SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 19, 1996
THE LOEWEN GROUP INC.
(Exact Name of Registrant as Specified in Charter)
British Columbia, 1-12163 98-0121376
Canada (Commission File (IRS Employer
(State or other Number) Identification No.)
jurisdiction of
incorporation)
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)
Item 5. Other Events
On November 20, 1996, The Loewen Group Inc. ("TLGI"),
Loewen Group International, Inc. ("Loewen") and
Blackstone Capital Partners II Merchant Banking Fund
L.P. and certain affiliates (together, "Blackstone")
announced that the Rose Hills Company, a new company
formed by them, had completed the acquisition of the
Rose Hills cemetery, the largest in North America, and
its related mortuary of Los Angeles (together, "Rose
Hills") for US$240 million.
TLGI will initially have a 20.5 percent common equity
interest in the new company, with Blackstone holding
the remainder. TLGI contributed US$95 million in cash
and property and Blackstone and a management
partnership ("MP") contributed US$35 million in cash to
fund the equity of the transaction. The remainder of
the funds was provided by bank debt syndicated by
Goldman, Sachs & Co. and Bank of Nova Scotia and 9.5
percent senior subordinated notes issued by Rose Hills
and syndicated by Smith Barney Inc.
In connection with the acquisition, Blackstone and TLGI
entered into a Put/Call Agreement, dated as of November
19, 1996 (the "Put/Call Agreement"). Pursuant to the
Put/Call Agreement, (i) Loewen will have a call option
excercisable from November 19, 2000 through November
18, 2002, to purchase all of Blackstone's and MP's
equity in Rose Hills (the "Call Option") and (ii)
Blackstone and MP will have a put option, exercisable
from and after November 20, 2002 through November 20,
2004, to require Loewen to purchase their respective
equity in Rose Hills (the "Put Option"). The exercise
price of the Put and Call Options are dependent upon a
formula for sharing the computed enterprise value of
Rose Hills, 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.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
Exhibit No. Description
Exhibit 99.1 Subscription Agreement, dated as of
November 19, 1996, by and among Rose Hills
Holdings Corp., Blackstone Capital Partners
II Merchant Banking Fund L.P., Blackstone
Rose Hills Offshore Capital Partners L.P.,
Blackstone Family Investment Partnership II
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L.P., Roses Delaware, Inc., The Loewen Group
Inc., Loewen Group International, Inc., and
RHI Management Direct, L.P.
Exhibit 99.2 Put/Call Agreement, dated as of
November 19, 1996 among Blackstone Capital
Partners II Merchant Banking Fund L.P.,
Blackstone Family Investment Partnership II
L.P., Blackstone Rose Hills Offshore Capital
Partners L.P., Loewen Group International
Inc., Roses Delaware, Inc., The Loewen Group
Inc. and RHI Management Direct L.P.
Exhibit 99.3 Stockholders' Agreement, dated as
of November 19, 1996, among Rose Hills
Holdings Corp., Blackstone Capital Partners
II Merchant Banking Fund L.P., Blackstone
Rose Hills Offshore Capital Partners L.P.,
Blackstone Family Investment Partnership II
L.P., Roses Delaware, Inc., Loewen Group
International, Inc. and RHI Management Direct
L.P.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
Dated: December 23, 1996
THE LOEWEN GROUP INC.
By: /s/ Peter S. Hyndman
Name: Peter S. Hyndman
Title: Corporate Secretary
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INDEX TO EXHIBITS
Exhibit No. Description
99.1 Subscription Agreement, dated as of November 19,
1996, by and among Rose Hills Holdings Corp.,
Blackstone Capital Partners II Merchant Banking
Fund L.P., Blackstone Rose Hills Offshore
Capital Partners L.P., Blackstone Family
Investment Partnership II L.P., Roses Delaware,
Inc., The Loewen Group Inc., Loewen Group
International, Inc., and RHI Management Direct,
L.P.
99.2 Put/Call Agreement, dated as of November 19,
1996 among Blackstone Capital Partners II
Merchant Banking Fund L.P., Blackstone Family
Investment Partnership II L.P., Blackstone Rose
Hills Offshore Capital Partners L.P., Loewen
Group International Inc., Roses Delaware, Inc.,
The Loewen Group Inc. and RHI Management Direct
L.P.
99.3 Stockholders' Agreement, dated as of November
19, 1996, among Rose Hills Holdings Corp.,
Blackstone Capital Partners II Merchant Banking
Fund L.P., Blackstone Rose Hills Offshore
Capital Partners L.P., Blackstone Family
Investment Partnership II L.P., Roses Delaware,
Inc., Loewen Group International, Inc. and RHI
Management Direct L.P.
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT, dated as of November 19, 1996 (the
"Agreement"), among ROSE HILLS HOLDINGS CORP., a Delaware
corporation formerly known as Tudor Holding Company ("Holdings"),
BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND L.P., a
Delaware limited partnership ("BCPII"), BLACKSTONE ROSE HILLS
OFFSHORE CAPITAL PARTNERS L.P., a Delaware limited partnership
("BROCP"), BLACKSTONE FAMILY INVESTMENT PARTNERSHIP II L.P., a
Delaware limited partnership ("BFIP" and, together with BCPII,
BROCP and each of their respective permitted assigns and
transferees as provided herein, "BCP"), ROSES DELAWARE, INC., a
Delaware corporation ("RDI"), THE LOEWEN GROUP INC, a British
Columbia corporation ("LWN"), LOEWEN GROUP INTERNATIONAL, INC., a
Delaware corporation ("LGII" and, together with LWN, RDI and each
of their respective permitted assigns and transferees as provided
herein, "Loewen"), and RHI MANAGEMENT DIRECT L.P., a Delaware
limited partnership ("RHIM"). BCP, Loewen and RHIM are herein
collectively referred to as the "Purchasers".
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of
September 19, 1996 (the "Merger Agreement"), among Roses, Inc.,
the stockholders of Roses, Inc. and Tudor Acquisition Corp., a
wholly owned subsidiary of Holdings which has been renamed Rose
Hills Acquisition Corp. and which is being renamed Rose Hills
Company ("Acquisition"), Acquisition has agreed to merge with and
into Roses, Inc.;
WHEREAS, pursuant to an Asset Purchase Agreement, dated September
19, 1996 (the "Asset Purchase Agreement"), between Rose Hills
Memorial Park Association (the "Association") and Acquisition,
Acquisition has agreed to purchase certain assets and assume
certain liabilities of the Association;
WHEREAS, Acquisition's rights under such agreements have been
assigned to wholly owned subsidiaries of Holdings;
WHEREAS, RDI, through its wholly owned subsidiaries which are
listed on Schedule 4.1 hereto (the "Subsidiaries"), owns and
operates certain funeral homes and combination properties located
in California which are described on Exhibit A hereto (the
"Satellite Properties");
WHEREAS, Holdings desires to own the Subsidiaries and operate the
Satellite Properties through one or more of its wholly owned
subsidiaries, and RDI is willing to convey the Subsidiaries to
Holdings in exchange for preferred shares of Holdings as herein
provided; and
WHEREAS, BCPII, BROCP, BFIP, LGII, RDI and RHIM are subscribing
for shares of Holdings pursuant to this Agreement, such that,
upon consummation of such subscription, all of the issued and
outstanding shares of capital stock of Holdings will be held by
such Purchasers;
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NOW, THEREFORE, in consideration of the mutual covenants and
conditions as hereinafter set forth, the parties hereto do hereby
agree as follows:
I. PURCHASE OF SHARES
1.1 Purchase of Common Shares by BCP. On the terms and
subject to the conditions of this Agreement, BCP hereby
subscribes for and agrees to purchase from Holdings, and Holdings
agrees to issue and sell to BCP, 785.2273 shares of unissued
common stock, par value $0.01 per share, of Holdings (the "BCP
Stock") for a purchase price of $44,000 per share, equal to an
aggregate purchase price of $34,550,000 (the "BCP Contribution").
The purchase of the BCP Stock shall be allocated among BCPII,
BROCP and BFIP as they shall agree.
1.2 Purchase of Common Shares by RHIM. On the terms
and subject to the conditions of this Agreement, RHIM hereby
subscribes for and agrees to purchase from Holdings, and Holdings
agrees to issue and sell to RHIM, 10.2273 shares of unissued
common stock, par value $0.01 per share, of Holdings (the "RHIM
Stock") for a purchase price of $44,000 per share, equal to an
aggregate purchase price of $450,000 (the "RHIM Contribution").
1.3 Purchase of Common Shares by LGII. On the terms
and subject to the conditions of this Agreement, LGII hereby
subscribes for and agrees to purchase from Holdings, and Holdings
agrees to issue and sell to LGII, 204.5454 shares of unissued
common stock, par value $0.01 per share, of Holdings (the "LGII
Common Stock") for a purchase price of $44,000 per share, equal
to an aggregate purchase price of $9,000,000 (the "LGII Common
Contribution").
1.4 Purchase of Preferred Shares by LGII. On the terms
and subject to the conditions of this Agreement, LGII hereby
subscribes for and agrees to purchase from Holdings, and Holdings
agrees to sell to LGII, $63 million stated value of 10% Pay-in-
Kind Cumulative Preferred Stock, par value $.01 per share, of
Holdings (the "LGII Preferred Stock" and, together with the LGII
Common Stock, the "LGII Stock") for a purchase price of
$63,000,000 (the "LGII Preferred Contribution" and, together with
the LGII Common Contribution, the "LGII Contribution").
1.5 Purchase of Preferred Shares by RDI. On the terms
and subject to the conditions of this Agreement, RDI hereby
subscribes for and agrees to purchase from Holdings, and Holdings
agrees to sell to RDI, $23 million stated value of 10% Pay-in-
Kind Cumulative Preferred Stock, par value $.01 per share, of
Holdings (the "RDI Preferred Stock" and, together with the LGII
Stock, the "Loewen Stock"), in exchange for the transfer to
Holdings of all the issued and outstanding shares of Capital
Stock of each of the Subsidiaries owned by RDI as set forth on
Schedule 4.1 free and clear of all encumbrances or other liens
(the "Subsidiary Stock") (the "RDI Preferred Contribution" and,
together with the LGII Contribution, the "Loewen Contribution").
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1.6 Delivery of Funds and Certificates. The closing of
the purchases and sales of the BCP Stock, the RHIM Stock and the
Loewen Stock (the "Closing" and the date on which the Closing
occurs, the "Closing Date") shall take place at the offices of
Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New
York, concurrently with the closing of the transactions
contemplated by the Merger Agreement as described in Section 1.2
thereof and the Asset Purchase Agreement as described in Section
3.1 thereof. At the Closing, Holdings will deliver to the
Purchasers duly executed certificates, registered in the
Purchasers' respective names and representing the BCP Stock, the
RHIM Stock and the Loewen Stock, as the case may be, against (i)
in the case of the BCP Contribution, the RHIM Contribution and
the LGII Contribution, payment of the BCP Contribution, the RHIM
Contribution or the LGII Contribution (net, in the case of the
LGII Contribution, of amounts previously deposited or paid by
LGII which are referred to in Section 4.1(a)(i) of the Merger
Agreement and Section 2.4(a)(i) of the Asset Purchase Agreement,
to the extent such deposits reduce the amount of the purchase
price payable pursuant to such agreements, and amounts advanced
to cover certain costs and expenses associated with the offering
of the Notes (as hereinafter defined), plus accrued interest
thereon), as applicable, by transfer of immediately available
funds to an account of Holdings previously notified to the
Purchasers by Holdings and (ii) in the case of the RDI Preferred
Contribution, the transfer to Holdings of the share certificates
evidencing all of the Subsidiary Stock, duly endorsed in blank or
accompanied by duly executed stock powers, in form satisfactory
to Holdings, and with all required stock transfer tax stamps
affixed, which together represents payment in full for the BCP
Stock, the RHIM Stock and the Loewen Stock.
II. REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Representations and Warranties of Holdings. Holdings represents
and warrants to the Purchasers as follows:
2.1 Holdings is a corporation duly incorporated,
validly existing and in good standing under the laws of the state
of Delaware and has all requisite corporate power and authority
to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery by Holdings of
this Agreement, the performance by Holdings of its obligations
hereunder, and the consummation by Holdings of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action. This Agreement has been duly executed and
delivered by Holdings and, assuming the due authorizations,
executions and deliveries thereof by the Purchasers, constitutes
a legal, valid and binding obligation of Holdings, enforceable
against Holdings in accordance with its terms.
2.2 The BCP Stock, the RHIM Stock and the Loewen
Stock, when issued and delivered in accordance with the terms
hereof, and any shares of additional capital stock of Holdings
issued pursuant to Section 5.4 of the Stockholders' Agreement
("Additional Equity") when issued and delivered in accordance
with the terms thereof, will be duly authorized, validly issued,
fully paid and nonassessable.
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2.3 The execution, delivery and performance by
Holdings of this Agreement and the consummation by Holdings of
the transactions contemplated hereby or by Section 5.4 of the
Stockholders' Agreement do not and will not, with or without the
giving of notice or the passage of time or both, (i) violate the
provisions of any law, rule or regulation applicable to Holdings
or its properties or assets; (ii) violate the provisions of the
certificate of incorporation or bylaws of Holdings; (iii) violate
any judgment, decree, order or award of any court, governmental
or quasi-governmental agency or arbitrator applicable to Holdings
or its properties or assets or (iv) violate, conflict with or
result in a breach or termination of, or otherwise give any
contracting party additional rights or compensation under, or the
right to terminate or accelerate, or constitute a default under
any agreement or any writing of any nature to which Holdings is a
party or by which any of its assets may be bound.
2.4 No consent, approval, exemption or authorization
is required to be obtained from, no notice is required to be
given to and no filing is required to be made with any third
party (including, without limitation, governmental and quasi-
governmental agencies, authorities and instrumentalities of
competent jurisdiction) by Holdings, which has not been made or
obtained, in order (i) for this Agreement to constitute a legal,
valid and binding obligation of Holdings or (ii) to authorize or
permit the consummation by Holdings of the issuance of the BCP
Stock, the RHIM Stock, the Loewen Stock and the Additional
Equity.
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Representations and Warranties of the Purchasers. Each of the
Purchasers represents and warrants, severally and not jointly, to
Holdings and to the other Purchasers that:
3.1 The execution and delivery of this Agreement by
such Purchaser, the performance by such Purchaser of its
obligations hereunder and the consummation by it of the
transactions contemplated hereby have been duly authorized by all
requisite corporate or partnership action, as appropriate, on the
part of such Purchaser. This Agreement has been duly executed
and delivered by such Purchaser and, assuming the due
authorization, execution and delivery thereof by the other
parties hereto, constitutes a legal, valid and binding obligation
of such Purchaser, enforceable against it in accordance with its
terms.
3.2 The execution, delivery and performances by such
Purchaser of this Agreement and the consummation by such
Purchaser of the transactions contemplated hereby do not and will
not, with or without the giving of notice or the passage of time
or both, (i) violate the provisions of any law, rule or
regulation applicable to such Purchaser or its respective
properties or assets; (ii) violate the provisions of the
constituent organizational documents or other governing
instruments of such Purchaser, as amended to date; (iii) violate
any judgment, decree, order or award of any court, governmental
or quasi-governmental agency or arbitrator applicable to such
Purchaser or its properties or assets or (iv) violate, conflict
with or result in a breach or termination of, or otherwise give
any contracting party additional rights or compensation under, or
the right to terminate or accelerate, or constitute a default
under any agreement or any writing of any nature to which Loewen
or any of the
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Subsidiaries or any of their affiliates is a party or by which
any of their respective assets or properties may be bound.
3.3 Except for filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act")
required to be made by BCP II, no consent, approval, exemption or
authorization is required to be obtained from, no notice is
required to be given to, and no filing is required to be made
with, any third party (including, without limitation,
governmental and quasi-governmental agencies, authorities and
instrumentalities of competent jurisdiction) by such Purchaser,
which has not been made or obtained, in order (i) for this
Agreement to constitute a legal, valid and binding obligation of
such Purchaser or (ii) to authorize or permit the consummation by
such Purchaser of the purchases of the BCP Stock, the RHIM Stock
or the Loewen Stock, as the case may be.
IV. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF LOEWEN
In addition to the several representations and warranties
contained in Article III above, each of the Loewen entities
jointly and severally represents and warrants to Holdings and BCP
that:
4.1 Corporate Matters; Subsidiary Stock. Each
Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of the incorporation state
indicated for such Subsidiary in Schedule 4.1. Each 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 condition (financial or otherwise) of such
Subsidiary, and each has full corporate power and authority to
carry on the business in which it is now engaged. Schedule 4.1
also sets forth the name and business address of each funeral
home, cemetery and/or other related businesses owned or operated
by the particular Subsidiary. The articles of incorporation or
corporate charters of each Subsidiary 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 by
the applicable Secretary of State for each Subsidiary, and a copy
of each Subsidiary's bylaws, as amended to date, certified by the
appropriate recording officers of each, will be delivered to BCP
and Holdings prior to or at the Closing. The Subsidiaries do not
own, directly or indirectly, any 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 or proprietary
interest in any entity or enterprise, however organized and
however such interest may be denominated or evidenced. Schedule
4.1 accurately sets forth the capitalization and ownership, and
the issued and outstanding capital stock, of each of the
Subsidiaries. As of the Closing Date, RDI will own all of the
outstanding capital stock of each of the Subsidiaries. All of
the outstanding capital stock of each Subsidiary is duly
authorized and validly issued, fully paid and nonassessable.
None of the shares of capital stock of any Subsidiary were issued
in violation of any preemptive rights. Between the date hereof
and the Closing, Loewen will cause each of the Subsidiaries not
to issue, sell or purchase, or agree to issue, sell or purchase,
any
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shares of common stock or any other security of such Subsidiary
(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 RDI, without the prior written
consent of BCP and Holdings. None of the 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 common stock or any other
security of any of the Subsidiaries. Except as set forth on
Schedule 4.1, there are no agreements with minority shareholders
of any of the Subsidiaries, or any other person who might
otherwise have any interest in any Subsidiary. There are no
agreements which would prevent or impair or otherwise affect the
transfer of the Subsidiary Stock to Holdings, free and clear of
all encumbrances or other liens, nor are there any agreements to
which any Subsidiary is a party or by which it is subject that
would purport to limit the ability of such Subsidiary to compete.
4.2 Records, Etc. The minute and stock record books
of RDI and each of the Subsidiaries, true and complete copies of
which have been delivered to BCP and Holdings, contain complete
and accurate records in all material respects of all meetings and
other corporate actions of the shareholders and Boards of
Directors of RDI and each of the Subsidiaries and all
transactions with respect to the capital stock of RDI and each of
the Subsidiaries, as of the date hereof.
4.3 Absence of Changes. Since December 31, 1995, each
of the Subsidiaries and Satellite Properties have been operated
only in the ordinary course of business, consistent with past
practices (including the acquisition of any new funeral home,
cemetery or other related businesses), and, except as reflected
in the Unaudited Financials or the notes thereto, there has not
been:
(i) any material adverse change in the condition,
financial or otherwise, of the assets, liabilities, earnings,
book value, businesses or prospects of any of the Subsidiaries
individually or all of the Subsidiaries in the aggregate;
(ii) any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting the
businesses or assets of any of the Subsidiaries;
(iii) the incurrence of any material obligation or
liability (whether absolute, accrued, contingent or otherwise and
whether due or to become due), affecting any of the 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;
(iv) any strike or work stoppage affecting any of
the Subsidiaries;
(v) the adoption of any statute, rule, regulation
or order which materially and adversely affects the businesses or
assets of any of the Subsidiaries;
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(vi) any sale, transfer or other disposition of
any assets of any of the Subsidiaries having a value individually
or in the aggregate in excess of $250,000 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 such Subsidiary, dispositions of surplus or used
equipment, or other dispositions in the ordinary course of
business, consistent with past practices;
(vii) any termination or waiver of any material
rights of value of any of the Subsidiaries other than in the
ordinary course of business;
(viii) any increase in the aggregate compensation
of the employees of any 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 (as defined in
Section 4.15 hereof) or in the ordinary course of business;
(ix) any expenditure or commitment individually or
in the aggregate in excess of $250,000 for acquisitions,
additions to or replacements of property, plant or equipment of
any of the Subsidiaries with the exception of the purchase of
property on Sherman Way in Van Nuys, California for Glasband-
Willen Mortuary and plans to develop the same as a new mortuary;
(x) any forward purchase commitments by any of the
Subsidiaries, or to which any of them may be obligated, involving
individually or in the aggregate more than $250,000 from any one
supplier, except as necessary to fulfill the normal and ordinary
inventory and operational requirements of each of the
Subsidiaries, consistent with past practices;
(xi) any change in the accounting methods or
practices followed by any of the Subsidiaries;
(xii) any amendment to the articles or certificate
of incorporation or by-laws or other charter or organizational
documents of any of the Subsidiaries;
(xiii) any material change in the method of
conducting the business of any of the Subsidiaries (for purposes
of the foregoing, any changes in preneed sales techniques or
practices or funding arrangements for preneed products or in
investment strategies with respect to preneed trust funds (other
than such changes required by applicable law or made in order to
implement policies and practices commonly employed by Loewen at
newly acquired properties) will be deemed to be material); and
(xiv) any event which would permit any third party
to demand repayment of any indebtedness of any of the
Subsidiaries prior to its normal maturity date.
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4.4 Tax Matters.
(a) "Tax" shall mean any federal, state, local,
or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code 59A), customs duties,
capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any
kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not. "Tax Return" shall mean any
return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
(b) All Tax Returns required to be filed with
respect to each of the Subsidiaries have been filed. All such
Tax Returns were correct and complete in all respects. All Taxes
owed by any of the Subsidiaries (whether or not shown on any Tax
Return) have been paid or adequate reserves have been
established. None of the Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax
Return.
(c) There is no material dispute or claim
concerning any Tax liability of any of the Subsidiaries either
claimed or raised by any authority in writing or as to which
LGII, RDI or their respective directors or officers has knowledge
based upon personal contact with any agent of such authority.
(d) Schedule 4.4(d) lists all Tax Returns filed
with respect to the Subsidiaries for taxable periods for which
the statute of limitations has not expired, indicates those Tax
Returns that have been audited, and indicates those Tax Returns
that currently are the subject of audit. None of the
Subsidiaries has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) None of the Subsidiaries has filed a consent
under Code 341(f) concerning collapsible corporations. None of
the Subsidiaries has made any material payments, is obligated to
make any material payments, or is a party to any agreement that
under certain circumstances could obligate it to make any
material payments that will not be deductible under Code 280G.
LGII and RDI are U.S. Persons for U.S. federal income tax
purposes. None of the Subsidiaries is a party to any tax
allocation or sharing agreement. None of the Subsidiaries has
been a member of an affiliated group filing a consolidated
federal income Tax Return other than the affiliated group of
which The Loewen Group Inc. is the common parent.
(f) The unpaid Taxes relating to the businesses
and assets of the Subsidiaries (A) did not, as of the most recent
fiscal month end, exceed by any material amount the reserve for
Tax liability (rather than any reserve for deferred taxes
established to reflect timing differences between book and tax
income) set forth on the face of the most recent balance sheet
respecting such Subsidiary (rather than any notes thereto)
delivered to Holdings and BCP and (B) will not exceed by any
material amount that reserve as adjusted
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for operations and transactions through the Closing Date in
accordance with the past custom and practice of the Subsidiaries
in filing their Tax Returns.
4.5 Title to Assets; Necessary Satellite Properties.
The Subsidiaries have, and as of the Closing will have, (a) good
and marketable title to the land, buildings, structures,
appurtenances and other real property owned by the Subsidiaries
and (b) good and marketable title to the tangible personal
property owned by the Subsidiaries and located at or used in
connection with the Satellite Properties, 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) statutory
liens for taxes or other governmental charges with respect to
owned real property of the Subsidiaries not yet due and payable
or the amount or validity of which is being contested in good
faith by appropriate proceedings by Loewen, and with respect to
which all reserves required by generally accepted accounting
principles have been established, (ii) 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 individually or in the aggregate, in
excess of $250,000, (iii) liens listed on Schedule 4.5, and (iv)
minor survey exceptions, reciprocal easement agreements and other
customary easements or 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 (such exceptions,
"Permitted Encumbrances"). Each of the Subsidiaries has all of
the properties, assets and rights which are necessary to carry on
their respective businesses as presently conducted.
4.6 Real Property Owned or Leased. (i) Schedule 4.6
contains a list and brief description of all real estate
(collectively, the "Real Property") used in the operation of each
of the Satellite Properties. For each parcel of Real Property
listed, Schedule 4.6 indicates whether such Real Property is
owned by a Subsidiary or leased by a 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, a
description of the parties to each lease, the termination date or
notice requirement with respect to termination, annual rental and
renewal or purchase options and any provisions limiting the
assignability thereof. To Loewen's best knowledge (i) the
structures, improvements and fixtures at or upon the Real
Property including, but not limited to, roofs and structural
elements thereof and the electrical, plumbing, heating,
ventilation, air conditioning and similar units and systems, have
to date been maintained by the respective Subsidiary in a manner
it considers to be reasonable for the conduct of the business and
are in reasonable operating condition to allow the business to
continue to be conducted as heretofore conducted, subject to the
provision of usual and customary maintenance and repair performed
in the ordinary course of business consistent with past practice;
and (ii) there is no material water diffusion or other intrusion
into any buildings, structures, or other improvements included in
the Real Property which would require a material expenditure for
repairs in the next twelve (12) months. The improvements on such
Real Property conform with all applicable federal, state and
local laws and regulations and the properties are zoned for the
various purposes for which such Real Property is currently being
10
used (other than permissible prior non-conforming uses), or
variances from such zoning ordinances have been granted.
(ii) As of the Closing, with respect to Real Property
leased, (a) all such leases are in full force and effect and
constitute valid and binding obligations of the respective
parties thereto, (b) there has not been and there currently is
not any default thereunder by any party, (c) 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 any such
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 transfer of
the Subsidiary Stock to Holdings under this Agreement. Loewen
has made available to Holdings true and complete copies of all
leases referred to in said Schedule 4.6.
(iii) All water, sewer, gas, steam, electric,
telephone, access and drainage facilities and all other utilities
required by law and by the normal operation of the Satellite
Properties are installed to the boundaries of such Real Property,
are connected to such Real Property where appropriate with valid
permits, and are adequate to service the Real Property for the
operation of the business currently conducted thereon and to
permit full compliance with all applicable law.
(iv) There is no pending or, to LGII's or any
Subsidiary's knowledge after due inquiry, threatened
condemnation, expropriation, eminent domain or similar proceeding
affecting all or any part of any Real Property, and neither
Loewen nor any Subsidiary has received any written or oral notice
of any of the same.
(v) Except for the Permitted Encumbrances and the
leases identified on Schedule 4.6, there are no contracts or
agreements to which Loewen or any Subsidiary is a party granting
to any Person the right of use or occupancy of any portion of the
Real Property.
4.7 Trademark and Trade Names. The Subsidiaries own
all right, title and interest in, to and under the trademarks,
service marks, trade names, service names, corporate names,
business names and corresponding logos (collectively,
"Trademarks") or have the perpetual, irrevocable, exclusive
license to use all of the Trademarks used in connection with the
operation of the Satellite Properties and any business related
thereto. A true and complete list of all owned and licensed
Trademarks is included in Schedule 4.7.
4.8Insurance. Each of the Subsidiaries, or Loewen on
behalf of each of the Subsidiaries, maintains in effect insurance
covering the Satellite Properties in an amount (a) believed by
LGII and RDI to be adequate and (b) customary for businesses of
the kind engaged in by the Subsidiaries in the same geographical
areas where such businesses are located, and such insurance
coverage shall be maintained by Loewen or the Subsidiaries
through the Closing. Schedule 4.8 includes a list of all
policies of insurance maintained with respect to each of the
Satellite Properties, true and complete copies of which have been
provided to BCP and Holdings.
11
4.9 Agreements, Etc. Schedule 4.9 contains a list and
brief description of each of the following contracts, agreements
and other instruments relating to any of the Subsidiaries: (i)
contract with or commitment to any labor union; (ii) contract
involving more than $200,000 in any instance for the future
purchase of materials, supplies, equipment or services; (iii)
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 any of the
Subsidiaries; (iv) 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; (v) contract or commitment
for expenditures, or letter of intent with respect thereto,
involving more than $200,000 in any instance; (vi) guaranty of
the obligations of a third party (other than guaranties by Loewen
of the obligations of a Subsidiary); (vii) agreement which
restricts or regulates any of the Subsidiaries with respect to
its doing business anywhere in the world; (viii) agreement or
arrangement for the sale of any of the assets, property or rights
of any of the 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; (ix) any acquisition or similar agreement pursuant to
which Loewen or any Subsidiary acquired or will acquire prior to
the Closing any of the Satellite Properties or business related
to the Satellite Properties; and (x) any noncompete or consulting
agreement benefitting any of the Subsidiaries or Satellite
Properties. Each of LGII, RDI and the Subsidiaries has performed
all the obligations required to be performed by it under each
such contract to date except for any non-performance that could
not reasonably be expected to have a material adverse effect on
the business, operations or condition (financial or otherwise) of
any of the Subsidiaries or Satellite Properties. None of the
Subsidiaries is 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 4.9,
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. The
continuation, validity and effectiveness of each item on Schedule
4.9 under the current material terms thereof will in no way be
adversely affected by the transfer of the Subsidiary Stock to
Holdings under this Agreement. True and complete copies of all
written agreements and written summaries of all oral agreements
described in Schedule 4.9 have been provided to BCP and Holdings
by Loewen. Without limiting the generality of the foregoing,
except as set forth on Schedule 4.9, the transfer to Holdings of
the Subsidiary Stock will not give rise to any right of any third
party to rescind, avoid or repudiate any agreement or arrangement
to which any of the Subsidiaries is a party or otherwise have any
adverse effect on Holdings, any Subsidiary or the transactions
contemplated by this Agreement.
4.10 Litigation, Etc. Except as set forth in Schedule
4.10, 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 Loewen or
any of the Subsidiaries after due inquiry, threatened against or
affecting any of the Subsidiaries or Satellite Properties,
whether at law or in equity, or before or by any international,
federal, state, municipal or other governmental instrumentality.
To the best of Loewen's knowledge
12
after due inquiry, there exists no reasonable basis for
litigation against or affecting any Subsidiary or Property.
4.11 Compliance; Governmental Authorizations. Except
as set forth in Schedule 4.11, each of the Subsidiaries is in
compliance in all material respects with all applicable 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.
Without limiting the generality of the foregoing, each of the
Subsidiaries is in compliance in all material respects with all
requirements of the Occupational Safety and Health Act and the
Americans with Disabilities Act pertaining to its facilities and
operations, and with all requirements of the Federal Trade
Commission's Funeral Industry Practice Regulation. Except as set
forth on Schedule 4.11, each of the Subsidiaries has all material
federal, state, local and foreign governmental operating licenses
and permits necessary to conduct its business 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 Loewen's knowledge after due inquiry,
threatened, to revoke or limit any thereof. None of such
licenses and permits will be terminated, limited or otherwise
affected by the transfer of the Subsidiary Stock to Holdings
pursuant to this Agreement.
4.12 Customer Contracts and Funds. Except as set forth
on Schedule 4.12, (i) All monies paid to any of the Subsidiaries
in respect of prearranged, prepaid or at need contracts for
funeral, burial, merchandise, cremation, cemetery property,
cemetery merchandise arrangements or other services ("Customer
Contracts") and all amounts recorded for deferred merchandise and
service liabilities associated with preneed cemetery sales and
deferred revenues associated with preneed funeral sales and
amounts required to be maintained for the care and maintenance of
cemetery property (collectively, the "Funds") have been properly
deposited, accounted for and administered as required by
applicable laws and regulations, the particular underlying
Customer Contract, and, in the case of insurance-funded Customer
Contracts, been properly and duly paid over to insurance carriers
(less applicable insurance commissions) and the applicable
Subsidiary is the beneficiary of all such insurance policies;
(ii) none of the Subsidiaries has any net deferred merchandise or
service liability relating to Customer Contracts for cemetery
merchandise or services which have not yet been delivered to the
purchaser; (iii) all accounts, deposits and trusts of Funds, and
the amounts thereof, are presently held and administered in
compliance in all material respects with all applicable laws,
rules and regulations (and except as set forth on Schedule 4.12,
there is no Shortfall (as defined in Section 5.1 hereof) with
respect to any unfunded preneed cemetery contract or preneed
funeral service contract); (iv) all withdrawals from accounts,
deposits and trusts of Funds and the investment and other uses of
the Funds (including but not limited to payment to trustees of
the applicable trusts) by each of the Subsidiaries have been made
in compliance in all material respects with all applicable laws,
rules and regulations and the particular underlying Customer
Contract; (v) each of the Subsidiaries has 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 Funds and, if required, the payment
of Taxes thereon; (vi) the terms and conditions of each Customer
Contract, including
13
but not limited to the collection of interest, comply in all
material respects with all applicable laws, rules and regulations
(including, but not limited to, full disclosure to customers of
all finance charges and other fees associated with multi-payment
plans for Customer Contracts); (vii) each of the Subsidiaries has
complied in all material respects with the terms and conditions
of all Customer Contracts to which they are parties and are not
aware of any default or allegation of default against any of them
thereunder; (viii) the Customer Contracts which have been
delivered to BCP and Holdings are the only agreements pursuant to
which caskets, funeral commodities or other inventory, funeral
services or cemetery merchandise, properties or services have
been sold by any of the Subsidiaries and (ix) all commissions
collected on behalf of commissioned salespeople in respect of the
Customer Contracts have been paid in the normal course of
business, consistent with past practices.
4.13 Labor Relations: Employees. Each of the
Subsidiaries is in compliance with all federal, state and local
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 condition (financial or otherwise) of the
Subsidiary. Except as listed in Schedule 4.13, there has been no
unfair labor practice complaint against any of the Subsidiaries
and there is no claim pending against any of the 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 Loewen,
threatened, against or involving any of the Subsidiaries and none
has occurred within the past three years. No representation
question exists with respect to the employees of any of the
Subsidiaries. None of the 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 any Subsidiary. No
grievance or arbitration proceeding is pending before any court
or governmental agency relating to any of the employees of any of
the Subsidiaries.
4.14 Compensation. Loewen has previously furnished to
BCP and Holdings a complete and accurate list of all current
officers, employees and consultants of each of the Subsidiaries
who, in the calendar years 1995 or 1996, have received or are
expected to receive aggregate remuneration in excess of $100,000
from Loewen or any 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 4.14.
4.15 Employee Benefit Matters. (a) Schedule 4.15
contains a true and complete list of each material "employee
benefit plan" (within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
including, without limitation, multiemployer plans within the
meaning of ERISA section 3(37)), stock purchase, stock option,
severance, employment, change-in-control, fringe benefit,
collective bargaining, bonus, incentive, deferred compensation
and all other employee benefit plans, agreements, programs,
policies or other arrangements, whether or not subject to ERISA
(including any funding mechanism therefor now in effect or
required in the future as a result of the transaction
contemplated by this Agreement or otherwise), whether formal or
informal, oral or written, under which any employee or former
employee of any of the Subsidiaries has any present
14
or future right to benefits or under which any of the
Subsidiaries has any present or future liability. All such
plans, agreements, programs, policies and arrangements shall be
collectively referred to as the "Plans."
(b) With respect to each Plan, Loewen has delivered to
BCP and Holdings a current, accurate and complete copy (or, to
the extent no such copy exists, an accurate description) thereof
and, to the extent applicable: (i) any related trust agreement or
other funding instrument; (ii) the most recent determination
letter, if applicable; (iii) any summary plan description and
other written communications (or a description of any oral
communications) by the Subsidiaries (or Loewen on behalf of the
Subsidiaries) to their employees concerning the extent of the
benefits provided under a Plan; and (iv) for the most recent year
(A) the Form 5500 and attached schedules, (B) audited financial
statements.
(c) (I) Each Plan has been established and
administered in accordance with its terms, and in compliance in
all material respects with the applicable provisions of ERISA,
the Code and other applicable laws, rules and regulations;
(ii) each Plan which is intended to be qualified within the
meaning of Code section 401(a) is so qualified and has received a
favorable determination letter as to its qualification, and
nothing has occurred, whether by action or failure to act, that
would cause the loss of such qualification and thereby adversely
affect any of the Subsidiaries; (iii) no event has occurred and
no condition exists with respect to any employee benefit plan (as
defined in Section 3(3) of ERISA) that would subject any of the
Subsidiaries, either directly or by reason of their affiliation
with any member of their "Controlled Group" (defined as any
organization which is a member of a controlled group of
organizations within the meaning of Code sections 414(b), (c),
(m) or (o)), to any material tax, fine, lien or penalty imposed
by ERISA, the Code or other applicable laws, rules and
regulations; (iv) for each Plan with respect to which a Form 5500
has been filed, no material change has occurred with respect to
the matters covered by the most recent Form 5500 since the date
thereof; and (v) no "reportable event" (as such term is defined
in ERISA section 4043), "prohibited transaction" (as such term is
defined in ERISA section 406 and Code section 4975) or
"accumulated funding deficiency" (as such term is defined in
ERISA section 302 and Code section 412 (whether or not waived))
has occurred with respect to any Plan.
(d) None of the Plans is subject to Title IV of ERISA.
(e) With respect to any multiemployer plan (within the
meaning of ERISA section 4001(a)(3)) to which any Subsidiary or
any member of their Controlled Group has any liability or
contributes (or has at any time contributed or had an obligation
to contribute): (i) none of the Subsidiaries or any member of
their Controlled Group has incurred any withdrawal liability
under Title IV of ERISA or would be subject to such liability if,
as of the Closing Date, any of the Subsidiaries or any member of
their Controlled Group were to engage in a complete withdrawal
(as defined in ERISA section 4203) or partial withdrawal (as
defined in ERISA section 4205) from any such multiemployer plan;
and (ii) no such multiemployer plan is in reorganization or
insolvent (as those terms are defined in ERISA sections 4241 and
4245, respectively).
(f) With respect to any Plan, (i) no actions, suits or
claims (other than routine claims for benefits in the ordinary
course) are pending or to the knowledge of Loewen
15
threatened, and (ii) no facts or circumstances exist that could
give rise to any such actions, suits or claims.
(g) No Plan exists that could result in the payment to
any present or former employee of any Subsidiaries of any money
or other property or accelerate or provide any other rights or
benefits to any present or former employee of any Subsidiaries as
a result of the transactions contemplated by this Agreement,
whether or not such payment would constitute a parachute payment
within the meaning of Code section 280G.
4.16 Financial Statements. Loewen has delivered to
BCP and Holdings true and complete copies of (i) the consolidated
balance sheets of each of the Subsidiaries which are included in
the Offering Memorandum for the Notes (as hereinafter defined)
for the year ended December 31, 1995, together with related
consolidated statements of operations and retained earnings,
shareholders' equity and cash flows for the period then ended
(collectively, the "Audited Financials"), in each case certified
by KPMG, independent chartered accountants, and (ii) the
unaudited consolidated balance sheet of each of the Subsidiaries
as at June 30, 1996, together with related consolidated
statements of operations and retained earnings, shareholders'
equity and cash flows for the six months then ended (the
"Unaudited Financials").
The Audited Financials and the Unaudited Financials (i) were, and
the SEC Financials (as defined in Section 5.7) will be, prepared
in accordance with U.S. generally accepted accounting principles
("GAAP"), consistently applied from period to period, and comply
as to form and substance with the rules and regulations of the
SEC, (ii) were, and the SEC Financials (as hereinafter defined)
will be, prepared in accordance with the books of account and
other financial records of each Subsidiary and (iii) present, and
the SEC Financials will present, fairly in all material respects
the consolidated financial position and results of operation of
each Subsidiary as at the dates thereof or for the periods
covered thereby in accordance with GAAP, applied on a basis
consistent with the past practices except for the capitalization
of covenants not to compete of each Subsidiary subject in the
case of the Unaudited Financials and any interim SEC Financials,
to normal year-end adjustments, none of which are expected to be
material.
4.17 Liabilities. At December 31, 1995, the
Subsidiaries taken as a whole had no material liabilities, Taxes
or obligations of any nature, fixed or contingent, matured or
unmatured, that were not recorded on the December 31, 1995
Audited Financials, and since December 31, 1995, none of the
Subsidiaries has incurred, nor does there exist on the Closing
Date any basis for, any liabilities, Taxes or obligations of any
nature, fixed or contingent, matured or unmatured, other than
those arising in the ordinary course of business.
4.18 Accounts Receivable. All of the accounts
receivable shown on the balance sheets contained in the Audited
and Unaudited Financials (i) reflect actual transactions, (ii)
have arisen from bona fide transactions in the ordinary and usual
course of the conduct of the business and (iii) to the knowledge
of Loewen, are not subject to any setoff or counterclaim and are
fully collectible in accordance with the terms of the underlying
16
contracts, subject to the reserve(s) shown on the applicable
Financial Statements, which in all respects is (are) adequate.
4.19 Inventory. The values at which inventory is shown
on the Audited and Unaudited Financial Statements have been
determined in accordance with the normal valuation policies of
each of the Subsidiaries, consistently applied. All additions to
and deletions from inventory since December 31, 1995 have been
only in the ordinary course of business, consistent with past
practice. The inventory as of the date of this Agreement
consists only of items of a quality and quantity commercially
usable or saleable in the ordinary course of business.
4.20 Business Generally. 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, condition (financial or otherwise)
or prospects of any of the Subsidiaries.
4.21 Bank Accounts; Officers. Schedule 4.21 is a list
of all bank accounts and safe deposit boxes in the name of or
controlled by any of the Subsidiaries, and details about the
persons having access thereto. Schedule 4.21 also contains a
list of all officers and directors of each of the Subsidiaries.
4.22 Insolvency. (i) No receiver has been appointed
for the whole or any part of the assets or business of any of the
Subsidiaries.
(ii) No petition has been presented, no order has been
made and no resolution has been passed for the winding-up of any
of the Subsidiaries.
(iii) No unsatisfied judgment is outstanding against
any of the Subsidiaries.
4.23 Environmental Matters. (i) Each of the
Subsidiaries and Satellite Properties is, and has been, in
compliance in all material respects with all applicable federal,
state and local statutes, laws, rules, regulations, common law,
decrees, judgments, orders and agreements relating to the
protection of the environment or human health, including without
limitation occupational health and safety laws and regulations,
(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, and, to the best of
Loewen's knowledge, there is no condition that would reasonably
be expected to prevent or materially interfere with such
compliance in the future.
(ii) Without limiting the generality of the foregoing,
except as would not reasonably be expected to give rise to a
material liability:
(a) no hazardous waste or hazardous substance, as
those terms are defined by RCRA and CERCLA, respectively, or any
other substance, including without
17
limitation, petroleum, petroleum products and asbestos, that is
regulated, or that could result in liability, under any
Environmental Law, (Collectively, "Hazardous Substances"), have
been disposed of at any time at, on, under or about any real
property owned, leased or operated by any of the Subsidiaries and
no Hazardous Substances are or were otherwise located at, on
under or about such real property except in compliance with
applicable laws;
(b) no polychlorinated biphenyls are or were located on
any real property owned, leased or operated by any of the
Subsidiaries, whether in electrical transformers or elsewhere, at
any time;
(c) no storage tanks, whether underground or otherwise,
containing Hazardous Substances, are or were located on any of
the real property owned, leased or operated by any of the
Subsidiaries at any time except in compliance with applicable
laws;
(d) no asbestos is or was located in any building on
any of the real property owned, leased or operated by any of the
Subsidiaries at any time;
(e) no Environmental Claim (as hereinafter defined) is
currently pending regarding the properties, operations or
business of any of the Subsidiaries and, to the best knowledge of
Loewen, there is no reason to believe that any such Environmental
Claim will be made in the future. "Environmental Claim" means
any written or oral notice, claim, demand, action, suit,
complaint, proceeding or other written communication by any
person alleging liability or potential liability (including
without limitation liability or potential liability for
investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damage, personal injury, fines
or penalties) arising out of, relating to, based on or resulting
from (i) the presence, discharge, emission, release or threatened
release of any Hazardous Materials at any location, (ii)
circumstances forming the basis of any violation or alleged
violation of any Environmental Laws or Environmental Permits, or
(iii) otherwise relating to obligations or liabilities under any
Environmental Laws;
(f) none of the business and operations of any of the
Subsidiaries and Satellite Properties is subject to any judgment,
decree, order or other similar requirement of any governmental
authority under any Environmental Laws;
(g) Hazardous Materials have not been disposed of or
arranged to be disposed of by any of the Subsidiaries from any
property currently or formerly owned, leased or operated by the
Subsidiaries in violation of, or in a manner or to a location
that could give rise to liability under, any applicable
Environmental Laws;
(h) There are no past or present actions, activities,
events, conditions or circumstances relating to the properties,
operations or business of any of the Subsidiaries including
without limitation the release, threatened release, emission,
discharge, generation, treatment, storage or disposal of
Hazardous Materials, at or about any real property owned, leased
or operated by any of the Subsidiaries, that
18
could give rise to any liability or obligation, or result in any
restriction on the use of the real property owned, leased or
operated by any of the Subsidiaries, under any applicable
Environmental Laws; and
(i) Except for contractual assignments relating to
LGII's purchase of the Subsidiaries in regard to the operations
or business of the Subsidiaries, there has been no assumption,
contractually or by operation of law, of any liabilities or
obligations under any Environmental Laws.
(ii) Each of the Subsidiaries has obtained and
maintained and are, and have been, in compliance in all material
respects with all permits issued by environmental or health
administrative agencies that are required with respect to their
respective operations (the "Environmental Permits") and no
modification, revocation, reissuance, alteration, transfer, or
amendment of the Environmental Permits, or any review by, or
approval of, any third party of the Environmental Permits is
required in connection with the execution or delivery of this
Agreement or the consummation of the transactions contemplated
hereby or the continuation of the business and operations of the
Subsidiaries following such consummation.
(iii) Loewen has made available to BCP and Holdings all
reports of any health or environmental studies or investigations
in the possession or under the control of it or any of the
Subsidiaries that have been conducted in connection with the real
property owned, leased or operated by any of the Subsidiaries.
(iv) Except as set forth on Schedule 4.23, Loewen has
heretofore obtained environmental reports with respect to each
parcel of real property owned or leased by the Satellite
Properties (the "Environmental Reports") copies of which have
been made available to BCP and Holdings.
4.24 Brokers and Advisors. Except for the fees and
expenses of Smith Barney, Inc. which will be paid by Loewen, no
action taken by Loewen or any Subsidiary in connection with or in
furtherance of the transactions contemplated hereby has or shall
cause any of Loewen, the Subsidiaries, BCP or Holdings to be
subject to any claim against it for a brokerage commission,
finder's fee, consulting fee, advisory fee or other like payment.
4.25 No Other Agreements to Sell the Shares or Assets.
Neither Loewen nor any Subsidiary has any legally enforceable
commitment or legal obligation, absolute or contingent, to any
other person or firm other than Holdings to sell, assign,
transfer or effect a sale of any of the Subsidiary Stock, any
other capital stock or equity investment in any Subsidiary, or
any material amount of the assets of any Subsidiary (other than
inventory in the ordinary course of business or fixed assets
which are no longer necessary to the operation of the business as
heretofore conducted), to effect any merger, consolidation,
liquidation, dissolution or other reorganization of any
Subsidiary, or to enter into any agreement or cause the entering
into of an agreement with respect to any of the foregoing.
4.26 Grave Spaces. To the best of Loewen's knowledge,
the undeveloped property owned by the Subsidiaries which is
presently contemplated as being usable as grave
(19)
spaces as indicated on Schedule 4.26 is suitable for such use
without unduly burdensome expense and consistent with past
practice of the applicable Subsidiary.
4.27 Disclosures. No representation or warranty by
Loewen contained in this Agreement, and no statement contained in
any certificate, Exhibit, list or other writing furnished to BCP
and Holdings in connection with the transactions contemplated by
this Agreement, contains any untrue statement of 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 BCP and Holdings 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 Loewen are true and
complete in all material respects.
4.28 Indebtedness. As of the Closing Date, the
aggregate unpaid principal and accrued interest of the Assumed
Obligations (as hereinafter defined), is less than or equal to
$1.6 million. Other than the Assumed Obligations, as of the
Closing Date, the Subsidiaries will have no indebtedness or other
contingent liabilities in respect of borrowed money.
V. OTHER AGREEMENTS AND COVENANTS OF THE PARTIES
5.1 Preneed Contracts and Trust Funds. (a) Loewen
will, upon receipt of written notice from Holdings, reimburse
Acquisition within 15 days of the end of each month for the
Shortfall associated with fulfilling, when presented for
performance, each preneed contract outstanding on the date
hereof; it being understood that with respect to each and every
such preneed contract presented for performance, Loewen agrees to
pay to Acquisition the amount of the aggregate Shortfall, if any,
associated with such preneed contract. Notwithstanding the
foregoing, Loewen shall be relieved from such obligation at such
time as the estimated future liability for all such preneed
contracts as estimated by Deloitte & Touche is less than or equal
to the aggregate amount held in trust therefor. "Shortfall"
means the difference as of the Closing between the full contract
price associated with fulfilling each preneed contract
outstanding on the date hereof and the amount which Acquisition
reasonably determines has been positively and specifically
theretofore placed in trust with respect to such preneed
contract.
(b) Although the aggregate amount of each monthly
Shortfall shall be paid by Loewen to Acquisition as provided
above, Loewen shall be entitled to review the books and records
relevant to the determination as to whether a Shortfall exists
with respect to any particular preneed contract. Loewen shall be
entitled to dispute any such determination that resulted in a
payment under this section 5.1, and in such event that parties
shall attempt to resolve such dispute and, if necessary, refer it
to a third party for resolution, in accordance with substantially
the same procedures described in Section 5.5(B) of the Put/Call
Agreement At the Closing, RDI will take all such action as may be
required by applicable laws, rules and regulations and otherwise
in order for Holdings to replace the trustees and other
fiduciaries who are listed on Schedule 5.1 of the Funds and any
other trust funds and accounts relating to
20
the preneed contracts with persons selected by Holdings, which
shall be effective at the Closing.
5.2 Resignation/Election of Trustees. RDI and Holdings
shall arrange for replacement of all persons listed on Schedule
5.2 who presently serving as directors and officers of the
Subsidiaries with persons selected by Holdings, which shall be
effective at the Closing.
5.3 Completion of Harbor Lawn Projects. Loewen agrees
that it shall remain responsible and obligated to pay all costs
and expenses incurred in connection with the completion of (i)
the New Jewish Garden Mausoleum and niches and (ii) remediation
of earthquake damage to the existing mausoleum at Harbor Lawn
Memorial Park, Inc. in accordance with all of the construction
and other contracts relating thereto (the "Construction
Contracts"), all of which are listed on Schedule 5.3, and the
payment of all fees and other compensation relating thereto,
which payments shall be made by Loewen directly to the
contractors, architects, engineers and other persons who are
parties to the Construction Contracts, consistent with past
practice and that Loewen will use its reasonable best efforts to
insure that such projects will be completed by March 31, 1997.
5.4 Net Operating Capital. Loewen will cause the
aggregate Net Operating Capital for all of the Subsidiaries on
the Closing Date to be greater than or equal to $2.1 million.
"Net Operating Capital" shall mean current assets plus long term
accounts receivable less current accounts payable and current
accrued liabilities (but excluding current portion of long-term
debt and taxes payable). As promptly as practicable but no later
than 30 days after the Closing Date, Loewen shall cause to be
prepared a balance sheet for the Subsidiaries as of the Closing
Date which shall be used as the basis for calculating Net
Operating Capital as of the Closing Date. Loewen shall deliver
such balance sheet and Net Operating Capital calculation to BCP
and Holdings, together with a certificate of the Chief Financial
Officer of LGII to the effect that, to the best of their
knowledge after due inquiry, such balance sheet and calculation
are true and correct and have been prepared in a manner
consistent with the Audited Financials. As promptly as
practicable but no later than 30 days after the Closing Date,
LGII shall pay to Holdings the amount, if any, by which aggregate
Net Operating Capital for all of the Subsidiaries on the Closing
Date is less than $2.1 million. In the event of a disagreement
concerning the Net Operating Capital, each party shall make
available to the other such books and records as are relevant to
such disagreement and are in the possession of such party, and
the parties shall work together in good faith to resolve such
disagreement. The portion of the Net Operating Capital, if any,
as to which the parties are unable to agree upon after thirty
(30) days shall be referred for resolution to a nationally
recognized accounting firm, mutually and reasonably acceptable to
both parties. The determination of such third party, whose costs
and expenses shall be borne equally by the parties, shall be
final and determinative. Upon such determination, Loewen shall
make any additional payment required to be made within two (2)
days of such determination.
5.5 Harbor Lawn Lawsuit. Loewen shall remain
responsible and obligated to pay all costs and expenses relating
to the lawsuit entitled La Canada Flintridge Development Corp.,
et. al. v. Harbor Lawn Memorial Park, Inc. et. al., including all
appeals
21
thereof, and will be entitled to retain all proceeds relating to
such lawsuit, whether as a result of a judgment, settlement or
otherwise.
5.6 Assumption of Certain Obligations. Holdings agrees
to assume all payment obligations with respect to (i) the
Promissory Note, dated August 12, 1994, between WhiteHurst
California and Georgia White Rowe with an original principal
balance of $1,375,327.07, (ii) the Promissory Note, dated August
12, 1994, between WhiteHurst California and Jack D. Rowe with an
original principal balance of $343,831.77 and (iii) the
agreements listed on Schedule 5.6 for covenants not to compete
entered into with the sellers of the Satellite Properties in
connection with the acquisition thereof with aggregate payments
not to exceed $819,878 (collectively, the "Assumed Obligations").
5.7 Financial Statements. Loewen agrees to provide to
Holdings and BCP, for inclusion in the registration statement
covering the exchange offer for the Notes, including amendments
thereto, such financial statements with respect to the Satellite
Properties (including Notes thereto) as are required under
applicable rules and regulations of the Securities and Exchange
Commission to be included in such registration statement or
amendment thereto (the "SEC Financials").
VI. CONDITIONS TO OBLIGATIONS OF BCP AND HOLDINGS
The obligations of BCP and Holdings to perform this Agreement are
subject only to the satisfaction of the following conditions on
or prior to the Closing, unless waived by BCP and Holdings:
6.1 Representations and Warranties. The
representations and warranties of Loewen in this Agreement or in
any Schedule, certificate or document delivered in connection
herewith shall have been true and correct in all material
respects on the Closing, and Holdings shall have received a
certificate signed by an officer of LGII and RDI to that effect.
6.2 Performance of Obligations of Loewen. Loewen 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, and Holdings shall have received a certificate signed by
an executive officer of LGII and RDI to that effect.
6.3 No Litigation. Except as described in Schedule
4.10, 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 condition
(financial or otherwise) of any of the Satellite Properties or
Subsidiaries and Holdings shall have received a certificate
signed by an
22
executive officer of LGII and RDI that to their best knowledge,
no such action, suit or other proceeding is pending.
6.4 Regulatory Consents, Authorizations, Etc. All
required 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,
in form reasonably satisfactory to BCP and Holdings, shall have
been obtained or made and the applicable waiting period,
including any extension thereof, under the HSR Act shall have
expired; provided that Holdings shall have used its best efforts
and taken all reasonable actions necessary to obtain such
consents, authorizations, orders, opinions, approvals, filings
and registrations.
6.5 Corporate Action. Appropriate evidence of all
necessary corporate action by LGII and RDI in connection with the
transactions contemplated hereby, including, without limitation,
certified copies of resolutions duly adopted by the Board of
Directors of LGII and RDI approving the transactions contemplated
hereby, and authorizing the execution, delivery and performance
by LGII and RDI of this Agreement and the other agreements,
documents and instruments to which LGII and RDI are a party
contemplated hereby, and a certificate as to the incumbency of
officers of LGII and RDI executing any instrument or other
document delivered in connection with such transactions, shall
have been delivered.
6.6 Note Offering. The proceeds of the offering of
$80,000,000 aggregate principal amount of 9 1/2% Senior
Subordinated Notes due 2004 (the "Notes") have been or are
concurrently being made available to Acquisition.
6.7 Term Loan. Acquisition has or is concurrently
receiving $75 million of proceeds from a senior secured term loan
facility from a syndicate of financial institutions, with Goldman
Sachs Credit Partners, an affiliate of Goldman, Sachs & Co., as
arranging agent.
6.8 Cemetery and Mortuary Acquisition. All conditions
precedent, other than the receipt by Holdings of the BCP
Contribution, the RHIM Contribution and the Loewen Contribution,
have been or are concurrently being fulfilled such that upon
consummation of this Agreement, the transactions contemplated by
the Merger Agreement and the Asset Purchase Agreement can be
effected. The transactions contemplated by the Merger Agreement
and the Asset Purchase Agreement shall be consummated
concurrently with consummation of the transactions contemplated
by this Agreement.
6.9 Opinions. Opinions, dated the Closing Date, of
Stradley, Ronan, Stevens & Young, LLP, counsel to LGII and RDI,
in the form attached as Exhibit B, and of Canadian counsel,
counsel to LWN, in the form attached as Exhibit C, shall have
been delivered to Holdings.
6.10 Subsidiary Stock. Stock certificates representing
all of the Subsidiary Stock, duly endorsed in blank or
accompanied by duly executed stock powers, in form
23
satisfactory to BCP and Holdings and with all required stock
transfer tax stamps affixed have been delivered to Holdings.
6.11 Stockholder's Agreement. Concurrent with the
consummation of the subscription for shares provided by this
Agreement, the parties hereto shall execute and deliver to each
other a Stockholders' Agreement in the form of Exhibit C attached
hereto (the "Stockholders' Agreement").
6.12 Satisfaction of Intercompany Indebtedness. At the
Closing, there shall be no amounts owed by any of the
Subsidiaries to LGII or any affiliate of LGII.
6.13 Other Agreements. At or prior to the Closing,
Loewen shall have executed and delivered any and all other
agreements as may reasonably be necessary, appropriate and/or
desirable in order to consummate the transactions contemplated by
this Agreement, including, without limitation, all documents
necessary to cancel and terminate, effective as of the Closing
Date, the Master Services Agreement, dated January 1, 1995, with
respect to each of the Subsidiaries and any other agreement
between Loewen or any of its affiliates and any Subsidiary (or
which affects any Subsidiary), in each case without there being
any further amounts owing by, or any further obligations of, any
Subsidiary (other than the Administrative Services Agreement
between LGII and Acquisition which will remain in effect
following the Closing).
6.14 No Material Adverse Change. From and including
the date hereof, there shall not have occurred any event which
has had in the aggregate a material adverse effect upon or a
material adverse change in the condition (financial or
otherwise), working capital, assets, liabilities, earnings, book
value, business, good will, going concern value or prospects of
any Subsidiary.
6.15 Resignations. Resignations executed by each
officer and director of each Subsidiary listed on Schedule 5.2
and resignations executed by each of the trustees and other
fiduciaries listed on Schedule 5.1 of each of the Funds and any
other trust funds and accounts relating to the preneed contracts,
all effective as of the Closing Date, shall have been delivered
to Holdings.
6.16 Outstanding Checks. Funds shall remain on deposit
at the Closing in each checking account maintained by each of the
Subsidiaries sufficient in amount to cover all outstanding checks
or drafts against such accounts.
6.17 Administrative Services Agreement. LWN, LGII and
Acquisition shall have entered into an Administrative Services
Agreement, substantially in the form attached as Exhibit D.
24
VII. CONDITIONS TO OBLIGATIONS OF LOEWEN
The obligations of Loewen to perform this Agreement are subject
only to the satisfaction of the following conditions on or prior
to the Closing, unless waived by Loewen:
7.1 Representations and Warranties. The
representations and warranties of BCP and Holdings in this
Agreement or in any Schedule, certificate or document delivered
in connection herewith shall have been true and correct when made
and shall be true and correct on the Closing as though made on
and as of the Closing, and Loewen shall have received a
certificate signed by an officer of BCP and Holdings to that
effect.
7.2 Performance of Obligations of BCP and Holdings.
BCP and Holdings 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, and Loewen shall have received a
certificate signed by an executive officer of BCP and Holdings to
that effect.
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 ability of Holdings to perform its
obligations under this Agreement and Loewen shall have received a
certificate signed by an executive officer of Holdings that to
his best knowledge, no such action, suit or other proceeding is
pending.
7.4 Regulatory Consents, Authorizations, Etc. All
required 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,
in form reasonably satisfactory to Loewen, shall have been
obtained or made and the applicable waiting period, including any
extensions thereof, under the HSR Act have expired; provided
that Loewen shall have used its best efforts and taken all
reasonable actions necessary to obtain such consents,
authorizations, orders, opinions, approvals, filings and
registrations.
7.5 Corporate Action. Appropriate evidence of all
necessary corporate action by Holdings and BCP in connection with
the transactions contemplated hereby, including, without
limitation, certified copies of resolutions duly adopted by the
Board of Directors of Holdings and BCP approving the transactions
contemplated hereby, and authorizing the execution, delivery and
performance by Holdings and BCP of this Agreement and the other
agreements, documents and instruments to which Holdings and BCP
are a party contemplated hereby, and a certificate as to the
incumbency of officers of Holdings and BCP executing any
instrument or other document delivered in connection with such
transactions;
25
7.6 Note Offering. The proceeds of the offering of
$80,000,000 aggregate principal amount of 9 1/2% Senior
Subordinated Notes due 2004 (the "Notes") have been or are
concurrently being made available to Acquisition.
7.7 Term Loan. Acquisition has or is concurrently
receiving $75 million of proceeds from a senior secured term loan
facility from a syndicate of financial institutions, with Goldman
Sachs Credit Partners, an affiliate of Goldman, Sachs & Co., as
arranging agent.
7.8 Cemetery and Mortuary Acquisition. All conditions
precedent, other than the receipt by Holdings of the BCP
Contribution, the RHIM Contribution and the Loewen Contribution,
have been or are concurrently being fulfilled such that upon
consummation of this Agreement, the transactions contemplated by
the Merger Agreement and the Asset Purchase Agreement can be
effected. The transactions contemplated by the Merger Agreement
and the Asset Purchase Agreement shall be consummated
concurrently with consummation of the transactions contemplated
by this Agreement.
7.9 Stockholder's Agreement. Concurrent with the
consummation of the subscription for shares provided by this
Agreement, the parties hereto shall execute and deliver to each
other the Stockholders' Agreement.
VIII. INDEMNIFICATION AND REMEDIES
8.1 Indemnification. (i) Each Purchaser severally
but not jointly agrees to indemnify, defend and hold Holdings,
its subsidiaries, each other Purchaser and each of their
respective affiliates and their respective directors, officers,
employees and agents harmless from and against and in respect of
any loss, claim, liability, fines, penalty, costs, expense or
damage incurred or sustained by such indemnified person, arising
out of or relating to any inaccuracy of, or breach by such
Purchaser of, representations and warranties contained in Article
III of this Agreement, obligations or covenants contained herein
or in certificates or other documents delivered hereunder or
pursuant hereto, and all reasonable costs and expenses (including
reasonable attorneys' fees) incurred by such indemnified person,
in connection with any action, suit, proceeding, demand,
assessment, settlement or judgment incident to any of the matters
indemnified against in this Section 8.1(i), including, without
limitation, all such costs and expenses incurred in investigating
and evaluating any of the foregoing.
(ii) Holdings agrees to indemnify, defend and hold
each Purchaser and each of their respective affiliates and their
respective directors, officers, employees and agents harmless
from and against and in respect of any loss, claim, liability,
fine, penalty, cost, expense or damage incurred or sustained by
such indemnified person any inaccuracy of, or breach by Holdings
of, any of its representations and warranties contained in
Article III of this Agreement, obligations or covenants,
contained herein or in certificates or other documents delivered
hereunder or pursuant hereto, and all reasonable costs and
expenses (including reasonable attorneys' fees) incurred by such
indemnified person in connection with any action, suit,
proceeding, demand, assessment, settlement or judgment incident
to any
26
of the matters indemnified against in this Section 8.1(ii),
including, without limitation, all such costs and expenses
incurred in investigating and evaluating any of the foregoing.
(iii) In addition to the indemnification provided in
Section 8.1(i) hereof, LWN, LGII and RDI jointly and severally
agree to indemnify, defend and hold Holdings, its subsidiaries
and BCP and each of their respective affiliates and their
respective directors, officers, employees and agents harmless, on
an after-tax basis, from and against and in respect of any loss,
claim, liability, fine, penalty, cost, expense, damage, judgment,
settlement, remedial and investigatory cost, and reasonable
attorneys', environmental consultants' and laboratory fees
incurred or sustained by such indemnified person resulting from,
arising out of or relating to
(a) any inaccuracy of, or breach by LWN, LGII or RDI
of, any of their respective representations and
warranties contained in Article IV of this Agreement it
being understood that (x) the schedules to Article IV
("Article IV Schedules") have been provided to Holdings
and BCP solely for informational purposes and (y)
certain provisions in Article IV have been qualified as
to knowledge solely for purposes of making the
representation or warranty true and correct and not for
purposes of elimination of liability hereunder; and
therefore, for purposes of determining indemnification
under this Section 8.1(iii)(a), (i) notwithstanding the
inclusion of any item or information on the Article IV
Schedules, Loewen shall be obligated fully under each
section of Article IV as if such item or information
were not set forth on the Article IV Schedules and (ii)
the Article IV representations and warranties shall be
read without any knowledge qualification, as
applicable;
(b) the operation of the Satellite Properties or any
business of the Subsidiaries prior to the Closing Date;
(c) any conduct, circumstance, event or condition
covered under Section 4.23 hereof or otherwise arising
out of or relating to Environmental Laws or Hazardous
Substances existing at or prior to the Closing relating
to the Subsidiaries or the Satellite Properties;
(d) the operation of Harbor Lawn Cemetery and Angels
Lawn Cemetery without a Certificate of Authority from
the State of California and the operation of San
Fernando Mortuary, Inc. without a funeral establishment
license;
(e) the liens disclosed on Schedule 4.5;
(f) acquisition by LGII or RDI of their respective
interests in Holdings and their respective indirect
interests in Roses, Inc. and the Association;
(g) any Shortfall as defined in Section 5.1 hereof;
27
(h) any liability of any Subsidiary (x) for any Taxes
of the Subsidiary with respect to any Tax year or
portion thereof ending on or before the Closing Date
(or for any Tax year beginning before and ending after
the Closing Date to the extent allocable (determined in
a manner consistent with Sections 8.2(a) or (b) to the
portion of such period beginning before and ending on
the Closing Date), and (y) for the unpaid taxes of any
person (other than any of the Subsidiaries) under Reg.
1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by
contract, or otherwise;
(i) any Taxes relating to gains from the sale of the
assets of any of the Subsidiaries to the extent such
gains would have been realized if the asset had been
sold in a fully taxable transaction on the Closing
Date;
(j) any Transfer Taxes, as defined in Section 8.2
hereof;
(k) to the extent that one or more representations
contained in Article IV of this Agreement would have
been breached but for exceptions in the representations
permitting violations up to certain specified dollar
amounts, the excess of all such exceptions over
$250,000;
and all reasonable costs and expenses (including reasonable
attorneys' fees) incurred by such indemnified person in
connection with any action, suit, proceeding, demand, assessment,
settlement or judgment incident to any of the matters indemnified
against in this Section 8.1(iii), including, without limitation,
all such costs and expenses incurred in investigating and
evaluating any of the foregoing.
(iv) If the indemnification provided for in Section
8.1(iii) shall for any reason be unavailable to or insufficient
to hold harmless an indemnified party under Section 8.1(iii) in
respect of any loss, claim, liability, fine, penalty, cost,
expense, damage, judgment, settlement, remedial and investigatory
cost, and reasonable attorneys', environmental consultants' and
laboratory fees incurred or sustained in respect thereof,
referred to therein, then each indemnifying party shall, in lieu
of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such
loss, claim, liability, fine, penalty, cost, expense, damage,
judgment, settlement, remedial and investigatory cost, and
reasonable attorneys', environmental consultants' and laboratory
fees incurred or sustained in respect thereof, in such proportion
as shall be appropriate to reflect the relative benefits received
by and the relative fault of the parties as well as any other
relevant equitable considerations.
(v) Any indemnity payment made pursuant to this Section
8 shall be treated as a contribution to the capital of Holdings,
provided, that such contribution shall not be deemed an
Additional LGII Contribution for purposes of the Put/Call
Agreement of even date herewith among BCP, LWN and LGII. In the
event that Holdings or its subsidiaries are liable for any Tax as
a result of an indemnity payment pursuant to this Section 8, then
the amount payable hereunder shall be increased to the extent
necessary to yield to Holdings (after payment of all Taxes) the
full amount of gains specified in this Section 8.
28
(vi) The representations and warranties contained
herein of the parties hereto shall survive the Closing and shall
continue in full force and effect (i) with respect to any
representation or warranty contained in Section 4.4 hereof, for
the applicable statute of limitations and (ii) with respect to
any other representation or warranty, for period of eight years
after the Closing. The expiration of any representation and
warranty shall not affect any claim made prior to the date of
such expiration, but shall extinguish a party's rights under
claims not made prior to such date. The covenants and agreements
of Loewen shall survive the Closing for an indefinite period.
(vii) Promptly after receipt by an indemnified party
under this Section 8.1 of notice of any claim or the commencement
of any action, the indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under this
Section 8.1, notify the indemnifying party in writing of the
claim or the commencement of that action, provided that the
failure to notify the indemnifying party shall not relieve it,
from any liability which it may have to the indemnified party
unless and only to the extent such failure materially prejudices
the ability of the indemnifying party to defend against or
mitigate damages arising out of such claim. If any claim shall
be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be
entitled to participate therein, and to assume the defense
thereof, with counsel reasonably satisfactory to the indemnified
party at the sole cost and expense of the indemnifying party.
After notice from the indemnifying party to the indemnified party
of its election to assume the defense of such claim or action,
the indemnifying party shall not be liable for other expenses
subsequently incurred by the indemnified party in connection with
the defense thereof other than reasonable costs of investigation,
provided, however, that if the indemnifying party elects not to
assume such defense or fails to give written notice to the
indemnified party assuming the defense of such claim within
thirty (30) days after the indemnifying party's receipt of notice
of such claim, the indemnified party may retain counsel
satisfactory to it, and the indemnifying party shall pay all
reasonable fees and expenses of such counsel for the indemnified
party promptly as statements therefore are received; provided,
however, that the indemnified party shall obtain the indemnifying
party's consent (which consent shall not be unreasonably withheld
or delayed) to any payment or settlement of any such claim.
Loewen, BCP and Holdings each agree to render to each other such
assistance as may reasonably be requested in order to insure the
proper and adequate defense of any such claim or proceeding, all
of which shall be at the cost of the indemnifying party. The
indemnified party shall also have the right to select its own
counsel, at its own expense, to represent the indemnified party
and to participate in the defense of such claim, as applicable.
An indemnified party may take over the defense of a claim at its
own expense at any time if it irrevocably waives its right to
indemnity as to that claim. The indemnified party shall be
obligated prior to claiming any indemnification or reimbursement
under this Agreement to use all reasonable efforts (at the
expense of the indemnifying party) to obtain any insurance
proceeds available to such indemnified party with regard to the
applicable claim; provided, however, that the success or failure
of such efforts on the part of the indemnified party shall not
relieve the indemnifying party of its obligation (i) to provide
indemnification hereunder or (ii) to assume the defense of the
claim, or, if failing to do so, to pay the fees and expenses of
counsel to the indemnified party.
29
8.2 Tax Matters. The following provisions shall
govern the allocation of responsibility as between Loewen and
Holdings for certain tax matters following the Closing:
(a) Tax Periods Ending on or Before the Closing Date.
Loewen shall prepare or cause to be prepared and file or cause to
be filed all Tax Returns relating to the Subsidiaries for all
periods ending on or prior to the Closing Date which are filed
after the Closing Date and shall pay all Taxes shown as due and
payable on such Tax Returns.
(b) Tax Periods Beginning Before and Ending After the
Closing Date. Holdings shall prepare or cause to be prepared and
file or cause to be filed any Tax Returns relating to the
Subsidiaries for Tax periods which begin before the Closing Date
and end after the Closing Date. Loewen shall pay to Holdings
within fifteen (15) days after the date on which Taxes are paid
with respect to such periods an amount equal to the portion of
such Taxes which relates to the portion of such Taxable period
ending on the Closing Date. For purposes of this Section 8.2(b),
in the case of any Taxes that are imposed on a periodic basis and
are payable for a Taxable period that includes (but does not end
on) the Closing Date, the portion of such Tax which relates to
the portion of such Taxable period ending on the Closing Date
shall (A) in the case of any Taxes other than Taxes based upon or
related to income or receipts, be deemed to be the amount of such
Tax for the entire Taxable period multiplied by a fraction the
numerator of which is the number of days in the Taxable period
ending on the Closing Date and the denominator of which is the
number of days in the entire taxable period, and (B) in the case
of any Tax based upon or related to income or receipts be deemed
equal to the amount which would be payable if the relevant
Taxable period ended on the Closing Date. Any credits relating
to a taxable period that begins before and ends after the Closing
Date shall be taken into account as though the relevant taxable
period ended on the Closing Date. All determinations necessary
to give effect to the foregoing allocations shall be made in a
manner consistent with prior practice of the applicable
Subsidiary.
(c) Refunds and Tax Benefits. Any Tax refunds that
are received by Holdings and its subsidiaries, and any amounts
credited against Tax to which Holdings or its subsidiaries become
entitled, that relate to Tax periods or portions thereof ending
on or before the Closing Date shall be for the account of Loewen,
and Holdings shall pay over to Loewen any such refund or the
amount of any such credit within fifteen (15) days after receipt
or entitlement thereto.
(d) Cooperation on Tax Matters. (i) Holdings and its
subsidiaries and Loewen shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection
with the filing of Tax Returns pursuant to this Section and any
audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually
convenient basis to provide additional information and
explanation of any material provided hereunder. Holdings and its
subsidiaries and Loewen (A) agree to retain all books and records
with respect to Tax matters pertinent to the Subsidiaries
relating to any Taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the
extent notified by Loewen or Holdings, any extensions thereof) of
the respective
(30)
Taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other
party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party
so requests, Loewen or Holdings, as the case may be, shall allow
the other party to take possession of such books and records.
(ii) Loewen and Holdings further agree, upon request,
to use their best efforts to obtain any certificate or other
document from any governmental authority or any other person as
may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including, but not limited to, with respect to
the transactions contemplated hereby).
(iii) Loewen and Holdings further agree, upon request,
to provide the other party with all information that either party
may be required to report pursuant to 6043 of the Code and all
Treasury Department Regulations promulgated thereunder.
(e) Tax Sharing Agreements. All tax sharing
agreements or similar arrangements with respect to or involving
the Subsidiaries shall be terminated as of the Closing Date and,
after the Closing Date, the Subsidiaries shall not be bound
thereby or have any liability thereunder.
(f) Certain Taxes. All transfer, documentary, sales,
use, stamp, registration and other such Taxes and fees (including
any penalties and interest thereon) incurred in connection with
this Agreement (including any New York State Gains Tax, New York
City Transfer Tax and any similar Tax imposed in other states or
subdivisions) (collectively, "Transfer Taxes"), shall be paid by
Loewen when due, and Loewen will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all
such transfer, documentary, sales, use, stamp, registration and
other Taxes and fees, and, if required by applicable law,
Holdings will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
IX. AGREEMENTS REGARDING THE BCP STOCK, THE RHIM STOCK AND THE
LOEWEN STOCK
9.1 Legends. The certificate (or certificates)
representing the BCP Stock, the RHIM Stock and the Loewen Stock
shall bear the following legend (until such time as subsequent
transfers thereof are no longer restricted in accordance with the
Securities and Exchange Act or the Stockholders' Agreement):
"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 NOVEMBER 19, 1996, AMONG ROSE
31
HILLS HOLDINGS CORP. (THE "COMPANY"), BLACKSTONE
CAPITAL PARTNERS II MERCHANT BANKING FUND L.P., FAMILY
INVESTMENT PARTNERSHIP II L.P., BLACKSTONE ROSE HILLS
OFFSHORE CAPITAL PARTNERS L.P., LOEWEN GROUP
INTERNATIONAL INC., ROSES DELAWARE, INC. AND RHI
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."
X. MISCELLANEOUS
10.1 Notices. Notices under this Agreement shall be
given in the manner provided in the Stockholders' Agreement.
10.2 Governing Law. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the
state of New York without regard to the conflicts of law
principles thereof. Each of the parties by its execution hereof
hereby (i) irrevocably submits to the jurisdiction of the federal
and state courts located in the Southern District of New York for
the purpose of any suit, action or other proceeding arising out
of or based upon this Agreement or any other agreement
contemplated hereby or relating to the subject matter hereof or
thereof and (ii) waives to the extent not prohibited by
applicable law, and agrees not to assert by way of motion, as a
defense or otherwise, that its property is exempt or immune from
attachment or execution, that any such proceeding brought in one
of the above-named courts is improper, or that any right or
remedy relating to this Agreement or any other agreement
contemplated hereby, or the subject matter hereof or thereof, may
not be
32
enforced in or by such court. Each of the parties hereby
consents to service of process in any such proceeding in any
manner permitted by the laws of the state of New York, and agrees
that service of process by registered or certified mail, return
receipt requested, at its address specified herein as reasonably
calculated to give actual notice.
10.3 WAIVERS OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.
10.4 No Assignment. No party hereto may assign its
rights and obligations hereunder without the prior consent of all
the other parties hereto.
10.5 Counterparts. This Agreement may be executed in
two or more counterparts, and by different parties on separate
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
10.6 Integration. This Agreement and the documents
referred to herein or delivered pursuant hereto, including the
exhibits hereto, contain the entire understanding of the parties
with respect to the subject matter hereof and thereof. There are
no agreements, representations, warranties, covenants or
undertakings with respect to the subject matter hereof and
thereof other than those expressly set forth herein and therein.
This Agreement supersedes all prior agreements and understandings
between the parties with respect to this subject matter.
10.7 Termination. This Agreement shall terminate upon
the termination of the Stockholders' Agreement.
10.8 Expenses. In the event that the transactions
contemplated by this Agreement are not consummated, then each
party shall bear its own costs and expenses.
10.9 Termination of Subscription Agreements. Holdings,
BCP II and LGII agree that upon execution of this Agreement, the
Subscription Agreements, dated September 12, 1996 to which each
of them is a party will be terminated without any liability or
further obligation to any other party and the subscription for
shares provided for therein shall be cancelled.
10.10 Transfer of BCP Stock. BCP represents and
warrants to LGII and LWN that it has no current plan to transfer
the BCP Stock to any of its affiliates.
33
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
ROSE HILLS HOLDINGS CORP.
By: /s/ executed
Name:
Title:
LOEWEN GROUP INTERNATIONAL, INC.
By: /s/ F. Andrew Scott
Name: F. Andrew Scott
Title:
THE LOEWEN GROUP INC.
By: /s/ F. Andrew Scott
Name: F. Andrew Scott
Title:
ROSES DELAWARE, INC.
By: /s/ F. Andrew Scott
Name: F. Andrew Scott
Title:
BLACKSTONE CAPITAL PARTNERS II
MERCHANT BANKING FUND L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.,
its general partner
By: /s/ executed
Name:
Title:
BLACKSTONE ROSE HILLS OFFSHORE CAPITAL PARTNERS L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.,
its general partner
By: /s/ executed
Name:
Title:
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP II L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.,
its general partner
By: /s/ executed
Name:
Title:
RHI MANAGEMENT DIRECT L.P.
By: PSI P&S CORP.,
its general partner
By: /s/ executed
Name:
Title:
Exhibit A
Satellite Properties
Angels Lawn Cemetary
Angels Lawn Funeral Home
Colton Funeral Home
Custer Christiansen Mortuary
Custer Christiansen Baldwin-Puente
Custer Christiansen Glendora
Custer Christiansen West Covina
Custer Christiansen Blackman
Diamond & Sons Mettler Mortuary
Diamond-Garden Grove Funeral Home
Glasband-Willen Mortuary
Grove Colonial Funeral Home
Harbor Lawn Cemetary
Harbor Lawn Memorial Park
Neels Brea Mortuary
Richardson-Peterson Mortuary
San Fernando Mortuary
White's Funeral Home
Exhibit B
Form of Opinion of
Stradley, Ronan, Stevens & Young, LLP
November 19, 1996
Rose Hills Holdings Corp.
c/o The Blackstone Group
Park Avenue 31st floor
New York, New York 10154
Ladies and Gentlemen:
We have acted as counsel to Loewen Group International Inc., a
Delaware corporation ("LGII") and Roses Delaware, Inc., a
Delaware corporation ("RDI") in connection with the transactions
contemplated by: 1) the subscription agreement, dated November
19, 1996, among Rose Hills Holdings Corp. ("Holdings"),
Blackstone Capital Partners II Merchant Banking Fund L.P.
("BCPII"), Blackstone Rose Hills Offshore Capital Partners L.P.
("BROCP"), Blackstone Family Investment Partnership II L.P.
("BFIP" and, together with BCPII, BOCP, "BCP"), The Loewen Group
Inc.("LWN"), LGII and RDI (the "Subscription Agreement"); 2) the
stockholders agreement, dated November 19, 1996, among Holdings,
BCP, LGII and RDI (the "Stockholders Agreement"); 3) the put/call
agreement, dated November 19, 1996, among BCP, LWN, LGII and RDI
(the "Put/Call Agreement"); and 4) the administrative services
agreement, dated November 19, 1996, among LGII, LWN and Rose
Hills Acquisition Corp. (the "Administrative Services
Agreement").
We have examined the Subscription Agreement, the Stockholders
Agreement, the Put/Call Agreement and the Administrative Services
Agreement and have examined such corporate records, agreements,
documents and other instruments and such certificates or
comparable documents of public officials and of officers and
representatives of the Company, and have made such other and
further investigations necessary as a basis for the opinions
hereinafter set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us
as certified or photostatic copies, and the authenticity of the
originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that:
1. Each of LGII and RDI is a corporation organized and in
good standing under the laws of the State of Delaware.
2. The Stockholders Agreement has been duly authorized,
executed and delivered by LGII and RDI and constitutes a legal,
valid and binding obligation of LGII and RDI enforceable against
LGII and RDI in accordance with its terms.
3. Each of the Subscription Agreement and the Put/Call
Agreement has been duly authorized, executed and delivered by
LWN, LGII and RDI and constitutes a legal, valid and binding
obligation of LWN, LGII and RDI enforceable against LWN, LGII and
RDI in accordance with its terms.
4. The Administrative Services Agreement has been duly
authorized, executed and delivered by LWN and LGII and
constitutes a legal, valid and binding obligation of LWN and LGII
enforceable against LWN and LGII in accordance with its terms.
5. Upon receipt of consideration for and delivery of the
Subsidiary Stock (as defined in the Subscription Agreement) in
accordance with the Subscription Agreement, Holdings will acquire
all of the rights of RDI in the Subsidiary Stock.
For purposes of the opinions set forth above, we have assumed
that Pennsylvania law is the same as New York law. We are
members of the Bar of the Commonwealth of Pennsylvania, and we do
not express any opinion herein concerning any law other than the
law of the Commonwealth of Pennsylvania, the federal law of the
United States and the Delaware General Corporation Law.
This opinion letter is rendered to you in connection with the
above described transactions. This opinion letter may not be
relied upon by you for any other purpose, or relied upon by, or
furnished to, any other person, firm or corporation without our
prior written consent.
Very truly yours,
Exhibit C
Form of Opinion of
Russell & DuMoulin
November 19, 1996
Rose Hills Holdings Corp.
c/o The Blackstone Group
Park Avenue 31st floor
New York, New York 10154
Ladies and Gentlemen:
We have acted as counsel to the Loewen Group Inc., a British
Columbia corporation ("LWN") in connection with the transactions
contemplated by: 1) the subscription agreement, dated November
19, 1996, among Rose Hills Holdings Corp. ("Holdings"),
Blackstone Capital Partners II Merchant Banking Fund L.P.
("BCPII"), Blackstone Rose Hills Offshore Capital Partners L.P.
("BROCP"), Blackstone Family Investment Partnership II L.P.
("BFIP" and, together with BCPII, BOCP, "BCP"), LWN, Loewen Group
International Inc., a Delaware corporation ("LGII") and Roses
Delaware, Inc., a Delaware corporation ("RDI")(the "Subscription
Agreement"); 2) the put/call agreement, dated November 19, 1996,
among BCP, LWN, LGII and RDI (the "Put/Call Agreement"); and 3)
the administrative services agreement, dated November 19, 1996,
among LGII, LWN and Rose Hills Acquisition Corp., a Delaware
corporation (the "Administrative Services Agreement").
We have examined the Subscription Agreement, the Put/Call
Agreement and the Administrative Services Agreement and have
examined such corporate records, agreements, documents and other
instruments and such certificates or comparable documents of
public officials and of officers and representatives of the
Company, and have made such other and further investigations
necessary as a basis for the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us
as certified or photostatic copies, and the authenticity of the
originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that:
1. LWN has been duly incorporated and is validly existing
and in good standing as a corporation under the laws of British
Columbia.
2. Each of the Subscription Agreement, the Put/Call
Agreement and the Administrative Services Agreement has been duly
authorized, executed and delivered by LWN.
3. All necessary corporate action has been taken by LWN to
authorize the Agreements and their execution and delivery by LWN.
We are members of the Bar of the province of British Columbia,
and we do not express any opinion herein concerning any law other
than the law of the province of British Columbia and the federal
law of Canada.
This opinion letter is rendered to you in connection with the
above described transactions. This opinion letter may not be
relied upon by you for any other purpose, or relied upon by, or
furnished to, any other person, firm or corporation without our
prior written consent.
Very truly yours,
_____________________________________
_____________________________________
PUT/CALL AGREEMENT
Among
BLACKSTONE CAPITAL PARTNERS II
MERCHANT BANKING FUND L.P.,
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP II L.P.,
BLACKSTONE ROSE HILLS OFFSHORE
CAPITAL PARTNERS L.P.,
LOEWEN GROUP INTERNATIONAL, INC.
ROSES DELAWARE, INC.
THE LOEWEN GROUP INC.
And
RHI MANAGEMENT DIRECT L.P.
________________________________
Dated as of: November 19, 1996
________________________________
____________________________________
____________________________________
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS 2
1.1 Certain Defined Terms 2
ARTICLE II
CALL AND PUT OPTIONS 16
2.1 Call Option 16
2.2 Put Option 16
2.3 Call Option Exercise Price 17
2.4 Put Option Exercise Price 17
ARTICLE III
CALCULATION OF OPTION PRICE 18
3.1 Calculation of Creation Price and Acquisition Creation
Price 18
3.2 Calculation of Pro Forma EBITDA for the Entry Relevant
Period and Creation Multiple 19
3.3 Calculation of Pro Forma Acquisition EBITDA for the Entry
Relevant Period 20
3.4 Calculation of EBITDA for the Exit Relevant Period 20
3.5 Access to Information; Resolution of Disputes;
Miscellaneous 20
ARTICLE IV
DETERMINATION OF OPTION CONSIDERATION; CERTAIN CONDITIONS 21
4.1 Option Consideration 21
4.2 Conditions to Issuance of Loewen Common Stock 23
ARTICLE V
REGISTRATION RIGHTS 24
5.1 Incidental Registration 24
5.2 Registration on Request 25
5.3 Registration Procedures 27
5.4 Indemnification 29
Page
ARTICLE VI
REPRESENTATIONS AND WARRANTIES 32
6.1 Representations and Warranties of All Parties 32
6.2 Representations and Warranties of LGII, RDI and LWN 32
6.3 Representations and Warranties of BCP and RHIM 33
ARTICLE VII
ADDITIONAL AGREEMENTS 34
7.1 Calculation of EBITDA 34
7.2 Further Assurances 35
7.3 LWN Guarantee 35
7.4 Drag-Along Rights 36
ARTICLE VIII
CLOSINGS 37
8.1 Payment of the Option Price in Cash or Loewen Common
Stock 37
8.2 Exercise of the BCP Liquidity Right 37
8.3 Default By LGII or LWN 38
8.4 Time and Place of Closing 38
ARTICLE IX
MISCELLANEOUS 38
9.1 Notices 38
9.2 Severability; Mutuality of Options 39
9.3 Entire Agreement 39
9.4 Amendment and Waiver 39
9.5 Assignment; Binding on Transferees 39
9.6 Variations in Pronouns 40
9.7 Governing Law 40
9.8 Further Assurances 40
9.9 Headings 40
9.10 Counterparts 40
9.11 Submission to Jurisdiction; Waivers. 40
9.12 WAIVERS OF JURY TRIAL 40
PUT/CALL AGREEMENT
PUT/CALL AGREEMENT, dated as of November 19, 1996 (this
"Agreement"), among Blackstone Capital Partners II Merchant
Banking Fund L.P., a Delaware limited partnership ("BCPII"),
Blackstone Rose Hills Offshore Capital Partners L.P., a Delaware
limited partnership ("BROCP"), Blackstone Family Investment
Partnership II L.P., a Delaware limited partnership ("BFIP" and,
together with BCPII, BROCP and each of their respective permitted
assigns and transferees as provided herein, and together with any
Affiliate thereof that acquires shares of the capital stock of
Rose Hills Holdings Corp., a Delaware corporation formerly known
as Tuder Holding Company ("Holdings"), 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"), Roses Delaware, Inc., a Delaware
corporation (together with its permitted assigns and transferees
as provided herein, "RDI"), The Loewen Group Inc., a British
Columbia corporation ("LWN") and RHI Management Direct L.P., a
Delaware limited partnership ("RHIM"). BCP, LGII, RDI and RHIM
are herein collectively referred to as the "Stockholders" and
individually as a "Stockholder."
WHEREAS, Tudor Acquisition Corp., a Delaware corporation which
has been renamed Rose Hills Acquisition Corp. ("RHAC"), has
agreed to (i) merge into Roses, Inc., a California corporation
("RI"), pursuant to an Agreement and Plan of Merger dated
September 19, 1996 (the "Merger Agreement") among RI, the
stockholders of RI and RHAC (which is assigning its rights under
the Merger Agreement to its wholly owned subsidiary RH Mortuary
Corporation) and (ii) acquire substantially all of the cemetery
related assets and liabilities of Rose Hills Memorial Park
Association (the "Association") pursuant to an Asset Purchase
Agreement dated September 19, 1996 (the "Asset Purchase
Agreement", and together with the Merger Agreement, the
"Agreements") between the Association and RHAC (which is
assigning its rights under the Asset Purchase Agreement to its
wholly owned subsidiary Rose Hills, Inc.);
WHEREAS, such transactions are being consummated concurrently
with the execution and delivery of this Agreement;
WHEREAS, pursuant to a Subscription Agreement of even date
herewith among Holdings, LWN and the Stockholders (the
"Subscription Agreement"), RDI has transferred to Holdings all of
the issued and outstanding stock of certain of its subsidiaries
which own and operate funeral homes and cemeteries in California
(the "Satellite Properties") in exchange for shares of Preferred
Stock (as hereinafter defined);
WHEREAS, pursuant to the Subscription Agreement LGII, RHIM and
the BCP Entities have acquired shares of Common Stock (as
hereinafter defined) and Preferred Stock; and
2
WHEREAS, the parties hereto desire to enter into this Agreement
for the purpose of setting forth certain agreements regarding the
rights and obligations of the Stockholders;
NOW, THEREFORE, in consideration of the mutual covenants and
conditions as hereinafter set forth, the parties hereto do hereby
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. Capitalized terms
used herein and not otherwise defined herein shall have the
following meanings:
"Acquisition" means the direct or indirect acquisition by
Holdings during the term of this Agreement of all or part of one
or more funeral homes or cemeteries (other than the Rose Hills
Cemetery, the Mortuary and the Satellite Properties), whether
effected as an acquisition by RHC or as a contribution pursuant
to a Contribution Agreement.
"Acquisition Creation Multiple" means in respect of any
Acquisition consummated prior to the Exit Relevant Period, the
quotient of (i) the relevant Acquisition Creation Price divided
by (ii) the relevant Pro Forma Acquisition EBITDA for the Entry
Relevant Period.
"Acquisition Creation Price" means (i) with respect to an
Acquisition of Contributed Properties consummated prior to the
Exit Relevant Period, the product of (x) 7 times (y) Acquisition
EBITDA for such Contributed Properties for the twelve full
calendar months ending immediately prior to or coincident with
the date a Contribution Agreement is executed and delivered by
the relevant parties in respect of such Acquisition and (ii) with
respect to any other Acquisition consummated prior to the Exit
Relevant Period, the price mutually agreed by BCP and LGII at the
time of such Acquisition utilizing the same methodology utilized
in calculating the Creation Price.
"Acquisition EBITDA" means, with respect to a particular
Acquisition and for any period, the amount of Consolidated Cash
Flow for the business being acquired in such Acquisition, subject
to Section 7.1 of this Agreement.
"Additional BCP Contribution" means the amount in U.S. Dollars of
each additional purchase of Common Stock made by BCP or any of
its Affiliates pursuant to Section 5.4 of the Stockholders'
Agreement.
"Additional LGII Contribution" means the amount in U.S. Dollars
of each additional purchase of Common Stock or Preferred Stock
made by LGII or any of its Affiliates prior to the Exit Relevant
Period pursuant to Section 5.4 or 5.5 of the Stockholders'
3
Agreement, but shall exclude any indemnity payments made pursuant
to Section 8.1 of the Subscription Agreement or Section 7.1(ii)
of any Contribution Agreement.
"Adjusted BCP Contribution" means the BCP Contribution less
$15,000,000.
"Adjusted Call Creation Multiple" means, as calculated in
connection with a particular Acquisition consummated prior to the
Exit Relevant Period, the sum of (a) the product of (i) the
relevant Acquisition Creation Multiple, times (ii) a fraction,
the numerator of which is the relevant Acquisition Creation Price
and the denominator of which is the sum of the relevant
Acquisition Creation Price and the Cumulative Creation Price, and
(b) the product of (i) the Adjusted Call Creation Multiple in
effect immediately prior to the relevant Acquisition times (ii) a
fraction, the numerator of which is the Cumulative Creation Price
and the denominator of which is the sum of such Cumulative
Creation Price plus the relevant Acquisition Creation Price. The
Adjusted Call Creation Multiple shall not be subject to any
further recalculation in respect of Acquisitions consummated
during or after the Exit Relevant Period.
"Adjusted Put Creation Multiple" means, as calculated in
connection with a particular Acquisition consummated prior to the
Exit Relevant Period:
(i) if such Acquisition involves Contributed Properties
acquired pursuant to a Contribution Agreement, the sum of
(x) the product of (a) the greater of the relevant
Minimum Put Multiple or 115% of the Adjusted Call Creation
Multiple in effect immediately prior to the relevant Acquisition
times (b) a fraction, the numerator of which is the Cumulative
Creation Price and the denominator of which is the sum of the
Cumulative Creation Price and the relevant Acquisition Creation
Price, and
(y) the product of (a) 115% of the greater of 7 or the
Acquisition Creation Multiple calculated for such Acquisition
times (b) a fraction, the numerator of which is the relevant
Acquisition Creation Price and the denominator of which is the
sum of the Cumulative Creation Price and the relevant Acquisition
Creation Price;
and (ii) if such Acquisition does not involve
Contributed Properties acquired pursuant to a Contribution
Agreement, the greater of (x) 115% of the Adjusted Call Creation
Multiple calculated in connection with such Acquisition and (y)
the relevant Minimum Put Multiple.
The Adjusted Put Creation Multiple shall not be subject to any
further recalculation in respect of Acquisitions consummated
during or after the Exit Relevant Period.
"Adjusted Total Equity Value means, as of the Exercise Date, the
sum of Total Equity Value, the Loewen Preferred Contribution and
Loewen Accrued Preferred Dividends.
4
"Affiliate" of any Person means any other Person that directly or
indirectly controls, is controlled by, or is under common control
with, such Person.
"ASA" means the Administrative Services Agreement, dated as of
November 19, 1996 among RHAC, LGII and LWN.
"BCP Call Hurdle Profit" means the amount in excess of the BCP
Contribution necessary to provide a 22.5% compounded annual
return on the BCP Contribution from and including the Closing
Date (or, with respect to Additional BCP Contributions, measured
from and including the date on which each such Additional BCP
Contribution was made) to but excluding the Exercise Date.
"BCP Common Stock" means the shares of Common Stock held by the
BCP Entities.
"BCP Contribution" means the sum of $35,000,000 (which includes
the investment in Common Stock made by RHIM) and the aggregate
amount of any Additional BCP Contributions.
"BCP Liquidity Right" is defined in Section 4.1.
"BCP Put Hurdle Profit" means the amount in excess of the BCP
Contribution necessary to provide a compounded annual return on
the BCP Contribution from and including the Closing Date (or,
with respect to Additional BCP Contributions, measured from and
including the date on which each such Additional BCP Contribution
was made) to but excluding the Exercise Date equal to (i) in the
event there has been a Change of Control after the date of this
Agreement and prior to the Exercise Date, 27.5% or (ii) in the
event there has been no such Change of Control, 25%.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are
authorized or required by law to close.
"Call Creation Multiple" means the quotient of (i) the Creation
Price divided by (ii) Pro Forma EBITDA for the Entry Relevant
Period.
"Call Option" is defined in Section 2.1.
"Call Option Exercise Price" is defined in Section 2.3.
"Capitalized Liabilities' means the capitalized value as of the
date of determination, computed utilizing a 10% discount rate, of
Holdings' liabilities on a consolidated basis relating to
covenants not to compete, consulting agreements (including all
salary payable under agreements with Messrs. Durko and Poulson)
and other former owners' expenses.
5
"Change of Control" means an event or series of events by which
(i) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than any
person consisting entirely of one or more of the Permitted
Holders, is or becomes after the date of this Agreement the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act as in effect on the date hereof, except that for
such purpose such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than
35% of the total voting power of all voting stock of LWN then
outstanding, whether as a result of issuance of securities of
LWN, any merger, consolidation, liquidation or dissolution of
LWN, any direct or indirect transfer of securities by a Permitted
Holder or otherwise, under circumstances where the Permitted
Holders (x) beneficially own (as so defined) in the aggregate a
lesser percentage of the voting stock of LWN than such other
person or group, and (y) do not have the right or ability by
voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of LWN;
(ii) (1) another corporation merges into LWN or LGII,
or LWN or LGII consolidates with or merges into any other
corporation or
(2) LWN conveys, transfers or leases all or
substantially all of its assets or a controlling interest in LGII
or all or substantially all the assets of LGII to any person or
group, in one transaction or a series of transactions other than
any conveyance, transfer or lease between LWN and a wholly owned
subsidiary of LWN,
in each case, in one transaction or a series of
related transactions with the effect that a person
or group, other than
(A) any person or group consisting of one or more
Permitted Holders or
(B) a person or group which is the beneficial
owner of more than 50% of the total voting power of all voting
stock of LWN immediately prior to such transaction
becomes the beneficial owner of more than 50% of the
total voting power of all voting stock of the surviving
or transferee corporation of such transaction or
series; or
(iii) individuals who currently constitute LWN's
Board of Directors (together with any new directors whose
election by LWN's Board of Directors, or whose nomination for
election by LWN's shareholders, was approved by a vote of a
majority of the Directors then still in office who were either
Directors at the date hereof or
6
whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
Directors of LWN then in office.
"Closing" means the consummation of the transactions contemplated
by the Agreements.
"Closing Date" means the date on which the Closing occurs.
"Common Stock" means the common stock, par value $.01 per share,
of Holdings, including, where applicable non-voting common stock
of Holdings issued in connection with a Contribution.
"Consolidated Cash Flow" has the meaning ascribed to such term in
the Indenture as of the date of this Agreement, subject to
Section 7.1 of this Agreement.
"Contributed Properties" means any funeral home or cemetery or
group thereof conveyed to Holdings pursuant to a Contribution
Agreement.
"Contribution" means a contribution of Contributed Properties
pursuant to a Contribution Agreement.
"Contribution Agreement" means a Nearby Property Contribution
Agreement entered into pursuant to Section 5.5 of the
Stockholders' Agreement.
"Creation Price" means the sum of (a) the BCP Contribution, plus
(b) the Loewen Contribution, plus (c) $155 million, plus (d) the
net amount of any interest accruing on the Notes from their date
of issuance through the Closing Date (net of interest earned by
the escrow agent on the net proceeds of the Note issuance), plus
(e) the amount as of the Closing Date of all Capitalized
Liabilities, plus (f) the cost of the Directors' and Officers'
liability insurance policy relating to acts occurring prior to
the Closing Date which RHAC is required to maintain pursuant to
Section 6.7 of the Merger Agreement, plus (g) all severance costs
incurred by RHC for all Mortuary, Association and other RHC
employees who were employees immediately prior to the Closing
Date and who are terminated within six months of the Closing
Date, plus (h) any liability under the Mortuary defined benefit
plan (calculated in accordance with the methodology used to
prepare the pro forma financial statements included in the
Offering Memorandum), including the cost, if any, of terminating
such plan, provided such termination occurs within six months of
the Closing Date plus (i) any liability under the Rose Hills
Mortuary, L.P. Supplemental Employee Retirement Plan (calculated
in accordance with the methodology used to prepare the pro forma
financial statements included in the Offering Memorandum), plus
(j) any liability (calculated in accordance with the methodology
used to prepare the pro forma financial statements included in
the Offering Memorandum) under the Mortuary's Deferred
Compensation Plan for Selected Executives of Rose Hills Mortuary,
L.P. (the "Phantom 401(k) Plan"), plus (k) any liability
(calculated in accordance with the methodology used to prepare
the pro forma financial statements included in the Offering
Memorandum) under the Association's Trustees' and Executives'
Pension Plans (as defined in the Asset Purchase Agreement), plus
(l) the present value as of the
7
Closing Date, computed utilizing a 10% discount rate, of amounts,
if any, paid to the Association in respect of California UBTI tax
pursuant to Section 10.4(b)(v) of the Asset Purchase Agreement,
plus (m) the present value as of the Closing Date, computed
utilizing a 10% discount rate, of any losses incurred by RHC in
respect of violations of the Employee Retirement Income Security
Act of 1974, as amended, and the regulations thereunder,
applicable to the Mortuary's 401(k) plan (including taxes to be
paid with respect thereto), plus (n) any other capitalization of
on- or off-balance sheet liabilities or obligations, plus (o) the
amount by which RHC's aggregate cash on hand as of the Closing
Date, after giving effect on a pro forma basis to the payment of
all Transaction Costs, regardless of whether such Transaction
Costs are paid at or subsequent to the Closing Date (but
excluding any cash received by RHC on the Closing Date from RI or
the Satellite Properties), is less than $1.0 million, plus (p)
the present value as of the Closing Date, computed utilizing a
10% discount rate, of any liabilities arising as a result of the
transactions contemplated by the Agreements, provided such
liabilities arise no later than six months after the Closing
Date, plus (q) any payments made to the owner of any mineral
rights on property owned by RHC in order to obtain a quitclaim of
such rights, less (r) the amount of any payment made by the
Association or the Mortuary to RHC in accordance with the post-
closing adjustment provisions of Section 4.1(b) of the Merger
Agreement and Section 2.4(b) of the Asset Purchase Agreement,
provided that any such items described in clauses (d) through (q)
that are funded on the Closing Date shall not require an
incremental increase in the Creation Price.
"Credit Agreement means the credit agreement dated as of November
19, 1996 among RHAC and the lenders thereunder.
"Cumulative Creation Price" means the sum of the Creation Price
and the aggregate Acquisition Creation Price in respect of all
Acquisitions prior to the Acquisition with respect to which such
Cumulative Creation Price is being calculated.
"Default Rate" has the meaning ascribed to such term in the
Credit Agreement as of the date of this Agreement (as calculated
with reference to an "AXEL" bearing interest at the "Base Rate",
as such terms are defined in the Credit Agreement).
"EBITDA" means, for any period, the amount of Consolidated Cash
Flow calculated for RHC on a consolidated basis for the relevant
period less any revenue recognized pursuant to the IBPS
Agreement, subject to Section 7.1 of this Agreement.
"EBITDA for the Exit Relevant Period" means EBITDA calculated for
the Exit Relevant period, provided, however, that in the event
that RHC has consummated an Acquisition during the Exit Relevant
Period, then EBITDA for the Exit Relevant Period shall be
restated to eliminate the Acquisition EBITDA attributable to such
Acquisition.
"Excess Value One" means the greater of (i) zero or (ii) Total
Equity Value minus Total Call Hurdle Value (if the calculation is
being made in connection with the Call Option) or Total Put
Hurdle Value (if the calculation is being made in connection with
the Put Option), up to a maximum amount which, when multiplied by
0.3 and added to the BCP Contribution plus the BCP Call Hurdle
Profit (if the calculation is being made in connection
8
with the Call Option) or the BCP Put Hurdle Profit (if the
calculation is being made in connection with the Put Option),
results in an Option Price that produces a twenty-five percent
(25%) compounded annual return on the BCP Contribution.
"Excess Value Two" means the greater of (i) zero or (ii) Total
Equity Value less Total Call Hurdle Value (if the calculation is
being made in connection with the Call Option) or Total Put
Hurdle Value (if the calculation is being made in connection with
the Put Option) less Excess Value One.
"Exercise Date" means the date specified for the closing of the
exercise of either of the Options, as set forth in a notice given
pursuant to Section 2.1(b) or 2.2(b), as applicable.
"Exercise Date Value" means the value per share of 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 the Mortuary and the Association included
in the "Pro Forma Financial Information" section of the Offering
Memorandum.
"Guarantee" means the guarantee obligation of LWN set forth in
Section 7.3 hereof.
"Holder" shall mean any BCP Entity and any Permitted Transferee
who owns registrable securities.
"Holders' Portion" of the underwriters' discounts and commissions
means, with respect to particular Registrable Securities being
sold pursuant to a registration effected under Section 5.1 or
5.2, the excess, if any, of the underwriters' discount and
commissions charged in connection with such disposition over the
amount that such charge would have otherwise been if the
Registrable Securities being sold were sold at a public offering
price equal to the Exercise Date Value.
"IBPS Agreement" means the Buddhist Complex Development and Use
Agreement, dated March 1, 1994, between the Association and the
International Buddhist Progress Society.
"Indenture" means the Indenture, dated as of November 15, 1996,
between RHAC, as issuer, and United States Trust Company of New
York, as trustee.
9
"LGII Call Hurdle Profit" means the amount in excess of the LGII
Common Contribution necessary to provide a 22.5% compounded
annual return on the LGII Common Contribution from and including
the Closing Date (or, with respect to Additional LGII
Contributions made in respect of Common Stock, measured from and
including the date on which each such Additional LGII
Contribution was made) to but excluding the Exercise Date.
"LGII Common Contribution" means the sum of $9,000,000 and the
aggregate amount of any Additional LGII Contributions made in
respect of Common Stock.
"LGII Put Hurdle Profit" means the amount in excess of the LGII
Common Contribution necessary to provide a 25% compounded annual
return on the LGII Common Contribution from and including the
Closing Date (or, with respect to Additional LGII Contributions
made in respect of Common Stock, measured from and including the
date on which each such Additional LGII Contribution was made) to
but excluding the Exercise Date.
"Loewen Accrued Preferred Dividends" means, as of the date of
determination, the aggregate liquidation preference of the Loewen
Preferred less the Loewen Preferred Contribution.
"Loewen Common Stock" means the common stock, par value $.01 per
share, of The Loewen Group Inc., a British Columbia corporation,
but excluding shares of Common Stock held as a consequence of any
Acquisition made during or after the Exit Relevant Period.
"Loewen Contribution" means the sum of the LGII Common
Contribution and the Loewen Preferred Contribution.
"Loewen Preferred" means the shares of Preferred Stock held by
LGII, RDI and their respective Affiliates but excluding shares of
Preferred Stock (including additional liquidation preference
attributable to accrued but unpaid dividends thereon) held as a
consequence of any Acquisition made during or after the Exit
Relevant Period.
"Loewen Preferred Catch-up Amount" means the excess of (a) the
amount necessary to provide a 16.0% compounded annual return on
the Loewen Preferred Contribution from and including the Closing
Date (or, with respect to Additional LGII Contributions made in
respect of Preferred Stock, measured from and including the date
on which each such Additional LGII Contribution was made) to but
excluding the Exercise Date, over (b) the liquidation preference
as of the Exercise Date of the Loewen Preferred (including all
accrued dividends whether undeclared or paid in kind).
"Loewen Preferred Contribution" means the sum of (i) $63,000,000,
(ii) the Subsidiary Stock valued at $23,000,000 and (iii) the
aggregate amount of any Additional LGII Contributions made in
respect of Preferred Stock.
10
"Management Equity Indebtedness" means the aggregate amount of
outstanding loans, including accrued interest thereon (whether or
not capitalized), provided by RHC to RHIM or its management for
purposes of the acquisition of Common Stock.
"Market Value" means the average of the daily closing prices of
the Loewen Common Stock for the 30 trading day period ending on
the Exercise Date or such other relevant date of determination,
as the case may be. The closing price for each day shall be the
last reported sales price regular way or, in case no such
reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case
on the New York Stock Exchange, or, if the 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.
"Minimum Put Multiple" means, for purposes of calculating the
Adjusted Put Creation Multiple in connection with a particular
Acquisition:
(i) 12, if the Adjusted Put Creation Multiple is
being calculated in connection with an Acquisition that does not
involve, and that has not been preceded at any time by, a
Contribution; provided, that the Minimum Put Multiple in effect
immediately following such Acquisition shall be deemed to remain
at 12 until adjusted as provided below;
(ii) 12, if the Adjusted Put Creation Multiple is
being calculated in connection with an Acquisition that involves,
but that has not been preceded at any time by, a Contribution;
provided, that the Minimum Put Multiple in effect immediately
following such Acquisition shall be deemed to be equal to the
Adjusted Put Creation Multiple calculated in connection with such
Acquisition;
(iii) the Weighted Minimum Put Multiple, if the
Adjusted Put Creation Multiple is being calculated in connection
with an Acquisition that does not involve, but that has been
preceded at any time by, a Contribution; provided, that the
Minimum Put Multiple in effect immediately following such
Acquisition shall be deemed to be equal to such Weighted Minimum
Put Multiple; and
(iv) the Minimum Put Multiple deemed to be in effect
immediately following the most recently preceding calculation of
the Adjusted Put Creation Multiple, if the Adjusted Put Creation
Multiple is being calculated in connection with an Acquisition
that involves, and that has been preceded at any time by, a
Contribution; provided that the Minimum Put Multiple in effect
immediately following
11
such Acquisition shall be deemed to be equal to the Adjusted Put
Creation Multiple calculated in connection with such Acquisition.
"Mortuary" means Roses, Inc., a California corporation, and its
consolidated subsidiaries, which are being indirectly acquired by
Holdings on the Closing Date pursuant to the Merger Agreement.
"Notes" means the $80 million of 9 1/2% senior subordinated notes
due 2004 issued pursuant to the Indenture.
"Notification Date" means the date notification is given by an
exercising party under any of the Options in accordance with
Section 2.1(b) or 2.2(b).
"Obligations" means the obligation of LGII to pay on the Exercise
Date the cash portion, if any, of the Option Price, including,
without limitation, interest accruing at the Default Rate after
the Exercise Date after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like
proceeding, relating to LGII whether or not a claim for post-
filing or post-petition interest is allowed in such proceeding.
"Offering Memorandum" the offering memorandum dated November 14,
1996 relating to the offering of the Notes.
"Option" means the Call Option or the Put Option, as applicable.
"Option Price" means the Call Option Exercise Price or the Put
Option Exercise Price, as applicable and as determined in
accordance with this Agreement.
"Option Shares" means shares of Loewen Common Stock issuable in
connection with the exercise of an Option.
"Option Shares" means shares of Loewen Common Stock, if any,
issuable in connection with the Option.
"Permitted Holders" means, collectively Ray Loewen and his
estate, spouse, heirs, lineal descendants and legatees and legal
representatives of any of the foregoing and the trustee of any
bona fide trust of which one or more of the foregoing are the
beneficiaries, and any entity of which any of the foregoing,
individually or collectively, beneficially owns more than 50% of
the voting stock.
"Permitted Transferee" means any Person to whom a Stockholder
transfers shares of Common Stock or Preferred Stock, as the case
may be, in accordance with the Stockholders' Agreement and who is
required to, and does, become bound by the terms of this
Agreement, and includes any Person to whom a Permitted Transferee
(as thus defined) of a Stockholder (or a Permitted Transferee of
a Permitted Transferee) so further transfers shares and who is
required to, and does, become bound by the terms of this
Agreement.
12
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or other entity.
"Preferred Stock" means the 10% Pay In-Kind Cumulative Preferred
Stock, par value $.01 per share, of Holdings.
"Pro Forma Acquisition EBITDA for the Entry Relevant Period"
means:
(i) in the case of an Acquisition consummated on or prior to the date
which is 24 months prior to the end of the Exit Relevant Period,
the quotient of (a) the sum of (i) Acquisition EBITDA for first
full twelve calendar months following such consummation date
divided by 1.06 and (ii) Acquisition EBITDA for the second full
twelve calendar months following such consummation date divided
by 1.06 raised to a power equal to 2 and (b) 2, and may be
expressed as a formula calculation as follows:
First 12 mos. Acquisition EBITDA + Second 12 mos. Acquisition EBITDA
________________________________ _________________________________
2
(1.06) (1.06)
____________________________________________________________________
2
(ii) in the case of an Acquisition consummated during the 12 months
prior to the beginning of the Exit Relevant Period, the quotient
of (a) the sum of (i) Acquisition EBITDA for first full twelve
calendar months following such consummation date divided by 1.06
and (ii) Acquisition EBITDA for the period beginning on the first
day of the first month following such twelve calendar month
period and ending on last day of the Exit Relevant Period (the
"Remaining Period") divided by 1.06 raised to a power equal to
the quotient of (x) 365 plus the number of days in the Remaining
Period and (y) 365 and (b) the quotient of (x) 365 plus the
number of days in the Remaining Period and (y) 365, and may be
expressed as a formula calculation as follows:
First 12 mos. EBITDA + Remaining Period EBITDA
____________________ _______________________
((365+# days in Remaining Period)/365)
(1.06) (1.06)
___________________________________________________________________
(365+# days in Remaining Period)/365
13
"Pro Forma EBITDA for the Entry Relevant Period" means the
quotient of (a) the sum of (i) EBITDA for calendar year 1997
divided by 1.06 raised to a power equal to the quotient of (x)
the number of days elapsed between the Closing Date and December
31, 1997 and (y) 365 and (ii) EBITDA for calendar year 1998
divided by 1.06 raised to a power equal to the quotient of (x)
the number of days elapsed between the Closing Date and December,
1998 and (y) 365, and (b) 2, and may be expressed as a formula
calculation as follows:
1997 EBITDA + 1998 EBITDA
______________________________________ _____________________________________
((# days since CD to 12-31-97)/365) ((# days since CD to 12-31-98)/365)
(1.06) (1.06)
______________________________________________________________________________
2
"Put Creation Multiple" means the greater of (i) 115% of the Call
Creation Multiple and (ii) 12.
"Put Option" is defined in Section 2.2.
"Put Option Exercise Price" is defined in Section 2.4.
"Registrable Securities" means any 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
14
than LWN's counsel, selected by the Holders of a majority of the
Registrable Securities being registered to represent all Holders
of the Registrable Securities being registered in connection with
each such registration (it being understood that any Holder may,
at its own expense, retain separate counsel to represent it in
connection with such registration), (vii) any fees and
disbursements of underwriters customarily paid by the issuers or
sellers of securities, and the reasonable fees and expenses of
any special experts retained in connection with the requested
registration, but excluding underwriting discounts and
commissions and transfer taxes, if any, and (viii) subject to the
obligation of Holders under Sections 5.1 and 5.2 to pay any
Holders' Portion thereof, all underwriting discounts and
commissions or other brokers' commissions charged in connection
with the sale of Registrable
"Relevant Creation Multiple" means the (i) Call Creation Multiple
or, if RHC has consummated an Acquisition prior to the Exit
Relevant Period, the most recently calculated Adjusted Call
Creation Multiple (where Total Enterprise Value is being
calculated in connection with the exercise of the Call Option) or
(ii) the Put Creation Multiple or, if RHC has consummated an
Acquisition prior to the Exit Relevant Period, the most recently
calculated Adjusted Put Creation Multiple (where Total Enterprise
Value is being calculated in connection with the exercise of the
Put Option).
"Remaining Period" has the meaning ascribed thereto in the
definition of Pro Forma Acquisition EBITDA for the Entry Relevant
Period.
"Revolver" means the revolving credit facility made available to
RHAC by a syndicate of commercial lenders on the Closing Date, or
any other similar facility subsequently replacing such facility.
"RHC" means Holdings and all of its subsidiaries.
"RHMI Common Stock" means the shares of Common Stock held by
RHMI.
"Securities Act" shall mean the Securities Act of 1933, and the
rules and regulations promulgated thereunder, as the same may be
amended from time to time.
"SEC" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act
or the Exchange Act.
"Stockholders' Agreement" means the Stockholders' Agreement,
dated as of November 19, 1996, among the Stockholders and
Holdings.
"Subsidiary Stock" means all of the issued and outstanding shares
of capital stock of each of the companies listed on Exhibit A to
the Subscription Agreement, dated November 19, 1996 among BCP,
LWN, LGII, RDI and RHIM.
"Total Call Hurdle Value" means the sum of the BCP Contribution,
the LGII Common Contribution, the BCP Call Hurdle Profit, the
LGII Call Hurdle Profit and the Loewen Preferred Catch-up Amount.
14
"Total Contribution" means the sum of (i) the BCP Contribution
and (ii) the Loewen Contribution.
"Total Enterprise Value" means the product of (i) the Relevant
Creation Multiple multiplied by (ii) EBITDA for the Exit Relevant
Period.
"Total Equity Value" means, as of the Exercise Date (each of the
following shall be determined as of the Exercise Date except for
Total Enterprise Value, which shall be determined in accordance
with the definition thereof), the sum of:
the excess, if any, of (i) Total Enterprise Value over (ii) the
sum of (a) the aggregate outstanding principal amount (including
accrued but unpaid interest thereon) of Holdings' consolidated
total indebtedness (excluding any amounts outstanding under the
Revolver and excluding any indebtedness or accrued interest
thereon (whether paid or unpaid) associated with or incurred to
finance any Acquisition consummated during or after the Exit
Relevant Period, plus (b) the remaining value as of the Exercise
Date of the Capitalized Liabilities taken into account in
calculating the Creation Price or the Acquisition Creation Price
of an Acquisition, plus (c) the Loewen Preferred Contribution,
plus (d) Loewen Accrued Preferred Dividends; and
the sum of (e) the aggregate amount of Holdings' consolidated
total cash, cash equivalents and any other marketable securities,
plus (f) cash utilized to pay for Acquisitions (including all
related transaction costs and expenses) consummated during or
after the Exit Relevant Period, plus (g) the amount of interest
that would have been saved assuming that the amounts described in
clause (f) had instead been utilized to repay indebtedness of RHC
which could have then been voluntarily repaid, and assuming the
indebtedness bearing the highest interest rate is the first to be
repaid, plus (h) the aggregate amount of Management Equity
Indebtedness.
"Total Put Hurdle Value" means the sum of the BCP Contribution,
the LGII Common Contribution, the BCP Put Hurdle Profit and the
LGII Put Hurdle Profit.
"Transaction Costs" means all costs and expenses of every nature
incurred by RHC in connection with consummation of the
transactions contemplated by the Agreements and the financing
thereof, including without limitation costs and expenses relating
to the issuance of the Notes and the subsequent registered
exchange offer with respect to the Notes and the Credit
Agreement.
"Weighted Minimum Put Multiple" means, for purposes of
calculating the Adjusted Put Creation Multiple in connection with
a particular Acquisition, the sum of (A) the product of (i) 12
times (ii) a fraction, the numerator of which is the Acquisition
Creation Price for such Acquisition and the denominator of which
is the sum of such Acquisition Creation Price and the Cumulative
Creation Price, plus (B) the product of (i) the Minimum Put
Multiple deemed to be in effect immediately prior to such
Acquisition times (ii) a fraction, the numerator of which is the
Cumulative Creation Price and the denominator of which is the sum
of Acquisition Creation Price and such Cumulative Creation Price.
16
ARTICLE II
CALL AND PUT OPTIONS
2.1 Call Option. (a) On the terms and subject to the
conditions set forth herein, each of the BCP Entities and RHIM
hereby grants to LGII an irrevocable option (the "Call Option")
exercisable beginning on the fourth anniversary of the Closing
Date and ending on the day before the sixth anniversary of the
Closing Date, to purchase (and, upon exercise of such Call Option
in accordance herewith, each BCP Entity irrevocably agrees to
sell to LGII) all, but not less than all, of the BCP Common Stock
or the RHIM Common Stock, as the case may be, respectively owned
by them. The aggregate purchase price with respect to all the
shares of BCP Common Stock and the RHIM 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 RHIM Common Stock shall equal the
Call Option Exercise Price divided by the aggregate number of
shares of BCP Common Stock and RHIM 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 RHIM, 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 RHIM 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 RHIM 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 RHIM) all, but not less than all, of the BCP Common
Stock and RHIM Common Stock respectively owned by them; provided
that the Put Option may be exercised only with respect to all the
BCP Common Stock and RHIM Common Stock, and provided further,
BMAII, as agent for each of the BCP Entities and RHIM, 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 RHIM 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 RHIM Common Stock shall equal the Put Option
Exercise Price divided by the aggregate number of shares of BCP
Common Stock and RHIM Common Stock being purchased, provided that
the BCP Entities may reallocate the Put Option Exercise Price
among themselves to the extent necessary to take into account
differences among them, if any, in making Additional BCP
Contributions.
17
(b) BMAII, as exclusive agent for BCP and RHIM, 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 RHIM Common Stock in accordance with the
Put Option.
2.3 Call Option Exercise Price. The Call Option
Exercise Price shall be determined as of the Exercise Date and
shall be equal to:
(i) the sum of the BCP Contribution and the BCP Call
Hurdle Profit, if Total Equity Value is equal to or less than
Total Call Hurdle Value; or
(ii) the sum of (a) the BCP Contribution, (b) the BCP
Call Hurdle Profit, (c) 30% of Excess Value One, if any and (d)
15% of Excess Value Two, if any, if Total Equity Value is greater
than the Total Call Hurdle Value.
2.4 Put Option Exercise Price. The Put Option Exercise
Price shall be determined as of the Exercise Date and shall be
equal to:
(i) Adjusted Total Equity Value, if Adjusted Total
Equity Value is equal to or less than Adjusted BCP Contribution;
(ii) Adjusted BCP Contribution plus the product of (a)
Adjusted Total Equity Value minus Adjusted BCP Contribution and
(b) the ratio of the BCP Put Hurdle Profit to the sum of (1) BCP
Put Hurdle Profit and (2) Loewen 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) Loewen 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)
Loewen 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) Loewen Preferred Contribution
and (z) Loewen 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) Loewen Preferred Contribution
and (e) Loewen 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) Loewen Preferred
Contribution, (y) Loewen Accrued Preferred Dividends and (z) $15
million;
18
(v) BCP Contribution plus BCP Put Hurdle Profit, if
Total Equity Value is greater than BCP Contribution plus BCP Put
Hurdle Profit plus LGII Common Contribution but less than Total
Put Hurdle Value; or
(vi) BCP Contribution plus BCP Put Hurdle Profit plus
30% of Excess Value One plus 15% of Excess Value Two, if Total
Equity Value is greater than Total Put Hurdle Value;
provided, however, that if (x) the ASA becomes terminable by RHAC
for any reason (other than as a result of a rejection of the ASA
following a bankruptcy event involving RHAC) or (y) LGII replaces
its designees on the board of directors of Holdings without the
consent of BCP (which consent shall not be unreasonably
withheld), then the Put Option Exercise Price shall equal the
greater of (a) the amount determined by applying the applicable
formula set forth above or (b) the sum of the BCP Put Hurdle
Profit and the BCP Contribution.
ARTICLE III
CALCULATION OF OPTION PRICE
3.1 Calculation of Creation Price and Acquisition
Creation Price. (a) Within 60 days of the Closing Date, the
Stockholders shall cause the chief financial officer of Holdings
to calculate the Creation Price and provide to the Stockholders
his written certification of his calculation of such amount.
Unless the amount so calculated is disputed by any Stockholder by
written notice given to the other Stockholders within 30 days of
its being so certified, subject to Section 7.1, it shall be final
and binding on the parties in calculating the Relevant Creation
Multiple. If such amount is so disputed by written notice as
aforesaid, such dispute shall be resolved in accordance with
Section 3.5(b), and the resolution process thereby provided shall
determine the Creation Price which shall, subject to Section 7.1,
be final and binding on the parties in calculating the Relevant
Creation Multiple.
(b) As early as practicable prior to the closing date
of any Acquisition involving Contributed Properties acquired
pursuant to a Contribution Agreement, the Stockholders shall
cause the chief financial officer of Holdings to calculate the
Acquisition Creation Price and the Cumulative Creation Price with
respect to such Acquisition (including the related Minimum Put
Multiple and Weighted Minimum Put Multiple) and provide to the
Stockholders his written certification of his calculation of such
amounts. Unless the amounts so calculated are disputed by any
Stockholder by written notice given to the other Stockholders
within 30 days of its being so certified, they shall, subject to
Section 7.1, be final and binding on the parties in calculating
the Adjusted Call Creation Multiple and the Adjusted Put Creation
Multiple. If any such amount is so disputed by written notice as
aforesaid, such dispute shall be resolved in accordance with
Section 3.5(b), and the resolution process thereby provided shall
determine the Acquisition Creation Price and the Cumulative
Creation Price, in respect of such Acquisition, which shall,
subject to Section 7.1, be final and binding on the parties for
purposes of the relevant Contribution Agreement and in
calculating the Adjusted Call Creation Multiple and the Adjusted
Put Creation Multiple (including the
19
related Minimum Put Multiple and Weighted Minimum Put Multiple)
in respect of such Acquisition.
(c) Within 60 days of the consummation of any
Acquisition that does not involve Contributed Properties acquired
pursuant to a Contribution Agreement, the Stockholders shall
cause the chief financial officer of Holdings to calculate the
Acquisition Creation Price and the Cumulative Creation Price with
respect to such Acquisition and provide to the Stockholders his
written certification of his calculation of such amounts. Unless
the amounts so calculated are disputed by any Stockholder by
written notice given to the other Stockholders within 30 days of
its being so certified, they shall, subject to Section 7.1, be
final and binding on the parties in calculating the Adjusted Call
Creation Multiple and the Adjusted Put Creation Multiple
(including the related Minimum Put Multiple and Weighted Minimum
Put Multiple). If any such amount is so disputed by written
notice as aforesaid, such dispute shall be resolved in accordance
with Section 3.5(b), and the resolution process thereby provided
shall determine the Acquisition Creation Price and the Cumulative
Creation Price, in respect of such Acquisition, which shall,
subject to Section 7.1, be final and binding on the parties in
calculating the Adjusted Call Creation Multiple and the Adjusted
Put Creation Multiple in respect of such Acquisition (including
the related Minimum Put Multiple and Weighted Minimum Put
Multiple).
3.2 Calculation of Pro Forma EBITDA for the Entry
Relevant Period and Creation Multiple. (a) Within 90 days of
the end of each of 1997 and 1998, the Stockholders shall cause
the chief financial officer of Holdings to calculate Holdings'
EBITDA for the calendar year then ended and provide to the
Stockholders his written certification of his calculation of such
amount. Unless the amount so calculated is disputed by any
Stockholder by written notice given to the other Stockholders
within 30 days of its being so certified, it shall, subject to
Section 7.1, be final and binding on the parties in calculating
Pro Forma EBITDA for the Entry Relevant Period. If such amount
is so disputed by written notice as aforesaid, such dispute shall
be resolved in accordance with Section 3.5(b), and the resolution
process thereby provided shall determine EBITDA for 1997 and/or
1998, as the case may be, which amount shall subject to Section
7.1, be final and binding on the parties in calculating Pro Forma
EBITDA for the Entry Relevant Period.
(b) Within 30 days of the determination of EBITDA for
calendar 1998, the Stockholders shall cause the chief financial
officer of Holdings to calculate Pro Forma EBITDA for the Entry
Relevant Period and the Call Creation Multiple and the Put
Creation Multiple and provide to the Stockholders his written
certification of his calculation of such amounts. Unless the
amounts so calculated are disputed by any Stockholder by written
notice given to the other Stockholders within 30 days of their
being so certified, they shall, subject to Section 7.1, be final
and binding on the parties. If such amounts are so disputed by
written notice as aforesaid, such dispute shall be resolved in
accordance with Section 3.5(b), and the resolution process
thereby provided shall determine the Pro Forma EBITDA for the
Entry Relevant Period and the Call Creation Multiple and the Put
Creation Multiple, which shall, subject to Section 7.1, be final
and binding on the parties.
20
3.3 Calculation of Pro Forma Acquisition EBITDA for
the Entry Relevant Period. (a) Within 90 days of the end of the
first full twelve calendar month period after the consummation of
an Acquisition, the Stockholders shall cause the chief financial
officer of Holdings to calculate the Acquisition EBITDA with
respect to such Acquisition for such twelve calendar month period
and provide to the Stockholders his written certification of his
calculation of such amount. Unless the amount so calculated is
disputed by any Stockholder by written notice given to the other
Stockholders within 30 days of its being so certified, it shall,
subject to Section 7.1, be final and binding in calculating Pro
Forma Acquisition EBITDA for the Entry Relevant Period. If such
amount is so disputed by written notice as aforesaid, such
dispute shall be resolved in accordance with Section 3.5(b), and
the resolution process thereby provided shall determine
Acquisition EBITDA for such twelve calendar month period, which
amount shall, subject to Section 7.1, be final and binding on the
parties in calculating Pro Forma Acquisition EBITDA for the Entry
Relevant Period.
(b) Within 90 days of the end of the second full twelve
calendar month period after the consummation of an Acquisition
but in no event later than 45 days after the Notification Date
(or, in the case of an Acquisition consummated after the date
that is 24 months prior to the end of the Exit Relevant Period,
within 45 days after the Notification Date), the Stockholders
shall cause the chief financial officer of Holdings to calculate
the Acquisition EBITDA with respect to such Acquisition and
provide to Stockholders, no later than 45 days after the
Notification Date, his written certification of his calculation
of such amount. Unless the amount so calculated is disputed by
any Stockholder by written notice given to the other Stockholders
within 30 days of its being so notified but in no event later
than 60 days after the Notification Date, it shall, subject to
Section 7.1, be final and binding in calculating Pro Forma
Acquisition EBITDA for the Entry Relevant Period. If such amount
is so disputed by written notice as aforesaid, such dispute shall
be resolved in accordance with Section 3.5(b), and the resolution
process thereby provided shall determine Acquisition EBITDA for
such twelve month period or the Remaining Period, as applicable,
which amount shall, subject to Section 7.1, be final and binding
on the parties in calculating Pro Forma Acquisition EBITDA for
the Entry Relevant Period.
3.4 Calculation of EBITDA for the Exit Relevant Period.
As promptly as practicable following the Notification Date, the
Stockholders shall cause the chief financial officer of Holdings
to calculate EBITDA for the Exit Relevant Period and provide to
the Stockholders, no later than 45 days after the Notification
Date, his written certification of his calculation of such
amount. Unless the amount so calculated is disputed by any
Stockholder by written notice given to the other Stockholders
within 15 days of its being so certified, it shall, subject to
Section 7.1, be final and binding on the parties in calculating
EBITDA for the Exit Relevant Period. If such amount is so
disputed by written notice as aforesaid, such dispute shall be
resolved in accordance with Section 3.5(b), and the resolution
process thereby provided shall determine EBITDA for the Exit
Relevant Period, which amount shall, subject to Section 7.1, be
final and binding on the parties in calculating Total Enterprise
Value.
3.5 Access to Information; Resolution of Disputes;
Miscellaneous. (a) Each Stockholder and its representatives
shall have full access to the books and records of Holdings and
its subsidiaries, and Loewen shall cause Holdings, the BCP
Entities and their respective
21
advisors to be provided with full access to the books and records
of any funeral homes or cemeteries that are to be Contributed
Properties, in connection with any calculation made pursuant to
this Article III. The parties hereby agree to cause Holdings,
and Loewen agrees with respect to any such proposed Contributed
Properties, to instruct the relevant auditors to make their work
papers available for review in this regard, and the Stockholders
hereby waive any objection which such Stockholder may raise with
respect thereto, and Loewen hereby waives and shall cause any
relevant Affiliates to waive any objection which they may raise
with respect thereto. The fees and expenses of the Stockholders'
representatives shall be paid by Holdings.
(b) In the event any Stockholder disputes any amount
calculated by the chief financial officer of Holdings and gives
timely notice of such dispute as described above, the
Stockholders shall negotiate in good faith as promptly as
practicable. In the event such dispute is not resolved within 14
days of the giving of notice of such dispute, the parties shall
promptly engage as "Arbitrator" a "big six" accounting firm
(which shall not be KPMG Peat Marwick or Deloitte & Touche LLP or
Holdings' or LWN's then existing auditors) to reach a final
determination of the amount whose calculation is in dispute. The
fees of the Arbitrators shall be shared equally between BCP
collectively and LGII, and the Arbitrator shall render its
decision within 21 days of its engagement for such purpose.
(c) The Acquisition EBITDA, the Acquisition Creation
Price, the Acquisition Creation Multiple, the Cumulative Creation
Price, the Pro Forma Acquisition EBITDA for the Entry Relevant
Period, the Adjusted Call Creation Multiple, the Adjusted Put
Creation Multiple, the Minimum Put Multiple, the Weighted Minimum
Put Multiple, and the Relevant Creation Multiple and any other
relevant components potentially relevant to the Option Price
shall be calculated in respect of each Acquisition made by RHC,
and the amounts so calculated shall be deemed to have been
calculated and be in effect immediately following consummation of
the relevant Acquisition regardless of when the actual
calculation of each such item is finally completed.
(d) By way of illustration, the "Illustrative
Scenarios" attached to this Agreement reflect the distribution
order in a call or put scenario pursuant to the formula described
herein.
ARTICLE IV
DETERMINATION OF OPTION CONSIDERATION; CERTAIN CONDITIONS
4.1 Option Consideration. (a) (i) LGII may use for
payment of the Option Price (either in whole or in part) payable
to the BCP Entities under the Call Option or the Put Option
either cash or, subject to the conditions of Section 4.2, Loewen
Common Stock, provided, however, that if the number of shares of
Loewen Common Stock deliverable to BCP under this Agreement, when
aggregated with the number of shares of Loewen Common Stock, if
any, previously delivered to BCP in connection with any earlier
exercise of the call option or the put option under the Put/Call
Agreement relating to the acquisition of Prime
22
Succession, Inc. which were not sold for cash as a result of the
exercise of the BCP Liquidity Right described therein, would
equal or exceed 25% of the outstanding shares of Loewen Common
Stock as of the Exercise Date, then the delivery of Loewen Common
Stock in payment of the Option Price hereunder shall require the
prior written consent of BCP. 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 hereof indemnification of BCP to the same
extent provided in Section 5.4) in connection with such issuance
and sale. If such net cash proceeds have not been paid to BCP on
the Exercise Date, the closing of the Option shall be in escrow
pending receipt of such proceeds by BCP. Any delay in remitting
net cash proceeds to BCP beyond the 90th day after the date on
which BCP notifies LWN of its desire to exercise the BCP
Liquidity Right shall require a "grossing up" (through the
issuance of additional shares) of the net cash proceeds required
to be received so as to reflect an implied interest component
(accruing from such 90th day to the date of actual payment to
BCP) at the rate of 10% per annum. If net cash proceeds have not
been received by BCP within 180 days after the date on which BCP
notifies LWN of its desire to exercise the BCP Liquidity Right,
LGII shall be required to pay the Option Price wholly in cash on
such 180th day.
(b) If BCP does not invoke the BCP Liquidity Right as
described in paragraph (a) above with respect to the entire
portion of the Option Price payable to BCP in 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 30 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 30 trading day period and through the Exercise Date, not to
take any corporate action (other than the declaration or payment
of a regular dividend) in respect of combining the outstanding
shares of 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.
23
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, LGII
and RDI set forth in Sections 6.1 and 6.2 hereof shall be true
and correct in all material respects when made and shall be true
and correct in all material respect at and as of the Exercise
Date.
(b) LWN, LGII and RDI shall have performed and
complied in all material respects with all agreements, covenants
and conditions contained herein which are required to be
performed or complied with by it on or before the Exercise Date.
(c) BCP shall have received a certificate, dated the
Exercise Date and signed by a principal executive officer of LWN,
certifying that the conditions set forth in Sections 4.2(a) and
4.2(b) are satisfied on and as of such date.
(d) LWN shall have provided BCP with a legal opinion
from counsel reasonably satisfactory to BCP with respect to
matters customarily covered in connection with the issuance of
shares to a private investor, and such option shall be reasonably
satisfactory in form and substance to BCP and its counsel.
(e) The receipt of the Option Shares by BCP shall not
have been enjoined (temporarily or permanently) as of the
Exercise Date or be prohibited by any applicable law or
governmental regulation.
(f) All proceedings taken in connection with the
issuance and delivery of the Option Shares and all documents and
papers relating thereto shall be reasonably satisfactory to BCP.
BCP shall have received copies of such documents and papers as it
may reasonably request in connection therewith, all in form and
substance reasonably satisfactory to it.
(g) Since the Notification Date, there shall not have
been any material adverse change in the general affairs,
management, financial position, shareholders' equity or results
of operations of LWN and its subsidiaries taken as a whole.
(h) No "Default" as described in Sections 8.6 or 8.7
of the credit agreement dated as of May 15, 1996 among LWN, LGII
and the lenders named therein (in the form thereof on the date
hereof) shall have occurred since the date of this Agreement.
ARTICLE V
REGISTRATION RIGHTS
5.1 Incidental Registration. (a) Right to Include
Registrable Securities. Following the issuance of Loewen Common
Stock to BCP pursuant to Section 4.1(b), each
24
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
25
referred to above, such reduced number of Registrable Securities
to be allocated pro rata among all requesting Holders on the
basis of the relative number of shares of Registrable Securities
then held by each such Holder (provided that any shares thereby
allocated to any such Holder that exceed such Holder's request
will be reallocated among the remaining requesting Holders in
like manner).
(d) Custody Agreement and Power of Attorney. Upon
LWN's request, any Holder will execute and deliver a custody
agreement and power of attorney in form and substance reasonably
satisfactory to LWN with respect to the shares of 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
26
Section 5.1, or (ii) if three registration statements relating to
registration requests under this Section 5.2(a) have previously
been filed and declared effective by the SEC.
(b) Expenses. LWN will pay all Registration Expenses
in connection with the first three registrations of Registrable
Securities pursuant to this Section 5.2 upon the written request
of any of the Holders, and each Holder shall pay the Holders'
Portion, if any, of the underwriting discounts and commissions
relating to the sale or disposition of such Holder's Registrable
Securities pursuant to a registration statement effected pursuant
to this Section 5.2. All expenses for any subsequent
registrations of Registrable Securities pursuant to this Section
5.2 shall be paid pro rata by all Persons (including the Holders
and LWN) participating in such registration on the basis of the
relative number of shares of 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
27
securities LWN proposes to sell up to the number of securities
that, in the opinion of the managing underwriter, can be sold.
5.3 Registration Procedures. If and whenever, LWN is
required to use its best efforts to effect or cause the
registration of any Registrable Securities under the Securities
Act as provided in this Agreement, LWN will, as expeditiously as
possible:
(a) prepare and, if the registration is pursuant to
notice given under Section 5.2(a), in any event within 45 days
after the giving of notice pursuant to Section 5.2(a), file with
the SEC a registration statement with respect to such Registrable
Securities on any form for which LWN then qualifies or which
counsel for LWN shall deem appropriate, and which form shall be
available for the sale of the Registrable Securities in
accordance with the intended methods of distribution thereof, and
use its best efforts to cause such registration statement to
become and remain effective; provided, however, that LWN may
discontinue any registration of its securities which is being
effected pursuant to Section 5.2 at any time prior to the
effective date of the registration statement relating thereto;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective for a period of 180 days or such
lesser period of time as LWN or any Holder may be required under
the Securities Act to deliver a prospectus in connection with any
sale of Registrable Securities, and to comply with the provisions
of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such
period in accordance with the intended methods of disposition by
the Holder or Holders thereof set forth in such registration
statement; provided, that before filing a registration statement
or prospectus, or any amendments or supplements thereto, LWN will
furnish to the Holders and their counsel copies of all documents
proposed to be filed, which documents will be subject to the
review of such counsel and will not be filed if such counsel
reasonably objects;
(c) furnish to each Holder of such Registrable
Securities such number of copies of such registration statement
and of each amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus
included in such registration statement (including each
preliminary prospectus and summary prospectus and prospectus
supplement, as applicable), in conformity with the requirements
of the Securities Act, and such other documents as such Holder
may reasonably request in order to facilitate the disposition of
the Registrable Securities by such Holder;
(d) use its best efforts to register or qualify such
Registrable Securities covered by such registration statement
under such other securities or blue sky laws of such
jurisdictions as each Holder shall reasonably request, and do any
and all other acts and things which may be reasonably necessary
or advisable to enable such Holder to consummate the disposition
in such jurisdictions of the Registrable Securities owned
28
by such Holder, except that LWN shall not for any such purpose be
required to qualify generally to do business as a foreign
corporation in any jurisdiction where, but for the requirements
of this Section 5.3(d), it would not be obligated to be so
qualified, to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in any
such jurisdiction;
(e) use its best efforts to cause such Registrable
Securities covered by such registration statement to be
registered with or approved by such other governmental agencies
or authorities as may be necessary to enable the Holder or
Holders thereof to consummate the disposition of such Registrable
Securities;
(f) notify each Holder of any such Registrable
Securities covered by such registration statement, at any time
when a prospectus relating thereto is required to be delivered
under the Securities Act within the appropriate period mentioned
in Section 5.3(b), of LWN's becoming aware that the prospectus
included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such
Holder, prepare and furnish to such Holder a reasonable number of
copies of an amended or supplemental prospectus as may be
necessary so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(g) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available
to its security holders, as soon as reasonably practicable (but
not more than eighteen months) after the effective date of the
registration statement, an earnings statement which shall satisfy
the provisions of Section 11(a) of the Securities Act and the
rules and regulations promulgated thereunder;
(h) use its best efforts to cause all such Registrable
Securities to be listed on any securities exchange on which the
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;
29
(j) obtain a "cold comfort" letter or letters from
LWN's independent public accountants in customary form and
covering matters of the type customarily covered by "cold
comfort" letters as the Holder or Holders of a majority of the
shares of such Registrable Securities shall reasonably request
(provided that Registrable Securities constitute at least 25% of
the securities covered by such registration statement); and
(k) make available for inspection by representatives
of the Holders of the Registrable Securities covered by such
registration statement, by any underwriter participating in any
disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained
by such Holders or any such underwriter, all pertinent financial
and other records, pertinent corporate documents and properties
of LWN, and cause all of LWN's officers, directors and employees
to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection
with such registration statement.
LWN may require each Holder of Registrable Securities as to which
any registration is being effected to furnish LWN with such
information regarding such Holder and pertinent to the disclosure
requirements relating to the registration and the distribution of
such securities as LWN may from time to time reasonably request
in writing.
Each Holder of Registrable Securities agrees that, upon receipt
of any notice from LWN of the happening of any event of the kind
described in Section 4(f), such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until
such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 4(f), and, if so
directed by LWN, such Holder will deliver to LWN (at LWN's
expense) all copies, other than permanent file copies then in
such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such
notice. In the event LWN shall give any such notice, the period
mentioned in Section 5.3(b) shall be extended by the number of
days during the period from the date of the giving of such notice
pursuant to Section 5.3(f) and through the date when each seller
of Registrable Securities covered by such registration statement
shall have received the copies of the supplemented or amended
prospectus contemplated by Section 5.3(f).
5.4 Indemnification. (a) Indemnification by LWN. In
the event of any registration of any securities of LWN under the
Securities Act pursuant to Section 5.1 or 5.2, LWN hereby
indemnifies and agrees to hold harmless, to the extent permitted
by law, each Holder of Registrable Securities covered by such
registration statement, each affiliate of such Holder and their
respective directors and officers or general and limited partners
(and the directors, officers, affiliates and controlling Persons
thereof), each other Person who participates as an underwriter in
the offering or sale of such securities and each other Person, if
any, who controls such Holder or any such underwriter within the
meaning of the Securities Act (collectively, the "Indemnified
Parties"), against any and all losses, claims, damages or
liabilities, joint or several, and expenses to which such
Indemnified Party may become subject under the Securities Act,
common law or otherwise, insofar as such losses, claims, damages
30
or liabilities (or actions or proceedings in respect thereof,
whether or not such Indemnified Party is a party thereto) arise
out of or are based upon (a) any untrue statement or alleged
untrue statement of any material fact contained in any
registration statement under which such securities were
registered under the Securities Act, any preliminary, final or
summary prospectus contained therein, or any amendment or
supplement thereto, or (b) any omission or alleged omission to
state therein a material fact necessary to make the statements
made, in the light of the circumstances under which they were
made, not misleading, and LWN will reimburse such Indemnified
Party for any legal or other expenses reasonably incurred by it
in connection with investigating or defending any such loss,
claim, liability, action or proceeding; provided, that LWN shall
not be liable to any Indemnified Party in any such case to the
extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is
based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement,
in any such preliminary, final or summary prospectus, or any
amendment or supplement thereto in reliance upon and in
conformity with written information with respect to such
Indemnified Party furnished to LWN by such Indemnified Party for
use in the preparation thereof; and provided, further, that LWN
will not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable Securities or
any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, under the indemnity agreement
in this Section 5.4(a) with respect to any preliminary prospectus
or the final prospectus or the final prospectus as amended or
supplemented, as the case may be, to the extent that any such
loss, claim, damage or liability of such underwriter or
controlling Person results from the fact that such underwriter
sold Registrable Securities to a person to whom there was not
sent or given, at or prior to the written confirmation of such
sale, a copy of the final prospectus (including any documents
incorporated by reference therein) or of the final prospectus as
then amended or supplemented (including any documents
incorporated by reference therein), whichever is most recent, if
LWN has previously furnished copies thereof to such underwriter.
Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of such Holder or any
Indemnified Party and shall survive the transfer of such
securities by such Holder.
(b) Indemnification by the Holders and Underwriters.
LWN may require, as a condition to including any Registrable
Securities in any registration statement filed in accordance with
Section 5.1 or 5.2 herein, that LWN shall have received an
undertaking reasonably satisfactory to it from the prospective
Holder of such Registrable Securities or any underwriter to
indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 5.4(a)) LWN, all other prospective
Holders or any underwriter, as the case may be, and any of their
respective affiliates, directors, officers and controlling
Persons, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement,
any preliminary, final or summary prospectus contained therein,
or any amendment or supplement, if such statement or alleged
statement or omission or alleged omission was made in reliance
upon and in conformity with written information with respect to
such Holder or underwriter furnished to LWN by such Holder or
underwriter expressly for use in the preparation of such
registration statement, preliminary, final or summary prospectus
or amendment or supplement, or a document incorporated by
reference into any of the foregoing. Such indemnity shall remain
in full force and effect regardless of any
31
investigation made by or on behalf of LWN or any of the Holders,
or any of their respective affiliates, directors, officers or
controlling Persons and shall survive the transfer of such
securities by such Holder.
(c) Notices of Claims, Etc. Promptly after receipt by
an indemnified party hereunder of written notice of the
commencement of any action or proceeding with respect to which a
claim for indemnification may be made pursuant to this Section
5.4, such indemnified party will, if a claim in respect thereof
is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action; provided, that
the failure of the indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its
obligations under Sections 5.4(a) or 5.4(b), except to the extent
that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party will be entitled to participate in
and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof
other than reasonable costs of investigation. If, the
indemnified party has been advised by counsel that having common
counsel would result in a conflict of interest between the
interests of such indemnified and indemnifying parties, then such
indemnified party may employ separate counsel reasonably
acceptable to the indemnifying party to represent or defend such
indemnified party in such action, it being understood, however,
that the indemnifying party shall not be liable for the
reasonable fees and expenses of more than one separate firm of
attorneys at any time for all such indemnified parties (and not
more than one separate firm of local counsel at any time for all
such indemnified parties) in such action. No indemnifying party
will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of
such claim or litigation.
(d) Other Indemnification. Indemnification similar to
that specified in this Section 5.4 (with appropriate
modifications) shall be given by LWN and each Holder of
Registrable Securities with respect to any required registration
or other qualification of securities under any federal or state
law or regulation or governmental authority other than the
Securities Act.
(e) Contribution. If recovery is not available under
the foregoing indemnification provisions of this Section 5 for
any reason other than as expressly specified therein, the parties
entitled to indemnification by the terms thereof shall be
entitled to contribution to liabilities and expenses except to
the extent that contribution is not permitted under Section 11(f)
of the Securities Act. In determining the amount of contribution
to which the respective parties are entitled, there shall be
considered the relative benefits received by each party from the
offering of the Registrable Securities (taking into account the
portion of
32
the proceeds realized by each), the parties' relative knowledge
and access to information concerning the matter with respect to
which the claim was asserted, the opportunity to correct and
prevent any misstatement or omission and any other equitable
considerations appropriate under the circumstances.
(f) Non-Exclusivity. The obligations of the parties
under this Section 5 shall be in addition to any liability which
any party may otherwise have to any other party.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of All Parties.
LWN, LGII, RDI and each Stockholder represents and warrants, on a
joint and several basis in the case of LWN, LGII and RDI and on a
several and not joint basis in the case of the Stockholders, as
follows:
(a) This Agreement has been duly executed and delivered by
such Person and constitutes the legal, valid and binding
obligation of such Person, enforceable against such Person in
accordance with the terms hereof except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting creditors' rights generally and by
general principles of equity; and
(b) The execution and delivery of this Agreement by such
Person does not, and the performance by it of its obligations
under this Agreement will not, violate, conflict with or
constitute a breach of, or a default under, any material
agreement, indenture or instrument to which such Person is a
party or which is binding on such Person, and will not result in
the creation of any lien on, or security interest in, any of the
assets of such Person.
6.2 Representations and Warranties of LGII, RDI and
LWN. LGII, RDI and LWN jointly and severally represent and
warrant to the BCP Entities as follows:
(a) The Option Shares have been or will be, prior to
issuance, duly authorized and, when such shares are issued,
delivered and paid for on the Exercise Date, will be validly
issued and outstanding, fully paid and nonassessable shares of
capital stock of LWN, with no personal liability attached to the
ownership thereof; and the holders of the outstanding stock are
not entitled to preemptive or other rights to subscribe for such
shares.
(b) Neither the issuance of the Option Shares nor
their sale in connection with the exercise of the BCP Liquidity
Option nor the consummation of any other of the transactions
contemplated in this Agreement, nor the fulfillment of the terms
of this Agreement, will conflict with, result in a breach of or
constitute a default under the terms of the certificate of
incorporation or similar organizational document or bylaws of
LWN, LGII or RDI or of any material agreement, indenture or
instrument to which LWN, LGII or RDI is a party or is bound, or
any order or regulation applicable to LWN, LGII or RDI of any
court, regulatory body, administrative agency or governmental
body having jurisdiction over LWN, LGII or RDI.
(c) No consent, approval or authorization of, or
filing, registration or qualification with, any court,
governmental, administrative or judicial authority or regulatory
body will be, as of the Exercise Date, required on the part of
LWN, LGII or RDI for the valid authorization, issuance, sale and
delivery of the Option Shares or for the execution, delivery and
performance of this Agreement other than those which have been
duly obtained or made.
(d) As of the Exercise Date, there will be no action
or proceeding or investigation pending or, to the best knowledge
of LWN, LGII and RDI, threatened against LWN, LGII or RDI or any
of their subsidiaries which, if determined adversely could
adversely affect the consummation of the transactions
contemplated by this Agreement. There are no actions or
proceedings challenging or seeking to restrain, materially limit
or prohibit the consummation of the transactions contemplated
hereby.
(e) On or prior to the beginning of the 20 trading day
period ending on the third calendar day prior to the Exercise
Date, the Loewen Common Stock will have been duly registered
under Section 12 of the Securities Exchange Act of 1934, and the
Option Shares will be listed on the New York Stock Exchange or
designated for inclusion in NASDAQ National Market System, as the
case may be, and such registration and listing or designation
shall remain in effect through the later of the Exercise Date or
the date shares of Loewen Common Stock issued for the account of
BCP are sold for BCP's account.
6.3 Representations and Warranties of BCP and RHIM.
Each of the BCP Entities and RHIM severally and not jointly
represent and warrant to LWN, LGII and RDI as follows:
(a) On the Exercise Date, each of the BCP Entities and
RHIM will have good and valid title to the shares of Common Stock
owned by each of them, free and clear of all liens, encumbrances,
equities and claims.
(b) No consent, approval or authorization of, or
filing, registration or qualification with, any court,
governmental, administrative or judicial authority or regulatory
body will be, as of the Exercise Date, required on the part of
any of the BCP Entities or RHIM for the valid sale and delivery
of the BCP Common Stock and the RHIM Common Stock to LGII as
contemplated herein.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Calculation of EBITDA. (a) At any time that
RHC's EBITDA is calculated pursuant to this Agreement, such
calculation shall be prepared in accordance with
34
the accounting practices of Mortuary and the Association in
effect on the Closing Date, without giving effect to any
modifications to such accounting and business practices made
subsequent to the Closing Date, regardless of whether such
modifications were made pursuant to the promulgation of rules,
regulations or statutes applicable to RHC, changes in GAAP or
otherwise provided, however, that EBITDA for the Entry Relevant
Period shall be adjusted to reflect payment of property taxes and
non-consolidation of the Endowment Care Fund as a result of RHC's
for-profit status.
(b) In the event that the ASA is terminated or reduced
in scope prior to the Exercise Date, then Pro Forma EBITDA for
the Entry Relevant Period will be restated to reflect the
incremental expense RHC would have incurred in fiscal years 1997
and 1998 had the ASA not been in place during those years or had
been in place but only on a comparably reduced scope basis, as
the case may be.
(c) Notwithstanding paragraph (a) above and regardless
of proper GAAP accounting, in the event payments pursuant to the
long term incentive plan for RHC management are due on or as a
result of the exercise of an Option, such payments will be
expensed on a straight line basis from the Closing Date to the
Exercise Date for purposes of computing Pro Forma EBITDA for the
Entry Relevant Period and EBITDA for the Exit Relevant Period.
(d) To the extent any Acquisitions are consummated
during 1997 or 1998, in calculating Pro Forma EBITDA for the
Entry Relevant Period, EBITDA shall be calculated on a pro forma
basis to exclude the Acquisition EBITDA attributable to such
Acquisitions. In calculating EBITDA and Acquisition EBITDA for
any period, all overhead charges shall be allocated among Rose
Hills and the Satellite Properties, on the one hand, and the
various businesses acquired in the relevant Acquisition or
Acquisitions, on the other hand, based on their relative total
net sales during the relevant period.
(e) Notwithstanding anything to the contrary contained
herein, EBITDA shall not include any nonrecurring income or
expense or any impact or any earnings attributable to the
withdrawal of all or part of any reserve established or in
existence in connection with any trust fund maintained by RHC.
(f) Notwithstanding anything contained herein to the
contrary, in the event there are any year to year increases in
the aggregate lease expense associated with the Satellite
Properties that are in excess of a rate per annum of 5%, such
"excess" increase in lease expense shall be excluded as an
expense item in calculating EBITDA.
(g) The various amounts calculated in accordance with
Article III shall be subject to subsequent adjustment based on
relevant events that occur after such calculations are made.
Such adjusted amounts shall be calculated by the chief financial
officer of Holdings, and the notification, dispute, and dispute
resolution mechanisms described in Section 3.5(b) shall apply,
mutatis mutandis, to such adjustment process.
35
7.2 Further Assurances. (a) Subject to the terms and
conditions hereof, each of the parties hereto agrees to use its
best efforts to take, or cause to be taken, all action and to do,
or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make
effective, reasonably promptly in light of the relevant
Notification Date and Option Date, the transactions contemplated
by this Agreement.
(b) Promptly following the Notification Date, each of
the parties hereto shall prepare and file all applications and
other notices required in connection with, and use their best
efforts to obtain promptly and comply with all conditions
contained in, all necessary regulatory approvals and any other
consent, approval or other actions by, or notice to or
registration or filing with, any governmental or administrative
agency or authority required or necessary to be made, obtained or
complied with, as the case may be, by any party hereto in
connection with the performance of the transactions contemplated
by this Agreement, including without limitation any premerger
notifications pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"). LWN, LGII and RDI
agree to, and shall cause their Affiliates to, (i) enter into
with the Federal Trade Commission and/or the Department of
Justice such decrees, consent orders and/or hold separate
undertakings and (ii) effectuate any divestitures, in each case
involving assets or operations of either RHC or LGII or its
Affiliates or both, as may be necessary in order to enable LGII
to purchase, as soon as practicable following the Notification
Date and in any event no later than the Exercise Date, the BCP
Common Stock and the RHIM Common Stock.
7.3 LWN Guarantee. (a) Guarantee. LWN hereby
unconditionally and irrevocably guarantees to the BCP Entities
and their respective successors, transferees and assigns, the
prompt and complete payment and performance by LGII and its
successors and assigns when due of the Obligations. LWN further
agrees to pay any and all expenses (including, without
limitation, all fees and disbursements of counsel) which may be
paid or incurred by the BCP Entities in enforcing any of their
rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or
collecting against, LGII or against LWN under this Guarantee.
(b) Guarantee Absolute and Unconditional. LWN waives
diligence, presentment, protest, demand for payment and notice of
default or nonpayment to or upon LGII or LWN with respect to the
Obligations. This Guarantee shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to
any circumstance whatsoever (with or without notice to or
knowledge of LGII or LWN) which constitutes, or might be
construed to constitute, an equitable or legal discharge of LGII
for the Obligations, or of LWN under this Guarantee, in
bankruptcy or in any other instance. This Guarantee shall remain
in full force and effect and be binding in accordance with and to
the extent of its terms upon LWN and its successors and assigns,
and shall inure to the benefit of the BCP Entities and their
respective successors, transferees and assigns, until all the
Obligations and the obligations of LWN under this Guarantee shall
have been satisfied by payment in full.
(c) Reinstatement. This Guarantee shall continue to
be effective, or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any of the
36
Obligations is rescinded or must otherwise be restored or
returned by the BCP Entities upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of LGII or upon or as
a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, LGII or any
substantial part of its property, or otherwise, all as though
such payments had not been made.
7.4 Drag-Along Rights. (a) In the event of a default
by LGII or LWN of their obligations under Section 4.1 to pay the
relevant Option Price as provided for herein, and such default
shall continue for 45 days, the BCP Entities shall be entitled to
solicit offers from third parties for the purchase of all or part
of the outstanding shares of Common Stock and Preferred Stock.
If, following such Event of Default and pursuant to such
solicitation, any of the BCP Entities receives a bona fide offer
from a Person other than a BCP Entity or any of its Affiliates (a
"Third Party") to purchase in an arms'-length transaction all or
part of the outstanding shares of Common Stock and Preferred
Stock owned by the Stockholders and such offer is accepted by
such BCP Entities, then LGII, RDI, RHIM and their respective
Permitted Transferees each agrees that it will Transfer all or
part of the shares of Common Stock and Preferred Stock owned by
it to such Third Party on the terms of the offer so accepted by
such BCP Entities, including the same per share consideration.
In any such transaction where less than all of the outstanding
shares of Common Stock are to be sold, such shares to be sold
shall be sold by BCP, LGII, RDI and RHIM pro rata in proportion
to their respective holdings of Common Stock.
(b) The BCP Entities shall give notice (the "Drag-Along
Notice") to each of the other Stockholders of any proposed
Transfer giving rise to the rights of such BCP Entities set forth
in Section 7.4(a) as soon as practicable following the acceptance
of the offer referred to in Section 7.4(a). The Drag-Along
Notice shall set forth the number of shares of Common Stock and
Preferred Stock proposed to be so Transferred, the name of the
proposed transferee, the proposed amount and form of
consideration (and if such consideration consists in part or in
whole of property other than cash, the Transferring Stockholder
shall provide such information, to the extent reasonably
available to the BCP Entities, relating to such consideration as
LGII, RDI, RHIM and their respective Permitted Transferees may
reasonably request in order to evaluate such non-cash
consideration) and the other terms and conditions of the offer.
The BCP Entities shall notify the Stockholders at least 20 days
in advance of entering into a definitive agreement in connection
with such offer if Stockholders will be required to sign any
agreement containing representations, warranties and indemnities
and will provide in advance to one counsel acting for Holdings
and the other Stockholders subject to the Drag-Along Notice
(which counsel shall be other than counsel for the BCP Entities)
a copy of the representations, warranties and indemnities
proposed to be made by such Stockholders. In any such agreement
such Stockholders will be required to make the same
representations, warranties and indemnities as the BCP Entities
so long as they are made severally and not jointly. The
Stockholders agree that Holdings shall pay the fees and expenses
of counsel for the Stockholders in connection with any
transaction referred to in this Section 7.4. If the Transfer
referred to in the Drag-Along Notice is not consummated within
120 days from the date of the Drag-Along Notice, the Transferring
Stockholder must deliver another Drag-Along Notice in order to
exercise its rights under this Section 3.6 with respect to such
Transfer or any other Transfer.
37
(c) Following a default as described in Section
7.4(a), any proceeds realized from the sale pursuant to this
Section 7.4 of the shares of Common Stock or Preferred Stock held
by LGII, RDI or their respective Permitted Transferees shall be
paid over to BCP to the extent necessary to satisfy the
Obligations which remain unsatisfied following the sale of the
BCP Common Stock and RHIM Common Stock, whether pursuant to
Section 7.4 or otherwise, and any excess proceeds shall be paid
over to LGII.
ARTICLE VIII
CLOSINGS
8.1 Payment of the Option Price in Cash or Loewen
Common Stock The closing of the purchase of BCP Common Stock and
RHIM Common Stock pursuant to the exercise of an Option as
provided in Sections 2.1 and 2.2 shall take place on the Exercise
Date in the event (a) the Option Price is to be paid wholly in
cash or (b) the Option Price is to be paid in part or in whole in
Loewen Common Stock and BCP does not exercise the BCP Liquidity
Right.
8.2 Exercise of the BCP Liquidity Right. In the event
the Option Price is to be paid in part or in whole in shares of
Loewen Common Stock and BCP exercises the BCP Liquidity Right as
provided in subsection 4.1(a)(ii), the closing of the purchase of
BCP Common Stock and RHIM Common Stock shall take place on the
Exercise Date, provided, that in the event LGII or LWN does not
deliver the net cash proceeds from the issuance and sale of
Loewen Common Stock on the Exercise Date to the extent required
as a result of the exercise of the BCP Liquidity Right, (a) BCP
and RHIM shall deliver into escrow (with an escrow agent
reasonably acceptable to both LGII and BCP) on the Exercise Date
the BCP Common Stock and the RHIM Common Stock, and (b) LGII
shall on the Exercise Date deliver into escrow with such escrow
agent the portion, if any, of the Option Price being paid in
cash, together with the requisite number of shares of Loewen
Common Stock, if any, as to which the BCP Liquidity Right has not
been exercised, and the closing of the exercise of the Option
shall take place on the earliest to occur of (i) the date on
which the requisite amount of net cash proceeds from the sale of
shares of Loewen Common Stock as to which the BCP Liquidity Right
has been exercised are received and (ii) the 180th day after the
date on which BCP notified LWN of its desire to exercise the BCP
Liquidity Right, at which time (subject to Section 8.3) the BCP
Common Stock and RHIM Common Stock shall be released from escrow
against payment of such portion of the Option Price payable in
cash and such requisite number of shares of Loewen Common Stock,
if any.
8.3 Default By LGII or LWN. In the event of a default
by LGII or LWN of their obligations to pay the Option Price on
the Exercise Date (or such later date as provided in Section
8.2), the BCP Common Stock and RHIM Common Stock shall be
released from escrow and returned to BCP and RHIM, as applicable,
and any funds or other assets held by the escrow agent in respect
of any earlier deposit by or on behalf of LGII or LWN shall be
retained by the escrow agent as collateral security for the
payment of the Obligations, and LWN and LGII hereby grant to BCP
a security interest in such funds or other amounts as
38
security for the Obligations. In the event all or any part of
the Option Price is not paid when due, such unpaid amount shall
constitute a continuing fixed obligation of LGII and shall bear
interest at the Default Rate until such unpaid amount is paid in
full (as well as after as before judgment).
8.4 Time and Place of Closing. The closing of the
purchase of the BCP Common Stock and RHIM Common Stock shall be
held at the principal office of the BCP Entities at 10:00 A.M.
local time on the date determined pursuant to this Article VIII.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. Notices hereunder shall be given
only by personal delivery, registered or certified mail, return
receipt requested, overnight courier service, or telex, telegram
or other form of electronic mail or by telecopy (and subsequently
confirmed by any other permitted means hereunder) and shall be
deemed transmitted when personally delivered or deposited in the
mail or delivered to a courier service or a carrier for
electronic transmittal (as the case may be), postage or charges
prepaid, and addressed to the particular party to whom the notice
is to be sent as follows:
(a) in the case of BCP or RHIM:
c/o The Blackstone Group
Park Avenue, 31st Floor
New York, NY 10154
Telecopier No.: (212) 754-8725
Attention: Howard A. Lipson
with a copy to:
Simpson Thacher & Bartlett
Lexington Avenue
New York, NY 10017
Telecopier No.: (212) 455-2502
Attention: Wilson S. Neely, Esq.
in the case of LGII or LWN:
The Loewen Group Inc.
Norland Avenue
Burnaby, British Columbia
Canada V5G 358
Telecopier No.: (604) 473-7305
Attention: Senior Vice President and Chief
Financial Officer
39
with a copy to:
The Loewen Group Inc.
c/o Loewen Group International, Inc.
East River Center Boulevard
Covington, Kentucky 41011
Telecopier No.: (606) 655-7154
Attention: Legal Department
or to such address as a party may instruct by notice hereunder.
Section 9.2 Severability; Mutuality of Options. In
the event any provision hereof is held or rendered void or
unenforceable by any court or other legal authority, then such
provisions shall be severable and shall not affect the remaining
provisions hereof. Notwithstanding the foregoing, in the event
either the call option or put option shall be held or rendered
void or unenforceable or breached by the party obligated thereon,
then the party holding such option shall be excused from
performing under the option it has granted.
Section 9.3 Entire Agreement. This Agreement,
together with the other agreements referred to herein, is the
entire Agreement among the parties, and, when executed by the
parties hereto, supersedes all prior agreements and
communications, either verbal or in writing, between the parties
hereto with respect to the subject matter contained herein.
Section 9.4 Amendment and Waiver. This Agreement may
not be amended, modified or supplemented unless consented to in
writing by the parties hereto. Any failure by a party hereto to
comply with any obligation, agreement or condition herein may be
expressly waived in writing by each of the other parties hereto,
but such waiver or failure to insist upon strict compliance with
such obligation, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any such subsequent or
other failure.
Section 9.5 Assignment; Binding on Transferees. The
provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and permitted transferees from and after the effective date
hereof. Subject to the last sentence of this Section 9.5, BCPII,
BFIP, RDI, LGII and RHMI may assign any of their respective
rights and obligations hereunder to any of their respective
Affiliates. LWN may not assign any of its rights and obligations
hereunder to any Person without the written consent of BCP. A
Person may become an assignee of the rights of a party hereto
only if such assignee becomes a party to this Agreement to the
same extent as the assignor; provided, that an assignment by any
party hereto of its rights hereunder shall not release such party
from its obligations hereunder unless all other parties hereto
consent to such release.
Section 9.6 Variations in Pronouns. All pronouns and
any variations thereof shall be deemed to refer to the masculine,
feminine or neuter, singular or plural, as the identity of the
antecedent person or persons or entity or entities may require.
40
Section 9.7 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York.
Section 9.8 Further Assurances. Each of the parties
shall execute such documents and other papers and take such
further actions as may be reasonably required or desirable to
carry out the provisions hereof and the transactions contemplated
hereby.
Section 9.9 Headings. The headings in this Agreement
are intended solely for convenience of reference and shall be
given no effect in the interpretation of this Agreement.
Section 9.10 Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
Section 9.11 Submission to Jurisdiction; Waivers.
Each of the parties hereto hereby irrevocably submits in any
legal action or proceeding relating to or arising out of this
Agreement, or for recognition and enforcement of any judgment in
respect thereof, to the jurisdiction of the United States
District Court for the Southern District of New York, and
appellate courts thereof. Each of the parties hereto further (i)
consents that any such action or proceeding may be brought in
such court and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in such court
or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same; (ii) agrees that
service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage
prepaid, to such party at its address set forth in Section 9.2 or
at such other address of which such party shall have given notice
pursuant thereto; (iii) agrees that nothing herein shall affect
the right to effect service of process in any other manner
permitted by law or shall limit the right to sue in any other
jurisdiction; and (iv) waives, to the maximum extent not
prohibited by law, any right it may have to claim or recover in
any legal action or proceeding referred to in this subsection any
special, exemplary, punitive or consequential damages.
Section 9.12 WAIVERS OF JURY TRIAL. EACH PARTY HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR
ANY COUNTERCLAIM THEREIN.
41
IN WITNESS WHEREOF, the undersigned have executed this
Agreement on the date first above written.
THE LOEWEN GROUP INC.
By: /s/ F. Andrew Scott
Name: F. Andrew Scott
Title:
LOEWEN GROUP INTERNATIONAL, INC.
By: /s/ F. Andrew Scott
Name: F. Andrew Scott
Title:
ROSES DELAWARE, INC.
By: /s/ F. Andrew Scott
Name: F. Andrew Scott
Title
BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
By: /s/ executed
Name:
Title:
BLACKSTONE ROSE HILLS OFFSHORE CAPITAL PARTNERS L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
By: /s/ executed
Name:
Title:
42
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP II L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
By: /s/ executed
Name:
Title:
RHI MANAGEMENT DIRECT L.P.
By: PSI P&S Corp.
General Partner
By:______________________
Name:
Title:
STOCKHOLDERS' AGREEMENT
Among
ROSE HILLS HOLDINGS CORP.,
BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND L.P.,
BLACKSTONE ROSE HILLS OFFSHORE CAPITAL PARTNERS L.P.,
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP II L.P.,
ROSES DELAWARE, INC.,
LOEWEN GROUP INTERNATIONAL, INC.
And
RHI MANAGEMENT DIRECT L.P.
________________________________
Dated as of November 19, 1996
________________________________
_________________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS 2
Section 1.1 Certain Defined Terms 2
ARTICLE II
SUBSCRIPTION; FINANCINGS; 3
Section 2.1 Subscriptions for Common Stock and Preferred Stock 3
Section 2.2 Debt Financing.
(a) High Yield Financing 3
(b) Bank Financing 4
Section 2.3 RHAC 4
Section 2.4 Payment of Expenses 4
ARTICLE III
RESTRICTIONS ON TRANSFER OF CAPITAL STOCK 4
Section 3.1 BCP, RHIM 4
Section 3.2 Loewen 4
Section 3.3 Transfers Void; Conditions to Permitted Transfers 4
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 5
Section 4.1 Election of the Board of Directors 5
Section 4.2 RHAC Board of Directors 6
Section 4.3 Declaration and Payment of Dividends 6
ARTICLE V
OTHER ARRANGEMENTS 6
Section 5.1 Transaction Fees 6
Section 5.3 Other Expenses 6
Section 5.4 Additional Equity 7
Section 5.5 Contribution of Nearby Properties 8
Section 5.6 Capital Stock of Subsidiaries 9
Page
ARTICLE VI
MISCELLANEOUS 9
Section 6.1 Legend 9
Section 6.2 Notices 10
Section 6.3 Severability 11
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 12
Section 6.9 Term 12
Section 6.10 Governing Law 12
Section 6.11 Further Assurances 12
Section 6.12 Headings 12
Section 6.13 Counterparts 12
Schedule 1 - Funds Flow Memorandum
Exhibit A - Subscription Agreement
Exhibit B - Nearby Property Contribution Agreement
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, dated as of November 19, 1996
(this "Agreement"), among Rose Hills Holdings Corp., a Delaware
corporation formerly known as Tudor Holding Company ("Holdings");
Blackstone Capital Partners II Merchant Banking Fund L.P., a
Delaware limited partnership ("BCPII"); Blackstone Rose Hills
Offshore Capital Partners L.P., a Delaware limited partnership
("BROCP"); Blackstone Family Investment Partnership II L.P., a
Delaware limited partnership ("BFIP" and, together with BCPII,
BROCP and each of their respective permitted assigns and
transferees as provided herein, "BCP"); Roses Delaware, Inc., a
Delaware corporation ("RDI"), Loewen Group International, Inc., a
Delaware corporation ("LGII"), The Loewen Group Inc., a British
Columbia corporation (together with its successors, "LWN"; and
together with LGII, RDI, any Contributor (as defined below) and
each of their respective permitted assigns and transferees as
provided herein, "Loewen") and RHI Management Direct L.P., a
Delaware limited partnership ("RHIM"). BCP, Loewen and RHIM are
herein collectively referred to as the "Stockholders" and
individually as a "Stockholder."
WHEREAS, pursuant to an Agreement and Plan of Merger,
dated as of September 19, 1996 as amended by the amendment
thereto dated November 19, 1996 (the "Merger Agreement"), among
Roses, Inc., the stockholders of Roses, Inc., Tudor Acquisition
Corp. (which was previously renamed Rose Hills Acquisition Corp.
and which has been renamed Rose Hills Company), a wholly owned
subsidiary of Holdings ("RHAC"), and RH Mortuary Corporation, a
Delaware corporation and a wholly-owned subsidiary of RHAC
("Mortuary"), Mortuary is merging with and into Roses, Inc.;
WHEREAS, pursuant to an Asset Purchase Agreement, dated
September 19, 1996 (the "Asset Purchase Agreement" and, together
with the Merger Agreement, the "Rose Hills Agreements"), between
Rose Hills Memorial Park Association (the "Association") and
RHAC, Rose Hills, Inc., a Delaware corporation and a wholly
owned subsidiary of RHAC, as assignee of RHAC's right and
obligations under the Asset Purchase Agreement, is purchasing
certain assets and assuming certain liabilities of the
Association;
WHEREAS, at the Closing the Stockholders will subscribe
for newly issued shares of capital stock of Holdings, such that
upon the consummation of such subscription the Stockholders will
hold all of the then issued and outstanding shares of capital
stock of Holdings;
WHEREAS, the parties hereto desire to enter into this
Agreement for the purpose of setting forth certain agreements
regarding future relationships among them;
NOW, THEREFORE, in consideration of the mutual
covenants and conditions as hereinafter set forth, the parties
hereto do hereby agree as follows:
2
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, and "Affiliation" shall have a
correlative meaning.
"ASA" means the Administrative Services Agreement
dated as of November 19, 1996 among RHAC, LWN and LGII.
"Board of Directors" means the Board of Directors of
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 Rose Hills Agreements occurs.
"Common Stock" means the common stock, par value $.01
per share, of Holdings, including shares of non-voting Common
Stock.
"Contribution Price" means, with respect to a Nearby
Property or Nearby Properties conveyed to Holdings pursuant to a
Nearby Property Contribution Agreement, the relevant Acquisition
Creation Price calculated with respect thereto pursuant to the
Put/Call Agreement.
"Contributor" means LWN or any of its Affiliates that
is designated as the Contributor under a Nearby Property
Contribution Agreement and which acquires shares of Non-Voting
Common Stock or Preferred Stock in accordance with the terms
thereof.
"Nearby Property Contribution Agreement" means an
agreement in the form of Exhibit B hereto with respect to the
transfer of a Nearby Property or Nearby Properties as to which
the option set forth in Section 5.5 hereof has been effectively
exercised.
"Nearby Property" means any funeral home or cemetery
that is located within a 20 mile radius of any funeral home or
cemetery then owned, operated or controlled by RHAC.
3
"Non-Voting-Common Stock" means the non-voting common
stock, par value $0.01 per share, of Holdings issued pursuant to
Section 5.5 hereof in connection with the acquisition of a
funeral home or cemetery pursuant to a Nearby Property
Contribution Agreement. Such stock shall be identical in all
respects to the regular Common Stock of Holdings except that it
shall have no voting rights.
"Offering Memorandum" means the offering memorandum
dated November 14, 1996 relating to the offering of RHAC's 9 1/2%
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.
"Put/Call Agreement" means the Put/Call Agreement dated
as of November 19, 1996 among LWN and the Stockholders.
"Preferred Stock" means the 10% Paid-in-Kind Cumulative
Preferred Stock, par value $.01 per share, of Holdings.
"Securities Act" means the Securities Act of 1933, as
amended.
"Transaction" means the transactions, contemplated by
the Rose Hills Agreements together with the other transactions
described in Article II 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; FINANCINGS; ACQUISITIONS
Section 2.1 Subscriptions for Common Stock and
Preferred Stock. At the Closing, the Stockholders named therein
will enter into a subscription agreement substantially in the
form of Exhibit A (the "Subscription Agreement"), pursuant to
which such parties will subscribe for newly issued shares of
capital stock of Holdings, such that such Stockholders will hold
all of the then issued and outstanding shares of capital stock of
Holdings.
Section 2.2 Debt Financing.
(a) High Yield Financing. Prior to the Closing
Date, RHAC issued $80 million aggregate principal amount of its 9
Senior Subordinated Notes Due 2004 (the "Notes"), the
proceeds of which (after deducting the initial purchaser's
discount) are being made available to RHAC on the Closing Date.
4
(b) Bank Financing. On the Closing Date, RHAC will
obtain a term loan in a principal amount of $75 million (the
"Term Loan"), pursuant to an agreement among RHAC and a syndicate
of financial institutions, which agreement shall also provide for
a $25 million revolving credit facility to be made available to
RHAC.
Section 2.3 RHAC. At the Closing, Holdings shall
contribute the proceeds from the subscription of shares to RHAC
and will cause RHAC to make appropriate contributions of capital
and intercompany loans to its subsidiaries in order for those
subsidiaries to pay the amounts called for in the Rose Hills
Agreements.
Section 2.4 Payment of Expenses. Holdings shall
cause RHAC to use the aggregate net proceeds of the high yield
financing described in subsection 2.2(a) hereof and the Term Loan
held by it to (i) discharge the liabilities described on Schedule
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, RHIM. Each of BCPII, BROCP 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 without the prior written consent of Loewen,
provided, that if Loewen fails to comply with its obligations
under Section 4.1 or Article VIII of the Put/Call Agreement (as
defined below) or has otherwise breached the Put/Call Agreement
such restriction shall lapse. Without the consent of BCP and
LGII, RHIM may not transfer shares of Common Stock to any other
Person.
Section 3.2 Loewen. Loewen may, subject to the last
sentence of Section 3.3 hereof, Transfer its shares of Common
Stock or Preferred Stock to any Affiliate of Loewen, but may not
Transfer such shares to any other Person without the prior
written consent of BCP, provided, that Loewen 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.
5
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"), Loewen shall have an option
to purchase the shares of Common Stock held by BCP and RHIM, and
BCP and RHIM shall have an option to require Loewen to purchase
the shares of Common Stock held by BCP and RHIM, 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
hereof.
Section 3.5 Redemption of Preferred Stock.
Notwithstanding the provisions of paragraphs 5 and 6 of Article
Fifth of the restated Certificate of Incorporation of Holdings,
there shall be no redemption of Preferred Stock held by Loewen or
its Affiliates without the consent of Loewen and BCP.
Section 3.6 Additional Issuance of Capital Stock.
Except as provided in Section 5.4 and 5.5 hereof, subsequent to
the Closing Date, Holdings will not issue additional shares of
Common Stock or Preferred Stock without the consent of BCP and
Loewen, and any Contributor to which such shares are issued
shall, as a condition to such issuance, execute and deliver to
the parties hereto a counterpart of the Agreement.
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 voting 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 BCPII 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 Holdings
previously designated by it, each Stockholder shall vote all of
the shares of voting 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 voting
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.
6
Section 4.2 RHAC Board of Directors. Each party to
this Agreement agrees that Holdings shall cause the board of
directors of RHAC to at all times consist of the same individuals
who comprise the Board of Directors of 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 Holdings to pay on a quarterly basis,
subject to the provisions of the GCL, dividends on the Preferred
Stock in accordance with Holdings' Certificate of Incorporation.
Section 4.4 Certain Business Practices. Holdings
shall not, and shall cause each of its direct and indirect
subsidiaries not to, make any (i) significant changes in its
current preneed cemetery or preneed funeral sales policies or
practices or its trusting, insurance or sales commission
practices other than as set forth in the Confidential Information
Memorandum, dated October 1996, prepared by Goldman Sachs or (ii)
sale or related series of sales of cemetery lots or grave sites
(collectively, "Sites") in excess of $250,000 or 100 Sites to any
one person or group of related persons without, in each case, the
approval of RHAC's Board of Directors.
ARTICLE V
OTHER ARRANGEMENTS
Section 5.1 Transaction Fees. If the Transaction is
consummated, Holdings shall pay on the Closing Date (a) a fee
equal to 1% of the Creation Price (as defined in the Put/Call
Agreement) to Blackstone Management Partners L.P. ("Blackstone")
and (b) a consulting fee equal to $1,500,000 and a reimbursement
of expenses in the amount of $1,000,000 to Loewen. Holdings
shall pay Blackstone $2,964,800 at Closing and shall pay the
remainder of such fee to Blackstone after the final calculation
of such Creation Price.
Section 5.2 Monitoring Fees. The Stockholders shall
each vote their shares of Voting 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 Holdings
or one of its subsidiaries, 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 Loewen is exercised
pursuant to the Put/Call Agreement. Holdings shall reimburse BCP
for all of its expenses incurred in monitoring.
Section 5.3 Other Expenses. If the Transaction is
consummated, Holdings 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) Loewen for amounts
payable to Loewen's professional advisors in connection with the
Transaction and paid by Loewen.
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(b) Loewen shall reimburse Holdings for any
withholding taxes incurred by Holdings in respect of, or related
to, the dividends payable on the Preferred Stock at the time such
liabilities are incurred.
Section 5.4 Additional Equity. (a) Following the
Closing Date, if an additional equity contribution to Holdings 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 RHAC's Term Loan or the Notes, BCP shall
have the right to contribute 100% of such additional equity. If
BCP elects to make such a contribution, it shall give Loewen
written notice (the "BCP Additional Equity Notice") to such
effect and Loewen 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 Loewen up to an amount equal to the ratio (before such
contributions) of the Loewen 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 Loewen written notice
to such effect and Loewen shall have the right to contribute 100%
of such additional equity. If Loewen elects to make such 100%
contribution, it shall give BCP written notice (the "Loewen
Additional Equity Notice") to such effect and BCP shall have the
right, exercisable by written notice to Loewen within five
Business Days from receipt of the Loewen Additional Equity
Notice, to replace (prior to Loewen's making such contribution) a
portion of Loewen's contribution with a contribution by BCP up to
an amount equal to the ratio (before such contributions) of the
BCP Contribution to the Loewen 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
Loewen on the Closing Date.
(b) Following the Closing Date, if additional equity
is required (the determination that such additional equity is
required to be made by the Board of Directors) to make
acquisitions of new properties which acquisitions have been
approved by the Board of Directors, Loewen will have the right to
contribute 100% of such additional equity which shall be, at the
option of Loewen, in the form of Common Stock or Preferred Stock
and the purchase price shall be the same price per share paid by
Loewen on the Closing Date.
(c) In the event an additional equity contribution is
required to be made pursuant to subparagraph (a) or (b) of this
Section 5.4, the Stockholders hereby agree to vote the shares of
voting Common Stock held by each of them to authorize the filing
of an amendment to Holdings' Certificate of Incorporation and to
take all such other actions required in order to authorize and
consummate the issuance of the relevant number of additional
shares of capital stock of Holdings in connection with such
additional equity contribution.
(d) 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 Holdings no later than ten Business
Days from the date the BCP Additional Equity Notice or the Loewen
Additional Equity Notice, as the case may
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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").
(e) As of each Additional Equity Closing Date,
Holdings hereby reaffirms to BCP and/or Loewen, 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 Contribution of Nearby Properties. (a)
In the event that prior to the Exit Relevant Period Loewen
acquires, operates or controls, directly or through a wholly
owned subsidiary, or otherwise becomes an Affiliate of, any
Person that owns, operates or controls, directly or indirectly, a
Nearby Property or Nearby Properties, then LWN and LGII and any
Affiliate designated by them as "Contributor" for purposes of the
relevant Nearby Property Contribution Agreement shall have the
option, exercisable in their sole discretion and subject to the
terms and conditions set forth herein, to execute and deliver to
Holdings a Nearby Property Contribution Agreement covering such
Nearby Property or Nearby Properties, which Holdings shall
promptly execute and deliver to LWN, LGII and the designated
Contributor, pursuant to which Nearby Property Contribution
Agreement the relevant Contributor, shall, subject to the terms
and on the conditions of such Nearby Property Contribution
Agreement, convey all of such Nearby Property(ies) to Holdings in
exchange for newly issued shares of Non-Voting Common Stock or
Preferred Stock of Holdings (or a combination thereof as selected
by the relevant Contributor) having an aggregate value equal to
the Contribution Price as therein provided.
(b) (i) Subject to clause (ii) below, the option
provided by this Section 5.5 is exercisable only with respect to
Nearby Properties (A) acquired by LWN directly or through a
wholly owned subsidiary, or (B) owned, operated or controlled
directly or indirectly by a Person who becomes an Affiliate of
LWN; provided, that such option is exercisable in the case of
either clause (A) or (B) only if the revenues attributable to the
Nearby Properties, during the most recently calculated quarterly
accounting period prior to consummation of such acquisition
transaction or series of transactions or the date of such
Affiliation, as the case may be, constitute less than 30% of the
total revenues during the same period of all the funeral homes
and cemeteries being acquired from such seller in such
transaction or series of transactions or owned by the Person that
becomes an Affiliate of LWN, as the case may be.
(ii) This option may not be exercised with respect to
any Nearby Property that was identified by Loewen as an
acquisition candidate and as to which Loewen has provided an
appropriately complete description to RHAC, but which has been
declined to be considered or has been otherwise rejected by
RHAC's Board of Directors as a potential acquisition. In
addition, this option may not be exercised with respect to any
Nearby Property that was identified by Loewen as an acquisition
candidate and that, pursuant to Loewen's exclusive engagement
under Section 1.3 b. of the ASA, should have been appropriately
presented and described to RHAC but which was not so presented
and described.
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(c) The execution and delivery to Holdings of a Nearby
Property Contribution Agreement by LWN, LGII and the relevant
Contributor with respect to any Nearby Property must occur no
later than ten months after the relevant Affiliation Date (as
defined in the ASA) in order for this option to be effective.
Section 5.6 Capital Stock of Subsidiaries.
Notwithstanding the foregoing, the parties hereby agree that,
except for the issuance to Robert Malinow of common stock of
Glasband-Willen Mortuary ("Glasband") representing 5% of
Glasband's issued and outstanding Common Stock, Holdings shall
not permit any of its direct or indirect subsidiaries directly or
indirectly, to issue any shares of capital stock to any entity or
person other than a wholly-owned subsidiary of 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):
"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
NOVEMBER 19, 1996, AMONG ROSE HILLS HOLDINGS CORP.,
BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND L.P.,
BLACKSTONE ROSE HILLS OFFSHORE CAPITAL PARTNERS
II L.P., BLACKSTONE FAMILY INVESTMENT PARTNERSHIP II L.P.,
ROSES DELAWARE, INC., LOEWEN GROUP INTERNATIONAL
INC. AND RHI 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
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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 Holdings:
Rose Hills Holdings Corp.
c/o The Blackstone Group
Park Avenue, 31st Floor
New York, New York 10154
Telecopier No.: (212) 754-8725
Attention: Howard A. Lipson
(b) in the case of BCP AND RHIM:
c/o The Blackstone Group
Park Avenue, 31st Floor
New York, New York 10154
Telecopier No.: (212) 754-8725
Attention: Howard A. Lipson
with a copy to:
Simpson Thacher & Bartlett
Lexington Avenue
New York, New York 10017
Telecopier No.: (212) 455-2502
Attention: Wilson S. Neely, Esq.
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(c) in the case of Loewen:
Loewen Group International, Inc.
East River Center Boulevard
Covington, Kentucky 41011
Telecopier No.: (606) 655-7154
Attention: Legal Department
with a copy to:
The Loewen Group Inc.
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 Term
Sheet dated September 18, 1996, as amended on November 13, 1996),
between the parties hereto with respect to the subject matter
contained herein.
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
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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 Loewen.
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
deemed an original, but all of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement on the date first above written.
ROSE HILLS HOLDINGS CORP.
By: /s/ executed
Name:
Title:
LOEWEN GROUP INTERNATIONAL, INC.
By: /s/ F. Andrew Scott
Name: F. Andrew Scott
Title:
ROSES DELAWARE, INC.
By: /s/ F. Andrew Scott
Name: F. Andrew Scott
Title:
BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
By: /s/ executed
Name:
Title:
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BLACKSTONE FAMILY INVESTMENT PARTNERSHIP II L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
By:____________________
Name:
Title:
BLACKSTONE ROSE HILLS OFFSHORE CAPITAL PARTNERS L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES II L.L.C.
General Partner
By:____________________
Name:
Title:
RHI MANAGEMENT DIRECT L.P.
By: PSI P&S CORP.
General Partner
By: /s/ Stephen A. Schwarzman
Name: Stephen A. Schwarzman
Title:
