PUT/CALL AGREEMENT
PUT/CALL AGREEMENT, dated as of August 26, 1996 (this "Agreement"),
among Blackstone Capital Partners II Merchant Banking Fund L.P., a Delaware
limited partnership ("BCPII"), Blackstone Offshore Capital Partners II L.P.,
a Cayman Islands limited partnership ("BOCP"), Blackstone Family Investment
Partnership II L.P., a Delaware limited partnership ("BFIP" and, together
with BCPII, BOCP 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 Prime Holdings (as defined below) as
contemplated by Section 5.4 of the Stockholders' Agreement referred to below,
"BCP" or the "BCP Entities"), Xxxxxx Group International Inc., a Delaware
corporation (together with its permitted assigns and transferees as provided
herein, "LGII"), The Xxxxxx Group Inc., a British Columbia corporation
("LWN"), and PSI Management Direct L.P., a Delaware limited partnership
("PSIM"). BCP, LGII and PSIM are herein collectively referred to as the
"Stockholders" and individually as a "Stockholder."
WHEREAS, pursuant to a stock purchase agreement dated as of June
14, 1996 (the "Stock Purchase Agreement"), among Prime Succession, Inc., a
Delaware corporation ("Existing Prime"), the other individuals or entities
listed on the signature pages thereto as selling stockholders (collectively,
the "Sellers"), LWN and Prime Succession Acquisition Corp., a Delaware
corporation formerly known as Blackhawk Acquisition Corp. which is to be
renamed Prime Succession, Inc. ("New Prime") at the Closing described below,
New Prime obtained the right to acquire all of the capital stock of Existing
Prime held by the Sellers, which right has previously been assigned to
Blackhawk Onshore Acquisition Company L.L.C. and Blackhawk Offshore Company
L.L.C. and is being further assigned to Existing Prime at the Closing, such
that Existing Prime would repurchase such capital stock from such Sellers;
WHEREAS, at the Closing and as contemplated by the Stockholders'
Agreement (as defined below), the Stockholders will subscribe for newly
issued shares of capital stock of Existing Prime, such that upon the
consummation of such subscription and the repurchase by Existing Prime of its
shares held by the Sellers as described above, the Stockholders will hold all
of the then issued and outstanding shares of capital stock of Existing Prime
(which will then be renamed Prime Succession Holdings, Inc. ("Prime
Holdings")); and
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:
"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 pursuant to Section 5.4 of the Stockholders' Agreement.
"Adjusted BCP Contribution" means the BCP Contribution less
$15,000,000.
"Adjusted Total Equity Value" means, as of the Exercise Date, the
sum of Total Equity Value, the LGII Preferred Contribution and LGII Accrued
Preferred Dividends.
"Affiliate" of any Person means any other Person that directly or
indirectly controls, is controlled by, or is under common control with, such
Person.
"BCP Call Hurdle Profit" means the amount in excess of the BCP
Contribution necessary to provide a 24.14% compound 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 $52,000,000 (which includes the
investment in Common Stock by PSIM) 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 25% 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.
"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 Option" is defined in Section 2.1.
"Call Option Exercise Price" is defined in Section 2.3.
"Closing" means the consummation of the transactions contemplated
by the Stock Purchase Agreement.
"Closing Date" means the date on which the Closing pursuant to the
Stock Purchase Agreement occurs.
"Common Stock" means the common stock, par value $.01 per share, of
Prime Holdings.
"Consolidated Cash Flow" has the meaning ascribed to such term in
the Indenture as of the date of this Agreement.
"Creation Multiple" means the quotient of (i) the Creation Price
divided by (ii) Pro Forma EBITDA for the Entry Relevant Period.
"Creation Price" means the sum of (a) the BCP Contribution, plus
(b) the LGII Contribution, plus (c) $190 million, plus (d) the amount as of
the Closing Date of Prime Holdings' liabilities on a consolidated basis
relating to covenants not to compete, consulting agreements and other former
owners' expenses, computed utilizing a 10% discount rate and assuming a
continuation of past payment practices, plus (e) the aggregate amount as of
the Closing Date of Existing Prime's liabilities on a consolidated basis in
respect of its obligations under the Casket Supply Agreement, dated as of
January 1, 1993, as amended, between Batesville Casket Company, Inc. and
Prime Succession, Inc., less (f) the amount of any payment made by the
Sellers to Prime Holdings in accordance with the post-closing adjustment
provisions of Section 4.6 of the Stock Purchase Agreement.
"Credit Agreement" means the credit agreement dated as of August
26, 1996 among New Prime, Existing Prime and the lenders thereunder.
"Default Rate" has the meaning ascribed to such term in the Credit
Agreement as of the date of this Agreement.
"EBITDA" means, for any period, the amount of Consolidated Cash
Flow calculated for Prime Holdings on a consolidated basis for the relevant
period, subject to Section 7.1 of this Agreement.
"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 0.5 and added to the BCP Contribution plus
the BCP Call Hurdle Profit (if the calculation is being made in connection
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 thirty percent (30%) 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 Xxxxxx 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 Existing Prime 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.
"Indenture" means the Indenture, dated as of August 15, 1996,
between Prime Succession Acquisition Corp., as issuer, and United States
Trust Company of New York, as trustee.
"LGII Accrued Preferred Dividends" means, as of the date of
determination, the aggregate liquidation preference of the LGII Preferred
less the LGII Preferred Contribution.
"LGII Common Contribution" means the sum of $16,000,000 and the
aggregate amount of any Additional LGII Contributions made in respect of
Common Stock.
"LGII Contribution" means the sum of the LGII Common Contribution
and the LGII Preferred Contribution.
"LGII 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.
"LGII Preferred" means the shares of Preferred Stock held by LGII
and its Affiliates.
"LGII Preferred Contribution" means the sum of $62,000,000 and the
aggregate amount of any Additional LGII Contributions made in respect of
Preferred Stock which sum shall not be reduced by any redemption of such
Preferred Stock.
"Xxxxxx Common Stock" means the common stock, par value $.01 per
share, of LWN.
"Management Equity Indebtedness" means the aggregate amount of
outstanding loans, including accrued interest thereon (whether or not
capitalized), provided by New Prime to PSIM or its management for purposes of
the acquisition of PSIM Common Stock.
"Market Value" means the average of the daily closing prices of the
Xxxxxx Common Stock for the 20 trading day period ending on the third
calendar day prior to 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
Xxxxxx Common Stock is not listed or admitted to trading on the New York
Stock Exchange, on the American Stock Exchange, or, if the Xxxxxx 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 Xxxxxx 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 Xxxxxx Common Stock is not
so quoted, the average of the closing bid and asked price of the Xxxxxx
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.
"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).
"Offering Memorandum" the offering memorandum dated August 13, 1996
relating to the offering of New Prime's 10-3/4% Senior Subordinated Notes due
2004.
"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.
"Option" means the Call Option or the Put Option, as applicable.
"Option Shares" means shares of Xxxxxx Common Stock issuable in
connection with the exercise of an Option.
"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 Xxxxxx Common Stock, if any,
issuable in connection with the Option.
"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.
"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 Prime Holdings.
"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 31, 1998 and (y)
365, and (b) 2, and may be expressed as a formula calculation as follows:
1997 EBITDA + 1998 EBITDA
(1.06)(# days since CD to 12/31/97/365)(1.06)(# days since CD to 12/31/98/365)
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2
"PSIM Common Stock" means the shares of Common Stock held by PSIM.
"Put Option" is defined in Section 2.2.
"Put Option Exercise Price" is defined in Section 2.4.
"Registrable Securities" means any Xxxxxx 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 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 Securities.
"Revolver" means the revolving credit facility made available to
New Prime by a syndicate of commercial lenders on the Closing Date, or any
other similar facility subsequently replacing such facility.
"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 August 26, 1996, among the Stockholders and Prime Holdings.
"Total Call Hurdle Value" means the sum of the BCP Contribution,
the LGII Common Contribution, the BCP Call Hurdle Profit and the LGII Hurdle
Profit.
"Total Contribution" means the sum of (i) the BCP Contribution and
(ii) the LGII Contribution.
"Total Enterprise Value" means the product of (i) the Creation
Multiple multiplied by (ii) EBITDA for the Exit Relevant Period.
"Total Equity Value" 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)
means 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 Prime Holdings' consolidated total indebtedness
(excluding any amounts outstanding under the Revolver), plus (b) the LGII
Preferred Contribution, plus (c) LGII Accrued Preferred Dividends, less (d)
the aggregate amount of Prime Holdings' consolidated total cash, cash
equivalents and any other marketable securities, less (e) 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 Hurdle
Profit.
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 PSIM 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 and PSIM irrevocably agrees to
sell to LGII) all, but not less than all, of the BCP Common Stock or PSIM
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 PSIM
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 each share of PSIM Common Stock shall equal the Call
Option Exercise Price divided by the aggregate number of shares of BCP Common
Stock and PSIM 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 PSIM, 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 PSIM 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 PSIM 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 PSIM) all, but not less than all, of the BCP Common Stock and PSIM Common
Stock respectively owned by them; provided that the Put Option may be
exercised only with respect to all the BCP Common Stock and PSIM Common
Stock, and provided further, BMAII, as agent for each of the BCP Entities and
PSIM, 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 PSIM 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 PSIM Common Stock shall equal the
Put Option Exercise Price divided by the aggregate number of shares of BCP
Common Stock and PSIM 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.
(b) BMAII, as exclusive agent for BCP and PSIM, 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
the PSIM 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) 50% of Excess Value One, if any and (d) 25% 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) LGII 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) LGII 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) LGII 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) LGII Preferred Contribution and (z)
LGII 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) LGII Preferred
Contribution and (e) LGII 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) LGII Preferred Contribution, (y) LGII Accrued
Preferred Dividends and (z) $15 million;
(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 50% of Excess
Value One plus 25% of Excess Value Two, if Total Equity Value is greater than
Total Put Hurdle Value.
ARTICLE III
CALCULATION OF OPTION PRICE
3.1 Calculation of Creation Price. Within 30 days of the Closing
Date, the Stockholders shall cause the chief financial officer of Prime
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, it shall be
final and binding on the parties in calculating the Creation Multiple. If
such amount is so disputed by written notice as aforesaid, such dispute shall
be resolved in accordance with Section 3.4(b), and the resolution process
thereby provided shall determine the Creation Price which shall be final and
binding on the parties in calculating the Creation 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 Prime
Holdings to calculate Prime 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 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 3.4(b), and the resolution process thereby
provided shall determine EBITDA for 1997 and/or 1998, as the case may be,
which amount shall be final and binding on the parties in calculating Pro
Forma EBITDA for the Entry Relevant Period.
(b) Promptly following the determination of EBITDA for calendar
1998, the Stockholders shall cause the chief financial officer of Prime
Holdings to calculate Pro Forma EBITDA for the Entry Relevant Period and the
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 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 3.4(b),
and the resolution process thereby provided shall determine the Pro Forma
EBITDA for the Entry Relevant Period and the Creation Multiple which shall be
final and binding on the parties.
3.3 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 Prime 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 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 3.4(b), and the resolution process thereby provided
shall determine EBITDA for the Exit Relevant Period, which amount shall be
final and binding on the parties in calculating Total Enterprise Value.
3.4 Access to Information; Resolution of Disputes. (a) Each
Stockholder and its representatives shall have full access to the books and
records of Prime Holdings and its subsidiaries in connection with any
calculation made pursuant to this Article III. The parties hereby agree to
cause Prime Holdings to instruct all auditors to make their work papers
available for review in this regard, and hereby waive any objection which
such Stockholder may raise with respect thereto. The fees and expenses of the
Stockholders' representatives shall be paid by Prime Holdings.
(b) In the event any Stockholder disputes any amount calculated by
the chief financial officer of Prime 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 Prime 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) 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 common stock, par
value $.01, of LWN ("Xxxxxx Common Stock"). If Xxxxxx 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
Xxxxxx Common Stock. The number of shares of Xxxxxx 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 Xxxxxx 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 Xxxxxx 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
Xxxxxx 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 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 Xxxxxx 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 Xxxxxx Common Stock. In this regard, LWN agrees (i) to
make an appropriate public announcement no later than the commencement of
such 20 trading day period with regard to the pending issuance of Xxxxxx
Common Stock to BCP on the Exercise Date, and (ii) during the period
commencing at the beginning of such 20 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 Xxxxxx 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.
(c) Regardless of the issuance of Xxxxxx Common Stock in
connection with the Call Option or the Put Option, the amount payable
pursuant to Section 2.1 or 2.2 by LGII for each share of PSIM Common Stock in
connection with the exercise of the Call Option or the Put Option shall be
paid by LGII in cash to PSIM on the Exercise Date.
4.2 Conditions to Issuance of Xxxxxx Common Stock. The ability of
LGII and LWN to issue Xxxxxx 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 and LGII 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 and LGII 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 has not 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 Section 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 August 26, 1996) 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 Xxxxxx Common Stock to BCP pursuant to
Section 4.1(b), each time LWN proposes to register Xxxxxx 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 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 Xxxxxx 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
Xxxxxx 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 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 Xxxxxx 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 Xxxxxx 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 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 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 Xxxxxx 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;
(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 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 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 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 and
each Stockholder represents and warrants, on a joint and several basis in the
case of LWN and LGII 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 and LWN. LGII 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 or LGII or
of any material agreement, indenture or instrument to which LWN or LGII is a
party or is bound, or any order or regulation applicable to LWN or LGII of
any court, regulatory body, administrative agency or governmental body having
jurisdiction over
