Exhibit 4.1


 


FIRST AMENDMENT TO CREDIT AGREEMENT


 


THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “First Amendment”),
dated as of January 7, 2005, is by and among CARRIAGE SERVICES, INC., a
Delaware corporation (the “Borrower”), the banks listed on the signature
pages hereof (the “Lenders”), WELLS FARGO BANK, N.A., as Syndication
Agent (in said capacity, the “Syndication Agent”), and BANK OF AMERICA,
N.A., as Administrative Agent, Swing Line Lender and L/C Issuer (in said
capacity as Administrative Agent, the “Administrative Agent”).


 


BACKGROUND


 


A.                                   The Borrower, the Lenders, the Syndication
Agent, and the Administrative Agent are parties to that certain Credit
Agreement, dated as of August 4, 2003 as modified by that certain
Commitment Increase Agreement, dated as of May 13, 2004 (as modified, the “Credit
Agreement”; the terms defined in the Credit Agreement and not otherwise
defined herein shall be used herein as defined in the Credit Agreement).


 


B.                                     The Borrower has advised the Lenders that it
intends to issue certain senior notes in aggregate amount not to exceed
$150,000,000 (hereinafter, the “Proposed Senior Note Issuance”).  The Borrower requests that the Lenders agree
to certain amendments to the Credit Agreement to account for the Proposed
Senior Note Issuance, in each case as more fully set forth herein.


 


C.                                     The Lenders parties to this First Amendment
(which Lenders constitute the Required Lenders as required under the Credit
Agreement) are willing to agree to such amendment, subject to the performance
and observance in full of each of the covenants, terms and conditions, and in
reliance upon all of the representations and warranties of the Borrower, set
forth herein.


 


NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the parties
hereto covenant and agree as follows:


 


1.                                       AMENDMENTS.


 


(a)                                  The definition of “Senior Notes” set
forth in Section 1.01 of the Credit Agreement is hereby amended to
read as follows:


 


“Senior Notes” means the up to
$150,000,000 Senior Notes of the Borrower issued on or about January 21,
2005, and including the unsecured guaranties thereof executed by certain
Subsidiaries of the Borrower, issued on substantially the same terms as set
forth on Exhibit A to the First Amendment.


 


(b)                                 The defined term “First Amendment” is
hereby added to Section 1.01 of the Credit Agreement in proper
alphabetical order to read as follows:


 


1





















 


“First Amendment” means that certain
First Amendment to Credit Agreement, dated as of January 7, 2005, among
the Borrower, the Lenders, the Syndication Agent and the Administrative Agent.


 


(c)                                  The defined term “Foreign Subsidiary”
is hereby added to Section 1.01 of the Credit Agreement in proper
alphabetical order to read as follows:


 


“Foreign Subsidiary” means each
Subsidiary of the Borrower which is organized under the laws of a jurisdiction
other than the United States of America or any State thereof.


 


(d)                                 Section 7.06(a) of the Credit Agreement is hereby amended to
(a) delete the last full paragraph thereof and (b) revise subsection (iii)
to read as follows:


 


(iii)                               so long as there exists no Default both before and after giving effect
to any such transaction, (x) the Borrower may make (A) payments of Dividends on
and redemptions of Existing Preferred Stock, (B) payments of Dividends on
Qualified Preferred Stock, and (C) distribution of the Trust Notes to the
holders of the Trust Preferred Stock in connection with the dissolution of the
Trust Subsidiary, and (y) the Borrower may pay interest on the Trust Notes to
the Trust Subsidiary and may cause or permit the Trust Subsidiary to declare,
make or pay Dividends in respect of the Trust Preferred Stock.


 


(e)                                  Section 7.11(a) of the Credit Agreement is hereby amended to
read as follows:


 


(a)                                  Maximum Leverage Ratio.  Permit
the Leverage Ratio at any time during any period of four fiscal quarters of the
Borrower to be greater than 4.00 to 1.00.


 


(f)                                    Amendment to Article VII.  Article VII
of the Credit Agreement is hereby amended by adding the following new Section 7.16
thereto to read as follows:


 


Section 7.16  Collateral.  On or before February 28, 2005, to
secure the Obligations, the Borrower shall, and shall cause it Subsidiaries
(other than the Trust Subsidiary) to, grant a first priority Lien and security
interest in (a) all Capital Stock of each of its Domestic Subsidiaries (other
than the Trust Subsidiary) and 66% of the Capital Stock of any Foreign
Subsidiary of the Borrower and (b) certain existing and future real and
personal property of the Borrower and each Domestic Subsidiary (other than the
Trust Subsidiary), including, but not limited to, machinery and equipment,
inventory and other goods, accounts receivable, owned real estate, leaseholds,
fixtures, bank accounts, general intangibles, financial assets, investment
property, license rights, patents, trademarks, trade names, copyrights, chattel
paper, insurance proceeds, contract rights, hedge agreements, documents,
instruments, indemnification rights, tax refunds and cash (collectively, the “Collateral”).
The Borrower shall, and shall cause its Domestic Subsidiaries to provide for
the benefit of the Administrative Agent and the Lenders, all items to fully
effect the foregoing, including, without


 


2





















 


limitation, provide the Administrative Agent with UCC-ls together with
security agreements, pledge agreements, mortgages, deeds of trust, appraisals,
hazard insurance, title insurance, UCC searches, tax and Lien searches,
intellectual property documentation and registration and other similar types of
documents, consents, authorizations, licenses, instruments and agreements relating
to all property and other assets of the Borrower and its Domestic Subsidiaries
as requested by the Administrative Agent, and opinions of local legal counsel
with respect to the execution and filing thereof, and perfection of Liens
created thereby.  Notwithstanding the
foregoing, in no event shall any provision of this Section 7.16
require (i) any assets owned by any Foreign Subsidiary to be pledged or
hypothecated to secure the Obligations or (ii) more than 66% of the issued and
outstanding Capital Stock of any Foreign Subsidiary of the Borrower to be
pledged to secure the Obligations.


 


(g)                                 Section 8.01 (1) of the Credit Agreement is hereby amended to
read as follows:


 


(1)                                  Other Obligations. (i) Any event shall occur or condition
shall exist under the Trust Preferred Stock, Trust Notes or Trust Guaranties
(collectively, the “Debt Documents”), after the applicable grace period,
if any, specified in such Debt Document, if the effect of such event or
condition is to accelerate the maturity of the Trust Preferred Stock or Trust
Notes, as applicable; (ii) without the prior written consent of the Required
Lenders, any modification shall be made to any Debt Document which (a) renders
the subordination provisions thereof more favorable to the holders of the Trust
Preferred Stock or Trust Notes, as applicable, or less favorable to the
Lenders, or (b) renders the economic terms of the Trust Preferred Stock or
Trust Notes, as applicable, materially more favorable to the holders of the
Trust Preferred Stock or Trust Notes, as applicable, or materially less
favorable to the Borrower or the applicable Subsidiary, or (iii) any event
shall occur under any Debt Document that would permit the holders thereof to
require the redemption or mandatory prepayment thereof.


 


(h)                                 Exhibit E to the Credit Agreement is hereby amended to be in the form of Exhibit
E to this First Amendment.


 


2.                                       APPLICABLE RATE.  Notwithstanding
anything in the Credit Agreement to the contrary, the parties hereto agree that
the Applicable Rate in effect from the date of effectiveness of this First
Amendment as determined pursuant to Section 4 hereof through and including
the date of the first Compliance Certificate delivered pursuant to Section 6.02(a)
of the Credit Agreement after such date of effectiveness shall be determined
based upon Pricing Level 4.


 


3.                                       REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT
OF DEFAULT.  By its execution and delivery hereof, the
Borrower represents and warrants that, as of the date hereof:


 


3





















 


(a)                                  the representations and warranties contained
in the Credit Agreement and the other Loan Documents are true and correct on
and as of the date hereof as made on and as of such date;


 


(b)                                 no event has occurred and is continuing which
constitutes a Default or Event of Default;


 


(c)                                  (i) the Borrower has full power and authority
to execute and deliver this First Amendment, (ii) this First Amendment has been
duly executed and delivered by the Borrower, and (iii) this First Amendment
constitutes the legal, valid and binding obligations of the Borrower,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable debtor relief laws and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law) and except as rights to indemnity may be limited by federal or state
securities laws;


 


(d)                                 neither the execution, delivery and
performance of this First Amendment, nor the consummation of any transactions
contemplated herein or therein, will conflict with (i) the certificate or
articles of incorporation or the applicable constituent documents or bylaws of
the Borrower or its Subsidiaries, (ii) to Borrower’s knowledge, any provision
or law, statute, rule or regulation applicable to the Borrower or its
Subsidiaries or (iii) any indenture, agreement or other instrument to which the
Borrower, the Subsidiaries or any of their properties are subject; and


 


(e)                                  no authorization, approval, consent, or other
action by, notice to, or filing with, any governmental authority or other
Person not previously obtained is required for (i) the execution, delivery or
performance by the Borrower of this First Amendment or (ii) the acknowledgement
by each Guarantor of this First Amendment.


 


4.                                       CONDITIONS OF EFFECTIVENESS.  This
First Amendment shall be effective on and as of the date of the Proposed Senior
Note Issuance, subject to the following:


 


(a)                                  the representations and warranties set forth
in Section 3 of this First Amendment shall be true and correct;


 


(b)                                 the Administrative Agent shall have received
counterparts of this First Amendment executed by the Required Lenders;


 


(c)                                  the Administrative Agent shall have received
counterparts of this First Amendment executed by the Borrower and acknowledged
by each Guarantor,


 


(d)                                 the Administrative Agent shall have received
an opinion of counsel to the Borrower, in form and substance satisfactory to
the Administrative Agent and its counsel, as to the matters set forth in
clauses (c), (d) and (e) of Section 3 hereof;


 


(e)                                  the Administrative Agent shall have received
evidence that the Senior Notes as defined in the Credit Agreement without
giving effect to this First Amendment shall have simultaneously been paid in
full and are extinguished; and


 


4





















 


(f)                                    the Administrative Agent shall have received
an amendment fee in immediately available funds in the amount of $15,000 for
each Lender.


 


This First Amendment shall in no event be effective until and unless
the Proposed Senior Note Issuance occurs, with the Borrower retaining the
discretion as to whether to consummate the Proposed Senior Note Issuance.


 


5.                                       TERMINATION.  If the Proposed Senior Note
Issuance does not occur by February 28, 2005, this First Amendment shall
terminate and be null and void without any action taken by any party hereto.


 


6.                                       GUARANTOR’S ACKNOWLEDGMENT.  By
signing below, each Guarantor (i) acknowledges, consents and agrees to the
execution, delivery and performance by the Borrower of this First Amendment,
(ii) acknowledges and agrees that its obligations in respect of its Guaranty
are not released, diminished, waived, modified, impaired or affected in any
manner by this First Amendment, or any of the provisions contemplated herein,
(iii) ratifies and confirms its obligations under its Guaranty and (iv)
acknowledges and agrees that it has no claim or offsets against, or defenses or
counterclaims to, its Guaranty.


 


7.                                       REFERENCE TO THE CREDIT AGREEMENT.


 


(a)                                  Upon and during the effectiveness of this
First Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”,
or words of like import shall mean and be a reference to the Credit Agreement,
as affected and amended by this First Amendment.


 


(b)                                 Except as expressly set forth herein, this
First Amendment shall not by implication or otherwise limit, impair, constitute
a waiver of, or otherwise affect the rights or remedies of the Administrative
Agent or the Lenders under the Credit Agreement or any of the other Loan
Documents, and shall not alter, modify, amend, or in any way affect the terms, conditions,
obligations, covenants, or agreements contained in the Credit Agreement or the
other Loan Documents, all of which are hereby ratified and affirmed in all
respects and shall continue in full force and effect.


 


8.                                       COSTS AND EXPENSES.  The
Borrower shall be obligated to pay the costs and expenses of the Administrative
Agent in connection with the preparation, reproduction, execution and delivery
of this First Amendment and the other instruments and documents to be delivered
hereunder.


 


9.                                       EXECUTION IN COUNTERPARTS.  This
First Amendment may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which when taken
together shall constitute but one and the same instrument.  For purposes of this First Amendment, a counterpart
hereof (or signature page thereto) signed and transmitted by any Person party
hereto to the Administrative Agent (or its counsel) by facsimile machine,
telecopier or electronic mail is to be treated as an original.  The signature of such Person thereon, for purposes
hereof, is to be considered as an
original signature, and the counterpart (or signature page thereto) so
transmitted is to be considered to have the same binding effect as an original signature
on an original document.


 


5





















 


10.                                 GOVERNING LAW; BINDING EFFECT.  This
First Amendment shall be governed by and construed in accordance with the laws
of the State of Texas applicable to agreements made and to be performed
entirely within such state; provided that the Administrative Agent and
each Lender shall retain all rights arising under federal law.  This First Amendment shall be binding upon the
Borrower and each Lender and their respective successors and assigns.


 


11.                                 HEADINGS.  Section headings in this
First Amendment are included herein for convenience of reference only and shall
not constitute a part of this First Amendment for any other purpose.


 


12.                               ENTIRE AGREEMENT.  THE CREDIT AGREEMENT, AS AMENDED BY THIS FIRST
AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AS TO THE SUBJECT MATTER THEREIN AND HEREIN AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE PARTIES.


 


REMAINDER OF PAGE LEFT INTENTIONALLY BLANK


 


6





















 


IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date above written.


 


	
   

  	
   

  	
  CARRIAGE
  SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Joseph Saporito

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   Joseph Saporito

  
	
   

  	
   

  	
   

  	
  Title:

  	
   Executive Vice
  President

  
						



 


7





















 


	
   

  	
   

  	
  BANK
  OF AMERICA, N.A.,
  as Administrative

  Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Suzanne M. Paul

  	
   

  
	
   

  	
   

  	
   

  	
  Name: 

  	
   SUZANNE M. PAUL

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   VICE PRESIDENT

  	
   

  
							



 


8





















 


	
   

  	
   

  	
  BANK OF AMERICA, N.A., as a Lender,
  L/C

  Issuer and Swing Line Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Gary L. Mingle

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   Gary L. Mingle

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   Senior Vice
  President

  	
   

  



 


9





















 


	
   

  	
   

  	
  WELLS
  FARGO BANK, N A.,
  as Syndication

  Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Warren R. Ross

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   Warren R. Ross

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   Vice President

  	
   

  
							



 


10





















 


GUARANTORS:


 


	
   

  	
  CARRIAGE FUNERAL HOLDINGS, INC.

  
	
   

  	
  CFS FUNERAL SERVICES, INC.

  
	
   

  	
  CARRIAGE HOLDING COMPANY, INC.

  
	
   

  	
  CARRIAGE FUNERAL SERVICES OF MICHIGAN, INC.

  
	
   

  	
  CARRIAGE FUNERAL SERVICES OF KENTUCKY, INC.

  
	
   

  	
  CARRIAGE FUNERAL SERVICES OF CALIFORNIA, INC.

  
	
   

  	
  CARRIAGE CEMETERY SERVICES OF IDAHO, INC.

  
	
   

  	
  WILSON & KRATZER
  MORTUARIES

  
	
   

  	
  ROLLING HILLS MEMORIAL PARK

  
	
   

  	
  CARRIAGE SERVICES OF CONNECTICUT, INC

  
	
   

  	
  CSI FUNERAL SERVICES OF MASSACHUSETTS, INC.

  
	
   

  	
  CHC INSURANCE AGENCY OF OHIO, INC.

  
	
   

  	
  BARNETT, DEMROW & ERNST, INC.

  
	
   

  	
  CARRIAGE SERVICES OF NEW MEXICO, INC.

  
	
   

  	
  FORASTIERE FAMILY FUNERAL SERVICE, INC.

  
	
   

  	
  CARRIAGE CEMETERY SERVICES, INC.

  
	
   

  	
  CARRIAGE SERVICES OF OKLAHOMA, L.L.C.

  
	
   

  	
  CARRIAGE SERVICES OF NEVADA, INC.

  
	
   

  	
  HUBBARD FUNERAL HOME, INC.

  
	
   

  	
  CARRIAGE TEAM CALIFORNIA (CEMETERY), LLC

  
	
   

  	
  CARRIAGE TEAM CALIFORNIA (FUNERAL), LLC

  
	
   

  	
  CARRIAGE TEAM FLORIDA (CEMETERY), LLC

  
	
   

  	
  CARRIAGE TEAM FLORIDA (FUNERAL), LLC

  
	
   

  	
  CARRIAGE SERVICES OF OHIO, LLC

  
	
   

  	
  CARRIAGE TEAM KANSAS, LLC

  
	
   

  	
  CARRIAGE MUNICIPAL CEMETERY SERVICES OF NEVADA, INC.

  
	
   

  	
  CARRIAGE CEMETERY SERVICES OF CALIFORNIA, INC.

  
	
   

  	
  CARRIAGE INTERNET STRATEGIES, INC.

  
	
   

  	
  CARRIAGE INVESTMENTS, INC.

  
	
   

  	
  CARRIAGE MANAGEMENT, L.P.

  
	
   

  	
  HORIZON CREMATION SOCIETY, INC.

  
	
   

  	
  CARRIAGE LIFE EVENTS, INC.

  
	
   

  	
  CARRIAGE
  MERGER I, INC.

  
	
   

  	
  CARRIAGE MERGER II, INC.

  
	
   

  	
  CARRIAGE MERGER III, INC.

  
	
   

  	
  CARRIAGE MERGER IV, INC.

  
	
   

  	
   

  



 


	
   

  	
   

  	
  By:

  	
  /s/
  Joseph Saporito

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   Joseph Saporito

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   Executive Vice
  President

  	
   

  



 


11





















 


	
   

  	
   

  	
  CARRIAGE INSURANCE AGENCY OF
  MASSACHUSETTS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Melvin C. Payne

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
    Melvin C.
  Payne

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
    Chief
  Executive Officer

  	
   

  



 


	
   

  	
   

  	
  COCHRANE’S CHAPEL OF THE ROSES,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Wendy Wilson Boyer

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
    Wendy
  Wilson Boyer

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
    President

  	
   

  



 


12





















 


	
   

  	
   

  	
  CARRIAGE INSURANCE AGENCY OF
  MASSACHUSETTS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Melvin C. Payne

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
    Melvin C.
  Payne

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
    Chief Executive
  Officer

  	
   

  



 


	
   

  	
   

  	
  COCHRANE’S CHAPEL OF THE ROSES,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Doug Wagemann

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
    Doug
  Wagemann

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
    Secretary

  	
   

  



 


13





















 


EXHIBIT E


 


FORM OF
COMPLIANCE CERTIFICATE


 


	
   

  	
   

  	
  Financial
  Statement Date:

  	
   

  	
  ,

  	
   

  



 


To:                              Bank of America, N.A., as Administrative
Agent 


 


Ladies
and Gentlemen:


 


Reference is made to that certain Credit Agreement, dated as of August 4,
2003 (as amended, restated, extended, supplemented or otherwise modified in
writing from time to time, the “Agreement;” the terms defined therein
being used herein as therein defined), among Carriage Services, Inc., a
Delaware corporation (the “Borrower”), the Lenders from time to time
party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer
and Swing Line Lender.


 


The undersigned Responsible Officer hereby certifies as of the date
hereof that he/she is the                                                  of
the Borrower, and that, as such, he/she is authorized to execute and deliver
this Certificate to the Administrative Agent on the behalf of the Borrower, and
that:


 


[Use
following paragraph 1 for fiscal year-end
financial statements]


 


1.                                       Attached hereto as Schedule 1 are
the year-end audited financial statements required by Section 6.01(a)
of the Agreement for the fiscal year of the Borrower ended as of the above
date, together with the report and opinion of an independent certified public
accountant required by such section.


 


[Use
following paragraph 1 for fiscal quarter-end
financial statements]


 


1.                                       Attached hereto as Schedule 1 are
the unaudited financial statements required by Section 6.01(b) of
the Agreement for the fiscal quarter of the Borrower ended as of the above date.  Such financial statements fairly present the financial
condition, results of operations and cash flows of the Borrower and its
Subsidiaries in accordance with GAAP as at such date and for such period,
subject only to normal year-end audit adjustments and the absence of footnotes.


 


2.                                       The undersigned has reviewed and is familiar
with the terms of the Agreement and has made, or has caused to be made under
his/her supervision, a detailed review of the transactions and condition
(financial or otherwise) of the Borrower during the accounting period covered
by the attached financial statements.


 


3.                                       A review of the activities of the Borrower
during such fiscal period has been made under the supervision of the
undersigned with a view to determining whether during such fiscal period the
Borrower performed and observed all its Obligations under the Loan Documents,
and


 


E - 1





















 


[select one:]


 


[to the best knowledge of the undersigned during such
fiscal period, the Borrower performed and observed each covenant and condition
of the Loan Documents applicable to it.]


 


–or–


 


[the following covenants or conditions have not been
performed or observed and the following is a list of each such Default and its
nature and status:]


 


4.                                       The representations and warranties of the Borrower
contained in Article V of the Agreement, or which are contained in
any document furnished at any time under or in connection with the Loan
Documents, are true and correct on and as of the date hereof, except to the
extent that such representations and warranties specifically refer to an
earlier date, in which case they are true and correct as of such earlier date,
and except that for purposes of this Compliance Certificate, the
representations and warranties contained in subsections (a) and (b) of Section 5.05
of the Agreement shall be deemed to refer to the most recent statements
furnished pursuant to clauses (a) and (b), respectively, of Section 6.01
of the Agreement, including the statements in connection with which this
Compliance Certificate is delivered.


 


5.                                       The financial covenant analyses and
information set forth on Schedule 2 attached hereto are true and
accurate on and as of the date of this Certificate.


 


IN WITNESS WHEREOF, the undersigned has executed this Certificate
on behalf of the Borrower as of                                  ,
                   .


 


	
   

  	
   

  	
  CARRIAGE SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  



 


E - 2





















 


For the Quarter/Year ended                             (“Statement
Date”)


 


SCHEDULE 2

to the Compliance
Certificate

($ in 000’s)


 


I.                                         Section 7.11(a) –
Maximum Leverage Ratio.


 


	
  A.

  	
   

  	
  Total
  Senior Debt (excluding the Trust Notes) at Statement Date:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  EBITDA
  for four consecutive fiscal quarters ending on the Statement Date (“Subject
  Period”):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (1)   Net Income for the Subject Period:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (2)   To the extent deducted in calculating Net
  Income, Interest Expense for
  the Subject Period:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (3)   To the extent deducted in calculating Net
  Income, the provision for
  federal, state, local and foreign income taxes payable by the Borrower and
  its Subsidiaries for the Subject Period:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (4)   To the extent deducted in calculating Net
  Income, depreciation and amortization expenses and payments in respect of
  Deferred Purchase Price for the Subject Period:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (5)   To the extent deducted in calculating Net
  Income, other expenses of the Borrower and the Subsidiaries reducing Net
  Income which do not represent a cash item in the Subject Period or any future
  period:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (6)   Non-cash items increasing Net Income for
  the Subject Period:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (7)   EBITDA (Lines I.B.l + 2 + 3 + 4 + 5 – 6):

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  Leverage
  Ratio (Line I.A. ÷ Line I.B.7):

  	
   

  	
   

  	
  to

  	
   

  



 


E - 3





















 


	
  Maximum permitted:

  	
   

  	
  4.00
  to 1.00

  



 


II.                                     Section 7.11(b) –
Minimum Fixed Charge
Coverage Ratio.


 


	
  A.

  	
   

  	
  EBITDA
  for the Subject Period (Line I.B.7. above):

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  Capital
  Expenditures for the Subject Period:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  Cash
  taxes paid during the Subject Period:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D.

  	
   

  	
  Cash
  tax refunds received during the Subject Period:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E.

  	
   

  	
  Cash
  Interest Expenses during the Subject Period (excluding cash Dividends paid in
  respect of the Trust Preferred Stock prior to the Closing Date):

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  F.

  	
   

  	
  Scheduled
  and required principal payments during the Subject Period in respect of Debt
  (other than scheduled and required principal payments on the Senior Notes):

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  G.

  	
   

  	
  Scheduled
  and required payments made by the Borrower in respect of Deferred Purchase
  Price for the Subject Period (to extent not included in II.E. and II.F.
  above):

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  H.

  	
   

  	
  Fixed
  Charge Coverage Ratio (Lines II.A. – II.B. – II.C. + to II.D.) ÷
  (Lines II.E. + II.F. + II.G):

  	
   

  	
   

  	
  to 1

  



 


	
   

  	
  Minimum required

  	
  2.00
  to 1.00

  



 


III.                                 Section 7.11(c) Minimum EBITDA


 


	
  A.

  	
   

  	
  (1)

  	
   

  	
  Minimum
  EBITDA for the Subject Period ending the last day of each fiscal quarter
  through and including the fiscal quarter in which the Series A Note Payment
  Date occurs:

  	
   

  	
  $

  	
  36,000,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (2)

  	
   

  	
  Actual

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  (1)

  	
   

  	
  Minimum
  EBITDA for the Subject Period ending the last day of each fiscal quarter
  thereafter:

  	
   

  	
  $

  	
  35,000,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (2)

  	
   

  	
  Actual

  	
   

  	
  $

  



 


E - 4





















 


The Offering


 


The summary below describes the principal
terms of the notes. Some of the terms and conditions described below are
subject to important limitations and exceptions.  The “Description of the Notes” section of
this offering memorandum contains a more detailed description of the terms and
conditions of the notes.  As used in this
summary of the offering, references to “we,” “us,” “our,” the “Company” and “Carriage”
refer to Carriage Services, Inc.


 


	
  Issuer

  	
   

  	
  Carriage
  Services, Inc,

  
	
  Notes
  offered

  	
   

  	
  $130,000,000 aggregate
  principal amount of       % senior notes due
  2015.

  
	
  Maturity
  date

  	
   

  	
                 ,
  2015.

  
	
  Interest
  payment dates

  	
   

  	
            and          ,
  beginning
                 ,
  2005.

  
	
  Guarantees

  	
   

  	
  All
  of our existing subsidiaries (other than the issuer of our TIDES preferred
  securities) will guarantee the notes on a senior basis.  Future restricted subsidiaries will also be
  required to guarantee the notes on a senior basis.

  
	
  Ranking

  	
   

  	
  The
  notes will be unsecured senior indebtedness.  The notes will rank senior in right of
  payment to our subordinated indebtedness, including our TIDES, and equal in
  right of payment with any of our existing and future senior indebtedness.  Each guarantee will be unsecured and will
  rank equally with all unsecured senior indebtedness of the guarantors and
  senior to all subordinated indebtedness of the guarantors.  The notes and guarantees will also be
  effectively subordinated to all of our secured indebtedness and the secured
  indebtedness of the subsidiary guarantors to the extent of the value of the
  assets securing such indebtedness.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  As
  of September 30, 2004, after giving effect to this offering and the use
  of proceeds therefrom as described under “Use of Proceeds,” including the
  pre-payment of certain of our existing senior notes, we would have had
  approximately $14.6 million of other senior indebtedness that would have
  ranked equally with the notes.  Initially,
  after using proceeds from this offering to pay down the outstanding principal
  and accrued but unpaid interest on our existing unsecured credit facility, we
  expect to have no or nominal borrowings under our existing unsecured credit
  facility or our amended senior secured credit facility.

  
	
  Optional
  redemption

  	
   

  	
  We
  will have the option to redeem the notes, in whole or in part, at any time on
  or after             ,
  2010, at the redemption prices described in this offering memorandum under
  the heading “Description of the Notes — Optional Redemption,” together with
  any accrued and unpaid interest to the date of redemption.

  
	
  Equity
  offering optional redemption

  	
   

  	
  Before            ,
  2008, we may, at any time or from time to time, redeem up to 35% of the aggregate principal amount
  of the notes with the net proceeds of one or more equity offerings at    %
  of the principal amount of the notes, plus any accrued and unpaid interest,
  provided at least 65% of the aggregate principal amount of the notes issued
  under the indenture remains outstanding after such redemption and the
  redemption occurs within 90 days of the date of the closing of such equity
  offering.

  



 





















 


	
  Change
  of control

  	
   

  	
  When
  a change of control event occurs, each holder of notes may require us to
  repurchase all or a portion of its notes at a price equal to 101% of the
  principal amount of the notes, plus any accrued and unpaid interest.

  
	
  Certain
  Covenants

  	
   

  	
  The
  indenture governing the notes will contain covenants that, among other
  things, will limit our ability and the ability of our restricted subsidiaries
  to;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  sell
  assets,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  pay
  dividends on, redeem or repurchase our capital stock or redeem or repurchase
  our subordinated debt,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  make
  investments,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  incur
  additional indebtedness,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  create
  certain liens,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  enter
  into agreements that restrict dividends or other payments from our restricted
  subsidiaries to us,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  consolidate,
  merge or transfer all or substantially all of the assets of us and our
  restricted subsidiaries taken as a whole,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  engage
  in transactions with affiliates, and

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  enter
  into sale and leaseback transactions.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  These
  covenants are subject to important exceptions and qualifications that are
  described under the heading “Description of the Notes” in this offering
  memorandum.

  
	
  Exchange
  offer, registration rights

  	
   

  	
  Under
  a registration rights agreement to be executed as part of this offering, we
  will agree to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  file
  a registration statement within 90 days after the issue date of the notes
  enabling holders of notes to exchange the privately placed notes offered
  hereby for publicly registered notes with substantially identical terms,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  use
  our reasonable best efforts to cause the registration statement to become
  effective within 180 days after the issue date of the notes,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  complete
  the exchange offer within 30 days after the effective date of our
  registration statement, and

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  file
  a shelf registration statement for the resale of the notes if we cannot
  effect an exchange offer within the time periods listed above and in other
  circumstances.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The
  interest rate of the notes will increase if we do not comply with our
  obligations under the registration rights agreement.  See “Exchange Offer; Registration Rights.”

  



 





















 


	
  Use
  of proceeds

  	
   

  	
  We
  estimate that the net proceeds from this offering will be approximately
  $125.5 million.  We intend to use the
  net proceeds from the offering:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  to
  prepay the principal and accrued but unpaid interest, and to pay the “make-whole”
  premium, on our existing senior notes;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  to
  repay outstanding borrowings under our existing unsecured credit facility;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  to
  repay TIDES deferred interest; and

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •

  	
  to
  fund general corporate purposes.

  
	
  Transfer restrictions; absence of a public market
  for the notes

  	
   

  	
  We
  have not registered the notes under the Securities Act of 1933 and the notes
  are subject to restrictions on transferability and resale.  The notes are new securities and there is
  currently no established market for the notes.  If issued, the exchange notes generally will
  be freely transferable but will also be new securities for which there will
  not initially be a market.  Accordingly,
  we cannot assure you as to the development or liquidity of any market for the
  notes or the exchange notes.  We expect
  that the notes will be eligible for trading in The PORTAL® Market.  The initial purchasers have advised us that
  they currently intend to make a market in the notes and, if issued, the
  exchange notes.  However, they are not
  obligated to do so, and they may discontinue any market making with respect
  to the notes or the exchange notes without notice.  We do not intend to apply for a listing of
  the notes, or, if issued, the exchange notes, on any securities exchange or
  for the inclusion of the notes, or, if issued, the exchange notes, on any
  automated dealer quotation system.

  
	
  Risk
  factors

  	
   

  	
  See
  “Risk Factors” and the other information in this offering memorandum for a
  discussion of factors you should carefully consider before deciding to invest
  in the notes.