EXHIBIT 10.1
NOTE TERMINATION AGREEMENT
THIS AGREEMENT, dated as of March 9, 2001, between XXXXXXX X. XXXXX, a
resident of Xxxxxxxxxx County, Texas ("Borrower"), and CARRIAGE SERVICES, INC.,
a Delaware corporation ("Lender");
W I T N E S E T H:
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WHEREAS, the Borrower is the "Maker" of that certain Promissory Note dated
March 31, 2000 payable to the order of Lender in the original principal amount
of $1,068,416.62 (the "Note"); and
WHEREAS, the Note is secured by, among other things, a prior perfected
lien and security interest in all of Borrower's personal property and assets
which are not exempt under applicable law, pursuant to the terms and conditions
of the Security Agreement dated March 31, 2000 between Borrower and Lender
("Security Agreement"); and
WHEREAS, the Note was secured by a pledge of 46,392 shares of Class A
Common Stock, $.01 par value, of Lender which were owned by Borrower, pursuant
to the Amended and Restated Security Agreement - Pledge dated March 31, 2000
between Borrower and Lender (the "Pledge Agreement"), and pursuant to the Stock
Purchase Agreement dated December 18, 2000, Lender repurchased all of such
shares from Borrower for the sum of $69,588.00, all of which was applied against
accrued interest and principal under the Note, in connection with which the
Pledge Agreement and the pledge evidenced thereby was cancelled; and
WHEREAS, as of the date of this Agreement, the fair market value of
Borrower's assets are less than the amount of his liabilities (including
indebtedness represented by the Note), and in particular the fair market value
of those assets of Borrower which are not exempt from seizure for the claims of
creditors under applicable principles of Texas and federal law ("non-exempt
assets") is substantially less than the amount of such liabilities; as a
consequence of which Borrower is "insolvent" within the meaning of Section
108(d)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
Treasury Regulations issued thereunder; and
WHEREAS, because the prospect of Lender's recovery of any remaining
principal, interest or other sums due under the Note are poor due to Borrower's
insolvency as aforesaid, Lender is willing to forgive all such sums due under
the Note and to therefore cancel the Note and the Security Agreement and all
obligations of Borrower thereunder;
NOW, THEREFORE, the parties agree as follows:
1. BORROWER INSOLVENCY. Borrower, on the basis of an independent appraisal
conducted on Borrower's non-exempt assets, is insolvent. The fair market value
of such non-exempt assets, as supported by such appraisal, is substantially less
than the sum of the principal, interest and other sums due under the Note plus
Borrower's other liabilities. In connection with the appraisal process, Borrower
has
furnished the independent appraiser with sufficient and complete information
concerning Borrower's non-exempt assets to enable such appraiser to fairly
conduct such appraisal. Borrower has provided Lender with a true and correct
copy of such appraisal. The Note matures March 31, 2001, and Borrower has no
reasonable means or prospect of paying the Note balance when the Note so
matures, or at any other time in the reasonably foreseeable future. On the basis
of the foregoing, Borrower has requested that Lender forgive the Note and all
related obligations, and Lender is willing to do so.
2. FORGIVENESS OF DEBT; CANCELLATION OF NOTE AND LIENS. Lender hereby
forgives Borrower and his heirs and assigns from all liabilities and obligations
arising under the Note and the Security Agreement, and hereby agrees to cancel
the Note and terminate the Security Agreement. Borrower hereby accepts such
forgiveness and cancellation and likewise agrees to such termination. Promptly
following execution of this Agreement, Lender shall (i) deliver to Borrower the
original of the Note, marked "Paid in Full" or words to that effect, and (ii)
take all necessary or appropriate action to evidence the termination of the
Security Agreement and the release of the liens thereby as Borrower may
reasonably request, including (without limitation) the execution and delivery of
UCC-3 termination statements and other lien releases.
3. SECTION 108 DISCHARGE OF INDEBTEDNESS. It is the parties' intention
that Lender's releases and termination of Borrower's liabilities and obligations
under the Note pursuant to this Agreement constitute a discharge of indebtedness
occurring when Borrower is insolvent, within the meaning of and qualifying for
treatment as being excluded from gross income under, Section 108(a)(1)(B) of the
Code. The parties agree to file all of their respective federal income tax
returns in a manner consistent with such position.
4. MUTUAL GENERAL RELEASES.
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4.1. BY LENDER. In confirmation of the provisions of this Agreement,
Lender, for itself and for all persons claiming by or through it, hereby
releases, acquits and fully discharges Borrower and his heirs and assigns
from any and all claims, liabilities, causes of action, damages or
expenses, known or unknown, accrued or unaccrued, contingent or
other-wise, whether sounding in contract or tort, arising on or before the
date hereof, under common law or by statute or regulation, that is based
upon facts arising prior to the date of this Agreement, with respect to
any matter or action related to the matters described in this Agreement
and any other matters and relationships between the parties, SAVE AND
EXCEPT only those obligations referred to in Section 4.3 below.
4.2. BY BORROWER. In confirmation of the provisions of this
Agreement, Borrower, for himself and for all persons claiming by or
through him, hereby releases, acquits and fully discharges Lender, its
subsidiaries and affiliated entities and their respective officers,
directors, employees, agents, advisors, successors and assigns from any
and all claims, liabilities, causes of action, damages or expenses, known
or unknown, accrued or unaccrued, contingent or other-wise, whether
sounding in contract or tort, arising on or before the date hereof, under
common law or by statute or regulation, that is based upon facts arising
prior to the date of this Agreement, with
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respect to any matter or action related to the matters described in this
Agreement and any other matters and relationships between the parties,
SAVE AND EXCEPT only those obligations referred to in Section 4.3 below.
4.3. OBLIGATIONS NOT RELEASED. Notwithstanding the foregoing
provisions of this Section 4, the parties shall not be released from their
respective obligations under the Separation Agreement and Release between
the parties dated as of December 18, 2000 (and those provisions of the
Employment Agreement described therein which by operation of such
Separation Agreement and Release are to survive the effectiveness
thereof), or the Stock Purchase Agreement between the parties dated as of
December 18, 2000.
5. MISCELLANEOUS.
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5.1. FURTHER ASSURANCES. Each party agrees to execute and deliver
from time to time after the date of this Agreement, at the reasonable
request of the other party, and without further consideration, such
additional instruments of conveyance and transfer, and to take such
other action as such other party may reasonably require to carry out the
transactions contemplated hereunder.
5.2. SURVIVAL. Regardless of any investigation made at any time by
or on behalf of any party hereto, all covenants, agreements,
representations and warranties made hereunder or pursuant hereto or in
connection with the transactions contemplated hereby and thereby
shall not terminate but shall survive the Closing and continue in
effect thereafter.
5.3. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have
been given if personally delivered, when mailed, first class, registered
or certified mail, postage prepaid, or when sent by electronic
communication and receipt is confirmed, as follows:
(i) if to the Lender:
Carriage Services, Inc.
0000 Xx. Xxxxx Xxxxx - 0xx Xxxxx
Xxxxxxx, Xxxxx 00000
Attn: Chief Executive Officer
(ii) if to the Borrower:
Xx. Xxxxxxx X. Xxxxx
00000 Xxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
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5.4. ASSIGNMENT; BINDING EFFECT. This Agreement may not be assigned
by either party hereto without the prior written consent of the other
party. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors, assigns, heirs and personal representatives.
5.5. SECTION AND PARAGRAPH HEADINGS. The section and paragraph
headings in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
5.6. AMENDMENT. This Agreement may be amended only by an instrument
in writing executed by the parties hereto.
5.7. ENTIRE AGREEMENT. This Agreement and the other documents
referred to herein constitute the entire agreement of the parties
hereto, and supersede all prior understandings with respect to the
subject matter hereof and thereof.
5.8. GOVERNING LAW. This Agreement shall be construed and enforced
under and in accordance with and governed by the law of the State of
Texas.
5.9. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall
constitute the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed and delivered
as of the date first above written.
BORROWER:
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/s/ Xxxxxxx X. Xxxxx
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XXXXXXX X. XXXXX
LENDER:
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CARRIAGE SERVICES, INC.
BY /s/ Xxxxxx X. Xxxxx
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XXXXXX X. XXXXX, Chief Executive Officer
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