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<SEC-DOCUMENT>0000898822-06-001391.txt : 20061130
<SEC-HEADER>0000898822-06-001391.hdr.sgml : 20061130
<ACCEPTANCE-DATETIME>20061129175714
ACCESSION NUMBER:		0000898822-06-001391
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20061128
ITEM INFORMATION:		Completion of Acquisition or Disposition of Assets
ITEM INFORMATION:		Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20061130
DATE AS OF CHANGE:		20061129

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SERVICE CORPORATION INTERNATIONAL
		CENTRAL INDEX KEY:			0000089089
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-PERSONAL SERVICES [7200]
		IRS NUMBER:				741488375
		STATE OF INCORPORATION:			TX
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-06402
		FILM NUMBER:		061246372

	BUSINESS ADDRESS:	
		STREET 1:		1929 ALLEN PKWY
		STREET 2:		P O BOX 130548
		CITY:			HOUSTON
		STATE:			TX
		ZIP:			77019
		BUSINESS PHONE:		7135225141

	MAIL ADDRESS:	
		STREET 1:		P O BOX 130548
		CITY:			HOUSTON
		STATE:			TX
		ZIP:			77219-0548
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>nov288k.txt
<TEXT>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

     PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  November 28, 2006

                        SERVICE CORPORATION INTERNATIONAL
- --------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

Texas                                   1-6402-1                74-1488375
- --------------------------------------------------------------------------------
(State or other jurisdiction of       (Commission              (IRS Employer
  incorporation)                      File Number)           Identification No.)

     1929 Allen Parkway, Houston, TX                         77019
- --------------------------------------------------------------------------------
   (Address of principal executive offices)                (Zip Code)

       Registrant's telephone number, including area code: (713) 522-5141

                                 Not Applicable
- --------------------------------------------------------------------------------
                (Former name or former address, if changed since
                                 last report.)

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17
        CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
        240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
        Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
        Act (17 CFR 240.13.e-4(c))

<PAGE>


ITEM 2.01.  COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.

On November 28, 2006, Service Corporation International ("SCI") completed its
acquisition of Alderwoods Group, Inc. ("Alderwoods"). Pursuant to the Agreement
and Plan of Merger, by and among Alderwoods, SCI and Coronado Acquisition
Corporation, a wholly owned subsidiary of SCI ("Merger Sub"), dated as of April
2, 2006 (the "Merger Agreement"), Merger Sub merged with and into Alderwoods and
Alderwoods became a wholly owned subsidiary of SCI (the "Merger").

At the effective time of the Merger, all of the outstanding shares of Alderwoods
common stock and restricted stock units were converted into the right to receive
$20.00 per share in cash, without interest. Each outstanding option or warrant
to purchase Alderwoods common stock was converted into the right to receive, for
each share of common stock issuable upon exercise of such option or warrant,
cash in the amount of the excess, if any, of $20.00 over the exercise price per
share of such option or warrant. The aggregate equity consideration payable as a
result of the Merger was approximately $809 million.

As a result of the acquisition, Alderwoods ceased to be publicly traded and,
accordingly, will no longer be listed on The Nasdaq Stock Market, Inc.

ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.

On November 28, 2006, pursuant to a Purchase Agreement dated as of November 28,
2006 (the "Purchase Agreement") among SCI and the initial purchasers named in
Schedule 1 thereto (collectively, the "Purchasers"), SCI sold $200 million
aggregate principal amount of unsecured senior notes, consisting of $50 million
of Floating Rate Series A Senior Notes due 2011 (the "Series A Notes") and $150
million of Floating Rate Series B Senior Notes due 2011 (the "Series B Notes"
and, together with the Series A Notes, the "Notes") to the Purchasers (the
"Offering"). The Notes rank equally with SCI's new Credit Agreement discussed
below and are unconditionally guaranteed by each of SCI's existing and
subsequently acquired or organized domestic subsidiaries and, in certain
circumstances, SCI's foreign subsidiaries. Interest on the Notes will accrue at
the rate of LIBOR plus 2.00% and will be payable quarterly in arrears. The
Series A Notes may be prepaid, in whole or in part, at any time without any
premium or penalty, other than customary LIBOR "breakage" costs. The Series B
Notes may be prepaid on the same terms after the first anniversary of the
issuance thereof. The Purchase Agreement evidencing the Notes contains customary
affirmative and negative covenants, and also requires SCI to maintain a maximum
total leverage ratio and a minimum interest coverage ratio. The Purchase
Agreement also specifies certain customary events of default. A copy of the
Purchase Agreement is filed as Exhibit 4.1 to this report and is incorporated
herein by reference. The Notes have not been registered under the Securities Act
of 1933, as amended (the "Securities Act"), and may not be offered or sold in
the United States absent registration or an applicable exemption from the
registration requirements of the Securities Act.

In addition, on November 28, 2006, SCI entered into a Credit Agreement, by and
among SCI, the Lenders specified therein, JPMorgan Chase Bank, N.A., as
Administrative Agent, Bank of America, N.A. and the Bank of Nova Scotia, as
Syndication Agents for the Revolving Loans, J.P. Morgan Securities Inc. and Banc
of America Securities LLC, as Joint Bookrunners and Joint Lead Arrangers for the
Revolving Loans and J.P. Morgan Securities Inc. and Merrill Lynch Capital
Corporation, as Joint Bookrunners and Joint Lead Arrangers for the Term Loan
(the "Credit Agreement"). Pursuant to the Credit Agreement, SCI borrowed an
aggregate of $150 million of term loans due November 28, 2009 (the "Borrowing").
Borrowings under the Credit Agreement bear interest at a rate equal to, at SCI's


<PAGE>


option, either (a) a LIBOR rate adjusted for certain additional costs, plus an
applicable margin (initially 2.00%) or (b) a base rate determined by reference
to the higher of (1) the prime rate of JPMorgan Chase Bank, N.A. and (2) the
federal funds rate plus 1/2 of 1%, plus an applicable margin (initially 1.00%).
The applicable margin for borrowings under the Credit Agreement may be reduced
subject to SCI attaining certain leverage ratios. In addition to paying interest
on outstanding principal under the Revolving Credit Agreement, SCI will pay a
commitment fee (initially 0.50% per annum) in respect of the average daily
unutilized commitments thereunder. With respect to outstanding letters of
credit, SCI will pay customary fees equal to the applicable margin for LIBOR
borrowings under the Revolving Credit Agreement, plus fronting fees of 0.125%
per annum. SCI is required to prepay outstanding term loans, subject to certain
exceptions, with 50% of annual excess cash flow (as defined in the Credit
Agreement) and 100% of the net cash proceeds of non-ordinary course asset sales
and equity issuances. SCI may voluntarily prepay outstanding term loans at any
time, in whole or in part, subject to a prepayment premium (initially 0.5%) and
customary LIBOR "breakage" costs. All obligations under the Credit Agreement are
unconditionally guaranteed to the same extent contemplated by the Purchase
Agreement for the Notes. The Credit Agreement contains customary affirmative and
negative covenants and events of default that are substantially identical to the
covenants and events of default in the Purchase Agreement for the Notes. A copy
of the Credit Agreement is filed as Exhibit 4.2 to this report and is
incorporated herein by reference.

SCI is using the net proceeds from the Offering and the Borrowing, together with
available cash and other financings, to consummate the acquisition of Alderwoods
and refinance certain other indebtedness.

ITEM 8.01.  OTHER EVENTS.

On November 28, 2006, SCI issued a press release disclosing certain of the
events set forth in Items 2.01 and 2.03 of this report. The information
contained in this Item 8.01 is qualified in its entirety by the press release,
which is filed as exhibit 99.1 to this report and incorporated herein by
reference.



ITEM 9.01.  FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

(a) Financial Statements of Business Acquired.

The financial statements required by Item 9.01(a) of Form 8-K will be filed by
amendment to this Form 8-K no later than 71 days after the date this initial
report on Form 8-K must be filed.

(b) Pro Forma Financial Information.

The pro forma financial statements required by Item 9.01(b) of Form 8-K will be
filed by amendment to this Form 8-K no later than 71 days after the date this
initial report on Form 8-K must be filed.

(d) Exhibits.

EXHIBIT NO.          DESCRIPTION OF EXHIBIT

2.1                  Certificate of Merger of Alderwoods Group, Inc., dated
                     November 28, 2006, merging Coronado Acquisition
                     Corporation with and into Alderwoods Group, Inc.

4.1                  Note Purchase Agreement, dated November 28, 2006 among
                     Service Corporation International and Purchasers
                     identified therein.


<PAGE>


4.2                  Credit Agreement, dated November 28, 2006 among Service
                     Corporation International, the lenders party thereto,
                     and JPMorgan Chase Bank, N.A., as Administrative Agent.

99.1                 Service Corporation International press release, dated
                     November 28, 2006.



<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                      SERVICE CORPORATION INTERNATIONAL
Date:  November 28, 2006
                                      By:  /s/ James M. Shelger
                                           ----------------------
                                      Name:  James M. Shelger
                                      Title: Senior Vice President, General
                                             Counsel and Secretary



<PAGE>


                                  EXHIBIT INDEX

EXHIBIT NO.          DESCRIPTION OF EXHIBIT

2.1                  Certificate of Merger of Alderwoods Group, Inc., dated
                     November 28, 2006, merging Coronado Acquisition
                     Corporation with and into Alderwoods Group, Inc.

4.1                  Note Purchase Agreement, dated November 28, 2006 among
                     Service Corporation International and Purchasers
                     identified therein.

4.2                  Credit Agreement, dated November 28, 2006 among Service
                     Corporation International, the lenders party thereto,
                     and JPMorgan Chase Bank, N.A., as Administrative Agent.


99.1                 Service Corporation International press release, dated
                     November 28, 2006.





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2
<SEQUENCE>2
<FILENAME>nov28ex21.txt
<DESCRIPTION>EXHIBIT 2.1
<TEXT>
                                                                     Exhibit 2.1


                              CERTIFICATE OF MERGER

                                       OF

                        CORONADO ACQUISITION CORPORATION

                                  with and into

                             ALDERWOODS GROUP, INC.

                  (Under Section 251 of the General Corporation
                          Law of the State of Delaware)

Alderwoods Group, Inc., a Delaware corporation, hereby certifies that:

1.       The name and state of incorporation of each of the constituent
         corporations are as follows: (a) Coronado Acquisition Corporation, a
         Delaware corporation ("Merger Co"); and (b) Alderwoods Group, Inc., a
         Delaware corporation (the "Company").

2.       The Agreement and Plan of Merger (the "Agreement and Plan of Merger"),
         dated as of April 2, 2006, by and among the Company, Service
         Corporation International, a Texas corporation, and Merger Co, setting
         forth the terms and conditions of the merger of Merger Co with and into
         the Company, has been approved, adopted, certified, executed and
         acknowledged by each of the constituent corporations in accordance with
         Section 251 of the General Corporation Law of the State of Delaware.

3.       The name of the surviving corporation is Alderwoods Group, Inc. (the
         "Surviving Corporation").

4.       At the effective time of the merger herein certified, the Restated
         Certificate of Incorporation of the Company, as in effect immediately
         prior to the merger shall be amended so as to read in its entirety as
         set forth in Exhibit A hereto and, as so amended, shall be the Restated
         Certificate of Incorporation of the Surviving Corporation.

5.       The executed Agreement and Plan of Merger is on file at the principal
         place of business of the Surviving Corporation located at 311 Elm
         Street, Suite 1000, Cincinnati, OH 45202.

6.       A copy of the Agreement and Plan of Merger will be furnished by the
         Surviving Corporation, on request and without cost, to any stockholder
         of any constituent corporation.



<PAGE>


         IN WITNESS WHEREOF, Alderwoods Group, Inc. has caused this certificate
 to be executed as of November 28, 2006.
                                           ALDERWOODS GROUP, INC.


                                           By:     /s/ Aaron Shipper
                                                --------------------------------
                                               Name: Aaron Shipper
                                               Title: Senior Vice President
                                                      Advance Planning





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>3
<FILENAME>nov28ex41.txt
<DESCRIPTION>EXHIBIT 4.1
<TEXT>
                                                                     Exhibit 4.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------





                        SERVICE CORPORATION INTERNATIONAL



     $50,000,000 Floating Rate Series A Senior Notes due November 28, 2011

     $150,000,000 Floating Rate Series B Senior Notes due November 28, 2011




                          -----------------------------
                             NOTE PURCHASE AGREEMENT
                          -----------------------------





                             Dated November 28, 2006





- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE

1.    AUTHORIZATION OF NOTES..................................................1

2.    SALE AND PURCHASE OF NOTES..............................................2

3.    CLOSING.................................................................2

4.    CONDITIONS TO CLOSING...................................................2

      4.1.   Representations and Warranties...................................2
      4.2.   Performance; No Default..........................................2
      4.3.   Compliance Certificates..........................................3
      4.4.   Opinions of Counsel..............................................3
      4.5.   Purchase Permitted By Applicable Law, Etc........................3
      4.6.   Sale of Other Notes..............................................4
      4.7.   Payment of Special Counsel Fees..................................4
      4.8.   Guaranty Agreement...............................................4
      4.9.   Sharing Agreement................................................4
      4.10.  Other Financing Arrangements.....................................4
      4.11.  Consummation of Merger...........................................4
      4.12.  Private Placement Number.........................................4
      4.13.  Changes in Corporate Structure...................................5
      4.14.  Funding Instructions.............................................5
      4.15.  Offeree Letter...................................................5
      4.16.  Proceedings and Documents........................................5

5.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................5

      5.1.   Organization; Power and  Authority...............................5
      5.2.   Authorization, Etc...............................................6
      5.3.   Disclosure.......................................................6
      5.4.   Organization and Ownership of Shares of Subsidiaries;
             Affiliates; Restrictive Agreements...............................6
      5.5.   Financial Statements; Material Liabilities.......................7
      5.6.   Compliance with Laws, Other Instruments, Etc.....................7
      5.7.   Governmental Authorizations, Etc.................................8
      5.8.   Litigation; Observance of Agreements, Statutes and Orders........8
      5.9.   Taxes............................................................8
      5.10.  Title to Property; Leases........................................9
      5.11.  Licenses, Permits, Etc...........................................9
      5.12.  Compliance with ERISA............................................9
      5.13.  Private Offering by the Company.................................10
      5.14.  Use of Proceeds; Margin Regulations.............................11
      5.15.  Existing Indebtedness; Future Liens.............................11
      5.16.  Foreign Assets Control Regulations, Etc.........................11
      5.17.  Status under Certain Statutes...................................12
      5.18.  Environmental Matters...........................................12

                                       i

<PAGE>

                                TABLE OF CONTENTS
                                  (continued)

                                                                            PAGE

      5.19.  Ranking of Obligations..........................................13

6.    REPRESENTATIONS OF THE PURCHASERS......................................13

      6.1.   Purchase for Investment.........................................13
      6.2.   Source of Funds.................................................13

7.    INFORMATION AS TO COMPANY..............................................15

      7.1.   Financial and Business Information..............................15
      7.2.   Officer's Certificate...........................................18
      7.3.   Visitation......................................................18

8.    PAYMENT AND PREPAYMENT OF THE NOTES....................................19

      8.1.   Maturity........................................................19
      8.2.   Optional Prepayments............................................19
      8.3.   Prepayment of Notes Upon Change in Control......................19
      8.4.   Allocation of Partial Prepayments...............................21
      8.5.   Maturity; Surrender, Etc........................................21
      8.6.   Purchase of Notes...............................................21
      8.7.   Interest Rate and Interest Payment Dates........................21
      8.8.   Yield Protection and Illegality.................................23

9.    AFFIRMATIVE COVENANTS..................................................26

      9.1.   Compliance with Law.............................................26
      9.2.   Insurance.......................................................26
      9.3.   Maintenance of Properties.......................................27
      9.4.   Payment of Taxes and Claims.....................................27
      9.5.   Corporate Existence, Etc........................................27
      9.6.   Books and Records...............................................27
      9.7.   Additional Subsidiary Guarantors................................28
      9.8.   Priority of Obligations.........................................28

10.   NEGATIVE COVENANTS.....................................................28

      10.1.  Indebtedness....................................................28
      10.2.  Limitations on Liens............................................31
      10.3.  Limit on Preferred Equity Issuance..............................31
      10.4.  Limitations on Sale/Leaseback Transactions......................32
      10.5.  Fundamental Changes; Line of Business...........................32
      10.6.  Investments, Loans, Advances, Guarantees and Acquisitions.......33
      10.7.  Limitation on Asset Sales.......................................35
      10.8.  Swap Agreements.................................................36
      10.9.  Restricted Payments.............................................36
      10.10. Transactions with Affiliates....................................38
      10.11. Restrictive Agreements; Maintenance of Most Favored Lender
             Status..........................................................38
      10.12. Financial Covenants.............................................39

                                       ii

<PAGE>

                                TABLE OF CONTENTS
                                  (continued)

                                                                            PAGE

      10.13. Terrorism Sanctions Regulations.................................40

11.   EVENTS OF DEFAULT......................................................40

12.   REMEDIES ON DEFAULT, ETC...............................................43

      12.1.  Acceleration....................................................43
      12.2.  Other Remedies..................................................43
      12.3.  Rescission......................................................44
      12.4.  No Waivers or Election of Remedies, Expenses, Etc...............44

13.   REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES..........................44

      13.1.  Registration of Notes...........................................44
      13.2.  Transfer and Exchange of Notes..................................44
      13.3.  Replacement of Notes............................................45

14.   PAYMENTS ON NOTES......................................................45

      14.1.  Place of Payment................................................45
      14.2.  Home Office Payment.............................................46
      14.3.  Record Date.....................................................46

15.   EXPENSES, ETC..........................................................46

      15.1.  Transaction Expenses............................................46
      15.2.  Survival........................................................47

16.   SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT...........47

17.   AMENDMENT AND WAIVER...................................................47

      17.1.  Requirements....................................................47
      17.2.  Solicitation of Holders of Notes................................47
      17.3.  Binding Effect, etc.............................................48
      17.4.  Notes Held by Company, etc......................................48

18.   NOTICES................................................................48

19.   REPRODUCTION OF DOCUMENTS..............................................49

20.   CONFIDENTIAL INFORMATION...............................................49

21.   SUBSTITUTION OF PURCHASER..............................................50

22.   MISCELLANEOUS..........................................................51

      22.1.  Successors and Assigns..........................................51
      22.2.  Payments Due on Non-Business Days...............................51
      22.3.  Accounting Terms................................................51
      22.4.  Severability....................................................51
      22.5.  Construction, etc...............................................51

                                      iii

<PAGE>

                               TABLE OF CONTENTS
                                  (continued)
                                                                            PAGE

      22.6.  Counterparts....................................................52
      22.7.  Governing Law...................................................52
      22.8.  Jurisdiction and Process; Waiver of Jury Trial..................52

                                       iv

<PAGE>

Schedule A          --    Information Relating to Purchasers

Schedule B          --    Defined Terms

Schedule 4.8        --    Initial Guarantors

Schedule 5.3        --    Disclosure Materials

Schedule 5.4        --    Subsidiaries of the Company and Ownership of
                          Subsidiary Stock

Schedule 5.5        --    Financial Statements

Schedule 5.8        --    Material Litigation

Schedule 5.15       --    Existing Indebtedness

Schedule 10.2       --    Existing Liens

Schedule 10.6       --    Existing Investments

Schedule 10.7             Merger-Related Asset Sales

Schedule            --    Restrictive Agreements
10.11(a)

Exhibit 1(a)        --    Form of Series A Floating Rate Senior Note due
                          November 28, 2011

Exhibit 1(b)        --    Form of Series B Floating Rate Senior Note due
                          November 28, 2011

Exhibit             --    Form of Opinion of Special Counsel for the Company
4.4(a)(i)

Exhibit             --    Form of Opinion of General Counsel for the Company
4.4(a)(ii)

Exhibit             --    Form of Opinion of Special Iowa Counsel to certain of
4.4(a)(iii)               the Initial Guarantors

Exhibit 4.4(b)      --    Form of Opinion of Special Counsel for the Purchasers

Exhibit 4.8         --    Form of Guaranty Agreement

Exhibit 4.9         --    Form of Sharing Agreement

v

<PAGE>

                        Service Corporation International
                               1929 Allen Parkway
                              Houston, Texas 77019
                            Facsimile: (713) 525-5596
      $50,000,000 Floating Rate Series A Senior Notes due November 28, 2011
     $150,000,000 Floating Rate Series B Senior Notes due November 28, 2011





                                                               November 28, 2006



To Each of The Purchasers Listed in
Schedule A Hereto:

Ladies and Gentlemen:

     SERVICE CORPORATION INTERNATIONAL,  a Texas corporation (together with its
permitted successors and assigns hereunder, the "COMPANY"),  agrees with each of
the purchasers  whose names appear at the end hereof (each,  a "PURCHASER"  and,
collectively, the "PURCHASERS") as follows:

1.   AUTHORIZATION OF NOTES.

     The Company will authorize the issue and sale of:

          (a) $50,000,000 aggregate principal amount of its Floating Rate Series
     A  Senior  Notes  due  November  28,  2011   (including   any   amendments,
     restatements or modifications  from  time  to  time, the  "SERIES A NOTES",
     such term to  include  any  such  notes  issued  in  substitution  therefor
     pursuant to Section 13 of this Agreement); and

          (b)  $150,000,000  aggregate  principal  amount of its  Floating  Rate
     Series B Senior  Notes due  November 28, 2011  (including  any  amendments,
     restatements or modifications from time to time, the "SERIES B NOTES", such
     term to include any such notes issued in substitution  therefor pursuant to
     Section 13 of this  Agreement  and,  together with the Series A Notes,  the
     "NOTES").  The Series A Notes and the Series B Notes shall be substantially
     in the forms set out in Exhibit 1(a) and Exhibit 1(b),  respectively,  with
     such changes  therefrom,  if any, as may be approved by the  Purchasers and
     the Company. Certain capitalized and other terms used in this Agreement are
     defined in Schedule B; and  references to a "Schedule" or an "Exhibit" are,
     unless  otherwise  specified,  to a Schedule or an Exhibit attached to this
     Agreement.

<PAGE>

2.   SALE AND PURCHASE OF NOTES.

     Subject to the terms  and  conditions of this  Agreement,  the Company will
issue and sell to each  Purchaser  and each  Purchaser  will  purchase  from the
Company, at the Closing provided for in Section 3, Notes in the principal amount
and in the Series specified  opposite such Purchaser's name in Schedule A at the
purchase  price  of  100%  of the  principal  amount  thereof.  The  Purchasers'
obligations  hereunder  are several and not joint  obligations  and no Purchaser
shall have any liability to any Person for the performance or non-performance of
any obligation by any other Purchaser hereunder.

3.   CLOSING.

     The sale and purchase  of the Notes to be purchased by each Purchaser shall
occur at the offices of Bingham  McCutchen  LLP, 399 Park Avenue,  New York,  NY
10022-4689,  at 10:00  A.M.,  New York Time,  at a closing  (the  "CLOSING")  on
November  28,  2006 or on such  other  Business  Day  thereafter  on or prior to
November 28, 2006 as may be agreed upon by the Company and the Purchasers  (such
date,  the  "CLOSING  DATE").  At the Closing the Company  will  deliver to each
Purchaser  the Notes to be purchased  by such  Purchaser in the form of a single
Note (of each Series,  if such Purchaser is purchasing Notes of both Series) (or
such  greater  number of Notes in  denominations  of at least  $100,000  as such
Purchaser may request) dated the Closing Date and registered in such Purchaser's
name (or in the name of its nominee),  against delivery by such Purchaser to the
Company  or its  order  of  immediately  available  funds in the  amount  of the
purchase price therefor by wire transfer of immediately  available funds for the
account of the Company to account number  0010-126-6337  at JPMorgan Chase Bank,
N.A.,  Houston,  Texas  ABA No.  021-000-021  Credit:  SCI  Funeral  &  Cemetery
Purchasing  Cooperative,  Inc.  Reference:  Note Purchase  Agreement.  If at the
Closing the Company shall fail to tender such Notes to any Purchaser as provided
above in this Section 3, or any of the  conditions  specified in Section 4 shall
not have been fulfilled to such Purchaser's satisfaction,  such Purchaser shall,
at its election,  be relieved of all further  obligations  under this Agreement,
without  thereby  waiving any rights such  Purchaser  may have by reason of such
failure or such nonfulfillment.

4.   CONDITIONS TO CLOSING.

     Each  Purchaser's  obligation to purchase and pay for the  Notes to be sold
to  such  Purchaser  at the  Closing  is  subject  to the  fulfillment  to  such
Purchaser's  satisfaction,  prior  to  or  at  the  Closing,  of  the  following
conditions:

     4.1. REPRESENTATIONS AND WARRANTIES.

     The  representations  and warranties of the Company in this Agreement shall
be correct when made and at the time of the Closing.

     4.2. PERFORMANCE; NO DEFAULT.

     The Company  shall  have  performed and complied  with all  agreements  and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after  giving  effect to the issue and sale
of the Notes (and the  application of the

                                       2

<PAGE>

proceeds thereof as contemplated by Section 5.14) no Default or Event of Default
shall have occurred and be  continuing.  Neither the Company nor any  Subsidiary
shall have entered into any  transaction  since the date of the Memorandum  that
would have been  prohibited  by Section 10 had such Section  applied  since such
date.

     4.3. COMPLIANCE CERTIFICATES.

          (a) OFFICER'S  CERTIFICATE.  The Company shall have  delivered to such
     Purchaser an Officer's Certificate, dated the Closing Date, certifying that
     the conditions specified in Sections 4.1, 4.2 and 4.13 have been fulfilled.

          (b) SECRETARY'S CERTIFICATE.  The Company shall have delivered to such
     Purchaser a certificate of its Secretary or Assistant Secretary,  dated the
     Closing Date,  certifying as to the resolutions  attached thereto and other
     corporate proceedings relating to the authorization, execution and delivery
     of the Notes and this Agreement.

          (c) INITIAL GUARANTORS' SECRETARY'S  CERTIFICATE.  Each of the Initial
     Guarantors shall have delivered to each Purchaser a certificate  certifying
     as to the  resolutions  attached  thereto  and  other  corporate  or  other
     proceedings  relating to the authorization,  execution and delivery by such
     Initial Guarantor of the Guaranty Agreement.

     4.4. OPINIONS OF COUNSEL.

     Such  Purchaser  shall  have  received  opinions  in  form  and   substance
satisfactory  to such  Purchaser,  dated  the  Closing  Date (a) (i) from  Locke
Liddell  & Sapp  LLP,  counsel  for  the  Company  and  certain  of the  Initial
Guarantors,  covering  the matters set forth in Exhibit  4.4(a)(i)  and covering
such other  matters  incident to the  transactions  contemplated  hereby as such
Purchaser  or its  counsel  may  reasonably  request  (and  the  Company  hereby
instructs its counsel to deliver such opinion to the Purchasers),  (ii) James M.
Shelger,  general  counsel to the  Company  covering  the  matters  set forth in
Exhibit  4.4(a)(ii) and covering such other matters incident to the transactions
contemplated hereby as such Purchaser or its counsel may reasonably request (and
the  Company  hereby  instructs  its  counsel  to  deliver  such  opinion to the
Purchasers) and (iii) from Davis, Brown,  Koehn, Shors & Roberts,  P.C., special
Iowa  counsel to certain of the  Initial  Guarantors,  covering  the matters set
forth in Exhibit  4.4(a)(iii)  and covering such other  matters  incident to the
transactions contemplated hereby as such Purchaser or its counsel may reasonably
request (and the Company hereby instructs its counsel to deliver such opinion to
the  Purchasers)  and (b) from Bingham  McCutchen LLP, the  Purchasers'  special
counsel in  connection  with such  transactions,  substantially  in the form set
forth in  Exhibit  4.4(b)  and  covering  such other  matters  incident  to such
transactions as such Purchaser may reasonably request.

     4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.

     On  the  Closing  Date  such  Purchaser's  purchase  of Notes  shall (a) be
permitted  by the laws  and  regulations  of each  jurisdiction  to  which  such
Purchaser is subject, without recourse to provisions (such as section 1405(a)(8)
of the New York  Insurance  Law)  permitting  limited  investments  by insurance
companies without restriction as to the character of the particular  investment,
(b) not violate any applicable law or regulation (including, without limitation,
Regulation  T, U or X of the Board of Governors of the Federal  Reserve  System)
and (c) not

                                       3

<PAGE>

subject such Purchaser to any tax, penalty or liability under or pursuant to any
applicable law or  regulation,  which law or regulation was not in effect on the
date hereof. If requested by such Purchaser,  such Purchaser shall have received
an Officer's Certificate certifying as to such matters of fact as such Purchaser
may  reasonably  specify to enable such  Purchaser  to  determine  whether  such
purchase is so permitted.

      4.6.  SALE OF OTHER NOTES.

      Contemporaneously with the Closing  the Company  shall sell to  each other
Purchaser and each other  Purchaser  shall purchase the Notes to be purchased by
it at the Closing as specified in Schedule A.

      4.7.  PAYMENT OF SPECIAL COUNSEL FEES.

      Without limiting the  provisions of  Section 15.1,  the Company shall have
paid on or before the Closing Date the fees,  charges and  disbursements  of the
Purchasers'  special counsel  referred to in Section 4.4 to the extent reflected
in a statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.

      4.8.  GUARANTY AGREEMENT.

      Each of the Persons  identified  on Schedule 4.8 hereto (all such Persons,
collectively, the "INITIAL GUARANTORS") shall have executed and delivered to the
Purchasers a Guaranty  Agreement  (as may be amended,  restated or modified from
time to time, the "GUARANTY  AGREEMENT"),  substantially  in the form of Exhibit
4.8.

      4.9.  SHARING AGREEMENT.

      The Company, the Initial Guarantors,  the Purchasers and all Persons party
to the Credit Agreement shall have executed the Sharing Agreement, substantially
in the form of Exhibit 4.9, among themselves and the others parties thereto, and
such Sharing Agreement shall be in full force and effect as of the Closing Date.

      4.10. OTHER FINANCING ARRANGEMENTS.

      The Company shall have  consummated the  transactions  contemplated by the
Credit  Agreement  and the Public Note  Agreement,  and the  Company  shall have
delivered to each Purchaser true and correct copies of the Credit  Agreement and
the Public Note Agreement,  each as in effect on the Closing Date,  certified as
such by a Responsible Officer.

      4.11. CONSUMMATION OF MERGER.

      All conditions precedent to the consummation of the Merger shall have been
satisfied (with the filing of the merger  certificate to occur immediately after
funding of the purchase of the Notes),  and the Company shall have  delivered to
each Purchaser a true and correct copy of the Merger Documents,  as in effect on
the Closing Date, certified as such by a Responsible Officer.

                                       4

<PAGE>

      4.12. PRIVATE PLACEMENT NUMBER.

      A Private  Placement  Number  issued by  Standard & Poor's  CUSIP  Service
Bureau (in  cooperation  with the SVO) shall have been  obtained  each Series of
Notes.

      4.13. CHANGES IN CORPORATE STRUCTURE.

      The Company shall not have changed its  jurisdiction of  incorporation  or
organization,  as applicable,  or been a party to any merger or consolidation or
succeeded to all or any substantial  part of the liabilities of any other entity
(other than as a result of the Merger),  at any time  following  the date of the
most recent financial statements referred to in Schedule 5.5.

      4.14. FUNDING INSTRUCTIONS.

      At least three  Business  Days prior to the Closing Date,  each  Purchaser
shall have received  written  instructions  signed by a  Responsible  Officer on
letterhead  of the Company  confirming  the  information  specified in Section 3
including (a) the name and address of the transferee  bank, (b) such  transferee
bank's ABA number and (c) the account  name and number  into which the  purchase
price for the Notes is to be deposited.

      4.15. OFFEREE LETTER.

      JPMorgan  Securities Inc. and Merrill Lynch & Co. shall have  delivered to
the Company,  its counsel,  each of the Purchasers and the  Purchasers'  special
counsel an offeree letter, in form and substance  satisfactory to each Purchaser
and the Company,  confirming the manner of the offering of the Notes by JPMorgan
Securities Inc. and Merrill Lynch & Co.

      4.16. PROCEEDINGS AND DOCUMENTS.

      All corporate and other  proceedings in connection  with the  transactions
contemplated  by this  Agreement and all documents and  instruments  incident to
such  transactions  shall be reasonably  satisfactory  to such Purchaser and its
special counsel,  and such Purchaser and its special counsel shall have received
all such counterpart originals or certified or other copies of such documents as
such Purchaser or such special counsel may reasonably request.

5.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY.(,)

      The Company  represents  and warrants to each  Purchaser  that,  as of the
Closing Date and after giving effect to the Merger:

      5.1.  ORGANIZATION; POWER AND AUTHORITY.

      Each of the Company and the Initial  Guarantors is a corporation  or other
entity duly organized,  validly  existing and in good standing under the laws of
its jurisdiction of organization,  and is duly qualified as a foreign entity and
is in good standing in each jurisdiction in which such qualification is required
by law,  other  than  those  jurisdictions  as to  which  the  failure  to be so
qualified  or in good  standing  could not,  individually  or in the  aggregate,
reasonably be expected to have a Material  Adverse  Effect.  Each of the Company
and the Initial Guarantors has the

                                       5

<PAGE>

corporate or other organizational power and authority to own or hold under lease
the properties it purports to own or hold under lease,  to transact the business
it  transacts  and  proposes to  transact,  and in the case of the  Company,  to
execute and deliver this  Agreement and the Notes and to perform the  provisions
hereof and thereof  and, in the case of each Initial  Guarantor,  to execute and
deliver the Guaranty Agreement and to perform the provisions thereof.

      5.2.  AUTHORIZATION, ETC.

          (a) This  Agreement  and the Notes  have been duly  authorized  by all
      necessary  corporate action on the part of the Company, and this Agreement
      constitutes,  and upon  execution  and  delivery  thereof each  Note  will
      constitute,   a  legal,   valid  and  binding  obligation of  the  Company
      enforceable  against the Company in  accordance  with its terms, except as
      such   enforceability   may  be  limited  by  (i)  applicable  bankruptcy,
      insolvency, reorganization, moratorium or other similar laws affecting the
      enforcement of creditors' rights generally and (ii) general  principles of
      equity  (regardless  of whether such  enforceability  is  considered  in a
      proceeding in equity or at law).

          (b) The Guaranty  Agreement has been duly  authorized by all necessary
      corporate action on the part of each Initial Guarantor party thereto,  and
      the Guaranty Agreement constitutes the legal, valid and binding obligation
      of such Initial  Guarantor enforceable  against such Initial  Guarantor in
      accordance with its terms, except as such enforceability may be limited by
      (i) applicable bankruptcy, insolvency, reorganization, moratorium or other
      similar laws affecting the enforcement of creditors' rights  generally and
      (ii)   general   principles   of  equity   (regardless  of  whether   such
      enforceability is considered in a proceeding in equity or at law).

      5.3.  DISCLOSURE.

      The  Company,  through its agents,  JPMorgan  Securities  Inc. and Merrill
Lynch & Co.,  has  delivered  to each  Purchaser  a copy of a Private  Placement
Memorandum,   dated  September,   2006  (the  "MEMORANDUM"),   relating  to  the
transactions  contemplated  hereby.  The  Memorandum  fairly  describes,  in all
material respects,  the general nature of the business and principal  properties
of the Company and its  Subsidiaries.  This  Agreement,  the  Memorandum and the
documents,  certificates or other writings  delivered to the Purchasers by or on
behalf of the Company in connection with the  transactions  contemplated  hereby
and identified in Schedule 5.3, and the financial  statements listed in Schedule
5.5 (this  Agreement,  the Memorandum and such documents,  certificates or other
writings and such  financial  statements  delivered to each  Purchaser  prior to
September  27,  2006  being  referred  to,  collectively,   as  the  "DISCLOSURE
DOCUMENTS"), taken as a whole, do not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
not misleading in light of the circumstances  under which they were made. Except
as disclosed in the Disclosure  Documents,  since  December 31, 2005,  there has
been no change in the financial condition,  operations,  business, properties or
prospects of the Company or any Subsidiary  except changes that  individually or
in the aggregate  could not  reasonably  be expected to have a Material  Adverse
Effect.  There is no fact known to the Company that could reasonably be expected
to have a Material  Adverse  Effect that has not been set forth herein or in the
Disclosure Documents.

                                       6

<PAGE>

      5.4.  ORGANIZATION  AND  OWNERSHIP  OF SHARES OF SUBSIDIARIES; AFFILIATES;
RESTRICTIVE AGREEMENTS.

          (a)  Schedule  5.4  contains  (except as noted  therein)  complete and
      correct  lists (i) of the  Company's  Subsidiaries,  showing,  as to  each
      Subsidiary, the  correct  name thereof,  the jurisdiction of its organiza-
      tion,  and the percentage  of shares of each class of its capital stock or
      similar Equity Interests  outstanding  owned by the Company and each other
      Subsidiary, (ii) of the Company's Affiliates, other than Subsidiaries, and
      (iii) of the Company's directors and senior officers.

          (b) All of the  outstanding  shares of capital stock or similar Equity
      Interests  of each  Subsidiary shown in Schedule 5.4 as being owned by the
      Company and its Subsidiaries have been validly issued,  are fully paid and
      nonassessable  and are owned by the Company or another Subsidiary free and
      clear of any Lien (except as otherwise disclosed in Schedule 5.4).

          (c) Each  Subsidiary  identified in Schedule 5.4 is a  corporation  or
      other legal entity duly  organized,  validly existing and in good standing
      under the laws of its jurisdiction of  organization, and is duly qualified
      as a foreign corporation  or other legal entity and is in good standing in
      each  jurisdiction in which such  qualification  is required by law, other
      than those  jurisdictions as to which the failure to be so qualified or in
      good standing could not, individually  or in the aggregate,  reasonably be
      expected to have a Material  Adverse Effect.  Each such Subsidiary has the
      corporate  or other  power and  authority to own or hold  under  lease the
      properties  it  purports  to own or hold under lease and to  transact  the
      business it transacts and proposes to transact.

          (d) No  Subsidiary  is a party to, or otherwise  subject to any legal,
      regulatory,  contractual or other  restriction (other than this Agreement,
      the agreements listed on Schedule 5.4 and customary limitations imposed by
      corporate  law  or  similar  statutes)  restricting the  ability  of  such
      Subsidiary  to pay  dividends  out of  profits or make any  other  similar
      distributions  of profits to the  Company or any of its Subsidiaries  that
      owns  outstanding  shares of capital stock or similar Equity  Interests of
      such Subsidiary.

      5.5.  FINANCIAL STATEMENTS; MATERIAL LIABILITIES.

      The  Company  has  delivered  to each  Purchaser  copies of the  financial
statements  of the Company and its  Subsidiaries  listed on Schedule 5.5. All of
said  financial  statements  (including  in each case the related  schedules and
notes)  fairly  present in all  material  respects  the  consolidated  financial
position  of  the  Company  and  its  Subsidiaries  as of the  respective  dates
specified in such Schedule and the consolidated  results of their operations and
cash flows for the  respective  periods so specified  and have been  prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments). The Company and its Subsidiaries do
not have any  Material  liabilities  that are not  disclosed  on such  financial
statements or otherwise disclosed in the Disclosure Documents.

                                       7

<PAGE>

      5.6.  COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.

      The  execution,  delivery  and  performance  by (a)  the  Company  of this
Agreement, the Notes and the Sharing Agreement and (b) each Initial Guarantor of
the Guaranty Agreement and the Sharing Agreement will not (i) contravene, result
in any breach of, or  constitute a default  under,  or result in the creation of
any Lien in respect of any property of the Company or any Subsidiary  under, any
indenture,  mortgage, deed of trust, loan, purchase or credit agreement,  lease,
corporate charter or by-laws,  or any other agreement or instrument to which the
Company or any  Subsidiary is bound or by which the Company or any Subsidiary or
any of their respective properties may be bound or affected,  (ii) conflict with
or result in a breach  of any of the  terms,  conditions  or  provisions  of any
order,  judgment,  decree,  or ruling of any court,  arbitrator or  Governmental
Authority  applicable  to the  Company or any  Subsidiary  or (iii)  violate any
provision  of any  statute  or  other  rule or  regulation  of any  Governmental
Authority applicable to the Company or any Subsidiary.

      5.7.  GOVERNMENTAL AUTHORIZATIONS, ETC.

      No  consent,  approval or  authorization  of, or  registration,  filing or
declaration with, any Governmental  Authority is required in connection with the
execution,  delivery or  performance by (a) the Company of this  Agreement,  the
Notes or the Sharing  Agreement  or (b) any Initial  Guarantor  of the  Guaranty
Agreement or the Sharing Agreement.

      5.8.  LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.

          (a) Except as disclosed on Schedule 5.8, there are no actions,  suits,
      investigations or proceedings pending or, to the knowledge of the Company,
      threatened  against  or  affecting the  Company or any  Subsidiary  or any
      property  of the  Company  or any Subsidiary  in any court or  before  any
      arbitrator  of any kind or before or by any Governmental  Authority  that,
      individually  or in the aggregate,  could reasonably be expected to have a
      Material Adverse Effect.

          (b) Neither the Company  nor any  Subsidiary  is in default  under any
      term of any agreement or  instrument to which it is a party or by which it
      is bound, or any order, judgment, decree or  ruling of any court, arbitra-
      tor or  Governmental  Authority or is in violation of any applicable  law,
      ordinance, rule or regulation (including without limitation  Environmental
      Laws or the USA Patriot Act) of any Governmental  Authority, which default
      or  violation,  individually  or in  the  aggregate,  could reasonably  be
      expected to have a Material Adverse Effect.

      5.9.  TAXES.

      The  Company  and its  Subsidiaries  have filed all tax  returns  that are
required to have been filed in any  jurisdiction,  and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their properties,  assets, income or franchises, to the extent such
taxes and  assessments  have  become due and payable and before they have become
delinquent,  except for any taxes and assessments (i) the amount of which is not
individually or in the aggregate  Material or (ii) the amount,  applicability or
validity of which is  currently  being  contested  in good faith by  appropriate
proceedings  and with respect to which the

                                       8

<PAGE>

Company or a Subsidiary,  as the case may be, has established  adequate reserves
in  accordance  with GAAP.  The  Company  knows of no basis for any other tax or
assessment that could  reasonably be expected to have a Material Adverse Effect.
The  charges,  accruals  and  reserves  on the  books  of the  Company  and  its
Subsidiaries in respect of federal,  state or other taxes for all fiscal periods
are  adequate.  The  federal  income  tax  liabilities  of the  Company  and its
Subsidiaries have been finally determined (whether by reason of completed audits
or the  statute  of  limitations  having  run)  for all  fiscal  years up to and
including the fiscal year ended December 31, 1998.

      5.10. TITLE TO PROPERTY; LEASES.

      The Company and its  Subsidiaries  have good and sufficient title to their
respective  properties  that  individually  or in the  aggregate  are  Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been  acquired by the Company or
any Subsidiary  after said date (except as sold or otherwise  disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this  Agreement.  All leases that  individually or in the aggregate are Material
are valid  and  subsisting  and are in full  force  and  effect in all  material
respects.

      5.11. LICENSES, PERMITS, ETC.

          (a) The Company  and its  Subsidiaries  own or possess  all  licenses,
      permits, franchises,  authorizations,   patents,  copyrights,  proprietary
      software, service marks,  trademarks and trade names,  or rights  thereto,
      that individually or in the aggregate are Material, without known conflict
      with the rights of others.

          (b) To the best knowledge of the Company, no product or service of the
      Company or any of its  Subsidiaries  infringes in any material respect any
      license, permit, franchise,  authorization, patent, copyright, proprietary
      software,  service mark, trademark, trade name or other right owned by any
      other Person.

          (c)  To the  best  knowledge  of the  Company,  there  is no  Material
      violation  by  any  Person  of  any right  of  the  Company  or any of its
      Subsidiaries with respect to any patent, copyright,  proprietary software,
      service  mark,  trademark,  trade name or other right owned or used by the
      Company or any of its Subsidiaries.

      5.12. COMPLIANCE WITH ERISA.

          (a)  The  Company  and  each  ERISA   Affiliate   have   operated  and
      administered  each Plan in compliance  with all applicable laws except for
      such  instances  of  noncompliance  as have not  resulted in and could not
      reasonably be expected to result in a Material Adverse Effect. Neither the
      Company nor any ERISA  Affiliate  has  incurred any  liability pursuant to
      Title I or IV of ERISA  (other than  benefit  liabilities in excess of the
      fair market value of plan  assets) or the penalty or excise tax provisions
      of the Code relating to employee  benefit plans (as  defined  in section 3
      of ERISA), and no event,  transaction  or condition has occurred or exists
      that could reasonably be expected to result in the  incurrence of any such
      liability by the Company or any ERISA  Affiliate, or in the  imposition of
      any Lien on any of the rights,  properties or assets of the Company or any

                                       9

<PAGE>

      ERISA  Affiliate, in either case  pursuant to Title I or IV of ERISA or to
      such penalty or excise tax  provisions or to section  401(a)(29) or 412 of
      the Code or section 4068 of ERISA, other than such liabilities or Liens as
      would not be individually or in the aggregate Material.

          (b) The present value of the aggregate benefit  liabilities under each
      of the Plans (other than  Multiemployer Plans),  determined as of December
      31, 2005 on the basis of the  assumptions used for  purposes of  Financial
      Accounting  Standards Board Statement No. 87, did not exceed the aggregate
      current  value  of the assets  of such  Plan  allocable  to  such  benefit
      liabilities  by more than $30,000,000  in the case of any  single  Plan or
      $40,000,000 in the aggregate for all Plans. The term "benefit liabilities"
      has the meaning  specified in section 4001 of ERISA and the terms "current
      value" and  "present  value"  have the  meaning  specified in section 3 of
      ERISA.

          (c) The Company and its ERISA Affiliates have not incurred  withdrawal
      liabilities  (and are not  subject to  contingent  withdrawal liabilities)
      under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
      individually or in the aggregate are Material.

          (d) The expected postretirement benefit obligation, other than pension
      obligations  (in each case  determined as of the last day of the Company's
      most recently  ended fiscal year in accordance with  Financial  Accounting
      Standards   Board   Statement  No.  106,   without regard  to  liabilities
      attributable  to  continuation  coverage  mandated by section 4980B of the
      Code) of the Company and its Subsidiaries is not Material.

          (e) The execution and delivery of this  Agreement and the issuance and
      sale of the  Notes  hereunder  will not  involve  any transaction  that is
      subject to the  prohibitions of section 406 of ERISA or in connection with
      which a tax could be imposed pursuant to section  4975(c)(1)(A)-(D) of the
      Code.  The  representation  by the Company to each  Purchaser in the first
      sentence of this  Section  5.12(e) is made in reliance upon and subject to
      the accuracy of such  Purchaser's  representation in Section 6.2 as to the
      sources  of the  funds  used to pay the  purchase price of the Notes to be
      purchased by such Purchaser.

      5.13. PRIVATE OFFERING BY THE COMPANY.

      Neither the Company nor anyone  acting on its behalf has offered the Notes
or any similar  Securities for sale to, or solicited any offer to buy any of the
same from, or otherwise  approached or negotiated in respect  thereof with,  any
Person  other  than  the  Purchasers  and not more  than 40 other  Institutional
Investors,  each of which  has been  offered  the  Notes at a  private  sale for
investment.  Neither the Company nor anyone  acting on its behalf has taken,  or
will take,  any action that would  subject the  issuance or sale of the Notes to
the  registration  requirements  of  Section 5 of the  Securities  Act or to the
registration  requirements  of any securities or blue sky laws of any applicable
jurisdiction.

      5.14. USE OF PROCEEDS; MARGIN REGULATIONS.

      The Company  will apply the proceeds of the sale of the Notes as set forth
in the "Sources and Uses" section of the Memorandum.  Except for the purchase of
all of the  outstanding  Equity

                                       10

<PAGE>

Interests of Alderwoods in connection with the transactions  contemplated by the
Merger  Documents  (which  Equity   Interests,   after  giving  effect  to  such
transactions, will be delisted and not available for trading by the Company), no
part of the proceeds from the sale of the Notes hereunder will be used, directly
or indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal  Reserve System
(12 CFR 221),  or for the  purpose  of  buying or  carrying  or  trading  in any
securities, in each case under such circumstances as to involve the Company in a
violation of Regulation X of said Board (12 CFR 224) or to involve any broker or
dealer in a violation of  Regulation T of said Board (12 CFR 220).  Margin stock
does not constitute more than 25% of the value of the consolidated assets of the
Company and its Subsidiaries and the Company does not have any present intention
that margin stock will constitute more than 25% of the value of such assets.  As
used in this  Section,  the  terms  "margin  stock"  and  "purpose  of buying or
carrying" shall have the meanings assigned to them in said Regulation U.

      5.15. EXISTING INDEBTEDNESS; FUTURE LIENS.

          (a) Except as described  therein,  Schedule 5.15 sets forth a complete
      and correct  list of all  outstanding Indebtedness  of the Company and its
      Subsidiaries  as of  the  Closing  Date (including  a  description  of the
      obligors  and  obligees,   principal  amount  outstanding  and  collateral
      therefor,  if any, and Guaranty thereof, if any).  Neither the Company nor
      any  Subsidiary  is in default  and no waiver of default is  currently  in
      effect, in the payment of any principal of or interest on any Indebtedness
      of the Company or such  Subsidiary and no event or  condition  exists with
      respect to any  Indebtedness of the Company or any  Subsidiary  that would
      permit (or that with notice or the lapse of time, or both,  would  permit)
      one or more  Persons to cause such  Indebtedness to become due and payable
      before  its stated  maturity  or before its  regularly scheduled  dates of
      payment.

          (b) Except as disclosed in Schedule 5.15, neither  the Company nor any
      Subsidiary  has agreed or consented to cause or permit in the future (upon
      the happening of a contingency or otherwise) any of its property,  whether
      now owned or hereafter acquired,  to be subject to a Lien not permitted by
      Section 10.2.

          (c) Neither the Company nor any Subsidiary is a party to, or otherwise
      subject  to  any  provision   contained  in,  any  instrument   evidencing
      Indebtedness  of the Company or such  Subsidiary, any  agreement  relating
      thereto or any other agreement (including, but not limited to, its charter
      or other organizational document) which limits the amount of, or otherwise
      imposes  restrictions on the  incurring of,  Indebtedness  of the Company,
      except as specifically indicated in Schedule 5.15.

      5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.

          (a) Neither the sale of the Notes by the Company hereunder nor its use
      of the  proceeds  thereof  will violate the Trading with the Enemy Act, as
      amended,  or any of the foreign assets  control  regulations of the United
      States Treasury  Department (31 CFR, Subtitle B, Chapter V, as amended) or
      any enabling legislation or executive order relating thereto.

                                       11

<PAGE>

          (b) Neither the Company nor any Subsidiary  (i) is a Person  described
      or  designated in the Specially  Designated Nationals and Blocked  Persons
      List of the  Office  of  Foreign  Assets  Control or in  Section  1 of the
      Anti-Terrorism  Order or (ii) engages in any dealings or transactions with
      any  such Person. The Company  and  its Subsidiaries are in compliance, in
      all material respects, with the USA Patriot Act.

          (c) No part of the proceeds from the sale of the Notes  hereunder will
      be used,  directly or  indirectly,  for any  payments to any  governmental
      official or  employee,  political  party,  official of a political  party,
      candidate  for  political  office,  or anyone  else acting in an  official
      capacity,  in order to  obtain,  retain or direct business  or obtain  any
      improper  advantage,  in violation  of the United States  Foreign  Corrupt
      Practices  Act of 1977,  as  amended,  assuming in all cases that such Act
      applies to the Company.

      5.17. STATUS UNDER CERTAIN STATUTES.

      Neither the Company nor any Subsidiary is subject to regulation  under the
Investment  Company Act of 1940, as amended,  the Public Utility Holding Company
Act of 2005, as amended,  the ICC  Termination  Act of 1995, as amended,  or the
Federal Power Act, as amended.

      5.18. ENVIRONMENTAL MATTERS.

          (a) Neither the Company nor any  Subsidiary has knowledge of any claim
      or has  received  any  notice of any  claim,  and no  proceeding  has been
      instituted raising any claim against  the Company or any  of  its  Subsid-
      iaries or any of their  respective  real properties now or formerly owned,
      leased or operated by any of them or other  assets, alleging any damage to
      the environment or violation of any Environmental  Laws,  except,  in each
      case, such as could not  reasonably  be  expected  to result in a Material
      Adverse Effect.

          (b) Neither the Company nor any  Subsidiary has knowledge of any facts
      which would give rise to any claim,  public or private,  of  violation  of
      Environmental Laws or damage to the environment emanating from,  occurring
      on or in any way related to real properties now or formerly owned,  leased
      or  operated by any of  them or to other  assets or their  use, except, in
      each case,  such as  could  not  reasonably  be  expected  to result  in a
      Material Adverse Effect.

          (c) Neither the Company nor any  Subsidiary  has stored any  Hazardous
      Materials on real properties now or formerly owned,  leased or operated by
      any of them and has not  disposed of any  Hazardous Materials  in a manner
      contrary  to any  Environmental Laws in each case in any manner that could
      reasonably be expected to result in a Material Adverse Effect; and

          (d) All buildings on all real properties now owned, leased or operated
      by  the  Company  or  any  Subsidiary  are in compliance  with  applicable
      Environmental Laws, except where failure to comply could not reasonably be
      expected to result in a Material Adverse Effect.

                                       12

<PAGE>

      5.19. RANKING OF OBLIGATIONS.

      The  Company's  payment  obligations  under this  Agreement and the Notes,
will,  upon the execution and delivery of this Agreement and the issuance of the
Notes, rank at least PARI PASSU, without preference or priority,  with all other
unsecured  and  unsubordinated  Indebtedness  of the  Company  except  for  such
Indebtedness  which is  mandatorily  preferred by law and not by contract.  Each
Guarantor's   payment  obligations  under  the  Guaranty  Agreement  will,  upon
execution  and  delivery of the  Guaranty  Agreement,  rank at least pari passu,
without  preference or priority,  with all other  unsecured  and  unsubordinated
Indebtedness of such Guarantor except for such Indebtedness which is mandatorily
preferred by law and not by contract.

6.    REPRESENTATIONS OF THE PURCHASERS.

      6.1.  PURCHASE FOR INVESTMENT.

      Each Purchaser  severally  represents  that it is purchasing the Notes for
its  own  account  or for  one or  more  separate  accounts  maintained  by such
Purchaser  or for the account of one or more pension or trust funds and not with
a view to the  distribution  thereof,  PROVIDED  that  the  disposition  of such
Purchaser's or their  property shall at all times be within such  Purchaser's or
their  control.  Each  Purchaser  understands  that  the  Notes  have  not  been
registered  under  the  Securities  Act and  may be  resold  only if  registered
pursuant  to the  provisions  of the  Securities  Act  or if an  exemption  from
registration  is  available,  except  under  circumstances  where  neither  such
registration  nor such an  exemption is required by law, and that the Company is
not required to register the Notes.

      6.2.  SOURCE OF FUNDS.

      Each  Purchaser  severally  represents  that at least one of the following
statements is an accurate representation as to each source of funds (a "SOURCE")
to be used by such  Purchaser  to pay the  purchase  price  of the  Notes  to be
purchased by such Purchaser hereunder:

          (a) the Source is an "insurance  company general account" (as the term
      is  defined  in  the  United  States   Department  of  Labor's  Prohibited
      Transaction  Exemption ("PTE") 95-60) in respect of which the reserves and
      liabilities  (as  defined  by the  annual  statement  for  life  insurance
      companies  approved  by the NAIC (the  "NAIC  ANNUAL  STATEMENT")) for the
      general account  contract(s)  held by or on behalf of any employee benefit
      plan  together  with the amount of the  reserves  and  liabilities for the
      general  account  contract(s)  held by or on behalf  of any other employee
      benefit plans  maintained  by the same  employer (or affiliate  thereof as
      defined in PTE 95-60) or by the same employee organization  in the general
      account do not  exceed 10% of the total reserves  and  liabilities  of the
      general account (exclusive of separate account liabilities)  plus  surplus
      as set forth  in  the NAIC  Annual  Statement  filed with such Purchaser's
      state of domicile; or

          (b) the  Source is a separate  account  that is  maintained  solely in
      connection with such Purchaser's fixed contractual obligations under which
      the amounts  payable,  or credited,  to any  employee benefit plan (or its
      related  trust) that has any interest in such  separate account (or to any
      participant or beneficiary of such plan (including any

                                       13

<PAGE>

      annuitant)) are not  affected in  any manner by the investment performance
      of the separate account; or

          (c) the  Source is either (i) an  insurance  company  pooled  separate
      account,  within the  meaning  of PTE  90-1  or  (ii)  a  bank  collective
      investment  fund, within the meaning of PTE 91-38 and, except as disclosed
      by  such Purchaser  to the Company in writing pursuant to this clause (c),
      no employee benefit plan or group of plans maintained by the same employer
      or employee  organization  beneficially  owns more than 10% of all  assets
      allocated to such pooled separate account or collective  investment  fund;
      or

          (d) the Source  constitutes assets of an "investment fund" (within the
      meaning  of  Part V of PTE  84-14 (the  "QPAM  EXEMPTION"))  managed  by a
      "qualified  professional  asset manager" or "QPAM"  (within the meaning of
      Part V of the QPAM  Exemption), no employee benefit plan's assets that are
      included in such  investment  fund, when  combined  with the assets of all
      other  employee  benefit  plans  established  or  maintained  by  the same
      employer or by an affiliate  (within the meaning of Section V(c)(1) of the
      QPAM Exemption) of such employer or by the same employee organization  and
      managed  by such QPAM, exceed 20% of the total client  assets  managed  by
      such QPAM, the  conditions of Part I(c) and (g) of the QPAM  Exemption are
      satisfied, neither the QPAM nor a Person  controlling or controlled by the
      QPAM (applying  the  definition  of  "control" in Section V(e) of the QPAM
      Exemption) owns a 5% or more interest in the Company and (i) the identity
      of such QPAM and (ii) the names of all employee benefit plans whose assets
      are included in such investment fund have been disclosed to the Company in
      writing pursuant to this clause (d); or

          (e) the Source  constitutes  assets of a "plan(s)" (within the meaning
      of  Section IV of  PTE 96-23 (the "INHAM  EXEMPTION")) managed  by an "in-
      house  asset  manager" or "INHAM" (within  the  meaning of  Part IV of the
      INHAM  Exemption), the  conditions of Part I(a),  (g) and (h) of the INHAM
      Exemption  are  satisfied, neither the INHAM nor a Person  controlling  or
      controlled by the INHAM  (applying the  definition of "control" in Section
      IV(d) of the  INHAM  Exemption) owns a 5% or more  interest in the Company
      and (i) the  identity of such INHAM and (ii) the  name(s) of the  employee
      benefit plan(s) whose assets  constitute the Source have been disclosed to
      the Company in writing pursuant to this clause (e); or

          (f) the Source is a governmental plan; or

          (g) the Source is one or more employee  benefit  plans,  or a separate
      account or  trust fund comprised  of one or more  employee  benefit plans,
      each of which has been identified  to the  Company in writing  pursuant to
      this clause (g); or

          (h) the Source does not include  assets of any employee  benefit plan,
      other than a plan exempt from the coverage of ERISA.

As used in this Section 6.2, the terms  "employee  benefit plan,"  "governmental
plan," and "separate  account"  shall have the respective  meanings  assigned to
such terms in section 3 of ERISA.

                                       14

<PAGE>

7.    INFORMATION AS TO COMPANY.

      7.1.  FINANCIAL AND BUSINESS INFORMATION.

      The Company shall deliver to each holder of Notes that is an Institutional
Investor:

          (a) QUARTERLY  STATEMENTS -- within 45 days (or such shorter period as
      is 15  days  greater  than  the  period applicable  to the  filing  of the
      Company's Quarterly Report on Form 10-Q (the "FORM 10-Q") with the SEC (or
      that would be so applicable  if the  Company  were  subject to such filing
      requirements))  after  the  end of each  quarterly  fiscal  period in each
      fiscal year of the Company (other than the last quarterly fiscal period of
      each such fiscal year), duplicate copies of,

               (i)  a  consolidated   balance  sheet  of  the  Company  and  its
          Subsidiaries as at the end of such quarter, and

               (ii) consolidated  statements of income, changes in shareholders'
          equity and cash flows of the  Company and its  Subsidiaries,  for such
          quarter  and (in the case of the  second and third  quarters)  for the
          portion of the fiscal year ending with such quarter,

      setting  forth  in each  case in  comparative  form  the  figures  for the
      corresponding  periods in the  previous  fiscal  year,  all in  reasonable
      detail, prepared in accordance with GAAP applicable to quarterly financial
      statements  generally,  and  certified  by a Senior  Financial  Officer as
      fairly presenting, in all material respects, the financial position of the
      companies  being  reported  on and their  results of  operations  and cash
      flows,  subject to changes resulting from year-end  adjustments,  PROVIDED
      that  delivery  within the time  period  specified  above of copies of the
      Company's Form 10-Q prepared in compliance with the requirements  therefor
      and filed with the SEC shall be deemed to satisfy the requirements of this
      Section  7.1(a),  PROVIDED,  FURTHER,  that the Company shall be deemed to
      have made such  delivery  of such Form 10-Q if it shall have  timely  made
      such Form 10-Q  available on "EDGAR" and on its home page on the worldwide
      web (at the date of this Agreement located at: http//www.sci-corp.com) and
      shall have  given  each  Purchaser  notice of such  availability  on EDGAR
      (which  notice may be provided in the  certificate  referred to in Section
      7.2)  and  on its  home  page  in  connection  with  each  delivery  (such
      availability   and  notice   thereof  being  referred  to  as  "ELECTRONIC
      DELIVERY");

          (b) ANNUAL  STATEMENTS -- within 90 days (or such shorter period as is
      15 days greater than the period applicable  to the filing of the Company's
      Annual Report on Form 10-K (the "FORM 10-K")  with  the SEC (or that would
      be so applicable if the Company were subject to such filing requirements))
      after the end of each fiscal year of the Company, duplicate copies of

               (i)  a  consolidated   balance  sheet  of  the  Company  and  its
          Subsidiaries as at the end of such year, and

               (ii) consolidated  statements of income, changes in shareholders'
          equity and cash flows of the  Company  and its  Subsidiaries  for such
          year,

                                       15

<PAGE>
      setting  forth  in each  case in  comparative  form  the  figures  for the
      previous  fiscal year,  all in reasonable  detail,  prepared in accordance
      with GAAP, and accompanied by

                    (A) an opinion thereon of independent  public accountants of
               recognized national standing, which opinion shall state that such
               financial  statements  present fairly, in all material  respects,
               the financial  position of the companies  being reported upon and
               their results of operations and cash flows and have been prepared
               in  conformity  with  GAAP,  and  that  the  examination  of such
               accountants in connection with such financial statements has been
               made in accordance with generally  accepted  auditing  standards,
               and that such audit provides a reasonable  basis for such opinion
               in the circumstances, and

                    (B) a certificate of such accountants stating that they have
               reviewed this Agreement and stating  further  whether,  in making
               their  audit,  they have become  aware of any  condition or event
               that then  constitutes a Default or an Event of Default,  and, if
               they are aware  that any such  condition  or event  then  exists,
               specifying  the nature and period of the  existence  thereof  (it
               being  understood  that such  accountants  shall  not be  liable,
               directly or  indirectly,  for any failure to obtain  knowledge of
               any Default or Event of Default  unless such  accountants  should
               have obtained  knowledge thereof in making an audit in accordance
               with generally  accepted auditing  standards or did not make such
               an audit),

      PROVIDED that the delivery  within the time period  specified above of the
      Company's  Form 10-K for such fiscal  year  (together  with the  Company's
      annual report to  shareholders,  if any,  prepared  pursuant to Rule 14a-3
      under the  Exchange  Act)  prepared in  accordance  with the  requirements
      therefor  and  filed  with  the  SEC,   together  with  the   accountant's
      certificate   described   in   clause   (B)   above   (the   "ACCOUNTANTS'
      CERTIFICATE"), shall be deemed to satisfy the requirements of this Section
      7.1(b),  PROVIDED,  FURTHER, that the Company shall be deemed to have made
      such  delivery of such Form 10-K if it shall have  timely made  Electronic
      Delivery  thereof,  in which event the Company shall  separately  deliver,
      concurrently with such Electronic Delivery, the Accountants' Certificate;

          (c) SEC AND OTHER REPORTS -- promptly upon their  becoming  available,
      one  copy  of (i) each  financial  statement,  report,  notice  or   proxy
      statement  sent by the Company or any  Subsidiary to its principal lending
      banks as a whole (excluding information sent to such banks in the ordinary
      course of administration of a bank facility, such as information  relating
      to pricing and borrowing availability) or to its public securities holders
      generally,  and (ii) each regular or  periodic  report, each  registration
      statement (without exhibits except as expressly requested by such holder),
      and each prospectus and all amendments thereto filed by the Company or any
      Subsidiary  with  the SEC and  of all  press releases and other statements
      made  available generally by the Company or any  Subsidiary  to the public
      concerning developments  that  are Material;  PROVIDED, that  the  Company
      shall be deemed to have made such  delivery of such copy if it shall  have
      timely made Electronic Delivery thereof;

                                       16

<PAGE>

          (d) NOTICE OF DEFAULT  OR EVENT OF  DEFAULT  --  promptly,  and in any
      event within five days after a Responsible  Officer becoming  aware of the
      existence  of any Default or Event of Default or that any Person has given
      any notice or taken any action with respect to a claimed default hereunder
      or that any Person has given any notice or  taken  any action with respect
      to a claimed default of the type referred to in Section  11(f),  a written
      notice  specifying  the  nature and period of  existence  thereof and what
      action the Company is taking or proposes to take with respect thereto;

          (e) ERISA MATTERS -- promptly, and in any event within five days after
      a Responsible  Officer  becoming aware of any of the following,  a written
      notice  setting forth the nature  thereof and the action, if any, that the
      Company or an ERISA Affiliate proposes to take with respect thereto:

               (i) with respect to any Plan, any reportable event, as defined in
          section  4043(c) of ERISA and the regulations  thereunder  (other than
          the Merger and the transactions  contemplated  thereunder),  for which
          notice thereof has not been waived pursuant to such  regulations as in
          effect on the date hereof; or

               (ii)  the  taking  by the  PBGC of  steps  to  institute,  or the
          threatening  by the  PBGC of the  institution  of,  proceedings  under
          section 4042 of ERISA for the  termination of, or the appointment of a
          trustee to administer,  any Plan, or the receipt by the Company or any
          ERISA Affiliate of a notice from a Multiemployer Plan that such action
          has been taken by the PBGC with respect to such Multiemployer Plan; or

               (iii) any event,  transaction  or condition  that could result in
          the incurrence of any liability by the Company or any ERISA  Affiliate
          pursuant  to Title I or IV of  ERISA  or the  penalty  or  excise  tax
          provisions of the Code relating to employee  benefit plans,  or in the
          imposition  of any Lien on any of the rights,  properties or assets of
          the Company or any ERISA Affiliate  pursuant to Title I or IV of ERISA
          or such penalty or excise tax  provisions,  if such liability or Lien,
          taken together with any other such liabilities or Liens then existing,
          could reasonably be expected to have a Material Adverse Effect;

          (f) NOTICES FROM GOVERNMENTAL  AUTHORITY -- promptly, and in any event
      within 30 days of receipt  thereof, copies of any notice to the Company or
      any Subsidiary from any federal or state  Governmental  Authority relating
      to  any  order, ruling,  statute  or  other law  or regulation  that could
      reasonably be expected to have a Material Adverse Effect;

          (g) REQUESTED  INFORMATION -- with reasonable  promptness,  such other
      data  and  information relating  to  the  business,  operations,  affairs,
      financial  condition,  assets or properties  of the  Company or any of its
      Subsidiaries  (including,  but  without limitation,  actual  copies of the
      Company's  Form  10-Q and Form  10-K) or relating  to the  ability  of the
      Company to perform its obligations hereunder, under the  Notes  and  under
      the Sharing  Agreement as from time to time may be reasonably requested by
      any such holder of Notes; and

                                       17

<PAGE>

          (h) INTEREST  RATE NOTICE -- Promptly,  and in any event within 5 days
      of any  change in the Prime Rate (to the  extent  there are any Prime Rate
      Loans  outstanding) and  within  5 days  after  the  commencement  of  any
      Interest Period, evidence in reasonable detail (which shall not be binding
      on the  holders of the  Notes) of the  computation  of the  interest  rate
      applicable to such Interest Period (including with such computation a copy
      of the  applicable Bloomberg page "Currency BBAM 1" relied upon in setting
      such rate)  and  specifying  the  next  succeeding  Interest Payment Date.
      Unless any  holder  of  Notes  delivers  written  objection  to  any  such
      computation to the  Company  within  45  days  of  receipt  thereof,  such
      computation shall be binding on the  holders of the Notes for the  related
      Interest Period (except in the case of manifest error).

      7.2. OFFICER'S CERTIFICATE.

      Each set of financial  statements  delivered to a holder of Notes pursuant
to Section  7.1(a) or Section  7.1(b) shall be accompanied by a certificate of a
Senior  Financial  Officer  setting  forth  (which,  in the  case of  Electronic
Delivery  of any such  financial  statements,  shall be by  separate  concurrent
delivery of such certificate to each holder of Notes):

          (a)  COVENANT  COMPLIANCE  --  the  information   (including  detailed
      calculations) required  in order to  establish  whether the Company was in
      compliance with the requirements of Section 9.7, 10.1,  10.4,  10.6, 10.7,
      10.9,  and 10.12, during the  quarterly  or annual  period  covered by the
      statements  then being  furnished  (including  with  respect  to each such
      Section,  where applicable,  the  calculations  of the  maximum or minimum
      amount,  ratio or percentage,  as the case may be,  permissible  under the
      terms  of such  Sections, and the  calculation  of the  amount,  ratio  or
      percentage then in existence); and

          (b) EVENT OF DEFAULT -- a statement that such Senior Financial Officer
      has reviewed the relevant terms hereof and has made, or caused to be made,
      under his or her  supervision, a review of the transactions and conditions
      of the Company and its Subsidiaries from the beginning of the quarterly or
      annual period covered by the  statements then being  furnished to the date
      of the  certificate  and that such  review  shall not have  disclosed  the
      existence  during such period of any condition or event that constitutes a
      Default or an Event of Default or, if any such  condition or event existed
      or exists  (including,  without  limitation,  any such  event or condition
      resulting from the failure of the Company or any Subsidiary to comply with
      any  Environmental Law),  specifying  the nature  and period of  existence
      thereof and what action the  Company  shall have taken or proposes to take
      with respect thereto.

      7.3.  VISITATION.

      The Company shall permit the  representatives of each holder of Notes that
is an Institutional Investor:

          (a) NO DEFAULT -- if no Default or Event of Default  then  exists,  at
      the  expense  of  such  holder  and  upon  reasonable  prior notice to the
      Company, to visit  the  principal  executive office  of  the  Company,  to
      discuss  the  affairs,  finances  and  accounts  of  the  Company  and its
      Subsidiaries  with the  Company's  officers,  and (with the consent of the

                                       19

<PAGE>

      Company, which consent will not be unreasonably  withheld) its independent
      public accountants,  and (with the consent of the Company,  which  consent
      will not  be  unreasonably  withheld)  to  visit  the  other  offices  and
      properties  of  the Company  and each  Subsidiary,  all at such reasonable
      times and as often as may be reasonably requested in writing; and

          (b) DEFAULT -- if a Default or Event of Default  then  exists,  at the
      expense of the  Company  to  visit  and  inspect  any of  the  offices  or
      properties of  the  Company  or  any  Subsidiary,  to  examine  all  their
      respective books of account,  records,  reports and other papers,  to make
      copies and extracts  therefrom, and to discuss their  respective  affairs,
      finances  and  accounts  with  their respective officers  and  independent
      public  accountants  (and by this  provision  the Company  authorizes said
      accountants  to discuss the  affairs, finances and accounts of the Company
      and its Subsidiaries), all at such times and as often as may be requested.

8.    PAYMENT AND PREPAYMENT OF THE NOTES.

      8.1.  MATURITY.

      As provided therein, the entire unpaid principal balance of each Series of
Notes shall be due and payable on the stated maturity date thereof.

      8.2.  OPTIONAL PREPAYMENTS.

      The Company may not prepay the outstanding principal balance of the Series
B Notes in whole or in part on or before the first  anniversary  of the  Closing
Date. At any time,  in the case of the Series A Notes,  or at any time after the
first  anniversary  of the Closing Date, in the case of the Series B Notes,  the
Company may, at its option,  upon notice as provided below,  prepay all, or from
time to time any part  of,  the  Series  A Notes  and the  Series B Notes,  in a
principal  amount not less than  $1,000,000,  at 100% of the principal amount so
prepaid,  and, if any interest on any Note is being  calculated  by reference to
the LIBO Rate and such prepayment is made on any date other than the last day of
the  applicable  Interest  Period for such Note,  any Breakage Cost Indemnity in
respect  thereof.  The  Company  will  give each  holder of Notes to be  prepaid
hereunder written notice of each optional  prepayment under this Section 8.2 not
less than (a) 15 Business Days in the case of any  LIBOR-Based  Loan and (b) one
(1) Business  Day in the case of any Prime Rate Loan,  and not more than 30 days
prior to the date fixed for such prepayment. Each such notice shall specify such
date,  the aggregate  principal  amount and Series of the Notes to be prepaid on
such date,  the principal  amount of each Note held by such holder to be prepaid
(determined  in  accordance  with Section  8.4),  the interest to be paid on the
prepayment date with respect to such principal  amount being prepaid,  and shall
affirm the  Company's  obligation  to pay the  Breakage  Cost  Indemnity to each
holder of the Notes to be prepaid,  if  applicable,  upon receipt from each such
holder of the  certificates  contemplated  by  Section  8.8(b).  Notwithstanding
anything  in this  Section  8.2 to the  contrary,  however,  the Company may not
prepay any of the Notes  pursuant  to this  Section 8.2 unless the Term Loan has
been paid in full.

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<PAGE>

     8.3. PREPAYMENT OF NOTES UPON CHANGE IN CONTROL.

          (a)  NOTICE  OF CHANGE IN  CONTROL.  The  Company  will,  within  five
     Business  Days after any  Responsible  Officer  obtaining  knowledge of the
     occurrence of any Change in Control,  give written notice of such Change in
     Control to each holder of Notes.  Such notice shall contain and  constitute
     an offer by the Company to prepay Notes as  described  in clause  8.3(b) of
     this Section 8.3 and shall be accompanied by the  certificate  described in
     clause (e) of this Section 8.3.

          (b) OFFER TO PREPAY NOTES.  The offer to prepay Notes  contemplated by
     clause (a) of this Section 8.3 shall be an offer to prepay,  in  accordance
     with and subject to this  Section  8.3,  all, but not less than all, of the
     Notes of each Series  held by each  holder (in this case only,  "holder" in
     respect of any Note  registered  in the name of a nominee  for a  disclosed
     beneficial  owner shall mean such beneficial  owner) on a date specified in
     such offer (the "CHANGE IN CONTROL PREPAYMENT DATE"), which date shall be a
     Business Day, that is not less than 30 days and not more than 60 days after
     the date of such offer (if the Change in Control  Prepayment Date shall not
     be specified in such offer, the Change in Control  Prepayment Date shall be
     the Business Day on or immediately following the 45th day after the date of
     such offer).

          (c) ACCEPTANCE;  REJECTION.  A holder of Notes may reject the offer to
     prepay  made  pursuant  to this  Section  8.3 by  causing  a notice of such
     rejection  to be  delivered  to the Company not less than 10 Business  Days
     before the applicable  Change in Control  Prepayment  Date specified in the
     applicable  notice provided under Section 8.3(b).  A failure by a holder of
     Notes to respond to an offer to prepay made  pursuant  to this  Section 8.3
     shall be deemed to constitute an acceptance of such offer by such holder.

          (d) PREPAYMENT. Prepayment of the Notes to be prepaid pursuant to this
     Section  8.3  shall be at 100% of the  principal  amount  of such  Notes so
     prepaid,  together with  interest on such Notes  accrued to the  applicable
     Change in Control  Prepayment Date and Breakage Cost Indemnity,  if any, in
     respect of all Notes to be prepaid.  Each  prepayment of Notes  pursuant to
     this  Section  8.3  shall  be  made on the  applicable  Change  in  Control
     Prepayment Date.

          (e) OFFICER'S CERTIFICATE.  Each offer to prepay the Notes pursuant to
     this  Section  8.3  shall  be  accompanied  by an  original  or a copy of a
     certificate,  executed  by a Senior  Financial  Officer of the  Company and
     dated  the date of such  offer,  specifying:  (i) the  proposed  Change  in
     Control  Prepayment  Date;  (ii) that such offer is made  pursuant  to this
     Section 8.3; (iii) the principal amount of each Note offered to be prepaid;
     (iv) the  interest  that would be due on each Note offered to be prepaid as
     of the Change in Control  Prepayment  Date; (v) that the conditions of this
     Section 8.3 have been fulfilled;  and (vi) in reasonable detail, the nature
     and date of the Change in Control  (including,  if known, the name or names
     of the Person or Persons acquiring control).

          (f) NOTICE CONCERNING STATUS OF HOLDERS OF NOTES.  Promptly after each
     Change  in  Control  Prepayment  Date  and the  making  of all  prepayments
     contemplated  on such Change in Control  Prepayment Date under this Section
     8.3 (and,  in any event,

                                       20

<PAGE>

     within 30 days  thereafter),  the Company  shall  deliver to each holder of
     Notes a certificate  signed by a Senior Financial Officer containing a list
     of the  then-current  holders of Notes (together with their  addresses) and
     setting forth as to each such holder the  outstanding  principal  amount of
     Notes held by such holder at such time.

     8.4. ALLOCATION OF PARTIAL PREPAYMENTS.

      In the case of each partial  prepayment  of the Notes  pursuant to Section
8.2, the principal  amount of the Notes to be prepaid  shall be allocated  among
all of the Notes (or, if such  prepayment is to be made on or prior to the first
anniversary of the Closing Date,  allocated  among all of the Series A Notes) at
the time outstanding in proportion, as nearly as practicable,  to the respective
unpaid principal amounts thereof not theretofore called for prepayment.

     8.5. MATURITY; SURRENDER, ETC.

     In the case of each  prepayment  of Notes  pursuant to this  Section 8, the
principal  amount of each Note to be  prepaid  shall  mature  and become due and
payable on the date fixed for such  prepayment  (which shall be a Business Day),
together with interest on such  principal  amount  accrued to such date, and the
Breakage Cost Indemnity, if applicable, payable to each holder of Notes that has
delivered to the Company the certificate  contemplated by Section 8.8(b),  on or
prior to such date (and the Company shall promptly pay Breakage Cost  Indemnity,
if  applicable,  to each  holder of Notes that shall  deliver  such  certificate
within 60 days  thereafter).  From and after such date, unless the Company shall
fail to pay such  principal  amount when so due and payable,  together  with the
interest and Breakage Cost  Indemnity,  if any, as  aforesaid,  interest on such
principal  amount shall cease to accrue.  Any Note paid or prepaid in full shall
be  surrendered  to the Company and cancelled and shall not be reissued,  and no
Note shall be issued in lieu of any prepaid principal amount of any Note.

     8.6. PURCHASE OF NOTES.

     The Company will not and will not permit any Affiliate to purchase, redeem,
prepay or otherwise  acquire,  directly or  indirectly,  any of the  outstanding
Notes except upon the payment or prepayment of the Notes in accordance  with the
terms of this  Agreement  and the Notes.  The Company will  promptly  cancel all
Notes  acquired by it or any Affiliate  pursuant to any payment or prepayment of
Notes  pursuant to any provision of this Agreement and no Notes may be issued in
substitution or exchange for any such Notes.

     8.7. INTEREST RATE AND INTEREST PAYMENT DATES.

          (a) INTEREST RATE.  Subject to Section 8.7(d),  Section  8.7(f)(i) and
     Section  8.8(a),  the  outstanding  principal  amount  of the Notes of each
     Series shall bear interest, for each Interest Period applicable thereto, at
     the relevant  LIBO Rate, as  determined  in this Section  8.7(a),  for such
     Interest  Period.  The  determination  of the applicable LIBO Rate shall be
     made by the Company in accordance with the terms hereof.  The Company shall
     provide such  determination  to the holders of the Notes in accordance with
     the provisions of Section 7.1(h),  but the failure of the Company to notify
     the  holders  of the Notes of any such  determination  shall not affect the
     obligations  of the  Company  hereunder.  While  an  Event  of  Default  is
     continuing, interest on the Notes shall be

                                       21

<PAGE>

     payable at the rate set forth in Section  8.7(f)(i) and shall be payable on
     each  Interest  Payment Date (or such shorter  intervals as interest may be
     paid under the Credit Agreement in such circumstances).

          (b) CALCULATION OF INTEREST. Interest on the Notes shall be calculated
     on the  basis of a 360 day  year and the  actual  number  of days  elapsed,
     calculated as to each Interest Period or other period during which interest
     accrues from and  including the first day thereof to but excluding the last
     day thereof.

          (c) PAYMENT OF INTEREST.  Subject to Section 8.7(a),  interest on each
     Note shall be payable on each Interest Payment Date.

          (d) INABILITY TO DETERMINE  LIBO RATE. If, prior to the first Business
     Day of any Interest Period,  the basis for determining the LIBO Rate ceases
     to be reported on Bloomberg page "Currency BBAM 1"(and JPMorgan Chase Bank,
     N.A., is not quoting the rate contemplated by clause (ii) of the definition
     of "LIBO Rate") and if the Required  Holders,  or their  designated  agent,
     shall have reasonably  determined (which  determination shall be conclusive
     and binding upon the Company)  that, by reason of  circumstances  affecting
     the relevant  market,  other adequate and reasonable means do not exist for
     ascertaining the interest rate applicable to Dollar loans to major banks in
     the London Interbank  Eurodollar market for such Interest Period,  then the
     Required  Holders shall  forthwith give notice  thereof to the Company.  If
     such notice is given,  (i) the interest rate  applicable to all LIBOR-Based
     Loans for such  Interest  Period  shall be the Prime Rate,  determined  and
     effective as of the first day of such Interest Period,  (ii) each reference
     herein and in the Notes to the "LIBO Rate" for any Interest Period shall be
     deemed thereafter to be a reference to the Prime Rate, and (iii) subject to
     Section 8.7(e) below,  such substituted rate shall thereafter be determined
     by the Required  Holders in accordance with the terms hereof.  Until notice
     contemplated  by Section 8.7(e) is furnished by the Required  Holders,  the
     LIBO Rate  (defined  without  giving  effect to clause (ii) of this Section
     8.7(d)) shall not apply to any LIBOR-Based Loan.

          (e)  REINSTATEMENT  OF LIBO  RATE.  If  there  has been at any time an
     interest  rate  substituted  for the LIBO Rate in  accordance  with Section
     8.7(a) or Section 8.7(d) and if in the  reasonable  opinion of the Required
     Holders, the circumstances  causing such substitution have ceased, then the
     Required  Holders  shall  promptly  notify  the  Company in writing of such
     cessation,  and on the first day of the next succeeding Interest Period the
     LIBO Rate shall be determined as originally  defined hereby.  Nevertheless,
     thereafter  the provisions of Section 8.7(a) and Section 8.7(d) above shall
     continue to be effective.

          (f) DEFAULT RATE; OVERDUE AMOUNTS.

               (i)  INCREASE  IN  INTEREST  RATE;  EVENT  OF  DEFAULT.  Upon the
          occurrence   and  during  the   continuance   (but  only   during  the
          continuance) of an Event of Default, the outstanding  principal amount
          of each Note shall bear  interest  from and  including the date of the
          occurrence of such Event of Default to, but  excluding,  the date when
          no Event of Default shall be continuing,  at a rate per annum equal to
          the Default Rate.

                                       22

<PAGE>

               (ii) INTEREST AND OTHER AMOUNTS.  Any overdue payment of interest
          on the  outstanding  principal  amount  of any  Notes,  and any  other
          overdue amount payable in accordance with the terms of this Agreement,
          the Notes or the Guaranty Agreement (regardless of whether the failure
          to make such  payment  constitutes  an Event of  Default),  shall bear
          interest,  payable on demand, for each day from and including the date
          payment thereof was due to the date of actual  payment,  at a rate per
          annum  equal to the  Default  Rate  (but  without  duplication  of the
          Default Rate payable under Section 8.7(f)(i)).

     8.8. YIELD PROTECTION AND ILLEGALITY.

          (a) ILLEGALITY.

               (i)  Notwithstanding  any other provision of this Agreement,  if,
          after the Closing Date,  any change in any law or regulation or in the
          interpretation  thereof by any Governmental Authority charged with the
          administration  or  interpretation  thereof shall make it unlawful for
          any holder of the Notes to  maintain  any  LIBOR-Based  Loan,  then by
          written notice to the Company:

                    (A) such holder  shall  promptly  notify the Company of such
               circumstances,  including a description of and the effective date
               of such law, regulation or interpretation  (which notice shall be
               withdrawn whenever such circumstances no longer exist);

                    (B) such holder may require that all outstanding LIBOR-Based
               Loans  held by it be  converted  to Prime  Rate  Loans  that bear
               interest at the Prime Rate,  in which event all such  LIBOR-Based
               Loans  shall  be  converted  automatically  to Prime  Rate  Loans
               bearing  interest  at the  Prime  Rate as of the  effective  date
               specified in such notice; and

                    (C) such notice  shall cease to be effective at such time as
               it shall no longer be unlawful  for such  holder to maintain  any
               LIBOR-Based  Loan and,  effective as of the first day of the next
               succeeding  Interest  Period,  the Notes  shall bear  interest in
               accordance with the provisions of Section 8.7(a);

               (ii) For purposes of this Section 8.8(a), a notice to the Company
          by a holder  of any Note  shall  be  effective  on the last day of the
          Interest Period during which such notice is given unless the effective
          date  specified in such notice is an earlier date (which  earlier date
          may be specified only if required by such change in law, regulation or
          interpretation),  in which event such notice  shall be effective as of
          such earlier date. If any such  conversion to the Prime Rate occurs on
          a day which is not the last day of an  Interest  Period,  the  Company
          shall pay to such  holder  such  amounts,  if any,  as may be required
          pursuant to Section 8.8(b).

          (b) BREAKAGE  COST  INDEMNITY.  The Company  agrees to indemnify  each
     holder of the Notes for,  and  promptly to pay to each such holder upon the
     written request of such

                                       23

<PAGE>

     holder,  any  amounts  required to  compensate  such holder for any losses,
     costs or expenses sustained or incurred by such holder arising out of:

               (i)  any  event  (including  any  acceleration  of the  Notes  in
          accordance  with Section 12.1 and any prepayment of the Notes pursuant
          to Sections 8.2 or 8.3) which results in:

                    (A) such  holder  receiving  any  amount on  account  of the
               principal of any Note prior to the end of the Interest  Period in
               effect therefor, or

                    (B) the conversion of any  LIBOR-Based  Loan to a Prime Rate
               Loan other than on the last day of the Interest  Period in effect
               therefor, or

               (ii) the failure by the Company to pay any amount in respect of a
          payment or prepayment required to be made hereunder on the date due in
          respect of any LIBOR-Based Loan,

      including,  without  limitation,  any loss,  cost or expense  incurred  by
reason of the liquidation or reemployment of deposits or other funds acquired by
such holder to fund or maintain such LIBOR-Based Loans.

      A certificate of any such holder of the Notes setting forth, in reasonable
detail,  the calculations of any amount or amounts which such holder is entitled
to receive  pursuant to this  Section  8.8(b) and the basis  therefor,  shall be
delivered to the Company and shall be prima facie evidence of such amount absent
manifest  error  unless  the  Company  notifies  such  holder in  writing to the
contrary within 30 days after such certificate is delivered to the Company.  The
provisions of this Section  8.8(b) shall remain  operative and in full force and
effect   regardless  of  prepayment  of  the  Notes,  the  consummation  of  the
transactions  contemplated hereby, the repayment of any Notes, the invalidity or
unenforceability of any other term or provision of this Agreement,  the Notes or
the  Guaranty  Agreement or any  investigation  made by or on behalf of any such
holder.

          (c) RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES.

               (i)  Notwithstanding  any other provision of this  Agreement,  if
          after the Closing Date any change in  applicable  law or regulation or
          in the  interpretation or  administration  thereof by any Governmental
          Authority charged with the  interpretation  or administration  thereof
          (whether  or not having  the force of law)  shall  change the basis of
          taxation of payments to any holder of the Notes of the principal of or
          interest  on any  LIBOR-Based  Loan made by such holder or any fees or
          expenses or  indemnities  payable  hereunder  (other  than  changes in
          respect of  franchise  taxes or taxes  imposed on or  measured  by the
          gross revenues or net income of any such holder,  in each case imposed
          by the  United  States of America  or the  jurisdiction  in which such
          holder is organized or has its  principal  office or by any  political
          subdivision or taxing authority therein),  or shall impose,  modify or
          deem applicable any reserve,  special  deposit or similar  requirement
          against  assets of,  deposits  with or for the  account  of, or credit
          extended by, any holder, or

                                       24

<PAGE>

          LIBOR-Based Loans made by any holder, and the collective result of the
          foregoing  shall be to increase  the cost to any such holder of making
          or maintaining any  LIBOR-Based  Loan on the basis of the LIBO Rate or
          to reduce the amount of any sum  received  or  receivable  by any such
          holder hereunder or under the Notes (whether of principal, interest or
          otherwise)  by an amount  deemed by such holder to be  material,  then
          such holder shall deliver to the Company a  certificate  setting forth
          such  additional  amount or amounts as will compensate such holder for
          such additional costs incurred or reduction suffered.

               (ii) If,  after the Closing  Date,  any holder of the Notes shall
          have reasonably determined that

                    (A) the adoption of any law, rule, regulation,  agreement or
               guideline  applicable to such holder regarding  capital adequacy,
               or any  amendment  or other  modification  to or of any such law,
               rule, regulation, agreement or guideline (whether such law, rule,
               regulation,  agreement or guideline was originally adopted before
               or after the Closing Date),

                    (B) any change in the  interpretation  or  administration of
               any law,  rule,  regulation,  agreement  or  guideline  regarding
               capital  adequacy  applicable to such holder by any  Governmental
               Authority  charged  with  the  interpretation  or  administration
               thereof, or

                    (C)  compliance  by any holder with any request or directive
               regarding  capital  adequacy  (whether or not having the force of
               law) of any Governmental Authority issued after the Closing Date,

          has or would have the effect of increasing  the cost to such holder of
          making or maintaining its investment in the Notes or reducing the rate
          of return on such holder's  capital as a consequence of the Notes to a
          level below that which such holder  could have  achieved  but for such
          applicability,   adoption,   change   or   compliance   (taking   into
          consideration such holder's policies with respect to capital adequacy)
          by an amount  deemed by such holder to be  material,  then such holder
          shall  deliver  to  the  Company  a  certificate  setting  forth  such
          additional  amount or amounts as will  compensate  such holder for any
          such reduction suffered.

               (iii) The certificate of any holder of the Notes delivered to the
          Company  pursuant  to clause  (i) or (ii) above  shall set  forth,  in
          reasonable  detail, the calculation of the amount or amounts necessary
          to compensate such holder as specified in clause (i) or (ii) above and
          the  basis   therefor   (which  shall  include   notice  of  the  law,
          regulations, guidelines, request or any interpretation thereof, of any
          Governmental  Authority  (whether or not having the force of law),  as
          applicable,  giving rise to such increased  costs or  reductions)  and
          shall be prima facie  evidence of such amount  absent  manifest  error
          unless the Company  notifies  such  holder in writing to the  contrary
          within 30 days of the delivery of such certificate. The Company agrees
          to pay such  holder  the amount  shown as due on

                                       25

<PAGE>

          any such  certificate  delivered by it within five Business Days after
          the Company's receipt of the same.

               (iv)  Failure  or delay on the part of any holder of the Notes to
          demand  compensation  for any increased  costs or reduction in amounts
          received or  receivable  or reduction  in return on capital  shall not
          constitute a waiver of such holder's right to demand such compensation
          with respect to any Interest  Period;  provided that the Company shall
          not be required  to  compensate  any holder of Notes  pursuant to this
          Section for any increased  costs or reductions  incurred more than 270
          days prior to the date that such  holder  notifies  the Company of any
          event  referred  to in the  foregoing  clause (ii) giving rise to such
          increased costs or reductions and of such holder's  intention to claim
          compensation  therefor;  provided  further  that, if such event giving
          rise to such increased costs or reductions is retroactive, the 270-day
          period  referred  to above  shall be extended to include the period of
          retroactive  effect  thereof.  The  protection of this Section  8.8(c)
          shall  be  available  to  such  holder   regardless  of  any  possible
          contention of the  invalidity  or  inapplicability  of the law,  rule,
          regulation,  agreement,  guideline or other  change or condition  that
          shall have occurred or been imposed.

9.   AFFIRMATIVE COVENANTS.

     The Company covenants that so long as any of the Notes are outstanding:

     9.1. COMPLIANCE WITH LAW.

     Without  limiting  Section 10.13,  the Company will, and will cause each of
its Subsidiaries to, comply with all laws,  ordinances or governmental  rules or
regulations  to which each of them is subject,  including,  without  limitation,
ERISA, the USA Patriot Act and Environmental  Laws, and will obtain and maintain
in effect all licenses, certificates, permits, franchises and other governmental
authorizations  necessary to the ownership of their respective  properties or to
the conduct of their respective businesses, in each case to the extent necessary
to ensure that non-compliance  with such laws,  ordinances or governmental rules
or  regulations  or failures  to obtain or  maintain  in effect  such  licenses,
certificates,  permits,  franchises and other governmental  authorizations could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

     9.2. INSURANCE.

     The Company will,  and will cause each of its  Subsidiaries  to,  maintain,
with financially sound and reputable  insurers,  insurance with respect to their
respective  properties and businesses against such casualties and contingencies,
of  such  types,  on such  terms  and in such  amounts  (including  deductibles,
co-insurance  and  self-insurance,  if adequate  reserves  are  maintained  with
respect  thereto)  as is  customary  in the  case  of  entities  of  established
reputations engaged in the same or a similar business and similarly situated.

                                       26

<PAGE>

     9.3. MAINTENANCE OF PROPERTIES.

     The Company will, and will cause each of its  Subsidiaries to, maintain and
keep, or cause to be maintained and kept,  their  respective  properties in good
repair, working order and condition (other than ordinary wear and tear), so that
the business carried on in connection therewith may be properly conducted at all
times,  PROVIDED  that this  Section  9.3 shall not  prevent  the Company or any
Subsidiary  from  discontinuing  the operation and the maintenance of any of its
properties  if such  discontinuance  is desirable in the conduct of its business
and the Company has concluded that such discontinuance  could not,  individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

     9.4. PAYMENT OF TAXES AND CLAIMS.

     The Company will, and will cause each of its  Subsidiaries to, file all tax
returns  required to be filed in any  jurisdiction  and to pay and discharge all
taxes  shown  to be due  and  payable  on such  returns  and  all  other  taxes,
assessments,  governmental  charges,  or levies  imposed on them or any of their
properties, assets, income or franchises, to the extent the same have become due
and payable and before they have become delinquent and all claims for which sums
have become due and payable  that have or might become a Lien on  properties  or
assets of the Company or any  Subsidiary,  PROVIDED that neither the Company nor
any Subsidiary need pay any such tax,  assessment,  charge, levy or claim if (i)
the amount,  applicability  or validity  thereof is  contested by the Company or
such Subsidiary on a timely basis in good faith and in appropriate  proceedings,
and the Company or a Subsidiary has established  adequate  reserves  therefor in
accordance  with GAAP on the books of the Company or such Subsidiary or (ii) the
nonpayment  of all such taxes,  assessments,  charges,  levies and claims in the
aggregate could not reasonably be expected to have a Material Adverse Effect.

     9.5. CORPORATE EXISTENCE, ETC.

     Subject to Section 10.5, the Company will at all times preserve and keep in
full force and effect its  corporate  existence.  Subject to  Sections  10.5 and
10.7,  the Company will at all times  preserve and keep in full force and effect
the  corporate  existence of each of its  Subsidiaries  (unless  merged into the
Company or a Subsidiary in accordance  with the  provisions of Section 10.5) and
all rights and  franchises of the Company and its  Subsidiaries  unless,  in the
good faith  judgment of the Company,  the  termination of or failure to preserve
and keep in full force and effect such corporate  existence,  right or franchise
could not, individually or in the aggregate, have a Material Adverse Effect.

     9.6. BOOKS AND RECORDS.

     The Company  will,  and will cause each of its  Subsidiaries  to,  maintain
proper books of record and account in  conformity  with GAAP and all  applicable
requirements  of  any   Governmental   Authority   having  legal  or  regulatory
jurisdiction over the Company or such Subsidiary, as the case may be.

                                       27

<PAGE>


     9.7. ADDITIONAL SUBSIDIARY GUARANTORS.

     If any Domestic  Subsidiary  is formed or acquired  after the Closing Date,
the Company  will,  within ten  Business  Days,  notify the holders of the Notes
thereof  and  promptly,  and in any event  within 20  Business  Days  after such
formation or acquisition,  cause such Subsidiary (a) to execute a joinder to the
Guaranty  Agreement  and to become a party to the Sharing  Agreement  and (b) to
deliver  such  opinions  of  counsel,  certificates,   accompanying  authorizing
resolutions  and  corporate  or similar  documents,  and such other  agreements,
instruments and other documents in respect of such Subsidiary's execution of the
joinder to the Guaranty  Agreement and becoming a party to the Sharing Agreement
as are  required  pursuant  to the  terms of the  Guaranty  Agreement  or as the
Required  Holders may  reasonably  request,  each of the  foregoing  in form and
substance reasonably  satisfactory to the Required Holders. If, on any date, the
aggregate  combined  revenues  of all Foreign  Subsidiaries  for the four fiscal
quarters  of the  Company  then  most  recently  ended  exceed  20% of the total
consolidated  revenue  of the  Company  and its  Subsidiaries  for  such  period
(calculated,  in each case, in accordance  with GAAP) or the aggregate  combined
assets of all Foreign  Subsidiaries,  measured  on such date,  exceed 20% of the
total  consolidated  assets of the Company and its  Subsidiaries  (calculated in
accordance with GAAP), measured on such date, the Company shall promptly, and in
any event  within  30 days of a  Responsible  Officer  becoming  aware  that the
revenues or assets of its Foreign  Subsidiaries  meet the  conditions  specified
above,  cause one or more of said Foreign  Subsidiaries (a) to execute a joinder
to the Guaranty Agreement and to become a party to the Sharing Agreement and (b)
to deliver  such  opinions of counsel,  certificates,  accompanying  authorizing
resolutions  and  corporate  or similar  documents,  and such other  agreements,
instruments and other documents in respect of such Subsidiary's execution of the
joinder to the Guaranty  Agreement and becoming a party to the Sharing Agreement
as are  required  pursuant  to the  terms of the  Guaranty  Agreement  or as the
Required  Holders may  reasonably  request,  each of the  foregoing  in form and
substance  reasonably  satisfactory to the Required  Holders,  such that,  after
giving  effect to such joinder to the  Guaranty  Agreement,  both the  aggregate
combined revenue and the aggregate  combined assets  (determined in each case in
accordance  with GAAP),  of all Foreign  Subsidiaries  that have not  executed a
joinder to the Guaranty  Agreement,  is less than 20% of the total  consolidated
revenue and total assets of the Company and all of its Subsidiaries.

     9.8. PRIORITY OF OBLIGATIONS.

     The Company will ensure that (a) its  obligations  under this Agreement and
the Notes, and (b) each Guarantor's  obligations  under the Guaranty  Agreement,
will at all times rank at least PARI PASSU, without preference or priority, with
all other  unsecured  and  unsubordinated  Indebtedness  of the  Company or such
Guarantor, respectively.

10.  NEGATIVE COVENANTS.

     The Company covenants that so long as any of the Notes are outstanding:

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     10.1. INDEBTEDNESS.

      The  Company  will not,  and will not permit any  Subsidiary  to,  create,
incur, assume or permit to exist any Indebtedness, except:

          (a)  Indebtedness created under this Agreement and the Notes;

          (b)  Indebtedness  in respect of the  Revolving  Borrowings  permitted
     under  the  Credit  Agreement,   in  an  aggregate  amount  not  to  exceed
     $400,000,000 at any time,  Indebtedness under the Term Loans (PROVIDED that
     the aggregate  amount of the  Indebtedness in respect of the Term Loans and
     the  Notes  does not  exceed  $350,000,000  outstanding  at any  time)  and
     Indebtedness  of the Company arising from the issuance of notes pursuant to
     the Public Note Agreement  related to the Merger in an aggregate amount not
     to exceed $500,000,000;

          (c)  Indebtedness  existing  on the  Closing  Date  and set  forth  on
     Schedule  5.15  and  extensions,  renewals  and  replacements  of any  such
     Indebtedness  that do not  increase  the  outstanding  principal  amount or
     change the  parties  directly  or  indirectly  responsible  for the payment
     thereof;  PROVIDED  that any such  refinancing  Indebtedness  (A)  shall be
     unsecured  and (B) shall not mature  before the earlier of (x) the maturity
     date of the  Indebtedness  refinanced and (y) the date six months following
     the Revolving Maturity Date;

          (d)  Indebtedness  of  the  Company  to  any  Subsidiary  and  of  any
     Subsidiary  to  the  Company  or  any  other   Subsidiary;   PROVIDED  that
     Indebtedness  of any  Subsidiary  that is not a Guarantor to the Company or
     any other  Guarantor  shall be subject to the  restrictions  on investments
     contained in Sections 10.6(c) and 10.6(d) below;

          (e)  Unsecured  Guarantees  by  the  Company  of  Indebtedness  of any
     Subsidiary and unsecured Guarantees by any Guarantor of Indebtedness of any
     other Guarantor,  to the extent said  Indebtedness is permitted  hereunder;
     PROVIDED  that no  Guarantor  or any other  Subsidiary  may  guarantee  any
     Indebtedness  under  the  Public  Note  Agreement  or  under  any  document
     identified  on Schedule  5.15 to the extent that such  Guarantee was not in
     effect on the Closing Date;

          (f)  Indebtedness of the Company or any Subsidiary  incurred after the
     Closing  Date under leases  (collectively,  the  "TRANSPORTATION  EQUIPMENT
     LEASES") of motor vehicles (including off-road vehicles) and aircraft;

          (g) (A)  Indebtedness of the Company or any Subsidiary  incurred after
     the Closing Date to finance the acquisition, construction or improvement of
     any fixed or capital assets,  including  Capital Lease  Obligations and any
     Indebtedness assumed in connection with the acquisition of any such assets,
     or secured by a Lien on any such assets prior to the  acquisition  thereof,
     and extensions,  renewals and replacements of any such Indebtedness that do
     not  increase  the  outstanding  principal  amount  or change  the  parties
     directly  or  indirectly   responsible   for  the  payment   thereof,   (B)
     Attributable  Debt (as  defined  below) of the  Company  or any  Subsidiary
     incurred after the date hereof pursuant to Sale and Leaseback  Transactions
     permitted  under Section 10.4 and (C)

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     Indebtedness  represented by seller notes executed by the Company  incurred
     after the date hereof in connection with Permitted  Acquisitions;  PROVIDED
     that (x) the  Indebtedness  in clause  (A) hereof is  incurred  prior to or
     within 120 days (or such longer  period if  necessary  solely to obtain any
     permits  or  licenses   required  in  connection  with  such   acquisition,
     construction  or improvement)  after such  acquisition or the completion of
     such construction or improvement and (y) the aggregate  principal amount of
     the  Indebtedness  permitted  by this clause (g) in excess of  Attributable
     Debt shall not exceed  $75,000,000 at any time  outstanding.  "ATTRIBUTABLE
     DEBT"  means,  with  respect  to any Sale and  Leaseback  Transaction,  the
     present  value  (computed  in  accordance  with GAAP as if the  obligations
     incurred  in  connection  with such  Sale and  Leaseback  Transaction  were
     Capital  Lease  Obligations)  of the total  obligations  of the  lessee for
     rental  payments  during the remaining  term of the lease  included in such
     Sale and Leaseback  Transaction  (including any period for which such lease
     has been  extended).  In the case of any lease which is  terminable  by the
     lessee upon payment of a penalty  (including any fee, however  denominated,
     paid upon  termination),  the Attributable  Debt shall be the lesser of (i)
     the Attributable Debt determined  assuming  termination upon the first date
     such lease may be  terminated  (in which case the  Attributable  Debt shall
     also  include  the  amount of such  penalty  or fee,  but no rent  shall be
     considered as required to be paid under such lease  subsequent to the first
     date upon which it may be so  terminated)  and (ii) the  Attributable  Debt
     determined  assuming no such  termination.  Any  determination  of any rate
     implicit  in the terms of the  lease  included  in such Sale and  Leaseback
     Transaction made in accordance with generally accepted financial  practices
     by the Company shall be binding and conclusive absent manifest error;

          (h) Unsecured  Indebtedness incurred under a credit facility by one or
     more Canadian  Subsidiaries  of the Company,  so long as each such Canadian
     Subsidiary  guarantees  the  Indebtedness  in  respect of the Notes and the
     aggregate  principal amount of such  Indebtedness  permitted by this clause
     (h) does not exceed $100,000,000 at any time outstanding;

          (i)  Unsecured  Indebtedness  of any  Subsidiary,  PROVIDED  that  the
     aggregate principal amount of all Indebtedness permitted by this clause (i)
     shall not exceed an aggregate  principal  amount of  $5,000,000 at any time
     outstanding;

          (j)  Obligations  incurred in connection with covenants not to compete
     to the extent  such  obligations  are treated as  indebtedness  under GAAP,
     PROVIDED that the aggregate principal amount of all Indebtedness  permitted
     by this clause (j) shall not exceed an aggregate  amount of  $50,000,000 at
     any time outstanding;

          (k)  Indebtedness  of any  Subsidiary of the Company in existence (but
     not incurred or created in connection  with the  acquisition by the Company
     or any other  Subsidiary of the Company  thereof) on the date on which such
     Subsidiary is acquired by the Company, PROVIDED (i) neither the Company nor
     any of its other  Subsidiaries  has any  obligation  with  respect  to such
     Indebtedness,  (ii) none of the  properties  of the  Company  or any of its
     other Subsidiaries is bound with respect to such Indebtedness and (iii) the
     Company is in compliance with the financial  covenants contained in Section
     10.12 after giving effect to such acquisition; and

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<PAGE>

          (l) Unsecured  Indebtedness  of the Company not permitted by any other
     clause of this  Section  10.1;  PROVIDED  that (A) no  Default  or Event of
     Default exists at the time of, or is created as a result of, the incurrence
     of such  Indebtedness,  (B) for all  Indebtedness in excess of $50,000,000,
     such  Indebtedness does not have a maturity date before the date six months
     following  the  maturity  date of the  Notes,  and (C)  the  terms  of such
     unsecured  Indebtedness  are not more  restrictive  than the  terms of this
     Agreement.

     10.2. LIMITATIONS ON LIENS

     The Company will not, and will not permit any Subsidiary to, create, incur,
assume  or  permit  to exist  any Lien on any  property  or asset  now  owned or
hereafter  acquired by it, or assign or sell any income or  revenues  (including
accounts receivable) or rights in respect of any thereof, except:

          (a) Permitted Encumbrances;

          (b) Any Lien on any property or asset of the Company or any Subsidiary
     existing on the Closing Date and set forth on Schedule 10.2;  PROVIDED that
     (i) such Lien shall not apply to any other property or asset of the Company
     or any  Subsidiary  and (ii) such Lien shall secure only those  obligations
     which it secures on the Closing Date;

          (c)  Any  Lien  existing  on  any  property  or  asset  prior  to  the
     acquisition  thereof by the  Company or any  Subsidiary  or existing on any
     property or asset of any Person that becomes a Subsidiary after the Closing
     Date prior to the time such Person becomes a Subsidiary;  PROVIDED that (i)
     such Lien is not created in  contemplation  of or in  connection  with such
     acquisition or such Person becoming a Subsidiary,  as the case may be, (ii)
     such Lien shall not apply to any other property or assets of the Company or
     any  Subsidiary  and (iii) such Lien shall  secure  only those  obligations
     which it secures on the date of such  acquisition  or the date such  Person
     becomes a Subsidiary, as the case may be;

          (d) Liens on  property  subject to  Transportation  Equipment  Leases,
     PROVIDED  that the  Indebtedness  secured by any  Transportation  Equipment
     Lease does not exceed the cost of acquiring the property  subject  thereto;
     and

          (e) Liens on fixed or capital assets acquired, constructed or improved
     by the  Company or any  Subsidiary;  PROVIDED  that (i) such  Liens  secure
     Indebtedness permitted under Section 10.1 above (other than Section 10.1(a)
     or Section 10.1(b)),  (ii) such Liens and the Indebtedness  secured thereby
     are  incurred  prior  to or  within  120 days (or  such  longer  period  if
     necessary  solely to obtain any permits or licenses  required in connection
     with such acquisition,  construction or improvement) after such acquisition
     or  the  completion  of  such   construction  or  improvement,   (iii)  the
     Indebtedness  secured  thereby  does  not  exceed  the  cost of  acquiring,
     constructing  or improving such fixed or capital assets and (iv) such Liens
     shall not  apply to any other  property  or  assets of the  Company  or any
     Subsidiary.

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<PAGE>

     10.3. LIMIT ON PREFERRED EQUITY ISSUANCE.

     The  Company  will not,  nor will it permit any  Subsidiary  to,  issue any
Preferred  Stock,  other  than (a)  Preferred  Stock of the  Company  issued (i)
without  any   mandatory   redemption   provisions   or  (ii)  pursuant  to  any
shareholders'  rights plan of the Company; and (b) Preferred Stock issued by any
Subsidiary to the extent,  and only to the extent,  that such Preferred Stock is
owned by the Company or another Subsidiary.

     10.4. LIMITATIONS ON SALE/LEASEBACK TRANSACTIONS.

     The Company will not, and will not permit any of its Subsidiaries to, enter
into any Sale and  Leaseback  Transaction;  PROVIDED  that the Company may enter
into  (a)  Sale  and  Leaseback   Transactions  if  the  aggregate   outstanding
Attributable  Debt in respect of Sale and  Leaseback  Transactions  permitted by
this clause (a) shall at no time exceed  $125,000,000 and (b) any Transportation
Equipment  Lease; and PROVIDED,  FURTHER that all  Attributable  Debt associated
with any such Sale and Leaseback Transaction shall be treated as Indebtedness of
the Company or any such Subsidiary,  as applicable,  and shall be subject to the
limitations of the covenant described in Section 10.1 above.

     10.5. FUNDAMENTAL CHANGES; LINE OF BUSINESS.

          (a) The Company will not, and will not permit any Subsidiary to, merge
     into or  consolidate  with any other Person,  or permit any other Person to
     merge into or consolidate  with it, or sell,  transfer,  lease or otherwise
     dispose  of (in one  transaction  or in a series  of  transactions)  assets
     (including capital stock of Subsidiaries) constituting all or substantially
     all the assets of the Company and its Subsidiaries on a consolidated  basis
     (whether now owned or hereafter  acquired),  or, in the case of the Company
     or any  Guarantor,  liquidate  or  dissolve,  except  that,  if at the time
     thereof and immediately  after giving effect thereto no Default or Event of
     Default shall have occurred and be continuing  (i) any Subsidiary may merge
     into the Company in a  transaction  in which the  Company is the  surviving
     corporation,  (ii) any Subsidiary may merge into any other  Subsidiary in a
     transaction  in which  the  surviving  entity  is a  Subsidiary;  PROVIDED,
     however,  that (A) no Guarantor may merge into a Foreign Subsidiary (unless
     prior to such merger,  such Guarantor was also a Foreign  Subsidiary),  and
     (B) after giving effect to such transaction,  the surviving Subsidiary is a
     Guarantor if either of such Subsidiaries was previously a Guarantor,  (iii)
     any permitted asset  disposition  involving the sale of a Subsidiary may be
     effected  by a merger of such  Subsidiary,  (iv) any  Subsidiary  may sell,
     transfer,  lease or  otherwise  dispose of its assets to the  Company or to
     another  Subsidiary;  PROVIDED,  however,  that (A) no Guarantor  may sell,
     transfer,  lease  or  otherwise  dispose  of  its  assets  to  any  Foreign
     Subsidiary (unless prior to such sale, transfer,  lease or disposition such
     Guarantor  was also a Foreign  Subsidiary),  and (B) after giving effect to
     such transaction, the surviving Subsidiary is a Guarantor if either of such
     Subsidiaries  was  previously  a  Guarantor,  and  (v) any  Subsidiary  may
     liquidate  or dissolve if the  Company  determines  in good faith that such
     liquidation  or  dissolution is in the best interests of the Company and is
     not  materially  disadvantageous  to the holders of the Notes;  PROVIDED in
     each  case  that  any  such  merger  involving  any  Person  that  is not a

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<PAGE>

     Wholly-Owned  Subsidiary  immediately  prior to such  merger  shall  not be
     permitted   unless  also   permitted  by  Section   10.6  below   regarding
     restrictions on investments.

          (b) The Company will not, and will not permit any of its  Subsidiaries
     to, engage to any material  extent in any business other than businesses of
     the type conducted by the Company and its  Subsidiaries on the Closing Date
     and businesses reasonably related thereto.

     10.6. INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND ACQUISITIONS.

      The  Company  will not,  and will not permit any of its  Subsidiaries  to,
purchase, hold or acquire (including pursuant to any merger with any Person that
was not a  Wholly-Owned  Subsidiary  prior to such  merger) any  capital  stock,
evidences of Indebtedness or securities (including any option,  warrant or other
right to acquire any of the  foregoing) of, make or permit to exist any loans or
advances  to,  guarantee  any  obligations  of,  or make or  permit to exist any
investment or any other interest in, any other Person,  or purchase or otherwise
acquire (in one transaction or a series of transactions) any assets of any other
Person constituting a business unit, except:

          (a) Permitted Investments;

          (b) Investments, guarantees and loans existing on the Closing Date and
     set forth on Schedule 10.6;

          (c) In addition to the investments,  guarantees and loans described in
     clause (b) above, investments by the Company and its Subsidiaries in Equity
     Interests in their  respective  Subsidiaries;  PROVIDED  that the aggregate
     amount of  investments  made under this  clause  (c), by the Company or any
     Subsidiary in Subsidiaries that are not Guarantors, together with all loans
     and advances and Guarantees  made in addition to those described in clauses
     (d) and (f) below by the Company or any Subsidiary to Subsidiaries that are
     not Guarantors, shall not exceed $30,000,000 at any time outstanding;

          (d) In addition to the investments,  guarantees and loans described in
     clause (b) above,  loans or advances made by the Company to any  Subsidiary
     or made by any Subsidiary to the Company or any other Subsidiary;  PROVIDED
     that the  amount of such  loans and  advances  made by the  Company  or any
     Subsidiary  to  Subsidiaries   that  are  not  Guarantors,   together  with
     investments and Guarantees made pursuant to clauses (c) above and (f) below
     by the Company or any Subsidiary to  Subsidiaries  that are not Guarantors,
     shall not exceed $30,000,000 at any time outstanding;

          (e) obligations of the Company to any Subsidiary, or of any Subsidiary
     to the Company or any other  Subsidiary,  arising from the  management  and
     investment of cash on a pooled basis in the ordinary course of business;

          (f) Guarantees  constituting  Indebtedness  permitted by Section 10.1;
     PROVIDED that (A) a Subsidiary  shall not guarantee any Indebtedness of the
     Company unless such  Subsidiary  also has Guaranteed the obligations of the
     Company in respect of the Notes,  (B) no  Subsidiary  shall  guarantee  any
     Indebtedness  under  the  Public  Note  Agreement  or

                                       33

<PAGE>

     under  any  document  identified  on  Schedule  5.15  (to the  extent  such
     Guarantee in respect of a document  identified  on Schedule 5.15 was not in
     effect on the Closing  Date),  and (C) the  aggregate  principal  amount of
     Indebtedness of Subsidiaries  that are not Guarantors that is Guaranteed by
     the Company or any Guarantor  pursuant to this Section 10.6,  together with
     investments  and loans and advances made by the Company or any Guarantor to
     Subsidiaries that are not Guarantors pursuant to clauses (c) and (d) above,
     shall  not  exceed  $30,000,000  at  any  time  outstanding  (exclusive  of
     investments, guarantees and loans described in clause (b) above);

          (g) Guarantees by the Company of accounts  payable of  Subsidiaries in
     the ordinary course of business;

          (h)  investments   received  in  connection  with  the  bankruptcy  or
     reorganization of, or settlement of delinquent  accounts and disputes with,
     customers and suppliers, in each case in the ordinary course of business;

          (i) investments in perpetual care trusts, pre-need trusts or similar
      transactions made (A) in the ordinary course of such Person's business and
      (B) subject to applicable federal, state or local regulations;

          (j)  Permitted  Acquisitions  for  consideration  consisting of common
     stock of the Company,  and other  consideration to the extent the amount or
     fair market value of such other  consideration  paid by the Company and its
     Subsidiaries  therefor (including  Indebtedness assumed pursuant to Section
     10.1 above) does not exceed (i) $50,000,000 for any single  acquisition and
     (ii) $100,000,000 for all acquisitions within a 12 month period;

          (k) Equity Interests and debt obligations  owned by the Company or any
     Subsidiary following an asset disposition permitted under Section 10.7;

          (l) Equity Interests in Persons owned by the Company or any Subsidiary
     following  the sale of Equity  Interests in  Subsidiaries  in  transactions
     constituting  permitted  asset  dispositions  under  Section 10.7 and other
     investments in joint ventures engaged in businesses  reasonably  related to
     the business of the Company; PROVIDED that no investment shall be permitted
     pursuant  to this  clause  (l) that,  together  with all other  investments
     permitted  under  this  clause  (l),  would at any time  have a book  value
     exceeding $50,000,000 in the aggregate;

          (m)  investments  not  permitted  by any other  clause of this Section
     10.6; PROVIDED that no investment shall be made pursuant to this clause (m)
     that,  together with all other investments made pursuant to this clause (m)
     after the Closing Date, would exceed $10,000,000 in the aggregate; and

          (n)  other  investments  not  permitted  by any  other  clause of this
     Section 10.6; PROVIDED that both before and immediately after giving effect
     to any such investment,  the Company has at least  $50,000,000 in liquidity
     in the form of Permitted  Investments  and at least  $150,000,000  of total
     liquidity,  including (A) unrestricted cash, (B) Permitted  Investments and
     (C) the difference  between the aggregate  Revolving Loan  Commitments

                                       34

<PAGE>

     (as defined in the Credit  Agreement)  under the revolving  credit facility
     available thereunder as of such date and the aggregate loans and letters of
     credit outstanding under such revolving credit facility as of such date.

     10.7. LIMITATION ON ASSET SALES.

     The Company will not, and will not permit any of its Subsidiaries to, sell,
transfer,  lease  or  otherwise  dispose  of any  asset,  including  any  Equity
Interest,  owned by it, nor will the Company permit any of its  Subsidiaries  to
issue any additional Equity Interest in such Subsidiary, except:

          (a)  sales of  inventory  (including  parcels  in  developed  cemetery
     properties),  used or surplus  equipment and Permitted  Investments  in the
     ordinary course of business;

          (b) sales,  transfers and dispositions to the Company or a Subsidiary;
     PROVIDED  that  any such  sales,  transfers  or  dispositions  involving  a
     Subsidiary that is not a Guarantor shall be made in compliance with Section
     10.10 below regarding restrictions on transactions with Affiliates;

          (c)  following  the  completion  of the sales  described in clause (d)
     below,  sales,  transfers,  leases and other  dispositions of assets (other
     than accounts  receivable or inventory)  the sale of which is not otherwise
     permitted by any other clause of this Section  10.7;  PROVIDED that (i) the
     aggregate book value of all assets sold,  transferred or otherwise disposed
     of in reliance  upon this clause (c)  subsequent  to the Closing Date shall
     not exceed 20% of the result of (x) the proforma  consolidated total assets
     of the Company and its Subsidiaries as of June 30, 2006, as provided in the
     Form 8-K filed with the SEC on September 19, 2006 PLUS any increase in such
     consolidated   total  assets  resulting  from  Permitted   Acquisitions  of
     Subsidiaries after the Closing Date (with each such increase to be measured
     as of the date of such Permitted  Acquisition)  MINUS (y) as of any date of
     calculation,   pre-need   funeral  and  cemetery   receivables   and  trust
     investments, cemetery perpetual care trust investments,  insurance invested
     assets  and any  similar  categories  of  assets  as  would be shown on the
     consolidated  balance sheet of the Company and its  Subsidiaries as of such
     date (which figure,  for the avoidance of doubt,  shall include any amounts
     in respect of such assets which may result from Permitted  Acquisitions  of
     Subsidiaries  after the Closing  Date) (and the Company and the  Purchasers
     hereby agree that, as of September 19, 2006, such calculation of clause (x)
     MINUS clause (y) will result in a total amount equal to $5,124,504,000.00),
     (ii) all sales, transfers, leases and other dispositions permitted pursuant
     to this  clause  (c) shall be made for fair  value and (iii) the  aggregate
     non-cash  consideration  received in connection with all such  transactions
     shall not exceed $400,000,000; and

          (d) asset sales for an aggregate  consideration  of up to $500,000,000
     contemplated  by the Company as a result of the Merger (the nature of which
     asset sales is described in Schedule  10.7),  whether or not such sales are
     required by the Federal  Trade  Commission,  the  proceeds of which will be
     applied,   in  part,  to  permanently   reduce  the  aggregate   amount  of
     Indebtedness outstanding in respect of the Term Loans.

                                       35

<PAGE>

     For purposes of Section 10.6 and this Section 10.7, any  transaction  which
is a "like kind  exchange"  under Section 1031 of the Code shall be considered a
disposition (if the Company or any Subsidiary  receives cash  consideration upon
the completion thereof) or an acquisition (if the Company or any Subsidiary pays
cash consideration upon the completion thereof) only upon the completion of such
transaction, and then only to the extent of the cash received or paid.

     10.8. SWAP AGREEMENTS.

      The  Company  will not,  and will not permit any of its  Subsidiaries  to,
enter into any Swap Agreement,  except Swap Agreements entered into (a) to hedge
or mitigate risks (including foreign exchange risks) to which the Company or any
Subsidiary has actual exposure (other than in respect of Equity Interests of, or
Indebtedness of, the Company or any of its Subsidiaries), and (b) to effectively
cap, collar or exchange  interest rates (from fixed to floating rates,  from one
floating  rate to  another  floating  rate or  otherwise)  with  respect  to any
interest-bearing liability or investment of the Company or any Subsidiary.

     10.9. RESTRICTED PAYMENTS.

          (a) The Company will not, and will not permit any of its  Subsidiaries
     to, declare or make, or agree to pay or make,  directly or indirectly,  any
     Restricted  Payment  except (i) that any Subsidiary may make any Restricted
     Payment to the Company or any other  Subsidiary  (PROVIDED that neither the
     Company nor any Guarantor may make any  Restricted  Payment to a Subsidiary
     that is not a Guarantor)  and (ii) as otherwise  provided  herein.  As used
     herein,  "RESTRICTED  PAYMENT"  means any  dividend  or other  distribution
     (whether in cash,  securities or other property) with respect to any Equity
     Interests  in the Company or any  Subsidiary,  or any  payment  (whether in
     cash, securities or other property),  including any sinking fund or similar
     deposit, on account of the purchase, redemption,  retirement,  acquisition,
     cancellation  or  termination  of any such Equity  Interests or any option,
     warrant or other right to acquire any such  Equity  Interests.  On any date
     that the Leverage Ratio, calculated as of such date, is greater than 3.5 to
     1.0, and so long as no Default or Event of Default  exists at the time,  or
     is created as a result of any such  dividend,  the  Company may declare and
     pay  dividends  with  respect  to  its  Equity   Interests  not  to  exceed
     $40,000,000 in the aggregate in the twelve month period  preceding the date
     of  such  proposed  dividend  (including  such  proposed  dividend  in  the
     calculation of such aggregate amount). On any date that the Leverage Ratio,
     calculated  as of such  date,  is less than or equal to 3.5 to 1.0,  and so
     long as no Default or Event of Default  exists at the time or is created as
     a  result  of any  dividend,  share  repurchase  or share  redemption,  the
     provisions  of this  section  will not apply to restrict  dividends,  share
     repurchases or share redemptions.

          (b)  Notwithstanding  the above,  on any date that the Leverage Ratio,
     calculated as of such date, is greater than 3.5 to 1.0 but less than 4.0 to
     1.0, so long as (i) there are no outstanding  Revolving Borrowings and (ii)
     the  Term  Loans  have  been  paid in full,  the  Company  may  make  share
     repurchases   of  its  Common  Stock  in  a  total  amount  not  to  exceed
     $100,000,000 in the aggregate after the Closing Date.

                                       36

<PAGE>

          (c) The Company will not,  nor will it permit any of its  Subsidiaries
     to,  make or agree to make,  directly or  indirectly,  any payment or other
     distribution  (whether in cash, securities or other property) in respect of
     principal  of or  interest  on any  Indebtedness,  or any  payment or other
     distribution (whether in cash, securities or other property), including any
     sinking fund or similar  deposit,  on account of the purchase,  redemption,
     retirement,  defeasance,  acquisition,  cancellation  or termination of any
     Indebtedness, except:

               (i) payment of Indebtedness created under this Agreement;

               (ii)  regularly   scheduled  and  other  mandatory  interest  and
          principal   payments   as  and  when  due  in  respect  of  any  other
          Indebtedness  permitted in accordance  with the  provisions of Section
          10.1;

               (iii)  refinancings of Indebtedness  permitted in accordance with
          the  provisions  of Section  10.1,  including the payment of customary
          fees, costs and expenses in connection therewith;

               (iv) the payment of secured  Indebtedness  that  becomes due as a
          result of the  voluntary  sale or transfer  of the  property or assets
          securing  such  Indebtedness  to the extent  such sale or  transfer is
          permitted under Section 10.7 above;

               (v) the  payment of  Indebtedness  of any Person  acquired by the
          Company or any Subsidiary that exists on the date of such acquisition;
          PROVIDED  that such Person  becomes a  Subsidiary  as a result of such
          acquisition;

               (vi) payment of Indebtedness  that matures prior to the Revolving
          Maturity Date; PROVIDED there are no outstanding  Revolving Borrowings
          at the time of any such payment and immediately after giving effect to
          any such payment;

               (vii)  payment of  Indebtedness  that matures after the Revolving
          Maturity Date;  PROVIDED that (A) no Indebtedness  described in clause
          (vi)  above is  outstanding,  other than (1)  non-public  Indebtedness
          disclosed  on  Schedule  5.15 (and,  for the  purposes  of this clause
          (vii),  non-public  Indebtedness  shall not include  any  Indebtedness
          incurred by the Company pursuant to a transaction in which the sale of
          such  Indebtedness to the ultimate  purchasers  thereof is exempt from
          registration  under the Securities Act pursuant to Rule 144A under the
          Securities  Act (17  C.F.R.  ss.230.144A)  as such rule may be amended
          from time to time) or (2) other non-public Indebtedness incurred after
          the Closing Date in an aggregate amount not to exceed $10,000,000, and
          (B) there are no outstanding Revolving Borrowings;

               (viii) prepayments and redemptions of Indebtedness of the Company
          or any  Subsidiary  with  proceeds of any  issuance and sale of common
          stock of the Company;

                                       37

<PAGE>

               (ix) exchanges of  Indebtedness  of the Company or any Subsidiary
          for common stock of the Company;

               (x)  other  prepayments  by the  Company  or any  Subsidiary  not
          permitted by any other clause of this Section  10.9;  PROVIDED that no
          such  prepayment or redemption  shall be made if (i) as of the date of
          such proposed prepayment or redemption,  the Leverage Ratio is greater
          than or equal to 3.5 to 1.00 and the  Company  or any  Subsidiary  has
          made other prepayments  permitted under this clause (x) (including the
          proposed  prepayment) in excess of $200,000,000  in the aggregate,  or
          (ii) as of the date of such  proposed  prepayment or  redemption,  the
          Leverage  Ratio  is less  than  3.5 to 1.00  and  the  Company  or any
          Subsidiary has made such other prepayments permitted under this clause
          (x) (including the proposed  prepayment) in excess of  $400,000,000 in
          the aggregate  (inclusive of the aggregate  amount of prepayments  and
          redemptions  made under clause (x)(i)),  in each case so long as there
          are no outstanding Revolving Borrowings; and

               (xi)  prepayment of the Term Loans,  the Revolving  Borrowings or
          the Alderwoods Debt in accordance with the terms thereof.

     10.10. TRANSACTIONS WITH AFFILIATES.

     The Company will not, and will not permit any Subsidiary to, sell, lease or
otherwise  transfer any  property or assets to, or purchase,  lease or otherwise
acquire  any  property  or  assets  from,  or  otherwise  engage  in  any  other
transactions  with,  any of  its  Affiliates,  except  (a)  transactions  in the
ordinary  course of  business  at prices  and on terms and  conditions  not less
favorable  to the  Company  or such  Subsidiary  than  could be  obtained  on an
arm's-length  basis from unrelated third parties,  (b)  transactions  between or
among the Company and one or more Subsidiaries that are Guarantors not involving
any other Affiliate, (c) any investment,  loan or advance involving a Subsidiary
that is permitted  under Section 10.6, (d) any Restricted  Payment  permitted by
Section  10.9  and  (e)  issuances  of  Equity   Interests  of  the  Company  in
satisfaction of obligations under retirement plans.

     10.11. RESTRICTIVE AGREEMENTS; MAINTENANCE OF MOST FAVORED LENDER STATUS.

          (a) The Company will not, and will not permit any of its  Subsidiaries
     to,  directly  or  indirectly,  enter  into,  incur or  permit to exist any
     agreement or other  arrangement  that  prohibits,  restricts or imposes any
     condition  upon (i) the ability of the Company or any Subsidiary to create,
     incur or permit to exist any Lien upon any of its properties or assets,  or
     (ii) the ability of any Subsidiary to pay dividends or other  distributions
     with  respect to any shares of its capital  stock or to make or repay loans
     or  advances  to  the  Company  or any  other  Subsidiary  or to  Guarantee
     Indebtedness of the Company or any other  Subsidiary that are, in each case
     in this clause  (ii),  more  restrictive  than that which  exists as of the
     Closing  Date;   PROVIDED  that  the  foregoing  shall  not  apply  to  (A)
     restrictions  and  conditions  imposed  by law or by  this  Agreement,  (B)
     restrictions  and  conditions  existing  on the date hereof  identified  on
     Schedule  10.11(a) (but,  subject to the following clause (C), this Section
     10.11(a)  shall apply to any  extension  or renewal of

                                       38

<PAGE>

     or  any  amendment  or  modification  expanding  the  scope  of,  any  such
     restriction or commitment),  (C) restrictions  and conditions  contained in
     any extension,  renewal,  replacement,  amendment or  modification  of each
     indenture  (including any supplemental  indentures entered into pursuant to
     the terms  thereof) to which the Company is a party on the Closing Date and
     which are identified on Schedule 10.11(a), so long as such restrictions and
     conditions  are not more  restrictive  than  those in the  indenture  being
     extended,   renewed,  replaced,  amended  or  modified  and  (D)  customary
     restrictions and conditions contained in agreements relating to the sale of
     a Subsidiary  pending such sale,  PROVIDED such restrictions and conditions
     apply only to the Subsidiary  that is to be sold and such sale is otherwise
     permitted hereunder.

          (b) If at any time on or after the Closing  Date,  the  Company  shall
     enter into any  amendment or other  modification  of the Credit  Agreement,
     which amendment or modification  contains one or more Additional  Covenants
     or Additional  Defaults,  the terms of this  Agreement  shall,  without any
     further  action on the part of the  Company  or any of the  holders  of the
     Notes,  be deemed to be amended  automatically  to include each  Additional
     Covenant and each  Additional  Default  contained in any such  amendment or
     modification. The Company further covenants to promptly execute and deliver
     at its expense  (including,  without  limitation,  the fees and expenses of
     counsel for the holders of the Notes) an  amendment  to this  Agreement  in
     form and substance  satisfactory  to the Required  Holders  evidencing  the
     amendment  of this  Agreement  to include  such  Additional  Covenants  and
     Additional  Defaults,  provided  that the  execution  and  delivery of such
     amendment  shall  not  be a  precondition  to  the  effectiveness  of  such
     amendment as provided for in this Section 10.11(b), but shall merely be for
     the  convenience  of  the  parties  hereto.  As  used  herein,  "ADDITIONAL
     COVENANT" means any affirmative or negative covenant or similar restriction
     contained  in  any  amendment  or  modification  of  the  Credit  Agreement
     applicable  to the Company or any  Subsidiary  (regardless  of whether such
     provision is labeled or otherwise  characterized as a covenant) the subject
     matter  of  which  either  (i) is  similar  to (or the same as) that of any
     covenant  in  Section  10 of  this  Agreement,  but  contains  one or  more
     provisions,  percentages,  amounts,  formulas or definitions  that are more
     restrictive  than those set forth herein or more  beneficial to the lenders
     under the Credit Agreement (and such covenant or similar  restriction shall
     be  deemed  an  Additional  Covenant  only  to the  extent  that it is more
     restrictive  or more  beneficial to such lenders) or (ii) is different from
     the  subject  matter of any  covenant in Section 10 of this  Agreement  and
     "ADDITIONAL  DEFAULT" means any provision contained in the Credit Agreement
     which permits the lenders  thereunder  to  accelerate  (with the passage of
     time or  giving  of  notice or both)  the  maturity  thereof  or  otherwise
     requires the Company or any Subsidiary to purchase the  Indebtedness  under
     the Credit  Agreement prior to the stated maturity thereof and which either
     (i) is similar to any Default or Event of Default  contained  in Section 11
     of  this  Agreement,  but  contains  one or more  provisions,  percentages,
     amounts,  formulas  or  definitions  that  are more  restrictive  or have a
     shorter  grace period than those set forth herein or is more  beneficial to
     the lenders under the Credit  Agreement (and such provision shall be deemed
     an Additional Default only to the extent that it is more restrictive, has a
     shorter  grace  period or is more  beneficial  to such  lenders) or (ii) is
     different  from the  subject  matter  of any  Default  or Event of  Default
     contained in Section 11 of this Agreement.

                                       39

<PAGE>


     10.12. FINANCIAL COVENANTS.

          (a) The Company will not permit the Leverage Ratio,  determined at the
     end of any fiscal quarter  occurring in a period set forth below, to exceed
     the ratio set forth below opposite such period.

       =======================================================================
              TIME PERIOD                                     RATIO
       =======================================================================
       Closing Date through and including June            5.50 to 1.00
       30, 2007
       -----------------------------------------------------------------------
       July 1, 2007 through and including                 5.25 to 1.00
       December 31, 2007
       -----------------------------------------------------------------------
       January 1, 2008 through and including June         5.00 to 1.00
       30, 2008
       -----------------------------------------------------------------------
       July 1, 2008 through and including                 4.75 to 1.00
       December 31, 2008
       -----------------------------------------------------------------------
       January 1, 2009 through and including              4.25 to 1.00
       December 31, 2009
       -----------------------------------------------------------------------
       January 1, 2010 through and including              3.75 to 1.00
       December 31, 2010
       -----------------------------------------------------------------------
       January 1, 2011 and thereafter                     3.50 to 1.00
       =======================================================================

          (b) The Company will not permit the ratio of EBITDA, for any period of
     four  consecutive  fiscal  quarters of the Company ending in any period set
     forth below,  to Consolidated  Interest  Expense for such period to be less
     than the ratio set forth below opposite such period.

       =======================================================================
              TIME PERIOD                                     RATIO
       =======================================================================
       Closing Date through and including                 2.50 to 1.00
       December 31, 2008
       -----------------------------------------------------------------------
       January 1, 2009 through and including June         2.75 to 1.00
       30, 2010
       -----------------------------------------------------------------------
       July 1, 2010 and thereafter                        3.00 to 1.00
       =======================================================================


     10.13. TERRORISM SANCTIONS REGULATIONS.

     The  Company  will not and will not permit any  Subsidiary  to (a) become a
Person described or designated in the Specially Designated Nationals and Blocked
Persons  List of the  Office of  Foreign  Assets  Control or in Section 1 of the
Anti-Terrorism Order or (b) engage in any dealings or transactions with any such
Person.

                                       40

<PAGE>

11.  EVENTS OF DEFAULT.

     An "EVENT OF DEFAULT"  shall exist if any of the  following  conditions  or
events shall occur and be continuing:

          (a) the Company  defaults in the payment of any  principal or Breakage
     Cost Indemnity,  if any, on any Note when the same becomes due and payable,
     whether at maturity or at a date fixed for  prepayment or by declaration or
     otherwise; or

          (b) the Company  defaults  in the payment of any  interest on any Note
     for more than five Business Days after the same becomes due and payable; or

          (c) the Company  defaults in the performance of or compliance with any
     term contained in Section 7.1(d) or Section 10; or

          (d) the Company  defaults in the performance of or compliance with any
     term contained  herein (other than those referred to in Sections 11(a), (b)
     and (c)), or any  Guarantor  defaults in the  performance  of or compliance
     with any term of the  Guaranty  Agreement  and such default is not remedied
     within 30 days after the  earlier of (i) a  Responsible  Officer  obtaining
     actual  knowledge  of such default and (ii) the Company  receiving  written
     notice of such default  from any holder of a Note (any such written  notice
     to be identified as a "notice of default" and to refer specifically to this
     Section 11(d)); or

          (e) any  representation or warranty made in writing by or on behalf of
     the Company or by any officer of the Company in this  Agreement or by or on
     behalf of any Guarantor or by any officer of such Guarantor in the Guaranty
     Agreement or in any writing  furnished in connection with the  transactions
     contemplated  hereby or thereby  proves to have been false or  incorrect in
     any material respect on the date as of which made; or

          (f) (i) the Company or any  Subsidiary  is in default (as principal or
     as guarantor or other surety) in the payment of any principal of or premium
     or  interest  on any  Indebtedness  that  is  outstanding  in an  aggregate
     principal  amount  of at  least  $15,000,000  beyond  any  period  of grace
     provided with respect thereto,  or (ii) the Company or any Subsidiary is in
     default in the  performance of or compliance  with any term of any evidence
     of any  Indebtedness  in an aggregate  outstanding  principal  amount of at
     least $15,000,000 or of any mortgage, indenture or other agreement relating
     thereto or any other condition exists, and as a consequence of such default
     or condition such  Indebtedness has become, or has been declared (or one or
     more  Persons are  entitled to declare  such  Indebtedness  to be), due and
     payable before its stated maturity or before its regularly  scheduled dates
     of payment,  or (iii) as a consequence of the occurrence or continuation of
     any event or condition  (other than the passage of time or the right of the
     holder of Indebtedness to convert such Indebtedness into Equity Interests),
     (x) the Company or any Subsidiary has become obligated to purchase or repay
     Indebtedness  before its regular maturity or before its regularly scheduled
     dates of payment in an aggregate  outstanding  principal amount of at least
     $15,000,000,  or (y) one or more

                                       41

<PAGE>

     Persons  have the right to  require  the  Company or any  Subsidiary  so to
     purchase or repay such Indebtedness; or

          (g) the Company or any  Subsidiary  (i) is  generally  not paying,  or
     admits in writing its  inability to pay, its debts as they become due, (ii)
     files,  or consents by answer or otherwise  to the filing  against it of, a
     petition for relief or  reorganization or arrangement or any other petition
     in bankruptcy,  for  liquidation  or to take  advantage of any  bankruptcy,
     insolvency,  reorganization,   moratorium  or  other  similar  law  of  any
     jurisdiction,  (iii) makes an assignment  for the benefit of its creditors,
     (iv) consents to the appointment of a custodian, receiver, trustee or other
     officer  with  similar  powers  with  respect to it or with  respect to any
     substantial part of its property,  (v) is adjudicated as insolvent or to be
     liquidated,  or (vi) takes  corporate  action for the purpose of any of the
     foregoing; or

          (h) a court or other Governmental  Authority of competent jurisdiction
     enters an order  appointing,  without  consent by the Company or any of its
     Subsidiaries, a custodian,  receiver, trustee or other officer with similar
     powers with  respect to it or with respect to any  substantial  part of its
     property,  or  constituting an order for relief or approving a petition for
     relief  or  reorganization  or any  other  petition  in  bankruptcy  or for
     liquidation or to take advantage of any bankruptcy or insolvency law of any
     jurisdiction, or ordering the dissolution, winding-up or liquidation of the
     Company or any of its  Subsidiaries,  or any such  petition  shall be filed
     against the Company or any of its  Subsidiaries and such petition shall not
     be dismissed within 60 days; or

          (i) a final judgment or judgments for the payment of money aggregating
     in excess of  $15,000,000  are rendered  against one or more of the Company
     and its  Subsidiaries  and which  judgments  are not,  within 30 days after
     entry  thereof,  bonded,  discharged or stayed pending  appeal,  or are not
     discharged  within 30 days after the  expiration of such stay or any action
     shall be legally  taken by a judgment  creditor  to attach or levy upon any
     assets of the Company or any Subsidiary to enforce any such judgment;

          (j) either of the Guaranty  Agreement or the Sharing  Agreement is not
     or ceases to be effective  against any  Guarantor for any period of 15 days
     or more or is alleged by the  Company or any  Guarantor  to be  ineffective
     against any Guarantor for any reason  unless,  in each case, the Company is
     in compliance  with Section 9.7 without such  Guarantor  continuing to be a
     Guarantor; or

          (k) if (i)  any  Plan  shall  fail  to  satisfy  the  minimum  funding
     standards  of ERISA or the Code  for any  plan  year or part  thereof  or a
     waiver of such standards or extension of any amortization  period is sought
     or  granted  under  section  412 of the  Code,  (ii) a notice  of intent to
     terminate  any Plan shall have been or is  reasonably  expected to be filed
     with the PBGC or the PBGC shall have  instituted  proceedings  under  ERISA
     section 4042 to terminate  or appoint a trustee to  administer  any Plan or
     the PBGC shall have notified the Company or any ERISA Affiliate that a Plan
     may become a subject of any such  proceedings,  (iii) the aggregate "amount
     of unfunded benefit liabilities" (within the meaning of section 4001(a)(18)
     of  ERISA)  under  all  Plans,  determined  in  accordance

                                       42

<PAGE>

     with Financial Accounting Standards Board Statement No. 87 (as in effect at
     such time, or any replacement thereof), shall exceed $50,000,000,  (iv) the
     Company  or any  ERISA  Affiliate  shall  have  incurred  or is  reasonably
     expected to incur any  liability  pursuant to Title I or IV of ERISA or the
     penalty or excise tax  provisions of the Code relating to employee  benefit
     plans,  (v)  the  Company  or  any  ERISA  Affiliate   withdraws  from  any
     Multiemployer  Plan  resulting in a "withdrawal  liability" as such term is
     defined in Part 1 of  Subtitle E of Title IV of ERISA,  or (vi) the Company
     or any Subsidiary  establishes or amends any employee  welfare benefit plan
     that  provides  post-employment  welfare  benefits  in a manner  that would
     increase the liability of the Company or any Subsidiary thereunder; and any
     such event or events  described in clauses (i) through  (vi) above,  either
     individually  or  together  with any  other  such  event or  events,  could
     reasonably be expected to have a Material Adverse Effect.

As used in  Section  11(k),  the terms  "EMPLOYEE  BENEFIT  PLAN" and  "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective  meanings assigned to such terms
in section 3 of ERISA.

12.  REMEDIES ON DEFAULT, ETC.

     12.1. ACCELERATION.

          (a) If an Event of Default  with  respect to the Company  described in
     Section  11(g) or (h) (other than an Event of Default  described  in clause
     (i) of Section 11(g) or described in clause (vi) of Section 11(g) by virtue
     of the fact that such clause  encompasses  clause (i) of Section 11(g)) has
     occurred,  all  the  Notes  then  outstanding  shall  automatically  become
     immediately  due and  payable  without  notice of intent to  accelerate  or
     notice of acceleration.

          (b) If any other Event of Default has occurred and is continuing,  the
     Required  Holders may at any time at their option,  by notice or notices to
     the Company  (other than notice of intent to  accelerate  which the Company
     hereby  waives),  declare all the Notes then  outstanding to be immediately
     due and payable.

          (c) If any Event of  Default  described  in  Section  11(a) or (b) has
     occurred  and is  continuing,  any  holder or  holders of Notes at the time
     outstanding  affected by such Event of Default  may at any time,  at its or
     their  option,  by notice or notices to the  Company  (other than notice of
     intent to  accelerate  which the Company  hereby  waives),  declare all the
     Notes held by it or them to be immediately due and payable.

     Upon any Notes  becoming due and payable under this Section  12.1,  whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes,  plus (x) all accrued and unpaid interest
thereon (including,  but not limited to, interest accrued thereon at the Default
Rate)  and (y)  the  Breakage  Cost  Indemnity  determined  in  respect  of such
principal  amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest, notice of intent to accelerate or further notice (other than the notice
described in Section  8.8(b) with respect to Breakage  Cost  Indemnity),  all of
which are hereby waived. The Company acknowledges, and the parties hereto agree,
that each holder of a Note has the right to maintain

                                       43

<PAGE>

its investment in the Notes free from repayment by the Company (except as herein
specifically  provided  for) and that the  provision for payment of any Breakage
Cost  Indemnity  by the  Company in the event that the Notes are  prepaid or are
accelerated  as a  result  of an  Event  of  Default,  is  intended  to  provide
compensation for the deprivation of such right under such circumstances.

     12.2. OTHER REMEDIES.

     If any  Default or Event of Default has  occurred  and is  continuing,  and
irrespective of whether any Notes have become or have been declared  immediately
due and  payable  under  Section  12.1,  the  holder  of any  Note  at the  time
outstanding  may  proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate  proceeding,  whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof,  or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.

      12.3. RESCISSION.

      At any time after any Notes have been declared due and payable pursuant to
Section 12.1(b) or (c), the Required Holders,  by written notice to the Company,
may  rescind  and annul any such  declaration  and its  consequences  if (a) the
Company  has paid all  overdue  interest  on the  Notes,  all  principal  of and
Breakage Cost  Indemnity,  if any, on any Notes that are due and payable and are
unpaid  other  than by  reason of such  declaration,  and all  interest  on such
overdue  principal  and  Breakage  Cost  Indemnity,  if any,  and (to the extent
permitted by applicable  law) any overdue  interest in respect of the Notes,  at
the Default  Rate,  (b) neither the Company nor any other Person shall have paid
any amounts which have become due solely by reason of such declaration,  (c) all
Events of Default and  Defaults,  other than  non-payment  of amounts  that have
become  due solely by reason of such  declaration,  have been cured or have been
waived  pursuant to Section  17, and (d) no judgment or decree has been  entered
for the payment of any monies due pursuant hereto or to the Notes. No rescission
and  annulment  under this Section 12.3 will extend to or affect any  subsequent
Event of Default or Default or impair any right consequent thereon.

      12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.

      No course of dealing and no delay on the part of any holder of any Note in
exercising  any right,  power or remedy  shall  operate  as a waiver  thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy  conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right,  power or remedy  referred to herein or therein
or now or  hereafter  available  at law,  in equity,  by  statute or  otherwise.
Without  limiting the  obligations  of the Company under Section 15, the Company
will pay to the holder of each Note on demand  such  further  amount as shall be
sufficient  to cover all costs  and  expenses  of such  holder  incurred  in any
enforcement or collection under this Section 12, including,  without limitation,
reasonable attorneys' fees, expenses and disbursements.

                                        44

<PAGE>

13.   REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

      13.1. REGISTRATION OF NOTES.

      The Company  shall keep at its principal  executive  office a register for
the registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each  transferee of one or more Notes shall be  registered in such  register.
Prior to due presentment for registration of transfer,  the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes  hereof,  and the Company  shall not be affected by any
notice or knowledge to the  contrary.  The Company shall give to any holder of a
Note  that is an  Institutional  Investor  promptly  upon  request  therefor,  a
complete and correct copy of the names and addresses of all  registered  holders
of Notes.

      13.2. TRANSFER AND EXCHANGE OF NOTES.

      Upon  surrender  of any  Note to the  Company  at the  address  and to the
attention of the designated  officer (all as specified in Section 18(iii)),  for
registration  of  transfer  or  exchange  (and in the  case of a  surrender  for
registration  of transfer  accompanied by a written  instrument of transfer duly
executed by the  registered  holder of such Note or such holder's  attorney duly
authorized in writing and  accompanied by the relevant  name,  address and other
information for notices of each transferee of such Note or part thereof), within
ten Business Days  thereafter,  the Company  shall  execute and deliver,  at the
Company's  expense  (except  as  provided  below),  one or more  new  Notes  (as
requested by the holder thereof) of the same Series in exchange therefor,  in an
aggregate  principal  amount  equal  to  the  unpaid  principal  amount  of  the
surrendered  Note.  Each such new Note shall be  payable to such  Person as such
holder may request and shall be  substantially  in the form of the Note for such
Series set forth in Exhibit 1(a) or Exhibit  1(b), as the case may be. Each such
new Note shall be dated and bear interest from the date to which  interest shall
have been paid on the surrendered Note or dated the date of the surrendered Note
if no interest shall have been paid thereon.  The Company may require payment of
a sum  sufficient  to cover any  stamp tax or  governmental  charge  imposed  in
respect  of any such  transfer  of  Notes.  Notes  shall not be  transferred  in
denominations  of less than  $100,000,  PROVIDED that if necessary to enable the
registration  of transfer by a holder of its entire  holding of Notes,  one Note
may  be in a  denomination  of  less  than  $100,000.  Any  transferee,  by  its
acceptance of a Note registered in its name (or the name of its nominee),  shall
be deemed to have made the  representation  set forth in Section 6.2 and to have
become a party to the Sharing  Agreement  (and each other  Lender (as defined in
the Sharing  Agreement)  shall be entitled to rely on such deemed joinder to the
Sharing Agreement.

      13.3. REPLACEMENT OF NOTES.

      Upon  receipt by the Company at the address  and to the  attention  of the
designated officer (all as specified in Section 18(iii)) of evidence  reasonably
satisfactory  to it of the  ownership  of and the loss,  theft,  destruction  or
mutilation of any Note (which evidence shall be, in the case of an Institutional
Investor,  notice from such  Institutional  Investor of such  ownership and such
loss, theft, destruction or mutilation), and

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<PAGE>

          (a) in the case of loss, theft or destruction, of indemnity reasonably
     satisfactory  to it  (PROVIDED  that if the holder of such Note is, or is a
     nominee  for,  an  original  Purchaser  or another  holder of a Note with a
     minimum net worth of at least  $100,000,000  or a  Qualified  Institutional
     Buyer,  such Person's own unsecured  agreement of indemnity shall be deemed
     to be satisfactory), or

          (b) in  the  case  of  mutilation,  upon  surrender  and  cancellation
     thereof,

within ten  Business  Days  thereafter,  the  Company at its own  expense  shall
execute and deliver,  in lieu thereof, a new Note of the same Series,  dated and
bearing  interest from the date to which  interest  shall have been paid on such
lost,  stolen,  destroyed  or  mutilated  Note or dated  the date of such  lost,
stolen, destroyed or mutilated Note if no interest shall have been paid thereon.

14.   PAYMENTS ON NOTES.

      14.1. PLACE OF PAYMENT.

      Subject to Section 14.2,  payments of principal,  Breakage Cost Indemnity,
if any,  and  interest  becoming  due and  payable on the Notes shall be made in
Houston, Texas at the principal office of the Company in such jurisdiction.  The
Company may at any time, by notice to each holder of a Note, change the place of
payment  of the  Notes so long as such  place of  payment  shall be  either  the
principal office of the Company in such  jurisdiction or the principal office of
a bank or trust company in such jurisdiction.

      14.2. HOME OFFICE PAYMENT.

      So long as any  Purchaser or its nominee  shall be the holder of any Note,
and  notwithstanding  anything  contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Breakage Cost  Indemnity,  if any, and interest by the method and at the address
specified for such purpose below such Purchaser's name in Schedule A, or by such
other method or at such other address as such Purchaser  shall have from time to
time  specified  to the  Company  in  writing  for  such  purpose,  without  the
presentation  or surrender  of such Note or the making of any notation  thereon,
except  that upon  written  request of the  Company  made  concurrently  with or
reasonably  promptly  after  payment  or  prepayment  in full of any Note,  such
Purchaser shall surrender such Note for cancellation,  reasonably promptly after
any such  request,  to the Company at its principal  executive  office or at the
place of payment most  recently  designated  by the Company  pursuant to Section
14.1. Prior to any sale or other  disposition of any Note held by a Purchaser or
its nominee,  such Purchaser  will, at its election,  either endorse thereon the
amount of principal  paid  thereon and the last date to which  interest has been
paid thereon or surrender such Note to the Company in exchange for a new Note or
Notes  pursuant to Section  13.2.  The Company  will afford the benefits of this
Section  14.2 to any  Institutional  Investor  that is the  direct  or  indirect
transferee of any Note  purchased by a Purchaser  under this  Agreement and that
has made the same agreement relating to such Note as the Purchasers have made in
this Section 14.2.

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<PAGE>

      14.3. RECORD DATE.

      Any   provision  set  forth  herein  or  in  the  Notes  to  the  contrary
notwithstanding,  the Company  shall make each payment of principal and interest
on any Note to the Person who is, on the second  Business Day  preceding the due
date for such payment, registered as the holder thereof at the close of business
on such second Business Day.

15.   EXPENSES, ETC.

      15.1. TRANSACTION EXPENSES.

      Whether or not the transactions  contemplated hereby are consummated,  the
Company will pay all costs and expenses (including reasonable attorneys' fees of
a special counsel and, if reasonably required by the Required Holders,  local or
other  counsel)  incurred by the  Purchasers  and each other holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or  consents  under or in respect of this  Agreement,  the Notes,  the  Guaranty
Agreement or the Sharing  Agreement  (whether or not such  amendment,  waiver or
consent becomes effective),  including,  without  limitation:  (a) the costs and
expenses  incurred in enforcing or defending (or  determining  whether or how to
enforce or defend) any rights  under this  Agreement,  the Notes,  the  Guaranty
Agreement  or the Sharing  Agreement or in  responding  to any subpoena or other
legal process or informal  investigative  demand issued in connection  with this
Agreement,  the Notes, the Guaranty  Agreement or the Sharing  Agreement,  or by
reason  of being a holder of any Note,  (b) the  costs and  expenses,  including
financial  advisors'  fees,  incurred  in  connection  with  the  insolvency  or
bankruptcy of the Company or any  Subsidiary or in connection  with any work-out
or restructuring of the  transactions  contemplated  hereby and by the Notes and
(c) the costs and expenses  incurred in  connection  with the initial  filing of
this Agreement and all related documents and financial  information with the SVO
PROVIDED,  that such costs and  expenses  under this clause (c) shall not exceed
$5,000. The Company will pay, and will save each Purchaser and each other holder
of a Note harmless from,  all claims in respect of any fees,  costs or expenses,
if any,  of brokers  and  finders  (other  than  those,  if any,  retained  by a
Purchaser or other holder in connection with its purchase of the Notes).

      15.2. SURVIVAL.

      The  obligations  of the Company  under this  Section 15 will  survive the
payment or transfer of any Note,  the  enforcement,  amendment  or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.

16.   SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

      All  representations  and  warranties  contained  herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by any  Purchaser  of any Note or portion  thereof or  interest  therein and the
payment of any Note, and may be relied upon by any subsequent  holder of a Note,
regardless  of any  investigation  made  at any  time  by or on  behalf  of such
Purchaser  or any  other  holder  of a Note.  All  statements  contained  in any
certificate  or  other  instrument  delivered  by or on  behalf  of the  Company
pursuant to this Agreement shall be deemed representations and warranties of the
Company under this

                                        47

<PAGE>

Agreement.  Subject to the  preceding  sentence,  this  Agreement  and the Notes
embody the entire  agreement and  understanding  between each  Purchaser and the
Company and supersede all prior  agreements and  understandings  relating to the
subject matter hereof.

17.   AMENDMENT AND WAIVER.

      17.1. REQUIREMENTS.

      This  Agreement  and the Notes may be amended,  and the  observance of any
term  hereof  or  of  the  Notes  may  be  waived   (either   retroactively   or
prospectively),  with (and only with) the written consent of the Company and the
Required  Holders,  except  that  (a)  no  amendment  or  waiver  of  any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof,  or any defined term (as it
is used therein),  will be effective as to any Purchaser  unless consented to by
such Purchaser in writing,  and (b) no such amendment or waiver may, without the
written  consent  of the  holder of each Note at the time  outstanding  affected
thereby, (i) subject to the provisions of Section 12 relating to acceleration or
rescission,  change the amount or time of any prepayment or payment of principal
of, or reduce the rate or change the time of payment or method of computation of
interest  or of the  Breakage  Cost  Indemnity  on, the Notes,  (ii)  change the
percentage  of the  principal  amount  of the  Notes  the  holders  of which are
required  to consent to any such  amendment  or  waiver,  or (iii)  amend any of
Sections 8, 11(a), 11(b), 12, 17 or 20.

      17.2. SOLICITATION OF HOLDERS OF NOTES.

          (a)  SOLICITATION.  The Company  will provide each holder of the Notes
     (irrespective  of the  amount of Notes  then  owned by it) with  sufficient
     information,  sufficiently  far in  advance  of  the  date  a  decision  is
     required, to enable such holder to make an informed and considered decision
     with respect to any proposed amendment, waiver or consent in respect of any
     of the provisions hereof or of the Notes. The Company will deliver executed
     or true and correct copies of each  amendment,  waiver or consent  effected
     pursuant to the provisions of this Section 17 to each holder of outstanding
     Notes promptly following the date on which it is executed and delivered by,
     or receives the consent or approval of, the requisite holders of Notes.

          (b) PAYMENT.  The Company will not directly or indirectly pay or cause
     to be paid any  remuneration,  whether by way of supplemental or additional
     interest,  fee or otherwise,  or grant any security or provide other credit
     support, to any holder of Notes as consideration for or as an inducement to
     the entering  into by any holder of Notes of any waiver or amendment of any
     of the terms and provisions hereof unless such remuneration is concurrently
     paid,  or  security  is  concurrently   granted  or  other  credit  support
     concurrently  provided,  on the same terms, ratably to each holder of Notes
     then  outstanding  even if such  holder did not  consent to such  waiver or
     amendment.

      17.3. BINDING EFFECT, ETC.

      Any  amendment  or waiver  consented  to as  provided  in this  Section 17
applies  equally to all holders of Notes and is binding  upon them and upon each
future  holder of any Note and upon the Company  without  regard to whether such
Note has been marked to indicate such amendment or waiver.  No such amendment or
waiver will extend to or affect any obligation,  covenant,

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<PAGE>

agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon.  Neither any course of dealing between the Company
and the holder of any Note nor any delay in exercising  any rights  hereunder or
under any Note  shall  operate  as a waiver of any  rights of any holder of such
Note. As used herein,  the term "this  Agreement" and  references  thereto shall
mean this Agreement as it may from time to time be amended or supplemented.

      17.4. NOTES HELD BY COMPANY, ETC.

      Solely for the purpose of determining whether the holders of the requisite
percentage of the aggregate principal amount of Notes then outstanding  approved
or  consented  to any  amendment,  waiver  or  consent  to be given  under  this
Agreement  or the Notes,  or have  directed  the  taking of any action  provided
herein  or in the  Notes to be taken  upon the  direction  of the  holders  of a
specified   percentage  of  the  aggregate   principal   amount  of  Notes  then
outstanding,  Notes  directly or  indirectly  owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.

      17.5. RELEASE OF GUARANTORS.

      Notwithstanding  any contrary  provision in this  Agreement,  the Guaranty
Agreement  or the  Sharing  Agreement,  if (a)  any  Guarantor  is no  longer  a
Subsidiary  and (b) at the time such  Guarantor  ceases to be a  Subsidiary,  no
Event of  Default  then  exists,  then  such  Guarantor  shall be  automatically
released from its obligations under the Guaranty Agreement, without any need for
any formal action by the holders of the Notes, and the holders of the Notes will
confirm  such  release  by a notice to the  Company  upon  receipt  of a request
therefor.

18.   NOTICES.

      All notices and communications  provided for hereunder shall be in writing
and sent (a) by telecopy if the sender on the same day sends a  confirming  copy
of such notice by a recognized overnight delivery service (charges prepaid),  or
(b) by  registered  or certified  mail with return  receipt  requested  (postage
prepaid),  or (c) by a  recognized  overnight  delivery  service  (with  charges
prepaid) or (d) in respect of any notice to be sent pursuant to Sections 7.1(a),
7.1(b),  7.1(c),  7.1(g), 7.1(h), or 7.2, by means of the Company's posting such
information   through  an  Electronic   Distribution   Service  (and  sending  a
notification  of such  posting  via  e-mail to each  holder of Notes  that is an
Institutional Investor at such holder's e-mail address as provided in Schedule A
or by any subsequent  holder of the Notes to the Company in accordance  with the
provisions  of this  Section 18 (or,  if any such  holder has not so provided an
e-mail  address to the  Company,  then such  notification  shall be  provided as
required under clause (a) above)). Any such notice (if not sent via e-mail) must
be sent:

               (i) if to any  Purchaser  or its  nominee,  to such  Purchaser or
          nominee at the address  specified for such  communications in Schedule
          A, or at such other  address as such  Purchaser or nominee  shall have
          specified to the Company in writing,

               (ii) if to any other  holder of any Note,  to such holder at such
          address as such other  holder  shall have  specified to the Company in
          writing, or

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<PAGE>

               (iii) if to the Company,  to the Company at its address set forth
          at the  beginning  hereof to the  attention of  Treasurer,  or at such
          other  address as the Company  shall have  specified  to the holder of
          each Note in writing.

Notices under this Section 18 will be deemed given only when actually received.

19.   REPRODUCTION OF DOCUMENTS.

      This  Agreement and all documents  relating  thereto,  including,  without
limitation,  (a)  consents,  waivers and  modifications  that may  hereafter  be
executed,  (b) documents  received by any  Purchaser at the Closing  (except the
Notes  themselves),  and  (c)  financial  statements,   certificates  and  other
information  previously  or hereafter  furnished  to any  Purchaser or any other
holder of Notes,  may be  reproduced  by such  Purchaser or such other holder of
Notes by any photographic,  photostatic,  electronic,  digital, or other similar
process  and such  Purchaser  or such  other  holder  of Notes may  destroy  any
original document so reproduced.  The Company agrees and stipulates that, to the
extent permitted by applicable law, any such reproduction shall be admissible in
evidence as the  original  itself in any judicial or  administrative  proceeding
(whether  or  not  the  original  is  in  existence  and  whether  or  not  such
reproduction  was made by such  Purchaser  or such other  holder of Notes in the
regular  course  of  business)  and  any   enlargement,   facsimile  or  further
reproduction of such reproduction shall likewise be admissible in evidence. This
Section 19 shall not  prohibit  the  Company  or any other  holder of Notes from
contesting  any such  reproduction  to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.

20.   CONFIDENTIAL INFORMATION.

      For the  purposes of this  Section 20,  "CONFIDENTIAL  INFORMATION"  means
information  delivered  to any  Purchaser  or any other holder of Notes by or on
behalf of the Company or any  Subsidiary  in  connection  with the  transactions
contemplated  by or otherwise  pursuant to this Agreement that is proprietary in
nature and that was clearly marked or labeled or otherwise adequately identified
when received by such Purchaser as being confidential information of the Company
or such  Subsidiary,  PROVIDED that such term does not include  information that
(a) was publicly known or otherwise known to such Purchaser prior to the time of
such  disclosure,  (b)  subsequently  becomes  publicly  known through no act or
omission by such Purchaser or any Person acting on such Purchaser's  behalf, (c)
otherwise  becomes known to such Purchaser other than through  disclosure by the
Company or any Subsidiary or (d) constitutes  financial  statements delivered to
such Purchaser  under Section 7.1 that are otherwise  publicly  available.  Each
Purchaser will maintain the confidentiality of such Confidential  Information in
accordance  with  procedures  adopted by such Purchaser in good faith to protect
confidential information of third parties delivered to such Purchaser,  PROVIDED
that such Purchaser may deliver or disclose Confidential  Information to (i) its
directors,  officers,  employees, agents, attorneys, trustees and affiliates (to
the extent  such  disclosure  reasonably  relates to the  administration  of the
investment  represented  by its Notes),  (ii) its  financial  advisors and other
professional   advisors  who  agree  to  hold   confidential   the  Confidential
Information substantially in accordance with the terms of this Section 20, (iii)
any other holder of any Note, (iv) any Institutional  Investor to which it sells
or offers to sell such Note or any part thereof or any participation therein (if
such  Person  has agreed in writing  prior to its  receipt of such  Confidential
Information  to be bound by the  provisions  of

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<PAGE>

this  Section  20), (v) any Person from which it offers to purchase any security
of the  Company  (if such  Person has agreed in writing  prior to its receipt of
such Confidential Information to be bound by the provisions of this Section 20),
(vi) any federal or state  regulatory  authority having  jurisdiction  over such
Purchaser, (vii) the NAIC or the SVO or, in each case, any similar organization,
or any nationally  recognized  rating agency that requires access to information
about such Purchaser's investment portfolio, or (viii) any other Person to which
such  delivery or  disclosure  may be  necessary  or  appropriate  (w) to effect
compliance with any law, rule, regulation or order applicable to such Purchaser,
(x) in response to any subpoena or other legal process,  (y) in connection  with
any  litigation to which such Purchaser is a party or (z) if an Event of Default
has occurred and is  continuing,  to the extent such  Purchaser  may  reasonably
determine  such delivery and  disclosure to be necessary or  appropriate  in the
enforcement  or for  the  protection  of the  rights  and  remedies  under  such
Purchaser's  Notes and this Agreement.  Each holder of a Note, by its acceptance
of a Note,  will be deemed to have  agreed to be bound by and to be  entitled to
the benefits of this Section 20 as though it were a party to this Agreement.  On
reasonable  request by the Company in connection with the delivery to any holder
of a Note of  information  required to be  delivered  to such holder  under this
Agreement or  requested  by such holder  (other than a holder that is a party to
this  Agreement or its nominee),  such holder will enter into an agreement  with
the Company embodying the provisions of this Section 20.

21.   SUBSTITUTION OF PURCHASER.

      Each  Purchaser  shall  have  the  right  to  substitute  any  one  of its
Affiliates  as the  purchaser  of the  Notes  that  it has  agreed  to  purchase
hereunder,  by written  notice to the  Company,  which notice shall be signed by
both such Purchaser and such Affiliate, shall contain such Affiliate's agreement
to be bound by this Agreement and shall contain a confirmation by such Affiliate
of the accuracy with respect to it of the  representations  set forth in Section
6.  Upon  receipt  of such  notice,  any  reference  to such  Purchaser  in this
Agreement  (other  than in this  Section  21),  shall be deemed to refer to such
Affiliate in lieu of such original  Purchaser.  In the event that such Affiliate
is so  substituted  as a  Purchaser  hereunder  and  such  Affiliate  thereafter
transfers  to  such  original  Purchaser  all of the  Notes  then  held  by such
Affiliate, upon receipt by the Company of notice of such transfer, any reference
to such Affiliate as a "Purchaser" in this Agreement (other than in this Section
21),  shall no longer be deemed to refer to such  Affiliate,  but shall refer to
such original  Purchaser,  and such original  Purchaser shall again have all the
rights of an original holder of the Notes under this Agreement.

22.   MISCELLANEOUS.

      22.1. SUCCESSORS AND ASSIGNS.

      All covenants and other  agreements  contained in this  Agreement by or on
behalf  of any of the  parties  hereto  bind and inure to the  benefit  of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.

      22.2. PAYMENTS DUE ON NON-BUSINESS DAYS.

      Anything in this  Agreement or the Notes to the  contrary  notwithstanding
(but  without  limiting  the  requirement  in Section 8.5 that the notice of any
optional  prepayment  specify  a

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<PAGE>

Business Day as the date fixed for such prepayment), any payment of principal of
or Breakage Cost Indemnity or interest on any Note,  including the maturity date
of such Note,  that is due on a date other than a Business  Day shall be made on
the next  succeeding  Business Day (or the immediately  preceding  Business Day,
with  respect to certain  instances  described  in the  definition  of  Interest
Payment Date),  and shall include the additional days elapsed in the computation
of the interest payable on such next succeeding Business Day.

      22.3. ACCOUNTING TERMS.

      All accounting  terms used herein which are not expressly  defined in this
Agreement have the meanings  respectively given to them in accordance with GAAP.
Except as otherwise  specifically  provided herein,  (a) all  computations  made
pursuant to this  Agreement  shall be made in accordance  with GAAP, and (b) all
financial  statements  shall be  prepared  in  accordance  with GAAP;  PROVIDED,
HOWEVER,  that if the Company notifies the holders of the Notes that the Company
requests an amendment  to any  provision  hereof to eliminate  the effect of any
change occurring after the Closing Date in GAAP or in the application thereof on
the operation of such provision (or if the Required Holders request an amendment
to any provision hereof for such purpose), regardless of whether any such notice
is given before or after such change in GAAP or in the application thereof, then
such  provision  shall be  interpreted  on the  basis of GAAP as in  effect  and
applied  immediately  before such change shall have become  effective until such
notice  shall  have been  withdrawn  or such  provision  amended  in  accordance
herewith.

      22.4. SEVERABILITY.

      Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction  shall,  as to such  jurisdiction,  be ineffective to the extent of
such  prohibition  or  unenforceability   without   invalidating  the  remaining
provisions  hereof,  and  any  such  prohibition  or   unenforceability  in  any
jurisdiction  shall (to the full  extent  permitted  by law) not  invalidate  or
render unenforceable such provision in any other jurisdiction.

      22.5. CONSTRUCTION, ETC.

      Each  covenant   contained  herein  shall  be  construed  (absent  express
provision to the contrary) as being independent of each other covenant contained
herein,  so that  compliance  with any one  covenant  shall not (absent  such an
express  contrary  provision)  be  deemed to  excuse  compliance  with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which  such  Person  is  prohibited  from  taking,  such  provision  shall be
applicable whether such action is taken directly or indirectly by such Person.

      For the avoidance of doubt,  all  Schedules and Exhibits  attached to this
Agreement shall be deemed to be a part hereof.

      22.6. COUNTERPARTS.

      This  Agreement  may be  executed in any number of  counterparts,  each of
which  shall be an  original  but all of which  together  shall  constitute  one
instrument.  Each  counterpart  may consist of a number of copies  hereof,  each
signed by less than all, but together signed by all, of the parties hereto.

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<PAGE>

     22.7. GOVERNING LAW.

      This Agreement shall be construed and enforced in accordance with, and the
rights of the  parties  shall be  governed  by, the law of the State of New York
excluding  choice-of-law  principles  of the law of such State that would permit
the application of the laws of a jurisdiction other than such State.

     22.8. JURISDICTION AND PROCESS; WAIVER OF JURY TRIAL.

          (a) The Company irrevocably submits to the non-exclusive  jurisdiction
     of any New York State or federal court sitting in the Borough of Manhattan,
     The City of New York, over any suit, action or proceeding arising out of or
     relating to this Agreement or the Notes. To the fullest extent permitted by
     applicable law, the Company irrevocably waives and agrees not to assert, by
     way of motion, as a defense or otherwise,  any claim that it is not subject
     to the  jurisdiction  of any such court,  any objection  that it may now or
     hereafter  have to the  laying  of the  venue of any such  suit,  action or
     proceeding  brought  in any such  court and any claim  that any such  suit,
     action or  proceeding  brought  in any such  court has been  brought  in an
     inconvenient forum.

          (b) The Company  consents to process  being  served by or on behalf of
     any  holder  of Notes in any  suit,  action  or  proceeding  of the  nature
     referred to in Section  22.8(a) by mailing a copy thereof by  registered or
     certified  mail  (or  any  substantially  similar  form of  mail),  postage
     prepaid,  return  receipt  requested,  to it at its  address  specified  in
     Section 18 or at such other  address of which such  holder  shall then have
     been  notified  pursuant  to said  Section.  The  Company  agrees that such
     service upon receipt (i) shall be deemed in every respect effective service
     of process upon it in any such suit,  action or proceeding  and (ii) shall,
     to the fullest extent  permitted by applicable law, be taken and held to be
     valid personal service upon and personal  delivery to it. Notices hereunder
     shall be conclusively  presumed received as evidenced by a delivery receipt
     furnished by the United States Postal  Service or any reputable  commercial
     delivery service.

          (c) Nothing in this  Section 22.8 shall affect the right of any holder
     of a Note to serve  process in any manner  permitted  by law,  or limit any
     right that the  holders  of any of the Notes may have to bring  proceedings
     against the  Company in the courts of any  appropriate  jurisdiction  or to
     enforce in any lawful manner a judgment obtained in one jurisdiction in any
     other jurisdiction.

          (d) The  parties  hereto  hereby  waive  trial  by jury in any  action
     brought  on or with  respect  to this  Agreement,  the  Notes or any  other
     document executed in connection herewith or therewith.

     22.9. INTEREST RATE LIMITATION.

          (a)  Notwithstanding  anything  herein  to the  contrary,  in no event
     whatsoever  shall the amount  contracted  for,  charged,  paid or otherwise
     agreed  to be paid to or  received  by the  holder of any Note for the use,
     forbearance  or  detention  of money  under this  Agreement,  the  Guaranty
     Agreement  or  the  Sharing  Agreement  or  otherwise  exceed

                                   53

<PAGE>

     the maximum  non-usurious  rate  pursuant to  applicable  law (the "MAXIMUM
     RATE"),  and if at any time  the  interest  rate  applicable  to any  Note,
     together  with all fees,  charges  and other  amounts  which are treated as
     interest in respect of such Note under  applicable  law  (collectively  the
     "CHARGES"),  shall exceed the Maximum Rate, the rate of interest payable in
     respect  of such Note  hereunder,  together  with all  Charges  payable  in
     respect  thereof,  shall be limited to the Maximum  Rate and, to the extent
     lawful, the interest and Charges that would have been payable in respect of
     such Note but were not payable as a result of the operation of this Section
     22.9 shall be cumulated and the interest and Charges payable to such holder
     of Notes in respect of other Notes or periods  shall be increased  (but not
     above the Maximum Rate therefor) until such cumulated amount, together with
     interest  thereon at the Default Rate to the date of repayment,  shall have
     been  received by such holder of Notes.  Anything  in this  Agreement,  the
     Guaranty   Agreement   or   the   Sharing   Agreement   to   the   contrary
     notwithstanding, the Company shall not be required to pay unearned interest
     and shall  never be  required  to pay  interest  at a rate in excess of the
     Maximum Rate, and if the effective  rate of interest which would  otherwise
     be payable  under this  Agreement,  the  Guaranty  Agreement or the Sharing
     Agreement  would exceed the Maximum  Rate,  or if any holder of Notes shall
     receive any unearned  interest or shall  receive  monies that are deemed to
     constitute  interest  which would  increase the effective  rate of interest
     payable by the Company under this Agreement,  the Guaranty Agreement or the
     Sharing  Agreement  to a rate in excess of the Maximum  Rate,  then (a) the
     amount of interest  which would  otherwise be payable by the Company  under
     this Agreement,  the Guaranty  Agreement or the Sharing  Agreement shall be
     reduced to the amount  allowed under  applicable  law, and (b) any unearned
     interest  paid by the Company or any interest paid by the Company in excess
     of the  Maximum  Rate shall be  credited  on the  principal  of (or, if the
     principal amount shall have been paid in full, refunded to the Company). It
     is  further  agreed  that,  without   limitation  of  the  foregoing,   all
     calculations of the rate of interest contracted for, charged or received by
     any holder of Notes under this  Agreement,  the  Guaranty  Agreement or the
     Sharing  Agreement,  are made for the purpose of  determining  whether such
     rate exceeds the Maximum Rate, and shall be made by  amortizing,  prorating
     and  spreading  in equal parts during the period of the full stated term of
     the obligations  evidenced by the Notes all interest at any time contracted
     for, charged or received by such holder of Notes in connection therewith.

                   [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.
                              NEXT PAGE IS SIGNATURE PAGE.]

                                        54

<PAGE>

      If you are in  agreement  with  the  foregoing,  please  sign  the form of
agreement  on a  counterpart  of this  Agreement  and return it to the  Company,
whereupon this Agreement  shall become a binding  agreement  between you and the
Company.

                                    Very truly yours,

                                    SERVICE CORPORATION INTERNATIONAL


                                    By: /s/ Eric D. Tanzberger
                                      ----------------------------------
                                       Name: Eric D. Tanzberger
                                       Title: Senior Vice President and Chief
                                              Financial Officer


This Agreement is hereby
accepted and agreed to as
of the date thereof.

[PURCHASER SIGNATURE BLOCKS OMITTED]




                   [Signature Page to Note Purchase Agreement]

<PAGE>


                                   SCHEDULE B

                                  DEFINED TERMS

      As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:

      "ACCOUNTANT'S CERTIFICATE" is defined in Section 7.1(b).

      "ADDITIONAL COVENANT" is defined in Section 10.11(b).

      "ADDITIONAL DEFAULT" is defined in Section 10.11(b).

      "AFFILIATE"  means, at any time, and with respect to any Person, any other
Person  that  at  such  time  directly  or   indirectly   through  one  or  more
intermediaries  Controls,  or is Controlled by, or is under common Control with,
such first Person,  and,  with respect to the Company,  shall include any Person
beneficially owning or holding, directly or indirectly, 10% or more of any class
of  voting  or  Equity  Interests  of  the  Company  or  any  Subsidiary  or any
corporation of which the Company and its Subsidiaries  beneficially own or hold,
in the aggregate,  directly or indirectly, 10% or more of any class of voting or
Equity  Interests.  As used in this definition,  "Control" means the possession,
directly or  indirectly,  of the power to direct or cause the  direction  of the
management  and policies of a Person,  whether  through the  ownership of voting
securities,  by contract or  otherwise.  Unless the  context  otherwise  clearly
requires,  any reference to an "Affiliate" is a reference to an Affiliate of the
Company.

      "THIS AGREEMENT" is defined in Section 17.3.

      "ALDERWOODS" means Alderwoods Group, Inc., a Delaware corporation.

      "ALDERWOODS DEBT" means the Indebtedness and all other obligations created
and existing  pursuant to that certain  Credit  Agreement,  dated  September 17,
2003,  by  and  among  Alderwoods,   as  borrower,  Bank  of  America,  NA.,  as
administrative  agent  thereunder and the other lenders party  thereto,  and all
related documents.

     "ANTI-TERRORISM  ORDER" means  Executive  Order No. 13,224 of September 24,
2001,  Blocking  Property and Prohibiting  Transactions with Persons Who Commit,
Threaten to Commit or Support  Terrorism,  66 U.S. Fed. Reg. 49, 079 (2001),  as
amended.

      "ATTRIBUTABLE DEBT" is defined in Section 10.1(g).

      "BREAKAGE COST INDEMNITY"  means in connection with each  LIBOR-Based Loan
the amount, if any, due pursuant to the terms of Section 8.8(b).

      "BUSINESS DAY" means (a) with respect to any determination of the Interest
Period with respect to any LIBOR-Based  Loan, a London Business Day, and (b) for
all other  purposes,  any day other than a Saturday,  a Sunday or a day on which
commercial  banks in New  York,  New York or  Houston,  Texas  are  required  or
authorized to be closed.

                                   Schedule B-1


<PAGE>

      "CANADIAN  SUBSIDIARY"  means any Subsidiary  organized  under the laws of
Canada or any province thereof.

      "CAPITAL LEASE  OBLIGATIONS"  means, as to any Person,  the obligations of
such  Person  to pay  rent  or  other  amounts  under  any  lease  of (or  other
arrangement  conveying  the  right  to use)  real  or  personal  property,  or a
combination  thereof,  which  obligations  are  required  to be  classified  and
accounted  for as capital  leases on a balance  sheet of such Person under GAAP,
and the  amount of such  obligations  shall be the  capitalized  amount  thereof
determined in accordance with GAAP.

      "CASH INTEREST EXPENSE" means interest expense determined under GAAP, less
amortization of deferred loan costs and original issue discounts.

      "CHANGE IN CONTROL" means (a) the  acquisition  of ownership,  directly or
indirectly,  beneficially  or of  record,  by any  Person or group  (within  the
meaning of the Exchange Act) of Equity Interests  representing  more than 25% of
the aggregate  ordinary  voting power  represented by the issued and outstanding
Equity Interests of the Company (including Equity Interests referenced in clause
(d) below);  (b) occupation of a majority of the seats (other than vacant seats)
on the board of  directors  of the  Company  by  persons  who were  neither  (i)
nominated  by the  board of  directors  of the  Company  nor (ii)  appointed  by
directors so nominated;  (c) the  acquisition of direct or indirect  Control (as
such term is defined  in the  definition  of  Affiliate)  of the  Company by any
Person or  group,  or (d) any event  that  gives  holders  of  preferred  Equity
Interests or other securities issued pursuant to any  shareholders'  rights plan
of the Company the right to purchase  or to convert  such  securities  into such
amount of voting  Equity  Interests  of the  Company as,  when so  purchased  or
converted  and added to the Equity  Interests  referred to in clause (a) of this
definition held by such holders,  would result in such holders holding more than
25% of the aggregate voting Equity Interests of the Company.

      "CHANGE IN CONTROL PREPAYMENT DATE" is defined in Section 8.3(b).

      "CHARGES" is defined in Section 22.9.

      "CLOSING" is defined in Section 3.

      "CLOSING DATE" is defined in Section 3.

      "CODE"  means the Internal  Revenue Code of 1986,  as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.

      "COMPANY" is defined in the first paragraph of this Agreement.

      "CONFIDENTIAL INFORMATION" is defined in Section 20.

      "CONSOLIDATED  INTEREST  EXPENSE"  means,  for any period,  Cash  Interest
Expense  (including  imputed  interest  expense  in  respect  of  Capital  Lease
Obligations)  paid by the  Company  and its  Subsidiaries  during  such  period;
PROVIDED,  HOWEVER,  that for the  period of four  fiscal  quarters  ending  (a)
December  31,  2006,  Consolidated  Interest  Expense  shall be deemed to be the
amount thereof for the quarter  ending on such date  multiplied by four, (b) for
the period of

                                  Schedule B-2

<PAGE>

four fiscal quarters ending March 31, 2007,  Consolidated Interest Expense shall
be deemed to be the amount  thereof  for the  immediately  preceding  two fiscal
quarters  multiplied  by two,  and (c) for the  period of four  fiscal  quarters
ending June 30, 2007,  Consolidated  Interest  Expense shall be deemed to be the
amount thereof for the immediately preceding three fiscal quarters multiplied by
four-thirds (4/3).

      "CONSOLIDATED  OPERATING  INCOME"  means,  for any period,  the  operating
income or loss of the Company and its Subsidiaries for such period determined on
a consolidated basis in accordance with GAAP.

      "CREDIT  AGREEMENT"  means  that  certain  Credit  Agreement,  dated as of
November  28,  2006,   among  the  Company,   JPMorgan  Chase  Bank,   N.A.,  as
Administrative Agent, the lenders from time to time party thereto, and the other
Persons party thereto, as amended, restated,  supplemented or otherwise modified
and in effect from time to time (except as otherwise specified herein).

      "DEFAULT" means an event or condition the occurrence or existence of which
would,  with the lapse of time or the giving of notice or both,  become an Event
of Default.

      "DEFAULT  RATE"  means,  at any time in respect of any Note,  that rate of
interest that is equal to the greater of (a) 2% per annum above the LIBO Rate or
(b) 2% per annum  above the Prime Rate,  regardless  of whether the LIBO Rate or
the Prime Rate is otherwise in effect at such time.

      "DISCLOSURE DOCUMENTS" is defined in Section 5.3.

      "DOLLARS" or "$" means lawful money of the United States of America.

      "DOMESTIC   SUBSIDIARY"  means  any  Subsidiary  that  is  not  a  Foreign
Subsidiary.

      "EBITDA" means, for any period,  without duplication,  for the Company and
its Subsidiaries, Consolidated Operating Income plus:

          (a) losses (or minus  gains) on sales of fixed  assets,  to the extent
     included in Consolidated  Operating Income, and impairments,  to the extent
     included in operating expenses; plus

          (b)  depreciation  (to the extent  included in operating  expenses and
     excluding amortization of deferred loan costs); plus

          (c) non-cash stock  compensation  expense/amortization  (to the extent
     included in operating expenses); plus

          (d) rent  expense in any period to the extent of the  portion  thereof
     determined,  subsequent  to such period,  to constitute  principal  paid in
     respect  of  capitalized  leases,  rather  than  rent  paid in  respect  of
     operating leases; plus

                                  Schedule B-3

<PAGE>

          (e) actual Merger-related, non-recurring cash expenses incurred to the
     extent  included in  operating  expenses and not to exceed  $60,000,000  in
     aggregate, including expenses incurred within the first 24 months after the
     Closing Date,  such as severance of management and  employees,  termination
     costs and  buyouts  of  contracts  and  lease  agreements,  conversions  of
     computer  systems and  networks,  transfer of documents  and other  assets,
     legal and advisory  fees  directly  related to the Merger,  and other items
     reasonably  incurred of a similar nature and non-cash  merger expenses that
     would not otherwise be included in other non-cash  addbacks to Consolidated
     Operating Income; plus

          (f) royalty  income  received  from American  Memorial Life  Insurance
     Company; minus

          (g) any losses attributable to surety premiums; minus

          (h) Pro Forma Divested EBITDA (or plus Pro Forma Divested  EBITDA,  if
     such figure is negative,  in each case to the extent previously included in
     Consolidated Operating Income); plus

          (i) EBITDA (or minus  EBITDA,  if such figure is negative) of acquired
     operations  for such period in respect of the time during such period which
     preceded  the  acquisition,  in each  case  to the  extent  not  previously
     included in Consolidated Operating Income; plus

          (j)  EBITDA  (or  minus  EBITDA,   if  such  figure  is  negative)  of
     discontinued operations still owned; plus

          (k) to the extent received or made by the Company or any Subsidiary in
     cash, net cash flow from (or minus net cash flow to) non-consolidated joint
     ventures (to the extent not included in Consolidated Operating Income);

      PROVIDED, HOWEVER, that EBITDA for the fiscal quarter ended March 31, 2006
shall be deemed to have been  $117,683,000,  EBITDA for the fiscal quarter ended
June 30,  2006  shall be deemed to have been  $109,851,000,  and  EBITDA for the
fiscal  quarter  ended   September  30,  2006  shall  be  deemed  to  have  been
$118,634,000  (in each case,  EBITDA  with  respect to such  fiscal  quarters is
subject to change to reflect  financial  information as a result of acquisitions
(other than the  Merger)  and  divestitures  occurring  after the Closing  Date,
calculated in accordance with the provisions of this definition), and, PROVIDED,
FURTHER that the  calculation of EBITDA for the fiscal  quarter ending  December
31, 2006 shall be  computed  as if  Alderwoods  had become a  Subsidiary  of the
Company on the first day of such fiscal quarter.

      "ELECTRONIC DELIVERY" is defined in Section 7.1(a).

      "ELECTRONIC  DISTRIBUTION  SERVICE"  means  IntraLinks(R)  or a comparable
internet document posting and distribution  service accessible by the holders of
the Notes.

      "ENVIRONMENTAL LAWS" means any and all federal,  state, local, and foreign
statutes,  laws, regulations,  ordinances,  rules,  judgments,  orders, decrees,
permits, concessions,  grants,

                                  Schedule B-4

<PAGE>

franchises,  licenses,  agreements  or  governmental  restrictions  relating  to
pollution and the protection of the  environment or the release of any materials
into the  environment,  including  but not limited to those related to Hazardous
Materials.

      "EQUITY INTERESTS" means shares of capital stock,  partnership  interests,
membership  interests in a limited liability company,  beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other  rights  entitling  the holder  thereof to purchase or acquire any such
equity interest.

      "ERISA"  means the Employee  Retirement  Income  Security Act of 1974,  as
amended from time to time, and the rules and regulations  promulgated thereunder
from time to time in effect.

      "ERISA   AFFILIATE"   means  any  trade  or   business   (whether  or  not
incorporated)  that is treated as a single  employer  together  with the Company
under section 414 of the Code.

      "EXCHANGE ACT" means the Securities  Exchange Act of 1934, as amended from
time to time, and the rules and regulations  promulgated thereunder from time to
time in effect.

      "EVENT OF DEFAULT" is defined in Section 11.

      "FOREIGN  SUBSIDIARY"  means any Subsidiary  organized under the laws of a
jurisdiction  other  than  the  United  States  or  any of  its  territories  or
possessions or any political  subdivision  thereof.  For the avoidance of doubt,
the  Commonwealth  of Puerto  Rico is, for the  purposes of Section  9.7,  not a
territory, possession or political subdivision of the United States.

      "FORM 10-K" is defined in Section 7.1(b).

      "FORM 10-Q" is defined in Section 7.1(a).

      "GAAP" means generally  accepted  accounting  principles as in effect from
time to time in the United States of America.

      "GOVERNMENTAL AUTHORITY" means

          (a) the government of

               (i) the United States of America or any State or other  political
          subdivision thereof, or

               (ii)  any  other   jurisdiction  in  which  the  Company  or  any
          Subsidiary conducts all or any part of its business,  or which asserts
          jurisdiction over any properties of the Company or any Subsidiary, or

          (b) any entity exercising executive, legislative, judicial, regulatory
     or administrative functions of, or pertaining to, any such government.

                                  Schedule B-5


<PAGE>

      "GUARANTEE"  means, with respect to any Person, any obligation (except the
endorsement  in the ordinary  course of business of negotiable  instruments  for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness,  dividend or other  obligation  of any other Person in any manner,
whether  directly or  indirectly,  including  (without  limitation)  obligations
incurred through an agreement, contingent or otherwise, by such Person:

          (a) to  purchase  such  indebtedness  or  obligation  or any  property
     constituting security therefor;

          (b) to advance or supply funds (i) for the purchase or payment of such
     indebtedness  or  obligation,  or (ii) to maintain  any working  capital or
     other  balance  sheet  condition or any income  statement  condition of any
     other  Person or  otherwise  to  advance  or make  available  funds for the
     purchase or payment of such indebtedness or obligation;

          (c)  to  lease  properties  or  to  purchase  properties  or  services
     primarily  for the purpose of assuring  the owner of such  indebtedness  or
     obligation  of the  ability  of any  other  Person to make  payment  of the
     indebtedness or obligation; or

          (d) otherwise to assure the owner of such  indebtedness  or obligation
     against loss in respect thereof.

In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.

      "GUARANTORS" means, collectively,  each of the Initial Guarantors together
with each Subsidiary which becomes a Guarantor  pursuant to the terms of Section
9.7.

      "GUARANTY AGREEMENT" is defined in Section 4.8.

      "HAZARDOUS  MATERIAL"  means any and all  pollutants,  toxic or  hazardous
wastes or other  substances  that might pose a hazard to health and safety,  the
removal  of which may be  required  or the  generation,  manufacture,  refining,
production, processing, treatment, storage, handling, transportation,  transfer,
use, disposal, release,  discharge,  spillage, seepage or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law including,
but not limited to, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum, petroleum products, lead based paint, radon gas or similar
restricted, prohibited or penalized substances.

      "HOLDER"  means,  with  respect  to any Note the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
13.1.

      "INDEBTEDNESS"  of  any  Person  means,  without   duplication,   (a)  all
obligations  of such Person for  borrowed  money or with  respect to deposits or
advances of any kind,  (b) all  obligations  of such Person  evidenced by bonds,
debentures,  notes or similar  instruments,  (c) all  obligations of such Person
upon which interest  charges are  customarily  paid, (d) all obligations of such
Person under  conditional sale or other title retention  agreements  relating to
property acquired by such Person,  (e) all obligations of such Person in respect
of the  deferred  purchase

                                  Schedule B-6

<PAGE>

price of property or services  (excluding  current  accounts payable incurred in
the ordinary course of business),  (f) all Indebtedness of others secured by (or
for which the holder of such  Indebtedness has an existing right,  contingent or
otherwise,  to be secured  by) any Lien on  property  owned or  acquired by such
Person,  whether or not the Indebtedness  secured thereby has been assumed,  (g)
all Guarantees by such Person of Indebtedness  of others,  (h) all Capital Lease
Obligations of such Person,  (i) all  obligations,  contingent or otherwise,  of
such  Person as an account  party in respect of letters of credit and letters of
guaranty,  (j) all  obligations,  contingent  or  otherwise,  of such  Person in
respect of bankers' acceptances,  (k) all obligations,  contingent or otherwise,
of such Person in respect of  securitization  transactions and (l) all synthetic
lease  obligations  of such  Person.  The  Indebtedness  of any Person (i) shall
include the Indebtedness of any other entity (including any partnership in which
such Person is a general  partner) to the extent such Person is liable  therefor
as a result of such Person's  ownership  interest in or other  relationship with
such entity,  except to the extent the terms of such  Indebtedness  provide that
such Person is not liable therefor,  but (ii) shall not include any Guarantee or
other contingent liability, direct or indirect, with respect to bonds, indemnity
agreements and similar arrangements  provided to assure that the Company and its
Subsidiaries  will fully perform  their  obligations  in respect of  prearranged
funeral  and  cemetery   services  and  goods  and/or   construction  of  burial
facilities.

      "INHAM EXEMPTION" is defined in Section 6.2(e).

      "INITIAL GUARANTORS" is defined in Section 4.8.

      "INSTITUTIONAL INVESTOR" means (a) any Purchaser of a Note, (b) any holder
of a Note holding  (together with one or more of its Affiliates) more than 5% of
the  aggregate  principal  amount of the Notes then  outstanding,  (c) any bank,
trust company, savings and loan association or other financial institution,  any
pension plan,  any  investment  company,  any insurance  company,  any broker or
dealer,  or any other similar  financial  institution  or entity,  regardless of
legal form, and (d) any Related Fund of any holder of any Note.

      "INTEREST  PAYMENT DATE" means each  quarterly  anniversary of the Closing
Date; provided,  that (a) if any Interest Payment Date would otherwise fall on a
day other than a Business Day, such Interest  Payment Date shall instead fall on
the next succeeding  Business Day unless such next succeeding Business Day would
fall in the next calendar month, in which case such Interest  Payment Date shall
instead  fall on the  next  preceding  Business  Day,  and  (b) if the  relevant
calendar  month  does not  contain  a day that  numerically  corresponds  to the
Closing Date, the related  Interest  Payment Date shall be the last Business Day
of the last calendar month of such Interest Period.

      "INTEREST  PERIOD" means (a) as to any LIBOR-Based  Loan,  initially,  the
three  month  period  commencing  on the  Closing  Date and  ending on the first
Interest Payment Date thereafter and, after such initial  Interest Period,  each
period commencing on the last day of the preceding Interest Period and ending on
the first Interest Payment Date  thereafter,  and (b) as to any Prime Rate Loan,
the  three  month  period  commencing  on  the  date  of the  conversion  of any
LIBOR-Based  Loan to a Prime Rate Loan or, in the case of a  continuation  of an
existing Prime Rate Loan, on the last day of the immediately  preceding Interest
Period  applicable  thereto,  and  ending on the  first  Interest  Payment  Date
thereafter;  PROVIDED, HOWEVER, that (i) in no event may any

                                  Schedule B-7

<PAGE>

Interest  Period end after the maturity date of the applicable Note and (ii) any
changes in the rate of interest  applicable to a Prime Rate Loan  resulting from
changes in the Prime Rate shall  take place  immediately  regardless  of whether
such change shall occur during such Interest Period.  Interest shall accrue from
and including  the first day of an Interest  Period to but excluding the earlier
of the last day of the Interest Period and the day on which the Notes are repaid
or prepaid in full.

      "INTEREST RATE MARGIN" means, at any time, with respect to the calculation
of interest on any Note, 2.00% per annum.

      "LEVERAGE RATIO" means, on any date, the ratio of the  consolidated  total
Indebtedness of the Company and its Subsidiaries, calculated as of such date, to
EBITDA for the period of four fiscal  quarters of the Company then most recently
ended;  PROVIDED that, as of any date on which the Company and its  Subsidiaries
have Indebtedness  outstanding  which, if prepaid on such date, would be subject
to a premium or penalty in respect of such prepayment,  then consolidated  total
Indebtedness  of the Company and its  Subsidiaries  shall be  calculated  net of
unrestricted  cash on hand of the  Company  and its  Subsidiaries  in  excess of
$25,000,000.

      "LIBOR-BASED  LOAN" means an extension of credit hereunder  evidenced by a
Note which bears interest at the LIBO Rate.

      "LIBO RATE"  means,  with  respect to the  applicable  Interest  Period as
determined for any LIBOR-Based Loan, the sum of (a) the Interest Rate Margin for
such  LIBOR-Based  Loan and (b) (i) the  rate per  annum  (rounded  upwards,  if
necessary,  to the next higher  1/100th of 1%),  equal to the  offered  rate for
deposits in Dollars,  for a period of time  comparable to such Interest  Period,
which appears on the Bloomberg page  "Currency  BBAM 1" as of 11:00 a.m.  London
time on the day that is two London  Business Days prior to the first day of such
Interest  Period,  or (ii) if such rate ceases to be reported in accordance with
the above  definition on Bloomberg  Page  "Currency  BBAM 1," the rate per annum
quoted by JPMorgan Chase Bank, N.A. at  approximately  11:00 A.M. (New York City
time) on the first Business Day of such Interest  Period for loans in Dollars to
major banks in the London interbank eurodollar market for a period equal to such
Interest  Period,  commencing on the first day of such Interest Period and in an
amount comparable to the principal amount thereof.

      "LIEN" means, with respect to any asset, (a) any mortgage,  deed of trust,
lien, pledge, hypothecation,  encumbrance, charge or security interest in, on or
of such asset,  (b) the interest of a vendor or a lessor  under any  conditional
sale  agreement,  capital lease or title  retention  agreement (or any financing
lease having  substantially  the same economic  effect as any of the  foregoing)
relating to such asset and (c) in the case of securities,  any purchase  option,
call or similar right of a third party with respect to such securities.

      "LONDON BUSINESS DAY" means a day on which dealings in Dollars are carried
on in the London inter-bank eurodollar market.

      "MARKETED  EBITDA" means the trailing  12-month EBITDA figure disclosed to
potential buyers preceding the sale of an operation or a Subsidiary.

                                  Schedule B-8

<PAGE>

      "MATERIAL"  means  material  in  relation  to  the  business,  operations,
affairs,  financial condition,  assets,  properties, or prospects of the Company
and its Subsidiaries taken as a whole.

      "MATERIAL  ADVERSE  EFFECT"  means a  material  adverse  effect on (a) the
business, operations,  affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the Company
to  perform  its  obligations  under  this  Agreement  and the  Notes  or of any
Guarantor to perform its obligations  under the Guaranty  Agreement,  or (c) the
validity  or  enforceability  of  this  Agreement,  the  Notes  or the  Guaranty
Agreement.

      "MAXIMUM RATE" is defined in Section 22.9.

      "MEMORANDUM" is defined in Section 5.3.

      "MERGER"  means the  merger  of a direct  Wholly-Owned  Subsidiary  of the
Company with and into Alderwoods,  where Alderwoods is the surviving Person as a
direct,  Wholly-Owned  Subsidiary  of the Company,  pursuant to the terms of the
Merger Documents.

      "MERGER  DOCUMENTS"  means the  Agreement  and Plan of Merger  dated as of
April  2,  2006,  among  the  Company,   Alderwoods  and  Coronado   Acquisition
Corporation and all related documents.

      "MOODY'S" means Moody's Investors Service, Inc.

      "MULTIEMPLOYER  PLAN"  means any Plan that is a  "multiemployer  plan" (as
such term is defined in section 4001(a)(3) of ERISA).

      "NAIC" means the National  Association of Insurance  Commissioners  or any
successor thereto.

      "NAIC ANNUAL STATEMENT" is defined in Section 6.2(a).

      "NOTES" is defined in Section 1(b).

      "OFFICER'S  CERTIFICATE" means a certificate of a Senior Financial Officer
or of any other  officer of the  Company  whose  responsibilities  extend to the
subject matter of such certificate.

      "PBGC"  means the Pension  Benefit  Guaranty  Corporation  referred to and
defined in ERISA or any successor thereto.

      "PERMITTED  ACQUISITION" means any acquisition (by merger or otherwise) by
the Company or a Subsidiary  of all or  substantially  all the assets of, or all
the Equity  Interests  in, a Person or division or line of business of a Person,
if (a) immediately  after giving effect thereto,  no Default has occurred and is
continuing or would result therefrom,  (b) the business of such acquired Person,
or such acquired business,  is reasonably related to the business of the Company
on the date  hereof,  (c) the  requirements  of  Section  9.7  shall  have  been
satisfied  within the time periods  specified  therein,  (d) the Company and the
Subsidiaries are in compliance, on a pro forma basis after giving effect to such
acquisition,  with  Section  10.12 to the  extent  then

                                  Schedule B-9

<PAGE>

applicable,  as if such  acquisition  had  occurred on the first day of the most
recently ended relevant  period for testing  compliance with such Section 10.12,
(e) such  acquisition  has been  approved by all  necessary  corporate and other
action by the  Person so  acquired  or the  Person  selling  the assets or other
property so acquired  by the Company or such  Subsidiary  and (f) in the case of
any acquisition in which the aggregate consideration paid by the Company and the
Subsidiaries  exceeds  $10,000,000,  the Company has delivered to the holders of
the Notes an Officer's  Certificate to the effect set forth in clauses (a), (b),
(c),  (d) and (e) above,  together  with all  financial  information  reasonably
requested by the Required  Holders relating to the Person or assets acquired and
reasonably detailed calculations  demonstrating  satisfaction of the requirement
set forth in clause (d) above.

      "PERMITTED ENCUMBRANCES" means:

          (a) liens  imposed  by law for taxes that are not yet due or are being
     contested in good faith,  with adequate  reserves,  and the failure of such
     contest could not  reasonably  be expected to result in a Material  Adverse
     Effect;

          (b) carriers', warehousemen's,  mechanics', materialmen's, repairmen's
     and other like  liens  imposed by law,  arising in the  ordinary  course of
     business and securing obligations that are not overdue by more than 30 days
     or are being  contested  in good  faith,  with  adequate  reserves  and the
     failure of such  contest  could not  reasonably  be expected to result in a
     Material Adverse Effect;

          (c) pledges and deposits  made in the  ordinary  course of business in
     compliance  with workers'  compensation,  unemployment  insurance and other
     social security laws or regulations;

          (d)  deposits  to secure the  performance  of bids,  trade  contracts,
     leases,  statutory obligations,  surety and appeal bonds, performance bonds
     and other obligations of a like nature, in each case in the ordinary course
     of business;

          (e) judgment  liens in respect of judgments  that do not constitute an
     Event of Default; and

          (f)  easements,   zoning   restrictions,   rights-of-way  and  similar
     encumbrances  on real  property  imposed by law or arising in the  ordinary
     course of business that do not secure any monetary  obligations  and do not
     materially  detract  from the value of the  affected  property or interfere
     with the ordinary conduct of business of the Company or any Subsidiary;

      PROVIDED that the term "Permitted Encumbrances" shall not include any lien
securing  Indebtedness,  and for the purposes of this  definition,  Indebtedness
shall include  Guarantees or other contingent  liabilities of the Company or any
Subsidiary,  direct or indirect, with respect to bonds, indemnity agreements and
similar  arrangements  provided to assure that the Company and its  Subsidiaries
will fully  perform  their  obligations  in respect of  prearranged  funeral and
cemetery services and goods and/or construction of burial facilities.

      "PERMITTED INVESTMENTS" means:

                                  Schedule B-10

<PAGE>

          (a)  direct  obligations  of,  or  obligations  the  principal  of and
     interest on which are  unconditionally  guaranteed by, the United States of
     America or Canada (or by any agency thereof to the extent such  obligations
     are backed by the full faith and credit of the United  States of America or
     Canada), in each case maturing within one year from the date of acquisition
     thereof;

          (b) investments in commercial  paper maturing within 270 days from the
     date of  acquisition  thereof and having,  at such date of  acquisition,  a
     rating  of A2 or better by S&P,  P2 or  better by  Moody's,  or R1 "mid" or
     better by Dominion Bond Rating Service, Ltd.;

          (c) investments in certificates of deposit,  banker's  acceptances and
     time deposits (including eurodollar deposits) maturing within 180 days from
     the date of acquisition thereof issued or guaranteed by or placed with, and
     money  market  deposit  accounts  issued or offered by, any bank which is a
     Lender (as such term is defined in the Credit  Agreement)  or any  domestic
     office of any commercial bank organized under the laws of the United States
     of America or Canada or any State or Province  thereof which has a combined
     capital and surplus and undivided profits of not less than $500,000,000;

          (d) fully collateralized repurchase agreements with a term of not more
     than 30 days for securities  described in clause (a) above and entered into
     with a financial  institution  satisfying the criteria  described in clause
     (c) above;

          (e) money  market funds that (i) comply with the criteria set forth in
     Securities and Exchange  Commission Rule 2a-7 under the Investment  Company
     Act of 1940,  (ii) are rated AAA by S&P or Aaa by  Moody's  and (iii)  have
     portfolio assets of at least $5,000,000,000;

          (f)   investments  in  corporate  debt   securities   (including  loan
     participations)   that  (i)  mature   within  60  days  from  the  date  of
     acquisition,  and (ii) are  rated BBB or better by S&P or Baa2 or better by
     Moody's at the date of acquisition;

          (g)  investments  in municipal  securities or auction rate  securities
     that are rated AA or better  by S&P or Aa or  better by  Moody's,  PROVIDED
     that the Company has the right to put such securities back to the issuer or
     seller thereof at least once every 60 days; and

          (h) other  investments  in an amount not to exceed  $10,000,000 in the
     aggregate   outstanding  at  any  one  time  by  Foreign   Subsidiaries  in
     certificates of deposit,  banker's  acceptances and time deposits (or other
     substantially  similar investments)  maturing within 180 days from the date
     of  acquisition  thereof  issued or guaranteed by or placed with, and money
     market deposit accounts (or other  substantially  similar deposit accounts)
     issued or offered by, any foreign  commercial  bank not organized under the
     laws of the United  States of  America  or Canada or any State or  Province
     thereof.

      "PERSON" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership,  Governmental Authority
or other entity.

                                  Schedule B-11

<PAGE>

      "PLAN"  means an  "employee  benefit  plan" (as defined in section 3(3) of
ERISA)  subject to Title I of ERISA that is or, within the preceding five years,
has been established or maintained, or to which contributions are or, within the
preceding  five years,  have been made or required to be made, by the Company or
any ERISA  Affiliate or with respect to which the Company or any ERISA Affiliate
may have any liability.

      "PREFERRED  STOCK"  means any class of capital  stock of a Person  that is
preferred over any other class of capital stock (or similar Equity Interests) of
such  Person as to the  payment of  dividends  or the payment of any amount upon
liquidation or dissolution of such Person.

      "PRIME RATE" means,  at any time, a rate per annum equal to the sum of the
Interest Rate Margin at such time plus the rate of interest  publicly  announced
at such time by JPMorgan Chase Bank, N.A. (or its successor) in New York City as
its "base" or "prime" rate.

      "PRIME RATE LOAN" means an  extension of credit  hereunder  evidenced by a
Note which bears interest at the Prime Rate.

      "PRO FORMA  DIVESTED  EBITDA"  equals  the total  "Marketed  EBITDA"  from
divested  operations  included in EBITDA in the preceding  four quarters  before
consideration of divestures.

      "PROPERTY" or "PROPERTIES" means, unless otherwise  specifically  limited,
real or  personal  property  of any  kind,  tangible  or  intangible,  choate or
inchoate.

      "PTE" is defined in Section 6.2(a).

      "PUBLIC NOTE AGREEMENT" shall mean that certain Senior Indenture, dated as
of February 1, 1993,  and the  supplemental  indentures  entered  into  pursuant
thereto  on October 3,  2006,  in  respect  of which the  Company  has issued an
aggregate amount of $500,000,000 of its Senior Notes.

      "PURCHASER" is defined in the first paragraph of this Agreement.

      "QPAM EXEMPTION" is defined in Section 6.2(d).

      "QUALIFIED  INSTITUTIONAL  BUYER"  means any  Person  who is a  "qualified
institutional  buyer"  within  the  meaning  of such  term as set  forth in Rule
144A(a)(1) under the Securities Act.

      "RELATED FUND" means,  with respect to any holder of any Note, any fund or
entity  that (a)  invests in  Securities  or bank  loans,  and (b) is advised or
managed by such  holder,  the same  investment  advisor as such  holder or by an
affiliate of such holder or such investment advisor.

      "REQUIRED  HOLDERS" means, at any time, the holders of at least a majority
in principal  amount of the Notes at the time  outstanding  (exclusive  of Notes
then owned by the Company or any of its Affiliates).

      "RESPONSIBLE  OFFICER"  means any Senior  Financial  Officer and any other
officer  of the  Company  with  responsibility  for  the  administration  of the
relevant portion of this Agreement.

                                  Schedule B-12

<PAGE>

      "RESTRICTED PAYMENT" is defined in Section 10.9(a).

      "REVOLVING  BORROWINGS"  shall  have the  meaning  given  such term in the
Credit Agreement.

      "REVOLVING  MATURITY  DATE" shall have the meaning  given such term in the
Credit Agreement as in effect on the date hereof.

      "SALE AND LEASEBACK TRANSACTION" means any arrangement whereby the Company
or any Subsidiary shall sell or transfer any property, real or personal, used or
useful  in  its  business,  whether  now  owned  or  hereinafter  acquired,  and
thereafter  rent or lease such property from the buyer or transferee of the sold
or transferred  property,  intending to use such property for  substantially the
same purpose or purposes.

      "S&P" means Standard & Poor's Ratings Services.

      "SEC" means the Securities  and Exchange  Commission of the United States,
or any successor thereto.

      "SECURITIES"  or  "SECURITY"  shall have the meaning  specified in Section
2(1) of the Securities Act.

      "SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time, and the rules and regulations  promulgated thereunder from time to time in
effect.

      "SENIOR FINANCIAL  OFFICER" means the chief financial  officer,  principal
accounting officer, treasurer or comptroller of the Company.

      "SERIES" means any one or more of the series of Notes issued hereunder.

      "SERIES A NOTES" is defined in Section 1(a).

      "SERIES B NOTES" is defined in Section 1(b).

      "SHARING AGREEMENT" means the Sharing Agreement,  dated as of November 28,
2006, among the banks and financial  institutions party thereto,  the holders of
the Notes,  JPMorgan Chase Bank, N.A., as Agent for the lenders under the Credit
Agreement,  and each of the lenders  party  thereto,  as such  agreement  may be
amended, modified, supplemented or restated from time to time in accordance with
the provisions thereof.

      "SOURCE" is defined in Section 6.2.

      "SUBSIDIARY" means, as to any Person, any other Person in which such first
Person or one or more of its  Subsidiaries  or such first Person and one or more
of its Subsidiaries  owns sufficient  equity or voting interests to enable it or
them  (as a group)  ordinarily,  in the  absence  of  contingencies,  to elect a
majority of the  directors  (or Persons  performing  similar  functions) of such
second Person,  and any partnership or joint venture if more than a 50% interest
in the profits or capital  thereof is owned by such first  Person or one or more
of its  Subsidiaries  or such

                                  Schedule B-13

<PAGE>

first Person and one or more of its  Subsidiaries  (unless such  partnership  or
joint venture can and does  ordinarily  take major business  actions without the
prior  approval of such Person or one or more of its  Subsidiaries).  Unless the
context  otherwise  clearly  requires,  any  reference  to a  "Subsidiary"  is a
reference to a Subsidiary of the Company.

      "SVO" means the Securities  Valuation  Office of the NAIC or any successor
to such Office.

      "SWAP  AGREEMENT"  means any agreement with respect to any swap,  forward,
future or derivative  transaction or option or similar agreement  involving,  or
settled by reference to, one or more rates, currencies,  commodities,  equity or
debt  instruments or securities,  or economic,  financial or pricing  indices or
measures  of  economic,  financial  or  pricing  risk or  value  or any  similar
transaction or any combination of these  transactions;  PROVIDED that no phantom
stock or similar  plan  providing  for  payments  only on  account  of  services
provided by current or former directors,  officers,  employees or consultants of
the Company or its Subsidiaries shall be a Swap Agreement.

      "TERM  LOAN"  means the term loans  made to the  Company  pursuant  to the
Credit Agreement.

      "TRANSPORTATION EQUIPMENT LEASES" is defined in Section 10.1(f).

      "USA  PATRIOT  ACT" means  United  States  Public Law 107-56,  Uniting and
Strengthening  America by Providing  Appropriate Tools Required to Intercept and
Obstruct  Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time,
and the  rules  and  regulations  promulgated  thereunder  from  time to time in
effect.

      "WHOLLY-OWNED  SUBSIDIARY"  means, at any time, any Subsidiary one hundred
percent of all of the Equity Interests (except directors' qualifying shares) and
voting  interests  of which are owned by any one or more of the  Company and the
Company's other Wholly-Owned Subsidiaries at such time.

                                  Schedule B-14


<PAGE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>4
<FILENAME>nov28ex42.txt
<DESCRIPTION>EXHIBIT 4.2
<TEXT>
                                                                     Exhibit 4.2
================================================================================


                                 [JPMorgan LOGO]

                                  $300,000,000
                           REVOLVING CREDIT AGREEMENT

                                  $150,000,000
                               TERM LOAN AGREEMENT

                                   DATED AS OF

                                NOVEMBER 28, 2006

                                      AMONG

                        SERVICE CORPORATION INTERNATIONAL
                                  AS BORROWER,

                            THE LENDERS PARTY HERETO,

                           JPMORGAN CHASE BANK, N.A.,
                            AS ADMINISTRATIVE AGENT,

                     BANK OF AMERICA, N.A. AND THE BANK OF NOVA SCOTIA,
                              AS SYNDICATION AGENTS
                            FOR THE REVOLVING LOANS,

                                         ---------

                           J.P. MORGAN SECURITIES INC.

                                       AND

                         BANC OF AMERICA SECURITIES LLC,
                  AS JOINT BOOKRUNNERS AND JOINT LEAD ARRANGERS
                             FOR THE REVOLVING LOANS

                                       AND

                          J.P. MORGAN SECURITIES, INC.

                                       AND

                       MERRILL LYNCH CAPITAL CORPORATION,
                  AS JOINT BOOKRUNNERS AND JOINT LEAD ARRANGERS
                                FOR THE TERM LOAN


===============================================================================

                                                              Andrews Kurth LLP
                                            Counsel to the Administrative Agent


<PAGE>

                                TABLE OF CONTENTS

                                                                         PAGE


ARTICLE I DEFINITIONS........................................................1
      SECTION 1.01 DEFINED TERMS.............................................1
      SECTION 1.02 CLASSIFICATION OF LOANS AND BORROWINGS...................17
      SECTION 1.03 TERMS GENERALLY..........................................17
      SECTION 1.04 ACCOUNTING TERMS; GAAP...................................18

ARTICLE II THE CREDITS......................................................18
      SECTION 2.01 REVOLVING LOAN COMMITMENTS...............................18
      SECTION 2.02 REVOLVING LOANS AND BORROWINGS...........................18
      SECTION 2.03 REQUESTS FOR REVOLVING BORROWINGS........................19
      SECTION 2.04 TERM LOANS...............................................20
      SECTION 2.05 SWINGLINE LOANS..........................................20
      SECTION 2.06 LETTERS OF CREDIT........................................21
      SECTION 2.07 FUNDING OF BORROWINGS....................................25
      SECTION 2.08 INTEREST ELECTIONS.......................................26
      SECTION 2.09 TERMINATION AND REDUCTION OF COMMITMENTS.................27
      SECTION 2.10 REPAYMENT OF LOANS; EVIDENCE OF DEBT.....................28
      SECTION 2.11 PREPAYMENT OF LOANS......................................29
      SECTION 2.12 FEES.....................................................30
      SECTION 2.13 INTEREST.................................................31
      SECTION 2.14 ALTERNATE RATE OF INTEREST...............................32
      SECTION 2.15 INCREASED COSTS..........................................32
      SECTION 2.16 BREAK FUNDING PAYMENTS...................................33
      SECTION 2.17 TAXES....................................................34
      SECTION 2.18 PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF
                   SET-OFFS.................................................35
      SECTION 2.19 MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS...........37
      SECTION 2.20 INCREASE IN THE REVOLVING LOAN COMMITMENTS...............37

ARTICLE III REPRESENTATIONS AND WARRANTIES..................................38
      SECTION 3.01 ORGANIZATION; POWERS.....................................38
      SECTION 3.02 AUTHORIZATION; ENFORCEABILITY............................38
      SECTION 3.03 GOVERNMENTAL APPROVALS; NO CONFLICTS.....................39
      SECTION 3.04 FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE..........39
      SECTION 3.05 PROPERTIES...............................................39
      SECTION 3.06 LITIGATION AND ENVIRONMENTAL MATTERS.....................39
      SECTION 3.07 COMPLIANCE WITH LAWS AND AGREEMENTS......................40
      SECTION 3.08 INVESTMENT AND HOLDING COMPANY STATUS....................40
      SECTION 3.09 TAXES....................................................40
      SECTION 3.10 ERISA....................................................40
      SECTION 3.11 DISCLOSURE...............................................40
      SECTION 3.12 SUBSIDIARIES.............................................41
      SECTION 3.13 MARGIN STOCK.............................................41

                                      -i-
<PAGE>

      SECTION 3.14 USE OF PROCEEDS..........................................41
      SECTION 3.15 SOLVENCY.................................................41

ARTICLE IV CONDITIONS.......................................................41
      SECTION 4.01 EFFECTIVE DATE...........................................41
      SECTION 4.02 EACH CREDIT EVENT........................................43

ARTICLE V AFFIRMATIVE COVENANTS.............................................43
      SECTION 5.01 FINANCIAL STATEMENTS; RATINGS CHANGE AND OTHER
                   INFORMATION..............................................43
      SECTION 5.02 NOTICES OF MATERIAL EVENTS...............................44
      SECTION 5.03 EXISTENCE; CONDUCT OF BUSINESS...........................45
      SECTION 5.04 PAYMENT OF OBLIGATIONS...................................45
      SECTION 5.05 MAINTENANCE OF PROPERTIES................................45
      SECTION 5.06 BOOKS AND RECORDS; INSPECTION RIGHTS.....................45
      SECTION 5.07 COMPLIANCE WITH LAWS.....................................45
      SECTION 5.08 USE OF PROCEEDS AND LETTERS OF CREDIT....................46
      SECTION 5.09 INSURANCE................................................46
      SECTION 5.10 REQUIRED GUARANTORS......................................46

ARTICLE VI NEGATIVE COVENANTS...............................................46
      SECTION 6.01 INDEBTEDNESS COVENANT....................................46
      SECTION 6.02 LIMIT ON PREFERRED EQUITY ISSUANCE.......................48
      SECTION 6.03 LIEN COVENANT............................................48
      SECTION 6.04 SALE AND LEASEBACK TRANSACTIONS..........................49
      SECTION 6.05 LIMITATION ON FUNDAMENTAL CHANGES........................49
      SECTION 6.06 RESTRICTIONS ON INVESTMENTS, LOANS,
                   ADVANCES, GUARANTEES AND ACQUISITIONS....................50
      SECTION 6.07 LIMITATION ON ASSET SALES................................52
      SECTION 6.08 SWAP AGREEMENTS..........................................53
      SECTION 6.09 LIMITATION ON RESTRICTED PAYMENTS........................53
      SECTION 6.10 RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES.............55
      SECTION 6.11 RESTRICTIONS ON RESTRICTIVE AGREEMENTS...................55
      SECTION 6.12 FINANCIAL COVENANTS......................................55

ARTICLE VII EVENTS OF DEFAULT...............................................56

ARTICLE VIII THE ADMINISTRATIVE AGENT.......................................58

ARTICLE IX MISCELLANEOUS....................................................60
      SECTION 9.01 NOTICES..................................................60
      SECTION 9.02 WAIVERS; AMENDMENTS; RELEASE OF GUARANTORS...............61
      SECTION 9.03 EXPENSES; INDEMNITY; DAMAGE WAIVER.......................62
      SECTION 9.04 SUCCESSORS AND ASSIGNS...................................63
      SECTION 9.05 SURVIVAL.................................................66
      SECTION 9.06 COUNTERPARTS; INTEGRATION; EFFECTIVENESS.................67
      SECTION 9.07 SEVERABILITY.............................................67
      SECTION 9.08 RIGHT OF SETOFF..........................................67

                                      -ii-
<PAGE>
      SECTION 9.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
                   PROCESS..................................................67
      SECTION 9.10 WAIVER OF JURY TRIAL.....................................68
      SECTION 9.11 HEADINGS.................................................68
      SECTION 9.12 CONFIDENTIALITY..........................................68
      SECTION 9.13 INTEREST RATE LIMITATION.................................69
      SECTION 9.14 USA PATRIOT ACT..........................................69
      SECTION 9.15 FINAL AGREEMENT OF THE PARTIES...........................70

                                     -iii-
<PAGE>


EXHIBITS:

Exhibit 1.01A   Form of  Guarantee  Agreement
Exhibit 1.01B   Form of  Revolving Promissory Note
Exhibit 1.01C   Form of Term Promissory Note
Exhibit 4.01(h) Form of Borrowing Request
Exhibit 5.01    Form of Compliance Certificate
Exhibit 9.04    Form of Assignment and Assumption
Annex I         Standard Terms and Conditions for Assignment and Assumption


SCHEDULES:

Schedule 2.01     Lender's Revolving Loan Commitments
Schedule 2.04     Lenders' Term Loan Commitments
Schedule 2.06(k)  Existing Letters of Credit
Schedule 3.12     List of Subsidiaries
Schedule 6.03(b)  Existing Liens
Schedule 6.06(b)  Existing Investments
Schedule 6.11     Restrictive Agreements
Schedule 9.04     Approved Funds




                                      -iv-

<PAGE>

            CREDIT AGREEMENT dated as of November 28, 2006,is entered into among
Service Corporation  International,  a Delaware  corporation,  the Lenders party
hereto, Bank of America, N.A., as the Syndication Agent for the Revolving Loans,
and JPMorgan Chase Bank, N.A., as Administrative Agent.

            The parties hereto agree as follows:

                                    ARTICLE I

                                  DEFINITIONS

           SECTION 1.01 DEFINED TERMS. As used in this Agreement, the following
terms have the meanings specified below:

            "ABR",  when used in reference to any Loan or  Borrowing,  refers to
whether such Loan, or the Loans comprising such Borrowing,  are bearing interest
at a rate determined by reference to the Alternate Base Rate.

            "ADJUSTED LIBO RATE" means, with respect to any Eurodollar Borrowing
for any  Interest  Period,  an  interest  rate per annum  (rounded  upwards,  if
necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.

            "ADMINISTRATIVE  AGENT"  means  JPMorgan  Chase Bank,  N.A.,  in its
capacity as administrative agent for the Lenders hereunder.

            "ADMINISTRATIVE QUESTIONNAIRE" means an Administrative Questionnaire
in a form supplied by the Administrative Agent.

            "AFFILIATE"  means,  with  respect to a  specified  Person,  another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.

            "ALDERWOODS" means Alderwoods Group, Inc., a Delaware corporation.
             ----------

            "ALDERWOODS  DEBT" means the Indebtedness and all other  obligations
created and existing  pursuant to that certain Credit  Agreement dated September
17, 2003 by and among Alderwoods Group, Inc. as borrower,  Bank of America, N.A.
as  administrative  agent and the other lenders party  thereto,  and all related
documents.

            "ALTERNATE BASE RATE" means,  for any day, a rate per annum equal to
the higher of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate
Base Rate due to a change in the Prime Rate or the Federal Funds  Effective Rate
shall be effective  from and including the effective  date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.

            "APPLICABLE MARGIN" means, for any day, with respect to any ABR Loan
or  Eurodollar  Revolving  Loan,  or with respect to the  facility  fees payable
hereunder,  as the case

<PAGE>

may be, the  Applicable  Margin per annum set forth below under the caption "ABR
Spread", "Eurodollar Spread" or "Commitment Fee Rate", as the case may be, based
upon the Leverage Ratio:

            For Revolving Loans:

================================================================================

                                             ABR      EURODOLLAR    COMMITMENT
 CATEGORY          LEVERAGE RATIO:         SPREAD      SPREAD       FEE RATE
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------

     I      = 4.0 to 1.0                     1.0%       2.0%        .50%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------

    II      = 3.0 to 1.0 but < 4.0 to 1.0    .75%       1.75%       .375%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------

    III     = 2.0 to 1.0 but < 3.0 to 1.0    .50%       1.50%       .375%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------

    IV      < 2.0 to 1.0                     .25%       1.25%       .25%
=============================================================================

            For Term  Loans,  the ABR Spread  will be 1.0%,  and the  Eurodollar
Spread will be 2.0%.

            For purposes of the foregoing,  each change in the Applicable Margin
resulting  from a change in the  Leverage  Ratio shall be  effective  during the
period  commencing on and  including the date of delivery to the  Administrative
Agent of such  consolidated  financial  statements  indicating  such  change and
ending on the date  immediately  preceding the  effective  date of the next such
change;  provided that the Leverage Ratio shall be deemed to be in Category I at
any time (a) that an Event of Default has occurred and is  continuing  or (b) at
the option of the Administrative Agent or at the request of the Required Lenders
if the Borrower fails to deliver the consolidated  financial statements required
to be delivered by it pursuant to SECTION  5.01(I) or SECTION  5.01(II),  during
the period  from the  expiration  of the time for  delivery  thereof  until such
consolidated financial statements are delivered.

            "APPLICABLE  PERCENTAGE"  means,  with  respect to any  Lender,  the
percentage of the total Revolving Loan Commitments  represented by such Lender's
Revolving Loan Commitment.  If the Revolving Loan Commitments have terminated or
expired, the Applicable Percentages shall be determined based upon the Revolving
Credit Exposures most recently in effect, giving effect to any assignments.

            "Approved  Fund" has the  meaning  assigned  to such term in SECTION
9.04.

            "ASSIGNMENT  AND  ASSUMPTION"  means an  assignment  and  assumption
entered  into by a Lender and an  assignee  (with the consent of any party whose
consent is required by SECTION 9.04), and accepted by the Administrative  Agent,
in the form of EXHIBIT  9.04 or any other form  approved  by the  Administrative
Agent.

            "AVAILABILITY  PERIOD"  means  the  period  from and  including  the
Effective  Date to but excluding the earlier of the Revolving  Maturity Date and
the date of termination of the Revolving Loan Commitments.

                                       2
<PAGE>

            "BOARD" means the Board of Governors of the Federal  Reserve  System
of the United States of America.

            "BORROWER"  means  Service  Corporation  International,  a  Delaware
corporation.

            "BORROWING"  means  (a)  Revolving  Loans  of the same  Type,  made,
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest  Period is in effect,  (b) the initial funding of the
Term Loan and subsequent  conversions or continuations thereof if such Borrowing
is made as a Eurodollar  Borrowing,  subject to the  limitation set forth in (a)
above, or (c) a Swingline Loan.

            "BORROWING  REQUEST" means a request by the Borrower for a Revolving
Borrowing substantially in the form of EXHIBIT 4.01(H).

            "BUSINESS DAY" means any day that is not a Saturday, Sunday or other
day on which  commercial  banks in Houston,  Texas are authorized or required by
law to remain closed;  PROVIDED that,  when used in connection with a Eurodollar
Loan,  the term "BUSINESS DAY" shall also exclude any day on which banks are not
open for dealings in dollar deposits in the London interbank market.

            "CAPITAL LEASE  OBLIGATIONS"  of any Person means the obligations of
such  Person  to pay  rent  or  other  amounts  under  any  lease  of (or  other
arrangement  conveying  the  right  to use)  real  or  personal  property,  or a
combination  thereof,  which  obligations  are  required  to be  classified  and
accounted  for as capital  leases on a balance  sheet of such Person under GAAP,
and the  amount of such  obligations  shall be the  capitalized  amount  thereof
determined in accordance with GAAP.

            "CASH  INTEREST  EXPENSE" means interest  expense  determined  under
GAAP, less amortization of deferred loan costs and original issue discounts.

            "CHANGE IN CONTROL" means (a) the acquisition of ownership, directly
or  indirectly,  beneficially  or of record,  by any Person or group (within the
meaning of the  Securities  Exchange Act of 1934 and the rules of the Securities
and Exchange  Commission  thereunder  as in effect on the date hereof) of Equity
Interests  representing  more than 25% of the  aggregate  ordinary  voting power
represented  by the issued and  outstanding  Equity  Interests  of the  Borrower
(including  Equity  Interests  referenced  in (d) below);  (b)  occupation  of a
majority of the seats (other than vacant seats) on the board of directors of the
Borrower by Persons who were neither (i)  nominated by the board of directors of
the Borrower nor (ii) appointed by directors so nominated;  (c) the  acquisition
of direct or indirect Control of the Borrower by any Person or group, or (d) any
event that gives  holders of  preferred  Equity  Interests  or other  securities
issued  pursuant to any  shareholders'  rights plan of the Borrower the right to
purchase or to convert such  securities to more than 25% of the aggregate  (less
the percentage of Equity  Interests  referenced in (a) above held by the holders
of such preferred Equity Interests) voting Equity Interests of the Borrower.

            "CHANGE  IN  LAW"  means  (a)  the  adoption  of any  law,  rule  or
regulation after the date of this Agreement,  (b) any change in any law, rule or
regulation or in the  interpretation or application  thereof by any Governmental
Authority  after the date of this  Agreement or


                                       3
<PAGE>

(c)  compliance  by any Lender or the Issuing  Bank (or, for purposes of SECTION
2.15(B), by any lending office of such Lender or by such Lender's or the Issuing
Bank's  holding  company,  if any)  with any  request,  guideline  or  directive
(whether or not having the force of law) of any  Governmental  Authority made or
issued after the date of this Agreement.

            "CLASS", when used in reference to any Loan or Borrowing,  refers to
whether such Loan, or the Loans comprising such Borrowing,  are Revolving Loans,
Term Loans or Swingline Loans.

            "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.

            "COMMITMENT" means, with respect to each Lender, the sum of (i) such
Lender's Revolving Loan Commitment plus (ii) such Lender's Term Loan Commitment.

            "CONSOLIDATED   EBITDA"  means  EBITDA  for  the  Borrower  and  its
Subsidiaries on a consolidated basis.

            "CONSOLIDATED  INTEREST  EXPENSE" means, for any period,  the actual
Cash Interest Expense  (including imputed interest expense in respect of Capital
Lease  Obligations)  paid by the Borrower and the Subsidiaries or accrued during
such period.

            "CONSOLIDATED OPERATING INCOME" means, for any period, the operating
income or loss of the Borrower and the Subsidiaries  for such period  determined
on a consolidated basis in accordance with GAAP.

            "CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the  direction  of the  management  or  policies of a Person,
whether  through the ability to exercise voting power, by contract or otherwise.
"CONTROLLING" and "CONTROLLED" have meanings correlative thereto.

            "DEFAULT" means any event or condition which constitutes an Event of
Default or which  upon  notice,  lapse of time or both  would,  unless  cured or
waived, become an Event of Default.

            "DISCLOSED MATTERS" means the actions, suits and proceedings and the
environmental matters disclosed in SCHEDULE 3.06.

            "DOLLARS"  or "$"  refers to lawful  money of the  United  States of
America.

            "DOMESTIC  SUBSIDIARY"  means any  Subsidiary  that is not a Foreign
Subsidiary.

            "EBITDA"  means,  for  any  period,  without  duplication,  for  the
Borrower and its Subsidiaries, Consolidated Operating Income

          (i)  minus any gains or plus any  losses on sales and  impairments  of
     assets, to the extent included in Consolidated Operating Income;

                                       4
<PAGE>

          (ii) plus  depreciation  and  amortization  (to the extent included in
     operating expenses and excluding amortization of deferred loan costs);

          (iii) plus non-cash stock  compensation  expense/amortization  (to the
     extent included in operating expenses);

          (iv) plus rent  expense in  previous  periods  associated  with assets
     later capitalized with on-balance sheet debt;

          (v)  plus  (A)  actual  Merger-related,  non-recurring  cash  expenses
     incurred to the extent  included in  operating  expenses  and not to exceed
     $60,000,000  in aggregate,  including  expenses  within the first 24 months
     after  Effective  Date,  such as severance  of  management  and  employees,
     termination   costs  and  buyouts  of  contracts   and  lease   agreements,
     conversions  of computer  systems and  networks,  transfer of documents and
     other assets,  legal and advisory fees directly related to the Merger,  and
     other items reasonably incurred of a similar nature and (B) non-cash merger
     expenses that would not otherwise be picked up in other  non-cash  addbacks
     to EBITDA;

          (vi)  plus  royalty  income  from  American  Memorial  Life  Insurance
     Company;

          (vii) minus expenses attributable to surety premiums;

          (viii)  minus Pro Forma  Divested  EBITDA (to the extent  positive and
     previously  included in operating income) or plus Pro Forma Divested EBITDA
     (to the extent negative and previously included in operating income);

          (ix) plus EBITDA of acquired  operations in the quarters preceding the
     acquisition;

          (x) plus EBITDA of discontinued  operations still owned (to the extent
     positive) and minus EBITDA of discontinued  operations  still owned (to the
     extent negative); and

          (xi) plus net cash flow from/to non-consolidated joint ventures to the
     extent received/paid in cash.

Provided,  however,  (a) EBITDA for the  quarter  ended  March 31, 2006 shall be
$117,683,000,  and  EBITDA  for  the  quarter  ended  June  30,  2006  shall  be
$109,851,000  (b) the EBITDA for each of such  quarters  is subject to change to
reflect financial information as a result of acquisitions and divestitures after
the Effective Date, (c) EBITDA for the quarter ended September 30, 2006 shall be
$118,634,000  and (d) the  calculation  of EBITDA for the fiscal  quarter ending
September 30, 2006 and the fiscal quarter ending December 31, 2006 shall include
the EBITDA of  Alderwoods  as a Subsidiary  of the Borrower as if the Merger had
occurred on the first day of the quarter for which EBITDA is being calculated.

            "EFFECTIVE DATE" means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).

                                       5
<PAGE>

            "ENVIRONMENTAL  LAWS"  means all laws,  rules,  regulations,  codes,
ordinances,  orders,  decrees,  judgments,   injunctions,   notices  or  binding
agreements  issued,  promulgated or entered into by any Governmental  Authority,
relating in any way to the  environment,  preservation or reclamation of natural
resources,  the  management,  release or  threatened  release  of any  Hazardous
Material or to health and safety matters.

            "ENVIRONMENTAL   LIABILITY"  means  any  liability,   contingent  or
otherwise   (including  any  liability  for  damages,   costs  of  environmental
remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary
directly  or  indirectly  resulting  from or  based  upon (a)  violation  of any
Environmental Law, (b) the generation, use, handling,  transportation,  storage,
treatment or disposal of any Hazardous Materials,  (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials into
the environment or (e) any contract,  agreement or other consensual  arrangement
pursuant to which  liability  is assumed or imposed  with  respect to any of the
foregoing.

            "EQUITY  INTERESTS"  means  shares  of  capital  stock,  partnership
interests,  membership  interests  in a limited  liability  company,  beneficial
interests in a trust or other equity  ownership  interests in a Person,  and any
warrants,  options or other rights  entitling the holder  thereof to purchase or
acquire any such equity interest.

            "ERISA" means the Employee  Retirement  Income Security Act of 1974,
as amended from time to time.

            "ERISA  AFFILIATE"  means  any  trade or  business  (whether  or not
incorporated) that, together with the Borrower,  is treated as a single employer
under  Section  414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and  Section  412 of the Code,  is treated as a single  employer  under
Section 414 of the Code.

            "ERISA  EVENT"  means (a) any  "reportable  event",  as  defined  in
Section 4043 of ERISA or the  regulations  issued  thereunder  with respect to a
Plan  (other  than an event for which the 30 day notice  period is waived or the
Merger  and the  transactions  contemplated  thereby);  (b) the  existence  with
respect  to any Plan of an  "accumulated  funding  deficiency"  (as  defined  in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing  pursuant to Section  412(d) of the Code or Section 303(d) of ERISA of an
application  for a waiver of the minimum  funding  standard  with respect to any
Plan; (d) the  incurrence by the Borrower or any of its ERISA  Affiliates of any
liability  under Title IV of ERISA with respect to the  termination of any Plan;
(e) the receipt by the Borrower or any ERISA  Affiliate  from the PBGC or a plan
administrator  of any notice  relating to an intention to terminate  any Plan or
Plans or to appoint a trustee to administer  any Plan; (f) the incurrence by the
Borrower or any of its ERISA  Affiliates  of any  liability  with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice,  or the receipt by
any  Multiemployer  Plan from the Borrower or any ERISA Affiliate of any notice,
concerning  the  imposition of Withdrawal  Liability or a  determination  that a
Multiemployer  Plan is, or is expected to be,  insolvent  or in  reorganization,
within the meaning of Title IV of ERISA.

                                       6
<PAGE>

            "EURODOLLAR",  when  used in  reference  to any  Loan or  Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.

            "EVENT OF DEFAULT" has the meaning  assigned to such term in ARTICLE
VII.

            "EXCESS  CASH FLOW" means (i) EBITDA,  minus (ii) the sum of accrued
cash taxes,  capital  expenditures,  Cash Interest Expense,  scheduled principal
payments made on all Indebtedness  other than the Revolving Loans (excluding any
payments made pursuant to Section SECTION 2.10(B)(II),  Restricted Payments made
and permitted hereunder, and cash expended for acquisitions permitted by SECTION
6.06.

            "EXCLUDED TAXES" means,  with respect to the  Administrative  Agent,
any Lender, the Issuing Bank or any other recipient of any payment to be made by
or on  account  of any  obligation  of the  Borrower  hereunder,  (a)  income or
franchise  taxes imposed on (or measured by) its net income by the United States
of America,  or by the  jurisdiction  under the laws of which such  recipient is
organized  or in which its  principal  office is located  or, in the case of any
Lender,  in which its  applicable  lending  office is  located,  (b) any  branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other  jurisdiction  in which the Borrower is located and (c) in the case
of a Foreign  Lender  (other  than an  assignee  pursuant  to a  request  by the
Borrower under SECTION 2.19(B)),  any withholding tax that is imposed on amounts
payable to such Foreign  Lender at the time such Foreign  Lender becomes a party
to this Agreement (or  designates a new lending  office) or is  attributable  to
such  Foreign  Lender's  failure to comply with SECTION  2.17(E),  except to the
extent that such Foreign Lender (or its assignor,  if any) was entitled,  at the
time  of  designation  of a new  lending  office  (or  assignment),  to  receive
additional  amounts  from the  Borrower  with  respect to such  withholding  tax
pursuant to SECTION 2.17(A).

            "FEDERAL  FUNDS  EFFECTIVE  RATE"  means,  for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds  transactions with members of the Federal Reserve System
arranged by Federal funds brokers,  as published on the next succeeding Business
Day by the  Federal  Reserve  Bank  of New  York,  or,  if  such  rate is not so
published for any day that is a Business Day, the average (rounded  upwards,  if
necessary,  to the  next  1/100 of 1%) of the  quotations  for such day for such
transactions  received  by the  Administrative  Agent from three  Federal  funds
brokers of recognized standing selected by it.

            "FINANCIAL  OFFICER" means the chief  financial  officer,  principal
accounting officer, treasurer or controller of the Borrower.

            "FOREIGN  LENDER" means any Lender that is organized  under the laws
of a jurisdiction other than that in which the Borrower is located. For purposes
of this  definition,  the United  States of America,  each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

            "FOREIGN  SUBSIDIARY" means any Subsidiary  organized under the laws
of a  jurisdiction  other than the United  States or any of its  territories  or
possessions or any political

                                       7
<PAGE>


subdivision thereof. For the avoidance of doubt, the Commonwealth of Puerto Rico
is not a territory, possession or political subdivision of the United States.

            "GAAP" means generally accepted accounting  principles in the United
States of America.

            "GOVERNMENTAL  AUTHORITY"  means the government of the United States
of America, any other nation or any political subdivision thereof, whether state
or local, and any agency,  authority,  instrumentality,  regulatory body, court,
central  bank or  other  entity  exercising  executive,  legislative,  judicial,
taxing,  regulatory  or  administrative  powers or functions of or pertaining to
government.

            "GUARANTEE"  of  or  by  any  Person  (the  "GUARANTOR")  means  any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of  guaranteeing  any  Indebtedness  or other  obligation of any
other  Person  (the  "PRIMARY  OBLIGOR")  in any  manner,  whether  directly  or
indirectly,  and including any obligation of the guarantor,  direct or indirect,
(a) to purchase or pay (or advance or supply  funds for the  purchase or payment
of) such  Indebtedness  or other  obligation  or to  purchase  (or to advance or
supply funds for the purchase of) any security for the payment  thereof,  (b) to
purchase or lease  property,  securities or services for the purpose of assuring
the owner of such  Indebtedness or other obligation of the payment thereof,  (c)
to maintain  working  capital,  equity capital or any other financial  statement
condition  or  liquidity  of the  primary  obligor so as to enable  the  primary
obligor to pay such  Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty  issued to support such
Indebtedness or obligation;  PROVIDED, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.

            "GUARANTEE   AGREEMENT"  means  the  Guarantee  of  the  Guarantors,
substantially  in the form of EXHIBIT 1.01A hereto,  guarantying the Obligations
of  Borrower  under  this  Agreement  and  the  Loan  Documents  and  all  other
Indebtedness  of the  Borrower to any of the Agents or Lenders in respect of any
hedging obligations, any overdrafts or treasury, depository, cash management, or
similar services.

            "GUARANTORS" means all Domestic Subsidiaries of the Borrower and any
other Subsidiary  required to execute a Guaranty  Agreement  pursuant to SECTION
5.10.

            "HAZARDOUS MATERIALS" means all explosive or radioactive  substances
or wastes and all  hazardous or toxic  substances,  wastes or other  pollutants,
including  petroleum or petroleum  distillates,  asbestos or asbestos containing
materials,  polychlorinated  biphenyls,  radon gas, infectious or medical wastes
and all other  substances  or wastes of any  nature  regulated  pursuant  to any
Environmental Law.

            "INCREASING LENDER" has the meaning set forth in Section 2.20.

            "INDEBTEDNESS"  of any Person means,  without  duplication,  (a) all
obligations  of such Person for  borrowed  money or with  respect to deposits or
advances of any kind,  (b) all  obligations  of such Person  evidenced by bonds,
debentures,  notes or similar  instruments,  (c) all  obligations of such Person
upon which interest  charges are  customarily  paid, (d) all obligations

                                       8
<PAGE>

of such  Person  under  conditional  sale or other  title  retention  agreements
relating to property acquired by such Person, (e) all obligations of such Person
in respect of the  deferred  purchase  price of property or services  (excluding
current accounts  payable incurred in the ordinary course of business),  (f) all
Indebtedness of others secured by (or for which the holder of such  Indebtedness
has an existing  right,  contingent or otherwise,  to be secured by) any Lien on
property  owned or  acquired  by such  Person,  whether or not the  Indebtedness
secured  thereby  has  been  assumed,  (g)  all  Guarantees  by such  Person  of
Indebtedness of others,  (h) all Capital Lease  Obligations of such Person,  (i)
all obligations,  contingent or otherwise, of such Person as an account party in
respect of letters of credit and  letters of guaranty  and (j) all  obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances.  The
Indebtedness  of any Person shall include the  Indebtedness  of any other entity
(including  any  partnership  in which such Person is a general  partner) to the
extent such Person is liable  therefor  as a result of such  Person's  ownership
interest in or other  relationship  with such  entity,  except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.

            "INDEMNIFIED TAXES" means Taxes other than Excluded Taxes.

            "INFORMATION   MEMORANDUM"   means  the   Confidential   Information
Memorandum dated September 2006 relating to the Borrower and the Transactions.

            "INTEREST COVERAGE RATIO" means the ratio of Consolidated  EBITDA to
Consolidated  Interest Expense, in each case, for the immediately preceding four
(4) fiscal  quarters,  provided,  in such calculation for the quarter ending (i)
December  31,  2006,  Consolidated  Interest  Expense  shall be deemed to be the
amount  thereof for such quarter  multiplied  by four (4),  (ii) March 31, 2007,
Consolidated  Interest  Expense shall be deemed to be the amount thereof for the
immediately preceding two (2) quarters multiplied by two (2), and (iii) June 30,
2007, Consolidated Interest Expense shall be deemed to be the amount thereof for
the immediately preceding three (3) quarters multiplied by four-thirds (4/3).

            "INTEREST  ELECTION  REQUEST"  means a request  by the  Borrower  to
convert or continue a Revolving Borrowing in accordance with SECTION 2.08.

            "INTEREST  PAYMENT  DATE"  means  (a) with  respect  to any ABR Loan
(other than a Swingline Loan), the last day of each March,  June,  September and
December,  (b) with respect to any Eurodollar Loan, the last day of the Interest
Period applicable to the Borrowing of which such Loan is a part and, in the case
of a Eurodollar  Borrowing  with an Interest  Period of more than three  months'
duration,  each day prior to the last day of such Interest Period that occurs at
intervals of three months' duration after the first day of such Interest Period,
and (c) with respect to any Swingline  Loan,  the day that such Loan is required
to be repaid.

            "INTEREST  PERIOD" means with respect to any  Eurodollar  Borrowing,
the  period  commencing  on  the  date  of  such  Borrowing  and  ending  on the
numerically  corresponding  day in the calendar month that is one, two, three or
six months  thereafter,  as the  Borrower may elect;  PROVIDED,  that (i) if any
Interest  Period  would end on a day other than a Business  Day,  such  Interest
Period shall be extended to the next succeeding Business Day unless, in the case
of a Eurodollar  Borrowing only, such next succeeding Business Day would fall in
the next calendar  month,  in which case such  Interest  Period shall end on the
next preceding  Business Day and (ii)


                                       9
<PAGE>

any Interest  Period that commences on the last Business Day of a calendar month
(or on a day for which  there is no  numerically  corresponding  day in the last
calendar  month of such  Interest  Period) shall end on the last Business Day of
the last calendar month of such Interest Period.  For purposes hereof,  the date
of a Borrowing  initially  shall be the date on which such Borrowing is made and
thereafter  shall  be the  effective  date  of the  most  recent  conversion  or
continuation of such Borrowing.

            "ISSUING BANK" means JPMorgan Chase Bank,  N.A., or Bank of America,
N.A.,  and any Lender that is an issuing bank with  respect to those  Letters of
Credit  described in SECTION 2.06(K) hereof,  each in its capacity as the issuer
of  Letters  of Credit  hereunder,  and their  successors  in such  capacity  as
provided in SECTION  2.06(I).  The Issuing Bank may, in its discretion,  arrange
for one or more  Letters  of Credit to be issued by  Affiliates  of the  Issuing
Bank,  in which case the term "Issuing  Bank" shall  include any such  Affiliate
with respect to Letters of Credit issued by such Affiliate.

            "LC DISBURSEMENT"  means a payment made by the Issuing Bank pursuant
to a Letter of Credit.

            "LC  EXPOSURE"  means,  at any  time,  the sum of (a) the  aggregate
undrawn  amount of all  outstanding  Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by or
on behalf of the  Borrower  at such time.  The LC  Exposure of any Lender at any
time shall be its Applicable Percentage of the total LC Exposure at such time.

            "LENDERS"  means the Persons  listed on SCHEDULE  2.01 and any other
Person  that shall have become a party  hereto  pursuant  to an  Assignment  and
Assumption, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Assumption. Unless the context otherwise requires, the term
"Lenders"  includes all  Revolving  Lenders,  all Term Lenders and the Swingline
Lender.

            "LETTER  OF  CREDIT"  means any letter of credit  issued  pursuant
to this Agreement.

           "LEVERAGE  RATIO" means, on any date,  the ratio of the Total Debt of
the Borrower and all of its Subsidiaries as of such date, to Consolidated EBITDA
for the immediately  preceding four (4) fiscal quarters,  PROVIDED, at such time
as the Borrower has no outstanding Indebtedness other than Indebtedness which is
not prepayable,  or is prepayable only with the addition of a prepayment penalty
or premium, the Leverage Ratio shall be defined as follows:

      the  ratio  of:  (a)(i)  Total  Debt  of  the  Borrower  and  all  of  its
      Subsidiaries  less (ii) all  unrestricted  cash on hand of said Persons in
      excess of  $25,000,000,  to (b)  Consolidated  EBITDA for the  immediately
      preceding four (4) fiscal quarters.

            "LIBO RATE" means, with respect to any Eurodollar  Borrowing for any
Interest Period, the rate appearing on Page 3750 of Reuters (or on any successor
or substitute  page of such Service,  or any successor to or substitute for such
Service,  providing rate quotations  comparable to those  currently  provided on
such page of such Service,  as determined by the Administrative  Agent from time
to time for purposes of providing  quotations  of interest  rates  applicable to
dollar deposits in the London  interbank  market) at  approximately  11:00 a.m.,


                                       10
<PAGE>

London  time,  two  Business  Days prior to the  commencement  of such  Interest
Period,  as the rate for  dollar  deposits  with a maturity  comparable  to such
Interest  Period.  In the event that such rate is not available at such time for
any reason,  then the "LIBO RATE" with respect to such Eurodollar  Borrowing for
such Interest  Period shall be the rate rounded  upwards,  if necessary,  to the
next  1/100 of 1% at which  dollar  deposits  of  $5,000,000  and for a maturity
comparable to such Interest Period are offered by the principal London office of
the Administrative Agent in immediately  available funds in the London interbank
market at approximately  11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.

            "LIEN" means,  with respect to any asset, (a) any mortgage,  deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such  asset,  (b) the  interest  of a  vendor  or a  lessor  under  any
conditional sale agreement,  capital lease or title retention  agreement (or any
financing  lease having  substantially  the same  economic  effect as any of the
foregoing)  relating  to such  asset  and (c) in the  case  of  securities,  any
purchase  option,  call or similar  right of a third party with  respect to such
securities.

            "LOAN  DOCUMENTS"  means this  Agreement,  the Notes,  the Guarantee
Agreement and any other documents executed in connection herewith or therewith.

            "LOAN PARTIES" means the Borrower and the Guarantors.

            "LOANS" means the Term Loans, the Revolving Loans and the Swing Line
Loans.

            "MARKETED   EBITDA"  means  the  trailing   12-month  EBITDA  figure
disclosed  to  potential  buyers  preceding  the  sale  of  an  operation  or  a
Subsidiary.

            "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise, of
the  Borrower  and the  Subsidiaries  taken as a whole,  (b) the  ability of the
Borrower  to perform  any of its  obligations  under this  Agreement  or (c) the
rights of or benefits available to the Lenders under this Agreement.

            "MATERIAL INDEBTEDNESS" means Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Swap Agreements, of
any one or more of the Borrower and its  Subsidiaries in an aggregate  principal
amount exceeding $15,000,000. For purposes of determining Material Indebtedness,
the "principal  amount" of the  obligations of the Borrower or any Subsidiary in
respect of any Swap Agreement at any time shall be the maximum  aggregate amount
(giving effect to any netting  agreements)  that the Borrower or such Subsidiary
would be required to pay if such Swap Agreement were terminated at such time.

            "MERGER" means the merger of a wholly owned direct Subsidiary of the
Borrower with and into Alderwoods, where Alderwoods is the surviving corporation
as a direct, wholly owned Subsidiary of the Borrower.

            "MOODY'S" means Moody's Investors Service, Inc.

            "MULTIEMPLOYER  PLAN"  means  a  multiemployer  plan as  defined  in
Section 4001(a)(3) of ERISA.

                                       11
<PAGE>
`
            "NOTE"  means  the  promissory  notes  substantially  in the form of
EXHIBIT 1.01B with respect to the Revolving Loans and EXHIBIT 1.01C with respect
to the Term Loans  executed by the Borrower to the order of a Lender,  partially
evidencing the Obligations.

            "OBLIGATIONS"  means all of the  Borrower's  obligations  and duties
under this Agreement and each of the other Loan Documents.

            "OTHER  TAXES"  means  any  and  all  present  or  future  stamp  or
documentary  taxes or any other  excise or  property  taxes,  charges or similar
levies arising from any payment made  hereunder or from the execution,  delivery
or enforcement of, or otherwise with respect to, this Agreement.

            "PARTICIPANT" has the meaning set forth in Section 9.04.

            "PBGC" means the Pension Benefit  Guaranty  Corporation  referred to
and defined in ERISA and any successor entity performing similar functions.

            "PERMITTED   ACQUISITION"   means  any  acquisition  (by  merger  or
otherwise)  by the  Borrower or a  Subsidiary  of all or  substantially  all the
assets  of, or all the  Equity  Interests  in, a Person or  division  or line of
business of a Person, if (a) immediately after giving effect thereto, no Default
has occurred and is  continuing or would result  therefrom,  (b) the business of
such acquired Person, or such acquired  business,  is reasonably  related to the
business of the Borrower on the date  hereof,  (c) the  requirements  of SECTION
5.10 shall have been satisfied within the time periods  specified  therein,  (d)
the Borrower and the Subsidiaries are in compliance,  on a pro forma basis after
giving  effect  to  such  acquisition,  with  SECTION  6.12 to the  extent  then
applicable, as if such acquisition had occurred on the first day of the relevant
period for testing  compliance with such Section,  (e) such acquisition has been
approved by all  necessary  corporate and other action by the Person so acquired
or the Person  selling the assets or other  property so acquired by the Borrower
or such Subsidiary and (f) in the case of any acquisition in which the aggregate
consideration paid by the Borrower and the Subsidiaries exceeds $10,000,000, the
Borrower has delivered to the Administrative  Agent an officer's  certificate to
the effect set forth in clauses (a), (b), (c), (d) and (e) above,  together with
all  financial  information  reasonably  requested by the  Administrative  Agent
relating to the Person or assets acquired and reasonably  detailed  calculations
demonstrating satisfaction of the requirement set forth in clause (d) above.

            "PERMITTED ENCUMBRANCES" means:

          (a) liens  imposed  by law for taxes that are not yet due or are being
contested in good faith, with adequate reserves, and the failure of such contest
could not reasonably be expected to result in a Material Adverse Effect;

          (b) carriers', warehousemen's,  mechanics', materialmen's, repairmen's
and other like liens imposed by law,  arising in the ordinary course of business
and securing  obligations that are not overdue by more than 30 days or are being
contested in good faith,  with adequate reserves and the failure of such contest
could not reasonably be expected to result in a Material Adverse Effect;

                                       12
<PAGE>

          (c) pledges and deposits  made in the  ordinary  course of business in
compliance with workers'  compensation,  unemployment insurance and other social
security laws or regulations;

          (d)  deposits  to secure the  performance  of bids,  trade  contracts,
leases,  statutory obligations,  surety and appeal bonds,  performance bonds and
other  obligations  of a like  nature,  in each case in the  ordinary  course of
business;

          (e) judgment  liens in respect of judgments  that do not constitute an
event of default; and

          (f)  easements,   zoning   restrictions,   rights-of-way  and  similar
encumbrances  on real property  imposed by law or arising in the ordinary course
of business that do not secure any monetary  obligations  and do not  materially
detract from the value of the affected  property or interfere  with the ordinary
conduct of business of the Borrower or any Subsidiary.

provided  that the term  "Permitted  Encumbrances"  shall not  include  any lien
securing Indebtedness.

            "PERMITTED INVESTMENTS" means:

          (a)  direct  obligations  of,  or  obligations  the  principal  of and
interest  on which are  unconditionally  guaranteed  by,  the  United  States of
America or Canada (or by any agency thereof to the extent such  obligations  are
backed by the full faith and credit of the United  States of America or Canada),
in each case maturing within one year from the date of acquisition thereof;

          (b) investments in commercial  paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, a rating of
A2 or better  by S&P,  P2 or  better  by  Moody's,  or R1 "mid" or better by The
Dominion Bond Rating Service;

          (c) investments in certificates of deposit,  banker's  acceptances and
time deposits (including  eurodollar deposits) maturing within 180 days from the
date of  acquisition  thereof  issued or guaranteed by or placed with, and money
market deposit  accounts issued or offered by, any Lender or any domestic office
of any commercial  bank organized under the laws of the United States of America
or Canada or any State or  Province  thereof  which has a combined  capital  and
surplus and undivided profits of not less than $500,000,000;

          (d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities  described in clause (a) above and entered into with
a financial institution satisfying the criteria described in clause (c) above;

          (e) money  market funds that (i) comply with the criteria set forth in
Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of
1940,  (ii) are rated AAA by S&P or Aaa by  Moody's  and  (iii)  have  portfolio
assets of at least $5,000,000,000;

                                       13
<PAGE>

(f)  investments in corporate debt securities  (including  loan  participations)
that (a) mature within 60 days from the date of  acquisition,  and (b) are rated
BBB or better by S&P or Baa2 or better by Moody's at the date of acquisition;

(g)  investments  in municipal  securities or auction rate  securities  that are
rated AA or better by S&P or Aa or better by Moody's, provided that the Borrower
has the right to put such  securities  back to the  issuer or seller  thereof at
least once every 60 days; and

(h) other investments in an amount not to exceed $10,000,000 in the aggregate at
any one time by  Foreign  Subsidiaries  in  certificates  of  deposit,  banker's
acceptances  and time  deposits  (or other  substantially  similar  investments)
maturing  within  180 days  from  the  date of  acquisition  thereof  issued  or
guaranteed  by or placed  with,  and money  market  deposit  accounts  (or other
substantially  similar  deposit  accounts)  issued or offered  by,  any  foreign
commercial  bank not organized under the laws of the United States of America or
Canada or any state or province thereof.

            "PERSON" means any natural person,  corporation,  limited  liability
company, trust, joint venture, association,  company, partnership,  Governmental
Authority or other entity.

            "PLAN"  means  any  employee  pension  benefit  plan  (other  than a
Multiemployer  Plan)  subject to the  provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA  Affiliate is (or, if such plan were  terminated,  would under Section
4069 of ERISA be deemed to be) an  "employer"  as  defined  in  Section  3(5) of
ERISA.

            "PRIME RATE" means the rate of interest per annum publicly announced
from time to time by JPMorgan  Chase Bank,  N.A., as its prime rate in effect at
its principal office in Houston,  Texas;  each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.

            "PRIVATE PLACEMENT NOTES" means collectively,  the Private Placement
Notes Series A and the Private Placement Notes Series B.

            "PRIVATE  PLACEMENT NOTES SERIES A" means the Floating Rate Series A
Senior  Notes due  November  28,  2011,  in the  aggregate  principal  amount of
$50,000,000  issued pursuant to that certain Note Purchase Agreement dated as of
November 28, 2006, by and among Borrower and the noteholders party thereto.

            "PRIVATE  PLACEMENT  NOTES SERIES B" means the Flowing Rate Series B
Senior  Notes due  November  28,  2011,  in the  aggregate  principal  amount of
$150,000,000 issued pursuant to that certain Note Purchase Agreement dated as of
November 28, 2006, by and among Borrower and the noteholders party thereto.

            "PRO FORMA  DIVESTED  EBITDA" means the total  Marketed  EBITDA from
divested operations  included in Consolidated  Operating Income in the preceding
four quarters before consideration of divestures.

            "REGISTER" has the meaning set forth in Section 9.04.

                                       14
<PAGE>

            "RELATED PARTIES" means, with respect to any specified Person,  such
Person's Affiliates and the respective directors,  officers,  employees,  agents
and advisors of such Person and such Person's Affiliates.

            "REQUIRED LENDERS" means, at any time, Lenders holding more than 50%
of the sum of the total (a) Term Loans, plus (b) Revolving Loan Commitments (or,
if the Revolving  Loan  Commitments  have  terminated or expired,  the Revolving
Credit Exposures) at such time.

            "RESTRICTED  PAYMENT"  means  any  dividend  or  other  distribution
(whether  in cash,  securities  or other  property)  with  respect to any Equity
Interests in the Borrower or any  Subsidiary,  or any payment  (whether in cash,
securities or other property), including any sinking fund or similar deposit, on
account of the purchase, redemption,  retirement,  acquisition,  cancellation or
termination of any such Equity  Interests or any option,  warrant or other right
to acquire any such Equity Interests.

            "REVOLVING  BORROWING"  means a Borrowing  under the Revolving  Loan
Commitment.

            "REVOLVING CREDIT EXPOSURE" means, with respect to any Lender at any
time, the sum of the  outstanding  principal  amount of such Lender's  Revolving
Loans and its LC Exposure and Swingline Exposure at such time.

            "REVOLVING   LENDERS"  means  the  Lenders  having   Revolving  Loan
Commitments.

            "REVOLVING LOAN" means a Loan made pursuant to Section 2.02.

            "REVOLVING LOAN  COMMITMENT"  means,  with respect to each Revolving
Lender,  the  commitment of such Lender to make  Revolving  Loans  including the
acquisition  participations  in Letters of Credit and Swingline Loans hereunder,
as such  commitment  may be (a)  reduced  from time to time  pursuant to SECTION
2.09,  (b) increased  from time to time pursuant to SECTION 2.20 and (c) reduced
or  increased  from time to time  pursuant to  assignments  by or to such Lender
pursuant to SECTION 9.04.  The initial  amount of each Lender's  Revolving  Loan
Commitment is set forth on SCHEDULE  2.01, or in the  Assignment  and Assumption
pursuant to which such Lender shall have assumed its Revolving Loan  Commitment,
as  applicable.  The initial  aggregate  amount of the Lenders'  Revolving  Loan
Commitments is $300,000,000.00.

            "REVOLVING MATURITY DATE" means five (5) years from the date of this
Agreement.

            "SALE AND LEASEBACK  TRANSACTION" means any arrangement  whereby the
Borrower or a Subsidiary shall sell or transfer any property,  real or personal,
used or useful in its business,  whether now owned or hereinafter acquired,  and
thereafter rent or lease from the buyer or transferee of the sold or transferred
property that it intends to use for  substantially  the same purpose or purposes
as the property sold or transferred.

            "S&P" means  Standard & Poor's  Rating  Services,  a division of the
McGraw Hill Companies, Inc.

                                       15
<PAGE>

            "STATUTORY RESERVE RATE" means a fraction  (expressed as a decimal),
the  numerator  of which is the number one and the  denominator  of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal,  special,  emergency or supplemental  reserves) expressed as a decimal
established  by the  Board to which the  Administrative  Agent is  subject  with
respect to the Adjusted LIBO Rate, for eurocurrency  funding (currently referred
to as  "Eurocurrency  Liabilities"  in Regulation D of the Board).  Such reserve
percentages   shall  include  those  imposed  pursuant  to  such  Regulation  D.
Eurodollar  Loans shall be deemed to constitute  eurocurrency  funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions  or  offsets  that may be  available  from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.

            "SUBSIDIARY" means, with respect to any Person (the "PARENT") at any
date, any corporation,  limited liability company,  partnership,  association or
other  entity the  accounts  of which  would be  consolidated  with those of the
parent in the  parent's  consolidated  financial  statements  if such  financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership,  association or other
entity (a) of which securities or other ownership  interests  representing  more
than 50% of the equity or more than 50% of the ordinary  voting power or, in the
case of a partnership,  more than 50% of the general partnership  interests are,
as of such date,  owned,  controlled  or held,  or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.

            "SUBSIDIARY" means any subsidiary of the Borrower.

            "SWAP  AGREEMENT"  means any  agreement  with  respect  to any swap,
forward,  future  or  derivative  transaction  or option  or  similar  agreement
involving,  or  settled  by  reference  to,  one  or  more  rates,   currencies,
commodities, equity or debt instruments or securities, or economic, financial or
pricing  indices or measures of economic,  financial or pricing risk or value or
any similar transaction or any combination of these transactions;  PROVIDED that
no phantom  stock or similar  plan  providing  for  payments  only on account of
services  provided  by  current  or former  directors,  officers,  employees  or
consultants of the Borrower or the Subsidiaries shall be a Swap Agreement.

            "SWINGLINE  EXPOSURE"  means,  at any time, the aggregate  principal
amount of all Swingline Loans  outstanding at such time. The Swingline  Exposure
of any  Lender  at any time  shall be its  Applicable  Percentage  of the  total
Swingline Exposure at such time.

            "SWINGLINE  LENDER" means JPMorgan Chase Bank, N.A., in its capacity
as lender of Swingline Loans hereunder.

            "SWINGLINE LOAN" means a Loan made pursuant to Section 2.05.

            "TAXES" means any and all present or future taxes, levies,  imposts,
duties,  deductions,   charges  or  withholdings  imposed  by  any  Governmental
Authority.

            "TERM LENDERS" means those Lenders having Term Loan Commitments.

                                       16
<PAGE>

            "TERM LOAN" means a Loan made pursuant to Section 2.04.

            "TERM LOAN COMMITMENT"  means, with respect to each Term Lender, the
commitment of such Lender to make Term Loans hereunder on the Effective Date, as
such  commitment  may be  reduced or  increased  from time to time  pursuant  to
SECTION 9.04.  The initial  amount of each Lender's Term Loan  Commitment is set
forth on SCHEDULE 2.04. The initial  aggregate  amount of the Lenders' Term Loan
Commitments is $150,000,000.

            "TERM LOAN  MATURITY  DATE"  means  three (3) years from the date of
this Agreement.

            "TOTAL  DEBT"  means  the  consolidated  total  Indebtedness  of the
Borrower and each of its Subsidiaries.

            "TRANSPORTATION EQUIPMENT LEASES" has the meaning assigned such term
in Section 6.06(f).

            "TRANSACTIONS" means the execution,  delivery and performance by the
Borrower of this  Agreement,  the  borrowing  of Loans,  the use of the proceeds
thereof and the issuance of Letters of Credit hereunder.

            "TYPE",  when used in reference to any Loan or Borrowing,  refers to
whether  the rate of  interest  on such Loan,  or on the Loans  comprising  such
Borrowing,  is determined by reference to the Adjusted LIBO Rate,  the Alternate
Base Rate.

            "WITHDRAWAL  LIABILITY" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.

          SECTION 1.02  CLASSIFICATION OF LOANS AND BORROWINGS.  For purposes of
this  Agreement,  Loans may be  classified  and  referred to by Class  (E.G.,  a
"Revolving  Loan") or by Type (E.G.,  a "Eurodollar  Loan") or by Class and Type
(E.G., a "Eurodollar  Revolving  Loan").  Borrowings  also may be classified and
referred  to by Class  (E.G.,  a  "Revolving  Borrowing")  or by Type  (E.G.,  a
"Eurodollar  Borrowing")  or by Class and Type (E.G.,  a  "Eurodollar  Revolving
Borrowing").

          SECTION 1.03 TERMS  GENERALLY.  The  definitions of terms herein shall
apply  equally to the singular and plural forms of the terms  defined.  Whenever
the context may require, any pronoun shall include the corresponding  masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed  by the phrase  "without  limitation".  The word "will"
shall be  construed  to have the same  meaning  and effect as the word  "shall".
Unless the context requires  otherwise (a) any definition of or reference to any
agreement,  instrument or other document  herein shall be construed as referring
to such  agreement,  instrument or other  document as from time to time amended,
supplemented  or  otherwise  modified  (subject  to  any  restrictions  on  such
amendments,  supplements or modifications  set forth herein),  (b) any reference
herein to any Person shall be construed to include such Person's  successors and
assigns, (c) the words "herein", "hereof" and "hereunder",  and words of similar
import, shall be construed to refer to this Agreement in its entirety and not

                                       17
<PAGE>

to any  particular  provision  hereof,  (d) all  references  herein to Articles,
Sections,  Exhibits  and  Schedules  shall be construed to refer to Articles and
Sections of, and Exhibits and  Schedules  to, this  Agreement  and (e) the words
"asset" and  "property"  shall be  construed to have the same meaning and effect
and to refer to any and all  tangible  and  intangible  assets  and  properties,
including cash, securities, accounts and contract rights.

          SECTION 1.04 ACCOUNTING  TERMS;  GAAP.  Except as otherwise  expressly
provided  herein,  all  terms of an  accounting  or  financial  nature  shall be
construed  in  accordance  with GAAP,  as in effect from time to time;  PROVIDED
that,  if the  Borrower  notifies  the  Administrative  Agent that the  Borrower
requests an amendment  to any  provision  hereof to eliminate  the effect of any
change occurring after the date hereof in GAAP or in the application  thereof on
the operation of such  provision (or if the  Administrative  Agent  notifies the
Borrower that the Required  Lenders request an amendment to any provision hereof
for such  purpose),  regardless  of whether any such  notice is given  before or
after such change in GAAP or in the  application  thereof,  then such  provision
shall be interpreted  on the basis of GAAP as in effect and applied  immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.

                                   ARTICLE II

                                   THE CREDITS

          SECTION  2.01  REVOLVING  LOAN  COMMITMENTS.  Subject to the terms and
conditions  set forth herein,  each  Revolving  Lender agrees to make  Revolving
Loans to the  Borrower  from time to time during the  Availability  Period in an
aggregate  principal amount that will not result in (a) such Lender's  Revolving
Credit Exposure  exceeding such Lender's  Revolving Loan Commitment as set forth
on  SCHEDULE  2.01  or (b)  the  sum of the  total  Revolving  Credit  Exposures
exceeding the total Revolving Loan Commitments.  Within the foregoing limits and
subject to the terms and conditions  set forth herein,  the Borrower may borrow,
prepay and reborrow Revolving Loans.

          SECTION 2.02 REVOLVING LOANS AND  BORROWINGS.  (a) Each Revolving Loan
shall be made as part of a  Borrowing  consisting  of Loans made by the  Lenders
ratably in accordance  with their  respective  Revolving Loan  Commitments.  The
failure  of any  Lender  to make any Loan  required  to be made by it shall  not
relieve  any  other  Lender  of its  obligations  hereunder;  PROVIDED  that the
Commitments  of the Lenders are several and no Lender shall be  responsible  for
any other Lender's failure to make Loans as required.

          (b)  Subject  to  SECTION  2.14,  each  Revolving  Borrowing  shall be
comprised  entirely of ABR Loans or Eurodollar Loans as the Borrower may request
in accordance herewith;  PROVIDED that all Borrowings made on the Effective Date
must be  made  as ABR  Borrowings,  unless  Borrower  shall  have  notified  the
Administrative  Agent in writing not later than 10:00 a.m.,  Houston time, three
(3)  Business  Days before the  Effective  Date of its  election for the initial
Borrowing  to be a Eurodollar  Borrowing.  Each  Swingline  Loan shall be an ABR
Loan.  Each  Revolving  Lender at its  option  may make any  Eurodollar  Loan by
causing any domestic or foreign branch or Affiliate of such Revolving  Lender to
make such  Revolving  Loan;  provided

                                       18
<PAGE>

that any exercise of such option shall not affect the obligation of the Borrower
to repay such Revolving Loan in accordance with the terms of this Agreement.

          (c) At the  commencement  of each Interest  Period for any  Eurodollar
Revolving  Borrowing,  such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000.00 and not less than $5,000,000.00.  At the time
that  each ABR  Revolving  Borrowing  is  made,  such  Borrowing  shall be in an
aggregate amount that is an integral multiple of $1,000,000.00 and not less than
$5,000,000.00;  PROVIDED that an ABR Revolving  Borrowing may be in an aggregate
amount that is equal to the entire unused  balance of the total  Commitments  or
that  is  required  to  finance  the  reimbursement  of  an LC  Disbursement  as
contemplated by SECTION 2.06(E).  Each Swingline Loan shall be in an amount that
is an  integral  multiple  of  $100,000.00  and  not  less  than  $1,000,000.00.
Borrowings of more than one Type and Class may be  outstanding at the same time;
PROVIDED  that there shall not at any time be more than a total of 10 Eurodollar
Revolving Borrowings outstanding.

          (d)  Notwithstanding  any  other  provision  of  this  Agreement,  the
Borrower  shall not be entitled to request,  or to elect to convert or continue,
any Revolving  Borrowing if the Interest  Period  requested with respect thereto
would end after the Revolving Maturity Date.

          SECTION 2.03 REQUESTS FOR REVOLVING BORROWINGS. To request a Revolving
Borrowing, the Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Borrowing,  not later than 10:00 a.m.,
Houston time,  three Business Days before the date of the proposed  Borrowing or
(b) in the case of an ABR Borrowing, not later than 11:00 a.m., Houston time, on
the date of the  proposed  Borrowing;  PROVIDED  that any such  notice of an ABR
Borrowing to finance the  reimbursement of an LC Disbursement as contemplated by
SECTION 2.06(E) may be given not later than 10:00 a.m.,  Houston, on the date of
the  proposed  Borrowing.  Each  such  telephonic  Borrowing  Request  shall  be
irrevocable and shall be confirmed  promptly by hand delivery or telecopy to the
Administrative  Agent of a written Borrowing  Request.  Each such telephonic and
written Borrowing Request shall specify the following  information in compliance
with SECTION 2.02:

          (i) the aggregate amount of the requested Borrowing;

          (ii) the date of such Borrowing, which shall be a Business Day;

          (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
          Borrowing;

          (iv) in the  case of a  Eurodollar  Borrowing,  the  initial  Interest
          Period to be applicable thereto,  which shall be a period contemplated
          by the definition of the term "Interest Period"; and

          (v) the location and number of the  Borrower's  account to which funds
          are to be  disbursed,  which  shall  comply with the  requirements  of
          SECTION 2.07.

If no election as to the Type of  Revolving  Borrowing  is  specified,  then the
requested Revolving  Borrowing shall be an ABR Borrowing.  If no Interest Period
is  specified  with  respect to any  requested  Eurodollar  Borrowing,  then the
Borrower  shall be deemed to have  selected  an  Interest

                                       19
<PAGE>

Period of one  month's  duration.  Promptly  following  receipt  of a  Borrowing
Request in accordance with this Section,  the Administrative  Agent shall advise
each Lender of the details thereof and of the amount of such Lender's Loan to be
made as part of the requested Borrowing.

          SECTION 2.04 TERM LOANS.  Subject to the terms and  conditions  herein
set  forth,  each Term  Lender  agrees to make and  maintain  a Term Loan in the
amount of such Lender's Term Loan  Commitment as set forth on SCHEDULE 2.04. The
Term Loans shall be fully  advanced on the Effective  Date,  and no Lender shall
have an  obligation  to make any  additional  Advance under the Term Loans after
such date.  Any amount  repaid under the Term Loans may not be  reborrowed.  All
amounts outstanding under the Term Loan shall, at the option of the Borrower, be
made and  maintained as ABR Borrowings or Eurodollar  Borrowings;  PROVIDED that
all Loans  comprising all or a portion of the same Borrowing  shall at all times
be of the same  Type.  The Term  Loan  may be made  and  maintained  as ten (10)
Borrowings bearing different interest rates;  provided,  that all of the initial
Borrowings  fully  advancing  the Term Loan on the  Effective  Date shall be ABR
Borrowings,  unless  Borrower  shall have notified the  Administrative  Agent in
writing not later than 10:00 a.m., Houston time, one (1) Business Day before the
Effective  Date of its  election  for the initial  Borrowing  to be a Eurodollar
Borrowing, and further provided that the amounts of each such Borrowing shall be
in amounts as provided in SECTION 2.02(C) with respect to Revolving Loans.  Each
Term Lender at its option may make or maintain  any  Eurodollar  Loan by causing
any  domestic  or foreign  branch of  Affiliate  of such Term  Lender to make or
maintain  such Term Loan;  provided  that any  exercise of such option shall not
affect the Obligation of the Borrower to repay such Term Loan in accordance with
this Agreement.

          SECTION 2.05 SWINGLINE  LOANS. (a) Subject to the terms and conditions
set forth herein,  the Swingline  Lender agrees to make  Swingline  Loans to the
Borrower  from time to time  during the  Availability  Period,  in an  aggregate
principal  amount  at any  time  outstanding  that  will not  result  in (i) the
aggregate   principal   amount  of   outstanding   Swingline   Loans   exceeding
$25,000,000.00 or (ii) the sum of the total Revolving Credit Exposures exceeding
the total Revolving Loan  Commitments;  PROVIDED that the Swingline Lender shall
not be required to make a Swingline Loan to refinance an  outstanding  Swingline
Loan.  Within the foregoing  limits and subject to the terms and  conditions set
forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans.

          (b) To  request a  Swingline  Loan,  the  Borrower  shall  notify  the
Administrative Agent of such request by telephone  (confirmed by telecopy),  not
later than 3:00 p.m.,  Houston  time, on the day of a proposed  Swingline  Loan.
Each such notice  shall be  irrevocable  and shall  specify the  requested  date
(which shall be a Business Day) and amount of the requested  Swingline Loan. The
Administrative  Agent  will  promptly  advise the  Swingline  Lender of any such
notice  received  from the  Borrower.  The  Swingline  Lender  shall  make  each
Swingline  Loan  available  to the  Borrower by means of a credit to the general
deposit account of the Borrower with the Swingline  Lender (or, in the case of a
Swingline  Loan made to  finance  the  reimbursement  of an LC  Disbursement  as
provided in SECTION  2.06(E),  by  remittance to the Issuing Bank) by 4:00 p.m.,
Houston time, on the requested date of such Swingline Loan.

          (c)  The  Swingline   Lender  may  by  written  notice  given  to  the
Administrative  Agent not later than 10:00 a.m.,  Houston  time, on any Business
Day require the Revolving Lenders to acquire participations on such Business Day
in all or a portion  of the  Swingline  Loans

                                       20
<PAGE>

outstanding.  Such notice shall specify the aggregate  amount of Swingline Loans
in which  Revolving  Lenders  will  participate.  Promptly  upon receipt of such
notice,  the  Administrative  Agent will give notice  thereof to each  Revolving
Lender,  specifying in such notice such Revolving Lender's Applicable Percentage
of such Swingline Loan or Loans.  Each  Revolving  Lender hereby  absolutely and
unconditionally  agrees, upon receipt of notice as provided above, to pay to the
Administrative  Agent, for the account of the Swingline  Lender,  such Revolving
Lender's  Applicable  Percentage of such Swingline Loan or Loans. Each Revolving
Lender acknowledges and agrees that its obligation to acquire  participations in
Swingline  Loans  pursuant to this paragraph is absolute and  unconditional  and
shall not be affected by any circumstance  whatsoever,  including the occurrence
and continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement,  withholding
or reduction whatsoever.  Each Revolving Lender shall comply with its obligation
under this paragraph by wire transfer of  immediately  available  funds,  in the
same  manner as  provided  in  SECTION  2.07 with  respect to Loans made by such
Revolving Lender (and SECTION 2.07 shall apply, MUTATIS MUTANDIS, to the payment
obligations  of the  Revolving  Lenders),  and the  Administrative  Agent  shall
promptly  pay to the  Swingline  Lender the  amounts so  received by it from the
Revolving  Lenders.  The  Administrative  Agent shall notify the Borrower of any
participations  in any Swingline Loan acquired  pursuant to this paragraph,  and
thereafter  payments  in  respect  of such  Swingline  Loan shall be made to the
Administrative  Agent and not to the Swingline  Lender.  Any amounts received by
the  Swingline  Lender  from the  Borrower  (or  other  party on  behalf  of the
Borrower) in respect of a Swingline  Loan after receipt by the Swingline  Lender
of the proceeds of a sale of  participations  therein shall be promptly remitted
to the  Administrative  Agent; any such amounts  received by the  Administrative
Agent shall be promptly  remitted by the  Administrative  Agent to the Revolving
Lenders that shall have made their  payments  pursuant to this  paragraph and to
the Swingline  Lender,  as their  interests  may appear;  provided that any such
payment  so  remitted  shall  be  repaid  to  the  Swingline  Lender  or to  the
Administrative  Agent,  as  applicable,  if and to the  extent  such  payment is
required  to be  refunded  to the  Borrower  for any  reason.  The  purchase  of
participations  in a Swingline Loan pursuant to this paragraph shall not relieve
the Borrower of any default in the payment thereof.

          SECTION 2.06 LETTERS OF CREDIT. (a) GENERAL.  Subject to the terms and
conditions set forth herein, the Borrower may request the issuance of Letters of
Credit  for  its  own  account,   in  a  form   reasonably   acceptable  to  the
Administrative  Agent and the  Issuing  Bank,  at any time and from time to time
during the Availability  Period. In the event of any  inconsistency  between the
terms and  conditions of this Agreement and the terms and conditions of any form
of letter of credit application or other agreement submitted by the Borrower to,
or entered into by the Borrower with, the Issuing Bank relating to any Letter of
Credit, the terms and conditions of this Agreement shall control.

          (b)  NOTICE  OF  ISSUANCE,   AMENDMENT,  RENEWAL,  EXTENSION;  CERTAIN
CONDITIONS.  To request the  issuance  of a Letter of Credit (or the  amendment,
renewal or extension of an  outstanding  Letter of Credit),  the Borrower  shall
hand  deliver  or  telecopy  (or  transmit  by  electronic   communication,   if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the  Administrative  Agent (reasonably in advance of the requested date
of issuance,  amendment,  renewal or extension) a notice requesting the issuance
of a Letter of  Credit,  or  identifying  the  Letter  of Credit to be  amended,
renewed or extended, and specifying the date of issuance,  amendment, renewal or
extension  (which  shall be a Business

                                       21
<PAGE>

Day),  the date on which such Letter of Credit is to expire  (which shall comply
with  paragraph (c) of this Section),  the amount of such Letter of Credit,  the
name and address of the beneficiary  thereof and such other information as shall
be  necessary  to prepare,  amend,  renew or extend  such  Letter of Credit.  If
requested by the Issuing Bank, the Borrower also shall submit a letter of credit
application on the Issuing Bank's  standard form in connection  with any request
for a Letter of Credit;  provided, that (a) in the event of any conflict between
such application and this Agreement,  this Agreement shall control,  and (b) any
grant of a Lien  contained in such  application  shall be ineffective so long as
this Agreement  remains in place.  A Letter of Credit shall be issued,  amended,
renewed or extended only if (and upon issuance,  amendment, renewal or extension
of each Letter of Credit the Borrower  shall be deemed to represent  and warrant
that), after giving effect to such issuance, amendment, renewal or extension (i)
the LC  Exposure  shall not  exceed  $175,000,000  and (ii) the total  Revolving
Credit Exposures shall not exceed the total Revolving Loan Commitments.

          (c) EXPIRATION DATE. Each Letter of Credit shall expire at or prior to
the close of  business on the earlier of (i) the date one year after the date of
the  issuance  of such  Letter  of Credit  (or,  in the case of any  renewal  or
extension  thereof,  one year after such renewal or extension) and (ii) the date
that is five  Business  Days prior to the Maturity  Date  provided,  a Letter of
Credit may  provide  for a later  expiration  date if,  simultaneously  with the
issuance (or if applicable,  the renewal)  thereof,  the Borrower pledges to the
Issuing Bank,  in a manner  reasonably  satisfactory  to it, funds in an account
with the Issuing Bank equal to 105% of the face amount of such Letter of Credit.

          (d)  PARTICIPATIONS.  By the  issuance  of a Letter of  Credit  (or an
amendment to a Letter of Credit  increasing the amount  thereof) and without any
further action on the part of the Issuing Bank or the Lenders,  the Issuing Bank
hereby  grants  to each  Revolving  Lender,  and each  Revolving  Lender  hereby
acquires from the Issuing Bank, a  participation  in such Letter of Credit equal
to  such  Revolving  Lender's  Applicable  Percentage  of the  aggregate  amount
available  to be drawn  under such  Letter of Credit.  In  consideration  and in
furtherance  of the  foregoing,  each  Revolving  Lender hereby  absolutely  and
unconditionally  agrees to pay to the  Administrative  Agent, for the account of
the Issuing  Bank,  such  Revolving  Lender's  Applicable  Percentage of each LC
Disbursement  made by the Issuing Bank and not reimbursed by the Borrower on the
date due as provided in paragraph (e) of this Section,  or of any  reimbursement
payment  required to be refunded to the Borrower for any reason.  Each Revolving
Lender  acknowledges  and agrees that its  obligation to acquire  participations
pursuant  to this  paragraph  in respect of  Letters of Credit is  absolute  and
unconditional  and  shall  not  be  affected  by  any  circumstance  whatsoever,
including any amendment,  renewal or extension of any Revolving Letter of Credit
or the  occurrence  and  continuance of a Default or reduction or termination of
the  Commitments,  and that each such payment  shall be made without any offset,
abatement, withholding or reduction whatsoever.

          (e) REIMBURSEMENT.  If the Issuing Bank shall make any LC Disbursement
in  respect  of a  Letter  of  Credit,  the  Borrower  shall  reimburse  such LC
Disbursement  by paying to the  Administrative  Agent an amount equal to such LC
Disbursement  not later than 11:00 a.m.,  Houston time, on the date that such LC
Disbursement  is made,  if the Borrower  shall have  received  notice of such LC
Disbursement  prior to 9:00 a.m., Houston time, on such date, or, if such notice
has not been received by the Borrower prior to such time on such date,  then not
later than

                                       22
<PAGE>

11:00 a.m.,  Houston  time,  on (i) the Business Day that the Borrower  receives
such notice, if such notice is received prior to 9:00 a.m., Houston time, on the
day of receipt, or (ii) the Business Day immediately  following the day that the
Borrower receives such notice, if such notice is not received prior to such time
on the day of receipt;  PROVIDED that, if such LC  Disbursement is not less than
$1,000,000,  the Borrower may,  subject to the conditions to borrowing set forth
herein,  request in  accordance  with  SECTION  2.03 or  SECTION  2.05 that such
payment be financed  with an ABR  Revolving  Borrowing or  Swingline  Loan in an
equivalent amount and, to the extent so financed,  the Borrower's  obligation to
make  such  payment  shall be  discharged  and  replaced  by the  resulting  ABR
Revolving  Borrowing  or  Swingline  Loan.  If the  Borrower  fails to make such
payment  when due,  the  Administrative  Agent  shall  notify each Lender of the
applicable  LC  Disbursement,  the payment then due from the Borrower in respect
thereof and such Revolving  Lender's  Applicable  Percentage  thereof.  Promptly
following  receipt  of such  notice,  each  Revolving  Lender  shall  pay to the
Administrative Agent its Applicable  Percentage of the payment then due from the
Borrower,  in the same manner as provided in SECTION  2.07 with respect to Loans
made by such Revolving Lender (and SECTION 2.07 shall apply,  MUTATIS  MUTANDIS,
to the payment  obligations of the Revolving  Lenders),  and the  Administrative
Agent shall  promptly pay to the Issuing Bank the amounts so received by it from
the Revolving Lenders. Promptly following receipt by the Administrative Agent of
any payment from the Borrower  pursuant to this  paragraph,  the  Administrative
Agent shall  distribute  such payment to the Issuing Bank or, to the extent that
Revolving Lenders have made payments pursuant to this paragraph to reimburse the
Issuing  Bank,  then to such  Revolving  Lenders and the  Issuing  Bank as their
interests may appear.  Any payment made by a Revolving  Lender  pursuant to this
paragraph to reimburse the Issuing Bank for any LC Disbursement  (other than the
funding of ABR Revolving Loans or a Swingline Loan as contemplated  above) shall
not  constitute a Loan and shall not relieve the Borrower of its  obligation  to
reimburse such LC Disbursement.

          (f) OBLIGATIONS  ABSOLUTE.  The Borrower's  obligation to reimburse LC
Disbursements  as provided in paragraph  (e) of this Section  shall be absolute,
unconditional  and  irrevocable,  and shall be performed  strictly in accordance
with the terms of this Agreement under any and all circumstances  whatsoever and
irrespective  of (i) any lack of  validity  or  enforceability  of any Letter of
Credit or this Agreement,  or any term or provision  therein,  (ii) any draft or
other  document  presented  under a  Letter  of  Credit  proving  to be  forged,
fraudulent  or invalid in any respect or any  statement  therein being untrue or
inaccurate  in any respect,  (iii) payment by the Issuing Bank under a Letter of
Credit  against  presentation  of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever,  whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower's obligations hereunder. Neither
the  Administrative  Agent,  the Lenders nor the Issuing Bank,  nor any of their
Related Parties,  shall have any liability or  responsibility by reason of or in
connection  with the issuance or transfer of any Letter of Credit or any payment
or  failure  to  make  any  payment  thereunder  (irrespective  of  any  of  the
circumstances  referred to in the preceding sentence),  or any error,  omission,
interruption,  loss or delay in transmission or delivery of any draft, notice or
other  communication  under or relating to any Letter of Credit  (including  any
document required to make a drawing thereunder),  any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank;  PROVIDED that the foregoing  shall not be construed to excuse the
Issuing Bank from  liability to the


                                       23
<PAGE>

Borrower  to the  extent of any direct  damages  (as  opposed  to  consequential
damages,  claims in respect of which are hereby  waived by the  Borrower  to the
extent  permitted by applicable law) suffered by the Borrower that are caused by
the Issuing Bank's failure to exercise care when determining  whether drafts and
other  documents  presented  under a Letter  of  Credit  comply  with the  terms
thereof.  The parties hereto  expressly agree that, in the absence of negligence
or willful  misconduct on the part of the Issuing Bank (as finally determined by
a court of  competent  jurisdiction),  the Issuing  Bank shall be deemed to have
exercised care in each such  determination.  In furtherance of the foregoing and
without limiting the generality thereof, the parties agree that, with respect to
documents  presented which appear on their face to be in substantial  compliance
with the  terms  of a Letter  of  Credit,  the  Issuing  Bank  may,  in its sole
discretion,   either  accept  and  make  payment  upon  such  documents  without
responsibility   for  further   investigation,   regardless  of  any  notice  or
information  to the  contrary,  or refuse to accept and make  payment  upon such
documents if such documents are not in strict  compliance with the terms of such
Letter of Credit.

          (g)  DISBURSEMENT   PROCEDURES.   The  Issuing  Bank  shall,  promptly
following its receipt thereof,  examine all documents  purporting to represent a
demand for payment  under a Letter of Credit.  The Issuing  Bank shall  promptly
notify  the  Administrative  Agent  and the  Borrower  by  telephone  (confirmed
electronically  or by  telecopy)  of such  demand for  payment  and  whether the
Issuing Bank has made or will make an LC Disbursement thereunder;  PROVIDED that
any  failure  to give or delay in  giving  such  notice  shall not  relieve  the
Borrower of its  obligation  to  reimburse  the Issuing  Bank and the  Revolving
Lenders with respect to any such LC Disbursement.

          (h)  INTERIM  INTEREST.   If  the  Issuing  Bank  shall  make  any  LC
Disbursement,  then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC  Disbursement  is made, the unpaid amount thereof shall
bear interest,  for each day from and including the date such LC Disbursement is
made  to  but  excluding  the  date  that  the  Borrower   reimburses   such  LC
Disbursement,  at the rate per annum then  applicable  to ABR  Revolving  Loans;
PROVIDED that, if the Borrower fails to reimburse such LC Disbursement  when due
pursuant to paragraph  (e) of this  Section,  then SECTION  2.13(D) shall apply.
Interest  accrued  pursuant  to this  paragraph  shall be for the account of the
Issuing Bank,  except that interest  accrued on and after the date of payment by
any Revolving  Lender pursuant to paragraph (e) of this Section to reimburse the
Issuing Bank shall be for the account of such Revolving  Lender to the extent of
such payment.

          (i)  REPLACEMENT OF THE ISSUING BANK. The Issuing Bank may be replaced
at any time by written agreement among the Borrower,  the Administrative  Agent,
the replaced  Issuing Bank and the successor  Issuing Bank.  The  Administrative
Agent shall notify the Revolving  Lenders of any such replacement of the Issuing
Bank.  At the time any such  replacement  shall become  effective,  the Borrower
shall pay all unpaid fees accrued for the account of the  replaced  Issuing Bank
pursuant  to  SECTION  2.12(B).  From and after the  effective  date of any such
replacement,  (i) the  successor  Issuing  Bank  shall  have all the  rights and
obligations  of the Issuing Bank under this Agreement with respect to Letters of
Credit to be issued  thereafter and (ii) references  herein to the term "Issuing
Bank"  shall be deemed to refer to such  successor  or to any  previous  Issuing
Bank, or to such successor and all previous  Issuing Banks, as the context shall
require.  After the  replacement  of an Issuing  Bank  hereunder,  the

                                       24
<PAGE>

replaced Issuing Bank shall remain a party hereto and shall continue to have all
the rights and  obligations of an Issuing Bank under this Agreement with respect
to Letters of Credit  issued by it prior to such  replacement,  but shall not be
required to issue additional Letters of Credit.

          (j) CASH COLLATERALIZATION. If any Event of Default shall occur and be
continuing,  on the  Business  Day that the  Borrower  receives  notice from the
Administrative  Agent or the  Revolving  Lenders  holding at least fifty percent
(50%) of the Revolving  Loan  Commitments  (or, if the maturity of the Loans has
been accelerated,  Lenders with LC Exposure representing greater than 25% of the
total LC Exposure)  demanding  the deposit of cash  collateral  pursuant to this
paragraph,  the Borrower  shall  deposit in an account  with the  Administrative
Agent,  in the  name of the  Administrative  Agent  and for the  benefit  of the
Revolving  Lenders,  an amount in cash equal to the LC  Exposure as of such date
plus any accrued and unpaid  interest  thereon;  PROVIDED that the obligation to
deposit  such cash  collateral  shall  become  effective  immediately,  and such
deposit shall become immediately due and payable, without demand or other notice
of any kind,  upon the  occurrence  of any Event of Default  with respect to the
Borrower  described in clause (h) or (i) of ARTICLE VII.  Such deposit  shall be
held by the  Administrative  Agent as collateral for the payment and performance
of the  obligations of the Borrower  under this  Agreement.  The  Administrative
Agent shall have exclusive  dominion and control,  including the exclusive right
of  withdrawal,  over  such  account.  Other  than any  interest  earned  on the
investment of such deposits,  which  investments shall be made at the option and
sole  discretion  of the  Administrative  Agent and at the  Borrower's  risk and
expense, such deposits shall not bear interest.  Interest or profits, if any, on
such investments shall accumulate in such account.  Moneys in such account shall
be applied by the  Administrative  Agent to  reimburse  the Issuing  Bank for LC
Disbursements  for which it has not been  reimbursed  and,  to the extent not so
applied, shall be held for the satisfaction of the reimbursement  obligations of
the  Borrower  for the LC Exposure at such time or, if the maturity of the Loans
has been  accelerated  (but  subject to the consent of Lenders  with LC Exposure
representing  greater than 25% of the total LC Exposure),  be applied to satisfy
other obligations of the Borrower to the Revolving Lenders under this Agreement.
If the Borrower is required to provide an amount of cash collateral hereunder as
a result of the  occurrence  of an Event of Default,  such amount (to the extent
not  applied as  aforesaid)  shall be  returned  to the  Borrower  within  three
Business Days after all Events of Default have been cured or waived.

          (k)  EXISTING  LETTERS OF CREDIT.  The letters of credit  described on
SCHEDULE  2.06(K)  will for all purposes be  considered  Letters of Credit under
this Credit Agreement.

          SECTION  2.07 FUNDING OF  BORROWINGS.  (a) Each Lender shall make each
Loan to be made by it hereunder on the proposed date thereof by wire transfer of
immediately  available  funds by 2:00 p.m.,  Houston time, to the account of the
Administrative  Agent most recently  designated by it for such purpose by notice
to the  Lenders;  PROVIDED  that  Swingline  Loans  shall be made as provided in
SECTION 2.05.  The  Administrative  Agent will make such Loans  available to the
Borrower by promptly  crediting  the amounts so received,  in like funds,  to an
account of the Borrower maintained with the Administrative  Agent in Houston and
designated by the Borrower in the applicable  Borrowing  Request;  PROVIDED that
ABR Revolving Loans made to finance the  reimbursement  of an LC Disbursement as
provided in SECTION 2.06(e) shall be remitted by the Administrative Agent to the
Issuing Bank.

                                       25
<PAGE>

          (b) Unless the Administrative  Agent shall have received notice from a
Lender prior to the  proposed  date of any  Borrowing  that such Lender will not
make  available  to  the  Administrative  Agent  such  Lender's  share  of  such
Borrowing,  the  Administrative  Agent may assume that such Lender has made such
share  available on such date in accordance  with  paragraph (a) of this Section
and may, in reliance  upon such  assumption,  make  available  to the Borrower a
corresponding  amount. In such event, if a Lender has not in fact made its share
of the applicable  Borrowing  available to the  Administrative  Agent,  then the
applicable Lender and the Borrower  severally agree to pay to the Administrative
Agent forthwith on demand such corresponding  amount with interest thereon,  for
each day from and  including  the date  such  amount  is made  available  to the
Borrower to but excluding the date of payment to the  Administrative  Agent,  at
(i) in the case of such Lender,  the greater of the Federal Funds Effective Rate
and a rate  determined by the  Administrative  Agent in accordance  with banking
industry  rules on interbank  compensation  or (ii) in the case of the Borrower,
the interest rate  applicable to such  Borrowing  (without any obligation to pay
any break funding  payment under SECTION 2.16 in connection  with such payment).
If such Lender pays such amount to the  Administrative  Agent,  then such amount
shall constitute such Lender's Loan included in such Borrowing.  If the Borrower
pays  such  amount  to the  Administrative  Agent,  it  shall  not  relieve  the
defaulting Lender of its legal responsibility for its default.

          SECTION 2.08 INTEREST ELECTIONS. (a) Each Borrowing initially shall be
of the Type specified in the applicable  Borrowing Request and, in the case of a
Eurodollar Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request.  Thereafter, the Borrower may elect to convert such Borrowing
to a  different  Type  or to  continue  such  Borrowing  and,  in the  case of a
Eurodollar  Borrowing,  may elect Interest Periods therefor,  all as provided in
this Section. The Borrower may elect different options with respect to different
portions of the affected  Borrowing,  in which case each such  portion  shall be
allocated  ratably among the Revolving  Lenders or Term Lenders,  as applicable,
holding the Loans comprising such Borrowing,  and the Loans comprising each such
portion shall be considered a separate  Borrowing.  This Section shall not apply
to Swingline Borrowings, which may not be converted or continued.

          (b) To make an election  pursuant to this Section,  the Borrower shall
notify the Administrative Agent of such election by telephone by the time that a
Borrowing  Request  would be required  under  SECTION 2.03 if the Borrower  were
requesting a Revolving  Borrowing of the Type resulting from such election to be
made on the  effective  date of such  election.  Each such  telephonic  Interest
Election  Request shall be irrevocable  and shall be confirmed  promptly by hand
delivery or telecopy to the Administrative  Agent of a written Interest Election
Request  in a form  approved  by the  Administrative  Agent  and  signed  by the
Borrower.

          (c) Each  telephonic  and  written  Interest  Election  Request  shall
specify the following information in compliance with SECTION 2.02:

          (i) the Borrowing to which such Interest Election Request applies and,
          if  different  options are being  elected  with  respect to  different
          portions  thereof,  the  portions  thereof  to be  allocated  to  each
          resulting  Borrowing  (in which case the  information  to be specified
          pursuant to clauses  (iii) and (iv) below shall be specified  for each
          resulting Borrowing);

                                       26
<PAGE>

          (ii) the effective date of the election made pursuant to such Interest
          Election Request, which shall be a Business Day;

          (iii) whether the  resulting  Borrowing is to be an ABR Borrowing or a
          Eurodollar Borrowing; and

          (iv)  if  the  resulting  Borrowing  is a  Eurodollar  Borrowing,  the
          Interest  Period to be applicable  thereto after giving effect to such
          election,  which shall be a period  contemplated  by the definition of
          the term "Interest Period".

If any such Interest  Election Request requests a Eurodollar  Borrowing but does
not  specify  an  Interest  Period,  then the  Borrower  shall be deemed to have
selected an Interest Period of one month's duration.

          (d) Promptly  following receipt of an Interest  Election Request,  the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.

          (e) If the  Borrower  fails  to  deliver  a timely  Interest  Election
Request with respect to a Eurodollar  Borrowing prior to the end of the Interest
Period  applicable  thereto,  then,  unless such Borrowing is repaid as provided
herein,  at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing.  Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is  continuing  and the  Administrative  Agent,  at the
request of the Required Lenders,  so notifies the Borrower,  then, so long as an
Event of Default is continuing (i) no outstanding  Borrowing may be converted to
or continued as a Eurodollar  Borrowing and (ii) unless repaid,  each Eurodollar
Borrowing  shall be  converted  to an ABR  Borrowing  at the end of the Interest
Period applicable thereto.

          SECTION 2.09  TERMINATION  AND  REDUCTION OF  COMMITMENTS.  (a) Unless
previously  terminated,  the Revolving Loan  Commitments  shall terminate on the
Revolving Maturity Date.

          (b) The  Borrower  may at any  time  terminate,  or from  time to time
reduce, the Revolving Loan Commitments;  PROVIDED that (i) each reduction of the
Revolving Loan Commitments shall be in an amount that is an integral multiple of
$1,000,000  and not  less  than  $5,000,000  and  (ii) the  Borrower  shall  not
terminate or reduce the Revolving  Loan  Commitments  if, after giving effect to
any concurrent prepayment of the Revolving Loans in accordance with SECTION 2.11
the Revolving Credit Exposure would exceed the total Revolving Loan Commitments;
provided that for purposes of this paragraph, the LC Exposure shall be deemed to
be zero if there exists either cash collateral  equal to 105% of the LC Exposure
or one or more back-up  letters of credit for the benefit of the Issuing Bank in
form and substance and issued by issuer(s)  satisfactory  to the Issuing Bank in
its sole  discretion.  Upon the  provision  of such cash  collateral  or back-up
letters of credit and the payment in full of all  Obligations,  then the Lenders
shall be released from their obligations  under SECTION 2.06(D),  and all letter
of credit fees accruing after the termination of the Revolving Loan  Commitments
shall be for the account of the Issuing Bank.

                                       27
<PAGE>

          (c) The Borrower shall notify the Administrative Agent of any election
to terminate or reduce the Revolving  Loan  Commitments  under  paragraph (b) of
this Section at least three  Business Days prior to the  effective  date of such
termination  or  reduction,  specifying  such  election and the  effective  date
thereof.  Promptly  following receipt of any notice,  the  Administrative  Agent
shall advise the Lenders of the contents  thereof.  Each notice delivered by the
Borrower  pursuant to this Section shall be irrevocable;  PROVIDED that a notice
of termination of the Revolving Loan  Commitments  delivered by the Borrower may
state that such notice is  conditioned  upon the  effectiveness  of other credit
facilities,  in which case such notice may be revoked by the Borrower (by notice
to the Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied.  Any  termination or reduction of the Revolving Loan
Commitments shall be permanent. Each reduction of the Revolving Loan Commitments
shall be made  ratably  among the  Revolving  Lenders in  accordance  with their
respective Revolving Loan Commitments.

          (d) There  shall be no  obligation  under  the Term  Loan  Commitments
following  the initial  Borrowing of the Term Loan on the  Effective  Date other
than to allow  conversions  or  continuations  of Term  Loan  Borrowing  made as
Eurodollar Borrowings at the expiration of the applicable Interest Period.

          SECTION 2.10  REPAYMENT OF LOANS;  EVIDENCE OF DEBT.  (a) The Borrower
hereby  unconditionally  promises to pay (i) to the Administrative Agent for the
account  of each  Revolving  Lender  the  then-unpaid  principal  amount of each
Revolving Loan on the Revolving  Maturity Date, (ii) subject to SECTION 2.05, to
the Swingline  Lender the then unpaid principal amount of each Swingline Loan on
the  earlier  of the  Revolving  Maturity  Date and the first  date  after  such
Swingline  Loan is made that is the 15th or last day of a calendar  month and is
at least two Business Days after such Swingline  Loan is made;  PROVIDED that on
each date that a  Revolving  Borrowing  is made,  the  Borrower  shall repay all
Swingline Loans then outstanding,  and (iii) to the Administrative Agent for the
account of each Term Lender the then unpaid principal amount of the Term Loan on
the Term Loan Maturity Date.

          (b) The Borrower shall repay the Term Loan as follows:

                    (i)   Commencing  on  December  31,  2006,   and  continuing
          thereafter  on the last  Business  Day of each  quarter,  the Borrower
          shall pay to the Administrative Agent, for the pro-rata benefit of the
          Term  Lenders,  a  quarter  of one  percent  (.25%)  of  the  original
          principal amount of the Term Loan;

                    (ii) The Borrower shall pay to the Administrative Agent, for
          the pro-rata  benefit of the Term Lenders,  one hundred percent (100%)
          of the net cash  proceeds of the sale of: (A) any assets  permitted to
          be sold pursuant to SECTION  6.07(C) AND (D) until the final repayment
          of the Term Loan, and (B) any equity in the Borrower, such payments to
          commence  and  be due  upon  the  last  day of  each  Interest  Period
          applicable to the Term Loan that occurs after the  aggregate  total of
          such proceeds equals  $10,000,000.00,  in any calendar year, provided,
          in each case, portions of any such prepayments  equaling not more than
          $1,000,000  each may be deferred until the next succeeding sale to the
          extent necessary to insure compliance with SECTION 2.04. Payments made
          pursuant to this


                                       28
<PAGE>

          clause shall be applied to principal in reverse  order of the payments
          due under clause (a)(iii) above.

                    (iii) The Borrower  shall pay to the  Administrative  Agent,
          for the pro-rata  benefit of each Term Lender,  fifty percent (50%) of
          all Excess Cash Flow, for the immediately preceding fiscal year of the
          Borrower,  such payments to commence on April 15, 2008 and  continuing
          on each April 15th  thereafter  until the final  repayment of the Term
          Loan.  Payments  made  pursuant  to this  clause  shall be  applied to
          principal in reverse  order of the payments due under clause  (a)(iii)
          above.

          (c) Each Lender shall maintain in accordance with its usual practice a
record evidencing the indebtedness of the Borrower to such Lender resulting from
each Loan made by such Lender,  including  the amounts of principal and interest
payable and paid to such Lender from time to time hereunder.

          (d) The Administrative  Agent shall maintain records in which it shall
record (i) the amount of each Loan made  hereunder,  the Class and Type  thereof
and the Interest Period applicable thereto,  (ii) the amount of any principal or
interest  due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the  Administrative
Agent hereunder for the account of the Lenders and each Lender's share thereof.

          (e) The entries made in the records  maintained  pursuant to paragraph
(c) or (d) of this Section  shall be PRIMA FACIE  evidence of the  existence and
amounts of the obligations  recorded  therein;  PROVIDED that the failure of any
Lender  or the  Administrative  Agent to  maintain  such  accounts  or any error
therein shall not in any manner  affect the  obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.

          (f) Any Lender may  request  that Loans made by it be  evidenced  by a
Note. In such event,  the Borrower  shall  prepare,  execute and deliver to such
Lender a Note  payable to the order of such  Lender (or,  if  requested  by such
Lender,  to such  Lender  and its  registered  assigns).  Thereafter,  the Loans
evidenced  by such  promissory  note and  interest  thereon  shall at all  times
(including after  assignment  pursuant to SECTION 9.04) be represented by one or
more  promissory  notes in such form  payable  to the  order of the payee  named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).

          SECTION 2.11  PREPAYMENT  OF LOANS.  (a) The  Borrower  shall have the
right at any time and from time to time to prepay  any  Revolving  Borrowing  in
whole or in part,  subject to prior notice in accordance  with  paragraph (c) of
this Section.

          (b) The Borrower  shall have the right to at any time and from time to
time to prepay the Term Loan,  in whole or in part,  subject to prior  notice in
accordance  with  paragraph  (c) of this  Section and  payment of the  following
prepayment  premium  (which  prepayment  premium  shall also be payable upon any
payment pursuant to SECTION 2.10(B)(II)):

          (i) .5% of any prepaid principal if such prepayment occurs between the
     Effective  Date and one hundred  eighty (180) days  following the Effective
     Date, and

                                       29
<PAGE>

          (ii) 1% of any principal  prepaid after one hundred  eighty (180) days
     following the Effective Date.

          (c) The Borrower  shall notify the  Administrative  Agent (and, in the
case of  prepayment  of a Swingline  Loan,  the  Swingline  Lender) by telephone
(confirmed  by  telecopy)  of  any  prepayment  hereunder  (i) in  the  case  of
prepayment of a Eurodollar  Borrowing,  not later than 11:00 a.m., Houston time,
three  Business  Days  before  the  date  of  prepayment,  (ii)  in the  case of
prepayment of an ABR  Revolving  Borrowing,  not later than 11:00 a.m.,  Houston
time,  one  Business Day before the date of  prepayment  or (iii) in the case of
prepayment of a Swingline Loan, not later than 12:00 noon,  Houston time, on the
date of prepayment.  Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof to
be prepaid; PROVIDED that, if a notice of prepayment is given in connection with
a  conditional  notice of  termination  of the  Revolving  Loan  Commitments  as
contemplated  by SECTION 2.09,  then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with SECTION 2.09.  Promptly
following  receipt of any such notice  relating to a  Revolving  Borrowing,  the
Administrative Agent shall advise the Revolving Lenders of the contents thereof.
Promptly  following  receipt of any such notice  relating to the Term Loan,  the
Administrative Agent shall advise the Term Lenders of the contents thereof. Each
partial  prepayment of any Revolving  Borrowing shall be in an amount that would
be permitted in the case of an advance of a Revolving Borrowing of the same Type
as provided in SECTION 2.02.  Each  prepayment  of a Borrowing  shall be applied
ratably to the Loans  included in the prepaid  Borrowing.  Prepayments  shall be
accompanied by accrued interest to the extent required by SECTION 2.13.

          (d)  Prepayments  of the Term Loan shall be applied  to  principal  in
reverse order of payments due pursuant to SECTION 2.10(B)(I).

          SECTION   2.12  FEES.   (a)  The   Borrower   agrees  to  pay  to  the
Administrative  Agent for the account of each Revolving Lender a commitment fee,
which shall accrue at the  Commitment  Fee Rate  described in the  definition of
"Applicable Margin" on the daily undrawn amount of the Revolving Loan Commitment
of such Revolving Lender during the period from and including the Effective Date
to but excluding the date on which such Commitment  terminates.  The face amount
of any  outstanding  Letters of Credit shall be considered to be drawn under the
Revolving Loan Commitment for purposes of calculating  commitment fees.  Accrued
commitment  fees shall be  payable  in  arrears on the last day of March,  June,
September and December of each year and on the date on which the Revolving  Loan
Commitments terminate, commencing on the first such date to occur after the date
hereof. All commitment fees shall be computed on the basis of a year of 360 days
and shall be payable for the actual number of days elapsed  (including the first
day but excluding the last day).

          (b) The Borrower agrees to pay (i) to the Administrative Agent for the
account  of each  Revolving  Lender  a  participation  fee with  respect  to its
participations  in Letters of Credit,  which shall accrue at the same Applicable
Margin used to determine  the interest rate  applicable to Eurodollar  Revolving
Loans on the  average  daily  amount  of such  Revolving  Lender's  LC  Exposure
(excluding any portion thereof  attributable  to unreimbursed LC  Disbursements)
during the period from and  including  the  Effective  Date to but excluding the
later of the date on which such Revolving  Lender's  Revolving  Loan  Commitment
terminates  and

                                       30
<PAGE>

the date on which such Revolving Lender ceases to have any LC Exposure, and (ii)
to the Issuing Bank a fronting fee, which shall accrue at the rate of 0.125% per
annum on the  average  daily  amount of the LC Exposure  (excluding  any portion
thereof  attributable to unreimbursed LC  Disbursements)  during the period from
and  including  the  Effective  Date to but  excluding  the later of the date of
termination of the Revolving Loan Commitments and the date on which there ceases
to be any LC Exposure,  as well as the Issuing Bank's standard fees with respect
to the  issuance,  amendment,  renewal or  extension  of any Letter of Credit or
processing of drawings thereunder.  Participation fees and fronting fees accrued
through and  including  the last day of March,  June,  September and December of
each year shall be payable on the third  Business Day  following  such last day,
commencing  on the first such date to occur after the Effective  Date;  PROVIDED
that all such fees  shall be  payable  on the date on which the  Revolving  Loan
Commitments  terminate  and any such fees  accruing  after the date on which the
Revolving Loan Commitments  terminate shall be payable on demand. Any other fees
payable to the Issuing Bank pursuant to this  paragraph  shall be payable within
10 days after demand. All participation fees and fronting fees shall be computed
on the basis of a year of 360 days and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).

          (c) The Borrower agrees to pay to the  Administrative  Agent,  for its
own account, fees payable in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent.

          (d) All fees  payable  hereunder  shall be paid on the dates  due,  in
immediately  available  funds,  to the  Administrative  Agent (or to the Issuing
Bank,  in the  case of fees  payable  to it) for  distribution,  in the  case of
facility fees and  participation  fees,  to the Lenders.  Fees paid shall not be
refundable under any circumstances.

          SECTION 2.13  INTEREST.  (a) The Loans  comprising  each ABR Borrowing
(including  each Swingline  Loan) shall bear interest at the Alternate Base Rate
plus the Applicable Margin.

          (b) The Loans comprising each Eurodollar Borrowing shall bear interest
at the Adjusted LIBO Rate for the Interest  Period in effect for such  Borrowing
plus the Applicable Margin.

          (c) Notwithstanding the foregoing,  if any principal of or interest on
any Loan or any fee or other  amount  payable by the  Borrower  hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise,  such
overdue amount shall bear interest,  after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue  principal of any Loan,  2.0% plus
the  rate  otherwise  applicable  to such  Loan  as  provided  in the  preceding
paragraphs  of this Section or (ii) in the case of any other  amount,  2.0% plus
the rate applicable to ABR Loans as provided in paragraph (a) of this Section.

          (d) Accrued  interest on each Loan shall be payable in arrears on each
Interest  Payment Date for such Loan and upon  termination  of the  Commitments;
PROVIDED  that (i) interest  accrued  pursuant to paragraph  (d) of this Section
shall be payable on demand,  (ii) in the event of any repayment or prepayment of
any Loan (other than a prepayment of an ABR  Revolving  Loan prior to the end of
the  Availability  Period),  accrued  interest on the principal amount repaid or

                                       31
<PAGE>

prepaid shall be payable on the date of such  repayment or prepayment  and (iii)
in the event of any conversion of any Eurodollar Revolving Loan prior to the end
of the current Interest Period therefor,  accrued interest on such Loan shall be
payable on the effective date of such conversion.

          (e) All interest hereunder shall be computed on the basis of a year of
360 days,  except that interest computed by reference to the Alternate Base Rate
at times  when the  Alternate  Base  Rate is based on the  Prime  Rate  shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed  (including the
first day but  excluding  the last day).  The  applicable  Alternate  Base Rate,
Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent,
and such determination shall be conclusive absent manifest error.

          SECTION 2.14 ALTERNATE RATE OF INTEREST.  If prior to the commencement
of any Interest Period for a Eurodollar Borrowing:

               (i)  the Administrative  Agent  determines  (which  determination
          shall  be  conclusive   absent   manifest  error)  that  adequate  and
          reasonable  means do not exist for ascertaining the Adjusted LIBO Rate
          or the LIBO Rate, as applicable, for such Interest Period; or

               (ii) the Administrative Agent is advised by the Required  Lenders
          that the Adjusted LIBO Rate or the LIBO Rate, as applicable,  for such
          Interest  Period will not  adequately  and fairly  reflect the cost to
          such Lenders (or Lender) of making or maintaining  their Loans (or its
          Loan) included in such Borrowing for such Interest Period;

then the Administrative  Agent shall give notice thereof to the Borrower and the
Lenders by  telephone  or telecopy as promptly as  practicable  thereafter  and,
until the  Administrative  Agent  notifies the Borrower and the Lenders that the
circumstances  giving  rise to such  notice no longer  exist,  (i) any  Interest
Election Request that requests the conversion of any Revolving  Borrowing to, or
continuation  of any  Revolving  Borrowing as, a Eurodollar  Borrowing  shall be
ineffective,  and (ii) any request for a new Eurodollar  Borrowing shall be made
as an ABR Borrowing.

          SECTION 2.15 INCREASED COSTS. (a) If any Change in Law shall:

          (i) impose, modify or deem applicable any reserve, special  deposit or
          similar  requirement  against  assets of,  deposits  with  or for  the
          account  of, or credit  extended  by,  any  Lender  (except  any  such
          reserve  requirement  reflected  in  the  Adjusted  LIBO Rate) or  the
          Issuing Bank; or

          (ii) impose on any Lender or the Issuing Bank or the London  interbank
          market any other  condition  affecting  this  Agreement or  Eurodollar
          Loans  made by such  Lender or any  Letter of Credit or  participation
          therein;

and the result of any of the  foregoing  shall be to  increase  the cost to such
Lender of making or  maintaining  any  Eurodollar  Loan (or of  maintaining  its
obligation  to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or

                                       32
<PAGE>
the Issuing Bank hereunder (whether of principal,  interest or otherwise),  then
the Borrower  will pay to such Lender or the Issuing  Bank,  as the case may be,
such additional  amount or amounts as will compensate such Lender or the Issuing
Bank,  as the case may be,  or an  after-tax  basis  for such  additional  costs
incurred or reduction suffered.

          (b) If any Lender or the Issuing  Bank  determines  that any Change in
Law regarding capital  requirements has or would have the effect of reducing the
rate of return on such Lender's or the Issuing  Bank's capital or on the capital
of such Lender's or the Issuing Bank's holding company, if any, as a consequence
of this Agreement or the Loans made by, or  participations  in Letters of Credit
held by, such Lender,  or the Letters of Credit issued by the Issuing Bank, to a
level below that which such Lender or the Issuing  Bank or such  Lender's or the
Issuing  Bank's  holding  company could have achieved but for such Change in Law
(taking into  consideration such Lender's or the Issuing Bank's policies and the
policies of such Lender's or the Issuing Bank's holding  company with respect to
capital  adequacy),  then from time to time the Borrower will pay to such Lender
or the Issuing  Bank, as the case may be, such  additional  amount or amounts as
will  compensate such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company on an after-tax basis for any such reduction suffered.

          (c) A  certificate  of a Lender or the Issuing Bank setting  forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its
holding  company,  as the case may be, as specified  in paragraph  (a) or (b) of
this Section shall be delivered to the Borrower and shall be  conclusive  absent
manifest  error.  The Borrower shall pay such Lender or the Issuing Bank, as the
case may be, the  amount  shown as due on any such  certificate  within ten (10)
days after receipt thereof.

          (d) Failure or delay on the part of any Lender or the Issuing  Bank to
demand  compensation  pursuant to this Section shall not  constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation;  PROVIDED
that the  Borrower  shall not be required to  compensate a Lender or the Issuing
Bank  pursuant to this Section for any increased  costs or  reductions  incurred
more than one  hundred  eighty  (180) days prior to the date that such Lender or
the Issuing Bank, as the case may be, notifies the Borrower of the Change in Law
giving rise to such  increased  costs or reductions  and of such Lender's or the
Issuing Bank's intention to claim compensation therefor;  PROVIDED FURTHER that,
if the  Change in Law  giving  rise to such  increased  costs or  reductions  is
retroactive,  then the  180-day  period  referred  to above shall be extended to
include the period of retroactive effect thereof.

          SECTION 2.16 BREAK FUNDING  PAYMENTS.  In the event of (a) the payment
of any  principal  of any  Eurodollar  Loan  other  than on the  last  day of an
Interest  Period  applicable  thereto  (including  as a  result  of an  Event of
Default),  (b) the conversion of any Eurodollar  Loan other than on the last day
of the Interest Period applicable thereto,  (c) the failure to borrow,  convert,
continue  or prepay  any  Eurodollar  Loan on the date  specified  in any notice
delivered  pursuant  hereto  (regardless  of whether  such notice may be revoked
under  SECTION  2.11(C)  and is revoked  in  accordance  therewith),  or (d) the
assignment  of any  Eurodollar  Loan other than on the last day of the  Interest
Period  applicable  thereto as a result of a request by the Borrower pursuant to
SECTION 2.19, then, in any such event, the Borrower shall compensate each Lender
for the loss,  cost and expense  attributable  to such  event.  In the case of a
Eurodollar  Loan,  such loss,  cost or expense to any Lender  shall be deemed to
include an amount determined by such Lender to be

                                       33
<PAGE>

the excess,  if any, of (i) the amount of interest  which would have  accrued on
the principal  amount of such Loan had such event not occurred,  at the Adjusted
LIBO Rate that would have been  applicable to such Loan, for the period from the
date of such event to the last day of the then current  Interest Period therefor
(or,  in the case of a failure to borrow,  convert or  continue,  for the period
that would have been the Interest Period for such Loan), over (ii) the amount of
interest  which  would  accrue on such  principal  amount for such period at the
interest rate which such Lender would bid were it to bid, at the commencement of
such period,  for dollar  deposits of a comparable  amount and period from other
banks in the  Eurodollar  market.  A certificate of any Lender setting forth any
amount or amounts  that such  Lender is  entitled  to receive  pursuant  to this
Section  shall be  delivered  to the  Borrower  and shall be  conclusive  absent
manifest  error.  The Borrower  shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.

          SECTION  2.17  TAXES.  Any and all  payments  by or on  account of any
obligation of the Borrower hereunder shall be made free and clear of and without
deduction  for any  Indemnified  Taxes  or  Other  Taxes;  PROVIDED  that if the
Borrower shall be required to deduct any  Indemnified  Taxes or Other Taxes from
such payments,  then (i) the sum payable shall be increased as necessary so that
after  making  all  required  deductions  (including  deductions  applicable  to
additional sums payable under this Section) the Administrative  Agent, Lender or
Issuing  Bank (as the case may be)  receives an amount equal to the sum it would
have received had no such  deductions  been made,  (ii) the Borrower  shall make
such deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.

          (b) In  addition,  the  Borrower  shall  pay any  Other  Taxes  to the
relevant Governmental Authority in accordance with applicable law.

          (c) The Borrower shall indemnify the Administrative Agent, each Lender
and the Issuing Bank, within 10 days after written demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent,
such Lender or the Issuing  Bank,  as the case may be, on or with respect to any
payment by or on account of any obligation of the Borrower hereunder  (including
Indemnified  Taxes or Other  Taxes  imposed or asserted  on or  attributable  to
amounts  payable under this Section) and any penalties,  interest and reasonable
expenses  arising  therefrom  or  with  respect  thereto,  whether  or not  such
Indemnified  Taxes or Other Taxes were correctly or legally  imposed or asserted
by the relevant Governmental  Authority.  A certificate as to the amount of such
payment or liability  delivered to the Borrower by a Lender or the Issuing Bank,
or by the Administrative Agent on its own behalf or on behalf of a Lender or the
Issuing Bank, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes
by the Borrower to a Governmental  Authority,  the Borrower shall deliver to the
Administrative  Agent the  original or a certified  copy of a receipt  issued by
such  Governmental  Authority  evidencing  such  payment,  a copy of the  return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.

          (e) Any  Foreign  Lender  that is  entitled  to an  exemption  from or
reduction  of  withholding  tax under the law of the  jurisdiction  in which the
Borrower is located,  or any treaty

                                       34
<PAGE>
to which such  jurisdiction  is a party,  with  respect to  payments  under this
Agreement  shall  deliver  to the  Borrower  (with a copy to the  Administrative
Agent),  at the  time or times  prescribed  by  applicable  law,  such  properly
completed and executed documentation  prescribed by applicable law or reasonably
requested  by the  Borrower  as will permit  such  payments  to be made  without
withholding or at a reduced rate.

          (f) If the Administrative  Agent or a Lender  determines,  in its sole
discretion,  that it has  received  a refund of any  Taxes or Other  Taxes as to
which it has been  indemnified  by the  Borrower  or with  respect  to which the
Borrower has paid additional amounts pursuant to this SECTION 2.17, it shall pay
over such refund to the Borrower  (but only to the extent of indemnity  payments
made, or additional  amounts paid, by the Borrower  under this SECTION 2.17 with
respect to the Taxes or Other  Taxes  giving  rise to such  refund),  net of all
out-of-pocket  expenses of the  Administrative  Agent or such Lender and without
interest  (other than any interest paid by the relevant  Governmental  Authority
with respect to such refund);  provided,  that the Borrower, upon the request of
the Administrative Agent or such Lender, agrees to repay the amount paid over to
the  Borrower  (plus any  penalties,  interest or other  charges  imposed by the
relevant  Governmental  Authority) to the Administrative Agent or such Lender in
the event the  Administrative  Agent or such  Lender is  required  to repay such
refund to such  Governmental  Authority.  This Section shall not be construed to
require the Administrative Agent or any Lender to make available its tax returns
(or any other information  relating to its taxes which it deems confidential) to
the Borrower or any other Person.

          SECTION  2.18  PAYMENTS  GENERALLY;  PRO RATA  TREATMENT;  SHARING  OF
SET-OFFS.  (a) The Borrower  shall make each  payment  required to be made by it
hereunder  (whether  of  principal,   interest,  fees  or  reimbursement  of  LC
Disbursements, or of amounts payable under SECTION 2.15, SECTION 2.16 or SECTION
2.17, or otherwise) prior to 12:00 noon,  Houston time, on the date when due, in
immediately  available  funds,  without  set off or  counterclaim.  Any  amounts
received   after  such  time  on  any  date  may,  in  the   discretion  of  the
Administrative  Agent,  be deemed to have been  received on the next  succeeding
Business Day for purposes of  calculating  interest  thereon.  All such payments
shall be made to the  Administrative  Agent at its  offices at 712 Main  Street,
Houston,  Texas,  except  payments to be made  directly  to the Issuing  Bank or
Swingline Lender as expressly  provided herein and except that payments pursuant
to SECTION  2.15,  SECTION  2.16 or SECTION  2.17 and SECTION 9.03 shall be made
directly  to the  Persons  entitled  thereto.  The  Administrative  Agent  shall
distribute any such payments  received by it for the account of any other Person
to the appropriate  recipient promptly following receipt thereof. If any payment
hereunder shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next  succeeding  Business Day, and, in the case of any
payment accruing  interest,  interest thereon shall be payable for the period of
such extension. All payments hereunder shall be made in dollars.

          (b) If at any time insufficient funds are received by and available to
the Administrative Agent to pay fully all amounts of principal,  unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be applied
(i) first,  towards  payment of interest  and fees then due  hereunder,  ratably
among the parties  entitled  thereto in accordance  with the amounts of interest
and fees then due to such parties, and (ii) second, towards payment of principal
and unreimbursed LC Disbursements then due hereunder, ratably among the parties

                                       35
<PAGE>
entitled thereto in accordance with the amounts of principal and unreimbursed LC
Disbursements then due to such parties.

          (c) If any  Lender  shall,  by  exercising  any  right  of set  off or
counterclaim  or  otherwise,  obtain  payment in respect of any  principal of or
interest on any of its Revolving Loans or  participations in LC Disbursements or
Swingline  Loans  resulting  in  such  Lender  receiving  payment  of a  greater
proportion of the aggregate amount of its Revolving Loans and  participations in
LC  Disbursements  and  Swingline  Loans and accrued  interest  thereon than the
proportion  received by any other Lender, then the Lender receiving such greater
proportion  shall  purchase  (for  cash at  face  value)  participations  in the
Revolving Loans and  participations  in LC Disbursements  and Swingline Loans of
other  Lenders to the extent  necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance  with the aggregate  amount
of principal of and accrued  interest on their  respective  Revolving  Loans and
participations in LC Disbursements and Swingline Loans; PROVIDED that (i) if any
such  participations  are purchased and all or any portion of the payment giving
rise  thereto is  recovered,  such  participations  shall be  rescinded  and the
purchase price restored to the extent of such recovery,  without  interest,  and
(ii) the  provisions  of this  paragraph  shall not be construed to apply to any
payment  made by the  Borrower  pursuant to and in  accordance  with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the  assignment  of  or  sale  of  a  participation  in  any  of  its  Loans  or
participations in LC Disbursements to any assignee or participant, other than to
the Borrower or any Subsidiary or Affiliate  thereof (as to which the provisions
of this  paragraph  shall  apply).  The Borrower  consents to the  foregoing and
agrees,  to the extent it may  effectively do so under  applicable law, that any
Lender  acquiring a  participation  pursuant to the foregoing  arrangements  may
exercise against the Borrower rights of set-off and counterclaim with respect to
such  participation  as fully as if such  Lender  were a direct  creditor of the
Borrower in the amount of such participation.

          (d) Unless the  Administrative  Agent shall have received  notice from
the Borrower prior to the date on which any payment is due to the Administrative
Agent for the  account of the  Lenders or the Issuing  Bank  hereunder  that the
Borrower will not make such payment,  the  Administrative  Agent may assume that
the Borrower has made such payment on such date in accordance  herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing Bank,
as the case may be, the amount due. In such event,  if the  Borrower  has not in
fact made such  payment,  then each of the Lenders or the Issuing  Bank,  as the
case may be, severally agrees to repay to the Administrative  Agent forthwith on
demand the amount so  distributed  to such Lender or Issuing Bank with  interest
thereon,  for each day from and including the date such amount is distributed to
it to but  excluding  the date of payment to the  Administrative  Agent,  at the
greater  of the  Federal  Funds  Effective  Rate  and a rate  determined  by the
Administrative  Agent in  accordance  with banking  industry  rules on interbank
compensation.

          (e) If any Lender  shall fail to make any payment  required to be made
by it pursuant to SECTION  2.05(C),  SECTION 2.06(D),  SECTION 2.06(E),  SECTION
2.07(B),  SECTION 2.18(D), or SECTION 9.03(C) then the Administrative Agent may,
in its discretion  (notwithstanding  any contrary provision  hereof),  apply any
amounts thereafter received by the Administrative  Agent for the account of such
Lender to satisfy such Lender's  obligations  under such Sections until all such
unsatisfied obligations are fully paid.

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<PAGE>
          SECTION 2.19 MITIGATION  OBLIGATIONS;  REPLACEMENT OF LENDERS.  (a) If
any Lender  requests  compensation  under  SECTION  2.15,  or if the Borrower is
required  to pay  any  additional  amount  to  any  Lender  or any  Governmental
Authority  for the  account of any Lender  pursuant to SECTION  2.17,  then such
Lender shall use reasonable  efforts to designate a different lending office for
funding or booking its Loans  hereunder or to assign its rights and  obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender,  such  designation or assignment  (i) would  eliminate or reduce
amounts payable pursuant to SECTION 2.15 or SECTION 2.17, as the case may be, in
the future and (ii) would not subject  such Lender to any  unreimbursed  cost or
expense and would not otherwise be  disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

          (b) If any Lender requests  compensation under SECTION 2.15, or if the
Borrower  is  required  to  pay  any  additional  amount  to any  Lender  or any
Governmental  Authority for the account of any Lender  pursuant to SECTION 2.17,
or if any Lender  defaults in its obligation to fund Loans  hereunder,  then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative  Agent,  require  such  Lender to assign  and  delegate,  without
recourse  (in  accordance  with and  subject to the  restrictions  contained  in
SECTION 9.04), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such  obligations  (which  assignee may be another
Lender,  if a Lender  accepts such  assignment);  PROVIDED that (i) the Borrower
shall have received the prior written consent of the Administrative Agent, which
consent shall not unreasonably be withheld, (ii) such Lender shall have received
payment  of an  amount  equal to the  outstanding  principal  of its  Loans  and
participations  in  LC  Disbursements  and  Swingline  Loans,  accrued  interest
thereon,  accrued fees and all other amounts  payable to it hereunder,  from the
assignee (to the extent of such  outstanding  principal and accrued interest and
fees) or the Borrower  (in the case of all other  amounts) and (iii) in the case
of any such  assignment  resulting from a claim for  compensation  under SECTION
2.15 or payments  required to be made pursuant to SECTION 2.17,  such assignment
will result in a reduction  in such  compensation  or payments in the future.  A
Lender  shall not be required to make any such  assignment  and  delegation  if,
prior  thereto,  as a result  of a  waiver  by such  Lender  or  otherwise,  the
circumstances  entitling the Borrower to require such  assignment and delegation
cease to apply.

          SECTION 2.20 INCREASE IN THE REVOLVING LOAN COMMITMENTS.  The Borrower
may on no more than two occasions during the period beginning on the date hereof
to and  including  the date that is six months prior to the  Revolving  Maturity
Date, by written notice to the Administrative Agent executed by the Borrower and
one or more financial  institutions (any such financial  institution referred to
in this Section  being  called an  "INCREASING  LENDER"),  which may include any
Lender,  cause the Revolving  Loan  Commitments to be extended by the Increasing
Lenders (or cause the Commitments of the Increasing Lenders to be increased,  as
the case may be) in an  amount  for each  Increasing  Lender  set  forth in such
notice;  provided,  that (i) each extension of new Revolving Loan Commitments or
increase in existing Revolving Loan Commitments pursuant to this paragraph shall
result in the aggregate  Revolving Loan  Commitments  being increased by no less
than  $10,000,000,  (ii) no  extension  of new  Revolving  Loan  Commitments  or
increase in existing  Revolving Loan Commitments  pursuant to this paragraph may
result in the aggregate Revolving Loan Commitments exceeding $400,000,000, (iii)
each Increasing  Lender, if not already a Lender hereunder,  shall be subject to
the  approval  of

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<PAGE>
the Administrative Agent (which approval shall not be unreasonably withheld) and
(iv) each Increasing  Lender, if not already a Lender hereunder,  shall become a
party to this Agreement by completing and delivering to the Administrative Agent
a duly executed  accession  agreement in a form  reasonably  satisfactory to the
Administrative Agent and the Borrower (an "ACCESSION AGREEMENT").  New Revolving
Loan  Commitments  and  increases in  Revolving  Loan  Commitments  shall become
effective on the date specified in the applicable  notices delivered pursuant to
this paragraph.  Upon the effectiveness of any Accession  Agreement to which any
Increasing  Lender is a party,  (i) such Increasing  Lender shall  thereafter be
deemed to be a party to this  Agreement  and shall be  entitled  to all  rights,
benefits and privileges accorded a Revolving Lender hereunder and subject to all
obligations of a Lender hereunder and (II) SCHEDULE 2.01 shall be deemed to have
been amended to reflect the Commitment of such Increasing  Lender as provided in
such Accession  Agreement.  Upon the  effectiveness of any increase  pursuant to
this Section in the Revolving  Loan  Commitment of a Revolving  Lender already a
party hereto,  SCHEDULE 2.01 shall be deemed to have been amended to reflect the
increased  Revolving  Loan  Commitment  of  such  Lender.   Notwithstanding  the
foregoing,  no increase in the aggregate  Revolving Loan  Commitments (or in the
Revolving  Loan  Commitment  of any Lender)  shall become  effective  under this
Section unless,  on the date of such increase,  the  Administrative  Agent shall
have received a certificate, dated as of the effective date of such increase and
executed  by a  Financial  Officer  of the  Borrower,  to the  effect  that  the
conditions  set  forth in  paragraphs  (i) and  (ii) of  SECTION  4.02  shall be
satisfied (with all references in such paragraphs to a Borrowing being deemed to
be  references  to such  increase  and  attaching  resolutions  of the  Borrower
approving  such  increase).  Following  any  extension of a new  Revolving  Loan
Commitment or increase of a Lender's Revolving Loan Commitment  pursuant to this
paragraph,  any Revolving Loans  outstanding  prior to the effectiveness of such
increase or extension  shall  continue to be  outstanding  until the ends of the
respective  Interests Periods applicable thereto,  and shall then be repaid and,
if the  Borrower  shall so  elect,  refinanced  with new  Revolving  Loans  made
pursuant  to  SECTION  2.01  ratably  in  accordance  with  the  Revolving  Loan
Commitments in effect following such extension or increase.

                                  ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

          The Borrower represents and warrants to the Lenders that:

          SECTION  3.01  ORGANIZATION;  POWERS.  Each  of the  Borrower  and its
Subsidiaries is duly organized,  validly existing and in good standing under the
laws of the  jurisdiction  of its  organization,  has all  requisite  power  and
authority  to carry on its  business  as now  conducted  and,  except  where the
failure to do so,  individually  or in the  aggregate,  could not  reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good  standing  in, every  jurisdiction  where such  qualification  is
required.

          SECTION  3.02  AUTHORIZATION;  ENFORCEABILITY.  The  Transactions  are
within the  Borrower's  corporate  powers and have been duly  authorized  by all
necessary  corporate and, if required,  stockholder  action.  This Agreement has
been duly executed and delivered by the Borrower and constitutes a legal,  valid
and binding  obligation of the  Borrower,  enforceable  in  accordance  with its
terms, subject to applicable bankruptcy, insolvency, reorganization,

                                       38
<PAGE>
moratorium or other laws affecting  creditors'  rights  generally and subject to
general  principles of equity,  regardless of whether considered in a proceeding
in equity or at law.

          SECTION 3.03 GOVERNMENTAL  APPROVALS;  NO CONFLICTS.  The Transactions
(a) do not require any consent or approval of,  registration  or filing with, or
any other  action  by,  any  Governmental  Authority,  except  such as have been
obtained  or made and are in full force and  effect,  (b) will not  violate  any
applicable  law or  regulation or the charter,  by-laws or other  organizational
documents  of  the  Borrower  or any of its  Subsidiaries  or any  order  of any
Governmental  Authority,  (c) will not violate or result in a default  under any
indenture, agreement or other instrument binding upon the Borrower or any of its
Subsidiaries  or its assets,  or give rise to a right  thereunder to require any
payment to be made by the Borrower or any of its Subsidiaries,  and (d) will not
result in the creation or imposition of any Lien on any asset of the Borrower or
any of its Subsidiaries.

          SECTION 3.04 FINANCIAL CONDITION;  NO MATERIAL ADVERSE CHANGE. (a) The
Borrower has heretofore  furnished to the Lenders its consolidated balance sheet
and statements of income,  stockholders  equity and cash flows (i) as of and for
the fiscal year ended December 31, 2005,  reported on by  PriceWaterhouseCoopers
LLP,  independent public accountants,  and (ii) as of and for the fiscal quarter
and the portion of the fiscal year ended June 30,  2006,  certified by its chief
financial  officer.  Such financial  statements  present fairly, in all material
respects, the financial position and results of operations and cash flows of the
Borrower and its consolidated Subsidiaries as of such dates and for such periods
in accordance with GAAP,  subject to year end audit  adjustments and the absence
of footnotes in the case of the statements referred to in clause (ii) above.

          (b) Since December 31, 2005, there has been no material adverse change
in the  business,  assets,  operations,  prospects  or  condition,  financial or
otherwise, of the Borrower and its Subsidiaries, taken as a whole.

          SECTION 3.05 PROPERTIES. (a) Each of the Borrower and its Subsidiaries
has good title to, or valid  leasehold  interests  in, all its real and personal
property material to its business, except for minor defects in title that do not
interfere with its ability to conduct its business as currently  conducted or to
utilize such properties for their intended purposes.

          (b) Each of the Borrower and its Subsidiaries  owns, or is licensed to
use, all  trademarks,  tradenames,  copyrights,  patents and other  intellectual
property  material to its business,  and the use thereof by the Borrower and its
Subsidiaries  does not infringe upon the rights of any other Person,  except for
any  such  infringements  that,  individually  or in the  aggregate,  could  not
reasonably be expected to result in a Material Adverse Effect.

          SECTION 3.06 LITIGATION AND  ENVIRONMENTAL  MATTERS.  (a) There are no
actions,  suits or  proceedings  by or before  any  arbitrator  or  Governmental
Authority  pending  against or, to the  knowledge  of the  Borrower,  threatened
against or  affecting  the Borrower or any of its  Subsidiaries  (i) as to which
there is a  reasonable  possibility  of an adverse  determination  and that,  if
adversely  determined,  could  reasonably  be expected,  individually  or in the
aggregate,  to result in a Material  Adverse  Effect  (other than the  Disclosed
Matters) or (ii) that involve this Agreement or the Transactions.

                                       39
<PAGE>
          (b) Except with respect to any other matters that,  individually or in
the aggregate,  could not reasonably be expected to result in a Material Adverse
Effect,  neither  the  Borrower  nor any of its  Subsidiaries  (i) has failed to
comply  with any  Environmental  Law or to obtain,  maintain  or comply with any
permit, license or other approval required under any Environmental Law, (ii) has
become subject to any Environmental Liability,  (iii) has received notice of any
claim with respect to any Environmental Liability or (iv) knows of any basis for
any Environmental Liability.

          (c) Since the date of this Agreement,  there has been no change in the
status of the Disclosed  Matters that,  individually  or in the  aggregate,  has
resulted in, or  materially  increased  the  likelihood  of, a Material  Adverse
Effect.

          SECTION 3.07 COMPLIANCE WITH LAWS AND AGREEMENTS. Each of the Borrower
and its  Subsidiaries is in compliance with all laws,  regulations and orders of
any Governmental  Authority applicable to it or its property and all indentures,
agreements and other instruments  binding upon it or its property,  except where
the failure to do so, individually or in the aggregate,  could not reasonably be
expected to result in a Material Adverse Effect.  No Default has occurred and is
continuing.

          SECTION  3.08  INVESTMENT  AND  HOLDING  COMPANY  STATUS.  Neither the
Borrower nor any of its  Subsidiaries is an "investment  company" as defined in,
or subject to regulation under, the Investment Company Act of 1940.

          SECTION  3.09 TAXES.  Each of the Borrower  and its  Subsidiaries  has
timely filed or caused to be filed all Tax returns and reports  required to have
been  filed and has paid or caused  to be paid all Taxes  required  to have been
paid by it,  except  (a)  Taxes  that  are  being  contested  in good  faith  by
appropriate  proceedings  and for  which the  Borrower  or such  Subsidiary,  as
applicable,  has set aside on its books  adequate  reserves or (b) to the extent
that the  failure  to do so could  not  reasonably  be  expected  to result in a
Material Adverse Effect.

          SECTION  3.10  ERISA.  No ERISA Event has  occurred  or is  reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a  Material  Adverse  Effect.  The  present  value of all  accumulated
benefit  obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial  Accounting  Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts,  exceed by more
than  $30,000,000.00  the fair market value of the assets of such Plan,  and the
present value of all accumulated  benefit  obligations of all underfunded  Plans
(based on the assumptions used for purposes of Statement of Financial Accounting
Standards  No.  87)  did  not,  as of the  date  of the  most  recent  financial
statements reflecting such amounts,  exceed by more than $50,000,000.00 the fair
market value of the assets of all such underfunded Plans.

          SECTION 3.11 DISCLOSURE. The Borrower has disclosed to the Lenders all
agreements,  instruments and corporate or other  restrictions to which it or any
of its  Subsidiaries  is  subject,  and all  other  matters  known to it,  that,
individually  or in the aggregate,  could  reasonably be expected to result in a
Material Adverse Effect. Neither the Information Memorandum nor any of the other
reports, financial statements, certificates or other information

                                       40
<PAGE>
furnished  by or on behalf of the  Borrower to the  Administrative  Agent or any
Lender  in  connection  with the  negotiation  of this  Agreement  or  delivered
hereunder  (as  modified or  supplemented  by other  information  so  furnished)
contains any material  misstatement  of fact or omits to state any material fact
necessary  to make the  statements  therein,  in the light of the  circumstances
under which they were made,  not  misleading;  PROVIDED  that,  with  respect to
projected  financial  information,   the  Borrower  represents  only  that  such
information  was  prepared in good faith based upon  assumptions  believed to be
reasonable at the time.

          SECTION 3.12  SUBSIDIARIES.  SCHEDULE 3.12 sets forth the name of, and
the ownership interest of the Borrower and each other Person in, each Subsidiary
of the  Borrower and  identifies  which are Foreign  Subsidiaries  and which are
Domestic  Subsidiaries  as of the date  hereof.  The shares of capital  stock or
other ownership interests of each Subsidiary are owned by the Borrower, directly
or indirectly, free and clear of all Liens.

          SECTION 3.13 MARGIN STOCK.  Neither the Borrower nor any Subsidiary is
engaged principally,  or as one of its important activities,  in the business of
extending  credit for the purpose of buying or carrying Margin Stock (as defined
in  Registration  U of the Board).  The proceeds of the Loans and the Letters of
Credit  will not be used in a way that  will  result  in any of the Loans or the
Letters of Credit  under this  Agreement  being  violative  of  Regulation  U or
Regulation X of the Board.

          SECTION 3.14 USE OF PROCEEDS.  The proceeds of the Loans shall be used
to repay existing  Indebtedness,  to finance,  in part, the Merger,  for working
capital and for general  corporate  purposes of, in each case,  the Borrower and
its  Subsidiaries.  The Borrower  represents and warrants to the Lenders and the
Administrative Agent that all Loans will be for business, commercial, investment
or other similar  purpose and not primarily for personal,  family,  household or
agricultural use, as such terms are used in the Texas Finance Code.

          SECTION 3.15 SOLVENCY.  Immediately  following the making of each Loan
on the Closing Date and after giving effect to the  application  of the proceeds
of each  Loan,  (a) the fair  market  value of the  assets  of each  Loan  Party
(individually   and  on  a  consolidated   basis)  will  exceed  its  debts  and
liabilities;  (b) the present fair  saleable  value of the property of each Loan
Party (individually and on a consolidated basis) will be greater than the amount
that  will be  required  to pay the  probable  liability  of its debts and other
liabilities; (c) each Loan Party (individually and on a consolidated basis) will
be able to pay its debts and liabilities as they become absolute and mature; and
(d) each Loan Party  (individually and on a consolidated  basis the Borrower and
each of its Subsidiaries) will not have unreasonably small capital with which to
conduct its  business as such  business is now  conducted  and is proposed to be
conducted following the Closing Date.

                                   ARTICLE IV

                                   CONDITIONS

          SECTION 4.01 EFFECTIVE  DATE.  The  obligations of the Lenders to make
Loans and of the Issuing  Bank to issue  Letters of Credit  hereunder  shall not
become  effective  until  the date

                                       41
<PAGE>
on which the Administrative Agent (or its counsel) shall have received from each
Loan Party, in form and substance satisfactory to it:

          (a) either (i) a counterpart of this Agreement  signed by the Borrower
or (ii) written  evidence  satisfactory to the  Administrative  Agent (which may
include electronic or telecopy  transmission of signed signature pages) that the
Borrower has signed a counterpart of this Agreement.

          (b) a Note for each Lender requesting one.

          (c) the executed  Guarantee  Agreement (or electronic or telecopy copy
of a signed  signature  page  thereof)  from each  Domestic  Subsidiary  and all
Foreign Subsidiaries as required by SECTION 5.10.

          (d) favorable written opinions (addressed to the Administrative  Agent
and the  Lenders  and dated  the  Effective  Date) of Locke  Liddell & Sapp LLP,
counsel for the Borrower and the  Guarantors,  the general  counsel of Borrower,
and Davis,  Brown,  Koehn,  Shors & Roberts,  P.C.  local Iowa  counsel  for the
Borrower and covering  such matters  relating to the Borrower,  the  Guarantors,
this  Agreement or the  Transactions  as the Required  Lenders shall  reasonably
request. The Borrower hereby requests such counsel to deliver such opinion.

          (e) such documents and certificates as the Administrative Agent or its
counsel may reasonably request relating to the organization,  existence and good
standing of the Borrower,  the  authorization  of the Transactions and any other
legal matters relating to the Borrower, this Agreement or the Transactions,  all
in form and substance satisfactory to the Administrative Agent and its counsel.

          (f) a  certificate,  dated  the  Effective  Date  and  signed  by  the
President,  a Vice President or a Financial Officer of the Borrower,  confirming
compliance  with the  conditions set forth in paragraphs (i) and (ii) of SECTION
4.02.

          (g) (i) satisfactory  audited  consolidated  balance sheet and related
statements of  operations,  stockholders'  equity and cash flows of the Borrower
for the two most recent  fiscal  years ended prior to the  Effective  Date as to
which such financial  statements are available and (ii)  satisfactory  unaudited
consolidated  balance sheet and related statements of operations,  stockholders'
equity and cash flows of the Borrower for each quarterly period ended subsequent
to the date of the latest financial  statements delivered pursuant to clause (i)
of this SECTION 4.01(G) as to which such financial statements are available.

          (h) Borrowing  Request  (substantially  in the form of EXHIBIT 4.01(H)
hereto).

          (i) evidence of liability and hazard  insurance for each Loan Party in
such amounts and on such terms as are standard and  customary in the industry in
which said entities conduct their operations.

          (j)  all  conditions   precedent  to  the  completion  of  the  Merger
(including  all requisite  approvals  therefor)  have been  satisfied  (with the
filing of the merger  certificate to occur  immediately  upon the funding of the
Term Loan);

                                       42
<PAGE>
          (k) all information  regarding the Borrower and its Subsidiaries  that
it is required to collect pursuant to the USA Patriot Act;

          (l) all fees and  other  amounts  due and  payable  on or prior to the
Effective Date, including,  to the extent invoiced,  reimbursement or payment of
all out of pocket  expenses  required to be  reimbursed  or paid by the Borrower
hereunder; and

          (m) such  other  documents  or items as the  Administrative  Agent may
reasonably request.

          SECTION 4.02 EACH CREDIT EVENT.  The obligation of each Lender to make
a Loan on the  occasion  of any  Borrowing,  and of the  Issuing  Bank to issue,
amend,  renew or extend any Letter of Credit,  is subject to the satisfaction of
the following conditions:

               (i) The representations and warranties of the Borrower set  forth
     in this Agreement  shall be true and correct on and as of the date of  such
     Borrowing or the date of issuance, amendment, renewal or extension of  such
     Letter of Credit, as applicable.

               (ii) At the time of and  immediately  after giving effect to such
     Borrowing or the  issuance, amendment, renewal or extension of such  Letter
     of  Credit,  as  applicable,  (i) no  Default  shall have occurred  and  be
     continuing  and (ii) there shall have been no events  that  have,  or could
     reasonably  be  expected  to cause,  a Material  Adverse  Effect since  the
     date of the last such issuance or Borrowing.

          (iii) A Borrowing Request.

Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit  shall be deemed to  constitute  a  representation  and  warranty  by the
Borrower on the date thereof as to the matters  specified in paragraphs  (i) and
(ii) of this Section.

                                   ARTICLE V

                              AFFIRMATIVE COVENANTS

            Until  the  Commitments  have  expired  or been  terminated  and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC  Disbursements  shall have been  reimbursed,  the Borrower  covenants and
agrees with the Lenders that:

          SECTION  5.01   FINANCIAL   STATEMENTS;   RATINGS   CHANGE  AND  OTHER
INFORMATION.   The  Borrower  will  furnish  to  the  Administrative  Agent  (in
electronic or hard copy form):

          (i) within 90 days after the end of each fiscal year of the  Borrower,
     its  audited   consolidated   balance  sheet  and  related   statements  of
     operations,  stockholders'  equity  and cash flows as of the end of and for
     such year,  setting forth in each case in comparative  form the figures for
     the previous  fiscal year,  all  reported on by  PriceWaterhouseCoopers  or
     other  independent  public  accountants  of  recognized  national  standing
     (without a "going concern" or like  qualification  or exception and without
     any qualification or

                                       43
<PAGE>

     exception  as to  the  scope  of  such  audit)  to  the  effect  that  such
     consolidated  financial  statements present fairly in all material respects
     the  financial  condition and results of operations of the Borrower and its
     consolidated  Subsidiaries on a consolidated  basis in accordance with GAAP
     consistently applied;

          (ii)  within 45 days after the end of each of the first  three  fiscal
     quarters of each  fiscal year of the  Borrower,  its  consolidated  balance
     sheet and related statements of operations,  stockholders'  equity and cash
     flows as of the end of and for such  fiscal  quarter  and the then  elapsed
     portion of the fiscal year,  setting forth in each case in comparative form
     the figures for the corresponding  period or periods of (or, in the case of
     the  balance  sheet,  as of the end  of)  the  previous  fiscal  year,  all
     certified  by one of its  Financial  Officers as  presenting  fairly in all
     material respects the financial  condition and results of operations of the
     Borrower  and its  consolidated  Subsidiaries  on a  consolidated  basis in
     accordance with GAAP consistently applied, subject to normal year-end audit
     adjustments and the absence of footnotes;

          (iii)  concurrently  with any delivery of financial  statements  under
     clause (i) or (ii)  above,  a  certificate  of a  Financial  Officer of the
     Borrower  (i)  certifying  as to whether a Default has  occurred  and, if a
     Default has occurred,  specifying the details  thereof and any action taken
     or proposed to be taken with respect thereto, (ii) setting forth reasonably
     detailed calculations  demonstrating  compliance with SECTION 3.10, SECTION
     6.01,  SECTION  6.07,  SECTION  6.09  and  SECTION  6.12  (in  the  form of
     compliance  certificate  attached hereto as EXHIBIT 5.01) and (iii) stating
     whether any change in GAAP or in the application thereof has occurred since
     the date of the audited  financial  statements  referred to in SECTION 3.04
     and, if any such change has occurred,  specifying the effect of such change
     on the financial statements accompanying such certificate;

          (iv)  concurrently  with any  delivery of financial  statements  under
     clause (i) above, an annual budget of the Borrower and the Subsidiaries for
     such fiscal year;

          (v) promptly after the same become publicly  available,  copies of all
     periodic and other reports,  proxy  statements and other materials filed by
     the Borrower or any Subsidiary with the Securities and Exchange Commission,
     or any Governmental  Authority succeeding to any or all of the functions of
     said Commission,  or with any national securities exchange, as the case may
     be; and

          (vi) promptly  following any request therefor,  such other information
     regarding the operations,  business affairs and financial  condition of the
     Borrower or any Subsidiary, or compliance with the terms of this Agreement,
     as the Administrative Agent or any Lender may reasonably request.

          SECTION 5.02 NOTICES OF MATERIAL EVENTS.  The Borrower will furnish to
the Administrative Agent prompt written notice of the following:

          (i) the occurrence of any Default;

          (ii) the filing or commencement  of any action,  suit or proceeding by
     or before any arbitrator or Governmental Authority against or affecting the
     Borrower or any

                                       44
<PAGE>

     Affiliate  thereof that,  if  adversely  determined,  could  reasonably  be
     expected to result in a Material Adverse Effect;

          (iii) the  occurrence of any ERISA Event that,  alone or together with
     any other ERISA Events that have occurred,  could reasonably be expected to
     result in liabilities of the Borrower and its Subsidiaries increasing after
     the Effective Date in an aggregate amount exceeding $5,000,000; and

          (iv) any other  development  that results in, or could  reasonably  be
     expected to result in, a Material Adverse Effect.

Each notice  delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or  development  requiring such notice and any action taken
or proposed to be taken with respect thereto.

          SECTION 5.03  EXISTENCE;  CONDUCT OF BUSINESS.  The Borrower will, and
will  cause  each of its  Subsidiaries  to,  do or cause  to be done all  things
necessary  to  preserve,  renew  and keep in full  force  and  effect  its legal
existence and the rights, licenses,  permits, privileges and franchises material
to the conduct of its business  unless the failure to do so could not reasonably
be expected to have a Material Adverse Effect; PROVIDED that the foregoing shall
not prohibit any merger,  consolidation,  liquidation or  dissolution  permitted
under SECTION 6.05.

          SECTION 5.04 PAYMENT OF OBLIGATIONS. The Borrower will, and will cause
each of its  Subsidiaries  to, pay its  obligations,  including Tax liabilities,
that,  if not paid,  could result in a Material  Adverse  Effect before the same
shall become  delinquent or in default,  except where (a) the validity or amount
thereof is being  contested in good faith by  appropriate  proceedings,  (b) the
Borrower or such  Subsidiary has set aside on its books  adequate  reserves with
respect  thereto in  accordance  with GAAP and (c) the  failure to make  payment
pending such contest  could not  reasonably  be expected to result in a Material
Adverse Effect.

          SECTION 5.05  MAINTENANCE OF  PROPERTIES.  The Borrower will, and will
cause each of its Subsidiaries to keep and maintain all property material to the
conduct of its business in good working order and  condition,  ordinary wear and
tear excepted.

          SECTION 5.06 BOOKS AND RECORDS;  INSPECTION RIGHTS. The Borrower will,
and will cause each of its  Subsidiaries  to,  keep  proper  books of record and
account in which full,  true and correct  entries are made of all  dealings  and
transactions in relation to its business and activities.  The Borrower will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative  Agent or any Lender,  upon reasonable prior notice, to visit
and inspect its  properties,  to examine  and make  extracts  from its books and
records,  and to discuss its affairs,  finances and condition  with its officers
and  independent  accountants,  all at such  reasonable  times  and as  often as
reasonably requested.

          SECTION 5.07  COMPLIANCE  WITH LAWS. The Borrower will, and will cause
each of its Subsidiaries to, comply with all laws, rules, regulations and orders
of any  Governmental  Authority  applicable  to it or its  property,  including,
without  limitation,  Environmental  Laws,

                                       45
<PAGE>
except where the failure to do so,  individually or in the aggregate,  could not
reasonably be expected to result in a Material Adverse Effect.

          SECTION  5.08 USE OF PROCEEDS  AND LETTERS OF CREDIT.  The proceeds of
the Loans will be used only to finance  the Merger and for  working  capital and
general  corporate  purposes.  No part of the proceeds of any Loan will be used,
whether directly or indirectly,  for any purpose that entails a violation of any
of the  Regulations of the Board,  including  Regulations T, U and X. Letters of
Credit  will be issued only to support  the  general  corporate  purposes of the
Borrower and its Subsidiaries.

          SECTION 5.09 INSURANCE.  The Borrower will, and will cause each of the
Subsidiaries  to,  maintain,  with  financially  sound and  reputable  insurance
companies,  insurance  in such  amounts  (with no greater  risk  retention)  and
against such risks as are customary  among  companies of established  reputation
engaged in the same or similar  businesses  and operating in the same or similar
locations.  The  Borrower  will  furnish  to the  Lenders,  upon  request of the
Administrative  Agent,  information in reasonable  detail as to the insurance so
maintained.

          SECTION 5.10 REQUIRED GUARANTORS.

          (a) If any  Domestic  Subsidiary  is  formed  or  acquired  after  the
Effective  Date,  the Borrower will,  within ten (10) Business Days,  notify the
Administrative  Agent and the Lenders thereof and promptly but in no event later
than twenty (20) Business  Days after such  formation or  acquisition  cause the
Subsidiary to execute a Guarantee Agreement.

          (b) If,  at any  time,  (i) the  aggregate  consolidated  revenues  of
Foreign  Subsidiaries  exceeds  twenty  percent  (20%)  of the  aggregate  total
consolidated  revenue  for the most  recently  ended  period of four (4)  fiscal
quarters of the  Company or (ii) the  aggregate  consolidated  assets of Foreign
Subsidiaries  exceeds twenty percent (20%) of the aggregate  total  consolidated
assets as of the end of the most recently  ended fiscal  quarter of the Borrower
and all of its  Subsidiaries,  the Borrower  shall promptly cause one or more of
said Foreign  Subsidiaries  to execute a Guarantee  Agreement  such that,  after
giving  effect to such  Guarantee  Agreement,  both the  aggregate  consolidated
revenue and the aggregate  consolidated assets (measured according to book value
basis), of all Foreign  Subsidiaries that have not executed a Guaranty,  is less
than twenty percent (20%) of the total consolidated  revenue and total assets of
the Borrower and all of its Subsidiaries.

                                   ARTICLE VI

                               NEGATIVE COVENANTS

            Until the  Commitments  have expired or terminated and the principal
of and  interest on each Loan and all fees payable  hereunder  have been paid in
full  and  all  Letters  of  Credit  have  expired  or  terminated  and  all  LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees with
the Lenders that:

          SECTION 6.01  INDEBTEDNESS  COVENANT.  The Borrower will not, and will
not permit  any  Subsidiary  to,  create,  incur,  assume or permit to exist any
Indebtedness, except:

                                       46
<PAGE>
          (a) Indebtedness created under the Loan Documents;

          (b) Indebtedness  pursuant to: (i) the private placement notes related
to the Merger, (the "PRIVATE PLACEMENT NOTES") that, together with the Term Loan
do not exceed  $350,000,000,  and (ii)  Indebtedness  of the  Borrower  of up to
$500,000,000 in public bond debt related to the Merger;

          (c)  Indebtedness  existing  on the  Effective  Date and set  forth on
SCHEDULE  6.01(C) hereto and extensions,  renewals and  replacements of any such
Indebtedness that do not increase the outstanding principal amount or change the
parties  directly or indirectly  responsible for the payment  thereof;  provided
that any such refinancing  Indebtedness (A) shall be unsecured and (B) shall not
mature  before  the  earlier  of (x)  the  maturity  date  of  the  Indebtedness
refinanced and (y) the date six months following the Revolving Maturity Date;

          (d)  Indebtedness  of  the  Borrower  to  any  Subsidiary  and  of any
Subsidiary to the Borrower or any other  Subsidiary;  provided that Indebtedness
of any  Subsidiary  that is not a Loan Party to the  Borrower  or any other Loan
Party shall be subject to SECTION 6.06 below;

          (e)  Unsecured  Guarantees  by the  Borrower  of  Indebtedness  of any
Subsidiary  and  Guarantees  by any  Guarantor  of  Indebtedness  of  any  other
Guarantor, to the extent said Indebtedness is permitted hereunder;

          (f) Indebtedness of the Borrower or any Subsidiary  incurred after the
Effective Date under leases (collectively, "TRANSPORTATION EQUIPMENT LEASES") of
motor vehicles (including off-road vehicles) and aircraft;

          (g) (A) Indebtedness of the Borrower or any Subsidiary  incurred after
the Effective Date to finance the  acquisition,  construction  or improvement of
any  fixed or  capital  assets,  including  Capital  Lease  Obligations  and any
Indebtedness  assumed in connection with the acquisition of any such assets,  or
secured  by a Lien on any such  assets  prior to the  acquisition  thereof,  and
extensions,  renewals  and  replacements  of any such  Indebtedness  that do not
increase  the  outstanding  principal  amount or change the parties  directly or
indirectly  responsible  for the  payment  thereof,  (B)  Attributable  Debt (as
defined below) of the Borrower or any Subsidiary  incurred after the date hereof
pursuant to Sale and  Leaseback  Transactions  permitted by SECTION 6.04 and (C)
Indebtedness represented by seller notes executed by the Borrower incurred after
the date hereof in connection with Permitted Acquisitions; provided that (i) the
Indebtedness  in clause (A) hereof is  incurred  prior to or within 120 days (or
such  longer  period if  necessary  solely to obtain  any  permits  or  licenses
required in connection with such acquisition, construction or improvement) after
such acquisition or the completion of such  construction or improvement and (ii)
the aggregate principal amount of the Indebtedness  permitted by this clause (g)
in  excess  of  Attributable  Debt  shall  not  exceed  $75,000,000  at any time
outstanding.  "ATTRIBUTABLE  DEBT" means, with respect to any Sale and Leaseback
transaction,  the present  value  (computed  in  accordance  with GAAP as if the
obligations incurred in connection with such Sale and Leaseback transaction were
capital lease  obligations)  of the total  obligations  of the lessee for rental
payments  during  the  remaining  term of the  lease  included  in such sale and
leaseback  transaction  (including  any  period  for which  such  lease has been
extended).  In the case of any lease  which is  terminable  by the  lessee  upon
payment  of a  penalty,  the  Attributable  Debt  shall be

                                       47
<PAGE>

the lesser of (i) the Attributable Debt determined assuming termination upon the
first date such lease may be  terminated  (in which case the  Attributable  Debt
shall also include the amount of the penalty, but no rent shall be considered as
required to be paid under such lease  subsequent to the first date upon which it
may be so terminated) and (ii) the Attributable Debt determined assuming no such
termination.  Any  determination  of any rate implicit in the terms of the lease
included  in  such  Sale  and  Leaseback  transaction  made in  accordance  with
generally  accepted  financial  practices by the  Borrower  shall be binding and
conclusive absent manifest error;

          (h) Unsecured Indebtedness incurred under a credit facility by any one
or more Canadian Subsidiaries of Borrower, so long as said Subsidiary guarantees
the Loans and,  further  provided  that the aggregate  principal  amount of such
Indebtedness permitted by this clause does not exceed $100,000,000;

          (i)  Unsecured  Indebtedness  of any  Subsidiary,  provided  that  the
aggregate  principal amount of all  Indebtedness  permitted by this clause shall
not  exceed  the  aggregate  principal  amount  of  $5,000,000.00  at  any  time
outstanding;

          (j)  Obligations  incurred in connection with covenants not to compete
to the extent such obligations are treated as indebtedness under GAAP,  provided
that the aggregate principal amount of all Indebtedness permitted by this clause
shall not exceed $50,000,000 at any time outstanding;

          (k)  Indebtedness  of any Subsidiary of the Borrower in existence (but
not incurred or created in connection  with an acquisition) on the date on which
such  Subsidiary is acquired by the Borrower,  provided (i) neither the Borrower
nor any of its  other  Subsidiaries  has any  obligation  with  respect  to such
Indebtedness,  (ii) none of the  properties  of the Borrower or any of its other
Subsidiaries is bound with respect to such  Indebtedness  and (iii) the Borrower
is in compliance with the financial covenants after such acquisition; and

          (l) Unsecured  Indebtedness of the Borrower not permitted by any other
clause of this SECTION 6.01; provided that (i) no Default exists at the time, or
is created as a result of, the  incurrence  of such  Indebtedness,  (ii) for all
Indebtedness  in  excess  of $50  million,  such  Indebtedness  does  not have a
maturity date before the date six months following the Revolving  Maturity Date,
and (iii) the terms of such unsecured Indebtedness are not more restrictive than
the terms of the Loan Documents.

          SECTION 6.02 LIMIT ON PREFERRED  EQUITY  ISSUANCE.  The Borrower  will
not, nor will it permit any  Subsidiary  to, issue any preferred  stock or other
preferred  Equity  Interests,  other than (a) preferred  Equity Interests of the
Borrower issued (i) without any mandatory redemption provisions or (ii) pursuant
to any  shareholders'  rights plan of the  Borrower;  and (b)  preferred  Equity
Interests issued by any Subsidiary to the extent,  and only to the extent,  that
such preferred Equity Interests are owned by the Borrower or another Subsidiary.

          SECTION 6.03 LIEN COVENANT. The Borrower will not, and will not permit
any  Subsidiary  to,  create,  incur,  assume or permit to exist any Lien on any
property or asset now owned or  hereafter  acquired by it, or assign or sell any
income or revenues (including  accounts  receivable) or rights in respect of any
thereof, except:

                                       48
<PAGE>
          (a) Permitted Encumbrances;

          (b)  Any  Lien  on  any  property  or  asset  of the  Borrower  or any
Subsidiary  existing on the  Effective  Date and set forth on SCHEDULE  6.03(B);
provided  that (i) such Lien shall not apply to any other  property  or asset of
the  Borrower  or any  Subsidiary  and (ii) such Lien  shall  secure  only those
obligations which it secures on the Effective Date hereof;

          (c)  Any  Lien  existing  on  any  property  or  asset  prior  to  the
acquisition  thereof  by the  Borrower  or any  Subsidiary  or  existing  on any
property or asset of any person that  becomes a Subsidiary  after the  Effective
Date prior to the time such Person becomes a Subsidiary;  provided that (i) such
Lien is not created in  contemplation  of or in connection with such acquisition
or such Person  becoming a Subsidiary,  as the case may be, (ii) such Lien shall
not apply to any other  property or assets of the Borrower or any Subsidiary and
(iii) such Lien shall secure only those obligations which it secures on the date
of such  acquisition or the date such Person  becomes a Subsidiary,  as the case
may be;

          (d) Liens on  property  subject to  Transportation  Equipment  Leases,
provided that the  Indebtedness  secured by any  Transportation  Equipment Lease
does not exceed the cost of acquiring the property subject thereto;

          (e) Liens on fixed or capital assets acquired, constructed or improved
by the Borrower or any Subsidiary; provided that (i) such Liens secure permitted
Indebtedness,  (ii) such Liens and the Indebtedness secured thereby are incurred
prior to or within 120 days (or such longer period if necessary solely to obtain
any  permits  or  licenses   required  in  connection  with  such   acquisition,
construction  or improvement)  after such  acquisition or the completion of such
construction or  improvement,  (iii) the  Indebtedness  secured thereby does not
exceed the cost of acquiring,  constructing  or improving  such fixed or capital
assets and (iv) such Liens  shall not apply to any other  property  or assets of
the Borrower or any Subsidiary; and

          (f) Liens in cash collateral pursuant to SECTION 2.06(J).

          SECTION 6.04 SALE AND LEASEBACK  TRANSACTIONS.  The Borrower will not,
and  will  not  permit  any of the  Subsidiaries  to,  enter  into  any Sale and
Leaseback  Transaction;  provided  that the Borrower may enter into (a) Sale and
Leaseback Transactions if the aggregate outstanding Attributable Debt in respect
of sale and leaseback transactions permitted by this clause (a) shall at no time
exceed  $125,000,000  and (b) any  Transportation  Equipment Lease; and provided
further that all  Attributable  Debt associated with any such Sale and Leaseback
transaction  shall be  treated  as  Indebtedness  of the  Borrower  and shall be
subject to the limitations of the Indebtedness covenant.

          SECTION 6.05 LIMITATION ON FUNDAMENTAL CHANGES.

          (a) The  Borrower  will not,  and will not permit any  Subsidiary  to,
merge into or consolidate  with any other Person,  or permit any other Person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) assets (including capital
stock of Subsidiaries)  constituting all or substantially  all the assets of the
Borrower and the  Subsidiaries  on a  consolidated  basis  (whether now owned or
hereafter acquired), or, in the case of the Borrower or any Guarantor, liquidate
or dissolve,

                                       49
<PAGE>
except that, if at the time thereof and immediately  after giving effect thereto
no Default shall have occurred and be continuing  (i) any  Subsidiary  may merge
into the  Borrower  in a  transaction  in which the  Borrower  is the  surviving
corporation,  (ii) any  Subsidiary  may  merge  into any other  Subsidiary  in a
transaction in which the surviving  entity is a Subsidiary;  PROVIDED,  HOWEVER,
that (A) no Guarantor may merge into a Foreign  Subsidiary (unless prior to such
merger,  such Foreign  Subsidiary  was also a  Guarantor),  and (B) after giving
effect to such transaction, the surviving Subsidiary is a Guarantor if either of
such  Subsidiaries  was  previously  a  Guarantor,  (iii)  any  permitted  asset
disposition  and involving the sale of a Subsidiary  may be effected by a merger
of such Subsidiary,  (iv) any Subsidiary may sell, transfer,  lease or otherwise
dispose  of its  assets to the  Borrower  or to  another  Subsidiary;  provided,
however, that (A) no Guarantor may sell, transfer, lease or otherwise dispose of
its assets to any Foreign Subsidiary (unless prior to such sale, transfer, lease
or  disposition  such Foreign  Subsidiary  was also a Guarantor),  and (B) after
giving effect to such  transaction,  the surviving  Subsidiary is a Guarantor if
either of such  Subsidiaries was previously a Guarantor,  and (v) any Subsidiary
may  liquidate  or dissolve if the Borrower  determines  in good faith that such
liquidation  or  dissolution is in the best interests of the Borrower and is not
materially  disadvantageous  to the  Lenders;  provided  that  any  such  merger
involving a person that is not a wholly owned  Subsidiary  immediately  prior to
such  merger  shall not be  permitted  unless  also  permitted  by SECTION  6.06
regarding Restrictions on Investments.

          (b) The Borrower will not, and will not permit any of the Subsidiaries
to, engage to any material  extent in any business other than  businesses of the
type  conducted by the Borrower and the  Subsidiaries  on the Effective Date and
businesses reasonably related thereto.

          SECTION 6.06 RESTRICTIONS ON INVESTMENTS,  LOANS, ADVANCES, GUARANTEES
AND  ACQUISITIONS.  The  Borrower  will  not,  and  will not  permit  any of the
Subsidiaries to,  purchase,  hold or acquire  (including  pursuant to any merger
with any Person that was not a wholly owned Subsidiary prior to such merger) any
capital stock,  evidences of Indebtedness  or securities  (including any option,
warrant or other  right to acquire any of the  foregoing)  of, make or permit to
exist any loans or advances to,  guarantee any obligations of, or make or permit
to exist any investment or any other interest in, any other Person,  or purchase
or otherwise acquire (in one transaction or a series of transactions) any assets
of any other Person constituting a business unit, except:

          (a) Permitted Investments;

          (b)  Investments,  guarantees and loans existing on the Effective Date
and set forth on SCHEDULE 6.06(B);

          (c) In addition to the investments described in (b) above, investments
by the Borrower and the  Subsidiaries  in Equity  Interests in their  respective
Subsidiaries; provided that the aggregate amount of investments made by Borrower
or any Subsidiary to  Subsidiaries  that are not  Guarantors,  together with all
loans and advances and  Guarantees  made  pursuant to clauses (d) and (f) below,
shall not exceed $30,000,000 at any time outstanding;

          (d) In addition to the loans described in (b) above, loans or advances
made by the Borrower to any Subsidiary or made by any Subsidiary to the Borrower
or any other

                                       50
<PAGE>
Subsidiary; provided that the amount of such loans and advances made by Borrower
or any  Subsidiary  to  Subsidiaries  that  are not  Guarantors,  together  with
investments  and  Guarantees  made  pursuant  to clause (c) above and clause (f)
below by Borrower or any  Subsidiary to  Subsidiaries  that are not  Guarantors,
shall not exceed $30,000,000 at any time outstanding;

          (e)  Obligations  of  the  Borrower  to  any  Subsidiary,  or  of  any
Subsidiary to the Borrower or any other Subsidiary,  arising from the management
and investment of cash on a pooled basis in the ordinary course of business;

          (f) Guarantees constituting permitted Indebtedness;  provided that (i)
a Subsidiary  shall not Guarantee any  Indebtedness  of the Borrower unless such
Subsidiary  also has  Guaranteed the Loans and the Private  Placement  Notes and
(ii) the aggregate principal amount of Indebtedness of Subsidiaries that are not
Guarantors  that is  Guaranteed  by any Borrower or  Guarantor  pursuant to this
clause (f), together with investments and loans and advances made by Borrower or
Guarantor to  Subsidiaries  that are not Guarantors  pursuant to clauses (c) and
(d) above,  shall not exceed  $30,000,000 at any time outstanding  (exclusive of
investments, guaranties and loans described in clause (b) immediately above);

          (g) Guarantees by the Borrower of accounts  payable of Subsidiaries in
the ordinary course of business;

          (h)  Investments   received  in  connection  with  the  bankruptcy  or
reorganization  of, or  settlement  of  delinquent  accounts and disputes  with,
customers and suppliers, in each case in the ordinary course of business;

          (i)  Investments in perpetual care trusts,  pre-need trusts or similar
transactions  made (a) in the ordinary course of such Person's  business and (b)
subject to applicable Federal, state or local regulations;

          (j)  Permitted  Acquisitions  for  consideration  consisting of common
stock of the Borrower,  and other consideration to the extent the amount or fair
market  value  of  such  other  consideration  paid  by  the  Borrower  and  the
Subsidiaries  therefor  (including  Indebtedness  assumed  pursuant  to  SECTION
6.01(L)  above)  does  not  exceed  (A)  $50,000,000  for any  single  Permitted
Acquisition,  and (B)  $100,000,000 for all Permitted  Acquisitions  within a 12
month period;

          (k) Equity Interests and debt obligations owned by the Borrower or any
Subsidiary following a transaction described in SECTION 6.07;

          (l)  Equity  Interests  in  Persons  owned  by  the  Borrower  or  any
Subsidiary   following  the  sale  of  Equity   Interests  in   Subsidiaries  in
transactions  constituting asset  dispositions  permitted under SECTION 6.07 and
other investments in joint ventures engaged in businesses  reasonably related to
the business of the Borrower as of the date of this Agreement;  provided that no
investment  shall be permitted  pursuant to this clause (l) that,  together with
all other investments  permitted under this clause (l), would at any time have a
book value exceeding $50,000,000 in the aggregate;

                                       51
<PAGE>
          (m)  Investments  not  permitted by any other clause of this  Section;
provided  that no  investment  shall be made  pursuant  to this clause (m) that,
together with all other  investments  made pursuant to this clause (m) after the
date hereof, would exceed $10,000,000 in the aggregate; and

          (n) Other alternative investments not permitted by any other clause of
this Section;  provided that both before and immediately  after giving effect to
any such investment,  (i) the Borrower has at least  $50,000,000 in liquidity in
the form of Permitted  Investments and at least $150,000,000 of total liquidity,
including  (A)  unrestricted  cash,  (B)  Permitted   Investments  and  (C)  the
difference between the aggregate  Revolving Loan Commitments as of such date and
the aggregate Revolving Credit Exposure as of such date.

          SECTION 6.07  LIMITATION  ON ASSET SALES.  The Borrower  will not, and
will not permit any of the Subsidiaries to, sell,  transfer,  lease or otherwise
dispose of any asset,  including any Equity Interest,  owned by it, nor will the
Borrower permit any of the Subsidiaries to issue any additional  Equity Interest
in such Subsidiary, except:

          (a)  sales of  inventory  (including  parcels  in  developed  cemetery
properties), used or surplus equipment and Permitted Investments in the ordinary
course of business;

          (b) sales, transfers and dispositions to the Borrower or a Subsidiary;
provided that any such sales,  transfers or dispositions  involving a Subsidiary
that is not a Guarantor  shall be made in compliance with SECTION 6.10 regarding
Restrictions on Transactions with Affiliates below;

          (c)  following  the  completion  of the sales  described in clause (d)
below sales,  transfers,  leases and other  dispositions  of assets  (other than
accounts  receivable or inventory) the sale of which is not otherwise  permitted
by any other clause;  provided  that (i) the aggregate  book value of all assets
sold,  transferred  or  otherwise  disposed of in reliance  upon this clause (c)
shall not exceed 20% of the proforma  consolidated  total assets of the Borrower
and its  Subsidiaries  as of June 30, 2006, as provided in the 8-K filing of the
Borrower  filed with the  Securities  Exchange  Commission on September 19, 2006
(plus any increase in the  consolidated  total assets  resulting  from permitted
acquisitions of  Subsidiaries  after the Effective Date, with each such increase
to be  measured  as of the date of such  permitted  acquisition,  less  pre-need
funeral and cemetery receivables and trust investments,  cemetery perpetual care
trust investments, insurance invested assets and any similar categories shown on
the  consolidated  balance sheet of the Borrower after giving effect to any such
permitted acquisitions) in the aggregate during the term hereof (as of September
19, 2006, such calculation of total net assets will result in an amount equal to
$5,124,504,000.00),  (ii) all sales,  transfers,  leases and other  dispositions
permitted pursuant to this clause (c) shall be made for fair value and (iii) the
aggregate,  non-cash  consideration  received in connection  with all such sales
shall not exceed $400,000,000 during the term hereof; and

          (d) asset sales up to $500 million  contemplated  by the Borrower as a
result of the Merger,  whether or not required by the Federal Trade  Commission,
the proceeds of which will be applied,  in part,  to reduce the Term Facility as
required hereunder.

                                       52
<PAGE>
            For purposes of this Section and SECTIONS  2.10(B)(II) and 6.06, any
transaction which is a "like kind exchange" under Section 1031 of the Code shall
be considered a disposition (if the Borrower or one of its Subsidiaries receives
cash  consideration  upon the  completion  thereof)  or an  acquisition  (if the
Borrower or one of its Subsidiaries pays cash  consideration upon the completion
thereof)  only upon the  completion  of such  transaction,  and then only to the
extent of the cash received or paid.

          SECTION  6.08 SWAP  AGREEMENTS.  The  Borrower  will not, and will not
permit any of the  Subsidiaries  to, enter into any Swap  Agreement,  except (a)
Swap  Agreements  entered  into to hedge or mitigate  risks  (including  foreign
exchange  risks) to which the  Borrower or any  Subsidiary  has actual  exposure
(other than in respect of equity  interests or  Indebtedness  of the Borrower or
any of its  Subsidiaries),  and (b)  Swap  Agreements  entered  into in order to
effectively  cap,  collar or  exchange  interest  rates  (from fixed to floating
rates,  from one  floating  rate to another  floating  rate or  otherwise)  with
respect to any  interest-bearing  liability or investment of the Borrower or any
Subsidiary.

          SECTION 6.09 LIMITATION ON RESTRICTED PAYMENTS.

          (a) The Borrower will not, and will not permit any of the Subsidiaries
to,  declare  or make,  or agree to pay or make,  directly  or  indirectly,  any
Restricted  Payment  except  that (i) any  Subsidiary  may  make any  Restricted
Payment to the  Borrower  or any other  Subsidiary  (provided  that  neither the
Borrower nor any Guarantor may make any Restricted  Payment to a Subsidiary that
is not a  Guarantor)  and (ii) as  otherwise  provided  herein.  At any time the
Leverage  Ratio  following  the making of a dividend is greater than 3.5 to 1.0,
and so long as no Default or Event of Default  exists at the time, or is created
as a result of any such  dividend,  the Borrower  may declare and pay  dividends
with respect to its Equity  Interests not to exceed $40 million in the aggregate
in any calendar year. At any time the Leverage  Ratio  following the making of a
dividend,  share  repurchase  or redemption is less than or equal to 3.5 to 1.0,
and so long as no Default  or Event of Default  exists at the time or is created
as a result of such dividend, share repurchase or redemption,  the provisions of
this  Section  will  not  apply  to  restrict  dividends,  share  repurchase  or
redemption.

          (b)  Notwithstanding  the  above,  at any time the  Leverage  Ratio is
greater  than 3.5 to 1.0 but less  than 4.0 to 1.0,  so long as (i)  there is no
outstanding  balance under the Revolving  Loan,  and (ii) the Term Loan has been
paid in full, Borrower may make share repurchases of its common stock in a total
amount not to exceed $100,000,000 during the term hereof. The Leverage Ratio for
purposes of this  subsection (b) will be determined  pursuant to the most recent
quarterly compliance  certificate;  provided, that if such ratio decreases below
3.5 to 1.0 during any  quarter  solely as a result of a decrease  in Total Debt,
then such ratio, until the next quarterly compliance  certificate,  for purposes
of this subsection (b) may, at the Borrower's option, be determined  pursuant to
a certificate calculating such ratio and executed by an officer of the Borrower.

          (c) The Borrower will not, nor will it permit any of the  Subsidiaries
to,  make or  agree  to make,  directly  or  indirectly,  any  payment  or other
distribution  (whether  in cash,  securities  or other  property)  in respect of
principal  of  or  interest  on  any  Indebtedness,  or  any  payment  or  other
distribution  (whether in cash,  securities  or other  property),  including any


                                       53
<PAGE>
sinking  fund or  similar  deposit,  on  account  of the  purchase,  redemption,
retirement,  defeasance,   acquisition,   cancellation  or  termination  of  any
Indebtedness, except:

          (i) payment of Indebtedness created hereunder;

          (ii) regularly  scheduled and other  mandatory  interest and principal
     payments  as and when due in respect of any  Indebtedness  permitted  under
     SECTION 6.01;

          (iii) refinancings of permitted Indebtedness, including the payment of
     customary fees, costs and expenses in connection therewith;

          (iv) the payment of secured  Indebtedness that becomes due as a result
     of the voluntary  sale or transfer of the property or assets  securing such
     Indebtedness to the extent such sale or transfer is permitted;

          (v) the payment of Indebtedness of any person acquired by the Borrower
     or any  Subsidiary  that exists on the date of such  acquisition;  provided
     that such Person becomes a Subsidiary as a result of such acquisition;

          (vi)  payment of  Indebtedness  that  matures  prior to the  Revolving
     Maturity Date; provided there are no outstanding Revolving Loans;

          (vii) payment of Indebtedness  that matures after the Revolving Credit
     Maturity Date;  provided that (A) no Indebtedness  described in clause (vi)
     above is outstanding,  other than (1) non-public  Indebtedness disclosed on
     the Effective Date or (2) other non-public  Indebtedness incurred after the
     Effective Date in an aggregate  amount not to exceed  $10,000,000,  and (B)
     there are no outstanding Revolving Loans;

          (viii)  prepayments and redemptions of Indebtedness of the Borrower or
     any  Subsidiary  with  proceeds of any issuance and sale of common stock of
     the Borrower;

          (ix) exchanges of common stock of the Borrower for Indebtedness of the
     Borrower or any Subsidiary;

          (x) other  prepayments by the Borrower or any Subsidiary not permitted
     by any other clause of this SECTION 6.09;  provided that no such prepayment
     or  redemption  shall  be  made  if (i) as of  date  of the  most  recently
     delivered financial statements, the Leverage Ratio is greater than or equal
     to 3.5 to 1.00 and the  Borrower  or any  Subsidiary  has made  such  other
     prepayments permitted under this clause (including the proposed prepayment)
     in excess of $200,000,000  in the aggregate,  or (ii) as of the date of the
     most recently delivered  financial  statements,  the Leverage Ratio is less
     than 3.5 to 1.00 and the  Borrower  or any  Subsidiary  has made such other
     prepayments permitted under this clause (including the proposed prepayment)
     in excess of  $400,000,000  in the  aggregate  (inclusive  of the aggregate
     amount of prepayments and redemptions  made under clause (i)), in each case
     so long as there are no outstanding Revolving Loans; and

          (xi)  prepayment  of the  Term  Facility,  prepayment  of the  Private
     Placement  Notes and prepayment of the Alderwoods  Debt in accordance  with
     the terms thereof.

                                       54
<PAGE>
          SECTION  6.10  RESTRICTIONS  ON  TRANSACTIONS  WITH  AFFILIATES.   The
Borrower  will not,  and will not  permit  any  Subsidiary  to,  sell,  lease or
otherwise  transfer any  property or assets to, or purchase,  lease or otherwise
acquire  any  property  or  assets  from,  or  otherwise  engage  in  any  other
transactions  with,  any of  its  Affiliates,  except  (a)  transactions  in the
ordinary  course of  business  at prices  and on terms and  conditions  not less
favorable  to the  Borrower  or such  Subsidiary  than could be  obtained  on an
arm's-length  basis from unrelated third parties,  (b)  transactions  between or
among  the  Borrower  and one or  more  Subsidiaries  that  are  Guarantors  not
involving any other affiliate,  (c) any investment,  loan or advance involving a
Subsidiary that is permitted hereunder,  (d) any Restricted Payment permitted by
SECTION  6.09  and  (e)  issuances  of  Equity  Interests  of  the  Borrower  in
satisfaction of obligations under retirement plans.

          SECTION 6.11 RESTRICTIONS ON RESTRICTIVE AGREEMENTS. The Borrower will
not, and will not permit any of the  Subsidiaries  to,  directly or  indirectly,
enter into,  incur or permit to exist any  agreement or other  arrangement  that
prohibits,  restricts  or  imposes  any  condition  upon (a) the  ability of the
Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any
of its  properties  or  assets,  or (b) the  ability  of any  Subsidiary  to pay
dividends or other distributions with respect to any shares of its capital stock
or to make or repay loans or advances to the Borrower or any other Subsidiary or
to guarantee  Indebtedness of the Borrower or any other  Subsidiary that are, in
each case in this clause (b), more  restrictive than that which exists as of the
date hereof; provided that the foregoing shall not apply to (i) restrictions and
conditions  imposed  by law or by  any  Loan  Document,  (ii)  restrictions  and
conditions  existing on the date hereof  identified  on SCHEDULE 6.11 (but shall
apply to any extension or renewal of, or any amendment or modification expanding
the scope of,  any such  restriction  or  commitment),  (iii)  restrictions  and
conditions  contained  in any  extension,  renewal,  replacement,  amendment  or
modification of each indenture  (including any supplemental  indentures  entered
into pursuant to the terms thereof) to which the Borrower is a party on the date
hereof and that is identified  on the schedule  referenced in clause (ii) above,
so long as such  restrictions and conditions are not more restrictive than those
in the indenture being extended, renewed, replaced, amended or modified and (iv)
the foregoing shall not apply to customary restrictions and conditions contained
in agreements  relating to the sale of a Subsidiary pending such sale,  provided
such restrictions and conditions apply only to the Subsidiary that is to be sold
and such sale is permitted hereunder.

          SECTION 6.12 FINANCIAL COVENANTS. (a) The Borrower will not permit the
Leverage  Ratio as of the last day of each fiscal quarter to be greater than the
following:


            EACH FISCAL QUARTER ENDING            MAXIMUM RATIO
            --------------------------            -------------
          December '06  -   June '07            5.50   to  1.00
          September '07 -   December '07        5.25   to  1.00
          March '08  -  June '08                5.00   to  1.00
          September '08     -                   4.75   to  1.00
          December '08
          March '09  -  December '09            4.25   to  1.00
          March '10  -  December '10            3.75   to  1.00
          Thereafter                            3.50   to  1.00

          (b) The Borrower will not permit the Interest Coverage Ratio as of the
last day of each fiscal quarter to be less than:

                                       55
<PAGE>
            EACH FISCAL QUARTER ENDING            MINIMUM RATIO
            --------------------------            -------------
          December '06 - December '08           2.50   to  1.00
          March '09  -  June '10                2.75   to  1.00
          Thereafter                            3.00   to  1.00

                                  ARTICLE VII

                                EVENTS OF DEFAULT

          If any of the following events ("EVENTS OF DEFAULT") shall occur:

          (a) the  Borrower  shall fail to pay any  principal of any Loan or any
reimbursement  obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or otherwise;

          (b) the Borrower shall fail to pay any interest on any Loan or any fee
or any other  amount  (other  than an amount  referred  to in clause (a) of this
Article) payable under this Agreement, when and as the same shall become due and
payable,  and such  failure  shall  continue  unremedied  for a  period  of five
Business Days;

          (c) any representation or warranty made or deemed made by or on behalf
of the Borrower or any Subsidiary in or in connection with this Agreement or any
amendment  or  modification  hereof  or  waiver  hereunder,  or in  any  report,
certificate,  financial  statement or other document furnished pursuant to or in
connection with this Agreement or any amendment or modification hereof or waiver
hereunder, shall prove to have been incorrect when made or deemed made;

          (d) the  Borrower  shall  fail to observe  or  perform  any  covenant,
condition or agreement  contained in SECTION 5.02, SECTION 5.03 (with respect to
the Borrower's existence) or SECTION 5.08, SECTION 5.10 or in ARTICLE VI;

          (e) the  Borrower  shall  fail to observe  or  perform  any  covenant,
condition or agreement  contained in this Agreement  (other than those specified
in clause (a),  (b) or (d) of this  Article),  and such failure  shall  continue
unremedied for a period of 30 days after notice thereof from the  Administrative
Agent to the Borrower (which notice will be given at the request of any Lender);

          (f) the  Borrower  or any  Subsidiary  shall fail to make any  payment
(whether of principal or interest  and  regardless  of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable;

          (g) any  event  or  condition  occurs  that  results  in any  Material
Indebtedness  becoming  due prior to its  scheduled  maturity or that enables or
permits  (with or without  the giving of notice,  the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled

                                       56
<PAGE>
maturity;  PROVIDED that this clause (g) shall not apply to secured Indebtedness
that becomes due as a result of the  voluntary  sale or transfer of the property
or assets securing such Indebtedness;

          (h) an  involuntary  proceeding  shall be commenced or an  involuntary
petition shall be filed seeking (i) liquidation,  reorganization or other relief
in respect of the Borrower or any  Subsidiary or its debts,  or of a substantial
part of its assets, under any Federal, state or foreign bankruptcy,  insolvency,
receivership  or similar law now or hereafter in effect or (ii) the  appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any Subsidiary or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue  undismissed for 60
days or an order or decree  approving or ordering any of the foregoing  shall be
entered;

          (i) the Borrower or any Subsidiary shall (i) voluntarily  commence any
proceeding or file any petition  seeking  liquidation,  reorganization  or other
relief under any Federal, state or foreign bankruptcy, insolvency,  receivership
or similar law now or hereafter in effect,  (ii) consent to the  institution of,
or fail to  contest  in a timely  and  appropriate  manner,  any  proceeding  or
petition described in clause (h) of this Article,  (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator,  conservator or
similar official for the Borrower or any Subsidiary or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding,  (v) make a general  assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting any of
the foregoing;

          (j) the  Borrower or any  Subsidiary  shall  become  unable,  admit in
writing its inability or fail generally to pay its debts as they become due;

          (k) one or more  judgments  for the  payment of money in an  aggregate
amount in excess of  $15,000,000  shall be rendered  against the  Borrower,  any
Subsidiary or any combination thereof and the same shall remain undischarged for
a period of 30 consecutive  days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of the  Borrower  or any  Subsidiary  to  enforce  any such
judgment;

          (l) an ERISA Event  shall have  occurred  that,  in the opinion of the
Required  Lenders,  when taken  together  with all other ERISA  Events that have
occurred,  could  reasonably  be expected to result in liability of the Borrower
and its Subsidiaries  increasing after the Effective Date in an aggregate amount
exceeding (i) $15,000,000 in any year or (ii) $40,000,000 for all periods;

          (m) a Change in Control shall occur; or

          (n) the Merger is not  consummated  within one (1) Business Day of the
initial Borrowing hereunder.

then,  and in every such event (other than an event with respect to the Borrower
described  in clause  (h) or (i) of this  Article),  and at any time  thereafter
during the continuance of such event, the  Administrative  Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i)

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terminate  the  Commitments,  and  thereupon  the  Commitments  shall  terminate
immediately,  and (ii) declare the Loans then  outstanding to be due and payable
in whole (or in part,  in which case any principal not so declared to be due and
payable may  thereafter  be declared to be due and  payable),  and thereupon the
principal of the Loans so declared to be due and payable,  together with accrued
interest  thereon and all fees and other  obligations  of the  Borrower  accrued
hereunder,  shall  become  due and  payable  immediately,  without  presentment,
demand,  protest or other notice of any kind,  all of which are hereby waived by
the Borrower; and in case of any event with respect to the Borrower described in
clause (h) or (i) of this Article, the Commitments shall automatically terminate
and the principal of the Loans then outstanding,  together with accrued interest
thereon and all fees and other  obligations of the Borrower  accrued  hereunder,
shall automatically become due and payable, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower, and
(iii) take such other steps to collect the Loans and protect the interest of the
Lenders as shall be allowed by law or in equity.

                                  ARTICLE VIII

                            THE ADMINISTRATIVE AGENT

          Each of the Lenders and the Issuing Bank hereby  irrevocably  appoints
the Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise  such powers as are delegated to
the  Administrative  Agent by the terms  hereof,  together with such actions and
powers as are reasonably incidental thereto.

          The bank serving as the Administrative  Agent hereunder shall have the
same rights and powers in its  capacity as a Lender as any other  Lender and may
exercise the same as though it were not the Administrative  Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally  engage
in any kind of business with the Borrower or any  Subsidiary or other  Affiliate
thereof as if it were not the Administrative Agent hereunder.

          The  Administrative  Agent  shall not have any  duties or  obligations
except those expressly set forth herein.  Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other  implied  duties,  regardless  of whether a Default  has  occurred  and is
continuing,  (b) the  Administrative  Agent  shall not have any duty to take any
discretionary action or exercise any discretionary  powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent is
required to exercise  in writing as  directed by the  Required  Lenders (or such
other  number or  percentage  of the  Lenders  as shall be  necessary  under the
circumstances  as provided in SECTION  9.02),  and (c) except as  expressly  set
forth herein, the Administrative Agent shall not have any duty to disclose,  and
shall not be liable for the failure to disclose, any information relating to the
Borrower or any of its  Subsidiaries  that is communicated to or obtained by the
bank serving as  Administrative  Agent or any of its Affiliates in any capacity.
The  Administrative  Agent shall not be liable for any action taken or not taken
by it with the consent or at the request of the Required  Lenders (or such other
number  or  percentage   of  the  Lenders  as  shall  be  necessary   under  the
circumstances  as provided  in SECTION  9.02) or in the absence of its own gross
negligence or willful misconduct.  The Administrative  Agent shall be deemed not
to have  knowledge of any Default  unless and until  written  notice  thereof is
given  to the  Administrative  Agent  by  the

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Borrower or a Lender, and the Administrative  Agent shall not be responsible for
or have any duty to  ascertain or inquire  into (i) any  statement,  warranty or
representation  made in or in connection with this Agreement,  (ii) the contents
of  any  certificate,  report  or  other  document  delivered  hereunder  or  in
connection  herewith,  (iii)  the  performance  or  observance  of  any  of  the
covenants,  agreements or other terms or conditions  set forth herein,  (iv) the
validity, enforceability,  effectiveness or genuineness of this Agreement or any
other  agreement,  instrument  or  document,  or  (v)  the  satisfaction  of any
condition  set forth in ARTICLE IV or  elsewhere  herein,  other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent.

          The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement,  instrument,  document or other writing  believed by it to be genuine
and to have been signed or sent by the proper Person. The  Administrative  Agent
also may rely upon any statement  made to it orally or by telephone and believed
by it to be made by the proper  Person,  and shall not incur any  liability  for
relying thereon.  The  Administrative  Agent may consult with legal counsel (who
may be counsel for the  Borrower),  independent  accountants  and other  experts
selected by it, and shall not be liable for any action  taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.

          The  Administrative  Agent  may  perform  any and all its  duties  and
exercise  its  rights  and  powers  by or  through  any one or  more  sub-agents
appointed by the  Administrative  Agent. The  Administrative  Agent and any such
sub-agent  may perform any and all its duties and exercise its rights and powers
through their  respective  Related  Parties.  The exculpatory  provisions of the
preceding  paragraphs  shall  apply to any  such  sub-agent  and to the  Related
Parties of the Administrative  Agent and any such sub-agent,  and shall apply to
their  respective  activities in connection  with the  syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.

          Subject   to  the   appointment   and   acceptance   of  a   successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders,  the Issuing Bank and the Borrower.
Upon any such  resignation,  the  Required  Lenders  shall  have the  right,  in
consultation  with the Borrower,  to appoint a successor.  If no successor shall
have been so  appointed  by the Required  Lenders and shall have  accepted  such
appointment within 30 days after the retiring  Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and the Issuing  Bank,  appoint a successor  Administrative  Agent which
shall be a bank with an office in Houston,  Texas,  or an  Affiliate of any such
bank. Upon the acceptance of its appointment as  Administrative  Agent hereunder
by a successor,  such successor  shall succeed to and become vested with all the
rights, powers,  privileges and duties of the retiring Administrative Agent, and
the  retiring  Administrative  Agent  shall be  discharged  from its  duties and
obligations  hereunder.  The  fees  payable  by  the  Borrower  to  a  successor
Administrative  Agent  shall  be the same as those  payable  to its  predecessor
unless  otherwise  agreed  between the  Borrower and such  successor.  After the
Administrative Agent's resignation hereunder, the provisions of this Article and
SECTION  9.03  shall  continue  in  effect  for the  benefit  of  such  retiring
Administrative  Agent,  its sub agents and their  respective  Related Parties in
respect of any actions  taken or omitted to be taken by any of them while it was
acting as Administrative Agent.

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<PAGE>
          Each  Lender  acknowledges  that it  has,  independently  and  without
reliance  upon the  Administrative  Agent or any other  Lender and based on such
documents  and  information  as it has deemed  appropriate,  made its own credit
analysis  and  decision  to  enter  into  this   Agreement.   Each  Lender  also
acknowledges  that  it  will,   independently  and  without  reliance  upon  the
Administrative  Agent  or any  other  Lender  and  based on such  documents  and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any related agreement or any document furnished hereunder or thereunder.

                                   ARTICLE IX

                                  MISCELLANEOUS

          SECTION  9.01  NOTICES.  (a) Except in the case of  notices  and other
communications  expressly  permitted  to be given by  telephone  (and subject to
paragraph (b) below), all notices and other  communications  provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopy, as follows:

          (i) if to the Borrower,  to it at 1929 Allen Parkway,  Houston,  Texas
     77019,  Attention of Chief  Financial  Officer  (Phone No. (713)  525-2821;
     Telecopy No. (713) 525-5596; E-Mail Address harry.loring@sci-us.com);

          (ii) if to the Administrative Agent, Issuing Bank or Swingline Lender,
     to JPMorgan Chase Bank,  Loan and Agency Services Group, 10 South Dearborn,
     19th Floor, Chicago,  Illinois 60603-2003,  Attention Lillian Arroyo (Phone
     No.  (312)   385-7014;   Telecopy  No.  (312)   732-1544;   E-Mail  Address
     lillian.arroyo@jpmchase.com), and a copy to JPMorgan Chase Bank, 711 Travis
     Street,  8N-78,  Houston,  Texas 77002,  Attention  Debra Harris (Phone No.
     (713)   216-5733;    Telecopy   No.   (713)   215-4651;    E-Mail   Address
     debra.m.harris@chase.com); and

          (iii)  if to any  other  Lender,  to it at its  address  (or  telecopy
     number) set forth in its Administrative Questionnaire.

          (b) Notices and other  communications  to the Lenders hereunder may be
delivered or  furnished  by  electronic  communications  pursuant to  procedures
approved by the  Administrative  Agent;  provided that the  foregoing  shall not
apply  to  notices  pursuant  to  ARTICLE  II  unless  otherwise  agreed  by the
Administrative  Agent and the applicable Lender. The Administrative Agent or the
Borrower   may,  in  its   discretion,   agree  to  accept   notices  and  other
communications  to  it  hereunder  by  electronic   communications  pursuant  to
procedures  approved by it;  provided  that approval of such  procedures  may be
limited to particular notices or communications.

          (c) Any party  hereto may change its  address or  telecopy  number for
notices  and other  communications  hereunder  by  notice  to the other  parties
hereto.  All  notices  and other  communications  given to any  party  hereto in
accordance  with the provisions of this  Agreement  shall be deemed to have been
given on the date of receipt.

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<PAGE>
          SECTION  9.02  WAIVERS;  AMENDMENTS;  RELEASE  OF  GUARANTORS.  (a) No
failure or delay by the Administrative  Agent, the Issuing Bank or any Lender in
exercising any right or power hereunder  shall operate as a waiver thereof,  nor
shall  any  single  or  partial  exercise  of any such  right or  power,  or any
abandonment  or  discontinuance  of steps  to  enforce  such a right  or  power,
preclude  any other or further  exercise  thereof or the  exercise  of any other
right or power. The rights and remedies of the Administrative Agent, the Issuing
Bank and the Lenders  hereunder  are  cumulative  and are not  exclusive  of any
rights or remedies that they would otherwise have. No waiver of any provision of
this  Agreement or consent to any departure by the Borrower  there from shall in
any event be effective  unless the same shall be  permitted by paragraph  (b) of
this  Section,  and then such waiver or consent  shall be effective  only in the
specific  instance  and for the purpose for which  given.  Without  limiting the
generality  of the  foregoing,  the making of a Loan or  issuance of a Letter of
Credit shall not be construed as a waiver of any Default,  regardless of whether
the Administrative  Agent, any Lender or the Issuing Bank may have had notice or
knowledge of such Default at the time.

          (b) Neither this  Agreement  nor any  provision  hereof may be waived,
amended or modified  except  pursuant to an agreement or  agreements  in writing
entered into by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders;  PROVIDED that no
such  agreement  shall (i) increase  the  Commitment  of any Lender  without the
written consent of such Lender,  (ii) reduce the principal amount of any Loan or
LC  Disbursement  or reduce  the rate of  interest  thereon,  or reduce any fees
payable hereunder,  without the written consent of each Lender affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any Loan
or LC Disbursement,  including,  without limitation, any payments required under
SECTION 2.10(B) hereof, or any interest thereon,  or any fees payable hereunder,
or reduce the  amount of,  waive or excuse any such  payment,  or  postpone  the
scheduled date of expiration of any  Commitment,  without the written consent of
each Lender  affected  thereby,  (iv) change SECTION  2.18(B) or (c) in a manner
that would alter the pro rata sharing of payments required thereby,  without the
written consent of each Lender, (v) permit an Interest Period with a duration in
excess of six (6) months,  or (vi) change any of the  provisions of this Section
or the definition of "Required Lenders" or any other provision hereof specifying
the number or  percentage  of  Lenders  required  to waive,  amend or modify any
rights  hereunder  or make any  determination  or grant any  consent  hereunder,
without  the  written  consent of each  Lender;  PROVIDED  FURTHER  that no such
agreement  shall  amend  or  waive  or  change  the  allocation  of a  mandatory
prepayment  without the  consent of the  holders of a majority of the  aggregate
outstanding  principal  amount of Term  Loans and that no such  agreement  shall
amend,  modify or  otherwise  affect the rights or duties of the  Administrative
Agent,  the Issuing Bank or the  Swingline  Lender  hereunder  without the prior
written consent of the  Administrative  Agent, the Issuing Bank or the Swingline
Lender, as the case may be.

          (c)  Notwithstanding  any contrary  position in this  Agreement or any
other Loan Document, if (a) a Guarantor is no longer a Subsidiary and (b) at the
time such Guarantor became a  non-subsidiary,  no Event of Default then existed,
then such Guarantor shall be automatically  released from its obligations  under
the  Guarantee  Agreement  to which it is a party,  without  need for any formal
action by the Administrative  Agent or any Lender; and the Administrative  Agent
will confirm such release by a notice to the Borrower  upon receipt of a request
therefor.

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<PAGE>
          SECTION 9.03  EXPENSES;  INDEMNITY;  DAMAGE  WAIVER.  (a) The Borrower
shall  pay  (i)  all  reasonable  out  of  pocket   expenses   incurred  by  the
Administrative Agent and its Affiliates,  including the reasonable fees, charges
and  disbursements of counsel for the  Administrative  Agent, in connection with
the syndication of the credit  facilities  provided for herein,  the preparation
and administration of this Agreement or any amendments, modifications or waivers
of the provisions hereof (whether or not the transactions contemplated hereby or
thereby  shall be  consummated),  (ii)  all  reasonable  out-of-pocket  expenses
incurred by the Issuing Bank in connection with the issuance, amendment, renewal
or  extension of any Letter of Credit or any demand for payment  thereunder  and
(iii) all  out-of-pocket  expenses  incurred by the  Administrative  Agent,  the
Issuing Bank or any Lender, including the fees, charges and disbursements of any
counsel  for the  Administrative  Agent,  the  Issuing  Bank or any  Lender,  in
connection  with the  enforcement or protection of its rights in connection with
this Agreement,  including its rights under this Section,  or in connection with
the Loans made or Letters of Credit issued hereunder,  including all such out-of
pocket expenses  incurred during any workout,  restructuring  or negotiations in
respect of such Loans or Letters of Credit.

          (b) The Borrower shall indemnify the Administrative Agent, the Issuing
Bank and each Lender,  and each Related  Party of any of the  foregoing  Persons
(each  such  Person  being  called  an  "INDEMNITEE")  against,  and  hold  each
Indemnitee harmless from, any and all losses, claims,  damages,  liabilities and
related expenses,  including the fees,  charges and disbursements of any counsel
for any Indemnitee,  incurred by or asserted against any Indemnitee  arising out
of, in connection  with, or as a result of (i) the execution or delivery of this
Agreement or any agreement or instrument contemplated hereby, the performance by
the parties hereto of their respective obligations hereunder or the consummation
of the Transactions or any other transactions contemplated hereby, (ii) any Loan
or Letter of Credit or the use of the proceeds there from (including any refusal
by the Issuing  Bank to honor a demand for  payment  under a Letter of Credit if
the documents  presented in connection  with such demand do not strictly  comply
with the terms of such Letter of Credit),  (iii) any actual or alleged  presence
or release of Hazardous  Materials on or from any property  owned or operated by
the Borrower or any of its Subsidiaries,  or any Environmental Liability related
in any way to the  Borrower  or any of its  Subsidiaries,  or (iv) any actual or
prospective claim,  litigation,  investigation or proceeding  relating to any of
the  foregoing,  whether  based  on  contract,  tort  or any  other  theory  and
regardless  of whether any  Indemnitee  is a party  thereto;  PROVIDED that such
indemnity shall not, as to any Indemnitee,  be available to the extent that such
losses,  claims,  damages,  liabilities or related  expenses are determined by a
court of  competent  jurisdiction  by final and  nonappealable  judgment to have
resulted from the gross negligence or willful misconduct of such Indemnitee.

          (c) To the extent that the Borrower  fails to pay any amount  required
to be paid by it to (i) the Issuing Bank or the Swingline Lender under paragraph
(a) or (b) of this Section, each Revolving Lender severally agrees to pay to the
Issuing  Bank  or the  Swingline  Lender,  as the  case  may be,  such  Lender's
Applicable   Percentage   (determined   as  of  the  time  that  the  applicable
unreimbursed  expense or  indemnity  payment is sought) of such  unpaid  amount;
provided that the  unreimbursed  expense or  indemnified  loss,  claim,  damage,
liability  or related  expense,  as the case may be, was incurred by or asserted
against the  Administrative  Agent,  the Issuing Bank or the Swingline Lender in
its capacity as such, and (ii) the  Administrative  Agent under paragraph (a) or
(b) of this  Section,  each Lender  severally  agrees to pay its pro-rata  share

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(based  on the total of the  outstanding  Term  Loans  plus the  Revolving  Loan
Commitments) of such amount to the Administrative Agent.

          (d) To the extent  permitted by applicable law, the Borrower shall not
assert,  and hereby waives,  any claim against any Indemnitee,  on any theory of
liability, for special, indirect,  consequential or punitive damages (as opposed
to direct or actual damages)  arising out of, in connection with, or as a result
of, this  Agreement or any  agreement or  instrument  contemplated  hereby,  the
Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

          (e) All amounts due under this Section shall be payable promptly after
written demand therefor.

          WITHOUT  LIMITING ANY PROVISION OF THIS  AGREEMENT,  IT IS THE EXPRESS
INTENTION  OF THE PARTIES  HERETO THAT EACH PERSON TO BE  INDEMNIFIED  HEREUNDER
SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL LOSSES,  LIABILITIES,
CLAIMS AND  DAMAGES  ARISING OUT OF OR  RESULTING  FROM THE  ORDINARY,  SOLE AND
CONTRIBUTORY NEGLIGENCE OF SUCH PERSON.

SECTION 9.04 SUCCESSORS AND ASSIGNS.  (a) The provisions of this Agreement shall
be  binding  upon and  inure to the  benefit  of the  parties  hereto  and their
respective  successors and assigns  permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), except that (i) the Borrower
may not assign or otherwise transfer any of its rights or obligations  hereunder
without the prior written  consent of each Lender (and any attempted  assignment
or transfer by the Borrower  without  such  consent  shall be null and void) and
(ii) no Lender  may  assign or  otherwise  transfer  its  rights or  obligations
hereunder  except in accordance  with this Section.  Nothing in this  Agreement,
expressed or implied,  shall be construed to confer upon any Person  (other than
the parties hereto,  their  respective  successors and assigns  permitted hereby
(including  any Affiliate of the Issuing Bank that issues any Letter of Credit),
Participants  (to the extent  provided in paragraph (c) of this Section) and, to
the extent  expressly  contemplated  hereby,  the Related Parties of each of the
Administrative  Agent,  the Issuing Bank and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.

          (b) (i)  Subject  to the  conditions  set forth in  paragraph  (b)(ii)
below,  any Lender may assign to one or more  assignees  all or a portion of its
rights and obligations  under this Agreement  (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written consent
(such consent not to be unreasonably withheld) of:

               (A) the Borrower, PROVIDED that no consent of the Borrower  shall
     be required for an assignment  to a Lender, an  Affiliate  of a Lender,  an
     Approved  Fund or, if an Event of Default has occurred  and is  continuing,
     any other assignee;

               (B)  the  Administrative  Agent, PROVIDED that no consent  of the
     Administrative  Agent shall be required  for an  assignment  to an assignee
     that is a Lender, an Affiliate of a Lender or an Approved Fund; and

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               (C) the Issuing  Bank  and Swingline  Lender,  provided  that  no
     consent  of  the  Issuing   Bank  or  the   Swingline   Lender   shall   be
     required  for an assignment of all or any portion of the Term Loan.

          (ii)  Assignments  shall  be  subject  to  the  following   additional
     conditions:

               (A) except  in  the  case of an  assignment  to  a Lender  or  an
     Affiliate of a Lender or an  assignment of the entire  remaining  amount of
     the assigning Lender's Revolving Loan Commitment or Loans of any Class, the
     amount of the Revolving  Loan  Commitment or Loans of the assigning  Lender
     subject to each such  assignment  (determined as of the date the Assignment
     and  Assumption  with  respect  to  such  assignment  is  delivered  to the
     Administrative  Agent)  shall not be less than  $5,000,000  with respect to
     Revolving  Loans or $500,000  with respect to Term Loans unless each of the
     Borrower and the Administrative Agent otherwise consent,  PROVIDED Approved
     Funds shall be aggregated for purposes of determining  compliance with such
     minimum assignment amount and that no such consent of the Borrower shall be
     required  if an Event of  Default  under  clause  (a),  (b),  (h) or (i) of
     ARTICLE VII has occurred and is continuing;

               (B)  each  partial  assignment  shall  be made  as an  assignment
     of  a  proportionate   part  of  all  the  assigning  Lender's  rights  and
     obligations  under this  Agreement,  PROVIDED that this clause shall not be
     construed to prohibit the  assignment  of a  proportionate  part of all the
     assigning  Lender's  rights  and  obligations  in  respect  of one Class of
     Commitments or Loans;

               (C) the parties to  each  assignment  shall  execute  and deliver
     to the Administrative  Agent an Assignment and Assumption,  together with a
     processing and  recordation  fee of $3,500;  PROVIDED that no more than one
     such fee shall be payable in connection with simultaneous assignments to or
     by two or more Approved Funds; and

               (D) the  assignee,  if it shall not be a Lender, shall deliver to
     the Administrative Agent an Administrative Questionnaire.

          For the purposes of this Section 9.04(b), the term "Approved Fund" has
the following meaning:

          "APPROVED FUND" means any Person (other than a natural person) that is
engaged in making,  purchasing,  holding or  investing in bank loans and similar
extensions  of  credit  in the  ordinary  course  of its  business  and  that is
administered or managed by (a) a Lender,  (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a Lender. All of
the entities on SCHEDULE 9.04 are Approved Funds.

          (iii)  Subject  to  acceptance  and  recording   thereof  pursuant  to
     paragraph  (b)(iv)  of this  Section,  from and  after the  effective  date
     specified in each Assignment and Assumption the assignee  thereunder  shall
     be a party  hereto  and,  to the extent of the  interest  assigned  by such
     Assignment  and  Assumption,  have the rights and  obligations  of a Lender
     under this Agreement,  and the assigning  Lender  thereunder  shall, to the
     extent of the  interest  assigned by such  Assignment  and  Assumption,  be
     released from its

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     obligations  under this  Agreement  (and, in the case of an Assignment  and
     Assumption  covering all of the assigning  Lender's  rights and obligations
     under this  Agreement,  such Lender  shall  cease to be a party  hereto but
     shall  continue  to be entitled to the  benefits of SECTION  2.15,  SECTION
     2.16,  SECTION 2.17 and SECTION 9.03;  provided that such release shall not
     affect any legal  responsibility  for such Lender's actions and failures to
     act occurring before the effective date of such Assignment and Assumption).
     Any assignment or transfer by a Lender of rights or obligations  under this
     Agreement  that does not comply with this SECTION 9.04 shall be treated for
     purposes of this Agreement as a sale by such Lender of a  participation  in
     such  rights and  obligations  in  accordance  with  paragraph  (c) of this
     Section.

          (iv) The Administrative  Agent, acting for this purpose as an agent of
     the  Borrower,  shall  maintain  at one  of its  offices  a  copy  of  each
     Assignment  and  Assumption   delivered  to  it  and  a  register  for  the
     recordation  of the names and addresses of the Lenders,  and the Commitment
     of, and principal amount of the Loans and LC  Disbursements  owing to, each
     Lender pursuant to the terms hereof from time to time (the "Register"). The
     entries  in the  Register  shall  be  conclusive,  and  the  Borrower,  the
     Administrative  Agent,  the  Issuing  Bank and the  Lenders  may treat each
     Person whose name is recorded in the Register  pursuant to the terms hereof
     as a Lender  hereunder for all purposes of this Agreement,  notwithstanding
     notice to the contrary.  The Register  shall be available for inspection by
     the Borrower,  the Issuing Bank and any Lender,  at any reasonable time and
     from time to time upon reasonable prior notice.

          (v) Upon its receipt of a duly  completed  Assignment  and  Assumption
     executed by an assigning Lender and an assignee,  the assignee's  completed
     Administrative Questionnaire (unless the assignee shall already be a Lender
     hereunder), the processing and recordation fee referred to in paragraph (b)
     of this  Section and any  written  consent to such  assignment  required by
     paragraph (b) of this Section,  the Administrative  Agent shall accept such
     Assignment and Assumption and record the information  contained  therein in
     the Register;  provided that if either the Assigning Lender or the assignee
     shall have failed to make any payment required to be made by it pursuant to
     SECTION 2.05(C), SECTION 2.06(D), SECTION 2.06(E), SECTION 2.07(B), SECTION
     2.18(D),  OR  SECTION  9.03(C),  the  Administrative  Agent  shall  have no
     obligation  to  accept  such  Assignment  and  Assumption  and  record  the
     information  therein in the Register  unless and until such  payment  shall
     have been made in full,  together  with all accrued  interest  thereon.  No
     assignment  shall be effective for purposes of this Agreement unless it has
     been recorded in the Register as provided in this paragraph.

          (c) (i) Any Lender  may,  without  the  consent of the  Borrower,  the
Administrative   Agent,  the  Issuing  Bank  or  the  Swingline   Lender,   sell
participations  to one or more banks or other entities (a  "Participant") in all
or a portion of such  Lender's  rights  and  obligations  under  this  Agreement
(including  all or a  portion  of its  Commitment  and the  Loans  owing to it);
provided that (A) such Lender's  obligations  under this Agreement  shall remain
unchanged,  (B) such Lender shall remain solely responsible to the other parties
hereto  for the  performance  of such  obligations  and  (C) the  Borrower,  the
Administrative  Agent,  the Issuing Bank and the other Lenders shall continue to
deal solely and  directly  with such  Lender in  connection  with such  Lender's
rights and  obligations  under  this  Agreement.  Any  agreement  or

                                       65
<PAGE>
instrument  pursuant to which a Lender sells such a participation  shall provide
that such Lender shall retain the sole right to enforce  this  Agreement  and to
approve  any  amendment,  modification  or  waiver  of  any  provision  of  this
Agreement;  provided  that such  agreement or  instrument  may provide that such
Lender will not, without the consent of the Participant, agree to any amendment,
modification  or waiver  described in the first proviso to SECTION  9.02(B) that
affects such  Participant.  Subject to paragraph  (c)(ii) of this  Section,  the
Borrower  agrees that each  Participant  shall be  entitled  to the  benefits of
SECTION  2.15,  SECTION 2.16 and SECTION 2.17 to the same extent as if it were a
Lender and had acquired its interest by assignment  pursuant to paragraph (b) of
this Section.  To the extent  permitted by law, each  Participant  also shall be
entitled to the  benefits of SECTION  9.08 as though it were a Lender,  provided
such  Participant  agrees to be subject  to SECTION  2.18(C) as though it were a
Lender.

          (ii) A  Participant  shall not be  entitled  to  receive  any  greater
          payment under SECTION 2.15 or SECTION 2.17 than the applicable  Lender
          would have been entitled to receive with respect to the  participation
          sold to such Participant, unless the sale of the participation to such
          Participant is made with the Borrower's express prior written consent.
          A Participant that would be a Foreign Lender if it were a Lender shall
          not be entitled to the benefits of SECTION 2.17 unless the Borrower is
          notified  of the  participation  sold to  such  Participant  and  such
          Participant  agrees,  for the benefit of the Borrower,  to comply with
          SECTION 2.17(E) as though it were a Lender.

          (d) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this  Agreement to secure  obligations of
such Lender,  including  without  limitation  any pledge or assignment to secure
obligations  to a Federal  Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security  interest;  PROVIDED that no such pledge
or  assignment  of a security  interest  shall  release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

          SECTION 9.05 SURVIVAL. All covenants, agreements,  representations and
warranties  made  by  the  Borrower  herein  and in the  certificates  or  other
instruments  delivered in connection with or pursuant to this Agreement shall be
considered  to have been  relied  upon by the  other  parties  hereto  and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit,  regardless of any investigation  made by
any  such  other   party  or  on  its  behalf  and   notwithstanding   that  the
Administrative  Agent,  the  Issuing  Bank or any  Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is  extended  hereunder,  and shall  continue in full force and effect as
long as the  principal of or any accrued  interest on any Loan or any fee or any
other  amount  payable  under this  Agreement is  outstanding  and unpaid or any
Letter of Credit is outstanding and so long as the Commitments  have not expired
or  terminated.  The  provisions  of SECTION 2.15,  SECTION 2.16,  SECTION 2.17,
SECTION 9.03 AND ARTICLE VIII, shall survive and remain in full force and effect
regardless of the  consummation of the  transactions  contemplated  hereby,  the
repayment of the Loans,  the  expiration or termination of the Letters of Credit
and the  Commitments  or the  termination  of this  Agreement  or any  provision
hereof.

                                       66
<PAGE>
          SECTION 9.06 COUNTERPARTS;  INTEGRATION; EFFECTIVENESS. This Agreement
may be executed in  counterparts  (and by different  parties hereto on different
counterparts),  each  of  which  may be  delivered  by  electronic  or  telecopy
transmission  and each of which shall  constitute an original,  but all of which
when taken together shall constitute a single  contract.  The Loan Documents and
any   separate   letter   agreements   with  respect  to  fees  payable  to  the
Administrative  Agent  constitute the entire contract among the parties relating
to the subject  matter hereof and supersede any and all previous  agreements and
understandings,  oral or written,  relating to the subject matter hereof. Except
as provided in SECTION 4.01, this Agreement shall become effective when it shall
have been executed by the Administrative Agent and when the Administrative Agent
shall have received  counterparts  hereof which,  when taken together,  bear the
signatures of each of the other parties hereto,  and thereafter shall be binding
upon and  inure to the  benefit  of the  parties  hereto  and  their  respective
successors and assigns.  Delivery of an executed counterpart of a signature page
of this  Agreement  by  telecopy  shall be  effective  as delivery of a manually
executed counterpart of this Agreement.

          SECTION 9.07 SEVERABILITY.  Any provision of this Agreement held to be
invalid,  illegal  or  unenforceable  in  any  jurisdiction  shall,  as to  such
jurisdiction,  be  ineffective to the extent of such  invalidity,  illegality or
unenforceability without affecting the validity,  legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a  particular  jurisdiction  shall not  invalidate  such  provision in any other
jurisdiction.

          SECTION  9.08  RIGHT OF  SETOFF.  If an Event of  Default  shall  have
occurred and be  continuing,  each Lender and each of its  Affiliates  is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all  deposits  (general  or  special,  time or
demand, provisional or final) at any time held and other obligations at any time
owing by such  Lender or  Affiliate  to or for the credit or the  account of the
Borrower against any of and all the obligations of the Borrower now or hereafter
existing under this Agreement  held by such Lender,  irrespective  of whether or
not such Lender  shall have made any demand  under this  Agreement  and although
such obligations may be unmatured.  The rights of each Lender under this Section
are in addition to other rights and remedies  (including other rights of setoff)
which such Lender may have.

          SECTION  9.09  GOVERNING  LAW;  JURISDICTION;  CONSENT  TO  SERVICE OF
PROCESS. (a)This Agreement shall be construed in accordance with and governed by
the law of the State of Texas.

          (b) The Borrower hereby irrevocably and unconditionally  submits,  for
itself and its property, to the nonexclusive jurisdiction of the District Courts
of the State of Texas sitting in Houston, Harris County, Texas and of the United
States District Court of the Southern District of Texas, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement,  or for  recognition or enforcement of any judgment,  and each of the
parties hereto hereby irrevocably and unconditionally  agrees that all claims in
respect of any such action or  proceeding  may be heard and  determined  in such
Texas State or, to the extent  permitted by law, in such Federal court.  Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive  and may be enforced in other  jurisdictions  by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that the  Administrative  Agent, the Issuing Bank or any Lender

                                       67
<PAGE>
may otherwise have to bring any action or proceeding  relating to this Agreement
against the Borrower or its properties in the courts of any jurisdiction.

          (c) Each party hereby irrevocably and  unconditionally  waives, to the
fullest extent it may legally and  effectively do so, any objection which it may
now or hereafter  have to the laying of venue of any suit,  action or proceeding
arising  out of or  relating  to this  Agreement  in any  court  referred  to in
paragraph (b) of this  Section.  Each of the parties  hereto hereby  irrevocably
waives,  to the fullest extent  permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

          (d) Each party to this  Agreement  irrevocably  consents to service of
process in the manner  provided  for  notices in SECTION  9.01.  Nothing in this
Agreement  will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

          SECTION 9.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY  IN ANY  LEGAL  PROCEEDING  DIRECTLY  OR  INDIRECTLY  ARISING  OUT OF OR
RELATING TO THIS  AGREEMENT OR THE  TRANSACTIONS  CONTEMPLATED  HEREBY  (WHETHER
BASED ON CONTRACT,  TORT OR ANY OTHER  THEORY).  EACH PARTY HERETO (A) CERTIFIES
THAT NO  REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY OTHER PARTY HAS  REPRESENTED,
EXPRESSLY  OR  OTHERWISE,  THAT SUCH  OTHER  PARTY  WOULD  NOT,  IN THE EVENT OF
LITIGATION,  SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)  ACKNOWLEDGES  THAT IT
AND THE OTHER PARTIES  HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

          SECTION 9.11 HEADINGS.  Article and Section  headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement  and  shall  not  affect  the   construction  of,  or  be  taken  into
consideration in interpreting, this Agreement.

          SECTION 9.12  CONFIDENTIALITY.  Each of the Administrative  Agent, the
Issuing  Bank and the Lenders  agrees to  maintain  the  confidentiality  of the
Information (as defined below),  except that Information may be disclosed (a) to
its and its Affiliates'  directors,  officers,  employees and agents,  including
accountants,  legal  counsel and other  advisors (it being  understood  that the
Persons to whom such  disclosure  is made will be informed  of the  confidential
nature  of  such   Information   and   instructed   to  keep  such   Information
confidential),  (b) to the extent requested by any regulatory authority,  (c) to
the extent  required by  applicable  laws or  regulations  or by any subpoena or
similar  legal  process,  (d) to any  other  party  to  this  Agreement,  (e) in
connection  with the exercise of any remedies  hereunder or any suit,  action or
proceeding  relating to this Agreement or the  enforcement of rights  hereunder,
(f) subject to an  agreement  containing  provisions  substantially  the same as
those  of this  Section,  to (i)  any  assignee  of or  Participant  in,  or any
prospective  assignee  of or  Participant  in, any of its rights or  obligations
under this Agreement,  (ii) any pledgee referred to in SECTION 9.04(D), or (iii)
any  actual  or  prospective  counterparty  (or  its  advisors)  to any  swap or
derivative  transaction  relating to the Borrower and its obligations,  (g) with
the consent of the  Borrower or (h) to the extent such  Information  (i) becomes
publicly  available  other than as a result of a breach of this  Section or (ii)

                                       68
<PAGE>
becomes available to the Administrative Agent, the Issuing Bank or any Lender on
a nonconfidential basis from a source other than the Borrower.  For the purposes
of this Section,  "INFORMATION" means all information received from the Borrower
relating to the Borrower or its business,  other than any such  information that
is available to the  Administrative  Agent,  the Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by the Borrower; PROVIDED that, in the
case of  information  received  from the Borrower  after the date  hereof,  such
information is clearly  identified at the time of delivery as confidential.  Any
Person  required to maintain the  confidentiality  of Information as provided in
this Section shall be  considered to have complied with its  obligation to do so
if  such  Person  has  exercised  the  same  degree  of  care  to  maintain  the
confidentiality  of such  Information  as such  Person  would  accord to its own
confidential information.

          SECTION 9.13 INTEREST RATE LIMITATION. Notwithstanding anything herein
to the  contrary,  in no event  whatsoever  shall  the  amount  contracted  for,
charged,  paid or otherwise agreed to be paid to or received by the Agent or any
Lender for the use,  forbearance  or detention of money under this  Agreement or
any Loan Document or otherwise exceed the maximum  non-usurious rate pursuant to
applicable  law (the  "MAXIMUM  RATE"),  and if at any time  the  interest  rate
applicable to any Loan,  together with all fees, charges and other amounts which
are treated as  interest on such Loan under  applicable  law  (collectively  the
"CHARGES"),  shall  exceed the Maximum  Rate,  the rate of  interest  payable in
respect of such Loan  hereunder,  together  with all Charges  payable in respect
thereof,  shall be limited to the Maximum  Rate and, to the extent  lawful,  the
interest  and Charges  that would have been  payable in respect of such Loan but
were not payable as a result of the operation of this Section shall be cumulated
and the interest and Charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the Maximum Rate therefor)  until such
cumulated amount,  together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by such Lender. Anything
in this  Agreement or any other Loan  Document to the contrary  notwithstanding,
the Borrower  shall not be required to pay unearned  interest and shall never be
required to pay  interest at a rate in excess of the  Maximum  Rate,  and if the
effective rate of interest which would otherwise be payable under this Agreement
and the other Loan  Documents  would exceed the Maximum Rate, or if the Agent or
any Lender shall receive any unearned  interest or shall receive monies that are
deemed to  constitute  interest  which  would  increase  the  effective  rate of
interest payable by the Borrower under this Agreement or Loan Document to a rate
in excess of the  Maximum  Rate,  then (a) the amount of  interest  which  would
otherwise be payable by the Borrower  under this  Agreement or any Loan Document
shall be  reduced  to the  amount  allowed  under  applicable  law,  and (b) any
unearned  interest  paid by the Borrower or any interest paid by the Borrower in
excess of the Maximum  Rate shall be credited  on the  principal  of (or, if the
principal amount shall have been paid in full, refunded to the Borrower).  It is
further agreed that,  without  limitation of the foregoing,  all calculations of
the rate of interest  contracted  for,  charged or received by any Lender  under
this  Agreement or any Loan  Document,  are made for the purpose of  determining
whether such rate  exceeds the Maximum  Rate,  and shall be made by  amortizing,
prorating and spreading in equal parts during the period of the full stated term
of the Loans  evidenced by said Notes all interest at any time  contracted  for,
charged or received by such Lender in connection therewith.

          SECTION  9.14 USA  PATRIOT  ACT.  Each  Lender  that is subject to the
requirements  of the USA Patriot Act (Title III of Pub. L. 107-56  (signed  into
law October 26,  2001)) (the

                                       69
<PAGE>
"PATRIOT ACT") hereby notifies the Borrower that pursuant to the requirements of
the Patriot Act, it is required to obtain,  verify and record  information  that
identifies the Borrower,  which information includes the name and address of the
Borrower  and other  information  that will allow such  Lender to  identify  the
Borrower in accordance with the Patriot Act.

          SECTION 9.15 FINAL  AGREEMENT OF THE PARTIES.  THIS WRITTEN  AGREEMENT
(INCLUDING  THE  EXHIBITS  AND  SCHEDULES  HERETO) AND THE OTHER LOAN  DOCUMENTS
CONSTITUTE  A "LOAN  AGREEMENT"  AS  DEFINED IN  SECTION  26.02(a)  OF THE TEXAS
BUSINESS  AND COMMERCE  CODE,  AND  REPRESENT  THE FINAL  AGREEMENT  BETWEEN THE
PARTIES  RELATING  TO THE  SUBJECT  MATTER  HEREOF  AND  THEREOF  AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE  PARTIES.  THERE ARE NO  UNWRITTEN  ORAL  AGREEMENTS  BETWEEN THE PARTIES
RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF.  Any previous agreement among
the parties  with respect to the subject  matter  hereof is  superseded  by this
Agreement.  Nothing in this  Agreement,  expressed  or  implied,  is intended to
confer  upon any party  other  than the  parties  hereto any  rights,  remedies,
obligations or liabilities under or by reason of this Agreement.

                                       70
<PAGE>
            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective  authorized officers as of the day and year
first above written.

                                    SERVICE CORPORATION
                                    INTERNATIONAL



                                    By: /s/ Eric D. Tanzberger
                                       -----------------------------------
                                       Name: Eric D. Tanzberger
                                       Title: Senior Vice President and Chief
                                              Financial Officer

                                       71
<PAGE>
                                    JPMORGAN CHASE BANK, N.A., individually
                                    and as Administrative Agent



                                    By: /s/ Robert L. Mendoza
                                       -----------------------------------
                                       Name: Robert L. Mendoza
                                       Title: Vice President

                                       72
<PAGE>
                                    BANK OF AMERICA, N.A., individually and as
                                    Syndication Agent



                                    By: /s/ Gary L. Mingle
                                       -----------------------------------
                                       Name: Gary L. Mingle
                                      Title: Senior Vice President

                                       73


<PAGE>
                                    THE BANK OF NOVA SCOTIA, as a Revolving
                                    Lender



                                    By: /s/ William E. Zarrett
                                       -----------------------------------
                                       Name: William E. Zarrett
                                      Title: Managing Director

                                       74

                                    WACHOVIA BANK, NATIONAL ASSOCIATION, as a
                                    Revolving Lender



                                    By: /s/ Kenneth C. Coulter
                                       -----------------------------------
                                       Name: Kenneth C. Coulter
                                      Title: Vice President

                                    MERRILL LYNCH CAPITAL CORPORATION



                                    By: /s/ Nancy E. Meadows
                                       -----------------------------------
                                       Name: Nancy E. Meadows
                                      Title: Vice President


                                    AMEGY BANK NATIONAL ASSOCIATION, as a
                                    Revolving Lender



                                    By: /s/ Preston Moore
                                       -----------------------------------
                                       Name: Preston Moore
                                      Title: Senior Vice President


                                    SUMITOMO MITSUI BANKING CORPORATION, as a
                                    Revolving Lender



                                    By: /s/ Shigeru Tsuru
                                       -----------------------------------
                                       Name: Shigeru Tsuru
                                      Title: Joint General Manager


                                    FIFTH THIRD BANK, a Michigan Banking
                                    Corporation, as a Revolving Lender



                                    By: /s/ Randolph Wolffis
                                       -----------------------------------
                                       Name: Randolph Wolffis
                                      Title: Vice President


                                    LEHMAN COMMERCIAL PAPER INC., as a
                                    Revolving Lender



                                    By: /s/ Ritam Bhalla
                                       -----------------------------------
                                       Name: Ritam Bhalla
                                      Title: Authorized Signatory


                                    RAYMOND JAMES BANK, FSB, as a
                                    Revolving Lender



                                    By: /s/ Laurens F. Schaad Jr.
                                       -----------------------------------
                                       Name: Laurens F. Schaad Jr.
                                      Title: Vice President


                                    REGIONS BANK, as a Revolving Lender



                                    By: /s/ Keith S. Page
                                       -----------------------------------
                                       Name: Keith S. Page
                                      Title: Senior Vice President


                                    BANK OF TEXAS, N.A., as a
                                    Revolving Lender



                                    By: /s/ Larry Ellis
                                       -----------------------------------
                                       Name: Larry Ellis
                                      Title: Bank of Texas

                                    MIZUHO CORPORATE BANK, LTD., as a
                                    Revolving Lender



                                    By: /s/ Bertram H. Tang
                                       -----------------------------------
                                       Name: Bertram H. Tang
                                      Title: SVP and Team Leader


                                    US BANK, N.A., as a Revolving Lender



                                    By: /s/ Kevin S. McFadden
                                       -----------------------------------
                                       Name: Kevin S. McFadden
                                      Title: Vice President

                                    COMPASS BANK, as a Revolving Lender



                                    By: /s/ Tom Browig
                                       -----------------------------------
                                       Name: Tom Browig
                                      Title: Senior Vice President


                                    SUNTRUST BANK, as a Revolving Lender



                                    By: /s/ Daniel S. Komitor
                                       -----------------------------------
                                       Name: Daniel S. Komitor
                                      Title: Director


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>5
<FILENAME>nov28ex991.txt
<DESCRIPTION>EXHIBIT 99.1
<TEXT>
                                                                    Exhibit 99.1


                        SERVICE CORPORATION INTERNATIONAL
           ANNOUNCES COMPLETION OF MERGER WITH ALDERWOODS GROUP, INC.


HOUSTON, Texas, November 28, 2006 . . . Service Corporation International (NYSE:
SCI) announced today that it has completed its acquisition of Alderwoods Group,
Inc. (Nasdaq: AWGI). Under the terms of the merger agreement, each outstanding
share of Alderwoods' common stock has been converted into the right to receive
$20.00 in cash, without interest. As a result of the acquisition, the common
stock of Alderwoods will cease to be publicly traded and, accordingly, will no
longer be listed on The Nasdaq Stock Market, Inc.

MERGER TRANSACTION
The Bank of New York Trust Company, N.A. will act as the paying agent in the
merger and will mail to former Alderwoods stockholders a letter of transmittal
and instructions for receiving payment of the merger consideration. Holders of
Alderwoods common stock certificates will receive the merger consideration soon
after submitting a properly completed letter of transmittal to The Bank of New
York Trust Company, N.A. All questions relating to receipt of the merger
consideration should be directed to The Bank of New York Trust Company, N.A. at
(214) 880-8238. Alderwoods stockholders whose shares are held by a broker, bank
or other nominee should contact such broker, bank or other nominee regarding
receipt of the merger consideration.

TENDER OFFERS
SCI announced that, pursuant to the terms of its previously announced cash
tender offer and consent solicitation for certain of its 7.70% Senior Notes due
2009, CUSIP Nos. 817565AX2, 817565AV6 and B17565AW4 (the "SCI 7.70% Notes"), SCI
has accepted for payment $139,047,000 aggregate principal amount, constituting
approximately 96.25% of the SCI 7.70% Notes. SCI also announced that the
supplemental indenture to the indenture governing the SCI 7.70% Notes, executed
on November 28, 2006, is now operative.

SCI announced that, pursuant to the terms of Alderwoods' previously announced
cash tender offer and consent solicitation for Alderwoods' 7.75% Senior Notes
due 2012, CUSIP No. 014383AFO (the "Alderwoods 7.75% Notes"), Alderwoods has
accepted for payment $200 million aggregate principal amount, constituting all
of the Alderwoods 7.75% Notes.

NEW CREDIT FACILITY
On November 28, 2006, SCI also entered into a new 5-year, $450 million senior
credit facility (the "Credit Facility") with a syndicate of financial
institutions, comprised of a $300 million revolving credit facility, which
replaces SCI's former $200 million revolving credit facility, and a $150 million
term loan facility. SCI funded the $150 million term loan (the "Term Loan")
under the Credit Facility. The $300 million revolving credit facility remains
undrawn. The proceeds of the Term Loan, together with cash on hand and other
financings, are being used to pay the merger consideration, to purchase the SCI
7.70% Notes and the Alderwoods 7.75% Notes and to pay related costs and
expenses.





<PAGE>




RELEASE OF ESCROWED FUNDS FROM PRIVATE OFFERING
On October 3, 2006, SCI announced the completion of a private offering of $500
million aggregate principal amount of unsecured senior notes, consisting of $250
million aggregate principal amount of 7 3/8% Senior Notes due 2014 and $250
million aggregate principal amount of 7 5/8% Senior Notes due 2018. The net
proceeds of each series of notes, previously held in separate escrow accounts
pending the consummation of the acquisition of Alderwoods and related
transactions, has now been released.

ADDITIONAL PRIVATELY PLACED NOTES
On November 28, 2006, SCI sold $200 million aggregate principal amount of
unsecured senior notes, consisting of $50 million of Floating Rate Series A
Senior Notes due 2011 and $150 million of Floating Rate Series B Notes due 2011
(collectively, the "Notes"). The Notes have not been registered under the
Securities Act of 1933, as amended, and may not be offered or sold in the United
States absent registration or an applicable exemption therefrom. The proceeds of
the Notes, together with cash on hand and other financings, will be used to pay
the merger consideration and to refinance certain other indebtedness.

FORWARD-LOOKING STATEMENTS
Certain statements contained in this press release regarding expected future
events, as well as certain information in other filings with the Securities
Exchange Commission ("SEC") and elsewhere, are forward-looking statements within
the meaning of Section 27A(i) of the Securities Act of 1933 and Section 21E(i)
of the Securities Exchange Act of 1934. The words "believe," "will," "continue,"
"expect" and similar expressions identify these forward-looking statements.
These forward-looking statements are based on the current expectations and
beliefs of SCI management and are subject to certain risks and uncertainties
that could cause actual results to differ materially from those stated,
including, but not limited to, various uncertainties associated with the funeral
service industry in general and Alderwoods' and SCI's operations in particular.
Additional factors that may affect future results are contained in Alderwoods'
and SCI's periodic reports filed with the SEC, especially under the headings
"Forward-Looking Statements" and "Risk Factors." Alderwoods and SCI undertake no
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.

ABOUT SERVICE CORPORATION INTERNATIONAL
Service Corporation International (NYSE: SCI), headquartered in Houston, Texas,
is North America's leading provider of deathcare products and services. At
September 30, 2006 and pro forma for the merger, we owned and operated 1,405
funeral homes, 214 cemeteries, and 234 combination funeral homes and cemeteries
in 46 states, eight Canadian provinces, the District of Columbia and Puerto
Rico. Through our businesses, we market the Dignity Memorial(R) brand which
offers assurance of quality, value, caring service and exceptional customer
satisfaction. For more information about Service Corporation International,
please visit our website at WWW.SCI-CORP.COM. For more information about Dignity
Memorial(R) please visit WWW.DIGNITYMEMORIAL.COM.



CONTACTS

Investors:  Debbie Young - Director / Investor Relations         (713) 525-9088

Media:  Greg Bolton - Director / Corporate Communications        (713) 525-5235







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