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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 26, 1996
THE LOEWEN GROUP INC.
(Exact Name of Registrant as Specified in Charter)
British Columbia, Canada 1-12163 98-0121376
------------------------ ------- ----------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4126 Norland Avenue, Burnaby, British Columbia, CANADA V5G 3S8
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 604-299-9321
----------------------------
N/A
- -------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
On August 26, 1996, The Loewen Group Inc. ("TLGI") announced that
Blackstone Capital Partners II Merchant Banking Fund L.P. and certain
affiliates (together, "Blackstone") and Loewen Group International,
Inc. ("Loewen") acquired Prime Succession Inc., the largest privately-
held funeral services company in North America ("Prime"), for
approximately $320 million, including transaction and financing costs.
Blackstone and a management partnership ("MP") contributed $52
million to Prime, for which they received an aggregate of 76.5% of
the Prime common stock. Loewen contributed $78 million, $16 million
of which was contributed in exchange for 23.5% of the Prime common
stock and $62 million of which was contributed for all of the Prime
preferred stock, which yields an annual payment-in-kind dividend of
10%. The remaining funds to finance the acquisition were obtained from
a high yield debt financing and a bank credit facility.
In connection with the acquisition, Blackstone, MP, Loewen and TLGI
entered into a Put/Call Agreement dated as of August 26, 1996 (the
"Put/Call Agreement"). Pursuant to the Put/Call Agreement, (i) Loewen
will have a call option exercisable from August 26, 2000 through
August 25, 2002, to purchase all of Blackstone's and MP's equity in
Prime (the "Call Option") and (ii) Blackstone and MP will have a put
option, exercisable from and after August 26, 2002 through August 25,
2004, to require Loewen to purchase their respective equity in Prime
(the "Put Option"). The exercise price of the Put and Call Options are
dependent upon a formula for sharing the computed enterprise value of
Prime, calculated based primarily on multiples of earnings before
interest, taxes, depreciation, and amortization for specified periods.
TLGI has guaranteed Loewen's obligations under the Put/Call Agreement.
The foregoing summary is qualified in its entirety to the
description of the various components of the transactions set forth in
the documents attached hereto as exhibits and incorporated by
reference herein.
In addition, on September 20, 1996, Loewen announced that a new
company formed in partnership with Blackstone entered into a
definitive agreement to acquire the cemetery and mortuary operations
and assets of The Rose Hills Memorial Park Association and Roses, Inc.
of Los Angeles for approximately $240 million. The transaction is
expected to close by mid-December, 1996. Certain terms of the
arrangement between Loewen and Blackstone are subject to further
negotiation. However, Loewen anticipates that such terms will be
similar to those of the Prime transaction, including the Put Option
and Call Option.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
EXHIBIT NO. DESCRIPTION
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Exhibit 99.1 Stock Purchase Agreement, dated as of June 14,
1996, by and among Prime Succession, Inc., the other
individuals or entities listed on the signature
pages thereof, The Loewen Group Inc. and Blackhawk
Acquisition Corp.
Exhibit 99.2 Put/Call Agreement, dated as of August 26, 1996,
among Blackstone Capital Partners II Merchant
Banking Fund L.P., Blackstone Offshore Capital
Partners II L.P., Blackstone Family Investment
Partnership II L.P., PSI Management Direct L.P.,
Loewen Group International, Inc. and The Loewen
Group Inc.
Exhibit 99.3 Stockholders' Agreement, dated as of August 26,
1996, among Prime Succession, Inc. (to be renamed
Prime Succession Holdings, Inc.), Blackstone Capital
Partners II Merchant Banking Fund L.P., Blackstone
Offshore Capital Partners II L.P., Blackstone Family
Investment Partnership II L.P., PSI Management
Direct L.P. and Loewen Group International, Inc.
2
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: October 11, 1996
THE LOEWEN GROUP INC.
By: /s/ PETER S. HYNDMAN
------------------------------
Name: Peter S. Hyndman
Title: Corporate Secretary
3
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
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99.1 Stock Purchase Agreement, dated as of June 14,
1996, by and among Prime Succession, Inc., the other
individuals or entities listed on the signature
pages thereof, The Loewen Group Inc. and Blackhawk
Acquisition Corp.
99.2 Put/Call Agreement, dated as of August 26, 1996,
among Blackstone Capital Partners II Merchant
Banking Fund L.P., Blackstone Offshore Capital
Partners II L.P., Blackstone Family Investment
Partnership II L.P., PSI Management Direct L.P.,
Loewen Group International, Inc. and The Loewen
Group Inc.
99.3 Stockholders' Agreement, dated as of August 26,
1996, among Prime Succession, Inc. (to be renamed
Prime Succession Holdings, Inc.), Blackstone Capital
Partners II Merchant Banking Fund L.P., Blackstone
Offshore Capital Partners II L.P., Blackstone Family
Investment Partnership II L.P., PSI Management
Direct L.P. and Loewen Group International, Inc.
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EXECUTION COPY
STOCK PURCHASE AGREEMENT
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TABLE OF CONTENTS
Section Page
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1. REPRESENTATIONS AND WARRANTIES OF BLACKHAWK . . . . . . . . . . . . . . 1
1.1 Organization, Standing and Power, Capitalization and Ownership of
Blackhawk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Subsidiaries of Blackhawk. . . . . . . . . . . . . . . . . . . . . 2
1.3 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Effect of Transaction, Records, Etc. . . . . . . . . . . . . . . . 3
1.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.7 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . 5
1.8 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.9 Title to Assets; Necessary Properties. . . . . . . . . . . . . . . 8
1.10 Real Property Owned or Leased. . . . . . . . . . . . . . . . . . . 9
1.11 Trademark and Trade Names. . . . . . . . . . . . . . . . . . . . . 10
1.12 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.13 Agreements, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.14 Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.15 Compliance; Governmental Authorizations. . . . . . . . . . . . . . 11
1.16 Preneed Contracts and Funds. . . . . . . . . . . . . . . . . . . . 12
1.17 Labor Relations; Employees . . . . . . . . . . . . . . . . . . . . 12
1.18 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.19 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . 13
1.20 Business Generally . . . . . . . . . . . . . . . . . . . . . . . . 15
1.21 Bank Accounts; Officers. . . . . . . . . . . . . . . . . . . . . . 15
1.22 Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.23 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 16
1.24 Firle Funeral Home . . . . . . . . . . . . . . . . . . . . . . . . 17
1.25 Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.26 Brokers and Advisors.. . . . . . . . . . . . . . . . . . . . . . . 17
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS . . . . . . . . . . . . . 17
2.1 Ownership of Shares. . . . . . . . . . . . . . . . . . . . . . . . 18
2.2 Title to Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.3 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.4 Effect of Transaction, Records, Etc. . . . . . . . . . . . . . . . 18
2.5 Brokers and Advisors . . . . . . . . . . . . . . . . . . . . . . . 19
2.6 Claims on Blackhawk. . . . . . . . . . . . . . . . . . . . . . . . 19
3. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE PURCHASER
AND GRIZZLY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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ii
Section Page
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3.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . 19
3.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.3 Effect of Transaction, Records, Etc. . . . . . . . . . . . . . . . 19
3.4 Investment Representations . . . . . . . . . . . . . . . . . . . . 20
3.5 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.6 No Knowledge of Misrepresentations or Omissions. . . . . . . . . . 20
3.7 HSR Filing Matters . . . . . . . . . . . . . . . . . . . . . . . . 20
3.8 Authorization; No Conflict . . . . . . . . . . . . . . . . . . . . 20
4. SALE OF SHARES; PRICE AND TERMS; ADJUSTMENTS. . . . . . . . . . . . . . 21
4.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.2 Sale and Purchase. . . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.4 Terms of Payment . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 Method of Payment. . . . . . . . . . . . . . . . . . . . . . . . . 22
4.6 Post Closing Adjustment. . . . . . . . . . . . . . . . . . . . . . 23
4.7 Payment of Post Closing Adjustment . . . . . . . . . . . . . . . . 23
5. CLOSING TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 Closing Obligations of the Sellers . . . . . . . . . . . . . . . . 24
5.2 Closing Obligations of the Purchaser . . . . . . . . . . . . . . . 25
6. OTHER AGREEMENTS AND COVENANTS OF THE PARTIES . . . . . . . . . . . . . 25
6.1 Operation of the Businesses of Blackhawk and the Blackhawk
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2 Supplements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.3 Regulatory Consents, Authorizations, Etc.. . . . . . . . . . . . . 27
6.4 Negotiations with Others . . . . . . . . . . . . . . . . . . . . . 27
6.5 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.7 Restrictions on Transfer of Shares . . . . . . . . . . . . . . . . 29
6.8 Federal Trade Commission/Wages & Salaries. . . . . . . . . . . . . 29
6.9 Application of Down Payment. . . . . . . . . . . . . . . . . . . . 29
6.10 Deposit Trust Closing Expenses . . . . . . . . . . . . . . . . . . 31
6.11 Pre-Closing Cooperation. . . . . . . . . . . . . . . . . . . . . . 31
6.12 Assistance in Financing. . . . . . . . . . . . . . . . . . . . . . 32
6.13 No Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.14 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . 32
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iii
Section Page
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7. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. . . . . . . . . . . . . . . 32
7.1 Representations and Warranties . . . . . . . . . . . . . . . . . . 33
7.2 Performance of Obligations of Blackhawk and the Sellers. . . . . . 34
7.3 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.4 Regulatory Consents, Authorizations, Etc . . . . . . . . . . . . . 35
7.5 Senior Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 35
7.6 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.7 All Shares Sold. . . . . . . . . . . . . . . . . . . . . . . . . . 35
8. CONDITIONS TO OBLIGATIONS OF THE SELLERS. . . . . . . . . . . . . . . . 35
8.1 Representations and Warranties . . . . . . . . . . . . . . . . . . 36
8.2 Performance of Obligations of the Purchaser. . . . . . . . . . . . 36
8.3 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.4 Regulatory Consents, Authorizations, Etc.. . . . . . . . . . . . . 36
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . 36
9.1 Representations and Warranties of Blackhawk. . . . . . . . . . . . 36
9.2 Representations and Warranties of the Sellers. . . . . . . . . . . 36
9.3 Representations and Warranties of the Purchaser. . . . . . . . . . 37
9.4 Limitation of Recourse . . . . . . . . . . . . . . . . . . . . . . 37
9.5 Acknowledgement by the Purchaser . . . . . . . . . . . . . . . . . 37
10. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.1 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . 40
11.2 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.3 Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.4 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.5 Entire Agreement; Amendments. . . . . . . . . . . . . . . . . . . 42
11.6 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.7 Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.9 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 45
11.10 No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . . 45
11.11 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.12 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement"), dated as of June 14, 1996,
by and among PRIME SUCCESSION, INC. ("Blackhawk"), the other individuals or
entities listed on the signature pages hereof (collectively, the "Sellers"), THE
LOEWEN GROUP INC. ("Grizzly") and BLACKHAWK ACQUISITION CORP., a Delaware
corporation (the "Purchaser").
WITNESSETH:
WHEREAS, the Sellers own in the aggregate (i) 129.03285 shares of common
stock, Class A, $0.01 par value per share ("Class A Common Stock"), of
Blackhawk, representing collectively 100.0% of the issued and outstanding shares
of Class A Common Stock, (ii) 900 shares of common stock, Class B, $0.01 par
value per share ("Class B Common Stock" and collectively with the Class A Common
Stock, the "Common Stock"), of Blackhawk, representing collectively 100.0% of
the issued and outstanding shares of Class B Common Stock, and (iii) 1,957
shares of preferred stock, $1,000 par value per share ("Preferred Stock"), of
Blackhawk, representing collectively 100.0% of the issued and outstanding
Preferred Stock (all of the shares of Common Stock and of Preferred Stock owned
by the Sellers being hereinafter referred to as the "Shares");
WHEREAS, each of the Sellers respectively holds such number of Shares as is
set forth below such Seller's name on Schedule 1.1 hereto; and
WHEREAS, the Sellers wish to sell to the Purchaser, and the Purchaser
wishes to purchase from the Sellers, the Shares, upon the terms and subject to
the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, Blackhawk, the Sellers, Grizzly and the
Purchaser hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF BLACKHAWK
Blackhawk represents and warrants to the Purchaser as follows:
1.1 ORGANIZATION, STANDING AND POWER, CAPITALIZATION AND OWNERSHIP OF
BLACKHAWK. Blackhawk is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Blackhawk has all
requisite corporate power and authority to own, lease and operate its
properties, to carry on its business as it is now being conducted
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and to execute, deliver and perform this Agreement and all other agreements,
documents and instruments contemplated hereby. Blackhawk is duly qualified to
do business and is in good standing as a foreign corporation in all of the
states in which it is required so to qualify, except where the failure to so
qualify could not be reasonably expected to have a material adverse effect on
the business, operations or financial condition of Blackhawk. The authorized
capital stock of Blackhawk consists of (a) 142 shares of Class A Common Stock,
$0.01 par value per share, of which 129.03285 are issued and outstanding, (b)
900 shares of Class B Common Stock, $0.01 par value per share, of which 900 are
issued and outstanding and (c) 1,957 shares of Preferred Stock, $1,000 par value
per share, of which 1,957 shares are issued and outstanding. No shares of
Common Stock or Preferred Stock are held in the treasury of Blackhawk. Schedule
1.1 sets forth a complete and accurate list of the shareholders of record of
Blackhawk and the number of shares owned by each shareholder. Except as set
forth in Schedule 1.1, Blackhawk is not a party to or bound by any options,
calls, contracts or commitments of any character relating to any issued or
unissued stock or any other equity security issued or to be issued by it. None
of the Shares was issued in violation of any preemptive rights binding on
Blackhawk.
1.2 SUBSIDIARIES OF BLACKHAWK. Except as set forth in Schedule 1.2, as of
the Closing Date, Blackhawk will own, directly or through one or more wholly-
owned subsidiaries, all of the outstanding capital stock of each of the
corporations listed in Schedule 1.2 (hereinafter referred to collectively as the
"Blackhawk Subsidiaries"). Schedule 1.2 sets forth an organizational chart for
the Blackhawk Subsidiaries and the legal name, registered office and registered
agent and state of incorporation of each Blackhawk Subsidiary. Each Blackhawk
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the incorporation state indicated for each Blackhawk
Subsidiary in Schedule 1.2. Each Blackhawk Subsidiary is duly qualified and in
good standing as a foreign corporation in each jurisdiction in which it is
required so to qualify, except where the failure so to qualify could not be
reasonably expected to have a material adverse effect on the business,
operations or financial condition of such Blackhawk Subsidiary, and each has
full corporate power and authority to carry on the business in which it is now
engaged. Schedule 1.2 also sets forth for each Blackhawk Subsidiary the name
and business address of each funeral home, cemetery and/or other related
businesses owned or operated by the particular Blackhawk Subsidiary. The
Articles of Incorporation or corporate charters of the Blackhawk Subsidiaries
and all amendments thereto, certified by the Secretary of State of the state in
which each is incorporated, a certificate of good standing, or similar
certificate, dated and certified within 30 days of the Closing Date by the
Secretary of State for each Blackhawk Subsidiary, and a copy of each Blackhawk
Subsidiary's Bylaws or Code of Regulations, as amended to date, certified by the
appropriate recording officers of each, will be delivered to the Purchaser prior
to or at the Closing. Except as set forth in Schedule 1.2, Blackhawk and the
Blackhawk Subsidiaries do not own, directly or indirectly, any material interest
in the capital stock of any other corporation, association, trust or similar
entity, any interest in the equity of any partnership or similar entity, any
share in any joint venture, or any other equity
2
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or proprietary interest in any entity or enterprise, however organized and
however such interest may be denominated or evidenced. Schedule 1.2 accurately
sets forth the capitalization and ownership, and the issued and outstanding
capital stock, of each of the Blackhawk Subsidiaries. All of the outstanding
capital stock of the Blackhawk Subsidiaries is duly authorized and validly
issued, fully paid and nonassessable. None of the shares of capital stock of
the Blackhawk Subsidiaries were issued in violation of any preemptive rights
binding on the Blackhawk Subsidiaries. There are no issued or outstanding
shares of any class of capital stock of the Blackhawk Subsidiaries other than
those set forth in Schedule 1.2. Between the date hereof and the Closing,
Blackhawk will cause each of the Blackhawk Subsidiaries not to issue, sell or
purchase, or agree to issue, sell or purchase, any shares of common stock or any
other security of the Blackhawk Subsidiaries (including, without limitation, any
option, right or warrant to purchase any common stock or any other security of
such entity) to any person or entity other than Blackhawk or a Blackhawk
Subsidiary, without the prior written consent of the Purchaser. Except as
disclosed in Schedule 1.2, none of the Blackhawk Subsidiaries has outstanding,
or has agreed to issue or sell, any options, rights, warrants, calls or other
commitments (either in the form of convertible securities or otherwise) pursuant
to which the holder thereof has or will or may have the right to purchase or
otherwise acquire any shares of stock or any other security of Blackhawk or any
of the Blackhawk Subsidiaries. No person, firm, corporation or other entity
owns or controls capital stock of the Blackhawk Subsidiaries, except as set
forth in Schedule 1.2.
1.3 AUTHORITY. The execution, delivery and performance of this Agreement
and the other agreements, documents and instruments contemplated hereby by
Blackhawk have been duly and validly authorized by Blackhawk's Board of
Directors. This Agreement and all other agreements, documents and instruments
contemplated hereby to be signed by Blackhawk constitute, or upon execution and
delivery will constitute, legal, valid and binding obligations of Blackhawk
enforceable against Blackhawk in accordance with their respective terms, subject
to applicable laws of bankruptcy, insolvency and similar laws affecting
creditors' rights generally and the application of general rules of equity.
1.4 EFFECT OF TRANSACTION, RECORDS, ETC. Except as set forth in
Schedule 1.4, neither the execution and delivery of this Agreement or any other
agreement, document or instrument contemplated hereby, nor the consummation by
Blackhawk and the Sellers of the transactions contemplated hereby or thereby,
nor the compliance by Blackhawk and the Sellers with any of the provisions
hereof or thereof, do or will: (a) conflict with or result in a breach of the
Articles of Incorporation or charter papers or Bylaws or Code of Regulations or
other organizational documents of Blackhawk, any of the Blackhawk Subsidiaries
or, with respect to the Sellers that are corporations or other business
entities, of such Sellers; (b) violate in any material respect any statute, law,
rule or regulation or any order, writ, injunction or decree of any court or
governmental authority to which Blackhawk, any of the Blackhawk Subsidiaries or
any of the Sellers is subject; or (c) violate or conflict with in any material
respect or constitute a material default under (or give rise to any right of
termination,
3
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cancellation or acceleration under) any material agreement or any writing of any
nature to which Blackhawk, any of the Blackhawk Subsidiaries or any of the
Sellers is a party or by which any of their respective assets or properties may
be bound, which agreement or writing will not be terminated on or before the
Closing Date. Except as set forth on Schedule 1.4 hereto, no consent or
approval of or notification to any governmental authority by Blackhawk, any of
the Sellers or any of the Blackhawk Subsidiaries is required for the execution
and delivery by Blackhawk and the Sellers of this Agreement or any other
agreement, document or instrument relating hereto, or the consummation of the
transactions contemplated hereby or thereby. Neither Blackhawk nor any of the
Blackhawk Subsidiaries is in default in the performance, observance or
fulfillment of any of the terms or conditions of their respective Articles of
Incorporation or charter papers or Bylaws or Code of Regulations. The minute
and stock record books of Blackhawk and each of the Blackhawk Subsidiaries, true
and complete copies of which have been delivered to the Purchaser, contain
complete and accurate records of all meetings and other corporate actions of the
shareholders and Boards of Directors of Blackhawk and each of the Blackhawk
Subsidiaries and all transactions with respect to the capital stock of Blackhawk
and each of the Blackhawk Subsidiaries, as of the date hereof.
1.5 FINANCIAL STATEMENTS. Blackhawk has delivered to the Purchaser true
and complete copies of (i) the consolidated balance sheets of Blackhawk as at
the close of each of the fiscal years ended December 31, 1992, 1993 and 1994,
together with related consolidated statements of operations and retained
earnings, shareholders' equity and cash flows for the years then ended
(collectively, the "Prior Audited Financials"), in each case certified by Ernst
& Young LLP, independent certified public accountants, (ii) the consolidated
balance sheet of Blackhawk as at December 31, 1995, (the "December Audited
Balance Sheet"), together with related consolidated statements of operations and
retained earnings, shareholders' equity and cash flows for the year then ended
(the "December Audited Income Statement" and collectively with the December
Audited Balance Sheet, the "December Audited Financials"), in each case
certified by Ernst & Young LLP, independent certified public accountants, and
(iii) the unaudited consolidated balance sheet of Blackhawk as at March 31,
1996, together with related consolidated statements of operations and retained
earnings, shareholders' equity and cash flows for the quarter then ended (the
"March Unaudited Financials").
The Prior Audited Financials, the December Audited Financials and the
March Unaudited Financials are attached hereto as Schedule 1.5. The Prior
Audited Financials, the December Audited Financials and the March Unaudited
Financials (i) were prepared in accordance with the books of account and other
financial records of Blackhawk and the Blackhawk Subsidiaries and (ii) present
fairly in all material respects the consolidated financial position and results
of operation of Blackhawk and the Blackhawk Subsidiaries as at the dates thereof
or for the periods covered thereby in accordance with generally accepted
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accounting principles, applied on a basis consistent with the past practices of
Blackhawk, subject, in the case of the March Unaudited Financials, to normal
year-end adjustments.
1.6 LIABILITIES. At the date of the December Audited Balance Sheet,
Blackhawk and the Blackhawk Subsidiaries did not have material liabilities,
taxes or obligations of any nature, fixed or contingent, matured or unmatured,
which were not recorded on the December Audited Balance Sheet and at the
Closing, Blackhawk and the Blackhawk Subsidiaries will not have material
liabilities, taxes or obligations of any nature, fixed or contingent, matured or
unmatured, which will not be recorded on the Closing Balance Sheet, or disclosed
in the Schedules to this Agreement. For purpose of this paragraph, a liability
shall be deemed material if it involves an obligation in excess of $50,000.
1.7 ABSENCE OF CHANGES. Except as otherwise set forth in Schedule 1.7
hereto, since December 31, 1995, Blackhawk and each of the Blackhawk
Subsidiaries have been operated only in the ordinary course of business,
consistent with past practices (including the formation of new Blackhawk
Subsidiaries and the acquisition by Blackhawk or any of the Blackhawk
Subsidiaries of new funeral home, cemetery or other related businesses), and
there has not been:
(a) any materially adverse change in the condition, financial or
otherwise, of the assets, liabilities, earnings, book value, businesses or
prospects of Blackhawk or any of the Blackhawk Subsidiaries;
(b) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the businesses or assets of Blackhawk or any
of the Blackhawk Subsidiaries;
(c) the incurrence of any material obligation or liability (whether
absolute, accrued, contingent or otherwise and whether due or to become
due), affecting Blackhawk or any of the Blackhawk Subsidiaries (including
any new indebtedness for borrowed money), other than obligations or
liabilities incurred in the ordinary course of business and consistent with
past practices;
(d) any strike or work stoppage affecting Blackhawk or any of the
Blackhawk Subsidiaries;
(e) the adoption of any statute, rule, regulation or order which
materially and adversely affects the businesses or assets of Blackhawk or
any of the Blackhawk Subsidiaries;
(f) any sale, transfer or other disposition of any assets of
Blackhawk or any of the Blackhawk Subsidiaries having a value with respect
to any single asset in excess of
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$25,000 or an aggregate value as to all such assets in excess of $1,000,000
to any party, except for payments of third party obligations incurred in
the ordinary course of business in accordance with the regular payment
practices of Blackhawk and the Blackhawk Subsidiaries, dispositions of
surplus or used equipment, or other dispositions in the ordinary course of
business, consistent with past practices;
(g) any termination or waiver of any material rights of value to
Blackhawk or any of the Blackhawk Subsidiaries;
(h) any increase in the aggregate compensation of the employees of
Blackhawk or any Blackhawk Subsidiary, including, without limitation, any
increase pursuant to any bonus, pension, profit sharing or other plan or
commitment other than those increases occurring pursuant to the terms of
the Plans;
(i) any expenditure or commitment in excess of $50,000 for
acquisitions, additions to or replacements of property, plant or equipment
of Blackhawk or any of the Blackhawk Subsidiaries;
(j) any forward purchase commitments by Blackhawk or any of the
Blackhawk Subsidiaries, or to which any of them may be obligated, involving
more than $50,000 from any one supplier, except as necessary to fulfill the
normal and ordinary inventory and operational requirements of Blackhawk and
each of the Blackhawk Subsidiaries, consistent with past practices;
(k) any change in the accounting methods or practices followed by
Blackhawk;
(l) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock of Blackhawk or any non
wholly-owned Blackhawk Subsidiary to any person or entity that is not
Blackhawk or a Blackhawk Subsidiary or the transfer of any shares of
capital stock of any Blackhawk Subsidiary (or any entity that was a
subsidiary of Blackhawk immediately prior to such transfer) held by
Blackhawk or any Blackhawk Subsidiary (other than to Blackhawk or another
Blackhawk Subsidiary);
(m) any amendment to the articles or certificate of incorporation or
by-laws or other charter or organizational documents of Blackhawk or any of
the Blackhawk Subsidiaries;
(n) any material change in the method of conducting the business of
Blackhawk or any of the Blackhawk Subsidiaries (for purposes of the
foregoing, any changes in preneed sales techniques or practices or funding
arrangements for preneed
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products or in investment strategies with respect to preneed trust funds
(other than such changes required by applicable law) will be deemed to be
material); and
(o) any event which would permit any third party to demand repayment
of any indebtedness of Blackhawk or any of the Blackhawk Subsidiaries prior
to its normal maturity date.
1.8 TAX MATTERS. Except as set forth in Schedule 1.8:
(a) To the best knowledge of Blackhawk, all federal, state, local and
foreign tax returns and tax reports required to be filed with respect to the
businesses and assets of Blackhawk and any of the Blackhawk Subsidiaries have
been filed with the appropriate governmental agencies in all jurisdictions in
which such returns and reports are required to be filed, or will be timely filed
by Blackhawk and the appropriate Blackhawk Subsidiary. To the best knowledge of
Blackhawk, all of the foregoing tax returns and reports were, or will be,
prepared in the manner required under applicable law and regulation and are, or
will be true, correct and complete in all respects, and all amounts shown as
owing thereon have been or will be paid with such returns or reports. Blackhawk
has made or prior to Closing will make available to the Purchaser true and
complete copies of all the respective federal, state, local and foreign income,
franchise, sales, employment and use, real estate and personal property tax
returns for Blackhawk and each of the Blackhawk Subsidiaries for each of the
four years ended December 31, 1992, December 31, 1993, December 31, 1994 and
December 31, 1995, respectively, and all such federal, state, local and foreign
income, franchise, sales, employment and use, real estate and personal property
tax returns filed prior to Closing which include Blackhawk or any of the
Blackhawk Subsidiaries with respect to periods ending after December 31, 1995
and prior to Closing.
(b) To the best knowledge of Blackhawk, there is no actual or
threatened dispute or disagreement with any international, federal, state or
local revenue authority or agency regarding liability or potential liability for
any tax in which an adverse determination could be reasonably expected to have a
material adverse effect on the business, operations or financial condition of
Blackhawk or any of the Blackhawk Subsidiaries. Blackhawk will have made
available to the Purchaser true and complete copies of any and all existing
Internal Revenue Service (the "IRS") audit reports and revenue agent's reports
which have been delivered to Blackhawk or any of the Blackhawk Subsidiaries and
any and all existing determination letters, private letter rulings, consents and
closing agreements obtained from or filed with the IRS for each of the four
years ended December 31, 1992, December 31, 1993, December 31, 1994 and December
31, 1995, respectively, relating to Blackhawk or any of the Blackhawk
Subsidiaries and all related settlement documents and correspondence. To the
best knowledge of Blackhawk, no unsettled claim for tax, assessment, fee, levy
or other governmental charge of any nature for which Blackhawk or any of the
Blackhawk Subsidiaries is presently or may become liable exists or has been
threatened and there is no
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valid basis for any such claim. No agreement which is now in effect has been
made with respect to Blackhawk or any of the Blackhawk Subsidiaries for the
waiver of any statute of limitations or the extension of time for the assessment
of any tax, assessment, fee, levy or other governmental charge of any nature.
Neither Blackhawk nor any of the Blackhawk Subsidiaries has agreed to, or is
required to, make any adjustments under Section 481(a) of the Internal Revenue
Code of 1986, as amended, (the "Code") by reason of a change in a method of
accounting or otherwise.
(c) To the best knowledge of Blackhawk, all federal, state, local and
foreign income, profits, franchise, gross receipts, sales, use, occupation,
property, excise, payroll, withholding and other taxes, duties or imports,
including interest, penalties and additions thereto (collectively, "Taxes")
shown on the tax returns referred to in Section 1.8(a) above as being owed by
Blackhawk or a Blackhawk Subsidiary were fully and duly paid when due, and all
Taxes due prior to the Closing Date will have been fully and duly paid when due,
and there is no further material liability of Blackhawk or any of the Blackhawk
Subsidiaries for Taxes, except as shall be adequately reserved for in the
Closing Balance Sheet.
(d) Neither Blackhawk nor any of the Blackhawk Subsidiaries has
entered into or is bound by any Tax sharing or similar agreement. Blackhawk is
not and has never been a United States real property holding company for
purposes of Section 1445 of the Code.
(e) For purposes of this paragraph 1.8, "material" shall mean only
those matters in excess of $50,000.
1.9 TITLE TO ASSETS; NECESSARY PROPERTIES. Except as set forth in
Schedule 1.9, Blackhawk and each of the Blackhawk Subsidiaries have, and as of
the Closing Date will have, (a) good and marketable title to all the real
property indicated on the December Audited Balance Sheet and the Closing Balance
Sheet, respectively, as being owned by Blackhawk or a Blackhawk Subsidiary; and
(b) good and marketable title to the tangible personal property included or to
be included on the December Audited Balance Sheet and the Closing Balance Sheet,
respectively, free and clear of all property interests, liens, pledges, claims,
charges, escrows, encumbrances, options, rights of first refusal, mortgages,
indentures, easements, licenses, security agreements or other agreements,
arrangements, contracts, commitments or obligations (collectively, the
"Encumbrances"), EXCEPT FOR (i) Encumbrances specifically described in Schedule
1.9 to this Agreement, (ii) statutory liens for taxes or other governmental
charges with respect to owned real property of Blackhawk and the Blackhawk
Subsidiaries not yet due and payable or the amount or validity of which is being
contested in good faith by appropriate proceedings by Blackhawk, and with
respect to which all reserves required by generally accepted accounting
principles have been established, (iii) mechanics, carriers, workers, repairers
and similar statutory liens arising or incurred in the ordinary course of
business for amounts which are not delinquent and are not in excess of $20,000
in the case of a single property and $75,000 in the aggregate and (iv)
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minor survey exceptions, reciprocal easement agreements and other customary
encumbrances on title to real property that (x) were not incurred in connection
with any indebtedness, (y) do not render title to the property encumbered
thereby unmarketable and (z) do not, individually or in the aggregate,
materially impair the use, for its current and anticipated purposes, or value of
such owned real property. Blackhawk and each of the Blackhawk Subsidiaries have
all of the properties, assets and rights which are necessary to carry on their
respective businesses as presently conducted.
1.10 REAL PROPERTY OWNED OR LEASED.
(a) Schedule 1.10 contains a list and brief description of all real
estate used in the operation of Blackhawk and each of the Blackhawk
Subsidiaries. For each parcel of real estate listed, the Schedule indicates
whether the real estate is owned by Blackhawk or a Blackhawk Subsidiary or
leased by Blackhawk or a Blackhawk Subsidiary as tenant or landlord, the purpose
to which such property is being employed and, in the case of any such property
which is leased, the termination date or notice requirement with respect to
termination, annual rental and renewal or purchase options and any provisions
limiting the assignability thereof. All of such real estate and the
improvements thereon are, to the best knowledge of Blackhawk, in reasonably good
condition and working order.
(b) With respect to real estate owned, each of Blackhawk and the
Blackhawk Subsidiaries has good and marketable title in fee simple to, and owns
all improvements (including buildings and other structures) on, the real estate
owned by it, subject only to those Encumbrances, if any, listed in Schedule 1.9.
To the best of Blackhawk's knowledge, there are no defaults or disputes relating
to said Encumbrances. As of the Closing Date, with respect to real estate
leased, and except as set forth in Schedule 1.10, (i) all such leases are in
full force and effect and constitute valid and binding obligations of the
respective parties thereto, (ii) there has not been and there currently is not
any default thereunder by any party, (iii) no event has occurred which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a default thereunder entitling the landlord to
terminate the lease and (iv) the continuation, validity and effectiveness of all
such leases under the current rentals and other current material terms thereof
will in no way be affected by the sale and transfer of the Shares by the Sellers
to the Purchaser under this Agreement. Blackhawk has made available to the
Purchaser true and complete copies of all leases referred to in said Schedule
1.10. To the best knowledge of Blackhawk, the improvements on such real estate
conform with all applicable federal, state and local laws and regulations and
the properties are zoned for the various purposes for which such real estate is
currently being used (other than permissible prior non-conforming uses), or
variances from such zoning ordinances have been granted.
(c) Blackhawk has, or prior to the Closing Date will have (i)
preliminary title reports for owner's polices of title insurance for all parcels
of real property specified in
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Schedule 1.10(c) (the "Properties"), from Chicago Title & Trust Co. (the "Title
Company"), along with copies of all documents and instruments reflecting items
noted as exceptions to title (collectively the "Preliminary Reports"), (ii) ALTA
Surveys of the Properties in form and substance acceptable to the Purchaser and
otherwise sufficient to enable the Title Company to delete from the Policies the
so-called standard exception for matters disclosed by an accurate survey of the
Properties (collectively, the "Surveys") and (iii), for each of the Properties,
an ALTA Extended Owner's Form B Policy of Title Insurance or its equivalent from
the Title Company (collectively, the "Policies"), insuring that fee simple title
to each of the Properties is vested in Blackhawk or any of the Blackhawk
Subsidiaries, as the case may be, such insurance to be in an amount reasonably
determined by the Purchaser.
1.11 TRADEMARK AND TRADE NAMES. Blackhawk or one of the Blackhawk
Subsidiaries, as the case may be, owns or has the right to use all the
trademarks and trade names which are used in the operation of the business of
Blackhawk and the Blackhawk Subsidiaries in their respective trade areas (a true
and complete list of which is included in Schedule 1.11), and, with respect to
all trademarks and trade names owned by it and to its best knowledge, has the
right to bring actions for the infringement thereof.
1.12 INSURANCE. Except as set forth in Schedule 1.12, Blackhawk maintains
in effect insurance covering Blackhawk and each of the Blackhawk Subsidiaries in
an amount (a) believed by Blackhawk to be adequate and (b) customary for
businesses of the kind engaged in by Blackhawk and the Blackhawk Subsidiaries in
the same geographical areas where such businesses are located, and such
insurance coverage shall be maintained by Blackhawk through the Closing Date.
Schedule 1.12 includes a list of all policies of insurance maintained with
respect to Blackhawk and each of the Blackhawk Subsidiaries, true and complete
copies of which have been provided to the Purchaser. Between now and the
Closing Date, Blackhawk shall furnish to the Purchaser and its agents such
additional information as the Purchaser shall reasonably request regarding such
insurance.
1.13 AGREEMENTS, ETC. Schedule 1.13 contains a list and brief description
of the following written contracts, agreements and other instruments relating to
Blackhawk or any of the Blackhawk Subsidiaries: (a) contract with or commitment
to any labor union; (b) contract involving more than $50,000 in any instance for
the future purchase of materials, supplies, equipment or services; (c) profit
sharing, bonus, incentive, stock option, pension, retirement, employee stock
purchase, health, dental, hospitalization, insurance or similar plan, agreement
or policy, formal or informal, providing benefits to any current or former
director, officer, shareholder or employee of Blackhawk or any of the Blackhawk
Subsidiaries; (d) indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of money, for a
line of credit or for a leasing transaction required to be capitalized in
accordance with Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board; (e) contract or commitment for
expenditures, or letter of intent with respect thereto, involving more than
$50,000 in any
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instance; (f) guaranty of the obligations of a third party (other than
guaranties by Blackhawk of the obligations of a Blackhawk Subsidiary or vice
versa); (g) agreement which restricts or regulates Blackhawk or any of the
Blackhawk Subsidiaries with respect to its doing business anywhere in the world;
(h) agreement or arrangement for the sale of any of the assets, property or
rights of Blackhawk or any of the Blackhawk Subsidiaries outside the ordinary
course of business, consistent with past practice, or requiring the consent of
any party to the consummation of the transactions contemplated hereby; (i) any
acquisition or similar agreement pursuant to which Blackhawk acquired or will
acquire prior to the Closing any of the businesses of the Blackhawk
Subsidiaries; and (j) any noncompete or consulting agreement benefitting
Blackhawk or any of the Blackhawk Subsidiaries. Each of Blackhawk and the
Blackhawk Subsidiaries has performed all the obligations required to be
performed by it to date except for any non-performance that could not reasonably
be expected to have a material adverse effect on the business, operations or
financial condition of Blackhawk or any of the Blackhawk Subsidiaries. Except
as set forth on Schedule 1.13, each of Blackhawk and the Blackhawk Subsidiaries
is not in material default or alleged to be in default in any respect under any
agreement, lease, contract, commitment, instrument or obligation required to be
listed in Schedule 1.13 to this Agreement, and there exists no event, condition
or occurrence which, after notice or lapse of time, or both, would constitute
such a material default by it of any of the foregoing. Except as otherwise
indicated in Schedule 1.13, the continuation, validity and effectiveness of each
item on such Schedule under the current material terms thereof will in no way be
adversely affected by the transfer of the Shares to the Purchaser under this
Agreement. True and complete copies of all written agreements and written
summaries of all oral agreements described in Schedule 1.13 have been provided
to the Purchaser by Blackhawk. Without limiting the generality of the
foregoing, except as set forth on Schedule 1.13, the sale to the Purchaser of
the Shares will not give rise to any right of any third party to rescind, avoid
or repudiate any agreement or arrangement (which will not be terminated as of
the Closing Date) listed in Schedule 1.13 to which Blackhawk or any of the
Blackhawk Subsidiaries is a party.
1.14 LITIGATION, ETC. Except as set forth in Schedule 1.14, 1.15 or 1.17,
there are no actions, suits, claims, investigations or legal or administrative
or arbitration proceedings, foreign or domestic, pending or, to the best of the
knowledge of Blackhawk, threatened against Blackhawk or any of the Blackhawk
Subsidiaries, whether at law or in equity, or before or by any international,
federal, state, municipal or other governmental instrumentality. To the best of
Blackhawk's knowledge, there exists no reasonable basis for litigation against
Blackhawk or any of the Blackhawk Subsidiaries that is not adequately insured,
or in which an adverse determination could be reasonably expected to have a
material adverse effect on the business, operations or financial condition of
Blackhawk or any of the Blackhawk Subsidiaries.
1.15 COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS. Except as set forth in
Schedule 1.15, Blackhawk and each of the Blackhawk Subsidiaries are in
compliance with all applicable
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federal, state, local or foreign laws, ordinances, regulations, treaties and
orders including, for example, matters relating to the environment,
anticompetitive practices, discrimination, trusting of prepaid and preneed
funeral and burial contract funds, disclosure of funeral prices, employment,
health and safety, except when such non-compliance could not reasonably be
expected to have a material adverse effect on the business, operations or
financial condition of Blackhawk or any of the Blackhawk Subsidiaries.
Blackhawk and each of the Blackhawk Subsidiaries have all material federal,
state, local and foreign governmental operating licenses and permits necessary
to conduct their respective businesses in the manner presently conducted, and
such operating licenses and permits are in full force and effect, and no
violations are or have been recorded in respect of any thereof, and no
proceeding is pending or, to the best of Blackhawk's knowledge, threatened, to
revoke or limit any thereof.
1.16 PRENEED CONTRACTS AND FUNDS. Except as set forth in Schedule 1.16,
(a) all monies ("Preneed Funds") paid to Blackhawk or any of the Blackhawk
Subsidiaries in respect of prearranged or prepaid funeral, burial, merchandise,
cremation or cemetery arrangements or contracts ("Preneed Contracts")
(including, but not limited to, amounts recorded for deferred merchandise and
service liabilities and revenues) have been properly accounted for and
administered as required by applicable state laws and regulations, and, in the
case of insurance-funded Preneed Contracts, been properly and duly paid over to
insurance carriers (less applicable insurance commissions); (b) all accounts,
deposits and trusts of Preneed Funds, and the amounts thereof, are presently
held and administered in compliance in all material respects with all applicable
state laws and regulations (and the corpus of each such trust, except as so
scheduled, will equal, as of the Closing Date (or, if the Closing Date is not a
date as of which the adequacy of such trust corpus is measured for purposes of
applicable law, treating the Closing Date as though it were the next day as of
which the adequacy of such trust corpus is so measured, provided that such
measurement date would not otherwise be later than the date of the first
anniversary of the date hereof), that required by the applicable state laws);
(c) all withdrawals from accounts, deposits and trusts of Preneed Funds by
Blackhawk and each of the Blackhawk Subsidiaries have been made in compliance in
all material respects with all applicable state laws and regulations; (d)
Blackhawk and each of the Blackhawk Subsidiaries have complied in all material
respects with all requirements of federal, state and local tax laws and
regulations with regard to the reporting of income and interest earned by
Preneed Funds and, if required, the payment of taxes thereon; (e) Blackhawk and
each of the Blackhawk Subsidiaries have complied in all material respects with
the terms and conditions of all Preneed Contracts to which they are parties and
are not aware, of any default or allegation of default against any of them
thereunder; and (f) all commissions collected on behalf of commissioned
salespeople in respect of the Preneed Contracts have been paid in the normal
course of business, consistent with past practices.
1.17 LABOR RELATIONS; EMPLOYEES. Blackhawk and each of the Blackhawk
Subsidiaries have generally enjoyed a good employer-employee relationship with
their employees. To the
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best knowledge of Blackhawk, Blackhawk and each of the Blackhawk Subsidiaries
are in compliance with all federal, state, local and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours, except for any non-compliance that could not
reasonably be expected to have a material adverse effect on the business,
operations or financial condition of Blackhawk or any of the Blackhawk
Subsidiaries. Except as listed in Schedule 1.17, no unfair labor practice
complaint against Blackhawk or any of the Blackhawk Subsidiaries has come to the
attention of Blackhawk and there is no claim pending against Blackhawk or any of
the Blackhawk Subsidiaries before the National Labor Relations Board or any
other governmental agency. There are no strikes, disputes, slowdowns or
stoppages pending or, to the best knowledge of Blackhawk, threatened, against or
involving Blackhawk or any of the Blackhawk Subsidiaries, and none has occurred
within the past three years. No representation question exists with respect to
the employees of Blackhawk or any of the Blackhawk Subsidiaries. Neither
Blackhawk nor any of the Blackhawk Subsidiaries is a party to any collective
bargaining agreement or other labor union contract, and no collective bargaining
agreement or other labor union contract is currently being negotiated by
Blackhawk or any Blackhawk Subsidiary. Except as listed in Schedule 1.17, no
grievance or arbitration proceeding is pending before any court or governmental
agency relating to any of the employees of Blackhawk or any of the Blackhawk
Subsidiaries.
1.18 COMPENSATION. Blackhawk has previously furnished to the Purchaser a
complete and accurate list of all current officers, employees and consultants of
Blackhawk or the Blackhawk Subsidiaries who, in the calendar years 1995 or 1996,
have received or are expected to receive aggregate remuneration in excess of
$70,000 from Blackhawk or any Blackhawk Subsidiary, together with the current
job title and aggregate remuneration rate (bonus and salary) for each such
person, a copy of which is attached hereto as Schedule 1.18.
1.19 EMPLOYEE BENEFIT MATTERS.
(a) Schedule 1.19 lists (i) all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other material benefit plans, or programs,
and all employment, termination, severance or other similar contracts or
agreements to which Blackhawk or any of the Blackhawk Subsidiaries is a party,
with respect to which Blackhawk or any of the Blackhawk Subsidiaries has any
obligation or which are maintained, contributed to or sponsored by Blackhawk or
any of the Blackhawk Subsidiaries for the benefit of any current or former
employee, officer, director or consultant of Blackhawk or any of the Blackhawk
Subsidiaries, (ii) any contracts or agreements between the Sellers or any of
their Affiliates and any employee of Blackhawk or any of the Blackhawk
Subsidiaries, including, without limitation, any contracts or agreements
relating to
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the sale of Blackhawk and (iii) any contract or agreement pursuant to which
labor services are provided to Blackhawk or any of the Blackhawk Subsidiaries
(collectively, the "Plans"). The Sellers have furnished or made available to
the Purchaser a complete and accurate copy of each Plan and (i) a copy of each
trust or other funding arrangement, (ii) each summary plan description and
summary of material modifications, (iii) the most recently filed IRS Form 5500,
(iv) the most recently received IRS determination letter for each such Plan, and
(v) the most recently prepared actuarial report and financial statement in
connection with each such Plan. Except as provided in the Plans, Blackhawk and
any of the Blackhawk Subsidiaries have no express or implied commitment (i) to
create or incur material liability with respect to or cause to exist any other
material employee benefit plan, program or agreement, (ii) to enter into any
contract or agreement to provide material compensation or benefits to any
individual other than in the ordinary course, consistent with its or their past
practice, or to make material changes in staffing levels, or (iii) to modify,
change or terminate any Plan, other than with respect to a modification, change
or termination required by ERISA or the Code or in the normal course.
(b) None of the Plans is a multiemployer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA or a single employer pension plan (within
the meaning of Section 4001(a)(15) of ERISA) for which Blackhawk or any of the
Blackhawk Subsidiaries could incur liability under Section 4063 or 4064 of
ERISA. Except as set forth and described in all material respects in Schedule
1.19, none of the Plans provides for the payment of separation, severance,
termination or similar-type benefits to any Person or obligates Blackhawk or any
of the Blackhawk Subsidiaries to pay separation, severance, termination or
similar-type benefits solely as a result of any transaction contemplated by this
Agreement or as a result of a "change in control," within the meaning of such
term under Section 280G of the Code. Except as set forth in Schedule 1.19, none
of the Plans provides for or promises retiree medical, disability or life
insurance benefits to any current or former employee, officer or director of
Blackhawk or any of the Blackhawk Subsidiaries. To the best knowledge of
Blackhawk, each of the Plans is subject only to the laws of the United States of
America or a political subdivision thereof.
(c) Each Plan is now and always has been operated in all material
respects in accordance with the requirements of all applicable law, including,
without limitation, ERISA and the Code, and all persons who participate in the
operation of such Plans and all Plan "fiduciaries" (within the meaning of
Section 3(21) of ERISA) have always acted in all material respects in accordance
with the provisions of all applicable law, including, without limitation, ERISA
and the Code. Blackhawk and each of the Blackhawk Subsidiaries have performed
all material obligations required to be performed by it under, is not in default
under or in violation of, and Blackhawk has no knowledge of any material default
or violation by any party to, any Plan. No legal action, suit or claim is
pending or, to the knowledge of Blackhawk, threatened with respect to any Plan
(other than claims for benefits
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in the ordinary course) and no fact or event exists that could give rise to any
such action, suit or claim.
(d) Each Plan which is intended to be qualified under Section 401(a)
of the Code has received or has timely requested a favorable determination
letter from the IRS covering the provisions of the Tax Reform Act of 1986 that
it is so qualified, and no fact or event has occurred since the date of such
determination letter from the IRS to adversely affect the qualified status of
any such Plan.
(e) Blackhawk and each of the Blackhawk Subsidiaries have not
incurred any material liability for any penalty or tax arising under
Section 4971, 4972, 4975, 4980, 4980B or 6652 of the Code or any liability under
Section 502 of ERISA, and Blackhawk has no knowledge of any fact or event which
could be reasonably expected to give rise to any such liability. Except as set
forth on Schedule 1.19, no complete or partial termination has occurred within
the five years preceding the date hereof with respect to any Plan. Blackhawk
and each of the Blackhawk Subsidiaries have not incurred nor are they reasonably
likely to incur any liability under Section 4069 or 4212(c) of Title IV of
ERISA.
(f) All contributions, premiums or payments required to be made with
respect to any Plan have been made on or before their due dates. All such
contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any government entity, and
Blackhawk has no knowledge of any fact or event which could give rise to any
such challenge or disallowance.
1.20 BUSINESS GENERALLY. Except as disclosed in Schedule 1.20, since
December 31, 1995, there has been no event, transaction or information which has
had or could reasonably be expected to have a material adverse effect on the
business, operations or financial condition of Blackhawk and the Blackhawk
Subsidiaries, taken as a whole.
1.21 BANK ACCOUNTS; OFFICERS. Schedule 1.21 is a list of all bank
accounts and safe deposit boxes in the name of or controlled by Blackhawk or a
Blackhawk Subsidiary, and details about the persons having access thereto.
Schedule 1.21 also contains a list of all officers and directors of Blackhawk
and all officers and directors of any of the Blackhawk Subsidiaries.
1.22 INSOLVENCY.
(a) No receiver has been appointed for the whole or any part of the
assets or business of Blackhawk or any of the Blackhawk Subsidiaries.
(b) No petition has been presented, no order has been made and no
resolution has been passed for the winding-up of Blackhawk or any of the
Blackhawk Subsidiaries.
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(c) No unsatisfied judgment is outstanding against Blackhawk or any
of the Blackhawk Subsidiaries.
1.23 ENVIRONMENTAL MATTERS.
(a) Except as set forth in Schedule 1.23, Blackhawk and each of the
Blackhawk Subsidiaries are in compliance in all material respects with all
federal, state and local environmental and occupational health and safety laws
and regulations that may pertain to their operations (collectively, the
"Environmental Laws"), including, but not limited to, the Resource Conservation
and Recovery Act ("RCRA"), as amended, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), as amended, the Occupational Health
and Safety Act ("OSHA"), as amended, and the regulations promulgated pursuant
thereto.
(b) Without limiting the generality of the foregoing, except as set
forth in Schedule 1.23 and except as would not reasonably be expected to give
rise to a material adverse effect on the business, operations or financial
condition of Blackhawk and the Blackhawk Subsidiaries, taken as a whole;
(i) no hazardous waste or hazardous substance, as those terms are
defined by RCRA and CERCLA, respectively, have been disposed of by
Blackhawk, or, to the best knowledge of Blackhawk, by any other person or
entity, in violation of any Environmental Law on any real property owned,
leased or operated by Blackhawk or any of the Blackhawk Subsidiaries;
(ii) no polychlorinated biphenyls (PCBs) are or were located on any
real property owned, leased or operated by Blackhawk or any of the
Blackhawk Subsidiaries, whether in electrical transformers or elsewhere, at
any time;
(iii) no storage tanks, whether underground or otherwise, containing
petroleum, petroleum fractions, hazardous substances or hazardous wastes,
are or were located on any of the real property owned, leased or operated
by Blackhawk or any of the Blackhawk Subsidiaries at any time; and
(iv) no asbestos is or was located in any building on any of the
real property owned, leased or operated by Blackhawk or any of the
Blackhawk Subsidiaries at any time.
(c) Blackhawk and each of the Blackhawk Subsidiaries have obtained
and maintained and are in compliance with all permits issued by environmental or
health administrative agencies that are required with respect to their
respective operations.
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(d) Blackhawk has made available to the Purchaser all reports of any
health or environmental studies or investigations in the possession or under the
control of Blackhawk, any of the Blackhawk Subsidiaries or any of the Sellers
that have been conducted in connection with the real property owned, leased or
operated by Blackhawk or any of the Blackhawk Subsidiaries.
(e) Blackhawk has heretofore obtained from Conestoga Rovers &
Associates, U.S. Environmental Group, Inc. or Midwest Environmental Consultants,
Inc. a Phase I environmental report with respect to each parcel of real property
owned or leased by Blackhawk and the Blackhawk Subsidiaries set forth on
Schedule 1.23(e) (the "Environmental Reports"). The cost of such Environmental
Reports, copies of which have been made available to the Purchaser, shall be
borne by the Purchaser.
1.24 FIRLE FUNERAL HOME. The acquisition of the Firle Funeral Home was
completed by Blackhawk prior to April 30, 1996, and was fully reflected on the
April 30 trial balance sheet previously made available to the Purchaser, and, as
of April 30, 1996, there were no remaining purchase price payment obligations to
the seller thereof in connection with such acquisition (it being understood that
Blackhawk or a Blackhawk Subsidiary has ongoing payment obligations with respect
to noncompete agreements entered into in connection therewith).
1.25 DISCLOSURES. No representation or warranty by Blackhawk contained in
this Agreement, and no statement contained in any certificate, Schedule,
Exhibit, list or other writing furnished to the Purchaser in connection with
this transaction, contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading. All copies of all writings furnished to the
Purchaser hereunder or in connection with the transactions contemplated hereby
are true and complete in all material respects. All Schedules to this Agreement
prepared by or on behalf of Blackhawk or the Sellers are true and complete in
all material respects.
1.26 BROKERS AND ADVISORS. No action taken by Blackhawk or any Blackhawk
Subsidiary in connection with or in furtherance of the transactions contemplated
hereby has or shall cause any of Blackhawk, any of the Blackhawk Subsidiaries,
the Purchaser or such Seller to be subject to any claim against it for a
brokerage commission, finder's fee, consulting fee, advisory fee or other like
payment.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers hereby represents and warrants to the Purchaser
severally as to itself, herself or himself and not jointly as to Sections 2.2,
2.3, 2.4, 2.5 and 2.6 below, jointly and severally as to Section 2.1(a) below
and on a pro rata basis (based on the percentages set
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forth opposite each such Seller's name on Schedule 4.6(e) hereto) as to Section
2.1(b) below, as follows:
2.1 OWNERSHIP OF SHARES.
(a) The Shares constitute all the issued and outstanding shares of
capital stock of Blackhawk.
(b) Except as set forth in Schedule 1.2, as of the Closing Date
Blackhawk will own, directly or through one or more wholly-owned subsidiaries,
all of the outstanding capital stock of each of the Blackhawk Subsidiaries.
2.2 TITLE TO SHARES. As of the date hereof and as of the Closing Date,
each of the Sellers has and will have good and valid title to the Shares
indicated as being owned by him, her or it in Schedule 1.1, free and clear of
all liens, encumbrances, equities and claims whatsoever. Except as set forth in
Schedule 1.1, each Seller represents and warrants that, as of the date hereof
and as of the Closing Date, there are and there will be no restrictions
whatsoever against the transfer of his, hers or its Shares to the Purchaser.
2.3 AUTHORITY. The execution, delivery and performance of this Agreement
and the other agreements, documents and instruments contemplated hereby by each
of the Sellers have been duly and validly authorized by all requisite action on
the part of such Seller. This Agreement and all other agreements, documents and
instruments contemplated hereby to be signed by each of the Sellers constitute,
or upon execution and delivery thereof will constitute, legal, valid and binding
obligations of each Seller enforceable in accordance with their respective
terms, subject to applicable laws of bankruptcy, insolvency and similar laws
affecting creditors' rights generally and the application of general rules of
equity.
2.4 EFFECT OF TRANSACTION, RECORDS, ETC. Except as set forth on Schedule
2.4, neither the execution and delivery of this Agreement or any other
agreement, document or instrument contemplated hereby, nor the consummation by
each Seller of the transactions contemplated hereby or thereby, nor the
compliance by such Seller with any of the provisions hereof or thereof, do or
will: (a) with respect to any Seller that is a corporation or other business
entity, conflict with or result in a breach of the Articles of Incorporation or
charter papers or Bylaws or Code of Regulations or other organizational
documents of such Seller; (b) violate any material statute, law, rule or
regulation or any order, writ, injunction or decree of any court or governmental
authority to which such Seller is subject; or (c) materially violate or conflict
with or constitute a material default under (or give rise to any right of
termination, cancellation or acceleration under) any material agreement or any
writing of any nature to which such Seller is a party or by which any of the
assets or properties of such Seller may be bound. Except as set forth on
Schedule 2.4, no consent or approval of or notification to any governmental
authority is required in connection with the
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execution and delivery by such Seller of this Agreement or any other agreement,
document or instrument relating hereto or the consummation of the transactions
contemplated hereby or thereby.
2.5 BROKERS AND ADVISORS. No action taken by any Seller in connection
with or in furtherance of the transactions contemplated hereby has or shall
cause any of Blackhawk, any of the Blackhawk Subsidiaries or the Purchaser to be
subject to any claim against it for a brokerage commission, finder's fee,
consulting fee, advisory fee or other like payment.
2.6 CLAIMS ON BLACKHAWK. No Seller or, to the actual knowledge of any
Seller, no affiliate of such Seller has any claim against Blackhawk or any
Blackhawk Subsidiary in respect of borrowed money or funded indebtedness or
obligations or liabilities for fees, expenses and advances (other than amounts
payable in the ordinary course of business as compensation to Sellers who are
employees), nor is any Seller or its affiliates party to any agreement with
Blackhawk or any Blackhawk Subsidiary, except as described in Schedule 2.6.
3. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE PURCHASER AND
GRIZZLY
A. The Purchaser represents and warrants to and agrees with Blackhawk and
the Sellers as follows:
3.1 ORGANIZATION, STANDING AND POWER. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Purchaser has all the power and authority of a corporation to own
and operate its properties, to carry on its businesses as now being conducted,
and to execute, deliver and perform this Agreement and all other agreements,
documents and instruments contemplated hereby.
3.2 AUTHORITY. The execution, delivery and performance of this Agreement
and the other agreements, documents and instruments contemplated hereby by the
Purchaser have been duly and validly authorized by all necessary corporate
action of the Purchaser. This Agreement and all other agreements, documents and
instruments contemplated hereby to be signed by the Purchaser constitute, or
upon execution and delivery will constitute, legal, valid and binding
obligations of the Purchaser enforceable in accordance with their respective
terms.
3.3 EFFECT OF TRANSACTION, RECORDS, ETC. Neither the execution and
delivery of this Agreement or any other agreement, document or instrument
contemplated hereby, nor the consummation by the Purchaser of the transactions
contemplated hereby or thereby, nor the compliance by the Purchaser with any of
the provisions hereof or thereof, do or will: (a)
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conflict with or result in a breach of the Articles of Incorporation or charter
papers or Bylaws or Code of Regulations of the Purchaser; (b) violate any
statute, law, rule or regulation or any order, writ, injunction or decree of any
court or governmental authority to which the Purchaser is subject; or (c)
violate or conflict with or constitute a material default under (or give rise to
any right of termination, cancellation or acceleration under) any agreement or
any writing of any nature to which the Purchaser is a party or by which any of
the assets or properties of the Purchaser may be bound. Except as otherwise
described in this Agreement, no consent or approval of or notification to any
governmental authority is required in connection with the execution and delivery
by the Purchaser of this Agreement or any other agreement, document or
instrument relating hereto or the consummation of the transactions contemplated
hereby or thereby.
3.4 INVESTMENT REPRESENTATIONS. The Purchaser is purchasing the Shares
for investment, for its own account and without a view to distribution or resale
thereof.
3.5 BROKERS. No action taken by the Purchaser in connection with or in
furtherance of the transactions contemplated hereby has or shall cause any of
Blackhawk, any of the Blackhawk Subsidiaries or any Seller to be subject to any
claim against it for a brokerage commission, finder's fee, consulting fee,
advisory fee or other like payment.
3.6 NO KNOWLEDGE OF MISREPRESENTATIONS OR OMISSIONS. To the best
knowledge of the Purchaser, as of the date hereof, there are no breaches of or
inaccuracies in any of the representations and warranties of the Sellers and
Blackhawk in this Agreement and the Schedules hereto, and, to the best knowledge
of the Purchaser, there are no errors in, or omissions from, any of the
Schedules to this Agreement.
B. Grizzly represents and warrants to and agrees as follows:
3.7 HSR FILING MATTERS. Neither Grizzly nor any of its affiliates will be
the acquiring person (as defined under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and the rules and
regulations promulgated thereunder) in connection with the acquisition
contemplated hereby.
3.8 AUTHORIZATION; NO CONFLICT. (a) The execution, delivery and
performance of this Agreement and the other agreements, documents and
instruments contemplated hereby by Grizzly and the payment by Grizzly of the
Down Payment as provided herein have been duly and validly authorized by all
necessary corporate and other action of Grizzly. This Agreement and all other
agreements, documents and instruments contemplated hereby to be signed by
Grizzly constitute, or upon execution and delivery will constitute, legal, valid
and binding obligations of Grizzly enforceable in accordance with their
respective terms.
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(b) Neither the execution and delivery of this Agreement or any other
agreement, document or instrument contemplated hereby, nor the carrying out by
Grizzly of its obligations hereunder and thereunder (including the payment by
Grizzly of the Down Payment as provided herein), nor the compliance by Grizzly
with any of the provisions hereof or thereof, do or will: (a) conflict with or
result in a breach of the organizational documents of Grizzly; (b) violate any
statute, law, rule or regulation or any order, writ, injunction or decree of any
court or governmental authority to which Grizzly is subject; or (c) violate or
conflict with or constitute a material default under (or give rise to any right
of termination, cancellation or acceleration under) any agreement or any writing
of any nature to which Grizzly is a party or by which any of the assets or
properties of Grizzly may be bound.
4. SALE OF SHARES; PRICE AND TERMS; ADJUSTMENTS
4.1 CLOSING DATE. The consummation of the transactions contemplated by
this Agreement shall take place at a closing (the "Closing") at the offices of
Davis Polk & Wardwell, located at 450 Lexington Avenue, New York, NY 10017, or
at such other place as the Purchaser and Blackhawk may mutually agree upon in
writing, at 10:00 A.M. on or as soon as practicable after the date on which the
conditions to Closing specified in Articles 7 and 8 shall have occurred;
PROVIDED, HOWEVER, that (subject to extension as provided in Section 11.4 below)
the Closing shall occur on or before September 20, 1996 (the "Closing Date").
4.2 SALE AND PURCHASE. On the Closing Date, in reliance upon the
representations, warranties and agreements of the parties and subject to the
terms and conditions hereof, the Sellers shall, against payment of the Purchase
Price, sell, assign, transfer, convey and deliver to the Purchaser, and the
Purchaser shall buy from the Sellers, free and clear of all encumbrances or
other liens, all of the Shares. At or prior to the Closing, the Sellers will
deliver to the Purchaser a schedule setting forth an allocation of the Purchase
Price among the Sellers, and, other than making any required payments in
accordance with Section 4.5, the Purchaser shall have no responsibility for the
allocation and distribution of such payments among the Sellers. The sale,
assignment, transfer, conveyance and delivery of the Shares shall be made by the
Sellers to the Purchaser at the Closing by delivery of the share certificates
evidencing all of the Shares, duly endorsed in blank or accompanied by duly
executed stock powers, in form satisfactory to the Purchaser and with all
required stock transfer tax stamps affixed. In addition, at the Closing, the
Sellers shall deliver to the Purchaser a receipt for the Purchase Price and all
opinions, certificates and other documents required to be delivered pursuant to
Article 7.
4.3 PRICE. The purchase price ("Purchase Price") for the Shares shall be
$171,789,632, LESS the Blackhawk liabilities as of the Closing with respect to
the following items
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(collectively, the "Adjustment Items"): (x) with respect to those certain
Employment Agreements, each dated December 22, 1992, by and among Blackhawk and
Fred Hunter Memorial Services, Inc. (as Employer) and Frederick B. Hunter,
Cheryl L. Ericson, Jessie Mae Hunter and Caryl Lyn Hunter, respectively, if, as
a result of the change in control of Blackhawk effected by the purchase of the
Shares, the parties to such contracts continue to have or have exercised any
rights thereunder to accelerate the payment obligations thereunder (and have not
waived such rights of acceleration), the net present value as of the Closing
Date, determined on a 12% discount rate, of the payments so accelerated, based
on an assumed inflation rate of 3% a year and (y) Blackhawk's obligations to
make any severance payments to any Seller, to senior management as a result of a
right arising from a change in control of Blackhawk and to any employee as a
result of a severance right created after the execution of this Agreement
requiring a payment by Blackhawk or a Blackhawk Subsidiary (except for severance
rights created in the ordinary course of business and consistent with past
practice). On the Closing Date, the Sellers shall deliver to the Purchaser a
certificate of the chief financial officer of Blackhawk as to the Adjustment
Items as of the Closing Date, which certificate shall serve as the basis for
payment at Closing.
4.4 TERMS OF PAYMENT. The Purchase Price shall be paid as follows:
(a) $5,000,000 plus the amount of any interest thereon by application
of amounts heretofore delivered to Chicago, L.P., as agent for all the Sellers,
by Grizzly, in connection with prior negotiations relating to Blackhawk;
(b) $500,000 (the "Deposit") has been deposited with Chicago Title &
Trust Company (the "Escrow Agent") and is being held in a trust by the Escrow
Agent; the Deposit, together with all interest earned thereon, will be
maintained in such trust ("Deposit Trust") until disbursed in accordance with
Section 4.7 or Section 6.10;
(c) $20,000,000 has been paid by Grizzly to Golder Thoma Cressey Fund
III, Limited Partnership (Chicago, L.P."), as agent for all the Sellers, and,
together with interest thereon, shall constitute the "Down Payment"; such amount
shall on the Closing Date be applied against the Purchase Price; and
(d) on the Closing Date, the Purchaser shall deliver to the Sellers
an amount in cash (the "Closing Date Cash") equal to the Purchase Price less the
sum of the amounts specified in paragraphs (a), (b) and (c).
4.5 METHOD OF PAYMENT. (a) On the Closing Date, the Purchaser shall wire
the Closing Date Cash into an account designated by Chicago, L.P., as agent for
all the Sellers, by notice to the Purchaser at least three days prior to the
Closing Date (the "Sellers' Account") for disbursement to the Sellers in
accordance with a written agreement among the Sellers. In
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the event any Seller has at the Closing any then outstanding monetary obligation
to Blackhawk or any Blackhawk Subsidiary, a corresponding portion of the Closing
Date Cash shall be offset against such obligation, and the Purchaser shall pay
the resulting net amount to the Sellers' Account.
(b) All payments made by the Purchaser pursuant to Section 4.4 shall
be made by wire transfer of readily available funds to the Sellers' Account or
otherwise as designated in writing to the Purchaser by the Sellers.
4.6 POST CLOSING ADJUSTMENT. If, within 20 days after the Closing, the
Purchaser shall notify the Sellers in writing of its belief that the amount of
the Adjustment Items is greater than that certified as of the Closing Date,
specifying the amount thereof in dispute and setting forth, in reasonable
detail, the basis for such dispute, the Purchaser and the Sellers shall attempt
in good faith to resolve the matter or matters in dispute. If the Purchaser and
the Sellers, notwithstanding such good faith effort, shall have failed to
resolve the matter or matters in dispute, then any remaining matter or matters
in dispute shall be finally and conclusively determined by arbitration pursuant
to Section 11.12. Within five business days after the earliest of (i) the
resolution of all disagreements with respect to the Earnings Certificate
directly by the Purchaser and the Sellers and (ii) the issuance of the report of
the Arbiter (the "Final Resolution Date"), if there is a determination that the
amount of the Adjustment Items so determined is greater than the amount
certified as of the Closing Date, the Sellers shall pay to the Purchaser,
together with interest on such sum at the then applicable federal funds rate for
the period from the Closing to the date of payment, the amount of such excess,
such payment to be made by wire transfer in immediately available funds to the
account designated in writing by the Purchaser to Chicago, L.P., on behalf of
the Sellers. If the Purchaser does not provide the Sellers written notice
within 20 days after the Closing Date as provided above, the amount of the
Adjustment Items as certified by the chief financial officer of Blackhawk (as
provided in Section 4.3) shall be deemed to be conclusive and binding on the
parties hereto and not subject to further review or dispute.
4.7 PAYMENT OF POST CLOSING ADJUSTMENT. If the Sellers are required to
pay to the Purchaser a post closing payment pursuant to Section 4.6, such amount
shall be disbursed from the Deposit Trust, and, on the Final Resolution Date
(or, if no notice of dispute is given within 20 days after the Closing as
provided above, on the 21st day after the Closing), the remainder of the Deposit
Trust, if any, shall be disbursed to the Sellers in accordance with Section
4.5(b). The Sellers shall be liable, jointly and severally, for any payments
due as determined pursuant to Section 4.6.
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5. CLOSING TRANSACTIONS
5.1 CLOSING OBLIGATIONS OF THE SELLERS. On the Closing Date, the
following shall be delivered to the Purchaser:
(a) stock certificates representing all of the Shares, duly endorsed
in blank or accompanied by duly executed stock powers, in form satisfactory
to the Purchaser and with all required stock transfer tax stamps affixed;
(b) appropriate evidence of all necessary corporate action by
Blackhawk in connection with the transactions contemplated hereby,
including, without limitation, certified copies of resolutions duly adopted
by the Board of Directors of Blackhawk approving the transactions
contemplated hereby, and authorizing the execution, delivery and
performance by Blackhawk of this Agreement and the other agreements,
documents and instruments to which Blackhawk is a party contemplated
hereby, and a certificate as to the incumbency of officers of Blackhawk
executing any instrument or other document delivered in connection with
such transactions;
(c) the certificates required by Sections 4.3, 7.1, 7.2 and 7.3 of
this Agreement;
(d) either (i) a certificate (prepared in accordance with
Section 1445(b)(2) of the Code) from each Seller of non-foreign status or
(ii) a certificate from Blackhawk (prepared in accordance with Section
1445(b)(3) of the Code) stating that Blackhawk is not and has never been a
United States real property holding company;
(e) tax lien waivers and tax good standing certificates indicating
the payment of franchise taxes from the jurisdictions where Blackhawk and
the Blackhawk Subsidiaries are located;
(f) an opinion, dated the Closing Date, of Kirkland & Ellis and of
Peter D. Cooper, counsel to Blackhawk and the Sellers, in form and
substance mutually acceptable to the parties hereto; and
(g) such duly signed resignations of the members of the Boards of
Directors and officers of Blackhawk and the Blackhawk Subsidiaries and such
changes relating to the accounts and safe deposit boxes of Blackhawk and
each of the Blackhawk Subsidiaries as the Purchaser shall have requested by
written notice to Blackhawk at least seven days prior to the Closing Date.
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5.2 CLOSING OBLIGATIONS OF THE PURCHASER. On the Closing Date, the
Purchaser shall:
(a) pay the Purchase Price as specified in Section 4.4;
(b) deliver to Chicago, L.P., as representative of the Sellers,
appropriate evidence of all necessary corporate action by Grizzly in
connection with the transactions contemplated hereby, including, without
limitation, certified copies of resolutions duly adopted by the Board of
Directors of Grizzly approving the obligations of Grizzly under this
Agreement and the other agreements contemplated hereby and authorizing the
execution, delivery and performance by Grizzly of this Agreement and a
certificate as to the incumbency of officers of Grizzly executing any
instrument or other document delivered in connection with such
transactions; and
(c) deliver to Chicago, L.P., as representatives of the Sellers, the
certificates required by Sections 8.1, 8.2 and 8.3 of this Agreement.
6. OTHER AGREEMENTS AND COVENANTS OF THE PARTIES
6.1 OPERATION OF THE BUSINESSES OF BLACKHAWK AND THE BLACKHAWK
SUBSIDIARIES. From the date hereof to the Closing Date, Blackhawk shall:
(a) consult with the Purchaser on a regular basis with respect to all
decisions which might materially affect the business or assets of Blackhawk
or any of the Blackhawk Subsidiaries; and
(b) except as the Purchaser may otherwise agree, operate the
businesses of Blackhawk and each of the Blackhawk Subsidiaries as currently
operated and only in the ordinary course and, consistent with such
operation, use its reasonable best efforts to preserve intact their current
respective business organizations and their relationships with their
employees and persons having dealings with them. Without limiting the
generality of the foregoing, Blackhawk shall not, and shall not permit any
Blackhawk Subsidiary to, without the prior consent of the Purchaser,
(i) take any action (over which Blackhawk can exercise control) to
cause any of the representations and warranties contained in Article 1
of this Agreement to be intentionally breached in any material adverse
respect;
(ii) increase the rate of compensation of the management employees
of Blackhawk or any Blackhawk Subsidiary, or introduce any additional
bonus, severance, pension, profit sharing or similar plan or agreement
for the employees of Blackhawk or any Blackhawk Subsidiary (other than
pursuant to existing
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contracts or arrangements or in the ordinary course of business
consistent with past practices);
(iii) make any expenditure or commitment in excess of $50,000 for
acquisitions, additions to or replacements of property, plant or
equipment of Blackhawk or any of the Blackhawk Subsidiaries;
(iv) create, incur or assume any indebtedness for borrowed money
other than increases in indebtedness incurred under its existing
credit facilities as of the date hereof or agree to any increase in
the rates of interest or other fees (including, without limitation,
prepayment fees) or expenses payable thereunder, except in accordance
with existing contracts or arrangements;
(v) make any material changes in accounting practices or
procedures, incur any material non-recurring charges or make any
material reversal of accounting reserves, except as required by
changes in generally accepted accounting principles;
(vi) make any declaration, setting aside or payment of any dividend
or other distribution in respect of the capital stock of Blackhawk or
any non wholly-owned Blackhawk Subsidiary to a person or entity that
is not Blackhawk or a Blackhawk Subsidiary; or
(vii) make any changes in preneed sales techniques or practices or
funding arrangements for preneed products or in investment strategies
with respect to preneed trust funds, except as otherwise required by
applicable law.
6.2 SUPPLEMENTS. From the date hereof until the Closing Date, upon
reasonable notice, Blackhawk will give to the Purchaser and its counsel,
accountants, employees and other authorized representatives reasonable access
during normal business hours to all of the offices, properties, books,
contracts, commitments, tax returns, records and affairs of Blackhawk and the
Blackhawk Subsidiaries. From time to time prior to the Closing Date, Blackhawk
shall furnish to the Purchaser supplemental information which Blackhawk has with
respect to any matters or events arising or discovered subsequent to the date
hereof which, if existing or known on the date hereof, would have rendered any
representation or warranty made by Blackhawk or the Sellers or any information
contained in any Schedule hereto inaccurate or incomplete. The furnishing of
such supplemental information shall not, however, affect or otherwise diminish
any of the representations and warranties of Blackhawk and the Sellers hereunder
and shall be disregarded in determining the effect of such representations and
warranties for the purposes of Article 7 hereof; provided that, if the Closing
occurs, such supplemental information shall be considered incorporated in and
supplemented to the representations and warranties of Blackhawk and the Sellers,
as
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applicable, and shall not serve as the basis for any claim of a breach of any
representation or warranty contained herein.
6.3 REGULATORY CONSENTS, AUTHORIZATIONS, ETC. Each party hereto will use
its reasonable best efforts to consummate the Closing, including obtaining all
consents, authorizations, orders and approvals of, and make all filings and
registrations with, any governmental commission, board or other regulatory body
or any other person required for or in connection with the consummation by it of
the transactions contemplated hereby and will cooperate fully with the other
parties in assisting them to obtain such consents, authorizations, orders and
approvals and to make such filings and registrations. No party hereto will take
or omit to take any action for the purpose of delaying, impairing or impeding
the receipt of any required consent, authorization, order or approval or the
making of any required filing or registration. Specifically, the parties will
make all filings as expeditiously as is reasonably practicable. As of the date
hereof, the Purchaser has no reason to believe that it cannot complete its
financing and obtain the necessary consents, authorizations, orders and
approvals prior to the Closing Date, and agrees to notify the Sellers as soon as
practicable after the Purchaser reasonably determines that it will not be able
to complete its financing and obtain the necessary consents, authorizations,
orders and approvals prior to the Closing Date.
6.4 NEGOTIATIONS WITH OTHERS. During the period from the date hereof to
the Closing Date, or until this Agreement is terminated in accordance with
Section 11.4, the Sellers and Blackhawk shall not, and shall direct their
respective agents, employees, officers, directors, representatives and
affiliates not to, without the prior written consent of the Purchaser, initiate
any discussions or engage in negotiations with, or provide any information other
than publicly available information to, any person, firm or entity (other than
the Purchaser, any affiliate thereof or any person that has been approved by the
Purchaser) concerning any possible proposal regarding a sale or other
disposition of Blackhawk or any Blackhawk Subsidiary or any of their respective
assets, and Blackhawk will notify the Purchaser immediately by telephone, and
thereafter promptly confirm in writing, if any such discussions or negotiations
are sought to be initiated with, any such information is requested from, or any
such proposal or possible proposal is received by, Blackhawk.
6.5 PUBLICITY. The parties hereto will not issue any press release or
otherwise make any public statement with respect to the transactions
contemplated hereby without the consent of the other party or parties (which
consent shall not be unreasonably withheld), except as may be required by law,
in which event such press release or public statements shall be made only after
consultation with the other party or parties.
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6.6 CONFIDENTIALITY.
(a) In the event that this Agreement is terminated prior to the
Closing, unless Blackhawk shall otherwise consent in writing (i) the Purchaser
agrees (and shall cause each affiliate, agent, representative, employee, officer
and director of the Purchaser) not to use or to disclose to any third party for
any reason whatsoever, any information regarding the existence of or details
concerning the transactions contemplated by this Agreement, or regarding
Blackhawk or any of the Blackhawk Subsidiaries which is of a proprietary or
confidential nature, including, without limitation, any customer lists, supplier
information, resource information, financial information, business or marketing
information, product information, sales information, or any other proprietary or
confidential information of Blackhawk or any Blackhawk Subsidiary (collectively,
the "Blackhawk Proprietary Information") and (ii) the Purchaser covenants to
return all Blackhawk Proprietary Information and copies and extracts thereof
obtained from Blackhawk to Blackhawk within five days after the date this
Agreement is terminated, to immediately destroy all notes, records or other
documentation the Purchaser made with regard to the Blackhawk Proprietary
Information, and not to utilize, directly or indirectly, in any manner, the
Blackhawk Proprietary Information in the Purchaser's business or the business of
any of the Purchaser's affiliates.
(b) In the event this Agreement is terminated prior to the Closing,
unless Purchaser shall otherwise consent in writing (i) Blackhawk and the
Sellers severally, and not jointly, agree (and shall cause each affiliate,
agent, representative, employee, officer and director of Blackhawk, any of the
Blackhawk Subsidiaries and the Sellers) not to use or disclose to any third
party, for any reason whatsoever, any information, whether relating to the time
prior to the Closing Date or following such date, regarding the existence of or
details concerning the transactions contemplated by this Agreement, or regarding
the Purchaser or Grizzly which is of a proprietary or confidential nature,
including, without limitation, any customer lists, resource or supplier lists,
financial information and any other proprietary or confidential information of
the Purchaser or Grizzly (the "Purchaser Proprietary Information"); and (ii)
Blackhawk covenants to return all Purchaser Proprietary Information and copies
and extracts thereof obtained from the Purchaser to the Purchaser within five
days after the date this Agreement is terminated, to immediately destroy all
notes, records or other documentation Blackhawk made with regard to the
Purchaser Proprietary Information, and not to utilize, directly or indirectly,
in any manner, the Purchaser Proprietary Information in Blackhawk's business or
the business of any of Blackhawk's affiliates.
(c) From the date hereof until the Closing Date, neither Grizzly nor
any Subsidiary of Grizzly nor the Purchaser shall, without the prior written
consent of Blackhawk, which consent shall not be unreasonably withheld, solicit
or make an offer of employment to any employees of Blackhawk or any Blackhawk
Subsidiary (excluding
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employees earning less than $30,000 on an annual basis who are not location
managers) or hire any location managers or more senior officers of Blackhawk or
any Blackhawk Subsidiary.
6.7 RESTRICTIONS ON TRANSFER OF SHARES. Blackhawk shall not transfer any
Shares on the stock transfer books of Blackhawk unless Blackhawk gives three
days' written notice thereof to the Purchaser and the transferee or payee by
written agreement with the Purchaser agrees to be liable (jointly and severally
with the transferring Seller, if Chicago, L.P., is the Seller) for such Seller's
obligations under the terms of this Agreement.
6.8 FEDERAL TRADE COMMISSION/WAGES & SALARIES. Blackhawk will cooperate
with the Purchaser in developing systems designed to enable Blackhawk and each
of the Blackhawk Subsidiaries to be able to comply, as soon as practicable,
following the Closing, with the reasonable procedures established by the
Purchaser to assure compliance with the rules and regulations of the Federal
Trade Commission with respect to funeral practices and the rules and regulations
issued by governmental authority under the jurisdiction of the Department of
Labor with respect to wages and salaries, in each case reflecting any
information developed or to be developed in the audit conducted by the Purchaser
with the cooperation of Blackhawk and the Sellers of the practices and
procedures of Blackhawk and its Subsidiaries prior to the Closing Date. To the
extent any of the Sellers has any outstanding indebtedness to Blackhawk as of
the Closing Date, such indebtedness shall be repaid on the Closing Date.
6.9 APPLICATION OF DOWN PAYMENT. If a Closing occurs hereunder, the Down
Payment shall be applied as provided in Section 4.4(c). If the Purchaser shall
fail to complete the Closing for any reason whatsoever (including, without
limitation, the failure of the condition specified in Section 7.6 or the
termination by the Purchaser pursuant to Section 11.4(e)) other than (i) as a
result of the failure of the conditions specifically set forth in any of
Sections 7.1 through 7.5 (after giving effect to the options, provisos, and
requirements set forth therein) or 7.7, (ii) the termination of this Agreement
pursuant to Section 11.4 as a result of the failure of the conditions set forth
in any of Sections 7.1 through 7.5 (after giving effect to the options,
provisos, and requirements set forth therein) or 7.7, (iii) the determination by
the Sellers not to complete the Closing as a result of the failure of the
conditions set forth in Article 8, or (iv) the election by Grizzly to enter into
the Substitute Stock Purchase Agreement (as defined below) (in which event the
provisions of such Substitute Stock Purchase Agreement shall apply), the Down
Payment, together with the amounts previously paid to Chicago, L.P. as described
in Section 4.4(a), will be retained by Sellers as liquidated damages in
satisfaction of all obligations of the Purchaser hereunder (provided that such
amounts shall not operate to limit the Sellers from seeking damages in excess of
such amounts to the extent Blackhawk has incurred or sustained losses, costs,
expenses and other liabilities in excess of such amounts as a result of a
violation by the Purchaser or Grizzly of the covenants contained in Section
6.6(a) or Section 6.6(c) or the commission by the Purchaser or Grizzly of acts
of fraud). If the Purchaser shall fail to
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complete the Closing (i) as a result of the failure of the conditions
specifically set forth in any of Sections 7.1) through 7.5 (after giving effect
to the options, provisos, and requirements set forth therein) or 7.7, (ii) the
termination of this Agreement pursuant to Section 11.4 as a result of the
failure of the conditions set forth in any of Sections 7.1 through 7.5 (after
giving effect to the options, provisos, and requirements set forth therein) or
7.7 or (iii) the determination by the Sellers not to complete the Closing as a
result of the failure of the conditions set forth in Article 8, the Down Payment
will be repaid to Grizzly. The Sellers shall be jointly and severally liable to
make any repayment of the Down Payment required by this Section. Whether or not
the Down Payment is to be retained by the Sellers or returned to Grizzly
pursuant to the foregoing provisions of this Section 6.9 (a "Final
Determination"), shall be determined pursuant to the following procedures:
(i) Within 30 days after written notice of termination of this
Agreement is delivered to any party pursuant to Section 11.4, Grizzly shall be
entitled to deliver to the Sellers a written notice specifying in reasonable
detail Grizzly's claim to return of the Down Payment pursuant to this Section
6.9 (the "Return Notice").
(ii) If such Return Notice is not delivered to the Sellers within
such 30-day period pursuant to clause (i) above, the Sellers shall be entitled
to retain the Down Payment with no further claims or assertions permitted to be
made with respect thereto by Grizzly or the Purchaser (or their permitted
assigns).
(iii) If within such 30-day period such Return Notice is delivered to
the Sellers pursuant to clause (i) above, the Down Payment shall be retained by
the Sellers or returned to Grizzly, as the case may be, upon the earlier to
occur, and pursuant to the terms, of (1) the written agreement of Grizzly and
the Sellers or (2) the final determination of the arbiters pursuant to Section
11.2 below.
Notwithstanding the foregoing, if the Purchaser notifies the Sellers
in writing on or prior to August 31, 1996, that, despite its good faith efforts,
it will not be able to complete the Closing as a result of the failure of the
condition set forth in Section 7.6 (Financing), accompanied by a certificate by
Grizzly that it intends to enter into a substitute Stock Purchase Agreement (the
"Substitute Stock Purchase Agreement") (a "Substitution Election"), the
following provisions shall apply: within 10 days following the receipt of the
Substitution Election, the Sellers and Blackhawk may deliver supplemental
information pursuant to Section 6.2 which, notwithstanding the other provisions
of Section 6.2, shall serve to update the representations and warranties of
Blackhawk and the Sellers, and shall be deemed to be incorporated into the
representations and warranties of Blackhawk and the Sellers in the Substitute
Stock Purchase Agreement, as of the date of and upon the execution and delivery
of such Substitute Stock Purchase Agreement; within 10 days after receipt of any
such supplemental information (with any modifications thereto as shall be agreed
by Grizzly, Blackhawk and the Sellers), Grizzly shall elect whether or not to
proceed with the
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execution and delivery of the Substitute Stock Purchase Agreement; if it elects
to proceed, Grizzly, Loewen Group International, Inc. and the Sellers will
execute and deliver the Substitute Stock Purchase Agreement in the form attached
hereto as Exhibit A, the Down Payment hereunder will be retained by the Sellers
as, and shall constitute, $20,000,000 of the Down Payment under the Substitute
Stock Purchase Agreement. The Down Payment (for all purposes of the Substitute
Stock Purchase Agreement) shall be $30,000,000, the application of which shall
be governed by the provisions of the Substitute Stock Purchase Agreement and, at
the time of the execution of the Substitute Stock Purchase Agreement, Grizzly
shall pay the Sellers the additional $10,000,000 in immediately available funds
to an account designated by the Sellers. In the event Grizzly elects to proceed
with the execution and delivery of the Substitute Stock Purchase Agreement as
provided above and the Sellers do not execute the Substitute Stock Purchase
Agreement, Grizzly shall have the right to compel by specific performance the
Sellers to execute the Substitute Stock Purchase Agreement.
The Purchaser and Grizzly hereby acknowledge and agree that the $5
million payment (plus interest thereon) referred to in Section 4.4(a) shall be
retained by Sellers if for any reason whatsoever no Closing occurs either under
this Agreement or the Substitute Stock Purchase Agreement.
6.10 DEPOSIT TRUST CLOSING EXPENSES. To the extent that Blackhawk or the
Sellers incur costs and expenses in connection with the transactions
contemplated hereby of the type specified in Schedule 6.10 hereto ("Closing
Expenses"), Grizzly shall be liable for and shall promptly deposit into the
Deposit Trust from time to time the amount of any such Closing Expenses as and
when incurred. Grizzly will permit Blackhawk to deduct from the Deposit Trust
some or all of Blackhawk's Closing Expenses prior to the Closing (it being
understood that any such deduction will not affect Grizzly's obligation to fund
all Closing Expenses and to deposit the amount of such Closing Expenses in the
Deposit Trust as provided herein). In order to qualify as a Closing Expense,
each such expense must be reasonable, supported by invoice or similar
documentation, and directly related to Blackhawk's costs, fees and expenses
incurred in connection with the transactions contemplated hereby.
6.11 PRE-CLOSING COOPERATION. The Sellers recognize that the Purchase
Price being paid by the Purchaser pursuant to this Agreement reflects the
anticipation by the parties of certain operational savings. These savings
include the effect of certain management changes and closing the present
corporate headquarters of Blackhawk, reducing the number of employees of
Blackhawk, including termination of the employment of certain officers of
Blackhawk, including Thomas H. Johnson, and other related savings. To this end,
the Sellers and Blackhawk will cooperate in developing plans and entering into
agreements prior to the Closing to implement these savings which will include
termination of employees at operating locations, closing of the corporate
headquarters and such other items as requested by Purchaser. Without limiting
the generality of the foregoing, the parties agree that the
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Blackhawk Succession, Inc. Shareholders Agreement, the proxies issued to Bruce
V. Rauner pursuant thereto and the agreements between Blackhawk Succession, Inc.
and various members of the senior management of Blackhawk will be terminated on
or prior to the Closing to the extent requested by Purchaser at no cost to
Blackhawk or the Purchaser.
6.12 ASSISTANCE IN FINANCING. Blackhawk acknowledges that the Purchaser
currently intends that payment of the Purchase Price pursuant to Section 4.3
will be financed, in part, by an offering of High Yield Securities and the
arranging of funded senior bank debt financing. Blackhawk will provide
customary assistance in connection with the Purchaser's efforts to raise such
financing, including, without limitation, making senior management reasonably
available for meetings with prospective lenders and investors and cooperating in
the preparation of offering documents and necessary financial and business
information to enable documents, including the financial statements of
Blackhawk, to comply with the rules and regulations of the Securities and
Exchange Commission, it being recognized that the Sellers and Blackhawk (prior
to the Closing) will have no responsibility with respect to such compliance.
6.13 NO LIQUIDATION. No Seller (if other than a natural person) shall
liquidate or dissolve itself (i) if a Closing does not occur under this
Agreement, until there has been a Final Determination that the Sellers are not
required to return any portion of the Down Payment (as defined herein) under
Section 6.9 of this Agreement to the Purchaser hereunder or that the Sellers are
required to return all or a portion of the Down Payment and such return has been
completed; (ii) if the Closing under this Agreement or the Substitute Stock
Purchase Agreement has occurred (and there is no ongoing indemnification
obligation of the Sellers to the Purchaser under the final provisos to Section
7.1, Section 7.2 or Section 7.3), until such time as there is a final
determination that the Sellers are not required to make any payment pursuant to
Section 4.6 or the corresponding provision of the Substitute Stock Purchase
Agreement to the Purchaser hereunder or thereunder or that the Sellers are
required to make such a payment and such payment has been completed; and (iii)
if the Closing under this Agreement or the Substitute Stock Purchase Agreement
has occurred and there is an ongoing indemnification obligation of the Sellers
to the Purchaser under the final provisos to Section 7.1, Section 7.2 or Section
7.3, until such time as such obligation has been discharged or fully performed.
6.14 TRANSACTIONS WITH AFFILIATES. Any agreement between any Seller or any
of its affiliates, on the one hand, and Blackhawk or any Blackhawk Subsidiary,
on the other hand, shall terminate on the Closing Date without any liability on
the part of Blackhawk or any Blackhawk Subsidiary.
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7. CONDITIONS TO OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser to perform this Agreement are subject only
to the satisfaction of the following conditions on or prior to the Closing Date,
unless waived by the Purchaser:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Blackhawk and the Sellers in this Agreement or in any Schedule, certificate or
document delivered in connection herewith shall have been true and correct in
all material respects when made and shall be true and correct on the Closing
Date in all material respects as though made on and as of the Closing Date, and
the Purchaser shall have received a certificate signed by an officer of
Blackhawk and by the Sellers to that effect; provided, however, that this
condition shall be deemed satisfied (except with respect to the representations
in Sections 2.1(a) and 2.2 (with respect to the existence of any liens,
encumbrances, equities or claims relating to the Shares only)) unless (i) the
Purchaser demonstrates that any such breaches (together with, but without
duplication, all amounts under Section 7.2) would reasonably be expected to
have, individually or in the aggregate, an adverse effect (determined, insofar
as any thereof are limited by reference to a material adverse effect on the
business, operations or financial condition of Blackhawk or its Subsidiaries,
without reference to such limitation) of more than $10,000,000 (the "Minimum
Damage Amount") on the business, properties, assets or liabilities of Blackhawk
or its Subsidiaries or the value thereof and (ii) neither the Purchaser nor
Grizzly had knowledge (within the meaning of Section 11.12) of any such breaches
prior to the date hereof; provided that, notwithstanding the foregoing if the
aggregate amount of such adverse effects is not more than $50,000,000, the
Sellers may, in their sole discretion, by delivery of written notice to the
Purchaser, elect to jointly and severally agree to indemnify, defend and hold
harmless the Purchaser against any and all losses, claims, costs, expenses,
liabilities and damages arising out of or relating to any failure of such
representations and warranties which are reasonably subject to quantification,
in which event such election shall be deemed to cause to be satisfied the
condition contained in this Section 7.1 with respect to such failure; and
PROVIDED FURTHER, that in the event of a breach of Section 2.2 relating to any
lien, encumbrance, equity or claim of not more than $5,000,000, individually or
in the aggregate, the Sellers may, in their sole discretion, elect to, jointly
and severally, agree to indemnify, defend and hold harmless the Purchaser
against any and all losses and damages arising out of or related to such breach,
in which event such election shall be deemed to cause to be satisfied the
condition contained in Section 7.1 with respect to such breach of Section 2.2;
and PROVIDED FURTHER, that in the event of a breach of Section 2.2 relating to
any lien, encumbrance, equity or claim (whether or not material or in excess of
$5,000,000), the Sellers may, in their sole discretion, elect to cure such
breach to the reasonable satisfaction of the Purchaser, in which event such cure
shall be deemed to cause to be satisfied the condition contained in Section 7.1
with respect to such breach of Section 2.2. Any disputes as to the fact or
amount of quantification shall be subject to the arbitration provisions of
Section 11.2.
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7.2 PERFORMANCE OF OBLIGATIONS OF BLACKHAWK AND THE SELLERS. Blackhawk
and each of the Sellers in all material respects shall have performed all
obligations required to be performed by them under this Agreement and complied
with all covenants to be complied with by them under this Agreement at or prior
to the Closing Date, and the Purchaser shall have received a certificate signed
by an executive officer of Blackhawk and the Sellers to that effect; provided,
however, that this condition shall be deemed satisfied (except with respect to
the obligations of the Sellers pursuant to Section 5.1(a)) unless (i) the
Purchaser demonstrates that any such breaches (together with, but without
duplication, all amounts under Section 7.1) would reasonably be expected to
have, individually or in the aggregate, an adverse effect (determined, insofar
as any thereof are limited by reference to a material adverse effect on the
business, operations or financial condition of Blackhawk or its Subsidiaries,
without reference to such limitation) of more than the Minimum Damage Amount on
the business, properties, assets or liabilities of Blackhawk or its Subsidiaries
or the value thereof and (ii) neither the Purchaser nor Grizzly had knowledge
(within the meaning of Section 11.12) of any such breaches prior to the date
hereof; provided that, notwithstanding the foregoing, the Sellers may, in their
sole discretion, by delivery of written notice to the Purchaser, if the
aggregate of such adverse effects is not more than $50,000,000, elect to jointly
and severally indemnify, defend and hold harmless the Purchaser against any and
all losses, claims, costs, expenses, liabilities and damages arising out of or
relating to any failure of such covenants which are reasonably subject to
quantification, in which event such election shall be deemed to cause to be
satisfied the condition contained in this section 7.2 with respect to such
default. Any disputes as to the fact or amount of quantification shall be
subject to the arbitration provisions of Section 11.2.
7.3 NO LITIGATION. No action, suit or other proceeding shall be pending
before any court, tribunal or governmental authority seeking or threatening to
restrain or prohibit the consummation of the transactions contemplated by this
Agreement, or seeking to obtain substantial damages in respect thereof, or
involving a claim that consummation thereof would result in the violation of any
law, decree or regulation of any governmental authority having appropriate
jurisdiction, or be one in which an adverse determination could be reasonably
expected to have a material adverse effect on the business, operations or
financial condition of Blackhawk or any of the Blackhawk Subsidiaries, and the
Purchaser shall have received a certificate signed by an executive officer of
Blackhawk and the Sellers that to Blackhawk's and the Sellers' best knowledge,
no such action, suit or other proceeding is pending; provided, however, that
this condition shall be deemed satisfied unless (i) the Purchaser demonstrates
that any such actions, suits or proceedings would reasonably be expected to
have, individually or in the aggregate, an adverse effect of more than
$10,000,000 on the business, properties, assets or liabilities of Blackhawk or
its Subsidiaries or the value thereof and (ii) neither the Purchaser nor Grizzly
had knowledge (within the meaning of Section 11.12) on the date hereof that any
such action, suit or other proceeding is pending; provided that, notwithstanding
the foregoing, if the aggregate of such adverse effects is not more than
$50,000,000, the Sellers may, in their sole discretion, by delivery of written
notice to the
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Purchaser, elect to jointly and severally agree to indemnify, defend and hold
harmless the Purchaser against any and all losses, claims, costs, expenses,
liabilities, damages, assessments, settlements or judgments arising out of or
relating to any such litigation, in which event (i) such election shall be
deemed to cause to be satisfied the condition contained in this section 7.3 with
respect to such litigation and (ii) the Sellers shall have the sole right to
control and assume the defense of such matter or liability with counsel selected
by them in their sole discretion (it being understood that the Purchaser shall
have the right, at its own expense, to participate in, but not to control, any
such defense, except that no settlement of any litigation will be entered into
without the prior consent of the Purchaser, which consent shall not be
unreasonably withheld, if the effect of such settlement would require Blackhawk
to materially adversely change the manner in which Blackhawk thereafter carries
on its business or otherwise constitutes the admission of wrongdoing by
Blackhawk and which settlement would reasonably be expected to have a material
adverse effect on the business, properties or financial condition of Blackhawk
and the Blackhawk Subsidiaries, taken as a whole).
7.4 REGULATORY CONSENTS, AUTHORIZATIONS, ETC. All consents,
authorizations, orders, opinions and approvals of, and filings and registrations
with, any United States federal or state governmental commission, board or other
regulatory body which are listed on Schedule 7.4, in form reasonably
satisfactory to the Purchaser, shall have been obtained or made; provided that
the Purchaser shall, in accordance with Section 6.3, have used its best efforts
and taken all reasonable actions necessary to obtain such consents,
authorizations, orders, opinions, approvals, filings and registrations.
7.5 SENIOR INDEBTEDNESS. No enforcement action shall have been taken
under any of the outstanding senior indebtedness instruments of Blackhawk prior
to Closing (including any action to accelerate the indebtedness or to foreclose
on any collateral) other than any action the effect of which shall have been
substantially eliminated by the payment and discharge of such indebtedness at
the Closing without a material adverse effect on Blackhawk and its Subsidiaries,
taken as a whole, or on the Purchaser.
7.6 FINANCING. The Purchaser shall have been able to complete the
financings necessary to enable it to pay the Purchase Price.
7.7 ALL SHARES SOLD. All of the Sellers shall have tendered their
respective Shares for delivery to the Purchaser.
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8. CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers to perform this Agreement are subject only
to the satisfaction, on or prior to the Closing Date, of the following
conditions, unless waived by the Sellers:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Purchaser and Grizzly in this Agreement or in any Schedule, certificate or
document delivered pursuant thereto shall have been true and correct when made
and be true and correct on the Closing Date as though made on and as of the
Closing Date, and the Sellers shall have received a certificate to that effect,
with respect to Grizzly, signed by an executive officer of Grizzly.
8.2 PERFORMANCE OF OBLIGATIONS OF THE PURCHASER. The Purchaser shall have
performed all obligations required to be performed by it under this Agreement
and complied with all covenants to be complied with by it under this Agreement
at or prior to the Closing Date and the Sellers shall have received a
certificate to that effect, with respect to Grizzly, signed by an executive
officer of Grizzly.
8.3 NO LITIGATION. No action, suit or other proceeding shall be pending
before any court, tribunal or governmental authority seeking or threatening to
restrain or prohibit the consummation of the transactions contemplated in this
Agreement, or seeking to obtain substantial damages in respect thereof, or
involving a claim that consummation thereof would result in the violation of any
law, decree or regulation of any governmental authority having appropriate
jurisdiction, and the Sellers shall have received a certificate to that effect,
with respect to Grizzly, signed by an executive officer of Grizzly, that, to
Grizzly's best knowledge, no such action, suit or other proceeding is pending.
8.4 REGULATORY CONSENTS, AUTHORIZATIONS, ETC. All consents,
authorizations, orders, opinions and approvals of, and filings and registrations
with, any United States federal or state governmental commission, board or other
regulatory body which are listed on Schedule 7.4, in form reasonably
satisfactory to the Sellers, shall have been obtained or made; provided that the
Sellers and Blackhawk shall have used their respective best efforts and taken
all reasonable actions necessary to obtain such consents, authorizations,
orders, opinions, approvals, filings and registrations required to be used and
taken by each of them, respectively.
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9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
9.1 REPRESENTATIONS AND WARRANTIES OF BLACKHAWK. The representations and
warranties of Blackhawk contained in Article 1 of this Agreement shall expire as
of the Closing Date and shall not survive the Closing.
9.2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The representations
and warranties of the Sellers contained in Article 2 of this Agreement (other
than in Sections 2.1, 2.2 and 2.3) shall expire as of the Closing Date and shall
not survive the Closing. The provisions of Sections 2.1, 2.2 and 2.3 shall
survive the Closing until the expiration of the applicable statute of
limitations, except that the representation and warranties in Section 2.1(b)
shall survive only until the first anniversary of the Closing.
9.3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The representations
and warranties of the Purchaser contained in Article 3 of this Agreement (other
than in Section 3.2) shall expire as of the Closing Date and shall not survive
the Closing. The provisions of Section 3.2 shall survive the Closing until the
expiration of the applicable statute of limitations.
9.4 LIMITATION OF RECOURSE. Following the Closing, in the absence of
fraud, neither Blackhawk nor any Seller shall have any liability or obligation
to indemnify or otherwise hold harmless the Purchaser or Blackhawk (or any of
their successors or permitted assigns) for any claim or any loss or liability
arising from or in any way relating to this Agreement or any of the transactions
contemplated hereby or any other transaction or event occurring on or prior to
the Closing (including, without limitation, any misrepresentation or inaccuracy
in, or breach of, any representations or warranties (other than the
representations and warranties contained in Sections 2.1, 2.2 and 2.3 and other
than their obligations under Sections 4.6, 4.7 and 6.13, and any liability
pursuant to the final provisos to Sections 7.1, 7.2 and 7.3) or any breach or
failure in performance prior to the Closing of any covenants or agreements made
by Blackhawk or the Sellers in this Agreement or in any Exhibit or Schedule
hereto or any certificate or instrument delivered hereunder), and neither the
Purchaser nor Blackhawk (or any of their successors or permitted assigns) shall
be entitled to bring any claim based on, relating to or arising out of any of
the foregoing against any Seller (or any Seller's employees, directors, agents
or representatives). Without limiting the generality of the foregoing, in the
absence of fraud, neither the Purchaser nor its respective successors or
permitted assigns shall be entitled to seek any rescission of the transactions
consummated under this Agreement or other remedy at law or in equity.
9.5 ACKNOWLEDGEMENT BY THE PURCHASER. The Purchaser understands that the
representations and warranties of Blackhawk and the Sellers will not survive the
Closing (except as expressly set forth in Section 9.2) and constitute the sole
and exclusive representations and warranties of Blackhawk and the Sellers to the
Purchaser in connection
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with the transactions contemplated hereby, and the Purchaser understands,
acknowledges and agrees that all other representations and warranties of any
kind or nature expressed or implied (including, without limitation, any relating
to the future or historical financial condition, results of operations, assets
or liabilities of Blackhawk) are specifically disclaimed by Blackhawk and the
Sellers. The foregoing does not affect any indemnification obligation of the
Seller that may arise in accordance with the provisions contained in Sections
7.1, 7.2 and 7.3.
10. DEFINITIONS
The terms set forth below are defined in the Sections of the Agreement
indicated:
Term Section
- ---- -------
AAA 11.2(b)
Adjustment Items 4.3
Agreement Forepart
Blackhawk Forepart
Blackhawk Proprietary Information 6.6(a)
Blackhawk Subsidiaries 1.2
CERCLA 1.23(a)
Class A Common Stock Forepart
Class B Common Stock Forepart
Closing 4.1
Closing Date 4.1
Closing Date Cash 4.4(d)
Closing Expenses 6.10
Code 1.8(b)
Common Stock Forepart
Communications 11.8
December Audited Balance Sheet 1.5
December Audited Financials 1.5
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Term Section
- ---- -------
December Audited Income Statement 1.5
Deposit 4.4(b)
Deposit Trust 4.4(b)
Down Payment 4.4(c)
Encumbrances 1.9
Environmental Laws 1.23(a)
Environmental Reports 1.23(e)
ERISA 1.19(a)
Final Determination 6.9
Final Resolution Date 4.6
Grizzly Forepart
HSR Act 3.8
IRS 1.8(b)
March Unaudited Financials 1.5
Minimum Damage Amount 7.1
OSHA 1.23(a)
Plans 1.19(a)
Policies 1.10(c)
Preferred Stock Forepart
Preliminary Reports 1.10(c)
Preneed Contracts 1.16
Preneed Funds 1.16
Prior Audited Financials 1.5
Properties 1.10(c)
Purchase Price 4.3
Purchaser Forepart
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Term Section
- ---- -------
Purchaser Proprietary Information 6.6(b)
RCRA 1.23(a)
Sellers Forepart
Sellers' Trust 4.5
Shares Forepart
Substitute Stock Purchase Agreement 6.9
Substitution Election 6.9
Surveys 1.10(c)
Taxes 1.8(c)
Title Company 1.10(c)
11. MISCELLANEOUS
11.1 PARTIES IN INTEREST. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by the Sellers and their respective
successors and permitted assigns, Blackhawk and its successors and permitted
assigns, and the Purchaser and its successors and permitted assigns; PROVIDED,
HOWEVER, that (i) the Purchaser may assign its rights under this Agreement to
one or more third parties (and any such third party transferees may further so
assign) provided that any such assignee or reassignee is Blackstone Capital
Partners II Merchant Banking Fund L.P. ("Blackstone") or Grizzly or an affiliate
of Blackstone or Grizzly, provided that the assignee shall execute a counterpart
of this Agreement agreeing to be bound by the terms hereof as "Purchaser" and
shall agree to pay the portion of the Purchase Price representing the portion of
the Purchaser's rights and obligations assigned to such third party in cash on
the Closing Date and the Purchaser shall remain obligated for all of its
obligations hereunder which are not performed by such assignee, (ii) except as
provided in clause (i), this Agreement may not be assigned by the Purchaser
without the prior written consent of Blackhawk, and (iii) any assignment by any
Seller of its rights and obligations hereunder shall be subject to Section 6.7.
In the event of any such assignment, the representations and warranties deemed
made hereunder by the assignee shall be appropriately modified to reflect the
form and jurisdiction of organization of such assignee.
11.2 ARBITRATION. (a) Subject to the limitations set forth in Article
9, all disputes hereunder, including any relating to a breach or claimed breach
of any representation, warranty, covenant, undertaking, restriction or other
agreement contained herein, shall be determined by binding arbitration in
accordance with the provisions of this Section 11.2.
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<PAGE>
(b) If either party shall notify the other that, in the judgment of such
first party, an arbitrable dispute has arisen, the parties hereto shall attempt
in good faith to resolve such dispute by mutual agreement. If no satisfactory
resolution of such dispute has occurred within 30 days after such notice, either
party may submit such dispute to final and binding arbitration, by three
arbitrators, conducted pursuant to the rules of the American Arbitration
Association (the "AAA") in effect at the time of the arbitration, except to the
extent such rules conflict with the provisions of this Agreement, in which case
the provisions of this Agreement shall control. The claimant shall nominate one
arbitrator in its request for arbitration. The respondent shall nominate one
arbitrator in its answer. The two party-appointed arbitrators shall name the
third arbitrator within 30 days after the second party-appointed arbitrator has
been named, failing which the AAA shall appoint the third arbitrator.
(c) The hearing shall be held by the arbitrators as soon as reasonably
practicable, consistent with the AAA arbitration rules and opportunity for
discovery. The parties specifically agree that, upon application by either
party, the arbitrators shall set a reasonable limitation on the period for
discovery related to the arbitration. No party may present a position or make
any argument at the hearing notice of which is not provided to the other party
in writing before the hearing.
(d) The decision of the arbitrators pursuant to this Section 11.2 shall be
in writing (setting forth in detail the basis for the decision) and shall be
final, binding and conclusive upon the parties and may be confirmed or embodied
in any order or judgment of any court having jurisdiction. The foregoing
agreement to arbitrate shall be specifically enforceable.
(e) The venue of any arbitration pursuant to this Section 11.2 shall be in
Manhattan or such other place as is mutually agreed upon by the parties. In any
arbitration pursuant to this Section 11.2, the arbitrators shall apply the
substantive law of the State of New York without reference to its conflict or
laws rules.
(f) Each party shall bear its respective costs incurred in connection with
any arbitration; PROVIDED, HOWEVER, that in the event that the arbitrators
determine that there was no reasonable basis for the non-prevailing party in the
arbitration to have brought or defended the claim, the non-prevailing party
shall pay all reasonable costs, including, without limitation, reasonable
attorneys' fees and expenses, costs and expenses associated with the arbitration
incurred by the prevailing party in connection therewith.
(g) The pendency of these dispute resolution procedures shall not relieve
either party from its duty to perform under this Agreement or serve to delay or
suspend its performance of its obligations.
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11.3 CHOICE OF LAW. This Agreement shall be construed in accordance with
the laws of the State of New York.
11.4 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) By mutual agreement of the Purchaser and the Sellers;
(b) By the Purchaser, if the conditions set forth in Article 7 shall
not have been complied with or performed in any material respect on or
before the Closing Date or if events shall have occurred which have made it
impossible for the conditions to Closing set forth in Article 7 to be
satisfied on or before the Closing Date; or
(c) By the Sellers, if the conditions set forth in Article 8 shall
not have been complied with or performed in any material respect on or
before the Closing Date or if events shall have occurred which have made it
impossible for the conditions to Closing set forth in Article 8 to be
satisfied on or before the Closing Date; or
(d) By the Sellers, the Purchaser or Blackhawk, if the Closing has
not occurred by September 20, 1996; or
(e) By the Purchaser if at any time it shall have determined in good
faith that it will be unable to finance the payment of the Purchase Price
(in which event the provisions of Section 6.9 shall be applicable);
provided that no party hereto may terminate this Agreement pursuant to this
Section 11.4 if such party is in material and willful breach of any of its
representations, warranties, covenants or agreements contained in this Agreement
or if it caused any of the conditions to closing not to be satisfied; and
provided further that (i) the Sellers may extend the date specified in clause
(d) above by an amount of time reasonably necessary to permit the Closing to
occur as soon as is practicable if there is a willful failure by the Purchaser
to satisfy one or more material closing conditions specified in Article 8 above
and (ii) the Purchaser may extend the date specified in clause (d) above by an
amount of time reasonably necessary to permit the Closing to occur as soon as is
practicable if there is a willful failure by the Sellers to satisfy one or more
of the closing conditions specified in Article 7 above.
In the event of the termination of this Agreement, this Agreement shall
thereafter become void and have no effect, and no party hereto shall have any
liability to the other parties hereto or their respective stockholders or
directors or officers in respect thereof, except for the obligations of the
parties hereto which by their express terms survive termination hereof and the
obligations of the parties hereto in Sections 6.5 and 6.6 and this Section 11.4
and
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except that nothing herein shall relieve any party from liability for any
willful breach of any provision of this Agreement prior to such termination.
11.5 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other writings
referred to herein or delivered in connection herewith contain the entire
understanding of the parties with respect to its subject matter and supersede
any prior understanding, agreements or representations by or between the
parties, written or oral, which may have related to the subject matter hereof in
any way. This Agreement may be amended only by written instrument duly executed
by all of the parties hereto.
11.6 HEADINGS. The section and subsection headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.7 CURRENCY. All reference to dollar figures contained herein shall
refer to United States currency.
11.8 NOTICES. All notices, claims, certificates, requests, demands and
other communications ("Communications") hereunder shall be in writing and shall
be deemed to have been duly given five days after mailing when mailed (by
registered or certified mail, postage prepaid) or sent by facsimile transmission
with confirmation of receipt (with hard copy to follow by registered or
certified mail, postage prepaid) addressed as follows:
If to the Purchaser to:
Blackhawk Acquisition Corp.
c/o The Blackstone Group
345 Park Avenue, 31st Floor
New York, N.Y. 10154
Attn: Howard A. Lipson
Fax: 212-754-8725
with a copies to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, N.Y. 10017-3954
Attn: Wilson S. Neely, Esq.
Fax: 212-455-2502
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<PAGE>
Loewen Group International, Inc.
50 River Center Blvd.
Covington, KY 41011
Attn: Legal Department
Fax: 606-655-7154
If to Blackhawk, to:
Prime Succession, Inc.
691 Tekulve Avenue
Batesville, IN 47006
Attn: Thomas H. Johnson
Fax: 812-933-0226
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Kevin R. Evanich, Esq.
Fax: 312-861-2200
If to the Sellers, to:
Golder Thoma Cressey Fund III,
Limited Partnership
6100 Sears Tower
Chicago, IL 60606
Attn: Bruce V. Rauner
Fax: 312-382-2201
44
<PAGE>
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Kevin R. Evanich, Esq.
Fax: 312-861-2200
If to Grizzly:
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia
Canada V5G 358
Attn: Finance Department
Fax: 604-473-7305
with a copy to:
The Loewen Group Inc.
c/o Loewen Group International, Inc.
50 East River Center Blvd.
Covington, KY 41011
Attn: Legal Department
Fax: 606-655-7154
or to such other address or addresses as the persons to whom notice is to be
given may have furnished to the others in writing in accordance herewith. A
Communication given by any other means shall be deemed duly given when actually
received by the addresses.
11.9 FURTHER ASSURANCES. After the Closing Date, without further
consideration, the Sellers and Purchaser shall execute and deliver such further
instruments and documents as either party shall reasonably request to consummate
the transactions contemplated by this Agreement and to perfect Purchaser's title
to the Shares.
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11.10 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns and nothing herein
expressed or implied shall give or be construed to give any person or entity,
other than the parties hereto and such permitted assigns, any legal or equitable
rights hereunder.
11.11 WAIVERS. No waiver of the terms, conditions or provisions of this
Agreement shall be valid unless in writing signed by the party granting said
waiver. Any such waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent,
same or different breach.
11.12 KNOWLEDGE. For purposes of this Agreement, (i) the phrase "to the
best knowledge of Blackhawk" shall mean the knowledge of Blackhawk after
reasonable inquiry of each Seller and of the President, each Vice President and
the General Counsel of Blackhawk; provided that Blackhawk shall have no
obligation or duty to inquire of any other person or entity and (ii) the phrase
"to the best knowledge of the Purchaser", and references to knowledge of
Purchaser or Grizzly, shall mean the knowledge of the Purchaser or Grizzly after
reasonable inquiry of the persons named in the most recent annual report of
Grizzly as executive officers of Grizzly and of J. C. Ojier Mathews, Ronald
Collins, Gary L. Wright and Charles Kizina; provided that the Purchaser shall
have no obligation or duty to inquire of any other person or entity.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
PRIME SUCCESSION, INC.
By
--------------------------------
its
-------------------------------
THE SELLERS:
----------------------------------
William B. Cutter
----------------------------------
Bernhard L. Gaarsoe
----------------------------------
Robert G. Horn
----------------------------------
Thomas H. Johnson
----------------------------------
Steven A. Tidwell
47
<PAGE>
GOLDER THOMA CRESSEY FUND III,
LIMITED PARTNERSHIP
By Golder, Thoma, Cressey & Rauner, L.P.,
its General Partner
By:
----------------------------
its
----------------------------
THE PURCHASER:
BLACKHAWK ACQUISITION
CORP.
By:
--------------------------------
its
--------------------------------
THE LOEWEN GROUP INC.
By:
--------------------------------
its
--------------------------------
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<PAGE>
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"), Loewen Group International Inc., a Delaware
corporation (together with its permitted assigns and transferees as provided
herein, "LGII"), The Loewen 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 Loewen 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.
"Loewen 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
Loewen 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
Loewen Common Stock is not listed or admitted to trading on the New York
Stock Exchange, on the American Stock Exchange, or, if the Loewen 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 Loewen 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 Loewen Common Stock is not
so quoted, the average of the closing bid and asked price of the Loewen
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 Loewen 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 Loewen 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)
______________________________________________________________
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 Loewen 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 ("Loewen Common Stock"). If Loewen 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
Loewen Common Stock. The number of shares of Loewen 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 Loewen 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 Loewen 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
Loewen 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 Loewen 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 Loewen 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 Loewen
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 Loewen 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 Loewen 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 Loewen Common Stock. The ability of
LGII and LWN to issue Loewen 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 Loewen Common Stock to BCP pursuant to
Section 4.1(b), each time LWN proposes to register Loewen 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 Loewen 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
Loewen 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 Loewen 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 Loewen 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 Loewen 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
<PAGE>
EXECUTION COPY
_________________________________________________________________
STOCKHOLDERS' AGREEMENT
Among
PRIME SUCCESSION, INC. (to be
renamed Prime Succession Holdings, Inc.),
BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND L.P.,
BLACKSTONE OFFSHORE CAPITAL PARTNERS II L.P.,
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP II L.P.
PSI MANAGEMENT DIRECT L.P.
And
LOEWEN GROUP INTERNATIONAL INC.
________________________________
Dated as of August 26, 1996
________________________________
_________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS.............................. 2
Section 1.1 Certain Defined Terms................................... 2
ARTICLE II
SUBSCRIPTION; RECAPITALIZATION..................... 3
Section 2.1 Subscriptions for Common Stock and
Preferred Stock...................................... 3
Section 2.2 Organizational Documents................................ 3
(a) Restated Certificate of Incorporation..................... 3
(b) Bylaws.................................................... 3
Section 2.3 Debt Financing.
(a) High Yield Financing...................................... 3
(b) Bank Financing............................................ 3
(c) Transfer of Capital Stock and Other Assets................ 3
(d) Declaration of Dividend................................... 4
Section 2.4 Assignment of Rights Under the Stock
Purchase Agreement; Purchase of Shares by
Existing Prime....................................... 4
(a) Assignment of Rights...................................... 4
(b) Purchase of Existing Prime Shares......................... 4
Section 2.5 Payment of Expenses by New Prime........................ 4
ARTICLE III
RESTRICTIONS ON TRANSFER OF CAPITAL STOCK............... 4
Section 3.1 BCP, PSIM............................................... 4
Section 3.2 LGII.................................................... 5
Section 3.3 Transfers Void; Conditions to Permitted
Transfers............................................ 5
Section 3.4 Put and Call Options.................................... 5
Section 3.5 Redemption of Preferred Stock........................... 5
Section 3.6 Additional Issuance of Capital Stock.................... 5
ARTICLE IV
GOVERNANCE............................... 6
Section 4.1 Election of the Board of Directors...................... 6
-1-
<PAGE>
Page
Section 4.2 New Prime Board of Directors............................ 6
Section 4.3 Declaration and Payment of Dividends.................... 6
ARTICLE V
OTHER ARRANGEMENTS........................... 7
Section 5.1 Transaction Fees........................................ 7
Section 5.3 Other Expenses.......................................... 7
Section 5.4 Additional Equity for Cure Event Purposes............... 7
Section 5.5 Capital Stock of Subsidiaries........................... 8
ARTICLE VI
MISCELLANEOUS............................. 9
Section 6.1 Legend.................................................. 9
Section 6.2 Notices................................................. 9
Section 6.3 Severability............................................ 10
Section 6.4 Entire Agreement........................................ 11
Section 6.5 Amendment and Waiver.................................... 11
Section 6.6 Consent to Specific Performance......................... 11
Section 6.7 Assignment.............................................. 11
Section 6.8 Variations in Pronouns.................................. 11
Section 6.9 Term.................................................... 11
Section 6.10 Governing Law.......................................... 11
Section 6.11 Further Assurances..................................... 12
Section 6.12 Headings............................................... 12
Section 6.13 Counterparts........................................... 12
-2-
<PAGE>
Exhibit A Subscription Agreement
Exhibit B Restated Certificate of Incorporation of Prime
Holdings
Exhibit C By-Laws of Prime Holdings
-3-
<PAGE>
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, dated as of August 26, 1996 (this
"Agreement"), among Prime Succession, Inc. ("Existing Prime"), a Delaware
corporation to be renamed Prime Succession Holdings, Inc. ("Prime Holdings");
Prime Succession Acquisition Corp. ("New Prime"), a Delaware corporation to be
renamed Prime Succession, Inc. and previously known as Blackhawk Acquisition
Corp.; 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, "BCP"); Loewen Group International, Inc., a Delaware
corporation (together with its permitted assigns and transferees as provided
herein, "LGII"); 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 Existing Prime, the other
individuals or entities listed on the signature pages thereto as selling
stockholders (collectively, the "Sellers"), The Loewen Group Inc., a British
Columbia corporation and New Prime, 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 Acquisition Company L.L.C. and is being further assigned to
Existing Prime at the Closing (as defined below), such that Existing Prime would
repurchase such capital stock from such Sellers;
WHEREAS, at the Closing 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;
WHEREAS, at the Closing New Prime will become a wholly owned
subsidiary of Existing Prime, and Existing Prime will contribute to New Prime
all of Existing Prime's currently held subsidiaries and other assets such that
New Prime will hold all the businesses previously held by Existing Prime; and
WHEREAS, the parties hereto desire to enter into this Agreement for
the purpose of setting forth certain agreements regarding future relationships
among parties to this Agreement;
<PAGE>
2
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:
"Affiliate" of any Person means any other Person that directly or
indirectly controls, is controlled by, or is under common control with, such
Person.
"Board of Directors" means the Board of Directors of
Prime Holdings.
"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.
"Closing" means the consummation of the transactions
described in Article II hereof.
"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.
"Existing Prime Shares" means all the shares of capital stock of
Existing Prime held by the Sellers.
"Offering Memorandum" means the offering memorandum dated August 13,
1996 relating to the offering of New Prime's 10-3/4% Senior Subordinated Notes
due 2004.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or other entity or a country or
government or any agency or political subdivision or instrumentality thereof or
of such subdivision.
"Preferred Stock" means the 10% Paid-in-Kind Cumulative Preferred
Stock, par value $.01 per share, of Prime Holdings.
"Securities Act" means the Securities Act of 1933, as amended.
"Transaction" means the acquisition and recapitalization of Existing
Prime as contemplated by the Stock
<PAGE>
3
Purchase Agreement together with the debt financings described in Section 2.3
hereof.
"Transfer" means to directly or indirectly sell, give, transfer,
assign, pledge, hypothecate or otherwise dispose of, or to contract or agree to
do any of the foregoing.
ARTICLE II
SUBSCRIPTION; RECAPITALIZATION
Section 2.1 Subscriptions for Common Stock and Preferred Stock. At
the Closing, the Stockholders will enter into a subscription agreement,
substantially in the form attached hereto as Exhibit A (the "Subscription
Agreement"), pursuant to which such parties will subscribe for newly issued
shares of capital stock of Existing Prime in accordance with the provisions
thereof such that, upon the repurchase by Existing Prime of all of its currently
outstanding shares of capital stock as part of the Transaction and the
effectiveness of the Amended Charter (as defined below), the Stockholders will
hold all of the then issued and outstanding shares of capital stock of Prime
Holdings.
Section 2.2 Organizational Documents.
(a) Restated Certificate of Incorporation. The parties hereto agree
that the restated certificate of incorporation of Existing Prime, substantially
in the form attached hereto as Exhibit B (the "Amended Charter"), will be filed
with the Secretary of State of the State of Delaware on the Closing Date. In
addition, on the Closing Date the certificate of incorporation of New Prime will
be amended to change its name to Prime Succession, Inc.
(b) Bylaws. The parties hereto shall, on the Closing Date, cause the
Board of Directors to adopt bylaws of Prime Holdings substantially in the form
attached hereto as Exhibit C.
Section 2.3 Debt Financing.
(a) High Yield Financing. Prior to the Closing Date, New Prime
issued $100 million aggregate principal amount of its 10-3/4% Senior
Subordinated Notes Due 2004 (the "Notes").
(b) Bank Financing. On the Closing Date, New Prime will obtain a
term loan in a principal amount of $90 million (the "Term Loan"), pursuant to an
agreement among New Prime and a syndicate of financial institutions, which
agreement shall also provide for a $25 million revolving credit facility to be
made available to New Prime.
(c) Transfer of Capital Stock and Other Assets. At the Closing, the
Stockholders shall (i) cause the filings
<PAGE>
4
referred to in subsection 2.2(a) hereof to occur (ii) cause there to be
transferred or otherwise issued to Existing Prime all the issued and outstanding
shares of New Prime and (iii) cause there to be transferred by Existing Prime to
New Prime all of the assets directly held by Existing Prime as of the time
immediately prior to the Closing.
(d) Declaration of Dividend. At the Closing, the Board of Directors
of New Prime will declare and authorize immediate payment of a dividend in an
amount equal to approximately $41.8 million (the "Intercompany Dividend"), which
amount, together with other funds to be received by Existing Prime, will enable
Existing Prime to repurchase all of its shares pursuant to the Stock Purchase
Agreement.
Section 2.4 Assignment of Rights Under the Stock Purchase Agreement;
Purchase of Shares by Existing Prime.
(a) Assignment of Rights. Prior to the Closing, New Prime assigned
all of its rights and obligations as a purchaser under the Stock Purchase
Agreement to Blackhawk Onshore Acquisition Company L.L.C. and Blackhawk Offshore
Acquisition Company L.L.C. (together, the "Assignees"). At the Closing, the
Assignees will assign to Existing Prime all of the Assignees' rights and
obligations with respect to the purchase of the Existing Prime Shares from the
Sellers pursuant to the Stock Purchase Agreement.
(b) Purchase of Existing Prime Shares. At the Closing, Existing
Prime shall repurchase the Existing Prime Shares from the Sellers pursuant to
the Stock Purchase Agreement. The aggregate net proceeds received by Existing
Prime pursuant to the Subscription Agreement and the Intercompany Dividend shall
be used by Existing Prime to pay the purchase price (the "Purchase Price") for
such Shares.
Section 2.5 Payment of Expenses by New Prime. New Prime shall use
the aggregate net proceeds of the high yield financing described in subsection
2.3(a) hereof and the Term Loan held by it after giving effect to the
Intercompany Dividend to (i) discharge the liabilities described on Schedule 1
attached hereto and (ii) for general corporate purposes including, but not
limited to, payment in accordance with Sections 5.1, 5.2 and 5.3 hereof of the
fees and expenses described therein.
ARTICLE III
RESTRICTIONS ON TRANSFER OF CAPITAL STOCK
Section 3.1 BCP, PSIM. Each of BCPII, BOCP and BFIP may, subject to
the last sentence of Section 3.3 hereof, Transfer all or part of its shares of
Common Stock to any of such Person's Affiliates, but may not Transfer such
shares to any other Person
<PAGE>
5
without the prior written consent of LGII, provided, that if LGII fails to
comply with its obligations under Section 4.1 or Article VIII of the Put/Call
Agreement (as defined below) such restriction shall lapse. Without the consent
of BCP and LGII, PSIM may not transfer shares of Common Stock to any Person.
Section 3.2 LGII. LGII may, subject to the last sentence of Section
3.3 hereof, Transfer its shares of Common Stock or Preferred Stock to any
Affiliate of LGII, but may not Transfer such shares to any other Person without
the prior written consent of BCP, provided, that LGII may and shall effect the
Transfer of such shares if so directed by BCP in accordance with Section 7.4 of
the Put/Call Agreement.
Section 3.3 Transfers Void; Conditions to Permitted Transfers. Each
Stockholder agrees that it will not Transfer any Common Stock or Preferred Stock
that such Stockholder now owns or hereafter acquires without complying with the
terms and conditions of this Agreement. Any Transfer of Common Stock or
Preferred Stock in violation of this Agreement shall be void ab initio. No
Stockholder may do indirectly, through a sale of its capital stock or otherwise,
that which is not permitted by this Section 3. No shares of Common Stock or
Preferred Stock may be Transferred or issued to any Person unless such Person,
prior to or concurrently with such Transfer or issuance, undertakes by a written
supplemental agreement to be bound by the terms of this Agreement and the
Put/Call Agreement to the same extent and in the same manner as the other
Stockholders.
Section 3.4 Put and Call Options. Notwithstanding the foregoing
provisions of this Article III, pursuant to a separate put and call agreement
entered into concurrently herewith (the "Put/Call Agreement"), LGII shall have
an option to purchase the shares of Common Stock held by BCP and PSIM, and BCP
and PSIM shall have an option to require LGII to purchase the shares of Common
Stock held by BCP and PSIM, subject, in each case, to the provisions of the
Put/Call Agreement. Transfers of Common Stock in accordance with the exercise of
the Options described in the Put/Call Agreement shall be permitted
notwithstanding anything to the contrary in Sections 3.1, 3.2 or 3.3 hereof.
Section 3.5 Redemption of Preferred Stock. Notwithstanding the
provisions of paragraphs 5 and 6 of Article Fifth of the Amended Charter, there
shall be no redemption of Preferred Stock held by LGII or its Affiliates without
the consent of LGII and BCP.
Section 3.6 Additional Issuance of Capital Stock. Except as provided
in Section 5.4 hereof and section (b) of Article Fifth of the Amended Charter,
subsequent to the Closing Date, Prime Holdings will not issue additional shares
of Common Stock or Preferred Stock without the consent of BCP and LGII.
<PAGE>
6
ARTICLE IV
GOVERNANCE
Section 4.1 Election of the Board of Directors. (a) Except as
provided below, each Stockholder shall vote all of the shares of Common Stock
owned or held of record by it so as to elect and continue in office a Board of
Directors comprised of eight directors, five of whom BCP shall have the right to
designate (the "BCP Directors") and three of whom LGII shall have the right to
designate (the "LGII Directors").
(b) If at any time that this Agreement is in effect BCP or LGII
shall notify the other of its desire to remove, with or without cause, any
director of Prime Holdings previously designated by it, each Stockholder shall
vote all of the shares of Common Stock owned or held of record by it so as to
remove such director.
(c) If at any time that this Agreement is in effect any director
previously designated by BCP or LGII ceases to serve on the Board of Directors
(whether by reason of death, resignation, removal or otherwise), the Stockholder
who designated such director shall be entitled to designate a successor director
to fill the vacancy created thereby. Each Stockholder agrees that it will vote
all of the shares of Common Stock owned or held of record by it so as to elect
such director.
(d) The provisions of this Section 4.1 shall terminate upon a sale
of Common Stock pursuant to Section 7.4 of the Put/Call Agreement.
Section 4.2 New Prime Board of Directors. Each party to this
Agreement agrees that Prime Holdings shall cause the board of directors of New
Prime to at all times consist of the same individuals who comprise the Board of
Directors of Prime Holdings.
Section 4.3 Declaration and Payment of Dividends. The parties hereto
agree to cause the Board of Directors to declare on a quarterly basis, subject
to their fiduciary duties and the provisions of the General Corporation Law of
the State of Delaware (the "GCL"), and Prime Holdings to pay on a quarterly
basis, subject to the provisions of the GCL, dividends on the Preferred Stock in
accordance with the Amended Charter.
Section 4.4 New Prime shall not make any significant changes in (i)
its current preneed cemetery sales policies or practices or (ii) its trusting or
insurance practices without the approval of its Board of Directors.
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7
ARTICLE V
OTHER ARRANGEMENTS
Section 5.1 Transaction Fees. If the Transaction is consummated, New
Prime shall pay on the Closing Date (a) a fee equal to $3,200,000 to Blackstone
Management Partners L.P. and (b) a consulting fee equal to $1,500,000 and a
reimbursement of expenses in the amount of $1,000,000 to LGII.
Section 5.2 Monitoring Fees. The Stockholders shall each vote their
shares of Common Stock and take such other action as may be reasonably necessary
so as to cause an annual monitoring fee in the amount of $250,000 to be paid by
Prime Holdings, annually in advance, to Blackstone Management Partners L.P. from
the Closing Date through the date on which the option of either of BCP or LGII
is exercised pursuant to the Put/Call Agreement.
Section 5.3 Other Expenses. (a) If the Transaction is consummated,
New Prime shall reimburse (i) BCP for (or otherwise pay on behalf of BCP) all
out-of-pocket expenses (including amounts paid by BCP to its professional
advisors) incurred in connection with the Transaction and (ii) LGII for amounts
payable to LGII's professional advisors in connection with the Transaction and
paid by LGII.
(b) LGII shall reimburse Prime Holdings for any withholding taxes
incurred by Prime Holdings in respect of, or related to, the dividends payable
by LGII at the time such liabilities are incurred.
Section 5.4 Additional Equity for Cure Event Purposes. (a) Following
the Closing Date, if an additional equity contribution to New Prime is necessary
to either cure or prevent an event of default under or breach of any financial
covenant contained in the credit agreement relating to New Prime's Term Loan,
BCP shall have the right to contribute 100% of such additional equity. If BCP
elects to make such a contribution, it shall give LGII written notice (the "BCP
Additional Equity Notice") to such effect and LGII shall have the right,
exercisable by written notice to BCP within five Business Days from receipt of
the BCP Additional Equity Notice, to replace (prior to BCP's making such
contribution) a portion of BCP's contribution with a contribution by LGII up to
an amount equal to the ratio (before such contributions) of the LGII
Contribution to the BCP Contribution (each as defined in the Put/Call
Agreement). If BCP elects not to make such a contribution, it shall give LGII
written notice to such effect and LGII shall have the right to contribute 100%
of such additional equity. If LGII elects to make such 100% contribution, it
shall give BCP written notice (the "LGII Additional Equity Notice") to such
effect and BCP shall have the right, exercisable by written notice to LGII
within five Business Days from receipt of the LGII Additional
<PAGE>
8
Equity Notice, to replace (prior to LGII's making such contribution) a portion
of LGII's contribution with a contribution by BCP up to an amount equal to the
ratio (before such contributions) of the BCP Contribution to the LGII
Contribution. Such capital contributions will involve the purchase of additional
shares of Common Stock or Preferred Stock, as the case may be, and the purchase
price shall be the same price per share paid by BCP and LGII on the Closing
Date.
(b) In the event an additional equity contribution is required to be
made pursuant to subparagraph (a) of this Section 5.4, BCP, LGII and PSIM hereby
agree to vote the shares of Common Stock held by each of them to authorize the
filing of an amendment to the Amended Charter and to take all such other actions
required in order to authorize and consummate the issuance of additional shares
of capital stock of Prime Holdings in connection with such additional equity
contribution.
(c) Each party electing to make an additional equity contribution
pursuant to subparagraph (a) of this Section 5.4, whether individually or on a
pro rata basis, shall contribute such additional equity to Prime Holdings no
later than ten Business Days from the date the BCP Additional Equity Notice or
the LGII Additional Equity Notice, as the case may be, was given and, in any
event, simultaneously with the making of the contribution by the other party
electing to make such contribution (the "Additional Equity Closing Date").
(d) As of each Additional Equity Closing Date, New Prime hereby
reaffirms to BCP and/or LGII, as the case may be, that the representations and
warranties contained in Article II of the Subscription Agreement are true and
correct on such Additional Equity Closing Date in all material respects as if
made on and as of such Additional Equity Closing Date.
Section 5.5 Capital Stock of Subsidiaries. Notwithstanding the
foregoing, the parties hereby agree that Prime Holdings shall not permit any of
its director or indirect subsidiaries directly or indirectly, to issue any
shares of capital stock (other than the issuance of common stock of New Prime
pursuant to the Transaction) to any entity or person other than a wholly-owned
subsidiary of Prime Holdings.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Legend. Each certificate representing shares of Common
Stock or Preferred Stock now held or hereafter acquired by any Stockholder shall
bear the following legend (until such time as subsequent transfers thereof are
no longer restricted in accordance with the Securities Act of 1933, as amended
or this Agreement):
<PAGE>
9
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE GIVEN,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE
DISPOSED OF UNLESS SUCH GIFT, SALE, ASSIGNMENT, TRANSFER, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF
THE STOCKHOLDERS' AGREEMENT (THE "STOCKHOLDERS' AGREEMENT"), DATED
AS OF AUGUST 26, 1996, AMONG PRIME SUCCESSION HOLDINGS, INC., PRIME
SUCCESSION, INC., BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING
FUND L.P., BLACKSTONE OFFSHORE CAPITAL PARTNERS II L.P., BLACKSTONE
FAMILY INVESTMENT PARTNERSHIP II L.P., LOEWEN GROUP INTERNATIONAL
INC. AND PSI MANAGEMENT DIRECT L.P. A COPY OF THE STOCKHOLDERS'
AGREEMENT IS ON FILE WITH THE SECRETARY OF THE COMPANY. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES
LAWS OF ANY STATE, AND EXCEPT AS OTHERWISE PROVIDED IN THE
STOCKHOLDERS' AGREEMENT NO SALE, ASSIGNMENT, TRANSFER, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND ALL APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS OR (B) TO THE EXTENT REQUESTED BY THE
COMPANY, IF THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF
COUNSEL WHICH SHALL BE REASONABLY SATISFACTORY TO THE COMPANY TO THE
EFFECT THAT SUCH SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION
OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF THE ACT AND
THE RULES AND REGULATIONS IN EFFECT THEREUNDER AND IS NOT IN
VIOLATION OF APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, ACKNOWLEDGES THAT IT
IS BOUND BY THE PROVISIONS OF THE STOCKHOLDERS' AGREEMENT TO THE
EXTENT PROVIDED THEREIN."
Section 6.2 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 Prime Holdings:
Prime Succession, Inc.
c/o The Blackstone Group
345 Park Avenue, 31st Floor
New York, NY 10154
Telecopier No.: (212) 754-8725
<PAGE>
10
Attention: Howard A. Lipson
with a copy to:
(b) in the case of BCP or PSIM:
c/o The Blackstone Group
345 Park Avenue, 31st Floor
New York, NY 10154
Telecopier No.: (212) 754-8725
Attention: Howard A. Lipson
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Telecopier No.: (212) 455-2502
Attention: Wilson S. Neely, Esq.
(c) in the case of LGII:
Loewen Group International, Inc.
50 East River Center Boulevard
Covington, Kentucky 41011
Telecopier No.: (606) 655-7154
Attention: Legal Department
with a copy to:
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia
Canada V5G 358
Telecopier No.: (604) 473-7305
Attention: Senior Vice President and Chief Financial
Officer
or to such address as a party may instruct by notice hereunder.
Section 6.3 Severability. In the event any provision
hereof is held void or unenforceable by any court, then such provisions shall be
severable and shall not affect the remaining provisions hereof.
Section 6.4 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 (including the Amended and Restated
Term Sheet dated August 13, 1996), between the parties hereto with respect to
the subject matter contained herein.
<PAGE>
11
Section 6.5 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 6.6 Consent to Specific Performance. The parties hereto
declare that it is impossible to measure in money the damages which would accrue
to a party by reason of failure to perform any of the obligations hereunder.
Therefore, if any party shall institute any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the other party has an adequate
remedy at law.
Section 6.7 Assignment. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided, no Stockholder may assign to any Person any of
its rights hereunder other than in connection with a Transfer to such Person of
shares of Common Stock or Preferred Stock in accordance with all the provisions
of this Agreement.
Section 6.8 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.
Section 6.9 Term. This Agreement shall terminate upon the earlier to
occur of (i) consummation of the exercise of the Option (as defined in the
Put/Call Agreement) pursuant to the Put/Call Agreement, without any default in
connection therewith and (ii) any date agreed upon in writing by BCP and LGII.
Section 6.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
Section 6.11 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 6.12 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 6.13 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be
<PAGE>
12
deemed an original, but all of which together shall constitute one and the same
instrument.
[Remainder of page intentionally left blank]
<PAGE>
13
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the date first above written.
PRIME SUCCESSION, INC. (to be
renamed Prime Succession Holdings,
Inc.)
By:______________________________
Name:
Title:
LOEWEN GROUP INTERNATIONAL INC.
By:______________________________
Name:
Title:
BLACKSTONE CAPITAL PARTNERS II
MERCHANT BANKING FUND L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
By:___________________________
Name:
Title:
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP II L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
By:____________________
Name:
Title:
<PAGE>
14
BLACKSTONE OFFSHORE CAPITAL
PARTNERS II L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
By:______________________
Name:
Title:
PSI MANAGEMENT DIRECT L.P.
By: PSI P&S CORP.
General Partner
By:______________________
Name:
Title:
