<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1996
REGISTRATION NOS. 333-03135 AND 333-03135-01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------
THE LOEWEN GROUP INC.
LOEWEN GROUP INTERNATIONAL, INC. (Exact name of registrant as specified
(Exact name of registrant as specified in its charter)
in its charter)
BRITISH COLUMBIA
DELAWARE
(State or other jurisdiction of incorporation or organization)
7261 7261
(Primary Standard Industrial Classification Code Number)
61-1264590 98-0121376
(I.R.S. Employer Identification Number)
50 EAST RIVERCENTER BOULEVARD 4126 NORLAND AVENUE
SUITE 800 BURNABY, BRITISH COLUMBIA
COVINGTON, KENTUCKY 41011 CANADA V5G 3S8
(606) 431-6663 (604) 299-9321
(Address, including zip or postal code, and telephone number, including area
code, of registrants' principal executive offices)
THE CORPORATION TRUST COMPANY TIMOTHY R. HOGENKAMP
1209 ORANGE STREET LOEWEN GROUP INTERNATIONAL, INC.
WILMINGTON, DELAWARE 19801 50 EAST RIVERCENTER BOULEVARD, SUITE
(302) 658-7581 800
COVINGTON, KENTUCKY 41011
(606) 431-6663
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
with copies to:
DWIGHT K. HAWES
VICE-PRESIDENT, FINANCE MICHELLE L. JOHNSON
THE LOEWEN GROUP INC. THELEN, MARRIN, JOHNSON & BRIDGES
4126 NORLAND AVENUE TWO EMBARCADERO CENTER, SUITE 2100
BURNABY, BRITISH COLUMBIA SAN FRANCISCO, CALIFORNIA 94111-3995
CANADA V5G 3S8
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
---------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THE EXCHANGE NOTES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. EXCHANGE NOTES MAY NOT BE ISSUED NOR MAY +
+OFFERS TO EXCHANGE BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO EXCHANGE +
+NOR SHALL THERE BE ANY ISSUANCE OF EXCHANGE NOTES IN ANY STATE IN WHICH SUCH +
+OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 26, 1996
LOEWEN GROUP INTERNATIONAL, INC.
OFFER TO EXCHANGE
$225,000,000 7 1/2% SERIES 3 SENIOR GUARANTEED NOTES DUE 2001
FOR
ALL OUTSTANDING 7 1/2% SERIES 1 SENIOR GUARANTEED NOTES DUE 2001
AND
$125,000,000 8 1/4% SERIES 4 SENIOR GUARANTEED NOTES DUE 2003
FOR
ALL OUTSTANDING 8 1/4% SERIES 2 SENIOR GUARANTEED NOTES DUE 2003
GUARANTEED BY
THE LOEWEN GROUP INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME
ON , 1996, UNLESS EXTENDED.
-----------
Loewen Group International, Inc., a Delaware corporation ("LGII"), hereby
offers (the "Exchange Offer"), upon the terms and subject to conditions set
forth in this prospectus ("Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange (i) up to an aggregate
principal amount of $225,000,000 of its 7 1/2% Series 3 Senior Guaranteed Notes
due 2001 (the "Series 3 Exchange Notes") for up to an aggregate principal
amount of $225,000,000 of its outstanding 7 1/2% Series 1 Senior Guaranteed
Notes due 2001 (the "Series 1 Notes") and (ii) up to an aggregate principal
amount of $125,000,000 of its 8 1/4% Series 4 Senior Guaranteed Notes due 2003
(the "Series 4 Exchange Notes" and, together with the Series 3 Exchange Notes,
the "Exchange Notes") for up to an aggregate principal amount of $125,000,000
of its outstanding 8 1/4% Series 2 Senior Guaranteed Notes due 2003 (the
"Series 2 Notes" and together with the Series 1 Notes, the "Outstanding
Notes"). The terms of the Series 3 Exchange Notes are identical in all material
respects to those of the Series 1 Notes, and the terms of the Series 4 Exchange
Notes are identical in all material respects to those of the Series 2 Notes,
except for certain transfer restrictions and registration rights relating to
the Outstanding Notes and except for certain interest provisions relating to
such registration rights. The Exchange Notes will be issued pursuant to, and
entitled to the benefits of, the Indenture (as defined) governing the
Outstanding Notes. The Exchange Notes and the Outstanding Notes are sometimes
referred to collectively as the "Notes."
The Exchange Notes will be fully and unconditionally guaranteed, on a senior
basis (the "Guarantees"), by The Loewen Group Inc., a corporation under the
laws of British Columbia, Canada ("Loewen" or the "Guarantor" and, together
with its subsidiaries and associated entities, the "Company"). The Exchange
Notes and the Guarantees will be unsecured senior obligations of LGII and
Loewen, respectively, and will rank pari passu in right of payment with all
unsecured senior indebtedness of LGII and Loewen, respectively.
The Exchange Notes include a covenant (the "Lien Limitation") limiting Liens
(as defined) to certain categories of Liens described in the Indenture (as
defined). On May 31, 1996, LGII entered into a five-year $750 million secured
revolving credit facility (the "New Bank Facility"). At that time, Loewen and
LGII also entered into a collateral trust arrangement with their senior
lenders, including the lenders under the New Bank Facility, pursuant to which
the Pari Passu Indebtedness (as defined) held by such senior lenders is secured
by, among other things, a pledge for the benefit of the senior lenders of the
shares held by Loewen of substantially all of the subsidiaries in which Loewen
directly or indirectly holds more than a 50% voting or economic interest and
all of the financial assets of LGII (LGII does not have material assets other
than financial assets) (collectively, the "Collateral"). In order to satisfy
the Lien Limitation, the Lien secured by the Collateral has to be shared
equally and ratably with the holders of the Indebtedness evidenced by the
Notes. However, the holders of the Exchange Notes will not have an independent
right to require the Lien secured by the Collateral to remain in place or to
require any other security for the Exchange Notes. As at June 30, 1996, the
aggregate amount of outstanding Pari Passu Indebtedness, including the
Indebtedness evidenced by the Outstanding Notes, was approximately $1.0
billion. See "Description of Exchange Notes" and "Description of Certain Other
Indebtedness."
The Exchange Notes and the Guarantees are effectively subordinated in right
of payment to all existing and future liabilities, including trade payables, of
the subsidiaries of LGII and Loewen. As at June 30, 1996, the aggregate amount
of Indebtedness of LGII's subsidiaries (excluding intercompany Indebtedness)
was approximately $74 million, and the aggregate amount of Indebtedness of
Loewen's subsidiaries other than LGII and its subsidiaries (excluding
intercompany Indebtedness) was approximately $8 million.
LGII will accept for exchange any and all Outstanding Notes that are properly
tendered in the Exchange Offer prior to 5:00 p.m., New York time, on ,
1996, unless extended by LGII, in its sole discretion (the "Expiration Date").
The Exchange Offer will not in any event be extended to a date beyond ,
1996. Tenders of Outstanding Notes may be withdrawn at any time prior to 5:00
p.m., New York time, on the Expiration Date. If LGII terminates the Exchange
Offer and does not accept for exchange any Outstanding Notes with respect to
the Exchange Offer, LGII will promptly return the Outstanding Notes to the
tendering holders thereof. The Exchange Offer is not conditioned upon any
minimum principal amount of Outstanding Notes being tendered for exchange, but
is otherwise subject to certain customary conditions. The Outstanding Notes may
be tendered only in integral multiples of $1,000.
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED CAREFULLY IN CONNECTION WITH THE EXCHANGE OFFER.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
Interest on the Exchange Notes will accrue from the date of issuance thereof
and will be payable semi-annually on April 15 and October 15 of each year,
commencing on October 15, 1996. Holders of the Exchange Notes will receive
interest on October 15, 1996 from the date of initial issuance of the
Outstanding Notes. Interest on the Outstanding Notes accepted for exchange
will cease to accrue upon issuance of the respective Exchange Notes. The
Series 3 Exchange Notes will mature on April 15, 2001, and the Series 4
Exchange Notes will mature on April 15, 2003. The Series 3 Exchange Notes will
not be redeemable prior to maturity. The Series 4 Exchange Notes will be
redeemable at the option of LGII, in whole or in part, at any time on or after
April 15, 2000 at the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the redemption date. In the event of a Change of
Control (as defined herein), LGII will be obligated to make an offer to
purchase all of the Notes then outstanding at a purchase price equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to
the purchase date. In addition, LGII will be obligated to make an offer to
purchase Notes in the event of certain asset sales. See "Description of
Exchange Notes."
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of LGII and Loewen contained in the Registration Rights Agreement
dated March 20, 1996 (the "Registration Rights Agreement") by and among LGII
and Loewen and Smith Barney, Inc., Alex. Brown & Sons Incorporated, Morgan
Stanley & Co. Incorporated, Nesbitt Burns Securities Inc. and RBC Dominion
Securities Corporation, as the initial purchasers (the "Initial Purchasers")
with respect to the initial sale of the Outstanding Notes. Based on
interpretations by the staff of the Securities and Exchange Commission (the
"Commission"), LGII and Loewen believe that, except as described below, the
Exchange Notes issued pursuant to the Exchange Offer in exchange for
Outstanding Notes may be offered for resale, resold and otherwise transferred
by respective holders thereof without further compliance with the registration
and prospectus delivery provisions of the Securities Act of 1933, as amended
(the "Securities Act"), provided that (i) such Exchange Notes are acquired in
the ordinary course of such holder's business and (ii) such holder does not
intend to participate in, has no arrangement or understanding with any person
to participate in, and is not engaged in and does not intend to engage in, a
distribution of the Exchange Notes. A holder of Outstanding Notes that is an
"affiliate" of LGII or Loewen within the meaning of Rule 405 under the
Securities Act or that is a broker-dealer who purchased Outstanding Notes from
the Company to resell pursuant to an exemption from registration (a) cannot
rely on such interpretations by the staff of the Commission, (b) will not be
permitted or entitled to tender such Outstanding Notes in the Exchange Offer,
and (c) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any sale or transfer of such
Outstanding Notes. In the event that applicable interpretations by the staff
of the Commission change or otherwise do not permit resales of the Exchange
Notes without compliance with the registration and prospectus delivery
requirements of the Securities Act, holders of Exchange Notes who transfer
Exchange Notes in violation of the prospectus delivery provisions of the
Securities Act or without an exemption from registration thereunder may incur
liability thereunder. The Company does not assume or indemnify holders against
such liability. Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received pursuant to the Exchange Offer in
exchange for Outstanding Notes that were acquired by such broker-dealer as a
result of market-making activities or other trading activities. LGII has
agreed that, for a period of 180 days after the Expiration Date, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. This Prospectus may not be used for any other offers to resell or
re-transfer any Exchange Notes, whether by a broker-dealer or otherwise. See
"Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the Notes.
There can be no assurance as to the liquidity of any markets that may develop
for the Exchange Notes, the ability of holders to sell the Exchange Notes or
the price at which holders would be able to sell the Exchange Notes. LGII does
not intend to list the Exchange Notes for trading on any national securities
exchange or over-the-counter market system. Future trading prices of the
Exchange Notes will depend on many factors including, among other things,
prevailing interest rates, the Company's operating results and the market for
similar securities. Certain of the Initial Purchasers have advised LGII that
they intend to make a market in the Exchange Notes offered hereby. However,
the Initial Purchasers are not obligated to do so and any market making may be
discontinued at any time without notice.
Neither LGII nor Loewen will receive any proceeds from the Exchange Offer.
LGII has agreed to pay the expenses incident to the Exchange Offer. No
underwriter is being used in connection with this Exchange Offer.
THIS PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
INTO SUCH DOCUMENTS) ARE AVAILABLE UPON REQUEST FROM THE CORPORATE SECRETARY
OF THE LOEWEN GROUP INC., 4126 NORLAND AVENUE, BURNABY, BRITISH COLUMBIA, V5G
3S8, CANADA; TELEPHONE (604) 299-9321. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1996.
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------
NO SECURITIES COMMISSION OR SIMILAR AUTHORITY IN CANADA HAS IN ANY WAY
PASSED UPON THE MERITS OF THE SECURITIES OFFERED HEREUNDER AND ANY
REPRESENTATION TO THE CONTRARY IS AN OFFENSE. THE SECURITIES OFFERED HEREUNDER
HAVE NOT BEEN AND WILL NOT BE QUALIFIED FOR SALE UNDER THE SECURITIES LAWS OF
CANADA AND, SUBJECT TO CERTAIN EXCEPTIONS, MAY NOT BE OFFERED OR SOLD IN
CANADA.
2
<PAGE>
AVAILABLE INFORMATION
LGII and Loewen have filed with the Commission a Registration Statement on
Form S-4 (together with any amendments, exhibits, annexes and schedules
thereto, the "Exchange Offer Registration Statement") pursuant to the
Securities Act and the rules and regulations thereunder, covering the Exchange
Notes. This Prospectus does not include all of the information set forth in
the Exchange Offer Registration Statement, certain parts of which are omitted
in accordance with the rules and regulations of the Commission. Statements
made in the Prospectus as to the contents of any contract, agreement or other
document referred to in the Exchange Offer Registration Statement are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Exchange Offer Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.
Loewen is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by
Loewen may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices located
at Seven World Trade Center, Suite 1300, New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such material can be obtained by mail from the Public
Reference section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, reports, proxy
statements and other information that Loewen or LGII files with the Commission
electronically are contained in the Internet Web site maintained by the
Commission. The Commission's Web site address is http://www.sec.gov. The
Common shares without par value of Loewen ("Common Shares") are quoted on The
Nasdaq National Market and are traded on The Toronto Stock Exchange and The
Montreal Exchange. Reports, proxy statements and other information filed by
Loewen may be inspected at the offices of The Nasdaq Stock Market at 1735 K
Street, N.W., Washington, D.C. 20006, at the offices of The Toronto Stock
Exchange at The Exchange Tower, 2 First Canadian Place, Toronto, Ontario,
Canada M5X 1J2 and at the offices of The Montreal Exchange at 800 Victoria
Square, Montreal, Quebec, Canada H4Z 1A9.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents heretofore filed by Loewen with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act (File No. 0-18429) are
hereby incorporated herein by reference: (i) Loewen's Annual Report on Form
10-K for the year ended December 31, 1995 (as amended on Form 10-K/A, filed
June 20, 1996); (ii) Loewen's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996 (filed May 15, 1996) and June 30, 1996 (filed August 14,
1996); (iii) Loewen's Current Reports on Form 8-K dated January 3, 1996,
January 17, 1996, January 24, 1996, January 26, 1996, February 6, 1996,
February 12, 1996, February 27, 1996, March 4, 1996, March 13, 1996, March 20,
1996, March 26, 1996 (as amended on Forms 8-K/A, filed June 10, 1996 and July
5, 1996), March 31, 1996, May 1, 1996, May 8, 1996, May 24, 1996, May 31,
1996, June 4, 1996, June 6, 1996, June 17, 1996, June 21, 1996 and August 7,
1996; and (iv) Loewen's Reports by Issuer of Securities Quoted on Nasdaq
Interdealer Quotation System on Form 10-C dated February 27, 1996 and March
20, 1996. All documents filed by Loewen pursuant to Section 13(a), 13(c), 14,
or 15(d) of the Exchange Act after the date of this Prospectus and prior to
180 days after the Expiration Date shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is incorporated
or deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
3
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus and certain documents incorporated herein by reference
contain both statements of historical fact and "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Examples of forward-looking statements include: (i) projections
of revenue, earnings, capital structure and other financial items, (ii)
statements of the plans and objectives of the Company or its management, (iii)
statements of future economic performance and (iv) assumptions underlying
statements regarding the Company or its business. Important factors, risks and
uncertainties that could cause actual results to differ materially from any
forward-looking statements ("Cautionary Statements") are disclosed in certain
documents incorporated by reference herein and may be included in this
Prospectus. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
FINANCIAL INFORMATION
All dollar amounts in this Prospectus are in United States dollars ("U.S.$"
or "$") unless otherwise indicated. References to "Cdn.$" are to Canadian
dollars.
The Company prepares its consolidated financial statements included in its
reports filed pursuant to the Exchange Act in accordance with accounting
principles generally accepted in Canada ("Canadian GAAP"). Differences between
Canadian GAAP and accounting principles generally accepted in the United
States ("U.S. GAAP"), as applicable to the Company, are explained in Note 21
to the consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, as amended (the
"1995 Consolidated Financial Statements"), and in Note 9 to the interim
consolidated financial statements included in the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996 (the "June 1996 Interim
Consolidated Financial Statements"). The selected consolidated financial data
with respect to Loewen included in this Prospectus is presented on a Canadian
GAAP and a U.S. GAAP basis. The selected consolidated financial data with
respect to LGII is presented on a Canadian GAAP basis only.
Financial statements with respect to Neweol Investments Ltd. (see Note 1
thereto), a corporation under the laws of British Columbia and a wholly owned
subsidiary of Loewen ("Neweol"), and Loewen Finance (Wyoming) Limited
Liability Company, a Wyoming limited liability company in which all of the
membership interests are owned by Loewen and Neweol ("Loewen Finance"), have
been prepared in accordance with U.S. GAAP.
The consolidated financial statements of the Company for the year ended
December 31, 1993, and for prior years, were published in Canadian dollars.
Effective January 1, 1994, the Company adopted the United States dollar as its
reporting currency and, accordingly, has published its consolidated financial
statements for the year ended December 31, 1994 and subsequent periods in
United States dollars. Financial information relating to periods prior to
January 1, 1994 has been translated from Canadian dollars into United States
dollars as required by Canadian GAAP at the December 31, 1993 rate of
U.S.$1.00 = Cdn.$1.3217.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus.
THE COMPANY
The Loewen Group Inc. operates the second-largest number of funeral homes and
cemeteries in North America and the largest number of funeral homes in Canada.
The Company also engages in the pre-need selling of funeral, cemetery and
cremation merchandise and services. As at July 26, 1996, the Company operated
909 funeral homes throughout North America. This included 796 funeral homes in
the United States (including locations in Puerto Rico) and 113 funeral homes in
Canada. In addition, as at such date, the Company operated 247 cemeteries in
the United States and six cemeteries in Canada. As at the close of business on
July 26, 1996, the Company had negotiated agreements for the acquisition of a
further 58 funeral homes and 55 cemeteries in the United States and five
funeral homes in Canada.
THE FUNERAL SERVICE INDUSTRY
The funeral service industry has a number of attractive characteristics.
Historically, the funeral service industry has had a low business risk compared
with most other businesses and has not been significantly affected by economic
or market cycles. According to the 1993 Business Failure Record published by
The Dun & Bradstreet Corporation, the average business failure rate in the
United States in 1993 was 109 per 10,000. The 1993 failure rate of the funeral
service and crematoria industry was 24 per 10,000, among the lowest of all
industries. Management believes this low failure rate is the result of a number
of factors, including customers' tendencies to make choices based on reputation
for quality service rather than price and the number of years required to
establish a caring reputation in the community.
In addition, future demographic trends are expected to contribute to the
continued stability of the funeral service industry. The U.S. Department of
Commerce, Bureau of the Census, projects that, reflecting the well-publicized
"graying of America" as the baby boom generation reaches old age, the number of
deaths in the United States will grow at approximately 1.0% annually from 1990
through 2010.
Finally, the funeral service industry in North America is highly fragmented,
consisting primarily of small, stable, family-owned businesses. Management
estimates that notwithstanding the increasing trend toward consolidation over
the last few years, only approximately 10% of the 23,500 funeral homes and
approximately 7% of the 11,000 cemeteries in North America are currently owned
and operated by the five largest publicly-traded North American funeral service
companies.
GROWTH STRATEGY
The Company capitalizes on these attractive industry fundamentals through a
growth strategy that emphasizes three principal components: (i) acquiring a
significant number of small, family-owned funeral homes and cemeteries; (ii)
acquiring "strategic" operations consisting predominantly of large, multi-
location urban properties that generally serve as platforms for acquiring
small, family-owned businesses in surrounding regions; and (iii) improving the
revenue and profitability of newly-acquired and established locations.
The first element of the Company's growth strategy is the acquisition of
small, family-owned funeral homes and cemeteries. Management believes that the
Company has a competitive advantage in this market due to its culture and its
well-known and understood reputation for honoring existing owners and staff.
The second element of the Company's growth strategy is the acquisition of
large, multi-location urban properties. In 1995, the Company's "strategic"
acquisitions included Osiris Holding Corporation ("Osiris"), a leading cemetery
operator in the United States, and MHI Group, Inc. ("MHI"), a publicly traded
company that operated 16 funeral homes and five cemeteries in Florida and
Colorado. In addition, in March 1996, the Company acquired certain assets from
S.I. Acquisition Associates, L.P. ("S.I."), which included 15 funeral homes,
two cemeteries and two insurance companies, all located in Louisiana.
5
<PAGE>
The final element of the Company's growth strategy is its focus on enhancing
the revenue and profitability of newly-acquired and established operations.
Through the Company's integration process, newly-acquired funeral homes
typically show an immediate improvement in gross margin due in part to the
significant economies of scale available to the Company. Cemeteries typically
show an improvement in gross margin within the first year after acquisition.
Over time, the Company has continued to increase the revenue and profitability
of its established operations through the introduction of additional
merchandising, cost control programs and inflation based pricing. On an ongoing
basis, the Company also seeks to improve the market share and earnings of
established operations by helping local managers to market services more
effectively and to enhance the reputation of their operations in the community.
1996 FINANCINGS
On May 31, 1996, LGII closed a five-year $750 million secured revolving
credit facility. Initial drawings under the New Bank Facility of approximately
$75 million were used to repay permanently the outstanding balance under LGII's
unsecured multi-currency revolving credit facilities (the "Multi-Currency
Revolver"). The balance of the New Bank Facility will be used for general
corporate purposes, including future acquisitions. See "Description of Certain
Other Indebtedness."
Also on May 31, 1996, Loewen, LGII and their senior lenders entered into a
collateral trust arrangement pursuant to which the senior lenders, as holders
of the Pari Passu Indebtedness (as defined), share the Collateral on a pari
passu basis. The Collateral includes a pledge for the benefit of such lenders
of the shares held by Loewen of substantially all of the subsidiaries in which
Loewen directly or indirectly holds more than a 50% voting or economic interest
and all of the financial assets of LGII (LGII does not have material assets
other than financial assets). See "Description of Certain Other Indebtedness."
The Exchange Notes include a Lien Limitation that limits Liens to certain
categories of Liens described in the Indenture. In order to satisfy the Lien
Limitation, the Lien secured by the Collateral for the holders of Pari Passu
Indebtedness has to be shared equally and ratably with the holders of the
Indebtedness evidenced by the Notes. However, the holders of the Exchange Notes
will not have an independent right to require the Lien secured by the
Collateral to remain in place or to require any other security for the Exchange
Notes. As at June 30, 1996, the aggregate amount of Pari Passu Indebtedness,
including the Indebtedness evidenced by the Outstanding Notes, was
approximately $1.0 billion.
In March 1996, all of the Outstanding Notes were issued pursuant to a private
placement (the "Initial Notes Offering") for gross proceeds of $350 million.
Concurrently with the Initial Notes Offering, Loewen completed a public
offering in Canada and a simultaneous private placement in the United States of
7,000,000 Common Shares and, in April 1996, sold an additional 700,000 Common
Shares (pursuant to the exercise of an over-allotment option) for aggregate
gross proceeds of approximately Cdn.$302 million (U.S.$221 million) (the "1996
Equity Offering"). The proceeds of the Initial Notes Offering and the 1996
Equity Offering were used to pay down the balance on the Multi-Currency
Revolver and for general corporate purposes including acquisitions.
In January 1996, Loewen completed a public offering in Canada and a
simultaneous private placement in the United States of 8,800,000 Convertible
First Preferred Shares Series C Receipts (the "Series C Receipts") for gross
proceeds of Cdn.$220 million (U.S. $161 million) (the "1996 Preferred Share
Offering"). The gross proceeds were deposited with an escrow agent. The net
proceeds were released to Loewen from time to time to fund acquisitions by
depositing with the escrow agent an equal dollar amount of 6.00% Cumulative
Redeemable Convertible First Preferred Shares, Series C ("Series C Preferred
Shares"). By June 1996, 8,800,000 Series C Preferred Shares had been deposited
with the escrow agent and all of the net proceeds had been released to Loewen.
----------------
LGII was incorporated in 1987 under the laws of Delaware. LGII's principal
executive offices are located at 50 East RiverCenter Boulevard, Covington,
Kentucky 41011; telephone (606) 431-6663. Loewen was incorporated in 1985 under
the laws of British Columbia, Canada. Loewen's principal executive offices are
located at 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8;
telephone (604) 299-9321.
6
<PAGE>
THE EXCHANGE OFFER
The Exchange Notes.......... The form and terms of the Exchange Notes are
identical in all material respects to the terms
of the respective Outstanding Notes for which
they may be exchanged pursuant to the Exchange
Offer, except for certain transfer restrictions
and registration rights relating to the
Outstanding Notes and except for certain interest
provisions relating to such registration rights
described below under "Description of Exchange
Notes."
The Exchange Offer.......... LGII is offering to exchange (i) up to an
aggregate principal amount of $225,000,000 of its
7 1/2% Series 3 Senior Guaranteed Notes due 2001
for up to an aggregate principal amount of
$225,000,000 of its outstanding 7 1/2% Series 1
Senior Guaranteed Notes due 2001 and (ii) up to
an aggregate principal amount of $125,000,000 of
its 8 1/4% Series 4 Senior Guaranteed Notes due
2003 for up to an aggregate principal amount of
$125,000,000 of its outstanding 8 1/4% Series 2
Senior Guaranteed Notes due 2003. Outstanding
Notes may be exchanged only in integral multiples
of $1,000.
Expiration Date; Withdrawal
of Tender.................. The Exchange Offer will expire at 5:00 p.m., New
York time, on , 1996, or such later date
and time to which it is extended by LGII, in its
sole discretion. The Exchange Offer will not in
any event be extended to a date beyond ,
1996. The tender of Outstanding Notes pursuant to
the Exchange Offer may be withdrawn at any time
prior to the Expiration Date. Any Outstanding
Notes not accepted for exchange for any reason
will be returned without expense to the tendering
holder thereof as promptly as practicable after
the expiration or termination of the Exchange
Offer.
Certain Conditions to the
Exchange Offer.............
The Exchange Offer is subject to certain
customary conditions, which may be waived by
LGII. See "The Exchange Offer--Certain Conditions
to the Exchange Offer."
Procedures for Tendering
Outstanding Notes..........
Each holder of Outstanding Notes wishing to
accept the Exchange Offer must complete, sign and
date the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or
such facsimile, together with such Outstanding
Notes and any other required documentation to the
Exchange Agent (as defined herein) at the address
set forth herein. By executing the Letter of
Transmittal, each holder will represent to LGII
that, among other things, (i) any Exchange Notes
to be received by it will be acquired in the
ordinary course of its business, (ii) it is not
engaged in and does not intend to engage in a
distribution of the Exchange Notes and (iii) it
is not an "affiliate" of LGII or Loewen within
the meaning of Rule 405 under the Securities Act
or, if it is an affiliate of LGII or Loewen, it
will comply with the registration and prospectus
delivery requirements of the Securities Act to
the extent applicable.
7
<PAGE>
Interest on the Exchange The Series 3 Exchange Notes will bear interest at
Notes...................... the rate of 7 1/2% per annum and the Series 4
Exchange Notes will bear interest at the rate of
8 1/4% per annum, payable semi-annually on April
15 and October 15 of each year, commencing
October 15, 1996, to holders of record of
Exchange Notes at the close of business on the
immediately preceding April 1 and October 1,
respectively. Holders of the Exchange Notes will
receive interest on October 15, 1996 from the
date of initial issuance of the Outstanding
Notes. Interest on the Outstanding Notes accepted
for exchange will cease to accrue upon issuance
of the respective Exchange Notes.
Special Procedures for
Beneficial Owners..........
Any beneficial owner whose Outstanding Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender such Outstanding Notes
in the Exchange Offer should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on its own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering its Outstanding Notes,
either make appropriate arrangements to register
ownership of the Outstanding Notes in its own
name or obtain a properly completed bond power
from the registered holder. The transfer of
registered ownership may take considerable time
and may not be able to be completed prior to the
Expiration Date.
Guaranteed Delivery Holders of Outstanding Notes who wish to tender
Procedures................. their Outstanding Notes and whose Outstanding
Notes are not immediately available or holders of
Outstanding Notes who cannot deliver their
Outstanding Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent, prior to the
Expiration Date, must tender their Outstanding
Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer--
Guaranteed Delivery Procedures."
Registration Requirements...
LGII has agreed to use its best efforts to
consummate the Exchange Offer. The Exchange Offer
will provide holders of the Outstanding Notes
with an opportunity to exchange their Outstanding
Notes for the Exchange Notes, which will be
issued without legends restricting the transfer
thereof. If applicable interpretations of the
staff of the Commission do not permit LGII to
effect the Exchange Offer, or in certain other
circumstances, LGII has agreed to file a shelf
registration statement covering resales of the
Outstanding Notes and to use its best efforts to
cause such shelf registration statement to be
declared effective under the Securities Act and,
subject to certain exceptions, to keep the shelf
registration statement effective for 180 days
after the effective date thereof.
8
<PAGE>
Certain U.S. and Canadian
Federal Tax
Considerations.............
For a discussion of certain U.S. and Canadian tax
considerations relating to the Exchange Notes,
see "Certain U.S. Federal Income Tax
Considerations" and "Certain Canadian Federal Tax
Considerations."
Use of Proceeds............. There will be no proceeds to LGII or Loewen from
the exchange of Notes pursuant to the Exchange
Offer.
Exchange Agent.............. Fleet National Bank is the Exchange Agent. The
address and telephone number of the Exchange
Agent are set forth in "The Exchange Offer--
Exchange Agent."
SUMMARY DESCRIPTION OF THE EXCHANGE NOTES
Issuer...................... Loewen Group International, Inc.
Exchange Notes.............. $225 million principal amount of 7 1/2% Series 3
Senior Guaranteed Notes due 2001
$125 million principal amount of 8 1/4% Series 4
Senior Guaranteed Notes due 2003
Maturity Dates.............. The Series 3 Exchange Notes will mature on April
15, 2001.
The Series 4 Exchange Notes will mature on April
15, 2003.
April 15 and October 15, commencing October 15,
Interest Payment Dates...... 1996
Ranking.....................
The Exchange Notes and the Guarantees, when
issued, will be secured senior obligations of
LGII and Loewen, respectively, and will rank pari
passu in right of payment with all secured senior
indebtedness of LGII and Loewen, respectively.
The Exchange Notes include a Lien Limitation that
limits Liens to certain categories of Liens
described in the Indenture. The Collateral for
the holders of Pari Passu Indebtedness includes a
pledge for the benefit of such lenders of the
shares of substantially all of the subsidiaries
in which Loewen directly or indirectly holds more
than a 50% voting or economic interest and all of
the financial assets of LGII (LGII does not have
material assets other than financial assets). In
order to satisfy the Lien Limitation, the Lien
secured by the Collateral has to be shared
equally and ratably with the holders of the
Indebtedness evidenced by the Notes. However, the
holders of the Exchange Notes will not have an
independent right to require the Lien secured by
the Collateral to remain in place or to require
any other security for the Exchange Notes. In the
event that the Lien secured by the Collateral is
released, if other security for the Exchange
Notes is not provided, the Exchange Notes will
become unsecured senior obligations of LGII and
Loewen and will rank junior in right of payment
to all secured indebtedness of LGII
9
<PAGE>
and Loewen. As at June 30, 1996, the aggregate
amount of Pari Passu Indebtedness, including the
Indebtedness evidenced by the Outstanding Notes,
was approximately $1.0 billion. The Exchange
Notes and related Guarantees will be effectively
subordinated in right of payment to all existing
and future liabilities, including trade payables,
of LGII's and Loewen's subsidiaries,
respectively. As at June 30, 1996, the aggregate
amount of Indebtedness of LGII's subsidiaries
(excluding intercompany Indebtedness) was
approximately $74 million, and the aggregate
amount of Indebtedness of Loewen's subsidiaries
other than LGII and its subsidiaries (excluding
intercompany Indebtedness) was approximately $8
million.
Guarantees.................. The Exchange Notes will be fully and
unconditionally guaranteed on a senior basis, as
to principal and interest, by Loewen.
Optional Redemption......... The Series 3 Exchange Notes will not be
redeemable prior to maturity. The Series 4
Exchange Notes will be redeemable at the option
of LGII, in whole or in part, at any time on or
after April 15, 2000 at a premium declining to
par in 2002, plus accrued and unpaid interest, if
any, to the redemption date.
Offers to Purchase.......... In the event of a Change of Control (as defined
herein), LGII will be obligated to make an offer
to purchase the then outstanding Exchange Notes
at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the purchase date. In
addition, LGII will be obligated to make an offer
to purchase the Exchange Notes at a purchase
price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest, if
any, to the purchase date, with the net cash
proceeds of certain sales or other dispositions
of assets. LGII's ability to purchase the
Exchange Notes will be dependent upon obtaining
third-party financing to the extent it may not
have available funds to meet its purchase
obligations. There can be no assurance that LGII
or the Guarantor will be able to obtain such
financing. The term "Change of Control" is
limited to certain specified transactions and may
not include other events that might adversely
affect the financial condition of LGII or result
in a downgrade of the credit rating of the
Exchange Notes.
Certain Covenants........... The Indenture contains certain covenants by
Loewen and its Restricted Subsidiaries (as
defined herein and including LGII), including,
but not limited to, covenants with respect to
limitations on the following matters: (i) the
incurrence of additional indebtedness, (ii)
certain payments, including dividends and
investments, (iii) the creation of liens, (iv)
sales of assets and preferred stock, (v)
transactions with interested persons, (vi)
payment restrictions affecting subsidiaries,
(vii) sale-leaseback transactions and (viii)
mergers and consolidations. During any time that
the ratings assigned to the Notes by the Rating
Agencies (as defined herein) are no less than
BBB- and Baa3, the covenants described under (i),
(ii), (iv), (v) and (vi) above will be suspended.
See "Description of Exchange Notes--Certain
Covenants."
10
<PAGE>
THE LOEWEN GROUP INC.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(IN THOUSANDS OF U.S.$, EXCEPT PER SHARE DATA, OPERATING DATA AND RATIOS)
Set forth below are certain selected consolidated financial and other
data of the Company for the periods indicated. This information should be
read in conjunction with the Company's 1995 Consolidated Financial
Statements and other information included or incorporated by reference
herein. The selected consolidated financial data for each of the years in
the five year period ended December 31, 1995 are derived from the Company's
audited consolidated financial statements and notes thereto, which have
been prepared in accordance with Canadian GAAP. The selected consolidated
financial data for the six months ended June 30, 1996 and 1995 are derived
from the unaudited June 1996 Interim Consolidated Financial Statements,
which in management's opinion include all adjustments, consisting only of
normal, recurring adjustments, necessary for a fair presentation of the
financial results for the interim periods. Interim results are not
necessarily indicative of the results that may be expected for any other
interim period or for a full year.
The financial results for the year ended December 31, 1995 include
provisions for the costs of settlements of two significant legal
proceedings, litigation-related finance costs and certain additional legal
and general and administrative costs. See "Recent Developments--Litigation
Settlements" for a more detailed description of the settlements and "Recent
Developments--1995 Results" for a more detailed description of the costs
related thereto.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
CANADIAN GAAP ------------------------- ------------------------------------------------------
1996 1995 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1)
------------ ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................. $ 416,240 $ 268,308 $ 599,939 $ 417,328 $ 303,011 $ 218,907 $ 162,605
Gross margin............ 154,097 106,428 226,808 158,854 115,118 83,708 63,087
Earnings from
operations............. 95,536 66,305 119,053 95,113 65,697 50,563 39,053
Net earnings (loss)..... 36,712 26,397 (76,684) 38,494 28,182 19,766 14,425
Basic earnings (loss)
per share (2)......... 0.60 0.62 (1.69) 0.97 0.77 0.59 0.46
Fully diluted earnings
(loss) per share
(2)(3)................. 0.60 0.62 (1.69) 0.97 0.76 0.58 0.46
OTHER FINANCIAL DATA:
Depreciation and
amortization........... $ 24,702 $ 17,486 $ 40,103 $ 28,990 $ 21,196 $ 16,059 $ 11,053
EBITDA (4).............. 120,238 83,791 (25,758) 124,103 86,893 66,622 50,106
Ratio of earnings to
fixed charges ......... 2.2x 2.4x -- (5) 2.5x 2.9x 2.6x 2.6x
Aggregate dividends
declared per Common
share.................. 0.120 0.050 0.050 0.070 0.045 0.030 0.015
<CAPTION>
AS AT JUNE 30, AS AT DECEMBER 31,
------------------------- ------------------------------------------------------
1996 1995 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1)
------------ ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............ $ 2,919,390 $ 1,647,344 $2,262,980 $1,326,275 $ 913,661 $ 675,111 $ 518,492
Total long-term debt
(6).................... 1,095,375 533,209 934,509 516,654 341,977 246,715 193,853
Preferred securities of
subsidiary............. 75,000 75,000 75,000 75,000 -- -- --
Shareholders' equity.... 1,025,968 630,944 614,682 411,139 325,890 236,317 172,394
OPERATING DATA:
Number of funeral home
location (7)........... 898 719 815 641 533 451 365
Number of funeral
services............... 69,949 54,488 114,319 93,760 78,847 63,516 52,212
Number of cemeteries
(7).................... 237 155 179 116 70 38 23
</TABLE>
11
<PAGE>
(1) Certain of the comparative figures have been reclassified to conform to
the presentation adopted in 1995.
(2) Earnings (loss) per share reflect the two-for-one subdivision of Common
Shares in June 1991.
(3) Fully diluted earnings (loss) per share figures assume exercise, if
dilutive, of employee and other stock options effective on their dates of
issue and that the funds derived therefrom were invested at annual after-
tax rates of return ranging from 5.85% to 8.49%, in accordance with
Canadian GAAP.
(4) EBITDA represents net earnings (loss) before interest, dividends on
preferred securities of subsidiary, income taxes, depreciation and
amortization. EBITDA has been included solely to facilitate the
consideration of the covenants of the Indenture that are based, in part,
on EBITDA. In addition, the Company understands that EBITDA is used by
certain investors as one measure of the Company's historical ability to
service its debt. EBITDA data are not a measure of financial performance,
do not represent cash flow from operations, under generally accepted
accounting principles, and should not be considered as a substitute for
net earnings as an indicator of the Company's operating performance or for
cash flow as a measure of liquidity. Please refer to the Consolidated
Statements of Changes in Financial Position, which include information
regarding cash provided by and applied to operations, investing and
financing, and Management's Discussion and Analysis of Financial Condition
and Results of Operations, which discusses liquidity and capital resources
(including sources and uses of capital) in greater detail, both of which
appear in Loewen's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996.
(5) The 1995 loss is not sufficient to cover fixed charges by a total of
$126,584 and as such the ratio of earnings to fixed charges has not been
computed. Reference is made to the Statement re Computation of Earnings to
Fixed Charges Ratio, which is an exhibit to the Exchange Offer
Registration Statement.
(6) Total long-term debt comprises long-term debt, including current portion.
(7) The numbers of locations for 1994 and 1993 include adjustments and
consolidations related to prior periods.
12
<PAGE>
Had the Company's Consolidated Financial Statements been prepared in
accordance with U.S. GAAP (see Note 21 to the Company's 1995 Consolidated
Financial Statements and Note 9 to the June 1996 Interim Consolidated Financial
Statements), selected consolidated financial data would be as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
U.S. GAAP ------------------------- ---------------------------------------------------------
1996 1995 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1)
------------ ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................. $ 416,240 $ 267,463 $ 599,939 $ 417,479 $ 308,402 $ 239,452 $ 185,993
Earnings from
operations............. 92,815 65,397 117,376 94,758 66,711 54,838 43,692
Earnings (loss) before
cumulative effect of
change in accounting
principles............. 36,973 26,644 (75,800) 39,652 28,912 21,330 15,893
Fully diluted earnings
(loss) per share before
cumulative effect of
change in accounting
principles (2)......... 0.60 0.61 (1.67) 0.98 0.77 0.62 0.50
OTHER FINANCIAL DATA:
EBITDA (3).............. 117,729 83,682 (26,967) 123,748 88,428 72,404 56,335
Ratio of earnings to
fixed charges.......... 2.1x 2.4x -- (4) 2.4x 2.9x 2.6x 2.5x
Aggregate dividends
declared per Common
share.................. 0.120 0.050 0.050 0.070 0.047 0.033 0.017
<CAPTION>
AS AT JUNE 30, AS AT DECEMBER 31,
------------------------- -------------------------------------------------------
1996 1995 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1)
------------ ------------ ---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets............ $ 3,065,744 $ 1,498,090 $2,345,874 $1,329,928 $ 921,342 $ 702,096 $ 592,666
Total long-term
debt(5)................ 1,095,375 533,209 894,509 516,654 341,977 256,577 221,736
Preferred securities of
subsidiary............. 75,000 75,000 75,000 75,000 -- -- --
Shareholders' equity.... 1,000,984 607,276 519,006 385,950 299,059 245,472 196,071
</TABLE>
- --------
(1) Certain of the comparative figures have been reclassified to conform to the
presentation adopted in 1995.
(2) Earnings (loss) per share reflects the two-for-one subdivision of Common
Shares in June 1991.
(3) EBITDA represents net earnings (loss) before interest, dividends on
preferred securities of subsidiary, income taxes, depreciation and
amortization. EBITDA has been included solely to facilitate the
consideration of the covenants of the Indenture that are based, in part, on
EBITDA. In addition, the Company understands that EBITDA is used by certain
investors as one measure of the Company's historical ability to service its
debt. EBITDA data are not a measure of financial performance, do not
represent cash flow from operations, under generally accepted accounting
principles, and should not be considered as a substitute for net earnings
as an indicator of the Company's operating performance or for cash flow as
a measure of liquidity. Please refer to the Consolidated Statements of
Changes in Financial Position, which include information regarding cash
provided by and applied to operations, investing and financing, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which discusses liquidity and capital resources (including
sources and uses of capital) in greater detail, both of which appear in
Loewen's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
(4) The 1995 loss is not sufficient to cover fixed charges by a total of
$128,261 and as such the ratio of earnings to fixed charges has not been
computed. Reference is made to the Statement re Computation of Earnings to
Fixed Charges Ratio, which is an exhibit to the Exchange Offer Registration
Statement.
(5) Total long-term debt comprises long-term debt, including current portion.
13
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS OF U.S.$)
Loewen Group International, Inc. serves as the holding company for the United
States assets and operations of the Company (other than assets and operations
in Puerto Rico). At July 26, 1996, LGII's operations consisted of 792 funeral
homes and 242 cemeteries. Loewen beneficially owns, directly or indirectly, all
of the outstanding common stock of LGII.
Set forth below are certain selected consolidated financial data relating to
LGII. The selected consolidated financial data for each of the years in the
five year period ended December 31, 1995 are derived from audited consolidated
financial statements of LGII, which have been prepared in accordance with
Canadian GAAP. The selected consolidated financial data for the six months
ended June 30, 1996 and 1995 are derived from unaudited interim consolidated
financial statements of LGII, which in management's opinion include all
adjustments consisting only of normal, recurring adjustments, necessary for a
fair presentation of the financial results for the interim periods. Interim
results are not necessarily indicative of the results that may be expected for
any other interim period or for a full year.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------------------------
1996 1995 1995 1994(1) 1993(1) 1992(1) 1991(1)
---------- ---------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................. $ 382,170 $ 238,793 $ 540,825 $ 365,458 $ 263,493 $ 190,047 $ 135,248
Gross margin............ 140,682 93,270 198,867 136,639 97,328 69,675 48,940
Earnings from
operations............. 88,232 59,978 75,715 84,390 59,462 44,910 29,297
Net earnings (loss)(2).. 10,912 11,546 (127,353) 7,491 10,671 9,766 7,661
<CAPTION>
AS AT JUNE 30, AS AT DECEMBER 31,
--------------------- ----------------------------------------------------
1996 1995 1995 1994(1) 1993(1) 1992(1) 1991(1)
---------- ---------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.......... $ 223,270 $ 124,026 $ 184,289 $ 96,943 $ 81,028 $ 57,145 $ 49,028
Non-current assets...... 2,368,445 1,264,048 1,776,425 998,753 686,260 507,545 398,239
---------- ---------- ---------- ---------- --------- --------- ---------
Total assets............ 2,591,715 1,388,074 1,960,714 1,095,696 767,288 564,690 447,267
Current liabilities..... 135,256 85,889 221,555 81,472 36,722 27,242 17,394
Long-term debt,
excluding current
portion................ 905,141 362,704 730,355 372,887 243,290 176,073 180,784
Other non-current
liabilities............ 1,248,416 683,132 891,354 396,534 324,964 251,734 149,214
Preferred securities of
subsidiary............. 75,000 75,000 75,000 75,000 -- -- --
Shareholders' equity.... 227,902 181,349 42,450 169,803 162,312 109,641 99,875
</TABLE>
- -------
(1) Certain of the comparative figures have been reclassified to conform to the
presentation adopted in 1995.
(2) Losses incurred during the year ended December 31, 1995 are as a result of
LGII recording the litigation settlements and additional intercompany
charges payable to Loewen. These intercompany charges are eliminated in the
consolidated financial statements of the Company.
14
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully prior to tendering Outstanding Notes in
the Exchange Offer.
HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION OF THE EXCHANGE NOTES
LGII and Loewen are holding companies with no significant independent
business operations. Accordingly, their primary sources of cash to meet debt
service and other obligations (including payments on the Notes) are dividends
and other payments from their respective subsidiaries. Consequently,
obligations of LGII and Loewen to their creditors, including holders of the
Notes, are effectively subordinated in right of payment and junior to all
liabilities (including trade payables) of their respective subsidiaries. As at
June 30, 1996, the aggregate amount of Indebtedness of LGII's subsidiaries
(excluding intercompany Indebtedness) was approximately $74 million, and the
aggregate amount of indebtedness of Loewen's subsidiaries other than LGII and
its subsidiaries, (excluding intercompany Indebtedness) was approximately $8
million.
POTENTIAL INSUFFICIENCY OF COLLATERAL; NO INDEPENDENT RIGHT TO SECURITY FOR
THE EXCHANGE NOTES
The Lien secured by the Collateral is shared equally and ratably by the
other holders of all Pari Passu Indebtedness, including the New Bank Facility
and the Notes. See "Description of Certain Other Indebtedness." There can be
no assurance that the Collateral will be sufficient to cover any payments due
on the Exchange Notes. In addition, the Collateral secures the Pari Passu
Indebtedness, including the Exchange Notes, only so long as it is required
under the New Bank Facility. The Collateral could be released by the lenders
under the New Bank Facility, in certain circumstances, without the approval of
all the other holders of Pari Passu Indebtedness, including the holders of the
Exchange Notes. The holders of the Exchange Notes have no independent right to
require the Lien secured by the Collateral to remain in place or to require
any other security for the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE; POSSIBLE ADVERSE EFFECT ON
TRADING MARKET FOR OUTSTANDING NOTES
Holders of Outstanding Notes who do not exchange their Outstanding Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer, as set forth in the legend thereon as a
consequence of the issuance of the Outstanding Notes pursuant to exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the
Outstanding Notes may not be offered or sold unless registered under the
Securities Act and applicable state laws, or pursuant to an exemption
therefrom. Subject to the obligation by LGII and Loewen to file a Shelf
Registration Statement covering resales of Outstanding Notes in certain
circumstances, LGII and Loewen do not intend to register the Outstanding Notes
under the Securities Act and, after consummation of the Exchange Offer, will
not be obligated to do so. In addition, any holders of Outstanding Notes who
tender in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Further, as a result of the Exchange Offer, it is expected
that a substantial decrease in the aggregate principal amount of Outstanding
Notes outstanding will occur. As a result, it is unlikely that a liquid
trading market will exist for the Outstanding Notes at any time. This lack of
liquidity will make transactions more difficult and may reduce the trading
price of the Outstanding Notes. See "The Exchange Offer" and "Description of
Exchange Notes--Registration Rights Agreement."
PENDING CLASS ACTIONS
The Company currently is involved in three class action lawsuits that have
been consolidated for pre-trial proceedings (the "Class Actions") which were
commenced against Loewen, LGII and certain affiliates and officers of the
Company when the price of the Common Shares fell in response to the
announcement of the Gulf
15
<PAGE>
National award (as defined). The Company has determined that it is not
possible to predict the final outcome of the Class Actions, and that it is not
possible to establish at this time a reasonable estimate of possible damages,
if any, or reasonably to estimate the range of possible damages, if any, that
may be awarded to the plaintiffs in the Class Actions. Accordingly, the
Company cannot predict whether the ultimate outcome of the Class Actions
(including settlement) will have a material adverse effect on the Company's
financial position, results of operations or liquidity. See "Legal
Proceedings."
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
There is no existing public market for the Exchange Notes, nor can there be
any assurance that a public market will develop. Certain of the Initial
Purchasers have advised LGII that they intend to make a market in the Exchange
Notes; however, the Initial Purchasers are not obligated to do so and any
market-making may be discontinued at any time without notice.
16
<PAGE>
RECENT DEVELOPMENTS
SECOND QUARTER 1996 RESULTS
For the six months ended June 30, 1996, the Company reported that
consolidated revenue increased 55.1% to $416.2 million from $268.3 million for
the six months ended June 30, 1995. Consolidated gross margin increased 44.8%
to $154.1 million in 1996 from $106.4 million in 1995, with funeral gross
margin increasing 21.1% and cemetery gross margin increasing 140.5%.
ACQUISITION PROGRAM
From January 1, 1996 to July 26, 1996, the Company closed approximately $394
million of funeral home, cemetery and related acquisitions. As at July 26,
1996, the Company has signed agreements for additional acquisitions
aggregating approximately $198 million, the majority of which the Company
expects to close prior to the end of 1996, for a total of approximately $592
million.
In addition, as at July 26, 1996, the Company was in the process of
evaluating or negotiating prospective acquisitions in competition with other
potential purchasers. The Company does not expect that all such potential
acquisitions will be completed during 1996, if at all. Several of such
potential acquisitions, one or more of which may be completed in 1996, would
be considered significant based on acquisition price. See "Business--Future
Acquisitions."
LITIGATION SETTLEMENTS
In November 1995, a Mississippi state court jury awarded J.J. O'Keefe, Sr.,
Gulf National Insurance Company and certain affiliates (collectively, "Gulf
National") $100 million in compensatory damages and $400 million in punitive
damages (the "Gulf National award") for claims arising out of a 1991 lawsuit
alleging breach of contract and related causes of action against Loewen, LGII
and two indirect subsidiaries (the "Company Defendants"). On February 1, 1996,
Gulf National and the Company Defendants executed a settlement agreement
pursuant to which, among other things, the parties agreed to a full mutual
release of all claims, and the Company Defendants agreed to deliver to Gulf
National or its designees $50 million in cash, 1.5 million Common Shares (the
"Gulf National Settlement Shares") and a promissory note in the amount of $80
million, payable over 20 years in equal annual installments of $4 million,
without interest (the "Gulf National settlement"). In connection with the
issuance of the Gulf National Settlement Shares, on February 9, 1996, Loewen,
LGII, Gulf National and certain other parties entered into a shareholders'
agreement, providing for, among other things, a price guarantee of $30 per
Common share in certain circumstances, a voting agreement and a right of first
refusal in favor of Loewen.
In April 1992, Provident American Corporation and a subsidiary (together,
"Provident") commenced a lawsuit against Loewen and LGII claiming compensatory
and punitive damages arising out of terminated negotiations relating to a pre-
need funeral insurance marketing arrangement. On February 12, 1996, Provident,
Loewen and LGII agreed to settle the litigation. On March 19, 1996, the
parties entered into a settlement agreement whereby, among other things, the
parties agreed to a full mutual release of all claims, and Provident received
from the Company one million Common Shares with a price guarantee of $27 per
share in certain circumstances (the "Provident Settlement Shares") and $3
million in cash (together with the Provident Settlement Shares, the "Provident
settlement").
See "Legal Proceedings" for further information regarding the Gulf National
and Provident settlements.
1995 RESULTS
The results for the year ended December 31, 1995 were significantly affected
by the Gulf National award in November 1995 and the Gulf National and
Provident settlements during the first quarter of 1996. The related costs are
reflected primarily in the results for the three months ended December 31,
1995. For that period, the
17
<PAGE>
Company recorded a net loss of $113.2 million as compared to net earnings of
$11.4 million in the same period of 1994. For the year ended December 31,
1995, the Company recorded a net loss of $76.7 million compared to net
earnings of $38.5 million in 1994.
Consolidated revenue increased 43.8% to $599.9 million in the year ended
December 31, 1995 from $417.3 million in 1994, with funeral revenue increasing
25.1% and cemetery revenue increasing 126.4%. Consolidated gross margin
increased 42.8% to $226.8 million in 1995 from $158.9 million in 1994. As a
percentage of revenue, funeral gross margin increased to 41.5% in 1995 from
40.5% in 1994 and cemetery gross margin increased to 27.8% in 1995 from 24.3%
in 1994. As a result of the change in mix between funeral and cemetery
operations, the combined gross margin decreased to 37.8% in 1995 from 38.1%
for the same period in 1994.
Funeral revenue increased 25.1% to $442.8 million in 1995 compared with
$353.9 million in 1994, primarily due to acquisitions. The funeral revenue
from locations in operation for all of 1994 and 1995 ("Established Locations")
increased by $7.5 million while corresponding funeral gross margins increased
from 40.6% to 42.1%. With the implementation of merchandising programs and
inflation-based price increases, the Company was able to more than offset a
1.3% decline in the number of funeral services performed at Established
Locations.
Cemetery revenue increased 126.4% to $143.6 million in 1995 compared with
$63.4 million in 1994, primarily due to acquisitions. Cemetery gross margin
increased to 27.8% in 1995 from 24.3% in 1994, primarily as a result of
increased sales activity and the integration of acquisitions with a higher
cemetery gross margin. The cemetery revenue from Established Locations
increased by $12 million, while corresponding cemetery gross margins increased
from 26.6% to 29.0%, both principally due to a higher level of pre-need sales
at higher margins.
In addition to its focus on quality at-need funeral and cemetery services,
the Company provides advanced funeral and cemetery planning to the communities
it serves. In 1995, approximately 16.0% of the funeral services performed by
the Company were prearranged, an increase from 14.8% in 1994. During 1995, the
Company sold approximately 28,000 funeral services to families planning in
advance compared with approximately 24,000 funeral services in 1994. In 1995,
approximately 60.9% of the Company's cemetery revenue was generated from pre-
need cemetery planning compared with 53.1% in 1994. The Company expects that
approximately 66% of its cemetery revenue will be generated from pre-need
planning in 1996. Notes 1 and 4 to the Company's 1995 Consolidated Financial
Statements provide information regarding the accounting treatment of pre-need
sales.
Insurance revenue in 1995 was $13.5 million. The Company determined in 1995
that it would not, as previously planned, sell a life insurance subsidiary
which had been acquired in connection with a larger acquisition in 1994 with
the intent that it be sold. The subsidiary was accounted for at cost from the
date of acquisition to June 30, 1995. Beginning July 1, 1995, the Company
reported the operations of the life insurance subsidiary on a consolidated
basis. On March 26, 1996, the Company purchased certain net assets of S.I.
Acquisitions Associates, L.P., which included two insurance companies.
United States based operations contributed 91.3% of 1995 consolidated
revenue compared with 88.4% in 1994.
For the year ended December 31, 1995, general and administrative expenses
increased 94.7% to $67.7 million from $34.8 million in 1994. As a percentage
of consolidated revenue, general and administrative expenses in 1995 were
11.3% as compared with 8.3% in 1994. Included in general and administrative
expenses in 1995, and principally in the fourth quarter, are litigation,
acquisition and other expenses, including $10.8 million for professional fees
and other costs related to the Gulf National and Provident litigation and
settlements, and a $3.5 million write-off of acquisition costs. The remaining
increase in general and administrative expenses can be attributed to an
expansion of the Company's infrastructure as a result of the integration of
acquired operations.
18
<PAGE>
Interest expense on long-term debt increased by $16.7 million in 1995
primarily as a result of additional borrowings by the Company to finance its
acquisitions. The Company's credit ratings were reduced as a result of the
Gulf National award. Unless the credit ratings are raised to the investment
grade ratings applied to the Company prior to the Gulf National award, the
Company's cost of borrowing will be higher than that experienced in 1995.
The dividends on preferred securities of an associated entity, Loewen Group
Capital, L.P. ("LGCLP"), increased from $2.7 million to $7.1 million as a
result of the Monthly Income Preferred Securities (the "MIPS") issued by LGCLP
in 1994 being outstanding for a full year. See Note 8 to the 1995 Consolidated
Financial Statements.
The Company recorded an expense of $165.0 million for the year ended
December 31, 1995 for the Gulf National and Provident settlements announced on
January 29, 1996 and February 12, 1996, respectively. The accrual of $135.0
million for the Gulf National settlement consisted of (i) $50.0 million
recorded in current liabilities in respect of a cash payment made in February
1996, (ii) $45.0 million recorded in shareholders' equity for the issue of 1.5
million Common Shares in February 1996 with a price guarantee of $30 per share
in certain circumstances, and (iii) $40.0 million recorded as long-term debt
representing the discounted value of a non-interest bearing promissory note
dated January 31, 1996 with payments of $4.0 million per annum over 20 years.
See "Legal Proceedings--Gulf National Settlement."
The accrual of $30 million for the Provident settlement consisted of (i)
$3.0 million recorded in current liabilities in respect of a payment made
March 19, 1996 and (ii) $27.0 million recorded in shareholders' equity for the
issue in March 1996 of one million Common Shares with a price guarantee of $27
in certain circumstances. See "Legal Proceedings--Provident Settlement."
The deferred income tax benefit of $60.3 million from the Gulf National and
Provident settlements has been recorded as a deferred income tax asset. Prior
to the tax recovery from the Gulf National and Provident settlements, income
taxes were $13.2 million, an effective rate of 32.0%, compared with $19.7
million in 1994, an effective rate of 33.9%. The decrease in the effective tax
rate in 1995 was primarily due to the expansion of the Company's international
financing arrangements. As a result of the above, the Company shows a net
income tax recovery of $47.2 million versus a net income tax expense of $19.7
million in 1994.
As a result of litigation during 1995 and the resulting Gulf National and
Provident settlements, litigation-related finance costs, aggregating $19.9
million, were expensed in 1995. These finance costs consisted of
(i) $7.4 million of finance costs incurred as a result of posting a $125
million bond in connection with the appeal of the Gulf National award, (ii)
$3.9 million for amendment of bank facilities due to litigation and write-off
of related existing deferred financing costs, and (iii) $8.6 million including
$7.1 million for the termination of interest rate agreements and a $1.5
million unrealized loss with respect to interest rate agreements entered into
in anticipation of a long-term debt issue that was aborted as a result of the
Gulf National award.
The cash provided from operations for 1995 decreased from $43.3 million to
$13.2 million primarily as a result of increased expenses associated with the
Gulf National litigation and increases in required working capital and other
non-cash balances arising from the additional cemetery operations. As at
December 31, 1995, there was a working capital deficiency arising from the $53
million accrual for the cash payments required to be made in 1996 under the
Gulf National and Provident settlements. The $50 million payment for the Gulf
National settlement was funded in 1996 by borrowings under the Company's
credit facilities. Cash provided from operations also reflects Common Shares
and debt to be issued under legal settlements which will be reflected as cash
applied to operations in 1996.
19
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Outstanding Notes and the net proceeds
from the concurrent 1996 Equity Offering generally were used to repay
indebtedness outstanding under the Multi-Currency Revolver. The amount by which
the aggregate net proceeds exceeded the then outstanding balance on the Multi-
Currency Revolver was approximately $83 million, which amount was added to cash
and marketable securities of the Company for working capital and other general
corporate purposes, including future acquisitions.
This Exchange Offer is intended to satisfy certain obligations of LGII and
Loewen under the Registration Rights Agreement. Neither LGII nor Loewen will
receive any proceeds from the issuance of the Exchange Notes offered hereby. In
consideration for issuing the Exchange Notes as contemplated in this
Prospectus, LGII will receive Outstanding Notes in like principal amount. The
form and terms of the Exchange Notes are identical in all material respects to
the form and terms of the respective Outstanding Notes, except as otherwise
described herein under "The Exchange Offer--Terms of the Exchange Offer." The
Outstanding Notes surrendered in exchange for Exchange Notes will be retired
and cancelled and cannot be reissued. Accordingly, issuance of the Exchange
Notes will not result in any increase in the outstanding debt of LGII or
Loewen.
CONSOLIDATED CAPITALIZATION
The following table sets forth the cash and marketable securities and total
capitalization of the Company as at June 30, 1996, adjusted to reflect the
exchange of all of the Outstanding Notes for Exchange Notes pursuant to the
Exchange Offer. Because the Outstanding Notes surrendered in exchange for
Exchange Notes will be retired and cancelled and cannot be reissued, whether
none, some or all of the Exchange Notes are issued pursuant to the Exchange
Offer will not result in any change in the outstanding long-term debt of LGII
or Loewen.
<TABLE>
<CAPTION>
AS AT JUNE 30, 1996
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and marketable securities........................ $ 36,521 $ 36,521
========== ==========
Short-term debt, including current portion of long-
term debt............................................ $ 68,041 $ 68,041
---------- ----------
Long-term debt
Outstanding Notes................................... 350,000 0
Exchange Notes...................................... 0 350,000
Senior guaranteed notes, Series A-E................. 246,600 246,600
New Bank Facility................................... 162,000 162,000
Canadian Revolver................................... 19,616 19,616
Term credit facilities.............................. 141,672 141,672
Other long-term debt................................ 175,487 175,487
Less current portion................................ (68,041) (68,041)
---------- ----------
Total long-term debt................................ 1,027,334 1,027,334
Preferred securities of subsidiary (1)................ 75,000 75,000
Total shareholders' equity............................ 1,025,968 1,025,968
---------- ----------
Total capitalization.................................. $2,128,302 $2,128,302
========== ==========
</TABLE>
- --------
(1) Reference is made to Note 8 to the 1995 Consolidated Financial Statements
for particulars of the preferred securities of subsidiary.
20
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Outstanding Notes were sold by the Company on March 20, 1996 to the
Initial Purchasers, who then sold the Outstanding Notes to certain
institutional investors. In connection with the sale of the Outstanding Notes,
LGII and Loewen and the Initial Purchasers entered into the Registration
Rights Agreement, pursuant to which LGII and Loewen agreed (i) to file a
registration statement with respect to an offer to exchange the Outstanding
Notes for senior subordinated debt securities of LGII with terms substantially
identical to the Outstanding Notes (except that the Exchange Notes will not
contain terms with respect to transfer restrictions, registration rights and
penalty interest) within 45 days after the date of original issuance of the
Outstanding Notes and (ii) to use their best efforts to cause such
registration statement to become effective under the Securities Act within 120
days after such issue date. If applicable law or interpretations of the staff
of the Commission do not permit the Company to effect the Exchange Offer, or
if certain holders of the Outstanding Notes notify the Company that they are
not permitted to participate in, or would not receive freely tradable Exchange
Notes pursuant to, the Exchange Offer, the Company will use its best efforts
to cause to become effective a shelf registration statement with respect to
the resale of the Outstanding Notes (the "Shelf Registration Statement") and
to keep the Shelf Registration Statement effective until 180 days after the
effective date thereof. The interest rate on the Outstanding Notes is subject
to increase under certain circumstances if the Company is not in compliance
with its obligations under the Registration Rights Agreements. See
"Description of the Exchange Notes--Registration Rights Agreement." Unless the
context requires otherwise, the term "holder" with respect to the Exchange
Offer means the registered holder of Notes or any other person who has
obtained a properly completed bond power from a registered holder.
RESALE OF EXCHANGE NOTES
Based on interpretations by the staff of the Commission set forth in no
action letters issued to third-parties, LGII and Loewen believe that, except
as described below, Exchange Notes issued pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by respective holders
thereof without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that (i) such Exchange
Notes are acquired in the ordinary course of such holder's business and (ii)
such holder does not intend to participate in, has no arrangement or
understanding with any person to participate in, and is not engaged in and
does not intend to engage in, a distribution of the Exchange Notes. A holder
of Outstanding Notes that is an "affiliate" of LGII or Loewen within the
meaning of Rule 405 under the Securities Act or that is a broker-dealer that
purchased Outstanding Notes from the Company to resell pursuant to an
exemption from registration, (a) cannot rely on such interpretations by the
staff of the Commission, (b) will not be permitted or entitled to tender such
Outstanding Notes in the Exchange Offer and, (c) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of such Outstanding Notes. Any holder who
tenders in the Exchange Offer with the intention or for the purpose of
participating in a distribution of the Exchange Notes cannot rely on such
interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Unless an exemption from
registration is otherwise available, any such resale transaction should be
covered by an effective registration statement containing the selling security
holders information required by Item 507 of Regulation S-K under the
Securities Act.
This Prospectus may be used for an offer to resell, resale or other
retransfer of Exchange Notes only as specifically set forth herein. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Outstanding Notes, where such Outstanding Notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, LGII will accept for exchange any and all
Outstanding Notes properly tendered and not withdrawn prior to 5:00
21
<PAGE>
p.m., New York time, on the Expiration Date. LGII will issue $1,000 principal
amount of Exchange Notes in exchange for each $1,000 principal amount of
Outstanding Notes surrendered pursuant to the Exchange Offer. Outstanding
Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes will be the same as the form and
terms of the Outstanding Notes, except that the Exchange Notes will be
registered under the Securities Act and hence will not bear legends
restricting the transfer thereof. The Exchange Notes will evidence the same
debt as the Outstanding Notes. The Exchange Notes will be issued under and
entitled to the benefits of the Indenture, which also authorized the issuance
of the Outstanding Notes, such that the Series 1 Notes and the Series 3
Exchange Notes will be treated as a single class of senior notes under the
Indenture, and the Series 2 Notes and the Series 4 Exchange Notes will be
treated as a single class of senior notes under the Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Outstanding Notes being tendered for exchange. Holders of
Outstanding Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer.
As of the date of this Prospectus, $350,000,000 aggregate principal amount
of the Outstanding Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is being sent to all registered holders of Outstanding
Notes. There will be no fixed record date for determining registered holders
of Outstanding Notes entitled to participate in the Exchange Offer.
LGII intends to conduct the Exchange Offer in accordance with the provisions
of the Registration Rights Agreement and the applicable requirements of the
Securities Act, and the rules and regulations of the Commission thereunder.
Outstanding Notes which are not tendered for exchange in the Exchange Offer
will remain outstanding and continue to accrue interest but will not retain
any rights under the Registration Rights Agreement.
LGII shall be deemed to have accepted for exchange properly tendered
Outstanding Notes when, as and if LGII shall have given oral or written notice
thereof to the Exchange Agent and complied with the applicable provisions of
the Registration Rights Agreement. The Exchange Agent will act as agent for
the tendering holders for the purposes of receiving the Exchange Notes from
LGII. LGII expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Outstanding Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions specified
below under "--Certain Conditions to the Exchange Offer."
Holders who tender Outstanding Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of
Outstanding Notes pursuant to the Exchange Offer. LGII will pay all charges
and expenses, other than certain applicable taxes described below, in
connection with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York time on ,
1996, unless LGII, in its sole discretion, extends the Exchange Offer, in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended. The Exchange Offer will not in any event
be extended to a date beyond , 1996.
In order to extend the Exchange Offer, LGII will notify the Exchange Agent
of any extension by oral or written notice and will mail to the registered
holders of Outstanding Notes an announcement thereof, each prior to 9:00 a.m.,
New York time, on the next business day after the then Expiration Date.
LGII reserves the right, in its sole discretion, (i) to delay accepting for
exchange any Outstanding Notes, to extend the Exchange Offer or to terminate
the Exchange Offer if any of the conditions set forth below under "--Certain
Conditions to the Exchange Offer" shall have occurred, shall exist or shall
not have been satisfied,
22
<PAGE>
by giving oral or written notice of such delay, extension or termination to
the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any
manner. Any such delay in acceptance, extension, termination or amendment will
be followed as promptly as practicable by oral or written notice thereof to
the registered holders of Outstanding Notes. If the Exchange Offer is amended
in a manner determined by LGII to constitute a material change, LGII and
Loewen will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders, and LGII will
extend the Exchange Offer for a period of five to ten business days, depending
upon the significance of the amendment and the manner of disclosure to the
registered holders, if the Exchange Offer would otherwise expire during such
five to ten business day period.
INTEREST ON THE EXCHANGE NOTES
The Series 3 Exchange Notes will bear interest at the rate of 7 1/2% per
annum and the Series 4 Exchange Notes will bear interest at the rate of 8 1/4%
per annum, payable semi-annually on April 15 and October 15 of each year,
commencing October 15, 1996, to holders of record on the immediately preceding
April 1 and October 1, respectively. Holders of the Exchange Notes will
receive interest on October 15, 1996 from the date of initial issuance of the
Outstanding Notes. Interest on the Outstanding Notes accepted for exchange
will cease to accrue upon issuance of the respective Exchange Notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, LGII will not be
required to accept for exchange, or exchange any Exchange Notes for, any
Outstanding Notes, and may terminate the Exchange Offer as provided herein
before the acceptance of any Outstanding Notes for exchange, if LGII
determines, in its reasonable discretion, that:
(a) an action or proceeding that might materially impair the ability of
LGII to proceed with the Exchange Offer is instituted or threatened in any
court or by or before any governmental agency with respect to the Exchange
Offer; or
(b) a law, statute, rule or regulation that might materially impair the
ability of LGII to proceed with the Exchange Offer is proposed, adopted or
enacted or an existing law, statute, rule or regulation is interpreted in a
manner that might materially impair the ability of LGII to proceed with the
Exchange Offer; or
(c) a governmental approval that LGII deems necessary for the
consummation of the Exchange Offer as contemplated hereby has not been
obtained.
LGII expressly reserves the right to amend or terminate the Exchange Offer,
and not to accept for exchange any Outstanding Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions of the Exchange
Offer specified above. LGII will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the Outstanding
Notes as promptly as practicable, such notice in the case of any extension to
be issued no later than 9:00 a.m., New York time, on the next business day
after the previously scheduled Expiration Date.
The foregoing conditions are for the sole benefit of LGII and may be
asserted by LGII regardless of the circumstances giving rise to any such
condition or may be waived by LGII in whole or in part at any time and from
time to time in its reasonable judgment. The failure by LGII at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, LGII will not accept for exchange any Outstanding Notes
tendered, and no Exchange Notes will be issued in exchange for any such
Outstanding Notes, if at such time any stop order shall be threatened or in
effect with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended.
PROCEDURES FOR TENDERING
Only a holder of Outstanding Notes may tender such Outstanding Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or facsimile thereof,
23
<PAGE>
have the signature thereon guaranteed if required by the Letter of
Transmittal, and mail or otherwise deliver such Letter of Transmittal or such
facsimile to the Exchange Agent prior to 5:00 p.m., New York time, on the
Expiration Date. In addition, either (i) Outstanding Notes must be received by
the Exchange Agent along with the Letter of Transmittal, or (ii) a timely
confirmation of book-entry transfer (a "Book-Entry Confirmation") of such
Outstanding Notes, if such procedure is available, into the Exchange Agent's
account at the Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below must be
received by the Exchange Agent prior to the Expiration Date, or (iii) the
holder must comply with the guaranteed delivery procedures described below. To
be tendered effectively, the Letter of Transmittal and other required
documents must be received by the Exchange Agent at the address set forth
below under "The Exchange Offer--Exchange Agent" prior to 5:00 p.m., New York
time, on the Expiration Date.
The tender by a holder which is not withdrawn prior to 5:00 p.m., New York
time, on the Expiration Date will constitute an agreement between such holder
and LGII in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO LGII OR
LOEWEN. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR
SUCH HOLDERS.
Any beneficial owner whose Outstanding Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender, should contact the registered holder promptly and instruct such
registered holder of Outstanding Notes to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender on its own behalf, such
owner must, prior to completing and executing the Letter of Transmittal and
delivering such owner's Outstanding Notes, either make appropriate
arrangements to register ownership of the Outstanding Notes in such owner's
name or obtain a properly completed bond power from the registered holder of
Outstanding Notes. The transfer of registered ownership may take considerable
time and may not be able to be completed prior to the Expiration Date.
Each holder of Outstanding Notes who wishes to exchange Outstanding Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii)
it is not engaged in and does not intend to engage in a distribution of the
Exchange Notes and (iii) it is not an "affiliate" of LGII or Loewen, within
the meaning of Rule 405 under the Securities Act, or, if it is an affiliate of
LGII or Loewen, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case may be, must be guaranteed by an Eligible Institution (as
defined below) unless the Outstanding Notes tendered pursuant thereto are
tendered (i) by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. If
signatures on a Letter Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantor must be a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act which is a member of
one of the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
24
<PAGE>
If the Letter of Transmittal is signed by a person other than the registered
holder of any Outstanding Notes listed therein, such Outstanding Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Outstanding
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Outstanding Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
LGII, evidence satisfactory to LGII of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Outstanding Notes and withdrawal of tendered
Outstanding Notes will be determined by LGII in its sole discretion, which
determination will be final and binding. LGII reserves the absolute right to
reject any and all Outstanding Notes not properly tendered or any Outstanding
Notes if acceptance would, in the opinion of counsel for LGII, be unlawful.
LGII also reserves the right to waive any defects, irregularities or
conditions of tender as to particular Outstanding Notes. LGII's interpretation
of the terms and conditions of the Exchange Offer (including the instructions
in the Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of
Outstanding Notes must be cured within such time as LGII shall determine.
Although LGII intends to notify holders of defects or irregularities with
respect to tenders of Outstanding Notes, neither LGII, the Exchange Agent nor
any other person shall incur any liability for failure to give such
notification. Tenders of Outstanding Notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any
Outstanding Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In all cases, issuance of Exchange Notes for Outstanding Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of Outstanding Notes or a timely Book-
Entry Confirmation of such Outstanding Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility, a properly completed and duly executed
Letter of Transmittal and all other required documents. If any tendered
Outstanding Notes are not accepted for exchange for any reason set forth in
the terms and conditions of the Exchange Offer or if Outstanding Notes are
submitted for a greater principal amount than the holder desires to exchange,
such unaccepted or non-exchanged Outstanding Notes will be returned without
expense to the tendering holder thereof (or, in the case of Outstanding Notes
tendered by book-entry transfer into the Exchange Agent's account at the Book-
Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such non-exchanged Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Outstanding Notes at the Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Outstanding Notes by causing
the Book-Entry Transfer Facility to transfer such Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance
with such Book-Entry Transfer Facility's procedures for transfer. However,
although delivery of Outstanding Notes may be effected through book-entry
transfer at the Book-Entry Transfer Facility, the Letter of Transmittal or
facsimile thereof, with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received by the
Exchange Agent at the address set forth below under "--Exchange Agent" on or
prior to the Expiration Date or, if the guaranteed delivery procedures
described below are to be complied with, within the time period provided under
such procedures. Delivery of documents to the Book-Entry Transfer Facility
does not constitute delivery to the Exchange Agent.
25
<PAGE>
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Outstanding Notes and (i) whose Outstanding
Notes are not immediately available or (ii) who cannot deliver their
Outstanding Notes, the Letter of Transmittal or any other required documents
to the Exchange Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the registered number(s)
of such Outstanding Notes and the principal amount of Outstanding Notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within three (3) New York Stock Exchange trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof) and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Notes in proper form for
transfer or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within three (3) New York Stock Exchange trading days after
the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Outstanding Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York time, on the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
timely received by the Exchange Agent at one of the addresses set forth below
under "--Exchange Agent." Any such notice of withdrawal must specify the name
of the person having tendered the Outstanding Notes to be withdrawn, identify
the Outstanding Notes to be withdrawn (including the principal amount of such
Outstanding Notes), and (where certificates for Outstanding Notes have been
transmitted) specify the name in which such Outstanding Notes were registered,
if different from that of the withdrawing holder. If certificates for
Outstanding Notes have been delivered or otherwise identified to the Exchange
Agent, then, prior to the release of such certificates, the withdrawing holder
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If
Outstanding Notes have been tendered pursuant to the procedures for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Outstanding Notes and otherwise comply with the procedures of
such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by LGII, whose
determination shall be final and binding on all parties. Any Outstanding Notes
so withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Outstanding Notes which have been tendered
for exchange but which are not exchanged for any reason will be returned to
the holder thereof without cost to such holder (or, in the case of Outstanding
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Outstanding Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Outstanding Notes)
as soon as practicable after withdrawal, rejection of tender or termination of
the Exchange Offer. Properly withdrawn Outstanding Notes may be retendered by
following one of the procedures described under "--Procedures for Tendering"
above at any time on or prior to the Expiration Date.
26
<PAGE>
EXCHANGE AGENT
Fleet National Bank has been appointed as Exchange Agent of the Exchange
Offer. Questions and requests for assistance, requests for additional copies
of this Prospectus or the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
By Hand: By Registered or Certified Mail or
Courier:
Fleet National Bank Fleet National Bank
Corporate Trust Operations Corporate Trust Operations
777 Main Street, Lower Level 777 Main Street, Lower Level
Hartford, Connecticut 06115 CTMO 0224
Attn: Patricia Williams Hartford, Connecticut 06115
Attn: Patricia Williams
By Facsimile:
(860) 986-7908
(For Eligible Institutions Only)
Confirm by Telephone:
(860) 986-1271
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by LGII. The principal
solicitation is being made by mail; however, additional solicitation may be
made by telegraph, telephone or in person by officers and regular employees of
the Company.
LGII has not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to broker-dealers or others soliciting
acceptances of the Exchange Offer. LGII, however, will pay the Exchange Agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by LGII and are estimated in the aggregate to be approximately
$500,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, and
related fees and expenses.
TRANSFER TAXES
LGII will pay all transfer taxes, if any, applicable to the exchange of
Notes pursuant to the Exchange Offer. If, however, certificates representing
Outstanding Notes for principal amounts not tendered or accepted for exchange
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of Notes tendered, or if tendered Notes are
registered in the name of any person other than the person signing the Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Notes pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment
of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Outstanding Notes who do not exchange their Outstanding Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer, as set forth in the legend thereon, as a
consequence of the issuance of the Outstanding Notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Outstanding Notes may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. LGII does not currently anticipate that it will register the Outstanding
Notes under the Securities Act. See "Risk Factors--Consequences of Failure to
Exchange; Possible Adverse Effect on Trading Market for Outstanding Notes."
27
<PAGE>
BUSINESS
OVERVIEW
The Company operates the second-largest number of funeral homes and
cemeteries in North America and the largest number of funeral homes in Canada.
The Company also engages in the pre-need selling of funeral, cemetery and
cremation merchandise and services. As at July 26, 1996, the Company operated
909 funeral homes throughout North America. This included 796 funeral homes in
the United States (including locations in Puerto Rico) and 113 funeral homes
in Canada. In addition, as at such date, the Company operated 247 cemeteries
in the United States and six cemeteries in Canada. As at the close of business
on July 26, 1996, the Company had negotiated agreements for the acquisition of
a further 58 funeral homes and 55 cemeteries in the United States and five
funeral homes in Canada. See "--Growth Strategy."
Consideration paid for acquired operations totaled approximately $362
million for the six months ended June 30, 1996, compared to consideration of
approximately $178 million for operations acquired during the same period in
1995. Consideration paid for acquired operations totaled approximately $265.6
million in 1994 and $487.9 million in 1995. Despite this growth, the Company
has maintained consistent margins, including a gross margin of at least 36%.
The Company's management structure and remuneration practices are designed
to support and encourage entrepreneurial drive and individual responsibility.
Each funeral home and cemetery is operated as a distinct profit center, with
monthly and annual financial performance monitored by regional and corporate
management in accordance with budgeted projections. Local managers are given a
high degree of autonomy. The Company believes that its funeral home and
cemetery managers, as members of the local community, are best able to judge
how to conduct day-to-day operations in a manner consistent with the
established character of the particular firm and the needs of the community.
THE FUNERAL SERVICE INDUSTRY
The funeral service industry has a number of attractive characteristics.
Historically, the funeral service industry has had a low business risk
compared with most other businesses and has not been significantly affected by
economic or market cycles. According to the 1993 Business Failure Record
published by The Dun & Bradstreet Corporation, the average business failure
rate in the United States in 1993 was 109 per 10,000. The 1993 failure rate of
the funeral services and crematoria industry was 24 per 10,000, among the
lowest of all industries. Management believes this low failure rate is the
result of a number of factors, including customers' tendencies to select a
funeral home based on reputation for quality service rather than price and the
number of years required to establish a caring reputation in the community.
In addition, future demographic trends are expected to contribute to the
continued stability of the funeral service industry. The U.S. Department of
Commerce, Bureau of the Census, projects that, reflecting the well-publicized
"graying of America" as the baby boom generation reaches old age, the number
of deaths in the United States will grow at approximately 1.0% annually from
1990 through 2010. The following table reflects the actual or estimated number
of deaths in the United States and the percentage of the total United States
population over 65 and over 75.
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL POPULATION
DEATHS ----------------
(MILLIONS) OVER 65 OVER 75
---------- -------- --------
<S> <C> <C> <C>
1980.......................................... 1.99 11.3% 4.4%
1985.......................................... 2.09 11.8 4.8
1990.......................................... 2.15 12.5 5.2
1995 (est.)................................... 2.21 12.8 5.6
2000 (est.)................................... 2.36 12.8 6.1
2010 (est.)................................... 2.60 13.3 6.4
</TABLE>
- --------
Source: U.S. Department of Commerce, Bureau of the Census, Current Population
Reports: Population Estimates and Projections. Series P-25, 1018.
28
<PAGE>
Finally, the funeral service industry in North America is highly fragmented,
consisting primarily of small, stable, family-owned businesses. Management
estimates that notwithstanding the increasing trend toward consolidation over
the last few years, only approximately 10% of the 23,500 funeral homes and
approximately 7% of the 11,000 cemeteries in North America currently are owned
and operated by the five largest publicly-traded North American funeral
service companies.
GROWTH STRATEGY
The Company capitalizes on the foregoing industry fundamentals through a
growth strategy that emphasizes three principal components: (i) acquiring a
significant number of small, family-owned funeral homes and cemeteries; (ii)
acquiring "strategic" operations consisting predominantly of large, multi-
location urban properties that generally serve as platforms for acquiring
small, family-owned businesses in surrounding regions; and (iii) improving the
revenue and profitability of newly-acquired and established locations.
The following table provides historical data on the Company's acquisition
program during the years ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1995 1994 1993
------ ------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Funeral homes acquired.................................... 177 110 83
Cemeteries acquired....................................... 64 46 33
Consideration............................................. $487.9 $265.6 $148.0
</TABLE>
From January 1 through July 26, 1996, the Company acquired 96 funeral homes
and 74 cemeteries for total consideration of approximately $394 million.
Family-Owned Businesses
The first element of the Company's growth strategy is the acquisition of
small, family-owned funeral homes and cemeteries. Management believes that the
Company has a competitive advantage in this market due to its culture and its
well-known and understood reputation for honoring existing owners and staff.
Strategic Acquisitions
The second element of the Company's growth strategy is the acquisition of
large, multi-location urban properties. The Company entered into commitments
for or consummated several "strategic" acquisitions during 1995.
Osiris
In March 1995, the Company purchased all of the outstanding shares of Osiris
Holding Corporation of Philadelphia, Pennsylvania which operated 22
cemeteries, four funeral home/cemetery combinations and one funeral home, all
located in the United States. The Osiris purchase has complemented the
Company's existing locations, as the Osiris locations were in markets in which
the Company did not have a strong presence. In addition, the Osiris
acquisition has provided the Company with an experienced cemetery management
team which will benefit the Company's other cemetery operations. The total
consideration for the transaction was $103.8 million plus additional
consideration of up to approximately $42 million payable to the former
shareholders of Osiris if certain performance related criteria are achieved
over a period of up to six years from the closing of the acquisition. For
financial reporting purposes, such additional consideration, if any, is
accrued as a liability once the likely outcome with respect to its payment is
determinable beyond a reasonable doubt. The Company has determined that, as at
December 31, 1995, the performance-related criteria would likely be met over
the term of the agreement and, accordingly, has allocated $35.3 million
representing the present value of additional consideration to cemetery
property and accrued a corresponding liability of $35.3 million. The full
amount of any unpaid contingent consideration will be immediately payable in
certain events, including the death, permanent disability, or termination of
employment without cause, of either of two former shareholders of Osiris who
are now part of the Company's senior management.
29
<PAGE>
MHI
In September 1995, the Company acquired MHI Group, Inc., a public company
that operated 16 funeral homes and five cemeteries in Florida and Colorado.
The total cost of the acquisition was approximately $86 million.
S.I. Acquisition Associates, L.P.
In March 1996, the Company acquired from S.I. Acquisition Associates, L.P.
certain funeral, cemetery and insurance assets, including 15 funeral homes,
two cemeteries and two insurance companies, all located in Louisiana. The
total cost to the Company of the acquisition was approximately $145 million.
Investment in Prime Succession, Inc.
On June 17, 1996, Loewen and Blackstone Capital Partners II Merchant Banking
Fund L.P. ("Blackstone") announced the signing of an agreement (the
"Agreement") to acquire the shares of Prime Succession, Inc. ("Prime"), the
largest privately-held funeral services company in North America, with 146
funeral homes and 16 cemeteries in 20 states.
A new entity formed by Loewen and Blackstone, Prime Succession Acquisition
Corp. ("PSAC") will acquire Prime for approximately $320 million. Blackstone
will contribute approximately $52 million, for which it will receive a
controlling interest in PSAC. Blackstone also will control the Board of
Directors of PSAC. Loewen will contribute approximately $78 million (a portion
of which was paid at signing) and will receive common equity and approximately
$62 million of preferred stock with an annual payment-in-kind dividend of 10%.
The Agreement also provides that Loewen has a call option that can be
exercised on the fourth anniversary of the closing date and for two years
thereafter, during which Loewen can acquire Blackstone's interest in PSAC. In
addition, Blackstone has a put option that can be exercised beginning on the
sixth anniversary of the closing date and for two years thereafter, during
which Blackstone can require Loewen to acquire its interest in PSAC. The
option price, in either case, will be based on a formula involving cash flow
from operations.
The acquisition, which is expected to be completed by mid-September 1996, is
subject to a number of conditions including regulatory approval. See Note 7 to
the June 1996 Interim Consolidated Financial Statements for additional
information regarding PSAC.
Growth through Integration
The final element of the Company's growth strategy is its focus on enhancing
the revenue and profitability of newly-acquired and established operations.
Through the Company's integration process, newly-acquired funeral homes
typically show an immediate improvement in gross margin due in part to the
significant economies of scale offered by the Company.
The Company believes that newly-acquired cemeteries will also show an
improvement in gross margin over time. Cemetery operations are predominantly
sales driven with a steady "at-need" revenue base. Management believes that
gross margins will increase as cost efficiencies are achieved and revenue is
enhanced through improved sales efforts.
The Company continues to increase the revenue and profitability of
established operations through the introduction of additional merchandising,
cost control programs and inflation based pricing. On an ongoing basis, the
Company also seeks to improve the market share and earnings of its established
operations by helping local managers to market services more effectively and
to enhance the reputation of their operations in the community.
30
<PAGE>
FUTURE ACQUISITIONS
At the close of business on July 26, 1996, the Company had signed
agreements, some of which are non-binding, for the acquisition of 63
additional funeral homes and 55 additional cemeteries aggregating
approximately $198 million. The Company expects to close most of the Signed
Acquisitions by the end of 1996.
In addition, as at July 26, 1996, the Company was in the process of
evaluating or negotiating prospective acquisitions in competition with other
potential purchasers. Several of such potential acquisitions, one or more of
which may be completed in 1996, would be considered significant based on
acquisition price. The Company is not able at this time to determine the
number or aggregate purchase price of the prospective acquisitions to which
the Company may become committed. The Company does not expect that all such
acquisitions will be completed during 1996, if at all.
ACQUISITION FUNDING
The timing and certainty of completion of Signed Acquisitions and future
acquisitions are based on many factors, including the availability of
financing. The Company will continue to finance acquisitions with a
combination of debt and equity offerings and credit facilities. The Company
believes that it will have sufficient funding for all Signed Acquisitions.
Funding for future acquisitions will be provided in part by the New Bank
Facility and by additional equity and debt offerings and credit facilities.
There can be no assurance that funds will be available to complete all future
acquisitions. Accordingly, there is no assurance that the Company will
complete any specific number or dollar amount of acquisitions in a particular
year.
The Company currently has a policy to include provisions in its acquisition
agreements requiring binding arbitration for disputes arising out of such
contracts. Under such policy, the arbitration provision may be modified or
omitted from an agreement with the consent of the Board of Directors in
circumstances that the Board of Directors deems appropriate. There can be no
assurance that the arbitration provision will be enforceable by the Company or
that the outcome of any arbitration would be more favorable to the Company
than the outcome of a court trial on the same facts and claims. Further,
acquisition agreements that involve payment of all or part of the purchase
price in Common Shares do not include the arbitration provision unless it is
modified to provide that such provision may not apply to alleged violations of
U.S. federal securities laws.
BUSINESS OPERATIONS
Funeral Homes
The Company's funeral homes offer a full range of funeral services, which
encompass the collection of remains, registration of death, professional
embalming, use of funeral home facilities, sale of caskets and related
merchandise, transportation to a place of worship or funeral chapel for a
religious service and transportation to a cemetery or crematorium. To provide
the public with the opportunity to choose the service that is most appropriate
from both an emotional and financial perspective, the Company offers complete
funeral services (including caskets and related merchandise) at prices ranging
from approximately $750 to $7,500 (and averaging approximately $3,500).
Cremation rates vary considerably from one region of North America to
another. The Company has operations in regions with both high and low
cremation rates. As a percentage of total funeral services, cremations in
North America have been increasing by approximately 1% annually over the past
five years. However, because the number of deaths has been increasing,
industry information reflects that the number of caskets sold (typically
associated with a traditional funeral service) has remained constant. The
Company has proprietary programs to provide a full range of service
alternatives to families choosing cremation.
The services offered by funeral homes can be purchased at the time of death
("at-need") or in advance through a prearranged agreement ("pre-need").
Prearranged funeral services enable the family to select the type
31
<PAGE>
of service and merchandise in advance at prices prevailing at the time of
selection. The Company believes that families in large urban markets are more
aware of and are more willing to purchase funeral products and services in
advance. The Company recognizes that the increasing demand for advanced
funeral and cemetery planning is a natural extension of the service and care
it offers families, and is committed to providing quality advanced funeral and
cemetery planning to the communities it serves.
As the Company has increased its presence in large urban markets, it has
significantly expanded its efforts to sell prearranged funeral services in
those markets. For example, the Company now has 20 regional marketing centers
that focus primarily on advanced funeral planning. In order to protect and
enhance its market share in these large urban markets, management believes
that the Company will need to continue to implement programs designed to
increase pre-need sales.
Payments made for pre-need contracts are either placed in trust by the
Company or are used on behalf of the purchaser of the pre-need contract to pay
premiums on life insurance policies under which the Company is designated the
beneficiary. At the date of performing a prearranged service, the Company
records as funeral revenue the amount originally trusted or the insurance
contract amount, together with all related accrued trust earnings and
increased insurance benefits.
Cemeteries
The Company's cemetery division assists families in making at-need and pre-
need arrangements and offers a complete line of cemetery products (including a
selection of burial spaces, burial vaults, lawn crypts, memorials, niches and
mausoleum crypts), the opening and closing of graves and cremation services.
The sale of cemetery pre-need arrangements is a significant component of the
cemetery operations. In 1995, 60.9% of cemetery revenue resulted from pre-need
sales, compared with 53.1% in 1994. The pre-need sale of interment rights and
other related products is recorded as revenue when customer contracts are
signed and, concurrently, related costs are recorded and an allowance is
established for customer cancellations and refunds based on management's
estimates of expected cancellations. Actual cancellation rates in the future
may result in a change in the estimate.
Insurance
The Company determined in 1995 that it would not, as previously planned,
sell a life insurance subsidiary which had been acquired in connection with a
larger acquisition in 1994 with the intent that is be sold. The subsidiary was
accounted for at cost from the date of acquisition to June 30, 1995. Beginning
July 1, 1995, the Company reported the operations of the life insurance
subsidiary on a consolidated basis. On March 26, 1996, the Company purchased
certain net assets of S.I. Acquisition Associates, L.P., which included two
insurance companies.
COMPETITION
Competition generally arises from two sources in the funeral industry. Local
community competition is oriented towards gaining market share. The market
share of a single funeral home or cemetery in any community is primarily a
function of the name and reputation of that funeral home or cemetery. Market
share increases within a community are usually gained over a long period of
time due to the high component of goodwill. Modest and tasteful promotional
programs can help enhance community profile but typically do not increase
market share significantly.
The Company also faces significant competition in its acquisition program.
In the United States funeral service industry acquisition market, the
Company's competition includes Service Corporation International and Stewart
Enterprises, Inc., both of which are publicly-traded companies with
significant United States operations. Various smaller companies provide
competition on a regional basis in the United States. The Company also
32
<PAGE>
experiences competition on a local level from operators who have focused on
acquiring funeral home groupings in concentrated geographic regions of the
United States.
REGULATION
The funeral service industry is regulated primarily on a state and
provincial basis with a vast majority of jurisdictions requiring licensing and
supervision of individuals who provide funeral-related services. A number of
jurisdictions also regulate the sale of pre-need services and the
administration of any resulting trust funds or insurance contracts. In
addition, concerns regarding lack of competition have led a few jurisdictions
to enact legislation designed to encourage competition by restricting the
common ownership of funeral homes and related operations within a specific
geographic region.
The Company's United States operations must also comply with federal
legislation, including the laws administered by the Occupational Safety and
Health Administration, the Americans with Disabilities Act and the Federal
Trade Commission ("FTC") regulations. The FTC administers the Trade Regulation
Rule on Funeral Industry Practices, the purpose of which is to prevent unfair
or deceptive acts or practices in connection with the provision of funeral
goods or services.
ENVIRONMENT
Management believes that the Company's primary environmental risk arises
upon the acquisition of a funeral home or cemetery. The Company manages this
risk by conducting extensive environmental due diligence of all potential
acquisition candidates. Management endeavors to ensure that any environmental
issues which occur prior to acquisition of an operation are identified and
addressed in advance of acquisition or are covered by an appropriate indemnity
by the seller.
Management does not believe that an environmental problem at any single
location will have a material adverse effect on the Company's financial
results.
EMPLOYEES
At June 30, 1996, the Company employed approximately 13,000 people with
approximately 400 people employed at the Company's corporate offices.
Management believes that its relationship with employees is good. Fewer than
75 of the Company's employees are members of collective bargaining units. All
full-time and eligible part-time employees who have been employed by the
Company for more than 90 days are entitled to five Common Shares as part of
the Company's "Sharing The Vision" program.
33
<PAGE>
LEGAL PROCEEDINGS
Gulf National Settlement. In November 1995, a jury in the Circuit Court of
the First Judicial District of Hinds County, Mississippi, awarded Gulf
National $100 million in compensatory damages and $400 million in punitive
damages in a lawsuit against the Company Defendants in which Gulf National
claimed breach of contract and related torts in connection with its
allegations that the Company failed to consummate certain business
transactions. The Company Defendants appealed the Gulf National award. On
January 24, 1996, the Mississippi Supreme Court ruled that in order to stay
execution of the Gulf National award pending the appeal thereof, the Company
Defendants would be required to post a supersedeas bond with the Circuit Court
in an amount equal to 125% of the judgment, or $625 million.
On February 1, 1996, the Company Defendants and Gulf National executed a
settlement agreement pursuant to which, among other things, the parties agreed
a full mutual release of all claims against each other, and the Company
Defendants agreed to deliver to Gulf National or its designees $50 million in
cash, 1.5 million Common Shares and a promissory note in the amount of $80
million payable over 20 years in equal annual installments of $4 million,
without interest. In connection with the issuance of the Gulf National
Settlement Shares, on February 9, 1996, Loewen, LGII, Gulf National and
various individuals and law firms that represented Gulf National (collectively
the "Shareholders") entered into an agreement with respect to the Gulf
National Settlement Shares (the "Shareholders' Agreement"), pursuant to which,
among other things, Loewen agreed to file by September 1, 1996 a registration
statement relating to the Gulf National Settlement Shares with the Commission
and to have such registration statement declared effective by December 31,
1996. LGII also has agreed to pay to each Shareholder, upon due notice
("Notice") a per share price guarantee amount in certain circumstances. The
per share price guarantee amount is equal to the amount, if any, by which $30
exceeds the weighted average trading price of the Common Shares for the five
consecutive trading days preceding the date of Notice. LGII may elect to pay
the aggregate price guarantee in Common Shares or cash. Notice may be
delivered, and LGII is required to pay the price guarantee, only with respect
to a 30-day period commencing February 14, 1997 (the "Determination Period").
LGII is relieved of its obligation to make such payment if during the
Determination Period the trading price of the Common Shares exceeds $30 for
any five consecutive trading days, provided that the registration statement
has become effective before the Determination Period or the Shareholders have
otherwise had an opportunity to sell their Gulf National Settlement Shares
during the Determination Period. The Shareholders have granted to Loewen or
its assignee a right of first refusal with respect to the Gulf National
Settlement Shares and have agreed, until February 9, 1998, to vote the Gulf
National Settlement Shares in accordance with the recommendations of the Board
of Directors of Loewen. The right of first refusal does not apply in respect
of any offers and sales at prices of $30 or more per Common Share during the
Determination Period.
Provident Settlement. In April 1992, Provident filed a lawsuit against
Loewen and LGII in the United States District Court for the Eastern District
of Pennsylvania alleging breach of contract and related tort claims arising
out of terminated negotiations concerning a possible pre-need funeral
insurance marketing arrangement. The complaint requested compensatory damages
in excess of $58.8 million and unspecified punitive damages, based on
allegations that the loss of the Company's pre-need business had deprived the
plaintiffs of aggregate future profits of approximately $58.8 million to $132
million.
On February 12, 1996, Provident, Loewen and LGII agreed to settle the
litigation. On March 19, 1996, the parties entered into a settlement providing
for a full mutual release from all claims against each other, and Loewen and
LGII delivered one million Common Shares and $3 million in cash to Provident
and certain designees. Loewen agreed to file a registration statement relating
to the Provident Settlement Shares with the Commission by June 30, 1996. LGII
agreed to pay to Provident for each Provident Settlement Share, in cash or
Common Shares, at LGII's election, the amount, if any, by which $27 exceeds
the weighted average trading price of the Common Shares during the five
consecutive trading days ending on the day before the registration statement
is declared effective.
Class Actions. On November 4, 1995, a class action lawsuit claiming
violations of Federal securities laws was filed on behalf of a class of
purchasers of Company securities against Loewen and five officers (four of
34
<PAGE>
whom are directors) in the United States District Court for the Eastern
District of Pennsylvania. LGII, LGCLP and the lead underwriters of the MIPS
offering (the "Underwriters") were subsequently added as defendants. On
November 7, 1995, a class action lawsuit was filed on behalf of a class of
purchasers of Common Shares against Loewen and the same individual defendants
in the United States District Court for the Southern District of Mississippi
alleging Federal securities law violations and related common law claims. On
December 1, 1995, a class action lawsuit was filed on behalf of a class of
purchasers of the Company's securities against Loewen, LGII, LGCLP and the
same individual defendants in the United States District Court for the Eastern
District of Pennsylvania.
Each of the Class Actions alleges that the defendants failed to disclose the
Company's anticipated liability in connection with the Gulf National
litigation. The Pennsylvania Class Actions also allege failure to disclose the
potential liability in connection with the Provident litigation. The Company
settled the lawsuits with Gulf National and Provident during the first quarter
of 1996.
In each of the Class Actions, the plaintiffs seek compensatory money damages
in an unspecified amount, together with attorneys fees, expert fees and other
costs and disbursement. In addition, the Mississippi Class Action seeks
unspecified punitive damages. The longest class period specified is from April
16, 1993 to November 1, 1995. Pursuant to a Transfer Order filed April 15,
1996 by the Judicial Panel on Multidistrict Litigation, the Mississippi Class
Action was transferred to the Eastern District of Pennsylvania for
consolidation of pretrial proceedings with the two Pennsylvania Class Actions.
The plaintiffs are expected to file a consolidated amended complaint on or
before August 26, 1996. LGII and Loewen expect that the claims in the
consolidated complaint will not differ substantially from the claims in each
of the Class Actions.
On June 11, 1996, all claims against the Underwriters were dismissed without
prejudice, by agreement of the parties. Prior to the dismissal, the
Underwriters had indicated to the Company that they would seek indemnity from
the Company for costs incurred. The Company has agreed to pay the
Underwriters' costs through the date of dismissal. The Company expects that
the Underwriters will seek further indemnity from the Company if any of the
claims against the Underwriters are reinstated.
The Company referred the claims to its insurance carrier under its directors
and officers insurance policy. On February 9, 1996, the carrier denied
coverage of the claim. The Company believes that such denial was improper. On
March 21, 1996, the Company commenced an action in British Columbia Supreme
Court seeking a declaration that the policy covers indemnification with
respect to the Class Actions. As of the date hereof, the Supreme Court has not
ruled on the action. The Company cannot predict at this time the extent to
which any settlement or litigation that may result from these claims will
ultimately be covered by insurance, if at all.
The Company has determined that it is not possible at this time to predict
the final outcome of these legal proceedings and that it is not possible to
establish a reasonable estimate of possible damages, if any, or reasonably to
estimate the range of possible damages that may be awarded to the plaintiffs.
Accordingly, no provision has been made in the Company's consolidated
financial statements.
Roe et al., Palladino et al., O'Sullivan and Schneider. In October 1995, Roe
and 22 other families filed a lawsuit against LGII and Osiris in Florida
Circuit Court in St. Petersburg. In early April 1996, a related lawsuit,
Palladino et al., was filed by eight families against LGII and Osiris in
Florida Circuit Court in St. Petersburg, and was assigned to the same judge
handling the Roe matter. In June 1996, the Roe and Palladino lawsuits were
consolidated and amended to include a total of 90 families (the "Consolidated
Complaint"), and in July 1996, the Palladino lawsuit was dismissed. The
gravamen of the Consolidated Complaint is that, in July 1992, employees of the
Royal Palm Cemetery facility who were installing a sprinkler line disturbed
the remains of infants in one section of the cemetery. The Consolidated
Complaint also names Loewen as a defendant (on an alter ego theory) and
includes claims for negligent retention of certain cemetery employees. Each
plaintiff identified in the Consolidated Complaint is seeking damages in
excess of $15,000, but the Consolidated Complaint alleges aggregate damages in
excess of $40 million. In addition, in May 1996, Sean M. O'Sullivan filed a
lawsuit against Osiris and LGII and, in July 1996, Karen Schneider filed a
lawsuit against Osiris and LGII. The factual allegations underlying the
O'Sullivan and Schneider complaints are identical to those alleged in the
Consolidated Complaint.
35
<PAGE>
At the time the remains allegedly were disturbed, the Royal Palm Cemetery
was owned by Osiris. Osiris was acquired by the Company in March 1995. The
insurance carrier for Osiris has assumed the defense of these claims, subject
to a reservation of rights. The policy limit is $11 million. No provision with
respect to this lawsuit has been made in the Company's consolidated financial
statements.
Rojas et al. On February 22, 1995, Juan Riveras Rojas, Leyda Rivera Vega,
the Conjugal Partnership constituted between them, and Carlos Rivera
Bustamente instituted a legal action against Loewen, LGII and a subsidiary in
the United States District Court for the District of Puerto Rico. The
complaint alleges that the defendants breached a contract and ancillary
agreements with the plaintiffs relating to the purchase of funeral homes and
cemeteries, and committed related torts. The plaintiffs seek compensatory
damages of $12.5 million, and unspecified punitive damages (although the
Company is advised by counsel that there is no entitlement to punitive damages
under Puerto Rican law). The Company has filed a motion to dismiss the
complaint on the grounds of failure to join an indispensable party. In
addition, the Company claims it has suffered damages far in excess of the
amount claimed by the plaintiffs as a result of breach of contract and related
torts on the part of the plaintiffs. A subsidiary of Loewen has filed a
complaint seeking damages in excess of $19 million from the plaintiffs in the
General Court of Justice of the Commonwealth of Puerto Rico. The Company has
determined that it is not possible at this time to predict the final outcome
of these legal proceedings and that it is not possible to establish a
reasonable estimate of possible damages, if any, or reasonably to estimate the
range of possible damages that may be awarded to the plaintiffs. Accordingly,
no provision has been made in the Company's consolidated financial statements.
Esner Estate. As described in the Company's previous periodic reports, on
February 1, 1995, Stuart B. Esner and Sandra Esner (the "Executors") as co-
executors for the Estate of Gerald F. Esner (the "Esner Estate") filed an
action in the Court of Common Pleas in Bucks County, Pennsylvania against
Osiris and a law firm that previously represented Osiris and its principal
shareholders, Gerald F. Esner, Lawrence Miller and William R. Shane. Messrs.
Miller and Shane currently are executive officers of Loewen and LGII. The
complaint alleged that Osiris breached the terms of a Second Amended and
Restated Shareholders' Agreement among Messrs. Esner, Miller and Shane (the
"Shareholders' Agreement") by attempting to repurchase shares of Osiris held
by the Esner Estate (the "Esner Shares") without complying with the terms of
the Shareholders' Agreement, and that the law firm breached its fiduciary duty
and committed malpractice in connection with the drafting of the Shareholders'
Agreement and its representation of Esner and Osiris. The Executors asked the
Court (i) to have the value of Osiris reappraised pursuant to the terms of the
Shareholders' Agreement and (ii) to require Osiris to repurchase the Esner
Shares pursuant to a new appraisal and the alleged terms of the Shareholders'
Agreement or, alternatively, to pay the Esner Estate the fair value of the
Esner Shares as determined by the new appraisal.
On March 17, 1995, LGII purchased all of the issued and outstanding shares
of Osiris, including the Esner Shares. In connection with the purchase, LGII
entered into an indemnification agreement whereby Messrs. Miller and Shane
agreed to indemnify and hold LGII harmless with respect to any claims,
liabilities, losses and expenses, including reasonable attorneys' fees, in
connection with or arising from the Esner Estate litigation.
On April 9, 1996, the Executors filed a second complaint, which names
Messrs. Miller and Shane and LGII as defendants. The second complaint alleges
breach of contract, fraud and related claims against Messrs. Miller and Shane,
and that LGII joined in a civil conspiracy by acquiring Osiris. The Executors
request compensatory damages of $24.3 million against the various defendants,
and seek punitive damages from Messrs. Miller and Shane. The two cases have
been consolidated by the Court. LGII has moved for a dismissal of the claims
against it for failure to state a claim upon which relief can be granted. That
motion has not yet been resolved.
No provision with respect to these lawsuits has been made in the Company's
consolidated financial statements.
Other. The Company is a party to other legal proceedings in the ordinary
course of its business but does not expect the outcome of any of such other
proceedings to have, individually or in the aggregate, a material adverse
effect on the Company's financial position, results of operations or
liquidity.
36
<PAGE>
DESCRIPTION OF EXCHANGE NOTES
The Exchange Notes will be issued in two separate series under an indenture
dated as at March 20, 1996 (the "Indenture") between LGII, Loewen, as
guarantor of the obligations of LGII under the Indenture, and Fleet National
Bank, as trustee (the "Trustee"). The following summary of the material
provisions of the Indenture does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the provisions of the Indenture
(a copy of which has been filed with the Commission as an exhibit to the
Exchange Offer Registration Statement), including the definitions of certain
terms contained therein and those terms made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "TIA"), as in
effect on the date of the Indenture. The definitions of certain capitalized
terms used in the following summary are set forth below under "--Certain
Definitions."
GENERAL
The Exchange Notes and the Guarantees, when issued, will be secured senior
obligations of LGII and Loewen, respectively, and will rank pari passu in
right of payment with all secured senior indebtedness of LGII and Loewen,
respectively. The Exchange Notes include a Lien Limitation that limits Liens
to certain categories of Liens described in the Indenture. The Collateral for
the holders of the Pari Passu Indebtedness includes a pledge for the benefit
of such lenders of the shares held by Loewen of substantially all of the
subsidiaries in which Loewen directly or indirectly holds more than a 50%
voting or economic interest and all of the financial assets of LGII (LGII does
not have material assets other than financial assets). In order to satisfy the
Lien Limitation, the Lien secured by the Collateral has to be shared equally
and ratably with the holders of the Indebtedness evidenced by the Notes.
However, the holders of the Exchange Notes will not have an independent right
to require the Lien secured by the Collateral to remain in place or to require
any other security for the Exchange Notes. As at June 30, 1996, the aggregate
amount of Pari Passu Indebtedness, including the Indebtedness evidenced by the
Outstanding Notes, was approximately $1.0 billion. The Exchange Notes and
Guarantees are effectively subordinated in right of payment to all existing
and future liabilities, including trade payables, of LGII's and Loewen's
subsidiaries, respectively. As at June 30, 1996, the aggregate amount of
Indebtedness of LGII's subsidiaries (excluding intercompany Indebtedness) was
approximately $74 million, and the aggregate amount of Indebtedness of
Loewen's subsidiaries other than LGII and its subsidiaries (excluding
intercompany Indebtedness) was approximately $8 million.
MATURITY, INTEREST AND PRINCIPAL
The Series 3 Exchange Notes will mature on April 15, 2001, and the Series 4
Exchange Notes will mature on April 15, 2003. Interest on the Series 3
Exchange Notes will accrue at the rate of 7 1/2% per annum, and interest on
the Series 4 Exchange Notes will accrue at the rate of 8 1/4% per annum.
Interest will be payable semi-annually on each April 15 and October 15,
commencing October 15, 1996, to the holders of record of Exchange Notes at the
close of business on the April 1 and October 1 immediately preceding such
interest payment date. Interest on the Exchange Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the original date of issuance (the "Issue Date"). Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
The Exchange Notes are not entitled to the benefit of any mandatory sinking
fund.
REDEMPTION AND OFFER TO PURCHASE
Optional Redemption. The Series 3 Exchange Notes will not be redeemable
prior to maturity. The Series 4 Exchange Notes will be redeemable at the
option of LGII, in whole or in part, at any time on or after April 15, 2000,
on not less than 30 nor more than 60 days' prior notice, at the redemption
prices (expressed as
37
<PAGE>
percentages of principal amount) set forth below, plus accrued and unpaid
interest, if any, to the redemption date, if redeemed during the 12-month
period beginning April 15 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000.............................................................. 104.125%
2001.............................................................. 102.063%
2002.............................................................. 100.000%
</TABLE>
If less than all of the Series 4 Exchange Notes are to be redeemed, the
particular Notes or portions thereof to be redeemed shall be selected for
redemption either (a) pro rata, by lot or by such other method as the Trustee
considers to be fair and appropriate or (b) in such manner as complies with
the requirements of the principal national securities exchange, if any, on
which the Series 4 Exchange Notes are listed. The amounts to be redeemed shall
be equal to $1,000 or any integral multiple thereof.
Offer to Repurchase in Certain Circumstances. LGII is obligated to make, and
the Guarantor will ensure that LGII makes (a) upon the occurrence of a Change
of Control, an offer to repurchase all outstanding Exchange Notes at a
purchase price of 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase, and (b) upon the occurrence
of certain sales or dispositions of assets (an "Asset Sale"), an offer to
repurchase Exchange Notes with a portion of the net cash proceeds thereof, at
a purchase price of 100% of the principal amount of the Exchange Notes, plus
accrued and unpaid interest, if any, to the date of purchase. In the event of
a Change of Control or an Asset Sale, there can be no assurance that LGII or
the Guarantor will have, or will be able to obtain, sufficient funds to
purchase all of the Exchange Notes or to pay the purchase price for all or any
portion of Exchange Notes that LGII or the Guarantor might be required to
purchase. See "--Certain Covenants; Change of Control" and "--Certain
Covenants; Disposition of Proceeds of Asset Sales."
Compliance with Securities Laws and Regulations. In the event of the
redemption of or an offer to repurchase Exchange Notes, LGII and the Guarantor
will comply with Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations thereunder.
CERTAIN COVENANTS
LGII and the Guarantor will jointly and severally make the following
covenants, among others, in the Indenture.
Limitation on Indebtedness. The Guarantor will not, and will not permit any
of its Restricted Subsidiaries (including, without limitation, LGII) to,
directly or indirectly, create, incur, issue, assume, guarantee or in any
manner become directly or indirectly liable, contingently or otherwise, for
the payment of (collectively, to "incur") any Indebtedness (including, without
limitation, any Acquired Indebtedness) other than Permitted Indebtedness.
Notwithstanding the foregoing limitations, the Guarantor and LGII (and any
Wholly-Owned Subsidiary with respect to Seller Financing Indebtedness) will be
permitted to incur Indebtedness (including, without limitation, Acquired
Indebtedness) if at the time of such incurrence, and after giving pro forma
effect thereto, the Consolidated Fixed Charge Coverage Ratio of the Guarantor
is at least equal to 2.25:1.
Limitation on Restricted Payments. The Guarantor will not, and will not
permit any of its Restricted Subsidiaries (including, without limitation,
LGII) to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution or payment
on or in respect of Capital Stock of the Guarantor or any of its Restricted
Subsidiaries or any payment made to the direct or indirect
holders (in their capacities as such) of Capital Stock of the Guarantor or
any of its Restricted Subsidiaries (other than (x) dividends or
distributions payable solely in Capital Stock of the Guarantor (other than
Redeemable Capital Stock) or in options, warrants or other rights to
purchase Capital Stock of the Guarantor (other than Redeemable Capital
Stock) and (y) dividends or other distributions to the extent declared or
paid to the Guarantor or any Wholly-Owned Subsidiary of the Guarantor),
38
<PAGE>
(b) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of the Guarantor or any of its Restricted Subsidiaries
(other than any such Capital Stock of a Wholly-Owned Subsidiary of the
Guarantor),
(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Indebtedness that is subordinate or junior in right of
payment to the Senior Notes or Pari Passu Indebtedness (other than any such
subordinated or Pari Passu Indebtedness owned by the Guarantor or a Wholly-
Owned Subsidiary of the Guarantor) or
(d) make any Investment (other than any Permitted Investment) in any
person,
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as "Restricted Payments"), unless, at the
time of and after giving effect to the proposed Restricted Payment (the amount
of any such Restricted Payment, if other than cash, shall be the Fair Market
Value on the date of such Restricted Payment of the asset(s) proposed to be
transferred by the Guarantor or such Restricted Subsidiary, as the case may
be, pursuant to such Restricted Payment), (A) no Default or Event of Default
shall have occurred and be continuing, (B) immediately prior to and after
giving effect to such Restricted Payment, the Guarantor would be able to incur
$1.00 of additional Indebtedness pursuant to the covenant described under "--
Limitation on Indebtedness" above (assuming a market rate of interest with
respect to such additional Indebtedness) and (C) the aggregate amount of all
Restricted Payments declared or made from and after the Issue Date would not
exceed the sum of (1) 50% of the aggregate Consolidated Net Income of the
Guarantor accrued on a cumulative basis during the period beginning on the
first day of the fiscal quarter of the Guarantor during which the Issue Date
occurs and ending on the last day of the fiscal quarter of the Guarantor
immediately preceding the date of such proposed Restricted Payment, which
period shall be treated as a single accounting period (or, if such aggregate
cumulative Consolidated Net Income of the Guarantor for such period shall be a
deficit, minus 100% of such deficit) plus (2) the aggregate net cash proceeds
received by the Guarantor or LGII (without duplication) either (x) as capital
contributions to the Guarantor or LGII (without duplication) after the Issue
Date from any person (other than the Guarantor, LGII or a Restricted
Subsidiary of the Guarantor or LGII, as the case may be) or (y) from the
issuance or sale of Capital Stock (excluding Redeemable Capital Stock, but
including Capital Stock issued upon the conversion of convertible Indebtedness
or from the exercise of options, warrants or rights to purchase Capital Stock
(other than Redeemable Capital Stock)) of the Guarantor or LGII (without
duplication) to any person (other than to the Guarantor, LGII or a Restricted
Subsidiary of the Guarantor or LGII, as the case may be) after the Issue Date
plus (3) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the Issue Date (excluding any
Investment described in clause (v) of the following paragraph), an amount
equal to the lesser of the return of capital with respect to such Investment
and the cost of such Investment less, in either case, the cost of the
disposition of such Investment plus (4) the sum of $15,000,000. For purposes
of the preceding clause (C)(2), the value of the aggregate net proceeds
received by the Guarantor or LGII (without duplication) upon the issuance of
Capital Stock upon the conversion of convertible Indebtedness or upon the
exercise of options, warrants or rights will be the net cash proceeds received
upon the issuance of such Indebtedness, options, warrants or rights plus the
incremental cash amount received by the Guarantor or LGII (without
duplication) upon the conversion or exercise thereof.
None of the foregoing provisions will prohibit (i) the payment of any
dividend within 60 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph;
(ii) so long as no Default or Event of Default shall have occurred and be
continuing, the redemption, repurchase or other acquisition or retirement of
any shares of any class of Capital Stock of the Guarantor, LGII or any
Restricted Subsidiary of the Guarantor or LGII in exchange for, or out of the
net cash proceeds of, a substantially concurrent (x) capital contribution to
the Guarantor or LGII from any person (other than a Related Obligor, as
described in the last sentence of this paragraph) or (y) issue and sale of
other shares of Capital Stock (other than Redeemable Capital Stock) of the
Guarantor or LGII to any person (other than to a Related Obligor); (iii) so
long as no Default or Event of Default shall have occurred and be continuing,
any redemption, repurchase or other acquisition or retirement of Indebtedness
that is subordinate or junior in right of payment to the Senior Notes and the
Guarantee by exchange for, or out of the net cash proceeds of, a substantially
concurrent (x) capital
39
<PAGE>
contribution to the Guarantor or LGII from any person (other than a Related
Obligor) or (y) issue and sale of (1) Capital Stock (other than Redeemable
Capital Stock) of the Guarantor or LGII to any person (other than a Related
Obligor); provided, however, that the amount of any such net proceeds that are
utilized for any such redemption, repurchase or other acquisition or
retirement shall be excluded from clause (C)(2) of the preceding paragraph; or
(2) Indebtedness of the Guarantor or LGII issued to any person (other than a
Related Obligor), so long as such Indebtedness is Pari Passu Indebtedness or
Indebtedness that is subordinate or junior in right of payment to the Senior
Notes and the Guarantee in the same manner and at least to the same extent as
the Indebtedness so purchased, exchanged, redeemed, acquired or retired; (iv)
so long as no Default or Event of Default shall have occurred and be
continuing, any redemption, repurchase or other acquisition or retirement of
Pari Passu Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to the Guarantor or LGII
from any person (other than a Related Obligor) or (y) issue and sale of
(1) Capital Stock (other than Redeemable Capital Stock) of the Guarantor or
LGII to any person (other than a Related Obligor); provided, however, that the
amount of any such net proceeds that are utilized for any such redemption,
repurchase or other acquisition or retirement shall be excluded from clause
(C)(2) of the preceding paragraph; or (2) Indebtedness of the Guarantor or
LGII issued to any person (other than a Related Obligor), so long as such
Indebtedness is Pari Passu Indebtedness or Indebtedness that is subordinate or
junior in right of payment to the Senior Notes and the Guarantee in the same
manner and at least to the same extent as the Indebtedness so purchased,
exchanged, redeemed, acquired or retired; (v) Investments constituting
Restricted Payments made as a result of the receipt of consideration that
consists of cash or Cash Equivalents from any Asset Sale made pursuant to and
in compliance with the covenant described under "--Disposition of Proceeds of
Asset Sales" below; (vi) so long as no Default or Event of Default has
occurred and is continuing, repurchases by the Guarantor of Common Stock of
the Guarantor from employees of the Guarantor or their authorized
representatives upon the death, disability or termination of employment of
such employees, in an aggregate amount not exceeding $10,000,000 in any
calendar year; (vii) Investments constituting Restricted Payments that are
permitted by subparagraphs (iv) and (v) of the proviso to the section entitled
"Limitation on Transactions with Interested Persons;" and (viii) the
declaration or the payment of dividends on, or the scheduled purchase or
redemption of, the Preferred Securities of a Special Finance Subsidiary or the
Series C Preferred Shares of the Guarantor. In computing the amount of
Restricted Payments previously made for purposes of clause (C) of the
preceding paragraph, Restricted Payments made under the preceding clauses (v),
(vi) and (vii) shall be included and those under clauses (i), (ii), (iii),
(iv) and (viii) shall not be so included. For purposes of this covenant only,
the term "Related Obligor" shall mean the Guarantor, LGII or a Restricted
Subsidiary of the Guarantor or LGII.
Limitation on Liens. The Guarantor will not, and will not permit any of its
Restricted Subsidiaries (including without limitation LGII) to, create, incur,
assume or suffer to exist any Liens of any kind against or upon any of its
property or assets, or any proceeds therefrom where the aggregate amount of
Indebtedness secured by any such Liens, together with the aggregate amount of
property subject to any Sale-Leaseback Transactions of the Guarantor and its
Restricted Subsidiaries (other than Permitted Sale-Leaseback Transactions),
exceeds 10% of the Guarantor's Consolidated Net Worth unless (x) in the case
of Liens securing Indebtedness that is subordinate or junior in right of
payment to the Notes, the Notes are secured by a Lien on such property, assets
or proceeds that is senior in priority to such Liens and (y) in all other
cases, the Senior Notes are equally and ratably secured except for (a) Liens
existing as at the Issue Date; (b) Liens securing the Securities or the
outstanding Notes; (c) Liens in favor of the Guarantor, LGII or any Wholly-
Owned Subsidiary; (d) Liens securing Indebtedness which is incurred to
refinance Indebtedness which has been secured by a Lien permitted under the
Indenture and which has been incurred in accordance with the provisions of the
Indenture; provided, however, that such Liens do not extend to or cover any
property or assets of the Guarantor or any of its Restricted Subsidiaries not
securing the Indebtedness so refinanced; and (e) Permitted Liens.
Change of Control. Upon the occurrence of a Change of Control, LGII will be,
and the Guarantor will ensure that LGII will be, obligated to make an offer to
purchase (a "Change of Control Offer"), and shall purchase, on a Business Day
(the "Change of Control Purchase Date") not more than 60 nor less than 30 days
following the occurrence of the Change of Control, all of the then outstanding
Senior Notes properly tendered and not withdrawn at a purchase price (the
"Change of Control Purchase Price") equal to 101% of the principal
40
<PAGE>
amount thereof plus accrued and unpaid interest, if any, to the Change of
Control Purchase Date. The Change of Control Offer is required to remain open
for at least 20 Business Days and until the close of business on the Change of
Control Purchase Date.
If a Change of Control occurs and LGII fails to pay the Purchase Price for
all Senior Notes properly tendered and not withdrawn, the Guarantor will be
obligated to purchase all such Senior Notes at the Change of Control Purchase
Price on the Change of Control Purchase Date.
In order to effect such Change of Control Offer, LGII or the Guarantor, as
the case may be, shall, not later than the 30th day after the occurrence of
the Change of Control, mail to each holder of Senior Notes notice of the
Change of Control Offer, which notice shall govern the terms of the Change of
Control Offer and shall state, among other things, the procedures that holders
of Senior Notes must follow to accept the Change of Control Offer.
If a Change of Control were to occur, there can be no assurance that LGII or
the Guarantor would have sufficient funds to pay the purchase price for all
Senior Notes that LGII or the Guarantor might be required to purchase. In the
event that LGII or the Guarantor were required to purchase Senior Notes
pursuant to a Change of Control Offer, each of LGII and the Guarantor expect
that they would need to seek third-party financing to the extent they may not
have available funds to meet their purchase obligations. However, there can be
no assurance that LGII or the Guarantor would be able to obtain such financing
on favorable terms, if at all.
Neither LGII nor the Guarantor shall be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements applicable to a Change of Control Offer made by LGII and
purchases all Senior Notes validly tendered and not withdrawn under such
Change of Control Offer.
In the event that a Change of Control occurs and LGII or the Guarantor is
required to purchase Exchange Notes as described above, LGII and the Guarantor
will comply with Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations thereunder.
With respect to the sale of assets referred to in the definition of Change
of Control, the phrase "all or substantially all" as used in such definition
varies according to the facts and circumstances of the subject transaction,
has no clearly established meaning under relevant law and is subject to
judicial interpretation. Accordingly, in certain circumstances there may be a
degree of uncertainty in ascertaining whether a particular transaction would
involve a disposition of "all or substantially all" of the assets of a person
and, therefore, it may be unclear whether a Change of Control has occurred and
whether the Senior Notes are subject to a Change of Control Offer.
Disposition of Proceeds of Asset Sales. The Guarantor will not, and will not
permit any of its Restricted Subsidiaries (including, without limitation,
LGII) (or First Capital Life Insurance Company of Louisiana, National Capital
Life Insurance Company or a Subsidiary holding the insurance company assets
obtained from S.I. Acquisition Associates, L.P.) to, make any Asset Sale
unless (a) the Guarantor or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value of the shares or assets sold or otherwise disposed of and
(b) at least 75% of such consideration consists of cash or Cash Equivalents.
To the extent the Net Cash Proceeds of any Asset Sale are not required to be
applied to repay, and permanently reduce the commitments under, the Credit
Agreements (as required by the terms thereof) or any other Pari Passu
Indebtedness, or are not so applied, the Guarantor or such Restricted
Subsidiary, as the case may be, may, within 180 days of such Asset Sale, apply
such Net Cash Proceeds to an investment in properties and assets that replace
the properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in the business of the Guarantor and
its Restricted Subsidiaries existing on the Issue Date or in businesses
reasonably related thereto ("Replacement Assets"). Any Net Cash Proceeds from
any Asset Sale that are neither used to repay, and permanently reduce the
commitments under, the Credit Agreements nor invested in Replacement Assets
within the 180-day period described above constitute "Excess Proceeds" subject
to disposition as provided below.
41
<PAGE>
When the aggregate amount of Excess Proceeds equals or exceeds $10,000,000,
the Guarantor shall cause LGII to make an offer to purchase (an "Asset Sale
Offer"), from all holders of the Senior Notes, not more than 40 Business Days
thereafter, an aggregate principal amount of Senior Notes equal to such Excess
Proceeds, at a price in cash equal to 100% of the outstanding principal amount
thereof plus accrued and unpaid interest, if any, to the purchase date. To the
extent that the aggregate principal amount of Senior Notes tendered pursuant
to an Asset Sale Offer is less than the Excess Proceeds, LGII may use such
deficiency for general corporate purposes. If the aggregate principal amount
of Senior Notes validly tendered and not withdrawn by holders thereof exceeds
the Excess Proceeds, Senior Notes to be purchased will be selected on a pro
rata basis. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset to zero.
In the event that an Asset Sale occurs and LGII or the Guarantor is required
to purchase Exchange Notes as described above, LGII and the Guarantor will
comply with Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations thereunder.
Limitation on Issuances and Sale of Preferred Stock by Restricted
Subsidiaries. The Guarantor (a) will not permit any of its Restricted
Subsidiaries (including, without limitation, LGII) to issue any Preferred
Stock (other than (i) Preferred Stock issued to the Guarantor or a Wholly-
Owned Subsidiary of the Guarantor and (ii) Preferred Securities of a Special
Finance Subsidiary); and (b) will not permit any person to own any Preferred
Stock of any Restricted Subsidiary of the Guarantor (other than (i) Preferred
Stock owned by the Guarantor or a Wholly-Owned Subsidiary of the Guarantor and
(ii) Preferred Securities of a Special Finance Subsidiary); provided, however,
that this covenant shall not prohibit the issuance and sale of (x) all, but
not less than all, of the issued and outstanding Capital Stock of any
Restricted Subsidiary of the Guarantor owned by the Guarantor or any of its
Restricted Subsidiaries in compliance with the other provisions of the
Indenture or (y) directors' qualifying shares or investments by foreign
nationals mandated by applicable law.
Limitation on Transactions with Interested Persons. The Guarantor will not,
and will not permit any of its Restricted Subsidiaries (including, without
limitation, LGII) to, directly or indirectly, enter into or suffer to exist
any transaction or series of related transactions (including, without
limitation, the sale, transfer, disposition, purchase, exchange or lease of
assets, property or services) with, or for the benefit of, any Affiliate of
the Guarantor or any beneficial owner (determined in accordance with the
Indenture) of 5% or more of the Common Stock of the Guarantor at any time
outstanding ("Interested Persons"), unless (a) such transaction or series of
related transactions are on terms that are no less favorable to the Guarantor
or such Restricted Subsidiary, as the case may be, than those which could have
been obtained in a comparable transaction at such time from persons who are
not Affiliates of the Guarantor or Interested Persons, (b) with respect to a
transaction or series of transactions involving aggregate payments or value
equal to or greater than $10,000,000, the Guarantor has obtained a written
opinion from an Independent Financial Advisor stating that the terms of such
transaction or series of transactions are fair to the Guarantor or its
Restricted Subsidiary, as the case may be, from a financial point of view and
(c) with respect to a transaction or series of transactions involving
aggregate payments or value equal to or greater than $2,500,000, the Guarantor
shall have delivered an officers' certificate to the Trustee certifying that
such transaction or series of transactions comply with the preceding clause
(a) and, if applicable, certifying that the opinion referred to in the
preceding clause (b) has been delivered and that such transaction or series of
transactions have been approved by a majority of the Board of Directors of the
Guarantor (including a majority of the disinterested directors); provided,
however, that this covenant will not restrict the Guarantor from (i) paying
dividends in respect of its Capital Stock permitted under the covenant
described under "--Limitation on Restricted Payments" above, (ii) paying
reasonable and customary fees to directors of the Guarantor or any Restricted
Subsidiary who are not employees of the Guarantor or any Restricted
Subsidiary, (iii) entering into transactions with its Wholly-Owned
Subsidiaries or permitting its Wholly-Owned Subsidiaries from entering into
transactions with other Wholly-Owned Subsidiaries of the Guarantor, (iv)
making loans or advances to senior officers and directors of the Guarantor or
any Restricted Subsidiary not in excess of $6,000,000 in the aggregate at any
one time outstanding, (v) guaranteeing loans made to officers and other
employees of the Guarantor and its Restricted Subsidiaries in connection with
the Guarantor's 1994 Management Equity Investment Plan not in excess of
$6,000,000 in the aggregate at any one time outstanding, (vi) making loans or
advances to officers, employees or consultants of the Guarantor and its
Restricted Subsidiaries for travel and moving expenses in the
42
<PAGE>
ordinary course of business for bona fide business purposes of the Guarantor
and its Restricted Subsidiaries, (vii) making other loans or advances to
officers, employees or consultants of the Guarantor and its Restricted
Subsidiaries in the ordinary course of business for bona fide business
purposes of the Guarantor and its Restricted Subsidiaries not in excess of
$10,000,000 in the aggregate at any one time outstanding, (viii) making
payments to officers or employees of the Guarantor or its Restricted
Subsidiaries pursuant to obligations undertaken, at a time when such persons
were not officers or employees of the Guarantor or its Restricted
Subsidiaries, in connection with arms' length Asset Acquisitions or (ix)
declaring or paying dividends on, or purchasing or redeeming, the Preferred
Securities of a Special Finance Subsidiary.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Guarantor will not, and will not permit any of its
Restricted Subsidiaries (including, without limitation, LGII) to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any Restricted Subsidiary of
the Guarantor to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock or any other interest or
participation in, or measured by, its profits, (b) pay any Indebtedness owed
to the Guarantor or any other Restricted Subsidiary of the Guarantor, (c) make
loans or advances to, or any Investment in, the Guarantor or any other
Restricted Subsidiary of the Guarantor, (d) transfer any of its properties or
assets to the Guarantor or any other Restricted Subsidiary of the Guarantor or
(e) guarantee any Indebtedness of the Guarantor or any other Restricted
Subsidiary of the Guarantor, except for such encumbrances or restrictions
existing under or by reason of (i) applicable law, (ii) customary non-
assignment provisions of any contract or any lease governing a leasehold
interest of the Guarantor or any Restricted Subsidiary of the Guarantor, (iii)
customary restrictions on transfers of property subject to a Lien permitted
under the Indenture which could not materially adversely affect the
Guarantor's ability to satisfy its obligations under the Indenture and the
Senior Notes, (iv) any agreement or other instrument of a person acquired by
the Guarantor or any Restricted Subsidiary of the Guarantor (or a Restricted
Subsidiary of such person) in existence at the time of such acquisition (but
not created in contemplation thereof), which encumbrance or restriction is not
applicable to any person, or the properties or assets of any person, other
than the person, or the properties or assets of the person, so acquired, (v)
provisions contained in any agreement or instrument relating to Indebtedness
which prohibit the transfer of all or substantially all of the assets of the
obligor thereunder unless the transferee shall assume the obligations of the
obligor under such agreement or instrument and (vi) encumbrances and
restrictions under Indebtedness in effect on the Issue Date (including under
the Senior Notes) and encumbrances and restrictions in permitted refinancings
or replacements thereof which are no less favorable to the holders of the
Senior Notes than those contained in the Indebtedness so refinanced or
replaced.
Limitation on Sale-Leaseback Transactions. The Guarantor will not, and will
not permit any of its Restricted Subsidiaries (including without limitation
LGII) to, enter into any Sale-Leaseback Transaction with respect to any
property of the Guarantor or any of its Restricted Subsidiaries where the
aggregate amount of property subject to such Sale-Leaseback Transactions,
together with the aggregate amount of Liens securing Indebtedness of the
Guarantor and its Restricted Subsidiaries (other than Permitted Liens),
exceeds 10% of the Guarantor's Consolidated Net Worth. Notwithstanding the
foregoing, the Guarantor and its Restricted Subsidiaries may enter into Sale-
Leaseback Transactions ("Permitted Sale-Leaseback Transactions") with respect
to property acquired or constructed after the Issue Date; provided that (a)
the Attributable Value of such Sale-Leaseback Transaction shall be deemed to
be Indebtedness of the Guarantor or such Restricted Subsidiary, as the case
may be, and (b) after giving pro forma effect to any such Sale-Leaseback
Transaction and the foregoing clause (a), the Guarantor would be able to incur
$1.00 of additional Indebtedness pursuant to the covenant described under "--
Limitation on Indebtedness" above (assuming a market rate of interest with
respect to such additional Indebtedness).
Limitation on Applicability of Certain Covenants. During any period of time
that (i) the ratings assigned to the Notes by each of S&P and Moody's
(collectively, the "Rating Agencies") are no less than BBB- and Baa3,
respectively (the "Investment Grade Ratings"), and (ii) no Default or Event of
Default has occurred and is continuing, the Guarantor and its Restricted
Subsidiaries, including without limitation LGII, will not be subject
43
<PAGE>
to the covenants entitled "Limitation on Indebtedness," "Limitation on
Restricted Payments," "Disposition of Proceeds of Asset Sales," "Limitation on
Issuances and Sale of Preferred Stock by Restricted Subsidiaries,"
"Limitations on Transactions with Interested Persons" and "Limitation on
Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries"
(collectively, the "Suspended Covenants"). If one or both Rating Agencies
withdraws its rating or downgrades its Investment Grade Rating, then
thereafter the Guarantor and its Restricted Subsidiaries will be subject, on a
prospective basis, to the Suspended Covenants (until the Rating Agencies have
again assigned Investment Grade Ratings to the Senior Notes) and compliance
with the Suspended Covenants with respect to Restricted Payments made after
the time of such withdrawal or downgrade will be calculated in accordance with
the covenant entitled "Limitation on Restricted Payments" as if such covenant
had been in effect at all times after the date of the Indenture.
Reporting Requirements. The Guarantor will file with the Commission, or if
not permitted or required to so file will deliver to the Trustee, the annual
reports, quarterly reports and other documents required to be filed with the
Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or not
the Guarantor has a class of securities registered under the Exchange Act. The
Guarantor will be required to file with the Trustee and provide to each Holder
within 15 days after it files them with the Commission (or if any such filing
is not permitted under the Exchange Act, 15 days after the Guarantor would
have been required to make such filing) copies of such reports and documents.
Rule 144A Information Requirement. If at any time the Guarantor is no longer
subject to the reporting requirements of the Exchange Act, it will furnish to
the Holders or beneficial holders of the Senior Notes and prospective
purchasers of the Senior Notes designated by the holders of the Senior Notes,
upon their request, any information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
MERGER, SALE OF ASSETS, ETC.
The Guarantor will not, and will not permit LGII to, in any transaction or
series of transactions, merge or consolidate with or into, or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of
its properties and assets as an entirety to, any person or persons, and the
Guarantor will not permit any of its Restricted Subsidiaries (including
without limitation LGII) to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the properties and assets of the
Guarantor or LGII or the Guarantor and its Restricted Subsidiaries, taken as a
whole, or LGII and its Restricted Subsidiaries, taken as a whole, to any other
person or persons, unless at the time of and after giving effect thereto (a)
either (i) if the transaction or series of transactions is a merger or
consolidation, the Guarantor or LGII or the Restricted Subsidiary, as the case
may be, shall be the surviving person of such merger or consolidation, or
(ii) the person formed by such consolidation or into which the Guarantor, LGII
or such Restricted Subsidiary, as the case may be, is merged or to which the
properties and assets of the Guarantor, LGII or such Restricted Subsidiary, as
the case may be, are transferred (any such surviving person or transferee
person being the "Surviving Entity") shall be a corporation organized and
existing under the laws of the United States of America, any state thereof,
the District of Columbia, Canada or any province thereof and shall expressly
assume by a supplemental indenture executed and delivered to the Trustee, in
form reasonably satisfactory to the Trustee, all the obligations of the
Guarantor or LGII, as the case may be, under the Senior Notes and the
Indenture, and in each case, the Indenture shall remain in full force and
effect; (b) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions),
no Default or Event of Default shall have occurred and be continuing and the
Guarantor, LGII or the Surviving Entity, as the case may be, after giving
effect to such transaction or series of transactions on a pro forma basis
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), could incur $1.00 of additional Indebtedness pursuant to the
covenant described under "--Certain Covenants; Limitation on Indebtedness"
above (assuming a market rate of interest with respect to such additional
Indebtedness); and (c) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without limitation,
44
<PAGE>
any Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction or series of transactions), the Consolidated
Net Worth of the Guarantor, LGII or the Surviving Entity, as the case may be,
is at least equal to the Consolidated Net Worth of the Guarantor or LGII, as
the case may be, immediately before such transaction or series of
transactions.
In connection with any consolidation, merger, transfer, lease, assignment or
other disposition contemplated hereby, the Guarantor or LGII, as the case may
be, shall deliver, or cause to be delivered, to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an officers' certificate and
an opinion of counsel, each stating that such consolidation, merger, transfer,
lease, assignment or other disposition and the supplemental indenture in
respect thereof comply with the requirements under the Indenture; provided,
however, that, solely for purposes of computing amounts described in subclause
(C) of the covenant described under "--Certain Covenants; Limitation on
Restricted Payments" above, any such successor person shall only be deemed to
have succeeded to and be substituted for the Guarantor or LGII, as the case
may be, with respect to periods subsequent to the effective time of such
merger, consolidation or transfer of assets.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Guarantor or LGII in accordance with the foregoing, in
which the Guarantor or LGII is not the continuing corporation, the successor
corporation formed by such a consolidation or into which the Guarantor or LGII
is merged or to which such transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Guarantor or
LGII, as the case may be, under the Indenture with the same effect as if such
successor corporation had been named as the Guarantor or LGII therein.
EVENTS OF DEFAULT
The following will be "Events of Default" with respect to each series of
Exchange Notes:
(i) default in the payment of the principal of or premium, if any, on any
Exchange Note of such series when the same becomes due and payable (upon
Stated Maturity, acceleration, required purchase, scheduled principal
payment or otherwise); or
(ii) default in the payment of an installment of interest on any of the
Exchange Notes of such series, when the same becomes due and payable, which
default continues for a period of 30 days; or
(iii) failure to perform or observe any other term, covenant or agreement
contained in the Exchange Notes of such series or the Indenture or the
Guarantee with respect to Exchange Notes of such series (other than a
default specified in clause (i) or (ii) above) and such default continues
for a period of 30 days after written notice of such default requiring the
Guarantor and LGII to remedy the same shall have been given (x) to the
Guarantor and LGII by the Trustee or (y) to the Guarantor, LGII and the
Trustee by holders of 25% in aggregate principal amount of the Exchange
Notes of such series then outstanding; or
(iv) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the Guarantor or any Restricted Subsidiary of the Guarantor (including
without limitation LGII) then has outstanding Indebtedness in excess of
$20,000,000 (including Senior Notes of another series), individually or in
the aggregate, and either (a) such Indebtedness is already due and payable
in full or (b) such default or defaults have resulted in the acceleration
of the maturity of such Indebtedness; or
(v) one or more judgments, orders or decrees of any court or regulatory
or administrative agency of competent jurisdiction for the payment of money
in excess of $20,000,000, either individually or in the aggregate, shall be
entered against the Guarantor or any Restricted Subsidiary of the Guarantor
(including without limitation LGII) or any of their respective properties
and shall not be discharged or bonded against or stayed and there shall
have been a period of 60 days after the date on which any period for appeal
has expired and during which a stay of enforcement of such judgment, order
or decree shall not be in effect; or
(vi) either (i) the collateral agent under the Credit Agreements or (ii)
any holder of at least $20,000,000 in aggregate principal amount of
Indebtedness of the Guarantor or any of its Restricted Subsidiaries
(including without limitation LGII) shall commence judicial proceedings to
foreclose upon assets of the
45
<PAGE>
Guarantor or any of its Restricted Subsidiaries having an aggregate Fair
Market Value, individually or in the aggregate, in excess of $20,000,000 or
shall have exercised any right under applicable law or applicable security
documents to take ownership of any such assets in lieu of foreclosure; or
(vii) the Guarantee with respect to such series ceases to be in full
force and effect or is declared null and void, or the Guarantor denies that
it has any further liability under the Guarantee with respect to such
series or gives notice to such effect (other than by reason of the
termination of the Indenture or the release of the Guarantee with respect
to such series in accordance with the Indenture) and such condition shall
have continued for a period of 60 days after written notice of such failure
(which notice shall specify the Default, demand that it be remedied and
state that it is a "Notice of Default") requiring the Guarantor and LGII to
remedy the same shall have been given (x) to the Guarantor and LGII by the
Trustee or (y) to the Guarantor, LGII and the Trustee by holders of at
least 25% in aggregate principal amount of the Senior Notes of any series
then outstanding; or
(viii) certain events of bankruptcy, insolvency or reorganization with
respect to the Guarantor or any Significant Subsidiary of the Guarantor
(including without limitation LGII) shall have occurred.
If an Event of Default (other than as specified in clause (viii) above)
shall occur and be continuing with respect to the Exchange Notes of any
series, the Trustee, by notice to the Guarantor and LGII, or the holders of at
least 25% in aggregate principal amount of the Exchange Notes of such series
then outstanding, by notice to the Trustee, the Guarantor and LGII, may
declare the principal of, premium, if any, and accrued and unpaid interest, if
any, on all of the outstanding Exchange Notes of such series due and payable
immediately, upon which declaration, all amounts payable in respect of the
Exchange Notes of such series shall be immediately due and payable. If an
Event of Default specified in clause (viii) above occurs and is continuing,
then the principal of, premium, if any, and accrued and unpaid interest, if
any, on all of the outstanding Exchange Notes of such series shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holder of Exchange Notes.
After a declaration of acceleration under the Indenture with respect to the
Exchange Notes of any series, but before a judgment or decree for payment of
the money due has been obtained by the Trustee, the holders of a majority in
aggregate principal amount of the outstanding Exchange Notes of such series,
by written notice to the Guarantor, LGII and the Trustee, may rescind such
declaration if (a) the Guarantor or LGII has paid or deposited with the
Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee
under the Indenture and the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, (ii) all overdue interest
on all Exchange Notes of such series, (iii) the principal of and premium, if
any, on any Exchange Notes of such series which have become due otherwise than
by such declaration of acceleration and interest thereon at the rate borne by
the Exchange Notes of such series, and (iv) to the extent that payment of such
interest is lawful, interest upon overdue interest and overdue principal at
the rate borne by the Exchange Notes of such series which has become due
otherwise than by such declaration of acceleration; (b) the rescission would
not conflict with any judgment or decree of a court of competent jurisdiction;
and (c) all Events of Default, other than the non-payment of principal of,
premium, if any, and interest on the Exchange Notes of such series that have
become due solely by such declaration of acceleration, have been cured or
waived.
Prior to the declaration of acceleration of the Exchange Notes of any
series, the holders of not less than a majority in aggregate principal amount
of the outstanding Exchange Notes of such series may on behalf of the holders
of all the Exchange Notes of such series waive any past defaults under the
Indenture, except a default in the payment of the principal of, premium, if
any, or interest on any Exchange Note of such series, or in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Exchange Note of such series
outstanding.
No holder of any of the Exchange Notes of any series has any right to
institute any proceeding with respect to the Indenture or the Exchange Notes
of such series or any remedy thereunder, unless the holders of at least 25% in
aggregate principal amount of the outstanding Exchange Notes of such series
have made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as Trustee under the Exchange Notes of such series
and the Indenture, the Trustee has failed to institute such proceeding within
30 days after receipt of such notice and the Trustee, within such 30-day
period, has not received directions inconsistent with
46
<PAGE>
such written request by holders of a majority in aggregate principal amount of
the outstanding Exchange Notes of such series. Such limitations do not apply,
however, to a suit instituted by a holder of an Exchange Note of such series
for the enforcement of the payment of the principal of, premium, if any, or
interest on such Exchange Note on or after the respective due dates expressed
in such Exchange Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. Subject to the provisions of the Indenture relating to the duties of
the Trustee, whether or not an Event of Default shall occur and be continuing,
the Trustee under the Indenture is not under any obligation to exercise any of
its rights or powers under the Indenture at the request or direction of any of
the holders unless such holders shall have offered to the Trustee reasonable
security or indemnity. Subject to certain provisions concerning the rights of
the Trustee, the holders of not less than a majority in aggregate principal
amount of the outstanding Exchange Notes of any series have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee under the Indenture with respect to the Exchange Notes of such series.
If an Event of Default occurs and is continuing and is known to the Trustee,
the Trustee shall mail to each holder of the Exchange Notes notice of the
Event of Default within 30 days after obtaining knowledge thereof. Except in
the case of an Event of Default in payment of principal of, premium, if any,
or interest on any Exchange Notes, the Trustee may withhold the notice to the
holders of such Exchange Notes if a committee of its trust officers in good
faith determines that withholding the notice is in the interest of the holders
of the Exchange Notes.
LGII is required to furnish to the Trustee annual and quarterly statements
as to the performance by LGII of its obligations under the Indenture and as to
any default in such performance. LGII is also required to notify the Trustee
within ten days of any event which is, or after notice or lapse of time or
both would become, an Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
Each of the Guarantor and LGII may, at its option and at any time, terminate
the obligations of the Guarantor and LGII with respect to the outstanding
Exchange Notes of any series ("defeasance"). Such defeasance means that the
Guarantor and LGII shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Exchange Notes of such series,
except for (i) the rights of holders of outstanding Exchange Notes of such
series to receive payment in respect of the principal of, premium, if any, and
interest on such Exchange Notes when such payments are due, (ii) LGII's
obligations to issue temporary Exchange Notes of such series, register the
transfer or exchange of any Exchange Notes of such series, replace mutilated,
destroyed, lost or stolen Exchange Notes of such series and maintain an office
or agency for payments in respect of the Exchange Notes of such series, (iii)
the rights, powers, trusts, duties and immunities of the Trustee, and (iv) the
defeasance provisions of the Indenture. In addition, each of the Guarantor and
LGII may, at its option and at any time, elect to terminate the obligations of
the Guarantor and LGII with respect to certain covenants that are set forth in
the Indenture, some of which are described under "--Certain Covenants" above
(including the covenant described under "--Certain Covenants; Change of
Control" above) and any subsequent failure to comply with such obligations
shall not constitute a Default or Event of Default with respect to the
Exchange Notes of such series ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (i) LGII must
irrevocably deposit with the Trustee, in trust, for the benefit of the holders
of the Exchange Notes of such series, cash in United States dollars, U.S.
Government Obligations (as defined in the Indenture), or a combination
thereof, in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of,
premium, if any, and interest on the outstanding Exchange Notes of such series
to maturity (except lost, stolen or destroyed Exchange Notes of such series
which have been replaced or paid); (ii) the Guarantor or LGII shall have
delivered to the Trustee an opinion of counsel to the effect that the holders
of the outstanding Exchange
47
<PAGE>
Notes of such series will not recognize income, gain or loss for federal
income tax purposes as a result of such defeasance or covenant defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred (in the case of defeasance, such opinion
must refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable federal income tax laws); (iii) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit;
(iv) such defeasance or covenant defeasance shall not cause the Trustee to
have a conflicting interest with respect to any securities of LGII; (v) such
defeasance or covenant defeasance shall not result in a breach or violation
of, or constitute a default under, any material agreement or instrument to
which the Guarantor or LGII is a party or by which it is bound; (vi) the
Guarantor or LGII shall have delivered to the Trustee an opinion of counsel to
the effect that after the 91st day following the deposit, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; and
(vii) the Guarantor or LGII shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent under the Indenture to either defeasance or covenant defeasance, as
the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding
Exchange Notes of any series when (i) either (a) all the Exchange Notes of
such series theretofore authenticated and delivered (except lost, stolen or
destroyed Exchange Notes of such series which have been replaced or repaid and
Exchange Notes of such series for whose payment money has theretofore been
deposited in trust or segregated and held in trust by LGII and thereafter
repaid to LGII or discharged from such trust) have been delivered to the
Trustee for cancellation or (b) all Exchange Notes of such series have
otherwise become due and payable and the Guarantor or LGII has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Exchange Notes
of such series not theretofore delivered to the Trustee for cancellation, for
principal of, premium, if any, and interest on the Exchange Notes of such
series to the date of deposit together with irrevocable instructions from the
Guarantor or LGII directing the Trustee to apply such funds to the payment
thereof at maturity; (ii) the Guarantor and LGII have paid all other sums
payable under the Indenture by LGII; (iii) there exists no Default or Event of
Default under the Indenture; and (iv) the Guarantor or LGII has delivered to
the Trustee an officers' certificate and an opinion of counsel stating that
all conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with.
AMENDMENTS AND WAIVERS
The Indenture will provide that the Guarantor and LGII, when authorized by a
Board Resolution, and the Trustee may amend, waive or supplement the Indenture
or the Exchange Notes without notice to or consent of any Holder: (a) to cure
any ambiguity, defect or inconsistency; (b) to comply with the provisions
described under "Merger, Sale of Assets, Etc." above; (c) to provide for
uncertificated Exchange Notes in addition to certificated Exchange Notes;
(d) to comply with any requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the TIA; or (e) to make any
change that would provide any additional benefit or rights to the Holders or
that does not adversely affect the rights of any Holder. Notwithstanding the
foregoing, the Guarantor, the Trustee and LGII may not make any change that
adversely affects the rights of any Holder under the Indenture. Other
modifications and amendments of the Indenture may be made with the consent of
the holders of not less than a majority in aggregate principal amount of each
series of the then outstanding Exchange Notes, except that, without the
consent of each holder of the Exchange Notes affected thereby, no amendment
may, directly or indirectly: (i) reduce the amount of Exchange Notes whose
holders must consent to any amendment; (ii) reduce the rate of or change the
time for payment of interest, including defaulted interest, on any Exchange
Notes; (iii) change the currency in which the Notes are payable; (iv) reduce
the principal of or change the fixed maturity of any Exchange Notes, or change
the date on which any Notes may be subject to repurchase, or reduce the
repurchase price therefor; (v) make any Exchange Notes payable in money other
than that stated in the Senior Notes; (vi) make any change in provisions of
the Indenture protecting the right of each holder of an Exchange Note to
receive payment of principal of and interest on such Exchange Note on or after
the date thereof or to bring suit to enforce such payment or permitting
holders of a majority in principal amount
48
<PAGE>
of the Exchange Notes of such series to waive Defaults or Events of Default;
(vii) subordinate in right of payment, or otherwise subordinate, the Exchange
Notes of such series to any other Indebtedness or obligation of the Guarantor
or LGII; or (viii) amend, alter, change or modify the obligation of LGII to
make and consummate a Change of Control Offer in the event of a Change of
Control or make and consummate an Asset Sale Offer or waive any Default in the
performance of any such offers or modify any of the provisions or definitions
with respect to any such offers.
REGISTRATION RIGHTS AGREEMENT
In the event that (i) due to a change in current interpretations by the
Commission, LGII determines that consummation of the Exchange Offer as
contemplated by the Registration Rights Agreement would violate applicable law
or applicable interpretations by the Commission, (ii) the Exchange Offer is
not for any other reason consummated within 150 days after the date on which
LGII delivered the Outstanding Notes to the Initial Purchasers (the "Closing
Date") or (iii) any holder or holders of $5,000,000 aggregate principal amount
of Outstanding Notes, within 30 days after consummation of the Exchange Offer,
notify LGII that such holders (x) are prohibited by applicable law or
Commission policy from participating in the Exchange Offer, (y) may not resell
Exchange Notes acquired by them in the Exchange Offer to the public without
delivering a prospectus and that the prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales
by such holders or (z) are broker-dealers and hold Outstanding Notes acquired
directly from LGII or an "affiliate" of LGII or Loewen, within the meaning of
Rule 405 under the Securities Act, it is contemplated that the Guarantor and
LGII will file a shelf registration statement covering resales (a) by all
holders of Outstanding Notes in the event LGII determines that the
consummation of the Exchange Offer would violate applicable law or
interpretations by the Commission pursuant to the foregoing clause (i) or the
Exchange Offer is not consummated within 150 days after the Closing Date
pursuant to the foregoing clause (ii), or (b) by the Initial Purchasers after
consummation of the Exchange Offer, if the Shelf Registration Statement is
required solely pursuant to the foregoing clause (iii), and will use their
best efforts to cause the Shelf Registration Statement to become effective and
to keep the Shelf Registration Statement effective for 180 days from the
effective date thereof. The Guarantor and LGII shall, if they file the Shelf
Registration Statement, provide to each holder of Outstanding Notes copies of
the prospectus included therein and notify each such holder when the Shelf
Registration Statement has become effective. A holder that sells Outstanding
Notes pursuant to the Shelf Registration Statement generally will be required
to be named as a selling security holder in the related prospectus and to
deliver a current prospectus to purchasers, and will be subject to certain of
the civil liability provisions under the Securities Act in connection with
such sales.
Under the Registration Rights Agreement, the Guarantor and LGII agreed to
use their best efforts to: (i) file the Exchange Offer Registration Statement
or a Shelf Registration Statement with the Commission within 45 days after the
Closing Date, (ii) have such Exchange Offer Registration Statement or Shelf
Registration Statement declared effective by the Commission, and (iii)
commence the Exchange Offer and issue the Exchange Notes in exchange for all
Outstanding Notes validly tendered in accordance with the terms of the
Exchange Offer prior to the close of the Exchange Offer, or, in the
alternative, cause the Shelf Registration Statement to remain effective for
180 days from the effective date thereof. Although the Guarantor and LGII
intend to file the Shelf Registration Statement, if required, there can be no
assurance that the Shelf Registration Statement will be filed or, if filed,
that it will become effective. Each holder of Outstanding Notes, by virtue of
being or becoming so, is bound by the provisions of the Registration Rights
Agreement that may require the holder to furnish notice or other information
to the Guarantor and LGII as a condition to certain obligations of the
Guarantor and LGII to file the Shelf Registration Statement by a particular
date or to maintain its effectiveness for the prescribed 180-day period.
If the Guarantor and LGII fail to comply with the above provisions,
additional interest ("Penalty Interest") shall be assessed on the Notes as
follows:
(i) (A) if the Exchange Offer Registration Statement or, in the event
that due to a change in current interpretations by the Commission the
Guarantor and LGII are not permitted to effect the Exchange Offer, the
Shelf Registration Statement is not filed within 45 days following the
Closing Date or (B) in the event that within 30 days after the consummation
of the Exchange Offer (the "prescribed time period"), any holder
49
<PAGE>
or holders of $5,000,000 aggregate principal amount of Outstanding Notes
shall notify LGII that such holders (x) are prohibited by applicable law or
Commission policy from participating in the Exchange Offer, (y) may not
resell Exchange Notes acquired by them in the Exchange Offer to the public
without delivering a prospectus and that the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for
such resales by such holders or (z) are broker-dealers and hold Outstanding
Notes acquired directly from LGII or an "affiliate" of LGII or Loewen,
within the meaning of Rule 405 under the Securities Act, if the Shelf
Registration Statement is not filed within 45 days after expiration of the
prescribed time period, then commencing on the 46th day after either the
Closing Date or the expiration of the prescribed time period, as the case
may be, Penalty Interest shall be accrued on the Notes over and above the
accrued interest at a rate of .50% per annum for the first 90 days
immediately following the 46th day after either the Closing Date or the
expiration of the prescribed time period, as the case may be, such Penalty
Interest rate increasing by an additional .25% per annum at the beginning
of each subsequent 90-day period;
(ii) if the Exchange Offer Registration Statement or a Shelf Registration
Statement is filed pursuant to clause (i) of the preceding paragraph and is
not declared effective within 120 days following either the Closing Date or
the expiration of the prescribed time period, as the case may be, then
commencing on the 121st day after either the Closing Date or the expiration
of the prescribed time period, as the case may be, Penalty Interest shall
be accrued on the Outstanding Notes over and above the accrued interest at
a rate of .50% per annum for the first 90 days immediately following the
121st day after either the Closing Date or the expiration of the prescribed
time period, as the case may be, such Penalty Interest rate increasing by
an additional .25% per annum at the beginning of each subsequent 90-day
period; and
(iii) if either (A) the Guarantor and LGII have not exchanged Exchange
Notes for all Outstanding Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to 30 days after the date on which
the Exchange Offer Registration Statement was declared effective, or (B) if
applicable, a Shelf Registration Statement has been declared effective and
such Shelf Registration Statement ceases to be effective prior to 180 days
from its original effective date, then, subject to certain exceptions,
Penalty Interest shall be accrued on the Outstanding Notes over and above
the accrued interest at a rate of .50% per annum for the first 60 days
immediately following the (x) 31st day after such effective date, in the
case of (A) above, or (y) the day such Shelf Registration Statement ceases
to be effective in the case of (B) above, such Penalty Interest rate
increasing by an additional .25% per annum at the beginning of each
subsequent 60-day period;
provided, however, that the Penalty Interest rate on the Outstanding Notes may
not exceed 1.5% per annum; and provided further that (1) upon the filing of
the Exchange Offer Registration Statement or a Shelf Registration Statement
(in the case of (i) above), (2) upon the effectiveness of the Exchange Offer
Registration Statement or a Shelf Registration Statement (in the case of (ii)
above), or (3) upon the exchange of Exchange Notes for all Outstanding Notes
validly tendered in the Exchange Offer or upon the effectiveness of the Shelf
Registration Statement which had ceased to remain effective prior to 180 days
from its original effective date (in the case of (iii) above), Penalty
Interest on the Outstanding Notes as a result of such clause (i), (ii) or
(iii) shall cease to accrue.
Any amounts of Penalty Interest due pursuant to clause (i), (ii) or (iii)
above will be payable in cash on the interest payment dates of the Outstanding
Notes. The amount of Penalty Interest will be determined by multiplying the
applicable Penalty Interest rate by the principal amount of the Outstanding
Notes, multiplied by a fraction, the numerator of which is the number of days
such Penalty Interest rate was applicable during such period (determined on
the basis of a 360-day year composed of twelve 30-day months), and the
denominator of which is 360.
The foregoing summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the provisions of the Registration Rights
Agreement. A copy of the Registration Rights Agreement has been filed with the
Commission as an exhibit to the Exchange Offer Registration Statement.
50
<PAGE>
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred
and is continuing, the Trustee will exercise such rights and powers vested in
it under the Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the TIA incorporated by reference therein
contain limitations on the rights of the Trustee thereunder, should it become
a creditor of the Guarantor or LGII, to obtain payment of claims in certain
cases or to realize on certain property received by it in respect of any such
claims, as security or otherwise. The Trustee is permitted to engage in other
transactions; provided, however, that if it acquires any conflicting interest
(as defined in the TIA) it must eliminate such conflict or resign.
GOVERNING LAW
The Indenture and the Exchange Notes will be governed by the laws of the
State of New York, without regard to the principles of conflicts of law.
CONSENT TO SERVICE AND JURISDICTION
Each of LGII and Loewen has appointed Thelen, Marrin, Johnson & Bridges, 330
Madison Avenue, New York, New York 10017, Attention: David P. Graybeal, Esq.,
as its authorized agent upon whom process may be served in any suit, action or
proceeding arising out of or based on the Indenture which may be instituted in
any federal or state court located in The City of New York, expressly consents
to the jurisdiction of any such court in respect of any such suit, action or
proceeding, and waives other requirements of or objections to personal
jurisdiction with respect thereto.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a person (a) assumed or
created in connection with an Asset Acquisition from such person or (b)
existing at the time such person becomes a Restricted Subsidiary of any other
person.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person.
"Asset Acquisition" means (a) an Investment by the Guarantor or any
Restricted Subsidiary of the Guarantor (including without limitation LGII) in
any other person pursuant to which such person shall become a Restricted
Subsidiary of the Guarantor, or shall be merged with or into the Guarantor or
any Restricted Subsidiary of the Guarantor, (b) the acquisition by the
Guarantor or any Restricted Subsidiary of the Guarantor of the assets of any
person (other than a Restricted Subsidiary of the Guarantor) which constitute
all or substantially all of the assets of such person or (c) the acquisition
by the Guarantor or any Restricted Subsidiary of the Guarantor of any division
or line of business of any person (other than a Restricted Subsidiary of the
Guarantor).
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any person other than the Guarantor or
a Restricted Subsidiary of the Guarantor (including without limitation LGII),
in one or a series of related transactions, of (a) any Capital Stock of any
Restricted Subsidiary of the Guarantor (other than in respect of director's
qualifying shares or investments by foreign nationals mandated by applicable
law) or of First Capital Life Insurance Company of Louisiana, National Capital
Life Insurance Company or a Subsidiary holding the insurance company assets
acquired from S.I. Acquisition Associates, L.P.; (b) all or substantially all
of the properties and assets of any division or line of business of the
Guarantor or any Restricted Subsidiary of the Guarantor; or (c) any other
properties or assets of the Guarantor or any Restricted Subsidiary of the
Guarantor other than in the ordinary course of business. For the purposes of
this definition, the term "Asset Sale" shall not include (i) any sale,
transfer or other disposition of equipment, tools or other assets
51
<PAGE>
(including Capital Stock of any Restricted Subsidiary of the Guarantor) by the
Guarantor or any of its Restricted Subsidiaries in one or a series of related
transactions in respect of which the Guarantor or such Restricted Subsidiary
receives cash or property with an aggregate Fair Market Value of $2,000,000 or
less; and (ii) any sale, issuance, conveyance, transfer, lease or other
disposition of properties or assets that is governed by the provisions
described under "--Merger, Sale of Assets, Etc." above.
"Attributable Value" means, as to any particular lease under which any
person is at the time liable other than a Capitalized Lease Obligation, and at
any date as at which the amount thereof is to be determined, the total net
amount of rent required to be paid by such person under such lease during the
initial term thereof as determined in accordance with GAAP, discounted from
the last date of such initial term to the date of determination at a rate per
annum equal to the discount rate which would be applicable to a Capitalized
Lease Obligation with a like term in accordance with GAAP. The net amount of
rent required to be paid under any such lease for any such period shall be the
aggregate amount of rent payable by the lessee with respect to such period
after excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges. In the
case of any lease which is terminable by the lessee upon the payment of a
penalty, such net amount shall also include the amount of such penalty, but no
rent shall be considered as required to be paid under such lease subsequent to
the first date upon which it may be so terminated. "Attributable Value" means,
as to a Capitalized Lease Obligation under which any person is at the time
liable and at any date as at which the amount thereof is to be determined, the
capitalized amount thereof that would appear on the face of a balance sheet of
such person in accordance with GAAP.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The City of New York,
State of New York or the city in which the Corporate Trust Office is located,
are authorized or obligated by law, regulation or executive order to close.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as
a capital lease obligation under GAAP, and, for the purpose of the Indenture,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness with
a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the Untied States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii)
certificates of deposit with a maturity of 180 days or less of any financial
institution that is not organized under the laws of the United States, any
state thereof or the District of Columbia that are rated at least A-1 by S&P
or at least P-1 by Moody's or at least an equivalent rating category of
another nationally recognized securities rating agency; (iv) repurchase
agreements and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the government of the
United States of America or issued by any agency thereof and backed by the
full faith and credit of the United States of America, in each case maturing
within 180 days from the date of acquisition; provided that the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions With Securities Dealers and Others, as
adopted by the Comptroller of the Currency on October 31, 1985; and (v) notes
held by the Guarantor or any Restricted Subsidiary (including without
limitation LGII) which were obtained by the Guarantor or such Restricted
Subsidiary in connection with Asset Sales (x) in the ordinary course of its
funeral home, cemetery or cremation businesses or (y) which were required to
be made pursuant to applicable federal or state law.
52
<PAGE>
"Change of Control" means the occurrence of any of the following events: (a)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), excluding Permitted Holders, is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except
that a person shall be deemed to have "beneficial ownership" of all securities
that such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time, upon the happening of an event
or otherwise), directly or indirectly, of more than 35% of the total Voting
Stock of the Guarantor or LGII, under circumstances where the Permitted
Holders (i) "beneficially own" (as so defined) a lower percentage of the
Voting Stock than such other "person" or "group" and (ii) 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 the Guarantor or LGII;
(b) the Guarantor or LGII consolidates with, or merges with or into, another
person or sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of its assets to another person, or another person
consolidates with, or merges with or into, the Guarantor or LGII, in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Guarantor or LGII is converted into or exchanged for cash, securities or other
property, other than any such transaction where (i) the outstanding Voting
Stock of the Guarantor or LGII is converted into or exchanged for (1) Voting
Stock (other than Redeemable Capital Stock) of the surviving or transferee
corporation or (2) cash, securities and other property in an amount which
could then be paid by the Guarantor or LGII as a Restricted Payment under the
Indenture, or a combination thereof, and (ii) immediately after such
transaction no "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), excluding Permitted Holders, is the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time, upon the
happening of an event or otherwise), directly or indirectly, of more than 50%
of the total Voting Stock of the surviving or transferee corporation; (c) at
any time during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Guarantor
or LGII (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders or stockholders
of the Guarantor or LGII was approved by a vote of 66 2/3% of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason (including the failure of such individuals to be elected in a
proxy contest involving a solicitation of proxies) to constitute a majority of
the Board of Directors of the Guarantor or LGII then in office; or (d) the
Guarantor or LGII is liquidated or dissolved or adopts a plan of liquidation
other than a liquidation of LGII into the Guarantor.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted.
"Common Stock" means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however
designated and whether voting or nonvoting) of, such person's common stock,
whether outstanding at the Issue Date or issued after the Issue Date, and
includes, without limitation, all series and classes of such common stock.
"Consolidated Cash Flow Available for Fixed Charges" means, with respect to
any person for any period, (A) the sum of, without duplication, the amounts
for such period, taken as a single accounting period, of (a) Consolidated Net
Income, (b) Consolidated Non-cash Charges, (c) Consolidated Interest Expense
and (d) Consolidated Income Tax Expense less (B) any non-cash items increasing
Consolidated Net Income for such period.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
person, the ratio of the aggregate amount of Consolidated Cash Flow Available
for Fixed Charges of such person for the full fiscal quarter immediately
preceding the date of the transaction (the "Transaction Date") giving rise to
the need to calculate the Consolidated Fixed Charge Coverage Ratio (such full
fiscal quarter being referred to herein as the "Prior Quarter") to the
aggregate amount of Consolidated Fixed Charges of such person for the Prior
Quarter. In addition to and without limitation of the foregoing, for purposes
of this definition, "Consolidated Cash Flow Available for Fixed Charges" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to, without duplication, (a)
the incurrence of any Indebtedness of such person or any of its Restricted
Subsidiaries (and the application of the net proceeds thereof) during the
53
<PAGE>
period commencing on the first day of the Prior Quarter to and including the
Transaction Date (the "Reference Period"), including, without limitation, the
incurrence of the Indebtedness giving rise to the need to make such
calculation (and the application of the net proceeds thereof), as if such
incurrence (and application) occurred on the first day of the Reference
Period, and (b) any Material Asset Sales or Material Asset Acquisitions
(including, without limitation, any Material Asset Acquisition giving rise to
the need to make such calculation as a result of such person or one of its
Restricted Subsidiaries (including any person who becomes a Restricted
Subsidiary as a result of the Material Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness) occurring during the
Reference Period, as if such Material Asset Sale or Material Asset Acquisition
occurred on the first day of the Reference Period. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (i)
interest on outstanding Indebtedness determined on a fluctuating basis as at
the Transaction Date and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; and (ii) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Reference Period. If such person or any of its Restricted
Subsidiaries directly or indirectly guarantees Indebtedness of a third person,
the above clause shall give effect to the incurrence of such guaranteed
Indebtedness as if such person or such Restricted Subsidiary had directly
incurred or otherwise assumed such guaranteed Indebtedness. For purposes of
this calculation, a Material Asset Acquisition is an Asset Acquisition which
is deemed by such person to be material for such purposes or which has a
purchase price of $30,000,000 or more and a Material Asset Sale is one or more
Asset Sales which relate to assets with an aggregate value of more than
$30,000,000.
"Consolidated Fixed Charges" means, with respect to any person for any
period, the sum of, without duplication, the amounts for such period of (i)
Consolidated Interest Expense and (ii) the product of (a) the aggregate amount
of dividends and other distributions paid or accrued during such period in
respect of Preferred Stock and Redeemable Capital Stock of such person and its
Restricted Subsidiaries on a consolidated basis and (b) a multiplier, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such person,
expressed as a decimal; provided, however, that the multiplier in clause (b)
shall be one if such dividend or other distribution is fully tax deductible.
"Consolidated Income Tax Expense" means, with respect to any person for any
period, the provision for federal, state, local and foreign income taxes of
such person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, the sum of (i) the interest expense of such
person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount, (b) the net cost under Interest Rate
Protection Obligations, (c) the interest portion of any deferred payment
obligation, (d) all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing and (e)
all accrued interest and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such
person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any person, for any period,
the consolidated net income (or loss) of such person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted,
to the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses, (ii) the portion of net
income (but not losses) of such person and its Restricted Subsidiaries
allocable to minority interests in unconsolidated persons to the extent that
cash dividends or distributions have not actually been received by such person
or one of its Restricted Subsidiaries, (iii) net income (or loss) of any
person combined with such person or one of its Restricted Subsidiaries on a
"pooling of interests" basis attributable to any period prior to the date of
combination, (iv) any gain or loss realized upon the termination of any
employee pension benefit plan, on an after-tax basis, (v) gains or losses in
respect of any
54
<PAGE>
Asset Sales by such person or one of its Restricted Subsidiaries, (vi) the net
income of any Restricted Subsidiary of such person to the extent that the
declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders and (vii) in the
case of the year ended December 31, 1995, losses in respect of the Gulf
National and Provident Litigation Expenses.
"Consolidated Net Tangible Assets" of the Guarantor as at any date means the
total amount of assets of the Guarantor and its Restricted Subsidiaries, less
applicable reserves, on a consolidated basis as the end of the fiscal quarter
immediately preceding such date, as determined in accordance with GAAP, less:
(i) Intangible Assets and (ii) appropriate adjustments on account of minority
interests of other persons holding equity investments in Restricted
Subsidiaries, in the case of each of clauses (i) and (ii) above as reflected
on the consolidated balance sheet of the Guarantor and its Restricted
Subsidiaries as at the end of the fiscal quarter immediately preceding such
date.
"Consolidated Net Worth" means, with respect to any person at any date, the
consolidated stockholders' equity of such person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock of such person
and its Restricted Subsidiaries, as determined in accordance with GAAP.
"Credit Agreements" means (i) until repaid with the proceeds of the Proposed
Bank Facility, the Multi-Currency Revolver, the Canadian Revolver and the MEIP
Facility, and thereafter the Proposed Bank Facility, as discussed under
"Description of Certain Indebtedness--Other Indebtedness" and (ii) the
Canadian five-year term credit facility described thereunder; in each case as
any such instrument may be amended, supplemented or otherwise modified from
time to time, and any successor or replacement facility.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Guarantor or any of its Restricted Subsidiaries against fluctuations in
currency values.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Event of Default" has the meaning set forth under "Events of Default"
herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any assets, the price which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction; provided, however, that, with respect
to any transaction which involves an asset or assets in excess of $5,000,000,
such determination shall be evidenced by resolutions of the Board of Directors
of the Guarantor delivered to the Trustee.
"Final Maturity Date" means April 15, 2001, with respect to the Series 1
Senior Notes, and April 15, 2003, with respect to the Series 2 Senior Notes.
"GAAP" means Canadian GAAP consistently applied until such time as the
Guarantor or LGII shall prepare their respective books of record in accordance
with U.S. GAAP at which time and all times thereafter GAAP shall mean U.S.
GAAP consistently applied.
"Guarantees" means the guarantees of the Notes created pursuant to the
Indenture.
"guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
55
<PAGE>
"Guarantor" shall mean The Loewen Group Inc., and shall include any
successor replacing such Guarantor pursuant to the Indenture, and thereafter
means such successor.
"Gulf National and Provident Litigation Expenses" means expenses of up to
$200,000,000 recorded by the Guarantor in its consolidated financial
statements for the year ended December 31, 1995 in connection with the conduct
and settlement of lawsuits brought against the Guarantor by (i) J.J. O'Keefe,
Sr., Gulf National Insurance Company and certain affiliates thereof before the
courts of the State of Mississippi and (ii) Provident American Corporation and
a subsidiary thereof before the United States District Court for the Eastern
District of Pennsylvania.
"Holder" means the person in whose name an Exchange Note is registered on
the Registrar's books.
"Indebtedness" means, with respect to any person, without duplication, (a)
all liabilities of such person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business and which are
not overdue by more than 90 days, but excluding, without limitation, all
obligations, contingent or otherwise, of such person in connection with any
undrawn letters of credit, banker's acceptance or other similar credit
transaction, (b) all obligations of such person evidenced by bonds, notes,
debentures or other similar instruments, (c) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such person (even if the rights and remedies
of the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), but excluding trade
accounts payable arising in the ordinary course of business, (d) all
Capitalized Lease Obligations of such person, (e) all Indebtedness referred to
in the preceding clauses of other persons and all dividends of other persons,
the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon property (including, without limitation, accounts and contract
rights) owned by such person, even though such person has not assumed or
become liable for the payment of such Indebtedness (the amount of such
obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (f) all guarantees of
Indebtedness referred to in this definition by such person, (g) all Redeemable
Capital Stock of such person valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued dividends, (h) all
obligations under or in respect of Currency Agreements and Interest Rate
Protection Obligations of such person, (i) any Preferred Stock of any
Restricted Subsidiary of such person valued at the sum of (without
duplication) (A) the liquidation preference thereof, (B) any mandatory
redemption payment obligations in respect thereof and (C) accrued dividends
thereon, and (j) any amendment, supplement, modification, deferral, renewal,
extension or refunding of any liability of the types referred to in clauses
(a) through (i) above. For purposes hereof, the "maximum fixed repurchase
price" of any Redeemable Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Redeemable
Capital Stock as if such Redeemable Capital Stock were purchased on any date
on which Indebtedness shall be required to be determined pursuant to this
Indenture, and if such price is based upon, or measured by, the fair market
value of such Redeemable Capital Stock, such fair market value shall be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock. For purposes of this definition, the term
"Indebtedness" shall not include (i) Indebtedness of a Wholly-Owned Subsidiary
owed to and held by the Guarantor, LGII or another Wholly-Owned Subsidiary, in
each case which is not subordinate in right of payment to any Indebtedness of
such Subsidiary, except that (a) any transfer of such Indebtedness by the
Guarantor, LGII or a Wholly-Owned Subsidiary (other than to the Guarantor,
LGII or to a Wholly-Owned Subsidiary) and (b) the sale, transfer or other
disposition by the Guarantor, LGII or any Restricted Subsidiary of the
Guarantor or LGII of Capital Stock of a Wholly-Owned Subsidiary which is owed
Indebtedness of another Wholly-Owned Subsidiary such that it ceases to be a
Wholly-Owned Subsidiary of the Guarantor or LGII shall, in each case, be an
incurrence of Indebtedness by such Restricted Subsidiary subject to the other
provisions of the Indenture; and (ii) Indebtedness of the Guarantor or LGII
owed to and held by a Wholly-Owned Subsidiary of the Guarantor or LGII which
is unsecured and subordinate in right of payment to the payment and
performance of the Guarantor's or LGII's obligations under the Indenture and
the Senior Notes except that (a) any transfer of such Indebtedness by a
Wholly-Owned Subsidiary of the Guarantor or LGII (other than to another
Wholly-Owned Subsidiary of the Guarantor or LGII) and (b) the sale, transfer
or other disposition
56
<PAGE>
by the Guarantor or LGII or any Restricted Subsidiary of the Guarantor or LGII
of Capital Stock of a Wholly-Owned Subsidiary which holds Indebtedness of the
Guarantor or LGII such that it ceases to be a Wholly-Owned Subsidiary shall,
in each case, be an incurrence of Indebtedness by the Guarantor or LGII, as
the case may be, subject to the other provisions of the Indenture.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Guarantor or LGII and (ii) which, in the
judgment of the Board of Directors of the Guarantor, is otherwise independent
and qualified to perform the task for which it is to be engaged.
"Interest Rate Protection Agreement" means any arrangement with any other
person whereby, directly or indirectly, such person is entitled to receive
from time to time periodic payments calculated by applying either a floating
or a fixed rate of interest on a stated notional amount in exchange for
periodic payments made by such person calculated by applying a fixed or a
floating rate of interest on the same notional amount and shall include,
without limitation, interest rate swaps, caps, floors, collars and similar
agreements.
"Interest Rate Protection Obligations" means the obligations of any person
pursuant to an Interest Rate Protection Agreement.
"Investment" means, with respect to any person, any direct or indirect loan
or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other person. "Investments" shall
exclude extensions of trade credit by the Guarantor and its Restricted
Subsidiaries (including without limitation LGII) in the ordinary course of
business in accordance with normal trade practices of the Guarantor or such
Restricted Subsidiary, as the case may be.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any
property of any kind. A person shall be deemed to own subject to a Lien any
property which such person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Maturity Date" means, with respect to any Security, the date on which any
principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Guarantor or any Restricted Subsidiary of the Guarantor
(including without limitation LGII) net of (i) brokerage commissions and other
fees and expenses (including, without limitation, fees and expenses of legal
counsel and investment bankers) related to such Asset Sale, (ii) provisions
for all taxes payable as a result of such Asset Sale, (iii) amounts required
to be paid to any person (other than the Guarantor or any Restricted
Subsidiary of the Guarantor) owning a beneficial interest in the assets
subject to the Asset Sale and (iv) appropriate amounts to be provided by the
Guarantor or any Restricted Subsidiary of the Guarantor, as the case may be,
as a reserve required in accordance with GAAP against any liabilities
associated with such Asset Sale and retained by the Guarantor or any
Restricted Subsidiary of the Guarantor, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale, all as
reflected in an officers' certificate delivered to the Trustee.
57
<PAGE>
"Pari Passu Indebtedness" means Indebtedness of LGII or the Guarantor which
ranks pari passu in right of payment with the Notes or the Guarantees, as the
case may be.
"Permitted Holders" mean (i) Raymond Loewen and Anne Loewen, taken together
and (ii) in the case of LGII, the Guarantor.
"Permitted Indebtedness" means, without duplication, each of the following:
(a) The Notes and Indebtedness of the Guarantor evidenced by the
Guarantees;
(b) Indebtedness of the Guarantor and its Restricted Subsidiaries
(including without limitation LGII) outstanding on the Issue Date (other
than Indebtedness under the Credit Agreements);
(c) Indebtedness of the Guarantor under the Credit Agreements in an
aggregate principal amount at any one time outstanding not to exceed
$750,000,000 less the Net Proceeds of any Asset Sale that are applied to
repay, and permanently reduce the commitments under, the Credit Agreements
(as required by the terms thereof);
(d) (i) Interest Rate Protection Obligations of the Guarantor covering
Indebtedness of the Guarantor and its Restricted Subsidiaries (including
without limitation LGII); (ii) Interest Rate Protection Obligations of any
Restricted Subsidiary of the Guarantor covering Indebtedness of such
Restricted Subsidiary; provided, however, that, in the case of either
clause (i) or (ii), (x) any Indebtedness to which any such Interest Rate
Protection Obligations relate bears interest at fluctuating interest rates
and is otherwise permitted to be incurred under this covenant and (y) the
notional principal amount of any such Interest Rate Protection Obligations
does not exceed the principal amount of the Indebtedness to which such
Interest Rate Protection Obligations relate;
(e) Indebtedness under Currency Agreements; provided, however, that in
the case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Guarantor and its
Restricted Subsidiaries (including without limitation LGII) outstanding
other than as a result of fluctuations in foreign currency exchange rates
or by reason of fees, indemnities and compensation payable thereunder;
(f) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within two business days of incurrence;
(g) Indebtedness incurred in respect of performance bonds or letters of
credit in lieu thereof provided in the ordinary course of business;
(h) Indebtedness of the Guarantor and its Restricted Subsidiaries
(including without limitation LGII) represented by letters of credit for
the account of the Guarantor and its Restricted Subsidiaries in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;
(i) Indebtedness of the Guarantor and its Restricted Subsidiaries
(including without limitation LGII) in addition to that described in
clauses (a) through (h) above, in an aggregate principal amount outstanding
at any time not exceeding $5,000,000; and
(j) (i) Indebtedness of the Guarantor the proceeds of which are used
solely to refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of the Guarantor and its Restricted Subsidiaries (including
without limitation LGII) and (ii) Indebtedness of any Restricted Subsidiary
of the Guarantor the proceeds of which are used solely to refinance
(whether by amendment, renewal, extension or refunding) Indebtedness of
such Restricted Subsidiary, in each case other than the Indebtedness
refinanced, redeemed or retired as described under "Use of Proceeds" herein
or incurred under clause (c), (d), (e), (f), (g), (h), or (i) of this
covenant; provided, however, that (x) the principal amount of Indebtedness
incurred pursuant to this clause (j) (or, if such Indebtedness provides for
an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the maturity thereof, the original issue
price of such
58
<PAGE>
Indebtedness) shall not exceed the sum of the principal amount of
Indebtedness so refinanced, plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of such
Indebtedness or the amount of any premium reasonably determined by the
Board of Directors of the Guarantor as necessary to accomplish such
refinancing by means of a tender offer or privately negotiated purchase,
plus the amount of expenses in connection therewith, (y) in the case of
Indebtedness incurred by the Guarantor pursuant to this clause (j) to
refinance Pari Passu Indebtedness, such Indebtedness constitutes Pari Passu
Indebtedness.
"Permitted Investments" means any of the following: (i) Investments in any
Wholly-Owned Subsidiary of the Guarantor (including (a) LGII and (b) any
person that pursuant to such Investment becomes a Wholly-Owned Subsidiary of
the Guarantor) and any person that is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to, the Guarantor
or any Wholly-Owned Subsidiary of the Guarantor at the time such Investment is
made; (ii) Investments in Cash Equivalents; (iii) Investments in Currency
Agreements on commercially reasonable terms entered into by the Guarantor or
any of its Restricted Subsidiaries in the ordinary course of business in
connection with the operations of the business of the Guarantor or its
Restricted Subsidiaries to hedge against fluctuations in foreign exchange
rates; (iv) loans or advances to officers, employees or consultants of the
Guarantor and its Restricted Subsidiaries for travel and moving expenses in
the ordinary course of business for bona fide business purposes of the
Guarantor and its Restricted Subsidiaries; (v) other loans or advances to
officers, employees or consultants of the Guarantor and its Restricted
Subsidiaries in the ordinary course of business for bona fide business
purposes of the Guarantor and its Restricted Subsidiaries not in excess of
$10,000,000 in the aggregate at any one time outstanding; (vi) Investments in
evidences of Indebtedness, securities or other property received from another
person by the Guarantor or any of its Restricted Subsidiaries in connection
with any bankruptcy proceeding or by reason of a composition or readjustment
of debt or a reorganization of such person or as a result of foreclosure,
perfection or enforcement of any Lien in exchange for evidences of
Indebtedness, securities or other property of such person held by the
Guarantor or any of its Restricted Subsidiaries, or for other liabilities or
obligations of such other person to the Guarantor or any of its Restricted
Subsidiaries that were created, in accordance with the terms of the Indenture;
(vii) Investments in Interest Rate Protection Agreements on commercially
reasonably terms entered into by the Guarantor or any of its Restricted
Subsidiaries in the ordinary course of business in connection with the
operations of the Guarantor and its Restricted Subsidiaries to hedge against
fluctuations in interest rates; (viii) Investments of funds received by the
Guarantor or its Restricted Subsidiaries (including without limitation LGII)
in the ordinary course of business, which funds are required to be held in
trust for the benefit of others by the Guarantor or such Restricted
Subsidiary, as the case may be, and which funds do not constitute assets or
liabilities of the Guarantor or such Restricted Subsidiary; (ix) the
acquisition of insurance company assets from S.I. Acquisition Associates,
L.P., and Investments not in excess of $50,000,000 in the aggregate in other
Unrestricted Subsidiaries which are engaged in the insurance business; and (x)
Investments not in excess of $50,000,000 in persons (other than Wholly-Owned
Subsidiaries) engaged in businesses incidental to the funeral home, cemetery
and cremation businesses of the Guarantor and its Restricted Subsidiaries.
"Permitted Liens" means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims either
(a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Guarantor or any of its Restricted
Subsidiaries (including without limitation LGII) shall have set aside on
its books such reserves as may be required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, governmental
contracts, performance
59
<PAGE>
and return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default so long as such
Lien is adequately bonded and any appropriate legal proceedings which may
have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Guarantor
or any of its Restricted Subsidiaries (including without limitation LGII);
(f) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
(g) any Lien existing on any asset of any corporation at the time such
corporation becomes a Restricted Subsidiary and not created in
contemplation of such event;
(h) any Lien on any asset securing Indebtedness incurred or assumed for
the purpose of financing all or any part of the cost of acquiring or
constructing such asset; provided, that such Lien attaches to such asset
concurrently with or within 18 months after the acquisition or completion
thereof;
(i) any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Guarantor or a
Restricted Subsidiary and not created in contemplation of such event;
(j) any Lien existing on any asset prior to the acquisition thereof by
the Guarantor or a Restricted Subsidiary and not created in contemplation
of such acquisition; and
(k) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of customs duties in connection with the
importation of goods; and
(l) any extension, renewal or replacement of any Lien permitted by the
preceding clauses (g), (h), (i) or (j) hereof in respect of the same
property or assets theretofore subject to such Lien in connection with the
extension, renewal or refunding of the Indebtedness secured thereby;
provided that (1) such Lien shall attach solely to the same such property
or assets and (2) such extension, renewal or refunding of such Indebtedness
shall be without increase in the principal remaining unpaid as at the date
of such extension, renewal or refunding.
"Person" means any individual, corporation, limited liability company
partnership, joint venture, association, joint-stock company, trust,
charitable foundation, unincorporated organization, government or any agency
or political subdivision thereof.
"Preferred Securities" means, with respect to a Special Finance Subsidiary,
any securities of such Subsidiary treated for accounting purposes as an equity
security that has preferential rights to any other security of such person
with respect to dividends or redemptions or upon liquidation.
"Preferred Stock" means, with respect to any person, any Capital Stock of
such person that has preferential rights to any other Capital Stock of such
person with respect to dividends or redemptions or upon liquidation and any
Preferred Securities.
"Redeemable Capital Stock" means any shares of any class or series of
Capital Stock, that, either by the terms thereof, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise, is
or upon the happening of an event or passage of time would be, required to be
redeemed prior to the Stated Maturity with respect to the principal of any
Note or is redeemable at the option of the holder thereof at any time prior to
any such Stated Maturity Date, or is convertible into or exchangeable for debt
securities at any time prior to any such Stated Maturity.
"Restricted Subsidiary" means any Subsidiary of the Guarantor other than an
Unrestricted Subsidiary.
"Sale-Leaseback Transaction" of any person means an arrangement with any
lender or investor or to which such lender or investor is a party providing
for the leasing by such person of any property or asset of such person
60
<PAGE>
which has been or is being sold or transferred by such person after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any person to whom funds
have been or are to be advanced by such lender or investor on the security of
such property or asset. The stated maturity of such arrangement shall be the
date of the last payment of rent or any other amount due under such
arrangement prior to the first date on which such arrangement may be
terminated by the lessee without payment of a penalty.
"S&P" means Standard & Poor's Corporation, and its successors.
"Seller Financing Indebtedness" means a purchase money Indebtedness issued
to the seller of a business or other assets for, and not in excess of, the
purchase price thereof.
"Significant Subsidiary" shall mean a Restricted Subsidiary which is a
"Significant Subsidiary" as defined in Rule 1.02(v) of Regulation S-X under
the Securities Act.
"Special Finance Subsidiary" means a Restricted Subsidiary whose sole assets
are debt obligations of LGII or the Guarantor and whose sole liabilities are
Preferred Securities the proceeds from the sale of which are or have been
advanced to LGII or the Guarantor.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is
due and payable, and when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness, or any installment of
interest thereon, is due and payable.
"Subsidiary" means, with respect to any person, (i) a corporation a majority
of whose Voting Stock is at the time, directly or indirectly, owned by such
person, by one or more Subsidiaries of such person or by such person and one
or more Subsidiaries thereof and (ii) any other person (other than a
corporation), including, without limitation, a joint venture, in which such
person, one or more Subsidiaries thereof or such person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other person
performing similar functions). For purposes of this definition, any directors'
qualifying shares or investments by foreign nationals mandated by applicable
law shall be disregarded in determining the ownership of a Subsidiary.
"Unrestricted Subsidiary" means (i) First Capital Life Insurance Company of
Louisiana, National Capital Life Insurance Company or a Subsidiary that has
acquired insurance company assets from S.I. Acquisition Associates, L.P. or
(ii) a Subsidiary of the Guarantor declared by the Board of Directors of the
Guarantor to be an Unrestricted Subsidiary; provided, that no such Subsidiary
shall be declared to be an Unrestricted Subsidiary unless (x) none of its
properties or assets were owned by the Guarantor or any of its Subsidiaries
prior to the Issue Date, other than any such assets as are transferred to such
Unrestricted Subsidiary in accordance with the covenant described under "--
Certain Covenants; Limitation on Restricted Payments" above, (y) its
properties and assets, to the extent that they secure Indebtedness, secure
only Non-Recourse Indebtedness and (z) it has no Indebtedness other than Non-
Recourse Indebtedness. As used above, "Non-Recourse Indebtedness" means
Indebtedness as to which (i) neither the Guarantor nor any of its Subsidiaries
(other than the relevant Unrestricted Subsidiary or another Unrestricted
Subsidiary) (1) provides credit support (including any undertaking, agreement
or instrument which would constitute Indebtedness), (2) guarantees or is
otherwise directly or indirectly liable or (3) constitutes the lender (in each
case, other than pursuant to and in compliance with the covenant described
under "--Certain Covenants; Limitation on Restricted Payments") and (ii) no
default with respect to such Indebtedness (including any rights which the
holders thereof may have to take enforcement action against the relevant
Unrestricted Subsidiary or its assets) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Guarantor or its
Subsidiaries (other than Unrestricted Subsidiaries) to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity.
61
<PAGE>
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect a least a majority of the board of directors, managers or trustees of
any person (irrespective of whether or not, at the time, Capital Stock of any
other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Wholly-Owned Subsidiary" means (i) any Restricted Subsidiary of the
Guarantor of which 100% of the outstanding Capital Stock is owned by the
Guarantor or one or more Wholly-Owned Subsidiaries of the Guarantor or by the
Guarantor and one or more Wholly-Owned Subsidiaries of the Guarantor,
including LGII, or (ii) any Subsidiary, at least 66 2/3% of the outstanding
voting securities of which, and all of the outstanding shares entitled to
receive dividends or other distributions of which, shall at the time be owned
or controlled, directly or indirectly, by the Guarantor or one or more Wholly-
Owned Subsidiaries of the Guarantor or by the Guarantor and one or more
Wholly-Owned Subsidiaries of the Guarantor, including LGII. For purposes of
this definition, any directors' qualifying shares or investments by foreign
nationals mandated by applicable law shall be disregarded in determining the
ownership of a Subsidiary.
62
<PAGE>
DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS
On May 31, 1996, LGII entered into a $750 million secured revolving credit
facility with a syndicate of banks. The New Bank Facility matures in May 2001.
Amounts borrowed under the New Bank Facility accrue interest at certain
alternative rates selected by LGII. As at July 26, 1996, the amount outstanding
under the New Bank Facility was $237.1 million, and such outstanding amount
bore interest at 6.71% per annum.
Loewen has a Cdn.$50.0 million revolving credit facility that matures in July
1999 (the "Canadian Revolver"), which was amended in July 1996 to modify
certain covenants to parallel the New Bank Facility. As at December 31, 1995
and July 26, 1996, Loewen had borrowed Cdn.$43.0 million and Cdn.$38.6 million,
respectively, under the Canadian Revolver. A subsidiary of Loewen has a $107.6
million secured term credit facility implemented in connection with the 1994
Management Equity Investment Plan that will terminate in July 2000 (the "MEIP
Loan"), which also was amended in July 1996 to modify certain covenants to
parallel the New Bank Facility. Loewen has a Cdn.$35.0 million five-year term
credit facility with a bank syndicate that will terminate in January 2000 (the
"Canadian Term Loan").
As at July 26, 1996, LGII and Loewen had outstanding an aggregate of $246.6
million of senior notes (the "Senior Guaranteed Notes"). The Senior Guaranteed
Notes, which consist of five series issued in 1991, 1993 and 1994, bear
interest at rates ranging from 6.49% to 9.93%, and have terms of seven to ten
years. Each series of Senior Guaranteed Notes issued by LGII is guaranteed by
Loewen, and each series of Senior Guaranteed Notes issued by Loewen is
guaranteed by LGII.
On May 31, 1996, Loewen, LGII and their senior lenders entered into a
collateral trust arrangement pursuant to which the senior lenders share the
Collateral on a pari passu basis. The Collateral includes a pledge for the
benefit of the senior lenders of (i) the shares held by Loewen of substantially
all of the subsidiaries in which Loewen directly or indirectly holds more than
a 50% voting or economic interest and (ii) all of the financial assets of LGII
(LGII does not have material assets other than financial assets), and is held
by a trustee for the equal and ratable benefit of the various holders of the
Pari Passu Indebtedness, including the lenders under the New Bank Facility, the
Canadian Revolver, the MEIP Loan and the Canadian Term Loan, as well as the
holders of the Senior Guaranteed Notes and the Notes.
The New Bank Facility and the credit facilities that comprise the Pari Passu
Indebtedness contain various covenants, including covenants restricting payment
of dividends on Common and Preferred Shares, limiting redemption or repurchase
of shares, limiting disposition of assets, limiting the amount of additional
debt, limiting the amount of capital expenditures and requiring the maintenance
of specified financial ratios. As at June 30, 1996, Loewen was in compliance
with all such covenants that were in effect at that time.
63
<PAGE>
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission set forth in no
action letters issued to third-parties, LGII and Loewen believe that, except
as described below, Exchange Notes issued pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by respective holders
thereof without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that (i) such Exchange
Notes are acquired in the ordinary course of such holder's business and (ii)
such holder does not intend to participate in, has no arrangement or
understanding with any person to participate in, and is not engaged in and
does not intend to engage in, a distribution of the Exchange Notes. A holder
of Outstanding Notes that is an "affiliate" of LGII or Loewen within the
meaning of Rule 405 under the Securities Act or that is a broker-dealer that
purchased Outstanding Notes from LGII to resell pursuant to an exemption from
registration (a) cannot rely on such interpretations by the staff of the
Commission, (b) will not be permitted or entitled to tender such Outstanding
Notes in the Exchange Offer and (c) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or transfer of such Outstanding Notes. Any holder who tenders Outstanding
Notes in the Exchange Offer with the intention or for the purpose of
participating in a distribution of the Exchange Notes cannot rely on such
interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Unless an exemption from
registration is otherwise available, any such resale transaction should be
covered by an effective registration statement containing the selling security
holders information required by Item 507 of Regulation S-K under the
Securities Act. To date, the staff of the Commission has taken the position
that a broken-dealer that has acquired securities in exchange for securities
that were acquired by such broker-dealer as a result of market-making
activities or other trading activities (a "Participating Broker-Dealer") may
fulfill its prospectus delivery requirements with the prospectus contained in
an exchange offer registration statement. Pursuant to the Registration Rights
Agreement, LGII has agreed to permit Participating Broker-Dealers and other
persons, if any, subject to similar prospectus delivery requirements to use
this Prospectus in connection with the resale of such Exchange Notes. LGII and
Loewen have agreed that, for a period of 180 days after the Expiration Date,
they will make this Prospectus, and any amendment or supplement to this
Prospectus, available to any broker-dealer that requests such documents in the
Letter of Transmittal.
Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make
certain representations to LGII as set forth in "The Exchange Offer--
Procedures for Tendering." In addition, each holder who is a broker-dealer and
who receives Exchange Notes for its own account in exchange for Outstanding
Notes that were acquired by it as a result of market-making activities or
other trading activities, will be required to acknowledge that it will deliver
a prospectus in connection with any resale by its of such Exchange Notes.
Neither LGII nor Loewen will receive any proceeds from the issuance of the
Exchange Notes. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange
Notes that were received by it for its own account in connection with the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act, and any profit on any such resale of Exchange Notes and
any commissions or concessions received by any such persons may be deemed to
be "underwriting compensation" under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
LGII has agreed to pay all expenses incidental to the Exchange Offer other
than commissions and concessions of any brokers or dealers and will indemnify
holders of the Outstanding Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Registration Rights Agreement.
64
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is the opinion of Thelen, Marrin, Johnson & Bridges, United
States counsel to LGII and Loewen, as to the material United States federal
income tax consequences generally applicable to a U.S. Holder (as defined)
that exchanges Outstanding Notes for Exchange Notes in the Exchange Offer and
that holds the Outstanding Notes, and will hold the Exchange Notes, as capital
assets. The opinion also describes the principal United States federal income
tax consequences expected to result from the holding of Exchange Notes by
certain Non-U.S. Holders (as defined).
The opinion reflects counsel's interpretation of the provisions of the
United States Internal Revenue Code of 1986, as amended (the "Tax Code"),
applicable Treasury regulations thereunder, judicial authority and
administrative rulings and practices now in effect, as applied to the proposed
transactions. There can be no assurance that the Internal Revenue Service will
not take a different position concerning the consequences of the Exchange
Offer or the ownership or disposition of Exchange Notes or that any such
position would not be sustained. Thus, future legislative, judicial or
administrative changes or interpretations, which may or may not be
retroactive, could produce United States tax consequences different from those
expressed in counsel's opinion. The opinion does not discuss all aspects of
federal income taxation that may be relevant to a particular holder in light
of the holder's particular investment circumstances, or to certain types of
holders subject to special treatment under the federal income tax laws (for
example, life insurance companies, tax-exempt entities and dealers in
securities) and does not discuss any aspect of state, local or foreign tax
laws.
As used in this opinion, the term "U.S. Holder" means a beneficial owner of
Notes that, for United States federal income tax purposes, is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, or (iii) an estate or trust the income of which
is subject to United States federal income taxation regardless of its source.
The term "Non-U.S. Holder" means a beneficial owner of Notes that, for United
States federal income tax purposes, is not a U.S. Holder.
TAX CONSEQUENCES TO U.S. HOLDERS
Exchange Offer
The exchange of the Outstanding Notes for Exchange Notes pursuant to the
Exchange Offer will not be treated as an "exchange" because the Exchange Notes
will not be considered to differ materially in kind or extent from the
Outstanding Notes. Rather, the Exchange Notes received by a holder of the
Outstanding Notes will be treated as a continuation of the Outstanding Notes
in the hands of such holder. As a result, there will be no federal income tax
consequences to holders exchanging the Outstanding Notes for the Exchange
Notes pursuant to the Exchange Offer.
Interest
Except as provided below in respect of certain Additional Interest (as
described below), a holder of a Note will be required to report stated
interest on the Note as interest income in accordance with the holder's method
of accounting for tax purposes.
Under the tax rules relating to original issue discount ("OID"), holders of
debt instruments issued at a discount that exceeds a nominal amount may be
required to recognize taxable interest income prior to the receipt of cash.
The Outstanding Notes were issued without taxable OID. The Treasury
Regulations relating to OID permit the accrual of OID to be determined, in the
case of a debt instrument with alternative payment schedules, based upon the
payment schedule most likely to occur, as determined by the issuer of the
debt, so long as the timing and amounts of each payment schedule are known as
of the issue date. Under certain circumstances, including failure of the
Company to register the Exchange Notes on a timely basis pursuant to an
effective
65
<PAGE>
registration statement, additional interest (the "Additional Interest")
accrues on the Outstanding Notes in the manner described in "Description of
Exchange Notes--Registration Rights Agreement." The possibility of Additional
Interest resulted in an alternative payment schedule. The Company did not
treat the possibility of Additional Interest as affecting the computation of
OID or the yield to maturity. When holders of Outstanding Notes became
entitled to Additional Interest, then, solely for purposes of determining the
accrual of OID, the yield to maturity on the Notes was re-determined by
treating the Outstanding Notes as reissued on the date that it was determined
that such Additional Interest was required to be paid, for an amount equal to
their adjusted issue price on such date. The payment of Additional Interest
during the period from July 19, 1996 to the effective date of the Registration
Statement does not produce taxable OID with respect to the Outstanding Notes.
The foregoing positions taken by the Company will be binding on all holders,
unless a holder explicitly discloses that its determination of the yield to
maturity is different from the Company's determination on a statement attached
to the holder's timely filed federal income tax return for the year that
includes the acquisition date of the Notes.
Tax Basis in Outstanding Notes and Exchange Notes
A holder's tax basis in a Note will be the holder's purchase price for the
Note, increased for OID, if any, previously included in income by the holder
with respect to the Notes and not yet paid. If a holder of an Outstanding Note
exchanges the Outstanding Note for an Exchange Note pursuant to the Exchange
Offer, the tax basis of the Exchange Note immediately after such exchange
should equal the holder's tax basis in the Outstanding Note immediately prior
to the Exchange.
Disposition of Outstanding Notes or Exchange Notes
The sale, exchange, redemption or other disposition of a Note will be a
taxable event, except in the case of an exchange pursuant to the Exchange
Offer (see the above discussion), or certain exchanges in which gain or loss
is not recognized under the Code. A holder will recognize gain or loss equal
to the difference between (i) the amount of cash (plus the fair market value
of any property) received upon such sale, exchange, redemption or other
taxable disposition of the Outstanding Note or the Exchange Note (except to
the extent attributable to accrued interest) and (ii) the holder's adjusted
tax basis in such Outstanding Note or Exchange Note. Such gain or loss will be
capital gain or loss, and will be long term if the Note has been held for more
than one year at the time of the sale or other disposition. The holding period
of an Exchange Note will include the holding period of the Outstanding Note
surrendered in exchange therefor.
Purchasers of Notes at Other than Original Issuance Price
The foregoing does not discuss special rules that may affect the treatment
of purchasers that acquire Notes other than at par, including those provisions
of the Internal Revenue Code relating to the treatment of "market discount,"
"bond premium" and "amortizable bond premium." Any such purchaser should
consult its tax advisor as to the consequences to it of the acquisition,
ownership, and disposition of Notes.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
In the case of a Non-U.S. Holder, such Non-U.S. Holder will not be subject
to U.S. federal income tax, including U.S. withholding tax, on interest paid
or OID (if any) on the Notes under the "portfolio interest" exception,
provided that (i) the Non-U.S. Holder does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of the
Company entitled to vote, (ii) the Non-U.S. Holder is not (a) a bank receiving
interest or OID pursuant to a loan agreement entered into in the ordinary
course of its trade or business or (b) a controlled foreign corporation that
is related to the Company through stock ownership, (iii) such interest or OID
is not effectively connected with a United States trade or business, and (iv)
either (a) the beneficial owner of the Notes certifies to the Company or its
agent, under penalties of perjury, that the beneficial owner is a foreign
person and provides a completed IRS Form W-8 ("Certificate of Foreign Status")
or (b) a securities clearing organization, bank or other financial institution
which holds customers' securities in the ordinary course of its trade or
business (a "financial institution") and holds the Notes, certifies to the
Company
66
<PAGE>
or its agency, under penalties of perjury, that it has received Form W-8 from
the beneficial owner or that it has received from another financial
institution a Form W-8 and furnishes the payor with a copy thereof. If any of
the situations described in proviso (i), (ii) or (iv) of the preceding
sentence do not exist, then, except as described below for effectively
connected income, interest paid and OID, if any, on the Notes would be subject
to U.S. withholding tax at a 30% rate (or lower tax treaty rate as evidenced
by an IRS Form 1001 (Ownership Exemption or Reduced Rate Certificate)). If the
income on the Notes is effectively connected with a Non-U.S. Holder's conduct
of a trade or business within the United States, then, absent tax treaty
protection, the Non-U.S. Holder will be subject to U.S. federal income tax on
such income in essentially the same manner as a United States person and, in
the case of a foreign corporation, may also be subject to the U.S. branch
profits tax.
On April 15, 1996, the Internal Revenue Service issued proposed Treasury
regulations setting forth revised procedures for claiming the benefit of the
portfolio interest exemption and treaty withholding rate reductions. If these
rules, which are proposed to take effect in 1998, are adopted in their current
form, non-U.S. holders of the Notes could continue to claim the benefit of the
portfolio debt exemption by filing a Form W-8 with the issuer. Form W-8 would
also be used to claim the benefit of applicable tax treaty provisions. In
addition, the existing procedures under which financial institutions are
permitted to provide certifications of foreign status on behalf of their non-
U.S. customers would be continued and expanded.
BACKUP WITHHOLDING
Unless a holder provides its correct taxpayer identification number
(employer identification number or social security number) to the Company and
certifies that such number is correct, under the federal income tax backup
withholding rules, 31% of (i) the interest paid on the Notes, and (ii)
proceeds of sale of the Notes, must be withheld and remitted to the United
States Treasury. However, certain holders (including, among others, certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. For a foreign individual to qualify as an exempt foreign
recipient, that holder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt foreign status. A Form W-8
filed to claim the benefit of the portfolio interest exception is generally
sufficient to prevent backup withholding in the case of an exempt foreign
recipient.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to withholding will be
reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained from the IRS.
CERTAIN CANADIAN FEDERAL TAX CONSIDERATIONS
The following is the opinion of Russell & DuMoulin, Canadian counsel to LGII
and Loewen, as to the material Canadian federal income tax consequences
generally applicable to an individual who is resident in the United States and
not in Canada who exchanges Outstanding Notes for Exchange Notes pursuant to
the Exchange Offer.
This opinion is based upon the current provisions of the Income Tax Act of
Canada (the "Tax Act"), the regulations thereunder and on counsel's
understanding of the current administrative practices of Revenue Canada
Customs, Excise and Taxation. The provisions of the Tax Act are subject to
income tax treaties to which Canada is a party, including the Canada-U.S.
Income Tax Convention (1980) (the "Tax Treaty"). This discussion is general
only and is not a substitute for independent advice from each Note holder's
own tax advisor.
There will be no Canadian income tax consequences to a holder of Outstanding
Notes in connection with the exchange of the Outstanding Notes for Exchange
Notes pursuant to the Exchange Offer.
Interest income paid by LGII will not subject holders of Exchange Notes to
any Canadian income taxes or withholding taxes. However, any payments made by
Loewen to or for the benefit of the holders of Exchange
67
<PAGE>
Notes pursuant to the Guarantees will be subject to Canadian withholding tax
to the extent such payments represent payments made as, on account or in lieu
of payment of interest. Under the Tax Act and the Tax Treaty, the rate of such
Canadian withholding tax would be 15%.
LEGAL MATTERS
The validity of the Exchange Notes, certain matters of New York law relating
to the Guarantees and certain statements as to United States taxation in the
Prospectus will be passed upon for LGII and Loewen by Thelen, Marrin, Johnson
& Bridges, San Francisco, California. The validity of the Guarantees, certain
statements as to Canadian taxation and as to enforceability of certain civil
liabilities against the Guarantor in the Prospectus will be passed upon for
Loewen by Russell & DuMoulin, Vancouver, Canada.
EXPERTS
The annual consolidated financial statements of the Company incorporated by
reference in this Prospectus have been audited by KPMG, Chartered Accountants,
for the periods indicated in its report thereon, which is incorporated herein
by reference. Such financial statements have been so incorporated in reliance
on such report given on the authority of KPMG as experts in accounting and
auditing.
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES AGAINST GUARANTOR
Loewen is a corporation organized under and governed by the laws of the
Province of British Columbia, Canada. Certain of its directors, controlling
persons, and officers are residents of Canada, and all or a portion of the
assets of such persons and of Loewen are located outside the United States. As
a result, it may be difficult or impossible for United States holders of the
Notes seeking to enforce the Guarantor's obligations under the Guarantees to
effect service within the United States upon Loewen (although it may be
possible to effect service upon direct or indirect United States subsidiaries
of Loewen) and those directors or officers who are not residents of the United
States, or to realize in the United States upon judgments of courts of the
United States predicated upon the civil liability of such persons under the
Securities Act or the Exchange Act, to the extent such judgments exceed such
person's United States assets. Loewen has been advised by Russell & DuMoulin,
its Canadian counsel, that there is doubt as to the enforceability in Canada
against any of these persons, in original actions or in actions for
enforcement of judgments of United States courts, of liabilities predicated
solely on the Securities Act or the Exchange Act.
68
<PAGE>
FINANCIAL STATEMENTS OF CERTAIN SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
Audited Consolidated Financial Statements
Report of KPMG, Chartered Accountants................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995............ F-3
Consolidated Statements of Operations and Retained Earnings for the
years ended December 31, 1994 and 1995................................. F-4
Consolidated Statements of Cash Flows for the years ended December 31,
1994 and 1995.......................................................... F-5
Notes to Consolidated Financial Statements.............................. F-6
Unaudited Interim Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1995 and June 30, 1996
(Unaudited)............................................................ F-13
Consolidated Statements of Operations and Retained Earnings (Unaudited)
for the three months ended June 30, 1995 and 1996, and for the six
months ended June 30, 1995 and 1996.................................... F-14
Consolidated Statements of Cash Flows (Unaudited) for the six months
ended June 30, 1995 and 1996........................................... F-15
Notes to Interim Financial Statements (Unaudited)....................... F-16
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
Audited Financial Statements
Report of Peat Marwick, Chartered Accountants........................... F-17
Balance Sheets as of December 31, 1994 and 1995......................... F-18
Statements of Income and Retained Earnings for the eight month period
ended December 31, 1994 and the year ended December 31, 1995........... F-19
Statements of Cash Flows for the eight month period ended December 31,
1994 and the year ended December 31, 1995.............................. F-20
Notes to Financial Statements........................................... F-21
Unaudited Interim Financial Statements
Balance Sheets as of December 31, 1995 and June 30, 1996 (Unaudited).... F-23
Statements of Income and Retained Earnings (Unaudited) for the three
months ended June 30, 1995 and 1996, and for the six months ended June
30, 1995 and 1996...................................................... F-24
Statements of Cash Flows (Unaudited) for the six months ended June 30,
1995 and 1996.......................................................... F-25
Notes to Interim Financial Statements (Unaudited)....................... F-26
</TABLE>
Financial statements of Neweol Investments Ltd. and of Loewen Finance
(Wyoming) Limited Liability Company are included in this Prospectus because
the outstanding shares of each of such companies constitute a "substantial
portion" of the Collateral for the Notes within the meaning of Rule 3-10 of
Regulation S-X.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholder
Neweol Investments Ltd.
We have audited the consolidated balance sheets of Neweol Investments Ltd.,
as defined in Note 1 to the financial statements, as at December 31, 1995 and
1994 and the consolidated statements of operations and retained earnings and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December
31, 1995 and 1994 and the results of its operations and its cash flows for the
years then ended, in accordance with generally accepted accounting principles
in the United States. As required by the Company Act of British Columbia, we
report that, in our opinion, these principles have been applied on a
consistent basis.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
August 15, 1996
F-2
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and term deposits............................. $ 81 $ 58
Receivables from affiliates........................ -- 117
Notes receivable from affiliates................... 24,831 7,595
-------- --------
24,912 7,770
Investment........................................... 35,717 26,250
Investments in affiliates............................ 6,367 9,464
Notes receivable from affiliates..................... 405,650 220,155
Other assets......................................... 291 94
-------- --------
$472,937 $263,733
======== ========
LIABILITIES AND SHAREHOLDER EQUITY
Current liabilities
Accounts payable and accrued liabilities........... $ 5,402 $ 1,239
Notes payable to affiliate......................... 4,275 --
-------- --------
9,677 1,239
Due to parent company................................ 168,982 157,575
Minority interest.................................... 8,508 4,250
Redeemable preferred shares
$1 Canadian par value, 500,000,000 shares
authorized, 77,200,000 shares issued and
outstanding (1994--nil)........................... 56,598 --
Shareholder equity
Capital stock, no par value, 1,000,000 shares
authorized, 80,401 shares issued and outstanding
(1994--301)....................................... 214,539 88,177
Retained earnings.................................. 10,415 6,484
Foreign exchange adjustment........................ 4,218 6,008
-------- --------
229,172 100,669
-------- --------
$472,937 $263,733
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994
------------ -----------
<S> <C> <C>
Revenue from affiliate
Interest income..................................... $ 33,129 $ 7,599
Other revenue....................................... 1,201 471
------------ -----------
34,330 8,070
Expenses
General and administrative.......................... 739 218
------------ -----------
Earnings from operations.............................. 33,591 7,852
Equity in losses and earnings of investees............ 19,444 --
Minority interest..................................... 564 130
------------ -----------
Earnings before income taxes.......................... 13,583 7,722
Current income tax expense............................ 5,377 1,238
------------ -----------
Net earnings.......................................... $ 8,206 $ 6,484
Dividends on redeemable preferred shares.............. 4,275 --
------------ -----------
Net earnings available to Common shareholder.......... 3,931 6,484
Retained earnings, beginning of year.................. 6,484 --
------------ -----------
Retained earnings, end of year........................ $ 10,415 $ 6,484
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED STATEMENTS OF CASH FLOWS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994
----------- -----------
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings...................................... $ 8,206 $ 6,484
Items not affecting cash
Minority interest............................... 564 130
Equity in losses and earnings of investees...... 19,444 --
Net changes in other non-cash balances............ 7,779 5,159
----------- -----------
35,993 11,773
----------- -----------
Investments
Loans to affiliate................................ (216,886) (213,595)
Financing
Advances from Parent company...................... 180,916 201,880
----------- -----------
Increase in cash and cash equivalents during the
year............................................... 23 58
Cash and cash equivalents, beginning of year........ 58 --
----------- -----------
Cash and cash equivalents, end of year.............. $ 81 $ 58
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE
AMOUNTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Neweol Investments Ltd. ("Neweol") was incorporated on November 6, 1992
under the laws of the Province of British Columbia as a wholly owned
subsidiary of The Loewen Group Inc. ("Parent company"). The principal
activities of the company, which commenced operations in 1994, are to provide
financing to other subsidiaries of the Parent company ("affiliates") and to
hold investments in affiliated and non-affiliated companies.
The consolidated financial statements have been prepared in United States
dollars in accordance with accounting principles generally accepted in the
United States. The consolidated financial statements require the use of
management estimates.
Basis of consolidation
The accompanying consolidated financial statements have been prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission and for inclusion in the registration statement on Form S-
4 of Loewen Group International, Inc. ("LGII") and the Parent company.
These consolidated financial statements include Neweol's ownership interests
in its majority-owned consolidated subsidiaries, Loewen Finance (Wyoming)
Limited Liability Company ("LFW"), Loewen Trading Corporation, Eagle Finance
Associates Limited, and 1096952 Ontario Limited, and its equity investment in
its affiliate LGII (collectively the "Company"). These interests constitute
the ongoing operations of Neweol subsequent to a reorganization that occurred
on July 19 and August 13, 1996. These consolidated financial statements
exclude certain subsidiaries of Neweol which were transferred to an affiliate
effective July 19 and August 13, 1996 and accordingly are not intended to be a
complete presentation of the historical consolidated financial position,
results of operations, and cash flows of Neweol. To the extent that Neweol's
interests in those subsidiaries were not transferred as a result of the
reorganization, such interests are reflected in the accompanying financial
statements.
All significant intercompany balances and transactions have been eliminated
from the consolidated financial statements.
Neweol has no operations independent of those carried on by its
subsidiaries. Neweol is dependent on future remittances from its subsidiaries
or capital contributions from its Parent company to satisfy its obligations,
all of which are to affiliates.
Investments
The Company initially records investments acquired from third parties at
cost and investments acquired from entities under common control at the
transferor's carrying value. The Company follows the equity method of
accounting for investments where it has significant influence over the
investee. The excess of the Company's carrying value of the investment as
reported on the balance sheet and the underlying equity in the net assets of
Arbor Memorial Services Inc. ("Arbor") is amortized over the estimated
weighted average useful lives of the underlying assets and included in Equity
in losses and earnings of investees in the statements of operations and
retained earnings and cash flows.
Accounting for income taxes
The Company follows the asset and liability method of accounting for income
taxes. Deferred income taxes are recognized for the future tax effects of
temporary differences between the carrying amounts of assets and
F-6
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
liabilities for financial reporting purposes and the amounts used for income
tax purposes. Deferred tax assets and liabilities are measured using enacted
rates expected to apply to taxable income in the years in which these
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Foreign currency
The assets and liabilities of the Canadian operations have been translated
into United States dollars at the rates of exchange as at the balance sheet
dates, and revenues and expenses are translated at the average rates of
exchange for the periods of operation. Unrealized gains and losses arising
from the translation are deferred and are classified as "Foreign exchange
adjustment" within shareholder equity.
NOTE 2. NOTES RECEIVABLE FROM AFFILIATE
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Notes receivable from affiliate comprise the following:
Current
Revolving credit loans..................................... $ 24,831 $ 7,595
-------- --------
Long-term
Term loans due in 1999..................................... $206,000 $206,000
Term loans due in 2000..................................... 199,650 --
Other...................................................... -- 14,155
-------- --------
$405,650 $220,155
======== ========
</TABLE>
The loans have been advanced to LGII and are unsecured. The revolving credit
loans are due on demand. Interest is earned at rates ranging from 9.06% to
10.01% per annum on the term loans and at U.S. prime plus 2% on the revolving
credit loans. The total amount available under the revolving credit facility
is $30,000,000. The other notes receivable represent receivables from
subsidiaries that were transferred during the July 19, 1996 reorganization.
NOTE 3. INVESTMENT
The Company holds 680,225 Class A voting shares (1994--680,225) of Arbor
representing 26.93% (market value $11,220,721) and 2,057,752 Class B non-
voting shares (1994--1,563,350) representing 26.63% (market value
$33,189,548). This investment has been accounted for by the equity method
commencing January 1, 1995, the date the Company determined it had significant
influence over Arbor. Arbor's fiscal year end is October 31, 1995. Accordingly
the Company records its equity in the earnings of Arbor on a two month lag.
The Company's equity in the earnings of Arbor amounted to $1,391,000 in 1995.
Arbor is a Canadian funeral services company and at October 31, 1995, Arbor
had assets and liabilities of $287,617,000 and $188,837,000 respectively
(1994--$239,434,000 and $167,932,000 respectively).
NOTE 4. INVESTMENTS IN AFFILIATES
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Investments in affiliates
Investment in LGII.............................................. $6,367 $ --
Other........................................................... -- 9,464
------ ------
$6,367 $9,464
====== ======
</TABLE>
F-7
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On July 13, 1995, the Company acquired a 15% interest in LGII from the
Parent company. LGII serves as the holding company for the Parent company's
United States funeral, cemetery and insurance operations. This investment was
recorded at the Parent company's carrying value of approximately $27,202,000.
The Company's equity in the loss of LGII amounted to $20,834,850 for the
period ended December 31, 1995. At December 31, 1995, LGII had assets and
liabilities of approximately $1,960,714,000 and $1,918,264,000 respectively.
LGII is subject to material legal proceedings and contingencies, as
described below:
Class Action Lawsuits
On November 4, 1995, a class action lawsuit claiming violations of Federal
securities laws was filed on behalf of a class of purchasers of securities
against the Parent company and five officers (four of whom are directors) in
the United States District Court for the Eastern District of Pennsylvania.
LGII, Loewen Group Capital, L.P. ("LGCLP") and the lead underwriters
("Underwriters") of the 1994 offering of Monthly Income Preferred Securities
by LGII and LGCLP were subsequently added as defendants. On November 7, 1995,
a class action lawsuit was filed on behalf of a class of purchasers of Common
Shares against the Parent company and the same individual defendants in the
United States District Court for the Southern District of Mississippi alleging
Federal securities law violations and related common law claims. On December
1, 1995, a class action lawsuit was filed on behalf of a class of purchasers
of the Parent company's and LGCLP's securities against the Parent company,
LGII, LGCLP and the same individual defendants in the United States District
Court for the Eastern District of Pennsylvania.
All of the Class Actions (collectively, the "Class Actions") allege that the
defendants failed to disclose the anticipated liability in connection with
certain litigation with J.J. O'Keefe, Sr., Gulf National Insurance Company and
certain affiliates (collectively, "Gulf National"). The Pennsylvania Class
Actions allege also failure to disclose the potential liability in connection
with certain litigation with Provident American Corporation and a subsidiary
(together, "Provident"). The lawsuits with Gulf National and Provident were
settled during the first quarter of 1996.
In each of the Class Actions, the plaintiffs seek compensatory money damages
in an unspecified amount, together with attorneys fees, expert fees and other
costs and disbursements. In addition, the Mississippi Class Action seeks
unspecified punitive damages. The longest class period specified is from April
16, 1993 to November 1, 1995. Pursuant to a Transfer Order filed April 15,
1996 by the Judicial Panel on Multidistrict Litigation, the Mississippi Class
Action was transferred to the Eastern District of Pennsylvania for
consolidation of pretrial proceedings with the two Pennsylvania Class Actions.
The plaintiffs are expected to file a consolidated amended complaint on or
before August 26, 1996. LGII expects that the claims in the consolidated
complaint will not differ substantially from the claims in each of the Class
Actions.
On June 11, 1996 all claims against the Underwriters were dismissed without
prejudice, by agreement of the parties. Prior to the dismissal, the
Underwriters had indicated to the Parent company and LGII that they would seek
indemnity from the Parent company and LGII for costs incurred. LGII has agreed
to pay the Underwriters costs through the date of dismissal. LGII expects that
the Underwriters will seek further indemnity if any of the claims against the
Underwriters are reinstated.
The Parent company referred the claims to its insurance carrier under its
directors and officers insurance policy. On February 9, 1996 the carrier
denied coverage of the claim. The Parent company believes that such denial was
improper. On March 21, 1996, the Parent company commenced an action in British
Columbia Supreme Court seeking a declaration that the policy covers
indemnification with respect to the Class Actions. As at August 2, 1996, the
Supreme Court had not ruled on the action.
F-8
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
LGII cannot predict at this time the extent to which any settlement or
litigation that may result from these claims will ultimately be covered by
insurance, if at all. LGII has determined that it is not possible to predict
the final outcome of these legal proceedings and that it is not possible to
establish a reasonable estimate of possible damages, if any, or reasonably to
estimate the range of possible damages that may be awarded to the plaintiffs.
Accordingly, no provision has been made in LGII's financial statements.
Roe, et al., Palladino et al., O'Sullivan and Schneider
In October 1995, Roe and 22 other families filed a lawsuit against LGII and
Osiris Holding Corporation in Florida Circuit Court in St. Petersburg. In
early April 1996, a related lawsuit, Palladino et al., was filed by eight
families against LGII and Osiris in Florida Circuit Court in St. Petersburg,
and was assigned to the same judge handling the Roe matter. In June 1996, the
Roe and Palladino lawsuits were consolidated and amended to include a total of
90 families (the "Consolidated Complaint") and in July 1996, the Palladino
lawsuit was dismissed. The gravamen of the Consolidated Complaint is that in
July 1992, employees of the Royal Palm Cemetery facility who were installing a
sprinkler line disturbed the remains of infants in one section of the
cemetery. The Consolidated complaint also names the Parent company as a
defendant (on an alter ego theory) and includes claims for negligent retention
of certain cemetery employees. Each plaintiff identified in the Consolidated
Complaint is seeking damages in excess of $15,000, but the Consolidated
Complaint alleges aggregate damages in excess of $40 million. In addition, in
May 1996, Sean M. O'Sullivan filed a lawsuit against Osiris and LGII and in
July 1996, Karen Schneider filed a lawsuit against Osiris and LGII. The
factual allegations underlying the O'Sullivan and Schneider complaint are
identical to those alleged in the Consolidated Complaint.
At the time the remains allegedly were disturbed, the Royal Palm Cemetery
was owned by Osiris. Osiris was acquired by LGII in March 1995. The insurance
carrier for Osiris has assumed the defense of these claims, subject to a
reservation of rights. The policy limit is $11,000,000. No provision with
respect to these lawsuits has been made in LGII's financial statements.
Rojas et al.
On February 22, 1995, Juan Rivera Rojas, Leyda Rivera Vega, the Conjugal
Partnership constituted between them, and Carlos Rivera Bustamente instituted
a legal action against the Parent Company, LGII and a subsidiary in the United
States District Court for the District of Puerto Rico. The complaint alleges
that the defendants breached a contract and ancillary agreements with the
plaintiffs relating to the purchase of funeral homes and cemeteries, and
committed related torts. The plaintiffs seek compensatory damages of
$12,500,000, and unspecified punitive damages (although LGII is advised by
counsel that there is no entitlement to punitive damages under Puerto Rican
law). LGII has filed a motion to dismiss the complaint on the grounds of
failure to join an indispensable party. In addition, LGII claims it has
suffered damages far in excess of the amount claimed by the plaintiffs as a
result of breach of contract and related torts on the part of the plaintiffs.
A subsidiary of LGII has filed a complaint seeking damages in excess of
$19,000,000 from the plaintiffs in the General Court of Justice of the
Commonwealth of Puerto Rico. LGII has determined that it is not possible to
predict the final outcome of these legal proceedings and that it is not
possible to establish a reasonable estimate of possible damages, if any, or
reasonably to estimate the range of possible damages that may be awarded to
the plaintiffs. Accordingly, no provision has been made in LGII's financial
statements.
Esner Estate
On February 1, 1995, Stuart B. Esner and Sandra Esner (the "Executors") as
co-executors for the Estate of Gerald F. Esner (the "Esner Estate") filed an
action in the Court of Common Pleas in Bucks County, Pennsylvania against
Osiris and a law firm that previously represented Osiris and its principal
shareholders, Gerald F. Esner, Lawrence Miller and William R. Shane. Messrs.
Miller and Shane currently are executive
F-9
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
officers of the Parent Company and LGII. The complaint alleged that Osiris
breached the terms of a Second Amended and Restated Shareholders' Agreement
among Messrs. Esner, Miller and Shane (the "Shareholders' Agreement") by
attempting to repurchase shares of Osiris held by the Esner Estate (the "Esner
Shares") without complying with the terms of the Shareholders' Agreement, and
that the law firm breached its fiduciary duty and committed malpractice in
connection with the drafting of the Shareholders' Agreement and its
representation of Esner and Osiris. The Executors asked the Court (i) to have
the value of Osiris reappraised pursuant to the terms of the Shareholders'
Agreement and (ii) to require Osiris to repurchase the Esner Shares pursuant
to a new appraisal and the alleged terms of the Shareholders' Agreement or,
alternatively, to pay the Esner Estate the fair value of the Esner Shares as
determined by the new appraisal.
On March 17, 1995, LGII purchased all of the issued and outstanding shares
of Osiris, including the Esner Shares. In connection with the purchase, LGII
entered into an indemnification agreement whereby Messrs. Miller and Shane
agreed to indemnify and hold LGII harmless with respect to any claims,
liabilities, losses and expenses, including reasonable attorneys' fees, in
connection with or arising from the Esner Estate litigation.
On April 9, 1996, the Executors filed a second complaint, which names
Messrs. Miller and Shane and LGII as defendants. The second complaint alleges
breach of contract, fraud and related claims against Messrs. Miller and Shane,
and that LGII joined in a civil conspiracy by acquiring Osiris. The Executors
request compensatory damages of $24,300,000 against the various defendants,
and seek punitive damages from Messrs. Miller and Shane. The two cases have
been consolidated by the Court. LGII has moved for a dismissal of the claims
against it for failure to state a claim upon which relief can be granted. That
motion has not yet been ruled upon. No provision with respect to these
lawsuits has been made in LGII's financial statements.
NOTE 5. INCOME TAXES
All income tax expense in 1995 and 1994 represents income taxes payable
outside Canada. Income tax differed from amounts computed by applying Canadian
federal and provincial income tax rates of 45.5% on earnings before income
taxes as a result of the following:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Expected income tax expense.................................. $ 6,180 $ 3,514
Foreign income taxed at lower rates.......................... (9,912) (2,283)
Equity in undistributed losses and earnings of investees..... 8,847 --
Other........................................................ 262 7
------- -------
$ 5,377 $ 1,238
======= =======
</TABLE>
NOTE 6. NOTES PAYABLE TO AFFILIATES AND DUE TO PARENT COMPANY
Notes payable to affiliates were issued in settlement of a preferred share
dividend and are due on demand. The amount due to the Parent company has no
designated repayment terms. The notes payable to affiliates and due to Parent
company are denominated in Canadian dollars and are non-interest bearing.
NOTE 7. REDEEMABLE PREFERRED SHARES
On January 31,1995 the authorized share capital of the Company was increased
by creating 500,000,000 non-voting Preferred shares with a par value of
Canadian $1.00 each. The holders of the preferred shares receive priority in
the payment of non-cumulative dividends, as declared annually by the directors
at a rate to be determined by resolution of the directors. Upon liquidation,
dissolution or wind-up, the preferred shareholders are entitled to
distribution equal to the redemption price before any assets of the Company
shall be distributed to
F-10
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the common shareholders. The preferred shares are redeemable at the Company's
option upon 21 days notice and retractable by the holder upon 120 days notice
at any time in whole or in part at the redemption price. The redeemable
preferred shares were issued upon the cancellation of 20,000 Common shares.
NOTE 8. CAPITAL STOCK
(a) Issued and outstanding
<TABLE>
<CAPTION>
NUMBER OF SHARES DOLLARS
------------------ -----------------
1995 1994 1995 1994
---------- ------ -------- -------
<S> <C> <C> <C> <C>
Common shares
Balance beginning of year............... 301 1 $ 88,177 $ 1
Issued during the year.................. 100,100 300 181,536 88,176
Repurchased by Company for cancellation
in exchange for redeemable preferred
shares................................. (20,000) -- (55,174) --
---------- ------ -------- -------
80,401 301 $214,539 $88,177
========== ====== ======== =======
</TABLE>
NOTE 9. RELATED PARTY TRANSACTIONS
The Company receives administrative support from the Parent company at no
charge to the Company. Direct costs of the Company's operations are recorded
as expenses.
LFW is managed by an affiliated entity. General and administrative expenses
are primarily a result of amounts paid under this management agreement.
NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, receivables from affiliates, revolving loans
receivable, accounts payable and accrued liabilities approximate fair value
due to the short-term maturities of these instruments. Financial instruments
with a carrying value different from their fair value include:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------- -------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Investment in Arbor Memorial Services
Inc. ............................... $ 35,717 $ 44,410 $ 26,250 $ 26,997
Notes receivable from affiliate...... 405,650 427,186 206,000 198,656
Not practicable to estimate fair
value
Investment in affiliates........... 6,367 -- 9,464 --
Notes receivable from affiliate.... -- -- 14,155 --
Financial liabilities:
Not practicable to estimate fair
value
Notes payable to affiliates........ 4,275 -- -- --
Due to Parent company.............. 168,982 -- 157,575 --
Redeemable preferred shares........ 56,598 -- -- --
</TABLE>
F-11
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. NON-CASH TRANSACTIONS
The Company entered into the following non-cash transactions:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1995 1994
---------- ---------
<S> <C> <C>
Investment in Arbor shares, funded through a capital
contribution from the Parent company..................... $ -- $ 23,981
Investment in Arbor shares, funded by an increase in due
to Parent company........................................ 7,338 3,368
Application of notes receivable and other transactions
reducing the balance due to Parent company............... 23,619 --
Reduction of amount due to Parent company upon issuance of
100,000 Common shares.................................... 154,334 --
Issuance of 77,200,000 Preferred shares and cancellation
of 20,000 Common shares.................................. 55,174 --
Acquisition of 15% of Parent company's interest in LGII's
Common shares in exchange for issuance of 100 Common
shares................................................... 27,202 --
</TABLE>
In addition, as a result of the reorganization described in Note 1, the 1994
financial statements reflect capital contributions from the Parent company of
$64,196,000, assets of $65,868,000 and a foreign exchange adjustment of
$1,672,000.
NOTE 12. SUBSEQUENT EVENTS
At various dates prior to April 30, 1996, the Company received approximately
$147,960,000 of advances from the Parent company and $40,792,000 of capital
contributions from the Parent company, which amounts were used primarily to
fund additional loans to LGII.
On May 9, 1996, the Company sold 13% of LFW to the Parent company for the
Company's net book value of approximately $78,700,000. The company's
percentage ownership in LFW was reduced to 85% as a result. No gain or loss
was recorded on the transaction.
At various dates in 1996, the Company increased its investment in LGII by an
aggregate amount of approximately $26,181,000, which amounts were financed
through capital contributions from the Parent company. The Company's
percentage ownership in LGII remained the same as a result of these
transactions.
On May 31, 1996, the Company issued a guarantee and pledged the shares of
its subsidiaries as collateral to secure debt owed by the Parent company and
LGII to their senior lenders. As of June 30, 1996, such indebtedness
aggregated $919,888,000. In connection with this transaction, the Company's
notes receivable from LGII were secured by LGII's financial assets and shares
of its subsidiaries and were subordinated to LGII's indebtedness to senior
lenders. On August 1, 1996, the Company and LGII amended the notes receivable
from LGII, increasing the interest rate on the notes to 11.5% per annum.
F-12
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and term deposits.............................. $ 81 $ 81
Accrued interest receivable from affiliate.......... 15,351 --
Notes receivable from affiliate..................... 10,866 24,831
-------- --------
26,298 24,912
Investment............................................ 36,723 35,717
Investments in affiliate.............................. 34,185 6,367
Notes receivable from affiliate....................... 590,040 405,650
Note receivable from Parent company................... 79,031 --
Other assets.......................................... 817 291
-------- --------
$767,094 $472,937
======== ========
LIABILITIES AND SHAREHOLDER EQUITY
Current liabilities
Accounts payable and accrued liabilities............ $ 2,871 $ 5,402
Due to affiliate.................................... 1,262 --
Notes payable to affiliate.......................... 4,276 4,275
-------- --------
8,409 9,677
Due to Parent company................................. 289,560 168,982
Minority interest..................................... 92,095 8,508
Redeemable preferred shares
$1 Canadian par value, 500,000,000 shares
authorized, 77,200,000 shares issued and
outstanding........................................ 56,611 56,598
Shareholder equity
Capital stock, no par value, 1,000,000 shares
authorized, 80,401 shares issued and outstanding... 281,512 214,539
Retained earnings................................... 34,590 10,415
Foreign exchange adjustment......................... 4,317 4,218
-------- --------
320,419 229,172
-------- --------
$767,094 $472,937
======== ========
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-13
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (UNAUDITED)
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------- ----------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue from affiliate
Interest income.......................... $14,242 $ 7,179 $25,659 $12,518
Other revenue............................ 556 267 1,033 460
------- ------- ------- -------
14,798 7,446 26,692 12,978
Expenses
General and administrative............... 397 194 705 307
------- ------- ------- -------
Earnings from operations................... 14,401 7,252 25,987 12,671
Equity in earnings of investees............ 1,426 392 2,629 694
Minority interest.......................... (1,374) (122) (1,580) (213)
------- ------- ------- -------
Earnings before income taxes............... 14,453 7,522 27,036 13,152
Current income tax expense................. 1,585 1,161 2,861 2,028
------- ------- ------- -------
Net earnings............................... $12,868 $ 6,361 $24,175 $11,124
Retained earnings, beginning of period..... 21,722 11,247 10,415 6,484
------- ------- ------- -------
Retained earnings, end of period........... $34,590 $17,608 $34,590 $17,608
======= ======= ======= =======
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-14
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings.......................................... $ 24,175 $ 11,124
Items not affecting cash
Minority interest................................... 1,580 213
Equity in earnings of investees..................... (2,629) (694)
Net changes in other non-cash balances.............. 1,549 4,639
--------- ---------
24,675 15,282
--------- ---------
Investing
Loans to affiliate.................................... (185,776) (196,183)
Financing
Advances from Parent company.......................... 120,309 180,876
Capital contribution from the Parent company.......... 40,792 --
--------- ---------
161,101 180,876
Increase (decrease) in cash and cash equivalents during
the period............................................. -- (25)
Cash and cash equivalents, beginning of period.......... 81 58
--------- ---------
Cash and cash equivalents, end of period................ $ 81 $ 33
========= =========
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-15
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE
AMOUNTS
NOTE 1. BASIS OF PRESENTATION
Neweol Investments Ltd. ("Neweol") was incorporated on November 6, 1992
under the laws of the Province of British Columbia as a wholly owned
subsidiary of The Loewen Group Inc. ("Parent company"). The principal
activities of the Company, which commenced in 1994, are to provide financing
to affiliates and to hold investments in affiliated and non-affiliated
companies. The interim consolidated financial statements (unaudited) include
the accounts of all subsidiary entities and reflect all adjustments consisting
only of normal recurring adjustments necessary for a fair presentation of the
financial results for the interim periods. The financial statements have been
prepared consistent with the accounting policies described in the Company's
financial statements as of and for the year ended December 31, 1995, and
should be read in conjunction therewith.
The interim consolidated financial statements (unaudited) have been prepared
in United States dollars in accordance with accounting principles generally
accepted in the United States.
Basis of consolidation
These interim consolidated financial statements have been prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and for inclusion in the registration statement on Form S-
4 of Loewen Group International, Inc. ("LGII") and the Parent company. The
accompanying interim consolidated financial statements (unaudited) represent
Neweol Investment Ltd.'s interests in its majority-owned subsidiaries, Loewen
Finance (Wyoming) Limited Liability Company, Loewen Trading Corporation, Eagle
Finance Associates Limited, and 1096952 Ontario Limited, and its equity
investment in its affiliate LGII, (collectively the "Company"). These
interests constitute the ongoing operations of Neweol subsequent to a
reorganization that occurred on July 19 and August 13, 1996. These interim
consolidated financial statements exclude certain subsidiaries of Neweol which
were transferred to an affiliate effective July 19 and August 13, 1996 and
accordingly are not intended to be a complete presentation of the historical
consolidated financial position, results of operations, and cash flows of
Neweol.
All significant intercompany balances and transactions have been eliminated
from the consolidated financial statements.
NOTE 2. NON-CASH TRANSACTIONS
On May 9, 1996, the Company sold 13% of Loewen Finance (Wyoming) Limited
Liability Company to the Parent company in exchange for a Note receivable of
approximately $107,800,000 Canadian ($78,700,000 US).
At various dates in 1996, the company increased its investment in LGII by an
aggregate amount of approximately $26,181,000 US, which amounts were financed
through capital contributions from the Parent company.
NOTE 3. SUBSEQUENT EVENT
The Company purchased accounts receivable from subsidiaries of LGII for
approximately $18,400,000 on August 16, 1996. The purchase was financed by
capital contributions from the Parent company.
F-16
<PAGE>
AUDITORS' REPORT TO THE MEMBERS
We have audited the accompanying balance sheets of Loewen Finance (Wyoming)
Limited Liability Company as at December 31, 1995 and 1994 and the related
statements of income and retained earnings and cash flows for the year ended
December 31, 1995 and for the period April 27, 1994 to December 31, 1994.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Loewen Finance (Wyoming)
Limited Liability Company as at December 31, 1995 and 1994, and the results of
its operations and its cash flows for the year and period then ended in
conformity with generally accepted accounting principles.
/s/ Peat Marwick
Chartered Accountants
Bridgetown, Barbados
February 9, 1996
F-17
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash................................................ $ 106 $ 27,551
Accrued interest and prepaid expenses............... -- 34,019
Due from related companies.......................... 331,286 198,113
------------ ------------
$ 331,392 $ 259,683
Loans receivable from affiliated companies (note
3)................................................. 430,481,000 213,595,000
------------ ------------
Total Assets.................................... $430,812,392 213,854,683
============ ============
LIABILITIES AND MEMBERS' EQUITY
Due to affiliated companies......................... $ 148,685 $ 115,387
Taxes payable (note 6).............................. 5,286,973 1,238,272
------------ ------------
Total liabilities............................... 5,435,658 1,353,659
------------ ------------
MEMBERS' EQUITY
Capital (note 4)
100 units authorised, issued and outstanding........ 100 100
Additional contributions............................ 397,150,000 206,000,000
------------ ------------
Total capital................................... 397,150,100 206,000,100
Retained earnings................................... 28,226,634 6,500,924
------------ ------------
Total members' equity........................... 425,376,734 212,501,024
------------ ------------
Total Liabilities and Members' Equity........... $430,812,392 $213,854,683
============ ============
</TABLE>
See accompanying notes to financial statements
F-18
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1995 AND FOR THE EIGHT MONTH PERIOD ENDED DECEMBER 31,
1994
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Revenue
Interest on affiliated companies loans receivable... $33,128,490 $ 7,593,970
Less, foreign withholding tax....................... (5,040,470) (1,160,880)
----------- -----------
Interest (net of foreign withholding tax)........... 28,088,020 6,433,090
----------- -----------
Other revenue
Financial services (note 5)....................... 141,940 68,600
Other services.................................... 1,059,506 286,942
----------- -----------
1,201,446 355,542
----------- -----------
Total revenue..................................... 29,289,466 6,788,632
Expenses
Administrative and general.......................... 726,801 210,316
----------- -----------
Income before taxation................................ 28,562,665 6,578,316
Taxation.............................................. 336,031 77,392
----------- -----------
Net income for the year/period........................ $28,226,634 $ 6,500,924
Retained earnings, beginning of year/period........... 6,500,924 --
----------- -----------
34,727,558 6,500,924
Dividends paid........................................ 6,500,924 --
----------- -----------
Retained earnings, end of year/period................. $28,226,634 $ 6,500,924
=========== ===========
</TABLE>
See accompanying notes to financial statements
F-19
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995 AND FOR THE EIGHT MONTH PERIOD ENDED DECEMBER 31,
1994
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Operating Activities
Net income for the year/period.................. $ 28,226,634 $ 6,500,924
Add (deduct) changes in non-cash working capital
balances relating to operations:
Accrued interest and prepaid expenses......... 34,019 (34,019)
Due from related companies.................... (133,173) (198,113)
Due to related companies...................... 33,298 115,387
Taxes payable................................. 4,048,701 1,238,272
------------- -------------
Cash provided by operating activities....... 32,209,479 7,622,451
------------- -------------
Investing Activities
Loans receivable from affiliated companies...... (216,886,000) (213,595,000)
------------- -------------
Cash applied to investing activities........ (216,886,000) (213,595,000)
------------- -------------
Financing Activities
Capital contributions........................... 191,150,000 206,000,100
Dividends paid.................................. (6,500,924) --
------------- -------------
Cash provided by financing activities....... 184,649,076 206,000,100
------------- -------------
(Decrease) increase in cash during the
year/period.................................... (27,445) 27,551
Cash at beginning of year/period................ 27,551 --
------------- -------------
Cash at end of year/period...................... $ 106 $ 27,551
============= =============
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(EXPRESSED IN U.S. DOLLARS)
1. GENERAL
The company was formed under the Wyoming Limited Liability Company Act on
March 30, 1994.
It was registered in Barbados as an external company under the provisions of
the Companies Act and conducts its principal activities as a licensee under
the International Business Companies Act. It commenced operations on August 4,
1994, after having obtained its IBC license on April 27, 1994.
The principal activity of the company is to act as a finance company.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of accounting
The company follows accrual basis accounting and in all material respects,
financial statements have been prepared in accordance with generally accepted
accounting principles in the U.S.A.
(b) Corporation tax
The company is subject to taxation in accordance with Section 10 of the
Barbados International Business Companies Act, at rates between 2.5% to 1.0 %.
For U.S. tax purposes the company is viewed as a fiscally transparent entity
whereby its income is deemed to be that of its partners.
3. LOANS RECEIVABLE FROM AFFILIATED COMPANIES
Loans receivable comprise the following:
<TABLE>
<CAPTION>
YEAR OF
SCHEDULED
REPAYMENT 1995 1994
--------- ------------- -------------
<S> <C> <C> <C>
Term loans............................ 1999 $ 206,000,000 $ 206,000,000
Term loans............................ 2000 199,650,000 --
------------- -------------
405,650,000 206,000,000
Revolving credit loans................ Demand 24,831,000 7,595,000
------------- -------------
$ 430,481,000 $ 213,595,000
============= =============
</TABLE>
Interest is earned at rates ranging from 9.06% to 10.01% per annum on the
term loans (1994--9.83% per annum) and at U.S. prime plus 2% on a quarterly
basis on the revolving credit loans (1994--U.S prime plus 2%).
F-21
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. CAPITAL
The capital of the company is divided into units with no par value. After
the initial capital contributions, members may by agreement make further
contributions in proportion to the units they hold. Changes in capital were as
follows:
<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
NUMBER AMOUNTS NUMBER AMOUNTS
UNITS: ------ ------------ ------ ------------
<S> <C> <C> <C> <C>
Outstanding, beginning of
year/period....................... 100 $ 100 -- $ --
Issued during year/period.......... -- -- 100 100
--- ------------ --- ------------
Outstanding, end of year/period.... 100 100 100 100
--- ------------ --- ------------
Contributions:
Balance, beginning of year/period.. 206,000,000 --
Additional during year/period...... 191,150,000 206,000,000
------------ ------------
Balance, end of year/period........ 397,150,000 206,000,000
------------ ------------
Total Capital.................... $397,150,100 $206,000,100
------------ ------------
</TABLE>
The company's units are held by:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Neweol Investments Ltd............................................ 98 98
The Loewen Group Inc. ............................................ 2 2
--- ---
Total........................................................... 100 100
=== ===
</TABLE>
5. FINANCIAL SERVICES
This amount represents facility and servicing fees pertaining to the
revolving credit loans referred to at Note 3 above.
6. TAXES PAYABLE
Taxes payable comprise the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Withholding tax on foreign source interest income.... $5,040,470 $1,160,880
Corporation tax...................................... 246,503 77,392
---------- ----------
$5,286,973 $1,238,272
========== ==========
</TABLE>
7. COMPARATIVE FIGURES
Certain of the comparative figures have been reclassified to conform with
the presentation adopted in the current year.
F-22
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
BALANCE SHEETS
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash............................................... $ 278 $ 106
Accrued interest receivable from affiliate......... 15,350,780 --
Due from affiliated companies...................... -- 331,286
------------ ------------
15,351,058 331,392
Loans receivable from affiliated companies........... 600,906,060 430,481,000
------------ ------------
Total Assets..................................... $616,257,118 $430,812,392
============ ============
LIABILITIES AND MEMBERS' EQUITY
Due to affiliated companies.......................... $ 511,375 $ 148,685
Taxes payable........................................ 2,860,661 5,286,973
------------ ------------
Total liabilities................................ 3,372,036 5,435,658
------------ ------------
MEMBERS' EQUITY
Capital (note 3)
100 units authorized, issued and outstanding......... 100 100
Additional contributions............................. 589,739,660 397,150,000
------------ ------------
Total capital.................................... 589,739,760 397,150,100
Retained earnings ................................... 23,145,322 28,226,634
------------ ------------
Total members' equity............................ 612,885,082 425,376,734
------------ ------------
Total Liabilities and Members' Equity............ $616,257,118 $430,812,392
============ ============
</TABLE>
See accompanying notes to interim financial statements.
F-23
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED)
(EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
THREE MONTHS ENDED JUNE 30, 30,
---------------------------- ------------------------
1996 1995 1996 1995
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue
Interest on affiliated
companies loans
receivable........... $14,242,173 $ 7,178,964 $25,659,285 $12,517,333
Less, foreign
withholding tax...... (1,441,203) (1,087,927) (2,600,601) (1,901,082)
------------- ------------- ----------- -----------
Interest (net of
foreign withholding
tax)................. 12,800,970 6,091,037 23,058,684 10,616,251
------------- ------------- ----------- -----------
Other revenue
Financial services.. 27,166 2,076 89,244 31,063
Other services...... 528,944 265,208 943,778 429,409
------------- ------------- ----------- -----------
556,110 267,284 1,033,022 460,472
------------- ------------- ----------- -----------
Total revenue....... 13,357,080 6,358,321 24,091,706 11,076,723
Expenses
Administrative and
general.............. 386,280 193,398 686,324 303,925
------------- ------------- ----------- -----------
Income before taxation.. 12,970,800 6,164,923 23,405,382 10,722,798
Taxation................ 144,120 72,529 260,060 126,739
------------- ------------- ----------- -----------
Net income for the
year/period............ $12,826,680 $ 6,092,394 $23,145,322 $10,646,059
Retained earnings,
beginning of
year/period............ 38,545,276 11,054,589 28,226,634 6,500,924
------------- ------------- ----------- -----------
51,371,956 17,146,983 51,371,956 17,146,983
Dividends paid.......... 28,226,634 6,500,924 28,226,634 6,500,924
------------- ------------- ----------- -----------
Retained earnings, end
of year/period......... $23,145,322 $ 10,646,059 $23,145,322 $10,646,059
============= ============= =========== ===========
</TABLE>
See accompanying notes to interim financial statements.
F-24
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
STATEMENTS OF CASH FLOWS (UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------
1996 1995
------------- -------------
<S> <C> <C>
Operating Activities
Net income for the year/period................ $ 23,145,322 $ 10,646,059
Add (deduct) changes in non-cash working
capital balances relating to operations:
Accrued interest receivable from affiliate
and prepaid expenses....................... (15,350,780) 34,019
Due from affiliated companies............... 331,286 76,917
Due to affiliated companies................. 362,690 (38,513)
Taxes payable............................... (2,426,312) 789,850
------------- -------------
Cash provided by operating activities..... 6,062,206 11,508,332
------------- -------------
Investing Activities
Loans receivable from affiliated companies.... (170,425,060) (196,183,000)
------------- -------------
Cash applied to investing activities...... (170,425,060) (196,183,000)
------------- -------------
Financing Activities
Capital contributions......................... 192,589,660 191,150,000
Dividends paid................................ (28,226,634) (6,500,924)
------------- -------------
Cash provided by financing activities..... 164,363,026 184,649,076
------------- -------------
Increase (decrease) in cash during the
year/period.................................. 172 (25,592)
Cash at beginning of year/period.............. 106 27,551
------------- -------------
Cash at end of year/period.................... $ 278 $ 1,959
============= =============
</TABLE>
See accompanying notes to interim financial statements.
F-25
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
NOTES TO INTERIM FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1996 AND THE YEAR ENDED DECEMBER 31, 1995
(EXPRESSED IN U.S. DOLLARS)
1. BASIS OF PRESENTATION
The interim financial statements (unaudited) include all adjustments,
consisting only of normal recurring adjustments necessary for a fair
presentation of the financial results for the interim periods. The financial
statements have been prepared consistent with the accounting policies
described in the Company's financial statements as of, and for the year ended
December 31, 1995, and should be read in conjunction therewith.
2. LOANS RECEIVABLE FROM AFFILIATED COMPANIES
During the six months ended June 30, 1996, the Company advanced $184,389,660
to LGII and received repayments on the revolving credit loans of $13,964,600.
The new loans were issued at interest rates ranging from 8.35% to 9.08%, and
they mature in 2001.
3. CAPITAL
During the six months ended June 30, 1996, the Company received capital
contributions of $192,589,660 (1995--$191,150,000). On May 9, 1996 Neweol
Investments Ltd. sold 13 units of the Company to The Loewen Group Inc.
F-26
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER MADE HEREBY, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER OR A SOLICITATION
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER
OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS,
NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Information by Reference.......................... 3
Disclosure Regarding Forward--Looking Statements........................... 4
Financial Information...................................................... 4
Prospectus Summary......................................................... 5
Risk Factors............................................................... 15
Recent Developments........................................................ 17
Use of Proceeds............................................................ 20
Consolidated Capitalization................................................ 20
The Exchange Offer......................................................... 21
Business................................................................... 28
Legal Proceedings.......................................................... 34
Description of Exchange Notes.............................................. 37
Description of Certain Other Indebtedness.................................. 63
Plan of Distribution....................................................... 64
Certain U.S. Federal Income Tax Considerations............................. 65
Certain Canadian Federal Tax Considerations................................ 67
Legal Matters.............................................................. 68
Experts.................................................................... 68
Enforceability of Certain Civil Liabilities Against Guarantor.............. 68
Financial Statements of Certain Subsidiaries............................... F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOEWEN GROUP INTERNATIONAL, INC.
$225,000,000 7 1/2% SERIES 3
SENIOR GUARANTEED NOTES DUE 2001
FOR ALL OUTSTANDING 7 1/2% SERIES 1
SENIOR GUARANTEED NOTES DUE 2001
AND
$125,000,000 8 1/4% SERIES 4
SENIOR GUARANTEED NOTES DUE 2003
FOR ALL OUTSTANDING 8 1/4% SERIES 2
SENIOR GUARANTEED NOTES DUE 2003
GUARANTEED BY
THE LOEWEN GROUP INC.
[LOGO OF LOEWEN GROUP INC. APPEARS HERE]
--------
PROSPECTUS
--------
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
LGII
Section 145 of the Delaware General Corporation Law ("Delaware Law")
permits, subject to certain conditions, a corporation to indemnify its
directors, officers, employees and agents against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such director, officer, employee or agent in connection
with threatened, pending or completed actions, suits and proceedings (other
than actions by or in the right of the corporation ) in or to which any of
such persons is a party or is threatened to be made a party.
Section 5.01 of the By-laws of LGII provides that LGII may indemnify its
directors, officers, employees and agents to the fullest extent permitted by
Delaware Law, including the advancement of funds, provided that such person
acted in good faith and in a manner such person reasonably believed to be in
or not opposed to the best interests of LGII and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such person's conduct
was unlawful.
The Board of Directors of LGII has determined that the expenses of the
officers named in the Shareholder Suits incurred in defending the Shareholder
Suits should be paid by LGII from time to time in advance of the final
disposition of such proceedings, subject to each such individual entering into
an undertaking to repay all amounts paid by LGII if it is ultimately
determined that such individual is not entitled to be indemnified by LGII
under the Delaware General Corporation Law.
LOEWEN
Section 152 of the Company Act of British Columbia provides in part that:
A company may, with the approval of the court, indemnify a director or
former director of the company or a director or former director of a
corporation of which it is or was a shareholder, and his heirs and personal
representatives, against all costs, charges and expenses, including any amount
paid to settle an action or satisfy a judgment, actually and reasonably
incurred by him, including an amount paid to settle an action or satisfy a
judgment in a civil, criminal or administrative action or proceeding to which
he is made a party by reason of being or having been a director, including an
action brought by the company or corporation, if
(a) he acted honestly and in good faith with a view to the best interests of
the corporation of which his is or was a director; and
(b) in the case of a criminal or administrative action or proceeding, he had
reasonable grounds for believing that his conduct was lawful.
Part 19 of Loewen's Articles provides that Loewen shall indemnify its
directors generally in accordance with the provisions of Section 152 and that
Loewen shall indemnify its Secretary and any Assistant Secretary against all
costs, charges and expenses incurred that have arisen as a result of serving
Loewen in such capacity. The Articles further provide that Loewen may
indemnify any of its officers, employees or agents against all costs, charges
and expenses incurred as a result of acting as an officer, employee and agent
of Loewen.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
Exhibit
Number Description
------- -----------
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY-HOLDERS, INCLUDING
INDENTURES
4.1 Indenture, dated as of March 20, 1996, by and between LGII,
Loewen, as guarantor of the obligations of LGII under the
Indenture, and Fleet National Bank of Connecticut, as
Trustee, with respect to Series 1, 2, 3 and 4 Senior
Guaranteed Notes of LGII (1)
4.2 Purchase Agreement, dated as of March 13, 1996, by and
between LGII, Loewen and the Initial Purchasers*
4.3 Receipt Agreement, dated as of January 3, 1996, for the
Cumulative Redeemable Convertible First Preferred Shares
Series C of Loewen (1)
4.4 Shareholder Protection Rights Plan, dated as of April 20,
1990, as amended on May 24, 1990 and April 7, 1994 and
reconfirmed on May 17, 1995 (2)
4.5 Amended and Restated Multicurrency Credit Agreement, dated
as of May 11, 1995, by and between LGII, as borrower,
Loewen, as guarantor, the banks named therein as lenders and
The First National Bank of Chicago, as agent for the banks
named therein as lenders (3)
4.6 Multicurrency Credit Agreement, dated as of May 11, 1995, by
and between LGII, as borrower, Loewen, as guarantor, the
banks named therein as lenders and The First National Bank
of Chicago, as agent for the banks named therein as lenders
(3)
4.7 Zero Coupon Loan Agreement, dated as of November 1, 1994, by
and between WLSP Investment Partners I, Neweol Finance B.V.,
Electrolux Holdings B.V., Man Producten Rotterdam B.V.,
Adinvest A.G., and Wachovia Bank of Georgia, N.A. (2)
4.8 MIPS Guarantee Agreement, dated August 15, 1994 (4)
4.9 Indenture, dated as of August 15, 1994, by and between LGII,
as issuer, Loewen, as guarantor, and State Street Bank and
Trust Company, as trustee with respect to 9.45% Junior
Subordinated Debentures, Series A, due 2024, issued by LGII
and guaranteed by Loewen (4)
4.10 Exchange Acknowledgment by Loewen, with respect to the 1994
Exchangeable Floating Rate Debentures due July 15, 2001
issued by LGII, dated June 15, 1994 (2)
4.11 1994 MEIP Credit Agreement, dated as of June 14, 1994, by
and between Loewen Management Investment Corporation, in its
capacity as agent for LGII ("LMIC"), Loewen and the banks
listed therein (the "MEIP Banks") and Wachovia Bank of
Georgia, N.A., as agent for the MEIP Banks ("MEIP Agent")
(2)
4.12 Guaranty dated as of June 14, 1994 by Loewen in favor of the
MEIP Agent for the ratable benefit of the MEIP Banks (2)
4.13 Guaranty dated as of June 14, 1994 by LGII in favor of the
MEIP Agent for the ratable benefit of the MEIP Banks (2)
4.14 Security Agreement, dated as of June 14, 1994, by and
between LMIC and the MEIP Agent (2)
4.15 Note Agreement, dated for reference September 1, 1993, by
and between Loewen and LGII re 9.62% Senior Guaranteed
Notes, Series D, due September 11, 2003, issued by Loewen
("Series D Notes"), as amended on June 10, 1994 (2)
II-2
<PAGE>
Exhibit
Number Description
------- -----------
4.16 Note Agreement by LGII and Loewen re 6.49% Senior Guaranteed
Notes, Series E, due February 25, 2004, issued by LGII
("Series E Notes"), dated for reference February 1, 1994 (2)
4.17 Guaranty Agreement by Loewen re Series E Notes, dated for
reference February 1, 1994 (2)
4.18 Guaranty Agreement by LGII re Series D Notes, dated for
reference April 1, 1993 (2)
4.19 Note Agreement by Loewen and LGII re 9.70% Senior Guaranteed
Notes, Series A, due November 1, 1998, issued by LGII
("Series A Notes"), 9.93% Senior Guaranteed Notes, Series B,
due November 1, 2001, issued by LGII ("Series B Notes"), and
9.70% Senior Guaranteed Notes, Series C, due November 1,
1998, issued Loewen ("Series C Notes"), dated for reference
October 1, 1991 (2)
4.20 Guaranty Agreement by Loewen re Series A Notes and Series B
Notes, dated for reference October 1, 1991 (2)
4.21 Guaranty Agreement by LGII re Series C Notes, dated for
reference October 1, 1991 (2)
4.22 Form of Senior Guarantee of the Notes (included in Exhibit
4.1) (1)
4.23 Form of Global Outstanding Note (included in Exhibit 4.1)
(1)
4.24 Form of Physical Outstanding Note (included in Exhibit 4.1)
(1)
4.25 Form of Global Exchange Note
4.26 Form of Physical Exchange Note
4.27 Credit Agreement, dated as of May 15, 1996, among LGII, as
borrower, Loewen, as a guarantor, the lenders named therein,
as the lenders, Goldman, Sachs & Co., as the documentation
agent and Bank of Montreal, as issuer, swingline lender and
agent*
4.28 Collateral Trust Agreement, dated as of May 15, 1996, among
Bankers Trust Company, as trustee, TLGI, LGII and various
other pledgers*
4.29 Second Amendment, dated for reference May 15, 1996, to Note
Agreements, dated for reference October 1, 1991, among
Loewen, LGII and institutions named therein, re Series A
Notes, Series B Notes and Series C Notes*
4.30 Second Amendment, dated for reference May 15, 1996, to Note
Agreements, dated for reference September 1, 1993, among
Loewen, LGII and institutions named therein, re Series D
Notes*
4.31 Second Amendment, dated for reference May 15, 1996, to Note
Agreements, dated for reference February 1, 1994, among
Loewen, LGII and Teachers Insurance and Annuity Association
of America, re Series E Notes*
4.32 Loewen and LGII hereby agree to furnish to the Commission,
upon request, a copy of the instruments which define the
rights of holders of long-term debt of the Company. None of
such instruments not included as exhibits herein
collectively represents long-term debt in excess of 10% of
the consolidated total assets of the Company.
5 OPINIONS RE LEGALITY
5.1 Opinion of Thelen, Marrin, Johnson & Bridges as to the
legality of the Exchange Notes
5.2 Opinion of Russell & DuMoulin as to the legality of the
Guarantees with respect to the Exchange Notes
II-3
<PAGE>
Exhibit
Number Description
------ ------------
8 OPINIONS AS TO TAX MATTERS
8.1 Opinion of Thelen, Marrin, Johnson & Bridges as to U.S.
federal tax matters
8.2 Opinion of Russell & DuMoulin as to Canadian
federal tax matters
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (1)(5)
12 STATEMENT RE COMPUTATION OF RATIOS
12.1 Statement re Computation of Earnings to Fixed
Charges Ratio (Canadian GAAP)
12.2 Statement re Computation of Earnings to Fixed
Charges Ratio (U.S. GAAP)
23 CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Thelen, Marrin, Johnson & Bridges
(included in Exhibits 5.1 and 8.1)
23.2 Consent of Russell & DuMoulin (included in Exhibits
5.2 and 8.2)
23.3 Consent of KPMG
23.4 Consent of Price Waterhouse LLP
23.5 Consent of Richter, Usher & Vineberg
23.6 Consent of Altschuler, Melvion and Glasser LLP
23.7 Consents of Keith J. Schulte Accountancy Corporation
23.8 Consents of Hirsch, Oelbaum, Bram & Hanover
23.9 Consent of The Dun & Bradstreet Corporation*
23.10 Consent of KPMG Peat Marwick LLP
23.11 Consent of KPMG
23.12 Consent of Peat Marwick
24 POWERS OF ATTORNEY
24.1 Loewen Group International, Inc. Powers of
Attorney*
24.2 The Loewen Group Inc. Powers of Attorney*
24.3 Powers of Attorney of the Principal Financial
Officer and Principal Accounting Officer of Loewen
and LGII (included in the signature pages to this
Registration Statement)
25 STATEMENT OF ELIGIBILITY OF TRUSTEE*
99 ADDITIONAL EXHIBITS
99.1 Form of Transmittal Letter*
99.2 Form of Notice of Guaranteed Delivery*
- --------
*Previously filed
(1) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1995, filed on March 28, 1996
(2) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1994, filed on March 31, 1995
(3)Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995, filed on May 11, 1995
(4) Incorporated by reference from the combined Form F-9/F-3 Registration
Statements filed by Loewen and LGII, respectively, (Nos. 33-81032 and 33-
81034) with the Commission on July 1, 1994, as amended on July 11, 1994,
July 22, 1994 and August 2, 1994
(5) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed on August 14, 1996.
(b) Financial Statement Schedules
None.
II-4
<PAGE>
ITEM 22. UNDERTAKINGS
(a) Undertakings required by Item 512 of Regulation S-K
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) Loewen hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of Loewen's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange
Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(b) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Burnaby,
Province of British Columbia, on this 23rd day of August, 1996.
Loewen Group International, Inc., a
Delaware corporation
By: /s/ Raymond L. Loewen
---------------------------------
Raymond L. Loewen
Chairman of the Board and
Chief Executive Officer
The Loewen Group Inc.,
a corporation under the laws of
British Columbia
By: /s/ Raymond L. Loewen
---------------------------------
Raymond L. Loewen
Chairman of the Board and
Chief Executive Officer
II-6
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Act, this amendment to the
registration statement on Form S-4 has been signed by the following persons in
the capacities and on the date indicated.
August 23, 1996 /s/ Raymond L. Loewen
- --------------- -----------------------------------------------
Date Raymond L. Loewen
Chairman of the Board, Chief Executive Officer
and Director
(Principal Executive Officer)
August 23, 1996 /s/ Timothy R. Hogenkamp*
- --------------- -----------------------------------------------
Date Timothy R. Hogenkamp
President and Chief Operating Officer
and Director
(Principal Executive Officer)
August 23, 1996 /s/ Paul Wagler
- --------------- -----------------------------------------------
Date Paul Wagler
Senior Vice-President, Finance and Chief
Financial Officer and Director
(Principal Financial Officer)
August 23, 1996 /s/ William G. Ballantyne
- --------------- -----------------------------------------------
Date William G. Ballantyne
Senior Vice-President, Financial Control and
Administration
(Principal Accounting Officer)
August 23, 1996 /s/ George M. Amato*
- --------------- -----------------------------------------------
Date George M. Amato
Director
August 23, 1996 /s/ Gordon S. Bigelow*
- --------------- -----------------------------------------------
Date Gordon S. Bigelow
Director
August 23, 1996 /s/ J.C. Carothers, Jr.*
- --------------- -----------------------------------------------
Date J.C. Carothers, Jr.
Director
- --------------- -----------------------------------------------
Date H. Steven Childress
Director
II-7
<PAGE>
August 23, 1996 /s/ Bruce E. Earthman*
- ------------ --------------------------------------------
Date Bruce E. Earthman
Director
August 23, 1996 /s/ Edward J. Fitzgerald*
- ------------ --------------------------------------------
Date Edward J. Fitzgerald
Director
August 23, 1996 /s/ Honorine T. Flanagan*
- ------------ --------------------------------------------
Date Honorine T. Flanagan
Director
August 23, 1996 /s/ Thomas F. Glodek*
- ------------ --------------------------------------------
Date Thomas F. Glodek
Director
August 23, 1996 /s/ Earl A. Grollman*
- ------------ --------------------------------------------
Date Earl A. Grollman
Director
August 23, 1996 /s/ Mary M. Howard*
- ------------ --------------------------------------------
Date Mary M. Howard
Director
August 23, 1996 /s/ Peter S. Hyndman*
- ------------ --------------------------------------------
Date Peter S. Hyndman
Director
August 23, 1996 /s/ Albert S. Lineberry, Jr.*
- ------------ --------------------------------------------
Date Albert S. Lineberry, Jr.
Director
August 23, 1996 /s/ Michael L. Loudon*
- ------------ --------------------------------------------
Date Michael L. Loudon
Director
II-8
<PAGE>
August 23, 1996 /s/ John E. Malletta, Sr.*
- ------------ --------------------------------------------
Date John E. Malletta, Sr.
Director
August 23, 1996 /s/ Hoyt Mayes*
- ------------ --------------------------------------------
Date Hoyt Mayes
Director
August 23, 1996 /s/ Lawrence Miller*
- ------------ --------------------------------------------
Date Lawrence Miller
Director
August 23, 1996 /s/ J. David Mullins*
- ------------ --------------------------------------------
Date J. David Mullins
Director
August 23, 1996 /s/ David F. Riemann*
- ------------ --------------------------------------------
Date David F. Riemann
Director
August 23, 1996 /s/ Robert D. Russell*
- ------------ --------------------------------------------
Date Robert D. Russell
Director
August 23, 1996 /s/ Michael L. Schweer*
- ------------ --------------------------------------------
Date Michael L. Schweer
Director
August 23, 1996 /s/ Bill Seale*
- ------------ --------------------------------------------
Date Bill Seale
Director
August 23, 1996 /s/ William R. Shane*
- ------------ --------------------------------------------
Date William R. Shane
Director
II-9
<PAGE>
August 23, 1996 /s/ David J. Shipper*
- ------------ --------------------------------------------
Date David J. Shipper
Director
August 23, 1996 /s/ Sandra C. Strong*
- ------------ --------------------------------------------
Date Sandra C. Strong
Director
August 23, 1996 /s/ Robert L. Studley*
- ------------ --------------------------------------------
Date Robert L. Studley
Director
August 23, 1996 /s/ Robert A. Weinstein*
- ------------ --------------------------------------------
Date Robert A. Weinstein
Director
August 23, 1996 /s/ John R. Wright, Sr.*
- ------------ --------------------------------------------
Date John R. Wright, Sr.
Director
*By: /s/ Raymond L. Loewen
-------------------------------
Raymond L. Loewen
Attorney-in-fact
II-10
<PAGE>
THE LOEWEN GROUP INC.
SIGNATURES
Pursuant to the requirements of the Securities Act, this amendment to the
registration statement on Form S-4 has been signed by the following persons in
the capacities and on the date indicated.
August 23, 1996 /s/ Raymond L. Loewen
- ------------ --------------------------------------------
Date Raymond L. Loewen
Chairman of the Board and Chief Executive
Officer and Director
(Principal Executive Officer)
August 23, 1996 /s/ Timothy R. Hogenkamp*
- ------------ --------------------------------------------
Date Timothy R. Hogenkamp
President and Chief Operating Officer and
Director
(Principal Executive Officer)
August 23, 1996 /s/ Paul Wagler
- ------------ --------------------------------------------
Date Paul Wagler
Senior Vice-President, Finance and Chief
Financial Officer and Director
(Principal Financial Officer)
August 23, 1996 /s/ William G. Ballantyne
- ------------ --------------------------------------------
Date William G. Ballantyne
Senior Vice-President, Financial Control and
Administration
(Principal Accounting Officer)
August 23, 1996 /s/ Kenneth S. Bagnell*
- ------------ --------------------------------------------
Date Kenneth S. Bagnell
Director
August 23, 1996 /s/ The Honorable J. Carter Beese, Jr.*
- ------------ --------------------------------------------
Date The Honorable J. Carter Beese, Jr.
Director
August 23, 1996 /s/ Earl A. Grollman*
- ------------ --------------------------------------------
Date Earl A. Grollman
Director
II-11
<PAGE>
August 23, 1996 /s/ Harold E. Hughes*
- ------------ --------------------------------------------
Date Harold E. Hughes
Director
August 23, 1996 /s/ Peter S. Hyndman*
- ------------ --------------------------------------------
Date Peter S. Hyndman
Director
August 23, 1996 /s/ Albert S. Lineberry, Sr.*
- ------------ --------------------------------------------
Date Albert S. Lineberry, Sr.
Director
August 23, 1996 /s/ Charles B. Loewen*
- ------------ --------------------------------------------
Date Charles B. Loewen
Director
August 23, 1996 /s/ Robert B. Lundgren*
- ------------ --------------------------------------------
Date Robert B. Lundgren
Director
August 23, 1996 /s/ James D. McLennan*
- ------------ --------------------------------------------
Date James D. McLennan
Director
August 23, 1996 /s/ Ernest G. Penner*
- ------------ --------------------------------------------
Date Ernest G. Penner
Director
/s/ The Right Honourable John N. Turner,
August 23, 1996 P.C., C.C., Q.C.*
- ------------ --------------------------------------------
Date The Right Honourable John N. Turner,
P.C., C.C., Q.C. Director
*By: /s/ Raymond L. Loewen
-------------------------------
Raymond L. Loewen
Attorney-in-fact
II-12
<PAGE>
AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
The undersigned is Loewen's authorized representative in the United States.
August 23, 1996 /s/ Timothy R. Hogenkamp*
- ------------ --------------------------------------------
Date Timothy R. Hogenkamp
*By: /s/ Raymond L. Loewen
-------------------------------
Raymond L. Loewen
Attorney-in-fact
II-13
<PAGE>
POWERS OF ATTORNEY
Each person whose signature appears below hereby appoints Raymond L. Loewen,
Peter S. Hyndman and Paul Wagler, and each of them severally, acting alone and
without the other, his true and lawful attorney-in-fact with authority to
execute in the name of each such person, and to file with the Securities and
Exchange Commission, together with any exhibits thereto and other documents
therewith, any and all amendments (including without limitation post-effective
amendments) to this registration statement necessary or advisable to enable
the Registrants to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission
in respect thereof, which amendments may make such changes in this
registration statement as the aforesaid attorney-in-fact deems appropriate.
August 23, 1996 /s/ Paul Wagler
- --------------- ---------------------------------------------------
Date Paul Wagler
Senior Vice-President, Finance and Chief Financial
Officer of The Loewen Group Inc. and Loewen Group
International, Inc.
(Principal Financial Officer of The Loewen Group
Inc. and Loewen Group International, Inc.)
August 23, 1996 /s/ William G. Ballantyne
- --------------- ---------------------------------------------------
Date William G. Ballantyne
Senior Vice-President, Financial Control and
Administration of The Loewen Group Inc. and Loewen
Group International, Inc.
(Principal Accounting Officer of The Loewen Group
Inc. and Loewen Group International, Inc.)
II-14
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY-HOLDERS, INCLUDING
INDENTURES
4.1 Indenture, dated as of March 20, 1996, by and
between LGII, Loewen, as guarantor of the
obligations of LGII under the Indenture, and Fleet
National Bank of Connecticut, as Trustee, with
respect to Series 1, 2, 3 and 4 Senior Guaranteed
Notes of LGII (1)
4.2 Purchase Agreement, dated as of March 13, 1996, by
and between LGII, Loewen and the Initial
Purchasers*
4.3 Receipt Agreement, dated as of January 3, 1996, for
the Cumulative Redeemable Convertible First
Preferred Shares Series C of Loewen (1)
4.4 Shareholder Protection Rights Plan, dated as of
April 20, 1990, as amended on May 24, 1990 and
April 7, 1994 and reconfirmed on May 17, 1995 (2)
4.5 Amended and Restated Multicurrency Credit
Agreement, dated as of May 11, 1995, by and between
LGII, as borrower, Loewen, as guarantor, the banks
named therein as lenders and The First National
Bank of Chicago, as agent for the banks named
therein as lenders (3)
4.6 Multicurrency Credit Agreement, dated as of May 11,
1995, by and between LGII, as borrower, Loewen, as
guarantor, the banks named therein as lenders and
The First National Bank of Chicago, as agent for
the banks named therein as lenders (3)
4.7 Zero Coupon Loan Agreement, dated as of November 1,
1994, by and between WLSP Investment Partners I,
Neweol Finance B.V., Electrolux Holdings B.V., Man
Producten Rotterdam B.V., Adinvest A.G., and
Wachovia Bank of Georgia, N.A. (2)
4.8 MIPS Guarantee Agreement, dated August 15, 1994 (4)
4.9 Indenture, dated as of August 15, 1994, by and
between LGII, as issuer, Loewen, as guarantor, and
State Street Bank and Trust Company, as trustee
with respect to 9.45% Junior Subordinated
Debentures, Series A, due 2024, issued by LGII and
guaranteed by Loewen (4)
4.10 Exchange Acknowledgment by Loewen, with respect to
the 1994 Exchangeable Floating Rate Debentures due
July 15, 2001 issued by LGII, dated June 15, 1994
(2)
4.11 1994 MEIP Credit Agreement, dated as of June 14,
1994, by and between Loewen Management Investment
Corporation, in its capacity as agent for LGII
("LMIC"), Loewen and the banks listed therein (the
"MEIP Banks") and Wachovia Bank of Georgia, N.A.,
as agent for the MEIP Banks ("MEIP Agent") (2)
4.12 Guaranty dated as of June 14, 1994 by Loewen in
favor of the MEIP Agent for the ratable benefit of
the MEIP Banks (2)
4.13 Guaranty dated as of June 14, 1994 by LGII in favor
of the MEIP Agent for the ratable benefit of the
MEIP Banks (2)
<PAGE>
Exhibit
Number Description
------ -----------
4.14 Security Agreement, dated as of June 14, 1994, by
and between LMIC and the MEIP Agent (2)
4.15 Note Agreement, dated for reference September 1,
1993, by and between Loewen and LGII re 9.62%
Senior Guaranteed Notes, Series D, due September
11, 2003, issued by Loewen ("Series D Notes"), as
amended on June 10, 1994 (2)
4.16 Note Agreement by LGII and Loewen re 6.49% Senior
Guaranteed Notes, Series E, due February 25, 2004,
issued by LGII ("Series E Notes"), dated for
reference February 1, 1994 (2)
4.17 Guaranty Agreement by Loewen re Series E Notes,
dated for reference February 1, 1994 (2)
4.18 Guaranty Agreement by LGII re Series D Notes, dated
for reference April 1, 1993 (2)
4.19 Note Agreement by Loewen and LGII re 9.70% Senior
Guaranteed Notes, Series A, due November 1, 1998,
issued by LGII ("Series A Notes"), 9.93% Senior
Guaranteed Notes, Series B, due November 1, 2001,
issued by LGII ("Series B Notes"), and 9.70% Senior
Guaranteed Notes, Series C, due November 1, 1998,
issued Loewen ("Series C Notes"), dated for
reference October 1, 1991 (2)
4.20 Guaranty Agreement by Loewen re Series A Notes and
Series B Notes, dated for reference October 1, 1991
(2)
4.21 Guaranty Agreement by LGII re Series C Notes, dated
for reference October 1, 1991 (2)
4.22 Form of Senior Guarantee of the Notes (included in
Exhibit 4.1) (1)
4.23 Form of Global Outstanding Note (included in
Exhibit 4.1) (1)
4.24 Form of Physical Outstanding Note (included in
Exhibit 4.1) (1)
4.25 Form of Global Exchange Note
4.26 Form of Physical Exchange Note
4.27 Credit Agreement, dated as of May 15, 1996, among
LGII, as borrower, Loewen, as a guarantor, the
lenders named therein, as the lenders, Goldman,
Sachs & Co., as the documentation agent and Bank of
Montreal, as issuer, swingline lender and agent*
4.28 Collateral Trust Agreement, dated as of May 15,
1996, among Bankers Trust Company, as trustee,
TLGI, LGII and various other pledgers*
4.29 Second Amendment, dated for reference May 15, 1996,
to Note Agreements, dated for reference October 1,
1991, among Loewen, LGII and institutions named
therein, re Series A Notes, Series B Notes and
Series C Notes*
4.30 Second Amendment, dated for reference May 15, 1996,
to Note Agreements, dated for reference September
1, 1993, among Loewen, LGII and institutions named
therein, re Series D Notes*
<PAGE>
Exhibit
Number Description
-------- ------------
4.31 Second Amendment, dated for reference May 15, 1996,
to Note Agreements, dated for reference February 1,
1994, among Loewen, LGII and Teachers Insurance and
Annuity Association of America, re Series E Notes*
4.32 Loewen and LGII hereby agree to furnish to the
Commission, upon request, a copy of the instruments
which define the rights of holders of long-term
debt of the Company. None of such instruments not
included as exhibits herein collectively represents
long-term debt in excess of 10% of the consolidated
total assets of the Company.
5 OPINIONS RE LEGALITY
5.1 Opinion of Thelen, Marrin, Johnson & Bridges as to
the legality of the Exchange Notes
5.2 Opinion of Russell & DuMoulin as to the legality of
the Guarantees with respect to the Exchange Notes
8 OPINIONS AS TO TAX MATTERS
8.1 Opinion of Thelen, Marrin, Johnson & Bridges as to
U.S. federal tax matters
8.2 Opinion of Russell & DuMoulin as to Canadian
federal tax matters
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (1) (5)
12 STATEMENT RE COMPUTATION OF RATIOS
12.1 Statement re Computation of Earnings to Fixed
Charges Ratio (Canadian GAAP)
12.2 Statement re Computation of Earnings to Fixed
Charges Ratio (U.S. GAAP)
23 CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Thelen, Marrin, Johnson & Bridges
(included in Exhibits 5.1 and 8.1)
23.2 Consent of Russell & DuMoulin (included in Exhibits
5.2 and 8.2)
23.3 Consent of KPMG
23.4 Consent of Price Waterhouse LLP
23.5 Consent of Richter, Usher & Vineberg
23.6 Consent of Altschuler, Melvion and Glasser LLP
23.7 Consents of Keith J. Schulte Accountancy Corporation
23.8 Consents of Hirsch, Oelbaum, Bram & Hanover
23.9 Consent of The Dun & Bradstreet Corporation*
23.10 Consent of KPMG Peat Marwick LLP
23.11 Consent of KPMG
23.12 Consent of Peat Marwick
<PAGE>
Exhibit
Number Description
------ -----------
24 POWERS OF ATTORNEY
24.1 Loewen Group International, Inc. Powers of
Attorney*
24.2 The Loewen Group Inc. Powers of Attorney*
25 STATEMENT OF ELIGIBILITY OF TRUSTEE*
99 ADDITIONAL EXHIBITS
99.1 Form of Transmittal Letter*
99.2 Form of Notice of Guaranteed Delivery*
- --------
*Previously filed
(1) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1995, filed on March 28, 1996
(2) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1994, filed on March 31, 1995
(3) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995, filed on May 11, 1995
(4) Incorporated by reference from the combined Form F-9/F-3 Registration
Statements filed by Loewen and LGII, respectively, (Nos. 33-81032 and 33-
81034) with the Commission on July 1, 1994, as amended on July 11, 1994,
July 22, 1994 and August 2, 1994
(5) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed on August 14, 1996
<PAGE>
EXHIBIT 4.25
[FORM OF GLOBAL EXCHANGE NOTE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 2.09
AND 2.10 OF THE INDENTURE.
LOEWEN GROUP INTERNATIONAL, INC.
___% SERIES __ SENIOR GUARANTEED NOTES DUE 200_
No. ___ $ __________
CUSIP No. __________
LOEWEN GROUP INTERNATIONAL, INC., a corporation incorporated under the
laws of the State of Delaware (herein called the "Company", which term includes
any successor corporation under the Indenture hereinafter referred to), for
value received, hereby promises to pay to CEDE & Co. or registered assigns, the
principal sum of ________________ Dollars on April 15, 200_, at the office or
agency of the Company referred to below, and to pay interest thereon on April 15
and October 15, in each year, commencing on October 15, 1996, accruing from the
most recent Interest Payment Date to which interest has been paid or duly
provided for or, if no interest has been paid, from the original date of
issuance, at the rate of __% per annum, until the principal hereof is paid or
duly provided for. Interest shall be computed on the basis of a 360-day year of
twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid to the person in whose name this Global Note (or one or
more Predecessor Notes) is registered at the close of business on the Regular
Record Date for such interest, which shall be April 1 or October 1 (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date (each a "Regular Record Date"). Any such interest not so punctually paid,
or duly provided for, and interest on such defaulted interest at the rate borne
by the Global Note, to the extent lawful, shall forthwith cease to be payable to
the Holder on such Regular Record Date, and may be paid to the person in whose
name this Global Note (or one or more Predecessor Notes) is registered at the
close of business on a special record date for the payment of such defaulted
interest to be fixed by the Trustee, notice of which shall be given to the
Holder of this Global Note not less than 10 days prior to such special record
date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which this Global Note
<PAGE>
may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in such Indenture.
The Holder of this Global Note is entitled to the benefits of a
Registration Rights Agreement, dated as of March 20, 1996, among the Company,
the Guarantor and the Initial Purchasers named therein (the "Registration Rights
Agreement"). The Registration Rights Agreement contains provisions permitting
an increase in the interest rate borne by this Global Note in the event of the
failure to file or to have declared effective an Exchange Offer Registration
Statement or Shelf Registration Statement (as such terms are defined in the
Registration Rights Agreement), or to consummate an Exchange Offer within
prescribed time periods specified in such Registration Rights Agreement.
Payment of the principal of, premium, if any, and interest on this
Global Note will be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan in The City of New York, or at such
other office or agency of the Company as may be maintained for such purpose, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however, that
-------- -------
payment of interest may be made at the option of the Company by check mailed to
the address of the person entitled thereto as such address shall appear on the
security register maintained by the Registrar.
Reference is hereby made to the further provisions of this Global Note
set forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, and a seal
has been affixed hereon, this Global Note shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: ____ __, 1996
LOEWEN GROUP INTERNATIONAL, INC.
By:
----------------------------------
Name:
Title:
[SEAL]
Attest:
By:
-------------------------
Title:
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series designated therein referred to
in the within-mentioned Indenture.
FLEET NATIONAL BANK,
as TRUSTEE
By:
----------------------------------
Authorized Officer
<PAGE>
(Reverse of Global Note)
1. Indenture. This Global Note is one of a duly authorized series of
---------
Senior Notes of the Company designated as its __% Series _ Senior Guaranteed
Notes due 200_, originally issued in an aggregate principal amount of $________
(the "Senior Notes"), which may be issued under an indenture (herein called the
"Indenture") dated as of March 20, 1996, among Loewen Group International, Inc.,
a Delaware corporation, as issuer (the "Company"), The Loewen Group Inc., as
guarantor of the obligations of the Company under the Indenture (the
"Guarantor") and Fleet National Bank of Connecticut, now known as Fleet National
Bank, a national banking association, as trustee (herein called the "Trustee,"
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties, obligations
and immunities thereunder of the Company, the Trustee, the Guarantor and the
Holder of this Global Note, and of the terms upon which this Global Note is, and
is to be, authenticated and delivered.
All capitalized terms used in this Global Note which are defined in
the Indenture and not otherwise defined herein shall have the meanings assigned
to them in the Indenture.
No reference herein to the Indenture and no provisions of this Global
Note or of the Indenture shall alter or impair the obligation of the Company or
the Guarantor, which is absolute and unconditional, to pay the principal of,
premium, if any, and interest on this Global Note at the times, place and rate,
and in the coin or currency, herein prescribed.
2. Redemption. This Global Note will not be
----------
redeemable at the option of the Company.
3. Guarantee. This Global Note is entitled to a senior Guarantee
---------
made for the benefit of the Holders. Reference is hereby made to the Guarantee
attached hereto and the Indenture (including, without limitation, Article 10
thereof) for the terms of the Guarantee.
4. Offers to Purchase. Sections 4.11 and 4.12 of the Indenture
------------------
provide that upon the occurrence of a Change of Control and following certain
Asset Sales, and subject to further limitations contained therein, the Company
shall make an offer to purchase certain amounts of the Global Note in accordance
with the procedures set forth in the Indenture.
5. Defaults and Remedies. If an Event of Default shall occur and be
---------------------
continuing, the principal of all of the outstanding Senior Notes, plus all
accrued and unpaid interest, if any, to and including the date the Senior Notes
are paid, may be declared due and payable in the manner and with the effect
provided in the Indenture.
6. Defeasance. The Indenture contains provisions (which provisions
----------
apply to this Senior Note) for defeasance at any time of (a) the entire
indebtedness of the Company and the Guarantor under this Global Note and (b)
certain restrictive covenants and related Defaults and Events of Default, in
each case upon compliance by the Company with certain conditions set forth
therein.
7. Amendments and Waivers. The Indenture permits, with certain
----------------------
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders under
the Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount of the Senior
Notes of each series at the time outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of each series of the Senior Notes at the time outstanding, on
behalf of the Holders of all the Senior Notes
<PAGE>
of such series, to waive compliance by the Company with certain provisions of
the Indenture and certain past Defaults under the Indenture and this Global Note
and their consequences. Any such consent or waiver by or on behalf of the Holder
of this Global Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Global Note and of any Global Note issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent or waiver is made upon this Senior Note.
8. Denominations, Transfer and Exchange. The Senior Notes are
------------------------------------
issuable only in registered form without coupons in denominations of $1,000 and
any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, the Senior Notes are exchangeable for a
like aggregate principal amount of Senior Notes of a different authorized
denomination, as requested by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Global Note is registrable on the
security register of the Company, upon surrender of this Global Note for
registration of transfer at the office or agency of the Company maintained for
such purpose in the Borough of Manhattan in The City of New York or at such
other office or agency of the Company as may be maintained for such purpose,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more new
Senior Notes, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
No service charge shall be made for any registration of transfer or
exchange or redemption of Senior Notes, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
9. Persons Deemed Owners. Prior to and at the time of due
---------------------
presentment of this Global Note for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the person in
whose name this Global Note is registered as the owner hereof for all purposes,
whether or not this Global Note shall be overdue, and neither the Company, the
Trustee nor any agent shall be affected by notice to the contrary.
10. Governing Law. This Global Note and the Guarantee shall be
-------------
governed by and construed in accordance with the laws of the State of New York,
without regard to conflicts of law principles.
<PAGE>
Schedule A
Exchange of (a) portions of this Global Note for
Physical Notes or (b) Physical Notes
for an interest in this Global Note.
Principal Amount of
Physical Notes
Issued in Exchange
for, or Exchanged for Remaining Principal
an Interest in, the Amount of this Notation
Date Global Note this Global Note Made By
- ---- --------------------------- ----------------------- --------------
- ---- --------------------------- ----------------------- --------------
- ---- --------------------------- ----------------------- --------------
- ---- --------------------------- ----------------------- --------------
- ---- --------------------------- ----------------------- --------------
- ---- --------------------------- ----------------------- --------------
- ---- --------------------------- ----------------------- --------------
- ---- --------------------------- ----------------------- --------------
- ---- --------------------------- ----------------------- --------------
<PAGE>
SENIOR GUARANTEE
----------------
For value received, the undersigned hereby unconditionally guarantees
to the Holder of this Global Note the payments of principal of, premium, if any,
and interest on this Global Note in the amounts and at the time when due, and
interest on the overdue principal, premium, if any, and interest, if any, on
this Global Note, if lawful, and the payment or performance of all other
obligations of the Company under the Indenture or the Senior Notes, to the
Holder of this Global Note and the Trustee, all in accordance with and subject
to the terms and limitations of this Global Note, the Indenture (including
without limitation Article 10 thereof) and this Guarantee. This Guarantee will
become effective in accordance with Article Ten of the Indenture and its terms
shall be evidenced therein. The validity and enforceability of the Guarantee
shall not be affected by the fact that it is not affixed to any particular Note.
The obligations of the undersigned to the Holders of Senior Notes and
to the Trustee pursuant to the Guarantee and the Indenture are expressly set
forth in the Indenture (including without limitation Article 10 thereof) and
reference is hereby made to the Indenture for the precise terms of the Guarantee
and all of the other provisions of the Indenture to which this Guarantee
relates. Each Holder of a Note, by accepting the same, agrees to and shall be
bound by such provisions.
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this instrument to be
duly executed under its corporate seal.
Dated: ____ ___, 1996
THE LOEWEN GROUP INC.
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
[CORPORATE SEAL]
Attest:
By:
-------------------------
Title:
<PAGE>
EXHIBIT 4.26
[FORM OF PHYSICAL EXCHANGE NOTE]
LOEWEN GROUP INTERNATIONAL, INC.
__% SERIES __ SENIOR GUARANTEED NOTES DUE 200_
No. ___ $__________
CUSIP No. __________
LOEWEN GROUP INTERNATIONAL, INC., a corporation incorporated under the
laws of the State of Delaware (herein called the "Company", which term includes
any successor corporation under the Indenture hereinafter referred to), for
value received, hereby promises to pay to ___________________, or registered
assigns, the principal sum of ___________ Dollars on April 15, 200_, at the
office or agency of the Company referred to below, and to pay interest thereon
on April 15 and October 15, in each year, commencing on October 15, 1996,
accruing from the most recent Interest Payment Date to which interest has been
paid or duly provided for or, if no interest has been paid, from the original
date of issuance, at the rate of ___% per annum, until the principal hereof is
paid or duly provided for. Interest shall be computed on the basis of a 360-day
year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid to the person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on the Regular Record
Date for such interest, which shall be April 1 or October 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date
(each a "Regular Record Date"). Any such interest not so punctually paid, or
duly provided for, and interest on such defaulted interest at the rate borne by
the Notes, to the extent lawful, shall forthwith cease to be payable to the
Holder on such Regular Record Date, and may be paid to the person in whose name
this Note (or one or more Predecessor Notes) is registered at the close of
business on a special record date for the payment of such defaulted interest to
be fixed by the Trustee, notice of which shall be given to Holders of the Notes
not less than 10 days prior to such special record date, or may be paid at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in such Indenture.
The Holder of this Note is entitled to the benefits of a Registration
Rights Agreement, dated as of March 20, 1996, among the Company, the Guarantor
and the Initial Purchasers named therein (the "Registration Rights Agreement").
The Registration Rights Agreement contains provisions permitting an increase in
the interest rate borne by this Note in the event of the failure to file or to
have declared effective an Exchange Offer Registration Statement or Shelf
Registration Statement (as such terms are defined in the Registration Rights
Agreement), or to consummate an Exchange Offer within prescribed time periods
specified in such Registration Rights Agreement.
Payment of the principal of, premium, if any, and interest on this
Note will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan in The City of New York, or at such other
office or agency of the Company as may be maintained for such purpose, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that
-------- -------
payment of interest may be made at the option of the Company by check mailed to
the address of the person entitled thereto as such address shall appear on the
security register maintained by the Registrar.
<PAGE>
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, and a seal
has been affixed hereon, this Note shall not be entitled to any benefit under
the Indenture, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: ____ __, 1996
LOEWEN GROUP INTERNATIONAL, INC.
By:
-----------------------------------
Name:
Title:
[SEAL]
Attest:
By:
------------------------
Title:
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series designated therein referred to
in the within-mentioned Indenture.
FLEET NATIONAL BANK,
as TRUSTEE
By:
----------------------------
Authorized Officer
<PAGE>
(Reverse of Note)
1. Indenture. This Note is one of a duly authorized series of Senior
---------
Notes of the Company designated as its __% Series _ Senior Guaranteed Notes due
200_, originally issued in an aggregate principal amount of $_____________ (the
"Senior Notes"), which may be issued under an indenture (herein called the
"Indenture") dated as of March 20, 1996, among Loewen Group International, Inc.,
a Delaware corporation, as issuer (the "Company"), The Loewen Group Inc., as
guarantor of the obligations of the Company under the Indenture (the
"Guarantor") and Fleet National Bank of Connecticut, now known as, Fleet
National Bank, a national banking association, as trustee (herein called the
"Trustee," which term includes any successor Trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee, the Guarantor
and the Holders of the Senior Notes, and of the terms upon which the Senior
Notes are, and are to be, authenticated and delivered.
All capitalized terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
No reference herein to the Indenture and no provisions of this Note or
of the Indenture shall alter or impair the obligation of the Company or the
Guarantor, which is absolute and unconditional, to pay the principal of,
premium, if any, and interest on this Note at the times, place and rate, and in
the coin or currency, herein prescribed.
2. Redemption. This Note will not be redeemable at the option of the
----------
Company.
3. Guarantee. This Note is entitled to a senior Guarantee made for
---------
the benefit of the Holders. Reference is hereby made to the Guarantee attached
hereto and the Indenture (including, without limitation, Article 10 thereof) for
the terms of the Guarantee.
4. Offers to Purchase. Sections 4.11 and 4.12 of the Indenture
------------------
provide that upon the occurrence of a Change of Control and following certain
Asset Sales, and subject to further limitations contained therein, the Company
shall make an offer to purchase certain amounts of the Senior Notes in
accordance with the procedures set forth in the Indenture.
5. Defaults and Remedies. If an Event of Default shall occur and be
---------------------
continuing, the principal of all of the Senior Notes, plus all accrued and
unpaid interest, if any, to and including the date the Senior Notes are paid,
may be declared due and payable in the manner and with the effect provided in
the Indenture.
6. Defeasance. The Indenture contains provisions (which provisions
----------
apply to this Note) for defeasance at any time of (a) the entire indebtedness of
the Company and the Guarantor under this Note and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance by the Company with certain conditions set forth therein.
7. Amendments and Waivers. The Indenture permits, with certain
----------------------
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders under
the Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount of the Senior
Notes of each series at the time outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of each series of the Senior Notes at the time outstanding, on
behalf of the Holders of all the Senior Notes
<PAGE>
of such series, to waive compliance by the Company with certain provisions of
the Indenture and certain past Defaults under the Indenture and this Note and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Senior Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note.
8. Denominations, Transfer and Exchange. The Senior Notes are
------------------------------------
issuable only in registered form without coupons in denominations of $1,000 and
any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, the Senior Notes are exchangeable for a
like aggregate principal amount of Senior Notes of a different authorized
denomination, as requested by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable on the security
register of the Company, upon surrender of this Note for registration of
transfer at the office or agency of the Company maintained for such purpose in
the Borough of Manhattan in The City of New York or at such other office or
agency of the Company as may be maintained for such purpose, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Senior Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
No service charge shall be made for any registration of transfer or
exchange or redemption of Senior Notes, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
9. Persons Deemed Owners. Prior to and at the time of due
---------------------
presentment of this Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the person in whose name
this Note is registered as the owner hereof for all purposes, whether or not
this Note shall be overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
10. Governing Law. This Note and the Guarantee shall be governed by
-------------
and construed in accordance with the laws of the State of New York, without
regard to conflicts of law principles.
<PAGE>
SENIOR GUARANTEE
----------------
For value received, the undersigned hereby unconditionally guarantees
to the Holder of this Global Note the payments of principal of, premium, if any,
and interest on this Global Note in the amounts and at the time when due, and
interest on the overdue principal, premium, if any, and interest, if any, on
this Global Note, if lawful, and the payment or performance of all other
obligations of the Company under the Indenture or the Senior Notes, to the
Holder of this Global Note and the Trustee, all in accordance with and subject
to the terms and limitations of this Global Note, the Indenture (including
without limitation Article 10 thereof) and this Guarantee. This Guarantee will
become effective in accordance with Article Ten of the Indenture and its terms
shall be evidenced therein. The validity and enforceability of the Guarantee
shall not be affected by the fact that it is not affixed to any particular Note.
The obligations of the undersigned to the Holders of Senior Notes and
to the Trustee pursuant to the Guarantee and the Indenture are expressly set
forth in the Indenture (including without limitation Article 10 thereof) and
reference is hereby made to the Indenture for the precise terms of the Guarantee
and all of the other provisions of the Indenture to which this Guarantee
relates. Each Holder of a Note, by accepting the same, agrees to and shall be
bound by such provisions.
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this instrument to be
duly executed under its corporate seal.
Dated: ____ ___, 1996
THE LOEWEN GROUP INC.
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
[CORPORATE SEAL]
Attest:
By:
-------------------------
Title:
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF THELEN, MARRIN, JOHNSON & BRIDGES]
August 23, 1996
Loewen Group International, Inc.
50 East RiverCenter Blvd., Suite 800
Covington, KY 41011
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia V5G 3S8
Canada
Ladies and Gentlemen:
We have acted as United States counsel for The Loewen Group Inc., a
corporation organized under the laws of British Columbia ("Loewen") and Loewen
Group International, Inc., a Delaware corporation ("LGII"), in connection with
the preparation and filing of the combined Registration Statement on Form S-4,
File Nos. 333-3135 and 333-3135-01, filed by Loewen and LGII with the Securities
and Exchange Commission (the "SEC") on May 3, 1996, as subsequently amended (the
"Registration Statement"). The Registration Statement relates to (i) the
issuance of up to an aggregate principal amount of $225,000,000 7 1/2% Series 3
Senior Guaranteed Notes due 2001 of LGII (the "Series 3 Notes") in exchange for
a like principal amount of its issued and outstanding 7 1/2% Series 1 Senior
Guaranteed Notes due 2001 (the "Series 1 Notes"), (ii) the issuance of up to an
aggregate principal amount of $125,000,000 8 1/4% Series 4 Senior Guaranteed
Notes due 2003 of LGII (the "Series 4 Notes") in exchange for a like principal
amount of its issued and outstanding 8 1/4% Series 2 Senior Guaranteed Notes due
2003 (the "Series 2 Notes"), (iii) the guarantee by Loewen of the Series 3 Notes
(the "Series 3 Guarantee") and (iv) the guarantee by Loewen of the Series 4
Notes (together with the Series 3 Guarantee, the "Guarantees"). The Series 1
Notes, Series 2 Notes, Series 3 Notes and Series 4 Notes and the Guarantees are
included in an Indenture dated March 20, 1996 (the "Indenture") by and between
Loewen, LGII and Fleet National Bank, as Trustee.
In this capacity, we have made such investigations and have reviewed
such other documents as we have deemed necessary or appropriate under the
circumstances, and have made such examinations of law as we have deemed
appropriate for purpose of giving the opinions expressed herein.
We also have been furnished with and have examined originals or
copies, certified or otherwise identified to our satisfaction, of all such
records of Loewen and LGII, agreements and other instruments, certificates of
officers and representative of Loewen and LGII, certificates
<PAGE>
Loewen Group International, Inc.
The Loewen Group Inc.
August 23, 1996
Page 2
of public officials and other documents as we have deemed necessary to require
as a basis for the opinions hereinafter expressed.
In making such examinations, we have assumed (i) the genuineness of
all signatures, (ii) the authenticity of all documents submitted to us as
originals; (iii) the conformity to original documents of all documents submitted
to us as certified copies or photocopies; (iv) the authority of all persons
signing documents examined by us except as to persons signing documents on
behalf of Loewen and LGII; (v) the identity and capacity of all individuals
acting or purporting to act as public officials; and (vi) the absence of
evidence extrinsic to the provisions of the Indenture that the respective
parties thereto intended a meaning contrary to that expressed by the provisions
of such agreements.
Based on the foregoing, we are of the opinion that:
(1) When the Series 3 Notes and the Series 4 Notes (collectively, the
"Exchange Notes") have been duly executed and authenticated as provided in the
Indenture, and delivered in exchange for the Series 1 Notes and Series 2 Notes
as described in the Registration Statement, the Exchange Notes will be valid and
legally binding obligations of LGII and will be entitled to the benefits of the
Indenture, subject to (a) limitations imposed by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights generally, including, without limitation, laws
relating to fraudulent transfers or conveyances, preferences and equitable
subordination, and (b) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), including
without limitation, an implied covenant of good faith and fair dealing.
(2) Assuming that the Guarantees and the Indenture have been
authorized by Loewen in accordance with the laws of British Columbia, when the
Guarantees are duly executed and delivered by Loewen in the manner contemplated
in the Registration Statement, the Guarantees will be valid and legally binding
obligations of Loewen, subject as to enforcement to bankruptcy, insolvency,
reorganization, moratorium, laws relating to fraudulent transfers or
conveyances, preferences and equitable subordination or similar laws relating to
or affecting the enforcement of creditors' rights generally, and general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), including without limitation, an implied
covenant of good faith and fair dealing.
We are authorized to engage in the practice of law only with respect
to the federal laws of the Untied States of America and the laws of the States
of California and New York and the General Corporate Law of the State of
Delaware and do not purport to be experts with respect to the laws of any other
jurisdiction, and we express no opinion as to the laws of any other state or
jurisdiction.
<PAGE>
Loewen Group International, Inc.
The Loewen Group Inc.
August 23, 1996
Page 3
We hereby consent to the filing of this opinion with the SEC as an
exhibit to the Registration Statement. We further consent to the use of our name
under the heading "Legal Matters" in the prospectus filed with the SEC as a part
of the Registration Statement.
Very truly yours,
/s/ Thelen, Marrin, Johnson & Bridges
THELEN, MARRIN, JOHNSON & BRIDGES
MLJ/WFO
<PAGE>
EXHIBIT 5.2
[LETTERHEAD OF RUSSELL & DUMOULIN]
Loewen Group International, Inc. August 23, 1996
50 East RiverCenter Boulevard
Covington, KY 41011 Matter No. LOE 20030
USA
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, BC V5G 3S8
Canada
Dear Sirs/Mesdames:
We have acted as British Columbia counsel for The Loewen Group Inc., a body
corporate organized under the laws of British Columbia ("Loewen") and Loewen
Group International, Inc., a Delaware corporation ("LGII") in connection with
the preparation of the combined Registration Statement on Form S-4 and Amendment
No. 2 to such Registration Statement to be filed by LGII and Loewen with the
Securities and Exchange Commission (the "SEC") on August 26, 1996, (the
"Registration Statement"), respecting (i) the guarantee (the "Series 3
Guarantee") by Loewen of 7 1/2% Series 3 Senior Guaranteed Exchange Notes due
2001 to be offered by LGII and (ii) the guarantee (the "Series 4 Guarantee") by
Loewen of 8 1/4% Series 4 Senior Guaranteed Exchange Notes due 2003 to be
offered by LGII (the Series 3 Guarantee together with the Series 4 Guarantee,
the "Guarantees") pursuant to the Indenture dated as of March 20, 1996, (the
"Indenture") made by and among LGII, Loewen and Fleet National Bank, as Trustee.
In this capacity, we have made such investigations and have reviewed such other
documents as we have deemed necessary or appropriate under the circumstances,
and have made such examinations of law as we have deemed appropriate for the
purpose of giving the opinions expressed herein.
We also have been furnished with and have examined originals or copies,
certified or otherwise identified to our satisfaction, of all such records of
Loewen and LGII, agreements and other instruments, certificates of officers and
representatives of Loewen and LGII, certificates of public officials and other
documents as we have deemed necessary to require as a basis for the opinion
hereinafter expressed.
<PAGE>
-2-
In making such examinations, we have assumed (i) the genuineness of all
signatures; (ii) the authenticity of all documents submitted to us as originals;
(iii) the conformity to original documents of all documents submitted to us as
certified copies or photocopies; (iv) the authority of all persons signing
documents examined by us except as to persons signing documents on behalf of
Loewen and LGII; (v) the identity and capacity of all individuals acting or
purporting to act as public officials; (vi) the absence of evidence extrinsic to
the provisions of the Guarantees or the Indenture that the respective parties
thereto intended a meaning contrary to that expressed by the provisions of such
agreements; and (vii) that each of the Guarantees and the Indenture, when
executed and delivered, will be executed and delivered in substantially the
form in which such document was filed with the SEC as part of the Registration
Statement.
Based on the foregoing, we are of the opinion that:
1. The Guarantees and the Indenture have been authorized by Loewen in
accordance with the laws of British Columbia.
2. The statements in the prospectus included in the Registration Statement
(the "Prospectus") as to the enforceability of the Guarantees in Canada
under the heading "Enforceability of Certain Civil Liabilities Against
Guarantor" to the extent that such matters represent matters of law or
legal conclusions, are accurate and complete statements or summaries of the
matters set forth therein.
We express no opinions as to matters of law in jurisdiction other than the
Province of British Columbia and the laws of Canada applicable therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We further consent to the use of our name under the
headings "Legal Matters" and "Enforceability of Certain Civil Liabilities
Against Guarantor" in the prospectus filed with the SEC as a part of the
Registration Statement.
Yours truly,
RUSSELL & DuMOULIN
/s/ Russell & DuMoulin
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF THELEN, MARRIN, JOHNSON & BRIDGES]
August 23, 1996
Loewen Group International, Inc.
Suite 800
50 East RiverCenter Blvd.
Covington, KY 41011
Ladies and Gentlemen:
We have acted as United States counsel for Loewen Group International,
Inc., a Delaware corporation (the "Company"), in connection with the preparation
of the Registration Statement on Form S-4 (the "Registration Statement"), filed
May 3, 1996, as amended by Amendment No. 1 to such Registration Statement filed
on June 20, 1996, and Amendment No. 2 to such Registration Statement to be filed
by the Company with the Securities and Exchange Commission (the "SEC") on
August 26, 1996, respecting the offer by the Company to exchange Series 3
Exchange Notes for the Company's outstanding Series 1 Notes and to exchange
Series 4 Exchange Notes for the Company 's outstanding Series 2 Notes.
You have requested our opinion with respect to the accuracy of the
discussions included in the Registration Statement under the heading "Certain
U.S. Federal Income Tax Considerations."
In our capacity as United States counsel for the Company, we have been
furnished with and have examined originals or copies, certified or otherwise
identified to our satisfaction, of such records of the Company, agreements and
other instruments, certificates of officers and representative of the Company,
certificates of public officials and other documents as we have deemed necessary
to require as a basis for the opinion hereinafter expressed. In making such
examinations, we have assumed (i) the genuineness of all signatures, (ii) the
authenticity of all documents submitted to us as originals; (iii) the conformity
to original documents of all documents submitted to us as certified copies or
photocopies; (iv) the identity and capacity of all individuals acting or
purporting to act as public officials; (v) that all representations and
statements set forth in the documents submitted to us are true
<PAGE>
Loewen Group International, Inc.
August 23, 1996
Page 2
and correct; and (vi) that all obligations imposed by any of the documents
submitted to us are enforceable in accordance with their terms.
We have also made such investigations and have reviewed such other
documents as we have deemed necessary or appropriate under the circumstances,
and have made such examinations of law as we have deemed appropriate for purpose
of giving the opinions expressed herein.
All capitalized terms used without definition in this letter have the
same meaning as in the Registration Statement.
Based on the foregoing, we are of the following opinion:
The statements concerning United States taxation set forth in the
Registration Statement under the heading "Certain U.S. Federal Income Tax
Considerations," to the extent that such statements represent matters of law or
legal conclusions, describe the material United States federal income tax
consequences expected to result to a holder of Series 1 Notes who exchanges such
notes for Series 3 Exchange Notes and to a holder of Series 2 Notes who
exchanges such notes for Series 4 Exchange Notes, subject, however, to the
limitation set forth in the Registration Statement that the statements apply
only to Series 1 and Series 2 Notes held as capital assets and do not purport to
address all aspects of federal income taxation or all tax considerations that
may be relevant to all categories of potential purchasers.
Our opinion is based on the Internal Revenue Code of 1986, as amended;
applicable Treasury regulations thereunder; judicial authority and
administrative rulings and practices now in effect, changes to any of which
after the date of the Registration Statement could apply on a retroactive basis
and affect the consequences described in the Registration Statement.
<PAGE>
Loewen Group International, Inc.
August 23, 1996
Page 3
We hereby consent to the filing of this opinion with the SEC as an
exhibit to the Registration Statement. We further consent to the use of our name
under the heading "Legal Matters" in the prospectus filed with the SEC as a part
of the Registration Statement.
Very truly yours,
/s/ Thelen, Marrin, Johnson & Bridges
THELEN, MARRIN, JOHNSON & BRIDGES
JMM:JRB:rg
<PAGE>
EXHIBIT 8.2
[LETTERHEAD OF RUSSEL & DuMOULIN]
Loewen Group International, Inc. August 23, 1996
50 East RiverCenter Blvd., Suite 800
Covington, KY 41011 Matter No. LOE20030
U.S.A. Direct Line:
(604) 631-3142
Ladies and Gentlemen:
We have acted as Canadian counsel for Loewen Group International, Inc., a
Delaware corporation (the "Company"), and The Loewen Group Inc., a corporation
under the laws of British Columbia (the "Guarantor"), in connection with the
preparation of the Registration Statement on Form S-4 filed by the Company with
the Securities and Exchange Commission (the "SEC") on May 3, 1996, as amended on
August 26, 1996 and as may be further amended and supplemented (the
"Registration Statement"), respecting the offer by the Company to exchange
Series 3 Exchange Notes for the Company's outstanding Series 1 Notes and to
exchange Series 4 Exchange Notes for the Company's outstanding Series 2 Notes.
You have requested our opinion with respect to the accuracy of the discussions
included in the Registration Statement under the heading "Certain Federal Income
Tax Considerations."
In our capacity as Canadian counsel for the Company, we have been furnished with
and have examined originals or copies, certified or otherwise identified to our
satisfaction, of such records of the Company, agreements and other instruments,
certificates of officers as representatives of the Company, certificates of
public officials and other documents as we have deemed necessary to require as a
basis for the opinion hereinafter expressed. In making such examinations, we
have assumed (i) the genuineness of all signatures; (ii) the authenticity of all
documents submitted to us as originals; (iii) the conformity to original
documents of all documents submitted to us as certified copies or photocopies;
(iv) the identity and capacity of all individuals acting or purporting to act as
public officials; (v) that all representations and statements set forth in the
documents submitted to us are true and correct; and (vi) that all obligations
imposed by any of the documents submitted to us are enforceable in accordance
with their terms.
We have also made such investigations and have reviewed such other documents as
we have deemed necessary or appropriate under the circumstances, and have made
such examinations of law as we have deemed appropriate for the purpose of giving
the opinions expressed herein.
<PAGE>
-2-
All capitalized terms used without definitions in this letter have the same
meaning as in the Registration Statement.
Based on the foregoing, we are of the opinion that, assuming the share exchanges
are made in accordance with the Exchange Offer and in the manner contemplated in
the Registration Statement, the statements concerning Canadian federal taxation
set forth in the Registration Statement under the heading "Certain Canadian
Federal Income Tax Considerations", to the extent that such statements represent
matters of law or legal conclusions, will represent an accurate description of
the material Canadian federal income tax consequences generally applicable to an
individual who is resident in the United States and not in Canada and who
exchanges Outstanding Notes for Exchange Notes pursuant to the Exchange Offer.
Our opinion is based on the current provisions of the Income Tax Act of Canada,
--------------
the regulations thereunder, our understanding of the current administrative
practices of Revenue Canada Customs, Excise and Taxation, income tax treaties to
which Canada is a party, including the Canada-U.S. Income Tax Convention (1980),
----------------------------------------
and existing judicial decisions, any of which could be changed at any time,
possibly on a retroactive basis. Any such changes could produce tax consequences
that could be different from the consequences described in the Registration
Statement. Our opinion is based on the assumptions described above, and if any
of such assumptions is incorrect, the tax consequences may be different from
the consequences described in the Registration Statement. Finally, our opinion
is not binding in any way on Revenue Canada Customs, Excise and Taxation or the
courts, which could reach conclusions as to the tax consequences that are
different from those described in the Registration Statement.
We hereby consent to the filing of this opinion with the SEC as an exhibit to
the Registration Statement. We further consent to the use of our name under the
heading "Legal Matters" and "Enforceability of Certain Civil Liabilities Against
Guarantor" in the prospectus filed with the SEC as a part of the Registration
Statement.
Yours truly,
RUSSELL & DuMOULIN
/s/ Frank S. Schober
- -----------------------------
Frank S. Schober
FSS/mwk
<PAGE>
EXHIBIT 12.1
THE LOEWEN GROUP INC.
COMPUTATION OF EARNINGS TO FIXED CHARGES RATIO
CANADIAN GAAP
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30 FOR THE YEAR ENDED DECEMBER 31,
------------------------- ------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------------ ------------ --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before
income taxes........... $ 52,446 $ 38,819 $(123,862) $58,232 $43,896 $31,480 $24,140
Fixed charges included
in earnings (loss)
before income taxes:
Interest on long-term
debt................. 39,546 23,942 50,913 34,203 21,801 19,083 14,913
Amortization of
deferred finance
costs................ 907 835 1,512 1,139 832 580 433
Dividends on preferred
securities of
subsidiary........... 1,772 1,772 7,088 2,678 -- -- --
------------ ------------ --------- ------- ------- ------- -------
42,225 26,549 59,513 38,020 22,633 19,663 15,346
------------ ------------ --------- ------- ------- ------- -------
Earnings (loss)......... $ 94,671 $ 65,368 $ (64,349) $96,252 $66,529 $51,143 $39,486
============ ============ ========= ======= ======= ======= =======
Fixed charges:
Fixed charges included
in earnings before
income taxes......... $ 42,225 $ 26,549 $ 59,513 $38,020 $22,633 $19,663 $15,346
Capitalized interest.. 1,219 834 2,722 1,128 117 -- --
------------ ------------ --------- ------- ------- ------- -------
Total fixed charges..... $ 43,444 $ 27,383 $ 62,235 $39,148 $22,750 $19,663 $15,346
============ ============ ========= ======= ======= ======= =======
Ratio of earnings to
fixed
charges (1)............ 2.2x 2.4x -- 2.5x 2.9x 2.6x 2.6x
============ ============ ========= ======= ======= ======= =======
</TABLE>
- --------
(1) The 1995 loss is not sufficient to cover fixed charges by a total of
$126,584, and as such the ratio of earnings to fixed charges has not been
computed.
<PAGE>
EXHIBIT 12.2
THE LOEWEN GROUP INC.
COMPUTATION OF EARNINGS TO FIXED CHARGES RATIO
U.S. GAAP
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JUNE 30 FOR THE YEAR ENDED DECEMBER 31,
----------------- ------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before
income taxes........... $ 49,725 $ 38,019 $(125,539) $57,877 $44,374 $33,964 $26,634
Fixed charges included
in earnings (loss)
before income taxes:
Interest on long-term
debt................. $39,546 $23,942 $ 50,913 $34,203 $22,337 $20,874 $17,058
Amortization of
deferred finance
costs................ 907 835 1,512 1,139 852 634 495
Dividends on preferred
securities of
subsidiary........... 1,772 1,772 7,088 2,678 -- -- --
-------- -------- --------- ------- ------- ------- -------
42,225 26,549 59,513 38,020 23,189 21,508 17,553
-------- -------- --------- ------- ------- ------- -------
Earnings (loss)......... $ 91,950 $ 64,568 $ (66,026) $95,897 $67,563 $55,472 $44,187
======== ======== ========= ======= ======= ======= =======
Fixed charges:
Fixed charges included
in earnings before
income taxes......... $ 42,225 $ 26,549 $ 59,513 $38,020 $23,189 $21,508 $17,553
Capitalized interest.. 1,219 834 2,722 1,128 120 -- --
-------- -------- --------- ------- ------- ------- -------
Total fixed charges..... $ 43,444 $ 27,383 $ 62,235 $39,148 $23,309 $21,508 $17,553
======== ======== ========= ======= ======= ======= =======
Ratio of earnings to
fixed
charges (1)............ 2.1x 2.4x -- 2.4x 2.9x 2.6x 2.5x
======== ======== ========= ======= ======= ======= =======
</TABLE>
- --------
(1) The 1995 loss is not sufficient to cover fixed charges by a total of
$128,261, and as such the ratio of earnings to fixed charges has not been
computed.
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
The Loewen Group Inc.
Loewen Group International, Inc.
We consent to the use of our report, dated February 26, 1996, except as to Note
12(b), which is as of March 19, 1996 and Note 20, which is as of March 26, 1996,
relating to the consolidated balance sheets of The Loewen Group Inc. as at
December 31, 1995 and 1994, and the related consolidated statements of
operations, retained earnings, and changes in financial position for each of the
years in the three year period ended December 31, 1995, and related schedule,
which report is incorporated herein by reference and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
August 23, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of
Loewen Group International, Inc. and
The Loewen Group Inc.
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-4 (Nos. 333-03135 and
333-03135-01) of the Loewen Group International, Inc. and The Loewen Group Inc.
of our report dated June 16, 1995 with respect to the financial statements of
MHI Group, Inc. as of April 30, 1995, and for each of the two years in the
period ended April 30, 1995, which appears as Exhibit No. 99.1 to The Loewen
Group Inc. Form 8-K dated May 1, 1996.
/s/ PRICE WATERHOUSE, LLP
Tampa, Florida
August 23, 1996
<PAGE>
EXHIBIT 23.5
AUDITORS' CONSENT
The Board of Directors of
Loewen Group International, Inc.
and The Loewen Group Inc.
We consent to the incorporation by reference in the registration statement on
Form S-4 of Loewen Group International, Inc. (Registration No. 333-03135) and
The Loewen Group Inc. (Registration No. 333-03135-01) of our report dated
February 27, 1996 with respect to the financial statements of Paperman & Sons
Inc. as of November 30, 1995 and for the eleven months then ended included in
the Current Report on Form 8-K of The Loewen Group Inc. dated May 1, 1996.
/s/ Richter, Usher & Vineberg
Montreal, Quebec
August 23, 1996
<PAGE>
EXHIBIT 23.6
INDEPENDENT AUDITORS' CONSENT
We have issued our report dated July 26, 1995, accompanying the consolidated
financial statements of Weinstein Family Services, Inc. and Subsidiaries as of
and for the year ended April 30, 1995 included in the current report on Form 8-K
of The Loewen Group Inc. dated May 1, 1996, which is incorporated by reference
in this registration statement. We hereby consent to the incorporation by
reference in the registration statement on Form S-4 (No. 333-03135-01 and No.
333-03135 of The Loewen Group Inc. and Loewen Group International, Inc.,
respectively), of the aforementioned report.
/s/ Altschuler, Melvion and Glasser LLP
Chicago, Illinois
August 23, 1996
<PAGE>
EXHIBIT 23.7
[LETTERHEAD OF KEITH J. SCHULTE ACCOUNTANCY CORPORATION]
The Board of Directors of
Loewen Group International, Inc. and
The Loewen Group Inc.
We consent to the incorporation by reference in the registration statement on
Form S-4 of Loewen Group International, Inc. and The Loewen Group Inc. (Reg. No.
333-03135 and 333-03135-01, respectively) of our report dated April 24, 1996,
with respect to the financial statements of Security Plus Mini & RV Storage,
Inc. as of December 31, 1994 and for the year then ended included in the Current
Report on Form 8-K of The Loewen Group Inc. dated May 1, 1996.
KEITH J. SCHULTE ACCOUNTANCY CORPORATION
BY: /s/ Keith J. Schulte
------------------------------------
Certified Public Accountant
Long Beach, California
August 23, 1996
<PAGE>
[LETTERHEAD OF KEITH J. SCHULTE ACCOUNTANCY CORPORATION]
The Board of Directors of
Loewen Group International, Inc. and
The Loewen Group Inc.
We consent to the incorporation by reference in the registration statement on
Form S-4 of Loewen Group International, Inc. and The Loewen Group Inc. (Reg. No.
333-03135 and 333-03135-01, respectively) of our report dated April 24, 1996,
with respect to the financial statements of International Memorial Society, Inc.
as of December 31, 1994 and for the year then ended included in the Current
Report on Form 8-K of The Loewen Group Inc. dated May 1, 1996.
KEITH J. SCHULTE ACCOUNTANCY CORPORATION
BY: /s/ Keith J. Schulte
------------------------------------
Certified Public Accountant
Long Beach, California
August 23, 1996
<PAGE>
[LETTERHEAD OF KEITH J. SCHULTE ACCOUNTANCY CORPORATION]
The Board of Directors of
Loewen Group International, Inc. and
The Loewen Group Inc.
We consent to the incorporation by reference in the registration statement on
Form S-4 of Loewen Group International, Inc. and The Loewen Group Inc. (Reg. No.
333-03135 and 333-03135-01, respectively) of our report dated April 24, 1996,
with respect to the financial statements of Palm Springs Mausoleum, Inc. as of
December 31, 1994 and for the year then ended included in the Current Report on
Form 8-K of The Loewen Group Inc. dated May 1, 1996.
KEITH J. SCHULTE ACCOUNTANCY CORPORATION
BY: /s/ Keith J. Schulte
------------------------
Certified Public Accountant
Long Beach, California
August 23, 1996
<PAGE>
[LETTERHEAD OF HIRSCH, OELBAUM, BRAM & HANOVER]
EXHIBIT 23.8
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of
Loewen Group International, Inc. and
The Loewen Group Inc.
We consent to the incorporation by reference in the registration statement on
Form S-4 of Loewen Group International, Inc. (Registration No. 333-03135) and
The Loewen Group Inc. (Reg. No. 333-03135-01) of our report, dated February 27,
1995 and April 23, 1996 as to Note 8, with respect to the financial statements
of Cemetery Gardens, Inc., as of December 31, 1994, and for the year then ended
included in the Current Report on Form 8-K of The Loewen Group, Inc., dated May
1, 1996.
/s/ Hirsch, Oelbaum, Bram & Hanover, C.P.As., P.C.
New York, New York
August 23, 1996
<PAGE>
[LETTERHEAD OF HIRSCH, OELBAUM, BRAM & HANOVER]
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of
Loewen Group International, Inc. and
The Loewen Group Inc.
We consent to the incorporation by reference in the registration statement on
Form S-4 of Loewen Group International, Inc. (Registration No. 333-03135) and
The Loewen Group Inc. (Reg. No. 333-03135-01) of our report, dated May 15, 1995
and, with respect to the financial statements of Beverly Hills Cemetery
Corporation, Inc., as of December 31, 1994, and for the year then ended
included in the Current Report on Form 8-K of The Loewen Group, Inc., dated May
1, 1996.
/s/ Hirsch, Oelbaum, Bram & Hanover, C.P.As., P.C.
New York, New York
August 23, 1996
<PAGE>
EXHIBIT 23.10
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Loewen Group International, Inc.
The Loewen Group Inc.:
We consent to the incorporation by reference in the Registration Statements
(Nos. 333-3135 and 333-3135-01) on Form S-4 of Loewen Group International, Inc.
and The Loewen Group Inc. of our report dated May 31, 1996, with respect to the
consolidated balance sheet of Ourso Investment Corporation and subsidiaries as
of December 31, 1995, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the year then ended, which report
appears in the Form 8-K/A No.2 of The Loewen Group Inc. dated July 5, 1996.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
August 23, 1996
<PAGE>
EXHIBIT 23.11
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Neweol Investments Ltd.
We consent to the use of our report, dated August 15, 1996, relating to the
balance sheets of Neweol Investments Ltd., as defined in Note 1 to the financial
statements, as at December 31, 1995 and 1994 and the related statements of
operations, retained earnings, and cash flows for the years then ended, which
report is included herein.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
August 23, 1996
<PAGE>
Exhibit 23.12
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Loewen Finance (Wyoming) Limited Liability Company
We consent to the use of our report, dated February 29, 1996, relating to the
balance sheets of Loewen Finance (Wyoming) Limited Liability Company as at
December 31, 1995 and 1994 and the related statements of income and retained
earnings, and cash flows for the years then ended, which report is included
herein.
/s/ Peat Marwick
Chartered Accountants
Bridgetown, Barbados
August 23, 1996
