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add a covenant requiring the Partnership and the Administrative Borrower to use their reasonable best efforts to
consummate the transactions contemplated under the Merger Agreement (as defined below) by May 15, 2019 (the
C-Corporation
Conversion); modify the definition of Change in Control
and several covenants, including but not limited to reporting covenants and covenants restricting fundamental changes, dispositions, investments, acquisitions and transactions with affiliates to permit the
C-Corporation
Conversion and to permit the Partnership to be a wholly-owned subsidiary of StoneMor Inc. (as defined below);
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add a covenant requiring the Administrative Borrower to engage Houlihan Lokey or any other acceptable financial
advisor by no later than the second business day after the Eighth Amendment Effective Date to advise it in the arrangement of the refinancing in full of the obligations with respect to the Tranche A Revolving Credit Facility (such refinancing, the
Refinancing);
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add a covenant requiring the Administrative Borrower to retain Carl Marks & Co. or another acceptable
consultant of recognized national standing on or prior to the Eighth Amendment Effective Date, who shall (i) assist the Administrative Borrower in further developing its financial planning and analysis function; (ii) prepare a detailed
analysis of G&A expenses and other overhead and develop cost savings initiatives and (iii) present a monthly written update to the Administrative Agent and the Lenders on progress; and
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amend other provisions of the Original Amended Agreement (as amended by the 2018 Amendments) in connection with
the foregoing.
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In addition, in the Eighth Amendment, the Administrative Agent and Lenders party thereto waived existing defaults under
the Original Amended Agreement (as amended by the 2018 Amendments) as a result of the Partnerships failure to (i) deliver the financial statements for the periods ended March 31, 2018, June 30, 2018 and September 30, 2018
and the related compliance certificates; (ii) comply with the facilitys maximum Consolidated Secured Net Leverage Ratio for each period ended June 30, 2018, September 30, 2018 and December 31, 2018 (iii) comply with the
facilitys minimum Fixed Charge Coverage Ratio for each period ended June 30, 2018, September 30, 2018 and December 31, 2018; and (iv) inaccuracies in representations and warranties resulting from such defaults. The
effectiveness of the Eighth Amendment was subject to the satisfaction of certain conditions, including the payment to the Tranche A Revolving Lenders of a fee in the aggregate amount of $0.8 million.
Merger and Reorganization Agreement
On
September 27, 2018, the Partnership, StoneMor GP LLC, a Delaware limited liability company and the general partner of the Partnership (GP), StoneMor GP Holdings LLC, a Delaware limited liability company and the sole member of GP
(GP Holdings), and Hans Merger Sub, LLC, a Delaware limited liability company and wholly-owned subsidiary of GP (Merger Sub), entered into a Merger and Reorganization Agreement (the Merger Agreement) pursuant to
which, among other things, GP will convert from a Delaware limited liability company into a Delaware corporation to be named StoneMor Inc. (the Company when referring to StoneMor Inc. subsequent to such conversion), the Partnership will
become a wholly owned subsidiary of the Company and the unitholders of the Partnership will become stockholders in the Company.
Upon the terms and
subject to the conditions set forth in the Merger Agreement, GP Holdings shall contribute the 2,332,878 common units representing limited partner interests in the Partnership (the Common Units) owned by it (the GP
Holdings Common Units) to GP and immediately following receipt thereof, GP shall contribute the GP Holdings Common Units to StoneMor LP Holdings, LLC, a Delaware limited liability company and wholly owned subsidiary of GP (LP
Sub) and LP Sub shall be admitted as a limited partner of the Partnership; (ii) GP shall convert into the Company (the Conversion) and all of the limited liability company interests of GP held by GP Holdings prior to the Conversion
shall be canceled; (iii) as part of the Conversion and before giving effect to the Merger (as defined below), GP Holdings will be the sole stockholder of StoneMor Inc. and, as consideration for the Conversion and the Merger, will receive
2,332,878 shares of common stock, par value $0.01 per share, of StoneMor Inc. (the Company Shares) (subject to adjustment as provided in the Merger Agreement) with respect to the 2,332,878 Common Units held by LP Sub
immediately prior to the Conversion, and 2,950,000 Company Shares (the General Partner Shares) (also subject to adjustment as provided in the Merger Agreement) with respect to the 1.04% general partner interest, the incentive
distribution rights and the governance and all other economic and other rights associated with the general partner interest held indirectly by GP Holdings through the GP immediately prior to the Conversion.
Pursuant to the Merger Agreement, (i) any then outstanding awards of phantom units granted to a member of the GP Board under the StoneMor Partners L.P.
Long-Term Incentive Plan (as amended April 19, 2010) (the 2004 Partnership Equity Plan), (ii) any then outstanding award of Phantom Units granted to a member of the GP Board under the StoneMor Partners L.P. 2014 Long-Term Incentive Plan
(the 2014 Partnership Equity Plan), which was also renamed the StoneMor Amended and Restated 2018 Long-Term Incentive Plan (the Restated Plan), (iii) any then outstanding award of Phantom Units that is not a 2004 Director
Deferred Phantom Unit Award or a 2014 Director Deferred Phantom Unit Award granted under either the 2004 Partnership Equity Plan or the 2014 Partnership Equity Plan (a Phantom Award), (iv) any then outstanding award of restricted units
(Restricted Units) granted under the 2014 Partnership Equity Plan, (v) any then outstanding award of unit appreciation rights (UARs) granted under the 2004 Partnership Equity Plan (a UAR Award), shall, without any
required action on the part of the holder thereof, be assumed by the Company and converted into an award denominated in Company Shares.
At the Effective
Time, Merger Sub shall be merged with and into the Partnership (the Merger), with the Partnership surviving and with the Company as its sole general partner and LP Sub as its sole holder of Common Units and each outstanding Common Unit,
including certain phantom units granted to members of the GP Board under the 2004 Partnership Equity Plan but excluding any Common Units held by LP Sub, being converted into the right to receive one Company Share. All of the limited liability
company interests in Merger Sub outstanding immediately prior to the Effective Time shall be converted into and become limited partner interests in the surviving entity. Following the Effective Time, the general partnership interests in the
Partnership issued and outstanding immediately prior to the Effective Time shall remain outstanding and unchanged subject to such changes as are set forth in the Second Amended and Restated Agreement of Limited Partnership of the Partnership, dated
as of September 9, 2008, as amended as of November 3, 2017 (the LPA), and the Company shall continue to be the sole general partner of the Partnership.
Per the terms of the Merger Agreement, each Party shall bear its own expenses, costs and fees (including attorneys, auditors and financing fees,
if any) in connection with the preparation and delivery of the Merger Agreement and compliance therewith, whether or not the transactions contemplated by the Merger Agreement are effected. The Partnership has incurred $2.1 million in legal and
other expenses for the Merger Agreement through December 31, 2018.
Extension of Interim Strategic Executive
On October 8, 2018, Leo J. Pound, Interim Strategic Executive, and StoneMor GP LLC (StoneMor GP), the general partner of StoneMor Partners
L.P. (the Partnership), modified the terms of the agreement dated July 26, 2018 pursuant to which he served as Interim Strategic Executive of StoneMor GP by extending the term of his service in such capacity through October 31,
2018. The agreement outlined the specific strategic initiatives for which Mr. Pound was responsible in that capacity, which focused primarily on enhancing the Partnerships financial management and improving its cash flow. StoneMor GP also
delegated to Joseph M. Redling, its current President and Chief Executive Officer, the authority to extend such term for one additional month. During such additional period of service as Interim Strategic Executive, Mr. Pound continued to
receive a monthly fee of $50,000.
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