents and the Banks that after giving effect to
the execution and delivery of this Amendment: (a) the representations and
warranties set forth in the Credit Agreement are true and correct on the date
hereof as though made on and as of such date; provided, however, that for
purposes of this Section 6, the reference in the first sentence of Section 4.07
to the Company Financials shall be a reference to the consolidated financial
statements of the Company and its Subsidiaries most recently delivered to the
Administrative Agent and the Banks by the Company pursuant to Section 5.01(a)(i)
or 5.01(a)(ii), as the case may be, and (b) no event has occurred and is
continuing that constitutes either a Default or an Event of Default.
SECTION 7. Reference to the Credit Agreement and Effect on the
Other Documents Executed Pursuant to the Credit Agreement.
(a) Upon the effectiveness of this Amendment, each reference
in the Credit Agreement to "this Agreement," "hereunder," "herein," "hereof" or
words of like import shall mean and be a reference to the Credit Agreement, as
amended hereby.
(b) Upon the effectiveness of this Amendment, each reference
in the documents and agreements delivered or to be delivered pursuant to the
Credit Agreement shall mean and be a reference to the Credit Agreement, as
amended hereby.
FACILITY A
-6-
<PAGE> 7
(c) Upon the effectiveness of this Amendment, each reference
in the Credit Agreement to "Consolidated Net Income" shall mean and be a
reference to such term as amended hereby.
(d) The Credit Agreement and other documents and agreements
delivered pursuant to the Credit Agreement, and modified by the amendments
referred to above, shall remain in full force and effect and are hereby ratified
and confirmed.
SECTION 8. Execution in Counterparts. This Amendment 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 to be an original and all of which taken together shall constitute but
one and the same instrument.
SECTION 9. GOVERNING LAW; BINDING EFFECT. THIS AMENDMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
AND APPLICABLE FEDERAL LAW AND SHALL BE BINDING UPON THE COMPANY, THE
ADMINISTRATIVE AGENT, THE CO-AGENTS, THE BANKS AND THE RETIRING BANKS AND THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS.
SECTION 10. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.
SECTION 11. ENTIRE AGREEMENT. THE CREDIT AGREEMENT (INCLUDING
THE EXHIBITS AND SCHEDULES HERETO), AS AMENDED HEREBY, THE BORROWING SUBSIDIARY
COUNTERPARTS, IF ANY, THE ASSIGNMENT AND ACCEPTANCES, IF ANY, AND THE AGENT'S
FEE LETTER EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING AMONG THE COMPANY, THE
ADMINISTRATIVE AGENT, THE CO-AGENTS, THE BANKS AND THE RETIRING BANKS RELATING
TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ALL PRIOR PROPOSALS,
AGREEMENTS AND UNDERSTANDINGS RELATING TO SUCH SUBJECT MATTER.
FACILITY A
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed effective as of the date first stated herein, by their
respective officers thereunto duly authorized.
SERVICE CORPORATION INTERNATIONAL
By:
-------------------------------------
Todd A. Matherne
Senior Vice President and Treasurer
FACILITY A
<PAGE> 9
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:
-----------------------------
Name:
Title:
FACILITY A
<PAGE> 10
BANK:
ABN AMRO BANK N.V.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Commitment: $15,000,000
FACILITY A
<PAGE> 11
BANK:
BANK OF AMERICA, N.A.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Commitment: $30,000,000
FACILITY A
<PAGE> 12
BANK:
THE BANK OF NEW YORK
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Commitment: $15,000,000
FACILITY A
<PAGE> 13
BANK:
BANK ONE, TEXAS, N.A.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Commitment: $20,000,000
FACILITY A
<PAGE> 14
BANK:
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Commitment: $9,000,000
FACILITY A
<PAGE> 15
BANK:
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION,
f/k/a TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Commitment: $44,000,000
FACILITY A
<PAGE> 16
BANK:
CITIBANK, N.A.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Commitment: $25,500,000
FACILITY A
<PAGE> 17
BANK:
COMMERZBANK AKTIENGESELLSCHAFT,
ATLANTA AGENCY
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Commitment: $21,000,000
FACILITY A
<PAGE> 18
BANK:
CREDIT LYONNAIS NEW YORK BRANCH
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Commitment: $20,000,000
FACILITY A
<PAGE> 19
BANK:
ROYAL BANK OF CANADA
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Commitment: $25,500,000
FACILITY A
<PAGE> 20
BANK:
SOCIETE GENERALE
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Commitment: $25,500,000
FACILITY A
<PAGE> 21
BANK:
SUNTRUST BANK, ATLANTA
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Commitment: $15,000,000
FACILITY A
<PAGE> 22
BANK:
UBS AG, STAMFORD BRANCH,
f/k/a UNION BANK OF SWITZERLAND
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Commitment: $25,500,000
FACILITY A
<PAGE> 23
BANK:
WESTPAC BANKING CORPORATION
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Commitment: $9,000,000
FACILITY A
<PAGE> 1
EXHIBIT 99.5
COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY AGREEMENT (FACILITY B)
THIS COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY
AGREEMENT (FACILITY B) dated as of June 27, 1997, among:
(a) SERVICE CORPORATION INTERNATIONAL, a Texas corporation
(the "Company");
(b) 611102 Saskatchewan Ltd., a Saskatchewan corporation, and
Service Corporation International Australia Pty Limited, a company limited by
shares incorporated in South Australia (collectively, the "Initial Borrowing
Subsidiaries"), and each other "Borrowing Subsidiary", as herein defined, that
becomes party hereto;
(c) the banks and other financial institutions named under the
caption "Banks" on the signature pages hereof (such banks together with each
other Person who becomes a Bank pursuant to Section 9.11, collectively, the
"Banks");
(d) THE CHASE MANHATTAN BANK, a New York banking corporation,
as administrative agent for the Banks (in such capacity together with any other
Person who becomes the Administrative Agent pursuant to Section 7.06, the
"Administrative Agent"); and
(e) BANK OF AMERICA ILLINOIS, CITIBANK N.A., NATIONSBANK,
N.A., ROYAL BANK OF CANADA, SOCIETE GENERALE, and UNION BANK OF SWITZERLAND
(collectively, the "Co-Agents").
PRELIMINARY STATEMENT
The Company has requested that the Banks extend a credit
facility to the Company and the Borrowing Subsidiaries in order to enable the
Company and the Borrowing Subsidiaries to borrow on a revolving credit basis on
and after the date hereof, on the terms and conditions set forth herein, a
principal amount not in excess of $700,000,000 at any time outstanding. The
Company has also requested that the Banks provide a procedure pursuant to which
each Bank may, on an uncommitted basis, bid up to the full amount of the Total
Commitment (as herein defined), regardless of such Bank's individual Commitment,
on borrowings by the Company and the Borrowing Subsidiaries thereunder. The
proceeds of all such borrowings are to be used for general corporate purposes of
the Borrowers including credit support for the Company's commercial paper
program. The Banks are willing to extend such credit to the Company and the
Borrowing
FACILITY B
<PAGE> 2
Subsidiaries on the terms and subject to the conditions herein set forth.
Accordingly, the Company, the Borrowing Subsidiaries, the Banks and the
Administrative Agent agree as follows:
ARTICLE I
DEFINITIONS, ACCOUNTING TERMS AND CONSTRUCTION
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings:
"ABR Borrowing" means a Borrowing comprised of ABR Loans.
"ABR Loan" means any Committed Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Acquisition" means the acquisition by the Company or any of
its Subsidiaries of a business, including any assets, leases and liabilities
(contingent or otherwise) related thereto, either by the cash purchase of stock
or assets or by an exchange or issuance of securities (including merger) or
assumption of liabilities or by a combination thereof.
"Administrative Agent" has the meaning specified in the
introduction to this Agreement.
"Administrative Questionnaire" means an Administrative
Questionnaire in the form of Exhibit 1.01A, which each Bank shall complete and
provide to the Administrative Agent and the Company.
"Affiliate" means, when used with respect to any Person, any
other Person which controls or is controlled by or is under common control with
such Person. As used in this definition, "control" means the possession,
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of securities or partnership or ownership
interests, by contract or otherwise).
"Agent's Fee Letter" means the fee letter agreement dated
April 29, 1997 between the Company and the Administrative Agent.
"Aggregate Competitive Loan Exposure" means the aggregate
amount of the Banks' Competitive Loan Exposures.
FACILITY B
-2-
<PAGE> 3
"Aggregate Outstanding Dollar Revolving Extensions of Credit"
means as to any Bank at any time, the aggregate principal amount of all
Committed Loans made by such Bank then outstanding.
"Aggregate Revolving Credit Exposure" means the aggregate
amount of the Banks' Revolving Credit Exposures.
"Agreement" means this Competitive Advance and Revolving
Credit Facility Agreement (Facility B).
"Agreement Currency" has the meaning assigned to such term in
Section 9.17.
"Alternate Base Rate" means, for any date, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of
(a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. "Prime Rate" means, as of a
particular date, the prime rate most recently determined by the Administrative
Agent at the Principal Office, automatically fluctuating upward and downward
with and at the time specified in each such announcement without notice to any
Borrower or any other Person, which prime rate may not necessarily represent the
lowest or best rate actually charged to a customer. "Federal Funds Effective
Rate" means, for any day, the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Administrative Agent from three federal funds brokers of
recognized standing selected by it. If for any reason the Administrative Agent
shall have determined (which determination, made in good faith, shall create a
rebuttable presumption that the same is accurate) that it is unable to ascertain
the Federal Funds Effective Rate for any reason, including the inability or
failure of the Administrative Agent to obtain sufficient quotations in
accordance with the terms hereof, the Alternate Base Rate shall be determined
without regard to clause (b) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Creditor" has the meaning specified in Section
9.17.
"Applicable Differential" means, on any date, with respect to
a Eurodollar Committed Borrowing, the applicable differential for such Borrowing
set forth below based upon the rating applicable on such date to the Index Debt:
FACILITY B
-3-
<PAGE> 4
<TABLE>
<S> <C>
Eurodollar Committed
Loan Differential
(in 1/100 of 1% per annum)
--------------------------
Category 1
A or higher by S&P; or A2 or higher
by Moody's 13.0
Category 2
Lower than A and equal to or higher
than BBB + by S&P; or lower than
A2 and equal to or higher than Baa1
by Moody's 14.0
Category 3
BBB by S&P; or Baa2
by Moody's 20.0
Category 4
BBB - or lower by S&P; or Baa3 or
lower by Moody's 25.0
</TABLE>
For purposes of the foregoing, (a) if neither Moody's nor S&P shall have in
effect a rating for the Index Debt, then both such rating agencies will be
deemed to have established ratings for the Index Debt in Category 4; (b) if only
one of S&P and Moody's shall have in effect a rating for the Index Debt, the
Company and the Banks will negotiate in good faith to agree upon another rating
agency to be substituted by an amendment to this Agreement for the rating agency
which shall not have a rating in effect, and, pending the effectiveness of such
amendment, the Applicable Differential will be determined by reference to the
available rating; (c) if the ratings established or deemed to have been
established by S&P and Moody's shall fall within different Categories, the
Applicable Differential shall be determined by reference to the superior (or
numerically lower) Category; and (d) if any rating established or deemed to have
been established by S&P or Moody's shall be changed (other than as a result of a
change in the rating system of either Moody's or S&P), such change shall be
effective as of the date on which such change is first announced by the rating
agency making such change. Each change in the Applicable Differential shall
apply to all Eurodollar Committed Loans that are outstanding at any time during
the period commencing on the effective date of such change and ending on the
date immediately preceding the effective date of the next such change. If the
rating system of either S&P or Moody's shall change prior to the Maturity Date,
the Company and the Banks shall negotiate in good faith to amend the references
to specific ratings in this definition to reflect such changed rating system.
FACILITY B
-4-
<PAGE> 5
"Applicable Fee Percentage" means, on any date, with respect
to the Total Commitment, the applicable percentage set forth below based upon
the rating applicable on such date to the Index Debt:
<TABLE>
<S> <C>
Applicable Fee Percentage
in 1/100 of 1% per annum
------------------------
Category 1
A or higher by S&P; or A2 or higher
by Moody's 7.0
Category 2
Lower than A and equal to or higher
than BBB + by S&P; or lower than
A2 and equal to or higher than Baa1
by Moody's 8.0
Category 3
BBB by S&P; or Baa2
by Moody's 10.0
Category 4
BBB- or lower by S&P; or Baa3 or
lower by Moody's 15.0
</TABLE>
For purposes of the foregoing, (a) if neither Moody's nor S&P shall have in
effect a rating for the Index Debt, then both such rating agencies will be
deemed to have established ratings for the Index Debt in Category 4; (b) if only
one of S&P and Moody's shall have in effect a rating for the Index Debt, the
Company and the Banks will negotiate in good faith to agree upon another rating
agency to be substituted by an amendment to this Agreement for the rating agency
which shall not have a rating in effect, and, pending the effectiveness of such
amendment, the Applicable Fee Percentage will be determined by reference to the
available rating; (c) if the ratings established or deemed to have been
established by S&P and Moody's shall fall within different Categories, the
Applicable Fee Percentage shall be determined by reference to the superior (or
numerically lower) Category; and (d) if any rating established or deemed to have
been established by S&P or Moody's shall be changed (other than as a result of a
change in the rating system of either S&P or Moody's), such change shall be
effective as of the date on which such change is first announced by the rating
agency making such change. Each change in the Applicable Fee Percentage shall
apply during the period commencing on the effective date of such change and
ending on the date immediately preceding the effective date of the next such
change. If the rating system of either S&P or Moody's shall change prior to the
Maturity Date, the Company and the Banks shall negotiate in good faith to amend
the references to specific ratings in this definition to reflect such changed
rating system.
FACILITY B
-5-
<PAGE> 6
"Applicable Lending Office" means, with respect to each Bank,
such Bank's Domestic Lending Office in the case of an ABR Loan or a Fixed Rate
Loan denominated in Dollars, such Bank's Eurocurrency Lending Office in the case
of a Eurocurrency Loan and such Bank (or its Affiliate, branch or agency, as
specified by such Bank) in the case of a Foreign Currency Loan.
"Assignment and Acceptance" has the meaning specified in
Section 9.11(c).
"Assurance" means, as to any Person, any guaranty or other
contingent liability of such Person (other than any endorsement for collection
or deposit in the ordinary course of business) including, without limitation,
contingent liabilities as an account party in respect of letters of credit,
direct or indirect, with respect to any obligation of another Person, through an
agreement or otherwise, including (a) any endorsement or discount with recourse
or other undertaking substantially equivalent to or having economic effect
similar to a guarantee in respect of any such obligation and (b) any agreement
(i) to purchase, or to advance or supply funds for the payment or purchase of,
any such obligation, (ii) to purchase, sell or lease property, products,
materials or supplies, or transportation or services, in order to enable such
other Person to pay any such obligation or to assure the owner thereof against
loss regardless of the delivery or non-delivery of the property, products,
materials or supplies or transportation or services or (iii) to make any loan,
advance or capital contribution to or other investment in, or to otherwise
provide funds to or for, such other Person in order to enable such Person to
satisfy any obligation (including any liability for a dividend, stock
liquidation payment or expense) or to assure a minimum equity, working capital
or other balance sheet condition for the benefit of the holder of any such
obligation. Notwithstanding the foregoing, the term "Assurance" shall not
include any guaranty or other contingent liability, direct or indirect, with
respect to (u) bonds, indemnity agreements and similar arrangements which are
provided to assure that the Company and its Subsidiaries fully perform their
obligations regarding prearranged funeral services and goods and/or construction
of burial facilities, (v) obligations of a Person acquired, or of a business
which has been acquired, in an Acquisition, provided that such obligations arose
prior to such Acquisition and were not created, incurred or assumed in
contemplation thereof, (w) obligations of a Subsidiary arising from an
Acquisition, (x) any duly authorized registered guaranty of the Company of a
promissory note of its Subsidiary issued or to be issued with respect to an
Acquisition in accordance with an Indenture dated as of May 1, 1970, executed
and delivered between the Company and TCB, as Trustee, (y) Letters of Credit, or
(z) obligations of the Company under the Enhancement Agreements. In no event
shall any unfunded commitment extended by Provident in the ordinary course of
its business of extending financing to the death care industry be considered an
Assurance and the loans and advances made by Provident pursuant to any such
commitment shall constitute investments and not Assurances. The amount of any
Assurance shall be equal to the outstanding amount of the obligation directly or
indirectly guaranteed (to the full extent of the obligation in respect of which
such Assurance is given or the maximum liability in respect of such Assurance of
the Person giving the same, whichever shall be less).
FACILITY B
-6-
<PAGE> 7
"Assured Obligation" means, as to any Person, any amount
guaranteed or otherwise supported by such Person pursuant to an Assurance.
"Australian Addendum" means the Foreign Currency Addendum,
dated as of the date hereof, between the Company, Service Corporation
International Australia Pty Limited, and the Foreign Currency Agent and the
Foreign Currency Banks named therein.
"Available Commitment" means as to any Bank, at any time of
determination, an amount equal to such Bank's Commitment at such time minus such
Bank's Revolving Credit Exposure at such time.
"Bank of America" means Bank of America National Trust and
Savings Association.
"Banks" has the meaning specified in the introduction to this
Agreement.
"Board" means the Board of Governors of the Federal Reserve
System of the United States.
"Borrowers" means the Company and the Borrowing Subsidiaries.
"Borrowing" means a Loan or group of Loans of a single Type
and currency made by the Banks (or, in the case of a Competitive Borrowing, by
the Bank or Banks whose Competitive Bids have been accepted pursuant to Section
2.03) on a single date and as to which a single Interest Period is in effect.
"Borrowing Date" means, with respect to each Borrowing made
pursuant to Section 2.03 or Section 2.04, the Business Day upon which the
proceeds of such Borrowing are to be made available to a Borrower.
"Borrowing Subsidiary" means each Initial Borrowing Subsidiary
and any other Wholly-owned Subsidiary of the Company (other than an Inactive
Subsidiary) designated as a Borrowing Subsidiary by the Company pursuant to
Section 2.22.
"Borrowing Subsidiary Counterpart" has the meaning specified
in Section 2.22.
"Business Day" means any day other than a Saturday, Sunday or
legal holiday in the State of New York or Texas or other day on which banks in
New York City or in Houston, Texas are required or authorized by law to close;
provided, however, that, when used in connection with a Eurocurrency Loan, the
term "Business Day" shall also exclude any day on which banks are not open for
dealings in deposits in Dollars or the relevant Foreign Currency in the London
interbank market.
FACILITY B
-7-
<PAGE> 8
"Calculation Date" means the last Business Day of each
calendar week.
"Canadian Addendum" means the Foreign Currency Addendum, dated
as of the date hereof, between the Company, 611102 Saskatchewan Limited, and the
Foreign Currency Agent and the Foreign Currency Banks named therein.
"Capital Lease" means, as to any Person, any lease in respect
of which the obligations of such Person constitute Capitalized Lease
Obligations.
"Capitalized Lease Obligations" means, as to any Person, all
lease obligations which shall have been or should be, in accordance with GAAP,
capitalized on the books of such Person.
"Chase" means The Chase Manhattan Bank, a New York banking
corporation and the successor to Chemical Bank, a New York banking corporation.
"Co-Agents" has the meaning specified in the introduction to
this Agreement.
"Code" means the Internal Revenue Code of 1986 and the
regulations promulgated thereunder.
"Commitment" means, with respect to each Bank, the amount set
forth beneath the name of such Bank on the signature pages hereof (or, as to any
Person that becomes a Bank after the Execution Date, on the signature page of
the Assignment and Acceptance executed by such Person), as such amount may be
permanently terminated or reduced from time to time pursuant to Section 2.12,
Section 2.14, Section 2.15 or Section 9.11, and as such amount may be increased
from time to time by assignment or assumption pursuant to Section 2.14, Section
2.15 or Section 9.11. The Commitment of each Bank shall automatically and
permanently terminate on the Maturity Date.
"Committed Borrowing" means a borrowing consisting of
concurrent Committed Loans from each of the Banks pursuant to Section 2.04
distributed ratably among the Banks in accordance with their respective
Available Commitments or resulting from a conversion or continuation of an
existing Committed Borrowing pursuant to Section 2.06.
"Committed Borrowing Request" has the meaning specified in
Section 2.04.
"Committed Loans" means the revolving loans made by the Banks
to the Company pursuant to Section 2.04. Each Committed Loan shall be a
Eurodollar Committed Loan or an ABR Loan. The term "Committed Loan" shall not
include any Foreign Currency Revolving Loan.
"Communications" has the meaning specified in Section 9.02.
"Company" has the meaning specified in the introduction to
this Agreement.
FACILITY B
-8-
<PAGE> 9
"Company Financials" has the meaning specified in Section
4.07.
"Competitive Bid" means an offer by a Bank to make a
Competitive Loan pursuant to Section 2.03.
"Competitive Bid Rate" means, as to any Competitive Bid made
by a Bank pursuant to Section 2.03(b), (i) in the case of a Eurocurrency
Competitive Loan, the Margin (which will be added to or subtracted from the IBO
Rate), and (ii) in the case of a Fixed Rate Loan, the fixed rate of interest, in
each case, offered by the Bank making such Competitive Bid.
"Competitive Bid Request" means a request for Competitive Bids
made pursuant to Section 2.03 in the form of Exhibit 2.03A.
"Competitive Borrowing" means a borrowing consisting of a
Competitive Loan or concurrent Competitive Loans from each Bank whose
Competitive Bid as all or as a part of such borrowing, as the case may be, has
been accepted by a Borrower under the bidding procedure described in Section
2.03.
"Competitive Loan" means a Loan from a Bank to a Borrower
pursuant to the bidding procedure described in Section 2.03, and shall be either
a Eurocurrency Competitive Loan or a Fixed Rate Loan, and shall include a
Competitive Loan denominated in a Foreign Currency.
"Competitive Loan Exposure" means, with respect to any Bank at
any time, the sum of the aggregate principal amount of all outstanding
Competitive Loans made by such Bank denominated in Dollars and the Dollar
Equivalent of all outstanding Competitive Loans made by such Bank denominated in
Foreign Currencies.
"Consolidated Assets" means, as to any Person, total
consolidated assets (including assets subject to Capital Leases) of such Person
and of its Consolidated Subsidiaries, as determined in accordance with GAAP.
"Consolidated Debt" means the Debt of the Company and its
Consolidated Subsidiaries.
"Consolidated Net Income" means consolidated net income (after
taxes) of the Company and its Consolidated Subsidiaries determined in accordance
with GAAP.
"Consolidated Subsidiary" means, with respect to any Person,
each Subsidiary of such Person the accounts of which are or should be
consolidated with the accounts of such Person in reporting the consolidated
financial statements of such Person in accordance with GAAP.
FACILITY B
-9-
<PAGE> 10
"Debt" means, when used with respect to any Person, without
duplication, (a) all indebtedness of such Person for borrowed money (whether by
loan or the issuance and sale of debt securities) or for the deferred purchase
price of property or services (excluding, however, Letter of Credit Obligations
of such Person), (b) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property), (c) all Capitalized Lease Obligations of such Person, (d) all
obligations of such Person in respect of interest rate protection agreements,
foreign currency exchange agreements or other similar agreements and
arrangements (the amount of any such obligation to be the amount that would be
payable upon the acceleration, termination or liquidation thereof), (e)
liabilities in respect of unfunded vested benefits under Plans, and (f) all Debt
of such Person referred to in clause (a), (b) (c) or (d) above secured by (or
for which the holder of such Debt has an existing right, contingent or otherwise
to be secured by) any Lien upon or interest in property (including accounts and
general intangibles, as such terms are defined in the Uniform Commercial Code in
effect in the State of New York) owned by such Person, even though such Person
has not assumed or become liable for the payment of such Debt. For purposes of
this Agreement, the term "Debt" shall exclude (i) Operating Lease Obligations
and (ii) obligations in respect of agreements and arrangements described in
clause (d) above to the extent (and only to the extent) such agreements and
arrangements are entered into to protect such Person and its Subsidiaries
against interest rate and exchange rate risks related to their respective
businesses, and not for speculative purposes.
"Default" means the occurrence of any event which with the
giving of notice or the passage of time or both could become an Event of
Default.
"Document" has the meaning specified in Section 8.02.
"Dollar Borrowing" means a Borrowing comprised of Dollar
Loans.
"Dollar Equivalent" means, on any date of determination, with
respect to any amount in any Foreign Currency, the equivalent in Dollars of such
amount, determined by the Administrative Agent using the Exchange Rate with
respect to such Foreign Currency then in effect as determined pursuant to
Section 1.04(a).
"Dollar Facility Excess" has the meaning specified in Section
2.24(b).
"Dollar Facility Overage" means an amount equal to the excess
of (a) the Total Commitment over (b) the aggregate amount of all Foreign
Currency Facility Maximum Borrowing Amounts (determined, if applicable, after
giving effect to any reduction therein made pursuant to Section 2.24(c)).
"Dollar Loan" means any Loan denominated in Dollars.
FACILITY B
-10-
<PAGE> 11
"Dollar Revolving Credit Excess" has the meaning specified in
Section 2.24(a).
"Dollar Revolving Credit Overage" means, with respect to any
Bank, an amount equal to the excess, if any, of (a) such Bank's Commitment over
(b) the aggregate Foreign Currency Bank Maximum Borrowing Amounts with respect
to all Foreign Currency Addenda to which such Bank or any of its Affiliates is a
party.
"Dollars", "dollars" and the symbol "$", without more, mean
the lawful currency of the United States of America.
"Domestic Lending Office" means, with respect to any Bank, the
office of such Bank specified as its "Domestic Lending Office" on such Bank's
signature page to this Agreement or, as to any Person who becomes a Bank after
the Execution Date, on the signature page of the Assignment and Acceptance
executed by such Person or such other office of such Bank as such Bank may
hereafter designate from time to time as its "Domestic Lending Office" by notice
to the Company and the Administrative Agent.
"Effective Date" means the date on which the conditions to
borrowing set forth in Article III are first met.
"Eligible Assignee" means (a) any Bank or any Affiliate of a
Bank; (b) a commercial bank organized or licensed under the laws of the United
States, or any state thereof, and having total assets in excess of
$1,000,000,000; (c) a commercial bank organized under the laws of any other
country which is a member of the OECD, or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000; provided that such
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (d) the central
bank of any country which is a member of the OECD; and (e) any other lender
approved by the Administrative Agent and the Company (which approval shall not
be unreasonably withheld).
"Enforcement Subsidiary" means, as to Provident, any
Wholly-owned Subsidiary formed by Provident for the purpose of foreclosing or
otherwise realizing upon the assets securing obligations due to Provident
pursuant to investments made by Provident.
"Enhancement Agreements" means the Support Agreements, the
Inducement Agreement and all other similar agreements.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated thereunder.
FACILITY B
-11-
<PAGE> 12
"ERISA Group" means all corporations, trades or businesses
(whether or not incorporated) and other Persons which, together with the
Company, are treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code.
"Eurocurrency Borrowing" means a Borrowing comprised of
Eurocurrency Loans.
"Eurocurrency Competitive Loan" means any Competitive Loan
(including any Competitive Loan denominated in any Foreign Currency) bearing
interest at a rate determined by reference to the IBO Rate in accordance with
the provisions of Article II.
"Eurocurrency Foreign Currency Borrowing" means any Borrowing
comprised of Eurocurrency Foreign Currency Loans.
"Eurocurrency Foreign Currency Loan" means any Foreign
Currency Revolving Loan bearing interest at a rate determined by reference to
the IBO Rate in accordance with the provisions of Article II.
"Eurocurrency Lending Office" means, with respect to each
Bank, the branch or Affiliate of such Bank which such Bank has designated as its
"Eurocurrency Lending Office" on such Bank's signature page to this Agreement
or, as to any Person who becomes a Bank after the Execution Date, on the
signature page of the Assignment and Acceptance executed by such Person or such
other office of such Bank as such Bank may hereafter designate from time to time
as its "Eurocurrency Lending Office" by notice to the Company and the
Administrative Agent.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D.
"Eurocurrency Loan" means any Eurocurrency Competitive Loan,
Eurodollar Committed Loan or Eurocurrency Foreign Currency Loan.
"Eurodollar Committed Borrowing" means any Committed Borrowing
comprised of Eurodollar Committed Loans.
"Eurodollar Committed Loan" means any Committed Loan bearing
interest at a rate determined by reference to the IBO Rate in accordance with
the provisions of Article II.
"Event of Default" means any of the events described in
Article VI.
"Exchange Rate" means with respect to any Foreign Currency on
a particular date, the rate at which such Foreign Currency may be exchanged into
Dollars, as set forth on such date on the Reuters currency page more
particularly described in the Foreign Currency Addendum for Loans to be made in
such Foreign Currency. In the event that such rate does not appear on any
Reuters currency page, the Exchange Rate with respect to such Foreign Currency
shall be determined by
FACILITY B
-12-
<PAGE> 13
reference to such other publicly available service for displaying exchange rates
as may be agreed upon by the Administrative Agent and the Borrower or, in the
absence of such agreement, such Exchange Rate shall instead be the
Administrative Agent's spot rate of exchange in the interbank market where its
foreign currency exchange operations in respect of such Foreign Currency are
then being conducted, at or about 10:00 A.M., local time, at such date for the
purchase of Dollars with such Foreign Currency, for delivery two Business Days
later; provided, however, that if at the time of any such determination, for any
reason, no such spot rate is being quoted, the Administrative Agent may use any
reasonable method it deems applicable to determine such rate, and such
determination shall, to the extent permitted by law, be conclusive absent
manifest error.
"Execution Date" means the earliest date upon which all of the
following shall have occurred: counterparts of this Agreement shall have been
executed by the Company, each Bank and the Administrative Agent, and the
Administrative Agent shall have received counterparts hereof which taken
together, bear the signatures of the Company and each Bank.
"Existing Agreements" means (a) the Competitive Advance and
Revolving Credit Facility Agreement (Facility A) dated as of June 30, 1995 among
the Company, the banks and other financial institutions party thereto, Bank of
America and NationsBank, as co-agents, Chase, as auction administration agent,
and TCB, as administrative agent, as amended from time to time to the date
hereof, and (b) the Existing Facility B Credit Agreement.
"Existing Facility B Credit Agreement" means the Competitive
Advance and Revolving Credit Facility Agreement (Facility B) dated as of June
30, 1995 among the Company, the other Borrowers (as defined therein), the banks
and other financial institutions party thereto, Bank of America and NationsBank,
as co-agents, Chase, as auction administration agent, and TCB, as administrative
agent, together with (a) the Sterling Addendum dated as of July 13, 1995 among
the Company, Family Funeral Directors Limited, the local lenders party thereto
and Chemical Investment Bank Limited, as local currency agent for such local
lenders, (b) the Australian Addendum dated as of July 13, 1995 among the
Company, Service Corporation International Australia Pty Limited, the local
lenders party thereto and Westpac Banking Corporation, as local currency agent
for such local lenders and (c) the Canadian Addendum dated as of August 30, 1995
among the Company, 611102 Saskatchewan Ltd., the local lenders party thereto and
Royal Bank of Canada, as local currency agent for such local lenders.
"Facility A Credit Agreement" means the Competitive Advance
and Revolving Credit Facility Agreement (Facility A) dated as of the date hereof
among the Company, the other Borrowers (as defined therein), the banks and other
financial institutions party thereto, Chase, as administrative agent, and the
Co-Agents (as defined therein).
"Facility Fees" has the meaning specified in Section 2.07(a).
"FDIC" means the Federal Deposit Insurance Corporation (or any
successor thereto).
FACILITY B
-13-
<PAGE> 14
"Federal Funds Effective Rate" has the meaning specified in
the definition of the term Alternate Base Rate.
"Financial Provisions" has the meaning specified in Section
1.02(c).
"Fixed Rate Borrowing" means a Borrowing comprised of Fixed
Rate Loans.
"Fixed Rate Loan" means any Competitive Loan (including any
Competitive Loan denominated in any Foreign Currency) bearing interest at a
fixed percentage rate per annum specified by the Bank making such Loan in its
Competitive Bid.
"Foreign Currency" means, as the context may require, any or
all of (a) the Australian dollar, or other lawful currency of the Commonwealth
of Australia, (b) the Belgian franc, or other lawful currency of the Kingdom of
Belgium, (c) the Canadian dollar, or other lawful currency of Canada, (d) the
French franc, or other lawful currency of the Republic of France, (e) the mark,
or other lawful currency of the Federal Republic of Germany, (f) the pound
sterling, or other lawful currency of the United Kingdom of Great Britain and
Northern Ireland, (g) the lire, or other lawful currency of currency of the
Italian Republic, (h) the Dutch guilder, or other lawful currency of the Kingdom
of The Netherlands, (i) the peseta, or other the lawful currency of the Republic
of Spain, (j) the Swiss franc, or other lawful currency of the Swiss
Confederation, and (k) any currency that is adopted as a Foreign Currency
pursuant to Section 2.22, provided, in any such case, that an Exchange Rate may
be calculated with respect thereto, and provided, further, that this definition
and Section 2.22 shall in any circumstances and in all events be subject to the
provisions of Section 9.18.
"Foreign Currency Addendum" means the Australian Addendum, the
Canadian Addendum, the Multicurrency Addendum, and each other foreign currency
addendum between the Company, one or more Borrowing Subsidiaries, the Foreign
Currency Agent named therein and one or more Foreign Currency Banks, in a form
acceptable to the Company, such Borrowing Subsidiaries, such Foreign Currency
Agent and such Foreign Currency Banks, the acceptability of such agreement to
any such Person being conclusively evidenced by its execution by such Person.
"Foreign Currency Agent" means, with respect to any Foreign
Currency Addendum, the Person named as the foreign currency agent therein.
"Foreign Currency Bank" means any Bank (or any Affiliate,
branch or agency thereof) party to a Foreign Currency Addendum. In the event any
agency or Affiliate of a Bank shall be party to a Foreign Currency Addendum,
such agency or Affiliate shall, to the extent of any commitment extended and any
Loans made by it, have all the rights of such Bank hereunder, provided, that
such Bank shall continue to the exclusion of such agency or Affiliate to have
all the voting and consensual rights vested in it by the terms hereof.
FACILITY B
-14-
<PAGE> 15
"Foreign Currency Bank Maximum Borrowing Amount" has the
meaning specified in Section 2.23(b).
"Foreign Currency Borrowing" means a Borrowing comprised of
Foreign Currency Loans.
"Foreign Currency Equivalent" means, on any date of
determination, with respect to any amount in Dollars, the equivalent in the
relevant Foreign Currency of such amount, determined by the Administrative Agent
using the Exchange Rate (or the inverse of such Exchange Rate, as the case may
be) with respect to such Foreign Currency then in effect as determined pursuant
to Section 1.04(a).
"Foreign Currency Facility Maximum Borrowing Amount" has the
meaning specified in Section 2.23(b).
"Foreign Currency Loan" means any Loan denominated in a
currency other than Dollars. A Foreign Currency Loan shall be a Competitive Loan
or a Foreign Currency Revolving Loan.
"Foreign Currency Loans (Dollar Equivalent)" means the Dollar
Equivalent of the relevant Foreign Currency Loans.
"Foreign Currency Revolving Borrowing" means any Borrowing
comprised of Foreign Currency Revolving Loans.
"Foreign Currency Revolving Loan" means any Foreign Currency
Loan other than a Competitive Loan.
"FST" means SCI Texas Funeral Services, Inc., a Texas
corporation.
"Funded Debt" means any Debt of any Person (including any
Capitalized Lease Obligation of such Person, but not including any deferred
taxes) payable more than one year from the date of the creation thereof;
provided, however, the term Funded Debt shall include the principal amount of
all Loans outstanding under this Agreement and the principal amount of all loans
outstanding under the Facility A Credit Agreement. The interests of minority
shareholders in such Person's Consolidated Subsidiaries which are shown on the
liability side of a balance sheet as "minority interests" but which are not
"obligations" are not within the definition of "Funded Debt."
"GAAP" means generally accepted accounting principles as set
forth in the opinions, statements and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants, the
Financial Accounting Standards Board and such other Persons as shall be approved
by a significant segment of the accounting profession and concurred in by the
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independent certified public accountants certifying any audited financial
statements of the Company, as such principles shall be in effect at the time of
any computation or determination or as of the date of the relevant financial
statements, as the case may be (the "Relevant Date"), subject to Section 1.02.
"Guaranteed Obligations" has the meaning specified in Section
8.01.
"Guaranty" means the guaranty of the Company contained in
Article VIII.
"Highest Lawful Rate" means, as to any Bank, at the particular
time in question, the maximum nonusurious rate of interest which, under
applicable law, such Bank is then permitted to charge the Borrowers on the
Loans. If the maximum rate of interest which, under applicable law, the Banks
are permitted to charge the Borrowers on the Loans shall change after the date
hereof, to the extent permitted by applicable law, the Highest Lawful Rate shall
be automatically increased or decreased, as the case may be, as of the effective
time of such change without notice to any Borrower or any other Person.
"Home Jurisdiction Withholding Taxes" means (a) in the case of
the Company, withholding for United States income taxes, United States back-up
withholding taxes and United States withholding taxes and (b) with respect to
611102 Saskatchewan Ltd., withholding for withholding taxes imposed by the
Dominion of Canada, (c) with respect to the Service Corporation International
Australia Pty Limited, withholding for withholding taxes imposed by the
Commonwealth of Australia and (d) withholding for withholding taxes imposed by
any country whose currency is added as a Foreign Currency pursuant to Section
2.25.
"IBO Rate" means, with respect to each date during each
Interest Period pertaining to a Eurocurrency Borrowing (other than an Interest
Period of 14 days), the rate appearing on page 3740 or 3750, as the case may be,
of the Dow Jones Markets (or on any successor or substitute page, or on any page
of any successor to or substitute for Dow Jones Markets, providing rate
quotations comparable to those currently provided on such page, as determined by
the Administrative Agent from time to time for purposes of providing quotations
of interest rates applicable to deposits in Dollars or the applicable Foreign
Currency in the London interbank market) or if any such currency does not appear
on either such page (or any such successor or substitute page, or page of any
successor to as substitute for Dow Jones Markets), such additional page of the
Dow Jones Markets upon which such currency appears, as agreed between the
Administrative Agent and the Company from time to time, at approximately 11:00
a.m., London time, two Business Days prior to the commencement of such Interest
Period, as the rate for deposits in Dollars or the applicable Foreign Currency
approximately equal in principal amount to such Eurocurrency Borrowing and with
a maturity equal to such Interest Period. In the event that such rate is not
available at such time for any reason and in the case of any Interest Period of
14 days, then the "IBO Rate" with respect to such Eurocurrency Borrowing for
such Interest Period shall be the rate (rounded to the nearest 1/16 of 1% or, if
there is no nearest 1/16 of 1%, the next higher 1/16 of 1%) at which deposits in
Dollars or the
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applicable Foreign Currency approximately equal in principal amount to such
Eurocurrency Borrowing and with a maturity equal to such Interest Period are
offered in immediately available funds to the Administrative Agent by leading
banks in the London interbank market at approximately 11:00 a.m., London time
(or as soon thereafter as possible), two Business Days prior to the commencement
of such Interest Period.
"Inactive Subsidiaries" means Subsidiaries of the Company
which are not actively engaged in the conduct of business and whose assets
and/or Liabilities are not material to the financial condition of the Company
and its Subsidiaries taken as a whole.
"Index Debt" means the Company's senior, unsecured, non-credit
enhanced Funded Debt.
"Inducement Agreement" means, collectively, the letter
agreement dated August 23, 1993 among the Company, PSI Funding, Inc. and FST and
the letter agreement dated April 5, 1993 among the Company, TCB and Provident.
"Initial Borrowing Subsidiaries" has the meaning specified in
the introduction to this Agreement.
"Intangibles" has the meaning normally ascribed thereto in
accordance with GAAP and shall include (a) excess cost over fair market value of
tangible assets acquired, (b) patents and patent rights, (c) trademarks, service
marks and trade names, (d) copyrights and (e) goodwill.
"Interest Payment Date" means (a) with respect to any
Eurocurrency Loan or ABR Loan, the last day of the Interest Period applicable
thereto and, in addition, the date on which such Loan is repaid or prepaid and,
in the case of a Eurocurrency Loan with an Interest Period of 6 months, the day
that would have been the Interest Payment Date for such Loan had an Interest
Period of 3 months been applicable to such Loan, (b) in the case of a Fixed Rate
Loan, the last day of the Interest Period applicable thereto and (c) in the case
of a Foreign Currency Revolving Loan (other than a Eurocurrency Loan), such days
as shall be specified in the applicable Foreign Currency Addendum.
"Interest Period" means:
(a) with respect to any Borrowing that is a Committed
Borrowing or Foreign Currency Revolving Borrowing:
(i) If such Borrowing is a Eurodollar Committed
Borrowing, the period commencing on the Borrowing Date of such
Borrowing or on the last day of the immediately preceding
Interest Period applicable to such Borrowing, as the case may
be, and ending (A) 14 days thereafter (subject to market
availability) or (B) on the
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numerically corresponding day (or if there is no corresponding
day, the last day) in the calendar month that is one, two,
three or six months thereafter, as a Borrower may elect;
(ii) If such Borrowing is an ABR Borrowing, the
period commencing on the Borrowing Date of such Borrowing and
ending on the earlier of (A) the next succeeding March 31,
June 30, September 30 or December 31, and (B) the Maturity
Date;
(iii) If such Borrowing is a Foreign Currency
Revolving Borrowing (other than a Eurocurrency Foreign
Currency Borrowing), such periods as shall be specified in the
applicable Foreign Currency Addendum; and
(iv) If such Borrowing is a Eurocurrency Foreign
Currency Borrowing, the period commencing on the Borrowing
Date of such Borrowing and ending on the numerically
corresponding day (or if there is no corresponding day, the
last day) in the calendar month that is one, two, three or six
months thereafter, as a Borrower may elect; or
(b) with respect to any Competitive Borrowing:
(i) If such Competitive Borrowing is a Fixed Rate
Borrowing, the period commencing on the Borrowing Date of such
Borrowing and ending on the date specified in the Competitive
Bid in which the offer to make such Fixed Rate Borrowing was
extended; provided, however, that each such period shall have
a duration of not less than seven calendar days nor more than
180 days; and
(ii) If such Competitive Borrowing is a Eurocurrency
Borrowing, the period commencing on the Borrowing Date of such
Borrowing and ending on the numerically corresponding date (or
if there is no corresponding date, the last day ) in the
calendar month that is one, two, three or six months
thereafter, as a Borrower may elect.
Notwithstanding the foregoing (i) if any Interest Period would end on a
day which shall not be a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, with respect to
Eurocurrency Loans only, such next succeeding Business Day would fall
in the next calendar month, in which case such Interest Period shall
end on the next preceding Business Day and (ii) no Interest Period may
be selected for any Borrowing that ends later than the Maturity Date.
Interest shall accrue from and including the first day of an Interest
Period to but excluding the last day of such Interest Period.
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"Judgment Currency" has the meaning specified in Section 9.17.
"Letter of Credit Obligations" means, when used with respect
to any Person, the contingent obligations of such Person in respect of Letters
of Credit.
"Letters of Credit" means, as to any Person, letters of credit
issued for the account of such Person other than letters of credit issued to pay
the purchase price of goods or services acquired in the ordinary course of
business by such Person or any other Person.
"Liabilities" of any Person has the meaning normally ascribed
thereto in accordance with GAAP and shall include (a) Capitalized Lease
Obligations of such Person or any of its Subsidiaries, (b) the interests of
minority shareholders in Consolidated Subsidiaries of such Person, (c)
indebtedness secured by Liens against any property of such Person or any of its
Subsidiaries whether or not such Person or such Subsidiary is liable for the
payment thereof, (d) subordinated debt and (e) deferred liabilities.
"Lien" means, when used with respect to any Person, any
mortgage, lien, charge, pledge, security interest or encumbrance of any kind
(whether voluntary or involuntary and whether imposed or created by operation of
law or otherwise) upon, or pledge of, any of its property or assets, whether now
owned or hereafter acquired, or any lease intended as security, any conditional
sale agreement, or any other title retention agreement.
"Loan" means a Competitive Loan, a Committed Loan, a
Eurocurrency Loan, a Fixed Rate Loan, an ABR Loan or a Foreign Currency Loan.
"Majority Banks" means, at any time, Banks holding at least
662/3% of the Total Commitment or (if either the Total Commitment has been
terminated or "Majority Banks" is being determined for purposes of Article VI)
Banks holding at least 662/3% of the then aggregate Dollar Equivalent of the
unpaid principal amount of the outstanding Loans.
"Margin" means, as to any Eurocurrency Competitive Loan, the
margin (expressed as a percentage rate per annum in the form of a decimal to no
more than four decimal places) to be added to or subtracted from the IBO Rate in
order to determine the interest rate applicable to such Loan, as specified in
the Competitive Bid relating to such Loan.
"Margin Stock" has the meaning specified in Section 4.13.
"Material Subsidiary" means, with respect to any Person, each
Subsidiary of such Person that would be a "significant subsidiary" as such term
is defined in Regulation S-X promulgated pursuant to the Securities Exchange Act
of 1934 as amended to the Effective Date; provided, however, for purposes of
determining whether any Subsidiary is a "Material Subsidiary," the reference to
"10 percent" in clauses (1), (2) and (3) of the definition of "significant
subsidiary" contained in said Regulation S-X shall be a reference to 5 percent;
and further provided, however,
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notwithstanding the foregoing, when used with respect to the Company, each
Borrowing Subsidiary shall be a Material Subsidiary of the Company.
"Maturity Date" means June 27, 2002, or the earlier
termination in whole of the Total Commitment pursuant to Section 2.12 or Section
6.01.
"Maximum Permissible Rate" has the meaning specified in
Section 9.08.
"Moody's" means Moody's Investors Service.
"Multicurrency Addendum" means a Foreign Currency Addendum in
a form acceptable the Company, the Administrative Agent, the Foreign Currency
Agent(s) named therein and the Foreign Currency Banks named therein, the
acceptability of such agreement to any such Person being conclusively evidenced
by its execution by such Person.
"NationsBank" means NationsBank, N.A., a national banking
association.
"Net Worth" means, in relation to the Company and its
Subsidiaries, Consolidated Assets of the Company less total consolidated
liabilities of the Company and its Consolidated Subsidiaries, as determined in
accordance with GAAP.
"OECD" means the Organization for Economic Cooperation and
Development (or any successor).
"Officer's Certificate" means, as to any Borrower, a
certificate signed in the name of such Borrower by its President, one of its
Vice Presidents, its Treasurer, its Secretary or one of its Assistant Treasurers
or Assistant Secretaries.
"Operating Lease Obligations" means obligations of a Person in
respect of any lease or agreement to lease other than Capitalized Lease
Obligations of such Person.
"Other Activities" has the meaning specified in Section 7.03.
"Other Financings" has the meaning specified in Section 7.03.
"Other Taxes" has the meaning specified in Section 2.20.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to all or any of its functions under ERISA.
"Person" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock company,
trust, unincorporated association, joint venture or
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other entity, or a foreign state or political subdivision thereof or any agency
of such state or subdivision.
"Plan" means any employee pension benefit plan maintained or
contributed to by the Company or any of its Subsidiaries or by any trade or
business (whether or not incorporated) under common control (as defined in
Section 4001(a)(14) or 4001(b) of ERISA) with the Company and insured by the
PBGC under Title IV of ERISA.
"Prime Rate" has the meaning specified in the definition of
the term Alternate Base Rate.
"Principal Office" means the office of the Administrative
Agent located at 270 Park Avenue, New York, New York 10017, or such other office
as the Administrative Agent may hereafter designate in writing as such to the
other parties hereto.
"Provident" means Provident Services, Inc., a Delaware
corporation.
"Register" has the meaning specified in Section 9.11(e).
"Regulation A" means Regulation A of the Board (respecting
loans to depository institutions), as the same is from time to time in effect,
and all official rulings and interpretations thereunder or thereof.
"Regulation D" means Regulation D of the Board (respecting
reserve requirements), as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
"Regulation G" means Regulation G of the Board (respecting
margin credit extended by Persons other than banks or registered broker
dealers), as the same is from time to time in effect, and all official rulings
and interpretations thereunder or thereof.
"Regulation U" means Regulation U of the Board (respecting
margin credit extended by banks), as the same is from time to time in effect,
and all official rulings and interpretations thereunder or thereof.
"Regulation X" means Regulation X of the Board (respecting
borrowers who obtain margin credit), as the same is from time to time in effect,
and all official rulings and interpretations thereunder or thereof.
"Relevant Date" has the meaning specified in the definition of
the term GAAP.
"Reset Date" has the meaning specified in Section 1.04(c).
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"Revolving Credit Exposure" means, with respect to any Bank at
any time, the aggregate principal amount at such time of all outstanding
Committed Loans of such Bank plus the aggregate Dollar Equivalent of the
principal amount of all outstanding Foreign Currency Revolving Loans of such
Bank and each Affiliate, branch or agency of such Bank that is a Foreign
Currency Bank.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"Subsidiary" means, with respect to any Person, any
corporation in which more than 50% of the stock of each class having ordinary
voting power shall, at the time as of which any determination is being made, be
owned of record and beneficially by such Person directly and/or through one or
more other Subsidiaries.
"Substantially-owned Subsidiary" means a Subsidiary of the
Company at least 80% of the outstanding capital stock of which, at the time any
determination is being made, is owned of record and beneficially by the Company
directly and/or through one or more other Subsidiaries.
"Support Agreements" means (a) the Support Agreement dated as
of September 14, 1988 between the Company and Provident, (b) the Australian
Support Agreement dated as of November 1, 1993 between the Company and Service
Corporation International Australia Pty Limited and (c) the three Support
Agreements dated respectively as of January 28, 1994, September 30, 1994 and
November 14, 1994, each between the Company and FST.
"Tangible Consolidated Assets" means, as to any Person,
Consolidated Assets less all Intangibles of such Person and its Consolidated
Subsidiaries.
"Taxes" has the meaning specified in Section 2.20.
"TCB" means Texas Commerce Bank National Association, a
national banking association.
"Total Capitalization" means, as of the date any determination
is made, the sum of Net Worth plus Consolidated Debt.
"Total Commitment" means, at any time, the aggregate amount of
the Banks' Commitments, as in effect at such time.
"Type" means, when used in respect of any Loan or Borrowing,
each of the following types of Loans or Borrowings as applicable: Eurocurrency
Loan or Eurocurrency Borrowing, (whether or not any such Loan or Borrowing is a
Foreign Currency Loan or Foreign Currency Borrowing) ABR Loan or ABR Borrowing
and Fixed Rate Loan or Fixed Rate Borrowing.
"United States" and "U.S." each means United States of
America.
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"Wholly-owned Subsidiary" means, as to any Person, a
Subsidiary, 100% of the stock of every class of which (except for directors'
qualifying shares) at the time as of which any determination is being made, is
owned of record and beneficially by such Person directly and/or through one or
more other Subsidiaries.
SECTION 1.02. Accounting Terms and Determinations. (a) Except
as otherwise provided in this Agreement, all computations and determinations as
to accounting or financial matters and all financial statements to be delivered
pursuant to this Agreement shall be made and prepared in accordance with GAAP
(including principles of consolidation where appropriate), and all accounting or
financial terms shall have the meanings ascribed to such terms by GAAP.
(b) If any change in GAAP after the date of this Agreement
shall be required to be applied to transactions then or thereafter in existence,
and a violation of or default under one or more provisions of this Agreement
shall have occurred or in the opinion of the Company would likely occur which
would not have occurred or be likely to occur if no change in accounting
principles had taken place:
(i) the parties agree that such violation or default shall not
constitute an Event of Default or a Default for a period of 60 days
from the date the Company notifies the Administrative Agent of the
application of this Section 1.02(b) identifying such change and the
provisions of this Agreement affected thereby;
(ii) the parties agree in such event to negotiate in good
faith an amendment of this Agreement which shall approximate to the
extent possible the economic effect of the original financial covenants
after taking into account such change in GAAP; and
(iii) if the parties are unable to agree on such an amendment
within such 60-day period, the Company shall have the option of (A)
prepaying the Loans (pursuant to Section 2.13 and the other applicable
provisions hereof) within 120 days from the date the Company notifies
the Administrative Agent of the application of this Section 1.02(b) or
(B) making all future calculations by application of GAAP applied on a
basis consistent with those in effect immediately prior to such change
in GAAP. If the Company does not exercise either such option within
said period by written notice to the Administrative Agent, then as used
in this Agreement, "GAAP" shall mean generally accepted accounting
principles in effect at the Relevant Date.
(c) If any change in GAAP after the date of this Agreement
shall be required to be applied to transactions or conditions then or thereafter
in existence, and the Administrative Agent shall assert that the effect of such
change is or shall likely be to distort materially the effect of any of the
definitions of financial terms in Article I or any of the financial covenants of
the Company in Article V (the "Financial Provisions"), so that the intended
economic effect of any of the Financial Provisions will not in fact be
accomplished:
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(i) the Administrative Agent shall notify the Company of such
assertion, specifying the change in GAAP which is objected to, and
until otherwise determined as provided below, the specified change in
GAAP shall not be made by the Company in its financial statements for
the purpose of applying the Financial Provisions; and
(ii) the parties shall follow the procedures set forth in
paragraph (ii) and the first sentence of paragraph (iii) of subsection
(b) of this Section 1.02. If the parties are unable to agree on an
amendment as provided in said paragraph (ii) and if the Company does
not exercise the option set forth in the first sentence of said
paragraph (iii) within the specified period, then as used in this
Agreement "GAAP" shall mean generally accepted accounting principles in
effect at the Relevant Date, except that the specified change in GAAP
which is objected to by the Administrative Agent shall not be made in
applying the Financial Provisions.
SECTION 1.03. Interpretation. (a) In this Agreement, unless a
clear contrary intention appears:
(i) the singular number includes the plural number and vice
versa;
(ii) reference to any gender includes each other gender;
(iii) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision;
(iv) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or individually,
provided that nothing in this clause (iv) is intended to authorize any
assignment not otherwise permitted by this Agreement;
(v) reference to any agreement, document or instrument,
including this Agreement, means such agreement, document or instrument
as amended, supplemented or modified and in effect from time to time in
accordance with the terms thereof and, if applicable, the terms hereof;
(vi) unless the context indicates otherwise, reference to any
Article, Section, Schedule or Exhibit means such Article or Section
hereof or such Schedule or Exhibit hereto;
(vii) the word "including" (and with correlative meaning
"include") means including, without limiting the generality of any
description preceding such term;
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(viii) with respect to the determination of any period of
time, the word "from" means "from and including" and the word "to"
means "to but excluding"; and
(ix) reference to any law means such as amended, modified,
codified or reenacted, in whole or in part, and in effect from time to
time.
(b) The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
(c) No provision of this Agreement shall be interpreted or
construed against any Person solely because that Person or its legal
representative drafted such provision.
SECTION 1.04. Certain Calculations. (a) Not later than 2:00
p.m., New York City time, on each Calculation Date, the Administrative Agent
shall (i) determine the Exchange Rate as of such Calculation Date with respect
to each Foreign Currency covered by a Foreign Currency Addendum and each Foreign
Currency in which any outstanding Competitive Loan is denominated and (ii) give
notice thereof to the Banks, the Company and the relevant Borrower Subsidiaries.
The Exchange Rates so determined shall become effective on the first Business
Day immediately following the relevant Calculation Date (a "Reset Date") and
shall remain effective until the next succeeding Reset Date.
(b) Not later than 6:00 p.m., New York City time, on each
Reset Date and each Borrowing Date, the Administrative Agent shall (i) determine
the Dollar Equivalent of the Foreign Currency Revolving Loans then outstanding
(after giving effect to any Foreign Currency Loans to be made or repaid on such
date) and of each Competitive Loan denominated in a Foreign Currency and (ii)
notify the Banks, the Company and the relevant Borrowing Subsidiaries of the
results of such determination.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments. (a) Subject to the terms and
conditions and relying upon the representations and warranties herein set forth,
each Bank agrees, severally and not jointly, to make Committed Loans to the
Borrowers, at any time and from time to time on and after the Effective Date and
until the Maturity Date. Each Bank's Commitment, as in effect on the Execution
Date, is set forth opposite its name on the signature page hereto for such Bank.
Such Commitments may be terminated or reduced from time to time pursuant to
Section 2.12.
(b) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth and in the applicable Foreign
Currency Addendum, each Foreign Currency Bank agrees, severally and not jointly,
to make Foreign Currency Revolving Loans to the
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Borrowers, at any time and from time to time on and after the execution of the
applicable Foreign Currency Addendum and until the Maturity Date.
(c) Notwithstanding anything to the contrary contained in this
Agreement, in no event may Committed Loans or Foreign Currency Revolving Loans
be borrowed under this Article II if, after giving effect thereto (and to any
concurrent repayment or prepayment of Loans), (i) the sum of the Aggregate
Revolving Credit Exposure and the Aggregate Competitive Loan Exposure would
exceed the Total Commitment then in effect, (ii) the Revolving Credit Exposure
of any Bank would exceed such Bank's Commitment, (iii) the Dollar Equivalent of
the aggregate principal amount of outstanding Foreign Currency Revolving Loans
denominated in a specified Foreign Currency or currencies would exceed the
applicable Foreign Currency Facility Maximum Borrowing Amount or (iv) the Dollar
Equivalent of the aggregate principal amount of outstanding Foreign Currency
Loans would exceed $500,000,000.
(d) Within the foregoing limits and subject to the terms,
conditions and limitations set forth herein, the Borrowers may borrow, pay or
prepay and reborrow hereunder, on and after the Effective Date and prior to the
Maturity Date. The respective commitments of the Foreign Currency Banks Parties
to the Australian Addendum and the Canadian Addendum to make Foreign Currency
Loans thereunder are set forth in those Foreign Currency Addenda. The
commitments of the Banks (or their Affiliates) to make Foreign Currency Loans
pursuant to Foreign Currency Addenda in Spanish pesetas, Italian lira, Swiss
francs, Belgium francs and in other Foreign Currencies are set forth on Exhibit
2.01.
SECTION 2.02. Loans. (a) Each Committed Loan shall be made as
part of a Borrowing consisting of Loans made by the Banks ratably in accordance
with their Available Commitments; provided, however, that the failure of any
Bank to make any Committed Loan shall not in itself relieve any other Bank of
its obligation to lend hereunder (it being understood, however, that no Bank
shall be responsible for the failure of any other Bank to make any Loan required
to be made by such other Bank). Each Foreign Currency Revolving Loan shall be
made as part of a Borrowing consisting of Loans made by the Foreign Currency
Banks parties to a Foreign Currency Addendum ratably in accordance with the
applicable Foreign Currency Bank Maximum Borrowing Amounts under such Foreign
Currency Addendum; provided, however, that the failure of any Foreign Currency
Bank to make any Foreign Currency Revolving Loan shall not in itself relieve any
other Foreign Currency Bank of its obligation to lend under such Foreign
Currency Addendum (it being understood, however, that no Foreign Currency Bank
shall be responsible for the failure of any other Foreign Currency Bank to make
any Foreign Currency Revolving Loan required to be made by such other Foreign
Currency Bank). Each Competitive Loan shall be made in accordance with the
procedures set forth in Section 2.03. The Loans comprising any Borrowing shall
be (i) in the case of Competitive Loans, in an aggregate principal amount which
is an integral multiple of $1,000,000 or 100,000 units of the applicable Foreign
Currency, as the case may be, and not less than $5,000,000, or the Foreign
Currency Equivalent thereof, subject to the proviso at the end of Section
2.03(d) and to Section 2.03(j), (ii) in the case of Committed Loans, in an
aggregate principal
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amount which is an integral multiple of $1,000,000 and not less than $5,000,000
(or an aggregate principal amount equal to the remaining balance of the
Available Commitments) and (iii) in the case of Foreign Currency Revolving
Loans, in an aggregate principal amount which is not less than the Foreign
Currency Equivalent of $5,000,000. All Committed Loans made pursuant to this
Article II shall be in Dollars. Subject to Section 2.11 and Section 2.15,
Competitive Loans made pursuant to this Article II shall be in Dollars or any
Foreign Currency.
(b) Each Competitive Borrowing shall be comprised entirely of
Eurocurrency Competitive Loans or Fixed Rate Loans, and each Committed Borrowing
shall be comprised entirely of Eurodollar Committed Loans or ABR Loans, as a
Borrower may request pursuant to Section 2.03 or 2.04, as applicable. Each Bank
may at its option make any Eurocurrency Loan or Foreign Currency Loan by causing
its Applicable Lending Office to make such Loan; provided that any exercise of
such option shall not affect the obligation of any Borrower to repay such Loan
in accordance with the terms of this Agreement. Borrowings of more than one Type
may be outstanding at the same time; provided, however, that no Borrower shall
be entitled to request any Borrowing which, if made, would result in an
aggregate of more than ten separate Committed Loans of any Bank to the Borrowers
being outstanding hereunder at any one time. For purposes of the foregoing,
Loans having different Interest Periods, regardless of whether they commence on
the same date, shall be considered separate Loans.
(c) Subject to Section 2.03(j), Section 2.04(b), Section 2.05
and, in the case of any Foreign Currency Revolving Loan, to any alternative
procedures set forth in the applicable Foreign Currency Addendum, each Bank
shall make each Loan to be made by it hereunder on the proposed date thereof by
wire transfer of immediately available funds to the Administrative Agent in New
York City, not later than 12:30 p.m., New York City time, and the Administrative
Agent shall by 3:00 p.m., New York City time, credit the amounts so received to
the general deposit account of the Company with the Administrative Agent or, if
a Borrowing shall not occur on such date because any condition precedent herein
specified shall not have been met, return the amounts so received to the
respective Banks. Competitive Loans shall be made by the Bank or Banks whose
Competitive Bids therefor are accepted pursuant to Section 2.03 in the amounts
so accepted and Committed Loans and Foreign Currency Revolving Loans shall be
made by the Banks, or the Banks party to the applicable Foreign Currency
Addendum, as the case may be, pro rata in accordance with Section 2.17. Unless
the Administrative Agent shall have received notice from a Bank prior to the
date of any Borrowing that such Bank will not make available to the
Administrative Agent such Bank's portion of such Borrowing, the Administrative
Agent may assume that such Bank has made such portion available to the
Administrative Agent on the date of such Borrowing in accordance with this
Section 2.02(c) and the Administrative Agent may, in reliance upon such
assumption, make available to the requesting Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have made
such portion available to the Administrative Agent, such Bank and the requesting
Borrower severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to such Borrower until the date such
amount is repaid to the Administrative Agent
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at (i) in the case of such Borrower, the interest rate applicable at the time to
the Loans comprising such Borrowing and (ii) in the case of such Bank, the
Federal Funds Effective Rate. If such Bank shall repay to the Administrative
Agent such corresponding amount, such amount shall constitute such Bank's Loan
as part of such Borrowing for purposes of this Agreement.
(d) Notwithstanding any other provision of this Agreement, no
Borrower shall be entitled to request any Borrowing pursuant to Section 2.03 or
Section 2.04 if the Interest Period requested with respect thereto would end
after the Maturity Date.
SECTION 2.03. Competitive Bid Procedure. (a) In order to
request Competitive Bids, a Borrower shall hand deliver or send by facsimile
transmission to the Administrative Agent a duly completed Competitive Bid
Request, to be received by the Administrative Agent (i) in the case of a
Eurocurrency Competitive Borrowing, not later than 10:00 a.m., New York City
time, five Business Days before the Borrowing Date specified for a proposed
Competitive Borrowing, and (ii) in the case of a Fixed Rate Borrowing, not later
than 10:00 a.m., New York City time, one Business Day before the Borrowing Date
specified for a proposed Competitive Borrowing. No Committed Loan shall be
requested in or made pursuant to a Competitive Bid Request. A Competitive Bid
Request that does not conform substantially to the format of Exhibit 2.03(A) may
be rejected at the Administrative Agent's sole discretion (to the extent
permitted by law), and the Administrative Agent shall promptly notify the
Borrower requesting such Competitive Bid of such rejection by facsimile
transmission. Each Competitive Bid Request shall in each case refer to this
Agreement and specify (x) whether the Competitive Borrowing then being requested
is to be a Eurocurrency Competitive Borrowing or a Fixed Rate Borrowing, (y) the
Borrowing Date of such Competitive Borrowing (which shall be a Business Day) and
the currency and the aggregate principal amount thereof (which shall be in a
minimum principal amount of $5,000,000 or the Foreign Currency Equivalent of
such amount and in an integral multiple of $1,000,000, or 100,000 units of the
applicable Foreign Currency, as the case may be), and (z) the Interest Period
with respect thereto. Promptly after its receipt of a Competitive Bid Request
that is not rejected as aforesaid, the Administrative Agent shall invite by
facsimile transmission (in substantially the form set forth in Exhibit 2.03(B))
the Banks to bid, on the terms and conditions of this Agreement, to make
Competitive Loans pursuant to such Competitive Bid Request. Notwithstanding the
foregoing, the Administrative Agent shall have no obligation to invite any Bank
to make a Competitive Bid pursuant to this Section 2.02(a) until such Bank has
delivered a properly completed Administrative Questionnaire to the
Administrative Agent.
(b) On and after the Effective Date, each Bank may, in its
sole discretion, make one or more Competitive Bids responsive to each
Competitive Bid Request of a Borrower. Each Competitive Bid by a Bank must be
received by the Administrative Agent via facsimile transmission, in the form of
Exhibit 2.03(C), (i) in the case of a Eurocurrency Competitive Borrowing, not
later than 2:00 p.m., New York City time, four Business Days before the
Borrowing Date specified for a proposed Competitive
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Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later than 10:00
a.m., New York City time, on the Borrowing Date specified for a proposed
Competitive Borrowing. Competitive Bids that do not conform substantially to the
format of Exhibit 2.03(C) may be rejected by the Administrative Agent after
conferring with, and upon the instruction of, the Borrower requesting such
Competitive Bid, and the Administrative Agent shall notify the applicable Bank
of such rejection as soon as practicable. Each Competitive Bid shall refer to
this Agreement and (x) specify the principal amount (which shall be in a minimum
principal amount of $5,000,000 or the Foreign Currency Equivalent of such amount
and in an integral multiple of $1,000,000 or 100,000 units of the applicable
Foreign Currency, as the case may be, and which may equal the entire aggregate
principal amount of the Competitive Borrowing requested by the Borrower
requesting such Competitive Bid, irrespective of such Bank's Commitment) of the
Competitive Loan that the applicable Bank is willing to make to such Borrower,
(y) specify the Competitive Bid Rate or Rates at which such Bank is prepared to
make the Competitive Loan or Loans and (z) confirm the Interest Period with
respect thereto specified by such Borrower in its Competitive Bid Request. If
any Bank shall elect not to make a Competitive Bid, such Bank shall so notify
the Administrative Agent by facsimile transmission (A) in the case of
Eurocurrency Competitive Loans, not later than 2:00 p.m., New York City time,
four Business Days before the Borrowing Date specified for a proposed
Competitive Borrowing, and (B) in the case of Fixed Rate Loans, not later than
10:00 a.m., New York City time, on the Borrowing Date specified for a proposed
Competitive Borrowing; provided, however, that failure by any Bank to give such
notice shall not cause such Bank to be obligated to make any Competitive Loan as
part of such Competitive Borrowing or subject such Bank to any other liability
hereunder. A Competitive Bid submitted by a Bank pursuant to this paragraph (b)
shall be irrevocable.
(c) The Administrative Agent shall promptly notify the
Borrower requesting such Competitive Bid by facsimile transmission of all the
Competitive Bids made, the Competitive Bid Rate and the maximum principal amount
of each Competitive Loan in respect of which a Competitive Bid was made and the
identity of the Bank that made each such Competitive Bid. The Administrative
Agent shall send a copy of all Competitive Bids to such Borrower for its records
as soon as practicable after completion of the bidding process set forth in this
Section 2.03.
(d) A Borrower may in its sole and absolute discretion,
subject only to the provisions of this Section 2.03(d), accept or reject any
Competitive Bid referred to in Section 2.03(c). Such Borrower shall notify the
Administrative Agent by telephone, confirmed by facsimile transmission, whether
and to what extent it has decided to accept or reject any or all of the
Competitive Bids referred to in Section 2.03(c), (i) in the case of a
Eurocurrency Competitive Borrowing, not later than 10:00 a.m., New York City
time, three Business Days before the Borrowing Date specified for a proposed
Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later
than noon, New York City time, on the Borrowing Date specified for a proposed
Competitive Borrowing, provided, however, (A) the failure by a Borrower to
accept or reject any Competitive Bid referred to in Section 2.03(c) shall be
deemed to be a rejection of such Competitive Bid, (B) no Borrower shall accept a
Competitive Bid made at a particular Competitive Bid Rate if such Borrower has
decided to reject a Competitive Bid made at a lower Competitive Bid Rate, (C)
the aggregate amount of the Competitive Bids accepted by a Borrower shall not
exceed the
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principal amount specified in the related Competitive Bid Request, (D) if a
Borrower shall accept a Competitive Bid or Bids made at a particular Competitive
Bid Rate but the amount of such Competitive Bid or Bids shall cause the total
amount of Competitive Bids to be accepted by such Borrower to exceed the amount
specified in the Competitive Bid Request, then such Borrower shall accept a
portion of such Competitive Bid or Bids in an amount equal to the amount
specified in the Competitive Bid Request less the amount of all other
Competitive Bids accepted with respect to such Competitive Bid Request, which
acceptance, in the case of multiple Competitive Bids at such Competitive Bid
Rate, shall be made pro rata in accordance with the amount of each such
Competitive Bid at such Competitive Bid Rate, and (E) except pursuant to clause
(D) above, no Competitive Bid shall be accepted for a Competitive Loan unless
such Competitive Loan is in a minimum principal amount of $5,000,000 because of
the provisions of clause (D) above, or the Foreign Currency Equivalent of such
amount and an integral multiple of $1,000,000 or 100,000 units of the applicable
Foreign Currency, as the case may be; provided further, however, that if a
Competitive Loan must be in an amount less than $5,000,000, such Competitive
Loan may be for a minimum of $1,000,000 or 100,000 units of the applicable
Foreign Currency, as the case may be, or any integral multiple thereof, and in
calculating the pro rata allocation of acceptances or portions of multiple
Competitive Bids at a particular Competitive Bid Rate pursuant to clause (D) the
amounts shall be rounded to integral multiples of $1,000,000 or 100,000 units of
the applicable Foreign Currency, as the case may be, in a manner which shall be
in the discretion of such Borrower. A notice given by a Borrower pursuant to
this Section 2.03(d) shall be irrevocable.
(e) The Administrative Agent shall promptly notify each Bank
making a Competitive Bid whether or not its Competitive Bid or corresponding
Competitive Bids have been accepted (and if so, in what amount and at what
Competitive Bid Rate) by facsimile transmission sent by the Administrative
Agent, and each successful bidder will thereupon become bound, subject to the
other applicable conditions hereof, to make the Competitive Loan in respect of
which its Competitive Bid has been accepted. After completing the notifications
referred to in the immediately preceding sentence, the Administrative Agent
shall notify each Bank of the aggregate principal amount of all Competitive Bids
accepted.
(f) The Administrative Agent shall notify each Bank of (i) the
IBO Rate applicable to any Eurocurrency Competitive Loan to be made by such Bank
pursuant to a Competitive Bid that has been accepted by a Borrower pursuant to
Section 2.03(d), and (ii) the sum of the applicable IBO Rate plus the Margin bid
by such Bank.
(g) A Competitive Bid Request shall not be made within five
Business Days of the date after the date of any previous Competitive Bid
Request, unless the Company and the Administrative Agent shall mutually agree
otherwise and notice of such agreement shall have been given to the Banks.
(h) If the Administrative Agent or any Affiliate of the
Administrative Agent shall at any time be a Bank with a Commitment hereunder and
shall elect to submit a Competitive Bid
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in its capacity as a Bank, it shall submit such Competitive Bid directly to the
Borrower requesting such Competitive Bid one quarter of an hour earlier than the
latest time at which the other Banks are required to submit their Competitive
Bids to the Administrative Agent pursuant to paragraph (b) above.
(i) All notices required by this Section 2.03 shall be given
in accordance with Section 9.02.
(j) Competitive Loans may be made in Foreign Currencies to the
extent requested in any Competitive Bid Request. Competitive Bids denominated in
a Foreign Currency shall not be made pursuant to a Foreign Currency Addendum.
With respect to any such Competitive Loans, the Company, and the Administrative
Agent may from time to time agree to modifications of the procedures set forth
in Section 2.02(b), Section 2.02(c) and this Section 2.03 (other than Section
2.03(h)) applicable thereto, and such modifications shall be set forth in the
applicable Competitive Bid Request.
SECTION 2.04. Committed and Foreign Currency Revolving
Borrowing Procedure. (a) In order to effect a Committed Borrowing, a Borrower
shall give written notice (or telephone notice promptly confirmed in writing) to
the Administrative Agent, substantially in the form of Exhibit 2.04 (a
"Committed Borrowing Request"), (i) in the case of a Eurodollar Committed
Borrowing, not later than noon, New York City time, three Business Days before
the Borrowing Date specified for such proposed Committed Borrowing, and (ii) in
the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on
the Borrowing Date specified for such proposed Committed Borrowing. No Fixed
Rate Loan or Eurocurrency Competitive Loan shall be requested or made pursuant
to a Committed Borrowing Request. Such Committed Borrowing Request shall be
irrevocable and shall in each case refer to this Agreement and specify (x)
whether the Borrowing then being requested is to be a Eurodollar Committed
Borrowing or an ABR Borrowing, (y) the Borrowing Date of such Borrowing (which
shall be a Business Day) and the aggregate amount thereof (which shall not be
less than $5,000,000 and shall be an integral multiple of $1,000,000) and (z)
the Interest Period with respect thereto. If no election as to the Type of
Committed Borrowing is specified in any such notice, then the requested
Committed Borrowing shall be an ABR Borrowing. If no Interest Period with
respect to any Eurodollar Committed Borrowing is specified in any such Committed
Borrowing Request, then the Borrower making such request shall be deemed to have
selected an Interest Period of one month's duration. If a Borrower shall not
have given notice in accordance with this Section 2.04 of its election to
refinance a Committed Borrowing prior to the end of the Interest Period in
effect for such Borrowing, then such Borrower shall (unless such Borrowing is
repaid at the end of such Interest Period) be deemed to have given notice of an
election to refinance such Borrowing with an ABR Borrowing. The Administrative
Agent shall promptly advise the Banks of any Committed Borrowing Request given
pursuant to this Section 2.04 and of each Bank's portion of the requested
Committed Borrowing by facsimile transmission.
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(b) In order to effect a Foreign Currency Revolving Borrowing,
a Borrower shall give the notice required under the relevant Foreign Currency
Addendum and shall promptly deliver a copy of such notice to the Administrative
Agent.
SECTION 2.05. Refinancings. Each Borrower may refinance all or
any part of any of its Borrowings with a Borrowing of the same or a different
Type made pursuant to Section 2.03 or Section 2.04, subject to the conditions
and limitations set forth herein and elsewhere in this Agreement, including
refinancings of Competitive Borrowings with Committed Borrowings and of
Committed Borrowings with Competitive Borrowings. Any Borrowing or part thereof
so refinanced shall be deemed to be repaid in accordance with Section 2.08 with
the proceeds of a new Borrowing hereunder and the proceeds of the new Borrowing,
to the extent they do not exceed the principal amount of the Borrowing being
refinanced, shall not be paid by the Banks to the Administrative Agent or by the
Administrative Agent to the Borrower to which such Borrowing has been made
pursuant to Section 2.02(c); provided, however, that (a) if the principal amount
extended by a Bank in a refinancing is greater than the principal amount, if
any, extended by such Bank in the Borrowing being refinanced, then such Bank
shall pay such difference to the Administrative Agent for distribution to the
Banks described in clause (b) below, (b) if the principal amount extended by a
Bank in the Borrowing being refinanced is greater than the principal amount, if
any, being extended by such Bank in the refinancing, the Administrative Agent
shall return the difference to such Bank out of amounts received pursuant to
clause (a) above, (c) to the extent any Bank fails to pay the Administrative
Agent amounts due from it pursuant to clause (a) above, any Borrowing or portion
thereof being refinanced shall not be deemed repaid in accordance with Section
2.08 to the extent of such failure and such Borrower shall pay such amount to
the Administrative Agent pursuant to Section 2.08 and (d) to the extent such
Borrower fails to pay to the Administrative Agent any amounts due in accordance
with Section 2.08 as a result of the failure of a Bank to pay the Administrative
Agent any amounts due as described in clause (c) above, the portion of any
refinanced Borrowing deemed not repaid shall be deemed to be outstanding solely
to the Bank which has failed to pay the Administrative Agent amounts due from it
pursuant to clause (a) above to the full extent of such Bank's portion of such
refinanced Loan.
SECTION 2.06. Conversion and Continuation of Committed
Borrowings. Each Borrower shall have the right at any time upon prior
irrevocable notice to the Administrative Agent (a) not later than 8:30 a.m., New
York City time, one Business Day prior to conversion, to convert any Eurodollar
Committed Borrowing into an ABR Borrowing, (b) not later than noon, New York
City time, three Business Days prior to conversion or continuation, to convert
any ABR Borrowing into a Eurodollar Committed Borrowing or to continue any
Eurodollar Committed Borrowing as a Eurodollar Committed Borrowing for an
additional Interest Period and (c) not later than 11:00 a.m., New York City
time, three Business Days prior to conversion, to convert the Interest Period
with respect to any Eurodollar Committed Borrowing to another permissible
Interest Period, subject in each case to the following:
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(i) each conversion or continuation shall be made pro rata
among the Banks in accordance with the respective principal amounts of
the Loans comprising the converted or continued Committed Borrowing and
no Borrowing may be converted into or continued as a Borrowing in a
different currency;
(ii) if less than all the outstanding principal amount of any
Committed Borrowing shall be converted or continued, the aggregate
principal amount of such Committed Borrowing converted or continued
shall be an integral multiple of $1,000,000 or 100,000 units of the
applicable Foreign Currency and not less than $5,000,000 or the Foreign
Currency Equivalent of such amount;
(iii) if any Eurodollar Committed Borrowing is converted at a
time other than the end of the Interest Period applicable thereto, such
Borrower shall pay, upon demand, any amounts due to the Banks pursuant
to Section 2.16;
(iv) any portion of a Committed Borrowing maturing or required
to be repaid in less than one month (or 14 days, if such an Interest
Period is available) may not be converted into or continued as a
Eurodollar Committed Borrowing;
(v) any portion of a Committed Borrowing which cannot be
continued as or converted into a Eurodollar Committed Borrowing by
reason of clause (iv) above shall be automatically converted into or
continued as an ABR Borrowing at the end of the Interest Period in
effect for such Borrowing; and
(vi) no Interest Period may be selected for any Eurodollar
Committed Borrowing that would end later than the Maturity Date.
Each notice pursuant to this Section 2.06 shall be irrevocable and shall refer
to this Agreement and specify (w) the identity and amount of the Committed
Borrowing that a Borrower requests be converted or continued, (x) whether such
Committed Borrowing is to be converted to or continued as a Eurodollar Committed
Borrowing or an ABR Borrowing, (y) if such notice requests a conversion, the
date of such conversion (which shall be a Business Day) and (z) if such
Committed Borrowing is to be converted to or continued as a Eurodollar Committed
Borrowing, the Interest Period with respect thereto. If no Interest Period is
specified in any such notice with respect to any conversion to or continuation
as a Eurodollar Committed Borrowing, a Borrower shall be deemed to have selected
an Interest Period of one month's duration. The Administrative Agent shall
promptly advise the other Banks of any notice given pursuant to this Section
2.06 and of each Bank's portion of any converted or continued Committed
Borrowing. If a Borrower shall not have given notice in accordance with this
Section 2.06 to continue any Committed Borrowing into a subsequent Interest
Period (and shall not otherwise have given notice in accordance with this
Section 2.06 to convert such Committed Borrowing), such Committed Borrowing
shall, at the end of the Interest
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Period applicable thereto (unless repaid pursuant to the terms hereof),
automatically be converted into or continued as an ABR Borrowing.
SECTION 2.07. Fees. (a) The Company agrees to pay to each
Bank, through the Administrative Agent, (i) on each March 31, June 30, September
30 and December 31 from the Execution Date to the date on which the Commitment
of such Bank has been terminated and (ii) on the Maturity Date and on any other
date on which the Commitment of such Bank has been terminated, facility fees
(such facility fees being the "Facility Fees"), in immediately available funds,
equal to the Applicable Fee Percentage of the amount of the Commitment of such
Bank from time to time outstanding, whether used, deemed used or unused, during
the preceding quarter (or shorter period commencing with the Execution Date
and/or ending with the Maturity Date).
(b) All Facility Fees shall be computed by the Administrative
Agent on the basis of the actual number of days elapsed in a year of 360 days,
and such computations, made in good faith, shall create a rebuttable presumption
that they are accurate. The Facility Fees due to each Bank shall commence to
accrue on the Execution Date and shall cease to accrue on the earlier of the
Maturity Date and the termination of the Commitment of such Bank as provided
herein.
(c) The Facility Fees due under this Section 2.07 shall be
paid on the date due, in immediately available funds, to the Administrative
Agent for distribution among the Banks.
(d) The Company agrees to pay to the Administrative Agent the
fees as provided in the Agent's Fee Letter.
(e) Notwithstanding the foregoing, in no event shall any Bank
be permitted to receive any compensation hereunder constituting interest in
excess of the Highest Lawful Rate.
SECTION 2.08. Repayment of Loans. (a) Each Borrower agrees to
pay the outstanding principal balance of each Loan (i) in the case of a
Competitive Loan, on the last day of the Interest Period applicable to such Loan
and on the Maturity Date, and (ii) in the case of a Committed Loan or Foreign
Currency Revolving Loan, on the Maturity Date unless another date is specified
in the Foreign Currency Addendum relating to such Foreign Currency Revolving
Loan. Each Loan shall bear interest from the date of the Borrowing of which such
Loan is a part on the outstanding principal balance thereof as set forth in
Section 2.09.
(b) Each Bank shall, and is hereby authorized by each Borrower
to make in its internal records relating to each Loan an appropriate notation
evidencing the date, amount and the Type of each Loan of such Bank to such
Borrower, the rate of interest applicable to such Loan and the Foreign Currency,
if any, in which such Loan is made, and each payment or prepayment of principal
of and interest on such Loan. The aggregate unpaid principal amount so recorded
shall be presumptive evidence of the principal amount owing by such Borrower to
such Bank in respect of such Loan. The failure of any Bank to make such a
notation or any error therein shall not in any
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manner affect the obligation of such Borrower to repay the Loans made by such
Bank in accordance with the terms hereof.
SECTION 2.09. Interest on Loans. (a) Subject to the provisions
of Section 2.09(d) and Section 2.10, the Loans comprising each Eurocurrency
Borrowing shall bear interest (computed on the basis of the actual number of
days elapsed over a year of 360 days) at a rate per annum equal to (i) in the
case of each Eurodollar Committed Loan, the lesser of (A) the IBO Rate for the
Interest Period in effect for such Borrowing plus the Applicable Differential
from time to time in effect and (B) the Highest Lawful Rate, (ii) in the case of
each Eurocurrency Competitive Loan, the lesser of (A) the IBO Rate for the
Interest Period in effect for such Borrowing plus the Margin offered by the Bank
making such Loan and accepted by a Borrower pursuant to Section 2.03 and (B) the
Highest Lawful Rate, (iii) in the case of each Foreign Currency Revolving Loan
that is a Eurocurrency Loan, the lesser of (A) the IBO Rate for the Interest
Period in effect for such Borrowing plus any spread specified in the applicable
Foreign Currency Addendum and (B) the Highest Lawful Rate and (iv) in the case
of each Foreign Currency Revolving Loan (other than a Eurocurrency Loan), such
rate as shall be specified in the applicable Foreign Currency Addendum.
(b) Subject to the provisions of Section 2.09(d) and Section
2.10, the Loans comprising each ABR Borrowing shall bear interest (computed on
the basis of the actual number of days elapsed over a year of 365 or 366 days,
as the case may be, if the Alternate Base Rate shall be based on the Prime Rate,
and a year of 360 days otherwise) at a rate per annum equal to the Alternate
Base Rate, but not in excess of the Highest Lawful Rate.
(c) Subject to the provisions of Section 2.10, each Fixed Rate
Loan shall bear interest at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days) equal to the fixed rate
of interest offered by the Bank making such Loan and accepted by a Borrower
pursuant to Section 2.03, but not in excess of the Highest Lawful Rate.
(d) Interest on each Loan shall be payable in arrears on each
Interest Payment Date applicable to such Loan except as otherwise provided in
this Agreement or in an applicable Foreign Currency Addendum. The applicable IBO
Rate or Alternate Base Rate for each Interest Period or day within an Interest
Period, as the case may be, shall be determined by the Administrative Agent
(which determination, made in good faith, shall create a rebuttable presumption
that the same is accurate). The Administrative Agent shall promptly advise the
Company and each Bank, as appropriate, of such determination.
SECTION 2.10. Interest on Overdue Amounts. If any Borrower
shall default in the payment of the principal of or interest on any Loan or any
other amount becoming due hereunder, whether at scheduled maturity by notice of
prepayment, acceleration or otherwise, such Borrower shall on demand from time
to time pay interest, to the extent permitted by law, on such defaulted amount
up to (but not including) the date of actual payment (after as well as before
judgment) at a rate per annum equal to the lesser of (a) the Alternate Base Rate
plus 2% per annum (if the Alternate
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Base Rate is based on the Prime Rate, computed on the basis of the actual number
of days elapsed over a year of 365 or 366 days, as the case may be; if the
Alternate Base Rate is based on the Federal Funds Effective Rate, computed on
the basis of the actual number of days elapsed over a year of 360 days) and (b)
the Highest Lawful Rate, or in the case of Foreign Currency Revolving Loans such
other rate as may be specified in the related Foreign Currency Addendum.
SECTION 2.11. Alternate Rate of Interest. In the event, and on
each occasion, that on the day two Business Days prior to the commencement of
any Interest Period for a Eurocurrency Borrowing, (a) the Administrative Agent
shall have determined that deposits in the principal amounts and currencies of
the Loans comprising such Borrowing are not generally available in the London
interbank market, or (b) the Majority Banks shall have determined (and notified
the Administrative Agent) that the rate at which such deposits are being offered
will not adequately and fairly reflect the cost to any Bank of making or
maintaining its Eurocurrency Loan during such Interest Period, the
Administrative Agent shall, as soon as practicable thereafter, give written
notice of such determination to the Borrowers and the Banks. In the event of any
such determination, any request by a Borrower for a Eurocurrency Loan shall,
until the circumstances giving rise to such notice no longer exist, be deemed to
be a request for an ABR Loan (if the requested Eurocurrency Loan was to be a
Dollar Loan or a Foreign Currency Revolving Loan pursuant to a Foreign Currency
Addendum in which no "Base Rate" is specified) or a request for a Foreign
Currency Loan bearing interest by reference to the "Base Rate" specified in the
applicable Foreign Currency Addendum (if the requested Eurocurrency Loan was to
be a Foreign Currency Revolving Loan pursuant to a Foreign Currency Addendum in
which a "Base Rate" is specified). Each such determination by the Administrative
Agent or the Majority Banks hereunder, made in good faith, shall create a
rebuttable presumption that the same is accurate.
SECTION 2.12. Termination and Reduction of Commitments. (a)
The Total Commitment shall be automatically terminated on the Maturity Date.
(b) Subject to Section 2.13(b), upon at least ten Business
Days' prior irrevocable written or facsimile notice to the Administrative Agent,
the Company may at any time in whole permanently terminate, or from time to time
in part permanently reduce, the Total Commitment; provided, however, that (i)
each partial reduction of the Total Commitment shall be in an integral multiple
of $1,000,000 and in a minimum principal amount of $25,000,000 and (ii) no such
termination or reduction shall be permitted if, after giving effect thereto and
to any repayments of the Loans made on the effective date thereof, (A) the sum
of the Aggregate Revolving Credit Exposure and the Aggregate Competitive Loan
Exposure would exceed the Total Commitment then in effect or (B) the Revolving
Credit Exposure of any Bank would exceed such Bank's Commitment. Such notice
shall specify the date and the amount of the termination or reduction of the
Total Commitment. The Administrative Agent shall promptly notify the Banks of
the amount of any such termination or reduction of the Total Commitment.
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(c) Except in the circumstances described in Section 2.14 or
Section 2.15, each reduction in the Total Commitment hereunder shall be made
ratably among the Banks in accordance with their respective Commitments. The
Company shall pay to the Administrative Agent for the account of the Banks, on
the date of each termination or reduction, the Facility Fees on the amount of
the Commitments so terminated or reduced, accrued through the date of such
termination or reduction.
SECTION 2.13. Prepayment. (a) Each Borrower shall have the
right at any time and from time to time to prepay any Committed Borrowing or
Foreign Currency Revolving Borrowing, in whole or in part, upon written or
facsimile notice (or telephone notice promptly confirmed by written or facsimile
notice) to the Administrative Agent: (i) before 10:00 a.m., New York City time,
five Business Days prior to prepayment, in the case of Eurodollar Committed
Loans, (ii) before 10:00 a.m., New York City time, one Business Day prior to
prepayment, in the case of ABR Loans and (iii) in the case of Foreign Currency
Revolving Loans, such time as shall be specified in the applicable Foreign
Currency Addendum; provided, however, that each partial prepayment shall be in
an amount which is an integral multiple of $1,000,000 or 100,000 units of the
applicable Foreign Currency and not less than $10,000,000 (or the Foreign
Currency Equivalent thereof). No Borrower shall have the right to prepay any
Competitive Borrowing.
(b) On the date of any termination or reduction of the
Commitments pursuant to Section 2.12(b), the Borrowers shall pay or prepay so
much of the Committed Borrowings as shall be necessary in order that the
aggregate principal amount of the Competitive Loans and Committed Loans
outstanding will not exceed the Total Commitment, after giving effect to such
termination or reduction.
(c) Each notice of prepayment given by a Borrower shall
specify the prepayment date and the principal amount of each Borrowing (or
portion thereof) to be prepaid, shall be irrevocable and shall commit such
Borrower to prepay such Borrowing (or portion thereof) by the amount stated
therein on the date stated therein. All prepayments under this Section 2.13
shall be subject to Section 2.16 and Section 2.17 but otherwise without premium
or penalty. All prepayments under this Section 2.13 shall be accompanied by
accrued interest on the principal amount being prepaid to the date of
prepayment.
(d) If, on the last day of any Interest Period for any
Borrowing or Borrowings, the sum of the Aggregate Revolving Credit Exposure and
the Aggregate Competitive Loan Exposure exceeds the Total Commitment, the
applicable Borrower (or, if more than one, the applicable Borrower(s) designated
by the Company) shall, on such day, prepay such Borrowing(s) in an amount equal
to the lesser of (i) such excess and (ii) the aggregate amount of such
Borrowing(s).
(e) If, on the last day of any Interest Period for any
Borrowing, the Revolving Credit Exposure of any Bank in respect of a Loan
included in such Borrowing exceeds such Bank's Commitment, the applicable
Borrower shall, on such day, prepay such Borrowing in an amount equal
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to the lesser of (i) the amount necessary to eliminate such excess and (ii) the
amount of such Borrowing.
SECTION 2.14. Reserve Requirements; Change in Circumstances.
(a) It is understood that the cost to each Bank of making or maintaining any of
the Loans may fluctuate as a result of the applicability of, or changes in,
reserve requirements imposed by the Board, including reserve requirements under
Regulation D in connection with Eurocurrency Liabilities, and any other similar
reserve, liquid asset or other requirement established by any governmental
authority of the United States or of the jurisdiction of any Foreign Currency or
in which any subject Loans in such currency are made to which banks in such
jurisdiction are subject. Subject to Section 9.08, each Borrower agrees to pay
to each Bank, as provided in Section 2.14(d), at any time when such Bank shall
be required to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional interest on the
unpaid principal amount of each Eurocurrency Loan of such Bank from the date of
such Loan until such principal amount is paid in full, payable on each Interest
Payment Date for such Eurocurrency Loan, at an interest rate per annum equal at
all times during each Interest Period to the excess of (i) the rate obtained by
dividing the IBO Rate for such Interest Period by a percentage equal to 100%
minus the reserve percentage applicable during such Interest Period under
regulations issued from time to time by the Board (or if more than one such
percentage is so applicable, minus the daily average of such percentages for
those days in such Interest Period during which any such percentage shall be so
applicable) for determining the maximum requirement (including any emergency,
supplemental or other marginal reserve requirement) for such Bank with respect
to liabilities or assets consisting of or including Eurocurrency Liabilities
over (ii) the IBO Rate for such Interest Period. It is understood by the parties
hereto that the rates of interest applicable to Eurocurrency Loans have been
determined on the assumption that no such reserve requirements exist or will
exist and that such rates do not reflect costs imposed on the Banks in
connection with such reserve requirements. It is agreed that for purposes of
this Section 2.14(a) the Eurocurrency Loans made hereunder shall be deemed to
constitute Eurocurrency Liabilities and to be subject to the reserve
requirements of Regulation D without benefit of or credit for proration,
exemptions or offsets which might otherwise be available to the Banks from time
to time under Regulation D.
(b) Notwithstanding any other provision herein, if after the
Execution Date the introduction of any applicable law or regulation or any
change in applicable law or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any Bank with any
applicable guideline or request from any central bank or governmental authority
(whether or not having the force of law), including the implementation of the
European monetary unit (i) shall change the basis of taxation of payments to any
Bank of the principal of or interest on any Eurocurrency Loan, Fixed Rate Loan
or Foreign Currency Loan made by such Bank or any other fees or amounts payable
hereunder (other than (x) taxes imposed on the overall net income of such Bank
or its Applicable Lending Office by the jurisdiction in which such Bank or its
Applicable Lending Office has its principal office or by any political
subdivision or taxing authority therein (or any tax which is enacted or adopted
by such
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jurisdiction, political subdivision or taxing authority as a direct substitute
for any such taxes) or (y) any tax, assessment or other governmental charge that
would not have been imposed but for the failure of any Bank to comply with any
certification, information, documentation or other reporting requirement), (ii)
shall impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, such Bank, or (iii) shall impose on such Bank or the London
interbank market any other condition affecting this Agreement or any
Eurocurrency Loan, Fixed Rate Loan or Foreign Currency Loan made by such Bank,
and the result of any of the foregoing shall be to increase the cost to such
Bank of maintaining its Commitment or of making or maintaining any Eurocurrency
Loan, Fixed Rate Loan or Foreign Currency Loan or to reduce the amount of any
sum received or receivable by such Bank hereunder (whether of principal,
interest or otherwise) in respect thereof by an amount deemed in good faith by
such Bank to be material, then each Borrower shall pay to the Administrative
Agent for the account of such Bank such additional amount or amounts with
respect to the Eurocurrency Loans, Fixed Rate Loans and Foreign Currency Loans
of such Borrower as will compensate such Bank for such increase or reduction to
such Bank upon demand by such Bank (through the Administrative Agent).
(c) If any Bank shall have determined in good faith that the
applicability of any law, rule, regulation or guideline adopted pursuant to or
arising out of the July 1988 report of the Basle Committee on Banking
Regulations and Supervisory Practices entitled "International Convergence of
Capital Measurement and Capital Standards" or the adoption after the Execution
Date of any other law, rule, regulation or guideline regarding capital adequacy,
or any change in any of the foregoing or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or any lending office of such Bank) with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Bank's capital as a consequence of this
Agreement or the Loans made by such Bank pursuant hereto to a level below that
which such Bank could have achieved but for such applicability, adoption, change
or compliance (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, as provided in Section 2.14(d), each Borrower shall pay to such
Bank such additional amount or amounts as will compensate such Bank for any such
increased capital requirement.
(d) Each Bank will notify the Borrowers through the
Administrative Agent of any event occurring after the date of this Agreement
which will entitle such Bank to compensation pursuant to this Section 2.14, as
promptly as practicable, and in any event within 90 days after it becomes aware
thereof and determines to request compensation. A certificate of a Bank setting
forth in reasonable detail (i) such amount or amounts as shall be necessary to
compensate such Bank (or participating banks or other entities pursuant to
Section 9.11) as specified in paragraph (a), (b) or (c) above, as the case may
be, and (ii) the calculation of such amount or amounts under clause (a)(i),
shall be delivered to the Borrowers (with a copy to the Administrative Agent)
and shall, to the extent
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permitted by law, be conclusive absent manifest error. The Borrowers shall pay
to the Administrative Agent for the account of such Bank the amount shown as due
on any such certificate within 10 days after its receipt of the same.
(e) Except as expressly provided in Section 2.14(d), failure
on the part of any Bank to demand compensation for any increased costs or
reduction in amounts received or receivable or reduction in return on capital
with respect to any Interest Period or any other period shall not constitute a
waiver of such Bank's rights to demand compensation for any increased costs or
reduction in amounts received or receivable or reduction in return on capital
with respect to such Interest Period or any other period; provided that no
Borrower shall be required to compensate a Bank pursuant to this Section 2.14
for any increased costs or reductions incurred more than 270 days prior to the
date that such Bank notifies such Borrower of the change in law giving rise to
such increased costs or reductions and of such Bank's intention to claim
compensation therefor; provided further that, if the change in law giving rise
to such increased costs or reductions is retroactive, then the 270-day period
referred to above shall be extended to include the period of retroactive effect
thereof. The protection of this Section 2.14 shall be available to each Bank
regardless of any possible contention of invalidity or inapplicability of law,
regulation or condition which shall have been imposed.
(f) In the event any Bank shall seek compensation pursuant to
this Section 2.14, the Company may give notice to such Bank (with copies to the
Administrative Agent) that it wishes to seek one or more Eligible Assignees
(which may be one or more of the Banks) to assume the Commitment of such Bank
and to purchase its outstanding Loans. Each Bank requesting compensation
pursuant to this Section 2.14 agrees to sell its Commitment, Loans and interest
in this Agreement pursuant to Section 9.11(c) to any such Eligible Assignee for
an amount equal to the sum of the outstanding unpaid principal of and accrued
interest on such Loans plus all other fees and amounts (including any
compensation claimed by such Bank under this Section 2.14 or Section 2.16) due
such Bank hereunder calculated, in each case, to the date such Commitment, Loans
and interest are purchased, whereupon such Bank shall have no further Commitment
or other obligation to any Borrower hereunder.
(g) Without prejudice to the survival of any other obligations
of the Borrowers hereunder, the obligations of the Borrower under this Section
2.14 shall survive the termination of this Agreement and the payment or
assignment of the Loans.
(h) Notwithstanding anything in this Section 2.14 to the
contrary, in no event shall any Bank be permitted to take or receive any
compensation hereunder constituting interest in excess of the Highest Lawful
Rate.
SECTION 2.15. Change in Circumstances. (a) Notwithstanding any
other provision herein, if any change in any law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any
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Bank or its Eurocurrency Lending Office to make or maintain any Eurocurrency
Loan or Foreign Currency Loan or to give effect to its obligations as
contemplated hereby, or shall limit the convertibility into Dollars of any
Foreign Currency (or make such conversion commercially impracticable), then, by
written notice to the Borrower and to the Administrative Agent, such Bank may:
(i) declare that Eurocurrency Loans or Loans in any affected
Foreign Currency, as applicable, will not thereafter be made by such
Bank hereunder, whereupon such Bank shall not submit a Competitive Bid
in response to a request for Eurocurrency Competitive Loans or
Competitive Loans in such Foreign Currency, as applicable, and any
request by a Borrower for a Eurodollar Committed Borrowing or Foreign
Currency Revolving Borrowing in such Foreign Currency, as applicable,
shall, as to such Bank only (unless such Borrower (x) shall have
withdrawn such request, in which case such request shall be of no force
and effect, or (y) shall have made a new request for a Borrowing of a
different Type in accordance with the terms hereof, which shall be
deemed to supersede such request for a Eurodollar Committed Borrowing),
be deemed a request for an ABR Loan in Dollars; and
(ii) require that all outstanding Eurocurrency Loans or Loans
in such Foreign Currency, as applicable, made by it be converted to ABR
Loans in Dollars in which event all such Loans shall be automatically
converted to ABR Loans in Dollars, as of the effective date of such
notice as provided in Section 2.15(b).
In the event any Bank shall exercise its rights under clause (i) or (ii) above
with respect to Eurocurrency Loans, all payments and prepayments of principal
which would otherwise have been applied to repay the Eurocurrency Loans that
would have been made by such Bank or the converted Eurocurrency Loans of such
Bank shall instead be applied to repay the ABR Loans made by such Bank or the
Banks, as the case may be, in lieu of, or resulting from the conversion of, such
Eurocurrency Loans. In the event any Foreign Currency Bank shall exercise its
rights under clause (i) or (ii) above with respect to Foreign Currency Loans,
all payments and prepayments in respect of such Foreign Currency Loans shall
thereafter be made in Dollars, converted at the then prevailing Exchange Rate.
(b) For purposes of this Section 2.15, a notice to any
Borrower (with a copy to the Administrative Agent) by any Bank pursuant to
Section 2.15(a) shall be effective as to each Eurocurrency Loan, if lawful, on
the last day of the Interest Period currently applicable to such Eurocurrency
Loan; in all other cases such notice shall be effective on the date of receipt
by the Borrower.
(c) In the event any Bank shall give a notice to any Borrower
pursuant to this Section 2.15, the Company may give notice to such Bank (with a
copy to the Administrative Agent) that it wishes to seek one or more Eligible
Assignees (which may be one or more of the Banks) to assume the Commitment of
such Bank and to purchase its outstanding Loans. Each Bank giving a
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notice to any Borrower pursuant to this Section 2.15 agrees to sell its
Commitment, Loans and interest in this Agreement pursuant to Section 9.11(c) to
any such Eligible Assignee for an amount equal to the sum of the outstanding
unpaid principal of and accrued interest on such Loans plus all other fees and
amounts (including any compensation claimed by such Bank under Section 2.14 or
Section 2.16) due such Bank hereunder calculated, in each case, to the date such
Commitment, Loans, interest and fees are purchased, whereupon such Bank shall
have no further Commitment or other obligation to any Borrower hereunder.
(d) None of the Banks shall be permitted to terminate
availability of Eurocurrency Loans as provided in this Section 2.15 on a
discriminatory basis (i.e., availability of Eurocurrency Loans is not also
terminated by the applicable Bank with respect to other customers of such Bank
similarly situated where such customer is subject to documents providing for
such right of termination).
SECTION 2.16. Indemnity. The Company shall indemnify each Bank
against any loss or reasonable expense which such Bank may sustain or incur as a
consequence of (a) any failure by a Borrower to fulfill on the date of any
Borrowing hereunder the applicable conditions set forth in Article III, (b) any
failure by a Borrower to borrow or to refinance, convert (other than conversion
into an ABR Loan) or continue any Loan hereunder after a Committed Borrowing
Request pursuant to Article II has been given or after Competitive Bids have
been accepted or after a notice of conversion or continuation has been given
pursuant to Section 2.05, (c) any payment, prepayment or conversion of a
Eurocurrency Loan or Fixed Rate Loan required or permitted by any provision of
this Agreement or otherwise made on a date other than the last day of the
applicable Interest Period, (d) any default in the payment or prepayment of the
principal amount of any Loan or any part thereof or interest accrued thereon, as
and when due and payable (at the due date thereof, by notice of prepayment or
otherwise), or (e) the occurrence of any Event of Default, including, in the
case of any of the events set forth in clauses (a) through (e) of this Section
2.16, any loss or reasonable expense sustained or incurred or to be sustained or
incurred in liquidating or employing deposits from third parties acquired to
effect or maintain such Loan or any part thereof as a Eurocurrency Loan or Fixed
Rate Loan. Such loss or reasonable expense shall include an amount equal to the
excess, if any, as reasonably determined by each Bank of (y) its cost of
obtaining the funds for the Loan being paid, prepaid or converted or not
borrowed, refinanced, converted or continued (based on the IBO Rate or, in the
case of a Fixed Rate Loan, the fixed rate of interest applicable thereto) for
the period from the date of such payment, prepayment or conversion or failure to
borrow, refinance, convert or continue to the last day of the Interest Period
for such Loan (or, in the case of a failure to borrow, refinance, convert or
continue, the Interest Period for the Loan which would have commenced on the
date of such failure to borrow, refinance, convert or continue) over (z) the
amount of interest (as reasonably determined by such Bank) that would be
realized by such Bank in reemploying the funds so paid, prepaid or converted or
not borrowed, refinanced, converted or continued for such period or Interest
Period, as the case may be. A certificate of each Bank setting forth any amount
or amounts which such Bank is entitled to receive pursuant to this Section 2.16
together with either a calculation of such amount or amounts or a statement of
the basis on which
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such amount or amounts have been determined shall be delivered to the Company
(with a copy to the Administrative Agent) and such calculation or statement,
made in good faith shall create a rebuttable presumption that the same is
accurate. The Company shall pay to the Administrative Agent for the account of
each Bank the amount shown as due on any certificate within 30 days after its
receipt of the same. Without prejudice to the survival of any other obligations
of the Company hereunder, the obligations of the Company under this Section 2.16
shall survive the termination of this Agreement and/or the payment or assignment
of any of the Loans. Without limitation of this Section 2.16, the provisions of
this Section 2.16 shall be enforceable against the Company with respect to the
conditions described in clauses (a) and (b) of this Section 2.16 with respect to
any Committed Borrowing Request or Competitive Bid Request given by a Borrower
hereunder on or after the Execution Date regardless of whether the Effective
Date occurs. Notwithstanding the foregoing, in no event shall any Bank be
permitted to receive any compensation hereunder constituting interest in excess
of the Highest Lawful Rate.
SECTION 2.17. Pro Rata Treatment. Except as required under
clause (d) of the proviso of Section 2.05, Section 2.14, Section 2.15, or
Section 2.16, (a) each Committed Borrowing and each refinancing of any Borrowing
with a Committed Borrowing shall be allocated pro rata among the Banks in
accordance with their respective Available Commitments, (b) each payment of the
Facility Fees and each reduction of the Commitments shall be allocated pro rata
among the Banks in accordance with their respective Commitments, (c) each
payment or prepayment of principal (other than any prepayment pursuant to
Section 2.24(d)) of any Committed Borrowing and each payment of interest on the
Loans comprising part of a Committed Borrowing shall be allocated pro rata among
the Banks participating in such Borrowing in accordance with the respective
principal amounts of their outstanding Loans comprising such Borrowing, (d) each
Foreign Currency Revolving Borrowing shall be allocated pro rata among the Banks
participating in such Borrowing, in accordance with their respective Foreign
Currency Bank Maximum Borrowing Amounts with respect to the applicable Foreign
Currency and (e) each payment or prepayment of principal of any Foreign Currency
Revolving Borrowing and each payment of interest on the Loans comprising part of
a Foreign Currency Revolving Borrowing shall be allocated pro rata among the
Banks participating in such Borrowing in accordance with the respective
principal amounts of their outstanding Loans comprising such Borrowing. Except
as required under clause (d) of the proviso of Section 2.05, each payment of
interest on any Competitive Borrowing shall be allocated pro rata among the
Banks participating in such Borrowing in accordance with the respective amounts
of accrued and unpaid interest on their outstanding Competitive Loans comprising
such Borrowing. Each Bank agrees that in computing such Bank's portion of any
Borrowing to be made hereunder, the Administrative Agent may, in its discretion,
round each Bank's percentage of such Borrowing to the next higher or lower whole
dollar amount or the Equivalent Amount in the case of a Foreign Currency
Borrowing.
SECTION 2.18. Sharing of Setoffs. Each Bank agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against the Borrowers (pursuant to Section 9.06 or otherwise), including, but
not limited to, a secured claim under Section 506 of Title
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11 of the United States Code or other security or interest arising from, or in
lieu of, such secured claim, received by such Bank under any applicable
bankruptcy, insolvency or other similar law or otherwise, or by similar means,
obtain payment (voluntary or involuntary) (other than pursuant to Section 2.14,
Section 2.15 or Section 2.16) of any Committed Loan or Loans as a result of
which the unpaid principal portion of the Committed Loans of such Bank shall be
proportionately less than the unpaid principal portion of the Committed Loans of
any other Bank, it shall be deemed simultaneously to have purchased from such
other Bank at face value, and shall promptly pay to such other Bank the purchase
price for, a participation in the Committed Loans of such other Bank, so that
the aggregate unpaid principal amount of the Committed Loans and participations
in the Committed Loans held by each Bank shall be in the same proportion to the
aggregate unpaid principal amount of all Committed Loans then outstanding as the
principal amount of its Committed Loans prior to such exercise of banker's lien,
setoff or counterclaim or other event was to the principal amount of all
Committed Loans outstanding prior to such exercise of banker's lien, setoff or
counterclaim or other event; provided, however, that, if any such purchase or
purchases or adjustments shall be made pursuant to this Section 2.18 and the
payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustment restored without interest. Each
Borrower expressly consents to the foregoing arrangements and agrees that any
Bank holding a participation in a Committed Loan deemed to have been so
purchased may, to the extent permitted by law, exercise any and all rights of
banker's lien, setoff or counterclaim with respect to any and all moneys owing
by such Borrower to such Bank by reason thereof as fully as if such Bank had
made a Committed Loan directly to such Borrower in the amount of such
participation.
SECTION 2.19. Payments. (a) Each Borrower shall make each
payment hereunder not later than noon, New York City time, on the day when due
to the Administrative Agent at its address referred to in Section 9.02 for the
account of the Banks, in federal or other immediately available funds (or, in
the case of Foreign Currency Revolving Loans, such other time and place as shall
be specified in the applicable Foreign Currency Addendum, or in the case of
Competitive Loans denominated in a Foreign Currency as may be agreed upon by the
Company, the Administrative Agent and the Bank or Banks whose Competitive Bids
have been accepted). The Administrative Agent will promptly thereafter cause to
be distributed like funds relating to the payment of principal or interest on
Committed Loans (other than pursuant to Section 2.14, Section 2.15 and Section
2.16) or Facility Fees ratably to the Banks and like funds relating to the
payment of any other amount (including payments of principal or interest on
Competitive Loans which are not made ratably to the Banks) payable to any Bank
to such Bank for the account of its Applicable Lending Office, in each case to
be applied in accordance with the terms of this Agreement. If the Administrative
Agent fails to send to any Bank its portion of any payment timely received by
the Administrative Agent hereunder by the close of business on the day such
payment was received, the Administrative Agent shall pay to such Bank interest
on its portion of such payment from the day such payment was timely received by
the Administrative Agent until the date such Bank's portion of such payment is
sent to such Bank, at the Federal Funds Effective Rate.
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(b) Whenever any payment hereunder (including principal of or
interest on any Borrowing or any fees or other amounts), shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest, fees or other amounts, as
the case may be; provided, however, if such extension would cause payment of
interest on or principal of a Eurocurrency Loan to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.
(c) Unless the Administrative Agent shall have received notice
from a Borrower prior to the date on which any payment is due to the Banks
hereunder that such Borrower will not make such payment in full, the
Administrative Agent may assume that such Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent a
Borrower shall not have so made such payment in full to the Administrative
Agent, each Bank shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until the date such
Bank repays such amount to the Administrative Agent, at the Federal Funds
Effective Rate. The provisions of this Section 2.19(c) shall apply, mutatis
mutandis, for the benefit of the Foreign Currency Agent under each Foreign
Currency Addendum from time to time in effect, whether or not such Foreign
Currency Addendum shall expressly so provide.
SECTION 2.20. Taxes. (a) Any and all payments by the Borrowers
hereunder (including any payments made under Section 2.09) shall be made, in
accordance with Section 2.19, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on the Administrative Agent's or any Bank's income and franchise taxes imposed
on the Administrative Agent or any Bank, in each case by the United States or
any jurisdiction under the laws of which it is organized or any political
subdivision of such jurisdiction of organization (all such nonexcluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If any Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to the Banks or
the Administrative Agent (i) the sum payable shall be increased by the amount
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.20) such Bank or the
Administrative Agent (as the case may be) shall receive an amount equal to the
sum it would have received had no such deductions been made, (ii) such Borrower
shall make such deductions and (iii) such Borrower shall pay the full amount
deducted to the relevant taxing authority or other governmental authority in
accordance with applicable law.
(b) In addition, each Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from
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any payment made hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any Loan (hereinafter referred
to as "Other Taxes").
(c) Each Borrower will indemnify each Bank and the
Administrative Agent for the full amount of Taxes and Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.20) paid by such Bank or the Administrative Agent, as the case may be,
and any liability (including penalties, interest and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. Such indemnification shall be made within 30 days after the
date any Bank or the Administrative Agent, as the case may be, makes written
demand therefor. If a Bank or the Administrative Agent shall become aware that
it is entitled to receive a refund in respect of Taxes or Other Taxes, it shall
promptly notify the applicable Borrower of the availability of such refund and
shall, within 30 days after receipt by such Borrower, apply for such refund at
such Borrower's expense. If any Bank or the Administrative Agent receives a
refund in respect of any Taxes or Other Taxes for which such Bank or the
Administrative Agent has received payment from a Borrower hereunder it shall
promptly notify such Borrower of such refund and shall, within 30 days after
receipt of a request by such Borrower (or promptly upon receipt, if such
Borrower has requested application for such refund pursuant hereto), repay such
refund to such Borrower without interest, provided that such Borrower, upon the
request of such Bank or the Administrative Agent, agrees to return such refund
(plus penalties, interest or other charges) to such Bank or the Administrative
Agent in the event such Bank or the Administrative Agent is required to repay
such refund.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes withheld by a Borrower in respect of any payment to any Bank (or
transferee) or the Administrative Agent, such Borrower will furnish to the
Administrative Agent, at its address referred to in Section 9.02, the original
or a certified copy of a receipt evidencing payment thereof or, if such original
or copy of a receipt is not available from the relevant taxing authority, other
documentation of payment reasonably satisfactory to such Bank (or transferee) or
the Administrative Agent.
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.20
shall survive the payment in full of principal and interest hereunder.
(f) Each Bank that is organized outside the United States and
each Foreign Currency Bank shall promptly after the later of the date hereof or
the date in which it shall become a "Bank" hereunder, or the date on which it
shall execute and deliver a Foreign Currency Addendum, or shall become a party
thereto, and from time to time thereafter upon the obsolescence or expiration of
any previously delivered form or certificate (but only so long as such Bank or
Foreign Currency Bank remains lawfully able to do so), provide the Company and
the Administrative Agent with any form or certificate that is required by any
taxing authority (including, if applicable, two original Internal Revenue
Service forms 1001 or 4224, as appropriate (or any successor form or other form
prescribed by the Internal Revenue Service), an original Internal Revenue
Service form W-9 (or any
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successor form), as shall be appropriate to establish, subject to the
penultimate sentence of this Section 2.19(f), that such Bank or Foreign Currency
Bank is exempt from Home Jurisdiction Withholding Taxes on payments pursuant to
this Agreement (including any payments made under any Foreign Currency
Addendum); provided, however, that such Bank or Foreign Currency Bank shall have
been advised in writing by the Company or any other Borrower (including at the
time any renewal form is due) of the form or certificate applicable to it,
determined by reference to the jurisdiction of organization and Applicable
Lending Offices of such Bank or Foreign Currency Bank, or such other branch or
office of such Bank or Foreign Currency Bank designated by such Bank or Foreign
Currency Bank from time to time as the branch or office at which any of its
Loans are to be made or maintained. Each Bank and Foreign Currency Bank shall
promptly notify the Company and the Administrative Agent if, because of any
change in the jurisdiction of organization or an Applicable Lending Office of
such Bank or Foreign Currency Bank, (A) it is required to withdraw or cancel any
form or certificate previously submitted by it or any form or certificate has
otherwise become ineffective or inaccurate or (B) payments to it are or will be
subject to withholding of any Home Jurisdiction Withholding Tax to a greater or
lesser extent than the extent to which payments to it pursuant to this Agreement
were previously subject. If any form or document referred to in this Section
2.19(f) requires the disclosure of information, other than information necessary
to compute the tax payable and information required on the date hereof by
Internal Revenue Service form 1001 or 4224, that each Bank or Foreign Currency
Bank reasonably considers to be confidential, such Bank or Foreign Currency Bank
shall give notice thereof to the Company and the Administrative Agent (and if
such notice is given by a Foreign Currency Bank, the relevant foreign Currency
Agent and the relevant Foreign Currency Borrower) and shall not be obligated to
include in such form or document such confidential information; provided,
however, such form or document will state that such confidential information may
be requested directly from such Bank or Foreign Currency Bank. Unless the
Borrowers and the Administrative Agent have received forms or other documents
satisfactory to them indicating that payments hereunder or under the Loans are
not subject to United States withholding tax or are subject to such tax at a
rate reduced by an applicable tax treaty, the Borrowers, the Administrative
Agent or the Foreign Currency Agent shall withhold taxes from such payments at
the applicable statutory rate in the case of payments to or for any Bank
organized under the laws of a jurisdiction outside the United States or any
Foreign Currency Bank.
(g) Any Bank or Foreign Currency Bank claiming any additional
amounts payable pursuant to this Section 2.20 shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any certificate or
document requested by a Borrower or to change the jurisdiction of its Applicable
Lending Office if the making of such a filing or change would avoid the need for
or reduce the amount of any such additional amounts which may thereafter accrue
and would not, in the sole determination of such Bank or Foreign Currency Bank,
be otherwise disadvantageous to such Bank or Foreign Currency Bank.
SECTION 2.21. Borrowing Subsidiary. The Company may designate
any Wholly- owned Subsidiary (other than an Inactive Subsidiary) as an
additional Borrowing Subsidiary. Upon the acceptance by the Administrative Agent
of a Borrowing Subsidiary Counterpart of this
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Agreement in the form of Exhibit 2.22 (a "Borrowing Subsidiary Counterpart")
executed by such Wholly-owned Subsidiary and the Company, such Wholly-owned
Subsidiary shall be a Borrowing Subsidiary and a party to this Agreement.
SECTION 2.22. Liability of Borrowing Subsidiaries.
Notwithstanding anything in this Agreement to the contrary, in no event shall
any Borrowing Subsidiary now or hereafter party to this Agreement be liable for
the Loans or any other obligations of the Company or any other Borrowing
Subsidiary hereunder; it being the intention of the parties hereto that each
Borrowing Subsidiary shall be liable only for the Loans made to it and its other
obligations hereunder.
SECTION 2.23. Terms of Foreign Currency Facilities. (a) The
Company may in its discretion from time to time designate that one or more
Borrowers may borrow Foreign Currency Loans on a revolving basis from any one or
more Banks, with the consent of each such Bank in its sole discretion, by
delivering a Foreign Currency Addendum to the Administrative Agent and the Banks
(through the Administrative Agent) executed by the Company, each such Borrower
and each such Bank; provided, however, that on the effective date of such
designation (i) an Exchange Rate with respect to each Foreign Currency covered
by such Foreign Currency Addendum shall be determinable by reference to the
Reuters currency pages (or comparable publicly available screen) and (ii) no
Default or Event of Default shall have occurred and be continuing. Each Borrower
and, by agreeing to any Foreign Currency Addendum, each relevant Foreign
Currency Bank, acknowledges and agrees that each reference in this Agreement to
any Bank shall, to the extent applicable, be deemed to be a reference to such
Foreign Currency Bank, subject to the second sentence of the definition of such
term.
(b) Each Foreign Currency Addendum shall set forth (i) the
maximum amount (expressed in Dollars and without duplication) available to be
borrowed from all Foreign Currency Banks under such Foreign Currency Addendum
(as the same may be reduced from time to time pursuant to Section 2.24(a) or
Section 2.24(b), a "Foreign Currency Facility Maximum Borrowing Amount") and
(ii) with respect to each Foreign Currency Bank party to such Foreign Currency
Addendum, the maximum amount (expressed in Dollars and without duplication)
available to be borrowed from such Foreign Currency Bank thereunder (as the same
may be reduced from time to time pursuant to Section 2.24(a) or Section 2.24(b),
a "Foreign Currency Bank Maximum Borrowing Amount"). In no event shall the
aggregate of all Foreign Currency Bank Maximum Borrowing Amounts in respect of
any Foreign Currency Bank at any time exceed such Bank's Commitment. Except as
provided in Section 2.23(c), the making of Foreign Currency Loans by a Foreign
Currency Bank under a Foreign Currency Addendum shall under no circumstances
reduce the amount available to be borrowed from such Bank under any other
Foreign Currency Addendum to which such Bank is a party.
(c) Except as otherwise required by applicable law, in no
event shall the Foreign Currency Banks have the right to accelerate the Foreign
Currency Loans outstanding thereunder, or to terminate their commitments (if
any) to make Foreign Currency Loans prior to the stated
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termination date in respect thereof, except that such Foreign Currency Banks
shall, in each case, have such rights upon an acceleration of the Loans and a
termination of the Commitments pursuant to Article VI, respectively. No Foreign
Currency Loan may be made (i) which is denominated in any currency other than a
Foreign Currency, (ii) if a Default or an Event of Default shall have occurred
and be continuing or would result therefrom or (iii) if, after giving effect
thereto, (A) the sum of the aggregate principal amount of the Dollar Loans and
Foreign Currency Loans (Dollar Equivalent) (other than Competitive Loans) of any
Bank then outstanding would exceed such Bank's Commitment, (B) the Dollar
Equivalent of the aggregate principal amount of outstanding Foreign Currency
Revolving Loans denominated in a specified Foreign Currency would exceed the
applicable Foreign Currency Facility Maximum Borrowing Amount or (C) the sum of
the Aggregate Revolving Credit Exposure and the Aggregate Competitive Loan
Exposure would exceed the Total Commitment.
(d) The relevant Foreign Currency Banks, or, if so specified
in the relevant Foreign Currency Addendum, an agent acting on their behalf,
shall furnish to the Administrative Agent, promptly following the making,
payment or prepayment of each Foreign Currency Revolving Loan, or at any other
time at the request of the Administrative Agent, a statement setting forth the
outstanding Foreign Currency Revolving Loans made under such Foreign Currency
Addendum and the amount and terms of any pending prepayment notices or borrowing
requests received by such Banks or agent through the date of the Administrative
Agent's request.
(e) The relevant Borrower shall furnish to the Administrative
Agent copies of any amendment, supplement or other modification to the terms of
any Foreign Currency Addendum promptly after the effectiveness thereof.
(f) The Company may terminate any Foreign Currency Addendum,
if there are not any Loans outstanding thereunder (or, if there are Loans
outstanding thereunder) with the consent of each Foreign Currency Bank party
thereto in its sole discretion, by written notice to the Administrative Agent,
which notice shall be executed by the Company, each relevant Borrower and, if
their consent is required, each such Foreign Currency Bank. Once notice of such
termination is received by the Administrative Agent, such Foreign Currency
Addendum and the loans and other obligations outstanding thereunder shall
immediately cease to be subject to the terms of this Agreement.
SECTION 2.24. Currency Fluctuations, etc. (a) If, on any Reset
Date or any Borrowing Date (after giving effect to (i) any Loans to be made or
repaid on such date and (ii) any amendment, supplement or other modification to
any Foreign Currency Addendum effective on such date of which the Administrative
Agent has received notice), the Aggregate Outstanding Dollar
Revolving Extensions of Credit of any Bank exceeds the Dollar Revolving Credit
Overage of such Bank (the amount of such excess, the "Dollar Revolving Credit
Excess"), then the Administrative Agent shall promptly notify the Company of
such Dollar Revolving Credit Excess. Within three Business Days after receiving
such notice (during which time the Banks shall not be obligated to
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make any further Loans hereunder), the Company may (i) prepay Loans other than
Foreign Currency Loans (or cause any Borrower to prepay Loans other than Foreign
Currency Loans made to it) and/or (ii) as indicated in a facsimile notice (or
telephone notice promptly confirmed by facsimile transmission) to the
Administrative Agent, reduce the Foreign Currency Maximum Borrowing Amount with
respect to any one or more Foreign Currency Addenda (and prepay Foreign Currency
Loans to the extent required as a result of such reduction) so that the
aggregate amount under clauses (i) and (ii) equals or exceeds and thereby
eliminates such Dollar Revolving Credit Excess. To the extent the Company does
not so eliminate such Dollar Revolving Credit Excess by the third Business Day,
then such Bank's Foreign Currency Bank Maximum Borrowing Amount under each
Foreign Currency Addendum to which such Bank is a party shall be reduced on such
third Business Day by an amount equal to the product of such Dollar Revolving
Credit Excess times a fraction the numerator of which shall equal the Foreign
Currency Bank Maximum Borrowing Amount under such Foreign Currency Addendum and
the denominator of which shall equal the aggregate of all Foreign Currency Bank
Maximum Borrowing Amounts of such Bank under all Foreign Currency Addenda to
which it is a party. After giving effect to any such reduction in Foreign
Currency Bank Maximum Borrowing Amounts, the Foreign Currency Facility Maximum
Borrowing Amount with respect to each Foreign Currency Addendum shall in turn be
reduced to an amount equal to the aggregate of Foreign Currency Bank Maximum
Borrowing Amounts of all Banks party to such Foreign Currency Addendum.
Reductions in Foreign Currency Facility Maximum Borrowing Amounts and Foreign
Currency Bank Maximum Borrowing Amounts pursuant to this Section 2.24(a) shall
be effective until the amount thereof shall be recalculated by the
Administrative Agent on the next succeeding Reset Date or Borrowing Date, and
shall not be deemed to reduce the stated amount of any commitment of any Foreign
Currency Bank in respect of any Foreign Currency Addendum, whether or not such
Foreign Currency Bank shall at the time by reason of its Foreign Currency Bank
Maximum Borrowing Amount be obligated to make Foreign Currency Loans thereunder
in the full amount of such commitment.
(b) If, on any Reset Date or Borrowing Date (after giving
effect to (i) any Loans to be made or repaid on such date and (ii) any
amendment, supplement or other modification to any Foreign Currency Addendum
effective on such date of which the Administrative Agent has received notice),
the sum of (A) the Aggregate Outstanding Dollar Revolving Extensions of Credit
of all the Banks and (B) the Aggregate Competitive Loan Exposure exceeds the
Dollar Facility Overage (the amount of such excess, the "Dollar Facility
Excess"), then the Administrative Agent shall promptly notify the Company of
such Dollar Facility Excess. Within three Business Days after receiving such
notice (during which time the Banks shall not be obligated to make any further
Loans hereunder), the Company may (i) prepay Loans other than Foreign Currency
Loans (or cause any Borrower to prepay Loans other than Foreign Currency Loans
made to it) and/or (ii) as indicated in a facsimile notice (or telephone notice
promptly confirmed by facsimile transmission) to the Administrative Agent,
reduce the Foreign Currency Facility Maximum Borrowing Amount with respect to
any one or more Foreign Currency Addenda (and prepay Foreign Currency Loans to
the extent required as a result of such reduction) so that the aggregate amount
under clauses (i) and (ii) equals or exceeds and thereby eliminates such Dollar
Facility Excess. To the extent the Company does not so eliminate
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such Dollar Facility Excess by the third Business Day, then the Foreign Currency
Facility Maximum Borrowing Amount under each Foreign Currency Addendum shall be
reduced on such third Business Day by an amount equal to the product of such
Dollar Facility Excess times a fraction the numerator of which shall equal the
Foreign Currency Facility Maximum Borrowing Amount under such Foreign Currency
Addendum and the denominator of which shall equal the aggregate of the Foreign
Currency Facility Maximum Borrowing Amounts with respect to all Foreign Currency
Addenda. Each such reduction in the Foreign Currency Facility Maximum Borrowing
Amount under a Foreign Currency Addendum shall in turn reduce the respective
Foreign Currency Bank Maximum Borrowing Amounts of each Foreign Currency Bank
party to such Foreign Currency Addendum, pro rata on the basis of the respective
Foreign Currency Bank Maximum Borrowing Amounts of such Foreign Currency Banks.
Reductions in Foreign Currency Facility Maximum Borrowing Amounts and Foreign
Currency Bank Maximum Borrowing Amounts pursuant to this Section 2.24(b) shall
be effective until the amount thereof shall be recalculated by the
Administrative Agent on the next succeeding Reset Date or Borrowing Date, and
shall not be deemed to reduce the stated amount of any commitment of any Foreign
Currency Bank in respect of any Foreign Currency Addendum.
(c) If, on any Reset Date, the Dollar Equivalent of the
Foreign Currency Loans outstanding under a Foreign Currency Addendum exceeds
105% of the Foreign Currency Facility Maximum Borrowing Amount with respect
thereto (after giving effect to any reductions therein effected pursuant to
Section 2.24(a) or Section 2.24(b) on such date), then the relevant Borrower
shall, within three Business Days after notice thereof from the Administrative
Agent, prepay Foreign Currency Loans in an aggregate amount such that, after
giving effect thereto, (i) the Dollar Equivalent of all such Foreign Currency
Loans shall be equal to or less than such Foreign Currency Facility Maximum
Borrowing Amount and (ii) the Dollar Equivalent of the Foreign Currency Loans of
each relevant Foreign Currency Bank shall be equal to or less than such Foreign
Currency Bank's Foreign Currency Bank Maximum Borrowing Amount with respect to
such Foreign Currency Addendum.
(d) If, on any Reset Date, the Revolving Credit Exposure of
any Bank exceeds 105% of such Bank's Commitment, then, within three Business
Days after notice thereof from the Administrative Agent, the Company shall
prepay and/or cause the relevant Borrowing Subsidiaries to prepay the Loans in
accordance with this Agreement, in an aggregate amount such that, after giving
effect thereto, the Revolving Credit Exposure of such Bank shall be equal to or
less than such Bank's Revolving Credit Commitment.
(e) The Administrative Agent shall promptly notify the
relevant Banks of the amount of any reductions in Foreign Currency Facility
Maximum Borrowing Amounts or Foreign Currency Bank Maximum Borrowing Amounts,
and the amount of any prepayments, required pursuant to this Section 2.24.
SECTION 2.25. Designation of Additional Foreign Currencies.
(a) The Company may from time to time request that any one or more additional
freely available currencies which are
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freely transferable and freely convertible into Dollars be designated as
"Foreign Currencies" hereunder by providing written notice to the Administrative
Agent specifying (i) each proposed new currency and (ii) any proposed Borrowing
Subsidiary to be a Borrower with respect to such proposed Foreign Currency. The
Administrative Agent shall promptly forward to each Bank a copy of any such
notice. Within ten Business Days following the receipt of such notice, each Bank
shall notify the Administrative Agent in writing whether such designation is
acceptable to such Bank, in its sole discretion, and (without such advice
constituting a commitment on the part of such Bank to do so) whether such Bank
has an interest in funding Loans in the proposed new currency and, if so, the
level (as an amount expressed in Dollars) of such Bank's interest, and the
Administrative Agent promptly shall notify the Company thereof.
(b) In the event that such designation is acceptable to the
Majority Banks, and that the Administrative Agent shall determine (after
consultation with the Company) that indications of interest in funding Loans in
such proposed new currency sufficient to satisfy the Company's projected need
for Loans denominated in such currency have been received from the Banks, the
Company shall cause the proposed Borrower to deliver to the Administrative Agent
(i) a Borrowing Subsidiary Counterpart, as provided in Section 2.21, (ii) a
Foreign Currency Addendum, as provided in Section 2.23, and (iii) such other
documents and instruments as the Administrative Agent reasonably may request.
(c) From and after the date upon which the Administrative
Agent has received the documents (all of which shall be in form and substance
reasonably satisfactory to the Administrative Agent) described in Section
2.25(b), the term "Foreign Currency" shall be deemed to be amended to reflect
the designation of such currency as a Foreign Currency, the terms "Borrowing
Subsidiary" and "Borrower" shall be deemed to be amended to reflect such new
Borrowing Subsidiary, and the term "Home Jurisdiction Withholding Taxes" shall
be deemed to be amended to reflect the withholding taxes of the country of such
new currency.
(d) The Administrative Agent shall give prompt notice to the
Banks of the effectiveness of such designation and shall deliver to each copies
of all documents delivered pursuant to Section 2.25(b).
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to the Initial Loans to the
Company or an Initial Borrowing Subsidiary. The obligation of each Bank to make
its initial Loan to the Company or an Initial Borrowing Subsidiary is subject to
the condition precedent that the Administrative Agent shall have received on or
before the initial Borrowing Date the following, each dated (unless otherwise
indicated) such date and, with respect to all such documents referred to in
Section 3.01(a),
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Section 3.01(b), Section 3.01(c), Section 3.01(d), Section 3.01(e), Section
3.01(f), Section 3.01(g), and Section 3.01(h) in sufficient copies for each Bank
and the Administrative Agent:
(a) A counterpart of (i) this Agreement (to which all of the
Exhibits and Schedules have been attached) dated as of the date hereof
executed by the Company, the Initial Borrowing Subsidiaries, the
Administrative Agent and the Banks, and (ii) in the case of an Initial
Borrowing Subsidiary, its Foreign Currency Addendum, executed by the
Company, the applicable Foreign Currency Agent and each of the Foreign
Currency Banks parties thereto.
(b) (i) A copy of the articles of incorporation, as amended,
of the Company, certified by the Secretary of State of the State of
Texas and a certificate as to the good standing of the Company from the
Comptroller of the State of Texas; (ii) a certificate of the Secretary
or an Assistant Secretary of the Company certifying (A) that attached
thereto is a true and complete copy of the bylaws of the Company as in
effect on the date of such certificate and at all times since a date
prior to the date of the resolutions described in (B) below, (B) that
attached thereto is a true and complete copy of resolutions (i) duly
adopted by the Executive Committee of the Board of Directors of the
Company authorizing the execution, delivery and performance of this
Agreement and the Agent's Fee Letter and (ii) duly adopted by the Board
of Directors of the Company, appointing said Executive Committee, and
that such resolutions have not been modified, rescinded or amended and
are in full force and effect, (C) that the articles of incorporation of
the Company have not been amended since the last amendment thereto
shown on the good standing certificate furnished pursuant to (i) above
and (D) as to the incumbency and specimen signatures of each officer of
the Company executing this Agreement and the Agent's Fee Letter and
(iii) a certificate of another officer of the Company as to the
incumbency and specimen signatures of the Secretary or Assistant
Secretary of the Company.
(c) (i) A copy of the articles or certificate of incorporation
(or other similar evidence of organization) of each Initial Borrowing
Subsidiary, together with all amendments, and a current certificate of
good standing, both certified by the appropriate governmental officer,
in its jurisdiction of organization; (ii) a certificate of the
Secretary or Assistant Secretary of such Initial Borrowing Subsidiary
certifying, inter alia, (A) true and correct copies of the bylaws (or
other similar document) of such Initial Borrowing Subsidiary as in
effect on the date of such certificate and at all times since a date
prior to the date of the resolutions or other action described in
clause (B) below, (B) true and complete copies of resolutions duly
adopted by the Board of Directors of such Initial Borrowing Subsidiary
(or of the taking of such other action as may be necessary and
appropriate under applicable law), authorizing such Initial Borrowing
Subsidiary to execute, deliver and perform its obligations under this
Agreement and to borrow and effect other transactions hereunder, and
that such resolutions or other action has not been modified, rescinded
or amended and is in full force and effect and (C) the incumbency and
specimen signatures of the Persons executing any
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documents on behalf of such Initial Borrowing Subsidiary; and (iii) a
certificate of another officer of such Initial Borrowing Subsidiary as
to the incumbency and specimen signature of the Secretary or Assistant
Secretary of such Initial Borrowing Subsidiary.
(d) A certificate of a Senior Vice President, an Executive
Vice President or a Vice President of the Company certifying (i) the
truth of the representations and warranties made by the Company in this
Agreement and (ii) the absence of the occurrence and continuance of any
Default or Event of Default and (iii) that on or prior to the initial
Borrowing Date, the principal of and interest on all loans, all accrued
fees and all other amounts due under the Existing Agreements shall have
been paid in full and the commitments thereunder shall have been
terminated.
(e) A certificate of a principal officer of each Initial
Borrowing Subsidiary certifying (i) the truth of the representations
and warranties set forth in this Agreement with respect to such Initial
Borrowing Subsidiary and (ii) the absence of the occurrence and
continuance of any Default or Event of Default with respect to such
Initial Borrowing Subsidiary.
(f) The written opinions of (i) Liddell, Sapp, Zivley, Hill &
LaBoon, L.L.P., counsel to the Company and the Initial Borrowing
Subsidiaries, addressed to the Administrative Agent and the Banks and
in form and substance acceptable to the Administrative Agent and the
Banks and (ii) James M. Shelger, Senior Vice President, General Counsel
and Secretary of the Company, addressed to the Administrative Agent and
the Banks and in form and substance acceptable to the Administrative
Agent and the Banks.
(g) One or more written opinions of local counsel to each
Initial Borrowing Subsidiary, each in form and substance satisfactory
to the Administrative Agent and the Banks.
(h) A letter from Corporation Service Company, in form and
substance satisfactory to the Administrative Agent, evidencing the
obligation of Corporation Service Company to accept service of process
in the State of New York on behalf of each Initial Borrowing
Subsidiary.
(i) An Administrative Questionnaire completed by each Bank.
In addition, on the Effective Date the Administrative Agent shall have received
all fees which it is entitled to receive on such date pursuant to the Agent's
Fee Letter.
SECTION 3.02. Conditions Precedent to the Initial Loan to each
Borrowing Subsidiary (other than an Initial Borrowing Subsidiary). The
obligation of each Bank to make its initial Loan to any Borrowing Subsidiary
(other than an Initial Borrowing Subsidiary) is subject to
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the further conditions precedent that the Administrative Agent shall have
received on or before the Borrowing Date for such Loan the following, each dated
such date, and in sufficient copies for each Bank:
(a) A Borrowing Subsidiary Counterpart executed by such
Borrowing Subsidiary and acknowledged by the Company and, if such
Borrowing Subsidiary is to obtain Foreign Currency Loans, a counterpart
of its Foreign Currency Addendum, executed by the Company, the
applicable Foreign Currency Agent and the Foreign Currency Banks
parties thereto.
(b) (i) A copy of the articles or certificate of incorporation
(or other similar evidence of organization) of such Borrowing
Subsidiary, together with all amendments, and a current certificate of
good standing, both certified by the appropriate governmental officer,
in its jurisdiction of organization; (ii) a certificate of the
Secretary or Assistant Secretary of such Borrowing Subsidiary
certifying, inter alia, (A) true and correct copies of the bylaws (or
other similar document) of such Borrowing Subsidiary as in effect on
the date of such certificate and at all times since a date prior to the
date of the resolutions or other action described in clause (B) below,
(B) true and complete copies of resolutions duly adopted by the Board
of Directors of such Borrowing Subsidiary (or of the taking of such
other action as may be necessary and appropriate under applicable law),
authorizing such Borrowing Subsidiary to execute, deliver and perform
its obligations under its Borrowing Subsidiary Counterpart this
Agreement, and to borrow and effect other transactions hereunder, and
that such resolutions or other action has not been modified, rescinded
or amended and is in full force and effect and (C) the incumbency and
specimen signatures of the Persons executing any documents on behalf of
such Borrowing Subsidiary; and (iii) a certificate of another officer
of such Borrowing Subsidiary as to the incumbency and specimen
signature of the Secretary or Assistant Secretary of such Borrowing
Subsidiary.
(c) A certificate of a principal officer of such Borrowing
Subsidiary certifying (i) the truth of the representations and
warranties set forth in this Agreement with respect to such Borrowing
Subsidiary and (ii) the absence of the occurrence and continuance of
any Default or Event of Default with respect to such Borrowing
Subsidiary.
(d) Written opinions of (i) counsel to such Borrowing
Subsidiaries, and (ii) the respective Foreign Currency Agents, each in
form and substance (including, without limitation, the allocation as
between such counsel of the matters covered by their respective
opinions) satisfactory to the Administrative Agent and the Banks.
(e) A letter from Corporation Service Company in form and
substance satisfactory to the Administrative Agent, evidencing the
obligation of Corporation Service Company to accept service of process
in the State of New York on behalf of such Borrowing Subsidiary.
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(f) Such other documents as either the Administrative Agent or
any Bank through the Administrative Agent may have reasonably
requested.
SECTION 3.03. Conditions Precedent to Each Committed Borrowing
and Foreign Currency Revolving Borrowing. The obligation of each Bank to make a
Committed Loan on the occasion of any Committed Borrowing and each Foreign
Currency Revolving Loan on the occasion of any Foreign Currency Revolving
Borrowing (including the initial Committed Borrowing and the initial Foreign
Currency Revolving Borrowing) shall be subject to the further conditions
precedent that on the Borrowing Date of such Borrowing or Foreign Currency
Revolving Borrowing the following statements shall be true (and each of the
giving of the applicable Committed Borrowing Request or the notice required by
the applicable Foreign Currency Addendum and the acceptance by a Borrower of the
proceeds of such Borrowing shall constitute a representation and warranty by the
Company and such Borrower (if not the Company) that on the date of such
Borrowing such statements are true; provided, however, that to the extent such
representation and warranty is made by a Borrowing Subsidiary, such
representation and warranty shall (in the case of clauses (a) and (b) be made
only with respect to such Borrowing Subsidiary and its Subsidiaries):
(a) The representations and warranties contained in Article IV
are correct on and as of the date of such Borrowing, before and after
giving effect to such Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date; provided, however,
that for purposes of this clause (a), on and after any date on which
the Company delivers its consolidated financial statements to the
Administrative Agent and the Banks pursuant to Section 5.01(a)(i) or
5.01(a)(ii), as the case may be, (A) the reference in the first
sentence of Section 4.07 to the Company Financials shall be a reference
to the consolidated financial statements of the Company and its
Subsidiaries most recently delivered to the Administrative Agent and
the Banks by the Company pursuant to Section 5.01(a)(i) or 5.01(a)(ii),
as the case may be, prior to the date of such Borrowing and (B) the
reference in the last sentence of Section 4.07 to December 31, 1996,
shall be a reference to the date of the audited consolidated financial
statements most recently delivered to the Administrative Agent and the
Banks pursuant to Section 5.01(a)(i);
(b) No event has occurred and is continuing, or would result
from such Borrowing or from the application of the proceeds therefrom,
which constitutes either a Default or an Event of Default; and
(c) Following the making of such Borrowing and all other
Borrowings to be made on the same day under this Agreement, the
aggregate principal amount of all Loans (by Dollar Equivalent in the
case of Foreign Currency Loans) then outstanding shall not exceed the
Total Commitment.
SECTION 3.04. Conditions Precedent to Each Competitive
Borrowing. The obligation of each Bank which is to make a Competitive Loan on
the occasion of a Competitive
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Borrowing (including the initial Competitive Borrowing) to make such Competitive
Loan as part of such Competitive Borrowing is subject to the further conditions
precedent that:
(a) The Administrative Agent shall have received a Competitive
Bid Request with respect thereto; and
(b) On the Borrowing Date of such Competitive Borrowing the
following statements shall be true (and each of the giving of the
applicable Competitive Bid Request and the acceptance by a Borrower of
the proceeds of such Competitive Borrowing shall constitute a
representation and warranty by the Company and such Borrower (if not
the Company) that on the date of such Competitive Borrowing such
statements are true; provided, however, that to the extent such
representation and warranty is made by a Borrowing Subsidiary, such
representation and warranty shall (in the case of clauses (i) and (ii)
be made only with respect to such Borrowing Subsidiary and its
Subsidiaries):
(i) The representations and warranties contained in
Article IV are correct on and as of the date of such
Competitive Borrowing, before and after giving effect to such
Competitive Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date; provided,
however, that for purposes of this clause (i), on and after
any date on which the Company delivers its consolidated
financial statements to the Administrative Agent and the Banks
pursuant to Section 5.01(a)(i) or 5.01(a)(ii), as the case may
be, (A) the reference in the first sentence of Section 4.07 to
the Company Financials shall be a reference to the
consolidated financial statements of the Company and its
Subsidiaries most recently delivered to the Administrative
Agent and the Banks by the Company pursuant to Section
5.01(a)(i) or 5.01(a)(ii), as the case may be, prior to the
date of such Competitive Borrowing and (B) the reference in
the last sentence of Section 4.07 to December 31, 1996, shall
be a reference to the date of the audited consolidated
financial statements most recently delivered to the
Administrative Agent and the Banks pursuant to Section
5.01(a)(i);
(ii) No event has occurred and is continuing, or
would result from such Competitive Borrowing or from the
application of the proceeds therefrom, which constitutes
either a Default or an Event of Default; and
(iii) Following the making of such Competitive
Borrowing and all other Borrowings to be made on the same day
under this Agreement, the aggregate principal amount of all
Loans (by Dollar Equivalent in the case of Foreign Currency
Loans) then outstanding shall not exceed the Total Commitment.
SECTION 3.05. Conditions Precedent to Conversions and
Continuations. The obligation of the Banks to convert any existing Committed
Borrowing into a Eurodollar Committed
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Borrowing or to continue any existing Committed Borrowing as a Eurodollar
Committed Borrowing is subject to the condition precedent that on the date of
such conversion or continuation no Default or Event of Default shall have
occurred and be continuing or would result from the making of such conversion or
continuation. The acceptance of the benefits of each such conversion and
continuation shall constitute a representation and warranty by the Company and
each Borrowing Subsidiary to each of the Banks that no Default or Event of
Default shall have occurred and be continuing or would result from the making of
such conversion or continuation; provided, however, that to the extent such
representation and warranty is made by a Borrowing Subsidiary, such
representation and warranty shall be made only with respect to such Borrowing
Subsidiary and its Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Administrative
Agent and the Banks and, to the extent the following relates to any Borrowing
Subsidiary or its Subsidiaries, such Borrowing Subsidiary severally represents
and warrants to the Administrative Agent and the Banks as follows (all
references in this Article IV to "this Agreement" being deemed to include also,
in the case of any Borrowing Subsidiary (other than an Initial Borrowing
Subsidiary), its Borrowing Subsidiary Counterpart):
SECTION 4.01. Organization and Qualification. The Company and
each of its Subsidiaries (except Inactive Subsidiaries) (a) are entities duly
organized, validly existing and in good standing under the laws of the
respective jurisdictions of their organization, (b) have the corporate or other
power to own their property and to carry on their businesses as now conducted
and (c) are duly qualified to do business as foreign corporations and are in
good standing in every jurisdiction in which the failure to be so qualified
would have a material adverse effect upon the business or properties of the
Company and its Subsidiaries taken as a whole or upon the ability of any
Borrower to perform its obligations under this Agreement or, in the case of the
Company, the Guaranty. The Company is a Texas corporation. The corporations
named in Schedule 4.01 are the only Subsidiaries of the Company on the date of
this Agreement, and such Schedule accurately reflects the percentage of (y) the
issued and outstanding capital stock and (z) the stock of each class having
ordinary voting power, of each Subsidiary owned by the Company on the date of
this Agreement and accurately identifies the Consolidated Subsidiaries, the
Inactive Subsidiaries, the Substantially-owned Subsidiaries and the Wholly-owned
Subsidiaries on the date of this Agreement.
SECTION 4.02. Authorization, Validity, Etc. Each Borrower has
the corporate or other power and authority to make and carry out this Agreement
(and, in the case of the Company, the Guaranty), to make the Borrowings provided
for herein and to perform its obligations hereunder (and, in the case of the
Company, the Guaranty) and all such action has been duly authorized by all
necessary corporate proceedings on its part. This Agreement has been duly and
validly executed and
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delivered by the Borrowers and the Guaranty and the Agent's Fee Letter have been
duly and validly executed and delivered by the Company and all such agreements
constitute valid and legally binding agreements of the Borrowers parties thereto
enforceable in accordance with their respective terms, except, in each case, as
such enforceability may be limited by bankruptcy, insolvency or other laws of
general application relating to or affecting the enforcement of creditors'
rights.
SECTION 4.03. Governmental Consents, Etc. No authorization,
consent, approval, license or exemption of or filing or registration with any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is necessary for the valid execution,
delivery or performance by any Borrower of this Agreement, or by the Company of
the Guaranty or the Agent's Fee Letter.
SECTION 4.04. Conflicting or Adverse Agreements or
Restrictions. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement or subject to any restriction which materially and
adversely affects the business or assets or financial condition of the Company
and its Subsidiaries taken as a whole. Neither the execution nor delivery of
this Agreement or the Guaranty nor compliance with the terms and provisions
hereof or thereof nor any Borrowing will be contrary to the provisions of, or
constitute a default under, (a) the charter or bylaws of the Company or any of
its Subsidiaries or (b) any applicable law or any applicable regulation, order,
writ, injunction or decree of any court or governmental instrumentality or (c)
any agreement to which the Company or any of its Subsidiaries is a party or by
which it is bound or to which it is subject, which default, in the case of
clause (b) or (c) of this Section 4.04 could, individually or together with all
other such defaults described in this Section 4.04, reasonably be expected to
result in a material adverse change in the business or condition of the Company
and its Subsidiaries taken as a whole or upon the ability of any Borrower to
perform its obligations under this Agreement and, in the case of the Company,
the Guaranty.
SECTION 4.05. Title to Assets. The Company and each Subsidiary
(except Inactive Subsidiaries) have good and indefeasible title to their
respective assets, subject to no Liens, except those permitted in Section
5.02(c).
SECTION 4.06. Actions Pending. There is no action or
proceeding pending or, to the knowledge of any Borrower, threatened against the
Company or any of its Subsidiaries before any court or administrative agency
which could reasonably be expected to result in a material adverse change in the
business or condition of the Company and its Subsidiaries taken as a whole or
upon the ability of such Borrower to perform its obligations under this
Agreement and, in the case of the Company, the Guaranty.
SECTION 4.07. Financial Statements. The Company has furnished
or has caused to be furnished to each Bank (a) consolidated financial statements
of the Company as at and for the fiscal year ended December 31, 1996, included
in the Company's annual report for the fiscal year ended December 31, 1996 and
accompanied by the report and opinion of Coopers & Lybrand L.L.P.,
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(b) the Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 1996 and (c) the Quarterly Report of the Company on Form 10-Q for
the fiscal quarter ended March 31, 1997 (the financial statements described in
clauses (a) through (c) being collectively, the "Company Financials"). The
Company Financials have been prepared in conformity with GAAP consistently
followed (except as otherwise disclosed in such financial statements) throughout
the periods involved and present fairly the consolidated financial condition of
the Company and its Consolidated Subsidiaries and the consolidated results of
operations of the Company and its Consolidated Subsidiaries as at the dates and
for the periods indicated. There has been no material adverse change in the
consolidated condition or operation, financial or otherwise, of the Company and
its Subsidiaries since December 31, 1996.
SECTION 4.08. Default. Neither the Company nor any of its
Subsidiaries is in default in any respect under the provisions of any instrument
evidencing any Debt or of any agreement relating thereto, or in default in any
respect under any order, writ, injunction or decree of any court, or in default
in any respect under or in violation of any law, order, regulation or demand of
any governmental instrumentality, which defaults or violations could reasonably
be expected to have a material adverse effect upon the business or properties of
the Company and its Subsidiaries taken as a whole or upon the ability of any
Borrower to perform its obligations under this Agreement and, in the case of the
Company, the Guaranty.
SECTION 4.09. Investment Company Act. Neither the Company nor
any of its Subsidiaries is, or is directly or indirectly controlled by or acting
on behalf of any Person which is, an "investment company," as such term is
defined in the Investment Company Act of 1940, as amended.
SECTION 4.10. Public Utility Holding Company Act. Neither the
Company nor any of its Subsidiaries is a non-exempt "holding company," or
subject to regulation as such, or, to the knowledge of the Company's officers,
an "affiliate" of a "holding company" or a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
SECTION 4.11 ERISA. Neither the Company nor any of its
Subsidiaries has incurred any accumulated funding deficiency, within the meaning
of ERISA, material to the Company and its Subsidiaries taken as a whole, whether
or not waived, or any liability material to the Company and its Subsidiaries,
when taken as a whole, under Title IV of ERISA.
SECTION 4.12. Payment of Taxes. The Company and each of its
Subsidiaries (except Inactive Subsidiaries) have filed all federal and state
income and franchise tax returns which, to the knowledge of the officers
thereof, are required to be filed and have paid all taxes shown on said returns
and all assessments which are due other than such taxes and assessments which
are being contested in good faith by appropriate proceedings diligently
conducted and for which reserves or other appropriate provisions, if any, as
shall be required by GAAP, have been made. The
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consolidated federal income tax returns of the Company and its Consolidated
Subsidiaries have been examined and reported on by the Internal Revenue Service
for all fiscal years to and including the fiscal year ended December 31, 1992.
SECTION 4.13. Purpose of Loans. None of the proceeds of the
Loans will be used for the purpose of purchasing or carrying any "margin stock"
within the meaning of Regulation G or Regulation U (herein called "Margin
Stock") or for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry Margin Stock, or for any other purpose
which might constitute a "purpose" credit within the meaning of Regulation G or
Regulation U, as now in effect or as they may hereafter be amended. Margin Stock
did not on December 31, 1996, and does not on the date hereof constitute more
than 25% of the assets of the Company or any of its Subsidiaries, and the
Company and the other Borrowers do not intend or foresee that Margin Stock will
at any time during the term of this Agreement constitute more than 25% of such
assets.
SECTION 4.14. Patents, Etc. The Company and each of its
Subsidiaries have all patents, patent rights or licenses, trademarks, service
marks, trademark rights, trade names, trade name rights, and copyrights which
are required in order for it to conduct its business as now conducted without
any known material conflict with the rights of others.
SECTION 4.15. No Material Guarantees or Letters of Credit.
Each Assured Obligation and each Letter of Credit Obligation of the Company and
its Subsidiaries is listed in the Company Financials, in the most recently
delivered financial statements delivered pursuant to Section 5.01(a) or on
Schedule 4.15, other than any such Assured Obligation or Letter of Credit
Obligation which individually does not exceed $100,000 or which together with
all such other Assured Obligations and Letter of Credit Obligations does not
exceed $1,000,000; provided, however, after the Effective Date, Schedule 4.15
shall be deemed to include all Assured Obligations and Letter of Credit
Obligations of the Company and its Subsidiaries incurred or issued in accordance
with the provisions of Section 5.02(g). Neither the Company nor any of its
Subsidiaries has any liability, contingent or otherwise, which either
individually or collectively with all such other liabilities could reasonably be
expected to have a material adverse effect upon the business or properties of
the Company and its Subsidiaries taken as a whole or upon the ability of any
Borrower to perform its obligations under this Agreement and, in the case of the
Company, the Guaranty.
SECTION 4.16. Enhancement Agreements. Schedule 4.16 describes
the principal amount of all obligations, including all Debt, Letter of Credit
Obligations and unfunded commitments which are covered by any Enhancement
Agreement; provided, however, after the Execution Date, Schedule 4.16 shall be
deemed to include all such principal obligations described on the schedule most
recently delivered pursuant to the last sentence of Section 5.01(a).
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ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants. So long as any Loan shall
remain unpaid or any Bank shall have any Commitment hereunder, unless the
Majority Banks shall otherwise agree in writing, each Borrower covenants and
agrees for itself and the Company covenants and agrees with respect to each
other Borrower as follows:
(a) Financial Statements and Other Information. The Company
shall deliver to each Bank:
(i) As soon as available, and in any event within 120
days after the end of each fiscal year, a copy of the annual
audit report of the Company for such fiscal year containing a
consolidated balance sheet, a consolidated statement of
income, a consolidated statement of stockholders' equity and a
consolidated statement of cash flows, all in reasonable detail
and accompanied by a report and opinion of Coopers & Lybrand
L.L.P. or another independent certified public accountant of
recognized standing satisfactory to the Majority Banks. The
Company will obtain from such accountants and deliver to each
Bank at the time said financial statements are delivered the
written statement of such accountants that in making the
examination necessary for said report and opinion they have
obtained no knowledge of any Event of Default or Default, or
if such accountants shall have obtained knowledge of any Event
of Default or Default, they shall state the nature and period
of existence thereof in such statement; provided, that such
accountants shall not be liable directly or indirectly to any
such Bank for failure to obtain knowledge of any Event of
Default or Default;
(ii) As soon as available, and in any event within 60
days after the end of each of the first three quarterly
accounting periods in each fiscal year, a consolidated
statement of stockholders' equity and the report of the
Company to the Securities and Exchange Commission on Form
10-Q;
(iii) Promptly after sending or filing thereof,
copies of all statements and reports sent to stockholders and
all effective registration statements and regular or periodic
reports filed with the Securities and Exchange Commission;
(iv) Promptly upon request, such additional financial
or other information as any Bank may reasonably request;
(v) Promptly, and in any case within five days after
the President, the Senior Vice President and Chief Financial
Officer, the Vice President and Treasurer or the General
Counsel of the Company learns thereof, notice of (A) the
occurrence of a Default or an Event of Default, (B) any
material default of the Company or any
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of its Subsidiaries under any other borrowed money obligation,
(C) any monetary or other material default of the Company or
any of its Subsidiaries under any material contract or (D)
receipt of any notice from any federal or other governmental
instrumentality of any violation by the Company or any of its
Subsidiaries of any legal requirement, which violation
together with all other such violations by the Company and its
Subsidiaries could reasonably be expected to have a material
adverse effect upon the business or properties of the Company
and its Subsidiaries taken as a whole or upon the ability of
any Borrower to perform its obligations under this Agreement
and, in the case of the Company, the Guaranty, describing the
nature of such Default, such Event of Default, such default or
such violation and what action the Company or such Subsidiary,
as the case may be, has taken or proposes to take with respect
thereto; and
(vi) Promptly after each annual meeting of the
Company's shareholders, an Officer's Certificate of the
election and incumbency of the Company's officers and
directors in form and substance satisfactory to the Banks.
All financial statements specified in clauses (i) and (ii) above shall
be furnished in consolidated form for the Company and its Consolidated
Subsidiaries. Investments by the Company in its Subsidiaries other than
its Consolidated Subsidiaries shall be accounted for on the equity
method. Together with each delivery of financial statements required by
clauses (i) and (ii) above, the Company will deliver to each Bank (y)
schedules and/or computations demonstrating that the Company is in
compliance with its covenants in Sections 5.02(a), 5.02(b), 5.02(c) and
5.02(g) or reflecting any noncompliance therewith as at the applicable
date and (z) an Officer's Certificate stating that there exists no
Event of Default or Default, or, if any Event of Default or Default
exists, stating the nature thereof, the period of existence thereof and
what action the Company or any other Borrower has taken or proposes to
take with respect thereto. Together with each delivery of financial
statements required by clause (i) above, the Company will deliver to
each such Bank a schedule of the principal amount of all obligations of
the Company covered by any Enhancement Agreement.
(b) Books and Records. Each Borrower shall maintain, and cause
each of its Subsidiaries to maintain, proper books of record and
account in accordance with generally accepted accounting practices.
(c) Insurance. Each Borrower shall maintain, and cause each of
its Subsidiaries to maintain, insurance with responsible companies (or
by self insurance to the extent authorized by law) in such amounts and
against such risks as is customarily carried on comparable business and
properties, and furnish to the Banks, upon request by the
Administrative Agent or any Bank, an Officer's Certificate containing
full information as to the insurance carried and self insurance levels
maintained; and promptly after notice in writing from the
Administrative Agent obtain such additional insurance as the
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Administrative Agent may reasonably request and which is customarily
carried on comparable businesses or properties.
(d) Maintenance of Property. Each Borrower shall cause its
property and the property of its Subsidiaries to be maintained,
preserved, protected and kept in good repair, working order and
condition so that the business carried on in connection therewith may
be conducted properly and efficiently.
(e) Inspection of Property and Records. Upon reasonable
advance notice, each Borrower shall permit any Person designated by the
Administrative Agent or any of the Banks in writing to visit and
inspect any of the properties, corporate books and financial records of
such Borrower and its Subsidiaries and discuss their respective affairs
and finances with their principal officers, all at such times as the
Administrative Agent or such Bank may reasonably request.
(f) Existence, Laws, Obligations. The Company shall maintain
its corporate existence, comply and cause its Subsidiaries (except
Inactive Subsidiaries) to comply with all applicable statutes and
governmental regulations, including all applicable environmental
statutes and regulations (except those the validity or applicability of
which the Company shall be contesting in good faith and by appropriate
proceedings diligently conducted for which such reserves or other
appropriate provisions, if any, as shall have been required by GAAP,
have been made), where the failure to so comply would have a material
adverse effect on the business, operations, property or condition of
the Company and its Subsidiaries taken as a whole or upon the ability
of any Borrower to perform its obligations under this Agreement and, in
the case of the Company, the Guaranty, and pay and cause its
Subsidiaries (except Inactive Subsidiaries) to pay all taxes,
assessments, governmental charges, claims for labor, supplies, rent and
other obligations which if unpaid might become a Lien against the
property of the Company or such Subsidiary (except Inactive
Subsidiaries), and where the failure to make such payment or where the
creation of such Lien would have a material adverse effect on the
business, operations, property, or condition of the Company and its
Subsidiaries taken as a whole or upon the ability of any Borrower to
perform its obligations under this Agreement and, in the case of the
Company, the Guaranty, except any of the foregoing liabilities being
contested in good faith by appropriate proceedings diligently conducted
for which such reserves or other appropriate provisions, if any, as
shall have been required by GAAP, have been made.
SECTION 5.02. Negative Covenants. So long as any Loan shall
remain unpaid or any Bank shall have any Commitment hereunder, without the
written consent of the Majority Banks:
(a) Net Worth. The Company will not permit Net Worth at any
time to be less than $1,100,000,000.
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(b) Debt. The Company will not permit the ratio of
Consolidated Debt to Total Capitalization at any time to be greater
than .65 to 1.0.
(c) Liens, Etc. The Company will not, and will not permit any
of its Subsidiaries to, incur any Liabilities secured by a Lien upon
any of the assets of the Company or any such Subsidiary or upon any
shares of stock or any long-term receivable of the Company due from any
of its Subsidiaries (whether such assets, shares of stock or long-term
receivables are now owned or hereafter acquired) without in any such
case effectively providing concurrently with the incurrence of any such
Liability that all sums payable at that time or thereafter under this
Agreement and the Guaranty (together with, if the Company shall so
determine, any other Liabilities of the Company or such Subsidiary then
existing or thereafter created which is not subordinate to such sums)
shall be secured equally and ratably with (or at the option of the
Company, prior to) such Liability, so long as such Liability shall be
so secured; provided, however, that nothing in this Section 5.02(c)
shall prevent, restrict or apply to (and there shall be excluded from
secured Debt in any computation under this Section 5.02(c)) Liabilities
secured by):
(i) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business that are not yet
past due or which are being contested by the Company or such
Subsidiary in good faith and against which adequate reserves
as required by GAAP have been established by the Company or
such Subsidiary, as the case may be;
(ii) Pledges or deposits made in the ordinary course
of business to secure payment of worker's compensation, or to
participate in any fund in connection with worker's
compensation, unemployment insurance, old-age pensions or
other social security programs;
(iii) Liens of mechanics, materialmen, repairmen,
warehousemen, carriers or other like Liens, securing
obligations incurred in the ordinary course of business that
are not yet past due or which are being contested by the
Company or such Subsidiary in good faith and against which
adequate reserves as required by GAAP have been established by
the Company or such Subsidiary, as the case may be;
(iv) Liens which secure Liabilities owing by a
Subsidiary of the Company to the Company or to another
Subsidiary of the Company;
(v) Deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary
course of business;
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(vi) Easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in
amount and which do not in any case materially detract from
the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of the
Company or such Subsidiary; and
(vii) Liens not otherwise permitted under this
Section 5.02(c) which secure Liabilities permitted hereunder
not exceeding, as to the Company and its Consolidated
Subsidiaries, 10% of Consolidated Assets at any time
outstanding.
(d) Stock of Subsidiaries, Merger, Sale of Assets, Etc. The
Company will not permit any of its Subsidiaries to issue or dispose of
its stock (other than directors' qualifying shares) except to the
Company or to another Subsidiary of the Company, and the Company will
not and will not permit any of its Subsidiaries to sell or otherwise
dispose of any shares of stock of, or obligation (howsoever evidenced)
from, any Subsidiary of the Company, or to merge or consolidate with
any other corporation or sell, lease or transfer or otherwise dispose
of all or a substantial part of its assets (as distinguished from sales
of excess land and other assets in the ordinary course of business
which are permitted), whether in one transaction or a series of
transactions, provided, however, that so long as after giving effect
thereto no Default or Event of Default shall exist, the following
transactions shall be permitted pursuant to this Section 5.02(d):
(i) Any corporation including any Subsidiary of the
Company may merge or consolidate with the Company provided
that the Company shall be the continuing or surviving
corporation;
(ii) Any corporation may merge into or consolidate
with any Subsidiary of the Company provided that the
continuing or surviving corporation is a Subsidiary of the
Company;
(iii) Any Subsidiary of the Company may sell, lease,
transfer or otherwise dispose of any of its assets to the
Company or another Subsidiary of the Company;
(iv) Provident may sell, lease, transfer or otherwise
dispose of the stock or any assets of any Enforcement
Subsidiary in an arm's-length transaction;
(v) The Company may, with respect to any Acquisition,
effect a disposition of stock or assets to the extent required
pursuant to any agreement or consent order entered into
between the Company and the Federal Trade Commission in
connection with and as a condition to such Acquisition; and
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(vi) The Company or any of its Subsidiaries may sell
or otherwise dispose of the stock of, or all or substantially
all of the assets of, any of their respective Subsidiaries if,
after giving effect to such sale or other disposition the
aggregate amount of all such sales and dispositions by the
Company and its Subsidiaries (including all dispositions
pursuant to clause (vi) above) occurring on and after the
Execution Date to the date of such sale or disposition do not
exceed 10% of Consolidated Assets on the date of such sale or
disposition.
Consensual Liens granted by the Company or any of its Subsidiaries
permitted pursuant to Section 5.02(c) shall not constitute a
"disposition" for purposes of this Section 5.02(d) until such time as
holder of any such Lien forecloses or otherwise enforces such Lien.
(e) Change in Accounting Method. The Company will not and will
not permit any of its Subsidiaries to make any change in the method of
computing depreciation for financial statement purposes or any other
material change in accounting methods other than such changes as may be
required by the Financial Accounting Standards Board or the Securities
and Exchange Commission or to conform newly acquired Subsidiaries to
the Company's accounting methods. Upon making any such change, the
Company will promptly give the Banks notice thereof.
(f) Change of Business. The Company will not and will not
permit any of its Subsidiaries to engage in a line or lines of business
other than those being engaged in by the Company or one or more of its
existing Subsidiaries on the date of this Agreement and lines of
business related to the death care industry.
(g) Guaranties and Letters of Credit. The Company will not and
will not permit any Subsidiary of the Company to make or permit to
remain outstanding any Assurance or any Letter of Credit unless, after
giving effect thereto, the aggregate amount of all Assured Obligations
and Letter of Credit Obligations then outstanding shall not exceed 20%
of Net Worth, excluding, without duplication, the sum of the aggregate
outstanding amount of all Debt of the Company and its Subsidiaries
guaranteed by any such Assurances.
(h) ERISA. The Company will not at any time permit any Plan
to:
(i) Engage in any "prohibited transaction" as such
term is defined in Section 4975 of the Code or in Section 406
of ERISA for which there is no applicable exemption;
(ii) Incur any "accumulated funding deficiency" as
such term is defined in Section 302 of ERISA and Section 412
of the Code, whether or not waived;
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(iii) Be terminated under circumstances which are
likely to result in the imposition of a Lien on the property
of the Company or any member of the ERISA Group pursuant to
Section 4068 of ERISA, if and to the extent such termination
is within the control of the Company; or
(iv) Cease to comply in any material respect with the
provisions of the Code and ERISA applicable to such Plan,
if any event or condition described in clause (i), (ii), (iii) or (iv)
above is likely to subject the Company or any member of its ERISA Group
to a liability which, in the aggregate, is material in relation to the
business, operations, property or condition, financial or otherwise, of
the Company and the other members of its ERISA Group on a consolidated
basis.
(i) Restriction on Use of Proceeds. No Borrower nor any agent
acting on behalf of any Borrower has taken or will take any action, or
has suffered to exist or will suffer to exist any condition, that might
cause this Agreement or any Loan to violate Regulation G, Regulation U,
Regulation X, or any other regulation of the Board or to violate the
Securities Exchange Act of 1934, as amended, in each case as in effect
now or as the same may hereafter be in effect. No Borrower will use,
directly or indirectly, the proceeds of any Loan hereunder to acquire
any security (within the meaning of the Securities Exchange Act of
1934, as amended), in any tender offer subject to Section 13 or 14 of
the Securities Exchange Act of 1934, as amended, unless such tender
offer has been approved by the Board of Directors (or other analogous
body) of the issuer of the securities that are the subject of such
tender offer, so long as a majority of the directors (or members)
constituting such Board (or such body) were directors (or members) at
least 30 days prior to the making of such tender offer.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) Failure to Pay the Loans or the Guaranty. The Company or
any Borrowing Subsidiary shall fail to pay or prepay (i) any principal
of or interest on any Loan or, in the case of the Company, any of the
Guaranteed Obligations, when due under this Agreement or (ii) any other
amount due hereunder within ten days following the date on which
payment of such other amount is due; or
(b) Failure to Pay Certain Other Indebtedness. The Company or
any of its Subsidiaries does not pay principal of or interest on any
other Debt, Assured Obligation or
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Letter of Credit Obligation, in an amount of $10,000,000 or more, owed
to a financial institution, when due or within any grace period allowed
by such Debt, Assured Obligation or Letter of Credit Obligation, or if
the holder of such other Debt, Assured Obligation or Letter of Credit
Obligation declares, or may declare, such other Debt, Assured
Obligation or Letter of Credit Obligation due prior to its stated
maturity because of the Company's or such Subsidiary's default
thereunder unless such default is waived or cured within one business
day of its discovery; or
(c) Failure to Pay Other Indebtedness. The Company or any of
its Subsidiaries does not pay principal of or interest on any Debt,
Assured Obligation or Letter of Credit Obligation, in an amount of
$10,000,000 or more (except those described in Sections 6.01(a) and
6.01(b)) within five days after the date due (or within any longer
period of grace that may be allowed by the terms thereof) or if the
holder or holders (or a trustee on behalf of such holder or holders) of
such other obligation declares such Debt, Assured Obligation or Letter
of Credit Obligation due (or such Debt, Assured Obligation or Letter of
Credit Obligation becomes due without such declaration) prior to its
stated maturity because of the Company's or such Subsidiary's default
thereunder, provided that if the holder of any such Debt, Assured
Obligation or Letter of Credit Obligation accelerates the maturity
thereof and the Company or such Subsidiary promptly (and in any case
within 30 days following such acceleration) pays such Debt, Assured
Obligation or Letter of Credit Obligation, it shall not be in default
under this Section 6.01(c) by reason of such acceleration; or
(d) Misrepresentation. Any material representation or warranty
made or deemed made by or on behalf of the Company or any Borrowing
Subsidiary herein or in any writing furnished in connection with this
Agreement shall be false or misleading in any material respect when
made or deemed made or furnished; or
(e) Violation of Certain Covenants. The Company violates any
covenant, agreement or condition contained in Section 5.02; or
(f) Violation of Other Covenants. The Company or any Borrowing
Subsidiary violates any other covenant, agreement or condition
contained herein and such violation shall not have been remedied within
30 days after written notice shall have been given to the Company or
such Borrowing Subsidiary by the Administrative Agent; or
(g) Assignment for Benefit of Creditors. The Company or any of
its Material Subsidiaries makes an assignment for the benefit of
creditors; or
(h) Voluntary Bankruptcy. The Company or any of its Material
Subsidiaries applies to any tribunal for the appointment of a trustee
or receiver or custodian (or other Person performing similar duties) of
any substantial part of the assets of the Company or such
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Material Subsidiary, or commences any proceedings relating to the
Company or such Material Subsidiary under any bankruptcy,
reorganization, rearrangement, insolvency, readjustment of debt,
dissolution or other liquidation law of any jurisdiction; or
(i) Involuntary Bankruptcy. Any such application is filed, or
any such proceedings are commenced, against the Company or any of its
Material Subsidiaries, and the Company or such Material Subsidiary
indicates its approval, consent or acquiescence, or an order is entered
appointing such trustee or receiver or custodian, or adjudicating the
Company or any of its Material Subsidiaries bankrupt or insolvent, or
approving the petition in any such proceedings, and such order remains
in effect for 60 days; or
(j) Dissolution or Split-Up. Any order is entered in any
proceeding against the Company or any of its Subsidiaries (i) which
shall have contributed more than 15% of Consolidated Net Income during
the immediately preceding fiscal year or (ii) the tangible assets of
which shall have constituted more than 15% of Tangible Consolidated
Assets of the Company as at the end of the immediately preceding fiscal
year, decreeing the dissolution or split-up of the Company or such
Subsidiary, and such order remains in effect for 60 days; or
(k) Failure to Pay Dividend. The Company does not pay any
dividend on any of its capital stock as declared or permits any
dividend to accumulate on any of its capital stock in respect of which
cumulative dividends are provided for; or
(l) Undischarged Judgment. Final judgment for the payment of
money in excess of $10,000,000 shall be rendered against the Company or
any of its Subsidiaries and the same shall remain undischarged for a
period of 30 days during which execution shall not be effectively
stayed; or
(m) ERISA Default. The actuarial present value of unfunded
vested benefits under all Plans (other than multiemployer plans, as
defined in Section 3(37) of ERISA) shall exceed $10,000,000 (excluding
in such computation any Plan with assets greater than benefit
liabilities), or any one or more of the following events shall occur
with respect to a Plan or Plans and such occurrence (or occurrences, in
the aggregate) could result in liability of the Company or any of its
Subsidiaries to the PBGC or to the Plan or Plans in the aggregate
amount of $10,000,000 or more for the Company and such Subsidiaries
taken as a whole:
(i) Any finding or determination shall be made under
Section 4041(c) or (e) of ERISA;
(ii) Any fact or circumstance shall occur which, in
the reasonable opinion of the Majority Banks, provides grounds
for the commencement of any proceeding under Section 4042 of
ERISA;
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(iii) Any proceeding shall be commenced under Section
4042 of ERISA;
(iv) Any Plan termination; or
(v) Any full or partial withdrawal (as such terms are
defined in Title IV of ERISA);
then, (i) if any Event of Default described in Section 6.01(h) or
Section 6.01(i) shall occur and be continuing, all Loans then
outstanding hereunder and interest accrued thereon and all other
liabilities hereunder shall thereupon become and be immediately due and
payable without presentment, demand, protest, notice of intent to
accelerate, or other notice of any kind to any Borrower or any other
Person, all of which are hereby expressly waived by each Borrower, the
Commitments shall thereupon immediately terminate and the Banks shall
be under no further obligation to make Loans hereunder, and (ii) if any
other Event of Default shall occur and be continuing, the
Administrative Agent shall (A) if requested by the Majority Banks, by
notice to the Borrowers, terminate the Commitments and they shall
thereupon immediately terminate and (B) if requested by the Majority
Banks, by notice to the Borrowers, declare all Loans then outstanding
hereunder and interest accrued thereon and all other liabilities of the
Borrowers hereunder and under the Agent's Fee Letter to be immediately
due and payable, and the same shall thereupon become and be forthwith
due and payable without presentment, demand, protest, notice of intent
to accelerate, or other notice of any kind to any Borrower or any other
Person, all of which are hereby expressly waived by each Borrower.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action. Subject to Section
7.06, each Bank hereby irrevocably appoints and authorizes the Administrative
Agent to act on its behalf and to exercise such powers under this Agreement and
the Guaranty as are specifically delegated to or required of the Administrative
Agent by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including enforcement or collection of the Loans) or the
Guaranty, the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Majority Banks, and such instructions shall be
binding upon all Banks; provided, however, that the Administrative Agent shall
not be required to take any action which exposes the Administrative Agent to
personal liability or which is contrary to this Agreement, the Guaranty or
applicable law.
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SECTION 7.02. Administrative Agent's Reliance, Etc. Neither
the Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement or the Loans (a) with the consent or at the
request of the Majority Banks or (b) in the absence of its or their own gross
negligence or willful misconduct (IT BEING THE EXPRESS INTENTION OF THE PARTIES
THAT THE ADMINISTRATIVE AGENT AND ITS DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES
SHALL HAVE NO LIABILITY FOR ACTIONS AND OMISSIONS UNDER THIS SECTION 7.02
RESULTING FROM THEIR SOLE ORDINARY OR CONTRIBUTORY NEGLIGENCE). Without
limitation of the generality of the foregoing, the Administrative Agent: (i) may
treat the original holder, or the holder named in the most recent notice of
assignment received by it pursuant to this Section 7.02, as the case may be, of
each Loan as the holder thereof until the Administrative Agent receives written
notice of the assignment or transfer thereof signed by such holder and in form
satisfactory to the Administrative Agent; (ii) may consult with legal counsel
(including counsel for any Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Bank
and shall not be responsible to any Bank for any statements, warranties or
representations made in or in connection with this Agreement or any Loan; (iv)
except as otherwise expressly provided herein, shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or to inspect the property (including
the books and records) of any Borrower; (v) shall not be responsible to any Bank
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any instrument or document furnished
pursuant hereto; and (vi) shall incur no liability under or in respect of this
Agreement or any Loan by acting upon any notice, consent, certificate or other
instrument or writing (which may be by facsimile transmission) reasonably
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03. Administrative Agent and Affiliates; Chase and
Affiliates. Without limiting the right of any other Bank to engage in any
business transactions with the Borrowers or any of its Affiliates, with respect
to their Commitments and the Loans, if any, made by them, Chase and each other
Bank that may become the Administrative Agent shall have the same rights and
powers under this Agreement and its Loans as any other Bank and may exercise the
same as though it were not the Administrative Agent; and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include Chase and any such
other Bank, in their individual capacities. Chase, each other Person who becomes
the Administrative Agent and their respective Affiliates may be engaged in, or
may hereafter engage in, one or more loans, letters of credit, leasing or other
financing activities not the subject of this Agreement (collectively, the "Other
Financings") with any Borrower or any of its Affiliates, or may act as trustee
on behalf of, or depositary for, or otherwise engage in other business
transactions with, any Borrower or any of its Affiliates (all Other Financings
and other such business transactions being collectively, the "Other Activities")
with no responsibility to account therefor to the Banks. Without limiting the
rights and remedies of the Banks specifically set forth herein, no other Bank by
virtue of being a Bank hereunder shall have any interest in (a) any Other
Activities, (b) any present or future guarantee by or for the account of any
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Borrower not contemplated or included herein, (c) any present or future offset
exercised by the Administrative Agent in respect of any such Other Activities,
(d) any present or future property taken as security for any such Other
Activities or (e) any property now or hereafter in the possession or control of
the Administrative Agent which may be or become security for the obligations of
any Borrower or any of its Affiliates hereunder and under the Loans by reason of
the general description of indebtedness secured, or of property contained in any
other agreements, documents or instruments related to such Other Activities;
provided, however, that if any payment in respect of such guarantees or such
property or the proceeds thereof shall be applied to reduction of the
obligations hereunder, then each Bank shall be entitled to share in such
application according to its pro rata portion of such obligations.
SECTION 7.04. Bank Credit Decision. Each Bank acknowledges and
agrees that it has, independently and without reliance upon the Administrative
Agent or any other Bank and based on the financial statements referred to in
Section 4.07 and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges and agrees that it will, independently
and without reliance upon the Administrative Agent or any other Bank and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.
SECTION 7.05. Administrative Agent's Indemnity. The
Administrative Agent shall not be required to take any action hereunder or to
prosecute or defend any suit in respect of this Agreement or the Loans unless
indemnified to the Administrative Agent's satisfaction by the Banks against
loss, cost, liability and expense. If any indemnity furnished to the
Administrative Agent shall become impaired, it may call for additional indemnity
and cease to do the acts indemnified against until such additional indemnity is
given. In addition, the Banks agree to indemnify the Administrative Agent (to
the extent not reimbursed by the Borrowers), ratably according to the respective
aggregate principal amounts of the Committed Loans then owing to each of them
(or if no Committed Loans are at the time outstanding, ratably according to the
respective aggregate amounts of their Commitments, or if no Commitments are
outstanding, the respective aggregate amounts of the Commitments immediately
prior to the time the Commitments ceased to be outstanding), from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the
Administrative Agent in any way relating to or arising out of this Agreement or
any action taken or omitted by the Administrative Agent under this Agreement
(including any action taken or omitted under Article II). Without limitation of
the foregoing, each Bank agrees to reimburse the Administrative Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
reasonable counsel fees) incurred by the Administrative Agent in connection with
the preparation, execution, administration, or enforcement of, or legal advice
in respect of rights or responsibilities under, this Agreement to the extent
that the Administrative Agent is not reimbursed for such expenses by the
Borrowers. The provisions of this Section 7.05 shall survive the termination of
this Agreement and/or the payment or assignment of
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any of the Loans. NOTWITHSTANDING THE FOREGOING, NO BANK SHALL BE LIABLE UNDER
THIS SECTION 7.05 TO THE ADMINISTRATIVE AGENT FOR ANY PORTION OF SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES OR DISBURSEMENTS DUE TO THE ADMINISTRATIVE AGENT RESULTING FROM
THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. EACH BANK
AGREES, HOWEVER, THAT IT EXPRESSLY INTENDS, UNDER THIS SECTION 7.05, TO
INDEMNIFY THE ADMINISTRATIVE AGENT RATABLY AS AFORESAID FOR ALL SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES AND DISBURSEMENTS ARISING OUT OF OR RESULTING FROM THE
ADMINISTRATIVE AGENT'S SOLE, ORDINARY OR CONTRIBUTORY NEGLIGENCE.
SECTION 7.06. Successor Administrative Agent. The
Administrative Agent may resign at any time by giving written notice thereof to
the Banks and the Borrowers and may be removed as Administrative Agent under
this Agreement at any time, with or without cause, by the Majority Banks. Upon
any such resignation or removal, the Majority Banks shall have the right to
appoint a successor Administrative Agent. If no successor Administrative Agent
shall have been so appointed by the Majority Banks, and shall have accepted such
appointment, within 30 calendar days after the retiring Administrative Agent's
giving of notice of resignation or the Majority Banks' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Banks, appoint a successor Administrative Agent, which shall be a commercial
bank organized or licensed under the laws of the United States of America or of
any state thereof and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring Administrative Agent's resignation or removal
as Administrative Agent hereunder, the provisions of this Article VII shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement.
SECTION 7.07. Notice of Default. The Administrative Agent
shall not be deemed to have knowledge or notice of the occurrence of any Default
or Event of Default hereunder unless the Administrative Agent shall have
received notice from a Bank or a Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default." If the Administrative Agent receives such a notice, the
Administrative Agent shall give notice thereof to the Banks; provided, however,
if such notice is received from a Bank, the Administrative Agent also shall give
notice thereof to the Company. The Administrative Agent shall be entitled to
take action or refrain from taking action with respect to such Default or Event
of Default as provided in Section 7.01 and Section 7.02.
SECTION 7.08. No Duty of Co-Agents. No Co-Agent shall have any
duties, responsibilities or liabilities in such capacity with respect to the
administration or enforcement of this Agreement.
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ARTICLE VIII
GUARANTY
In consideration of the premises and in order to induce the
Banks to make Loans hereunder to the Borrowing Subsidiaries:
SECTION 8.01. Guaranty. The Company hereby unconditionally and
irrevocably guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all obligations of each Borrowing
Subsidiary to pay the principal of and interest on the Loans owed by such
Borrowing Subsidiary (including interest accruing or becoming owing both prior
to and subsequent to the commencement of any proceeding against or with respect
to such Borrowing Subsidiary under any chapter of the Bankruptcy Code of 1978
(11 U.S.C. ss. 101 et seq.), as from time to time amended, or any similar
statute in any other jurisdiction, whether or not such interest may be the
subject of an allowable claim in such proceeding), and all other amounts from
time to time payable by such Borrowing Subsidiary under this Agreement,
including the Foreign Currency Loans made pursuant to the terms of any Foreign
Currency Addendum (such obligations with respect to the Borrowing Subsidiaries
being herein called the "Guaranteed Obligations"), and agrees to pay any and all
reasonable costs and expenses incurred by each Bank and the Administrative Agent
in enforcing any rights under this guaranty (including the reasonable fees and
expenses of outside counsel or the reasonable allocated costs of in-house
counsel). This guaranty is an absolute, irrevocable, unconditional, present and
continuing guaranty of payment and not of collectibility and is in no way
conditioned or contingent upon any attempt to collect from any Borrowing
Subsidiary, or any other action, occurrence or circumstance whatsoever.
SECTION 8.02. Guaranty Absolute. The Company guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of
this Agreement and the Loans owed by the Borrowing Subsidiaries. The Company
agrees that the Guaranteed Obligations, this Agreement, the Foreign Currency
Addenda and all other instruments and agreements applicable to the Company and
the Borrowing Subsidiaries (this Agreement and all such other instruments and
agreements being hereinafter referred to in this Article VIII as the
"Documents") may be extended or renewed, and Loans repaid and reborrowed in
whole or in part, without notice to or assent by the Company, and that it will
remain bound upon this guaranty notwithstanding any extension, renewal or other
alteration of any Guaranteed Obligations or Documents, or any repayment and
reborrowing of Loans. To the maximum extent permitted by applicable law, except
as expressly provided in this Agreement, the obligations of the Company under
this guaranty shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms hereof under any circumstances
whatsoever, including:
(a) any extension, renewal, modification, settlement,
compromise, waiver or release in respect of any Guaranteed Obligations;
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(b) any extension, renewal, amendment, modification,
rescission, waiver or release in respect of any of the Documents;
(c) any release, exchange, substitution, non-perfection or
invalidity of, or failure to exercise rights or remedies with respect
to, any direct or indirect security for any Guaranteed Obligations,
including the release of any Borrowing Subsidiary or other Person
liable on any Guaranteed Obligations;
(d) any change in the corporate existence, structure or
ownership of the Company, any Borrowing Subsidiary or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting the
Company, any Borrowing Subsidiary or any of their respective assets;
(e) the existence of any claim, defense, set-off or other
rights or remedies which any Borrowing Subsidiary at any time may have
against the Company, or the Company or such Borrowing Subsidiary may
have at any time against the Administrative Agent, any Bank, any other
Borrowing Subsidiary or any other Person, whether in connection with
this Agreement, the other Documents, the transactions contemplated
thereby or any other transaction other than by the payment in full by
the Borrowing Subsidiaries of the Guaranteed Obligations after the
termination of the Commitments of the Banks;
(f) any invalidity or unenforceability for any reason of this
Agreement or any other Document, or any provision of law purporting to
prohibit the payment or performance by the Company or any Borrowing
Subsidiary of the Guaranteed Obligations or the Documents, or of any
other obligation to the Administrative Agent or any Bank; or
(g) any other circumstances or happening whatsoever, whether
or not similar to any of the foregoing.
SECTION 8.03. Effect of Debtor Relief Laws. If after receipt
of any payment of, or proceeds of any security applied (or intended to be
applied) to the payment of all or any part of the Guaranteed Obligations, the
Administrative Agent or any Bank is for any reason compelled to surrender or
voluntarily surrenders, such payment or proceeds to any Person (a) because such
payment or application of proceeds is or may be avoided, invalidated, declared
fraudulent, set aside, determined to be void or voidable as a preference,
fraudulent conveyance, fraudulent transfer, impermissible set-off or a diversion
of trust funds or (b) for any other reason, including (i) any judgment, decree
or order of any court or administrative body having jurisdiction over the
Administrative Agent, any Bank or any of their respective properties or (ii) any
settlement or compromise of any such claim effected by the Administrative Agent
or any Bank with any such claimant (including any Borrowing Subsidiary), then
the Guaranteed Obligations or part thereof intended to be satisfied shall be
reinstated and continue, and this guaranty shall continue in full force as if
such payment or proceeds had not been received, notwithstanding any revocation
thereof or the
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cancellation of any instrument evidencing any Guaranteed Obligations or
otherwise; and the Company shall be liable to pay the Administrative Agent and
the Banks, and hereby does indemnify the Administrative Agent and the Banks and
hold them harmless for the amount of such payment or proceeds so surrendered and
all expenses (including reasonable attorneys' fees, court costs and expenses
attributable thereto) incurred by the Administrative Agent or any Bank in the
defense of any claim made against it that any payment or proceeds received by
the Administrative Agent or any Bank in respect of all or part of the Guaranteed
Obligations must be surrendered. The provisions of this paragraph shall survive
the termination of this Agreement, and any satisfaction and discharge of the
Borrowing Subsidiaries by virtue of any payment, court order or any federal or
state law.
SECTION 8.04. Subrogation. Notwithstanding any payment or
payments made by the Company hereunder, or any set-off or application by the
Administrative Agent or any Bank of any security or of any credits or claims,
the Company will not assert or exercise any rights of the Administrative Agent
or any Bank or of the Company against any Borrowing Subsidiary to recover the
amount of any payment made by the Company to the Administrative Agent or any
Bank hereunder by way of any claim, remedy or subrogation, reimbursement,
exoneration, contribution, indemnity, participation or otherwise arising by
contract, by statute, under common law or otherwise, and the Company shall not
have any right of recourse to or any claim against assets or property of any
Borrowing Subsidiary, until all of the obligations of the Company and the
Borrowing Subsidiaries under the Documents are paid in full. If any amount shall
nevertheless be paid to the Company by a Borrowing Subsidiary prior to payment
in full of the obligations of the Company and such Borrowing Subsidiary under
the Documents, such amount shall be held in trust for the benefit of the
Administrative Agent and the Banks and shall forthwith be paid to the
Administrative Agent to be credited and applied to the Guaranteed Obligations,
whether matured or unmatured. The provisions of this paragraph shall survive the
termination of this Agreement, and any satisfaction and discharge of the
Borrowing Subsidiaries by virtue of any payment, court order or any federal or
state law.
SECTION 8.05. Subordination. If the Company becomes the holder
of any indebtedness payable by a Borrowing Subsidiary, the Company hereby
subordinates all indebtedness owing to it from such Borrowing Subsidiary to all
indebtedness of such Borrowing Subsidiary to the Administrative Agent and the
Banks, and agrees that during the continuance of any Default or Event of Default
it shall not accept any payment on the same until payment in full of the
obligations of such Borrowing Subsidiary under this Agreement and the other
Documents after the termination of the Commitments of the Banks, and shall in no
circumstance whatsoever attempt to set-off or reduce any obligations hereunder
because of such indebtedness. If any amount shall nevertheless be paid to the
Company by a Borrowing Subsidiary prior to payment in full of the Guaranteed
Obligations, such amount shall be held in trust for the benefit of the
Administrative Agent and the Banks and shall forthwith be paid to the
Administrative Agent to be credited and applied to the Guaranteed Obligations,
whether matured or unmatured.
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SECTION 8.06. Waiver. The Company hereby waives promptness,
diligence, notice of acceptance and, to the extent permitted by law, any other
notice with respect to any of the Guaranteed Obligations and this guaranty and
waives presentment, demand of payment, notice of intent to accelerate, notice of
dishonor or nonpayment and any requirement that the Administrative Agent or any
Bank institute suit, collection proceedings or take any other action to collect
the Guaranteed Obligations, including any requirement that the Administrative
Agent or any Bank protect, secure, perfect or insure any Lien against any
property subject thereto or exhaust any right or take any action against any
Borrowing Subsidiary or any other Person or any collateral (it being the
intention of the Administrative Agent, the Banks and the Company that this
guaranty is to be a guaranty of payment and not of collection). It shall not be
necessary for the Administrative Agent or any Bank, in order to enforce any
payment by the Company hereunder, to institute suit or exhaust its rights and
remedies against any Borrowing Subsidiary or any other Person, including others
liable to pay any Guaranteed Obligations, or to enforce its rights against any
security ever given to secure payment thereof. The Company hereby expressly
waives to the maximum extent permitted by applicable law each and every right to
which it may be entitled by virtue of the suretyship laws of the State of Texas,
including any and all rights it may have pursuant to Rule 31, Texas Rules of
Civil Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code
and Chapter 34 of the Texas Business and Commerce Code. The Company hereby
waives marshaling of assets and liabilities, notice by the Administrative Agent
or any Bank of any indebtedness or liability to which such Bank applies or may
apply any amounts received by such Bank, and of the creation, advancement,
increase, existence, extension, renewal, rearrangement or modification of the
Guaranteed Obligations. The Company expressly waives, to the extent permitted by
applicable law, the benefit of any and all laws providing for exemption of
property from execution or for valuation and appraisal upon foreclosure.
SECTION 8.07. Full Force and Effect. This Guaranty is a
continuing guaranty and shall remain in full force and effect until all of the
obligations of the Company and the Borrowing Subsidiaries under this Agreement
and the other Documents and all other amounts payable under this guaranty have
been paid in full (after the termination of the Commitments of the Banks). All
rights, remedies and powers provided in this guaranty may be exercised, and all
waivers contained in this guaranty may be enforced, only to the extent that the
exercise or enforcement thereof does not violate any provisions of applicable
law which may not be waived.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by the Company
herefrom, shall in any event (except as contemplated by Section 2.03(j) be
effective unless the same shall be in writing and signed by the Majority Banks
in all cases, and then, in any case, such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, however, that no
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amendment, waiver or consent shall, unless in writing and signed by each Bank
affected thereby, do any of the following: (a) change the definitions of
"Applicable Differential," "Applicable Fee Percentage" or "Majority Banks"
contained in Section 1.01, (b) except as expressly provided in Section 2.14(f)
or Section 2.15(c), reduce or increase the amount or alter the terms of the
Commitments of any Banks or subject any Banks to any additional obligations, (c)
reduce or forgive the principal of, or rate or amount of interest applicable to,
any Loan other than as provided in this Agreement, or any fees hereunder, (d)
postpone any date fixed for any payment of principal of, or interest on, the
Loans or any fees hereunder, (e) change Section 4.13, this Section 9.01, the
last sentence of Section 9.11(a) or Article VIII, (f) change the percentage of
the Commitments or of the aggregate unpaid principal amount of the Loans, or the
number of Banks, which shall be required for the Banks or any of them to take
any action hereunder or (g) release the Guaranty; and provided that no
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Banks required above to take such
action, affect the rights or duties of the Administrative Agent under this
Agreement.
SECTION 9.02. Notices, Etc. The Administrative Agent, any
Bank, or the holder of any Loan, giving consent or notice or making any request
of any Borrower provided for hereunder, shall notify each Bank and the
Administrative Agent thereof. In the event that the holder of any Loan
(including any Bank) shall transfer such Loan, it shall promptly so advise the
Administrative Agent which shall be entitled to assume conclusively that no
transfer of any Loan has been made by any holder (including any Bank) unless and
until the Administrative Agent receives written notice to the contrary. Notices,
consents, requests, approvals, demands and other communications (collectively
"Communications") provided for or required herein shall be in writing (including
facsimile Communications) and mailed, sent by facsimile transmission or
delivered:
(a) If to any Borrower, to it:
c/o Service Corporation International
1929 Allen Parkway
P.O. Box 130548
Houston, Texas 77019-0548
Telecopy Number: (713) 525-9067
Attention: Secretary
(b) If to the Administrative Agent, to it at:
Chase Agent Services
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Telephone Number: (212) 552-7953
Telecopy Number: (212) 552-5658
Attention: Sandra Miklave
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with a copy to:
Texas Commerce Bank National Association
707 Travis Street, 5TCBE 78
Houston, Texas 77002
Telephone Number: (713) 216-5319
Telecopy Number: (713) 216-7500
Attention: Jan Danvers
(c) If to any Bank, as specified on the signature page for
such Bank hereto or, in the case of any Person who becomes a Bank after
the date hereof, as specified on the signature page of the Assignment
and Acceptance executed by such Bank, or as to any party, such other
address or facsimile number as such party may hereafter specify for
such purpose in a Communication to the other parties hereto.
(d) All Communications shall, when mailed, sent by facsimile
transmission or delivered, be effective when deposited in the mails to
any party at its address specified above, on the signature page hereto,
or on the signature page of such Assignment and Acceptance (or other
address designated by such party to the other parties hereto) or sent
by facsimile transmission to any party to the facsimile transmission
number as set forth herein or on the signature pages hereto, or on the
signature pages of such Assignment and Acceptance (or other facsimile
number designated by such party in a Communication to the other parties
hereto) or delivered personally to any party at its address specified
above, on the signature page hereof or on the signature page of such
Assignment and Acceptance (or other address designated by such party in
a Communication to the other parties hereto; provided, however,
Communications to the Administrative Agent pursuant to Article II or
Article VII shall not be effective until received by the Administrative
Agent; and provided, further, that each Borrower shall indemnify each
of the Administrative Agent and the Banks against any costs, claim,
loss, expense (including legal fees) or liability which any of them may
sustain or incur as a consequence of any facsimile notice or
communication originating from such Borrower not being actually
received by or delivered to the intended recipient thereof or any
facsimile communication purporting to originate from such Borrower
being made or delivered fraudulently.
SECTION 9.03. No Waiver; Remedies. No failure on the part of
any Bank or the Administrative Agent to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, or any abandonment or discontinuance of any
steps to enforce such right, preclude any other or further exercise thereof or
the exercise of any other right. No notice to or demand on any Borrower in any
case shall entitle such Borrower to any other or further notice or demand in
similar or other circumstances. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
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SECTION 9.04. Costs, Expenses and Taxes. The Company agrees to
pay on demand: (a) all reasonable costs and expenses of the Administrative Agent
in connection with the preparation, execution, delivery and administration of
this Agreement and the other documents to be delivered hereunder, including the
reasonable fees and out-of-pocket expenses of counsel for the Administrative
Agent with respect thereto and with respect to advising the Administrative Agent
as to its rights and responsibilities under this Agreement, and any
modification, supplement or waiver of any of the terms of this Agreement or any
modification or extension of the Loans, and (b) all reasonable costs and
expenses of each of the Banks and the Administrative Agent (including reasonable
counsel fees and expenses of outside counsel and the reasonable allocated costs
of in-house legal services) in connection with the enforcement of this Agreement
and the Loans. In addition, unless prohibited by applicable law, the Company
shall pay any and all stamp, mortgage and similar taxes payable or determined to
be payable in connection with the execution and delivery or enforcement of this
Agreement and the Loans and the other documents to be delivered hereunder, and
agrees to save the Administrative Agent and each Bank harmless from and against
any and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery or enforcement of this
Agreement. Without prejudice to the survival of any other obligations of the
Company hereunder, the obligations of the Company under this Section 9.04 shall
survive the termination of this Agreement and the payment or assignment of the
Loans.
SECTION 9.05. Indemnity. (a) The Company shall indemnify the
Administrative Agent, the Banks and each Affiliate thereof and their respective
directors, officers, employees and agents from, and hold each of them harmless
against, any and all losses, liabilities, claims and damages to which any of
them may become subject, insofar as such losses, liabilities, claims and damages
arise out of or result from (i) any actual or proposed use by any Borrower of
the proceeds of any extension of credit by any Bank hereunder or (ii) any
investigation, litigation or other proceeding (including any threatened
investigation or proceeding) relating to the foregoing, and the Company shall
reimburse the Administrative Agent and each Bank, and each Affiliate thereof and
their respective directors, officers, employees and agents, upon demand for any
expenses (including legal fees) reasonably incurred in connection with any such
investigation or proceeding; but excluding any such losses, liabilities, claims,
damages or expenses incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified.
(b) WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT, IT IS
THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED
HEREUNDER OR THEREUNDER SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND
ALL LOSSES, LIABILITIES, CLAIMS AND DAMAGES ARISING OUT OF OR RESULTING FROM THE
ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON. Without prejudice to
the survival of any other obligations of the Company hereunder, the obligations
of the Company under this Section 9.05 shall survive the termination of this
Agreement and the payment or assignment of the Loans.
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SECTION 9.06. Right of Setoff. If any Event of Default shall
have occurred and be continuing, each Bank is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Bank or any
branch, subsidiary or Affiliate of such Bank to or for the credit or the account
of the Company and each Borrowing Subsidiary against any of and all the
obligations of the Company or such Borrowing Subsidiary now or hereafter
existing under this Agreement and any Loan held by such Bank, irrespective of
whether or not such Bank or the Administrative Agent shall have made any demand
under this Agreement and although such obligations may be unmatured. Each Bank
agrees promptly to notify the Borrower as to which such setoff and application
was made after any such setoff and application made by such Bank, but the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Bank under this Section 9.06 are in addition to
other rights and remedies (including other rights of setoff) which such Bank may
have.
SECTION 9.07. Governing Law. This Agreement and all other
documents executed in connection herewith (including the Foreign Currency
Addenda, each Assignment and Acceptance and each Borrowing Subsidiary
Counterpart), shall be deemed to be contracts and agreements executed by the
Borrowers, the Administrative Agent and the Banks party thereto under the laws
of the State of New York and of the United States and for all purposes shall be
construed in accordance with, and governed by, the laws of said state and of the
United States. Without limitation of the foregoing, nothing in this Agreement or
in any such other agreement shall be deemed to constitute a waiver of any rights
which any Bank may have under applicable federal legislation relating to the
amount of interest which such Bank may contract for, take, receive, reserve or
charge in respect of any Loans, including any right to contract for, take,
receive, reserve and charge interest at the rate allowed by the law of the state
where such Bank is located.
SECTION 9.08. Interest. Anything in this Agreement to the
contrary notwithstanding, no Borrower shall ever be required to pay unearned
interest on any Loan and shall never be required to pay interest on such Loan at
a rate in excess of the Highest Lawful Rate, and if the effective rate of
interest which would otherwise be payable under this Agreement and such Loan
would exceed the Highest Lawful Rate, or if the holder of such Loan shall
receive any unearned interest or shall receive monies that are deemed to
constitute interest which would increase the effective rate of interest payable
by such Borrower under this Agreement and such Loan to a rate in excess of the
Highest Lawful Rate, then (a) the amount of interest which would otherwise be
payable by such Borrower under this Agreement and such Loan shall be reduced to
the amount allowed under applicable law; and (b) any unearned interest paid by
such Borrower or any interest paid by such Borrower in excess of the Highest
Lawful Rate shall be credited on the principal of such Loan. It is further
agreed that all calculations of the rate of interest contracted for, charged or
received by any Bank under the Loans made by it, or under this Agreement, which
are made for the purpose of determining whether such rate exceeds the Highest
Lawful Rate applicable to such Bank (such Highest Lawful Rate being such Bank's
"Maximum Permissible Rate"), shall be made, to the
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extent permitted by usury laws applicable to such Bank (now or hereafter
enacted), by amortizing, prorating and spreading in equal parts during the
period of the full stated term of the Loans all interest at any time contracted
for, charged or received by such Bank in connection therewith. If at any time
and from time to time (y) the amount of interest payable to any Bank on any date
shall be computed at such Bank's Maximum Permissible Rate pursuant to this
Section 9.08 and (z) in respect of any subsequent interest computation period
the amount of interest otherwise payable to such Bank would be less than the
amount of interest payable to such Bank computed at such Bank's Maximum
Permissible Rate, then the amount of interest payable to such Bank in respect of
such subsequent interest computation period shall continue to be computed at
such Bank's Maximum Permissible Rate until the total amount of interest payable
to such Bank shall equal the total amount of interest which would have been
payable to such Bank if the total amount of interest had been computed without
giving effect to this Section 9.08.
SECTION 9.09. Survival of Representations, Warranties and
Covenants. All representations, warranties and covenants contained herein or
made in writing by the Borrowers in connection herewith shall survive the
execution and delivery of this Agreement, and will bind and inure to the benefit
of the respective successors and assigns of the parties hereto, whether so
expressed or not, provided, that the undertaking of the Banks to make Loans to
the Borrowers shall not inure to the benefit of any successor or assign of any
Borrower.
SECTION 9.10. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Company and the Administrative
Agent and when the Administrative Agent shall have been notified by each Bank
that such Bank has executed it and, except as provided in Section 9.09,
thereafter shall be binding upon and inure to the benefit of the Company, any
Borrowing Subsidiaries that may become party hereto, the Administrative Agent
and each Bank and their respective successors and assigns.
SECTION 9.11. Successors and Assigns; Participations. (a)
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and permitted assigns of
such party; and all covenants, promises and agreements by or on behalf of the
Company, the Administrative Agent or the Banks that are contained in this
Agreement shall bind and inure to the benefit of their respective successors and
permitted assigns. No Borrower may assign or transfer any of its rights or
obligations hereunder without the written consent of all the Banks.
(b) Each Bank, without the consent of the Company, may 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 and the Loans owing
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to it); provided, however, that (i) the selling Bank's obligations under this
Agreement shall remain unchanged; (ii) such Bank shall remain solely responsible
to the other parties hereto for the performance of such obligations; (iii) the
participating banks or other entities shall be entitled to the cost protection
provisions contained in Article II and Section 9.04; and (iv) the Borrowers, the
Administrative Agent and the other Banks shall continue to deal solely and
directly with the selling Bank in connection with such Bank's rights and
obligations under this Agreement; provided, however, that each Bank shall retain
the sole right and responsibility to enforce the obligations of the Borrowers
relating to the Loans including the right to approve any amendment, modification
or waiver of any provision of this Agreement; and further provided, however, the
selling Bank may grant a participant voting rights with respect to (x)
amendments, modifications or waivers with respect to any fees payable hereunder
(including the amount and the dates fixed for the payment of any such fees) or
the amount of principal or the rate of interest payable on, or the dates fixed
for any payment of principal of or interest on, the Loans and (y) amendments,
modifications or waivers to, or release of, the Guaranty. Each Bank shall
provide the Company with prompt notice of the identity of each participating
bank to which a participation in its Commitment or any Committed Loan is sold
and the amount of such participation.
(c) With the prior consent of the Company and the
Administrative Agent, such consent not to be unreasonably withheld, a Bank may
assign to one or more Eligible Assignees (provided, however, no such consent
shall be required if such Eligible Assignee is a Bank or an Affiliate of a Bank)
and, without the consent of the Company or the Administrative Agent, a Bank may
assign to one of its Affiliates, all or a portion of its interests, rights, and
obligations under this Agreement (including all or a portion of its Commitments
and the same portion of the Loans at the time owing to it); provided, however,
that (i) each such assignment shall be of a constant, and not a varying,
percentage of all the assigning Bank's rights and obligations under this
Agreement and partial assignments shall (except in the case of assignments to an
Affiliate of such Bank or to other Banks), be in a minimum principal amount of
$5,000,000 and (ii) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording in the
Register (as defined below), an Assignment and Acceptance substantially in the
form of Exhibit 9.11 (an "Assignment and Acceptance"), together with a properly
completed Administrative Questionnaire from such Eligible Assignee, and a
processing and recordation fee of $2,000; provided, however, no Borrower shall
have any obligation to pay or reimburse any Person for the payment of such
processing and recordation fee, except for assignments pursuant to Section 2.14
or Section 2.15. The Eligible Assignee party to each Assignment and Acceptance
also shall deliver a copy of its Administrative Questionnaire to the Company.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five Business Days after the execution thereof (unless
otherwise provided in such Assignment and Acceptance) (x) the Eligible Assignee
thereunder shall be a party
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hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Bank hereunder and (y) the assignor Bank thereunder
shall, to the extent provided in such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the remaining portion of an assigning Bank's rights
and obligations under this Agreement, such Bank shall cease to be a party
hereto, provided, however, such Bank shall have the benefits of Section 2.14,
Section 2.20, Section 9.04 and Section 9.05).
(d) By executing and delivering an Assignment and Acceptance,
the Bank assignor thereunder and the Eligible Assignee confirm to and agree with
each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim known to
such Bank assignor, such Bank assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any other
instrument or document furnished pursuant hereto or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto; (ii) such Bank
assignor makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower or the performance or
observance of its respective obligations under this Agreement or any other
instrument or document furnished pursuant hereto; (iii) such Eligible Assignee
confirms that it has received a copy of this Agreement together with copies of
the most recent financial statements delivered pursuant to Section 4.07 or
Section 5.01(a) and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such Eligible Assignee will, independently and
without reliance upon the Administrative Agent, such Bank assignor or any other
Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such Eligible Assignee appoints and authorizes
the Administrative Agent to take such action on behalf of such Eligible Assignee
and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; (vi) such Eligible Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Bank and (vii) such
Eligible Assignee confirms that it is an Eligible Assignee as defined herein.
(e) The Administrative Agent shall maintain at its office a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Banks and the Commitments of, and
principal amount of the Loans owing to, each Bank from time to time (the
"Register"). The entries in the Register shall, to the extent permitted
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by law, be conclusive, in the absence of manifest error, and each Borrower, the
Administrative Agent and the Banks may treat each Person whose name is recorded
in the Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by any Borrower or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed
by an assigning Bank and an Eligible Assignee and, if required, the written
consent to such assignment, the Administrative Agent shall, if such Assignment
and Acceptance has been completed and is substantially in the form of Exhibit
9.11, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Banks and the Borrowers.
(g) Notwithstanding any other provision herein, any Bank may,
in connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 9.11 disclose to the assignee or
participant or proposed assignee or participant, any information relating to the
Borrowers furnished to such Bank by or on behalf of any Borrower; provided, that
prior to any such disclosure, each such assignee or participant or proposed
assignee or participant shall agree to preserve the confidentiality, pursuant to
Section 9.12, of any confidential information relating to the Borrowers received
from such Bank.
(h) Anything in this Section 9.11 to the contrary
notwithstanding, any Bank may at any time, without the consent of any Borrower
or the Administrative Agent, assign and pledge all or any portion of its
Commitment and the Loans owing to it to any Federal Reserve Bank (and its
transferees) as collateral security pursuant to Regulation A and any Operating
Circular issued by such Federal Reserve Bank. No such assignment shall release
the assigning Bank from its obligations hereunder. Notwithstanding the
foregoing, in connection with any such pledge of such Loans to the Federal
Reserve Bank, any Bank may request that such Loans be evidenced by a note or
notes in form and substance satisfactory to such Bank and the Company.
SECTION 9.12. Confidentiality. Each Bank agrees to exercise
its best efforts to keep any information delivered or made available by the
Company or any Borrowing Subsidiary to it (including any information obtained
pursuant to Section 5.01(e)) which is clearly indicated to be confidential
information, confidential from anyone other than Persons employed or retained by
such Bank or any of its Affiliates who are or are expected to become engaged in
evaluating, approving, structuring or administering the Loans; provided that
nothing herein shall prevent any Bank from disclosing such information (a) to
any other Bank; (b) pursuant to subpoena or upon the order of any court or
administrative agency; (c) upon the request or demand of any regulatory agency
or authority having jurisdiction over such Bank; (d) which has been publicly
disclosed; (e) to the extent
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reasonably required in connection with any litigation to which the
Administrative Agent, any Bank, any Borrower or their respective Affiliates may
be a party; (f) to the extent reasonably required in connection with the
exercise of any remedy hereunder; (g) to such Bank's legal counsel and
independent auditors; and (h) to any actual or proposed participant or assignee
of all or part of its rights hereunder which has agreed in writing to be bound
by the provisions of this Section 9.12.
SECTION 9.13. Separability. Should any clause, sentence,
paragraph or Section of this Agreement be judicially declared to be invalid,
unenforceable or void, such decision will not have the effect of invalidating or
voiding the remainder of this Agreement, and the parties hereto agree that the
part or parts of this Agreement so held to be invalid, unenforceable or void
will be deemed to have been stricken herefrom and the remainder will have the
same force and effectiveness as if such part or parts had never been included
herein.
SECTION 9.14. Limitation by Law. All waivers, indemnities and
rights provided in this Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and all the
provisions of this Agreement are intended to be subject to all applicable
mandatory provisions of law which may be controlling and to be limited to the
extent necessary so that they will not render this Agreement invalid or
unenforceable, in whole or in part.
SECTION 9.15. Independence of Covenants. All covenants
contained in this Agreement shall be given independent effect so that if a
particular action or condition is not permitted by any such covenant, the fact
that such action or condition would be permitted by an exception to, or
otherwise be within the limitations of, another covenant shall not avoid the
occurrence of a Default or Event of Default if such action is taken or condition
exists.
SECTION 9.16. Appointment of Company as Agent for the Other
Borrowers. Each Borrowing Subsidiary hereby irrevocably appoints the Company as
its agent for the purpose of giving on its behalf any notice and taking any
other action provided for in this Agreement, and hereby agrees that it shall be
bound by any such notice or action given or taken by the Company hereunder
irrespective of whether or not any such notice shall have in fact been
authorized by such Borrowing Subsidiary and irrespective of whether or not the
agency provided for herein shall have theretofore been terminated.
SECTION 9.17. Judgment. The obligations of each Borrower in
respect of any sum due to any party hereto or any holder of the obligations
owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment
in a currency (the "Judgment Currency") other than the currency in which such
sum is stated to be due hereunder (the "Agreement Currency"), be discharged only
to the extent that, on the Business Day following receipt by the Applicable
Creditor of any sum
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adjudged to be so due in the Judgment Currency, the Applicable Creditor may in
accordance with normal banking procedures in the relevant jurisdiction purchase
the Agreement Currency with the Judgment Currency; if the amount of the
Agreement Currency so purchased is less than the sum originally due to the
Applicable Creditor in the Agreement Currency, such Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Applicable Creditor against such loss. The obligations of the Borrowers
contained in this Section 9.17 shall survive the termination of this Agreement
and the payment of all other amounts owing hereunder.
SECTION 9.18. European Monetary Union. (a) If, as a result of
the implementation of European monetary union, (i) any Foreign Currency ceases
to be lawful currency of the nation issuing the same and is replaced by a
European common currency, or (ii) any Foreign Currency and a European common
currency are at the same time recognized by the central bank or comparable
authority of the nation issuing such Foreign Currency as lawful currency of such
nation and the Administrative Agent or the Majority Banks shall so request in a
notice delivered to the Company, then any amount payable hereunder by any party
hereto in such Foreign Currency shall instead be payable in the European common
currency and the amount so payable shall be determined by translating the amount
payable in such currency to such European common currency at the exchange rate
recognized by the European Central Bank for the purposes of implementing
European monetary union. Prior to making any such request with respect to any
currency, each amount payable hereunder in such Foreign Currency will, except
under the circumstances described in Section 2.15, continue to be payable only
in that Foreign Currency.
(b) Each Borrower agrees, at the request of the Majority
Banks, at the time of or at any time following the implementation of European
monetary union, to enter into an agreement amending this Agreement in such
manner as the Majority Banks shall reasonably specify in order to reflect the
implementation of such monetary union and to place the parties hereto in a
substantially equivalent position to the position they would have been in
hereunder had such monetary union not been implemented.
SECTION 9.19. SUBMISSION TO JURISDICTION; WAIVER OF
IMMUNITIES. (a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT,
THE FOREIGN CURRENCY ADDENDA AND THE AGENT'S FEE LETTER MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH
BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS WITH
RESPECT TO ANY SUCH ACTION OR PROCEEDING. EACH BORROWING SUBSIDIARY HEREBY
IRREVOCABLY DESIGNATES, APPOINTS AND
FACILITY B
-88-
<PAGE> 89
EMPOWERS CORPORATION SERVICE COMPANY, WITH OFFICES ON THE DATE HEREOF AT 80
STATE STREET, ALBANY, NEW YORK 12201, AS ITS DESIGNEE, APPOINTEE AND AGENT TO
RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS
PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS
WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH
DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH
BORROWING SUBSIDIARY AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN
THE STATE OF NEW YORK ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION
SATISFACTORY TO THE ADMINISTRATIVE AGENT. EACH BORROWING SUBSIDIARY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN
SECTION 9.02, SUCH SERVICE TO BECOME EFFECTIVE THIRTY DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY BANK TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY BORROWING SUBSIDIARY IN ANY OTHER
JURISDICTION.
(b) TO THE EXTENT THAT ANY BORROWER HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY (SOVEREIGN OR OTHERWISE) FROM ANY LEGAL ACTION, SUIT OR
PROCEEDING, FROM JURISDICTION OF ANY COURT OR FROM SET-OFF OR ANY LEGAL PROCESS
(WHETHER SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OF JUDGMENT, EXECUTION OF JUDGMENT OR OTHERWISE) WITH RESPECT TO
ITSELF OR ANY OF ITS PROPERTY, SUCH BORROWER HEREBY IRREVOCABLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER
THIS AGREEMENT AND THE FOREIGN CURRENCY ADDENDA. EACH BORROWER HEREBY AGREES
THAT THE WAIVERS SET FORTH IN THIS SECTION 9.19 SHALL HAVE THE FULLEST EFFECT
PERMITTED UNDER THE FOREIGN SOVEREIGN IMMUNITIES ACT OF 1976 OF THE UNITED
STATES OF
FACILITY B
-89-
<PAGE> 90
AMERICA AND ARE INTENDED TO BE IRREVOCABLE AND NOT SUBJECT TO WITHDRAWAL FOR
PURPOSES OF SUCH ACT.
SECTION 9.20. Entire Agreement. This Agreement (including the
Exhibits and Schedules hereto), the Borrowing Subsidiary Counterparts, if any,
the Assignment and Acceptances, if any, the Foreign Currency Addenda, and the
Agent's Fee Letter embody the entire agreement and understanding among the
Company, the Administrative Agent and the Banks relating to the subject matter
hereof and thereof and supersede all prior proposals, agreements and
understandings relating to such subject matter.
SECTION 9.21. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
SERVICE CORPORATION INTERNATIONAL
By:
--------------------------------------
Name: Gregory L. Cauthen
Title: Vice President and Treasurer
FACILITY B
<PAGE> 91
611102 SASKATCHEWAN LTD.
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 92
SERVICE CORPORATION INTERNATIONAL
AUSTRALIAN PTY LIMITED
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 93
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 94
CO-AGENTS:
BANK OF AMERICA ILLINOIS, as Co-Agent
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 95
CITIBANK N.A., as Co-Agent
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 96
NATIONSBANK, N.A., as Co-Agent
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 97
ROYAL BANK OF CANADA, as Co-Agent
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 98
SOCIETE GENERALE, as Co-Agent
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 99
UNION BANK OF SWITZERLAND, as Co-Agent
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 100
BANKS
ABN AMRO BANK N.V., HOUSTON AGENCY
By:
---------------------------------------
Name: David P. Orr
Title: Vice President
By:
---------------------------------------
Name: Ronald A. Mahle
Title: Group Vice President
Three Riverway, Suite 1700
Houston, Texas 77056
Telecopy No.: (713) 629-7533
Domestic Lending Office
ABN AMRO Bank N.V., Houston Agency
Three Riverway, Suite 1700
Houston, Texas 77056
Attn: Ms. Josephine Zozdorado
Telecopy No.: (713) 964-3331
Eurodollar Lending Office
ABN AMRO Bank N.V., Houston Agency
Three Riverway, Suite 1700
Houston, Texas 77056
Attn: Mr. David Orr
Telecopy No.: (713) 964-3323
Commitment: $35,000,000.00
FACILITY B
<PAGE> 101
BANK OF AMERICA ILLINOIS
By:
---------------------------------------
Name:
Title:
231 South LaSalle Street
Chicago, Illinois 60697
Telecopy No.: (312) 987-1276
Domestic Lending Office
Bank of America Illinois
1850 Gateway Boulevard
Concord, California 94520
Attn: Camille Gibby
Telecopy No.: (510) 675-7759
Eurodollar Lending Office
Bank of America Illinois
1850 Gateway Boulevard
Concord, California 94520
Attn: Camille Gibby
Telecopy No.: (510) 675-7759
Commitment: $59,500,000.00
FACILITY B
<PAGE> 102
THE BANK OF NEW YORK
By:
---------------------------------------
Name:
Title:
One Wall Street, 22nd Floor
New York, New York 10286
Telecopy No.: (212) 635-6434
Domestic Lending Office
One Wall Street, 22nd Floor
New York, New York 10286
Attn: Larry Geter
Telecopy No.: (212) 635-6740
Eurodollar Lending Office
One Wall Street, 22nd Floor
New York, New York 10286
Attn: Larry Geter
Telecopy No.: (212) 635-6740
Commitment: $35,000,000.00
FACILITY B
<PAGE> 103
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By:
---------------------------------------
Name: John L. Stacy
Title: Vice President
333 Clay Street, Suite 3400
Houston, Texas 77002
Telecopy No.: (713) 659-1414
Domestic Lending Office
Banque Nationale De Paris, Houston Agency
333 Clay Street, Suite 3400
Houston, Texas 77002
Attn: Donna Rose
Telecopy No.: (713) 659-1414
Eurodollar Lending Office
Banque Nationale De Paris, Houston Agency
333 Clay Street, Suite 3400
Houston, Texas 77002
Attn: Donna Rose
Telecopy No.: (713) 659-1414
Commitment: $21,000,000.00
FACILITY B
<PAGE> 104
THE BANK OF TOKYO-MITSUBISHI, LTD.,
HOUSTON AGENCY
By:
---------------------------------------
Name:
Title:
1100 Louisiana Street, Suite 2800
Houston, Texas 77002-5216
Telecopy No.: (713) 658-0116
Domestic Lending Office
The Bank of Tokyo-Mitsubishi, Ltd., Houston Agency
1100 Louisiana Street, Suite 2800
Houston, Texas 77002-5216
Attn: David L. Denbina, P.E.
Telecopy No.: (713) 658-0116
Eurodollar Lending Office
The Bank of Tokyo-Mitsubishi, Ltd., Houston Agency
1100 Louisiana Street, Suite 2800
Houston, Texas 77002-5216
Attn: David L. Denbina, P.E.
Telecopy No.: (713) 658-0116
Commitment: $35,000,000.00
FACILITY B
<PAGE> 105
CIBC, INC.
By:
---------------------------------------
Name:Robin W. Elliott
Title:Authorized Signatory
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Telecopy No.: (404) 319-4950
Domestic Lending Office
CIBC, Inc.
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Attn: Kelli Jones
Telecopy No.: (770) 319-4817
Eurodollar Lending Office
CIBC, Inc.
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Attn: Kelli Jones
Telecopy No.: (770) 319-4817
Commitment: $35,000,000.00
FACILITY B
<PAGE> 106
CITIBANK, N.A.
By:
---------------------------------------
Name:
Title:
400 Perimeter Center Terrace
Suite 600
Atlanta, Georgia 30346
Telecopy No.: (770) 668-8137
Domestic Lending Office
Citibank, N.A.
1 Court Square, 7th Floor
Long Island City, New York 11120
Eurodollar Lending Office
Citibank, N.A.
1 Court Square, 7th Floor
Long Island City, New York 11120
Commitment: $59,500,000.00
FACILITY B
<PAGE> 107
COMMERZBANK AKTIENGESELLSCHAFT,
ATLANTA AGENCY
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
Promenade Two, Suite 3500
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Telecopy No.: (404) 888-6539
Domestic Lending Office
Commerzbank Aktiengesellschaft, Atlanta Agency
Promenade Two, Suite 3500
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attn: David Suttles - AVP
Telecopy No.: (404) 888-6539
Eurodollar Lending Office
Commerzbank Aktiengesellschaft, Atlanta Agency
Promenade Two, Suite 3500
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attn: David Suttles - AVP
Telecopy No.: (404) 888-6539
Commitment: $14,000,000.00
FACILITY B
<PAGE> 108
CREDIT LYONNAIS NEW YORK BRANCH
By:
---------------------------------------
Name:
Title:
1301 Avenue of the Americas
New York, New York 10019
Telecopy No.: (212) 954-3312
Domestic Lending Office
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Telecopy No.: (212) 954-3312
Eurodollar Lending Office
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Telecopy No.: (212) 954-3312
Commitment: $14,000,000.00
with notices to:
Credit Lyonnais
Dallas Representative Office
2200 Ross Avenue, Suite 4400W
Dallas, Texas 75201
FACILITY B
<PAGE> 109
THE FUJI BANK, LIMITED
By:
---------------------------------------
Name:
Title:
One Houston Center
1221 McKinney, Suite 4100
Houston, Texas 77010
Telecopy No.: (713) 759-0048
Domestic Lending Office
The Fuji Bank, Limited
One Houston Center
1221 McKinney, Suite 4100
Houston, Texas 77010
Attn: Frances Flores
Telecopy No.: (713) 951-0590
Eurodollar Lending Office
The Fuji Bank, Limited
One Houston Center
1221 McKinney, Suite 4100
Houston, Texas 77010
Attn: Frances Flores
Telecopy No.: (713) 951-0590
Commitment: $14,000,000.00
FACILITY B
<PAGE> 110
ISTITUTO BANCARIO SAN PAOLO DI
TORINO SPA
By:
---------------------------------------
Name: William J. De Angelo
Title: First Vice President
By:
---------------------------------------
Name: Robert S. Wurster
Title: First Vice President
245 Park Avenue, 35th Floor
New York, New York 10167
Telecopy No.: (212) 599-5303
Domestic Lending Office
Istituto Bancario San Paolo Di Torino S.P.A.
245 Park Avenue, 35th Floor
New York, New York 10167
Attn: Robert Wurster
Telecopy No.: (212) 599-5303
Eurodollar Lending Office
Istituto Bancario San Paolo Di Torino S.P.A.
245 Park Avenue, 35th Floor
New York, New York 10167
Attn: Robert Wurster
Telecopy No.: (212) 599-5303
Commitment: $14,000,000.00
FACILITY B
<PAGE> 111
NATIONSBANK N.A.
By:
---------------------------------------
Name:
Title:
700 Louisiana, 8th Floor
Houston, Texas 77002
Telecopy No.: (713) 247-5719
Domestic Lending Office
NationsBank N.A.
101 North Tryon Street
Charlotte, NC 28255
Attn: Kerri Thompson
Telecopy No.: (704) 386-8694
Eurodollar Lending Office
NationsBank N.A.
101 North Tryon Street
Charlotte, NC 28255
Attn: Kerri Thompson
Telecopy No.: (704) 386-8694
Commitment: $59,500,000.00
FACILITY B
<PAGE> 112
ROYAL BANK OF CANADA
By:
---------------------------------------
Name:
Title:
12450 Greenspoint Drive, Suite 1450
Houston, Texas 77060
Telecopy No.: (281) 874-0081
Domestic Lending Office
Royal Bank of Canada
c/o New York Branch
Financial Square, 32 Old Slip
New York, New York 10005
Telecopy No.: (212) 428-2372
Eurodollar Lending Office
Royal Bank of Canada
c/o New York Branch
Financial Square, 32 Old Slip
New York, New York 10005
Telecopy No.: (212) 428-2372
Commitment: $59,500,000.00
FACILITY B
<PAGE> 113
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
---------------------------------------
Name:
Title:
2001 Ross Avenue, Suite 4800
Dallas, Texas 75201
Telecopy No.: (214) 754-0171
Domestic Lending Office
Societe Generale, Southwest Agency
2001 Ross Avenue, Suite 4800
Dallas, Texas 75201
Telecopy: (214) 754-0171
Eurodollar Lending Office
Societe Generale, Southwest Agency
2001 Ross Avenue, Suite 4800
Dallas, Texas 75201
Telecopy: (214) 754-0171
Commitment: $59,500,000.00
FACILITY B
<PAGE> 114
SUNTRUST BANK, ATLANTA
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
Center 120
25 Park Place, NE
Atlanta, Georgia 30303
Telecopy No.: (404) 827-6270
Domestic Lending Office
Suntrust Bank, Atlanta
Center 120
25 Park Place, NE
Atlanta, Georgia 30303
Telecopy: (404) 827-6270
Eurodollar Lending Office
Suntrust Bank, Atlanta
Center 120
25 Park Place, NE
Atlanta, Georgia 30303
Telecopy: (404) 827-6270
Commitment: $35,000,000.00
FACILITY B
<PAGE> 115
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By:
---------------------------------------
Name: Jan Danvers
Title: Senior Vice President
712 Main Street
5TCB-E 78
Houston, Texas 77002
Telecopy No.: (713) 216-7500
Domestic Lending Office
Texas Commerce Bank National Association
712 Main Street
Houston, Texas 77002
Attn: Gloria Aguilar
Telecopy No.: (713) 216-7500
Eurodollar Lending Office
Texas Commerce Bank National Association
712 Main Street
Houston, Texas 77002
Attn: Gloria Aguilar
Telecopy No.: (713) 216-7500
Commitment: $70,000,000.00
FACILITY B
<PAGE> 116
UNION BANK OF SWITZERLAND
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
299 Park Avenue
New York, New York 10171
Telecopy No.: (212) 821-5534
Domestic Lending Office
Union Bank of Switzerland
299 Park Avenue
New York, New York 10171
Telecopy: (212) 821-5534
Eurodollar Lending Office
Union Bank of Switzerland
299 Park Avenue
New York, New York 10171
Telecopy: (212) 821-5534
Commitment: $59,500,000.00
FACILITY B
<PAGE> 117
WESTPAC BANKING CORPORATION
By:
---------------------------------------
Name: Craig Jones
Title: Vice President
575 Fifth Avenue
New York, New York 10017
Telecopy No.: (212) 551-1995
Domestic Lending Office
Westpac Banking Corporation
575 Fifth Avenue
New York, New York 10017
Attn: Craig Jones
Telecopy No.: (212) 551-1995
Eurodollar Lending Office
Westpac Banking Corporation
575 Fifth Avenue
New York, New York 10017
Attn: Craig Jones
Telecopy No.: (212) 551-1995
Commitment: $21,000,000.00
FACILITY B
<PAGE> 1
EXHIBIT 99.6
AGREEMENT AND FIRST AMENDMENT
TO COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY AGREEMENT (FACILITY B)
THIS AGREEMENT AND FIRST AMENDMENT TO COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY AGREEMENT (FACILITY B) (this "Amendment") dated as of
November 2, 1999 is among:
(a) SERVICE CORPORATION INTERNATIONAL, a Texas corporation
(the "Company");
(b) SERVICE CORPORATION INTERNATIONAL, PLC, SERVICE
CORPORATION INTERNATIONAL AUSTRALIA PTY LIMITED, 61102 SASKATCHEWAN LTD., SCI
INTERNATIONAL LIMITED and SCI NEDERLAND, B.V. (formerly FONTINA INVESTMENTS
B.V.), (collectively, the "Borrowing Subsidiaries");
(c) the banks and other financial institutions listed on the
signature pages hereof, (collectively, the "Banks"); and
(d) THE CHASE MANHATTAN BANK, a New York banking corporation,
as administrative agent for the Banks (in such capacity, the "Administrative
Agent").
PRELIMINARY STATEMENT
The Company, the Borrowing Subsidiaries, the Banks, the
Administrative Agent and the Co-Agents (defined therein), are parties to a
Competitive Advance and Revolving Credit Facility Agreement (Facility B) dated
as of June 27, 1997 (said Competitive Advance and Revolving Credit Facility
Agreement (Facility B) being the "Credit Agreement"). All capitalized terms
defined in the Credit Agreement and not otherwise defined herein shall have the
same meanings herein as in the Credit Agreement. The Company, the Banks and the
Administrative Agent have agreed, upon the terms and conditions specified
herein, to amend the Credit Agreement as hereinafter set forth:
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the Company, the Banks and the
Administrative Agent hereby agree as follows:
FACILITY B
<PAGE> 2
SECTION 1. Amendments to Section 1.01 of the Credit Agreement.
(a) The terms "Applicable Differential" and "Applicable Fee
Percentage" and the respective definitions thereof are hereby deleted from the
Credit Agreement.
(b) The definitions of the term "Consolidated Net Income"
contained in Section 1.01 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"'Consolidated Net Income' means, for any period, the net
income of the Company and its Subsidiaries for such period (taken as a
cumulative whole), determined on a consolidated basis in accordance
with GAAP and adjusted to exclude (a) net after-tax extraordinary gains
or losses, (b) restructuring charges, and (c) the cumulative effect of
any changes in accounting principles.
(b) The following defined terms are hereby added to Section
1.01 of the Credit Agreement:
(i) "Applicable Percentage" means, for any day, (a) with
respect to any Eurodollar Loan, the applicable percentage set forth
below under the caption "Eurodollar Spread" and (b) with respect to the
Facility Fee, the applicable percentage set forth below under the
caption "Facility Fee Rate", in each case determined by reference to
the highest level applicable based upon the ratings by S&P and Moody's
in effect on such date for the Index Debt:
<TABLE>
<CAPTION>
Level 1 Level 2 Level 3 Level 4
--------- ---------- --------- -------
Ratings >=BBB and >=BBB- and >=BB+ and <BB+ or
(S&P/Moody's) >=Baa2 >=Baa3 >=Ba1 <Ba1
------------- -------- ---------- -------- -------
<S> <C> <C> <C> <C>
Eurodollar Spread 1.00% 1.25% 1.375% 1.50%
Facility Fee Rate 0.25% 0.25% 0.375% 0.50%
</TABLE>
For purposes of the foregoing, (i) if either Moody's or S&P shall not
have in effect a rating for the Index Debt (other than by reason of the
circumstances referred to in the last sentence of this paragraph), then
such rating agency shall be deemed to have established a rating below
BB+ or Ba1, as the case may be; (ii) if the ratings established or
deemed to have been established by Moody's and S&P for the Index Debt
shall fall within different levels, the Applicable Percentage shall be
based on the lower of the two ratings; and (iii) if the ratings
established or deemed to have been established by Moody's or S&P for
the Index Debt shall be changed (other than as a result of a change in
the rating system of Moody's or S&P), such change shall be effective as
of the date on which it is first announced by the applicable rating
agency. Each change in the Applicable Percentage shall apply for
purposes
FACILITY B
-2-
<PAGE> 3
of determining interest on the outstanding Eurodollar Loans and the
Facility Fee during the period commencing on the effective date of such
change and ending on the date immediately preceding the effective date
of the next such change. If the rating system of Moody's or S&P shall
change, or if either such rating agency shall cease to be in the
business of rating corporate debt obligations, the Company and the
Banks shall negotiate in good faith to amend this definition to reflect
such changed rating system or the absence of ratings from such rating
agency and, pending the effectiveness of such amendment, the Applicable
Percentage shall be determined by reference to the rating most recently
in effect prior to such change or cessation.
(ii) "Consolidated EBITDA" means, in respect of any fiscal
quarter, the sum of (a) Consolidated Net Income for such fiscal quarter
and (b) the amount of all Interest Expense, taxes paid during such
fiscal quarter, depreciation and amortization allowances and other
non-cash expenses of the Company and its Subsidiaries, as determined on
a consolidated basis in accordance with GAAP, but in the case of clause
(b) only to the extent deducted in the determination of Consolidated
Net Income for such fiscal quarter.
(iii) "Interest Expense" means, with respect to any fiscal
quarter, without duplication, the following (in each case, eliminating
all offsetting debits and credits between the Company and its
Subsidiaries and all other items required to be eliminated in the
course of the preparation of consolidated financial statements of the
Company and its Subsidiaries in accordance with GAAP): all interest in
respect of Debt of the Company and its Subsidiaries (including imputed
interest on Capital Lease Obligations) paid in cash during, and
deducted in determining Consolidated Net Income for, such fiscal
quarter.
(iv) "First Amendment" means the Agreement and First Amendment
to Competitive Advance and Revolving Credit Facility Agreement
(Facility B) dated as of November 2, 1999 among the Company, the Banks
party thereto and the Administrative Agent.
(v) "First Amendment Execution Date" means the date the First
Amendment has been executed by all the parties thereto.
SECTION 2. Amendments to Article II of the Credit Agreement.
(a) Section 2.07(a) of the Credit Agreement is hereby amended in its entirety to
read as follows:
"(a) The Company agrees to pay in immediately available funds
to the Administrative Agent for the account of each Bank, through the
Administrative Agent, (i) on each March 31, June 30, September 30 and
December 31 commencing December 31, 1999 from the First Amendment
Execution Date to
FACILITY B
-3-
<PAGE> 4
the date on which the Commitment of such Bank has been terminated and
(ii) on the Maturity Date and on any other date on which the Commitment
of such Bank has been terminated, facility fees (each a "Facility
Fee"and collectively, the "Facility Fees"), which shall accrue at the
Applicable Percentage on the amount of the Commitment of such Bank from
time to time outstanding, whether used, deemed used or unused, during
the preceding quarter (or shorter period commencing with the First
Amendment Execution Date and/or ending with the Maturity Date),
provided, however, if any Loans are outstanding to any Bank after the
Maturity Date then such Facility Fee shall continue to accrue on the
daily amount of such Bank's outstanding Loans from and including the
Maturity Date to but excluding the date all such Loans are paid in
full.".
(b) Section 2.09(a) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(a) Subject to the provisions of Section 2.09(d) and Section
2.10, the Loans comprising each Eurocurrency Borrowing shall bear
interest (computed on the basis of the actual number of days elapsed
over a year of 360 days) at a rate per annum equal to (i) in the case
of each Eurodollar Committed Loan, the lesser of (A) the IBO Rate for
the Interest Period in effect for such Borrowing plus the Applicable
Percentage in effect for such Loans from time to time and (B) the
Highest Lawful Rate, (ii) in the case of each Eurocurrency Competitive
Loan, the lesser of (A) the IBO Rate for the Interest Period in effect
for such Borrowing plus the Margin offered by the Bank making such Loan
and accepted by a Borrower pursuant to Section 2.03 and (B) the Highest
Lawful Rate,(iii) in the case of each Foreign Currency Revolving Loan
that is a Eurocurrency Loan, the lesser of (A) the IBO Rate for the
Interest Period in effect for such Borrowing plus any spread specified
in the applicable Foreign Currency Addendum and (B) the Highest Lawful
Rate and (iv) in the case of each Foreign Currency Revolving Loan
(other than a Eurocurrency Loan), such rate as shall be specified in
the applicable Foreign Currency Addendum.".
SECTION 3. Amendments to Article V. Article V of the Credit
Agreement is hereby amended as follows:
(a) The penultimate sentence of Section 5.01(a) is hereby
amended in its entirety to read as follows:
"Together with each delivery of financial statements required
by clauses (i) and (ii) above, the Company will deliver to each Bank
(y) schedules and/or computations demonstrating that the Company is in
compliance with its covenants in Sections 5.02(a), 5.02(b), 5.02(c),
5.02(g) and 5.02(j) or reflecting any noncompliance therewith as at the
applicable date and (z) an Officer's Certificate stating that there
exists no Event of Default or Default, or, if any Event of Default or
FACILITY B
-4-
<PAGE> 5
Default, stating the nature thereof, the period of existence thereof
and what action the Company or any other Borrower has taken or proposes
to take with respect thereto.".
(b) Section 5.02(a) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(a) Net Worth. The Company will not permit Net Worth at any
time to be less than the sum of (a) $2,500,000,000, plus (b) 50% of
Consolidated Net Income (if positive) for each fiscal quarter ending
during the period from January 1, 1999 to the end of its most recently
completed fiscal quarter, plus (c) 100% of the net proceeds received by
the Company on or after January 1, 1999 from all shares, rights to
purchase, warrants, options, participations or other equivalents of the
Company's equity, including all common stock and preferred stock.".
(c) Section 5.02(b) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(b) Debt. (i) The Company will not permit the ratio of
Consolidated Debt to Total Capitalization at any time to be greater
than .60 to 1.0.
(ii) The Company will not permit the sum of (A) the
aggregate amount of Debt of its Subsidiaries (other than Debt
held by the Company) plus (B) Assured Obligations of its
Subsidiaries to exceed 20% of Net Worth.".
(d) Section 5.02 of the Credit Agreement is hereby amended to
add the following as Section 5.02(j):
"(j) EBITDA. The Company will not permit the ratio of
Consolidated EBITDA to Interest Expense at any time to be less than
2.75 to 1.0, calculated at the end of each fiscal quarter for such
fiscal quarter and the immediately preceding three fiscal quarters.".
SECTION 4. Amendment to Section 9.02. Clause (a) of Section
9.02 is hereby amended in its entirety to read as follows:
"(a) change the definitions of "Applicable Percentages" or
"Majority Banks" contained in Section 1.01,".
SECTION 5. Conditions of Effectiveness. This Amendment shall
become effective when, and only when the following conditions shall have been
fulfilled:
FACILITY B
-5-
<PAGE> 6
(a) the Company, the Administrative Agent and the Majority
Banks shall have executed a counterpart hereof and delivered the same to the
Administrative Agent or, in the case of any Bank as to which an executed
counterpart hereof shall not have been so delivered, the Administrative Agent
shall have received written confirmation by telecopy or other similar writing
from such Bank of execution of a counterpart hereof by such Bank; and
(b) the Administrative Agent shall have received from the
Company a certificate of the Secretary or Assistant Secretary of the Company
certifying that attached thereto is (i) a true and complete copy of the general
borrowing resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance of the Credit Agreement, as amended hereby,
and (ii) the incumbency and specimen signature of each officer of the Company
executing this Amendment.
SECTION 6. Representations and Warranties True; No Default or
Event of Default. The Company hereby represents and warrants to the
Administrative Agent, the Co-Agents and the Banks that after giving effect to
the execution and delivery of this Amendment: (a) the representations and
warranties set forth in the Credit Agreement are true and correct on the date
hereof as though made on and as of such date; provided, however, that for
purposes of this Section 6, the reference in the first sentence of Section 4.07
to the Company Financials shall be a reference to the consolidated financial
statements of the Company and its Subsidiaries most recently delivered to the
Administrative Agent and the Banks by the Company pursuant to Section 5.01(a)(i)
or 5.01(a)(ii), as the case may be, and (b) no event has occurred and is
continuing that constitutes either a Default or an Event of Default.
SECTION 7. Reference to the Credit Agreement and Effect on the
Other Documents Executed Pursuant to the Credit Agreement.
(a) Upon the effectiveness of this Amendment, each reference
in the Credit Agreement to "this Agreement," "hereunder," "herein," "hereof" or
words of like import shall mean and be a reference to the Credit Agreement, as
amended hereby.
(b) Upon the effectiveness of this Amendment, each reference
in the documents and agreements delivered or to be delivered pursuant to the
Credit Agreement shall mean and be a reference to the Credit Agreement, as
amended hereby.
(c) Upon the effectiveness of this Amendment, each reference
in the Credit Agreement to "Consolidated Net Income" shall mean and be a
reference to such term as amended hereby.
(d) The Credit Agreement and other documents and agreements
delivered pursuant to the Credit Agreement, and modified by the amendments
referred to above, shall remain in full force and effect and are hereby ratified
and confirmed.
FACILITY B
-6-
<PAGE> 7
SECTION 8. Execution in Counterparts. This Amendment 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 to be an original and all of which taken together shall constitute but
one and the same instrument.
SECTION 9. GOVERNING LAW; BINDING EFFECT. THIS AMENDMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
AND APPLICABLE FEDERAL LAW AND SHALL BE BINDING UPON THE COMPANY, THE
ADMINISTRATIVE AGENT, THE CO-AGENTS, THE BANKS AND THE RETIRING BANKS AND THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS.
SECTION 10. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.
SECTION 11. ENTIRE AGREEMENT. THE CREDIT AGREEMENT (INCLUDING
THE EXHIBITS AND SCHEDULES HERETO), AS AMENDED HEREBY, THE BORROWING SUBSIDIARY
COUNTERPARTS, THE ASSIGNMENT AND ACCEPTANCES, IF ANY, AND THE AGENT'S FEE LETTER
EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING AMONG THE COMPANY, THE
ADMINISTRATIVE AGENT, THE CO-AGENTS, THE BANKS AND THE RETIRING BANKS RELATING
TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ALL PRIOR PROPOSALS,
AGREEMENTS AND UNDERSTANDINGS RELATING TO SUCH SUBJECT MATTER.
FACILITY B
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed effective as of the date first stated herein, by their
respective officers thereunto duly authorized.
SERVICE CORPORATION INTERNATIONAL
By:
--------------------------------------
Todd A. Matherne
Senior Vice President and Treasurer
FACILITY B
<PAGE> 9
SERVICE CORPORATION INTERNATIONAL, PLC
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 10
SCI INTERNATIONAL LIMITED
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 11
SCI NEDERLAND, B.V.
(formerly, FONTINA INVESTMENTS B.V.)
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 12
611102 SASKATCHEWAN LTD.
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 13
SERVICE CORPORATION INTERNATIONAL
AUSTRALIAN PTY LIMITED
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 14
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:
--------------------------------------
Name:
Title:
FACILITY B
<PAGE> 15
BANK:
ABN AMRO BANK N.V.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $35,000,000
FACILITY B
<PAGE> 16
BANK:
BANK OF AMERICA, N.A.,
F/K/A BANK OF AMERICA ILLINOIS
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $119,000,000
FACILITY B
<PAGE> 17
BANK:
THE BANK OF NEW YORK
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $35,000,000
FACILITY B
<PAGE> 18
BANK:
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $21,000,000
FACILITY B
<PAGE> 19
BANK:
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION,
f/k/a TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $70,000,000
FACILITY B
<PAGE> 20
BANK:
CIBC, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $35,000,000
FACILITY B
<PAGE> 21
BANK:
CITIBANK, N.A.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $59,500,000
FACILITY B
<PAGE> 22
BANK:
COMMERZBANK AKTIENGESELLSCHAFT,
ATLANTA AGENCY
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $14,000,000
FACILITY B
<PAGE> 23
BANK:
CREDIT COMMERCIAL DE FRANCE
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $35,000,000
FACILITY B
<PAGE> 24
BANK:
CREDIT LYONNAIS NEW YORK BRANCH
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $14,000,000
FACILITY B
<PAGE> 25
BANK:
THE FUJI BANK, LIMITED
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $14,000,000
FACILITY B
<PAGE> 26
BANK:
SAN PAOLO IMI S.p.A.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $14,000,000
FACILITY B
<PAGE> 27
BANK:
ROYAL BANK OF CANADA
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $59,500,000
FACILITY B
<PAGE> 28
BANK:
SOCIETE GENERALE
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $59,500,000
FACILITY B
<PAGE> 29
BANK:
SUNTRUST BANK, ATLANTA
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $35,000,000
FACILITY B
<PAGE> 30
BANK:
UBS AG, STAMFORD BRANCH,
f/k/a UNION BANK OF SWITZERLAND
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $59,500,000
FACILITY B
<PAGE> 31
BANK:
WESTPAC BANKING CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitment: $21,000,000
FACILITY B
<PAGE> 1
EXHIBIT 99.7
EXECUTION COPY
================================================================================
CREDIT AGREEMENT
DATED AS OF
NOVEMBER 2, 1999
AMONG
SERVICE CORPORATION INTERNATIONAL,
AS THE COMPANY,
THE LENDERS PARTY HERETO,
THE CHASE MANHATTAN BANK,
AS THE ADMINISTRATIVE AGENT,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
AS THE SYNDICATION AGENT,
AND
BANK OF AMERICA, NATIONAL ASSOCIATION,
CITIBANK, N.A.,
AND
CREDIT LYONNAIS NEW YORK BRANCH
AS THE MANAGING AGENTS
CHASE SECURITIES INC.
AS THE SOLE BOOK MANAGER/LEAD ARRANGER
================================================================================
Amended and Restated
Credit Agreement
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
ARTICLE I DEFINITIONS, ACCOUNTING TERMS AND CONSTRUCTION..............................................1
SECTION 1.01. Certain Defined Terms.......................................................................1
SECTION 1.02. Accounting Terms and Determinations........................................................15
SECTION 1.03. Interpretation.............................................................................16
ARTICLE II THE CREDITS................................................................................17
SECTION 2.01. Commitments................................................................................17
SECTION 2.02. Loans......................................................................................18
SECTION 2.03. [Intentionally Omitted]....................................................................19
SECTION 2.04. Borrowing Procedure........................................................................19
SECTION 2.05. Refinancings...............................................................................19
SECTION 2.06. Conversion and Continuation of Borrowings..................................................20
SECTION 2.07. Fees.......................................................................................21
SECTION 2.08. Repayment of Loans.........................................................................22
SECTION 2.09. Interest on Loans..........................................................................22
SECTION 2.10. Interest on Overdue Amounts................................................................22
SECTION 2.11. Alternate Rate of Interest.................................................................23
SECTION 2.12. Termination and Reduction of Commitments...................................................23
SECTION 2.13. Prepayment.................................................................................24
SECTION 2.14. Reserve Requirements; Change in Circumstances..............................................24
SECTION 2.15. Change in Circumstances....................................................................27
SECTION 2.16. Indemnity..................................................................................28
SECTION 2.17. Pro Rata Treatment.........................................................................29
SECTION 2.18. Sharing of Setoffs.........................................................................29
SECTION 2.19. Payments...................................................................................30
SECTION 2.20. Taxes......................................................................................31
SECTION 2.21. Extensions of Termination Date.............................................................32
ARTICLE III CONDITIONS OF LENDING......................................................................33
SECTION 3.01. Conditions Precedent to the Initial Loans to the Company...................................33
SECTION 3.02. Conditions Precedent to Each Borrowing.....................................................35
SECTION 3.03. Conditions Precedent to Conversions and Continuations......................................35
ARTICLE IV REPRESENTATIONS AND WARRANTIES.............................................................36
SECTION 4.01. Organization and Qualification.............................................................36
SECTION 4.02. Authorization, Validity, Etc...............................................................36
SECTION 4.03. Governmental Consents, Etc.................................................................36
SECTION 4.04. Conflicting or Adverse Agreements or Restrictions..........................................37
SECTION 4.05. Title to Assets............................................................................37
SECTION 4.06. Actions Pending............................................................................37
SECTION 4.07. Financial Statements.......................................................................37
</TABLE>
Amended and Restated
Credit Agreement
-i-
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
SECTION 4.08. Default....................................................................................38
SECTION 4.09. Investment Company Act.....................................................................38
SECTION 4.10. Public Utility Holding Company Act.........................................................38
SECTION 4.11. ERISA......................................................................................38
SECTION 4.12. Payment of Taxes...........................................................................38
SECTION 4.13. Purpose of Loans...........................................................................38
SECTION 4.14. Patents, Etc...............................................................................39
SECTION 4.15. No Material Guarantees or Letters of Credit................................................39
SECTION 4.16. Enhancement Agreements.....................................................................39
SECTION 4.17. Year 2000..................................................................................39
ARTICLE V COVENANTS.............................................................................40
SECTION 5.01. Affirmative Covenants......................................................................40
SECTION 5.02. Negative Covenants.........................................................................42
ARTICLE VI EVENTS OF DEFAULT.....................................................................47
SECTION 6.01. Events of Default..........................................................................47
ARTICLE VII THE ADMINISTRATIVE AGENT.............................................................50
SECTION 7.01. Authorization and Action...................................................................50
SECTION 7.02. Administrative Agent's Reliance, Etc.......................................................50
SECTION 7.03. Administrative Agent and Affiliates; Chase and Affiliates..................................51
SECTION 7.04. Bank Credit Decision.......................................................................51
SECTION 7.05. Administrative Agent's Indemnity...........................................................52
SECTION 7.06. Successor Administrative Agent.............................................................52
SECTION 7.07. Notice of Default..........................................................................53
SECTION 7.08. No Duty....................................................................................53
ARTICLE VIII MISCELLANEOUS.........................................................................53
SECTION 8.01. Amendments, Etc............................................................................53
SECTION 8.02. Notices, Etc...............................................................................54
SECTION 8.03. No Waiver; Remedies........................................................................55
SECTION 8.04. Costs, Expenses and Taxes..................................................................55
SECTION 8.05. Indemnity..................................................................................56
SECTION 8.06. Right of Setoff............................................................................56
SECTION 8.07. Governing Law..............................................................................57
SECTION 8.08. Interest...................................................................................57
SECTION 8.09. Survival of Representations, Warranties and Covenants......................................57
SECTION 8.10. Binding Effect.............................................................................58
SECTION 8.11. Successors and Assigns; Participations.....................................................58
SECTION 8.12. Confidentiality............................................................................61
SECTION 8.13. Separability...............................................................................61
SECTION 8.14. Limitation by Law..........................................................................61
SECTION 8.15. Independence of Covenants..................................................................61
</TABLE>
Amended and Restated
Credit Agreement
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
SECTION 8.16. Judgment...................................................................................61
SECTION 8.17. Submission to Jurisdiction; Waiver of Immunities...........................................62
SECTION 8.18. Entire Agreement...........................................................................63
SECTION 8.19. Execution in Counterparts..................................................................63
</TABLE>
Annex I - Commitments
Exhibit 1.01. Administrative Questionnaire
Exhibit 2.04. Form of Borrowing Request
Exhibit 8.11. Form of Assignment and Acceptance
Schedule 4.01 Subsidiaries
Schedule 4.15 Assurances and Letters of Credit
Schedule 4.16 Enhancement Agreements
Amended and Restated
Credit Agreement
-iii-
<PAGE> 5
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of November 2, 1999, among:
(a) SERVICE CORPORATION INTERNATIONAL, a Texas corporation
(the "Company");
(b) the banks and other financial institutions named under the
caption "Banks" on the signature pages hereof (such banks together with each
other Person who becomes a Bank pursuant to Section 8.11, collectively, the
"Banks"); and
(c) THE CHASE MANHATTAN BANK, a New York banking corporation,
as administrative agent for the Banks (in such capacity together with any other
Person who becomes the Administrative Agent pursuant to Section 7.06, the
"Administrative Agent").
P R E L I M I N A R Y S T A T E M E N T
A. The Company has requested that the Banks extend a credit
facility to the Company in order to enable the Company to borrow on a revolving
credit basis on and after the date hereof, on the terms and conditions set forth
herein, a principal amount not in excess of $600,000,000. The Banks are willing
to extend such credit to the Company on the terms and subject to the conditions
herein set forth. Accordingly, the Company, the Banks and the Administrative
Agent agree as follows:
ARTICLE I
DEFINITIONS, ACCOUNTING TERMS AND CONSTRUCTION
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings:
"ABR Borrowing" means a Borrowing comprised of ABR Loans.
"ABR Loan" means any Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Acquisition" means the acquisition by the Company or any of
its Subsidiaries of a business, including any assets, leases and liabilities
(contingent or otherwise) related thereto, either by the purchase of stock or
assets for cash or other property or by an exchange or issuance of Equity
Interests (including merger) or assumption of liabilities or by a combination
thereof.
Amended and Restated
Credit Agreement
<PAGE> 6
"Administrative Agent" has the meaning specified in the
introduction to this Agreement.
"Administrative Questionnaire" means an Administrative
Questionnaire in the form of Exhibit 1.01, which each Bank shall complete and
provide to the Administrative Agent and the Company.
"Affiliate" means, when used with respect to any Person, any
other Person which controls or is controlled by or is under common control with
such Person. As used in this definition, "control" means the possession,
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of securities or partnership or ownership
interests, by contract or otherwise).
"Agreement" means this Credit Agreement.
"Agreement Currency" has the meaning specified in Section
8.16.
"Alternate Base Rate" means, for any date, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of
(a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. "Prime Rate" means, as of a
particular date, the prime rate most recently determined by the Administrative
Agent at the Principal Office, automatically fluctuating upward and downward
with and at the time specified in each such announcement without notice to the
Company or any other Person, which prime rate may not necessarily represent the
lowest or best rate actually charged to a customer. "Federal Funds Effective
Rate" means, for any day, the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Administrative Agent from three federal funds brokers of
recognized standing selected by it. If for any reason the Administrative Agent
shall have determined (which determination, made in good faith, shall create a
rebuttable presumption that the same is accurate) that it is unable to ascertain
the Federal Funds Effective Rate for any reason, including the inability or
failure of the Administrative Agent to obtain sufficient quotations in
accordance with the terms hereof, the Alternate Base Rate shall be determined
without regard to clause (b) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Creditor" has the meaning specified in Section
8.16.
Amended and Restated
Credit Agreement
-2-
<PAGE> 7
"Applicable Lending Office" means, with respect to each Bank,
such Bank's Domestic Lending Office in the case of an ABR Loan and such Bank's
Eurodollar Lending Office in the case of a Eurodollar Loan.
"Applicable Percentage" means, for any day, (a) with respect
to any Eurodollar Loan, the applicable percentage set forth below under the
caption "Eurodollar Spread" and (b) with respect to the Facility Fee, the
applicable percentage set forth below under the caption "Facility Fee Rate", in
each case determined by reference to the highest level applicable based upon the
ratings by S&P and Moody's in effect on such date for the Index Debt:
<TABLE>
<CAPTION>
Level 1 Level 2 Level 3 Level 4
------- ------- ------- -------
Ratings >=BBB and >=BBB- and >=BB+ and <BB+ or
(S&P/Moody's) >=Baa2 >=Baa3 >=Ba1 <Ba1
- ------------- ------ ------ ----- ----
<S> <C> <C> <C> <C>
Eurodollar Spread 1.00% 1.25% 1.375% 1.50%
Facility Fee Rate 0.25% 0.25% 0.375% 0.50%
</TABLE>
For purposes of the foregoing, (i) if either Moody's or S&P shall not have in
effect a rating for the Index Debt (other than by reason of the circumstances
referred to in the last sentence of this paragraph), then such rating agency
shall be deemed to have established a rating below BB+ or Ba1, as the case may
be; (ii) if the ratings established or deemed to have been established by
Moody's and S&P for the Index Debt shall fall within different levels, the
Applicable Percentage shall be based on the lower of the two ratings; and (iii)
if the ratings established or deemed to have been established by Moody's or S&P
for the Index Debt shall be changed (other than as a result of a change in the
rating system of Moody's or S&P), such change shall be effective as of the date
on which it is first announced by the applicable rating agency. Each change in
the Applicable Percentage shall apply for purposes of determining interest on
the outstanding Eurodollar Loans and the Facility Fee during the period
commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next such change. If the rating
system of Moody's or S&P shall change, or if either such rating agency shall
cease to be in the business of rating corporate debt obligations, the Company
and the Banks shall negotiate in good faith to amend this definition to reflect
such changed rating system or the absence of ratings from such rating agency
and, pending the effectiveness of such amendment, the Applicable Percentage
shall be determined by reference to the rating most recently in effect prior to
such change or cessation.
"Assignment and Acceptance" has the meaning specified in
Section 8.11(c).
"Assurance" means, as to any Person, any guaranty or other
contingent liability of such Person (other than any endorsement for collection
or deposit in the ordinary course of business) including, without limitation,
contingent liabilities as an account party in respect of letters of credit,
Amended and Restated
Credit Agreement
-3-
<PAGE> 8
direct or indirect, with respect to any obligation of another Person, through an
agreement or otherwise, including (a) any endorsement or discount with recourse
or other undertaking substantially equivalent to or having economic effect
similar to a guarantee in respect of any such obligation and (b) any agreement
(i) to purchase, or to advance or supply funds for the payment or purchase of,
any such obligation, (ii) to purchase, sell or lease property, products,
materials or supplies, or transportation or services, in order to enable such
other Person to pay any such obligation or to assure the owner thereof against
loss regardless of the delivery or non-delivery of the property, products,
materials or supplies or transportation or services or (iii) to make any loan,
advance or capital contribution to or other investment in, or to otherwise
provide funds to or for, such other Person in order to enable such Person to
satisfy any obligation (including any liability for a dividend, stock
liquidation payment or expense) or to assure a minimum equity, working capital
or other balance sheet condition for the benefit of the holder of any such
obligation. Notwithstanding the foregoing, the term "Assurance" shall not
include any guaranty or other contingent liability, direct or indirect, with
respect to (u) bonds, indemnity agreements and similar arrangements which are
provided to assure that the Company and its Subsidiaries fully perform their
obligations regarding prearranged funeral services and goods and/or construction
of burial facilities, (v) obligations of a Person acquired, or of a business
which has been acquired, in an Acquisition, provided that such obligations arose
prior to such Acquisition and were not created, incurred or assumed in
contemplation thereof, (w) obligations of a Subsidiary arising from an
Acquisition, (x) any duly authorized registered guaranty of the Company of a
promissory note of its Subsidiary issued or to be issued with respect to an
Acquisition in accordance with an Indenture dated as of May 1, 1970, executed
and delivered between the Company and Chase Bank of Texas, as Trustee, (y)
Letters of Credit, or (z) obligations of the Company under the Enhancement
Agreements. In no event shall any unfunded commitment extended by Provident in
the ordinary course of its business of extending financing to the death care
industry be considered an Assurance and the loans and advances made by Provident
pursuant to any such commitment shall constitute investments and not Assurances.
The amount of any Assurance shall be equal to the outstanding amount of the
obligation directly or indirectly guaranteed (to the full extent of the
obligation in respect of which such Assurance is given or the maximum liability
in respect of such Assurance of the Person giving the same, whichever shall be
less).
"Assured Obligation" means, as to any Person, any amount
guaranteed or otherwise supported by such Person pursuant to an Assurance.
"Banks" has the meaning specified in the introduction to this
Agreement.
"Board" means the Board of Governors of the Federal Reserve
System of the United States.
"Borrowing" means a borrowing consisting of concurrent Loans
from each of the Banks pursuant to Section 2.04 distributed ratably among the
Banks in accordance with their
Amended and Restated
Credit Agreement
-4-
<PAGE> 9
respective Commitments or resulting from a conversion or continuation of an
existing Borrowing pursuant to Section 2.06.
"Borrowing Date" means, with respect to each Borrowing made
pursuant to Section 2.03 or Section 2.04, the Business Day upon which the
proceeds of such Borrowing are to be made available to the Company.
"Borrowing Request" has the meaning specified in Section 2.04.
"Business Day" means any day other than a Saturday, Sunday or
legal holiday in the State of New York or Texas or other day on which banks in
New York City or in Houston, Texas are required or authorized by law to close;
provided, however, that, when used in connection with a Eurodollar Loan, the
term "Business Day" shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Capital Lease" means, as to any Person, any lease in respect
of which the obligations of such Person constitute Capitalized Lease
Obligations.
"Capitalized Lease Obligations" means, as to any Person, all
lease obligations which shall have been or should be, in accordance with GAAP,
capitalized on the books of such Person.
"Chase" means The Chase Manhattan Bank, a New York banking
corporation.
"Chase Bank of Texas" means Chase Bank of Texas, National
Association, a national banking association.
"Code" means the Internal Revenue Code of 1986 and the
regulations promulgated thereunder.
"Commitment" means, with respect to each Bank, the amount set
forth beneath the name of such Bank on Annex I (or, as to any Person that
becomes a Bank after the Execution Date, on the signature page of the Assignment
and Acceptance executed by such Person), as such amount may be permanently
terminated or reduced from time to time pursuant to Section 2.12, Section 2.14,
Section 2.15 or Section 8.11, and as such amount may be increased from time to
time by assignment or assumption pursuant to Section 2.14, Section 2.15 or
Section 8.11. The Commitment of each Bank shall automatically and permanently
terminate on the Maturity Date.
"Communications" has the meaning specified in Section 8.02.
"Company" has the meaning specified in the introduction to
this Agreement.
"Company Financials" has the meaning specified in Section
4.07.
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"Consolidated Assets" means, as to any Person, total
consolidated assets (including assets subject to Capital Leases) of such Person
and of its Subsidiaries, as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Debt" means the Debt of the Company and its
Subsidiaries, as determined on a consolidated basis in accordance with GAAP.
"Consolidated EBITDA" means, in respect of any fiscal quarter,
the sum of (a) Consolidated Net Income for such fiscal quarter and (b) the
amount of all Interest Expense, taxes paid during such fiscal quarter,
depreciation and amortization allowances and other non-cash expenses of the
Company and its Subsidiaries, as determined on a consolidated basis in
accordance with GAAP, but in the case of clause (b) only to the extent deducted
in the determination of Consolidated Net Income for such fiscal quarter.
"Consolidated Net Income" means, for any period, the net
income of the Company and its Subsidiaries for such period (taken as a
cumulative whole), determined on a consolidated basis in accordance with GAAP
and adjusted to exclude (a) net after-tax extraordinary gains or losses, (b)
restructuring charges, and (c) the cumulative effect of any changes in
accounting principles.
"Consolidated Subsidiary" means, with respect to any Person,
each Subsidiary of such Person the accounts of which are or should be
consolidated with the accounts of such Person in reporting the consolidated
financial statements of such Person in accordance with GAAP.
"Debt" means, when used with respect to any Person, without
duplication, (a) all indebtedness of such Person for borrowed money (whether by
loan or the issuance and sale of debt securities) or for the deferred purchase
price of property or services (excluding, however, Letter of Credit Obligations
of such Person), (b) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property), (c) all Capitalized Lease Obligations of such Person, (d) all
obligations of such Person in respect of interest rate protection agreements,
foreign currency exchange agreements or other similar agreements and
arrangements (the amount of any such obligation to be the amount that would be
payable upon the acceleration, termination or liquidation thereof), (e)
liabilities in respect of unfunded vested benefits under Plans, and (f) all Debt
of such Person referred to in clause (a), (b) (c) or (d) above secured by (or
for which the holder of such Debt has an existing right, contingent or otherwise
to be secured by) any Lien upon or interest in property (including accounts and
general intangibles, as such terms are defined in the Uniform Commercial Code in
effect in the State of New York) owned by such Person, even though such Person
has not assumed or become liable for the payment of such Debt. For purposes of
this Agreement, the term "Debt" shall exclude (i) Operating Lease Obligations
and (ii) obligations in respect of agreements and arrangements described in
clause (d) above to the extent (and only to the extent) such
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agreements and arrangements are entered into to protect such Person and its
Subsidiaries against interest rate and exchange rate risks related to their
respective businesses, and not for speculative purposes.
"Default" means the occurrence of any event which with the
giving of notice or the passage of time or both could become an Event of
Default.
"Distribution" means (a) dividends or other distributions or
payments on capital stock or other Equity Interests of the Company (except
distributions in such stock or other Equity Interests); and (b) the redemption
or acquisition of Equity Interests of the Company or of warrants, rights or
other options to purchase Equity Interests of the Company (except when solely in
exchange for Equity Interests of the Company) unless made, contemporaneously,
from the net proceeds of a sale of Equity Interests of the Company.
"Dollars","dollars" and the symbol "$", without more, mean the
lawful currency of the United States of America.
"Domestic Lending Office" means, with respect to any Bank, the
office of such Bank specified as its "Domestic Lending Office" on such Bank's
signature page to this Agreement or, as to any Person who becomes a Bank after
the Execution Date, on the signature page of the Assignment and Acceptance
executed by such Person or such other office of such Bank as such Bank may
hereafter designate from time to time as its "Domestic Lending Office" by notice
to the Company and the Administrative Agent.
"Effective Date" means the date on which the conditions to
borrowing set forth in Article III are first met.
"Eligible Assignee" means (a) any Bank or any Affiliate of a
Bank; (b) a commercial bank organized or licensed under the laws of the United
States, or any state thereof, and having total assets in excess of
$1,000,000,000; (c) a commercial bank organized under the laws of any other
country which is a member of the OECD, or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000; provided that such
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (d) the central
bank of any country which is a member of the OECD; and (e) any other lender
approved by the Administrative Agent and the Company (which approval shall not
be unreasonably withheld).
"Enforcement Subsidiary" means, as to Provident, any
Wholly-owned Subsidiary formed by Provident for the purpose of foreclosing or
otherwise realizing upon the assets securing obligations due to Provident
pursuant to investments made by Provident.
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"Enhancement Agreements" means the Support Agreements, the
Inducement Agreement and all other similar agreements.
"Equity Interests" means, with respect to any Person, shares
of the capital stock, partnership interests or other equity interests in such
Person or any warrants, options or other rights to acquire any such equity
interests.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated thereunder.
"ERISA Group" means all corporations, trades or businesses
(whether or not incorporated) and other Persons which, together with the
Company, are treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D.
"Eurodollar Borrowing" means a Borrowing comprised of
Eurodollar Loans.
"Eurodollar Lending Office" means, with respect to each Bank,
the branch or Affiliate of such Bank which such Bank has designated as its
"Eurodollar Lending Office" on such Bank's signature page to this Agreement or,
as to any Person who becomes a Bank after the Execution Date, on the signature
page of the Assignment and Acceptance executed by such Person or such other
office of such Bank as such Bank may hereafter designate from time to time as
its "Eurodollar Lending Office" by notice to the Company and the Administrative
Agent.
"Eurodollar Loan" means any Loan bearing interest at a rate
determined by reference to the IBO Rate in accordance with the provisions of
Article II.
"Event of Default" means any of the events described in
Article VI.
"Execution Date" means the earliest date upon which all of the
following shall have occurred: counterparts of this Agreement shall have been
executed by the Company, each Bank and the Administrative Agent, and the
Administrative Agent shall have received counterparts hereof which taken
together, bear the signatures of the Company and each Bank.
"Existing Termination Date" has the meaning specified in
Section 2.21.
"Extended Termination Date" means, as at any date, the date to
which the Termination Date has then most recently been extended pursuant to
Section 2.21.
"Facility Fees" has the meaning specified in Section 2.07(a).
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"FDIC" means the Federal Deposit Insurance Corporation (or any
successor thereto).
"Federal Funds Effective Rate" has the meaning specified in
the definition of the term Alternate Base Rate.
"Fee Letter" means the fee letter agreement dated October 11,
1999 between the Company, the Administrative Agent and Chase Securities Inc.
"Financial Provisions" has the meaning specified in Section
1.02(c).
"FST" means SCI Texas Funeral Services, Inc., a Texas
corporation.
"Funded Debt" means any Debt of any Person (including any
Capitalized Lease Obligation of such Person, but not including any deferred
taxes) payable more than one year from the date of the creation thereof. The
interests of minority shareholders in such Person's Consolidated Subsidiaries
which are shown on the liability side of a balance sheet as "minority interests"
but which are not "obligations" are not within the definition of "Funded Debt."
"GAAP" means generally accepted accounting principles as set
forth in the opinions, statements and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants, the
Financial Accounting Standards Board and such other Persons as shall be approved
by a significant segment of the accounting profession and concurred in by the
independent certified public accountants certifying any audited financial
statements of the Company, as such principles shall be in effect at the time of
any computation or determination or as of the date of the relevant financial
statements, as the case may be (the "Relevant Date"), subject to Section 1.02.
"Highest Lawful Rate" means, as to any Bank, at the particular
time in question, the maximum nonusurious rate of interest which, under
applicable law, such Bank is then permitted to charge the Company on the Loans.
If the maximum rate of interest which, under applicable law, the Banks are
permitted to charge the Company on the Loans shall change after the date hereof,
to the extent permitted by applicable law, the Highest Lawful Rate shall be
automatically increased or decreased, as the case may be, as of the effective
time of such change without notice to the Company or any other Person.
"IBO Rate" means, with respect to each date during each
Interest Period pertaining to a Eurodollar Borrowing (other than an Interest
Period of 14 days), the rate appearing on page 3750 of Telerate (or on any
successor or substitute page, or any page of any successor to or substitute for
Telerate, providing rate quotations comparable to those currently provided on
such page, as determined by the Administrative Agent from time to time for
purposes of providing quotations of interest rates applicable to deposits in
Dollars in the London interbank market) at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Interest Period,
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as the rate for deposits in Dollars approximately equal in principal amount to
such Eurodollar Borrowing and with a maturity equal to such Interest Period. In
the event that such rate is not available at such time for any reason, and in
the case of an Interest Period of 14 days, then the "IBO Rate" with respect to
such Eurodollar Borrowing for such Interest Period shall be the rate (rounded to
the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, the next higher
1/16 of 1%) at which deposits in Dollars approximately equal in principal amount
to such Eurodollar Borrowing and with a maturity equal to such Interest Period
are offered in immediately available funds to the Administrative Agent by
leading banks in the London interbank market at approximately 11:00 a.m., London
time (or as soon thereafter as possible), two Business Days prior to the
commencement of such Interest Period.
"Inactive Subsidiaries" means Subsidiaries of the Company
which are not actively engaged in the conduct of business and whose assets
and/or Liabilities are not material to the financial condition of the Company
and its Subsidiaries taken as a whole.
"Index Debt" means the Company's senior, unsecured, non-credit
enhanced Funded Debt.
"Inducement Agreement" means, collectively, the letter
agreement dated August 23, 1993 among the Company, PSI Funding, Inc. and FST and
the letter agreement dated April 5, 1993 among the Company, Chase Bank of Texas
and Provident.
"Intangibles" has the meaning normally ascribed thereto in
accordance with GAAP and shall include (a) excess cost over fair market value of
tangible assets acquired, (b) patents and patent rights, (c) trademarks, service
marks and trade names, (d) copyrights and (e) goodwill.
"Interest Expense" means, with respect to any fiscal quarter,
without duplication, the following (in each case, eliminating all offsetting
debits and credits between the Company and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Subsidiaries in accordance with
GAAP): all interest in respect of Debt of the Company and its Subsidiaries
(including imputed interest on Capital Lease Obligations) paid in cash during,
and deducted in determining Consolidated Net Income for, such fiscal quarter.
"Interest Payment Date" means with respect to any Eurodollar
Loan or ABR Loan, the last day of the Interest Period applicable thereto and, in
addition, the date on which such Loan is repaid or prepaid and, in the case of a
Eurodollar Loan with an Interest Period of 6 months, the day that would have
been the Interest Payment Date for such Loan had an Interest Period of 3 months
been applicable to such Loan.
"Interest Period" means, with respect to any Borrowing:
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(a) If such Borrowing is a Eurodollar Borrowing, the period
commencing on the Borrowing Date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the case
may be, and ending (A) 14 days thereafter (subject to market availability) or
(B) on the numerically corresponding day (or if there is no corresponding day,
the last day) in the calendar month that is one, two, three or six months
thereafter, as the Company may elect; and
(b) If such Borrowing is an ABR Borrowing, the period
commencing on the Borrowing Date of such Borrowing and ending on the earliest of
(A) the next succeeding March 31, June 30, September 30 or December 31, and (B)
the Maturity Date.
Notwithstanding the foregoing, (i) if any Interest Period would end on a day
which shall not be a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless, with respect to Eurodollar Loans only, such
next succeeding Business Day would fall in the next calendar month, in which
case such Interest Period shall end on the next preceding Business Day, and (ii)
no Interest Period may be selected for any Borrowing that ends later than the
Maturity Date. Interest shall accrue from and including the first day of an
Interest Period to but excluding the last day of such Interest Period.
"Judgment Currency" has the meaning specified in Section 8.16.
"Letter of Credit Obligations" means, when used with respect
to any Person, the contingent obligations of such Person in respect of Letters
of Credit.
"Letters of Credit" means, as to any Person, letters of credit
issued for the account of such Person other than letters of credit issued to pay
the purchase price of goods or services acquired in the ordinary course of
business by such Person or any other Person.
"Liabilities" of any Person has the meaning normally ascribed
thereto in accordance with GAAP and shall include (a) Capitalized Lease
Obligations of such Person or any of its Subsidiaries, (b) the interests of
minority shareholders in consolidated Subsidiaries of such Person, (c)
indebtedness secured by Liens against any property of such Person or any of its
Subsidiaries whether or not such Person or such Subsidiary is liable for the
payment thereof, (d) subordinated debt and (e) deferred liabilities.
"Lien" means, when used with respect to any Person, any
mortgage, lien, charge, pledge, security interest or encumbrance of any kind
(whether voluntary or involuntary and whether imposed or created by operation of
law or otherwise) upon, or pledge of, any of its property or assets, whether now
owned or hereafter acquired, or any lease intended as security, any conditional
sale agreement, or any other title retention agreement.
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"Loans" means the revolving loans made by the Banks to the
Company pursuant to Section 2.04. Each Loan shall be a Eurodollar Loan or an ABR
Loan.
"Majority Banks" means, at any time, Banks holding at least
662/3% of the Total Commitment or (if either the Total Commitment has been
terminated or "Majority Banks" is being determined for purposes of Article VI)
Banks holding at least 662/3% of the then aggregate unpaid principal amount of
the outstanding Loans.
"Margin Stock" has the meaning specified in Section 4.13.
"Material Subsidiary" means, with respect to any Person, each
Subsidiary of such Person that would be a "significant subsidiary" as such term
is defined in Regulation S-X promulgated pursuant to the Securities Exchange Act
of 1934 as amended to the Effective Date; provided, however, for purposes of
determining whether any Subsidiary is a "Material Subsidiary," the reference to
"10 percent" in clauses (1), (2) and (3) of the definition of "significant
subsidiary" contained in said Regulation S-X shall be a reference to 5 percent.
"Maturity Date" means the Existing Termination Date.
"Maximum Permissible Rate" has the meaning specified in
Section 8.08.
"Moody's" means Moody's Investors Service.
"Net Worth" means, in relation to the Company and its
Subsidiaries, Consolidated Assets of the Company less total liabilities of the
Company and its Subsidiaries, as determined on a consolidated basis in
accordance with GAAP.
"Notice of Extension" has the meaning specified in Section
2.21.
"Notice of Revocation" has the meaning specified in Section
2.21.
"OECD" means the Organization for Economic Cooperation and
Development (or any successor).
"Officer's Certificate" means a certificate signed in the name
of the Company by its President, one of its Vice Presidents, its Treasurer, its
Secretary or one of its Assistant Treasurers or Assistant Secretaries.
"Operating Lease Obligations" means obligations of a Person in
respect of any lease or agreement to lease other than Capitalized Lease
Obligations of such Person.
"Original Termination Date" means October 29, 2000.
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"Other Activities" has the meaning specified in Section 7.03.
"Other Financings" has the meaning specified in Section 7.03.
"Other Taxes" has the meaning specified in Section 2.20.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to all or any of its functions under ERISA.
"Person" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock company,
trust, unincorporated association, joint venture or other entity, or a foreign
state or political subdivision thereof or any agency of such state or
subdivision.
"Plan" means any employee pension benefit plan maintained or
contributed to by the Company or any of its Subsidiaries or by any trade or
business (whether or not incorporated) under common control (as defined in
Section 4001(a)(14) or 4001(b) of ERISA) with the Company and insured by the
PBGC under Title IV of ERISA.
"Prime Rate" has the meaning specified in the definition of
the term Alternate Base Rate.
"Principal Office" means the office of the Administrative
Agent located at 270 Park Avenue, New York, New York 10017, or such other office
as the Administrative Agent may hereafter designate in writing as such to the
other parties hereto.
"Provident" means Provident Services, Inc., a Delaware
corporation.
"Register" has the meaning specified in Section 8.11(e).
"Regulation A" means Regulation A of the Board (respecting
loans to depository institutions), as the same is from time to time in effect,
and all official rulings and interpretations thereunder or thereof.
"Regulation D" means Regulation D of the Board (respecting
reserve requirements), as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
"Regulation U" means Regulation U of the Board (respecting
margin credit extended by banks), as the same is from time to time in effect,
and all official rulings and interpretations thereunder or thereof.
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"Regulation X" means Regulation X of the Board (respecting
borrowers who obtain margin credit), as the same is from time to time in effect,
and all official rulings and interpretations thereunder or thereof.
"Relevant Date" has the meaning specified in the definition of
the term GAAP.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.
"Subsidiary" means, with respect to any Person, any
corporation in which more than 50% of the stock of each class having ordinary
voting power shall, at the time as of which any determination is being made, be
owned of record and beneficially by such Person directly and/or through one or
more other Subsidiaries.
"Substantially-owned Subsidiary" means a Subsidiary of the
Company at least 80% of the outstanding capital stock of which, at the time any
determination is being made, is owned of record and beneficially by the Company
directly and/or through one or more other Subsidiaries.
"Support Agreements" means (a) the Support Agreement dated as
of September 14, 1988 between the Company and Provident, (b) the Australian
Support Agreement dated as of November 1, 1993 between the Company and Service
Corporation International Australia Pty Limited and (c) the three Support
Agreements dated respectively as of January 28, 1994, September 30, 1994 and
November 14, 1994, each between the Company and FST.
"Tangible Consolidated Assets" means, as to any Person,
Consolidated Assets less all Intangibles of such Person and its Consolidated
Subsidiaries.
"Taxes" has the meaning specified in Section 2.20.
"Termination Date" means, except as expressly provided in
Section 2.21(d) and Section 2.21(e), at any time, the Original Termination Date
or an Extended Termination Date, as the case may be or, in either case, the
earlier date of termination in whole of the Total Commitment pursuant to Section
2.12 or Section 6.01.
"Total Capitalization" means, as of the date any determination
is made, the sum of Net Worth plus Consolidated Debt.
"Total Commitment" means, at any time, the aggregate amount of
the Banks' Commitments, as in effect at such time.
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"Type" means, when used in respect of any Loan or Borrowing,
each of the following types of Loans or Borrowings as applicable: Eurodollar
Loan or Eurodollar Borrowing and ABR Loan or ABR Borrowing.
"United States" and "U.S." each means United States of
America.
"Wholly-owned Subsidiary" means, as to any Person, a
Subsidiary, 100% of the stock of every class of which (except for directors'
qualifying shares) at the time as of which any determination is being made, is
owned of record and beneficially by such Person directly and/or through one or
more other Subsidiaries.
SECTION 1.02. Accounting Terms and Determinations.
(a) Except as otherwise provided in this Agreement, all
computations and determinations as to accounting or financial matters and all
financial statements to be delivered pursuant to this Agreement shall be made
and prepared in accordance with GAAP (including principles of consolidation
where appropriate), and all accounting or financial terms shall have the
meanings ascribed to such terms by GAAP.
(b) If any change in GAAP after the date of this Agreement
shall be required to be applied to transactions then or thereafter in existence,
and a violation of or default under one or more provisions of this Agreement
shall have occurred or in the opinion of the Company would likely occur which
would not have occurred or be likely to occur if no change in accounting
principles had taken place:
(i) the parties agree that such violation or default shall not
constitute an Event of Default or a Default for a period of 60 days
from the date the Company notifies the Administrative Agent of the
application of this Section 1.02(b) identifying such change and the
provisions of this Agreement affected thereby;
(ii) the parties agree in such event to negotiate in good
faith an amendment of this Agreement which shall approximate to the
extent possible the economic effect of the original financial
covenants after taking into account such change in GAAP; and
(iii) if the parties are unable to agree on such an amendment
within such 60-day period, the Company shall have the option of (A)
prepaying the Loans (pursuant to Section 2.13 and the other
applicable provisions hereof) within 120 days from the date the
Company notifies the Administrative Agent of the application of this
Section 1.02(b) or (B) making all future calculations by application
of GAAP applied on a basis consistent with those in effect
immediately prior to such change in GAAP. If the Company does not
exercise either such option within said period by written notice to
the Administrative
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Agent, then as used in this Agreement, "GAAP" shall mean generally
accepted accounting principles in effect at the Relevant Date.
(c) If any change in GAAP after the date of this Agreement
shall be required to be applied to transactions or conditions then or thereafter
in existence, and the Administrative Agent shall assert that the effect of such
change is or shall likely be to distort materially the effect of any of the
definitions of financial terms in Article I or any of the financial covenants of
the Company in Article V (the "Financial Provisions"), so that the intended
economic effect of any of the Financial Provisions will not in fact be
accomplished:
(i) the Administrative Agent shall notify the Company of such
assertion, specifying the change in GAAP which is objected to, and
until otherwise determined as provided below, the specified change in
GAAP shall not be made by the Company in its financial statements for
the purpose of applying the Financial Provisions; and
(ii) the parties shall follow the procedures set forth in
paragraph (ii) and the first sentence of paragraph (iii) of
subsection (b) of this Section 1.02. If the parties are unable to
agree on an amendment as provided in said paragraph (ii) and if the
Company does not exercise the option set forth in the first sentence
of said paragraph (iii) within the specified period, then as used in
this Agreement "GAAP" shall mean generally accepted accounting
principles in effect at the Relevant Date, except that the specified
change in GAAP which is objected to by the Administrative Agent shall
not be made in applying the Financial Provisions.
SECTION 1.03. Interpretation. (a) In this Agreement, unless a
clear contrary intention appears:
(i) the singular number includes the plural number and vice
versa;
(ii) reference to any gender includes each other gender;
(iii) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision;
(iv) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns
are permitted by this Agreement, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually, provided that nothing in this clause (iv) is intended
to authorize any assignment not otherwise permitted by this
Agreement;
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(v) reference to any agreement, document or instrument,
including this Agreement, means such agreement, document or
instrument as amended, supplemented or modified and in effect from
time to time in accordance with the terms thereof and, if
applicable, the terms hereof;
(vi) unless the context indicates otherwise, reference to any
Article, Section, Schedule or Exhibit means such Article or Section
hereof or such Schedule or Exhibit hereto;
(vii) the word "including" (and with correlative meaning
"include") means including, without limiting the generality of any
description preceding such term;
(viii) with respect to the determination of any period of
time, the word "from" means "from and including" and the word "to"
means "to but excluding"; and
(ix) reference to any law means such as amended, modified,
codified or reenacted, in whole or in part, and in effect from time
to time.
(b) The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
(c) No provision of this Agreement shall be interpreted or
construed against any Person solely because that Person or its legal
representative drafted such provision.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments. (a) Subject to the terms and
conditions and relying upon the representations and warranties herein set forth,
each Bank agrees, severally and not jointly, to make Loans to the Company, at
any time and from time to time on and after the Effective Date and until the
Termination Date in an aggregate principal amount at any time outstanding not to
exceed such Bank's Commitment, subject, however, to the conditions that (i) at
no time shall the outstanding aggregate principal amount of all Loans exceed the
Total Commitment and (ii) at all times the outstanding aggregate principal
amount of all Loans made by each Bank shall equal the product of (A) the
percentage which its Commitment represents of the Total Commitment times (B) the
outstanding aggregate principal amount of all Loans made pursuant to Section
2.04. Each Bank's Commitment, as in effect on the Execution Date, is set forth
opposite its name on Annex I. Such Commitments may be terminated or reduced from
time to time pursuant to Section 2.12.
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(b) Within the foregoing limits and subject to the terms,
conditions and limitations set forth herein, the Company may borrow, pay or
prepay and reborrow hereunder, on and after the Effective Date and prior to the
Termination Date.
SECTION 2.02. Loans. (a) Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Banks ratably in accordance with their
Commitments; provided, however, that the failure of any Bank to make any Loan
shall not in itself relieve any other Bank of its obligation to lend hereunder
(it being understood, however, that no Bank shall be responsible for the failure
of any other Bank to make any Loan required to be made by such other Bank). The
Loans comprising any Borrowing shall be in an aggregate principal amount which
is an integral multiple of $1,000,000 and not less than $5,000,000 (or an
aggregate principal amount equal to the remaining balance of the available
Commitments).
(b) Each Bank may at its option make any Eurodollar Loan by
causing its Eurodollar Lending Office to make such Loan; provided that any
exercise of such option shall not affect the obligation of the Company to repay
such Loan in accordance with the terms of this Agreement. Borrowings of more
than one Type may be outstanding at the same time; provided, however, that the
Company shall not be entitled to request any Borrowing which, if made, would
result in an aggregate of more than ten separate Loans of any Bank to the
Company being outstanding hereunder at any one time. For purposes of the
foregoing, Loans having different Interest Periods, regardless of whether they
commence on the same date, shall be considered separate Loans.
(c) Subject to Section 2.05, each Bank shall make each Loan to
be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds to the Administrative Agent in New York City, not
later than 12:30 p.m., New York City time, and the Administrative Agent shall by
3:00 p.m., New York City time, credit the amounts so received to the general
deposit account of the Company with the Administrative Agent or, if a Borrowing
shall not occur on such date because any condition precedent herein specified
shall not have been met, return the amounts so received to the respective Banks.
Unless the Administrative Agent shall have received notice from a Bank prior to
the date of any Borrowing that such Bank will not make available to the
Administrative Agent such Bank's portion of such Borrowing, the Administrative
Agent may assume that such Bank has made such portion available to the
Administrative Agent on the date of such Borrowing in accordance with this
Section 2.02(c) and the Administrative Agent may, in reliance upon such
assumption, make available to the Company on such date a corresponding amount.
If and to the extent that such Bank shall not have made such portion available
to the Administrative Agent, such Bank and the Company severally agree to repay
to the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Company until the date such amount is repaid to the
Administrative Agent at (i) in the case of the Company, the interest rate
applicable at the time to the Loans comprising such Borrowing and (ii) in the
case of such Bank, the Federal Funds Effective Rate. If such Bank shall repay to
the Administrative Agent such
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corresponding amount, such amount shall constitute such Bank's Loan as part of
such Borrowing for purposes of this Agreement.
(d) Notwithstanding any other provision of this Agreement, the
Company shall not be entitled to request any Borrowing pursuant to Section 2.04
if the Interest Period requested with respect thereto would end after the
Maturity Date.
SECTION 2.03. [Intentionally Omitted]
SECTION 2.04. Borrowing Procedure. In order to effect a
Borrowing, the Company shall give written notice (or telephone notice promptly
confirmed in writing) to the Administrative Agent, substantially in the form of
Exhibit 2.04 (a "Borrowing Request"), (a) in the case of a Eurodollar Borrowing,
not later than noon, New York City time, three Business Days before the
Borrowing Date specified for such proposed Borrowing, and (b) in the case of an
ABR Borrowing, not later than 11:00 a.m., New York City time, on the Borrowing
Date specified for such proposed Borrowing. Such Borrowing Request shall be
irrevocable and shall in each case refer to this Agreement and specify (x)
whether the Borrowing then being requested is to be a Eurodollar Borrowing or an
ABR Borrowing, (y) the Borrowing Date of such Borrowing (which shall be a
Business Day) and the aggregate amount thereof (which shall not be less than
$5,000,000 and shall be an integral multiple of $1,000,000) and (z) the Interest
Period with respect thereto. If no election as to the Type of Borrowing is
specified in any such notice, then the requested Borrowing shall be an ABR
Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is
specified in any such Borrowing Request, then the Company shall be deemed to
have selected an Interest Period of one month's duration. If the Company shall
not have given notice in accordance with this Section 2.04 of its election to
refinance a Borrowing prior to the end of the Interest Period in effect for such
Borrowing, then the Company shall (unless such Borrowing is repaid at the end of
such Interest Period) be deemed to have given notice of an election to refinance
such Borrowing with an ABR Borrowing. The Administrative Agent shall promptly
advise the Banks of any Borrowing Request given pursuant to this Section 2.04
and of each Bank's portion of the requested Borrowing by facsimile transmission.
SECTION 2.05. Refinancings. The Company may refinance all or
any part of any of its Borrowings with a Borrowing of the same or a different
Type made pursuant to Section 2.03 or Section 2.04, subject to the conditions
and limitations set forth herein and elsewhere in this Agreement. Any Borrowing
or part thereof so refinanced shall be deemed to be repaid in accordance with
Section 2.08 with the proceeds of a new Borrowing hereunder and the proceeds of
the new Borrowing, to the extent they do not exceed the principal amount of the
Borrowing being refinanced, shall not be paid by the Banks to the Administrative
Agent or by the Administrative Agent to the Company pursuant to Section 2.02(c);
provided, however, that (a) if the principal amount extended by a Bank in a
refinancing is greater than the principal amount, if any, extended by such Bank
in the Borrowing being refinanced, then such Bank shall pay such difference to
the Administrative Agent
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for distribution to the Banks described in clause (b) below, (b) if the
principal amount extended by a Bank in the Borrowing being refinanced is greater
than the principal amount, if any, being extended by such Bank in the
refinancing, the Administrative Agent shall return the difference to such Bank
out of amounts received pursuant to clause (a) above, (c) to the extent any Bank
fails to pay the Administrative Agent amounts due from it pursuant to clause (a)
above, any Borrowing or portion thereof being refinanced shall not be deemed
repaid in accordance with Section 2.08 to the extent of such failure and the
Company shall pay such amount to the Administrative Agent pursuant to Section
2.08 and (d) to the extent the Company fails to pay to the Administrative Agent
any amounts due in accordance with Section 2.08 as a result of the failure of a
Bank to pay the Administrative Agent any amounts due as described in clause (c)
above, the portion of any refinanced Borrowing deemed not repaid shall be deemed
to be outstanding solely to the Bank which has failed to pay the Administrative
Agent amounts due from it pursuant to clause (a) above to the full extent of
such Bank's portion of such refinanced Loan.
SECTION 2.06. Conversion and Continuation of Borrowings. The
Company shall have the right at any time upon prior irrevocable notice to the
Administrative Agent (a) not later than 8:30 a.m., New York City time, one
Business Day prior to conversion, to convert any Eurodollar Borrowing into an
ABR Borrowing, (b) not later than noon, New York City time, three Business Days
prior to conversion or continuation, to convert any ABR Borrowing into a
Eurodollar Borrowing or to continue any Eurodollar Borrowing as a Eurodollar
Borrowing for an additional Interest Period and (c) not later than 11:00 a.m.,
New York City time, three Business Days prior to conversion, to convert the
Interest Period with respect to any Eurodollar Borrowing to another permissible
Interest Period, subject in each case to the following:
(i) each conversion or continuation shall be made pro rata
among the Banks in accordance with the respective principal amounts
of the Loans comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, the aggregate principal
amount of such Borrowing converted or continued shall be an integral
multiple of $1,000,000 and not less than $5,000,000;
(iii) if any Eurodollar Borrowing is converted at a time other
than the end of the Interest Period applicable thereto, the Company
shall pay, upon demand, any amounts due to the Banks pursuant to
Section 2.16;
(iv) any portion of a Borrowing maturing or required to be
repaid in less than one month (or 14 days, if such an Interest Period
is available) may not be converted into or continued as a Eurodollar
Borrowing;
(v) any portion of a Borrowing which cannot be continued as or
converted into a Eurodollar Borrowing by reason of clause (iv) above
shall be automatically converted
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into or continued as an ABR Borrowing at the end of the Interest
Period in effect for such Borrowing; and
(vi) no Interest Period may be selected for any Eurodollar
Borrowing that would end later than the Maturity Date.
Each notice pursuant to this Section 2.06 shall be irrevocable and shall refer
to this Agreement and specify (w) the identity and amount of the Borrowing that
the Company requests be converted or continued, (x) whether such Borrowing is to
be converted to or continued as a Eurodollar Borrowing or an ABR Borrowing, (y)
if such notice requests a conversion, the date of such conversion (which shall
be a Business Day) and (z) if such Borrowing is to be converted to or continued
as a Eurodollar Borrowing, the Interest Period with respect thereto. If no
Interest Period is specified in any such notice with respect to any conversion
to or continuation as a Eurodollar Borrowing, the Company shall be deemed to
have selected an Interest Period of one month's duration. The Administrative
Agent shall promptly advise the other Banks of any notice given pursuant to this
Section 2.06 and of each Bank's portion of any converted or continued Borrowing.
If the Company shall not have given notice in accordance with this Section 2.06
to continue any Borrowing into a subsequent Interest Period (and shall not
otherwise have given notice in accordance with this Section 2.06 to convert such
Borrowing), such Borrowing shall, at the end of the Interest Period applicable
thereto (unless repaid pursuant to the terms hereof), automatically be converted
into or continued as an ABR Borrowing.
SECTION 2.07. Fees. (a) The Company agrees to pay in
immediately available funds to the Administrative Agent for the account of each
Bank, (i) on each March 31, June 30, September 30 and December 31, commencing
December 31, 1999, and (ii) on the Maturity Date and on any other date on which
the Commitment of such Bank has been terminated, facility fees (each a "Facility
Fee" and collectively, the "Facility Fees"), which shall accrue at the
Applicable Percentage on the amount of the Commitment of such Bank from time to
time outstanding, whether used, deemed used or unused, during the calendar
quarter (or shorter period commencing with the Execution Date and/or ending on
the Maturity Date) then ended; provided, however, if any Loans are outstanding
to any Bank after the Maturity Date then such Facility Fee shall continue to
accrue on the daily amount of such Bank's outstanding Loans from and including
the Maturity Date to but excluding the date all such Loans are paid in full.
(b) All Facility Fees shall be computed by the Administrative
Agent on the basis of the actual number of days elapsed in a year of 360 days,
and such computations, made in good faith, shall create rebuttable presumption
that they are accurate. The Facility Fees due to each Bank shall commence to
accrue on the Execution Date and shall cease to accrue on the earlier of the
Maturity Date and the termination of the Commitment of such Bank as provided
herein.
(c) The Facility Fees due under this Section 2.07 shall be
paid on the date due, in immediately available funds, to the Administrative
Agent for distribution among the Banks.
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(d) The Company agrees to pay to the Administrative Agent the
fees as provided in the Fee Letter.
(e) Notwithstanding the foregoing, in no event shall any Bank
be permitted to receive any compensation hereunder constituting interest in
excess of the Highest Lawful Rate.
SECTION 2.08. Repayment of Loans. (a) The Company agrees to
pay the outstanding principal balance of each Loan on the Maturity Date. Each
Loan shall bear interest from the date of the Borrowing of which such Loan is a
part on the outstanding principal balance thereof as set forth in Section 2.09.
(b) Each Bank shall, and is hereby authorized by the Company
to make in its internal records relating to each Loan an appropriate notation
evidencing the date, amount and the Type of each Loan of such Bank to the
Company, the rate of interest applicable to such Loan and each payment or
prepayment of principal of and interest on such Loan. The aggregate unpaid
principal amount so recorded shall be presumptive evidence of the principal
amount owing by the Company to such Bank in respect of such Loan. The failure of
any Bank to make such a notation or any error therein shall not in any manner
affect the obligation of the Company to repay the Loans made by such Bank in
accordance with the terms hereof.
SECTION 2.09. Interest on Loans. (a) Subject to the provisions
of Sections 2.09(c), 2.10 and 2.11, the Loans comprising each Eurodollar
Borrowing shall bear interest (computed on the basis of the actual number of
days elapsed over a year of 360 days) at a rate per annum equal to the lesser of
(i) the IBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Percentage in effect for such Loans from time to time and (ii) the
Highest Lawful Rate
(b) Subject to the provisions of Section 2.09(c) and Section
2.10, the Loans comprising each ABR Borrowing shall bear interest (computed on
the basis of the actual number of days elapsed over a year of 365 or 366 days,
as the case may be, if the Alternate Base Rate shall be based on the Prime Rate,
and a year of 360 days otherwise) at a rate per annum equal to the Alternate
Base Rate, but not in excess of the Highest Lawful Rate.
(c) Interest on each Loan shall be payable in arrears on each
Interest Payment Date applicable to such Loan except as otherwise provided in
this Agreement. The applicable IBO Rate or Alternate Base Rate for each Interest
Period or day within an Interest Period, as the case may be, shall be determined
by the Administrative Agent (which determination, made in good faith, shall
create a rebuttable presumption that the same is accurate). The Administrative
Agent shall promptly advise the Company and each Bank, as appropriate, of such
determination.
SECTION 2.10. Interest on Overdue Amounts. If the Company
shall default in the payment of the principal of or interest on any Loan or any
other amount becoming due hereunder,
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whether at scheduled maturity, by notice of prepayment, acceleration or
otherwise the Company shall on demand from time to time pay interest, to the
extent permitted by law, on such defaulted amount up to (but not including) the
date of actual payment (after as well as before judgment) at a rate per annum
equal to the lesser of (a) the Alternate Base Rate plus 2% per annum (if the
Alternate Base Rate is based on the Prime Rate, computed on the basis of the
actual number of days elapsed over a year of 365 or 366 days, as the case may
be; if the Alternate Base Rate is based on the Federal Funds Effective Rate,
computed on the basis of the actual number of days elapsed over a year of 360
days) and (b) the Highest Lawful Rate.
SECTION 2.11. Alternate Rate of Interest. In the event, and on
each occasion, that on the day two Business Days prior to the commencement of
any Interest Period for a Eurodollar Borrowing, (a) the Administrative Agent
shall have determined that dollar deposits in the principal amounts of the Loans
comprising such Borrowing are not generally available in the London interbank
market, or (b) the Majority Banks shall have determined (and notified the
Administrative Agent) that the rate at which such dollar deposits are being
offered will not adequately and fairly reflect the cost to any Bank of making or
maintaining its Eurodollar Loan during such Interest Period, the Administrative
Agent shall, as soon as practicable thereafter, give written notice of such
determination to the Company and the Banks. In the event of any such
determination, any request by the Company for a Eurodollar Loan shall, until the
circumstances giving rise to such notice no longer exist, be deemed to be a
request for an ABR Loan. Each such determination by the Administrative Agent or
the Majority Banks hereunder, made in good faith, shall create a rebuttable
presumption that the same is accurate.
SECTION 2.12. Termination and Reduction of Commitments. (a)
The Total Commitment shall be automatically terminated on the Maturity Date.
(b) Subject to Section 2.13(b), upon at least ten Business
Days' prior irrevocable written or facsimile notice to the Administrative Agent,
the Company may at any time in whole permanently terminate, or from time to time
in part permanently reduce, the Total Commitment; provided, however, that each
partial reduction of the Total Commitment shall be in an integral multiple of
$1,000,000 and in a minimum principal amount of $25,000,000. Such notice shall
specify the date and the amount of the termination or reduction of the Total
Commitment. The Administrative Agent shall promptly notify the Banks of the
amount of any such termination or reduction of the Total Commitment.
(c) Except in the circumstances described in Section 2.14 or
Section 2.15, each reduction in the Total Commitment hereunder shall be made
ratably among the Banks in accordance with their respective Commitments. The
Company shall pay to the Administrative Agent for the account of the Banks, on
the date of each termination or reduction, the Facility Fees on the amount of
the Commitments so terminated or reduced, accrued through the date of such
termination or reduction.
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SECTION 2.13. Prepayment. (a) The Company shall have the right
at any time and from time to time to prepay any Borrowing, in whole or in part,
upon written or facsimile notice (or telephone notice promptly confirmed by
written or facsimile notice) to the Administrative Agent: (i) before 10:00 a.m.,
New York City time, five Business Days prior to prepayment, in the case of
Eurodollar Loans and (ii) before 10:00 a.m., New York City time, one Business
Day prior to prepayment, in the case of ABR Loans; provided, however, that each
partial prepayment shall be in an amount which is an integral multiple of
$1,000,000 and not less than $10,000,000.
(b) On the date of any termination or reduction of the
Commitments pursuant to Section 2.12(b), the Company shall pay or prepay so much
of the Borrowings as shall be necessary in order that the aggregate principal
amount of the Loans outstanding will not exceed the Total Commitment, after
giving effect to such termination or reduction.
(c) Each notice of prepayment given by the Company shall
specify the prepayment date and the principal amount of each Borrowing (or
portion thereof) to be prepaid, shall be irrevocable and shall commit the
Company to prepay such Borrowing (or portion thereof) by the amount stated
therein on the date stated therein. All prepayments under this Section 2.13
shall be subject to Section 2.16 and Section 2.17 but otherwise without premium
or penalty. All prepayments under this Section 2.13 shall be accompanied by
accrued interest on the principal amount being prepaid to the date of
prepayment.
SECTION 2.14. Reserve Requirements; Change in Circumstances.
(a) It is understood that the cost to each Bank of making or maintaining any of
the Loans may fluctuate as a result of the applicability of, or changes in,
reserve requirements imposed by the Board, including reserve requirements under
Regulation D in connection with Eurocurrency Liabilities. Subject to Section
8.08, the Company agrees to pay to each Bank, as provided in Section 2.14(d), at
any time when such Bank shall be required to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities,
additional interest on the unpaid principal amount of each Eurodollar Loan of
such Bank from the date of such Loan until such principal amount is paid in
full, payable on each Interest Payment Date for such Eurodollar Loan, at an
interest rate per annum equal at all times during each Interest Period to the
excess of (i) the rate obtained by dividing the IBO Rate for such Interest
Period by a percentage equal to 100% minus the reserve percentage applicable
during such Interest Period under regulations issued from time to time by the
Board (or if more than one such percentage is so applicable, minus the daily
average of such percentages for those days in such Interest Period during which
any such percentage shall be so applicable) for determining the maximum
requirement (including any emergency, supplemental or other marginal reserve
requirement) for such Bank with respect to liabilities or assets consisting of
or including Eurocurrency Liabilities over (ii) the IBO Rate for such Interest
Period. It is understood by the parties hereto that the rates of interest
applicable to Eurodollar Loans have been determined on the assumption that no
such reserve requirements exist or will exist and that such rates do not reflect
costs imposed on the Banks in connection with such reserve requirements. It is
agreed that for purposes of this Section 2.14(a) the Eurodollar Loans made
hereunder shall be deemed to constitute
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Eurocurrency Liabilities and to be subject to the reserve requirements of
Regulation D without benefit of or credit for proration, exemptions or offsets
which might otherwise be available to the Banks from time to time under
Regulation D.
(b) Notwithstanding any other provision herein, if after the
Execution Date the introduction of any applicable law or regulation or any
change in applicable law or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any Bank with any
applicable guideline or request from any central bank or governmental authority
(whether or not having the force of law) (i) shall change the basis of taxation
of payments to any Bank of the principal of or interest on any Eurodollar Loan
made by such Bank or any other fees or amounts payable hereunder (other than (x)
taxes imposed on the overall net income of such Bank or its Applicable Lending
Office by the jurisdiction in which such Bank or its Applicable Lending Office
has its principal office or by any political subdivision or taxing authority
therein (or any tax which is enacted or adopted by such jurisdiction, political
subdivision or taxing authority as a direct substitute for any such taxes) or
(y) any tax, assessment or other governmental charge that would not have been
imposed but for the failure of any Bank to comply with any certification,
information, documentation or other reporting requirement), (ii) shall impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
such Bank, or (iii) shall impose on such Bank or the London interbank market any
other condition affecting this Agreement or any Eurodollar Loan made by such
Bank, and the result of any of the foregoing shall be to increase the cost to
such Bank of maintaining its Commitment or of making or maintaining any
Eurodollar Loan or to reduce the amount of any sum received or receivable by
such Bank hereunder (whether of principal, interest or otherwise) in respect
thereof by an amount deemed in good faith by such Bank to be material, then the
Company shall pay to the Administrative Agent for the account of such Bank such
additional amount or amounts with respect to the Eurodollar Loans as will
compensate such Bank for such increase or reduction to such Bank upon demand by
such Bank (through the Administrative Agent).
(c) If any Bank shall have determined in good faith that the
applicability of any law, rule, regulation or guideline adopted pursuant to or
arising out of the July 1988 report of the Basle Committee on Banking
Regulations and Supervisory Practices entitled "International Convergence of
Capital Measurement and Capital Standards" or the adoption after the Execution
Date of any other law, rule, regulation or guideline regarding capital adequacy,
or any change in any of the foregoing or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or any lending office of such Bank) with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Bank's capital as a consequence of this
Agreement or the Loans made by such Bank pursuant hereto to a level below that
which such Bank could have achieved but for such applicability, adoption, change
or compliance (taking into consideration such Bank's policies with respect to
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capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, as provided in Section 2.14(d), the Company shall pay to such Bank
such additional amount or amounts as will compensate such Bank for any such
increased capital requirement.
(d) Each Bank will notify the Company through the
Administrative Agent of any event occurring after the date of this Agreement
which will entitle such Bank to compensation pursuant to this Section 2.14, as
promptly as practicable, and in any event within 90 days after it becomes aware
thereof and determines to request compensation. A certificate of a Bank setting
forth in reasonable detail (i) such amount or amounts as shall be necessary to
compensate such Bank (or participating banks or other entities pursuant to
Section 8.11) as specified in paragraph (a), (b) or (c) above, as the case may
be, and (ii) the calculation of such amount or amounts under clause (a)(i),
shall be delivered to the Company (with a copy to the Administrative Agent) and
shall, to the extent permitted by law, be conclusive absent manifest error. The
Company shall pay to the Administrative Agent for the account of such Bank the
amount shown as due on any such certificate within 10 days after its receipt of
the same.
(e) Except as expressly provided in Section 2.14(d), failure
on the part of any Bank to demand compensation for any increased costs or
reduction in amounts received or receivable or reduction in return on capital
with respect to any Interest Period or any other period shall not constitute a
waiver of such Bank's rights to demand compensation for any increased costs or
reduction in amounts received or receivable or reduction in return on capital
with respect to such Interest Period or any other period; provided that the
Company shall not be required to compensate a Bank pursuant to this Section 2.14
for any increased costs or reductions incurred more than 270 days prior to the
date that such Bank notifies the Company of the change in law giving rise to
such increased costs or reductions and of such Bank's intention to claim
compensation therefor; provided further that, if the change in law giving rise
to such increased costs or reductions is retroactive, then the 270-day period
referred to above shall be extended to include the period of retroactive effect
thereof. The protection of this Section 2.14 shall be available to each Bank
regardless of any possible contention of invalidity or inapplicability of law,
regulation or condition which shall have been imposed.
(f) In the event any Bank shall seek compensation pursuant to
this Section 2.14, the Company may give notice to such Bank (with copies to the
Administrative Agent) that it wishes to seek one or more Eligible Assignees
(which may be one or more of the Banks) to assume the Commitment of such Bank
and to purchase its outstanding Loans. Each Bank requesting compensation
pursuant to this Section 2.14 agrees to sell its Commitment, Loans and interest
in this Agreement pursuant to Section 8.11(c) to any such Eligible Assignee for
an amount equal to the sum of the outstanding unpaid principal of and accrued
interest on such Loans plus all other fees and amounts (including any
compensation claimed by such Bank under this Section 2.14 or Section 2.16) due
such Bank hereunder calculated, in each case, to the date such Commitment, Loans
and interest are purchased, whereupon such Bank shall have no further Commitment
or other obligation to the Company hereunder.
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(g) Without prejudice to the survival of any other obligations
of the Company hereunder, the obligations of the Company under this Section 2.14
shall survive the termination of this Agreement and the payment or assignment of
the Loans.
(h) Notwithstanding anything in this Section 2.14 to the
contrary, in no event shall any Bank be permitted to take or receive any
compensation hereunder constituting interest in excess of the Highest Lawful
Rate.
SECTION 2.15. Change in Circumstances. (a) Notwithstanding any
other provision herein, if any change in any law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Bank or
its Eurodollar Lending Office to make or maintain any Eurodollar Loan or to give
effect to its obligations as contemplated hereby, then, by written notice to the
Company and to the Administrative Agent, such Bank may:
(i) declare that Eurodollar Loans will not thereafter be made
by such Bank hereunder, whereupon any request by the Company for a
Eurodollar Borrowing shall, as to such Bank only (unless the Company
(x) shall have withdrawn such request, in which case such request
shall be of no force and effect, or (y) shall have made a new request
for a Borrowing of a different Type in accordance with the terms
hereof, which shall be deemed to supersede such request for a
Eurodollar Borrowing), be deemed a request for an ABR Loan; and
(ii) require that all outstanding Eurodollar Loans made by it
be converted to ABR Loans, in which event all such Eurodollar Loans
shall be automatically converted to ABR Loans as of the effective
date of such notice as provided in Section 2.15(b).
In the event any Bank shall exercise its rights under clause (i) or (ii) above
with respect to Eurodollar Loans, all payments and prepayments of principal
which would otherwise have been applied to repay the Eurodollar Loans that would
have been made by such Bank or the converted Eurodollar Loans of such Bank shall
instead be applied to repay the ABR Loans made by such Bank or the Banks, as the
case may be, in lieu of, or resulting from the conversion of, such Eurodollar
Loans.
(b) For purposes of this Section 2.15, a notice to the Company
(with a copy to the Administrative Agent) by any Bank pursuant to Section
2.15(a) shall be effective as to each Eurodollar Loan, if lawful, on the last
day of the Interest Period currently applicable to such Eurodollar Loan; in all
other cases such notice shall be effective on the date of receipt by the
Company.
(c) In the event any Bank shall give a notice to the Company
pursuant to this Section 2.15, the Company may give notice to such Bank (with a
copy to the Administrative Agent) that it wishes to seek one or more Eligible
Assignees (which may be one or more of the Banks) to
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assume the Commitment of such Bank and to purchase its outstanding Loans. Each
Bank giving a notice to the Company pursuant to this Section 2.15 agrees to sell
its Commitment, Loans and interest in this Agreement pursuant to Section 8.11(c)
to any such Eligible Assignee for an amount equal to the sum of the outstanding
unpaid principal of and accrued interest on such Loans plus all other fees and
amounts (including any compensation claimed by such Bank under Section 2.14 or
Section 2.16) due such Bank hereunder calculated, in each case, to the date such
Commitment, Loans, interest and fees are purchased, whereupon such Bank shall
have no further Commitment or other obligation to the Company hereunder.
(d) None of the Banks shall be permitted to terminate
availability of Eurodollar Loans as provided in this Section 2.15 on a
discriminatory basis (i.e., availability of Eurodollar Loans is not also
terminated by the applicable Bank with respect to other customers of such Bank
similarly situated where such customer is subject to documents providing for
such right of termination).
SECTION 2.16. Indemnity. The Company shall indemnify each Bank
against any loss or reasonable expense which such Bank may sustain or incur as a
consequence of (a) any failure by the Company to fulfill on the date of any
Borrowing hereunder the applicable conditions set forth in Article III, (b) any
failure by the Company to borrow or to refinance, convert (other than conversion
into an ABR Loan) or continue any Loan hereunder after a Borrowing Request
pursuant to Article II has been given or after a notice of conversion or
continuation has been given pursuant to Section 2.05, (c) any payment,
prepayment or conversion of a Eurodollar Loan required or permitted by any
provision of this Agreement or otherwise made on a date other than the last day
of the applicable Interest Period, (d) any default in the payment or prepayment
of the principal amount of any Loan or any part thereof or interest accrued
thereon, as and when due and payable (at the due date thereof, by notice of
prepayment or otherwise), or (e) the occurrence of any Event of Default,
including, in the case of any of the events set forth in clauses (a) through (e)
of this Section 2.16, any loss or reasonable expense sustained or incurred or to
be sustained or incurred in liquidating or employing deposits from third parties
acquired to effect or maintain such Loan or any part thereof as a Eurodollar
Loan. Such loss or reasonable expense shall include an amount equal to the
excess, if any, as reasonably determined by each Bank of (y) its cost of
obtaining the funds for the Loan being paid, prepaid or converted or not
borrowed, refinanced, converted or continued (based on the IBO Rate) for the
period from the date of such payment, prepayment or conversion or failure to
borrow, refinance, convert or continue to the last day of the Interest Period
for such Loan (or, in the case of a failure to borrow, refinance, convert or
continue, the Interest Period for the Loan which would have commenced on the
date of such failure to borrow, refinance, convert or continue) over (z) the
amount of interest (as reasonably determined by such Bank) that would be
realized by such Bank in reemploying the funds so paid, prepaid or converted or
not borrowed, refinanced, converted or continued for such period or Interest
Period, as the case may be. A certificate of each Bank setting forth any amount
or amounts which such Bank is entitled to receive pursuant to this Section 2.16
together with either a calculation of such amount or amounts or a statement of
the basis on which such amount or amounts have been determined shall be
delivered to the Company (with
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a copy to the Administrative Agent) and such calculation or statement, made in
good faith, shall create a rebuttable presumption that the same is accurate. The
Company shall pay to the Administrative Agent for the account of each Bank the
amount shown as due on any certificate within 30 days after its receipt of the
same. Without prejudice to the survival of any other obligations of the Company
hereunder, the obligations of the Company under this Section 2.16 shall survive
the termination of this Agreement and/or the payment or assignment of any of the
Loans. Without limitation of this Section 2.16, the provisions of this Section
2.16 shall be enforceable against the Company with respect to the conditions
described in clauses (a) and (b) of this Section 2.16 with respect to any
Borrowing Request given by the Company hereunder on or after the Execution Date
regardless of whether the Effective Date occurs. Notwithstanding the foregoing,
in no event shall any Bank be permitted to receive any compensation hereunder
constituting interest in excess of the Highest Lawful Rate.
SECTION 2.17. Pro Rata Treatment. Except as required under
clause (d) of the proviso of Section 2.05, Section 2.14, Section 2.15, or
Section 2.16, (a) each Borrowing and each refinancing of any Borrowing with
another Borrowing shall be allocated pro rata among the Banks in accordance with
their respective available Commitments, (b) each payment of the Facility Fees
and each reduction of the Commitments shall be allocated pro rata among the
Banks in accordance with their respective Commitments and (c) each payment or
prepayment of principal of any Borrowing and each payment of interest on the
Loans comprising part of a Borrowing shall be allocated pro rata among the Banks
participating in such Borrowing in accordance with the respective principal
amounts of their outstanding Loans comprising such Borrowing. Each Bank agrees
that in computing such Bank's portion of any Borrowing to be made hereunder, the
Administrative Agent may, in its discretion, round each Bank's percentage of
such Borrowing to the next higher or lower whole dollar amount.
SECTION 2.18. Sharing of Setoffs. Each Bank agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against the Company (pursuant to Section 8.06 or otherwise), including, but not
limited to, a secured claim under Section 506 of Title 11 of the United States
Code or other security or interest arising from, or in lieu of, such secured
claim, received by such Bank under any applicable bankruptcy, insolvency or
other similar law or otherwise, or by similar means, obtain payment (voluntary
or involuntary) (other than pursuant to Section 2.14, Section 2.15 or Section
2.16) of any Loan or Loans as a result of which the unpaid principal portion of
the Loans of such Bank shall be proportionately less than the unpaid principal
portion of the Loans of any other Bank, it shall be deemed simultaneously to
have purchased from such other Bank at face value, and shall promptly pay to
such other Bank the purchase price for, a participation in the Loans of such
other Bank, so that the aggregate unpaid principal amount of the Loans and
participations in the Loans held by each Bank shall be in the same proportion to
the aggregate unpaid principal amount of all Loans then outstanding as the
principal amount of its Loans prior to such exercise of banker's lien, setoff or
counterclaim or other event was to the principal amount of all Loans outstanding
prior to such exercise of banker's lien, setoff or counterclaim or other event;
provided, however, that, if any such purchase or purchases or adjustments shall
be made
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pursuant to this Section 2.18 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Company expressly consents to the
foregoing arrangements and agrees that any Bank holding a participation in a
Loan deemed to have been so purchased may, to the extent permitted by law,
exercise any and all rights of banker's lien, setoff or counterclaim with
respect to any and all moneys owing by the Company to such Bank by reason
thereof as fully as if such Bank had made a Loan directly to the Company in the
amount of such participation.
SECTION 2.19. Payments. (a) The Company shall make each
payment hereunder not later than noon, New York City time, on the day when due
in lawful money of the United States (in freely transferable dollars) to the
Administrative Agent at its address referred to in Section 8.02 for the account
of the Banks, in federal or other immediately available funds. The
Administrative Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal or interest on Loans (other than pursuant
to Section 2.14, Section 2.15 and Section 2.16), Facility Fees ratably to the
Banks and like funds relating to the payment of any other amount payable to any
Bank to such Bank for the account of its Applicable Lending Office, in each case
to be applied in accordance with the terms of this Agreement. If the
Administrative Agent fails to send to any Bank its portion of any payment timely
received by the Administrative Agent hereunder by the close of business on the
day such payment was received, the Administrative Agent shall pay to such Bank
interest on its portion of such payment from the day such payment was timely
received by the Administrative Agent until the date such Bank's portion of such
payment is sent to such Bank, at the Federal Funds Effective Rate.
(b) Whenever any payment hereunder (including principal of or
interest on any Borrowing or any fees or other amounts), shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest, fees or other amounts, as
the case may be; provided, however, if such extension would cause payment of
interest on or principal of a Eurodollar Loan to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.
(c) Unless the Administrative Agent shall have received notice
from the Company prior to the date on which any payment is due to the Banks
hereunder that the Company will not make such payment in full, the
Administrative Agent may assume that the Company has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent the
Company shall not have so made such payment in full to the Administrative Agent,
each Bank shall repay to the Administrative Agent forthwith on demand such
amount distributed to such Bank together with interest thereon, for each day
from the date such amount is distributed to such Bank until the date such Bank
repays such amount to the Administrative Agent, at the Federal Funds Effective
Rate.
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SECTION 2.20. Taxes. (a) Except as expressly provided in the
last sentence of Section 2.20(f), any and all payments by the Company hereunder
shall be made, in accordance with Section 2.19, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding
taxes imposed on the Administrative Agent's or any Bank's income and franchise
taxes imposed on the Administrative Agent or any Bank, in each case by the
United States or any jurisdiction under the laws of which it is organized or any
political subdivision of such jurisdiction of organization (all such nonexcluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Company shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to the Banks or
the Administrative Agent (i) the sum payable shall be increased by the amount
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.20) such Bank or the
Administrative Agent (as the case may be) shall receive an amount equal to the
sum it would have received had no such deductions been made, (ii) the Company
shall make such deductions and (iii) the Company shall pay the full amount
deducted to the relevant taxing authority or other governmental authority in
accordance with applicable law.
(b) In addition, the Company agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any Loan (hereinafter referred to as "Other Taxes").
(c) The Company will indemnify each Bank and the
Administrative Agent for the full amount of Taxes and Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.20) paid by such Bank or the Administrative Agent, as the case may be,
and any liability (including penalties, interest and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. Such indemnification shall be made within 30 days after the
date any Bank or the Administrative Agent, as the case may be, makes written
demand therefor. If a Bank or the Administrative Agent shall become aware that
it is entitled to receive a refund in respect of Taxes or Other Taxes, it shall
promptly notify the Company of the availability of such refund and shall, within
30 days after receipt by the Company, apply for such refund at the Company's
expense. If any Bank or the Administrative Agent receives a refund in respect of
any Taxes or Other Taxes for which such Bank or the Administrative Agent has
received payment from the Company hereunder it shall promptly notify the Company
of such refund and shall, within 30 days after receipt of a request by the
Company (or promptly upon receipt, if the Company has requested application for
such refund pursuant hereto), repay such refund to the Company without interest,
provided that the Company, upon the request of such Bank or the Administrative
Agent, agrees to return such refund (plus penalties, interest or other charges)
to such Bank or the Administrative Agent in the event such Bank or the
Administrative Agent is required to repay such refund.
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(d) Within 30 days after the date of any payment of Taxes or
Other Taxes withheld by the Company in respect of any payment to any Bank (or
transferee) or the Administrative Agent, the Company will furnish to the
Administrative Agent, at its address referred to in Section 8.02, the original
or a certified copy of a receipt evidencing payment thereof or, if such original
or copy of a receipt is not available from the relevant taxing authority, other
documentation of payment reasonably satisfactory to such Bank (or transferee) or
the Administrative Agent.
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.20
shall survive the payment in full of principal and interest hereunder.
(f) Each Bank which is organized outside the United States
shall promptly notify the Company of any change in its Applicable Lending Office
and upon written request of the Company shall, prior to the immediately
following due date of any payment by the Company hereunder, deliver to the
Company such certificates, documents or other evidence, as required by the Code
or Treasury Regulations issued pursuant thereto, including Internal Revenue
Service Form 4224 or Form 1001 and any other certificate or statement or
exemption required by Treasury Regulation Section 1.1441-1(a) or Section
1.1441-6(c) or any subsequent version thereof, properly completed and duly
executed by such Bank establishing that such payment is (i) not subject to
withholding under the Code because such payment is effectively connected with
the conduct by such Bank of a trade or business in the United States or (ii)
totally exempt from United States tax under a provision of an applicable tax
treaty. Unless the Company and the Administrative Agent have received forms or
other documents satisfactory to them indicating that payments hereunder or under
the Loans are not subject to United States withholding tax or are subject to
such tax at a rate reduced by an applicable tax treaty, the Company or the
Administrative Agent shall withhold taxes from such payments at the applicable
statutory rate in the case of payments to or for any Bank or assignee organized
under the laws of a jurisdiction outside the United States.
(g) Any Bank claiming any additional amounts payable pursuant
to this Section 2.20 shall use reasonable efforts (consistent with legal and
regulatory restrictions) to file any certificate or document requested by the
Company or to change the jurisdiction of its Applicable Lending Office if the
making of such a filing or change would avoid the need for or reduce the amount
of any such additional amounts which may thereafter accrue and would not, in the
sole determination of such Bank, be otherwise disadvantageous to such Bank.
SECTION 2.21. Extensions of Termination Date. (a) The Company
may, by notice to the Administrative Agent (a "Notice of Extension") given not
less than 30 nor more than 45 days prior to the then effective Termination Date
(such then effective Termination Date being an "Existing Termination Date"),
advise the Banks that it requests an extension of the Existing Termination Date
by not more than 364 calendar days, effective on the Existing Termination Date.
The Administrative Agent will promptly, and in any event within five Business
Days of the receipt of each Notice of Extension, notify the Banks of the
contents of each such Notice of Extension.
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(b) Each Notice of Extension shall be irrevocable upon the
Company and constitute a representation by the Company that (i) neither any
Event of Default nor any Default has occurred and is continuing, (ii) the
representations and warranties contained in Article IV (other than those which
expressly relate to an earlier date) are correct on and as of the date of such
Notice of Extension, as though made on and as of such date and (iii) no Loans
shall be outstanding on the Existing Termination Date.
(c) In the event that a Notice of Extension is given to the
Administrative Agent as provided in Section 2.21(a), and the Administrative
Agent notifies a Bank of the contents thereof as provided in Section 2.21(a),
such Bank shall on or before the fifteenth day next preceding the Existing
Termination Date advise the Administrative Agent and the Company whether or not
such Bank consents to the extension requested thereby and if any Bank fails to
so advise the Administrative Agent and the Company, such Bank shall be deemed
not to have consented to such extension.
(d) Notwithstanding any provision of this Section 2.21 to the
contrary, each Bank that has expressly consented to an extension of the
Termination Date, may in its sole and absolute discretion at any time prior to
the Existing Termination Date give the Administrative Agent written notice that
such Bank has revoked its consent to such extension of the Existing Termination
Date (a "Notice of Revocation"). Each Notice of Revocation shall be irrevocable.
Upon receipt of any Notice of Revocation, the Administrative Agent will promptly
notify the Company and the Banks of the content of each Notice of Revocation and
the Termination Date shall be the Existing Termination Date.
(e) In the event (i) an extension of the Termination Date is
consented to by all of the Banks and none of the Banks delivers a Notice of
Revocation in accordance with Section 2.21(d) and (ii) on the Existing
Termination Date the Company deliver to the Administrative Agent and each of the
Banks a certificate to the effect that no Default or Event of Default has
occurred and is continuing on the Existing Termination Date and that the
representations and warranties contained in Article IV (other than those which
expressly relate to an earlier date) are correct on and as of the Existing
Termination Date as though made on and as of such date, the Termination Date for
the Loans and the Commitments of all of the Banks shall be automatically
extended 364 calendar days past the Existing Termination Date, effective on the
Existing Termination Date; provided, however, unless all outstanding Loans are
repaid in full on the Existing Termination Date, the Termination Date for the
Loans and the Commitments of the Banks shall be the Existing Termination Date.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to the Initial Loans to the
Company. The obligation of each Bank to make its initial Loan to the Company is
subject to the condition precedent
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that the Administrative Agent shall have received on or before the initial
Borrowing Date the following, each dated (unless otherwise indicated) such date
and, with respect to all such documents referred to in Section 3.01(a), Section
3.01(b), Section 3.01(c) and Section 3.01(d), in sufficient copies for each Bank
and the Administrative Agent:
(a) A counterpart of this Agreement (to which all of the
Exhibits and Schedules have been attached) dated as of the date hereof executed
by the Company, the Administrative Agent, the Co-Agents and the Banks.
(b) (i) A copy of the articles of incorporation, as amended,
of the Company, certified by the Secretary of State of the State of Texas and a
certificate as to the good standing of the Company from the Comptroller of the
State of Texas; (ii) a certificate of the Secretary or an Assistant Secretary of
the Company certifying (A) that attached thereto is a true and complete copy of
the bylaws of the Company as in effect on the date of such certificate and at
all times since a date prior to the date of the resolutions described in (B)
below, (B) that attached thereto is a true and complete copy of resolutions (i)
duly adopted by the Executive Committee of the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement and the
Fee Letter, and (ii) duly adopted by the Board of Directors of the Company,
appointing said Executive Committee, and that such resolutions have not been
modified, rescinded or amended and are in full force and effect, (C) that the
articles of incorporation of the Company have not been amended since the last
amendment thereto shown on the good standing certificate furnished pursuant to
(i) above and (D) as to the incumbency and specimen signatures of each officer
of the Company executing this Agreement and the Fee Letter and (iii) a
certificate of another officer of the Company as to the incumbency and specimen
signatures of the Secretary or Assistant Secretary of the Company.
(c) A certificate of a Senior Vice President, an Executive
Vice President or a Vice President of the Company certifying (i) the truth of
the representations and warranties made by the Company in this Agreement and
(ii) the absence of the occurrence and continuance of any Default or Event of
Default.
(d) The written opinions of (i) Locke Liddell & Sapp LLP,
counsel to the Company, addressed to the Administrative Agent and the Banks and
in form and substance acceptable to the Administrative Agent and the Banks and
(ii) James M. Shelger, Senior Vice President, General Counsel and Secretary of
the Company, addressed to the Administrative Agent and the Banks and in form and
substance acceptable to the Administrative Agent and the Banks.
(e) An Administrative Questionnaire completed by each Bank.
(f) (i) The Competitive Advance and Revolving Credit Facility
Agreement (Facility A) dated as of June 27, 1997 among the Company, the banks
party thereto, the Administrative Agent and the Co-Agents (as defined therein),
as amended, and (ii) the Competitive Advance and Revolving Credit Facility
Agreement (Facility B) dated as of June 27, 1997 among the
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Company, certain Subsidiaries of the Company, the banks party thereto, the
Administrative Agent and the Co-Agents (as defined therein) shall have been
amended contemporaneously with this Amendment to conform the financial
covenants, rate of interest applicable to the Committed Loans (as defined
therein) and rate at which facility fees accrue thereunder to the corresponding
provisions of this Agreement.
In addition, on the Effective Date the Administrative Agent shall have received
all fees which it is entitled to receive on such date pursuant to the Fee
Letter.
SECTION 3.02. Conditions Precedent to Each Borrowing. The
obligation of each Bank to make a Loan on the occasion of any Borrowing
(including the initial Borrowing) shall be subject to the further conditions
precedent that on the Borrowing Date of such Borrowing the following statements
shall be true (and each of the giving of the applicable Borrowing Request and
the acceptance by the Company of the proceeds of such Borrowing shall constitute
a representation and warranty by the Company that on the date of such Borrowing
such statements are true):
(a) The representations and warranties contained in Article IV
are correct on and as of the date of such Borrowing, before and after giving
effect to such Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date; provided, however, that for purposes of this
clause (a), on and after any date on which the Company delivers its consolidated
financial statements to the Administrative Agent and the Banks pursuant to
Section 5.01(a)(i) or 5.01(a)(ii), as the case may be, (A) the reference in the
first sentence of Section 4.07 to the Company Financials shall be a reference to
the consolidated financial statements of the Company and its Subsidiaries most
recently delivered to the Administrative Agent and the Banks by the Company
pursuant to Section 5.01(a)(i) or 5.01(a)(ii), as the case may be, prior to the
date of such Borrowing and (B) the reference in the last sentence of Section
4.07 to June 30, 1998, shall be a reference to the date of the audited
consolidated financial statements most recently delivered to the Administrative
Agent and the Banks pursuant to Section 5.01(a)(i);
(b) No event has occurred and is continuing, or would result
from such Borrowing or from the application of the proceeds therefrom, which
constitutes either a Default or an Event of Default; and
(c) Following the making of such Borrowing and all other
Borrowings to be made on the same day under this Agreement, the aggregate
principal amount of all Loans then outstanding shall not exceed the Total
Commitment.
SECTION 3.03. Conditions Precedent to Conversions and
Continuations. The obligation of the Banks to convert any existing Borrowing
into a Eurodollar Borrowing or to continue any existing Borrowing as a
Eurodollar Borrowing is subject to the condition precedent that on the date of
such conversion or continuation no Default or Event of Default shall have
occurred and be continuing or would result from the making of such conversion or
continuation. The
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acceptance of the benefits of each such conversion and continuation shall
constitute a representation and warranty by the Company to each of the Banks
that no Default or Event of Default shall have occurred and be continuing or
would result from the making of such conversion or continuation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Administrative
Agent and the Banks as follows:
SECTION 4.01. Organization and Qualification. The Company and
each of its Subsidiaries (except Inactive Subsidiaries) (a) are entities duly
organized, validly existing and in good standing under the laws of the
respective jurisdictions of their organization, (b) have the corporate or other
power to own their property and to carry on their businesses as now conducted
and (c) are duly qualified to do business as foreign corporations and are in
good standing in every jurisdiction in which the failure to be so qualified
would have a material adverse effect upon the business or properties of the
Company and its Subsidiaries taken as a whole or upon the ability of the Company
to perform its obligations under this Agreement or the Fee Letter. The Company
is a Texas corporation. The corporations named in Schedule 4.01 are the only
Subsidiaries of the Company on the date of this Agreement, and such Schedule
accurately reflects the percentage of (y) the issued and outstanding capital
stock and (z) the stock of each class having ordinary voting power, of each
Subsidiary owned by the Company on the date of this Agreement and accurately
identifies the Consolidated Subsidiaries, the Inactive Subsidiaries, the
Substantially-owned Subsidiaries and the Wholly-owned Subsidiaries on the date
of this Agreement.
SECTION 4.02. Authorization, Validity, Etc. The Company has
the corporate or other power and authority to make and carry out this Agreement
to make the Borrowings provided for herein and to perform its obligations
hereunder and under the Fee Letter, and all such action has been duly authorized
by all necessary corporate proceedings on its part. This Agreement and the Fee
Letter have been duly and validly executed and delivered by the Company and both
such agreements constitute valid and legally binding agreements of the Company
enforceable in accordance with their respective terms, except, in each case, as
such enforceability may be limited by bankruptcy, insolvency or other laws of
general application relating to or affecting the enforcement of creditors'
rights.
SECTION 4.03. Governmental Consents, Etc. No authorization,
consent, approval, license or exemption of or filing or registration with any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is necessary for the valid execution,
delivery or performance by the Company of this Agreement or the Fee Letter.
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SECTION 4.04. Conflicting or Adverse Agreements or
Restrictions. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement or subject to any restriction which materially and
adversely affects the business or assets or financial condition of the Company
and its Subsidiaries taken as a whole. Neither the execution nor delivery of
this Agreement or the Fee Letter nor compliance with the terms and provisions
hereof or thereof nor any Borrowing will be contrary to the provisions of, or
constitute a default under, (a) the charter or bylaws of the Company or any of
its Subsidiaries or (b) any applicable law or any applicable regulation, order,
writ, injunction or decree of any court or governmental instrumentality or (c)
any agreement to which the Company or any of its Subsidiaries is a party or by
which it is bound or to which it is subject, which default, in the case of
clause (b) or (c) of this Section 4.04 could, individually or together with all
other such defaults described in this Section 4.04, reasonably be expected to
result in a material adverse change in the business or condition of the Company
and its Subsidiaries taken as a whole or upon the ability of the Company to
perform its obligations under this Agreement and the Fee Letter.
SECTION 4.05. Title to Assets. The Company and each Subsidiary
(except Inactive Subsidiaries) have good and indefeasible title to their
respective assets, subject to no Liens, except those permitted in Section
5.02(d).
SECTION 4.06. Actions Pending. There is no action or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries before any court or administrative agency
which could reasonably be expected to result in a material adverse change in the
business or condition of the Company and its Subsidiaries taken as a whole or
upon the ability of the Company to perform its obligations under this Agreement
and the Fee Letter.
SECTION 4.07. Financial Statements. The Company has furnished
or has caused to be furnished to each Bank (a) consolidated financial statements
of the Company as at and for the fiscal year ended December 31, 1998, included
in the Company's annual report for the fiscal year ended December 31, 1998 and
accompanied by the report and opinion of Coopers & Lybrand L.L.P. (currently
PricewaterhouseCoopers LLP), (b) the Annual Report of the Company on Form 10-K
for the fiscal year ended December 31, 1998 and (c) the Quarterly Reports of the
Company on Form 10-Q for the fiscal quarters ended March 31 and June 30, 1999
(the financial statements described in clauses (a) through (c) being
collectively, the "Company Financials"). The Company Financials have been
prepared in conformity with GAAP consistently followed (except as otherwise
disclosed in such financial statements) throughout the periods involved and
present fairly the consolidated financial condition of the Company and its
Consolidated Subsidiaries and the consolidated results of operations of the
Company and its Consolidated Subsidiaries as at the dates and for the periods
indicated. There has been no material adverse change in the consolidated
condition or operation, financial or otherwise, of the Company and its
Subsidiaries since June 30, 1998.
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SECTION 4.08. Default. Neither the Company nor any of its
Subsidiaries is in default in any respect under the provisions of any instrument
evidencing any Debt or of any agreement relating thereto, or in default in any
respect under any order, writ, injunction or decree of any court, or in default
in any respect under or in violation of any law, order, regulation or demand of
any governmental instrumentality, which defaults or violations could reasonably
be expected to have a material adverse effect upon the business or properties of
the Company and its Subsidiaries taken as a whole or upon the ability of the
Company to perform its obligations under this Agreement and the Fee Letter.
SECTION 4.09. Investment Company Act. Neither the Company nor
any of its Subsidiaries is, or is directly or indirectly controlled by or acting
on behalf of any Person which is, an "investment company," as such term is
defined in the Investment Company Act of 1940, as amended.
SECTION 4.10. Public Utility Holding Company Act. Neither the
Company nor any of its Subsidiaries is a non-exempt "holding company," or
subject to regulation as such, or, to the knowledge of the Company's officers,
an "affiliate" of a "holding company" or a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
SECTION 4.11. ERISA. Neither the Company nor any of its
Subsidiaries has incurred any accumulated funding deficiency, within the meaning
of ERISA, material to the Company and its Subsidiaries taken as a whole, whether
or not waived, or any liability material to the Company and its Subsidiaries,
when taken as a whole, under Title IV of ERISA.
SECTION 4.12. Payment of Taxes. The Company and each of its
Subsidiaries (except Inactive Subsidiaries) have filed all federal and state
income and franchise tax returns which, to the knowledge of the officers
thereof, are required to be filed and have paid all taxes shown on said returns
and all assessments which are due other than such taxes and assessments which
are being contested in good faith by appropriate proceedings diligently
conducted and for which reserves or other appropriate provisions, if any, as
shall be required by GAAP, have been made. The consolidated federal income tax
returns of the Company and its Consolidated Subsidiaries have been examined and
reported on by the Internal Revenue Service for all fiscal years to and
including the fiscal year ended December 31, 1994.
SECTION 4.13. Purpose of Loans. None of the proceeds of the
Loans will be used for the purpose of purchasing or carrying any "margin stock"
within the meaning of Regulation U (herein called "Margin Stock") or for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry Margin Stock, or for any other purpose which might
constitute a "purpose" credit within the meaning of Regulation U, as now in
effect or as they may hereafter be amended. Margin Stock did not on December 31,
1998, and does not on the date hereof constitute more than 25% of the assets of
the Company or any of its Subsidiaries, and the Company
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does not intend or foresee that Margin Stock will at any time during the term of
this Agreement constitute more than 25% of such assets.
SECTION 4.14. Patents, Etc. The Company and each of its
Subsidiaries have all patents, patent rights or licenses, trademarks, service
marks, trademark rights, trade names, trade name rights, and copyrights which
are required in order for it to conduct its business as now conducted without
any known material conflict with the rights of others.
SECTION 4.15. No Material Guarantees or Letters of Credit.
Each Assured Obligation and each Letter of Credit Obligation of the Company and
its Subsidiaries is listed in the Company Financials, in the most recently
delivered financial statements delivered pursuant to Section 5.01(a) or on
Schedule 4.15, other than any such Assured Obligation or Letter of Credit
Obligation which individually does not exceed $100,000 or which together with
all such other Assured Obligations and Letter of Credit Obligations does not
exceed $1,000,000; provided, however, after the Effective Date, Schedule 4.15
shall be deemed to include all Assured Obligations and Letter of Credit
Obligations of the Company and its Subsidiaries incurred or issued in accordance
with the provisions of Section 5.02(h). Neither the Company nor any of its
Subsidiaries has any liability, contingent or otherwise, which either
individually or collectively with all such other liabilities could reasonably be
expected to have a material adverse effect upon the business or properties of
the Company and its Subsidiaries taken as a whole or upon the ability of the
Company to perform its obligations under this Agreement and the Fee Letter.
SECTION 4.16. Enhancement Agreements. Schedule 4.16 describes
the principal amount of all obligations, including all Debt, Letter of Credit
Obligations and unfunded commitments which are covered by any Enhancement
Agreement; provided, however, after the Execution Date, Schedule 4.16 shall be
deemed to include all such principal obligations described on the schedule most
recently delivered pursuant to the last sentence of Section 5.01(a).
SECTION 4.17. Year 2000. Any reprogramming required to prevent
the occurrence of a material adverse effect upon the business or properties of
the Company and its Subsidiaries taken as a whole or upon the ability of the
Company to perform its obligations under this Agreement and the Fee Letter, in
and following the year 2000, of (a) the computer systems of the Company and its
Subsidiaries and (b) equipment containing embedded microchips (including systems
and equipment supplied by others or with which the systems of the Company or any
of its Subsidiaries interface) and the testing of all mission critical systems
and equipment, as so reprogrammed, will be completed by November 30, 1999. The
cost to the Company of such reprogramming and testing and of the reasonably
foreseeable consequences of year 2000 to the Company and its Subsidiaries
(including reprogramming errors and the failure of others' systems or equipment)
will not result in a Default or an Event of Default or could reasonably be
expected to have a material adverse effect upon the business or properties of
the Company and its Subsidiaries taken as a whole or upon the ability of the
Company to perform its obligations under this Agreement and the Fee Letter.
Except for such of the reprogramming referred to in the preceding sentence as
may be necessary, the
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computer and management information systems of the Company and its Subsidiaries
are and, with ordinary course upgrading and maintenance, will continue for the
term of this Credit Agreement to be, sufficient to permit the Company and its
Subsidiaries to conduct their businesses without a material adverse effect upon
the business or properties of the Company and its Subsidiaries taken as a whole
or upon the ability of the Company to perform its obligations under this Credit
Agreement and the Fee Letter.
ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants. So long as any Loan shall
remain unpaid or any Bank shall have any Commitment hereunder, unless the
Majority Banks shall otherwise agree in writing, as follows:
(a) Financial Statements and Other Information. The Company
shall deliver to each Bank:
(i) As soon as available, and in any event within 120
days after the end of each fiscal year, a copy of the annual audit
report of the Company for such fiscal year containing a consolidated
balance sheet, a consolidated statement of income, a consolidated
statement of stockholders' equity and a consolidated statement of
cash flows, all in reasonable detail and accompanied by a report and
opinion of PricewaterhouseCoopers L.L.P. or another independent
certified public accountant of recognized standing satisfactory to
the Majority Banks. The Company will obtain from such accountants and
deliver to each Bank at the time said financial statements are
delivered the written statement of such accountants that in making
the examination necessary for said report and opinion they have
obtained no knowledge of any Event of Default or Default, or if such
accountants shall have obtained knowledge of any Event of Default or
Default, they shall state the nature and period of existence thereof
in such statement; provided, that such accountants shall not be
liable directly or indirectly to any such Bank for failure to obtain
knowledge of any Event of Default or Default;
(ii) As soon as available, and in any event within 60
days after the end of each of the first three quarterly accounting
periods in each fiscal year, a consolidated statement of
stockholders' equity and the report of the Company to the Securities
and Exchange Commission on Form 10-Q;
(iii) Promptly after sending or filing thereof,
copies of all statements and reports sent to stockholders and all
effective registration statements and regular or periodic reports
filed with the Securities and Exchange Commission;
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(iv) Promptly upon request, such additional financial
or other information as any Bank may reasonably request;
(v) Promptly, and in any case within five days after
the President, the Senior Vice President and Chief Financial Officer,
the Vice President and Treasurer or the General Counsel of the
Company learns thereof, notice of (A) the occurrence of a Default or
an Event of Default, (B) any material default of the Company or any
of its Subsidiaries under any other borrowed money obligation, (C)
any monetary or other material default of the Company or any of its
Subsidiaries under any material contract or (D) receipt of any notice
from any federal or other governmental instrumentality of any
violation by the Company or any of its Subsidiaries of any legal
requirement, which violation together with all other such violations
by the Company and its Subsidiaries could reasonably be expected to
have a material adverse effect upon the business or properties of the
Company and its Subsidiaries taken as a whole or upon the ability of
the Company to perform its obligations under this Agreement and the
Fee Letter, describing the nature of such Default, such Event of
Default, such default or such violation and what action the Company
or such Subsidiary, as the case may be, has taken or proposes to take
with respect thereto; and
(vi) Promptly after each annual meeting of the
Company's shareholders, an Officer's Certificate of the election and
incumbency of the Company's officers and directors in form and
substance satisfactory to the Banks.
All financial statements specified in clauses (i) and (ii)
above shall be furnished in consolidated form for the Company and its
Consolidated Subsidiaries. Investments by the Company in its Subsidiaries other
than its Consolidated Subsidiaries shall be accounted for on the equity method.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each Bank (y) schedules and/or
computations demonstrating that the Company is in compliance with its covenants
in Sections 5.02(a), 5.02(b), 5.02(c), 5.02(d), 5.02(h), 5.02(k) and 5.02(l) or
reflecting any noncompliance therewith as at the applicable date and (z) an
Officer's Certificate stating that there exists no Event of Default or Default,
or, if any Event of Default or Default exists, stating the nature thereof, the
period of existence thereof and what action the Company has taken or proposes to
take with respect thereto. Together with each delivery of financial statements
required by clause (i) above, the Company will deliver to each such Bank a
schedule of the principal amount of all obligations of the Company covered by
any Enhancement Agreement.
(b) Books and Records. The Company shall maintain, and cause
each of its Subsidiaries to maintain, proper books of record and account in
accordance with generally accepted accounting practices.
(c) Insurance. The Company shall maintain, and cause each of
its Subsidiaries to maintain, insurance with responsible companies (or by self
insurance to the extent authorized by
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law) in such amounts and against such risks as is customarily carried on
comparable business and properties, and furnish to the Banks, upon request by
the Administrative Agent or any Bank, an Officer's Certificate containing full
information as to the insurance carried and self insurance levels maintained;
and promptly after notice in writing from the Administrative Agent obtain such
additional insurance as the Administrative Agent may reasonably request and
which is customarily carried on comparable businesses or properties.
(d) Maintenance of Property. The Company shall cause its
property and the property of its Subsidiaries to be maintained, preserved,
protected and kept in good repair, working order and condition so that the
business carried on in connection therewith may be conducted properly and
efficiently.
(e) Inspection of Property and Records. Upon reasonable
advance notice, the Company shall permit any Person designated by the
Administrative Agent or any of the Banks in writing to visit and inspect any of
the properties, corporate books and financial records of the Company and its
Subsidiaries and discuss their respective affairs and finances with their
principal officers, all at such times as the Administrative Agent or such Bank
may reasonably request.
(f) Existence, Laws, Obligations. The Company shall maintain
its corporate existence, comply and cause its Subsidiaries (except Inactive
Subsidiaries) to comply with all applicable statutes and governmental
regulations, including all applicable environmental statutes and regulations
(except those the validity or applicability of which the Company shall be
contesting in good faith and by appropriate proceedings diligently conducted for
which such reserves or other appropriate provisions, if any, as shall have been
required by GAAP, have been made), where the failure to so comply would have a
material adverse effect on the business, operations, property or condition of
the Company and its Subsidiaries taken as a whole or upon the ability of the
Company to perform its obligations under this Agreement and the Fee Letter, and
pay and cause its Subsidiaries (except Inactive Subsidiaries) to pay all taxes,
assessments, governmental charges, claims for labor, supplies, rent and other
obligations which if unpaid might become a Lien against the property of the
Company or such Subsidiary (except Inactive Subsidiaries), and where the failure
to make such payment or where the creation of such Lien would have a material
adverse effect on the business, operations, property or condition of the Company
and its Subsidiaries taken as a whole or upon the ability of the Company to
perform its obligations under this Agreement and the Fee Letter, except any of
the foregoing liabilities being contested in good faith by appropriate
proceedings diligently conducted for which such reserves or other appropriate
provisions, if any, as shall have been required by GAAP, have been made.
SECTION 5.02. Negative Covenants. So long as any Loan shall
remain unpaid or any Bank shall have any Commitment hereunder, without the
written consent of the Majority Banks:
(a) Net Worth. The Company will not permit Net Worth at any
time to be less than the sum of (a) $2,500,000,000, plus (b) 50% of Consolidated
Net Income (if positive) for each
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fiscal quarter ending during the period from January 1, 1999 to the end of its
most recently completed fiscal quarter, plus (c) 100% of the net proceeds
received by the Company after January 1, 1999 from all shares, rights to
purchase, warrants, options, participations or other equivalents of the
Company's equity, including all common stock and preferred stock.
(b) Debt. (i) The Company will not permit the ratio of
Consolidated Debt to Total Capitalization at any time to be greater than .60 to
1.0.
(ii) The Company will not permit the sum of (A) the
aggregate amount of Debt of its Subsidiaries (other than Debt held by
the Company) plus (B) Assured Obligations of its Subsidiaries to exceed
20% of Net Worth.
(c) EBITDA. The Company will not permit the ratio of
Consolidated EBITDA to Interest Expense at any time to be less than 2.75 to 1.0
calculated at the end of each fiscal quarter for such fiscal quarter and the
immediately preceding three fiscal quarters."
(d) Liens, Etc. The Company will not, and will not permit any
of its Subsidiaries to, incur any Liabilities secured by a Lien upon any of the
assets of the Company or any such Subsidiary or upon any shares of stock or any
long-term receivable of the Company due from any of its Subsidiaries (whether
such assets, shares of stock or long-term receivables are now owned or hereafter
acquired) without in any such case effectively providing concurrently with the
incurrence of any such Liability that all sums payable at that time or
thereafter under this Agreement (together with, if the Company shall so
determine, any other Liabilities of the Company or such Subsidiary then existing
or thereafter created which is not subordinate to such sums) shall be secured
equally and ratably with (or at the option of the Company, prior to) such
Liability, so long as such Liability shall be so secured; provided, however,
that nothing in this Section 5.02(d) shall prevent, restrict or apply to (and
there shall be excluded from secured Debt in any computation under this Section
5.02(d)) Liabilities secured by):
(i) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business that are not yet past due
or which are being contested by the Company or such Subsidiary in good
faith and against which adequate reserves as required by GAAP have been
established by the Company or such Subsidiary, as the case may be;
(ii) Pledges or deposits made in the ordinary course
of business to secure payment of worker's compensation, or to
participate in any fund in connection with worker's compensation,
unemployment insurance, old-age pensions or other social security
programs;
(iii) Liens of mechanics, materialmen, repairmen,
warehousemen, carriers or other like Liens, securing obligations
incurred in the ordinary course of business that are not yet past due
or which are being contested by the Company or such Subsidiary in good
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faith and against which adequate reserves as required by GAAP have been
established by the Company or such Subsidiary, as the case may be;
(iv) Liens which secure Liabilities owing by a
Subsidiary of the Company to the Company or to another Subsidiary of
the Company;
(v) Deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(vi) Easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business which,
in the aggregate, are not substantial in amount and which do not in any
case materially detract from the value of the property subject thereto
or materially interfere with the ordinary conduct of the business of
the Company or such Subsidiary; and
(vii) Liens not otherwise permitted under this
Section 5.02(d) which secure Liabilities permitted hereunder not
exceeding, as to the Company and its Consolidated Subsidiaries, 5% of
Consolidated Assets at any time outstanding.
(e) Stock of Subsidiaries, Merger, Sale of Assets, Etc. The
Company will not permit any of its Subsidiaries to issue or dispose of its
Equity Interests (other than directors' qualifying shares) except to the Company
or to another Subsidiary of the Company, and the Company will not and will not
permit any of its Subsidiaries to sell or otherwise dispose of any Equity
Interests of, or obligation (howsoever evidenced) from, any Subsidiary of the
Company, or merge or consolidate with any other corporation or sell, lease or
transfer or otherwise dispose of all or a substantial part of its assets (as
distinguished from sales of excess land and other assets in the ordinary course
of business which are permitted), whether in one transaction or a series of
transactions, provided, however, that so long as after giving effect thereto no
Default or Event of Default shall exist, the following transactions shall be
permitted pursuant to this Section 5.02(e):
(i) Any corporation including any Subsidiary of the
Company may merge or consolidate with the Company provided that the
Company shall be the continuing or surviving corporation;
(ii) Any corporation may merge into or consolidate
with any Subsidiary of the Company provided that the continuing or
surviving corporation is a Subsidiary of the Company;
(iii) Any Subsidiary of the Company may sell, lease,
transfer or otherwise dispose of any of its assets to the Company or
another Subsidiary of the Company;
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(iv) Provident may sell, lease, transfer or otherwise
dispose of the Equity Interests or any assets of any Enforcement
Subsidiary in an arm's-length transaction;
(v) The Company may, with respect to any Acquisition,
effect a disposition of Equity Interests or assets to the extent
required pursuant to any agreement or consent order entered into
between the Company and the Federal Trade Commission in connection with
and as a condition to such Acquisition; and
(vi) The Company or any of its Subsidiaries may sell
or otherwise dispose of all or any part of their respective assets if,
after giving effect to such sale or other disposition the aggregate
amount of all such sales and dispositions by the Company and its
Subsidiaries (including all dispositions pursuant to clause (v) above)
occurring on and after the Execution Date to the date of such sale or
disposition do not exceed 10% of Consolidated Assets on the date of
such sale or disposition.
Consensual Liens granted by the Company or any of its Subsidiaries permitted
pursuant to Section 5.02(d) shall not constitute a "disposition" for purposes of
this Section 5.02(d) until such time as holder of any such Lien forecloses or
otherwise enforces such Lien.
(f) Change in Accounting Method. The Company will not and will
not permit any of its Subsidiaries to make any change in the method of computing
depreciation for financial statement purposes or any other material change in
accounting methods other than such changes as may be required by the Financial
Accounting Standards Board or the Securities and Exchange Commission or to
conform newly acquired Subsidiaries to the Company's accounting methods. Upon
making any such change, the Company will promptly give the Banks notice thereof.
(g) Change of Business. The Company will not and will not
permit any of its Subsidiaries to engage in a line or lines of business other
than those being engaged in by the Company or one or more of its existing
Subsidiaries on the date of this Agreement and lines of business related to the
death care industry.
(h) Guaranties and Letters of Credit. The Company will not and
will not permit any Subsidiary of the Company to make or permit to remain
outstanding any Assurance or any Letter of Credit unless, after giving effect
thereto, the aggregate amount of all Assured Obligations and Letter of Credit
Obligations then outstanding shall not exceed 20% of Net Worth, excluding,
without duplication, the sum of the aggregate outstanding amount of all Debt of
the Company and its Subsidiaries guaranteed by any such Assurances.
(i) ERISA. The Company will not at any time permit any Plan
to:
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(i) Engage in any "prohibited transaction" as such
term is defined in Section 4975 of the Code or in Section 406 of ERISA
for which there is no applicable exemption;
(ii) Incur any "accumulated funding deficiency" as
such term is defined in Section 302 of ERISA and Section 412 of the
Code, whether or not waived;
(iii) Be terminated under circumstances which are
likely to result in the imposition of a Lien on the property of the
Company or any member of the ERISA Group pursuant to Section 4068 of
ERISA, if and to the extent such termination is within the control of
the Company; or
(iv) Cease to comply in any material respect with the
provisions of the Code and ERISA applicable to such Plan,
if any event or condition described in clause (i), (ii), (iii) or (iv) above is
likely to subject the Company or any member of its ERISA Group to a liability
which, in the aggregate, is material in relation to the business, operations,
property or condition, financial or otherwise, of the Company and the other
members of its ERISA Group on a consolidated basis.
(j) Restriction on Use of Proceeds. Neither the Company nor
any agent acting on behalf of the Company has taken or will take any action, or
has suffered to exist or will suffer to exist any condition, that might cause
this Agreement or any Loan to violate Regulation U, Regulation X, or any other
regulation of the Board or to violate the Securities Exchange Act of 1934, as
amended, in each case as in effect now or as the same may hereafter be in
effect. The Company will not use, directly or indirectly, the proceeds of any
Loan hereunder to acquire any security (within the meaning of the Securities
Exchange Act of 1934, as amended), in any tender offer subject to Section 13 or
14 of the Securities Exchange Act of 1934, as amended, unless such tender offer
has been approved by the Board of Directors (or other analogous body) of the
issuer of the securities that are the subject of such tender offer, so long as a
majority of the directors (or members) constituting such Board (or such body)
were directors (or members) at least 30 days prior to the making of such tender
offer.
(k) Distributions. The Company will not, and will not permit
any Subsidiary to, at any time, declare or make, or incur any liability to
declare or make, any Distribution unless immediately after giving effect to such
action:
(i) the aggregate amount of Distributions of the
Company and its Subsidiaries declared or made during the period
commencing on November 2, 1999, and ending on the date such
Distribution is declared or made, inclusive, would not exceed the sum
of
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(A) 50% of Consolidated Net Income for such
period (or minus 100% of Consolidated Net Income for such
period if Consolidated Net Income for such period is a loss),
plus
(B) the aggregate amount of proceeds of
issuance of the capital stock of the Company for such period;
and
(ii) no Default or Event of Default would exist.
(l) Acquisitions. The Company will not nor will it permit any
of its Subsidiaries to make any Acquisition or series of related Acquisitions if
the aggregate fair market value of the total consideration provided by the
Company and such Subsidiaries (including cash and other property and liabilities
assumed and including Equity Interests) would exceed $250,000,000.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) Failure to Pay the Loans. The Company shall fail to pay or
prepay (i) any principal of or interest on any Loan when due under this
Agreement or (ii) any other amount due hereunder within ten days
following the date on which payment of such other amount is due; or
(b) Failure to Pay Certain Other Indebtedness. The Company or
any of its Subsidiaries does not pay principal of or interest on any
other Debt, Assured Obligation or Letter of Credit Obligation, in an
amount of $50,000,000 or more, owed to a financial institution, when
due or within any grace period allowed by such Debt, Assured Obligation
or Letter of Credit Obligation, or if the holder of such other Debt,
Assured Obligation or Letter of Credit Obligation declares, or may
declare, such other Debt, Assured Obligation or Letter of Credit
Obligation due prior to its stated maturity because of the Company's or
such Subsidiary's default thereunder unless such default is waived or
cured within one business day of its discovery; or
(c) Failure to Pay Other Indebtedness. The Company or any of
its Subsidiaries does not pay principal of or interest on any Debt,
Assured Obligation or Letter of Credit Obligation, in an amount of
$50,000,000 or more (except those described in Sections 6.01(a) and
6.01(b)) within five days after the date due (or within any longer
period of grace that may be allowed by the terms thereof) or if the
holder or holders (or a trustee on behalf of such holder or holders) of
such other obligation declares such Debt, Assured Obligation or
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Letter of Credit Obligation due (or such Debt, Assured Obligation or
Letter of Credit Obligation becomes due without such declaration) prior
to its stated maturity because of the Company's or such Subsidiary's
default thereunder, provided that if the holder of any such Debt,
Assured Obligation or Letter of Credit Obligation accelerates the
maturity thereof and the Company or such Subsidiary promptly (and in
any case within 30 days following such acceleration) pays such Debt,
Assured Obligation or Letter of Credit Obligation, it shall not be in
default under this Section 6.01(c) by reason of such acceleration; or
(d) Misrepresentation. Any material representation or warranty
made or deemed made by or on behalf of the Company herein or in any
writing furnished in connection with this Agreement shall be false or
misleading in any material respect when made or deemed made or
furnished; or
(e) Violation of Certain Covenants. The Company violates any
covenant, agreement or condition contained in Section 5.02; or
(f) Violation of Other Covenants. The Company violates any
other covenant, agreement or condition contained herein and such
violation shall not have been remedied within 30 days after written
notice shall have been given to the Company by the Administrative
Agent; or
(g) Assignment for Benefit of Creditors. The Company or any
of its Material Subsidiaries makes an assignment for the benefit of
creditors; or
(h) Voluntary Bankruptcy. The Company or any of its Material
Subsidiaries applies to any tribunal for the appointment of a trustee
or receiver or custodian of any substantial part of the assets of the
Company or such Material Subsidiary, or commences any proceedings
relating to the Company or such Material Subsidiary under any
bankruptcy, reorganization, rearrangement, insolvency, readjustment of
debt, dissolution or other liquidation law of any jurisdiction; or
(i) Involuntary Bankruptcy. Any such application is filed, or
any such proceedings are commenced, against the Company or any of its
Material Subsidiaries, and the Company or such Material Subsidiary
indicates its approval, consent or acquiescence, or an order is entered
appointing such trustee or receiver or custodian, or adjudicating the
Company or any of its Material Subsidiaries bankrupt or insolvent, or
approving the petition in any such proceedings, and such order remains
in effect for 60 days; or
(j) Dissolution or Split-Up. Any order is entered in any
proceeding against the Company or any of its Subsidiaries (i) which
shall have contributed more than 15% of Consolidated Net Income during
the immediately preceding fiscal year or (ii) the tangible assets of
which shall have constituted more than 15% of Tangible Consolidated
Assets of the
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Company as at the end of the immediately preceding fiscal year,
decreeing the dissolution or split-up of the Company or such
Subsidiary, and such order remains in effect for 60 days; or
(k) Failure to Pay Dividend. The Company does not pay any
dividend on any of its capital stock as declared or permits any
dividend to accumulate on any of its capital stock in respect of which
cumulative dividends are provided for; or
(l) Undischarged Judgment. Final judgment for the payment of
money in excess of $10,000,000 shall be rendered against the Company or
any of its Subsidiaries and the same shall remain undischarged for a
period of 30 days during which execution shall not be effectively
stayed; or
(m) ERISA Default. The actuarial present value of unfunded
vested benefits under all Plans (other than multiemployer plans, as
defined in Section 3(37) of ERISA) shall exceed $10,000,000 (excluding
in such computation any Plan with assets greater than benefit
liabilities), or any one or more of the following events shall occur
with respect to a Plan or Plans and such occurrence (or occurrences, in
the aggregate) could result in liability of the Company or any of its
Subsidiaries to the PBGC or to the Plan or Plans in the aggregate
amount of $10,000,000 or more for the Company and such Subsidiaries
taken as a whole:
(i) Any finding or determination shall be made under
Section 4041(c) or (e) of ERISA;
(ii) Any fact or circumstance shall occur which, in
the reasonable opinion of the Majority Banks, provides grounds
for the commencement of any proceeding under Section 4042 of
ERISA;
(iii) Any proceeding shall be commenced under Section
4042 of ERISA;
(iv) Any Plan termination; or
(v) Any full or partial withdrawal (as such terms are
defined in Title IV of ERISA);
then, (i) if any Event of Default described in Section 6.01(h) or
Section 6.01(i) shall occur and be continuing, all Loans then
outstanding hereunder and interest accrued thereon and all other
liabilities hereunder shall thereupon become and be immediately due and
payable without presentment, demand, protest, notice of intent to
accelerate, or other notice of any kind to the Company or any other
Person, all of which are hereby expressly waived by the Company, the
Commitments shall thereupon immediately terminate and the Banks shall
be under no further obligation to make Loans hereunder, and (ii) if any
other Event of Default
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shall occur and be continuing, the Administrative Agent shall (A) if
requested by the Majority Banks, by notice to the Company, terminate
the Commitments and they shall thereupon immediately terminate and (B)
if requested by the Majority Banks, by notice to the Company, declare
all Loans then outstanding hereunder and interest accrued thereon and
all other liabilities of the Company hereunder and under the Fee Letter
to be immediately due and payable, and the same shall thereupon become
and be forthwith due and payable without presentment, demand, protest,
notice of intent to accelerate, or other notice of any kind to the
Company or any other Person, all of which are hereby expressly waived
by the Company.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action. Subject to Section
7.06, each Bank hereby irrevocably appoints and authorizes the Administrative
Agent to act on its behalf and to exercise such powers under this Agreement as
are specifically delegated to or required of the Administrative Agent by the
terms hereof or thereof, together with such powers as are reasonably incidental
thereto. As to any matters not expressly provided for by this Agreement
(including enforcement or collection of the Loans) the Administrative Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Majority Banks,
and such instructions shall be binding upon all Banks; provided, however, that
the Administrative Agent shall not be required to take any action which exposes
the Administrative Agent to personal liability or which is contrary to this
Agreement, or applicable law.
SECTION 7.02. Administrative Agent's Reliance, Etc. Neither
the Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement or the Loans (a) with the consent or at the
request of the Majority Banks or (b) in the absence of its or their own gross
negligence or willful misconduct (IT BEING THE EXPRESS INTENTION OF THE PARTIES
THAT THE ADMINISTRATIVE AGENT AND ITS DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES
SHALL HAVE NO LIABILITY FOR ACTIONS AND OMISSIONS UNDER THIS SECTION 7.02
RESULTING FROM THEIR SOLE ORDINARY OR CONTRIBUTORY NEGLIGENCE). Without
limitation of the generality of the foregoing, the Administrative Agent: (i) may
treat the original holder, or the holder named in the most recent notice of
assignment received by it pursuant to this Section 7.02, as the case may be, of
each Loan as the holder thereof until the Administrative Agent receives written
notice of the assignment or transfer thereof signed by such holder and in form
satisfactory to the Administrative Agent; (ii) may consult with legal counsel
(including counsel for the Company), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Bank
and shall not be responsible to any Bank for any statements, warranties or
representations made in or in connection with this Agreement or any Loan; (iv)
except as
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otherwise expressly provided herein, shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or to inspect the property (including the books and
records) of the Company; (v) shall not be responsible to any Bank for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any instrument or document furnished pursuant hereto; and
(vi) shall incur no liability under or in respect of this Agreement or any Loan
by acting upon any notice, consent, certificate or other instrument or writing
(which may be by facsimile transmission) reasonably believed by it to be genuine
and signed or sent by the proper party or parties.
SECTION 7.03. Administrative Agent and Affiliates; Chase and
Affiliates. Without limiting the right of any other Bank to engage in any
business transactions with the Company or any of its Affiliates, with respect to
their Commitments and the Loans, if any, made by them, Chase and each other Bank
that may become the Administrative Agent shall have the same rights and powers
under this Agreement and its Loans as any other Bank and may exercise the same
as though it were not the Administrative Agent; and the term "Bank" or "Banks"
shall, unless otherwise expressly indicated, include Chase and any such other
Bank, in their individual capacities. Chase, each other Person who becomes the
Administrative Agent and their respective Affiliates may be engaged in, or may
hereafter engage in, one or more loans, letters of credit, leasing or other
financing activities not the subject of this Agreement (collectively, the "Other
Financings") with the Company or any of its Affiliates, or may act as trustee on
behalf of, or depositary for, or otherwise engage in other business transactions
with, the Company or any of its Affiliates (all Other Financings and other such
business transactions being collectively, the "Other Activities") with no
responsibility to account therefor to the Banks. Without limiting the rights and
remedies of the Banks specifically set forth herein, no other Bank by virtue of
being a Bank hereunder shall have any interest in (a) any Other Activities, (b)
any present or future guarantee by or for the account of the Company not
contemplated or included herein, (c) any present or future offset exercised by
the Administrative Agent in respect of any such Other Activities, (d) any
present or future property taken as security for any such Other Activities or
(e) any property now or hereafter in the possession or control of the
Administrative Agent which may be or become security for the obligations of the
Company or any of its Affiliates hereunder and under the Loans by reason of the
general description of indebtedness secured, or of property contained in any
other agreements, documents or instruments related to such Other Activities;
provided, however, that if any payment in respect of such guarantees or such
property or the proceeds thereof shall be applied to reduction of the
obligations hereunder, then each Bank shall be entitled to share in such
application according to its pro rata portion of such obligations.
SECTION 7.04. Bank Credit Decision. Each Bank acknowledges and
agrees that it has, independently and without reliance upon the Administrative
Agent or any other Bank and based on the financial statements referred to in
Section 4.07 and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges and agrees that it will, independently
and without reliance upon the Administrative Agent or any other Bank and based
on such documents and
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information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
SECTION 7.05. Administrative Agent's Indemnity. The
Administrative Agent shall not be required to take any action hereunder or to
prosecute or defend any suit in respect of this Agreement or the Loans unless
indemnified to the Administrative Agent's satisfaction by the Banks against
loss, cost, liability and expense. If any indemnity furnished to the
Administrative Agent shall become impaired, it may call for additional indemnity
and cease to do the acts indemnified against until such additional indemnity is
given. In addition, the Banks agree to indemnify the Administrative Agent (to
the extent not reimbursed by the Company), ratably according to the respective
aggregate principal amounts of the Loans then owing to each of them (or if no
Loans are at the time outstanding, ratably according to the respective aggregate
amounts of their Commitments, or if no Commitments are outstanding, the
respective aggregate amounts of the Commitments immediately prior to the time
the Commitments ceased to be outstanding), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Administrative Agent under this Agreement (including any action taken or
omitted under Article II). Without limitation of the foregoing, each Bank agrees
to reimburse the Administrative Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including reasonable counsel fees) incurred by
the Administrative Agent in connection with the preparation, execution,
administration, or enforcement of, or legal advice in respect of rights or
responsibilities under, this Agreement to the extent that the Administrative
Agent is not reimbursed for such expenses by the Company. The provisions of this
Section 7.05 shall survive the termination of this Agreement and/or the payment
or assignment of any of the Loans. Notwithstanding the foregoing, no Bank shall
be liable under this Section 7.05 to the Administrative Agent for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements due to the Administrative Agent
resulting from the Administrative Agent's gross negligence or willful
misconduct. Each Bank agrees, however, that it expressly intends, under this
Section 7.05, to indemnify the Administrative Agent ratably as aforesaid for all
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses and disbursements arising out of or resulting from the
Administrative Agent's sole, ordinary or contributory negligence.
SECTION 7.06. Successor Administrative Agent. The
Administrative Agent may resign at any time by giving written notice thereof to
the Banks and the Company and may be removed as Administrative Agent under this
Agreement at any time, with or without cause, by the Majority Banks. Upon any
such resignation or removal, the Majority Banks shall have the right to appoint
a successor Administrative Agent. If no successor Administrative Agent shall
have been so appointed by the Majority Banks, and shall have accepted such
appointment, within 30 calendar days after the retiring Administrative Agent's
giving of notice of resignation or the Majority Banks' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf
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of the Banks, appoint a successor Administrative Agent, which shall be a
commercial bank organized or licensed under the laws of the United States of
America or of any state thereof and having a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Administrative Agent's
resignation or removal as Administrative Agent hereunder, the provisions of this
Article VII shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.
SECTION 7.07. Notice of Default. The Administrative Agent
shall not be deemed to have knowledge or notice of the occurrence of any Default
or Event of Default hereunder unless the Administrative Agent shall have
received notice from a Bank or the Company referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default." If the Administrative Agent receives such a notice, the
Administrative Agent shall give notice thereof to the Banks; provided, however,
if such notice is received from a Bank, the Administrative Agent also shall give
notice thereof to the Company. The Administrative Agent shall be entitled to
take action or refrain from taking action with respect to such Default or Event
of Default as provided in Section 7.01 and Section 7.02.
SECTION 7.08. No Duty. No agent other than the Administrative
Agent shall have any duties, responsibilities or liabilities in such capacity
with respect to the administration or enforcement of this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by the Company
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Majority Banks in all cases, and then, in any case, such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by each Bank affected thereby, do
any of the following: (a) change the definition of "Majority Banks" contained in
Section 1.01, (b) except as expressly provided in Section 2.14(f) or Section
2.15(c), reduce or increase the amount or alter the terms of the Commitments of
any Banks or subject any Banks to any additional obligations, (c) reduce or
forgive the principal of, or rate or amount of interest applicable to, any Loan
other than as provided in this Agreement, or any fees hereunder, (d) postpone
any date fixed for any payment of principal of, or interest on, the Loans or any
fees hereunder, (e) change Section 4.13, this Section 8.01, the last sentence of
Section 8.11(a) or, (f) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the
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Loans, or the number of Banks, which shall be required for the Banks or any of
them to take any action hereunder; and provided that no amendment, waiver or
consent shall, unless in writing and signed by the Administrative Agent in
addition to the Banks required above to take such action, affect the rights or
duties of the Administrative Agent under this Agreement.
SECTION 8.02. Notices, Etc. The Administrative Agent, any Bank, or the
holder of any Loan, giving consent or notice or making any request of the
Company provided for hereunder, shall notify each Bank and the Administrative
Agent thereof. In the event that the holder of any Loan (including any Bank)
shall transfer such Loan, it shall promptly so advise the Administrative Agent
which shall be entitled to assume conclusively that no transfer of any Loan has
been made by any holder (including any Bank) unless and until the Administrative
Agent receives written notice to the contrary. Notices, consents, requests,
approvals, demands and other communications (collectively "Communications")
provided for or required herein shall be in writing (including facsimile
Communications) and mailed, sent by facsimile transmission or delivered:
(a) If to the Company, to it at:
1929 Allen Parkway
P.O. Box 130548
Houston, Texas 77019-0548
Telecopy Number: (713) 525-9067
Attention: Secretary
(b) If to the Administrative Agent, to it at:
Chase Agent Services
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Telephone Number: (212) 552-7277
Telecopy Number: (212) 552-5658
Attention: Janet Belden
with a copy to:
Chase Bank of Texas, National Association
707 Travis Street, 5 CBBN 78
Houston, Texas 77002
Telephone Number: (713) 216-5324
Telecopy Number: (713) 216-6004
Attention: Michael Ondruch
(c) If to any Bank, as specified on the signature page for
such Bank hereto or, in the case of any Person who becomes a Bank after the date
hereof, as specified on the signature page of the Assignment and Acceptance
executed by such Bank, or as to any party, such other address or
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facsimile number as such party may hereafter specify for such purpose in a
Communication to the other parties hereto.
(d) All Communications shall, when mailed, sent by facsimile
transmission or delivered, be effective when deposited in the mails to any party
at its address specified above, on the signature page hereto, or on the
signature page of such Assignment and Acceptance (or other address designated by
such party to the other parties hereto) or sent by facsimile transmission to any
party to the facsimile transmission number as set forth herein or on the
signature pages hereto, or on the signature pages of such Assignment and
Acceptance (or other facsimile number designated by such party in a
Communication to the other parties hereto) or delivered personally to any party
at its address specified above, on the signature page hereof or on the signature
page of such Assignment and Acceptance (or other address designated by such
party in a Communication to the other parties hereto; provided, however,
Communications to the Administrative Agent pursuant to Article II or Article VII
shall not be effective until received by the Administrative Agent; and provided,
further, that the Company shall indemnify each of the Administrative Agent and
the Banks against any costs, claim, loss, expense (including legal fees) or
liability which any of them may sustain or incur as a consequence of any
facsimile notice or communication originating from the Company not being
actually received by or delivered to the intended recipient thereof or any
facsimile communication purporting to originate from the Company being made or
delivered fraudulently.
SECTION 8.03. No Waiver; Remedies. No failure on the part of
any Bank or the Administrative Agent to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, or any abandonment or discontinuance of any
steps to enforce such right, preclude any other or further exercise thereof or
the exercise of any other right. No notice to or demand on the Company in any
case shall entitle the Company to any other or further notice or demand in
similar or other circumstances. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
SECTION 8.04. Costs, Expenses and Taxes. The Company agrees to
pay on demand: (a) all reasonable costs and expenses of the Administrative Agent
in connection with the preparation, execution, delivery and administration of
this Agreement and the other documents to be delivered hereunder, including the
reasonable fees and out-of-pocket expenses of counsel for the Administrative
Agent with respect thereto and with respect to advising the Administrative Agent
as to its rights and responsibilities under this Agreement, and any
modification, supplement or waiver of any of the terms of this Agreement or any
modification or extension of the Loans, and (b) all reasonable costs and
expenses of each of the Banks and the Administrative Agent (including reasonable
counsel fees and expenses of outside counsel and the reasonable allocated costs
of in-house legal services) in connection with the enforcement of this Agreement
and the Loans. In addition, unless prohibited by applicable law, the Company
shall pay any and all stamp, mortgage and similar taxes payable or determined to
be payable in connection with the execution and delivery or enforcement of this
Agreement and the Loans and the other documents to be delivered hereunder, and
agrees to save the Administrative Agent and each Bank harmless from and against
any and all
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liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery or enforcement of this Agreement.
Without prejudice to the survival of any other obligations of the Company
hereunder, the obligations of the Company under this Section 8.04 shall survive
the termination of this Agreement and the payment or assignment of the Loans.
SECTION 8.05. Indemnity. (a) The Company shall indemnify the
Administrative Agent, the Banks and each Affiliate thereof and their respective
directors, officers, employees and agents from, and hold each of them harmless
against, any and all losses, liabilities, claims and damages to which any of
them may become subject, insofar as such losses, liabilities, claims and damages
arise out of or result from (i) any actual or proposed use by the Company of the
proceeds of any extension of credit by any Bank hereunder or (ii) any
investigation, litigation or other proceeding (including any threatened
investigation or proceeding) relating to the foregoing, and the Company shall
reimburse the Administrative Agent and each Bank, and each Affiliate thereof and
their respective directors, officers, employees and agents, upon demand for any
expenses (including legal fees) reasonably incurred in connection with any such
investigation or proceeding; but excluding any such losses, liabilities, claims,
damages or expenses incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified.
(b) WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT, IT IS
THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED
HEREUNDER OR THEREUNDER SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND
ALL LOSSES, LIABILITIES, CLAIMS AND DAMAGES ARISING OUT OF OR RESULTING FROM THE
ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON. Without prejudice to
the survival of any other obligations of the Company hereunder, the obligations
of the Company under this Section 8.05 shall survive the termination of this
Agreement and the payment or assignment of the Loans.
SECTION 8.06. Right of Setoff. If any Event of Default shall
have occurred and be continuing, each Bank is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Bank or any
branch, subsidiary or Affiliate of such Bank to or for the credit or the account
of the Company against any of and all the obligations of the Company now or
hereafter existing under this Agreement and any Loan held by such Bank,
irrespective of whether or not such Bank or the Administrative Agent shall have
made any demand under this Agreement and although such obligations may be
unmatured. Each Bank agrees promptly to notify the Company as to which such
setoff and application was made after any such setoff and application made by
such Bank, but the failure to give such notice shall not affect the validity of
such setoff and application. The rights of each Bank under this Section 8.06 are
in addition to other rights and remedies (including other rights of setoff)
which such Bank may have.
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SECTION 8.07. Governing Law. This Agreement and all other
documents executed in connection herewith (including each Assignment and
Acceptance ) shall be deemed to be contracts and agreements executed by the
Company, the Administrative Agent and the Banks party thereto under the laws of
the State of New York and of the United States and for all purposes shall be
construed in accordance with, and governed by, the laws of said state and of the
United States. Without limitation of the foregoing, nothing in this Agreement or
in any such other agreement shall be deemed to constitute a waiver of any rights
which any Bank may have under applicable federal legislation relating to the
amount of interest which such Bank may contract for, take, receive, reserve or
charge in respect of any Loans, including any right to contract for, take,
receive, reserve and charge interest at the rate allowed by the law of the state
where such Bank is located.
SECTION 8.08. Interest. Anything in this Agreement to the
contrary notwithstanding, the Company shall never be required to pay unearned
interest on any Loan and shall never be required to pay interest on such Loan at
a rate in excess of the Highest Lawful Rate, and if the effective rate of
interest which would otherwise be payable under this Agreement and such Loan
would exceed the Highest Lawful Rate, or if the holder of such Loan shall
receive any unearned interest or shall receive monies that are deemed to
constitute interest which would increase the effective rate of interest payable
by the Company under this Agreement and such Loan to a rate in excess of the
Highest Lawful Rate, then (a) the amount of interest which would otherwise be
payable by the Company under this Agreement and such Loan shall be reduced to
the amount allowed under applicable law; and (b) any unearned interest paid by
the Company or any interest paid by the Company in excess of the Highest Lawful
Rate shall be credited on the principal of such Loan. It is further agreed that
all calculations of the rate of interest contracted for, charged or received by
any Bank under the Loans made by it, or under this Agreement, which are made for
the purpose of determining whether such rate exceeds the Highest Lawful Rate
applicable to such Bank (such Highest Lawful Rate being such Bank's "Maximum
Permissible Rate"), shall be made, to the extent permitted by usury laws
applicable to such Bank (now or hereafter enacted), by amortizing, prorating and
spreading in equal parts during the period of the full stated term of the Loans
all interest at any time contracted for, charged or received by such Bank in
connection therewith. If at any time and from time to time (y) the amount of
interest payable to any Bank on any date shall be computed at such Bank's
Maximum Permissible Rate pursuant to this Section 8.08 and (z) in respect of any
subsequent interest computation period the amount of interest otherwise payable
to such Bank would be less than the amount of interest payable to such Bank
computed at such Bank's Maximum Permissible Rate, then the amount of interest
payable to such Bank in respect of such subsequent interest computation period
shall continue to be computed at such Bank's Maximum Permissible Rate until the
total amount of interest payable to such Bank shall equal the total amount of
interest which would have been payable to such Bank if the total amount of
interest had been computed without giving effect to this Section 8.08.
SECTION 8.09. Survival of Representations, Warranties and
Covenants. All representations, warranties and covenants contained herein or
made in writing by the Company in
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connection herewith shall survive the execution and delivery of this Agreement,
and will bind and inure to the benefit of the respective successors and assigns
of the parties hereto, whether so expressed or not, provided, that the
undertaking of the Banks to make Loans to the Company shall not inure to the
benefit of any successor or assign of the Company.
SECTION 8.10. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Company and the Administrative
Agent and when the Administrative Agent shall have been notified by each Bank
that such Bank has executed it and, except as provided in Section 8.09,
thereafter shall be binding upon and inure to the benefit of the Company, the
Administrative Agent and each Bank and their respective successors and assigns.
SECTION 8.11. Successors and Assigns; Participations. (a)
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and permitted assigns of
such party; and all covenants, promises and agreements by or on behalf of the
Company, the Administrative Agent or the Banks that are contained in this
Agreement shall bind and inure to the benefit of their respective successors and
permitted assigns. The Company may not assign or transfer any of its rights or
obligations hereunder without the written consent of all the Banks.
(b) Each Bank, without the consent of the Company, may 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 and the Loans owing to it); provided, however,
that (i) the selling Bank's obligations under this Agreement shall remain
unchanged; (ii) such Bank shall remain solely responsible to the other parties
hereto for the performance of such obligations; (iii) the participating banks or
other entities shall be entitled to the cost protection provisions contained in
Article II and Section 8.04; and (iv) the Company, the Administrative Agent and
the other Banks shall continue to deal solely and directly with the selling Bank
in connection with such Bank's rights and obligations under this Agreement;
provided, however, that each Bank shall retain the sole right and responsibility
to enforce the obligations of the Company relating to the Loans including the
right to approve any amendment, modification or waiver of any provision of this
Agreement; and further provided, however, the selling Bank may grant a
participant voting rights with respect to amendments, modifications or waivers
with respect to any fees payable hereunder (including the amount and the dates
fixed for the payment of any such fees) or the amount of principal or the rate
of interest payable on, or the dates fixed for any payment of principal of or
interest on, the Loans. Each Bank shall provide the Company with prompt notice
of the identity of each participating bank to which a participation in its
Commitment or any Loan is sold and the amount of such participation.
(c) With the prior consent of the Company and the
Administrative Agent, such consent not to be unreasonably withheld, a Bank may
assign to one or more Eligible Assignees (provided, however, no such consent
shall be required if such Eligible Assignee is a Bank or an Affiliate of a Bank)
and, without the consent of the Company or the Administrative Agent, a Bank
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may assign to one of its Affiliates, all or a portion of its interests, rights,
and obligations under this Agreement (including all or a portion of its
Commitments and the same portion of the Loans at the time owing to it);
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of all the assigning Bank's rights and obligations under
this Agreement and partial assignments shall (except in the case of assignments
to an Affiliate of such Bank or to other Banks), be in a minimum principal
amount of $5,000,000 and (ii) the parties to each such assignment shall execute
and deliver to the Administrative Agent, for its acceptance and recording in the
Register (as defined below), an Assignment and Acceptance substantially in the
form of Exhibit 8.11 (an "Assignment and Acceptance"), together with a properly
completed Administrative Questionnaire from such Eligible Assignee and a
processing and recordation fee of $2,000; provided, however, the Company shall
not have any obligation to pay or reimburse any Person for the payment of such
processing and recordation fee, except for assignments pursuant to Section 2.14
or Section 2.15. The Eligible Assignee party to each Assignment and Acceptance
also shall deliver a copy of its Administrative Questionnaire to the Company.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five Business Days after the execution thereof (unless
otherwise provided in such Assignment and Acceptance) (x) the Eligible Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder
and (y) the assignor Bank thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all of the remaining
portion of an assigning Bank's rights and obligations under this Agreement, such
Bank shall cease to be a party hereto, provided, however, such Bank shall have
the benefits of Section 2.14, Section 2.20, Section 8.04 and Section 8.05).
(d) By executing and delivering an Assignment and Acceptance,
the Bank assignor thereunder and the Eligible Assignee confirm to and agree with
each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim known to
such Bank assignor, such Bank assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any other
instrument or document furnished pursuant hereto or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto; (ii) such Bank
assignor makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Company or the performance or
observance of its obligations under this Agreement or any other instrument or
document furnished pursuant hereto; (iii) such Eligible Assignee confirms that
it has received a copy of this Agreement together with copies of the most recent
financial statements delivered pursuant to Section 4.07 or Section 5.01(a) and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance;
(iv) such Eligible Assignee will, independently and without reliance upon the
Administrative Agent, such Bank assignor or any other Bank and based on such
documents and
Amended and Restated
Credit Agreement
-59-
<PAGE> 64
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
Eligible Assignee appoints and authorizes the Administrative Agent to take such
action on behalf of such Eligible Assignee and to exercise such powers under
this Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; (vi) such
Eligible Assignee agrees that it will perform in accordance with their terms all
of the obligations which by the terms of this Agreement are required to be
performed by it as a Bank and (vii) such Eligible Assignee confirms that it is
an Eligible Assignee as defined herein.
(e) The Administrative Agent shall maintain at its office a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Banks and the Commitments of, and
principal amount of the Loans owing to, each Bank from time to time (the
"Register"). The entries in the Register shall, to the extent permitted by law,
be conclusive, in the absence of manifest error, and the Company, the
Administrative Agent and the Banks may treat each Person whose name is recorded
in the Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Company or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed
by an assigning Bank and an Eligible Assignee and, if required, the written
consent to such assignment, the Administrative Agent shall, if such Assignment
and Acceptance has been completed and is substantially in the form of Exhibit
8.11, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Banks and the Company.
(g) Notwithstanding any other provision herein, any Bank may,
in connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 8.11 disclose to the assignee or
participant or proposed assignee or participant, any information relating to the
Company furnished to such Bank by or on behalf of the Company; provided, that
prior to any such disclosure, each such assignee or participant or proposed
assignee or participant shall agree to preserve the confidentiality, pursuant to
Section 8.12, of any confidential information relating to the Company received
from such Bank.
(h) Anything in this Section 8.11 to the contrary
notwithstanding, any Bank may at any time, without the consent of the Company or
the Administrative Agent, assign and pledge all or any portion of its Commitment
and the Loans owing to it to any Federal Reserve Bank (and its transferees) as
collateral security pursuant to Regulation A and any Operating Circular issued
by such Federal Reserve Bank. No such assignment shall release the assigning
Bank from its obligations hereunder. Notwithstanding the foregoing, in
connection with any such pledge of such Loans to the Federal Reserve Bank, any
Bank may request that such Loans be evidenced by a note or notes in form and
substance satisfactory to such Bank and the Company.
Amended and Restated
Credit Agreement
-60-
<PAGE> 65
SECTION 8.12. Confidentiality. Each Bank agrees to exercise
its best efforts to keep any information delivered or made available by the
Company to it (including any information obtained pursuant to Section 5.01(e))
which is clearly indicated to be confidential information, confidential from
anyone other than Persons employed or retained by such Bank or any of its
Affiliates who are or are expected to become engaged in evaluating, approving,
structuring or administering the Loans; provided that nothing herein shall
prevent any Bank from disclosing such information (a) to any other Bank; (b)
pursuant to subpoena or upon the order of any court or administrative agency;
(c) upon the request or demand of any regulatory agency or authority having
jurisdiction over such Bank; (d) which has been publicly disclosed; (e) to the
extent reasonably required in connection with any litigation to which the
Administrative Agent, any Bank, the Company or their respective Affiliates may
be a party; (f) to the extent reasonably required in connection with the
exercise of any remedy hereunder; (g) to such Bank's legal counsel and
independent auditors; and (h) to any actual or proposed participant or assignee
of all or part of its rights hereunder which has agreed in writing to be bound
by the provisions of this Section 8.12.
SECTION 8.13. Separability. Should any clause, sentence,
paragraph or Section of this Agreement be judicially declared to be invalid,
unenforceable or void, such decision will not have the effect of invalidating or
voiding the remainder of this Agreement, and the parties hereto agree that the
part or parts of this Agreement so held to be invalid, unenforceable or void
will be deemed to have been stricken herefrom and the remainder will have the
same force and effectiveness as if such part or parts had never been included
herein.
SECTION 8.14. Limitation by Law. All waivers, indemnities and
rights provided in this Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and all the
provisions of this Agreement are intended to be subject to all applicable
mandatory provisions of law which may be controlling and to be limited to the
extent necessary so that they will not render this Agreement invalid or
unenforceable, in whole or in part.
SECTION 8.15. Independence of Covenants. All covenants
contained in this Agreement shall be given independent effect so that if a
particular action or condition is not permitted by any such covenant, the fact
that such action or condition would be permitted by an exception to, or
otherwise be within the limitations of, another covenant shall not avoid the
occurrence of a Default or Event of Default if such action is taken or condition
exists.
SECTION 8.16. Judgment. The obligations of the Company in
respect of any sum due to any party hereto or any holder of the obligations
owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment
in a currency (the "Judgment Currency") other than the currency in which such
sum is stated to be due hereunder (the "Agreement Currency"), be discharged only
to the extent that, on the Business Day following receipt by the Applicable
Creditor of any sum adjudged to be so due in the Judgment Currency, the
Applicable Creditor may in accordance with normal banking procedures in the
relevant jurisdiction purchase the Agreement Currency with the Judgment
Currency; if the amount of the Agreement Currency so purchased is less than the
sum
Amended and Restated
Credit Agreement
-61-
<PAGE> 66
originally due to the Applicable Creditor in the Agreement Currency, the Company
agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify the Applicable Creditor against such loss. The obligations of the
Company contained in this Section 8.16 shall survive the termination of this
Agreement and the payment of all other amounts owing hereunder.
SECTION 8.17. SUBMISSION TO JURISDICTION; WAIVER OF
IMMUNITIES. (a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
AND THE FEE LETTER MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF
THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION
OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. THE
COMPANY HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CORPORATION SERVICE
COMPANY, WITH OFFICES ON THE DATE HEREOF AT 80 STATE STREET, ALBANY, NEW YORK
12201, AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND ACKNOWLEDGE
FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL
LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH
ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND AGENT SHALL
CEASE TO BE AVAILABLE TO ACT AS SUCH, THE COMPANY AGREES TO DESIGNATE A NEW
DESIGNEE, APPOINTEE AND AGENT IN THE STATE OF NEW YORK ON THE TERMS AND FOR THE
PURPOSES OF THIS PROVISION SATISFACTORY TO THE ADMINISTRATIVE AGENT. THE COMPANY
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS
PROVIDED IN SECTION 8.02, SUCH SERVICE TO BECOME EFFECTIVE THIRTY DAYS AFTER
SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT
OR ANY BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
(b) TO THE EXTENT THAT THE COMPANY HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY (SOVEREIGN OR OTHERWISE) FROM ANY LEGAL ACTION, SUIT OR
PROCEEDING, FROM JURISDICTION OF ANY COURT OR FROM SET-OFF OR ANY LEGAL PROCESS
(WHETHER SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
Amended and Restated
Credit Agreement
-62-
<PAGE> 67
EXECUTION OF JUDGMENT, EXECUTION OF JUDGMENT OR OTHERWISE) WITH RESPECT TO
ITSELF OR ANY OF ITS PROPERTY, THE COMPANY HEREBY IRREVOCABLY WAIVES AND AGREES
NOT TO PLEAD OR CLAIM SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT. THE COMPANY HEREBY AGREES THAT THE WAIVERS SET FORTH IN THIS SECTION
8.17 SHALL HAVE THE FULLEST EFFECT PERMITTED UNDER THE FOREIGN SOVEREIGN
IMMUNITIES ACT OF 1976 OF THE UNITED STATES OF AMERICA AND ARE INTENDED TO BE
IRREVOCABLE AND NOT SUBJECT TO WITHDRAWAL FOR PURPOSES OF SUCH ACT.
SECTION 8.18. Entire Agreement. This Agreement (including the
Exhibits and Schedules hereto), the Assignment and Acceptances, if any, and the
Fee Letter embody the entire agreement and understanding among the Company, the
Administrative Agent and the Banks relating to the subject matter hereof and
thereof and supersede all prior proposals, agreements and understandings
relating to such subject matter.
SECTION 8.19. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
Amended and Restated
Credit Agreement
-63-
<PAGE> 68
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
SERVICE CORPORATION INTERNATIONAL
By:
-----------------------------------
Name: Todd A. Matherne
Title: Senior Vice President
and Treasurer
Amended and Restated
Credit Agreement
<PAGE> 69
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:
-----------------------------------
Name:
Title:
Amended and Restated
Credit Agreement
<PAGE> 70
BANKS
ABN AMRO BANK N.V.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Three Riverway, Suite 1700
Houston, Texas 77056
Telecopy No.: (713) 629-7533
Domestic Lending Office
ABN AMRO Bank N.V.
208 South LaSalle Street
Suite 1500
Chicago, Illinois 60603
Attn: Credit Administration
Telephone: (312) 992-5118
Telecopy No.: (312) 992-5111
Eurodollar Lending Office
ABN AMRO Bank N.V.
208 South LaSalle Street
Suite 1500
Chicago, Illinois 60603
Attn: Credit Administration
Telephone: (312) 992-5118
Telecopy No.: (312) 992-5111
Amended and Restated
Credit Agreement
<PAGE> 71
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By:
-----------------------------------
Name:
Title:
333 Clay Street, Suite 3400
Houston, Texas 77002
Telecopy No.: (713) 659-1414
Domestic Lending Office
Banque Nationale De Paris,
Houston Agency
333 Clay Street, Suite 3400
Houston, Texas 77002
Attn: Donna Rose
Telecopy No.: (713) 659-1414
Eurodollar Lending Office
Banque Nationale De Paris,
Houston Agency
333 Clay Street, Suite 3400
Houston, Texas 77002
Attn: Donna Rose
Telecopy No.: (713) 659-1414
Amended and Restated
Credit Agreement
<PAGE> 72
BANK ONE, TEXAS, NA
By:
-----------------------------------
Name:
Title:
910 Travis Street, 7th Floor
Houston, Texas 77002
Telecopy No.: (713) 751-6199
Domestic Lending Office
Bank One, Texas, NA
910 Travis Street, 7th Floor
Houston, Texas 77002
Telecopy No.: (713) 751-6199
Eurodollar Lending Office
Bank One, Texas, NA
910 Travis Street, 7th Floor
Houston, Texas 77002
Amended and Restated
Credit Agreement
<PAGE> 73
CITIBANK, N.A.
By:
------------------------------------
Name:
Title:
400 Perimeter Center Terrace
Suite 600
Atlanta, Georgia 30346
Telecopy No.: (770) 668-8137
Domestic Lending Office
Citibank, N.A.
399 Park Avenue, 10th Floor, Zone 7
New York, New York 10043
Eurodollar Lending Office
Citibank, N.A.
399 Park Avenue, 10th Floor, Zone 7
New York, New York 10043
Amended and Restated
Credit Agreement
<PAGE> 74
COMMERZBANK AKTIENGESELLSCHAFT,
ATLANTA AGENCY
By:
-----------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
Promenade Two, Suite 3500
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Telecopy No.: (404) 888-6539
Domestic Lending Office
Commerzbank Aktiengesellschaft,
Atlanta Agency
Promenade Two, Suite 3500
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attn: David Suttles - AVP
Telecopy No.: (404) 888-6539
Eurodollar Lending Office
Commerzbank Aktiengesellschaft,
Atlanta Agency
Promenade Two, Suite 3500
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attn: David Suttles - AVP
Telecopy No.: (404) 888-6539
Amended and Restated
Credit Agreement
<PAGE> 75
CREDIT LYONNAIS NEW YORK BRANCH
By:
-----------------------------------
Name:
Title:
1301 Avenue of the Americas
New York, New York 10019
Telecopy No.: (212) 954-3312
Domestic Lending Office
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Telecopy No.: (212) 954-3312
Eurodollar Lending Office
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Telecopy No.: (212) 954-3312
with notices to:
Credit Lyonnais
Dallas Representative Office
2200 Ross Avenue, Suite 4400W
Dallas, Texas 75201
Amended and Restated
Credit Agreement
<PAGE> 76
LLOYDS TSB BANK plc
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Lloyds TSB Bank plc, Miami
One Biscayne Tower, Suite 3200
2 South Biscayne Boulevard
Miami, Florida 33131
Domestic Lending Office
Lloyds TSB Bank plc, Miami
One Biscayne Tower, Suite 3200
2 South Biscayne Boulevard
Miami, Florida 33131
Eurodollar Lending Office
Lloyds TSB Bank plc, Miami
One Biscayne Tower, Suite 3200
2 South Biscayne Boulevard
Miami, Florida 33131
Amended and Restated
Credit Agreement
<PAGE> 77
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:
-----------------------------------
Name:
Title:
60 Wall Street
New York, New York 10260-0060
Telecopy No.: (212) 648-5249
Domestic Lending Office
Morgan Guaranty Trust
Company of New York
60 Wall Street
New York, New York 10260-0060
Telecopy No.: (212) 648-5249
Eurodollar Lending Office
Morgan Guaranty Trust
Company of New York
60 Wall Street
New York, New York 10260-0060
Telecopy No.: (212) 648-5249
Amended and Restated
Credit Agreement
<PAGE> 78
BANK OF AMERICA, N.A.
f/k/a NationsBank, N.A.
By:
-----------------------------------
Name:
Title:
700 Louisiana, 8th Floor
Houston, Texas 77002
Telecopy No.: (713) 247-6360
Domestic Lending Office
Bank of America, N.A.
f/k/a NationsBank, N.A.
101 North Tryon Street
Charlotte, NC 28255
Attn: Matthew Menz
Telecopy No.: (704) 409-0083
Eurodollar Lending Office
Bank of America, N.A.
f/k/a NationsBank, N.A.
101 North Tryon Street
Charlotte, NC 28255
Attn: Matthew Menz
Telecopy No.: (704) 409-0083
Amended and Restated
Credit Agreement
<PAGE> 79
ROYAL BANK OF CANADA
By:
-----------------------------------
Name:
Title:
12450 Greenspoint Drive, Suite 1450
Houston, Texas 77060
Telecopy No.: (281) 874-0081
Domestic Lending Office
Royal Bank of Canada
1 Liberty Plaza
New York, New York 10006
Telecopy No.: (212)428-2372
Eurodollar Lending Office
Royal Bank of Canada
1 Liberty Plaza
New York, New York 10006
Telecopy No.: (212) 428-2372
Amended and Restated
Credit Agreement
<PAGE> 80
SOCIETE GENERALE
By:
-----------------------------------
Name:
Title:
181 West Madison, Suite 3400
Chicago, Illinois 60602
Telecopy No.: (312) 578-5099
Domestic Lending Office
Societe Generale
181 West Madison, Suite 3400
Chicago, Illinois 60602
Telecopy No.: (312) 578-5099
Eurodollar Lending Office
Societe Generale
181 West Madison, Suite 3400
Chicago, Illinois 60602
Telecopy No.: (312) 578-5099
Amended and Restated
Credit Agreement
<PAGE> 81
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By:
-----------------------------------
Michael Ondruch
Vice President
712 Main Street
Houston, Texas 77002
Telecopy No.: (713) 216-6004
Telephone No.: (713) 216-5324
Attention: Michael Ondruch
Domestic Lending Office
Chase Bank of Texas,
National Association
712 Main Street
Houston, Texas 77002
Telecopy No.: (713) 216-6004
Eurodollar Lending Office
Chase Bank of Texas,
National Association
712 Main Street
Houston, Texas 77002
Telecopy No.: (713) 216-6004
Amended and Restated
Credit Agreement
<PAGE> 82
UBS AG, STAMFORD BRANCH
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
677 Washington Blvd.
6 North
Stamford, Connecticut 06901
Telecopy No.: (203) 719-3898
Domestic Lending Office
UBS AG, Stamford Branch
677 Washington Blvd.
Stamford, Connecticut 06901
Telecopy No.: (203) 719-3898
Eurodollar Lending Office
UBS AG, Stamford Branch
677 Washington Blvd.
6 North
Stamford, Connecticut 06901
Telecopy No.: (203) 719-3898
Amended and Restated
Credit Agreement
<PAGE> 83
ANNEX I
COMMITMENTS
<TABLE>
<S> <C>
Chase Bank of Texas, National Association $ 88,474,576.28
ABN AMRO Bank N.V. $ 41,758,474.58
Bank of America, N.A., f/k/a NationsBank, N.A. $ 60,000,000.00
Bank One, Texas, NA $ 41,758,474.58
Banque Nationale de Paris, Houston Agency $ 15,000,000.00
Citibank, N.A. $ 55,677,966.10
Commerzbank Aktiengesellshaft, Atlanta Agency $ 41,758,474.58
Credit Lyonnais New York Branch $ 55,677,966.10
Lloyds TSB Bank plc $ 23,199,152.53
Morgan Guaranty Trust Company of New York $ 74,237,288.14
Royal Bank of Canada $ 23,199,152.53
Societe Generale $ 37,500,000.00
UBS AG, Stamford Branch $ 41,758,474.58
----------------------
TOTAL $ 600,000,000.00
</TABLE>
Amended and Restated
Credit Agreement
<PAGE> 1
EXHIBIT 99.12
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
)
)
IN RE SERVICE CORPORATION )
INTERNATIONAL ) CIVIL ACTION NO. H-99-0280
) (Judge Lynn N. Hughes)
)
)
DEFENDANTS' REPLY TO PLAINTIFFS' OPPOSITION
TO DEFENDANTS' MOTION TO DISMISS THE
CONSOLIDATED CLASS ACTION COMPLAINT
J. Clifford Gunter III
Andrew M. Edison
Bracewell & Patterson, L.L.P.
South Tower Pennzoil Place
711 Louisiana, Suite 2900
Houston, Texas 77002-2781
Telephone: (713) 223-2900
Facsimile: (713) 221-1212
COUNSEL FOR DEFENDANTS
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION......................................................................................................1
ARGUMENT .........................................................................................................2
A. Plaintiffs Fail to Plead with Sufficient Particularity..........................................2
1. Plaintiffs are Pleading on Information and Belief......................................3
2. Plaintiffs do not Plead the Factual Basis for their Allegations........................5
3. Plaintiffs Must Identify Internal Documents and Informants
Relied Upon in Filing the Complaint....................................................6
4. The Preneed Study and Defendants' Alleged Statements do not
Support the Allegations in the Complaint...............................................8
B. Plaintiffs Fail to Adequately Allege Scienter..................................................11
1. Plaintiffs do not State with Particularity Facts Giving Rise
to a Strong Inference of Scienter for Each Act or Omission
Alleged...............................................................................11
2. Plaintiffs' Allegations of Motive and Opportunity are not Sufficient..................12
C. Many of the Alleged Misstatements are not Actionable as a Matter
of Law.........................................................................................15
D. Plaintiffs' Section 11 and Section 12(a)(2) Claims Fail........................................16
1. Plaintiffs' Section 11 and 12(a)(2) Claims are Subject to Rule 9(b)
and the Reform Act. ..................................................................16
2. The Accuracy of the Registration Statement/Prospectus is Tested
on its Effective Date - November 20, 1998.............................................17
3. The Registration Statement/Prospectus did not Require
Defendants to Disclose all Ongoing Developments Relating
to SCI's Business.....................................................................19
CONCLUSION.......................................................................................................23
CERTIFICATE OF SERVICE...........................................................................................23
</TABLE>
-i-
<PAGE> 3
TABLE OF AUTHORITIES
<TABLE>
<CAPTION>
PAGE
----
CASES
- -----
<S> <C>
Acito v. IMCERA Group, Inc.,
47 F.3d 47 (2d Cir. 1995) ...............................................................................15
Decker v. Massey-Ferguson, Ltd., 534 F. Supp. 873 (S.D.N.Y. 1981)
(same), aff'd in part, rev'd in part on other grounds,
681 F.2d 111 (2d Cir. 1982)...............................................................................7
Finkel v. Stratton Corp.,
754 F. Supp. 318 (S.D.N.Y. 1990), aff'd in part,
rev'd in part on other grounds, 962 F.2d 169 (2d Cir. 1992)..............................................18
Hartsell v. Source Media, Inc.,
1999 WL 649645 (N.D. Tex. 1999) ..........................................................................3
Hockey v. Medhekar,
1997 WL 203704 (N.D. Cal. 1997) ..........................................................................6
In re Cirrus Logic Sec. Litig.,
946 F. Supp. 1446 (N.D. Cal. 1996) ......................................................................13
In re Donald J. Trump Casino Securities Litigation,
793 F. Supp. 543 (D.M.J. 1992), aff'd, 7 F.3d 357 (3d Cir. 1993) ........................................21
In re Fine Host Corp. Sec. Litig.,
25 F. Supp.2d 61 (D.Conn. 1988) .........................................................................14
In re Green Tree Financial Corp. Stock Litigation,
1999 WL 684173 (D. Minn. 1999) ................................................................................3
In re Health Management,
970 F. Supp. 192 (E.D.N.Y. 1997) ........................................................................15
In re Health Mngmt Syst. Inc. Sec. Litig.,
1998 WL 283286 (S.D.N.Y. 1998) ...........................................................................3
In re PETsMART, Inc. Securities Litigation,
61 F. Supp.2d 982 (D.Ariz. 1999) .........................................................................3
</TABLE>
-ii-
<PAGE> 4
TABLE OF AUTHORITIES
<TABLE>
<CAPTION>
PAGE
----
CASES
- -----
<S> <C>
In re Silicon Graphics Sec. Litig.,
183 F.3d 970 (9th Cir. 1999) .............................................................................3
Law v. Medco Research, Inc.,
113 F.3d 781 (7th Cir. 1997) .............................................................................7
Lirette v. Shiva Corp.,
999 F. Supp. 164 (D. Mass. 1998) .........................................................................3
Marksman Partners L.P. v. Chantal Pharmaceutical Corp.,
927 F. Supp. 1297 (C.D. Cal. 1996) .......................................................................7
Medhekar v. United States Dist. Court,
99 F.3d 325 (9th Cir. 1996) ..............................................................................6
Melder v. Morris,
27 F.3d 1097 (5th Cir. 1994) ............................................................................16
Mills v. Polar Molecule Corp.,
12 F.3d 1170 (2d Cir. 1993) .............................................................................12
Moll v. U.S. Life Title Ins. Co.,
654 F. Supp. 1012 (S.D.N.Y. 1987) ........................................................................7
Nelson v. Paramount Communications, Inc.,
872 F. Supp. 1242 (S.D.N.Y. 1994) .......................................................................17
Novak v. Kasaks,
997 F. Supp. 425 (S.D.N.Y. 1998) ......................................................................4, 7
Plevy v. Haggerty,
38 F. Supp. 2d 816 (C.D.Cal. 1998) ......................................................................14
RGB Eye Associates v. Physicians Resource Group, Inc.,
1999 WL 980801 (N.D. Tex. 1999) .........................................................................13
Rubin v. Trimble,
1997 WL 227956 (N.D.Cal. 1997) ...........................................................................7
Salinger v. Projectavision, Inc.,
972 F. Supp. 222 (S.D. N.Y. 1997) .......................................................................15
Sears v. Likens,
912 F.2d 889 (7th Cir. 1990) ............................................................................16
</TABLE>
-iii-
<PAGE> 5
TABLE OF AUTHORITIES
<TABLE>
<CAPTION>
PAGE
----
CASES
- -----
<S> <C>
Segan v. Dreyfus Corp.,
513 F.2d 695 (2d Cir. 1975) ..............................................................................7
Shapiro v. UJB Fin. Corp.,
964 F.2d 272 (3d Cir.), cert. denied, 506 U.S. 934 (1992) ...............................................16
Shaw v. Digital Equipment Corp.,
82 F.3d 1194 (1st Cir. 1996). ...........................................................................22
Tirone v. Calderone-Curran Ranches, Inc.,
1978 WL 1095 (W.D.N.Y. 1978) ............................................................................18
Tuchman v. DSC Communications Corp.,
4 F.3d 1061 (5th Cir. 1994) ..........................................................................2, 14
Walish v. Leverage Group, Inc.,
1998 WL 314644 (E.D. Pa. 1998) ..........................................................................12
Williams v. WMX Techs., Inc.,
112 F.3d 175 (5th Cir.), cert. denied, 118 S.Ct. 412 (1997) ..........................................10-12
Zeid v. Kimberley,
973 F. Supp. 910 (N.D. Cal. 1997), vacated, 1999 WL 993649 (9th Cir. 1999)................................4
STATUTES/RULES
- --------------
15 U.S.C. Section 77k(a) .....................................................................................17
15 U.S.C. Section 77l(2)......................................................................................17
15 U.S.C. Section 78u-4(b)(1)(B)...............................................................................3
15 U.S.C. Section 78u-4(b)(3)(B)...............................................................................6
Private Securities Litigation Reform Act of 1995......................................................in passium
</TABLE>
-iv-
<PAGE> 6
TABLE OF AUTHORITIES
<TABLE>
<CAPTION>
PAGE
----
OTHER
- -----
<S> <C>
141 Cong. Rec. H2848 (March 8, 1995)...........................................................................8
141 Cong. Rec. H2849 (March 8, 1995)...........................................................................8
3A Harold S. Bloomenthal, Securities and Federal Corporate Law Section 8.23 (1993) ...........................18
Fed. R. Civ. P. 8(a)(2)........................................................................................2
Fed. R. Civ. P. 9(b)........................................................................................2, 3
H.R. Conf. Rep. No. 104-369 (1995).............................................................................8
Thomas Lee Hazen, Treatise on the Law of Securities Regulation.
Section 7.3 (3d ed. 1995) ...............................................................................18
</TABLE>
-v-
<PAGE> 7
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
)
)
IN RE SERVICE CORPORATION )
INTERNATIONAL ) CIVIL ACTION NO. H-99-0280
) (Judge Lynn N. Hughes)
)
)
DEFENDANTS' REPLY TO PLAINTIFFS' OPPOSITION
TO DEFENDANTS' MOTION TO DISMISS THE
CONSOLIDATED CLASS ACTION COMPLAINT
Defendants file this Reply to Plaintiffs' Opposition to Defendants'
Motion to Dismiss the Consolidated Class Action Complaint, and would show the
Court as follows:
INTRODUCTION
Why do Plaintiffs struggle to evade the requirements of the Private
Securities Litigation Reform Act of 1995 ("Reform Act")? If Plaintiffs had facts
to support their claim that a fraud has taken place, one would expect that they
would have complied with the Reform Act by pleading particularized facts or
information in their possession and demonstrating that these allegations give
rise to a strong inference of fraudulent intent. Rather than comply with the
Reform Act, Plaintiffs will concoct any argument they can to evade the tough new
requirements that Congress laid down. Plaintiffs argue that the Consolidated
Class Action Complaint ("CCAC") is plead neither on personal knowledge nor on
information and belief, but on a new species of pleading, "investigation of
counsel," that remarkably allows them to evade all of the Reform Act's
heightened pleading requirements. Rather than respond to Defendants' scienter
arguments, Plaintiffs hunker down and repeat their mantra that the court is
compelled to accept as true all of the CCAC's allegations, no
<PAGE> 8
matter how demonstrably false or inadequate.(1) The Reform Act forbids this kind
of stonewalling.
Plaintiffs must allege in their complaint all of the facts or
information in their possession so that the Court can decide at the pleading
stage if their allegations are sufficient to create a strong inference of
fraudulent intent. Plaintiffs cannot simply assert "beliefs," no matter how
particularized, and glide into discovery in search of a claim. In this case,
Plaintiffs' opposition is an exercise in denial. Plaintiffs essentially ignore
that the Reform Act ever happened, simply rehashing the allegations of the CCAC
and failing to distinguish the wealth of authority that has held that such
allegations insufficient under the Reform Act. If the Reform Act is to have any
bite, it must stop this case at the pleading stage.
ARGUMENT
A. PLAINTIFFS FAIL TO PLEAD WITH SUFFICIENT PARTICULARITY.
In most cases, all a plaintiff's complaint must contain is a "short and
plain statement of the claim showing that the pleader is entitled to relief."
Fed. R. Civ. P. 8(a)(2). In a federal securities fraud case, however, a
plaintiff may not take refuge in the usually liberal standards employed in a
Rule 12(b)(6) motion. Instead, a plaintiff seeking to avoid dismissal for
failure to state a claim "must plead specific facts, not mere conclusory
allegations." Tuchman v. DSC Communications Corp., 14 F.3d 1061, 1067 (5th Cir.
1994). Indeed, Rule 9(b) imposes a heightened level of pleading for fraud
claims: "In all averments of fraud or mistake, the circumstances constituting
fraud or mistake shall be stated with particularity." Fed. R. Civ. P. 9(b). See
also Tuchman, 14 F.3d at 1067 (applying Rule 9(b) to federal securities fraud
claims). The Reform Act imposes an even higher pleading
- ----------------------
(1) Plaintiffs correctly note that there are two principal claims at
issue in this case. The first claim is brought under Section 10(b) on behalf of
both SCI shareholders and former ECI shareholders. The second claim is brought
under Sections 11 and 12(a)(2) on behalf of former ECI shareholders. Both claims
should be dismissed.
-2-
<PAGE> 9
burden, expressly providing that when a plaintiff's complaint is based upon
information and belief, the plaintiff must "state with particularity all facts
upon which the belief is formed." 15 U.S.C. Section 78u-4(b)(1)(B) (emphasis
added).(2) Quite simply, Plaintiffs have failed to satisfy this burden.(3)
1. PLAINTIFFS ARE PLEADING ON INFORMATION AND BELIEF.
Plaintiffs offer several excuses for their failure to comply with the
Reform Act. First, they contend they need not comply with the Reform Act because
they are pleading on the basis of "investigation of counsel," not on knowledge
or on information and belief. See Opposition Brief at pp. 21-22.
As one would expect, the Reform Act's requirement that plaintiffs state
the factual basis for their claims may not be sidestepped simply by claiming
that allegations which are clearly based on "information and belief" are, in
actuality, based on "investigation of counsel." See In re Health Management Sys.
Inc. Sec. Litig., 1998 WL 283286, *3 (S.D.N.Y. 1998) (investigation of counsel
is an unacceptable approach to pleading falsity under the Reform Act); Hartsell
v. Source Media, Inc., 1999 WL 649645, *1 (N.D. Tex. 1999) (holding that
allegations made on "investigation of counsel" are to be treated the same as
allegations made on "information and belief"); In re Green Tree Financial Corp.
Stock Litigation, 1999 WL 684173, *10 (D. Minn. 1999) (same); In re PETsMART,
Inc. Securities Litigation, 61 F. Supp.2d 982 (D.Ariz. 1999) (same); Lirette v.
Shiva Corp., 999 F. Supp. 164, 165 (D. Mass. 1998) ("assertions that the
allegations that follow are ...
- ------------------
(2) "Although the words `facts' and `particularity' are not defined in
the statute, their meaning is plain...[W]e read the statutory command that a
plaintiff plead all the `facts' with `particularity' to mean that a plaintiff
must provide a list of all relevant circumstances in great detail." In re
Silicon Graphics Sec. Litig., 183 F.3d 970 (9th Cir. 1999) (Silicon Graphics
II).
(3) As described in Section D.1., Plaintiffs' Section 11 and 12(a)(2)
claims are subject to Rule 9(b) and the Reform Act.
-3-
<PAGE> 10
founded on 'information and belief' [and] based upon 'investigation by
Plaintiffs' counsel' ... utterly failed to comply with" the Reform Act").
If allegations based upon investigation of counsel are permitted to
replace allegations based upon information and belief, the Reform Act's
heightened pleading requirements will be easily evaded. See, e.g., Novak v.
Kasaks, 997 F. Supp. 425, 431 (S.D.N.Y. 1998) (pleading based on investigation
of counsel held not sufficient to avoid the Reform Act's requirement that
plaintiffs state the factual basis for their claim). This violates both the
letter and the spirit of the Reform Act.
Plaintiffs cite several cases which appear, at first glance, to endorse
"investigation of counsel" as a means to avoid the Reform Act's pleading
requirements for allegations based on information and belief. See, e.g., Zeid v.
Kimberley, 973 F. Supp. 910, 915 (N.D. Cal. 1997), vacated, 1999 WL 993649 (9th
Cir. 1999). A closer look at these cases, however, reveals that they actually
support a heightened pleading requirement. In Zeid, for example, the plaintiffs'
insisted that their complaint was based on investigation of counsel rather than
on information and belief to mean that their claims were based on personal
knowledge. Id. This holding did not, as Plaintiffs suggest, reduce Plaintiffs'
burden to plead their claims with particularity. Rather, it heightened it. The
Zeid court held that plaintiffs who base their claims on "investigation of
counsel" were required to meet the strict, rather than the relaxed, pleading
requirements of Rule 9(b) and the Reform Act. Id. In other words, the Zeid court
held that plaintiffs who based their complaint on "investigation of counsel" had
undertaken to do more than plead the facts from which falsity and intent to
defraud could be inferred; they had undertaken to plead with particularity (1)
each statement alleged to have been misleading; (2) the reason or reasons why
the statement is misleading; and (3) as to each statement, those facts giving
rise to a strong inference that the defendants acted with scienter. Id.
-4-
<PAGE> 11
2. PLAINTIFFS DO NOT PLEAD THE FACTUAL BASIS FOR THEIR
ALLEGATIONS.
Plaintiffs spend page after page in their Opposition Brief merely
restating the allegations contained in the CCAC. The problem with Plaintiffs's
approach is that the CCAC provides no "particular facts" supporting Plaintiffs'
alleged belief that SCI committed fraud. Rather than plead particularized facts,
Plaintiffs have pled only "particularized beliefs" hoping to slip past the
strong inference requirement. Plaintiffs offer no clue regarding the
"information" upon which their "particularized beliefs" are based. Because they
do not plead such detailed information, Plaintiffs have disabled the Court from
doing the task that Congress mandated: determining whether the facts in
Plaintiffs' possession -- rather than Plaintiffs' speculations -- give rise to a
strong inference of fraud.
For example, the CCAC alleges that SCI failed to actively manage its
mortuary trust assets, and that by 1998 that failure had an increasing impact on
SCI's profit margins. See CCAC at p. 36. According to the CCAC, rather
than disclose that SCI had an enormous backlog of unmanaged, underperforming
preneed funeral trust funds and that a material number of SCI's preneed funeral
contracts had been, and would continue to be, performed at significant losses,
SCI falsely represented that SCI was actively managing its backlog of acquired
preneed trust assets. See CCAC at p. 45, 47.
These conclusory allegations, which anyone can make, are not sufficient
to meet Plaintiffs' pleading burden. As explained in detail in the Defendants'
Motion to Dismiss, the CCAC does not plead the sources of their information, how
they received such information, and why such information rendered the
Defendants' statements false or misleading.(4) It is not enough simply to
- -----------------
(4) As noted in Defendants' Motion to Dismiss, "Plaintiffs point to a
number of statements made by the SCI Defendants and claim, without providing any
factual support, that the opposite of
-5-
<PAGE> 12
allege that SCI's preneed funeral business was in the tank, and that SCI failed
to disclose it. If that were the case, every securities fraud case would survive
a motion to dismiss. Plaintiffs must provide concrete facts which support their
allegations - not merely repeat unsubstantiated assertions.
Even more egregious is Plaintiffs' tacit admission that with respect to
the most central allegations in the CCAC - that SCI's preneed business was
unprofitable and negatively impacted the Company's overall profit margins and
performance - there is no factual basis whatsoever for their allegations.
Instead, Plaintiffs assert that discovery is required to provide a basis for
their alleged "belief." See Opposition Brief at p. 25. The Reform Act requires
that a complaint plead specific facts that a fraud has occurred before discovery
may commence. 15 U.S.C. Section 78u-4(b)(3)(B) (all discovery shall be stayed
during the pendency of a motion to dismiss); Medhekar v. United States Dist.
Court, 99 F.3d 325, 328 (9th Cir. 1996) ("Congress clearly intended that
complaints in these securities actions should stand or fall based on the actual
knowledge of the plaintiffs rather than information produced by the defendants
after the action has been filed."). Under the Reform Act, Plaintiffs' faint
hopes hope that the discovery process might lead eventually to some plausible
cause of action cannot satisfy their heightened obligation to plead
particularized facts evidencing fraud.
3. PLAINTIFFS MUST IDENTIFY INTERNAL DOCUMENTS AND INFORMANTS
RELIED UPON IN FILING THE COMPLAINT.
The Reform Act specifically requires a plaintiff to identify the source
of information offered in support of Plaintiffs' allegations and specific
details concerning the content and origin of supposed "internal documents." See,
e.g., Silicon Graphics II, 183 F.3d at 985 ("a plaintiff must provide, in great
detail, all the relevant facts forming the basis of her belief"); Hockey v.
Medhekar, 1997 WL
- -----------------
what the SCI Defendants said was true." See Defendants' Motion to Dismiss at
p.15. This does not pass muster.
-6-
<PAGE> 13
203704, *8 (N.D. Cal. 1997) ("Nowhere in plaintiffs' complaint is there a
reference to a particular corporate documents or data. Plaintiffs do not attempt
to show when these documents were created, by whom they were drafted, or even
whether [the company] regularly prepared such documents").
Citing several Pre-Reform Act Second Circuit cases,(5) Plaintiffs
claims that they do not have to "specify which internal documents they relied on
or even that they relied on internal documents at all." See Opposition Brief at
p. 27. In making this argument, Plaintiffs ignore the fact that post-Reform Act
cases universally hold that the Reform Act increases the pleading requirements
for securities fraud, and do not limit this increased standard solely to
scienter. See, e.g., Law v. Medco Research, Inc., 113 F.3d 781, 785 (7th Cir.
1997) (Reform Act "stiffened" the requirement that fraud be pled with
particularity); Marksman Partners L.P. v. Chantal Pharmaceutical Corp., 927 F.
Supp. 1297, 1308 (C.D. Cal. 1996) ("the pleading standard in securities fraud
cases has been made more rigorous"); Rubin v. Trimble, 1997 WL 227956, at *8
(N.D.Cal. 1997) (Reform Act "significantly raised the pleading standard for
federal securities claims"). Despite Plaintiffs' wish to be subject to the less
demanding pre-Reform Act pleading requirements, the Reform Act's heightened
pleading standard is in full force and effect.
- -----------------
(5) Contrary to Plaintiffs' assertion that, prior to the Reform Act,
the Second Circuit employed a relaxed pleading standard, Second Circuit courts
enforced three explicit requirements for information and belief pleading. First,
a plaintiff had to identify the specific sources of his information. Second, the
plaintiff had to identify what information was gleaned from each source.
Finally, plaintiff then had to link each belief to the specific source of
information upon which it was based. These requirements served an important
purpose: "to allow each defendant and the Court to review the sources and
determine, at the pleading stage, whether an inference of fraud may be fairly
drawn from the information contained therein." Moll v. U.S. Life Title Ins. Co.,
654 F. Supp. 1012, 1035 (S.D.N.Y. 1987). See also Segan v. Dreyfus Corp., 513
F.2d 695, 696 (2d Cir. 1975) ("A suit charging fraud may not be based on facts
so secret that the defendants cannot be told what they are"); Decker v.
Massey-Ferguson, Ltd., 534 F. Supp. 873 (S.D.N.Y. 1981) (same), aff'd in part,
rev'd in part on other grounds, 681 F.2d 111 (2d Cir. 1982).
-7-
<PAGE> 14
Part of the Reform Act's increased pleading standard includes a
requirement to identify internal documents and informants relied upon in filing
the complaint. See, e.g., Novak, 997 F. Supp. at 435. Plaintiffs fail to do
this. If Plaintiffs had a factual basis for their claims, one would think they
would gladly set forth their alleged evidence, rather than throw up every
roadblock known to man.
Congress clearly intended to impose on plaintiffs the obligation to
reveal everything they know about the alleged misconduct for which they sue,
including the precise identity of their source of that belief, whether it is
documents or individuals. In enacting the Reform Act, Congress specifically
rejected an alternative that would simply have required plaintiffs to plead
facts that support their beliefs. See 141 Cong. Rec. H2848 (March 8, 1995).
Instead, Congress adopted a requirement that a plaintiff must "state with
particularity all facts upon which the belief is formed." 15 U.S.C. Section
78u-4(b)(1)(B). Congress rejected the alternative language even though its
proponent, Congressman Dingell, pointed out that the enacted language would
require plaintiffs to name confidential informants, among others, to satisfy the
pleading standard. See 141 Cong. Rec. H2849 (March 8, 1995) (the Reform Act
requires a plaintiff to include in his pleadings "the names of confidential
informants, employees, competitors, Government employees, members of the media,
and others who have provided information leading to the filing of the case").
This heightened pleading requirement is not, as Plaintiffs assert, an
unfair burden. Rather, it signifies Congress' recognition that "[u]nwarranted
fraud claims can lead to serious injury to reputation for which our legal system
offers no redress." H.R. Conf. Rep. No. 104-369, at 41, 48 (1995).
4. THE PRENEED STUDY AND DEFENDANTS' ALLEGED STATEMENTS DO NOT
SUPPORT THE ALLEGATIONS IN THE COMPLAINT.
-8-
<PAGE> 15
The only internal SCI document cited by Plaintiffs in the CCAC to
support their allegations was the Preneed Study. In citing the Preneed Study,
Plaintiffs took a considerable gamble. If, in fact, the Preneed Study did not
support Plaintiffs' claims, Plaintiffs would be left without any factual support
for their claims. That is exactly what has occurred.
The Preneed Study,(6) which was attached as Exhibit C to Defendants'
Motion to Dismiss, conclusively demonstrates that Plaintiffs' allegations, as
contained in the CCAC, are without merit. See Defendants' Motion to Dismiss at
pp. 17-21. Not surprisingly, Plaintiffs suggest that this Court should not be
permitted to look at the Preneed Study, but should instead "accept as true
reasonable inferences drawn from plaintiffs' allegations." See Opposition Brief
at p. 25. Unfortunately for Plaintiffs, the Fifth Circuit does not put on
blinders and accept unsupportable conclusions. In Melder v. Morris, 27 F.3d
1097, 1100 (5th Cir. 1994), for example, the Fifth Circuit dismissed a
securities fraud claim when the plaintiffs alleged misstatements in a
prospectus, "but upon further review these alleged misstatements amount[ed] to
gross mischaracterizations of the contents of the prospectuses." The same is the
case here.
While the CCAC repeatedly alleges that the Preneed Study confirmed that
"a material number of SCI's funeral services had been and would continue to be,
performed at significant losses to SCI"(7) and that "a significant number of
independent funeral homes acquired by SCI failed to
- -----------------
(6) Plaintiffs assert that Defendants have "submitted a collection of
select unauthenticated internal SCI documents that [Defendants] conclusorily
assert constitute the preneed study alleged in the Complaint." See Opposition
Brief at p. 6. This is simply not true. The Preneed Study is authenticated by
the declaration of Mary Beth Russo, a former SCI employee who was responsible
for coordinating the Preneed Study.
(7) See CCAC at pp. 32, 35, 44 and 74(a).
-9-
<PAGE> 16
actively manage their mortuary trust assets,"(8) the Preneed Study contains no
such statements. Faced with the clear and unequivocal language of the Preneed
Study, Plaintiffs are forced to retreat from such allegations, and, instead,
pick around the edges to find any morsel in the Preneed Study that will support
their claims. Plaintiffs point to various sentences in the Preneed Study, most
taken wholly out of context, in a desperate attempt to salvage their claim.(9)
Plaintiffs are not successful.(10)
Furthermore, Plaintiffs make much of so-called "admissions" by
Defendants that the fourth quarter earnings shortfall was caused by SCI's
unprofitable preneed business. See Opposition Brief at p. 26. Plaintiffs cite an
industry publication, however, that does not even purport to quote an SCI
executive. See CCAC at p. 127 ("SCI has said in the past that it loses
money on some of its preneed services because the contract was sold at too low a
price"). Under the Reform Act, such articles do not support a claim for fraud.
See, e.g., Williams v. WMX Techs., Inc., 112 F.3d 175, 179 (5th Cir.), cert.
denied, 118 S.Ct. 412 (1997) ("failure of [articles] to identify specific
statements made by any
- -----------------
(8) Id.
(9) For example, Plaintiffs claim that the Preneed Study confirmed that
SCI did not have a "scientific, analytical approach, focused on meeting SCI's
financial objectives." See Opposition Brief at 6. This quote is taken completely
out of context, as the Preneed Study actually states that "Although SCI
previously had an overall asset allocation policy for these trusts, the new
allocation has been developed based upon a more scientific, analytical approach,
focused on meeting SCI's financial objectives." See Exhibit C-3 to Defendants'
Motion to Dismiss, at SCI0070 (emphasis added).
(10) Plaintiffs also claim that SCI's trust fund returns had to be more
than 8.5 percent annually to cover the increasing cost of funeral services. See
Opposition Brief at 7. This figure is ludicrous, and demonstrates why the Reform
Act implemented strict pleading requirements. Plaintiffs pluck the 8.5 percent
figure from the sky, failing to identify where, if at all, such a figure came
from. See CCAC at P. 26. If Plaintiffs are not required to identify their
sources, Plaintiffs can make unsubstantial assertions that have no basis in fact
and routinely survive a motion to dismiss. That is exactly what the Reform Act
was designed to prevent. In this case, the absurdity of Plaintiffs' 8.5 percent
annual figure is demonstrated by Heiligbrodt's statement that preneed contracts
sold in the 1980s were priced 20 percent less than today. See CCAC at P. 126.
That suggests an increase in the cost of funeral services at less than 2 percent
per year, not an inflated 8.5 percent per year.
-10-
<PAGE> 17
of the defendants is fatal"); In re Marion Merrell Dow, Inc., 1993 WL 393810, *3
(W.D. Mo. 1993) (for the plaintiffs to use the contents of newspaper articles
for the basis of a securities fraud claim, "the defendants must have had some
sort of control over the statements [in newspaper articles], either as a press
release or a direct quote").
Plaintiffs also rely on Defendant Heiligbrodt's comment that "the at
need value of many of the preneed plans sold in the 1980s is about 20 percent
less than the company presently charges for its services." This is not, as
Plaintiffs claim, an admission of liability. Rather, it reflects the simple fact
that there is inflation, that prices have risen over time, and that a preneed
funeral sold 15 to 20 years ago for, say $4,000, would cost a customer more
today.(11)
B. PLAINTIFFS FAIL TO ADEQUATELY ALLEGE SCIENTER.
1. PLAINTIFFS DO NOT STATE WITH PARTICULARITY FACTS GIVING RISE
TO A STRONG INFERENCE OF SCIENTER FOR EACH ACT OR OMISSION
ALLEGED.
The Reform Act expressly requires that "the complaint shall, with
respect to each act or omission alleged to violate this chapter, state with
particularity facts giving rise to a strong inference that the defendant acted
with the required state of mind." 15 U.S.C. Section 78u-4(b)(2) (emphasis
added). As explained above, the CCAC lacks such specific factual allegations.
Without such "corroborating details, the Court simply "cannot determine whether
there is any factual basis for alleging that the officers knew that their
statements were false at the time they were made." Silicon Graphics II, 183 F.2d
at 985. The CCAC should, therefore, be dismissed.
- -----------------
(11) It is also important to remember that if a preneed customer
purchased a preneed funeral for say, $4,000, in 1985, that money would be
deposited in a mortuary trust fund or used to pay premiums on life insurance
policies. "Earnings on trust funds and increasing benefits under insurance
funded contracts also increase the amount of cash to be received upon
performance of the funeral." See Exhibit B to Defendants' Motion to Dismiss at
p.16.
-11-
<PAGE> 18
Although Plaintiffs limit their discussion of the legislative history
of the Reform Act to a footnote, it is clear that the Reform Act sets out a new,
more rigorous standard for pleading scienter than is found in prior case law.
Defendants' Motion to Dismiss concisely set forth the relevant legislative
history, and there is no need to repeat that analysis again here.(12) See
Defendants' Motion to Dismiss at pp. 28-32. Under the heightened scienter
standard, allegations of motive and opportunity alone will no longer be presumed
sufficient to support the required strong inference of scienter, but instead a
plaintiff claiming securities fraud must allege specific facts constituting
strong circumstantial evidence that the Defendants' conduct involved knowledge
or severely reckless disregard of wrongdoing.
Plaintiffs' attempt to make an end-run around the Reform Act's pleading
requirements for scienter by claiming that they have alleged specific facts
which create a strong inference that the defendants acted knowingly or
recklessly. Once again, it is not sufficient to raise conclusory allegations.
See, e.g., Walish v. Leverage Group, Inc., 1998 WL 314644, at *3 (E.D. Pa. 1998)
(allegations that defendants "knowingly made false statements" and "recklessly
created a false and misleading impression" do not meet the standards for
pleading scienter under the Reform Act). Plaintiffs must specify a meaningful
factual basis for the allegation that Defendants knew facts contradicting their
public statements. There is no such factual detail here, much less "a list of
all relevant circumstances in great detail." Silicon Graphics II, 183 F.2d at
984.
- -----------------
(12) Contrary to plaintiffs' suggestion, the Fifth Circuit in Williams,
112 F.3d 175, did not hold that allegations of motive and opportunity alone
satisfy the Reform Act's heightened requirement for pleading scienter. Instead,
the Williams court, in the course of dismissing plaintiffs' securities fraud
claims, merely opined that the Reform Act's heightened pleading standard is
consistent with Second Circuit case law requiring a plaintiff to "specify the
statements contended to be fraudulent, identify the speaker, state when and
where the statements were made, and explain why the statements were fraudulent."
112 F.3d at 177-78 (citing Mills v. Polar Molecule Corp., 12 F.3d 1170, 1175 (2d
Cir. 1993)).
-12-
<PAGE> 19
2. PLAINTIFFS' ALLEGATIONS OF MOTIVE AND OPPORTUNITY ARE NOT
SUFFICIENT.
Even if this Court finds that the Reform Act's scienter requirement can
be met by allegations showing only motive and opportunity, Plaintiffs'
allegations fail because they do not adequately establish motive on the part of
Defendants.
a. ALLEGATIONS THAT DEFENDANTS MADE FALSE AND MISLEADING
STATEMENTS TO MAINTAIN SCI'S BOND RATING AND
FACILITATE THE SCI-ECI MERGER FAIL TO CREATE THE
REQUIRED INFERENCE OF SCIENTER.
It is important to remember that the only allegations raised in the
CCAC to support an inference of scienter were that Defendants made false and
misleading statements: (1) to maintain SCI's bond rating; and (2) to facilitate
the consummation of the SCI-ECI merger. In Defendants' Motion to Dismiss,
Defendants cited a plethora of case law for the proposition that these motive
allegations fail to satisfy the Reform Act. See Defendants' Motion to Dismiss at
pp. 33-35. Defendants also explained that if all a securities fraud plaintiff
had to do to sufficiently plead scienter was to allege that the defendants
artificially inflated a stock's price to obtain more favorable terms in a
stock-for-stock transaction "nearly every stock-for-stock transaction conducted
in the United States could be subject to challenge." In re Cirrus Logic Sec.
Litig., 946 F. Supp. 1446, 1477 (N.D. Cal. 1996).
Like two ships passing in the night, Plaintiffs ignore Defendants'
arguments, and simply cite several cases which suggest that allegations that
defendants had a motive to artificially inflate stock price to facilitate a
stock-for-stock transaction suffices to allege scienter. See Opposition Brief at
pp. 33-34.(13)
- -----------------
(13) Interestingly, Plaintiffs do not respond to the cases cited by
Defendants in which courts refused to infer motive from allegations that
misstatements were made to maintain a high bond or credit rating.
-13-
<PAGE> 20
A recent case from the Northern District of Texas highlights the
sensibility of Defendants' position, and demonstrates the flaws in Plaintiffs'
argument. In RGB Eye Associates v. Physicians Resource Group, Inc., 1999 WL
980801, *9 (N.D. Tex. 1999), a case decided on October 27, 1999, Judge Fitzwater
refused to accept plaintiffs' scienter allegations that the defendant had an
incentive to maximize the price of its stock so that it could expand through
acquisitions and acquire other physicians' practices. The reason: "courts reject
motive theories that would almost universally permit an inference of
fraud...`Accordingly, assertions that would almost universally be true...are
inadequate of themselves to plead motive.' Such allegations are `alone
insufficient to plead a strong inference of fraud.'" Id. (citations omitted).
Similarly, Plaintiffs' scienter allegations in this case should be rejected, as
they fail to satisfy the Reform Act's heightened standard for pleading scienter.
b. PLAINTIFFS' ALLEGATION THAT THE SCI DEFENDANTS MADE
MISSTATEMENTS TO MAINTAIN AND ENHANCE THEIR EXECUTIVE
POSITIONS FAILS TO CREATE THE REQUIRED INFERENCE OF
SCIENTER.
In a footnote in their Opposition Brief, Plaintiffs allege, for the
very first time, that the Individual Defendants had "motives to maintain and
enhance the price of SCI common stock to protect and enhance their executive
positions and the substantial compensation and prestige obtained thereby." See
Opposition Brief at p. 35 fn. 20.
The problem with Plaintiffs' argument is that the Fifth Circuit, on
numerous occasions, has rejected similar attempts to allege scienter. "Accepting
the plaintiffs' allegation of motive -- basically that the defendant officers
and directors were motivated by incentive compensation -- would effectively
eliminate the state of mind requirement as to all corporate officers and
defendants." Melder, 27 F.3d at 1102. "Incentive compensation can hardy be the
basis on which an allegation of fraud is predicated. On a practical level, were
the opposite true, the executives of
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<PAGE> 21
virtually every corporation in the United States would be subject to fraud
allegations." Tuchman, 14 F.3d at 1068. See also In re Fine Host Corp. Sec.
Litig., 25 F. Supp.2d 61, 69 (D.Conn. 1988) (rejecting allegation that
defendants' incentive compensation was based, in part, on the strength of [the
company's] financial result); Plevy v. Haggerty, 38 F. Supp. 2d 816, 833
(C.D.Cal. 1998) (the motive "to reap the benefits of munificent incentive
compensations plans that were tied to [the company's] reported earnings and
stock prices... [is] insufficient as a matter of law."); Acito v. IMCERA Group,
Inc., 47 F.3d 47, 54 (2d Cir. 1995) ("incentive compensation can hardly be the
basis on which an allegation of fraud is predicated"); Salinger v.
Projectavision, Inc., 972 F. Supp. 222, 234 (S.D. N.Y. 1997) (a generalized
interest in executive compensation tied to stock price performance are
insufficient allegations of scienter).
c. PLAINTIFFS ALLEGE NO BASIS FOR IMPUTING MOTIVES TO
THE INDIVIDUAL DEFENDANTS.
Even if Plaintiffs have successfully pled scienter with respect to SCI,
Plaintiffs' securities fraud claim should be dismissed against the Individual
Defendants because Plaintiffs' factual allegations do not indicate that key
officers and directors had any motive to commit fraud. Plaintiffs recognize that
to adequately plead motive they must show "concrete benefits that could be
realized by one or more of the false statements." In re Health Management, 970
F. Supp. 192, 202 (E.D.N.Y. 1997). Here, Plaintiffs cannot show -- and do not
allege - that the Individual Defendants realized any concrete benefits. To the
contrary, Plaintiffs concede that there is a total absence of insider trading in
this case, thereby eliminating any financial motive on the part of the
Individual Defendants to engage in fraudulent activity. See Opposition Brief at
p. 34. The Individual Defendants should, therefore, be dismissed.
C. MANY OF THE ALLEGED MISSTATEMENTS ARE NOT ACTIONABLE AS A MATTER OF
LAW.
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<PAGE> 22
Defendants' Motion to Dismiss explained that a number of statements
alleged to be false and misleading are merely non-actionable statements of
corporate optimism. See Defendants' Motion to Dismiss at pp. 23-27. While
Defendants readily concede that not every statement in the CCAC is a statement
of puffery, Defendants stick by their contention that those selected statements
identified in their Motion to Dismiss are, in fact, nonactionable expressions of
optimism. See CCAC at pp. 75, 78, 84 and 96. Defendants' Motion to Dismiss
identifies these statements in detail.
Along those same lines, some, but not all, of the statements challenged
by Plaintiffs are simply announcements of past financial results and, therefore,
not actionable. See CCAC at pp. 78, 86 and 96. Similarly, the Reform Act's safe
harbor provisions protect not every statement in the CCAC, but only those
selected forward-looking statements allegedly made by Defendants.
D. PLAINTIFFS' SECTION 11 AND SECTION 12(a)(2) CLAIMS FAIL.
1. PLAINTIFFS' SECTION 11 AND 12(a)(2) CLAIMS ARE SUBJECT TO RULE
9(b) AND THE REFORM ACT.
Ignoring Fifth Circuit authority directly on point, Plaintiffs cite
three cases from outside the Fifth Circuit and argue that their Section 11 and
12(a)(2)(14) claims are not subject to the particularity requirements of Rule
9(b) and the Reform Act. See Opposition Brief at 20. Plaintiffs' position is
without merit. In Melder, 27 F.3d 1097, the Fifth Circuit addressed this very
issue, holding that the particularity requirements of Rule 9(b) apply to claims
brought under Section 11 and Section 12(a)(2) of the 1933 Securities Act. The
Fifth Circuit noted:
[Plaintiffs] maintain that their 19[3]3 Securities Act claims
were inappropriately subjected to the Rule 9(b) heightened
pleading standard. This argument is untenable in light of the
complaint's
- -----------------
(14) Congress amended Section 12 of the Securities Act of 1933 in the
Reform Act, adding subsection 12(b) to section 12 and redesignating subsections
12(1) and 12(2) as 12(a)(1) and 12(a)(2). Most of the cases refer to section
12(2), the pre-amendment designation.
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<PAGE> 23
wholesale adoption of the allegations under the securities
fraud claims for purposes of the Securities Act claims. When
1933 Securities Act claims are grounded in fraud rather than
negligence as they clearly are here, Rule 9(b) applies.
Id. at 1100 fn. 6. See also Shapiro v. UJB Fin. Corp., 964 F.2d 272, 287-89 (3d
Cir.), cert. denied, 506 U.S. 934 (1992) (holding that Rule 9(b) applies to
Section 11 and 12(a)(2) claims); Sears v. Likens, 912 F.2d 889, 892-93 (7th Cir.
1990) (same). Given the Fifth Circuit's analysis, there is no reason to believe
that the Reform Act should be treated any differently. When Plaintiffs' claims
are grounded in fraud rather than negligence, the Reform Act's strict pleading
requirements should also apply to Plaintiffs' Section 11 and 12(a)(2) claims.
2. THE ACCURACY OF THE REGISTRATION STATEMENT/PROSPECTUS IS
TESTED ON ITS EFFECTIVE DATE - NOVEMBER 20, 1998.
Plaintiffs' Opposition Brief suggests that all Plaintiffs have to do to
state a cognizable claim under Sections 11 and 12(a)(2) is to plead that (1) the
fourth quarter had ended; (2) the fourth quarter's poor results were necessarily
complete; (3) Defendants closed on the ECI transaction without disclosing these
results; and (4) the Registration Statement/Prospectus affirmatively represented
that SCI experienced no events which would have a materially adverse effect on
its business condition. See Opposition Brief at 2. This is simply not the case.
Section 11 creates an express right of action for securities purchasers
where "any part of the registration statement, when such part became effective,
contained an untrue statement of a material fact or omitted to state a material
fact. 15 U.S.C. Section 77k(a) (emphasis added). Similarly, Section 12(2)
imposes liability for using a prospectus "which includes an untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements, in light of the circumstances under which they were made, not
misleading." 15 U.S.C. Section 77l(2).
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<PAGE> 24
The accuracy of the Registration Statement/Prospectus is, therefore,
tested on its effective date, which in this case is November 20, 1998.(15) See
15 U.S.C. Section 77k(a) (liability attaches for misstatements in a prospectus
at the time such part becomes effective); Nelson v. Paramount Communications,
Inc., 872 F. Supp. 1242, 1246 (S.D.N.Y. 1994) (Section 11, by its own terms, is
limited to material omissions in parts of registration statements that were
misleading "when such part[s] became effective"); 3A Harold S. Bloomenthal,
Securities and Federal Corporate Law Section 8.23, at 8-102 (1993) ("The
prospectus for purposes of section 11 speaks as of the date the registration
statement becomes effective"). "[W]hen subsequent events make an effective
Registration Statement misleading, Section 11 does not apply." Thomas Lee Hazen,
Treatise on the Law of Securities Regulation Section 7.3, at 387 (3d ed. 1995).
Plaintiffs suggest that the supplement to the prospectus dated December
17, 1998(16) was, in actuality, an amendment to the Registration
Statement/Prospectus, thereby altering the effective date.(17) See Opposition
Brief at 18 fn. 8. This argument is unpersuasive.
Amendments to a registration statement require compliance with
certain administrative procedures before the Securities and
Exchange Commission. Supplements to a prospectus can be
accomplished by merely the filing of copies with the
Commission. There has been no showing by Plaintiffs that the
supplements to the Prospectus contained information which
could be properly only be included in
- -----------------
(15) See CCAC at p. 7.
(16) The December 17, 1998 supplement is attached as Exhibit A.
(17) On December 14, 1998, SCI and ECI executed an amendment to the
merger agreement. That amendment increased the minimum price of SCI common stock
used to calculate the merger consideration to be received by ECI's stockholders
from $34 to $38, and increased the maximum amount of asset divestitures required
to obtain antitrust approval. See Exhibit A. On December 17, 1999, a supplement
to the Registration Statement/Prospectus was filed with the Securities Exchange
Commission. Id. There was never an amendment to the Registration
Statement/Prospectus.
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<PAGE> 25
an amendment to the Registration Statement or that the
supplements were issued under procedures pertinent to
amendments.
Tirone v. Calderone-Curran Ranches, Inc., 1978 WL 1095, *3 (W.D.N.Y. 1978); see
also Finkel v. Stratton Corp., 754 F. Supp. 318, 327 (S.D.N.Y. 1990), aff'd in
part, rev'd in part on other grounds, 962 F.2d 169 (2d Cir. 1992) (filing a
supplemental prospectus dated July, 1985 did not make the effective date for
Section 11 purposes July 1985; rather, the effective date for Section 11
remained the date the Registration Statement was originally filed).
The question in this case is not, as Plaintiffs posit, whether
Defendants failed to disclose in the Registration Statement/Prospectus any
material information concerning SCI's financial condition as of January 19,
1999, the date the SCI-ECI transaction closed. Rather, the key question is
whether the CCAC contains sufficient allegations that the Defendants failed to
disclose in the Registration Statement any material information concerning SCI's
financial condition as of November 20, 1998. The answer, quite simply, is no.
Despite Plaintiffs' protestations to the contrary, the fact that the
quarter was halfway completed does not automatically mean that, as of November
20, 1998, SCI was in possession of information which indicated that the quarter
as a whole would fall below analysts' expectations. This is especially true in
the death care industry because "[t]he death rate tends to be somewhat higher in
the winter months and [SCI's] funeral service locations generally experience a
higher volume of business during those months" See Exhibit B to Defendants'
Motion to Dismiss at p.2. While Plaintiffs claim that SCI had computer reports
detailing cemetery and funeral volumes, Plaintiffs concede that SCI could not,
as of November 20, 1998, predict that cemetery and funeral sales for the
remaining half of the quarter would fail to meet or exceed analysts'
expectations.
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<PAGE> 26
3. THE REGISTRATION STATEMENT/PROSPECTUS DID NOT REQUIRE
DEFENDANTS TO DISCLOSE ALL ONGOING DEVELOPMENTS RELATING TO
SCI'S BUSINESS.
Plaintiffs repeatedly claim that the Registration Statement/Prospectus
was patently misleading because it contained a provision requiring SCI to
disclose up until the closing of the SCI-ECI transaction any event which was
having a "material adverse effect" on its business conditions. This argument is
a red herring. Plaintiffs conveniently forget to mention that the merger
agreement, which is attached to the Registration Statement/Prospectus,(18)
defines "material adverse effect" as follows:
any event, occurrence, fact, condition, change, development or
effect that is or could reasonably be anticipated to be
materially adverse to the business, assets (including
intangible assets), liabilities, financial condition, results
of operations, properties (including intangible properties) or
business prospects of [ECI] and all of its Subsidiaries or
[SCI] and all of its Subsidiaries, as applicable, taken as a
whole, EXCLUDING SPECIFICALLY ANY SUCH EVENT, OCCURRENCE,
FACT, CONDITION, CHANGE, DEVELOPMENT OR EFFECT RESULTING FROM
. . . CHANGES GENERALLY APPLICABLE TO COMPANIES ENGAGED IN
BUSINESSES OR INDUSTRIES SIMILAR TO THOSE IN WHICH [ECI] AND
ITS SUBSIDIARIES AND [SCI] AND ITS SUBSIDIARIES ARE ENGAGED.
See Exhibit B, at A-36 to A-37 (emphasis added). Thus, contrary to Plaintiffs'
assertions, Defendants were under no obligation to disclose adverse business
conditions if those conditions were generally applicable to companies engaged in
businesses or industries in which SCI and ECI were engaged, i.e., the death care
industry.
To further this point, the Registration Statement/Prospectus contained
detailed, meaningful disclosures indicating that the information contained in
the Registration Statement/Prospectus was effective only as of November 20,
1998. In particular, the Registration Statement/Prospectus stated as follows:
- -----------------
(18) The Registration Statement/Prospectus is attached as Exhibit B.
-20-
<PAGE> 27
THIS PROXY STATEMENT/PROSPECTUS IS DATED NOVEMBER 20, 1998.
YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THE
PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER
THAN SUCH DATE, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR THE ISSUANCE OF SCI
COMMON STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE
CONTRARY.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
SCI OR ECI SINCE THE DATE OF THIS PROXY STATEMENT/PROSPECTUS
OR THAT THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROXY
STATEMENT/PROSPECTUS.
Id. at p. 3 (emphasis in original). This cautionary language cannot be ignored.
See In re Donald J. Trump Casino Securities Litigation, 793 F. Supp. 543, 553
(D.N.J. 1992), aff'd, 7 F.3d 357 (3d Cir. 1993) ("the allegations of the
complaint are not read in isolation; they cannot be separated from the language
of the Prospectus, including whatever cautionary language appears in that
text"). Even a cursory reading of the Registrations Statement/Prospectus reveals
that the information in the Registration Statement/Prospectus is only
represented as correct as of the date of the Registration Statement/Prospectus -
November 20, 1998.
At the same time, SCI made investors aware that there were several
"important factors which could cause actual results to differ materially from
those in forward-looking statements." See Form 10-Q for the quarter ended
September 30, 1998, attached as Exhibit I to Defendants' Motion to Dismiss, at
22-23.(19) Those factors include, among others, the following:
1) Changes in general economic conditions both
domestically and internationally impacting financial
markets (e.g. marketable security values as well as
currency and interest rate fluctuations).
- -----------------
(19) The Form 10-Q for the Quarter ended September 30, 1998 was
expressly incorporated into the Registration Statement/Prospectus. See Exhibit B
at p.2.
-21-
<PAGE> 28
2) Changes in domestic and international political
and/or regulatory environments in which the Company
operates, including tax and accounting policies.
Changes in regulations may impact the Company's
ability to enter or expand new markets.
3) Changes in consumer demand for the Company's services
caused by several factors such as changes in local
death rates, cremation rates, competitive pressures
and local economic conditions.
4) The Company's ability to identify and complete
additional acquisitions on terms that are favorable
to the Company, to successfully integrate
acquisitions into the Company's business and to
realize expected cost savings in connection with such
acquisitions. The Company's future results may be
materially impacted by changes in the level of
acquisition activity.
Id. It is hard to imagine a more detailed cautionary statement.
Plaintiffs rely heavily on the First Circuit's opinion in Shaw v.
Digital Equipment Corp., 82 F.3d 1194 (1st Cir. 1996). In Shaw, the Registration
Statement's effective date was March 21, 1994, a mere 11 days before the end of
the quarter then in progress. The Shaw plaintiffs alleged that, as of the
Registration Statement's effective date, the defendants were aware of material
facts portending unexpectedly large losses, and that the failure to disclose
these material facts in the Registration Statement/Prospectus violated both
sections 11 and 12(a)(2). The present case presents an entirely different
factual situation. Here, the effective date of the Registration
Statement/Prospectus is November 20, 1998, just about halfway through the
quarter then in progress, and almost two full months before the announcement of
SCI's fourth quarter 1998 earnings. As explained above, it is unreasonable to
assume that, simply because half of the quarter had occurred, Plaintiffs could
foresee that the quarter as a whole would turn out to be disappointing. In
short, Plaintiffs have failed to plead sufficient facts to demonstrate
otherwise.
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<PAGE> 29
CONCLUSION
For the above reasons, Defendants' Motion to Dismiss the Consolidated
Class Action Complaint should be granted. Plaintiffs' Consolidated Class Action
Complaint should be dismissed.
Respectfully submitted,
Bracewell & Patterson, L.L.P.
By:
---------------------------------
J. Clifford Gunter III
State Bar No. 08627000
Andrew M. Edison
State Bar No. 00790029
South Tower Pennzoil Place
711 Louisiana, Suite 2900
Houston, Texas 77002-2781
Telephone: (713) 223-2900
Facsimile: (713) 221-1212
COUNSEL FOR DEFENDANTS
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing document
was forwarded by messenger on the 24th day of November, 1999 to Plaintiffs' Lead
Counsel:
Mr. Roger E. Greenberg
Greenberg, Peden, Siegmyer & Oshman, P.C.
12 Greenway Plaza
10th Floor
Houston, Texas 77046
----------------------------------------
Andrew M. Edison
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<PAGE> 1
EXHIBIT 99.14
NO. 32548-99-11
JAMES P. HUNTER, III and ) IN THE DISTRICT COURT OF
JAMES P. HUNTER, III FAMILY TRUST, )
)
Plaintiffs, )
)
VS. )
)
SERVICE CORPORATION )
INTERNATIONAL, ROBERT L. WALTRIP, )
L. WILLIAM HEILIGBRODT, GEORGE R. )
CHAMPAGNE, W. BLAIR WALTRIP, )
JAMES M. SHELGER, WESLEY T. )
MCRAE and PRICEWATERHOUSE )
COOPERS, L.L.P., )
)
Defendants. ) ANGELINA COUNTY, TEXAS
SERVICE CORPORATION INTERNATIONAL, ROBERT L. WALTRIP,
L. WILLIAM HEILIGBRODT, GEORGE R. CHAMPAGNE, W. BLAIR WALTRIP,
JAMES M. SHELGER, AND WESLEY T. MCRAE'S ORIGINAL ANSWER
Defendants Service Corporation International, Robert L. Waltrip, L.
William Heiligbrodt, George R. Champagne, W. Blair Waltrip, James M. Shelger and
Wesley T. McRae (collectively "SCI Defendants") file their Original Answer, as
follows.
GENERAL DENIAL
The SCI Defendants deny each and every, all and singular, material
allegations contained in Plaintiff's Original Petition as provided under Rule 92
and demand that this court require the Plaintiff to prove its charges and
allegations as required by the Constitution and laws of this state. Without
waiving the foregoing general denial, the SCI Defendants assert the following
affirmative defenses.
AFFIRMATIVE DEFENSES
1. Plaintiff has failed to take reasonable steps to mitigate damages.
<PAGE> 2
2. Plaintiff's claim for exemplary or punitive damages is barred
because exemplary or punitive damages are not properly available and/or any
award of exemplary or punitive damages is unconstitutional.
3. Plaintiff's own conduct is the proximate cause of any damages
sustained.
4. Pursuant to Section 33A(2) of the Texas Securities Act, Plaintiff
knew of any alleged untruth or omission.
5. Pursuant to Section 33A(2) of the Texas Securities Act, the SCI
Defendants did not know, and in the exercise of reasonable care, could not have
known, of any alleged untruth or omission.
WHEREFORE, premises considered, Service Corporation International,
Robert L. Waltrip, L. William Heiligbrodt, George R. Champagne, W. Blair
Waltrip, James M. Shelger and Wesley T. McRae pray that a take-nothing judgment
be entered against the Plaintiff in this case, that the Plaintiff's claims be
dismissed with prejudice to refile the same, and that Service Corporation
International, Robert L. Waltrip, L. William Heiligbrodt, George R. Champagne,
W. Blair Waltrip, James M. Shelger and Wesley T. McRae receive any and all
further relief to which they are entitled.
Respectfully submitted,
Bracewell & Patterson, L.L.P.
By:
------------------------------------
J. Clifford Gunter III
State Bar No. 08627000
Andrew M. Edison
State Bar No. 00790629
Thomas F.A. Hetherington
State Bar No. 24007359
<PAGE> 3
South Tower Pennzoil Place
711 Louisiana, Suite 2900
Houston, Texas 77002-2781
Telephone: (713) 223-2900
Facsimile: (713) 221-1212
Counsel for Defendants Service Corporation
International, Robert L. Waltrip, L. William
Heiligbrodt, George R. Champagne, W. Blair
Waltrip, James M. Shelger and Wesley T. McRae
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing document
has been forwarded on this 29th day of November, 1999, to:
Mark L.D. Wawro
Susman Godfrey L.L.P.
1000 Louisiana St., Suite 5100
Houston, Texas 77002
Ms. Martha A. Evans
Susman Godfrey L.L.P.
2323 Bryan St., Suite 1400
Dallas, Texas 75201
-----------------------------------
Andrew M. Edison
