e424b3
Filed
Pursuant to Rule 424(b)(3)
Registration No. 333-174856
Prospectus
Stewart Enterprises,
Inc.
Offer to Exchange
Up to $200,000,000 Registered 6.50% Senior Notes Due
2019
for
Any and all Outstanding Unregistered 6.50% Senior Notes Due
2019
We are offering to exchange, upon the terms and subject to the
conditions set forth in this prospectus and the accompanying
letter of transmittal, all of our 6.50% senior notes due
2019 that we have registered under the Securities Act of 1933
(the Exchange Notes) for any and all of our
outstanding 6.50% senior notes due 2019 (the
Outstanding Notes). In this prospectus we refer to
the Exchange Notes and the Outstanding Notes collectively as the
notes.
The
Exchange Offer
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We hereby offer to exchange all Outstanding Notes that are
validly tendered and not withdrawn for an equal principal amount
of Exchange Notes which are registered under the Securities Act
of 1933.
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The exchange offer will expire at 5:00 p.m. New York City
time, on July 18, 2011, unless extended.
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You may withdraw tenders of your Outstanding Notes at any time
before the exchange offer expires.
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The Exchange Notes are substantially identical to the
Outstanding Notes, except that the transfer restrictions and
registration rights relating to the Outstanding Notes will not
apply to the Exchange Notes.
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We believe that the exchange of Outstanding Notes will not be a
taxable event for federal income tax purposes, but you should
read Material U.S. Federal Income Tax
Consequences beginning on page 57 for more
information.
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We will not receive any proceeds from the exchange offer.
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No public market currently exists for the Exchange Notes. We do
not intend to apply for listing of the Exchange Notes on any
securities exchange or the Nasdaq Stock Market or to arrange for
them to be quoted on any quotation system.
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Interest on the Exchange Notes will be paid at the rate of 6.50%
per annum, semi-annually in cash in arrears on each April 15 and
October 15. See Exchange Offer Interest
on the Exchange Notes.
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Investing in the Exchange Notes involves risks that we
describe in the Risk Factors section beginning on
page 10.
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the exchange offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
Exchange Notes. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
underwriter within the meaning of the Securities Act
of 1933. This prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for
Outstanding Notes where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or
other trading activities. We have agreed that, for a period of
up to 180 days after the date of this prospectus, we will
make this prospectus available to any broker-dealer for use in
connection with any such resale. See Plan of
Distribution.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved the Exchange
Notes or passed on the adequacy or accuracy of this prospectus
and any representation to the contrary is a criminal offense.
The date of this prospectus is June 15, 2011.
TABLE OF
CONTENTS
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Page
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ii
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ii
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iii
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1
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7
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8
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10
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32
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34
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57
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60
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61
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61
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ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement on
Form S-4
under the Securities Act of 1933, as amended (Securities
Act) that we filed with the Securities and Exchange
Commission (the SEC). In making your decision
whether to participate in the exchange offer, you should rely
only on the information contained in this prospectus (including
by means of incorporation by reference) and in the accompanying
letter of transmittal. We have not authorized any person to
provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely
on it. You should not assume that the information appearing in
this prospectus is accurate as of any date other than the date
on the front cover of this prospectus.
Moreover, this prospectus does not contain all of the
information set forth in the registration statement and the
exhibits thereto. You may refer to the registration statement
and the exhibits thereto for more information. Statements made
in this prospectus regarding the contents of any contract or
document filed as an exhibit to the registration statement are
not necessarily complete and, in each instance, reference is
hereby made to the copy of such contract or document so filed.
Each such statement is qualified in its entirety by such
reference.
AVAILABLE
INFORMATION AND INCORPORATION BY REFERENCE
We file annual, quarterly and current reports and other
information with the SEC. Our SEC filings are available to the
public over the Internet at the SECs website at
http://www.sec.gov.
You may also read and copy any document we file at the
SECs public reference room in Washington, D.C. Please
call the SEC at
1-800-SEC-0330
for further information on the operation of its public reference
room. Our Class A common stock is listed on The NASDAQ
Global Select Market. You may also inspect the information we
file with the SEC at the offices of The NASDAQ Global Select
Market, Reports Section, 1735 K Street NW,
Washington, D.C. 20006. The information we file with the
SEC and other information about us also is available on our
website at
http://www.stewartenterprises.com.
However, the information on our website is not a part of this
prospectus.
We are incorporating by reference the documents listed below and
any future filings made with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934
between the date of this prospectus and the closing of the
exchange offer:
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our Annual Report on
Form 10-K
for the year ended October 31, 2010;
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our Quarterly Reports on
Form 10-Q
for the quarters ended January 31, 2011 and April 30,
2011;
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our Current Reports on
Form 8-K
filed with the SEC on December 2, 2010, January 28,
2011, February 2, 2011, April 1, 2011, April 4,
2011, April 5, 2011, April 8, 2011, April 18,
2011, April 19, 2011 and April 21, 2011; and
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our definitive proxy statement on Schedule 14A relating to
our 2011 Annual Meeting of Shareholders.
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The information incorporated by reference is considered to be
part of this prospectus and information that we file later with
the SEC will automatically update and may supersede information
in this prospectus and information previously filed with the SEC.
Descriptions in this prospectus, including those contained in
the documents incorporated by reference, of contracts and other
documents are not necessarily complete and, in each instance,
reference is made to the copies of these contracts and documents
filed as exhibits to the documents incorporated by reference in
this prospectus.
This prospectus incorporates important business and financial
information about the company that is not included in or
delivered with this document. This information is available
without charge to security holders upon written or oral request.
You may review these filings, at no cost, over the Internet at
our website at
http://www.stewartenterprises.com,
or request a copy of these filings by writing or calling us as
follows:
Stewart Enterprises, Inc.
1333 South Clearview Parkway
Jefferson, Louisiana 70121
Attention: Martin R. deLauréal
(504) 729-1429
ii
To obtain timely delivery of any of our filings, agreements
or other documents, you must make your request to us no later
than July 11, 2011, which is five business days prior to
the expiration of the exchange offer. In the event that we
extend the exchange offer, you must submit your request at least
five business days before the expiration date of the exchange
offer, as extended. We may extend the exchange offer in our sole
discretion. We do not currently intend to extend the expiration
date. See The exchange offer for more detailed
information.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements other than statements of historical fact
contained or incorporated by reference in this prospectus, are
forward-looking statements. The words anticipates,
expects, believes, goals,
intends, plans or projects
and similar expressions are intended to identify forward-looking
statements. Forward-looking statements are based on a number of
assumptions about future events and are subject to significant
risks, uncertainties and other factors that may cause our actual
results to differ materially. Important factors that could cause
our actual results to differ materially from the expectations,
expressed or implied, in the forward-looking statements include,
but are not limited to, the following:
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effects on our trusts and escrow accounts of changes in stock
and bond prices and interest and dividend rates;
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effects of a substantial decline in market value of our trust
assets, including decreased future cash flow and earnings as a
result of reduced earnings from our trusts and trust fund
management and the potential to realize additional losses and
additional cemetery perpetual care funding obligations and tax
valuation allowances;
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effects on at-need and preneed sales of a weak economy;
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effects on revenue due to the changes in the number of deaths in
our markets and potential declines in funeral call volume;
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effects on our revenue and earnings of the continuing national
trend toward increased cremation and the increases in the
percentage of cremations performed by us that are inexpensive
direct cremations;
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effects on cash flow and earnings as a result of increased
costs, particularly supply costs related to increases in
commodity prices and fuel costs;
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effects on our market share, prices, revenues and margins of
intensified price competition or improved advertising and
marketing by competitors, including low-cost casket providers
and increased offerings of products or services over the
Internet;
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risk of loss due to hurricanes and other natural disasters;
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our ability to consummate significant acquisitions of, or
investments in, death care or related businesses successfully;
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the effects on us of our industrys complex accounting
model; and
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other risks and uncertainties described in our Annual Report on
Form 10-K
for the fiscal year ended October 31, 2010 filed with the
SEC.
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For a more detailed description of risks, see Risk
Factors beginning on page 10 herein. All
forward-looking statements contained or incorporated by
reference in this document are expressly qualified in their
entirety by the cautionary statements in this paragraph and the
Risk Factors section herein and in our reports filed
with the SEC. We undertake no obligation to update any
forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
law.
iii
PROSPECTUS
SUMMARY
This summary highlights selected information contained
elsewhere in this prospectus or incorporated herein by
reference, but may not contain all information that may be
important to you. We encourage you to carefully read this entire
prospectus and the documents to which we refer you, including
Risk Factors and the consolidated financial
statements and other information incorporated by reference
herein. In this prospectus, the terms Stewart,
Company, we, us,
our and similar terms mean Stewart Enterprises, Inc.
and, unless otherwise indicated or the context otherwise
requires, its subsidiaries, taken as a whole.
We report our financial results on a fiscal year rather than
a calendar year basis. When we refer to a particular fiscal year
in this prospectus, we mean the twelve months ended
October 31 of that year. When we refer to our consolidated
financial statements or the notes thereto we are referring
to those consolidated financial statements as of
October 31, 2010 and 2009 and for each of the three years
in the period ended October 31, 2010, and the notes
thereto, that have been filed with the SEC in our Annual Report
on
Form 10-K
for the fiscal year ended October 31, 2010 and are
incorporated by reference into this prospectus.
Company
Overview
Founded in 1910, we are the second largest provider of funeral
and cemetery products and services in the death care industry in
the United States. Through our subsidiaries, we provide a
complete range of funeral and cremation merchandise and
services, along with cemetery property, merchandise and
services, both at the time of need and on a preneed basis. As of
April 30, 2011, our operations included 217 funeral homes
and 140 cemeteries in 24 states within the United
States and in Puerto Rico.
Our principal executive offices are located at 1333 South
Clearview Parkway, Jefferson, Louisiana 70121, and our telephone
number is (504)729-1400.
Summary
Of The Exchange Offer
We are conducting this exchange offer to satisfy our
obligations in the registration rights agreement that we entered
into in connection with the sales of the Outstanding Notes. You
should read the discussion under the headings The Exchange
Offer and Description of Notes for further
information regarding the exchange offer and the Exchange Notes
to be issued in the exchange offer.
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The initial offering of Outstanding Notes |
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We sold the Outstanding Notes on April 18, 2011 to Merrill
Lynch, Pierce, Fenner & Smith Incorporated,
J.P. Morgan Securities LLC, SunTrust Robinson Humphrey,
Inc., BBVA Securities Inc., and Morgan Keegan &
Company, Inc. (collectively the Initial Purchasers).
The Initial Purchasers subsequently resold the Outstanding Notes
to qualified institutional buyers pursuant to Rule 144A
under the Securities Act and to
non-U.S.
Persons within the meaning of Regulation S under the
Securities Act. |
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The exchange |
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We are offering to exchange the Exchange Notes for your
Outstanding Notes. In order to be exchanged, an Outstanding Note
must be properly tendered and accepted. All Outstanding Notes
that are validly tendered and not validly withdrawn will be
exchanged. We will issue Exchange Notes promptly after the
expiration of the exchange offer. |
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Registration rights |
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Under a registration rights agreement executed as part of the
offering of Outstanding Notes, we and the guarantors agreed to: |
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file this registration statement to exchange the
Outstanding Notes for Exchange Notes with substantially the same
terms;
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use reasonable best efforts to cause this
registration statement to become effective;
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use reasonable best efforts to consummate the
exchange offer within 210 days after the issue date; and
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use reasonable best efforts to file a shelf
registration statement for the resale of the Outstanding Notes
if we cannot effect an exchange offer within the time period
listed above and in certain other circumstances.
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The exchange offer is intended to satisfy your rights under the
registration rights agreement. After the exchange offer is
complete, you will no longer be entitled to any exchange rights
or registration rights with respect to your Outstanding Notes. |
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Resales |
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Based on an interpretation by the staff of the SEC set forth in
no-action letters issued to third parties, we believe that the
Exchange Notes issued pursuant to the exchange offer in exchange
for Outstanding Notes may be offered for resale, resold and
otherwise transferred by you (unless you are our
affiliate within the meaning of the Securities Act)
without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that you: |
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are acquiring the Exchange Notes in the ordinary
course of business; and
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have not engaged in, do not intend to engage in, and
have no arrangement or understanding with any person or entity,
including any of our affiliates, to participate in, a
distribution of the Exchange Notes.
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In addition, each participating broker-dealer that receives
Exchange Notes for its own account pursuant to the exchange
offer in exchange for Outstanding Notes that were acquired as a
result of market-making or other trading activity must also
acknowledge that it will deliver a prospectus in connection with
any resale of the Exchange Notes. For more information, see
Plan of Distribution. |
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Any holder of Outstanding Notes, including any broker-dealer, who |
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is our affiliate,
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does not acquire the Exchange Notes in the ordinary
course of its business, or
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tenders in the exchange offer with the intention to
participate, or for the purpose of participating, in a
distribution of Exchange Notes,
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cannot rely on the position of the staff of the Commission
expressed in Exxon Capital Holdings Corporation, Morgan
Stanley & Co., Incorporated or similar no-action
letters and, in the absence of an exemption, must comply with
the registration and prospectus delivery requirements of the
Securities Act in connection with the resale of the Exchange
Notes. |
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Expiration time |
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The exchange offer will expire at 5:00 p.m., New York City
time, on July 18, 2011, unless we extend the exchange offer
in our sole discretion, in which case the term expiration
time means the latest date and time to which the exchange
offer is extended. We do not currently intend to extend the
expiration date. |
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Conditions to the exchange offer |
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The exchange offer is subject to customary conditions, some of
which we may waive. For more information, see The Exchange
Offer Conditions to the Exchange Offer. |
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Procedures for tendering Outstanding Notes |
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If you wish to tender your Outstanding Notes for exchange in
this exchange offer, you must transmit to the exchange agent on
or before the expiration date: |
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a computer-generated message transmitted by means of
the Automated Tender Offer Program System of DTC, or
ATOP, in which you acknowledge and agree to be bound
by the terms of the letter of transmittal and which, when
received by the exchange agent, forms a part of a confirmation
of book-entry transfer. As part of the book-entry transfer, DTC
will facilitate the exchange of your Outstanding Notes and
update your account to reflect the issuance of the Exchange
Notes to you. ATOP allows you to electronically transmit your
acceptance of the exchange offer to DTC instead of physically
completing and delivering a letter of transmittal to the
exchange agent; and
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a timely confirmation of book-entry transfer of your
Outstanding Notes into the account of the exchange agent at DTC.
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By agreeing to be bound by the letter of transmittal, you will
represent to us that, among other things: |
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any Exchange Notes that you receive will be acquired
in the ordinary course of your business;
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you have no arrangements or understandings with any
person or entity, including any of our affiliates, to
participate in the distribution of the Exchange Notes;
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if you are a broker-dealer that will receive
Exchange Notes for your own account in exchange for Outstanding
Notes that were acquired as a result of market-making
activities, that you will deliver a prospectus, as required by
law, in connection with any resale of the Exchange Notes; and
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you are not our affiliate as defined in
Rule 405 of the Securities Act, or, if you are an
affiliate, you will company with any applicable registration and
prospectus delivery requirements of the Securities Act.
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Special procedures for beneficial owners |
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If you are the beneficial owner of book-entry interests and your
name does not appear on a security position listing of DTC as
the holder of the book-entry interests or if you are a
beneficial owner of Outstanding Notes that are registered in the
name of a broker, dealer, commercial bank, trust company or
other nominee and you wish to tender the book-entry interest of
Outstanding Notes in the |
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exchange offer, you should contact the person in whose name your
book-entry interests or Outstanding Notes are registered
promptly and instruct that person to tender on your behalf. |
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Withdrawal of tenders |
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A tender of Outstanding Notes pursuant to this exchange offer
may be withdrawn at any time prior to the expiration date. Any
Outstanding Notes not accepted for exchange for any reason will
be returned without expense to the tendering holder promptly
after the expiration or termination of this exchange offer. |
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Delivery of the Exchange Notes |
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The Exchange Notes issued pursuant to this exchange offer will
be delivered to holders who tender Outstanding Notes promptly
following the expiration time. |
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Consequences of failure to exchange |
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All untendered Outstanding Notes will continue to be subject to
the restrictions on transfer provided for in the Outstanding
Notes and in the indenture. In general, the Outstanding Notes
may not be offered or sold unless registered under the
Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable
state securities laws. Other than in connection with this
exchange offer, we do not anticipate that we will register the
Outstanding Notes under the Securities Act. |
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Material U.S. federal income tax consequences |
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We believe that the exchange of Outstanding Notes for Exchange
Notes in the exchange offer should not be a taxable event for
U.S. federal income tax purposes. For more information, see
Material U.S. federal income tax consequences. |
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Use of proceeds |
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We will not receive any cash proceeds from the issuance of the
Exchange Notes. |
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Exchange agent |
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U.S. Bank National Association is the exchange agent for this
exchange offer. The address and telephone number of the exchange
agent are set forth in the section captioned The Exchange
Offer Exchange Agent. |
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Summary
of the Exchange Notes
The summary below describes the principal terms of the
Exchange Notes. Some of the terms and conditions described below
are subject to important limitations and exceptions. See
Description of Notes for a more detailed description
of the terms and conditions of the Exchange Notes.
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Issuer |
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Stewart Enterprises, Inc., a Louisiana corporation |
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Notes offered |
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$200,000,000 aggregate principal amount of 6.50% senior
notes due 2019. The terms of the Exchange Notes are
substantially identical to the terms of the Outstanding Notes,
except that the transfer restrictions and registration rights
relating to the Outstanding Notes do not apply to the Exchange
Notes. |
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Maturity date |
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April 15, 2019. |
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Interest |
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6.50% per annum. |
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Interest payment dates |
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Interest on the notes will be payable semi-annually in arrears
in cash on each April 15 and October 15, commencing on
October 15, 2011. |
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Guarantees |
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The notes will be fully and unconditionally guaranteed, jointly
and severally, on a senior unsecured basis, by substantially all
of our existing and future direct and indirect domestic
subsidiaries, except for specified subsidiaries. See
Description of Notes Guarantees. |
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Ranking |
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The notes will be our senior unsecured obligations and will rank: |
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senior to any future indebtedness that is expressly
subordinated to the notes;
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equally in right of payment with our existing and
future senior unsecured indebtedness; and
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effectively junior to all of our existing and future
secured obligations, to the extent of the value of the assets
securing such obligations, and to the indebtedness and other
liabilities of our non-guarantor subsidiaries.
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The guarantees will rank: |
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senior to any future indebtedness that is expressly
subordinated to the guarantees of such subsidiaries;
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equally in right of payment with the existing and
future senior indebtedness of such subsidiaries; and
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effectively junior to all of the existing and future
secured obligations of such subsidiaries, to the extent of the
value of the assets securing such obligations.
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As of April 30, 2011, we had no amounts drawn under our
$150.0 million senior secured revolving credit facility,
and our availability under the facility, after giving
consideration to $7.5 million outstanding letters of credit
and a $24.8 million Florida bond, was $117.7 million.
As of April 30, 2011, our non-guarantor subsidiaries had
$120.8 million of total liabilities. |
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Optional redemption |
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We may, at our option, redeem the notes, in whole or in part, at
any time on or after April 15, 2014 at the redemption
prices described in Description of Notes
Optional Redemption, plus accrued and unpaid interest, and
prior to such date pursuant to certain make-whole provisions. |
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Change of control |
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Upon certain Change of Control events (as defined in
the indenture), each holder of notes may require us to
repurchase all or a portion of its notes at a purchase price
equal to 101% of the principal amount thereof, plus accrued and
unpaid interest to the date of purchase. See Description
of Notes Repurchases at the Option of Holders upon
Change of Control. |
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Certain covenants |
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The indenture governing the notes contains covenants that, among
other things, will limit our ability and the ability of our
subsidiaries to: |
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create liens securing indebtedness; and
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enter into sale and leaseback transactions.
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The indenture contains covenants that will also limit our
ability to merge, consolidate or sell substantially all our
assets. These covenants are subject to important exceptions. See
Risk Factors There are no restrictive
covenants in the indenture for the notes relating to our ability
to incur future indebtedness or complete certain other
transactions and Description of Notes
Covenants for more information. |
You should refer to the section Risk Factors for
an explanation of some risks of participating in the exchange
offer.
6
Ratio of
earnings to fixed charges
Our ratio of earnings to fixed charges was as follows:
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Six Months
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Ended
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Years Ended October 31,
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April 30, 2011
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2010
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2009
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2008
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2007
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2006
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Ratio of earnings to fixed charges
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3.24(1
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2.69(2
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2.21(3
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1.40(4
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2.85(5
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2.82(6
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(1) |
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Includes a $1.8 million pre-tax loss on early
extinguishment of debt due to the refinancing of the senior
notes and senior secured revolving credit facility and
($0.4) million in net losses on dispositions. |
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(2) |
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Includes a $1.0 million pre-tax net loss on early
extinguishment of debt due to fiscal year 2010 debt repurchases. |
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(3) |
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Includes a $6.2 million pre-tax net gain on early
extinguishment of debt due to fiscal year 2009 debt repurchases,
a $3.4 million charge related to the estimated probable
funding obligation to fund the cemetery perpetual care trust net
realized losses, a $0.4 million charge for hurricane
related expenses, a $0.3 million charge for separation
charges primarily related to the retirement of an executive
officer and net impairment losses on dispositions of
($0.2) million. |
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(4) |
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Includes a charge of $2.3 million related to Hurricanes
Katrina and Ike, a charge of $26.0 million for impairment
of goodwill, a $13.3 million charge related to the
estimated probable obligation to fund the cemetery perpetual
care trust net realized losses and net impairment losses on
dispositions of ($0.4) million. |
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(5) |
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Includes a charge of $2.5 million related to Hurricane
Katrina, a charge of $0.6 million for separation charges
primarily related to separation pay of a former executive
officer who retired in the first quarter of 2007 and
$0.7 million for the loss on early extinguishment of debt
related to the June 2007 senior convertible debt transaction. |
|
(6) |
|
Includes a net recovery of $1.6 million related to
Hurricane Katrina, business interruption insurance proceeds of
$3.2 million related to Hurricane Katrina, a charge of
$1.0 million for separation charges related to the July
2005 restructuring of our divisions and retirement of an
executive officer and net impairment losses on dispositions of
($0.2) million. |
For purposes of computing the ratio of earnings to fixed
charges, earnings consist of pre-tax earnings from continuing
operations plus fixed charges (excluding interest capitalized
during the period). Fixed charges consist of interest expense,
amortization of capitalized interest, amortization of debt
expense and discount or premium relating to any indebtedness and
the portion of rental expense that management believes to be
representative of the interest component of rental expense.
7
Selected
Consolidated Financial Data
The following selected consolidated financial data should be
read in conjunction with our historical consolidated financial
statements and related notes and Managements
discussion and analysis of financial condition and results of
operations incorporated by reference in this prospectus.
The selected consolidated financial data as of and for each of
the years ended October 31, 2006 through 2010 have been
derived from our audited consolidated financial statements and
the selected consolidated financial data for the six months
ended April 30, 2010 and 2011 is derived from our unaudited
condensed consolidated financial statements. Historical results
are not necessarily indicative of the results to be expected in
the future.
The data for fiscal years 2006 through 2009 have been
reclassified to reflect certain businesses as discontinued
operations under the provisions of Accounting Standards
Codification 360 Property, Plant and Equipment
(ASC 360) as discussed in footnote 1 to the table
below. In addition, the data for fiscal years 2006 through 2009
reflects the required retrospective adoption of accounting
guidance related to convertible debt instruments and
participating securities as described in footnote 1 to the table
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Years Ended October 31,(1)
|
|
|
April 30,
|
|
|
|
2006(2)
|
|
|
2007(3)
|
|
|
2008(4)
|
|
|
2009(5)
|
|
|
2010(6)
|
|
|
2010
|
|
|
2011(7)
|
|
|
|
(Dollars in thousands, except per share amounts)
|
|
|
Statement of Earnings Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
512,709
|
|
|
$
|
521,332
|
|
|
$
|
526,246
|
|
|
$
|
486,379
|
|
|
$
|
499,907
|
|
|
$
|
252,045
|
|
|
|
258,929
|
|
Total gross profit
|
|
$
|
114,440
|
|
|
$
|
112,307
|
|
|
$
|
100,607
|
|
|
$
|
87,619
|
|
|
$
|
96,204
|
|
|
$
|
50,323
|
|
|
$
|
53,996
|
|
Earnings (loss) from continuing operations
|
|
$
|
37,469
|
|
|
$
|
38,038
|
|
|
$
|
(7,468
|
)
|
|
$
|
23,191
|
|
|
$
|
30,569
|
|
|
$
|
15,849
|
|
|
$
|
18,042
|
|
Earnings from discontinued operations
|
|
|
124
|
|
|
|
577
|
|
|
|
134
|
|
|
|
75
|
|
|
|
409
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
37,593
|
|
|
$
|
38,615
|
|
|
$
|
(7,334
|
)
|
|
$
|
23,266
|
|
|
$
|
30,978
|
|
|
$
|
15,878
|
|
|
$
|
18,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
$
|
.35
|
|
|
$
|
.36
|
|
|
$
|
(.08
|
)
|
|
$
|
.25
|
|
|
$
|
.33
|
|
|
$
|
.17
|
|
|
$
|
.20
|
|
Earnings from discontinued operations
|
|
|
|
|
|
|
.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
.35
|
|
|
$
|
.37
|
|
|
$
|
(.08
|
)
|
|
$
|
.25
|
|
|
$
|
.33
|
|
|
$
|
.17
|
|
|
$
|
.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
$
|
.35
|
|
|
$
|
.36
|
|
|
$
|
(.08
|
)
|
|
$
|
.25
|
|
|
$
|
.33
|
|
|
$
|
.17
|
|
|
$
|
.20
|
|
Earnings from discontinued operations
|
|
|
|
|
|
|
.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
.35
|
|
|
$
|
.37
|
|
|
$
|
(.08
|
)
|
|
$
|
.25
|
|
|
$
|
.33
|
|
|
$
|
.17
|
|
|
$
|
.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
|
$
|
.10
|
|
|
$
|
.10
|
|
|
$
|
.10
|
|
|
$
|
.105
|
|
|
$
|
.12
|
|
|
$
|
.06
|
|
|
$
|
.06
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
2,380,577
|
|
|
$
|
2,419,716
|
|
|
$
|
2,087,306
|
|
|
$
|
2,099,004
|
|
|
$
|
2,142,866
|
|
|
$
|
2,147,052
|
|
|
$
|
2,193,651
|
|
Long-term debt, less current maturities
|
|
|
374,020
|
|
|
|
396,620
|
|
|
|
402,291
|
|
|
|
339,721
|
|
|
|
314,027
|
|
|
|
341,014
|
|
|
|
315,891
|
|
Shareholders equity
|
|
|
446,893
|
|
|
|
457,554
|
|
|
|
396,232
|
|
|
|
408,657
|
|
|
|
425,484
|
|
|
|
420,706
|
|
|
|
431,573
|
|
|
|
|
(1) |
|
Effective November 1, 2005, we began recording share-based
compensation costs using the modified prospective application
transition method. |
|
|
|
Effective November 1, 2007, we implemented the required
guidance related to uncertain tax positions and recognized a
$1.0 million charge to the November 1, 2007
accumulated deficit balance. |
|
|
|
Effective November 1, 2009, we adopted FASB issued guidance
regarding the accounting for convertible debt instruments that
may be settled in cash upon conversion. This guidance applies to
our senior convertible notes, which were originally issued in
2007, and was required to be applied retrospectively to all
periods presented. |
8
|
|
|
|
|
Effective November 1, 2009, we adopted FASB issued guidance
on determining whether instruments granted in share-based
payment transactions are participating securities. |
|
|
|
All businesses sold that met the criteria for discontinued
operations under applicable accounting guidance have been
classified as discontinued operations for all periods presented. |
|
(2) |
|
During fiscal year 2006, we recorded the following items: |
|
|
|
$1.6 million in net hurricane related
recoveries and $3.2 million in business interruption
insurance proceeds related to Hurricane Katrina.
|
|
|
|
$1.0 million in separation charges related to
separation pay of former executive officers and additional
reorganization costs for the 2005 restructuring of the divisions.
|
|
(3) |
|
During fiscal year 2007, we recorded the following items: |
|
|
|
$0.7 million charge for the loss on early
extinguishment of debt as a result of the refinancing in
connection with our senior convertible debt transaction.
|
|
|
|
$2.5 million in net hurricane related expenses
related to Hurricane Katrina.
|
|
|
|
$0.6 million in separation charges related to
separation pay of former executive officers and additional
reorganization costs for the 2005 restructuring of the divisions.
|
|
(4) |
|
During fiscal year 2008, we recorded the following items: |
|
|
|
$26.0 million charge for goodwill impairment.
|
|
|
|
$13.3 million in charges related to our
estimated probable obligation to fund the cemetery perpetual
care trust investment losses and a $7.4 million tax
valuation allowance as a result of realized trust investment
losses.
|
|
|
|
$2.3 million in net hurricane related expenses
related to Hurricanes Ike and Katrina.
|
|
(5) |
|
During fiscal year 2009, we recorded the following items: |
|
|
|
$6.2 million in gains on early extinguishment
of debt due to open market purchases of our senior convertible
notes.
|
|
|
|
$3.4 million in charges related to our
estimated probable obligation to fund the cemetery perpetual
care trust investment losses.
|
|
|
|
$0.4 million in net hurricane related expenses
primarily related to the lawsuit we filed against our insurance
carriers related to our Hurricane Katrina claim.
|
|
|
|
$0.3 million in separation charges related to
the separation pay of a former executive officer and costs
related to the reorganization of our operating structure.
|
|
(6) |
|
During fiscal year 2010, we recorded the following items: |
|
|
|
$0.6 million in gains on dispositions recorded
in discontinued operations.
|
|
|
|
$1.0 million charge for the loss on early
extinguishment of debt due to open market purchases of our
senior convertible notes. |
|
(7) |
|
During the six months ended April 30, 2011, we recorded the
following items: |
|
|
|
$1.8 million charge for the loss on early
extinguishment of debt as a result of the refinancing of the
senior secured revolving credit facility and senior notes in
April 2011.
|
|
|
|
$0.4 million charge for the net loss on
dispositions.
|
9
RISK
FACTORS
Investing in the notes involves risks. You should carefully
consider the risks described below as well as other information
and data included or incorporated by reference in this
prospectus. Additional risks and uncertainties not currently
known to us or that we consider to be immaterial may also
materially impact our business, operations or financial
condition. Any of the following risks could impair our business,
financial condition or operating results. This could cause you
to lose all or part of your investment in the notes.
Risks
Related to the Exchange Offer
Because
there is no public market for the Exchange Notes, you may not be
able to resell your Exchange Notes.
The Exchange Notes will be registered under the Securities Act,
but will constitute a new issue of securities with no
established trading market, and there can be no assurance as to:
|
|
|
|
|
the liquidity of any trading market that may develop;
|
|
|
|
the ability of holders to sell their Exchange Notes; or
|
|
|
|
the price at which the holders would be able to sell their
Exchange Notes.
|
If a trading market were to develop, the Exchange Notes might
trade at higher or lower prices than their principal amount or
purchase price, depending on many factors including prevailing
interest rates, the market for similar securities and our
financial performance, as well as declines in the prices of
securities, or the financial performance or prospects of similar
companies.
Any market-making activity with respect to the Exchange Notes
may be discontinued at any time without notice. In addition, any
market-making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act, and may be limited
during the exchange offer or the pendency of an applicable shelf
registration statement. There can be no assurance that an active
trading market will exist for the Exchange Notes or that any
trading market that does develop will be liquid.
In addition, any Outstanding Note holder who tenders in the
exchange offer for the purpose of participating in a
distribution of the Exchange Notes may be deemed to have
received restricted securities, and if so, will be required to
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction. For a description of these requirements, see the
section Exchange Offer.
Your
notes will not be accepted for exchange if you fail to follow
the exchange offer procedures and, as a result, your notes will
continue to be subject to existing transfer restrictions and you
may not be able to sell your notes.
We will not accept your Outstanding Notes for exchange if you do
not follow the exchange offer procedures. We will issue Exchange
Notes as part of this exchange offer only after a timely tender
of Outstanding Notes. If you do not tender your Outstanding
Notes by the expiration date of the exchange offer, we will not
accept your Outstanding Notes for exchange. If there are defects
or irregularities with respect to your tender of Outstanding
Notes, we will not accept such Outstanding Notes for exchange.
We are under no duty to give notification of defects or
irregularities with respect to the tenders of Outstanding Notes
for exchange.
If you
do not exchange your Outstanding Notes, your Outstanding Notes
will continue to be subject to the existing transfer
restrictions and you may not be able to sell your
notes.
We did not register the Outstanding Notes, nor do we intend to
do so following the exchange offer. Outstanding Notes that are
not tendered will therefore continue to be subject to the
existing transfer restrictions and may be transferred only in
limited circumstances under the securities laws. If you do not
exchange your Outstanding Notes, you will lose your right to
have such Outstanding Notes registered under the federal
10
securities laws. As a result, if you hold Outstanding Notes
after the exchange offer, you may not be able to sell your
Outstanding Notes.
The
reoffering and resale of the Outstanding Notes is subject to
significant legal restrictions.
The Outstanding Notes have not been registered under the
Securities Act or any state securities laws. As a result,
holders of Outstanding Notes may reoffer or resell Outstanding
Notes only if:
|
|
|
|
|
there is an applicable exemption from the registration
requirements of the Securities Act and applicable state laws
that applies to the circumstances of the offer and sale, or
|
|
|
|
we file a registration statement and it becomes effective.
|
Risks
Related to the Notes
Our
indebtedness could adversely affect our financial condition and
impair our ability to operate our business, and we may incur
additional debt.
As of April 30, 2011, we had $337.4 million of debt
outstanding and $117.7 million of availability under our
$150.0 million senior secured revolving credit facility
after giving consideration to $7.5 million outstanding
letters of credit and a $24.8 million bond related to our
preneed funeral trusts in Florida. As of April 30, 2011,
our ratio of total indebtedness to shareholders equity was
0.8 to 1.00.
The indenture governing the notes does not limit our and our
subsidiaries ability to incur additional debt. We could
incur additional debt, which could negatively impact our
financial condition, results of operations and business
prospects and prevent us from satisfying our obligations under
the notes.
The degree to which we are leveraged or may become leveraged in
the future could have important consequences to you, including:
|
|
|
|
|
we may be required to dedicate a substantial portion of our cash
flow from operations to pay principal of, and interest on, our
indebtedness, thereby reducing funds available for operations,
working capital, capital expenditures, expansion, acquisitions
or general corporate or other purposes or to carry out other
aspects of our business plan;
|
|
|
|
we may be more highly leveraged than our competitors, which may
place us at a competitive disadvantage;
|
|
|
|
it may increase our vulnerability to general adverse economic
and industry conditions and limit our ability to withstand
competitive pressures;
|
|
|
|
it may limit, along with the financial and other restrictive
covenants in our senior secured revolving credit facility and
future indebtedness, among other things, our ability to borrow
additional funds;
|
|
|
|
our flexibility in planning for, or reacting to, changes in our
business and industry may be limited; and
|
|
|
|
it may make it more difficult for us to satisfy our obligations
with respect to the notes.
|
The occurrence of any one of these events could have a material
adverse effect on our business, financial condition, results of
operations, business prospects and ability to satisfy our
obligations under the notes.
Our ability to meet our debt obligations and other expenses will
depend on our future performance, which will be affected by
financial, business, economic, regulatory and other factors,
many of which we are unable to control. For more information on
our indebtedness, please see Description of Other
Indebtedness and the financial statements incorporated by
reference herein.
11
In the
event of our bankruptcy or liquidation, holders of the notes
will be paid from any assets remaining after payments to any
holders of secured debt, and debt and other liabilities of our
non-guarantor subsidiaries.
The notes and the guarantees will be general unsecured senior
obligations of us and our subsidiary guarantors, effectively
junior to any of our existing or future secured debt, to the
extent of the value of assets securing that debt. The notes and
the guarantees will be effectively subordinated to the
indebtedness and other liabilities of our non-guarantor
subsidiaries. If we are declared bankrupt or insolvent, or are
liquidated, holders of our secured debt and any secured debt of
our subsidiaries will be entitled to be paid from our assets
before any payment may be made with respect to the notes. In
addition, in that circumstance, holders of debt and other
creditors of our non-guarantor subsidiaries would be entitled to
be paid from the assets of those subsidiaries before the
proceeds of those assets could be applied to pay the notes. If
any of the foregoing events occurs, we cannot assure you that we
will have sufficient assets to pay amounts due on our secured
debt, the secured debt of our subsidiary guarantors, the debt
and other liabilities of our non-guarantor subsidiaries, and the
notes and other unsecured liabilities of ours and our
subsidiaries. As a result, holders of the notes may receive
less, ratably, than holders of secured debt of ours or our
subsidiary guarantors or the debt of our non-guarantor
subsidiaries in the event of bankruptcy or liquidation.
We can borrow up to $150.0 million under our senior secured
revolving credit facility, which is guaranteed on a senior
secured basis by substantially the same subsidiaries that will
guarantee the notes. As of April 30, 2011, our
non-guarantor subsidiaries had approximately $120.8 million
of total liabilities. The indenture governing the notes does not
restrict our ability to incur additional debt, and permits a
significant amount of secured debt to be incurred. See
Description of Notes.
As of April 30, 2011, our balance sheet included
approximately $901.9 million in assets reflecting funds
held in our preneed funeral merchandise and services trusts,
preneed cemetery merchandise and services trusts, cemetery
perpetual care trusts and amounts due from our customers. We
believe that, pursuant to state laws that require the
establishment of these trusts, most of these trusts are legally
not likely to be available to satisfy the claims of our or the
guarantors creditors.
Stewart
Enterprises, Inc. is a holding company and depends on cash flows
from subsidiaries to meet its obligations.
Stewart Enterprises, Inc. is a holding company, and it conducts
substantially all of its operations through its subsidiaries.
Consequently it does not have any income from operations and
does not expect to generate any significant income from
operations in the future. Although the notes are guaranteed by
all of our existing and future domestic subsidiaries, except for
specified subsidiaries, as a result of this holding company
structure, Stewart Enterprises, Inc.s ability to meet its
debt service obligations, including its obligations under the
notes, substantially depends upon its subsidiaries cash
flow and payment of funds to it by its subsidiaries as
dividends, loans, advances or other payments. Stewart
Enterprises, Inc.s subsidiaries payment of dividends
or making of loans, advances or other payments may be subject to
regulatory or contractual restrictions.
Our non-guarantor subsidiaries are separate and distinct legal
entities with no obligation to pay any amounts due pursuant to
the notes or the guarantees or to provide us or the guarantors
with funds for Stewarts payment obligations. Our cash
flows and our ability to service our debt, including the notes,
depends in part on the earnings of our non-guarantor
subsidiaries and on the distribution of earnings, loans or other
payments to us by these subsidiaries. In fiscal year 2010 the
non-guarantor subsidiaries contributed 8.6% of our consolidated
revenue, 15.5% of our consolidated earnings from continuing
operations, 6.9% of our consolidated assets and 12.5% of our
consolidated operating cash flow. In addition, the ability of
these non-guarantor subsidiaries to make any dividend,
distribution, loan or other payment to us or a guarantor could
be subject to statutory or contractual restrictions. Payments to
us or a guarantor by these non-guarantor subsidiaries will also
be contingent on their earnings and their business
considerations. Because we depend in part on the cash flows of
these non-guarantor subsidiaries to meet our obligations, these
types of restrictions may impair our ability to make scheduled
interest and principal payments on the notes.
12
Furthermore, in the event of any bankruptcy, liquidation or
reorganization of a non-guarantor subsidiary, you will not have
any claim as a creditor against such subsidiary. As a result,
all debt and other liabilities, including trade payables, of the
non-guarantor subsidiaries, whether secured or unsecured, must
be satisfied before any of the assets of such subsidiaries would
be available for distribution, upon a liquidation or otherwise,
to us in order for us to meet our obligations with respect to
the notes. As of April 30, 2011, the non-guarantor
subsidiaries had $120.8 million of liabilities.
There
are no restrictive covenants in the indenture for the notes
relating to our ability to incur future indebtedness or complete
certain other transactions.
The indenture governing the notes does not contain any financial
covenants or covenants restricting our ability to pay dividends,
incur indebtedness, enter into transactions with affiliates,
issue or repurchase securities or make investments. See
Description of Notes.
We may
not be able to generate cash flow to meet our debt service
obligations.
Our ability to make payments on our indebtedness, including the
notes, and to fund planned capital expenditures will depend on
our ability to generate cash in the future. This, to a
significant extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are
beyond our control.
We cannot assure you that our business will generate sufficient
cash flow from operations to service our outstanding
indebtedness, or that future borrowings will be available to us
in an amount sufficient to enable us to pay our indebtedness or
to fund our other capital needs. If our business does not
generate sufficient cash flow from operations to service our
outstanding indebtedness, we may have to undertake alternative
financing plans, such as:
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refinancing or restructuring our debt;
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selling assets;
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reducing or delaying acquisitions or capital investments; or
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seeking to raise additional capital.
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However, we cannot assure you that we would be able to implement
alternative financing plans, if necessary, on commercially
reasonable terms or at all, or that implementing any such
alternative financing plans would allow us to meet our debt
obligations. Our inability to generate sufficient cash flow to
satisfy our debt obligations, including our obligations under
the notes, or to obtain alternative financings, could materially
and adversely affect our business, financial condition, results
of operations and prospects.
Covenant
restrictions under our debt agreements may limit our ability to
operate our business.
Our senior secured revolving credit facility limits, among other
things, our and the guarantors ability to: borrow money;
pay dividends or distributions; purchase or redeem stock; make
investments; engage in transactions with affiliates; engage in
sale and leaseback transactions; effect a consolidation or
merger or sell, transfer, lease, or otherwise dispose of all or
substantially all of our assets; and create liens on our assets.
In addition, our senior secured revolving credit facility
contains specific limits on capital expenditures. Furthermore,
our senior secured revolving credit facility requires us to
maintain specified financial ratios. The indenture governing the
notes restricts our and the guarantors ability to create
liens on assets, enter into sale and leaseback transactions and
merge or consolidate with other companies. Our and our
subsidiaries future indebtedness may contain similar or
even more restrictive covenants.
These covenants may require that we take action to reduce our
debt or to act in a manner contrary to our business objectives.
In addition, events beyond our control, including changes in
general economic and business conditions, may affect our ability
to satisfy these covenants. We might not meet those covenants,
and the lenders might not waive any failure to meet those
covenants. A breach of any of those covenants could result in a
default under such indebtedness. If an event of default under
our senior secured revolving credit
13
facility occurs, the lenders could elect to declare all amounts
outstanding thereunder, together with accrued interest, to be
immediately due and payable. Any such declaration would also
result in an event of default under the indentures governing our
senior convertible notes due 2014 and 2016 (the 2014
notes and 2016 notes, respectively) and the
indenture governing the notes. See Description of Other
Indebtedness and Description of Notes.
We may
be unable to repurchase the notes when required by the holders
in connection with a change of control.
Upon a change of control of our company as defined in the
indenture for the notes, holders of the notes will have the
right to require us to repurchase all or any part of their notes
for cash at a price equal to 101% of the principal amount of the
notes repurchased, plus any accrued and unpaid interest. Also,
under our senior secured revolving credit facility, a change of
control is an event of default which would require us to pay all
amounts outstanding under the facility. We cannot assure you
that we will have sufficient financial resources or be able to
arrange financing to pay the repurchase price of the notes on
any date that we would be required to do so under the terms of
the notes.
The
guarantees may not be enforceable because of fraudulent
conveyance laws.
Under Federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, if, among other things, any guarantor
subsidiary, at the time it incurred the debt evidenced by its
guarantee:
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received less than reasonably equivalent value or fair
consideration for the guarantee; or
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issued the guarantee with the intent of hindering, delaying or
defrauding its present or future creditors; and
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was insolvent or rendered insolvent as a result of issuing the
guarantees;
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was engaged in a business or transaction for which that
guarantor subsidiarys remaining assets constituted
unreasonably small capital; or
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intended to incur, or believed that it would incur, debts beyond
its ability to pay those debts as they matured,
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then the guarantee of that guarantor subsidiary could be voided,
or claims by holders of the notes under that guarantee could be
subordinated to all other debts of that guarantor subsidiary. In
addition, any payment by that guarantor subsidiary pursuant to
its guarantee could be required to be returned to that guarantor
subsidiary, or to a fund for the benefit of the creditors of
that guarantor subsidiary.
The measures of insolvency for purposes of the foregoing
considerations will vary depending upon the law applied in any
proceeding with respect to the foregoing. Generally, however, a
guarantor subsidiary would be considered insolvent if:
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the sum of its debts, including contingent liabilities, was
greater than the saleable value of all of its assets at a fair
valuation;
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the present fair saleable value of its assets was less than the
amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they
become absolute and mature; or
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it could not pay its debts as they become due.
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Your
ability to sell the notes may be limited by the absence of an
active trading market, and there is no assurance that an active
trading market will develop for the notes.
The notes are a new issue of securities for which there is no
established public market. We do not presently intend to apply
for listing of the notes on any securities exchange. The initial
purchasers have advised us that they intend to make a market in
the notes as permitted by applicable laws and regulations.
14
However, the initial purchasers are not obligated to make a
market in the notes, and they may discontinue their
market-making activities at any time without notice.
Therefore, we cannot assure you that an active market for the
notes will develop or, if developed, that it will continue.
Historically, the market for non-investment grade debt has been
subject to disruptions that have caused substantial volatility
in the prices of securities similar to the notes. We cannot
assure you that the market, if any, for the notes will be free
from similar disruptions or that any such disruptions may not
adversely affect the prices at which you may sell your notes.
Risks
Related to Our Business
Our
earnings from our trusts can be reduced by declines in stock and
bond prices and interest and dividend rates, which can have a
significant adverse effect on our gross profit, net earnings and
cash flows.
Because of our preneed sales activities and the related state
trusting requirements that accompany preneed sales, our business
is impacted by changes in financial markets. We maintain three
types of trusts: (1) preneed funeral merchandise and
services, (2) preneed cemetery merchandise and services and
(3) cemetery perpetual care. Our trust assets are generally
invested in a mix of equity and fixed-income securities, and
dividend and interest earnings and investment gains and losses
are affected by financial market conditions that are not within
our control. Generally, declines in market performance reduce
the earnings in our trusts and reduce our earnings and cash
flow. In addition, any significant or sustained investment
losses could result in there being insufficient funds in the
trusts to cover the cost of delivering services and merchandise
in the future and result in there being less funds available to
defray the costs of cemetery maintenance. Any such deficiency
would have to be covered by operating cash flow, which could
have a material adverse effect on our financial position and
results of operations. In addition, our subsidiary, Investors
Trust, Inc. (ITI), earns trust management fees based
on the fair market value of the trusts managed; therefore,
declines in the fair market value of the assets in the trusts
decrease the amount of fees we collect and record for trust
management.
In fiscal years 2010, 2009 and 2008, cemetery perpetual care
trust earnings, funeral and cemetery merchandise and services
trust earnings and ITI trust management fees comprised 6%, 6%
and 7% of our revenue, respectively, and 30%, 31% and 36% of our
gross profit, for each respective year. During fiscal year 2008
and the first quarter of fiscal year 2009, we experienced
significant declines in the market value of our trust portfolio,
consistent with overall market declines during that time period.
During fiscal year 2010, our preneed funeral and cemetery
merchandise and services trusts experienced a total return of
14.2%, and our cemetery perpetual care trust experienced a total
return of 15.1%. However, these improved returns did not restore
all of the market value lost during fiscal year 2008 and early
2009. On October 31, 2007, the aggregate market value of
our trust portfolio was $926.7 million, on October 31,
2010, it was $795.4 million, and on April 30, 2011, it
was $841.2 million. Declines in our perpetual care trust
earnings and in revenue for fees we earn for managing our trusts
impact current revenue, while earnings on preneed funeral
merchandise and services and preneed cemetery merchandise and
services are allocated to the underlying contracts and
recognized as revenue when the underlying products or services
are delivered. During fiscal year 2010, we recognized
$1.4 million more in revenue than we did in fiscal year
2009 from trust-related activities, or $30.7 million in
fiscal year 2010 compared to $29.3 million in fiscal year
2009. By comparison, in fiscal year 2007, we recognized
$38.5 million from trust-related activities. Based on
current market conditions as of April 30, 2011, we believe
the revenue from trust earnings recognized on delivery of
preneed services and merchandise, cemetery perpetual care
earnings and trust management fees for fiscal year 2011 would be
about the same as for fiscal year 2010. If market conditions
further deteriorate or we experience additional realized losses,
trust-related revenue would likely further decrease. The preneed
contracts we manage are long-term in nature, and we believe the
trust investments will appreciate in value over the long-term.
However, whether they will appreciate and over what time period
are unknown. Additional information regarding our trusts and
related risks are described in the risk factors that follow.
15
Earnings
in preneed funeral and cemetery merchandise and services trusts
may be reduced by declines in stock and bond prices and will be
reduced by declines in interest and dividend rates, resulting in
lower future revenues and cash flows, and potential contract
impairment charges.
Declines in earnings in our preneed funeral and cemetery
merchandise and services trusts can cause a decline in our
reported future revenues and cash flows. With respect to these
trusts, we defer recognition and generally withdrawal of
dividends, interest income and realized earnings until the
underlying product or service is delivered. Realized gains and
losses generally have no immediate impact on our revenues,
margins, earnings or cash flow, except to the extent there are
tax consequences as described later in these risk factors.
Dividends, interest income and realized gains and losses are
allocated to the underlying contracts and will affect the amount
of future revenue recognized, and cash withdrawn, at the time
the specific contract is performed. In our preneed funeral and
cemetery merchandise and services trusts, as of April 30,
2011, the fair market value of the investments in the trusts of
$599.5 million was $103.5 million lower than our cost
basis of $703.0 million. In most of our trusts, unrealized
gains and losses are not allocated to individual contracts, in
accordance with our trust agreements; however, as gains and
losses are realized, they are allocated to the underlying
contracts and will affect the amount of earnings we recognize
and cash we withdraw at the time the contracts are ultimately
performed. As of April 30, 2011, we had $217.7 million
in earnings that have been previously realized and allocated to
contracts that we will recognize in the future when the
underlying contracts are performed. Therefore, significant
unrealized losses in these trusts, if they do not recover over
time, can limit future earnings available to us. For fiscal
years 2010 and 2009, funeral trust earnings included in our
reported revenue amounted to $11.3 million, and cemetery
merchandise and service trust earnings amounted to
$2.6 million and $3.2 million, respectively.
If the fair market value of these trusts were to decline below
the estimated costs to deliver the underlying products and
services, we would record a charge to earnings to record a
liability for the expected losses on the delivery of the
associated contract. As of April 30, 2011, no such charge
was required.
Realized
capital losses in preneed funeral and cemetery merchandise and
services trusts for which we are the grantor, if we have or
expect insufficient offsetting capital gains, can cause
increases in our current period effective tax rate and a
reduction of our current period reported net earnings and a
reduction in operating cash flows in future
periods.
Approximately one-half of the April 30, 2011 fair market
value of our preneed funeral and cemetery merchandise and
services trusts are trusts for which we are the grantor. For
these trusts (unlike the remaining trusts for which the
customers are the grantors), we retain the income tax
characteristics of all earnings as realized in the trust. For
example, capital gains and losses in the trusts are capital
gains and losses on our tax returns. In addition, we must
recognize these earnings currently for tax purposes, while for
book purposes they are deferred until the contract is performed.
For the six months ended April 30, 2011 and fiscal years
2010 and 2009, the trusts for which we are the grantor realized
net gains (losses) for book purposes of $4.7 million,
($1.0) million and ($5.1) million, respectively.
Realized capital losses in the trusts for which we are the
grantor, if we have or expect insufficient offsetting capital
gains in the future, can require us to record a valuation
allowance against the related deferred tax asset (capital loss
carryforward), which increases our current period effective tax
rate and reduces our current period reported net earnings.
During fiscal year 2008, we recorded a tax valuation allowance
of $7.4 million related to capital losses realized in our
preneed funeral and cemetery merchandise and services trusts for
which we are the grantor for tax purposes. We recorded an
additional $0.4 million tax valuation allowance in fiscal
year 2009 and were able to reduce the allowance by
$1.8 million in fiscal year 2010 and by $3.3 million
for the six months ended April 30, 2011. Essentially, the
current period valuation allowance reflects the fact that, if we
cannot generate capital gains in the future against which to use
the tax benefit of the capital loss (which is limited to five
years), when we perform the contract, we will recognize more
income and pay higher taxes for tax purposes than we will for
book purposes. This tax relationship does not occur with respect
to trusts for which the customer is the grantor, because all of
their earnings are service revenue and thus ordinary income to
us, and we do not recognize the revenue for either tax or book
purposes until the underlying contract is performed.
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As of April 30, 2011, we have approximately
$79.0 million remaining in unrealized losses in trusts for
which we are the grantor; hypothetically, if all of these losses
were realized at once, this would have resulted in an additional
valuation allowance of approximately $31.6 million,
assuming a projected tax rate of 40%. We currently have only a
limited amount of embedded capital gains in our trusts. Also, we
have utilized all previous capital gains recorded in tax year
2008 and prior tax years to offset capital losses. Accordingly,
if we experience additional realized losses in these trusts and
do not have or expect to have future capital gains available
(within or outside the trusts) to offset these losses, we would
record additional valuation allowances and related reductions of
net income.
Earnings
in cemetery perpetual care trusts may be reduced by declines in
stock and bond prices and will be reduced by declines in
interest and dividend rates, resulting in lower current and
potentially future revenues and cash flows. In addition, we may
be required to fund realized net capital losses in these trusts,
which would have a negative effect on our earnings and cash
flow.
Pursuant to cemetery perpetual care contracts and laws, a
portion, generally 10% to 15%, of the proceeds from cemetery
property sales is deposited into perpetual care trusts. The
income from these trusts, which have been established in most
jurisdictions in which we operate cemeteries, is used for
maintenance of those cemeteries, but principal must generally be
held by the trust in perpetuity. The statutory provisions that
create and regulate these trusts differ from state to state, as
do the regulatory interpretations of the provisions. The trusts
are reviewed regularly by the respective state regulatory
authorities.
We currently recognize all dividend and interest income earned
and, in states where it is permitted, realized net capital gains
generated by cemetery perpetual care trusts. We are currently
utilizing some of the cash that could be withdrawn from the
trusts to satisfy our funding obligation resulting from
previously realized capital losses, which is discussed below.
The remaining cash withdrawn is used to defray the costs of
cemetery maintenance. Therefore, declines in these eligible
distributable earnings in cemetery perpetual care trusts would
cause a decline in cash flows. Likewise, sustained declines in
these earnings would reduce future revenues and cash flows. As a
result, we would need to devote more of our cash flow from other
sources to continue to maintain our cemeteries at the same
level. For fiscal 2010, earnings in these trusts contributed
$7.4 million to cemetery revenue, which includes
$2.1 million in capital gains. Unless current market
conditions improve substantially, we expect to report earnings
from the trusts in the future consistent with fiscal year 2010,
which is lower than we have historically earned.
In our cemetery perpetual care trusts, as of April 30,
2011, the fair market value of our investments of
$241.7 million was $33.2 million lower than our cost
basis of $274.9 million. If we realize losses in our
cemetery perpetual care trusts and the fair market value of the
trust assets is less than the aggregate amounts required to be
contributed to the trust, some states may require us to make
cash deposits to the trust to cover the net realized loss or may
require us to stop withdrawing earnings until future earnings
cover the net realized loss.
In those states where we have withdrawn realized net capital
gains in the past, regulators may seek replenishment of the
realized net capital losses either by requiring a cash deposit
to the trust or by prohibiting or restricting withdrawals of
future earnings until they cover the loss. As of April 30,
2011, $12.6 million was recorded for the estimated probable
future funding obligation. As of April 30, 2011, we had net
unrealized losses of approximately $30.3 million in the
trusts in these states. Because some of these trusts currently
have assets with a fair market value less than the aggregate
amounts required to be contributed to the trust, any additional
realized net capital losses in these trusts may result in a
corresponding funding liability and increase in cemetery costs.
In those states where realized net capital gains have not been
withdrawn, due to the different laws and our practices in those
states, we do not believe that we will be required to replenish
the realized net capital loss, and have not recorded a funding
obligation; however, it is possible that regulators may disagree
with our conclusion, and future funding obligations may exist.
As of April 30, 2011, the realized net capital loss in
these trusts was $2.3 million, and the unrealized loss was
$2.9 million.
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Our
distributions from cemetery perpetual care trusts include net
realized capital gains on investment sales in states where
permitted. If regulations in these states are changed to no
longer permit withdrawal of realized capital gains, our cemetery
perpetual care trust eligible distributable earnings may be
reduced in the future, which would reduce our earnings and cash
flows.
In states where permitted, we withdraw and recognize as revenue
net realized capital gains on investment sales in cemetery
perpetual care trusts. During fiscal year 2010, we recognized
$2.1 million of net realized capital gains in cemetery
perpetual care trusts. Currently, our portfolio mix in these
states is more heavily weighted to investments that potentially
generate capital gains, such as equities. In states where we do
not withdraw capital gains, our portfolio mix is more heavily
weighted to fixed income type securities. We are currently
transitioning all cemetery perpetual care trusts to a more
diversified asset allocation that emphasizes higher levels of
current income while preserving capital. If states where capital
gains are currently permitted to be withdrawn make changes in
legislation or regulations to not allow capital gains to be
withdrawn in the future, our future revenues and cash flow may
be reduced from historical levels until we are able to replace
some or all of the investments that potentially generate capital
gains with ones that generate more ordinary income such as fixed
income securities. Given current economic conditions and market
values, we may not be able to make that shift quickly without
triggering capital losses that could require additional funding
obligations.
Reduced
market values of preneed funeral and cemetery merchandise and
services trusts and cemetery perpetual care trusts will also
reduce our trust management fees.
The fees that our subsidiary, ITI, collects for managing the
trusts are based on the fair market value of the trusts as
determined by quoted market prices. Thus as market values
decline, the earnings ITI collects and the cash we withdraw for
managing the trusts is also reduced. To the extent market values
do not improve, we will earn less in ITI fees than we have
historically earned. During fiscal years 2010, 2009 and 2008,
ITI trust management fees collected were approximately
$9.4 million, $8.0 million and $10.0 million,
respectively.
Our
trust portfolio is invested in various sectors, some of which
may be more susceptible to additional adverse impact from the
current economic environment.
As of April 30, 2011, approximately 17% of the individual
issuer investments of our preneed funeral and cemetery
merchandise and services trust portfolios and 21% of the
individual issuer investments of our cemetery perpetual care
trust portfolios are invested in the financials sector. For the
preneed funeral and cemetery merchandise and services trust
portfolio individual issuer financial sector investments,
approximately 64% was invested in preferred stock, 19% in
fixed-income securities and 17% in common stock investments. For
the cemetery perpetual care trust portfolio individual issuer
financial sector investments, approximately 60% was invested in
preferred stock, 32% in fixed-income securities and 8% in common
stock investments. The current economic environment may result
in greater declines to the fair market value of our investments
in this and other sectors as compared to the performance of our
overall trust portfolio
and/or
market benchmarks, including the S&P 500 Index. Each sector
has particular risks associated with it, and depending on our
asset allocation, sector mix, company-specific information and
future economic events, our portfolio could be at risk for
further decline.
A weak
economy could decrease preneed sales. A reduction in
discretionary spending could also decrease amounts at-need
customers are willing to pay, and could cause third-party
insurance providers that fund our insurance-funded preneed
funeral contracts to experience financial
difficulties.
A weak economy that causes customers to reduce discretionary
spending could cause, and we believe has caused, a decline in
preneed sales, and could also decrease the amounts at-need
customers are willing to pay. Declines in preneed cemetery
property sales and average revenue per at-need event would
reduce current revenue. Declines in preneed funeral and cemetery
service and merchandise sales would reduce our backlog and could
reduce our future revenues and market share.
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A weak economy could also impact our customers ability to
pay, causing increased delinquencies, increased bad debt and
decreased finance charge revenue which would reduce future
earnings and cash flow. A weakened economy could also increase
costs related to sales force turnover and commissions we are
unable to recoup as contract cancellation rates increase. If a
contract is cancelled before collecting a specified amount, the
related commission is charged back to the sales counselor. If
the sales counselor is no longer employed by us when the
contract is cancelled, we are often unable to recoup that
commission.
Some of the preneed funeral contracts we sell are funded by life
insurance or annuity contracts issued by third-party insurers.
The net amount of these contracts that have not been fulfilled
as of April 30, 2011 was $537.6 million. These
contracts are not reflected in our consolidated balance sheet,
but we include them when we discuss our anticipated
backlog or anticipated future revenue from preneed
funeral sales. Approximately 70% of these contracts have been
funded by Forethought Life Insurance Company. If Forethought or
other insurance companies that have issued policies to our
customers experience financial difficulties, our potential
future revenue associated with these contracts, and commissions
we would receive from selling these types of contracts in the
future, could be at risk.
Continued
economic weakness and financial and stock market declines could
reduce future potential earnings and cash flows and could result
in future goodwill impairments.
As of April 30, 2011, goodwill amounted to
$247.0 million, consisting of $198.3 million in the
funeral segment and $48.7 million in the cemetery segment.
Our cemetery segment tends to be more sensitive to goodwill
impairments because it has a heavier reliance on preneed sales
which are impacted by changes in consumer sentiment and customer
discretionary income. If current economic conditions worsen,
causing decreased revenues and increased costs, or if the
current economic conditions result in additional companies in
which the trust portfolio is invested in filing for bankruptcy,
we may have a triggering event which could result in further
goodwill impairments.
Our
same-store funeral call volumes have not increased for a number
of years due to many factors, such as the number of deaths and
competition in our markets, our ability to identify changing
consumer preferences and various other factors, some of which
are beyond our control.
Our same-store funeral call volumes have not increased for a
number of years due to many factors described elsewhere in this
report, including the number of deaths and intense competition
in our markets, and our ability to identify changing consumer
preferences. From fiscal years 2006 to 2010, we experienced
same-store funeral call volume changes of (0.2)%, (2.2)%, 0%,
(5.9)% and (2.1)%, respectively. We can give no assurance that
we will be able to increase same-store funeral call volumes over
the long term. Declines in same-store funeral calls can
adversely affect revenues and profits if not offset by increases
in average revenue per call or alternative sources of revenue.
Price
competition could reduce market share or cause us to reduce
prices to retain or recapture market share, either of which
could reduce revenues and margins.
Our funeral home and cemetery operations generally face intense
competition in local markets that typically are served by
numerous funeral homes and cemetery firms. We have historically
experienced price competition primarily from independent funeral
home and cemetery operators, and from monument dealers, casket
retailers, low-cost funeral providers and other non-traditional
providers of services or products including, in recent years,
Internet providers. From time to time, this price competition
has caused us to lose market share in some markets. In other
markets, we have had to reduce prices, thereby reducing profit
margins in order to retain or recapture market share. Increased
price competition in the future could further reduce revenues,
profit margins and backlog and potentially impact our annual
goodwill impairment analysis.
Discount retailers sell caskets at prices substantially lower
than prices we offer. Consumers also can now buy caskets in
funeral supply stores and directly from manufacturers, as well
as over the Internet. Competition from these sources could
reduce our casket sales, which could adversely affect funeral
revenues and margins.
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Increased
advertising and better marketing by competitors, as well as
increased offering of products or services over the Internet,
could cause us to lose market share and revenues or cause us to
incur increased costs or to decrease prices in order to retain
or recapture market share.
In recent years, the marketing of preneed funeral services
through television, radio and print advertising, direct mailings
and personal sales calls has increased. Extensive advertising or
effective marketing by competitors in local markets could cause
us to lose market share and revenues or cause us to incur
increased marketing costs. In addition, competitors may change
the types or mix of products or services offered. These changes
may attract customers, causing us to lose market share and
revenue or to incur costs necessary to respond to competition by
varying the types or mix of products or services offered by us.
Also, increased use of the Internet by customers to research
and/or
purchase products and services could cause us to lose market
share to competitors offering lower prices or that sell products
or services over the Internet.
If we
are not able to respond effectively to changing consumer
preferences, our market share, revenues and profitability could
decrease.
Future market share, revenues and profits will depend in part on
our ability to anticipate, identify and respond to changing
consumer preferences. We may not correctly anticipate or
identify trends in consumer preferences, or we may identify them
later than our competitors do. In addition, any strategies we
may implement to address these trends may prove incorrect or
ineffective.
Increased
preneed sales may have a negative impact on current cash flow
and earnings.
Preneed sales of cemetery property and funeral and cemetery
products and services, which are generally paid on an
installment basis, are generally cash flow negative initially,
primarily due to the commissions and other costs to acquire the
sale and the fact that a portion of the sales proceeds is
required to be placed into trusts or escrow accounts. We will
continue to invest a significant portion of cash flow in preneed
acquisition costs, which reduces cash flow available for other
activities, and, to the extent preneed activities are increased,
cash flow would be further reduced, and our ability to service
debt could be adversely affected.
Increased
costs may have a negative impact on earnings and cash
flows.
We may not be successful in maintaining our margins and may
incur additional costs. For example, in the past, we have
experienced increased property and casualty insurance costs
primarily as a result of hurricanes and natural disasters. On
March 23, 2010, the Patient Protection and Affordable Care
Act became law, and one week later, the Health Care and
Education Reconciliation Act of 2010 became effective, together
enacting comprehensive health care reform in the United States.
The legislation is likely to increase our health care costs.
Many provisions of the law that could impact our business will
not become effective until 2014, or later, and require
implementation through regulations that have not yet been
promulgated. Accordingly, the costs and other effects of the
legislation, which may include the cost of compliance and
potentially increased costs of providing for medical insurance
for our employees, cannot be determined with certainty at this
time. We incurred additional costs in fiscal year 2010 in
conjunction with improving our business systems. In addition,
the costs of certain commodities, particularly copper, which
represents a large component of our bronze markers sold in our
cemetery business, fuel and energy costs have increased. Some of
the costs impacting our business are largely beyond our control.
To the extent that we are unable to pass these cost increases on
to our customers, they will have a negative impact on our
earnings and cash flows.
Our
business is subject to the risk of losses due to hurricanes and
other natural disasters.
Our Company is headquartered in the New Orleans metropolitan
area, and approximately 75 of our funeral homes and 45 of our
cemeteries, along with our mausoleum construction and sales
business, ACME Mausoleum, are located near the Gulf Coast in
southern Texas, Louisiana, Mississippi, Alabama and Florida,
along the eastern coasts of Florida, and North and South
Carolina and in Puerto Rico. These areas are periodically
threatened by hurricanes, which can damage our properties,
interrupt our business and disrupt the lives of our customers
and employees. We are also at risk for tornadoes at our
locations in the midwestern
20
United States and for earthquakes at our locations along the
west coast of the United States. In fiscal year 2005, our
business was adversely affected by Hurricanes Katrina, Wilma and
Rita. In fiscal year 2008, Hurricane Ike impacted our Houston
area operations. Our insurance may not protect us from all
material losses or expenses incurred in connection with a
natural disaster.
We
have an estimate included in our deferred revenue liability of
approximately $3 million, and we may become aware of new
information that would require us to increase that estimated
liability.
From time to time, unidentified contracts are presented to us
primarily relating to contracts sold prior to the time we
acquired certain businesses. In addition, from time to time, we
have identified in our backlog, certain contracts in which
services or merchandise have already been delivered. Using
historical trends, and statistical analyses, we have recorded an
estimated liability for these items of approximately
$3.0 million as of April 30, 2011. To the extent we
are made aware of contracts that exceed the estimated liability
recorded, or cause us to conclude that we should increase the
estimated liability recorded, we would have to record a charge
to earnings for the estimated cost to deliver the products and
services.
Our
Chairman may have a significant and disproportionate influence
on the outcome of election of directors and other matters
presented for a vote of shareholders and this control may be
exercised in a manner that may conflict with the interests of
other shareholders.
As of February 15, 2011, our Chairman, Frank B.
Stewart, Jr., beneficially owned 7,216,675 shares (or
approximately 8.2%) of our outstanding Class A common stock
and all of the 3,555,020 outstanding shares of our Class B
common stock. There is no established public trading market for
our Class B common stock. Because each share of
Class B common stock is entitled to 10 votes on all matters
presented for a vote by our shareholders, Mr. Stewart
controls approximately 34.7% of our total voting power, while
holding approximately 11.8% of our outstanding equity.
Accordingly, Mr. Stewart may have a significant and
disproportionate influence over the election of directors and
other matters requiring the affirmative vote of our shareholders
and this control may be exercised in a manner that may conflict
with the interest of other shareholders. Additionally, because
Louisiana law and our articles of incorporation require the
affirmative vote of two-thirds of the voting power present to
approve certain major transactions such as mergers and any
amendments to our articles of incorporation, Mr. Stewart
may have the ability to prevent the consummation of such
actions, even if they are recommended by our Board of Directors
and favored by a substantial majority of our shareholders.
Increases
in interest rates would increase interest costs on any
variable-rate long-term debt and could have a material adverse
effect on our net income and earnings per share.
We have no variable-rate long-term debt agreements besides our
senior secured revolving credit facility. Although we have no
amounts currently drawn under the credit facility, any amounts
borrowed in the future are subject to variable interest rates.
Any significant increase in interest rates could increase our
interest costs on our variable-rate long-term debt or
indebtedness incurred in the future, which could decrease our
net income and earnings per share materially.
We may
not be able to consummate significant acquisitions of or
investments in death care or related businesses
successfully.
Although we have not made any significant acquisitions in recent
years, we may in the future. Also, our New Invention
initiative calls for us to seek to generate new tangential
growth opportunities not tied to the growth of our base
business. Any such acquisitions and investments have risks. We
may fail to identify suitable candidates, and even if we do, we
may not be able to successfully complete the transaction or
integrate the new business into our existing business. We may
not be able to find businesses for sale at prices we are willing
to pay. Acquisition activity, if any, will also depend on our
ability to enter new markets. Due in part to our lack of
experience operating or investing in new areas and to the
presence of competitors who have been in certain markets longer
than we have, such acquisitions or investments may be more
difficult or expensive than we anticipate.
21
The
application of generally accepted accounting principles to our
business is complex, and we have had significant changes in the
application of generally accepted accounting principles to our
business. No assurances can be given that we will not face
similar issues in the future.
Our industry is unusual because we often sell products and
services many years prior to the time they are required to be
delivered, and we are required by varying state laws to hold
customer funds related to these sales in trust until the
products and services are ultimately delivered. The accounting
for these unusual features is complex, and in prior years there
have been periodic changes in the application of generally
accepted accounting principles to our business. Some of these
changes have made it difficult to compare results from one
period to the next. Such changes have also increased our
administrative costs. We can give no assurances that we will not
face similar issues in the future.
Risks
Related to Our Industry
Declines
in the number of deaths in our markets can cause a decrease in
revenues. Changes in the number of deaths are not predictable
from market to market or over the short term, and reliable
statistics on deaths in particular markets can be difficult to
obtain.
Declines in the number of deaths could cause at-need sales of
funeral and cemetery services, property and merchandise to
decline and could cause a decline in the number of preneed sales
being delivered, both of which could decrease revenues. Although
the United States Bureau of the Census estimates that the number
of deaths in the United States will increase by approximately 1%
per year from 2008 to 2020, longer life spans could reduce the
rate of deaths. Changes in the number of deaths can vary among
local markets and from quarter to quarter, and variations in the
number of deaths in our markets or from quarter to quarter are
not predictable. However, generally the number of deaths
fluctuates with the seasons with more deaths occurring during
the winter months primarily resulting from pneumonia and
influenza. These variations can cause revenues to fluctuate.
Our comparisons of the change in the number of families served
to the change in the number of deaths reported by the Centers
for Disease Control and Prevention (CDC) from time
to time may not necessarily be meaningful. The CDC receives
weekly mortality reports from 122 cities and metropolitan
areas in the United States within two to three weeks from
the date of death and reports the total number of deaths
occurring in these areas each week based on the reports received
from state health departments. The comparability of our funeral
calls to the CDC data is limited, as reports from the state
health departments are often delayed, and the 122 cities
reporting to the CDC are not necessarily comparable with the
markets in which we operate.
We
have experienced an increase in the proportion of lower-priced,
non-traditional funeral services and direct cremations, which we
believe is part of the continuing national trend toward
increased cremation.
Our traditional cemetery and funeral service operations face
competition from the increasing number of cremations in the
United States. Industry studies indicate that the percentage of
cremations has steadily increased and that cremations will
represent approximately 46% of deaths in the United States by
the year 2015, compared to 36% in 2008. In fiscal years 2008,
2009 and 2010, 40%, 41% and 42%, respectively, of the funeral
services we performed in our operations were cremations, and
56%, 56% and 64% of those were direct cremations, respectively.
A full service cremation, which includes a funeral service,
merchandise and memorialization of the remains in a mausoleum or
columbarium niche or a burial of the remains, can result in
funeral and cemetery revenue and profit margins similar to those
of traditional funeral services and burials, although the
cemetery property sale revenue would generally be lower. In
contrast, a basic or direct cremation, with no funeral service
or casket and no memorialization of the remains, produces no
revenues for cemetery operations and lower revenues and profit
margins for funeral operations when delivered through a
traditional funeral home. During fiscal years 2007 through 2010,
we experienced a reduction in the proportion of full service
traditional funeral services and cremations and an increase in
the proportion of lower-priced, non-traditional funeral services
and direct cremations. A continuation of this trend would
adversely affect the revenues and gross profits of our funeral
and cemetery businesses. To address this trend, we have been
22
intensifying our efforts to market full service cremations and
have begun a program of enhancing our cremation memorialization
offerings. In addition, the increasing trend towards cremations
in the United States could cause us to lose market share to
firms specializing in cremations.
Because
the funeral and cemetery businesses are high fixed-cost
businesses, positive or negative changes in revenue can have a
disproportionately large effect on cash flow and
profits.
Funeral homes and cemetery businesses must incur many of the
costs of operating and maintaining facilities, land and
equipment regardless of the level of sales in any given period.
For example, we must pay salaries, utilities, property taxes and
maintenance costs on funeral homes and maintain the grounds of
cemeteries regardless of the number of funeral services or
interments performed. Because we cannot decrease these costs
significantly or rapidly when we experience declines in sales,
declines in sales can cause margins, profits and cash flow to
decline at a greater rate than the decline in revenues.
Changes
or increases in, or failure to comply with, regulations
applicable to our business could increase costs or decrease cash
flows.
The death care industry is subject to extensive regulation and
licensing requirements under federal, state and local laws. For
example, the funeral home industry is regulated by the Federal
Trade Commission (the FTC) under the FTCs
Trade Regulation Rule on Funeral Industry Practices,
16 CFR Part 453 (the Funeral Rule), which
defines certain acts or practices as unfair or deceptive and
contains certain requirements to prevent these acts or
practices, and requires funeral homes to take actions designed
to protect consumers. State laws impose licensing requirements
and regulate preneed sales including our preneed trust
activities. Embalming facilities are subject to stringent
environmental and health regulations. Compliance with these
regulations is burdensome, and we are always at risk of not
complying with the regulations.
In addition, from time to time, governments and agencies propose
to amend or add regulations, which could increase costs or
decrease cash flows. For example, federal, state, Puerto Rican
and other regulatory agencies have considered and may enact
additional legislation or regulations that could affect the
death care industry. Several jurisdictions and regulatory
agencies have considered or are considering regulations that
could require more liberal refund and cancellation policies for
preneed sales of products and services, limit or eliminate our
ability to use surety bonding, impose or increase trust
requirements and prohibit the common ownership of funeral homes
and cemeteries in the same market. If adopted by the regulatory
authorities of the jurisdictions in which we operate, these and
other possible proposals could have a material adverse effect on
us, our financial condition, our results of operations, our cash
flows and our future prospects. On September 29, 2009,
Representative Bobby L. Rush (D.-Ill.) introduced H.R. 3655 to
direct the FTC to draft regulations to extend the Funeral Rule
to cemeteries, crematories and sellers of caskets and other
funeral merchandise and to require certain disclosures with
respect to preneed sales of funeral services or funeral goods.
The bill was reported favorably by the Energy and Commerce
Committee on July 21, 2010, and an estimate of its cost was
submitted by the Congressional Budget Office on
September 8, 2010. The full House of Representatives did
not vote on this bill during the 2010 congressional session, and
the bill was reintroduced as H.R. 900 by Rep. Rush on
March 3, 2011. The Energy and Commerce Committee referred
the bill to the Subcommittee on Commerce,
Manufacturing & Trade on March 11, 2011. The
subcommittee has not yet issued a report regarding the proposed
bill, nor has the full House of Representatives voted on it.
USE OF
PROCEEDS
This exchange offer is intended to satisfy our obligations under
the registration rights agreement. We will not receive any cash
proceeds from the issuance of the Exchange Notes. In
consideration for issuing the Exchange Notes contemplated in
this prospectus, we will receive Outstanding Notes in like
principal amount, the form and terms of which are the same as
the form and terms of the Exchange Notes, except as otherwise
described in this prospectus. The Outstanding Notes surrendered
in exchange for the Exchange Notes will be retired and
cancelled. Accordingly, the issuance of the Exchange Notes will
not result in any increase in our indebtedness.
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THE
EXCHANGE OFFER
Purpose
and Effect of the Exchange Offer
At the closing of the offering of the Outstanding Notes, we
entered into a registration rights agreement with the initial
purchasers, for the benefit of the holders, pursuant to which we
and our subsidiary guarantors (the Guarantors)
agreed, at our cost, to:
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file a registration statement (the exchange offer
registration statement) with the SEC with respect to a
registered exchange offer (the exchange offer) to
exchange the Outstanding Notes for Exchange Notes guaranteed by
the Guarantors having terms identical in all material respects
to the Outstanding Notes (except that the Exchange Notes will
not contain terms with respect to transfer restrictions or
Additional Interest (as defined below));
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use our reasonable best efforts to cause the exchange offer
registration statement to be declared effective under the
Securities Act; and
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use our reasonable best efforts to consummate the exchange offer
within 210 days after April 18, 2011 (the Issue
Date).
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After the effectiveness of the exchange offer registration
statement, we will offer the Exchange Notes in exchange for
surrender of the Outstanding Notes. We will keep the registered
exchange offer open for not less than 20 Business Days (or
longer if required by applicable law) after the date notice of
the exchange offer is given to the holders. For each Outstanding
Note surrendered to us pursuant to the exchange offer, the
holder of such note will receive an Exchange Note having a
principal amount equal to that of the surrendered Outstanding
Note. Under existing SEC interpretations, the Exchange Notes and
the related guarantees generally will be freely transferable by
holders other than affiliates of ours or any Guarantor after the
registered exchange offer without further registration under the
Securities Act. See Plan of Distribution.
Each holder that wishes to exchange its Outstanding Notes for
Exchange Notes will be required to represent that, among other
things:
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any Exchange Notes to be received by it will be acquired in the
ordinary course of its business,
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it is not engaged in and does not intend to engage in, and has
no arrangement or understanding with any person to participate
in, a distribution (within the meaning of the Securities Act) of
the Exchange Notes in violation of the provisions of the
Securities Act,
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it is not an affiliate of ours or the Guarantors, as
defined in Rule 405 under the Securities Act, or if it is
an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the
extent applicable,
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if such holder is a broker-dealer, it did not acquire
Outstanding Notes directly from us, and
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if such holder is a broker-dealer (a participating
broker-dealer) that will receive Exchange Notes for its
own account in exchange for Outstanding Notes acquired as a
result of market-making or other trading activities, it will
deliver a prospectus in connection with any resale of such
Exchange Notes.
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Under similar SEC interpretations, participating broker-dealers
may fulfill their prospectus delivery requirements with respect
to Exchange Notes (other than a resale of an unsold allotment
from the original sale of the notes) with the prospectus
contained in the exchange offer registration statement. Under
the registration rights agreement, we and the Guarantors are
required to use our best efforts to keep the exchange offer
registration statement continuously effective for a period of up
to 180 days after the date on which such statement is
declared effective, or such shorter period as may be necessary
to satisfy such prospectus delivery requirements.
In the event that:
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any changes in law or the applicable interpretations of the
staff of the SEC do not permit us and the Guarantors to effect
such exchange offer,
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for any other reason the exchange offer is not consummated
within 210 days of the Issue Date,
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any holder is prohibited by law or the applicable
interpretations of the staff of the SEC from participating in
the exchange offer or does not receive Exchange Notes on the
date of the exchange that may be sold without restriction under
state and federal securities laws (other than due solely to the
status of such holder as an affiliate of ours or any
Guarantor), or
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the initial purchaser so requests with respect to Outstanding
Notes that have, or that are reasonably likely to be determined
to have, the status of unsold allotments in an initial
distribution,
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then we and the Guarantors will, at our cost and subject to the
terms of the registration rights agreement, (a) use our
reasonable best efforts to file a registration statement (the
shelf registration statement) covering resales of
the Outstanding Notes or the Exchange Notes, as the case may be,
from time to time, (b) use our reasonable best efforts to
cause the shelf registration statement to be declared effective
under the Securities Act on or prior to the 210th day after
the Issue Date and (c) use our reasonable best efforts to
keep the shelf registration statement continuously effective
under the Securities Act for the period ending on the date which
is one year from the Issue Date or such shorter period ending
when all Outstanding Notes
and/or
Exchange Notes covered by the shelf registration statement have
been sold in the manner set forth and as contemplated in the
shelf registration statement. We will, in the event a shelf
registration statement is filed, among other things, provide to
each holder for which such shelf registration statement was
filed copies of the prospectus which is a part of the shelf
registration statement, notify each such holder when the shelf
registration statement has become effective and take certain
other actions as are required to permit unrestricted resales of
the Outstanding Notes or the Exchange Notes, as the case may be.
A holder selling Outstanding Notes or Exchange Notes pursuant to
the shelf registration statement generally would be required to
be named as a selling security holder in the related prospectus
and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities
Act in connection with such sales and will be bound by the
provisions of the registration rights agreement which are
applicable to such holder (including certain indemnification
obligations). In addition, each holder of the Outstanding Notes
or Exchange Notes to be registered under the shelf registration
statement will be required to deliver information to be used in
connection with the shelf registration statement within the time
period set forth in the registration rights agreement in order
to have such holders Outstanding Notes or Exchange Notes
included in the shelf registration statement and to benefit from
the provisions regarding Additional Interest set forth in the
following paragraph.
If:
(i) the exchange offer is not consummated or a shelf
registration statement, if required, is not declared effective,
in each case, on or prior to the 210th day following the
Issue Date, or
(ii) the shelf registration statement is declared effective
but thereafter ceases to be effective or usable, except if the
shelf registration ceases to be effective or usable as
specifically permitted under the registration rights agreement,
(each such event referred to in clauses (i) and (ii) a
registration default), Additional Interest in the
form of additional cash interest (Additional
Interest) will accrue on the affected notes following the
registration default and up to but excluding the date on which
the registration default is cured. The rate of Additional
Interest will be 0.25% per annum for the first
90-day
period immediately following the occurrence of a registration
default, increasing by an additional 0.25% per annum with
respect to each subsequent
90-day
period up to a maximum amount of Additional Interest of 1.00%
per annum.
This summary of certain provisions of the registration rights
agreement does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions
of the registration rights agreement, a copy of which we will
provide upon receipt of a request delivered to our address set
forth elsewhere in this prospectus.
25
Terms of
the Exchange Offer
Upon the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal, a copy of which
accompanies this prospectus, we will accept any and all
Outstanding Notes validly tendered and not withdrawn prior to
the Expiration Date. We will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of
Outstanding Notes accepted in the exchange offer. Holders may
tender some or all of their Outstanding Notes pursuant to the
exchange offer. However, Outstanding Notes may be tendered only
in minimum denominations of $2,000 and integral multiples of
$1,000 in excess thereof.
The form and terms of the Exchange Notes are the same as the
form and terms of the Outstanding Notes, except that
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the Exchange Notes will have been registered under the
Securities Act and will not bear legends restricting their
transfer pursuant to the Securities Act, and
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except as otherwise described above, holders of the Exchange
Notes will not be entitled to the rights of holders of
Outstanding Notes under the registration rights agreement.
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The Exchange Notes will evidence the same debt as the
Outstanding Notes which they replace, and will be issued under,
and be entitled to the benefits of, the indenture which governs
all of the notes.
Solely for reasons of administration and for no other purpose,
we have fixed the close of business on June 17, 2011 as the
record date for the exchange offer for purposes of determining
the persons to whom this prospectus and the letter of
transmittal will be mailed initially. Only a registered holder
of Outstanding Notes or such holders legal representative
or attorney-in-fact as reflected on the records of the trustee
under the indenture may participate in the exchange offer. There
will be no fixed record date for determining registered holders
of the Outstanding Notes entitled to participate in the exchange
offer.
Holders of the Outstanding Notes do not have any appraisal or
dissenters rights under Louisiana law or the indenture in
connection with the exchange offer. We intend to conduct the
exchange offer in accordance with the applicable requirements of
the Exchange Act and the rules and regulations of the SEC
thereunder.
We shall be deemed to have accepted validly tendered Outstanding
Notes when, as and if we have given oral or written notice
thereof to the exchange agent. The exchange agent will act as
agent for the tendering holders of the Outstanding Notes for the
purposes of receiving the Exchange Notes. The Exchange Notes
delivered pursuant to the exchange offer will be issued on the
earliest practicable date following our acceptance for exchange
of Outstanding Notes.
Holders who tender Outstanding Notes in the exchange offer will
not be required to pay brokerage commissions or fees or, subject
to the instructions in the letter of transmittal, transfer taxes
with respect to the exchange of the Outstanding Notes pursuant
to the exchange offer. We will pay all charges and expenses,
other than certain applicable taxes, in connection with the
exchange offer. See Fees and Expenses.
Expiration
Date; Extensions; Amendments
The term Expiration Date with respect to the
exchange offer, shall mean 5:00 p.m., New York City time,
on July 18, 2011, unless we, in our sole discretion, extend
the exchange offer, in which case the term Expiration
Date shall mean the latest date and time to which the
exchange offer is extended. We do not currently intend to extend
the expiration date. The Exchange Notes issued pursuant to this
exchange offer will be delivered promptly following the
expiration date to the holders who validly tender their
Outstanding Notes.
In order to extend the exchange offer, we will notify the
exchange agent of any extension by oral or written notice and
will make a public announcement thereof, each prior to
9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date of the exchange
offer.
We reserve the right, in our sole discretion,
(1) to delay accepting any Outstanding Notes,
(2) to extend the exchange offer,
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(3) if any of the conditions set forth below under
Conditions to the exchange offer have
not been satisfied, to terminate the exchange offer, or
(4) to amend the terms of the exchange offer in any manner.
We may effect any such delay, extension or termination by giving
oral or written notice thereof to the exchange agent.
Except as specified in the second paragraph under this heading,
any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by a
notice thereof. If the exchange offer is amended in a manner
determined by us to constitute a material change, we will
promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders of
the Outstanding Notes. The exchange offer will then be extended
for a period of five to ten business days, as required by law,
depending upon the significance of the amendment and the manner
of disclosure to the registered holders, if the exchange offer
would otherwise expire during such five to ten business day
period.
Procedures
for Tendering Outstanding Notes
Tenders
of Outstanding Notes
The tender by a holder of Outstanding Notes pursuant to the
procedures set forth below will constitute the tendering
holders acceptance of the terms and conditions of the
exchange offer. Our acceptance for exchange of Outstanding Notes
tendered pursuant to the procedures described below will
constitute a binding agreement between such tendering holder and
us in accordance with the terms and subject to the conditions of
the exchange offer. Only holders are authorized to tender their
Outstanding Notes. The procedures by which Outstanding Notes may
be tendered by beneficial owners that are not holders will
depend upon the manner in which the Outstanding Notes are held.
DTC has authorized DTC participants that are beneficial owners
of Outstanding Notes through DTC to tender their Outstanding
Notes as if they were holders. To effect a tender, DTC
participants should transmit their acceptance to DTC through the
DTC Automated Tender Offer Program (ATOP), for which
the transaction will be eligible, and follow the procedures for
book-entry transfer, set forth below under
Book-Entry delivery procedures.
Tender
of Outstanding Notes held through a custodian
To tender effectively Outstanding Notes that are held of record
by a custodian bank, depository, broker, trust company or other
nominee, the beneficial owner thereof must instruct such holder
to tender the Outstanding Notes on the beneficial owners
behalf. A letter of instructions from the record owner to the
beneficial owner may be included in the materials provided along
with this prospectus which may be used by the beneficial owner
in this process to instruct the registered holder of such
owners Outstanding Notes to effect the tender.
Tender
of Outstanding Notes held through DTC
To tender effectively Outstanding Notes that are held through
DTC, DTC participants should transmit their acceptance through
ATOP, for which the transaction will be eligible, and DTC will
then edit and verify the acceptance and send an Agents
Message to the exchange agent for its acceptance.
Delivery of tendering Outstanding Notes held through DTC must be
made to the exchange agent pursuant to the book-entry delivery
procedures set forth below.
Except as provided below, unless the Outstanding Notes being
tendered are deposited with the exchange agent on or prior to
the Expiration Date (accompanied by a properly completed and
duly executed letter of transmittal or a properly transmitted
Agents Message), we may, at our option, reject such
tender. Exchange of Exchange Notes for Outstanding Notes will be
made only against deposit of the tendered Outstanding Notes and
delivery of all other required documents.
27
Book-entry
delivery procedures
The exchange agent will establish accounts with respect to the
Outstanding Notes at DTC for purposes of the exchange offer
within two business days after the date of this prospectus, and
any financial institution that is a participant in DTC may make
book-entry delivery of the Outstanding Notes by causing DTC to
transfer such Outstanding Notes into the exchange agents
account in accordance with DTCs procedures for such
transfer. However, although delivery of Outstanding Notes may be
effected through book-entry at DTC, the letter of transmittal
(or facsimile thereof), with any required signature guarantees
or an Agents Message in connection with a book-entry
transfer, and any other required documents, must, in any case,
be transmitted to and received by the exchange agent at one or
more of its addresses set forth in this prospectus on or prior
to the Expiration Date. Delivery of documents to DTC does not
constitute delivery to the exchange agent. The confirmation of a
book-entry transfer into the exchange agents account at
DTC as described above is referred to herein as a
Book-Entry Confirmation.
The term Agents Message means a message
transmitted by DTC to, and received by, the exchange agent and
forming a part of the Book-Entry Confirmation, which states that
DTC has received an express acknowledgment from each participant
in DTC tendering the Outstanding Notes and that such participant
has received the letter of transmittal and agrees to be bound by
the terms of the letter of transmittal and we may enforce such
agreement against such participant.
Notwithstanding any other provision hereof, delivery of Exchange
Notes by the exchange agent for Outstanding Notes tendered and
accepted for exchange pursuant to the exchange offer will, in
all cases, be made only after timely receipt by the exchange
agent of such Outstanding Notes (or Book-Entry Confirmation of
the transfer of such Outstanding Notes into the exchange
agents account at DTC as described above), and the letter
of transmittal (or facsimile thereof) with respect to such
Outstanding Notes, properly completed and duly executed, with
any required signature guarantees and any other documents
required by the letter of transmittal, or a properly transmitted
Agents Message.
Determination
of validity
All questions as to the validity, form, eligibility (including
time of receipt), acceptance and withdrawal of tendered
Outstanding Notes will be determined by us in our sole
discretion, which determination will be final and binding. We
reserve the absolute right to reject any and all Outstanding
Notes not properly tendered or any Outstanding Notes our
acceptance of which, in the opinion of our counsel, would be
unlawful.
We also reserve the right to waive any defects, irregularities
or conditions of tender as to particular Outstanding Notes. The
interpretation of the terms and conditions of our exchange offer
(including the instructions in the letter of transmittal) by us
will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of
Outstanding Notes must be cured within such time as we shall
determine.
Although we intend to notify holders of defects or
irregularities with respect to tenders of Outstanding Notes
through the exchange agent, neither we, the exchange agent nor
any other person is under any duty to give such notice, nor
shall they incur any liability for failure to give such
notification. Tenders of Outstanding Notes will not be deemed to
have been made until such defects or irregularities have been
cured or waived.
Any Outstanding Notes received by the exchange agent that are
not validly tendered and as to which the defects or
irregularities have not been cured or waived, or if Outstanding
Notes are submitted in a principal amount greater than the
principal amount of Outstanding Notes being tendered by such
tendering holder, such unaccepted or non-exchanged Outstanding
Notes will be credited to the appropriate account maintained by
the appropriate book-entry transfer facility.
By tendering, each registered holder will represent to us that,
among other things,
(a) the Exchange Notes to be acquired by the holder and any
beneficial owner(s) of the Outstanding Notes in connection with
the exchange offer are being acquired by the holder and any
beneficial owner(s) in the ordinary course of business of the
holder and any beneficial owner(s),
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(b) the holder and each beneficial owner are not
participating, do not intend to participate, and have no
arrangement or understanding with any person to participate, in
a distribution of the Exchange Notes,
(c) the holder and each beneficial owner acknowledge and
agree that (x) any person participating in the exchange
offer for the purpose of distributing the Exchange Notes must
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a
secondary resale transaction with respect to the Exchange Notes
acquired by such person and cannot rely on the position of the
Staff of the SEC set forth in no-action letters that are
discussed herein under Resale of the Exchange
Notes; Plan of distribution, and (y) any
broker-dealer that receives Exchange Notes for its own account
in exchange for Outstanding Notes pursuant to the exchange offer
must delivery a prospectus in connection with any resale of such
Exchange Notes, but by so acknowledging, the holder shall not be
deemed to admit that, by delivering a prospectus, it is an
underwriter within the meaning of the Securities Act,
(d) neither the holder nor any beneficial owner is an
affiliate, as defined under Rule 405 of the
Securities Act, of ours, and
(e) the holder and each beneficial owner understands, that
a secondary resale transaction described in clause (c)
above should be covered by an effective registration statement
containing the selling securityholder information required by
Item 507 of
Regulation S-K
of the SEC.
Each broker-dealer that receives Exchange Notes for its own
account in exchange for Outstanding Notes, where such
Outstanding Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See
Resale of the Exchange Notes; Plan of
distribution.
Withdrawal
Of Tenders
Except as otherwise provided herein, tenders of Outstanding
Notes pursuant to the exchange offer may be withdrawn, unless
accepted for exchange as provided in the exchange offer, at any
time prior to the Expiration Date of the exchange offer.
Any notice of withdrawal must specify the name and number of the
account at the appropriate book-entry transfer facility to be
credited with such withdrawn Outstanding Notes and must
otherwise comply with such book-entry transfer facilitys
procedures.
If the Outstanding Notes to be withdrawn have been delivered or
otherwise identified to the exchange agent, a signed notice of
withdrawal meeting the requirements discussed above is effective
immediately upon written or facsimile notice of withdrawal even
if physical release is not yet effected. A withdrawal of
Outstanding Notes can only be accomplished in accordance with
these procedures.
All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined
by us in our sole discretion, which determination shall be final
and binding on all parties. No withdrawal of Outstanding Notes
will be deemed to have been properly made until all defects or
irregularities have been cured or expressly waived. Neither we,
the exchange agent nor any other person will be under any duty
to give notification of any defects or irregularities in any
notice of withdrawal or revocation, nor shall we or they incur
any liability for failure to give any such notification. Any
Outstanding Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the exchange offer and no
Exchange Notes will be issued with respect thereto unless the
Outstanding Notes so withdrawn are retendered. Properly
withdrawn Outstanding Notes may be retendered in accordance with
the procedures described above under
Procedures for tendering Outstanding
Notes at any time prior to the Expiration Date of the
exchange offer.
Any Outstanding Notes which have been tendered but which are not
accepted for exchange due to the rejection of the tender due to
uncured defects or the prior termination of the exchange offer,
or which have been validly withdrawn, will be returned to the
appropriate account in accordance with the book-entry transfer
facilitys procedures.
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Conditions
to the Exchange Offer
The exchange offer shall not be subject to any conditions, other
than that
(1) the SEC has issued an order or orders declaring the
indenture governing the notes qualified under the
Trust Indenture Act of 1939,
(2) the exchange offer, or the making of any exchange by a
holder, does not violate applicable law or any applicable
interpretation of the staff of the SEC,
(3) no action or proceeding shall have been instituted or
threatened in any court or by or before any governmental agency
with respect to the exchange offer, which, in our judgment,
might impair our ability to proceed with the exchange offer,
(4) there shall not have been adopted or enacted any law,
statute, rule or regulation which, in our judgment, would
materially impair our ability to proceed with the exchange
offer, or
(5) there shall not have occurred any material change in
the financial markets in the United States or any outbreak of
hostilities or escalation thereof or other calamity or crisis
the effect of which on the financial markets of the United
States, in our judgment, would materially impair our ability to
proceed with the exchange offer.
If we determine in our sole discretion that any of the
conditions to the exchange offer are not satisfied, we may
(1) refuse to accept any Outstanding Notes and return all
tendered Outstanding Notes to the tendering holders,
(2) extend the exchange offer and retain all Outstanding
Notes tendered prior to the Expiration Date applicable to the
exchange offer, subject, however, to the rights of holders to
withdraw such Outstanding Notes (see
Withdrawal of Tenders), or
(3) waive such unsatisfied conditions with respect to the
exchange offer and accept all validly tendered Outstanding Notes
which have not been withdrawn.
If such waiver constitutes a material change to the exchange
offer, we will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered
holders, and will extend the exchange offer for a period of five
to ten business days, depending upon the significance of the
waiver and the manner of disclosure to the registered holders,
if the exchange offer would otherwise expire during such five to
ten business day period.
Consequences
of Failure to Exchange
The Outstanding Notes that are not exchanged for Exchange Notes
pursuant to the exchange offer will remain restricted
securities. Accordingly, the Outstanding Notes may be resold
only:
(1) to us upon redemption thereof or otherwise;
(2) so long as the Outstanding Notes are eligible for
resale pursuant to Rule 144A, to a person inside the United
States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under
the Securities Act in a transaction meeting the requirements of
Rule 144A;
(3) in an offshore transaction pursuant to
Regulation S under the Securities Act;
(4) pursuant to an exemption from registration in
accordance with Rule 144, if available, under the
Securities Act;
(5) in reliance on another exemption from the registration
requirements of the Securities Act; or
(6) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States.
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Exchange
Agent
U.S. Bank National Association, the trustee under the
indenture governing the notes, has been appointed as exchange
agent for the exchange offer. Questions and requests for
assistance, requests for additional copies of this prospectus or
of the letter of transmittal and requests for other documents
should be directed to the exchange agent addressed as follows:
By Mail
or Hand:
U.S.
Bank National Association
60 Livingston Avenue
EP-MN-WS3C
St. Paul, MN
55107-3918
Attention: Specialized Finance Department
By
Facsimile:
(651) 495-8158
Confirm
by
Telephone:
1-800-934-6802
Fees and
Expenses
We will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telecopy, telephone or in
person by officers and regular employees of Stewart Enterprises,
Inc. and our affiliates.
No dealer-manager has been retained in connection with the
exchange offer and no payments will be made to brokers, dealers
or others soliciting acceptance of the exchange offer. However,
reasonable and customary fees will be paid to the exchange agent
for its services and it will be reimbursed for its reasonable
out-of-pocket
expenses in connection therewith.
Our out of pocket expenses for the exchange offer will include
fees and expenses of the exchange agent and the trustee under
the indenture, accounting and legal fees and printing costs,
among others.
We will pay all transfer taxes, if any, applicable to the
exchange of the Outstanding Notes pursuant to the exchange
offer. If, however, a transfer tax is imposed for any reason
other than the exchange of the Outstanding Notes pursuant to the
exchange offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not
submitted with the letter of transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
Accounting
Treatment
The Exchange Notes will be recorded at the carrying value of the
Outstanding Notes and no gain or loss for accounting purposes
will be recognized. The expenses of the exchange offer will be
amortized over the term of the Exchange Notes.
Resale of
the Exchange Notes
For information about resale of the Exchange Notes, see
Plan of Distribution.
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DESCRIPTION
OF OTHER INDEBTEDNESS
Senior
Secured Revolving Credit Facility
Our senior secured revolving credit facility matures
April 20, 2016 and includes a $150.0 million revolving
credit facility, a $30.0 million sublimit for the issuance
of standby letters of credit and a $10.0 million sublimit
for swingline loans. We may also request the addition of a new
tranche of term loans, an increase in the commitments to the
senior secured revolving credit facility or a combination
thereof not to exceed $50.0 million. As of April 30,
2011, no amounts were outstanding under the senior secured
revolving credit facility. After giving effect to
$7.5 million of outstanding letters of credit and
$24.8 million reserve for a Florida bond, as of
April 30, 2011 we have $117.7 million available for
future borrowings under the senior secured revolving credit
facility.
The interest rate on the senior secured revolving credit
facility ranges from LIBOR plus 225.0 to 275.0 basis
points, and is LIBOR plus 250.0 basis points as of
April 30, 2011. We pay a quarterly commitment fee ranging
from 40 to 50 basis points based on the undrawn portion of
the commitments.
The senior secured revolving credit facility is governed by the
following financial covenants:
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Maintenance on a rolling four quarter basis of a maximum
consolidated adjusted leverage ratio (total funded debt (net of
eligible securities and readily marketable securities, but in no
event greater than $30,000,000) divided by EBITDA (as defined))
of not more than 4.75 to 1.00;
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Maintenance on a rolling four quarter basis of a maximum
consolidated senior secured leverage ratio (total funded senior
secured debt divided by EBITDA (as defined)) of not
more than 2.00 to 1.00; and
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Maintenance on a rolling four quarter basis of a minimum
consolidated interest coverage ratio (EBITDAR (as defined)
divided by interest expense paid in cash plus rent expense less
certain transaction costs to the extent such constitutes cash
interest expense) of not less than 2.60 to 1.00.
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The covenants include limitations on (i) liens,
(ii) mergers, consolidations and asset sales,
(iii) the incurrence of debt, (iv) dividends, stock
redemptions and the redemption
and/or
prepayment of other debt, (v) capital expenditures,
(vi) investments and acquisitions and
(vii) transactions with affiliates. If there is no default
or event of default, we may pay cash dividends and repurchase
stock, provided that the aggregate amount of the dividends and
stock repurchased plus other types of restricted payments in any
fiscal year does not exceed $30.0 million (subject to
adjustment). The agreement also limits capital expenditures in
any fiscal year to $45.0 million, with a provision for the
carryover of permitted but unused amounts. The lenders under the
senior secured revolving credit facility can accelerate all
obligations under the senior secured revolving credit facility
and terminate the revolving credit commitments if an event of
default occurs and is continuing.
Obligations under the senior secured revolving credit facility
are guaranteed by substantially all existing and future direct
and indirect domestic subsidiaries of the Company formed under
the laws of any one of the states or the District of Columbia of
the United States of America (SEI Guarantors).
The lenders under the senior secured revolving credit facility
have a first priority perfected security interest in
(1) all of the capital stock or other equity interests of
each of the domestic subsidiaries of the Company whether now
existing or hereafter created or acquired other than certain
excluded immaterial subsidiaries and 65 percent of the
voting capital stock of all direct foreign subsidiaries whether
now existing or hereafter acquired and (2) all other
present and future assets and properties of the Company and the
SEI Guarantors except (a) real property, (b) vehicles,
(c) assets to which applicable law or regulation prohibits
security interest therein or requires the consent of a third
party, (d) contract rights in which a security interest
without the approval of the other party to the contract would
constitute a default thereunder (e) any assets with respect
to which a security interest cannot be perfected and (f) a
certain securities account to be maintained for the benefit of
one of the Companys umbrella insurance policies.
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Senior
Convertible Notes
As of April 30, 2011, we had outstanding $86.4 million
aggregate principal amount of 3.125% senior convertible
notes due 2014 (the 2014 notes) and
$45.1 million aggregate principal amount of
3.375% senior convertible notes due 2016 (the 2016
notes and together with the 2014 notes, the senior
convertible notes). In connection with the sale of the
senior convertible notes, we also sold common stock warrants for
approximately $43.9 million, and purchased call options for
approximately $60.0 million, as described below.
The 2014 notes and 2016 notes are governed by separate
indentures dated as of June 27, 2007, among us, the
guarantors named therein and the trustee. The 2014 notes mature
July 15, 2014, and the 2016 notes mature July 15,
2016. The 2014 notes bear interest at a rate of 3.125% per
annum, and the 2016 notes bear interest at a rate of 3.375% per
annum. Interest is payable semiannually in arrears on January 15
and July 15 of each year.
Holders may convert their senior convertible notes based on a
conversion rate of 90.4936 shares of our Class A
common stock per $1,000 principal amount of senior convertible
notes (which is equal to an initial conversion price of
approximately $11.05 per share), subject to adjustment:
(1) during any fiscal quarter beginning after
October 31, 2007, if the closing price of the our
Class A common stock for a specified period in the prior
quarter is more than 130% of the conversion price per share,
(2) for a specified period after five trading days in which
the trading price of the notes for each trading day was less
than 95% of the product of the closing price of our Class A
common stock and the then applicable conversion rate,
(3) if specified distributions to holders of our
Class A common stock occur, (4) if a fundamental
change occurs or (5) during the last month prior to the
maturity date of the notes. None of these conditions had been
met as of April 30, 2011.
Upon conversion, in lieu of shares of our Class A common
stock, for each $1,000 principal amount of senior convertible
notes converted, a holder will receive an amount in cash equal
to the lesser of (1) $1,000 or (2) the conversion
value, determined in the manner set forth in the indentures, of
the number of shares of Class A common stock equal to the
conversion rate. If the conversion value exceeds $1,000, we will
also deliver, at our election, cash or Class A common stock
or a combination of cash and Class A common stock with
respect to such excess amount, subject to the limitations in the
indentures. If a holder elects to convert its senior convertible
notes in connection with certain fundamental change
transactions, we will pay, to the extent described in the
indentures, a make whole premium by increasing the conversion
rate applicable to such senior convertible notes.
Upon specified fundamental change events, holders will have the
option to require us to purchase for cash all or any portion of
their senior convertible notes at a price equal to 100% of the
principal amount of the senior convertible notes plus accrued
and unpaid interest, if any, to, but excluding, the fundamental
change purchase date.
The senior convertible notes are our senior unsecured
obligations. The senior convertible notes are guaranteed, fully
and unconditionally, jointly and severally, on an unsecured
senior basis, by all of our subsidiaries that are guarantors of
the notes. The indentures contain events of default which, if
they occur, entitle the holders of the senior convertible notes
to declare the senior convertible notes immediately due and
payable.
Also, in connection with the sale of the senior convertible
notes in 2007, we purchased call options with respect to our
Class A common stock from Bank of America/Merrill Lynch
International. As of April 30, 2011, the call options
covered, subject to anti-dilution adjustments,
8,641,600 shares of Class A common stock for the 2014
notes and 4,511,900 shares of Class A Common Stock for
the 2016 notes, at strike prices that correspond to the initial
conversion price of the notes. The call options are expected to
offset our exposure to dilution from conversion of the senior
convertible notes because any shares we would be obligated to
deliver to holders upon conversion of the senior convertible
notes would be delivered to us by the counterparty to the call
options.
We also entered into warrant transactions in 2007, whereby we
sold to Bank of America/Merrill Lynch Financial Markets warrants
expiring in 2014 and 2016 to acquire, subject to customary
anti-dilution adjustments, shares of our Class A common
stock. The strike prices of the sold warrants expiring in 2014
and 2016 are $12.93 per share of Class A common stock and
$13.76 per share of Class A common stock, respectively. The
warrants expiring in 2014 and 2016 may not be exercised
prior to the maturity of the 2014 notes and 2016 notes,
respectively. We can elect to settle the warrants in cash or
Class A common stock,
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subject to certain conditions. As of April 30, 2011, the
number of shares subject to the warrants was 6,913,280 related
to the 2014 notes and 3,609,518 related to the 2016 notes.
By selling the warrants, we used the proceeds to offset much of
the cost of the call options. By simultaneously purchasing the
call options and selling the warrants, we effectively increased
the conversion premium on the senior convertible notes to
55-65% above
the market price of the Class A common stock at the time of
the offering.
6.25% Senior
Notes due 2013
As of April 30, 2011, we had repurchased
$194.2 million of our $200.0 million outstanding
6.25 percent senior notes due in 2013. We redeemed the
remaining $5.8 million notes outstanding in May 2011 at par.
Other
As of April 30, 2011, our subsidiaries had approximately
$0.1 million of long-term debt that represents notes the
subsidiaries issued as part of the purchase price of acquired
businesses or debt the subsidiaries assumed in connection with
acquisitions. All of this debt is secured by liens on the stock
or assets of the related subsidiaries.
DESCRIPTION
OF NOTES
The Outstanding Notes were, and the Exchange Notes will be,
issued under an Indenture (the Indenture) among the
Company, the Guarantors and U.S. Bank National Association,
as trustee (the Trustee). The terms of the Notes
include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939,
as amended (the Trust Indenture Act). Any
Outstanding Notes that remain outstanding after completion of
the exchange offer, together with the Exchange Notes issued in
the exchange offer, will be treated as a single class of
securities under the Indenture.
The following description is a summary of the material
provisions of the Indenture. It does not restate that agreement
in its entirety. We urge you to read the Indenture and the
Registration Rights Agreement because they, and not this
description, define your rights as holders of the Notes.
You can find the definitions of certain terms used in this
description below under the caption Certain
Definitions. Certain defined terms used in this
description but not defined below under the caption
Certain Definitions have the meanings
assigned to them in the Indenture. In this description, the word
Company refers only to Stewart Enterprises, Inc. and
not to any of its Subsidiaries.
Brief
Description of the Notes
The Notes:
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are general unsecured and unsubordinated obligations of the
Company;
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are pari passu in right of payment with all existing and any
future unsecured, unsubordinated Indebtedness of the Company;
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are senior in right of payment to all existing and any future
subordinated Indebtedness of the Company;
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are effectively subordinated to all existing and any future
secured Indebtedness of the Company, including any Indebtedness
incurred by the Company under its senior secured revolving
credit facility, to the extent of the assets securing such
Indebtedness;
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are guaranteed by the Guarantors as described under
Note Guarantees; and
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are effectively subordinated to all existing and any future
Indebtedness and other liabilities of the Companys
Subsidiaries that are not guaranteeing the Notes, to the extent
of the assets of such Subsidiaries.
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As of April 30, 2011 the Notes were effectively
subordinated to approximately $0.1 million of senior
secured Indebtedness. The Company currently has a maximum
borrowing capacity of $150.0 million and no amount drawn
under its existing senior secured revolving credit facility. As
of April 30, 2011, the Notes and the Note Guarantees ranked
pari passu with $137.3 million of Indebtedness. As
of April 30, 2011, the Notes were effectively subordinated
to $120.8 million of liabilities of the Companys
Subsidiaries that are not guaranteeing the Notes. For fiscal
year 2010, the Companys Subsidiaries that are not
Guarantors contributed 8.6% of its consolidated revenues, 15.5%
of its consolidated earnings from continuing operations and
12.5% of its consolidated operating cash flows and at
October 31, 2010 had 6.9% of its consolidated assets.
There are no contractual limitations in the Indenture on the
issuance by the Company or its Subsidiaries of additional
Indebtedness, including Indebtedness that could rank equally
with the Notes or the Note Guarantees, as applicable, or the
issuance of additional Indebtedness by the Companys
non-guarantor Subsidiaries, to which the Notes would be
structurally subordinated. The Companys senior secured
revolving credit facility contains certain contractual
limitations on the issuance of additional Indebtedness,
including Indebtedness that could rank prior to or equally with
the Notes; however, the lenders under such facility may waive
these limitations, and any new agreement into which the Company
enters may not contain similar limitations.
Principal,
Maturity and Interest
The Indenture provides for the issuance by the Company of Notes
with an unlimited principal amount, of which $200.0 million
have been issued. The Company may issue additional notes (the
Additional Notes) from time to time. The Notes and
any Additional Notes subsequently issued under the Indenture
would be treated as a single class for all purposes under the
Indenture, including, without limitation, waivers, amendments,
redemptions and offers to purchase. The Company will issue Notes
in denominations of $2,000 and integral multiples of $1,000 in
excess thereof. The Notes will mature on April 15, 2019.
Interest on the Notes accrues at the rate of 6.50% per annum and
is payable semi-annually in arrears on April 15 and
October 15, commencing on October 15, 2011. The
Company will make each interest payment to the Holders of record
on the immediately preceding April 1 and October 1.
Interest on the Notes accrues from the date of original issuance
or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a
360-day year
comprised of twelve
30-day
months.
Methods
of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to the Company
at least 10 Business Days prior to the applicable payment date,
the Company will pay all principal, interest and premium and
Additional Interest, if any, on that Holders Notes in
accordance with those instructions. All other payments on Notes
will be made at the office or agency of the Paying Agent and
Registrar within the City and State of New York unless the
Company elects to make interest payments by check mailed to the
Holders at their addresses set forth in the register of Holders;
provided that all payments of principal, premium, if any, and
interest (including Additional Interest, if any) with respect to
Global Notes registered in the name of or held by The Depository
Trust Company (DTC) or its nominee will be made
by wire transfer of immediately available funds to the account
specified by DTC.
Paying
Agent and Registrar for the Notes
The Trustee will initially act as Paying Agent and Registrar.
The Company may change the Paying Agent or Registrar without
prior notice to the Holders, and the Company or any of its
Subsidiaries may act as Paying Agent or Registrar.
35
Transfer
and Exchange
A Holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange
any Note selected for redemption. Also, the Company is not
required to transfer or exchange any Note for a period of
15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of
it for all purposes.
Note
Guarantees
The Notes are guaranteed, jointly and severally, by all of the
Domestic Subsidiaries of the Company, other than Excluded
Subsidiaries. Excluded Subsidiaries consist of: Investors Trust,
Inc., which serves as the Companys investment advisor on
its investment portfolio and the Companys preneed funeral,
merchandise and perpetual care trust funds and escrow accounts;
West Lawn Cemetery, which is an immaterial Subsidiary that is
prohibited by law from guaranteeing the Notes; Fine Finishes,
Inc. and Taylor M. Simpson Co., which are inactive Subsidiaries
that have been administratively dissolved; and Lake Lawn Park,
LLC, Rest Hills Memorial Park, Inc. and Heavens Pets at
Lakelawn Metairie, LLC, which are immaterial non-wholly owned
Domestic Subsidiaries of the Company. Each Note Guarantee:
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is a general unsecured and unsubordinated obligation of that
Guarantor;
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is pari passu in right of payment with all existing and any
future unsecured, unsubordinated Indebtedness of that Guarantor;
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is senior in right of payment to all existing and any future
subordinated Indebtedness of that Guarantor; and
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is effectively subordinated to all existing and any future
secured Indebtedness of that Guarantor, including the Guarantee
by that Guarantor of Indebtedness under the Companys
senior secured revolving credit facility, to the extent of the
assets securing such Indebtedness.
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The obligations of each Guarantor under its Note Guarantee will
be limited as necessary to prevent that Note Guarantee from
constituting a fraudulent conveyance under applicable law. We
cannot assure you that this limitation will protect the Note
Guarantees from fraudulent conveyance or fraudulent transfer
challenges or, if it does, that the remaining amount due and
collectible under the Note Guarantees would suffice, if
necessary, to pay the Notes in full when due. In a Florida
bankruptcy case, a similar provision was found to be
unenforceable and as a result the subsidiary guarantees in that
case were found to be fraudulent conveyances. If this case is
followed, the risk that the Note Guarantees will be found to be
fraudulent conveyances will be significantly increased. See
Risk Factors Risks Related to the
Notes The guarantees may not be enforceable because
of fraudulent conveyance laws.
If the Company or any of its Subsidiaries acquires or creates
another Domestic Subsidiary on or after the date of the
Indenture, then that newly acquired or created Domestic
Subsidiary must become a Guarantor and execute a supplemental
indenture and deliver an Opinion of Counsel to the Trustee,
unless such Domestic Subsidiary is subject to regulatory
restrictions that prohibit the execution of a guarantee or is an
immaterial non-wholly owned Domestic Subsidiary that does not,
directly or indirectly, Guarantee any other Indebtedness of the
Company or any Subsidiary.
Optional
Redemption
Prior to April 15, 2014, the Company may redeem all or a
part of the Notes, upon not less than 30 nor more than
60 days notice, at a redemption price equal to the
sum of (1) 100% of the principal amount thereof, plus
(2) the Applicable Premium as of the date of redemption,
plus (3) accrued and unpaid interest and Additional
Interest, if any, thereon, to the applicable redemption date,
subject to the rights of the Holders of the Notes on the
relevant record date to receive interest on the relevant
interest payment date.
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On or after April 15, 2014, the Company may redeem all or a
part of the Notes, upon not less than 30 nor more than
60 days notice, at the redemption prices (expressed
as percentages of principal amount) set forth below plus accrued
and unpaid interest and Additional Interest, if any, thereon, to
the applicable redemption date, subject to the rights of the
Holders of the Notes on the relevant record date to receive
interest on the relevant interest payment date, if redeemed
during the twelve-month period beginning on April 15 of the
years indicated below:
|
|
|
|
|
Year
|
|
Percentage
|
|
|
2014
|
|
|
104.875
|
%
|
2015
|
|
|
103.250
|
%
|
2016
|
|
|
101.625
|
%
|
2017 and thereafter
|
|
|
100.000
|
%
|
If less than all of the Notes are to be redeemed at any time,
the Trustee will select Notes for redemption as follows:
(1) if the Notes are listed on any national securities
exchange, in compliance with the requirements of such principal
national securities exchange; or
(2) if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and
appropriate.
No Notes of $2,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each
Holder of Notes to be redeemed at its registered address.
Notices of redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of
redemption that relates to that Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion of the original
Note will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption
become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions
of them called for redemption.
Mandatory
Redemption
The Company is not required to make mandatory redemption or
sinking fund payments with respect to the Notes.
Repurchase
at the Option of Holders upon a Change of Control
If a Change of Control occurs, each Holder of Notes will have
the right to require the Company to repurchase all or any part
(equal to $2,000 or an integral multiple of $1,000 in excess
thereof) of that Holders Notes pursuant to a Change of
Control Offer on the terms set forth in the Indenture. In the
Change of Control Offer, the Company will offer a Change of
Control Payment in cash equal to 101% of the aggregate principal
amount of Notes repurchased plus accrued and unpaid interest and
Additional Interest, if any, thereon, to the Change of Control
Payment Date. Within 30 days following any Change of
Control, the Company will mail a notice to each Holder
describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes on the Change
of Control Payment Date specified in such notice, which date
shall be no earlier than 30 days and no later than
60 days from the date such notice is mailed, pursuant to
the procedures required by the Indenture and described in such
notice. The Company will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations
are applicable in connection with the repurchase of the Notes as
a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with
the Change of Control provisions of the Indenture, the Company
will comply with the applicable securities laws and regulations
and will not be deemed to have breached its obligations under
the Change of Control provisions of the Indenture by virtue of
such compliance.
37
On the Change of Control Payment Date, the Company will, to the
extent lawful:
(1) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the
Change of Control Payment in respect of all Notes or portions
thereof so tendered; and
(3) deliver or cause to be delivered to the Trustee the
Notes so accepted together with an Officers Certificate
stating the aggregate principal amount of Notes or portions
thereof being purchased by the Company.
The Paying Agent will promptly mail or wire transfer to each
Holder of Notes so tendered the Change of Control Payment for
such Notes, and the Trustee will promptly authenticate and mail
(or cause to be transferred by book entry) to each Holder a new
Note equal in principal amount to any unpurchased portion of the
Notes surrendered, if any; provided that each such new
Note will be in a principal amount of $2,000 or an integral
multiple of $1,000 in excess thereof. The Company will publicly
announce the results of the Change of Control Offer on or as
soon as practicable after the Change of Control Payment Date.
The existing senior secured revolving credit facility currently
restricts the Company from purchasing any Notes, and also
provides that certain change of control events with respect to
the Company would constitute a default under such credit
facility. Any future credit agreements, or other similar
agreements to which the Company becomes a party, may contain
similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its
lenders to the purchase of Notes or could attempt to refinance
the borrowings that contain such prohibition. If the Company
does not obtain such a consent or repay such borrowings, the
Company will remain prohibited from purchasing Notes. In such
case, the Companys failure to purchase tendered Notes
would constitute an Event of Default under the Indenture which
would, in turn, constitute a default under such other agreements.
The provisions described above that require the Company to make
a Change of Control Offer following a Change of Control will be
applicable regardless of whether any other provisions of the
Indenture are applicable. Except as described above with respect
to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that
the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
The Company will not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change
of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under
such Change of Control Offer.
The definition of Change of Control includes a phrase relating
to the direct or indirect sale, transfer, conveyance or other
disposition of all or substantially all of the
properties or assets of the Company and its Subsidiaries taken
as a whole. Although there is a limited body of case law
interpreting the phrase substantially all, there is
no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require
the Company to repurchase such Notes as a result of a sale,
transfer, conveyance or other disposition of less than all of
the assets of the Company and its Subsidiaries taken as a whole
to another Person or group may be uncertain. In addition,
Holders may not be entitled to require the Company to repurchase
their Notes in certain circumstances involving a significant
change in the composition of the Board of Directors of the
Company, including in connection with a proxy contest, where the
Companys Board of Directors does not endorse a dissident
slate of directors but approves them for purposes of the
Indenture.
38
Certain
Covenants
Liens
The Company will not, and will not permit any of its
Subsidiaries to, create, incur, assume or otherwise cause or
suffer to exist or become effective any Lien of any kind (other
than Permitted Liens) upon any property or assets of the Company
or its Subsidiaries, now owned or hereafter acquired, to secure
any Indebtedness without providing that the Notes shall be
secured equally and ratably with (or, in the case of
subordinated Indebtedness, prior to) such other Indebtedness for
so long as such other Indebtedness is so secured, unless, after
giving effect thereto, the aggregate amount of all such secured
Indebtedness of the Company and its Subsidiaries (excluding
Indebtedness secured by Permitted Liens) would not exceed 10.0%
of Consolidated Adjusted Net Tangible Assets of the Company.
Sale
and Leaseback Transactions
The Company will not, and will not permit any of its
Subsidiaries to, enter into any transaction with any Person
(other than the Company or its Subsidiaries) providing for the
leasing to the Company or any of its Subsidiaries of any real
property which has been or is to be sold or transferred by the
Company or such Subsidiary of the Company to such Person unless
either:
(1) the Company or such Subsidiary could create a Lien
securing Indebtedness in an amount equal to the Attributable
Debt of such sale and leaseback transaction without equally and
ratably securing all the Notes pursuant to the covenant
described in Liens; or
(2) within 120 days after such transaction the Company
applied (and in any such case the Company covenants that it will
so apply) an amount equal to the greater of
(a) the net proceeds of the sale of the real property
leased pursuant to such transaction or
(b) the Fair Market Value of the real property so leased at
the time of entering into such transaction (as determined by the
Companys Board of Directors)
to the prepayment, repayment, redemption, reduction or
retirement (other than pursuant to any mandatory sinking fund,
mandatory redemption or mandatory prepayment provision or at
maturity) of Funded Debt of the Company; provided that,
in any event, the Company may enter into a sale and leaseback
transaction covering that certain portion of ground bearing
municipal address 1333 South Clearview Parkway, Jefferson,
Louisiana 70121, together with all improvements thereon.
Merger,
Consolidation or Sale of Assets
The Company will not, directly or indirectly:
(1) consolidate or merge with or into another Person
(whether or not the Company is the surviving corporation) or
(2) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties and assets of the
Company and its Subsidiaries taken as a whole, in one or more
related transactions, to another Person or Persons, unless:
(1) either: (a) the Company is the surviving
corporation; or (b) the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, conveyance or other
disposition shall have been made (i) is a corporation
organized or existing under the laws of the United States, any
state thereof or the District of Columbia and (ii) assumes
all the obligations of the Company under the Notes, the
Indenture and the Registration Rights Agreement pursuant to
agreements reasonably satisfactory to the Trustee;
(2) immediately after giving effect to such transaction no
Default or Event of Default exists; and
(3) each Guarantor, unless such Guarantor is the Person
with which the Company has entered into a transaction under this
covenant, shall have by amendment to its Note Guarantee
confirmed that its Note Guarantee shall apply to the obligations
of the Company or the surviving Person in accordance with the
Notes and the Indenture.
39
In addition, the Company may not, directly or indirectly, lease
all or substantially all of its properties or assets, in one or
more related transactions, to any other Person.
Guarantees
If the Company or any of its Subsidiaries acquires or creates
another Domestic Subsidiary on or after the date of the
Indenture (other than an Excluded Subsidiary), or an Excluded
Subsidiary ceases to be an Excluded Subsidiary, then that newly
acquired or created Domestic Subsidiary, or former Excluded
Subsidiary, must become a Guarantor and execute a supplemental
indenture providing for a Note Guarantee by such Subsidiary and
deliver an Opinion of Counsel to the Trustee.
The Company will not permit any of its Subsidiaries which are
not Guarantors, directly or indirectly, to Guarantee any other
Indebtedness of the Company or any Subsidiary that is a
Guarantor unless such Subsidiary simultaneously executes and
delivers a supplemental indenture providing for a Note Guarantee
by such Subsidiary and delivers an Opinion of Counsel to the
Trustee.
The Note Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all
of the Capital Stock of a Guarantor to a Person that is not
(either before or after giving effect to such transaction) an
Affiliate of the Company; or
(2) solely in the case of a Note Guarantee created pursuant
to the second paragraph of this covenant, upon the release or
discharge of the Guarantee which resulted in the creation of
such Note Guarantee pursuant to this covenant, except a
discharge or release by or as a result of payment under such
Guarantee.
Payments
for Consent
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid
any consideration to or for the benefit of any Holder of Notes
for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the Indenture or the Notes
unless such consideration is offered to be paid and is paid to
all Holders of the Notes that consent, waive or agree to amend
in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
Reports
Whether or not required by the Commission, so long as any Notes
are outstanding, the Company will furnish (without exhibits) to
the Trustee for forwarding to the Holders of the Notes within
the time periods specified in the Commissions rules and
regulations:
(1) all quarterly and annual financial information that
would be required to be contained in a filing with the
Commission on
Forms 10-Q
and 10-K if
the Company were required to file such Forms, including a
Managements Discussion and Analysis of Financial
Condition and Results of Operations and, with respect to
the annual information only, a report on the annual financial
statements by the Companys certified independent
accountants; and
(2) all current reports that would be required to be filed
with the Commission on
Form 8-K
if the Company were required to file such reports.
In addition, whether or not required by the Commission, the
Company will file a copy of all of the information and reports
referred to in clauses (1) and (2) above with the
Commission for public availability within the time periods
specified in the Commissions rules and regulations (unless
the Commission will not accept such a filing) and make such
information available to securities analysts and prospective
investors upon request. In addition, the Company and the
Guarantors have agreed that, for so long as any Notes remain
outstanding, they will furnish to the Holders and to prospective
investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities
Act.
40
Events of
Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of
interest on, or Additional Interest with respect to, the Notes;
(2) default in payment when due (whether at maturity, upon
acceleration, redemption or otherwise) of the principal of, or
premium, if any, on the Notes;
(3) failure by the Company or any of its Subsidiaries to
comply with the provisions described under the captions
Repurchase at the Option of Holders upon a
Change of Control, or Certain
Covenants Merger, Consolidation or Sale of
Assets;
(4) failure by the Company or any of its Subsidiaries for
30 days after written notice by the Trustee or Holders
representing 25% or more of the aggregate principal amount of
Notes outstanding to comply with any of the other agreements in
the Indenture;
(5) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by the Company
or any of its Subsidiaries (or the payment of which is
Guaranteed by the Company or any of its Subsidiaries) whether
such Indebtedness or Guarantee now exists, or is created after
the date of the Indenture, if that default:
(a) is caused by a failure to make any payment when due at
the final maturity of such Indebtedness (a Payment
Default); or
(b) results in the acceleration of such Indebtedness prior
to its express maturity,
and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default
or the maturity of which has been so accelerated, aggregates
$15.0 million or more;
(6) failure by the Company or any of its Subsidiaries to
pay final judgments aggregating in excess of $15.0 million,
which judgments are not paid, discharged or stayed for a period
of 60 days;
(7) except as permitted by the Indenture, any Note
Guarantee of a Significant Subsidiary (or any Subsidiaries that
together would constitute a Significant Subsidiary) shall be
held in any judicial proceeding to be unenforceable or invalid
or shall cease for any reason to be in full force and effect or
any Guarantor or any Person acting on behalf of any Guarantor,
shall deny or disaffirm its obligations under its Note
Guarantee; and
(8) certain events of bankruptcy or insolvency with respect
to the Company or any Significant Subsidiary of the Company (or
any Subsidiaries that together would constitute a Significant
Subsidiary).
In the case of an Event of Default arising from certain events
of bankruptcy or insolvency, with respect to the Company (or any
Subsidiaries that together would constitute a Significant
Subsidiary), all outstanding Notes will become due and payable
immediately without further action or notice. If any other Event
of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding
Notes may declare all the Notes to be due and payable
immediately by notice in writing to the Company specifying the
Event of Default.
Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the
Notes notice of any Default or Event of Default (except a
Default or Event of Default relating to the payment of principal
or interest or Additional Interest) if it determines that
withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the
Notes then outstanding by notice to the Trustee may on behalf of
the Holders of all of the Notes waive any existing Default or
Event of Default and its
41
consequences under the Indenture except a continuing Default or
Event of Default in the payment of interest or Additional
Interest on, or the principal of, the Notes. The Holders of a
majority in principal amount of the then outstanding Notes will
have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to
the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may
involve the Trustee in personal liability, or that the Trustee
determines in good faith may be unduly prejudicial to the rights
of Holders of Notes not joining in the giving of such direction
and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of
Notes. A Holder may not pursue any remedy with respect to the
Indenture or the Notes unless:
(1) the Holder gives the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal
amount of outstanding Notes make a written request to the
Trustee to pursue the remedy;
(3) such Holder or Holders offer the Trustee indemnity
satisfactory to the Trustee against any costs, liability or
expense;
(4) the Trustee does not comply with the request within
60 days after receipt of the request and the offer of
indemnity; and
(5) during such
60-day
period, the Holders of a majority in aggregate principal amount
of the outstanding Notes do not give the Trustee a direction
that is inconsistent with the request.
However, such limitations do not apply to the right of any
Holder of a Note to receive payment of the principal of, premium
or Additional Interest, if any, or interest on, such Note or to
bring suit for the enforcement of any such payment, on or after
the due date expressed in the Notes, which right shall not be
impaired or affected without the consent of the Holder.
The Company is required to deliver to the Trustee annually
within 90 days after the end of each fiscal year a
statement regarding compliance with the Indenture. Upon becoming
aware of any Default or Event of Default, the Company is
required to deliver to the Trustee a statement specifying such
Default or Event of Default.
No
Personal Liability of Directors, Officers, Employees and
Stockholders
No director, officer, employee, incorporator or stockholder of
the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company or the Guarantors under the
Notes, the Indenture, the Note Guarantees or for any claim based
on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and
releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes. The waiver may not
be effective to waive liabilities under the federal securities
laws.
Legal
Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have
all of its obligations discharged with respect to the
outstanding Notes and all obligations of the Guarantors
discharged with respect to their Note Guarantees (Legal
Defeasance) except for:
(1) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, or interest or premium
and Additional Interest, if any, on such Notes when such
payments are due from the trust referred to below;
(2) the Companys obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance
of an office or agency for payment and money for security
payments held in trust;
(3) the rights, powers, trusts, duties and immunities of
the Trustee, and the Companys and the Guarantors
obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
42
In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company and the Guarantors
released with respect to certain covenants that are described in
the Indenture (Covenant Defeasance) and thereafter
any omission to comply with those covenants shall not constitute
a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including
non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under Events of Default
will no longer constitute Events of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(1) the Company must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders of the Notes, cash in
U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, or interest and
premium and Additional Interest, if any, on the outstanding
Notes on the Stated Maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether
the Notes are being defeased to maturity or to a particular
redemption date;
(2) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that (a) the Company
has received from, or there has been published by, the Internal
Revenue Service a ruling or (b) since the date of the
Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders
of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company shall
have delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and
be continuing either: (a) on the date of such deposit; or
(b) insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period
ending on the 123rd day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default
under any material agreement or instrument to which the Company
or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries is bound;
(6) the Company must have delivered to the Trustee an
Opinion of Counsel to the effect that, (1) assuming no
intervening bankruptcy of the Company or any Guarantor between
the date of deposit and the 123rd day following the deposit
and assuming that no Holder is an insider of the
Company under applicable bankruptcy law, after the
123rd day following the deposit, the trust funds will not
be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting
creditors rights generally, including Section 547 of
the United States Bankruptcy Code and (2) the creation of
the defeasance trust does not violate the Investment Company Act
of 1940;
(7) the Company must deliver to the Trustee an
Officers Certificate stating that the deposit was not made
by the Company with the intent of preferring the Holders of
Notes over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding creditors of the
Company or others;
(8) if the Notes are to be redeemed prior to their Stated
Maturity, the Company must deliver to the Trustee irrevocable
instructions to redeem all of the Notes on the specified
redemption date; and
43
(9) the Company must deliver to the Trustee an
Officers Certificate and an Opinion of Counsel, each
stating that all conditions precedent relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
Amendment,
Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the
Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal
amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of,
or tender offer or exchange offer for, Notes), and any existing
default or compliance with any provision of the Indenture or the
Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes
(including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for,
Notes).
Without the consent of each Holder affected, an amendment or
waiver may not (with respect to any Notes held by a
non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of
any Note or change the optional redemption date or optional
redemption price of the Notes from those stated under the
caption Optional Redemption;
(3) reduce the rate of or change the time for payment of
interest on any Note;
(4) waive a Default or Event of Default in the payment of
principal of, or interest, or premium or Additional Interest, if
any, on, the Notes (except a rescission of acceleration of the
Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(5) make any Note payable in money other than
U.S. dollars;
(6) make any change in the provisions of the Indenture
relating to waivers of past Defaults or Events of Default or the
rights of Holders of Notes to receive payments of principal of,
or interest or premium or Additional Interest, if any, on, the
Notes;
(7) release any Guarantor from any of its obligations under
its Note Guarantee or the Indenture, except in accordance with
the terms of the Indenture;
(8) impair the right to institute suit for the enforcement
of any payment on or with respect to the Notes or the Note
Guarantees;
(9) amend, change or modify the obligation of the Company
to make and consummate a Change of Control Offer in the event of
a Change of Control in accordance with the covenant described
under the caption Repurchase at the Option of Holders upon
a Change of Control after such Change of Control has
occurred, including, in each case, amending, changing or
modifying any definition relating thereto;
(10) except as otherwise permitted under the covenants
described under the captions Certain
Covenants Merger, Consolidation and Sale of
Assets and Certain Covenants
Guarantees, consent to the assignment or transfer by the
Company or any Guarantor of any of their rights or obligations
under the Indenture; or
(11) make any change in the preceding amendment and waiver
provisions.
Notwithstanding the preceding, without the consent of any Holder
of Notes, the Company, the Guarantors and the Trustee may amend
or supplement the Indenture or the Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
44
(3) to provide for the assumption of the Companys or
any Guarantors obligations to Holders of Notes in the case
of a merger or consolidation or sale of all or substantially all
of the Companys or such Guarantors assets;
(4) to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not
adversely affect the legal rights under the Indenture of any
such Holder;
(5) to comply with requirements of the Commission in order
to effect or maintain the qualification of the Indenture under
the Trust Indenture Act;
(6) to comply with the provisions described under
Certain Covenants Guarantees;
(7) to evidence and provide for the acceptance of
appointment by a successor Trustee; or
(8) to provide for the issuance of Additional Notes in
accordance with the Indenture.
Satisfaction
and Discharge
The Indenture will be discharged and will cease to be of further
effect as to all Notes issued thereunder, when:
(1) either:
(a) all Notes that have been authenticated (except lost,
stolen or destroyed Notes that have been replaced or paid and
Notes for whose payment money has theretofore been deposited in
trust and thereafter repaid to the Company) have been delivered
to the Trustee for cancellation; or
(b) all Notes that have not been delivered to the Trustee
for cancellation have become due and payable by reason of the
making of a notice of redemption or otherwise or will become due
and payable within one year and the Company or any Guarantor has
irrevocably deposited or caused to be deposited with the Trustee
as trust funds in trust solely for the benefit of the Holders,
cash in U.S. dollars, non-callable Government Securities,
or a combination thereof, in such amounts as will be sufficient
without consideration of any reinvestment of interest, to pay
and discharge the entire Indebtedness on the Notes not delivered
to the Trustee for cancellation for principal, premium and
Additional Interest, if any, and accrued interest to the date of
maturity or redemption;
(2) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit or shall occur as a
result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any other
instrument to which the Company or any Guarantor is a party or
by which the Company or any Guarantor is bound;
(3) the Company or any Guarantor has paid or caused to be
paid all sums payable by it under the Indenture; and
(4) the Company has delivered irrevocable instructions to
the Trustee under the Indenture to apply the deposited money
toward the payment of the Notes at maturity or the redemption
date, as the case may be.
In addition, the Company must deliver an Officers
Certificate and an Opinion of Counsel to the Trustee stating
that all conditions precedent to satisfaction and discharge have
been satisfied.
Concerning
the Trustee
If the Trustee becomes a creditor of the Company or any
Guarantor, the Indenture and the Trust Indenture Act limit
its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within
90 days, apply to the Commission for permission to continue
or resign.
45
The Indenture provides that in case an Event of Default will
occur and be continuing, the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. Subject to such
provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request
of any Holder of Notes, unless such Holder will have offered to
the Trustee security and indemnity satisfactory to it against
any loss, liability or expense.
Book-Entry,
Delivery and Form
The Exchange Notes will be represented by one or more Notes in
registered, global form without interest coupons (collectively,
the Global Notes). Except as set forth below, Notes
will be issued in registered, global form in minimum
denominations of $2,000 and integral multiples of $1,000 in
excess thereof. The Global Notes will be deposited upon issuance
with the Trustee as custodian for DTC in New York, New York, and
registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC,
including Euroclear Bank S.A./N.V. as operator of the Euroclear
System (Euroclear) and Clearstream Banking, S.A.
(Clearstream).
Except as set forth below, the Global Notes may be transferred,
in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the
Global Notes may not be exchanged for Notes in certificated
form, except in the limited circumstances described below. See
Exchange of Global Notes for Certificated
Notes. Transfers of beneficial interests in the Global
Notes will be subject to the applicable rules and procedures of
DTC and its direct or indirect participants (including, if
applicable, those of Euroclear and Clearstream), which may
change from time to time.
Depository
Procedures
The following description of the operations and procedures of
DTC, Euroclear and Clearstream are provided solely as a matter
of convenience. These operations and procedures are solely
within the control of the respective settlement systems and are
subject to changes by them. The Company takes no responsibility
for these operations and procedures and urges investors to
contact the system or their participants directly to discuss
these matters.
DTC has advised the Company that DTC is a limited-purpose trust
company created to hold securities for its participating
organizations (collectively, the Participants) and
to facilitate the clearance and settlement of transactions in
those securities between Participants through electronic
book-entry changes in accounts of its Participants. The
Participants include securities brokers and dealers (including
the Initial Purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to
DTCs system is also available to other entities such as
banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either
directly or indirectly (collectively, the Indirect
Participants). Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The
ownership interests in, and transfers of ownership interests in,
each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures
established by it:
(1) upon deposit of the Global Notes, DTC will credit the
accounts of Participants designated by the Initial Purchasers
with portions of the principal amount of the Global
Notes; and
(2) ownership of these interests in the Global Notes will
be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect
to the Participants) or by the Participants and the Indirect
Participants (with respect to other owners of beneficial
interest in the Global Notes).
Investors in the Global Notes who are Participants in DTCs
system may hold their interests therein directly through DTC.
Investors in the Global Notes who are not Participants may hold
their interests therein indirectly through organizations
(including Euroclear and Clearstream) which are Participants in
such system. All interests in a Global Note, including those
held through Euroclear or Clearstream, may be subject to the
46
procedures and requirements of DTC. Those interests held through
Euroclear or Clearstream may also be subject to the procedures
and requirements of such systems.
Except as described below, owners of interests in the Global
Notes will not have Notes registered in their names, will not
receive physical delivery of Notes in certificated form and will
not be considered the registered owners or Holders
thereof under the Indenture for any purpose.
Payments in respect of the principal of, and interest and
premium and Additional Interest, if any, on a Global Note
registered in the name of DTC or its nominee will be payable to
DTC in its capacity as the registered Holder under the
Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the Persons in whose names the Notes,
including the Global Notes, are registered as the owners thereof
for the purpose of receiving payments and for all other
purposes. Consequently, neither the Company, the Trustee nor any
agent of the Company or the Trustee has or will have any
responsibility or liability for:
(1) any aspect of DTCs records or any
Participants or Indirect Participants records
relating to or payments made on account of beneficial ownership
interest in the Global Notes or for maintaining, supervising or
reviewing any of DTCs records or any Participants or
Indirect Participants records relating to the beneficial
ownership interests in the Global Notes; or
(2) any other matter relating to the actions and practices
of DTC or any of its Participants or Indirect Participants.
DTC has advised the Company that its current practice, upon
receipt of any payment in respect of securities such as the
Notes (including principal and interest), is to credit the
accounts of the relevant Participants with the payment on the
payment date unless DTC has reason to believe it will not
receive payment on such payment date. Each relevant Participant
is credited with an amount proportionate to its beneficial
ownership of an interest in the principal amount of the relevant
security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial
owners of Notes will be governed by standing instructions and
customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the
responsibility of DTC, the Trustee or the Company. Neither the
Company nor the Trustee will be liable for any delay by DTC or
any of its Participants in identifying the beneficial owners of
the Notes, and the Company and the Trustee may conclusively rely
on and will be protected in relying on instructions from DTC or
its nominee for all purposes.
Transfers between Participants in DTC will be effected in
accordance with DTCs procedures, and will be settled in
same-day
funds, and transfers between participants in Euroclear and
Clearstream will be effected in accordance with their respective
rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the
one hand, and Euroclear or Clearstream participants, on the
other hand, will be effected through DTC in accordance with
DTCs rules on behalf of Euroclear or Clearstream, as the
case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions
to Euroclear or Clearstream, as the case may be, by the
counterparty in such system in accordance with the rules and
procedures and within the established deadlines (Brussels time)
of such system. Euroclear or Clearstream, as the case may be,
will, if the transaction meets its settlement requirements,
deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or
receiving interests in the relevant Global Note in DTC, and
making or receiving payment in accordance with normal procedures
for same-day
funds settlement applicable to DTC. Euroclear participants and
Clearstream participants may not deliver instructions directly
to the depositories for Euroclear or Clearstream.
DTC has advised the Company that it will take any action
permitted to be taken by a Holder of Notes only at the direction
of one or more Participants to whose account DTC has credited
the interests in the Global Notes and only in respect of such
portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the
Notes, DTC reserves the right to exchange the Global Notes for
legended Notes in certificated form, and to distribute such
Notes to its Participants.
47
Although DTC, Euroclear and Clearstream have agreed to the
foregoing procedures to facilitate transfers of interests in the
Global Notes among participants in DTC, Euroclear and
Clearstream, they are under no obligation to perform or to
continue to perform such procedures, and may discontinue such
procedures at any time. Neither the Company nor the Trustee nor
any of their respective agents will have any responsibility for
the performance by DTC, Euroclear or Clearstream or their
respective participants or indirect participants of their
respective obligations under the rules and procedures governing
their operations.
Exchange
of Global Notes for Certificated Notes
A Global Note is exchangeable for definitive Notes in registered
certificated form (Certificated Notes) if:
(1) DTC (a) notifies the Company that it is unwilling
or unable to continue as depositary for the Global Notes or
(b) has ceased to be a clearing agency registered under the
Exchange Act, and in each case the Company fails to appoint a
successor depositary;
(2) the Company, at its option, notifies the Trustee in
writing that it elects to cause the issuance of Certificated
Notes (DTC has advised the Company that, in such event, under
its current practices, DTC would notify its Participants of the
Companys request, but will only withdraw beneficial
interests from a Global Note at the request of each
Participant); or
(3) there shall have occurred and be continuing a Default
or Event of Default with respect to the Notes.
In addition, beneficial interests in a Global Note may be
exchanged for Certificated Notes upon prior written notice given
to the Trustee by or on behalf of DTC in accordance with the
Indenture. In all cases, Certificated Notes delivered in
exchange for any Global Note or beneficial interests in Global
Notes will be registered in the names, and issued in any
approved denominations, requested by or on behalf of the
depositary (in accordance with its customary procedures).
Exchange
of Certificated Notes for Global Notes
Certificated Notes may not be exchanged for beneficial interests
in any Global Note unless the transferor first delivers to the
Trustee a written certificate (in the form provided in the
Indenture) to the effect that such transfer will comply with the
appropriate transfer restrictions applicable to such Notes.
Same Day
Settlement and Payment
The Company will make payments in respect of the Notes
represented by the Global Notes (including principal, premium,
if any, interest and Additional Interest, if any) by wire
transfer of immediately available funds to the accounts
specified by the Global Note Holder. The Company will make all
payments of principal, interest and premium and Additional
Interest, if any, with respect to Certificated Notes by wire
transfer of immediately available funds to the accounts
specified by the Holders thereof or, if no such account is
specified, by mailing a check to each such Holders
registered address. The Notes represented by the Global Notes
are expected to be eligible to trade in DTCs
Same-Day
Funds Settlement System, and any permitted secondary market
trading activity in such Notes will, therefore, be required by
DTC to be settled in immediately available funds. The Company
expects that secondary trading in any Certificated Notes will
also be settled in immediately available funds.
Because of time zone differences, the securities account of a
Euroclear or Clearstream participant purchasing an interest in a
Global Note from a Participant in DTC will be credited, and any
such crediting will be reported to the relevant Euroclear or
Clearstream participant, during the securities settlement
processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC.
DTC has advised the Company that cash received in Euroclear or
Clearstream as a result of sales of interests in a Global Note
by or through a Euroclear or Clearstream participant to a
Participant in DTC will be received with value on the settlement
date of DTC but will be available in the
48
relevant Euroclear or Clearstream cash account only as of the
business day for Euroclear or Clearstream following DTCs
settlement date.
Certain
Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all
such terms, as well as any other capitalized terms used herein
for which no definition is provided.
Additional Interest means all additional
interest owing on the Notes pursuant to the Registration Rights
Agreement.
Affiliate of any specified Person means
(1) any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with
such specified Person or (2) any executive officer or
director of such specified Person. For purposes of this
definition, control, as used with respect to any
Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise. For purposes of this
definition, the terms controlling, controlled
by and under common control with shall have
correlative meanings.
Applicable Premium means, with respect to a
Note at any redemption date, the greater of (1) 1.00% of
the principal amount of such Note and (2) the excess of
(a) the present value at such redemption date of
(i) the redemption price of such Note on April 15,
2014 (such redemption price being set forth in the table
appearing under Optional Redemption)
plus (ii) all remaining required interest payments due on
such Note through April 15, 2014 (excluding accrued but
unpaid interest to the redemption date), computed using a
discount rate equal to the Treasury Rate plus 50 basis
points, over (b) the principal amount of the Note.
Attributable Debt in respect of a sale and
leaseback transaction of the type referred to in the first
paragraph under Certain Covenants Sale and
Leaseback Transactions means, at the time of
determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease
included in such a sale and leaseback transaction, including any
period for which such lease has been extended or may, at the
option of the lessor, be extended. Such present value shall be
calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
Beneficial Owner has the meaning assigned to
such term in
Rule 13d-3
and
Rule 13d-5
under the Exchange Act, except that in calculating the
beneficial ownership of any particular person (as
that term is used in Section 13(d)(3) of the Exchange Act),
such person shall be deemed to have beneficial
ownership of all securities that such person has the
right to acquire by conversion or exercise of other securities,
whether such right is currently exercisable or is exercisable
only upon the occurrence of a subsequent condition. The terms
Beneficially Owns and Beneficially Owned
shall have a corresponding meaning.
Board of Directors means:
(1) with respect to a corporation, the board of directors
of the corporation;
(2) with respect to a partnership, the Board of Directors
of the general partner of the partnership; and
(3) with respect to any other Person, the board or
committee of such Person serving a similar function.
Board Resolution means a resolution certified
by the Secretary or an Assistant Secretary of the Company to
have been duly adopted by the Board of Directors of the Company
and to be in full force and effect on the date of such
certification.
Business Day means any day other than a Legal
Holiday.
49
Capital Lease Obligations means, at the time
any determination thereof is to be made, the amount of the
liability in respect of a capital lease that would at that time
be required to be capitalized on a balance sheet in accordance
with GAAP.
Capital Stock means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any
and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or
limited); and
(4) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person.
Change of Control means the occurrence of any
of the following:
(1) the direct or indirect sale, transfer, conveyance or
other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of
all or substantially all of the properties or assets of the
Company and its Subsidiaries, taken as a whole, to any
person (as that term is used in
Section 13(d)(3) of the Exchange Act);
(2) the adoption of a plan relating to the liquidation or
dissolution of the Company;
(3) any person or group (as such
terms are used in Sections 13(d) and 14(d) of the Exchange
Act), other than the Principals, becomes the ultimate Beneficial
Owner, directly or indirectly, of 35% or more of the voting
power of the Voting Stock of the Company;
(4) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing
Directors; or
(5) the Company consolidates with, or merges with or into,
any Person, or any Person consolidates with, or merges with or
into the Company, in any such event pursuant to a transaction in
which any of the outstanding Voting Stock of the Company or such
other Person is converted into or exchanged for cash, securities
or other property, other than any such transaction where
(A) the Voting Stock of the Company outstanding immediately
prior to such transaction is converted into or exchanged for
Voting Stock (other than Disqualified Stock) of the surviving or
transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee
Person (immediately after giving effect to such issuance) or, if
the Company survives the merger, the Voting Stock of the Company
outstanding immediately prior to such transaction constitutes a
majority of the outstanding shares of Voting Stock of the
Company immediately after the transaction, and
(B) immediately after such transaction, no
person or group (as such terms are used
in Section 13(d) and 14(d) of the Exchange Act), other than
the Principals, becomes, directly or indirectly, the ultimate
Beneficial Owner of 35% or more of the voting power of the
Voting Stock of the surviving or transferee Person.
Commission means the United States Securities
and Exchange Commission.
Consolidated Adjusted Net Tangible Assets of
any Person means, as of any date, the amount which, in
accordance with GAAP, would be set forth under the caption
Total Assets (or any like caption) on a consolidated
balance sheet of such Person and its Subsidiaries, as of the end
of the most recently ended fiscal quarter for which financial
statements have been provided to Holders of the Notes pursuant
to covenant described under the caption
Certain Covenants Reports,
less (1) all intangible assets, including, without
limitation, goodwill, organization costs, patents, trademarks,
copyrights, franchises, and research and development costs;
(2) preneed funeral receivables and trust investments,
preneed cemetery receivables and trust investments, deferred
charges and cemetery perpetual care trust investments (or, in
each case, its equivalent); and (3) current liabilities.
50
Continuing Directors means, as of any date of
determination, any member of the Board of Directors of the
Company who:
(1) was a member of such Board of Directors on the date of
the Indenture; or
(2) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing
Directors who were members of such Board of Directors at the
time of such nomination or election.
Credit Facilities means one or more debt
facilities (including, without limitation, the existing senior
secured revolving credit facility) or commercial paper
facilities, in each case with banks or other lenders providing
for revolving credit loans, term loans, receivables financing or
letters of credit, in each case as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part
from time to time, provided, however, that any
such amendment, restatement, modification, renewal, refunding,
replacement or refinancing is, in each case, with banks or other
lenders providing for revolving credit loans, term loans,
receivables financing or letters of credit.
Default means any event that is, or with the
passage of time or the giving of notice or both would be, an
Event of Default.
Disqualified Stock means any Capital Stock
that, by its terms (or by the terms of any security into which
it is convertible, or for which it is exchangeable, in each case
at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the
option of the holder thereof, in whole or in part, on or prior
to the date that is one year after the date on which the Notes
mature. Notwithstanding the preceding sentence, any Capital
Stock that would constitute Disqualified Stock solely because
the holders thereof have the right to require the Company to
repurchase such Capital Stock upon the occurrence of a change of
control will not constitute Disqualified Stock if (1) the
change of control provisions applicable to such
Capital Stock are no more favorable to the holders of such
Capital Stock than the provision contained in
Repurchase at the Option of Holder upon a
Change of Control covenant described herein and
(2) such Capital Stock specifically provides that such
Person will not repurchase or redeem any such stock pursuant to
such provision prior to the Companys repurchase of such
Notes as are required to be repurchased pursuant to
Repurchase at the Option of Holder
upon a Change of Control covenant. The term
Disqualified Stock shall also include any options,
warrants or other rights that are convertible into Disqualified
Stock or that are redeemable at the option of the holder, or
required to be redeemed, prior to the date that is one year
after the date on which the Notes mature.
Domestic Subsidiary means any Subsidiary of
the Company that was formed under the laws of the United States
or any state thereof or the District of Columbia.
Excluded Subsidiary means (a) Investors
Trust, Inc., for so long as it is a regulated trust company;
(b) West Lawn Cemetery, for so long as it is subject to
regulatory restrictions prohibiting the execution of a Note
Guarantee; (c) each of Fine Finishes, Inc. and Taylor M.
Simpson Co., for so long as it is inactive; (d) each of
Lake Lawn Park, LLC, Rest Hills Memorial Park, Inc. and
Heavens Pets at Lakelawn Metairie, LLC, for so long as it
is an immaterial non-wholly owned Domestic Subsidiary of the
Company; and (e) any future Domestic Subsidiary
(i) for so long as it is subject to regulatory restrictions
that prohibit the execution of a Note Guarantee or
(ii) that is an immaterial non-wholly owned Domestic
Subsidiary, each as certified to the Trustee pursuant to an
Officers Certificate.
Fair Market Value means the price that would
be paid in an arms-length transaction between an informed
and willing seller under no compulsion to sell and an informed
and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors.
Funded Debt means Indebtedness for money
borrowed which by its terms matures at or is extendible or
renewable at the option of the obligor to a date more than
12 months after the date of the creation of such
Indebtedness.
51
GAAP means generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants, the opinions and pronouncements of
the Public Company Accounting Oversight Board and in the
statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity
as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
Government Securities means securities that
are direct obligations of the United States of America for the
timely payment of which its full faith and credit is pledged.
Guarantee means, as to any Person, a
guarantee other than by endorsement of negotiable instruments
for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of
a pledge of assets or through letters of credit or reimbursement
agreements in respect thereof, of all or any part of any
Indebtedness of another Person.
Guarantors means:
(1) each direct or indirect Domestic Subsidiary of the
Company (other than Excluded Subsidiaries) on the date of the
Indenture; and
(2) any other Subsidiary that executes a Note Guarantee in
accordance with the provisions of the Indenture;
and their respective successors and assigns until released from
their obligations under their Note Guarantees and the Indenture
in accordance with the terms of the Indenture. For the avoidance
of doubt, non-guarantor Subsidiaries as used in this
prospectus means any Excluded Subsidiary and any Subsidiary of
the Company that is not a Domestic Subsidiary.
Hedging Obligations means, with respect to
any specified Person, the obligations of such Person under:
(1) interest rate swap agreements, interest rate cap
agreements, interest rate collar agreements and other agreements
or arrangements with respect to exposure to interest rates;
(2) commodity swap agreements, commodity option agreements,
forward contracts and other agreements or arrangements with
respect to exposure to commodity prices; and
(3) foreign exchange contracts, currency swap agreements
and other agreements or arrangements with respect to exposure to
foreign currency exchange rates.
Holder means a Person in whose name a Note is
registered.
Indebtedness means, with respect to any
specified Person, any indebtedness of such Person, whether or
not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar
instruments;
(3) evidenced by letters of credit (or reimbursement
agreements in respect thereof), but excluding obligations with
respect to letters of credit (including trade letters of credit)
securing obligations (other than obligations described in
clauses (1) or (2) above or clauses (5), (6) or
(8) below) entered into in the ordinary course of business
of such Person to the extent such letters of credit are not
drawn upon or, if drawn upon, to the extent such drawing is
reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement;
(4) in respect of bankers acceptances;
(5) in respect of Capital Lease Obligations and
Attributable Debt;
(6) in respect of the balance deferred and unpaid of the
purchase price of any property, except any such balance that
constitutes an accrued expense or trade payable;
52
(7) representing Hedging Obligations, other than Hedging
Obligations that are incurred for the purpose of fixing, hedging
or swapping interest rate, commodity price or foreign currency
exchange rate risk (or to reverse or amend any such agreements
previously made for such purposes), and not for speculative
purposes, and that do not increase the Indebtedness of the
obligor outstanding at any time other than as a result of
fluctuations in interest rates, commodity prices or foreign
currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder; or
(8) representing Disqualified Stock valued at the greater
of its voluntary or involuntary maximum fixed repurchase price
plus accrued dividends;
if and to the extent any of the preceding items (other than
letters of credit and Hedging Obligations) would appear as a
liability upon a balance sheet of the specified Person prepared
in accordance with GAAP. In addition, the term
Indebtedness includes (x) all Indebtedness of
others secured by a Lien on any asset of the specified Person
(whether or not such Indebtedness is assumed by the specified
Person), provided that the amount of such Indebtedness
shall be the lesser of (A) the Fair Market Value of such
asset at such date of determination and (B) the amount of
such Indebtedness, and (y) to the extent not otherwise
included, the Guarantee by the specified Person of any
Indebtedness of any other Person. For purposes hereof, the
maximum fixed repurchase price of any Disqualified
Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified
Stock as if such Disqualified Stock were repurchased on any date
on which Indebtedness shall be required to be determined
pursuant to the Indenture, and if such price is based upon, or
measured by, the Fair Market Value of such Disqualified Stock,
such fair market shall be determined in good faith by the Board
of Directors of the issuer of such Disqualified Stock.
The amount of any Indebtedness outstanding as of any date shall
be the outstanding balance at such date of all unconditional
obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation, and shall be:
(1) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount; and
(2) the principal amount thereof, together with any
interest thereon that is more than 30 days past due, in the
case of any other Indebtedness;
provided that Indebtedness shall not include:
(i) any liability for federal, state, local or other taxes,
(ii) performance, surety or appeal bonds provided in the
ordinary course of business,
(iii) any liability arising from the honoring by a bank or
other financial institution of a check, draft or similar
instrument drawn against insufficient funds in the ordinary
course of business, provided, however, that such
liability is extinguished within five Business Days of its
incurrence, or
(iv) agreements providing for indemnification, adjustment
of purchase price or similar obligations, or Guarantees or
letters of credit, surety bonds or performance bonds securing
any obligations of the Company or any of its Subsidiaries
pursuant to such agreements, in any case incurred in connection
with the disposition or acquisition of any business, assets or
Subsidiary (other than Guarantees of Indebtedness incurred by
any Person acquiring all or any portion of such business, assets
or Subsidiary for the purpose of financing such acquisition), so
long as, in the case of a disposition, the principal amount does
not exceed the gross proceeds actually received by the Company
or any Subsidiary in connection with such disposition.
Lien means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset, whether or not filed,
recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or
agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction.
53
Note Guarantee means a Guarantee of the Notes
on an unsubordinated basis pursuant to the Indenture.
Officer means, with respect to any Person,
the chairman of the board, the chief executive officer, the
president, the chief operating officer, the chief financial
officer, the chief accounting officer, the treasurer, any
assistant treasurer, the controller, the secretary, any
assistant secretary or any vice-president of such Person.
Officers Certificate means a
certificate signed on behalf of the Company by at least two
Officers of the Company, one of whom must be the chief executive
officer, the chief financial officer, the treasurer or the chief
accounting officer of the Company, that meets the requirements
of the Indenture.
Opinion of Counsel means an opinion from
legal counsel who is reasonably acceptable to the Trustee (who
may be counsel to or an employee of the Company) that meets the
requirements of the Indenture.
Permitted Liens means:
(1) Liens on the assets of the Company and any Subsidiary
of the Company securing Credit Facilities in an aggregate
principal amount at any one time outstanding not to exceed
$355 million;
(2) Liens in favor of the Company or any Subsidiary of the
Company;
(3) Liens on property of a Person existing at the time such
Person is merged with or into or consolidated with the Company
or any Subsidiary of the Company; provided that such Liens were
in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company or
any Subsidiary of the Company;
(4) Liens on property existing at the time of acquisition
thereof by the Company or any Subsidiary of the Company,
provided that such Liens were in existence prior to the
contemplation of such acquisition and do not extend to any
property other than the property so acquired by the Company or
its Subsidiary;
(5) Liens on current assets of the Company or any
Subsidiary of the Company;
(6) Liens existing on the date of the Indenture (other than
such Liens permitted by clause (1) above);
(7) Liens incurred in the ordinary course of business, and
not otherwise included under the definition of Permitted
Liens herein, of the Company or any Subsidiary of the
Company with respect to Indebtedness that does not exceed
$20.0 million at any one time outstanding;
(8) Liens securing Indebtedness (including Capital Lease
Obligations) incurred to finance the construction, purchase or
lease of, or repairs, improvements or additions to, property of
the Company or any Subsidiary of the Company; provided that such
Lien shall attach only to the assets constructed, purchased,
leased or improved, and the Indebtedness (other than any
interest thereon) secured by such Lien may not be incurred more
than 180 days after the later of the acquisition,
completion of construction, repair, improvement, addition or
commencement of full operation of the property subject to such
Lien;
(9) Any extensions, renewals or replacement (or successive
extensions, renewals or replacements of any Liens permitted
under clauses (3), (4), (6) and (8) above; provided
that (a) the principal amount of Indebtedness secured
thereby shall not exceed the principal amount of Indebtedness
secured prior to such extension, renewal or replacement and
(b) such extension, renewal or replacement Lien shall be
limited to all or part of the assets that secured the Lien so
extended, renewed or replaced (plus improvements and
construction on such real property);
(10) Liens to secure Indebtedness incurred in connection
with industrial revenue or development bond financing, which
Liens extend solely to the property which is the subject thereof;
(11) (i) statutory Liens of landlords, (ii) Liens
of carriers, warehousemen, mechanics, materialmen and
(iii) other Liens arising in the ordinary course of
business and in existence less than 90 days from the date
of creation thereof for amounts not yet due or which are being
contested in good faith by appropriate
54
proceedings diligently conducted, and with respect to which
adequate reserves are being maintained in accordance with GAAP,
which Liens are not yet exercisable to effect the sale or
seizure of property subject thereto;
(12) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Persons
obligations in respect of bankers acceptances issued or
created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods;
(13) judgment Liens not giving rise to a Default so long as
such Liens are adequately bonded and any appropriate legal
proceedings which may have been duly initiated for the review of
such judgment have not been finally terminated or the period
within which the proceedings may be initiated has not expired;
(14) Liens securing reimbursement obligations with respect
to commercial letters of credit in the ordinary course of
business which encumber documents and other assets relating to
such letters of credit and products and proceeds
thereof; and
(15) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements of the Company or any Subsidiary, including rights
of offset and setoff.
Permitted Transferee means:
(1) the spouse and any lineal descendant (including adopted
children) of Frank B. Stewart, Jr., and any spouse of any
such lineal descendant (all such spouses and lineal descendants
being hereinafter referred to as Family Members);
(2) the trustee of a trust for the sole benefit of Frank B.
Stewart, Jr.
and/or
Family Members;
(3) (i) a partnership made up exclusively of Frank B.
Stewart, Jr.
and/or
Family Members, or (ii) a corporation wholly-owned by Frank
B. Stewart, Jr.
and/or
Family Members, provided, however, that as of the date that such
partnership or corporation is no longer comprised of or owned
exclusively by Frank B. Stewart, Jr.
and/or
Family Members, such partnership or corporation will no longer
be a Permitted Transferee; or
(4) the executor, administrator or personal representative
of the estate of Frank B. Stewart, Jr. or any Family
Member, or the guardian or conservator of Frank B.
Stewart, Jr. or any Family Member who has been adjudged
disabled by a court of competent jurisdiction.
Person means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company or
government or other entity.
Principals means Frank B. Stewart, Jr.
or any Permitted Transferee.
Refinancing Transactions means the
transactions consummating the refinancing of (i) the
Companys $95.0 million senior secured revolving
credit facility dated June 2, 2009 and (ii) the
Companys 6.25% Senior Notes due 2013.
Registration Rights Agreement means the
Registration Rights Agreement, to be dated the date of the
Indenture, among the Company, the Guarantors, Merrill Lynch,
Pierce, Fenner & Smith Incorporated J.P. Morgan
Securities LLC, SunTrust Robinson Humphrey, Inc., BBVA
Securities Inc., and Morgan Keegan & Company, Inc.
Significant Subsidiary means any Subsidiary
that would constitute a significant subsidiary
within the meaning of Article 1 of
Regulation S-X
of the Securities Act; provided, however, that for
purposes of the Indenture and the Notes, 5% shall be substituted
for 10% in each place that it appears in such definition.
Stated Maturity means, with respect to any
installment of interest or principal on any series of
Indebtedness, the date on which such payment of interest or
principal was scheduled to be paid in the original
55
documentation governing such Indebtedness, and shall not include
any contingent obligations to repay, redeem or repurchase any
such interest or principal prior to the date originally
scheduled for the payment thereof.
Subsidiary means, with respect to any
specified Person:
(1) any corporation, association or other business entity
of which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners
of which are such Person or one or more Subsidiaries of such
Person (or any combination thereof).
Treasury Rate means the yield to maturity at
the time of computation of United States Treasury securities
with a constant maturity (as compiled and published in the most
recent Federal Reserve Statistical Release H.15 (519) which
has become publicly available at least two Business Days prior
to the date fixed for prepayment (or, if such Statistical
Release is no longer published, any publicly available source
for similar market data)) most nearly equal to the
then-remaining term of the Notes to April 15, 2014;
provided, however, that if the then-remaining term
of the Notes to April 15, 2014, is not equal to the
constant maturity of a United States Treasury security for which
a weekly average yield is given, the Treasury Rate will be
obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United
States Treasury securities for which such yields are given,
except that if the then-remaining term of the Notes to
April 15, 2014 is less than one year, the weekly average
yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year will be used.
Voting Stock of any Person as of any date
means the Capital Stock of such Person that is at the time
entitled to vote in the election of the Board of Directors of
such Person.
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MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following describes the material U.S. federal income
tax consequences of the ownership and disposition of the notes
by holders who purchase notes at their original issuance for a
price equal to the issue price of the notes (i.e., the first
price at which a substantial amount of the notes is sold other
than to bond houses, brokers or similar persons or organizations
acting in the capacity of underwriters, placement agents or
wholesalers) and who hold the notes as capital assets
(generally, property held for investment). This discussion is
not a complete discussion of all the potential tax consequences
that may be relevant to you. This discussion is based upon the
Internal Revenue Code of 1986 (the Code), as
amended, its legislative history, existing and proposed
regulations thereunder, published rulings and court decisions,
all as in effect on the date of this document, and all of which
are subject to change, possibly on a retroactive basis.
The tax treatment of holders of the notes may vary depending
upon their particular situations. Certain holders, including
insurance companies, tax exempt organizations, financial
institutions, investors in pass-through entities, certain
U.S. expatriates, taxpayers subject to the alternative
minimum tax, broker-dealers and persons holding the notes as
part of a straddle, hedge or
conversion transaction, may be subject to special
rules not discussed below. This discussion does not address any
estate, gift, foreign, state or local taxes.
We urge you to consult your own tax advisors regarding the
particular U.S. federal income tax consequences to you of
holding and disposing of notes, any tax consequences that may
arise under the laws of any relevant foreign, state, local, or
other taxing jurisdiction or under any applicable tax treaty, as
well as possible effects of changes in federal or other tax
laws.
In certain circumstances (see Description of the
Notes Optional Redemption,
Repurchase at the Option of Holders upon a
Change of Control, we may elect or be obligated to pay
amounts on the notes that are in excess of stated interest or
principal on the notes. We do not intend to treat the
possibility of paying such additional amounts as causing the
notes to be treated as contingent payment debt
instruments. However, additional income will be recognized
if any such additional payment is made. It is possible that the
Internal Revenue Service (the IRS) may take a
different position, in which case a holder might be required to
accrue interest income at a higher rate than the stated interest
rate and to treat as ordinary interest income any gain realized
on the taxable disposition of the note. The remainder of this
discussion assumes that the notes will not be treated as
contingent payment debt instruments. Investors should consult
their own tax advisors regarding the possible application of the
contingent payment debt instrument rules to the notes.
Tax
Consequences of the Exchange Offer
The tender of Outstanding Notes in exchange for Exchange Notes
in the exchange offer will not constitute a taxable event to
holders for United States federal income tax purposes and,
accordingly, the United States federal income tax
consequences of holding the Exchange Notes are identical to
those of holding the Outstanding Notes. As a result, no gain or
loss will be recognized by a holder upon receipt of an Exchange
Note in exchange for an Outstanding Note and any such holder
will have the same adjusted basis and holding period in the
Exchange Note as in the Outstanding Note immediately before the
exchange.
U.S.
Holders
The following is a summary of the material U.S. federal
income tax consequences that will apply to you if you are a
U.S. holder of the notes. For purposes of this discussion,
you are a U.S. holder if you are a beneficial
owner of notes and you are:
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an individual citizen or resident of the United States;
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a corporation or other entity treated as a corporation for
U.S. federal income tax purposes, created or organized in
or under the laws of the United States or of any state thereof
or the District of Columbia;
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an estate whose income is subject to U.S. federal income
taxation regardless of its source; or
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a trust if a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more
United States persons have the authority to control all
substantial decisions of the trust or a trust that has a valid
election in effect under applicable regulations to be treated as
a United States person.
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If a partnership or other entity treated as a partnership for
U.S. federal income tax purposes holds the notes, the tax
treatment of a partner will generally depend on the status of
the partner and on the activities of the partnership. Partners
of partnerships holding notes should consult their tax advisors.
Stated
Interest on the Notes
Stated interest on the notes generally will be taxable to you as
ordinary income at the time it is received or accrued in
accordance with your regular method of accounting for United
States federal income tax purposes.
Sale,
Taxable Exchange, Redemption, Retirement or Other Taxable
Disposition of the Notes
Upon a sale, taxable exchange, redemption, retirement or other
taxable disposition of a note, you generally will recognize gain
or loss equal to the difference between the amount received upon
such disposition (less any amount attributable to accrued
interest which will be taxable as ordinary income, if not
previously included in gross income) and your adjusted tax basis
in the note at that time. Your adjusted tax basis in the note
will generally equal the amount you paid for the note. Such gain
or loss generally will be capital gain or loss, and will be
long-term capital gain or loss if, at the time of the
disposition, the note has been held for more than one year.
Under current law, long-term capital gains of certain
non-corporate holders are generally taxed at lower rates than
items of ordinary income. The deductibility of capital losses is
subject to limitations.
Backup
Withholding and Information Reporting
In general, information reporting and backup withholding will
apply to payments of interest on the notes and to the proceeds
from the sale, taxable exchange, redemption, retirement or other
disposition of a note paid to you if you fail to provide the
withholding agent with a correct taxpayer identification number,
certified under penalties of perjury, as well as certain other
information. Backup withholding is not an additional tax. If
backup withholding applies to you, you may use the amounts
withheld as a refund or credit against your U.S. federal
income tax liability, as long as you timely provide certain
information to the IRS.
New
Legislation
For taxable years beginning after December 31, 2012, newly
enacted legislation is scheduled to impose a 3.8% tax on the
net investment income of certain United States
citizens and resident aliens, and on the undistributed net
investment income of certain estates and trusts. Among
other items, net investment income would generally
include gross income from interest, and net gain from the sale,
taxable exchange redemption, exchange, retirement or other
taxable disposition of a note, less certain deductions.
Non-U.S.
Holders
The following is a summary of the material U.S. federal
income tax consequences that will apply to you if you are a
non-U.S. holder
of the notes. You are a
non-U.S. holder
for purposes of this discussion if you are a beneficial owner of
notes that is an individual, corporation, estate or trust that
is not a U.S. holder.
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Stated
Interest on the Notes
Stated interest that we pay to you that is not effectively
connected with your conduct of a U.S. trade or business
will not be subject to U.S. federal income tax and
U.S. federal withholding tax will not be required on that
payment if you:
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do not actually or constructively own 10% or more of the
combined voting power of all classes of our stock entitled to
vote;
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are not a controlled foreign corporation with
respect to which we are a related person;
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are not a bank receiving interest on a loan entered into in the
ordinary course of business within the meaning of the
Code; and
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you certify to us, our payment agent, or the person who would
otherwise be required to withhold U.S. federal income tax,
on IRS
Form W-8BEN
or applicable substitute form, under penalties of perjury, that
you are not a United States person and provide your name and
address.
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If you do not satisfy the preceding requirements, your interest
on a note that is not effectively connected with a
U.S. trade or business would generally be subject to
U.S. withholding tax at a flat rate of 30% unless that rate
is reduced or eliminated pursuant to an applicable tax treaty
(provided certain certification requirements are met).
Sale,
Taxable Exchange, Redemption, Retirement or Other Taxable
Disposition of the Notes
You generally will not be subject to U.S. federal income
tax with respect to gain recognized on a sale, taxable exchange,
redemption, retirement or other taxable disposition of a note
unless:
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the gain is effectively connected with your conduct of a trade
or business within the United States, and, if an applicable tax
treaty applies, is attributable to a permanent establishment or
fixed base you maintain in the United States; or
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you are an individual who is present in the United States for
183 or more days in the taxable year of the disposition and
certain other requirements are met.
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If you are a
non-U.S. holder
described in the first bullet point above, you generally will be
subject to tax as described below (See
Non-U.S. Holders
Income or Gain Effectively Connected With a U.S. Trade or
Business). If you are a
non-U.S. holder
described in the second bullet point above, you generally will
be subject to a flat 30% United States federal income tax on the
gain derived from the sale, redemption, exchange, retirement or
other disposition, which may be offset by certain
U.S. source capital losses.
Income
or Gain Effectively Connected with a U.S. Trade or
Business
If you are engaged in trade or business in the United States,
and if interest on a note or gain on the sale, taxable exchange,
redemption, retirement or other taxable disposition of a note is
effectively connected with the conduct of that trade or business
(and, if an applicable income tax treaty so requires, is
attributable to a permanent establishment or fixed base
maintained by you in the United States) you will be subject to
regular U.S. federal income tax on the interest or gain in
the same manner as if you were a United States person but will
be exempt from U.S. withholding tax if you provide to us,
our payment agent or the person who would otherwise be required
to withhold U.S. federal income tax, a properly completed
and executed IRS
Form W-8ECI
or applicable substitute form. In addition to regular
U.S. federal income tax, if you are a corporation, you may
be subject to a U.S. branch profits tax at a 30% rate or
such lower rate as may be available under an applicable income
tax treaty.
Information
Reporting and Backup Withholding
Backup withholding and information reporting generally will not
apply to payments to you of interest on the notes by us or our
paying agent to you if you certify as to your
non-U.S. status
under penalties of perjury or otherwise establish an exemption,
provided that neither we nor our paying agent has actual
knowledge or
59
reason to know that you are a United States person or that the
conditions of any other exemptions are not in fact satisfied.
However, payments of interest on the notes are required to be
reported on IRS
Form 1042-S
even if the payments are not otherwise subject to information
reporting.
The payments of the proceeds of the disposition of notes to or
through the U.S. office of a U.S. or foreign broker
will be subject to information reporting and backup withholding
unless you provide the certification described above under
Stated Interest on the Notes or otherwise establish
an exemption. The proceeds of a disposition of notes effected
outside the United States to or through a foreign office of a
broker generally will not be subject to backup withholding or
information reporting. However, if that broker is a United
States person, a controlled foreign corporation for
U.S. federal income tax purposes, a foreign person 50% or
more of whose gross income from all sources for certain periods
is effectively connected with a trade or business in the United
States, or a foreign partnership that is engaged in the conduct
of a trade or business in the United States or that has one
or more partners that are U.S. persons who in the aggregate
hold more than 50% of the income or capital interests in the
partnership, information reporting requirements will apply
unless that broker has documentary evidence in its files of your
non-U.S. status
and has no actual knowledge or reason to know to the contrary or
unless you otherwise establish an exemption.
You are urged to consult your tax advisors regarding the
application of information reporting and backup withholding to
your particular situation, the availability of an exemption
therefrom, and the procedure for obtaining such an exemption, if
available. Any amounts withheld from a payment to you under the
backup withholding rules will be allowed as a credit against
your U.S. federal income tax liability, if any, and may
entitle you to a refund, provided you timely furnish the
required information to the IRS.
Treasury
Circular 230 Disclosure
The preceding discussion of material U.S. federal income
tax considerations and any other discussion in this prospectus
of the tax consequences or tax risks of an investment in the
notes is not intended or written to be used, and cannot be used,
by any person for the purpose of avoiding tax penalties that may
be imposed on the person. This discussion was written to support
the marketing of the transaction(s) or matter(s) addressed
herein, and the taxpayer should seek advice based on the
taxpayers particular circumstances from an independent tax
advisor. No limitation has been imposed by legal counsel on
disclosure of the tax treatment or tax structure of the
transaction.
PLAN OF
DISTRIBUTION
Based on interpretations by the staff of the SEC set forth in
no-action letters issued to third parties, we believe that the
Exchange Notes issued pursuant to the exchange offer may be
offered for resale, resold and otherwise transferred by holders
thereof without compliance with the registration and prospectus
delivery provisions of the Securities Act; provided, that such
Exchange Notes are acquired in the ordinary course of such
holders business and such holders are not engaged in, and
do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a distribution
of such Exchange Notes; and provided further, that such holder
is not (1) an affiliate of ours or the
Guarantors within the meaning of the Securities Act, (2) a
broker-dealer who acquired Outstanding Notes directly from our
company or (3) except as provided below, a broker-dealer
who acquired Outstanding Notes as a result of market-making or
other trading activities.
Based on such SEC interpretations, a broker-dealer who acquired
Outstanding Notes as a result of market-making or other trading
activities may participate in the exchange offer with respect to
such notes and resell the Exchange Notes received in exchange,
provided that the following conditions are met: (1) in
connection with any such resales, the broker-dealer delivers
this prospectus (which contains a plan of distribution with
respect to such resale transactions); (2) the broker-dealer
has not entered into any arrangement with the company or any of
our affiliates to distribute the Exchange Notes; (3) we
make each person participating in the exchange offer aware that
any such broker-dealer may be considered an
underwriter under the Securities Act and must
deliver such prospectus; and (4) we include in the letter
of transmittal an acknowledgement by such broker-dealer that it
will deliver this prospectus in connection with
60
any resale of such Exchange Notes. By so acknowledging and by
delivering a prospectus, such broker-dealer will not be deemed
to admit that it is an underwriter within the
meaning of the Securities Act.
Pursuant to the registration rights agreement, we have agreed to
permit broker-dealers to use this prospectus in connection with
the resale of the Exchange Notes. To the extent necessary to
ensure that the prospectus is available, we agreed to use our
best efforts to keep the exchange offer registration statement
continuously effective, supplemented, amended and current for a
period of 180 days after the date on which the registration
statement is declared effective or such shorter period as will
terminate when such broker-dealers are no longer required to
deliver the prospectus. We will provide sufficient copies of the
latest version of this prospectus to such broker-dealers
promptly after such request at any time during this period.
We will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for
their own account pursuant to the exchange offer may be sold
from time to time in one or more transactions in the
over-the-counter
market, in negotiated transactions, through the writing of
options on the Exchange Notes or a combination of such methods
of resale, at prices related to such prevailing market prices or
at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by
it for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of such
Exchange Notes may be deemed to be an underwriter
within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an underwriter within the meaning
of the Securities Act.
Each holder of Outstanding Notes who wishes to exchange
Outstanding Notes for Exchange Notes in the exchange offer will
be require to make certain representations to us as set forth in
The Exchange Offer.
Any holder using the exchange offer to participate in a
distribution of the Exchange Notes cannot rely on the SEC staff
positions enunciated in Exxon Capital Holdings Corporation,
Morgan Stanley & Co., Incorporated or similar letters
and, in the absence of an exemption, must comply with the
registration and prospectus delivery requirements of the
Securities Act in connection with a resale of Exchange Notes.
Such a secondary resale transaction should be covered by an
effective registration statement containing the selling security
holder information required by the Securities Act and rules
promulgated thereunder.
We have agreed to pay the expenses incident to the exchange
offer other than commissions or concessions of any brokers or
dealers and will indemnify the holders of the Exchange Notes
against certain liabilities, including under the Securities Act,
as set forth in the registration rights agreement.
LEGAL
MATTERS
The validity of the securities offered hereby will be passed
upon for us by Jones, Walker, Waechter, Poitevent,
Carrère & Denègre L.L.P.
EXPERTS
The financial statements and managements assessment of the
effectiveness of internal control over financial reporting
(which is included in Managements Report on Internal
Control over Financial Reporting) incorporated in this
Prospectus by reference to the Annual Report on
Form 10-K
for the year ended October 31, 2010 have been so
incorporated in reliance on the report of PricewaterhouseCoopers
LLP, an independent registered public accounting firm, given on
the authority of said firm as experts in auditing and accounting.
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