Item 1.01
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Entry into a Material Definitive Agreement.
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Indenture and Collateral Agreement
On June 27, 2019 (the Closing Date), StoneMor Partners L.P. (the Partnership), Cornerstone Family Services of
West Virginia Subsidiary, Inc. (Cornerstone and, collectively with the Partnership, the Issuers), certain direct and indirect subsidiaries of the Partnership (the Guarantors), the initial purchasers party thereto
(the Initial Purchasers) and Wilmington Trust, National Association, as trustee (in such capacity, the Trustee) and as collateral agent (in such capacity, the Collateral Agent) entered into an indenture (the
Indenture) with respect to the 9.875%/11.500% Senior Secured PIK Toggle Notes due 2024 (the Notes). Capitalized terms that are used in this description of the Indenture but not defined herein shall have the meaning assigned
to such terms in the Indenture.
Pursuant to the terms of the Indenture, on the Closing Date, the Initial Purchasers purchased Notes in
the aggregate principal amount of $385.0 million in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the Securities Act) pursuant to Section 4(a)(2) thereof. The gross
proceeds from the sale of the Notes was $371.525 million, less advisor fees (including a placement agent fee of approximately $7.0 million), legal fees, mortgage costs and other closing expenses, as well as cash funds for collateralization of
existing letters of credit and credit card needs under the former credit facility.
The Issuers will pay interest at either a fixed rate
of 9.875% per annum in cash or, at their option through January 30, 2022, a fixed rate of 7.50% per annum in cash plus a fixed rate of 4.00% per annum payable in kind by increasing the principal amount of the Notes or by issuing additional
Notes. Interest is payable quarterly in arrears on the 30
th
day of each March, June, September and December, commencing September 30, 2019. The Notes mature on June 30, 2024.
The Notes are senior secured obligations of the Issuers. The Issuers joint and several obligations under the Notes and the Indenture are
jointly and severally guaranteed (the Note Guarantees) by each subsidiary of the Partnership (other than Cornerstone) that the Partnership has caused or will cause to become a Guarantor pursuant to the terms of the Indenture. In
addition, the Issuers, the Guarantors and the Collateral Agent entered into a Collateral Agreement dated the Closing Date (the Collateral Agreement). Pursuant to the Indenture and the Collateral Agreement, the Issuers obligations
under the Indenture and the Notes and the Guarantors Note Guarantees are secured by a first priority lien and security interest (subject to permitted liens and security interests) in substantially all of the Issuers and the
Guarantors assets, whether now owned or hereafter acquired, excluding certain assets which include, among others: (a) trust and other fiduciary accounts and amounts required to be deposited or held therein and (b) unless encumbered
by an existing mortgage, owned and leased real property that (i) may not be pledged as a matter of law or without governmental approvals, (ii) is not operated or intended to be operated as a cemetery, crematory or funeral home or
(iii) is the subject of specified immaterial leases.
The Issuers may redeem the Notes at their option, in whole or in part, at any
time for a redemption price equal to the principal balance thereof, accrued and unpaid interest thereon and, if applicable, a premium (the Applicable Premium) calculated as follows:
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If redeemed before June 27, 2021, the sum of 4% of the principal amount so redeemed plus the excess of (i)
the interest that would have accrued on the principal amount of the redeemed Notes from the redemption date through June 27, 2021 assuming an interest rate of 11.50% per annum over (ii) the interest that would have accrued on the
principal amount of the redeemed Notes from the redemption date through June 27, 2021 at an interest rate equal to the then-applicable rate on United States Treasury securities for the period most nearly equaling that time period plus 0.50%;
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If redeemed on or after June 27, 2021 and before June 27, 2022, 4% of the principal amount so redeemed;
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If redeemed on or after June 27, 2022 and before June 27, 2023, 2% of the principal amount so redeemed;
and
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If redeemed on or after June 27, 2022, no premium will be payable.
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The Issuers are obligated to redeem Notes with the net cash proceeds of certain dispositions described in the Indenture, tax refunds,
insurance or condemnation proceeds and certain other extraordinary receipts. The redemption price for such redemptions is the principal balance of the Notes being redeemed, all accrued and unpaid interest thereon plus, with respect to redemptions
from asset dispositions with net proceeds in excess of $55.0 million, an Applicable Premium of 2% of the principal amount so redeemed.
The Issuers are also obligated to use 75% of any Excess Cash Flow, less any amount paid in any voluntary redemption of Notes during the
applicable period or subsequent thereto and prior to the applicable redemption date, to redeem Notes at a redemption price equal to the principal balance thereof and all accrued and unpaid interest thereon.
All interest payable in connection with the redemption of any Notes is payable in cash.
The Indenture requires the Issuers and the Guarantors, as applicable, to comply with various affirmative covenants regarding, among other
matters, delivery to the Trustee of financial statements and certain other information or reports filed with the Securities and Exchange Commission (the SEC) and the maintenance and investment of trust funds and trust accounts into which
certain sales proceeds are required by law to be deposited.
The Indenture includes financial covenants pursuant to which the Issuers will
not permit:
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the Operating Cash Flow Amount for the twelve months ending December 31, 2019 to be less than
$20.0 million;
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the ratio of the sum of the Operating Cash Flow Amount plus Cash Interest Expense to Cash Interest Expense, or
the Consolidated Interest Coverage Ratio, for the twelve months ending as of each date set forth below, to be less than:
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March 31, 2020
June 30, 2020
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0.40x
0.75x
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September 30, 2020
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1.00x
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December 31, 2020
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1.15x
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March 31, 2021
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1.25x
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June 30, 2021
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1.30x
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September 30, 2021
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1.35x
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December 31, 2021
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1.45x
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March 31, 2022 and each quarter end thereafter
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1.50x
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the aggregate amount of Capital Expenditures for the prior four fiscal quarters as of the last day of any fiscal
quarter beginning with the fiscal quarter ending September 30, 2019 to be more than $20.0 million;
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the average daily balance of Unrestricted Cash and unrestricted Permitted Investments of the Partnership and its
subsidiaries as of the end of any day for any
10-business
day period to be less than $20.0 million during the quarter ending September 30, 2019, $15.0 million during the quarter ending
December 31, 2019 and $12.5 million during any subsequent quarter; or
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the ratio of the (a) the sum of Unrestricted Cash, accounts receivable and merchandise trust account
balances to (b) the aggregate principal or face amount of Consolidated Funded Indebtedness, or Asset Coverage Test, for the applicable measurement period as of the last day of any fiscal quarter beginning with the fiscal quarter ending
September 30, 2019, to be less than 1.60:1.00.
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The Indenture requires the Issuers and the Guarantors, as
applicable, to comply with certain other covenants including, but not limited to, covenants that, subject to certain exceptions, limit the Issuers and the Guarantors ability to: (i) incur additional indebtedness; (ii) grant
liens; (iii) engage in certain sale/leaseback, merger, consolidation or asset sale transactions; (iv) make certain investments; (v) pay dividends or make distributions; (vi) engage in affiliate transactions and (vii) amend
its organizational documents.
The Indenture provides for certain events of default, the occurrence and continuation of which could,
subject to certain conditions, cause all amounts owing under the Notes to become due and payable, including but not limited to the following:
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failure by the Issuers to pay any interest on any Note when it becomes due and payable that remains uncured for
five business days;
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failure by the Issuers to pay the principal on any of the Notes when it becomes due and payable, whether at the
due date thereof, at a date fixed for redemption, by acceleration or otherwise;
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failure by the Issuers to comply with the agreement and covenants relating to maintenance of its legal existence,
providing notice of any default or event of
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default or use of proceeds from the sale of the Notes or any of the negative covenants in the Indenture;
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failure by the Issuers to comply with any other agreement or covenant contained in the Indenture, the Collateral
Agreement or any other Note Document that remains uncured for a period of 15 days after the earlier of written notice and request for cure from the Trustee or holders of at least 25% of the aggregate principal amount of Notes;
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the acceleration of or the failure to pay at final maturity indebtedness (other than the Notes) in a principal
amount exceeding $5.0 million;
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the occurrence of a Change in Control (see definition below);
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certain bankruptcy or insolvency proceedings involving an Issuer or any subsidiary;
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the conversion of StoneMor GP LLC, the Partnerships general partner (the General Partner), into
a corporation (the
C-Corporation
Conversion) shall not have occurred on or before March 31, 2020 and such default remains uncured for a period of five business days; and
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failure by the Partnership or any Subsidiary to maintain one or more licenses, permits or similar approvals for
the conduct of its business where the sum of the revenue associated therewith represents the lesser of (i) 15% of the Partnerships and its Subsidiaries consolidated revenue and (ii) $30.0 million, and such breach is not cured within
30 days.
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At the option of holders holding a majority of the outstanding principal amount of the Notes (and
automatically upon any default for failure to pay principal of the Notes when due and payable or certain bankruptcy or insolvency proceedings involving an Issuer), the interest rate on the Notes will increase to 13.50% per annum, payable in cash.
A Change in Control means:
(A) any person or group (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act, but excluding any employee benefit plan of such person or its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than the Permitted
Holders (which includes Axar Capital Management, L.P. and its Affiliates), becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to have beneficial
ownership of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of Equity Interests representing more than 50% of the
Equity Interests in the Partnership or the General Partner entitled to vote for members of the board of directors or equivalent governing body of the Partnership or the General Partner on a fully-diluted basis (and taking into account all such
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securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time);
(B) the Permitted Holders cease to have a contractual right under the Nomination and Director
Voting Agreement to appoint or nominate (x) three of the directors on the board of directors of the General Partner or, after the
C-Corporation
Conversion, directors on the board of directors of the
C-Corporation
in the case of a 7 member board of directors, or (y) at least 3/7ths of such directors in the event that the board of directors of the General Partner or the
C-Corporation,
as applicable, does not contain 7 members;
(C) any holder of Equity Interests other than the Permitted Holders has the contractual or
other right to appoint or nominate a majority of the directors on the board of directors of the General Partner or, after the
C-Corporation
Conversion, a majority of the directors on the board of directors of
the
C-Corporation;
(D) prior to the
C-Corporation
Conversion, the General Partner ceases to act as the sole general partner of the Partnership;
(E) the Partnership ceases to own 100% of the Equity Interests in the Operating Company; or
(F) after the consummation of the
C-Corporation
Conversion, the
C-Corporation
ceases to own 100% of the partnership interests in the Partnership;
provided that
notwithstanding anything in this definition to the contrary, the consummation of the transactions to effectuate the
C-Corporation
Conversion shall not, themselves, be deemed to constitute or result in a Change
in Control.
Registration Rights Agreement
In connection with the sale of the Notes, on June 27, 2019, the Issuers, the Guarantors party thereto and the Initial Purchasers entered
into a Registration Rights Agreement (the Notes Registration Rights Agreement), pursuant to which the Issuers and the Guarantors agreed, for the benefit of the holders of the Notes, to use their commercially reasonable efforts to file a
registration statement with the SEC with respect to a registered offer to exchange the Notes for new exchange notes having terms substantially identical in all material respects to the Notes, with certain exceptions (the Exchange
Offer). The Issuers have agreed to use their commercially reasonable efforts (i) to consummate the Exchange Offer on or before July 14, 2020 (the Exchange Date) and (ii) upon the occurrence of certain events
described in the Notes Registration Rights Agreement which result in the inability to consummate the Exchange Offer, to cause a shelf registration statement covering resales of the Notes to be declared effective.
If the Issuers fail to comply with their obligations under the Notes Registration Rights Agreement, additional interest will accrue on the
Notes at a rate of 0.25% per annum (increasing by an additional 0.25% per annum with respect to each subsequent
90-day
period that occurs after the date on which such default occurs, up to a maximum additional
interest rate of 1.00%) from and including the date on which any such default shall occur to but excluding the earlier of (x) the date on which all such defaults have been cured and (y) the date on which the Notes are freely tradeable by
persons other than affiliates of the Issuers
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pursuant to Rule 144 under the Securities Act.
The Indenture (including the form of
Notes), the Collateral Agreement and the Notes Registration Rights Agreement (collectively, the Debt Transaction Documents) include various representations, warranties, covenants and other provisions, as applicable, customary for
transactions of this nature. The foregoing summaries of the Debt Transaction Documents are not intended to be complete and are qualified in their entirety by reference to the Debt Transaction Documents, which the Partnership will file with the SEC
as exhibits to a future report.
Series A Preferred Unit Purchase Agreement
On June 27, 2019, funds and accounts affiliated with Axar Capital Management LP (Axar) and certain other investors
(individually a Purchaser and collectively the Purchasers) and the Partnership entered into the Series A Preferred Unit Purchase Agreement (the Series A Purchase Agreement) pursuant to which the Partnership sold
to the Purchasers an aggregate of 52,083,333 of the Partnerships Series A Preferred Units (the Preferred Units) representing limited partner interests in the Partnership with certain rights, preferences and privileges as are set
forth in the Partnerships Third Amended and Restated Agreement of Limited Partnership dated as of June 27, 2019 (the Third Amended Partnership Agreement). The purchase price for the Preferred Units sold pursuant to the Series
A Purchase Agreement (the Purchased Units) was $1.1040 per Purchased Unit, reflecting an 8% discount to the liquidation preference of each Preferred Unit, for an aggregate purchase price of $57.5 million. The terms of the sale of
the Purchased Units were determined based on arms-length negotiations between the General Partner and Axar.
Pursuant to the Series A
Purchase Agreement, the Partnership agreed to file a registration statement on Form
S-1
with the SEC as promptly as practicable to effect a $40,185,483 rights offering of common units representing limited
partnership interests in the Partnership (Common Units) to all holders of Common Units (other than the Purchasers, American Infrastructure Funds LP and their respective affiliates) with a purchase price of $1.20 per Common Unit (the
Rights Offering), and agreed to use its reasonable best efforts to complete the Rights Offering within 100 days after the Closing Date. The proceeds from the Rights Offering will be used to redeem certain of the Preferred Units as
described below.
Under the Series A Purchase Agreement, the Partnership also granted the Purchasers a preemptive right to purchase a pro
rata share of any subsequent issuance of Common Units or shares of common stock of the corporation (Common Stock) into which the General Partner is converted in the
C-Corporation
Conversion or
rights to acquire any such securities, for so long as the Purchaser continues to hold any Preferred Units, any Common Units or Common Stock issued upon conversion thereof.
The Preferred Units have the following rights, preferences and privileges, among others as set forth in the Third Amended Partnership
Agreement:
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Conversion: The Preferred Units are convertible at the option of the holders thereof at any time beginning 10
days after completion of the Rights Offering and shall automatically be converted upon consummation of the
C-Corporation
Conversion, in each case at an initial conversion rate of one Common Unit or one share
of Common Stock, as applicable, for each Preferred Unit. Subject to customary exceptions, the conversion rate for each Preferred Unit is subject to adjustment (a) proportionately, in the event of distributions made in the form of interests in
the Partnership, any split, combination or similar recapitalization of Common Units and certain other specified transactions with respect to interests in the Partnership, (b) upon any issuance or deemed issuance by the Partnership prior to
consummation of the Rights Offering of Common Units for a price per Common Unit less than the Series A Liquidation Preference (as defined below), to the rate determined by dividing the Series A Liquidation Preference by the price per Common Unit in
such issuance or deemed issuance and (c) upon any issuance or deemed issuance by the Partnership after consummation of the Rights Offering of Common Units for a price per Common Unit less than the Series A Liquidation Preference, to a rate
determined on a weighted average anti-dilution adjustment basis.
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Voting: The holder of a Preferred Unit is entitled to one vote
for each Common Unit into which such Preferred Unit is convertible (whether or not such right to convert is exercisable at such time). The holders of Preferred Units are entitled to vote as a single class with the holders of Common Units on all
matters submitted to the limited partners for a vote. In addition, the affirmative vote of the holders of at least 60% of the outstanding Preferred Units is required to:
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Amend the Third Amended Partnership Agreement or the Partnerships Certificate of Limited Partnership if
such amendment would be adverse (other than in a
de minimus
manner) to any of the rights, preferences or privileges of the Preferred Units;
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Pay any distribution from Capital Surplus (as defined in the Third Amended Partnership Agreement); or
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Issue any class or series of interest in the Partnership that, with respect to distributions, is senior to or
pari passu
with the Preferred Units, or modify the terms of any existing class or series of interest in the Partnership to so provide.
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Distributions: Holders of Preferred Units are entitled to participate in any distributions made to holders of
Common Units on an
as-converted
basis (whether or not such right to convert is exercisable at such time), and any such distributions with respect to Preferred Units shall be excluded in calculating the
distributions or allocations of income or gain to holders of incentive distribution rights under the Third Amended Partnership Agreement.
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Redemption: Upon completion of the Rights Offering, the Partnership is obligated to use 100% of the net proceeds
thereof to redeem up to 33,487,904 Preferred Units held by Axar and the other Purchasers at a redemption price of $1.20 per Preferred Unit.
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Liquidation: Upon any liquidation, dissolution or winding up of the Partnership, holders of Preferred Units are
entitled to receive a payment of $1.20 per Preferred Unit (the Series A Liquidation Preference) before payments are made to any other class or series of interest in the Partnership ranking junior to the Preferred Units, including Common
Units.
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Restrictions on Transfer: Holders of Preferred Units may not transfer such Preferred
Units other than to one or more affiliates without the approval of the Partnership.
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The Series A Purchase Agreement
includes various representations, warranties, covenants, indemnification and other provisions which are customary for a transaction of this nature.
The Partnership offered and sold the Purchased Units in reliance upon the exemption from the registration requirements of the Securities Act
pursuant to Section 4(a)(2) thereof. The Partnership relied on this exemption from registration based in part on representations made by the Purchasers in the Series A Purchase Agreement.
Registration Rights Agreement
In connection with the sale of the Preferred Units, on June 27, 2019, the Partnership, the General Partner and the Purchasers entered
into a Registration Rights Agreement (the Equity Registration Rights Agreement) pursuant to which the Partnership agreed to use its reasonable best efforts to file a registration statement with the SEC to permit the resale of the Common
Units or Common Stock issuable upon conversion of the Purchased Units or otherwise owned by the Purchasers and their controlled affiliates and securities issued pursuant to any split, dividend, recapitalization, exchange or similar event
(collectively, the Registrable Securities). The Partnership also agreed to use its reasonable best efforts to cause such registration statement to become effective by the earlier of 30 days after consummation of the
C-Corporation
Conversion or May 1, 2020 (the Target Effective Date) and to keep such registration statement effective until the earlier of the date on which all such Registrable Securities may be
sold without restriction or limitation pursuant to Rule 144 under the Securities Act and without the requirement to be in compliance with Rule 144(c)(1) under the Securities Act or the date on which all such Registrable Securities have been sold.
The Partnership agreed to permit certain Purchasers to require the Partnership, if any such Purchaser elects to dispose of Registrable Securities under a registration statement pursuant to an underwritten public offering, to enter into an
underwriting agreement with an underwriter selected by such Purchaser (and reasonably approved by the Partnership, such approval not to be unreasonably withheld, conditioned or delayed) and take all such other reasonable actions as are requested by
the underwriter to expedite or facilitate the disposition of such Registrable Securities. The Partnership also granted the Purchasers the right to include such Registrable Securities in certain other registration
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statements the Partnership may file. The registration rights granted pursuant to the Equity Registration Rights Agreement are subject to exceptions, limitations and restrictions customary for a
transaction of this nature. The Equity Registration Rights Agreement also provides that the General Partner shall assume all of the obligations of the Partnership upon consummation of the
C-Corporation
Conversion.
Third Amended and Restated Agreement of Limited Partnership
On June 27, 2019, the General Partner approved the amendment and restatement of the Partnerships agreement of limited partnership
to establish the Preferred Units as a class of interests in the Partnership and to make certain other changes as the General Partner determined to be necessary and appropriate in connection with the issuance of the Purchased Units and/or which do
not adversely affect the other limited partners of the Partnership in any material respect. The material rights, preferences and privileges of the Preferred Units are described under the caption
Series A Preferred Unit Purchase
Agreement
in this Item 1.01 above, which description is incorporated in its entirety by reference herein.
Second Amendment
to Merger and Reorganization Agreement
As previously disclosed, on September 27, 2018, the Partnership, the General Partner,
StoneMor GP Holdings LLC, a Delaware limited liability company and the sole member of the General Partner (GP Holdings), and Hans Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of the General Partner
(Merger Sub), entered into a Merger and Reorganization Agreement (as amended to date, the Merger Agreement) pursuant to which, among other things, the General Partner will convert from a Delaware limited liability company
into a Delaware corporation to be named StoneMor Inc. (the Company) and Merger Sub will merge with and into the Partnership (the Merger) with the Partnership surviving and with the Company as its sole general partner (such
transaction, the
C-Corporation
Conversion).
On June 27, 2019, the Partnership,
the General Partner, GP Holdings and Merger Sub entered into an amendment to the Merger Agreement (the Second Amendment to Merger Agreement) to, among other things, provide that the Preferred Units that are outstanding on the date of
consummation of the Merger shall be automatically converted into the number of shares of Common Stock into which the Preferred Units are then convertible, provide that the Board of Directors of the General Partner immediately prior to the Merger
shall be the Board of Directors of the Company following the Merger and extend the termination date of the Merger Agreement to March 31, 2020.
Third Amendment to Voting and Support Agreement
As previously disclosed, in connection with the execution and delivery of the Merger Agreement, on September 27, 2018, the Partnership,
the General Partner, GP Holdings, Robert B. Hellman, Jr., in his capacity as trustee under the Voting and Investment Trust Agreement for the benefit of American Cemeteries Infrastructure Investors, LLC (ACII and, together with GP
Holdings, the ACII Entities), Axar Capital Management, LP, a Delaware limited partnership (Axar), Axar GP, LLC, a Delaware limited liability company (Axar GP), and Axar Master Fund, Ltd., a Cayman Islands exempted
limited partnership (the Axar Funds and, together with
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Axar and Axar GP, the Axar Entities) entered into a voting and support agreement (as amended to date, the Voting and Support Agreement), pursuant to which, among other
things, the Axar Entities were restricted from owning or acquiring more than 27.49% in aggregate of the outstanding Common Units prior to the closing of the Merger.
On June 27, 2019, the Partnership, the General Partner, GP Holdings, ACII and the Axar Entities entered into an amendment to the Voting
and Support Agreement (the Third Amendment to Voting and Support Agreement). The Third Amendment to the Voting and Support Agreement provides that, in calculating the 27.49% aggregate of the outstanding Common Units that the Axar
Entities are permitted to own or acquire prior to the closing of the Merger, the Preferred Units acquired pursuant to the Series A Purchase Agreement and any equity issued upon conversion of or in consideration of such Preferred Units shall be
excluded.
The terms and provisions of the Second Amendment to Merger Agreement, the Third Amendment to Voting and Support Agreement and
the Second Amendment to Nomination and Director Voting Agreement (defined and discussed below) were reviewed and approved by the Conflicts Committee of the General Partners Board of Directors, which is comprised entirely of independent
directors.
The foregoing summaries of the Series A Purchase Agreement, the Equity Registration Rights Agreement, the Third Amended
Partnership Agreement, the Second Amendment to Merger Agreement and the Third Amendment to Voting and Support Agreement (collectively, the Equity Transaction Documents) are not intended to be complete and are qualified in their entirety
by reference to the Equity Transaction Documents, which are attached hereto as Exhibits 10.1, 10.2, 3.1, 10.3 and 10.4, respectively, and are incorporated herein by reference.
Second Amendment to Nomination and Director Voting Agreement
As previously disclosed, in connection with the execution and delivery of the Merger Agreement, on September 27, 2018, the General
Partner, GP Holdings, ACII and the Axar Entities entered into a nomination and director voting agreement (as amended to date, the Nomination and Director Voting Agreement), pursuant to which, among other things, (i) the General
Partner agreed to permit the Axar Entities to designate up to one nominee to the Company Board of Directors and the ACII Entities to designate up to two nominees to the Company Board of Directors, subject to the terms and conditions set forth
therein, and (ii) as amended, during the period commencing on the closing date of the Merger and ending on the date 30 days following the delivery of all requisite notices of immediate effective resignation from the board of directors of the
Company (the Standstill Termination Date), the Axar Entities are restricted from owning or acquiring more than 27.49% in aggregate of the of the outstanding Common Stock.
On June 27, 2019, the General Partner, GP Holdings, ACII and the Axar Entities entered into an amendment to the Nomination and Director
Voting Agreement (the Second Amendment to Nomination and Director Voting Agreement) which provides that the Axar Entities shall have the right to designate three of the seven directors on the Company Board of Directors (or if the number
of such directors is increased, three-sevenths of total number of directors) until the refinancing or repayment of the Notes under the Indenture. Subject to the prior refinancing or
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repayment of the Notes under the Indenture, the right of Axar to designate directors to the Company Board of Directors shall be as follows:
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so long as the Axar Entities and their respective affiliates (the Axar Group) continue to
beneficially own at least 15% of the then-outstanding Common Stock, the Axar Entities will be entitled to designate three (3) directors for nomination to the Company Board of Directors;
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so long as the Axar Group continues to beneficially own at least 10% but less than 15% of the then-outstanding
Common Stock, the Axar Entities will be entitled to designate two (2) directors for nomination to the Company Board of Directors;
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so long as the Axar Group continues to beneficially own at least 5% but less than 10% of the then-outstanding
Common Stock, the Axar Entities will be entitled to designate one (1) director for nomination to the Company Board of Directors; and
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if the Axar Group beneficially owns less than 5% of the then-outstanding Common Stock, the right of the Axar
Entities to designate any director for nomination to the Company Board of Directors shall terminate.
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The Second
Amendment to Nomination and Voting Agreement also provides that the ACII Entities shall have the right to designate one (1) director for nomination to the Company Board of Directors so long as the ACII Entities and their respective affiliates
continue to beneficially own at least 4% of the then-outstanding Common Stock.
The Second Amendment to Nomination and Director Voting
Agreement also provides that, in calculating the 27.49% aggregate of the outstanding Common Stock that the Axar Entities are permitted to own or acquire during the period commencing on the closing date of the Merger and ending on the Standstill
Termination Date, the Preferred Units acquired pursuant to the Series A Purchase Agreement and any equity issued upon conversion of or in consideration of such Preferred Units shall be excluded.
Third Amended and Restated Limited Liability Company Agreement of StoneMor GP LLC
On June 27, 2019, the General Partner, GP Holdings and Axar Special Member LLC, a wholly-owned subsidiary of Axar (Axar Special
Member), entered into the Third Amended and Restated Limited Liability Company Agreement of the General Partner, pursuant to which the Axar Special Member was admitted as a member with the right to designate three-sevenths of the board of
directors of the General Partner, consistent with the provisions of the Second Amendment to Nomination and Voting Agreement as described above.
The foregoing summary of the Third Amended and Restated Limited Liability Company Agreement of the General Partner is not intended to be
complete and is qualified in its entirety by reference thereto, which is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
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