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PUT/CALL AGREEMENT
Among
BLACKSTONE CAPITAL PARTNERS II
MERCHANT BANKING FUND L.P.,
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP II L.P.,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ HILLS OFFSHORE
CAPITAL PARTNERS L.P.,
▇▇▇▇▇▇ GROUP INTERNATIONAL, INC.
ROSES DELAWARE, INC.
THE ▇▇▇▇▇▇ GROUP INC.
And
RHI MANAGEMENT DIRECT L.P.
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Dated as of: November 19, 1996
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS................................................. 2
1.1 Certain Defined Terms............................................................................. 2
ARTICLE II
CALL AND PUT OPTIONS............................................. 16
2.1 Call Option....................................................................................... 16
2.2 Put Option........................................................................................ 16
2.3 Call Option Exercise Price........................................................................ 17
2.4 Put Option Exercise Price......................................................................... 17
ARTICLE III
CALCULATION OF OPTION PRICE......................................... 18
3.1 Calculation of Creation Price and Acquisition Creation Price...................................... 18
3.2 Calculation of Pro Forma EBITDA for the Entry Relevant Period and
Creation Multiple............................................................................ 19
3.3 Calculation of Pro Forma Acquisition EBITDA for the Entry Relevant
Period....................................................................................... 20
3.4 Calculation of EBITDA for the Exit Relevant Period................................................ 20
3.5 Access to Information; Resolution of Disputes; Miscellaneous...................................... 20
ARTICLE IV
DETERMINATION OF OPTION CONSIDERATION; CERTAIN CONDITIONS.......................... 21
4.1 Option Consideration.............................................................................. 21
4.2 Conditions to Issuance of ▇▇▇▇▇▇ Common Stock..................................................... 23
ARTICLE V
REGISTRATION RIGHTS............................................. 24
5.1 Incidental Registration........................................................................... 24
5.2 Registration on Request........................................................................... 25
5.3 Registration Procedures .......................................................................... 27
5.4 Indemnification .................................................................................. 29
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Page
ARTICLE VI
REPRESENTATIONS AND WARRANTIES........................................ 32
6.1 Representations and Warranties of All Parties..................................................... 32
6.2 Representations and Warranties of LGII, RDI and LWN............................................... 32
6.3 Representations and Warranties of BCP and ▇▇▇▇.................................................... 33
ARTICLE VII
ADDITIONAL AGREEMENTS............................................ 34
7.1 Calculation of EBITDA............................................................................. 34
7.2 Further Assurances................................................................................ 35
7.3 LWN Guarantee..................................................................................... 35
7.4 Drag-Along Rights................................................................................. 36
ARTICLE VIII
CLOSINGS................................................... 37
8.1 Payment of the Option Price in Cash or ▇▇▇▇▇▇ Common Stock........................................ 37
8.2 Exercise of the BCP Liquidity Right............................................................... 37
8.3 Default By LGII or LWN............................................................................ 38
8.4 Time and Place of Closing......................................................................... 38
ARTICLE IX
MISCELLANEOUS................................................ 38
9.1 Notices........................................................................................... 38
9.2 Severability; Mutuality of Options................................................................ 39
9.3 Entire Agreement.................................................................................. 39
9.4 Amendment and Waiver.............................................................................. 39
9.5 Assignment; Binding on Transferees................................................................ 39
9.6 Variations in Pronouns............................................................................ 40
9.7 Governing Law..................................................................................... 40
9.8 Further Assurances................................................................................ 40
9.9 Headings.......................................................................................... 40
9.10 Counterparts..................................................................................... 40
9.11 Submission to Jurisdiction; Waivers.............................................................. 40
9.12 WAIVERS OF JURY TRIAL............................................................................ 40
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PUT/CALL AGREEMENT
PUT/CALL AGREEMENT, dated as of November 19, 1996 (this "Agreement"),
among Blackstone Capital Partners II Merchant Banking Fund L.P., a Delaware
limited partnership ("BCPII"), ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ Hills Offshore Capital Partners
L.P., a Delaware limited partnership ("BROCP"), Blackstone Family Investment
Partnership II L.P., a Delaware limited partnership ("BFIP" and, together with
BCPII, BROCP and each of their respective permitted assigns and transferees as
provided herein, and together with any Affiliate thereof that acquires shares of
the capital stock of Rose Hills Holdings Corp., a Delaware corporation formerly
known as ▇▇▇▇▇ Holding Company ("Holdings"), as contemplated by Section 5.4 of
the Stockholders' Agreement referred to below, "BCP" or the "BCP Entities"),
▇▇▇▇▇▇ Group International Inc., a Delaware corporation (together with its
permitted assigns and transferees as provided herein, "LGII"), Roses Delaware,
Inc., a Delaware corporation (together with its permitted assigns and
transferees as provided herein, "RDI"), The ▇▇▇▇▇▇ Group Inc., a British
Columbia corporation ("LWN") and RHI Management Direct L.P., a Delaware limited
partnership ("▇▇▇▇"). BCP, LGII, RDI and ▇▇▇▇ are herein collectively referred
to as the "Stockholders" and individually as a "Stockholder."
WHEREAS, Tudor Acquisition Corp., a Delaware corporation which has
been renamed Rose Hills Acquisition Corp. ("RHAC"), has agreed to (i) merge into
Roses, Inc., a California corporation ("RI"), pursuant to an Agreement and Plan
of Merger dated September 19, 1996 (the "Merger Agreement") among RI, the
stockholders of RI and RHAC (which is assigning its rights under the Merger
Agreement to its wholly owned subsidiary RH Mortuary Corporation) and (ii)
acquire substantially all of the cemetery related assets and liabilities of Rose
Hills Memorial Park Association (the "Association") pursuant to an Asset
Purchase Agreement dated September 19, 1996 (the "Asset Purchase Agreement", and
together with the Merger Agreement, the "Agreements") between the Association
and RHAC (which is assigning its rights under the Asset Purchase Agreement to
its wholly owned subsidiary Rose Hills, Inc.);
WHEREAS, such transactions are being consummated concurrently
with the execution and delivery of this Agreement;
WHEREAS, pursuant to a Subscription Agreement of even date
herewith among Holdings, LWN and the Stockholders (the "Subscription
Agreement"), RDI has transferred to Holdings all of the issued and outstanding
stock of certain of its subsidiaries which own and operate funeral homes and
cemeteries in California (the "Satellite Properties") in exchange for shares of
Preferred Stock (as hereinafter defined);
WHEREAS, pursuant to the Subscription Agreement LGII, ▇▇▇▇ and
the BCP Entities have acquired shares of Common Stock (as hereinafter defined)
and Preferred Stock; and
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WHEREAS, the parties hereto desire to enter into this
Agreement for the purpose of setting forth certain agreements regarding the
rights and obligations of the Stockholders;
NOW, THEREFORE, in consideration of the mutual covenants and
conditions as hereinafter set forth, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. Capitalized terms used
herein and not otherwise defined herein shall have the following meanings:
"Acquisition" means the direct or indirect acquisition by
Holdings during the term of this Agreement of all or part of one or more funeral
homes or cemeteries (other than the Rose Hills Cemetery, the Mortuary and the
Satellite Properties), whether effected as an acquisition by RHC or as a
contribution pursuant to a Contribution Agreement.
"Acquisition Creation Multiple" means in respect of any
Acquisition consummated prior to the Exit Relevant Period, the quotient of (i)
the relevant Acquisition Creation Price divided by (ii) the relevant Pro Forma
Acquisition EBITDA for the Entry Relevant Period.
"Acquisition Creation Price" means (i) with respect to an
Acquisition of Contributed Properties consummated prior to the Exit Relevant
Period, the product of (x) 7 times (y) Acquisition EBITDA for such Contributed
Properties for the twelve full calendar months ending immediately prior to or
coincident with the date a Contribution Agreement is executed and delivered by
the relevant parties in respect of such Acquisition and (ii) with respect to any
other Acquisition consummated prior to the Exit Relevant Period, the price
mutually agreed by BCP and LGII at the time of such Acquisition utilizing the
same methodology utilized in calculating the Creation Price.
"Acquisition EBITDA" means, with respect to a particular
Acquisition and for any period, the amount of Consolidated Cash Flow for the
business being acquired in such Acquisition, subject to Section 7.1 of this
Agreement.
"Additional BCP Contribution" means the amount in U.S. Dollars
of each additional purchase of Common Stock made by BCP or any of its Affiliates
pursuant to Section 5.4 of the Stockholders' Agreement.
"Additional LGII Contribution" means the amount in U.S.
Dollars of each additional purchase of Common Stock or Preferred Stock made by
LGII or any of its Affiliates prior to the Exit Relevant Period pursuant to
Section 5.4 or 5.5 of the Stockholders'
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Agreement, but shall exclude any indemnity payments made pursuant to Section 8.1
of the Subscription Agreement or Section 7.1(ii) of any Contribution Agreement.
"Adjusted BCP Contribution" means the BCP Contribution less
$15,000,000.
"Adjusted Call Creation Multiple" means, as calculated in
connection with a particular Acquisition consummated prior to the Exit Relevant
Period, the sum of (a) the product of (i) the relevant Acquisition Creation
Multiple, times (ii) a fraction, the numerator of which is the relevant
Acquisition Creation Price and the denominator of which is the sum of the
relevant Acquisition Creation Price and the Cumulative Creation Price, and (b)
the product of (i) the Adjusted Call Creation Multiple in effect immediately
prior to the relevant Acquisition times (ii) a fraction, the numerator of which
is the Cumulative Creation Price and the denominator of which is the sum of such
Cumulative Creation Price plus the relevant Acquisition Creation Price. The
Adjusted Call Creation Multiple shall not be subject to any further
recalculation in respect of Acquisitions consummated during or after the Exit
Relevant Period.
"Adjusted Put Creation Multiple" means, as calculated in
connection with a particular Acquisition consummated prior to the Exit Relevant
Period:
(i) if such Acquisition involves Contributed Properties
acquired pursuant to a Contribution Agreement, the sum of
(x) the product of (a) the greater of the relevant Minimum Put
Multiple or 115% of the Adjusted Call Creation Multiple in effect
immediately prior to the relevant Acquisition times (b) a fraction, the
numerator of which is the Cumulative Creation Price and the denominator
of which is the sum of the Cumulative Creation Price and the relevant
Acquisition Creation Price, and
(y) the product of (a) 115% of the greater of 7 or the
Acquisition Creation Multiple calculated for such Acquisition times (b)
a fraction, the numerator of which is the relevant Acquisition Creation
Price and the denominator of which is the sum of the Cumulative
Creation Price and the relevant Acquisition Creation Price;
and (ii) if such Acquisition does not involve Contributed
Properties acquired pursuant to a Contribution Agreement, the greater of (x)
115% of the Adjusted Call Creation Multiple calculated in connection with such
Acquisition and (y) the relevant Minimum Put Multiple.
The Adjusted Put Creation Multiple shall not be subject to any further
recalculation in respect of Acquisitions consummated during or after the Exit
Relevant Period.
"Adjusted Total Equity Value means, as of the Exercise Date,
the sum of Total Equity Value, the ▇▇▇▇▇▇ Preferred Contribution and ▇▇▇▇▇▇
Accrued Preferred Dividends.
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"Affiliate" of any Person means any other Person that directly
or indirectly controls, is controlled by, or is under common control with, such
Person.
"ASA" means the Administrative Services Agreement, dated as of
November 19, 1996 among RHAC, LGII and LWN.
"BCP Call Hurdle Profit" means the amount in excess of the BCP
Contribution necessary to provide a 22.5% compounded annual return on the BCP
Contribution from and including the Closing Date (or, with respect to Additional
BCP Contributions, measured from and including the date on which each such
Additional BCP Contribution was made) to but excluding the Exercise Date.
"BCP Common Stock" means the shares of Common Stock held by
the BCP Entities.
"BCP Contribution" means the sum of $35,000,000 (which
includes the investment in Common Stock made by ▇▇▇▇) and the aggregate amount
of any Additional BCP Contributions.
"BCP Liquidity Right" is defined in Section 4.1.
"BCP Put Hurdle Profit" means the amount in excess of the BCP
Contribution necessary to provide a compounded annual return on the BCP
Contribution from and including the Closing Date (or, with respect to Additional
BCP Contributions, measured from and including the date on which each such
Additional BCP Contribution was made) to but excluding the Exercise Date equal
to (i) in the event there has been a Change of Control after the date of this
Agreement and prior to the Exercise Date, 27.5% or (ii) in the event there has
been no such Change of Control, 25%.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law to close.
"Call Creation Multiple" means the quotient of (i) the
Creation Price divided by (ii) Pro Forma EBITDA for the Entry Relevant Period.
"Call Option" is defined in Section 2.1.
"Call Option Exercise Price" is defined in Section 2.3.
"Capitalized Liabilities' means the capitalized value as of
the date of determination, computed utilizing a 10% discount rate, of Holdings'
liabilities on a consolidated basis relating to covenants not to compete,
consulting agreements (including all salary payable under agreements with
Messrs. ▇▇▇▇▇ and ▇▇▇▇▇▇▇) and other former owners' expenses.
5
"Change of Control" means an event or series of events by
which
(i) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than any person
consisting entirely of one or more of the Permitted Holders, is or
becomes after the date of this Agreement the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act as in effect on
the date hereof, except that for such purpose such person shall be
deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly,
of more than 35% of the total voting power of all voting stock of LWN
then outstanding, whether as a result of issuance of securities of LWN,
any merger, consolidation, liquidation or dissolution of LWN, any
direct or indirect transfer of securities by a Permitted Holder or
otherwise, under circumstances where the Permitted Holders (x)
beneficially own (as so defined) in the aggregate a lesser percentage
of the voting stock of LWN than such other person or group, and (y) do
not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors of
LWN;
(ii) (1) another corporation merges into LWN or
LGII, or LWN or LGII consolidates with or
merges into any other corporation or
(2) LWN conveys, transfers or leases all or
substantially all of its assets or a
controlling interest in LGII or all or
substantially all the assets of LGII to any
person or group, in one transaction or a
series of transactions other than any
conveyance, transfer or lease between LWN
and a wholly owned subsidiary of LWN,
in each case, in one transaction or a series of
related transactions with the effect that a person
or group, other than
(A) any person or group consisting of one or
more Permitted Holders
or
(B) a person or group which is the beneficial
owner of more than 50% of the total voting
power of all voting stock of LWN immediately
prior to such transaction
becomes the beneficial owner of more than 50% of the total
voting power of all voting stock of the surviving or
transferee corporation of such transaction or series; or
(iii) individuals who currently constitute LWN's Board of
Directors (together with any new directors whose election by LWN's
Board of Directors, or whose nomination for election by LWN's
shareholders, was approved by a vote of a majority of the Directors
then still in office who were either Directors at the date hereof or
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whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Directors of LWN
then in office.
"Closing" means the consummation of the transactions
contemplated by the Agreements.
"Closing Date" means the date on which the Closing occurs.
"Common Stock" means the common stock, par value $.01 per
share, of Holdings, including, where applicable non-voting common stock of
Holdings issued in connection with a Contribution.
"Consolidated Cash Flow" has the meaning ascribed to such term
in the Indenture as of the date of this Agreement, subject to Section 7.1 of
this Agreement.
"Contributed Properties" means any funeral home or cemetery or
group thereof conveyed to Holdings pursuant to a Contribution Agreement.
"Contribution" means a contribution of Contributed Properties
pursuant to a Contribution Agreement.
"Contribution Agreement" means a Nearby Property Contribution
Agreement entered into pursuant to Section 5.5 of the Stockholders' Agreement.
"Creation Price" means the sum of (a) the BCP Contribution,
plus (b) the ▇▇▇▇▇▇ Contribution, plus (c) $155 million, plus (d) the net amount
of any interest accruing on the Notes from their date of issuance through the
Closing Date (net of interest earned by the escrow agent on the net proceeds of
the Note issuance), plus (e) the amount as of the Closing Date of all
Capitalized Liabilities, plus (f) the cost of the Directors' and Officers'
liability insurance policy relating to acts occurring prior to the Closing Date
which RHAC is required to maintain pursuant to Section 6.7 of the Merger
Agreement, plus (g) all severance costs incurred by RHC for all Mortuary,
Association and other RHC employees who were employees immediately prior to the
Closing Date and who are terminated within six months of the Closing Date, plus
(h) any liability under the Mortuary defined benefit plan (calculated in
accordance with the methodology used to prepare the pro forma financial
statements included in the Offering Memorandum), including the cost, if any, of
terminating such plan, provided such termination occurs within six months of the
Closing Date plus (i) any liability under the Rose Hills Mortuary, L.P.
Supplemental Employee Retirement Plan (calculated in accordance with the
methodology used to prepare the pro forma financial statements included in the
Offering Memorandum), plus (j) any liability (calculated in accordance with the
methodology used to prepare the pro forma financial statements included in the
Offering Memorandum) under the Mortuary's Deferred Compensation Plan for
Selected Executives of Rose Hills Mortuary, L.P. (the "Phantom 401(k) Plan"),
plus (k) any liability (calculated in accordance with the methodology used to
prepare the pro forma financial statements included in the Offering Memorandum)
under the Association's Trustees' and Executives' Pension Plans (as defined in
the Asset Purchase Agreement), plus (l) the present value as of the
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Closing Date, computed utilizing a 10% discount rate, of amounts, if any, paid
to the Association in respect of California UBTI tax pursuant to Section
10.4(b)(v) of the Asset Purchase Agreement, plus (m) the present value as of the
Closing Date, computed utilizing a 10% discount rate, of any losses incurred by
RHC in respect of violations of the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder, applicable to the Mortuary's
401(k) plan (including taxes to be paid with respect thereto), plus (n) any
other capitalization of on- or off-balance sheet liabilities or obligations,
plus (o) the amount by which RHC's aggregate cash on hand as of the Closing
Date, after giving effect on a pro forma basis to the payment of all Transaction
Costs, regardless of whether such Transaction Costs are paid at or subsequent to
the Closing Date (but excluding any cash received by RHC on the Closing Date
from RI or the Satellite Properties), is less than $1.0 million, plus (p) the
present value as of the Closing Date, computed utilizing a 10% discount rate, of
any liabilities arising as a result of the transactions contemplated by the
Agreements, provided such liabilities arise no later than six months after the
Closing Date, plus (q) any payments made to the owner of any mineral rights on
property owned by RHC in order to obtain a quitclaim of such rights, less (r)
the amount of any payment made by the Association or the Mortuary to RHC in
accordance with the post-closing adjustment provisions of Section 4.1(b) of the
Merger Agreement and Section 2.4(b) of the Asset Purchase Agreement, provided
that any such items described in clauses (d) through (q) that are funded on the
Closing Date shall not require an incremental increase in the Creation Price.
"Credit Agreement means the credit agreement dated as of
November 19, 1996 among RHAC and the lenders thereunder.
"Cumulative Creation Price" means the sum of the Creation
Price and the aggregate Acquisition Creation Price in respect of all
Acquisitions prior to the Acquisition with respect to which such Cumulative
Creation Price is being calculated.
"Default Rate" has the meaning ascribed to such term in the
Credit Agreement as of the date of this Agreement (as calculated with reference
to an "AXEL" bearing interest at the "Base Rate", as such terms are defined in
the Credit Agreement).
"EBITDA" means, for any period, the amount of Consolidated
Cash Flow calculated for RHC on a consolidated basis for the relevant period
less any revenue recognized pursuant to the IBPS Agreement, subject to Section
7.1 of this Agreement.
"EBITDA for the Exit Relevant Period" means EBITDA calculated
for the Exit Relevant period, provided, however, that in the event that RHC has
consummated an Acquisition during the Exit Relevant Period, then EBITDA for the
Exit Relevant Period shall be restated to eliminate the Acquisition EBITDA
attributable to such Acquisition.
"Excess Value One" means the greater of (i) zero or (ii) Total
Equity Value minus Total Call Hurdle Value (if the calculation is being made in
connection with the Call Option) or Total Put Hurdle Value (if the calculation
is being made in connection with the Put Option), up to a maximum amount which,
when multiplied by 0.3 and added to the BCP Contribution plus the BCP Call
Hurdle Profit (if the calculation is being made in connection
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with the Call Option) or the BCP Put Hurdle Profit (if the calculation is being
made in connection with the Put Option), results in an Option Price that
produces a twenty-five percent (25%) compounded annual return on the BCP
Contribution.
"Excess Value Two" means the greater of (i) zero or (ii) Total
Equity Value less Total Call Hurdle Value (if the calculation is being made in
connection with the Call Option) or Total Put Hurdle Value (if the calculation
is being made in connection with the Put Option) less Excess Value One.
"Exercise Date" means the date specified for the closing of
the exercise of either of the Options, as set forth in a notice given pursuant
to Section 2.1(b) or 2.2(b), as applicable.
"Exercise Date Value" means the value per share of ▇▇▇▇▇▇
Common Stock determined in accordance with Section 4.1(b).
"Exit Relevant Period" means the period of twelve full
calendar months ending immediately prior to or coincident with the Notification
Date.
"GAAP" means generally accepted accounting principles, as in
effect in the United States of America on the date hereof and applied on a basis
consistent with the manner in which such principles were applied in the
preparation of the historical financial statements of the Mortuary and the
Association included in the "Pro Forma Financial Information" section of the
Offering Memorandum.
"Guarantee" means the guarantee obligation of LWN set forth in
Section 7.3 hereof.
"Holder" shall mean any BCP Entity and any Permitted
Transferee who owns registrable securities.
"Holders' Portion" of the underwriters' discounts and
commissions means, with respect to particular Registrable Securities being sold
pursuant to a registration effected under Section 5.1 or 5.2, the excess, if
any, of the underwriters' discount and commissions charged in connection with
such disposition over the amount that such charge would have otherwise been if
the Registrable Securities being sold were sold at a public offering price equal
to the Exercise Date Value.
"IBPS Agreement" means the Buddhist Complex Development and
Use Agreement, dated March 1, 1994, between the Association and the
International Buddhist Progress Society.
"Indenture" means the Indenture, dated as of November 15,
1996, between RHAC, as issuer, and United States Trust Company of New York, as
trustee.
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"LGII Call Hurdle Profit" means the amount in excess of the
LGII Common Contribution necessary to provide a 22.5% compounded annual return
on the LGII Common Contribution from and including the Closing Date (or, with
respect to Additional LGII Contributions made in respect of Common Stock,
measured from and including the date on which each such Additional LGII
Contribution was made) to but excluding the Exercise Date.
"LGII Common Contribution" means the sum of $9,000,000 and the
aggregate amount of any Additional LGII Contributions made in respect of Common
Stock.
"LGII Put Hurdle Profit" means the amount in excess of the
LGII Common Contribution necessary to provide a 25% compounded annual return on
the LGII Common Contribution from and including the Closing Date (or, with
respect to Additional LGII Contributions made in respect of Common Stock,
measured from and including the date on which each such Additional LGII
Contribution was made) to but excluding the Exercise Date.
"▇▇▇▇▇▇ Accrued Preferred Dividends" means, as of the date of
determination, the aggregate liquidation preference of the ▇▇▇▇▇▇ Preferred less
the ▇▇▇▇▇▇ Preferred Contribution.
"▇▇▇▇▇▇ Common Stock" means the common stock, par value $.01
per share, of The ▇▇▇▇▇▇ Group Inc., a British Columbia corporation, but
excluding shares of Common Stock held as a consequence of any Acquisition made
during or after the Exit Relevant Period.
"▇▇▇▇▇▇ Contribution" means the sum of the LGII Common
Contribution and the ▇▇▇▇▇▇ Preferred Contribution.
"▇▇▇▇▇▇ Preferred" means the shares of Preferred Stock held by
LGII, RDI and their respective Affiliates but excluding shares of Preferred
Stock (including additional liquidation preference attributable to accrued but
unpaid dividends thereon) held as a consequence of any Acquisition made during
or after the Exit Relevant Period.
"▇▇▇▇▇▇ Preferred Catch-up Amount" means the excess of (a) the
amount necessary to provide a 16.0% compounded annual return on the ▇▇▇▇▇▇
Preferred Contribution from and including the Closing Date (or, with respect to
Additional LGII Contributions made in respect of Preferred Stock, measured from
and including the date on which each such Additional LGII Contribution was made)
to but excluding the Exercise Date, over (b) the liquidation preference as of
the Exercise Date of the ▇▇▇▇▇▇ Preferred (including all accrued dividends
whether undeclared or paid in kind).
"▇▇▇▇▇▇ Preferred Contribution" means the sum of (i)
$63,000,000, (ii) the Subsidiary Stock valued at $23,000,000 and (iii) the
aggregate amount of any Additional LGII Contributions made in respect of
Preferred Stock.
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"Management Equity Indebtedness" means the aggregate amount of
outstanding loans, including accrued interest thereon (whether or not
capitalized), provided by RHC to ▇▇▇▇ or its management for purposes of the
acquisition of Common Stock.
"Market Value" means the average of the daily closing prices
of the ▇▇▇▇▇▇ Common Stock for the 30 trading day period ending on the Exercise
Date or such other relevant date of determination, as the case may be. The
closing price for each day shall be the last reported sales price regular way
or, in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange, or, if the ▇▇▇▇▇▇ Common Stock is not listed or admitted to
trading on the New York Stock Exchange, on the American Stock Exchange, or, if
the ▇▇▇▇▇▇ Common Stock is not listed or admitted to trading on the American
Stock Exchange, the average of the closing bid and asked prices of the ▇▇▇▇▇▇
Common Stock in the over-the-counter market as reported on the NASDAQ system of
the National Association of Securities Dealers, Inc. or if the ▇▇▇▇▇▇ Common
Stock is not so quoted, the average of the closing bid and asked price of the
▇▇▇▇▇▇ Common Stock in the over-the-counter market as furnished by any
nationally recognized New York Stock Exchange member firm selected by LWN for
such purpose.
"Minimum Put Multiple" means, for purposes of calculating the
Adjusted Put Creation Multiple in connection with a particular Acquisition:
(i) 12, if the Adjusted Put Creation Multiple is being
calculated in connection with an Acquisition that does not involve, and
that has not been preceded at any time by, a Contribution; provided,
that the Minimum Put Multiple in effect immediately following such
Acquisition shall be deemed to remain at 12 until adjusted as provided
below;
(ii) 12, if the Adjusted Put Creation Multiple is being
calculated in connection with an Acquisition that involves, but that
has not been preceded at any time by, a Contribution; provided, that
the Minimum Put Multiple in effect immediately following such
Acquisition shall be deemed to be equal to the Adjusted Put Creation
Multiple calculated in connection with such Acquisition;
(iii) the Weighted Minimum Put Multiple, if the Adjusted
Put Creation Multiple is being calculated in connection with an
Acquisition that does not involve, but that has been preceded at any
time by, a Contribution; provided, that the Minimum Put Multiple in
effect immediately following such Acquisition shall be deemed to be
equal to such Weighted Minimum Put Multiple; and
(iv) the Minimum Put Multiple deemed to be in effect
immediately following the most recently preceding calculation of the
Adjusted Put Creation Multiple, if the Adjusted Put Creation Multiple
is being calculated in connection with an Acquisition that involves,
and that has been preceded at any time by, a Contribution; provided
that the Minimum Put Multiple in effect immediately following
11
such Acquisition shall be deemed to be equal to the Adjusted Put
Creation Multiple calculated in connection with such Acquisition.
"Mortuary" means Roses, Inc., a California corporation, and
its consolidated subsidiaries, which are being indirectly acquired by Holdings
on the Closing Date pursuant to the Merger Agreement.
"Notes" means the $80 million of 9 1/2% senior subordinated
notes due 2004 issued pursuant to the Indenture.
"Notification Date" means the date notification is given by an
exercising party under any of the Options in accordance with Section 2.1(b) or
2.2(b).
"Obligations" means the obligation of LGII to pay on the
Exercise Date the cash portion, if any, of the Option Price, including, without
limitation, interest accruing at the Default Rate after the Exercise Date after
the filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to LGII whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding.
"Offering Memorandum" the offering memorandum dated November
14, 1996 relating to the offering of the Notes.
"Option" means the Call Option or the Put Option, as
applicable.
"Option Price" means the Call Option Exercise Price or the Put
Option Exercise Price, as applicable and as determined in accordance with this
Agreement.
"Option Shares" means shares of ▇▇▇▇▇▇ Common Stock issuable
in connection with the exercise of an Option.
"Option Shares" means shares of ▇▇▇▇▇▇ Common Stock, if any,
issuable in connection with the Option.
"Permitted Holders" means, collectively ▇▇▇ ▇▇▇▇▇▇ and his
estate, spouse, heirs, lineal descendants and legatees and legal representatives
of any of the foregoing and the trustee of any bona fide trust of which one or
more of the foregoing are the beneficiaries, and any entity of which any of the
foregoing, individually or collectively, beneficially owns more than 50% of the
voting stock.
"Permitted Transferee" means any Person to whom a Stockholder
transfers shares of Common Stock or Preferred Stock, as the case may be, in
accordance with the Stockholders' Agreement and who is required to, and does,
become bound by the terms of this Agreement, and includes any Person to whom a
Permitted Transferee (as thus defined) of a Stockholder (or a Permitted
Transferee of a Permitted Transferee) so further transfers shares and who is
required to, and does, become bound by the terms of this Agreement.
12
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or other entity.
"Preferred Stock" means the 10% Pay In-Kind Cumulative
Preferred Stock, par value $.01 per share, of Holdings.
"Pro Forma Acquisition EBITDA for the Entry Relevant Period"
means:
(i) in the case of an Acquisition consummated on or prior to
the date which is 24 months prior to the end of the Exit Relevant Period, the
quotient of (a) the sum of (i) Acquisition EBITDA for first full twelve calendar
months following such consummation date divided by 1.06 and (ii) Acquisition
EBITDA for the second full twelve calendar months following such consummation
date divided by 1.06 raised to a power equal to 2 and (b) 2, and may be
expressed as a formula calculation as follows:
First 12 mos. Acquisition EBITDA Second 12 mos. Acquisition EBITDA
-------------------------------- + ---------------------------------
2
(1.06) (1.06)
--------------------------------------------------------------------
2
(ii) in the case of an Acquisition consummated during the 12 months
prior to the beginning of the Exit Relevant Period, the quotient of (a) the sum
of (i) Acquisition EBITDA for first full twelve calendar months following such
consummation date divided by 1.06 and (ii) Acquisition EBITDA for the period
beginning on the first day of the first month following such twelve calendar
month period and ending on last day of the Exit Relevant Period (the "Remaining
Period") divided by 1.06 raised to a power equal to the quotient of (x) 365 plus
the number of days in the Remaining Period and (y) 365 and (b) the quotient of
(x) 365 plus the number of days in the Remaining Period and (y) 365, and may be
expressed as a formula calculation as follows:
First 12 mos. EBITDA Remaining Period EBITDA
----------------------- + ----------------------------------------------
((365+# days in Remaining Period)/365)
(1.06) (1.06)
--------------------------------------------------------------------------------
(365+# days in Remaining Period)/365
13
"Pro Forma EBITDA for the Entry Relevant Period" means the
quotient of (a) the sum of (i) EBITDA for calendar year 1997 divided by 1.06
raised to a power equal to the quotient of (x) the number of days elapsed
between the Closing Date and December 31, 1997 and (y) 365 and (ii) EBITDA for
calendar year 1998 divided by 1.06 raised to a power equal to the quotient of
(x) the number of days elapsed between the Closing Date and December, 1998 and
(y) 365, and (b) 2, and may be expressed as a formula calculation as follows:
1997 EBITDA 1998 EBITDA
----------------------------------------- + ---------------------------
((# days since CD to 12-31-97)/365) ((# days since CD to
12-31-98)/365)
(1.06) (1.06)
-----------------------------------------------------------------------------
2
"Put Creation Multiple" means the greater of (i) 115% of the
Call Creation Multiple and (ii) 12.
"Put Option" is defined in Section 2.2.
"Put Option Exercise Price" is defined in Section 2.4.
"Registrable Securities" means any ▇▇▇▇▇▇ Common Stock (i)
issued to BCP and as to which BCP, as contemplated by Section 4.1(b), is not
exercising the BCP Liquidity Right, or (ii) which is issued or distributed in
respect of any shares covered by the preceding clause (i) by way of stock
dividend or stock split or other distribution, recapitalization or
reclassification. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (w) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (x) they shall have been sold
pursuant to Rule 144 (or any successor provision) under the Securities Act, (y)
they shall have been otherwise transferred, new certificates for them not
bearing a legend restricting further transfer shall have been delivered by LWN
and subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any state securities or blue
sky law then in force, or (z) they shall have ceased to be outstanding.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance with Sections 5.2 and 5.3 of this
Agreement, including, without limitation, (i) all SEC and securities exchange or
National Association of Securities Dealers, Inc. registration and filing fees,
(ii) all fees and expenses of complying with securities or blue sky laws
(including fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), (iii) all printing,
messenger and delivery expenses, (iv) all fees and expenses incurred in
connection with the listing of the Registrable Securities on any securities
exchange pursuant to Section 5.3(h), (v) the fees and disbursements of counsel
for LWN and of its independent public accountants, including the expenses of any
special audits and/or "cold comfort" letters required by or incident to such
performance and compliance, (vi) the reasonable fees and disbursements of one
counsel, other
14
than LWN's counsel, selected by the Holders of a majority of the Registrable
Securities being registered to represent all Holders of the Registrable
Securities being registered in connection with each such registration (it being
understood that any Holder may, at its own expense, retain separate counsel to
represent it in connection with such registration), (vii) any fees and
disbursements of underwriters customarily paid by the issuers or sellers of
securities, and the reasonable fees and expenses of any special experts retained
in connection with the requested registration, but excluding underwriting
discounts and commissions and transfer taxes, if any, and (viii) subject to the
obligation of Holders under Sections 5.1 and 5.2 to pay any Holders' Portion
thereof, all underwriting discounts and commissions or other brokers'
commissions charged in connection with the sale of Registrable
"Relevant Creation Multiple" means the (i) Call Creation
Multiple or, if RHC has consummated an Acquisition prior to the Exit Relevant
Period, the most recently calculated Adjusted Call Creation Multiple (where
Total Enterprise Value is being calculated in connection with the exercise of
the Call Option) or (ii) the Put Creation Multiple or, if RHC has consummated an
Acquisition prior to the Exit Relevant Period, the most recently calculated
Adjusted Put Creation Multiple (where Total Enterprise Value is being calculated
in connection with the exercise of the Put Option).
"Remaining Period" has the meaning ascribed thereto in the
definition of Pro Forma Acquisition EBITDA for the Entry Relevant Period.
"Revolver" means the revolving credit facility made available
to RHAC by a syndicate of commercial lenders on the Closing Date, or any other
similar facility subsequently replacing such facility.
"RHC" means Holdings and all of its subsidiaries.
"RHMI Common Stock" means the shares of Common Stock held by
RHMI.
"Securities Act" shall mean the Securities Act of 1933, and
the rules and regulations promulgated thereunder, as the same may be amended
from time to time.
"SEC" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act or the
Exchange Act.
"Stockholders' Agreement" means the Stockholders' Agreement,
dated as of November 19, 1996, among the Stockholders and Holdings.
"Subsidiary Stock" means all of the issued and outstanding
shares of capital stock of each of the companies listed on Exhibit A to the
Subscription Agreement, dated November 19, 1996 among BCP, LWN, LGII, RDI and
▇▇▇▇.
"Total Call Hurdle Value" means the sum of the BCP
Contribution, the LGII Common Contribution, the BCP Call Hurdle Profit, the LGII
Call Hurdle Profit and the ▇▇▇▇▇▇ Preferred Catch-up Amount.
15
"Total Contribution" means the sum of (i) the BCP Contribution
and (ii) the ▇▇▇▇▇▇ Contribution.
"Total Enterprise Value" means the product of (i) the Relevant
Creation Multiple multiplied by (ii) EBITDA for the Exit Relevant Period.
"Total Equity Value" means, as of the Exercise Date (each of
the following shall be determined as of the Exercise Date except for Total
Enterprise Value, which shall be determined in accordance with the definition
thereof), the sum of:
(x) the excess, if any, of (i) Total Enterprise Value over
(ii) the sum of (a) the aggregate outstanding principal amount (including
accrued but unpaid interest thereon) of Holdings' consolidated total
indebtedness (excluding any amounts outstanding under the Revolver and excluding
any indebtedness or accrued interest thereon (whether paid or unpaid) associated
with or incurred to finance any Acquisition consummated during or after the Exit
Relevant Period, plus (b) the remaining value as of the Exercise Date of the
Capitalized Liabilities taken into account in calculating the Creation Price or
the Acquisition Creation Price of an Acquisition, plus (c) the ▇▇▇▇▇▇ Preferred
Contribution, plus (d) ▇▇▇▇▇▇ Accrued Preferred Dividends; and
(y) the sum of (e) the aggregate amount of Holdings'
consolidated total cash, cash equivalents and any other marketable securities,
plus (f) cash utilized to pay for Acquisitions (including all related
transaction costs and expenses) consummated during or after the Exit Relevant
Period, plus (g) the amount of interest that would have been saved assuming that
the amounts described in clause (f) had instead been utilized to repay
indebtedness of RHC which could have then been voluntarily repaid, and assuming
the indebtedness bearing the highest interest rate is the first to be repaid,
plus (h) the aggregate amount of Management Equity Indebtedness.
"Total Put Hurdle Value" means the sum of the BCP
Contribution, the LGII Common Contribution, the BCP Put Hurdle Profit and the
LGII Put Hurdle Profit.
"Transaction Costs" means all costs and expenses of every
nature incurred by RHC in connection with consummation of the transactions
contemplated by the Agreements and the financing thereof, including without
limitation costs and expenses relating to the issuance of the Notes and the
subsequent registered exchange offer with respect to the Notes and the Credit
Agreement.
"Weighted Minimum Put Multiple" means, for purposes of
calculating the Adjusted Put Creation Multiple in connection with a particular
Acquisition, the sum of (A) the product of (i) 12 times (ii) a fraction, the
numerator of which is the Acquisition Creation Price for such Acquisition and
the denominator of which is the sum of such Acquisition Creation Price and the
Cumulative Creation Price, plus (B) the product of (i) the Minimum Put Multiple
deemed to be in effect immediately prior to such Acquisition times (ii) a
fraction, the numerator of which is the Cumulative Creation Price and the
denominator of which is the sum of Acquisition Creation Price and such
Cumulative Creation Price.
16
ARTICLE II
CALL AND PUT OPTIONS
2.1 Call Option. (a) On the terms and subject to the
conditions set forth herein, each of the BCP Entities and ▇▇▇▇ hereby grants to
LGII an irrevocable option (the "Call Option") exercisable beginning on the
fourth anniversary of the Closing Date and ending on the day before the sixth
anniversary of the Closing Date, to purchase (and, upon exercise of such Call
Option in accordance herewith, each BCP Entity irrevocably agrees to sell to
LGII) all, but not less than all, of the BCP Common Stock or the ▇▇▇▇ Common
Stock, as the case may be, respectively owned by them. The aggregate purchase
price with respect to all the shares of BCP Common Stock and the ▇▇▇▇ Common
Stock being purchased shall be equal to the Call Option Exercise Price (as
defined in Section 2.3). The consideration to be paid for each share of BCP
Common Stock and ▇▇▇▇ Common Stock shall equal the Call Option Exercise Price
divided by the aggregate number of shares of BCP Common Stock and ▇▇▇▇ Common
Stock being purchased, provided that the BCP Entities may reallocate the Call
Option Exercise Price among themselves to the extent necessary to take into
account differences among them, if any, in making Additional BCP Contributions.
(b) LGII shall give Blackstone Management Associates II
L.L.C., a Delaware limited liability company ("BMAII"), as agent for each of the
BCP Entities and ▇▇▇▇, written notice of exercise of the Call Option no less
than 90 nor more than 120 days prior to the Business Day specified in such
notice for exercise of the Call Option. Subject to the preceding sentence, a
notice of exercise of the Call Option may be given during or prior to the
commencement of the period in which the Call Option is exercisable and shall
irrevocably commit the Stockholders to the purchase and sale of the BCP Common
Stock and ▇▇▇▇ Common Stock in accordance with the Call Option.
2.2 Put Option. (a) On the terms and subject to the conditions
set forth herein, LGII hereby grants to each BCP Entity and ▇▇▇▇ an irrevocable
option (the "Put Option"), exercisable beginning on the sixth anniversary of the
Closing Date and ending on the eighth anniversary of the Closing Date, to
require LGII to purchase (and, upon exercise of such Put Option in accordance
herewith, LGII agrees to purchase from the BCP Entities and ▇▇▇▇) all, but not
less than all, of the BCP Common Stock and ▇▇▇▇ Common Stock respectively owned
by them; provided that the Put Option may be exercised only with respect to all
the BCP Common Stock and ▇▇▇▇ Common Stock, and provided further, BMAII, as
agent for each of the BCP Entities and ▇▇▇▇, shall have the exclusive authority
to deliver notice of such exercise to LGII. The aggregate purchase price with
respect to all the shares of BCP Common Stock and ▇▇▇▇ Common Stock being
purchased shall be equal to the Put Option Exercise Price (as defined in Section
2.4). The consideration to be paid for each share of BCP Common Stock and ▇▇▇▇
Common Stock shall equal the Put Option Exercise Price divided by the aggregate
number of shares of BCP Common Stock and ▇▇▇▇ Common Stock being purchased,
provided that the BCP Entities may reallocate the Put Option Exercise Price
among themselves to the extent necessary to take into account differences among
them, if any, in making Additional BCP Contributions.
17
(b) BMAII, as exclusive agent for BCP and ▇▇▇▇, shall give
LGII written notice of exercise of the Put Option no less than 90 nor more than
120 days prior to the Business Day specified in such notice for exercise of the
Put Option. Subject to the preceding sentence, a notice of exercise of the Put
Option may be given at any time during or prior to the commencement of the
period in which the Put Option is exercisable and shall irrevocably commit the
Stockholders to the purchase and sale of the BCP Common Stock and ▇▇▇▇ Common
Stock in accordance with the Put Option.
2.3 Call Option Exercise Price. The Call Option Exercise
Price shall be determined as of the Exercise Date and shall be equal to:
(i) the sum of the BCP Contribution and the BCP Call
Hurdle Profit, if Total Equity Value is equal to or less than Total Call Hurdle
Value; or
(ii) the sum of (a) the BCP Contribution, (b) the BCP Call
Hurdle Profit, (c) 30% of Excess Value One, if any and (d) 15% of Excess Value
Two, if any, if Total Equity Value is greater than the Total Call Hurdle Value.
2.4 Put Option Exercise Price. The Put Option Exercise Price
shall be determined as of the Exercise Date and shall be equal to:
(i) Adjusted Total Equity Value, if Adjusted Total Equity Value
is equal to or less than Adjusted BCP Contribution;
(ii) Adjusted BCP Contribution plus the product of (a) Adjusted
Total Equity Value minus Adjusted BCP Contribution and (b) the ratio of the BCP
Put Hurdle Profit to the sum of (1) BCP Put Hurdle Profit and (2) ▇▇▇▇▇▇ Accrued
Preferred Dividends, if Adjusted Total Equity Value is greater than Adjusted BCP
Contribution but less than or equal to the sum of (x) Adjusted BCP Contribution,
(y) ▇▇▇▇▇▇ Accrued Preferred Dividends and (z) BCP Put Hurdle Profit;
(iii) Adjusted BCP Contribution plus BCP Put Hurdle Profit, if
Adjusted Total Equity Value is greater than the sum of (a) Adjusted BCP
Contribution, (b) BCP Put Hurdle Profit and (c) ▇▇▇▇▇▇ Accrued Preferred
Dividends, but equal to or less than the sum of (v) Adjusted BCP Contribution,
(w) BCP Put Hurdle Profit, (x) LGII Common Contribution, (y) ▇▇▇▇▇▇ Preferred
Contribution and (z) ▇▇▇▇▇▇ Accrued Preferred Dividends;
(iv) Total Equity Value less the LGII Common Contribution, if
Adjusted Total Equity Value is greater than the sum of (a) Adjusted BCP
Contribution, (b) BCP Put Hurdle Profit, (c) LGII Common Contribution, (d)
▇▇▇▇▇▇ Preferred Contribution and (e) ▇▇▇▇▇▇ Accrued Preferred Dividends but
equal to or less than the sum of (u) Adjusted BCP Contribution, (v) BCP Put
Hurdle Profit, (w) LGII Common Contribution, (x) ▇▇▇▇▇▇ Preferred Contribution,
(y) ▇▇▇▇▇▇ Accrued Preferred Dividends and (z) $15 million;
18
(v) BCP Contribution plus BCP Put Hurdle Profit, if Total Equity
Value is greater than BCP Contribution plus BCP Put Hurdle Profit plus LGII
Common Contribution but less than Total Put Hurdle Value; or
(vi) BCP Contribution plus BCP Put Hurdle Profit plus 30% of
Excess Value One plus 15% of Excess Value Two, if Total Equity Value is greater
than Total Put Hurdle Value;
provided, however, that if (x) the ASA becomes terminable by RHAC for any reason
(other than as a result of a rejection of the ASA following a bankruptcy event
involving RHAC) or (y) LGII replaces its designees on the board of directors of
Holdings without the consent of BCP (which consent shall not be unreasonably
withheld), then the Put Option Exercise Price shall equal the greater of (a) the
amount determined by applying the applicable formula set forth above or (b) the
sum of the BCP Put Hurdle Profit and the BCP Contribution.
ARTICLE III
CALCULATION OF OPTION PRICE
3.1 Calculation of Creation Price and Acquisition Creation
Price. (a) Within 60 days of the Closing Date, the Stockholders shall cause the
chief financial officer of Holdings to calculate the Creation Price and provide
to the Stockholders his written certification of his calculation of such amount.
Unless the amount so calculated is disputed by any Stockholder by written notice
given to the other Stockholders within 30 days of its being so certified,
subject to Section 7.1, it shall be final and binding on the parties in
calculating the Relevant Creation Multiple. If such amount is so disputed by
written notice as aforesaid, such dispute shall be resolved in accordance with
Section 3.5(b), and the resolution process thereby provided shall determine the
Creation Price which shall, subject to Section 7.1, be final and binding on the
parties in calculating the Relevant Creation Multiple.
(b) As early as practicable prior to the closing date of any
Acquisition involving Contributed Properties acquired pursuant to a Contribution
Agreement, the Stockholders shall cause the chief financial officer of Holdings
to calculate the Acquisition Creation Price and the Cumulative Creation Price
with respect to such Acquisition (including the related Minimum Put Multiple and
Weighted Minimum Put Multiple) and provide to the Stockholders his written
certification of his calculation of such amounts. Unless the amounts so
calculated are disputed by any Stockholder by written notice given to the other
Stockholders within 30 days of its being so certified, they shall, subject to
Section 7.1, be final and binding on the parties in calculating the Adjusted
Call Creation Multiple and the Adjusted Put Creation Multiple. If any such
amount is so disputed by written notice as aforesaid, such dispute shall be
resolved in accordance with Section 3.5(b), and the resolution process thereby
provided shall determine the Acquisition Creation Price and the Cumulative
Creation Price, in respect of such Acquisition, which shall, subject to Section
7.1, be final and binding on the parties for purposes of the relevant
Contribution Agreement and in calculating the Adjusted Call Creation Multiple
and the Adjusted Put Creation Multiple (including the
19
related Minimum Put Multiple and Weighted Minimum Put Multiple) in respect of
such Acquisition.
(c) Within 60 days of the consummation of any Acquisition that
does not involve Contributed Properties acquired pursuant to a Contribution
Agreement, the Stockholders shall cause the chief financial officer of Holdings
to calculate the Acquisition Creation Price and the Cumulative Creation Price
with respect to such Acquisition and provide to the Stockholders his written
certification of his calculation of such amounts. Unless the amounts so
calculated are disputed by any Stockholder by written notice given to the other
Stockholders within 30 days of its being so certified, they shall, subject to
Section 7.1, be final and binding on the parties in calculating the Adjusted
Call Creation Multiple and the Adjusted Put Creation Multiple (including the
related Minimum Put Multiple and Weighted Minimum Put Multiple). If any such
amount is so disputed by written notice as aforesaid, such dispute shall be
resolved in accordance with Section 3.5(b), and the resolution process thereby
provided shall determine the Acquisition Creation Price and the Cumulative
Creation Price, in respect of such Acquisition, which shall, subject to Section
7.1, be final and binding on the parties in calculating the Adjusted Call
Creation Multiple and the Adjusted Put Creation Multiple in respect of such
Acquisition (including the related Minimum Put Multiple and Weighted Minimum Put
Multiple).
3.2 Calculation of Pro Forma EBITDA for the Entry Relevant
Period and Creation Multiple. (a) Within 90 days of the end of each of 1997 and
1998, the Stockholders shall cause the chief financial officer of Holdings to
calculate Holdings' EBITDA for the calendar year then ended and provide to the
Stockholders his written certification of his calculation of such amount. Unless
the amount so calculated is disputed by any Stockholder by written notice given
to the other Stockholders within 30 days of its being so certified, it shall,
subject to Section 7.1, be final and binding on the parties in calculating Pro
Forma EBITDA for the Entry Relevant Period. If such amount is so disputed by
written notice as aforesaid, such dispute shall be resolved in accordance with
Section 3.5(b), and the resolution process thereby provided shall determine
EBITDA for 1997 and/or 1998, as the case may be, which amount shall subject to
Section 7.1, be final and binding on the parties in calculating Pro Forma EBITDA
for the Entry Relevant Period.
(b) Within 30 days of the determination of EBITDA for calendar
1998, the Stockholders shall cause the chief financial officer of Holdings to
calculate Pro Forma EBITDA for the Entry Relevant Period and the Call Creation
Multiple and the Put Creation Multiple and provide to the Stockholders his
written certification of his calculation of such amounts. Unless the amounts so
calculated are disputed by any Stockholder by written notice given to the other
Stockholders within 30 days of their being so certified, they shall, subject to
Section 7.1, be final and binding on the parties. If such amounts are so
disputed by written notice as aforesaid, such dispute shall be resolved in
accordance with Section 3.5(b), and the resolution process thereby provided
shall determine the Pro Forma EBITDA for the Entry Relevant Period and the Call
Creation Multiple and the Put Creation Multiple, which shall, subject to Section
7.1, be final and binding on the parties.
20
3.3 Calculation of Pro Forma Acquisition EBITDA for the Entry
Relevant Period. (a) Within 90 days of the end of the first full twelve calendar
month period after the consummation of an Acquisition, the Stockholders shall
cause the chief financial officer of Holdings to calculate the Acquisition
EBITDA with respect to such Acquisition for such twelve calendar month period
and provide to the Stockholders his written certification of his calculation of
such amount. Unless the amount so calculated is disputed by any Stockholder by
written notice given to the other Stockholders within 30 days of its being so
certified, it shall, subject to Section 7.1, be final and binding in calculating
Pro Forma Acquisition EBITDA for the Entry Relevant Period. If such amount is so
disputed by written notice as aforesaid, such dispute shall be resolved in
accordance with Section 3.5(b), and the resolution process thereby provided
shall determine Acquisition EBITDA for such twelve calendar month period, which
amount shall, subject to Section 7.1, be final and binding on the parties in
calculating Pro Forma Acquisition EBITDA for the Entry Relevant Period.
(b) Within 90 days of the end of the second full twelve
calendar month period after the consummation of an Acquisition but in no event
later than 45 days after the Notification Date (or, in the case of an
Acquisition consummated after the date that is 24 months prior to the end of the
Exit Relevant Period, within 45 days after the Notification Date), the
Stockholders shall cause the chief financial officer of Holdings to calculate
the Acquisition EBITDA with respect to such Acquisition and provide to
Stockholders, no later than 45 days after the Notification Date, his written
certification of his calculation of such amount. Unless the amount so calculated
is disputed by any Stockholder by written notice given to the other Stockholders
within 30 days of its being so notified but in no event later than 60 days after
the Notification Date, it shall, subject to Section 7.1, be final and binding in
calculating Pro Forma Acquisition EBITDA for the Entry Relevant Period. If such
amount is so disputed by written notice as aforesaid, such dispute shall be
resolved in accordance with Section 3.5(b), and the resolution process thereby
provided shall determine Acquisition EBITDA for such twelve month period or the
Remaining Period, as applicable, which amount shall, subject to Section 7.1, be
final and binding on the parties in calculating Pro Forma Acquisition EBITDA for
the Entry Relevant Period.
3.4 Calculation of EBITDA for the Exit Relevant Period. As
promptly as practicable following the Notification Date, the Stockholders shall
cause the chief financial officer of Holdings to calculate EBITDA for the Exit
Relevant Period and provide to the Stockholders, no later than 45 days after the
Notification Date, his written certification of his calculation of such amount.
Unless the amount so calculated is disputed by any Stockholder by written notice
given to the other Stockholders within 15 days of its being so certified, it
shall, subject to Section 7.1, be final and binding on the parties in
calculating EBITDA for the Exit Relevant Period. If such amount is so disputed
by written notice as aforesaid, such dispute shall be resolved in accordance
with Section 3.5(b), and the resolution process thereby provided shall determine
EBITDA for the Exit Relevant Period, which amount shall, subject to Section 7.1,
be final and binding on the parties in calculating Total Enterprise Value.
3.5 Access to Information; Resolution of Disputes;
Miscellaneous. (a) Each Stockholder and its representatives shall have full
access to the books and records of Holdings and its subsidiaries, and ▇▇▇▇▇▇
shall cause Holdings, the BCP Entities and their respective
21
advisors to be provided with full access to the books and records of any funeral
homes or cemeteries that are to be Contributed Properties, in connection with
any calculation made pursuant to this Article III. The parties hereby agree to
cause Holdings, and ▇▇▇▇▇▇ agrees with respect to any such proposed Contributed
Properties, to instruct the relevant auditors to make their work papers
available for review in this regard, and the Stockholders hereby waive any
objection which such Stockholder may raise with respect thereto, and ▇▇▇▇▇▇
hereby waives and shall cause any relevant Affiliates to waive any objection
which they may raise with respect thereto. The fees and expenses of the
Stockholders' representatives shall be paid by Holdings.
(b) In the event any Stockholder disputes any amount
calculated by the chief financial officer of Holdings and gives timely notice of
such dispute as described above, the Stockholders shall negotiate in good faith
as promptly as practicable. In the event such dispute is not resolved within 14
days of the giving of notice of such dispute, the parties shall promptly engage
as "Arbitrator" a "big six" accounting firm (which shall not be KPMG Peat
Marwick or Deloitte & Touche LLP or Holdings' or LWN's then existing auditors)
to reach a final determination of the amount whose calculation is in dispute.
The fees of the Arbitrators shall be shared equally between BCP collectively and
LGII, and the Arbitrator shall render its decision within 21 days of its
engagement for such purpose.
(c) The Acquisition EBITDA, the Acquisition Creation Price,
the Acquisition Creation Multiple, the Cumulative Creation Price, the Pro Forma
Acquisition EBITDA for the Entry Relevant Period, the Adjusted Call Creation
Multiple, the Adjusted Put Creation Multiple, the Minimum Put Multiple, the
Weighted Minimum Put Multiple, and the Relevant Creation Multiple and any other
relevant components potentially relevant to the Option Price shall be calculated
in respect of each Acquisition made by RHC, and the amounts so calculated shall
be deemed to have been calculated and be in effect immediately following
consummation of the relevant Acquisition regardless of when the actual
calculation of each such item is finally completed.
(d) By way of illustration, the "Illustrative Scenarios"
attached to this Agreement reflect the distribution order in a call or put
scenario pursuant to the formula described herein.
ARTICLE IV
DETERMINATION OF OPTION CONSIDERATION; CERTAIN CONDITIONS
4.1 Option Consideration. (a) (i) LGII may use for payment of
the Option Price (either in whole or in part) payable to the BCP Entities under
the Call Option or the Put Option either cash or, subject to the conditions of
Section 4.2, ▇▇▇▇▇▇ Common Stock, provided, however, that if the number of
shares of ▇▇▇▇▇▇ Common Stock deliverable to BCP under this Agreement, when
aggregated with the number of shares of ▇▇▇▇▇▇ Common Stock, if any, previously
delivered to BCP in connection with any earlier exercise of the call option or
the put option under the Put/Call Agreement relating to the acquisition of Prime
22
Succession, Inc. which were not sold for cash as a result of the exercise of the
BCP Liquidity Right described therein, would equal or exceed 25% of the
outstanding shares of ▇▇▇▇▇▇ Common Stock as of the Exercise Date, then the
delivery of ▇▇▇▇▇▇ Common Stock in payment of the Option Price hereunder shall
require the prior written consent of BCP. If ▇▇▇▇▇▇ Common Stock is to be
issued, LWN shall notify BCP within 15 days of the Notification Date of the
percentage of the Option Price payable to the BCP Entities to be paid in ▇▇▇▇▇▇
Common Stock. The number of shares of ▇▇▇▇▇▇ Common Stock issuable to BCP on the
Exercise Date will be calculated as follows.
(ii) If BCP notifies LWN within 30 days of the Notification Date
of its desire promptly to sell the shares of ▇▇▇▇▇▇ Common Stock received in
full or partial payment of the Option Price, then LWN will, on behalf of LGII,
issue for the account of BCP, and will undertake for the benefit of BCP to
effectuate the sale of, such number of shares of ▇▇▇▇▇▇ Common Stock as would,
upon consummation of such sale, yield net cash proceeds to BCP equal to the
portion of the Option Price that would have otherwise been paid in cash to the
BCP Entities (such notification by BCP together with the sale of ▇▇▇▇▇▇ Common
Stock for such purpose being referred to as the "BCP Liquidity Right").
(iii) LWN shall, on behalf of LGII, bear all Registration Expenses
in connection with such issuance and sale (including the entire amount of any
and all underwriters' discounts and commissions) and provide customary and
appropriate undertakings (including hereof indemnification of BCP to the same
extent provided in Section 5.4) in connection with such issuance and sale. If
such net cash proceeds have not been paid to BCP on the Exercise Date, the
closing of the Option shall be in escrow pending receipt of such proceeds by
BCP. Any delay in remitting net cash proceeds to BCP beyond the 90th day after
the date on which BCP notifies LWN of its desire to exercise the BCP Liquidity
Right shall require a "grossing up" (through the issuance of additional shares)
of the net cash proceeds required to be received so as to reflect an implied
interest component (accruing from such 90th day to the date of actual payment to
BCP) at the rate of 10% per annum. If net cash proceeds have not been received
by BCP within 180 days after the date on which BCP notifies LWN of its desire to
exercise the BCP Liquidity Right, LGII shall be required to pay the Option Price
wholly in cash on such 180th day.
(b) If BCP does not invoke the BCP Liquidity Right as
described in paragraph (a) above with respect to the entire portion of the
Option Price payable to BCP in ▇▇▇▇▇▇ Common Stock, the number of shares
issuable to BCP in respect of the non-cash portion of the Option Price will be
based on the Market Value of the ▇▇▇▇▇▇ Common Stock. In this regard, LWN agrees
(i) to make an appropriate public announcement no later than the commencement of
such 30 trading day period with regard to the pending issuance of ▇▇▇▇▇▇ Common
Stock to BCP on the Exercise Date, and (ii) during the period commencing at the
beginning of such 30 trading day period and through the Exercise Date, not to
take any corporate action (other than the declaration or payment of a regular
dividend) in respect of combining the outstanding shares of ▇▇▇▇▇▇ Common Stock,
including combining its outstanding shares into a smaller number of shares or
issuing rights or warrants to stockholders of record on a date prior to the
Exercise Date.
23
4.2 Conditions to Issuance of ▇▇▇▇▇▇ Common Stock. The ability
of LGII and LWN to issue ▇▇▇▇▇▇ Common Stock in lieu of LGII paying the Option
Price to BCP in cash is subject to the satisfaction, on or before the Exercise
Date, of each of the following conditions:
(a) The representations and warranties of LWN, LGII and RDI
set forth in Sections 6.1 and 6.2 hereof shall be true and correct in all
material respects when made and shall be true and correct in all material
respect at and as of the Exercise Date.
(b) LWN, LGII and RDI shall have performed and complied in all
material respects with all agreements, covenants and conditions contained herein
which are required to be performed or complied with by it on or before the
Exercise Date.
(c) BCP shall have received a certificate, dated the Exercise
Date and signed by a principal executive officer of LWN, certifying that the
conditions set forth in Sections 4.2(a) and 4.2(b) are satisfied on and as of
such date.
(d) LWN shall have provided BCP with a legal opinion from
counsel reasonably satisfactory to BCP with respect to matters customarily
covered in connection with the issuance of shares to a private investor, and
such option shall be reasonably satisfactory in form and substance to BCP and
its counsel.
(e) The receipt of the Option Shares by BCP shall not have
been enjoined (temporarily or permanently) as of the Exercise Date or be
prohibited by any applicable law or governmental regulation.
(f) All proceedings taken in connection with the issuance and
delivery of the Option Shares and all documents and papers relating thereto
shall be reasonably satisfactory to BCP. BCP shall have received copies of such
documents and papers as it may reasonably request in connection therewith, all
in form and substance reasonably satisfactory to it.
(g) Since the Notification Date, there shall not have been any
material adverse change in the general affairs, management, financial position,
shareholders' equity or results of operations of LWN and its subsidiaries taken
as a whole.
(h) No "Default" as described in Sections 8.6 or 8.7 of the
credit agreement dated as of May 15, 1996 among LWN, LGII and the lenders named
therein (in the form thereof on the date hereof) shall have occurred since the
date of this Agreement.
ARTICLE V
REGISTRATION RIGHTS
5.1 Incidental Registration. (a) Right to Include
Registrable Securities. Following the issuance of ▇▇▇▇▇▇ Common Stock to BCP
pursuant to Section 4.1(b), each
24
time LWN proposes to register ▇▇▇▇▇▇ Common Stock under the Securities Act
(other than a registration on Form S-4 or S-8, or any successor or other forms
promulgated for similar purposes), whether or not for sale for its own account,
pursuant to a registration statement on which it is permissible to register
Registrable Securities for sale to the public under the Securities Act, it will
give prompt written notice to all Holders of its intention to do so and of the
Holders' rights under this Section 5.1(a). Upon the written request of any
Holder made within 30 days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
Holder), LWN will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which LWN has been so requested to
register by the Holders thereof; provided that (i) if, at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, LWN shall determine for any reason not to proceed with the
proposed registration, LWN may, at its election, give written notice of such
determination to each Holder and thereupon shall be relieved of its obligation
to register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), and (ii) if such registration involves an underwritten offering by
LWN (underwritten, at least in part, by Persons who are not Affiliates of LWN),
all Holders requesting to have Registrable Securities included in LWN's
registration must sell their Registrable Securities to such underwriters who
shall have been selected by LWN on the same terms and conditions as apply to
LWN, with such differences, including any with respect to indemnification and
contribution, as may be customary or appropriate in combined primary and
secondary offerings. If a proposed registration pursuant to this Section 5.1(a)
involves such an underwritten public offering, any Holder making a request under
this Section 5.1(a) in connection with such registration may elect in writing,
prior to the effective date of the registration statement filed in connection
with such registration, to withdraw such request and not to have such securities
registered in connection with such registration.
(b) Expenses. LWN will pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 5.1(a), regardless of whether such registration statement
becomes effective, and each Holder shall pay the Holders' Portion, if any, of
all underwriting discounts and commissions relating to the sale or disposition
of such Holder's Registrable Securities pursuant to a registration statement
effected pursuant to this Section 5.1(a).
(c) Priority in Incidental Registrations. If a registration
pursuant to this Section 5.1 involves an underwritten offering by LWN (as
described in Section 5.1(a)(ii)) and the managing underwriter with respect to
such offering advises LWN in writing that, in its opinion, the number of
securities (including all Registrable Securities) which LWN, the Holders and any
other persons intend to include in such registration exceeds the largest number
of securities which can be sold in such offering without having an adverse
effect on the offering of securities as contemplated by LWN (including the price
at which LWN proposes to sell such securities), then LWN will include in such
registration (i) first, all the securities LWN proposes to sell for its own
account, (ii) second, the number of Registrable Securities which the Holders
have requested to be included in such registration and which, in the opinion of
such managing underwriter, can be sold without having the adverse effect
25
referred to above, such reduced number of Registrable Securities to be allocated
pro rata among all requesting Holders on the basis of the relative number of
shares of Registrable Securities then held by each such Holder (provided that
any shares thereby allocated to any such Holder that exceed such Holder's
request will be reallocated among the remaining requesting Holders in like
manner).
(d) Custody Agreement and Power of Attorney. Upon LWN's
request, any Holder will execute and deliver a custody agreement and power of
attorney in form and substance reasonably satisfactory to LWN with respect to
the shares of ▇▇▇▇▇▇ Common Stock to be registered pursuant to this Section 5.1
(a "Custody Agreement and Power of Attorney"). The Custody Agreement and Power
of Attorney will provide, among other things, that the Holder will deliver to
and deposit in custody with the custodian and attorney-in-fact named therein a
certificate or certificates representing such shares of ▇▇▇▇▇▇ Common Stock
(duly endorsed in blank by the registered owner or owners thereof or accompanied
by duly executed stock powers in blank) and irrevocably appoint said custodian
and attorney-in-fact as the Holder's agent and attorney-in-fact with full power
and authority to act under the Custody Agreement and Power of Attorney on the
Holder's behalf with respect to the matters specified therein.
(e) Other Agreements. Each Holder agrees that it will
execute such other agreements as LWN may reasonably request to further
accomplish the purposes of this Section 5.1.
5.2 Registration on Request. (a) Request by Holders. Upon the
written request of any Holder or Holders owning at least 20% of the Registrable
Securities that are subject to this Agreement, requesting that LWN effect the
registration under the Securities Act of all or part of such Holder's or
Holders' Registrable Securities (which Registrable Securities requested to be
registered have an aggregate Market Value as of the date of such request of not
less than $50 million), and specifying the intended method of disposition
thereof, LWN will promptly give written notice of such requested registration to
all other Holders, and thereupon will, as expeditiously as possible, use its
best efforts to effect the registration under the Securities Act of:
(i) the Registrable Securities which LWN has been so
requested to register by such Holder or Holders; and
(ii) all other Registrable Securities which LWN has been
requested to register by any other Holder thereof by written request
given to LWN within 30 days after the giving of such written notice by
LWN (which request shall specify the intended method of disposition of
such Registrable Securities),
so as to permit the disposition (in accordance with the Holders' intended method
thereof) of the Registrable Securities so to be registered; provided, that LWN
shall not be obligated to file a registration statement relating to any
registration request under this Section 5.2(a)(i) within a period of one year
after the effective date of any other registration statement relating to (A) any
registration request under this Section 5.2(a) or (B) any registration effected
under
26
Section 5.1, or (ii) if three registration statements relating to registration
requests under this Section 5.2(a) have previously been filed and declared
effective by the SEC.
(b) Expenses. LWN will pay all Registration Expenses in
connection with the first three registrations of Registrable Securities pursuant
to this Section 5.2 upon the written request of any of the Holders, and each
Holder shall pay the Holders' Portion, if any, of the underwriting discounts and
commissions relating to the sale or disposition of such Holder's Registrable
Securities pursuant to a registration statement effected pursuant to this
Section 5.2. All expenses for any subsequent registrations of Registrable
Securities pursuant to this Section 5.2 shall be paid pro rata by all Persons
(including the Holders and LWN) participating in such registration on the basis
of the relative number of shares of ▇▇▇▇▇▇ Common Stock of each such Person
included in such registration.
(c) Effective Registration Statement. A registration requested
pursuant to this Section 5.2 will not be deemed to have been effected unless it
has become effective; provided, that if, within the period ending on the earlier
to occur of (i) 180 days after the applicable registration statement has become
effective, or (ii) the date on which the distribution of the Registrable
Securities covered thereby has been completed, the offering of Registrable
Securities pursuant to such registration is interfered with by any stop order,
injunction or other order or requirement of the SEC or other governmental agency
or court, such registration will be deemed not to have been effected.
(d) Selection of Underwriters. If a requested registration
pursuant to this Section 5.2 involves an underwritten offering, the Holders of a
majority of the Registrable Securities which have requested inclusion in such
registration shall have the right to select the investment banker or bankers and
managers to administer the offering; provided, however, that such investment
banker or bankers and managers shall be reasonably satisfactory to LWN; provided
further, that if LWN is including shares of ▇▇▇▇▇▇ Common Stock in such
registration statement, LWN shall have the right to select such bankers or
managers.
(e) Priority in Requested Registrations. If a requested
registration pursuant to this Section 5.2 involves an underwritten offering and
the managing underwriter advises LWN in writing that, in its opinion, the number
of securities requested to be included in such registration (including
securities of LWN which are not Registrable Securities) exceeds the largest
number of securities which can be sold in such offering, LWN will include in
such registration only the Registrable Securities requested to be included in
such registration. In the event that the number of Registrable Securities
requested to be included in such registration exceeds the number which, in the
opinion of such managing underwriter, can be sold, the number of such
Registrable Securities to be included in such registration shall be allocated
pro rata among all requesting Holders on the basis of the relative number of
shares of Registrable Securities then held by each such Holder (provided that
any shares thereby allocated to any such Holder that exceed such Holder's
request shall be reallocated among the remaining requesting Holders in like
manner). In the event that the number of Registrable Securities requested to be
included in such registration is less than the number which, in the opinion of
the managing underwriter, can be sold, LWN may include in such registration the
27
securities LWN proposes to sell up to the number of securities that, in the
opinion of the managing underwriter, can be sold.
5.3 Registration Procedures. If and whenever, LWN is required
to use its best efforts to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in this Agreement, LWN will, as
expeditiously as possible:
(a) prepare and, if the registration is pursuant to notice
given under Section 5.2(a), in any event within 45 days after the
giving of notice pursuant to Section 5.2(a), file with the SEC a
registration statement with respect to such Registrable Securities on
any form for which LWN then qualifies or which counsel for LWN shall
deem appropriate, and which form shall be available for the sale of the
Registrable Securities in accordance with the intended methods of
distribution thereof, and use its best efforts to cause such
registration statement to become and remain effective; provided,
however, that LWN may discontinue any registration of its securities
which is being effected pursuant to Section 5.2 at any time prior to
the effective date of the registration statement relating thereto;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of 180 days or such lesser period of
time as LWN or any Holder may be required under the Securities Act to
deliver a prospectus in connection with any sale of Registrable
Securities, and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the
intended methods of disposition by the Holder or Holders thereof set
forth in such registration statement; provided, that before filing a
registration statement or prospectus, or any amendments or supplements
thereto, LWN will furnish to the Holders and their counsel copies of
all documents proposed to be filed, which documents will be subject to
the review of such counsel and will not be filed if such counsel
reasonably objects;
(c) furnish to each Holder of such Registrable Securities such
number of copies of such registration statement and of each amendment
and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and summary prospectus
and prospectus supplement, as applicable), in conformity with the
requirements of the Securities Act, and such other documents as such
Holder may reasonably request in order to facilitate the disposition of
the Registrable Securities by such Holder;
(d) use its best efforts to register or qualify such
Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as each
Holder shall reasonably request, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
Holder to consummate the disposition in such jurisdictions of the
Registrable Securities owned
28
by such Holder, except that LWN shall not for any such purpose be
required to qualify generally to do business as a foreign corporation
in any jurisdiction where, but for the requirements of this Section
5.3(d), it would not be obligated to be so qualified, to subject itself
to taxation in any such jurisdiction, or to consent to general service
of process in any such jurisdiction;
(e) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the Holder or Holders thereof to consummate the
disposition of such Registrable Securities;
(f) notify each Holder of any such Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 5.3(b), of LWN's
becoming aware that the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing, and at the request of any
such Holder, prepare and furnish to such Holder a reasonable number of
copies of an amended or supplemental prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(g) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable (but not more than
eighteen months) after the effective date of the registration
statement, an earnings statement which shall satisfy the provisions of
Section 11(a) of the Securities Act and the rules and regulations
promulgated thereunder;
(h) use its best efforts to cause all such Registrable
Securities to be listed on any securities exchange on which the ▇▇▇▇▇▇
Common Stock is then listed, if such Registrable Securities are not
already so listed and if such listing is then permitted under the rules
of such exchange, and to provide a transfer agent and registrar for
such Registrable Securities covered by such registration statement no
later than the effective date of such registration statement;
(i) enter into such customary agreements (including an
underwriting agreement in customary form) and take such other actions
as sellers of a majority of shares of such Registrable Securities or
the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities, including
making appropriate members of senior management of LWN available for
customary participation in a "road show" presentation to potential
investors;
29
(j) obtain a "cold comfort" letter or letters from LWN's
independent public accountants in customary form and covering matters
of the type customarily covered by "cold comfort" letters as the Holder
or Holders of a majority of the shares of such Registrable Securities
shall reasonably request (provided that Registrable Securities
constitute at least 25% of the securities covered by such registration
statement); and
(k) make available for inspection by representatives of the
Holders of the Registrable Securities covered by such registration
statement, by any underwriter participating in any disposition to be
effected pursuant to such registration statement and by any attorney,
accountant or other agent retained by such Holders or any such
underwriter, all pertinent financial and other records, pertinent
corporate documents and properties of LWN, and cause all of LWN's
officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement.
LWN may require each Holder of Registrable Securities as to
which any registration is being effected to furnish LWN with such information
regarding such Holder and pertinent to the disclosure requirements relating to
the registration and the distribution of such securities as LWN may from time to
time reasonably request in writing.
Each Holder of Registrable Securities agrees that, upon
receipt of any notice from LWN of the happening of any event of the kind
described in Section 4(f), such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 4(f), and, if so
directed by LWN, such Holder will deliver to LWN (at LWN's expense) all copies,
other than permanent file copies then in such Holder's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice. In the event LWN shall give any such notice, the period
mentioned in Section 5.3(b) shall be extended by the number of days during the
period from the date of the giving of such notice pursuant to Section 5.3(f) and
through the date when each seller of Registrable Securities covered by such
registration statement shall have received the copies of the supplemented or
amended prospectus contemplated by Section 5.3(f).
5.4 Indemnification. (a) Indemnification by LWN. In the event
of any registration of any securities of LWN under the Securities Act pursuant
to Section 5.1 or 5.2, LWN hereby indemnifies and agrees to hold harmless, to
the extent permitted by law, each Holder of Registrable Securities covered by
such registration statement, each affiliate of such Holder and their respective
directors and officers or general and limited partners (and the directors,
officers, affiliates and controlling Persons thereof), each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such Holder or any such underwriter
within the meaning of the Securities Act (collectively, the "Indemnified
Parties"), against any and all losses, claims, damages or liabilities, joint or
several, and expenses to which such Indemnified Party may become subject under
the Securities Act, common law or otherwise, insofar as such losses, claims,
damages
30
or liabilities (or actions or proceedings in respect thereof, whether or not
such Indemnified Party is a party thereto) arise out of or are based upon (a)
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such securities were registered under
the Securities Act, any preliminary, final or summary prospectus contained
therein, or any amendment or supplement thereto, or (b) any omission or alleged
omission to state therein a material fact necessary to make the statements made,
in the light of the circumstances under which they were made, not misleading,
and LWN will reimburse such Indemnified Party for any legal or other expenses
reasonably incurred by it in connection with investigating or defending any such
loss, claim, liability, action or proceeding; provided, that LWN shall not be
liable to any Indemnified Party in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
in any such preliminary, final or summary prospectus, or any amendment or
supplement thereto in reliance upon and in conformity with written information
with respect to such Indemnified Party furnished to LWN by such Indemnified
Party for use in the preparation thereof; and provided, further, that LWN will
not be liable to any Person who participates as an underwriter in the offering
or sale of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, under the indemnity
agreement in this Section 5.4(a) with respect to any preliminary prospectus or
the final prospectus or the final prospectus as amended or supplemented, as the
case may be, to the extent that any such loss, claim, damage or liability of
such underwriter or controlling Person results from the fact that such
underwriter sold Registrable Securities to a person to whom there was not sent
or given, at or prior to the written confirmation of such sale, a copy of the
final prospectus (including any documents incorporated by reference therein) or
of the final prospectus as then amended or supplemented (including any documents
incorporated by reference therein), whichever is most recent, if LWN has
previously furnished copies thereof to such underwriter. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such Holder or any Indemnified Party and shall survive the transfer of
such securities by such Holder.
(b) Indemnification by the Holders and Underwriters. LWN may
require, as a condition to including any Registrable Securities in any
registration statement filed in accordance with Section 5.1 or 5.2 herein, that
LWN shall have received an undertaking reasonably satisfactory to it from the
prospective Holder of such Registrable Securities or any underwriter to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 5.4(a)) LWN, all other prospective Holders or any underwriter,
as the case may be, and any of their respective affiliates, directors, officers
and controlling Persons, with respect to any statement or alleged statement in
or omission or alleged omission from such registration statement, any
preliminary, final or summary prospectus contained therein, or any amendment or
supplement, if such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written information
with respect to such Holder or underwriter furnished to LWN by such Holder or
underwriter expressly for use in the preparation of such registration statement,
preliminary, final or summary prospectus or amendment or supplement, or a
document incorporated by reference into any of the foregoing. Such indemnity
shall remain in full force and effect regardless of any
31
investigation made by or on behalf of LWN or any of the Holders, or any of their
respective affiliates, directors, officers or controlling Persons and shall
survive the transfer of such securities by such Holder.
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 5.4, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided, that the failure of the
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under Sections 5.4(a) or 5.4(b), except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party will be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. If, the
indemnified party has been advised by counsel that having common counsel would
result in a conflict of interest between the interests of such indemnified and
indemnifying parties, then such indemnified party may employ separate counsel
reasonably acceptable to the indemnifying party to represent or defend such
indemnified party in such action, it being understood, however, that the
indemnifying party shall not be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time for all such indemnified
parties (and not more than one separate firm of local counsel at any time for
all such indemnified parties) in such action. No indemnifying party will consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that
specified in this Section 5.4 (with appropriate modifications) shall be given by
LWN and each Holder of Registrable Securities with respect to any required
registration or other qualification of securities under any federal or state law
or regulation or governmental authority other than the Securities Act.
(e) Contribution. If recovery is not available under the
foregoing indemnification provisions of this Section 5 for any reason other than
as expressly specified therein, the parties entitled to indemnification by the
terms thereof shall be entitled to contribution to liabilities and expenses
except to the extent that contribution is not permitted under Section 11(f) of
the Securities Act. In determining the amount of contribution to which the
respective parties are entitled, there shall be considered the relative benefits
received by each party from the offering of the Registrable Securities (taking
into account the portion of
32
the proceeds realized by each), the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was asserted,
the opportunity to correct and prevent any misstatement or omission and any
other equitable considerations appropriate under the circumstances.
(f) Non-Exclusivity. The obligations of the parties under this
Section 5 shall be in addition to any liability which any party may otherwise
have to any other party.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of All Parties. LWN, LGII,
RDI and each Stockholder represents and warrants, on a joint and several basis
in the case of LWN, LGII and RDI and on a several and not joint basis in the
case of the Stockholders, as follows:
(a) This Agreement has been duly executed and delivered by such Person
and constitutes the legal, valid and binding obligation of such Person,
enforceable against such Person in accordance with the terms hereof except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights generally and by
general principles of equity; and
(b) The execution and delivery of this Agreement by such Person does
not, and the performance by it of its obligations under this Agreement will not,
violate, conflict with or constitute a breach of, or a default under, any
material agreement, indenture or instrument to which such Person is a party or
which is binding on such Person, and will not result in the creation of any lien
on, or security interest in, any of the assets of such Person.
6.2 Representations and Warranties of LGII, RDI and LWN. LGII,
RDI and LWN jointly and severally represent and warrant to the BCP Entities as
follows:
(a) The Option Shares have been or will be, prior to issuance,
duly authorized and, when such shares are issued, delivered and paid for on the
Exercise Date, will be validly issued and outstanding, fully paid and
nonassessable shares of capital stock of LWN, with no personal liability
attached to the ownership thereof; and the holders of the outstanding stock are
not entitled to preemptive or other rights to subscribe for such shares.
(b) Neither the issuance of the Option Shares nor their sale
in connection with the exercise of the BCP Liquidity Option nor the consummation
of any other of the transactions contemplated in this Agreement, nor the
fulfillment of the terms of this Agreement, will conflict with, result in a
breach of or constitute a default under the terms of the certificate of
incorporation or similar organizational document or bylaws of LWN, LGII or RDI
or of any material agreement, indenture or instrument to which LWN, LGII or RDI
is a party or is bound, or any order or regulation applicable to LWN, LGII or
RDI of any court,
33
regulatory body, administrative agency or governmental body having jurisdiction
over LWN, LGII or RDI.
(c) No consent, approval or authorization of, or filing,
registration or qualification with, any court, governmental, administrative or
judicial authority or regulatory body will be, as of the Exercise Date, required
on the part of LWN, LGII or RDI for the valid authorization, issuance, sale and
delivery of the Option Shares or for the execution, delivery and performance of
this Agreement other than those which have been duly obtained or made.
(d) As of the Exercise Date, there will be no action or
proceeding or investigation pending or, to the best knowledge of LWN, LGII and
RDI, threatened against LWN, LGII or RDI or any of their subsidiaries which, if
determined adversely could adversely affect the consummation of the transactions
contemplated by this Agreement. There are no actions or proceedings challenging
or seeking to restrain, materially limit or prohibit the consummation of the
transactions contemplated hereby.
(e) On or prior to the beginning of the 20 trading day period
ending on the third calendar day prior to the Exercise Date, the ▇▇▇▇▇▇ Common
Stock will have been duly registered under Section 12 of the Securities Exchange
Act of 1934, and the Option Shares will be listed on the New York Stock Exchange
or designated for inclusion in NASDAQ National Market System, as the case may
be, and such registration and listing or designation shall remain in effect
through the later of the Exercise Date or the date shares of ▇▇▇▇▇▇ Common Stock
issued for the account of BCP are sold for BCP's account.
6.3 Representations and Warranties of BCP and ▇▇▇▇. Each of
the BCP Entities and ▇▇▇▇ severally and not jointly represent and warrant to
LWN, LGII and RDI as follows:
(a) On the Exercise Date, each of the BCP Entities and ▇▇▇▇
will have good and valid title to the shares of Common Stock owned by each of
them, free and clear of all liens, encumbrances, equities and claims.
(b) No consent, approval or authorization of, or filing,
registration or qualification with, any court, governmental, administrative or
judicial authority or regulatory body will be, as of the Exercise Date, required
on the part of any of the BCP Entities or ▇▇▇▇ for the valid sale and delivery
of the BCP Common Stock and the ▇▇▇▇ Common Stock to LGII as contemplated
herein.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Calculation of EBITDA. (a) At any time that RHC's
EBITDA is calculated pursuant to this Agreement, such calculation shall be
prepared in accordance with
34
the accounting practices of Mortuary and the Association in effect on the
Closing Date, without giving effect to any modifications to such accounting and
business practices made subsequent to the Closing Date, regardless of whether
such modifications were made pursuant to the promulgation of rules, regulations
or statutes applicable to RHC, changes in GAAP or otherwise provided, however,
that EBITDA for the Entry Relevant Period shall be adjusted to reflect payment
of property taxes and non-consolidation of the Endowment Care Fund as a result
of RHC's for-profit status.
(b) In the event that the ASA is terminated or reduced in
scope prior to the Exercise Date, then Pro Forma EBITDA for the Entry Relevant
Period will be restated to reflect the incremental expense RHC would have
incurred in fiscal years 1997 and 1998 had the ASA not been in place during
those years or had been in place but only on a comparably reduced scope basis,
as the case may be.
(c) Notwithstanding paragraph (a) above and regardless of
proper GAAP accounting, in the event payments pursuant to the long term
incentive plan for RHC management are due on or as a result of the exercise of
an Option, such payments will be expensed on a straight line basis from the
Closing Date to the Exercise Date for purposes of computing Pro Forma EBITDA for
the Entry Relevant Period and EBITDA for the Exit Relevant Period.
(d) To the extent any Acquisitions are consummated during 1997
or 1998, in calculating Pro Forma EBITDA for the Entry Relevant Period, EBITDA
shall be calculated on a pro forma basis to exclude the Acquisition EBITDA
attributable to such Acquisitions. In calculating EBITDA and Acquisition EBITDA
for any period, all overhead charges shall be allocated among Rose Hills and the
Satellite Properties, on the one hand, and the various businesses acquired in
the relevant Acquisition or Acquisitions, on the other hand, based on their
relative total net sales during the relevant period.
(e) Notwithstanding anything to the contrary contained herein,
EBITDA shall not include any nonrecurring income or expense or any impact or any
earnings attributable to the withdrawal of all or part of any reserve
established or in existence in connection with any trust fund maintained by RHC.
(f) Notwithstanding anything contained herein to the contrary,
in the event there are any year to year increases in the aggregate lease expense
associated with the Satellite Properties that are in excess of a rate per annum
of 5%, such "excess" increase in lease expense shall be excluded as an expense
item in calculating EBITDA.
(g) The various amounts calculated in accordance with Article
III shall be subject to subsequent adjustment based on relevant events that
occur after such calculations are made. Such adjusted amounts shall be
calculated by the chief financial officer of Holdings, and the notification,
dispute, and dispute resolution mechanisms described in Section 3.5(b) shall
apply, mutatis mutandis, to such adjustment process.
35
7.2 Further Assurances. (a) Subject to the terms and
conditions hereof, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective, reasonably promptly in light of the relevant
Notification Date and Option Date, the transactions contemplated by this
Agreement.
(b) Promptly following the Notification Date, each of the
parties hereto shall prepare and file all applications and other notices
required in connection with, and use their best efforts to obtain promptly and
comply with all conditions contained in, all necessary regulatory approvals and
any other consent, approval or other actions by, or notice to or registration or
filing with, any governmental or administrative agency or authority required or
necessary to be made, obtained or complied with, as the case may be, by any
party hereto in connection with the performance of the transactions contemplated
by this Agreement, including without limitation any premerger notifications
pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇
▇▇▇"). LWN, LGII and RDI agree to, and shall cause their Affiliates to, (i)
enter into with the Federal Trade Commission and/or the Department of Justice
such decrees, consent orders and/or hold separate undertakings and (ii)
effectuate any divestitures, in each case involving assets or operations of
either RHC or LGII or its Affiliates or both, as may be necessary in order to
enable LGII to purchase, as soon as practicable following the Notification Date
and in any event no later than the Exercise Date, the BCP Common Stock and the
▇▇▇▇ Common Stock.
7.3 LWN Guarantee. (a) Guarantee. LWN hereby unconditionally
and irrevocably guarantees to the BCP Entities and their respective successors,
transferees and assigns, the prompt and complete payment and performance by LGII
and its successors and assigns when due of the Obligations. LWN further agrees
to pay any and all expenses (including, without limitation, all fees and
disbursements of counsel) which may be paid or incurred by the BCP Entities in
enforcing any of their rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or collecting against,
LGII or against LWN under this Guarantee.
(b) Guarantee Absolute and Unconditional. LWN waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon LGII or LWN with respect to the Obligations. This
Guarantee shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to any circumstance whatsoever (with or
without notice to or knowledge of LGII or LWN) which constitutes, or might be
construed to constitute, an equitable or legal discharge of LGII for the
Obligations, or of LWN under this Guarantee, in bankruptcy or in any other
instance. This Guarantee shall remain in full force and effect and be binding in
accordance with and to the extent of its terms upon LWN and its successors and
assigns, and shall inure to the benefit of the BCP Entities and their respective
successors, transferees and assigns, until all the Obligations and the
obligations of LWN under this Guarantee shall have been satisfied by payment in
full.
(c) Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the
36
Obligations is rescinded or must otherwise be restored or returned by the BCP
Entities upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of LGII or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, LGII or any
substantial part of its property, or otherwise, all as though such payments had
not been made.
7.4 Drag-Along Rights. (a) In the event of a default by LGII
or LWN of their obligations under Section 4.1 to pay the relevant Option Price
as provided for herein, and such default shall continue for 45 days, the BCP
Entities shall be entitled to solicit offers from third parties for the purchase
of all or part of the outstanding shares of Common Stock and Preferred Stock.
If, following such Event of Default and pursuant to such solicitation, any of
the BCP Entities receives a bona fide offer from a Person other than a BCP
Entity or any of its Affiliates (a "Third Party") to purchase in an arms'-length
transaction all or part of the outstanding shares of Common Stock and Preferred
Stock owned by the Stockholders and such offer is accepted by such BCP Entities,
then LGII, RDI, ▇▇▇▇ and their respective Permitted Transferees each agrees that
it will Transfer all or part of the shares of Common Stock and Preferred Stock
owned by it to such Third Party on the terms of the offer so accepted by such
BCP Entities, including the same per share consideration. In any such
transaction where less than all of the outstanding shares of Common Stock are to
be sold, such shares to be sold shall be sold by BCP, LGII, RDI and ▇▇▇▇ pro
rata in proportion to their respective holdings of Common Stock.
(b) The BCP Entities shall give notice (the "Drag-Along
Notice") to each of the other Stockholders of any proposed Transfer giving rise
to the rights of such BCP Entities set forth in Section 7.4(a) as soon as
practicable following the acceptance of the offer referred to in Section 7.4(a).
The Drag-Along Notice shall set forth the number of shares of Common Stock and
Preferred Stock proposed to be so Transferred, the name of the proposed
transferee, the proposed amount and form of consideration (and if such
consideration consists in part or in whole of property other than cash, the
Transferring Stockholder shall provide such information, to the extent
reasonably available to the BCP Entities, relating to such consideration as
LGII, RDI, ▇▇▇▇ and their respective Permitted Transferees may reasonably
request in order to evaluate such non-cash consideration) and the other terms
and conditions of the offer. The BCP Entities shall notify the Stockholders at
least 20 days in advance of entering into a definitive agreement in connection
with such offer if Stockholders will be required to sign any agreement
containing representations, warranties and indemnities and will provide in
advance to one counsel acting for Holdings and the other Stockholders subject to
the Drag-Along Notice (which counsel shall be other than counsel for the BCP
Entities) a copy of the representations, warranties and indemnities proposed to
be made by such Stockholders. In any such agreement such Stockholders will be
required to make the same representations, warranties and indemnities as the BCP
Entities so long as they are made severally and not jointly. The Stockholders
agree that Holdings shall pay the fees and expenses of counsel for the
Stockholders in connection with any transaction referred to in this Section 7.4.
If the Transfer referred to in the Drag-Along Notice is not consummated within
120 days from the date of the Drag-Along Notice, the Transferring Stockholder
must deliver another Drag-Along Notice in order to exercise its rights under
this Section 3.6 with respect to such Transfer or any other Transfer.
37
(c) Following a default as described in Section 7.4(a), any
proceeds realized from the sale pursuant to this Section 7.4 of the shares of
Common Stock or Preferred Stock held by LGII, RDI or their respective Permitted
Transferees shall be paid over to BCP to the extent necessary to satisfy the
Obligations which remain unsatisfied following the sale of the BCP Common Stock
and ▇▇▇▇ Common Stock, whether pursuant to Section 7.4 or otherwise, and any
excess proceeds shall be paid over to LGII.
ARTICLE VIII
CLOSINGS
8.1 Payment of the Option Price in Cash or ▇▇▇▇▇▇ Common Stock
The closing of the purchase of BCP Common Stock and ▇▇▇▇ Common Stock pursuant
to the exercise of an Option as provided in Sections 2.1 and 2.2 shall take
place on the Exercise Date in the event (a) the Option Price is to be paid
wholly in cash or (b) the Option Price is to be paid in part or in whole in
▇▇▇▇▇▇ Common Stock and BCP does not exercise the BCP Liquidity Right.
8.2 Exercise of the BCP Liquidity Right. In the event the
Option Price is to be paid in part or in whole in shares of ▇▇▇▇▇▇ Common Stock
and BCP exercises the BCP Liquidity Right as provided in subsection 4.1(a)(ii),
the closing of the purchase of BCP Common Stock and ▇▇▇▇ Common Stock shall take
place on the Exercise Date, provided, that in the event LGII or LWN does not
deliver the net cash proceeds from the issuance and sale of ▇▇▇▇▇▇ Common Stock
on the Exercise Date to the extent required as a result of the exercise of the
BCP Liquidity Right, (a) BCP and ▇▇▇▇ shall deliver into escrow (with an escrow
agent reasonably acceptable to both LGII and BCP) on the Exercise Date the BCP
Common Stock and the ▇▇▇▇ Common Stock, and (b) LGII shall on the Exercise Date
deliver into escrow with such escrow agent the portion, if any, of the Option
Price being paid in cash, together with the requisite number of shares of ▇▇▇▇▇▇
Common Stock, if any, as to which the BCP Liquidity Right has not been
exercised, and the closing of the exercise of the Option shall take place on the
earliest to occur of (i) the date on which the requisite amount of net cash
proceeds from the sale of shares of ▇▇▇▇▇▇ Common Stock as to which the BCP
Liquidity Right has been exercised are received and (ii) the 180th day after the
date on which BCP notified LWN of its desire to exercise the BCP Liquidity
Right, at which time (subject to Section 8.3) the BCP Common Stock and ▇▇▇▇
Common Stock shall be released from escrow against payment of such portion of
the Option Price payable in cash and such requisite number of shares of ▇▇▇▇▇▇
Common Stock, if any.
8.3 Default By LGII or LWN. In the event of a default by LGII
or LWN of their obligations to pay the Option Price on the Exercise Date (or
such later date as provided in Section 8.2), the BCP Common Stock and ▇▇▇▇
Common Stock shall be released from escrow and returned to BCP and ▇▇▇▇, as
applicable, and any funds or other assets held by the escrow agent in respect of
any earlier deposit by or on behalf of LGII or LWN shall be retained by the
escrow agent as collateral security for the payment of the Obligations, and LWN
and LGII hereby grant to BCP a security interest in such funds or other amounts
as
38
security for the Obligations. In the event all or any part of the Option Price
is not paid when due, such unpaid amount shall constitute a continuing fixed
obligation of LGII and shall bear interest at the Default Rate until such unpaid
amount is paid in full (as well as after as before judgment).
8.4 Time and Place of Closing. The closing of the purchase of
the BCP Common Stock and ▇▇▇▇ Common Stock shall be held at the principal office
of the BCP Entities at 10:00 A.M. local time on the date determined pursuant to
this Article VIII.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. Notices hereunder shall be given only by
personal delivery, registered or certified mail, return receipt requested,
overnight courier service, or telex, telegram or other form of electronic mail
or by telecopy (and subsequently confirmed by any other permitted means
hereunder) and shall be deemed transmitted when personally delivered or
deposited in the mail or delivered to a courier service or a carrier for
electronic transmittal (as the case may be), postage or charges prepaid, and
addressed to the particular party to whom the notice is to be sent as follows:
(a) in the case of BCP or ▇▇▇▇:
c/o The Blackstone Group
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(c) in the case of LGII or LWN:
The ▇▇▇▇▇▇ Group Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ 358
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Senior Vice President and Chief Financial Officer
39
with a copy to:
The ▇▇▇▇▇▇ Group Inc.
c/▇ ▇▇▇▇▇▇ Group International, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Legal Department
or to such address as a party may instruct by notice hereunder.
Section 9.2 Severability; Mutuality of Options. In the event
any provision hereof is held or rendered void or unenforceable by any court or
other legal authority, then such provisions shall be severable and shall not
affect the remaining provisions hereof. Notwithstanding the foregoing, in the
event either the call option or put option shall be held or rendered void or
unenforceable or breached by the party obligated thereon, then the party holding
such option shall be excused from performing under the option it has granted.
Section 9.3 Entire Agreement. This Agreement, together with
the other agreements referred to herein, is the entire Agreement among the
parties, and, when executed by the parties hereto, supersedes all prior
agreements and communications, either verbal or in writing, between the parties
hereto with respect to the subject matter contained herein.
Section 9.4 Amendment and Waiver. This Agreement may not be
amended, modified or supplemented unless consented to in writing by the parties
hereto. Any failure by a party hereto to comply with any obligation, agreement
or condition herein may be expressly waived in writing by each of the other
parties hereto, but such waiver or failure to insist upon strict compliance with
such obligation, agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any such subsequent or other failure.
Section 9.5 Assignment; Binding on Transferees. The provisions
of this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted transferees from and after
the effective date hereof. Subject to the last sentence of this ▇▇▇▇▇▇▇ ▇.▇,
▇▇▇▇▇, ▇▇▇▇, ▇▇▇, ▇▇▇▇ and RHMI may assign any of their respective rights and
obligations hereunder to any of their respective Affiliates. LWN may not assign
any of its rights and obligations hereunder to any Person without the written
consent of BCP. A Person may become an assignee of the rights of a party hereto
only if such assignee becomes a party to this Agreement to the same extent as
the assignor; provided, that an assignment by any party hereto of its rights
hereunder shall not release such party from its obligations hereunder unless all
other parties hereto consent to such release.
Section 9.6 Variations in Pronouns. All pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine or
neuter, singular or plural, as the identity of the antecedent person or persons
or entity or entities may require.
40
Section 9.7 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
Section 9.8 Further Assurances. Each of the parties shall
execute such documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby.
Section 9.9 Headings. The headings in this Agreement are
intended solely for convenience of reference and shall be given no effect in the
interpretation of this Agreement.
Section 9.10 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 9.11 Submission to Jurisdiction; Waivers. Each of the
parties hereto hereby irrevocably submits in any legal action or proceeding
relating to or arising out of this Agreement, or for recognition and enforcement
of any judgment in respect thereof, to the jurisdiction of the United States
District Court for the Southern District of New York, and appellate courts
thereof. Each of the parties hereto further (i) consents that any such action or
proceeding may be brought in such court and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding in such court or
that such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same; (ii) agrees that service of process in any such
action or proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage prepaid, to
such party at its address set forth in Section 9.2 or at such other address of
which such party shall have given notice pursuant thereto; (iii) agrees that
nothing herein shall affect the right to effect service of process in any other
manner permitted by law or shall limit the right to ▇▇▇ in any other
jurisdiction; and (iv) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding referred
to in this subsection any special, exemplary, punitive or consequential damages.
Section 9.12 WAIVERS OF JURY TRIAL. EACH PARTY HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
41
IN WITNESS WHEREOF, the undersigned have executed this
Agreement on the date first above written.
THE ▇▇▇▇▇▇ GROUP INC.
By: /s/ F. ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: F. ▇▇▇▇▇▇ ▇▇▇▇▇
Title:
▇▇▇▇▇▇ GROUP INTERNATIONAL, INC.
By: /s/ F. ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: F. ▇▇▇▇▇▇ ▇▇▇▇▇
Title:
ROSES DELAWARE, INC.
By: /s/ F. ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: F. ▇▇▇▇▇▇ ▇▇▇▇▇
Title:
BLACKSTONE CAPITAL PARTNERS II
MERCHANT BANKING FUND L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
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▇▇▇▇▇▇▇ PARTNERS L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP II L.P.
43
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
RHI MANAGEMENT DIRECT L.P.
By: PSI P&S Corp.
General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title:
