<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-12163
----------------
THE LOEWEN GROUP INC.
(Exact name of registrant as specified in its charter)
----------------
<TABLE>
<S> <C>
BRITISH COLUMBIA, CANADA 98-0121376
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
4126 NORLAND AVENUE,
BURNABY, BRITISH COLUMBIA V5G 3S8
(Address of principal executive offices)(zip code)
604-299-9321
Registrant's telephone number, including area code
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check /X/ whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
----------------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check /X/ whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes / / No / /
----------------
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of outstanding Common shares as of November 12, 1996 was
59,089,689.
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<PAGE>
THE LOEWEN GROUP INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS
as of September 30, 1996 and December 31, 1995......................... 1
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
for the Three Months Ended September 30, 1996 and 1995 and the Nine
Months Ended September 30, 1996 and 1995............................... 2
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
for the Nine Months Ended September 30, 1996 and 1995.................. 3
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS........................... 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................... 20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS................................................. 28
ITEM 5. OTHER INFORMATION................................................. 31
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................. 33
SIGNATURES.............................................................................. 39
</TABLE>
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
THE LOEWEN GROUP INC.
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
DECEMBER 31,
1995
SEPTEMBER 30, ------------
1996
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and term deposits............................................................ $ 24,385 $ 39,454
Receivables, net of allowances.................................................... 182,535 115,953
Inventories....................................................................... 31,624 27,489
Prepaid expenses.................................................................. 9,515 8,185
------------- ------------
248,059 191,081
Prearranged funeral services........................................................ 260,370 245,854
Long-term receivables, net of allowances............................................ 246,083 167,367
Investments......................................................................... 173,889 86,815
Insurance invested assets........................................................... 289,598 97,024
Cemetery property, at cost.......................................................... 533,335 369,022
Property and equipment.............................................................. 657,441 551,965
Names and reputations............................................................... 532,736 424,944
Deferred income taxes............................................................... 54,498 61,959
Other assets........................................................................ 125,959 66,949
------------- ------------
$ 3,121,968 $2,262,980
------------- ------------
------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current indebtedness.............................................................. $ -- $ 38,546
Accrued settlements............................................................... -- 53,000
Accounts payable and accrued liabilities.......................................... 103,109 80,058
Long-term debt, current portion................................................... 79,438 69,671
------------- ------------
182,547 241,275
Long-term debt...................................................................... 1,176,027 864,838
Other liabilities................................................................... 172,636 136,433
Insurance policy liabilities........................................................ 210,828 84,898
Deferred prearranged funeral services revenue....................................... 260,370 245,854
Preferred securities of subsidiary.................................................. 75,000 75,000
Shareholders' equity
Share capital..................................................................... 794,525 490,055
Share capital issuable under legal settlements.................................... -- 72,000
Preferred shares.................................................................. 157,146 --
Retained earnings................................................................. 77,001 36,439
Foreign exchange adjustment....................................................... 15,888 16,188
------------- ------------
1,044,560 614,682
------------- ------------
$ 3,121,968 $2,262,980
------------- ------------
------------- ------------
</TABLE>
Contingencies (Notes 3, 7, 8, 9, and 10)
See accompanying notes to interim consolidated financial statements
-1-
<PAGE>
THE LOEWEN GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue
Funeral........................................... $ 130,788 $ 106,263 $ 397,760 $ 317,235
Cemetery.......................................... 77,706 38,887 198,912 95,533
Insurance......................................... 22,959 8,352 51,021 8,352
--------- --------- --------- ---------
231,453 153,502 647,693 421,120
Costs and expenses
Funeral........................................... 80,427 63,809 237,854 185,040
Cemetery.......................................... 51,033 27,834 133,774 68,483
Insurance......................................... 16,708 6,555 38,683 6,555
--------- --------- --------- ---------
148,168 98,198 410,311 260,078
--------- --------- --------- ---------
83,285 55,304 237,382 161,042
Expenses
General and administrative........................ 19,051 13,210 53,932 35,464
Costs related to hostile takeover proposal........ 2,615 -- 2,615 --
Costs of legal proceedings........................ -- 2,583 -- 2,966
Depreciation and amortization..................... 14,303 11,212 39,005 28,698
--------- --------- --------- ---------
35,969 27,005 95,552 67,128
--------- --------- --------- ---------
Earnings from operations............................ 47,316 28,299 141,830 93,914
Interest on long-term debt.......................... 22,925 11,810 62,471 35,752
--------- --------- --------- ---------
Earnings before dividends on preferred securities of
subsidiary and income taxes....................... 24,391 16,489 79,359 58,162
Dividends on preferred securities of subsidiary..... 1,772 1,772 5,316 5,316
--------- --------- --------- ---------
Earnings before income taxes........................ 22,619 14,717 74,043 52,846
Income taxes
Current........................................... 2,560 3,326 6,281 13,867
Deferred.......................................... 3,938 1,408 15,951 3,289
--------- --------- --------- ---------
6,498 4,734 22,232 17,156
--------- --------- --------- ---------
Equity in earnings of associated companies.......... 793 126 1,815 816
--------- --------- --------- ---------
Net earnings for the period......................... $ 16,914 $ 10,109 $ 53,626 $ 36,506
Retained earnings, beginning of period.............. 62,497 139,520 36,439 115,492
Common share dividends.............................. -- -- (6,631) (2,369)
Preferred share dividends........................... (2,410) -- (6,433) --
--------- --------- --------- ---------
Retained earnings, end of period.................... $ 77,001 $ 149,629 $ 77,001 $ 149,629
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic earnings per share............................ $ 0.25 $ 0.21 $ 0.84 $ 0.82
Fully diluted earnings per share.................... $ 0.25 $ 0.20 $ 0.84 $ 0.82
Dividend per Common share........................... $ -- $ -- $ 0.12 $ 0.05
</TABLE>
See accompanying notes to interim consolidated financial statements.
-2-
<PAGE>
THE LOEWEN GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
--------- ---------
(UNAUDITED)
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings.......................................................... $ 53,626 $ 36,506
Items not affecting cash
Depreciation and amortization....................................... 39,005 28,698
Deferred income taxes............................................... 15,951 3,289
Other............................................................... 18,125 5,563
Equity in earnings of associated companies.......................... (1,815) (816)
Share capital and debt issuable under legal settlements............... (112,000) --
Net changes in other non-cash balances................................ (177,658) (30,217)
--------- ---------
(164,766) 43,023
--------- ---------
Investments
Business acquisitions................................................. (437,789) (351,377)
Construction of new facilities........................................ (10,932) (8,564)
Investments, net...................................................... (82,517) (23,775)
Purchase of insurance invested assets................................. (44,649) --
Proceeds on disposition of insurance invested assets.................. 37,999 --
Purchase of property and equipment.................................... (18,207) (14,958)
Proceeds on disposition of assets..................................... 2,855 15,692
Other................................................................. (15,365) (31,669)
--------- ---------
(568,605) (414,651)
--------- ---------
Financing
Issue of share capital, before income tax recovery.................... 299,833 199,505
Issue of preferred shares, before income tax recovery................. 154,094 --
Increase in long-term debt............................................ 800,940 208,123
Reduction in long-term debt........................................... (465,664) (13,395)
Common share dividends................................................ (6,631) (2,369)
Preferred share dividends............................................. (6,433) --
Current note payable.................................................. (38,546) --
Other................................................................. (18,864) (552)
--------- ---------
718,729 391,312
--------- ---------
Increase (decrease) in cash and cash equivalents during the period...... (14,642) 19,684
Effect of foreign exchange adjustment................................... (427) (153)
Cash and cash equivalents, beginning of period.......................... 39,454 11,649
--------- ---------
Cash and cash equivalents, end of period................................ $ 24,385 $ 31,180
--------- ---------
--------- ---------
Cash and cash equivalents include
Cash and term deposits................................................ $ 24,385 $ 35,180
Bank indebtedness, included in current indebtedness................... -- (4,000)
--------- ---------
$ 24,385 $ 31,180
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to interim consolidated financial statements.
-3-
<PAGE>
THE LOEWEN GROUP INC.
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
The United States dollar is the principal currency of the Company's business
and accordingly the consolidated financial statements are expressed in United
States dollars. The financial statements have been prepared in accordance with
accounting principles generally accepted in Canada.
The interim consolidated financial statements (unaudited) include the
accounts of all subsidiary companies and include all adjustments, consisting of
normal recurring adjustments, which in management's opinion are necessary for a
fair presentation only of the financial results for the interim periods. The
financial statements have been prepared consistent with the accounting policies
described in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission for the year ended December 31, 1995 and should be read
in conjunction therewith. Certain of the comparative figures have been
reclassified to conform to the presentation adopted in the current period.
NOTE 2. ACQUISITIONS
During the nine months ended September 30, 1996, the Company acquired 115
funeral homes, 91 cemeteries and two insurance companies in the United States,
and nine funeral homes and one cemetery in Canada, for a total consideration of
approximately $437,789,000. Included in these acquisitions is the purchase of
certain net assets of S.I. Acquisition Associates L.P. ("S.I.") of
Donaldsonville, Louisiana, for approximately $150,000,000, including costs of
acquisition. S.I. concurrently acquired all the outstanding shares of Ourso
Investment Corporation. The assets include 15 funeral homes, two cemeteries and
two insurance companies.
During the nine months ended September 30, 1995, the Company acquired 124
funeral homes and 56 cemeteries in the United States and six funeral homes and
two cemeteries in Canada.
All of the Company's acquisitions have been accounted for by the purchase
method. The preliminary purchase price allocation for certain of these
acquisitions has been estimated based on available information at the time and
is subject to revision. The effect of acquisitions at dates of purchase on the
consolidated balance sheet is shown below. Included in these amounts is
$11,600,000 representing the present value of total contingent payments related
to a 1995 acquisition of approximately $13,500,000 which the Company recorded in
the third quarter of 1996 when the outcome of the contingency became
determinable.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Current assets.................................................................. $ 8,793 $ 12,709
Prearranged funeral services.................................................... 17,975 43,094
Long-term receivables, net of allowances........................................ 60,386 61,278
Investments..................................................................... -- 10,018
Insurance invested assets....................................................... 185,971 --
Cemetery property, at cost...................................................... 161,975 163,005
Property and equipment.......................................................... 97,573 64,197
Names and reputations........................................................... 121,865 61,043
Other assets.................................................................... 2,747 39,246
---------- ----------
657,285 454,590
Current liabilities............................................................. (10,511) (6,079)
Long-term debt.................................................................. (22,330) (7,614)
Other liabilities............................................................... (44,195) (40,003)
Insurance policy liabilities.................................................... (125,207) --
Deferred income taxes........................................................... 722 (6,423)
Deferred prearranged funeral services revenue................................... (17,975) (43,094)
---------- ----------
$ 437,789 $ 351,377
---------- ----------
---------- ----------
</TABLE>
-4-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 2. ACQUISITIONS (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Consideration
Cash, including assumed debt repaid at closing................................ $ 378,596 327,914
Debt.......................................................................... 35,924 15,663
Share capital................................................................. 11,650 7,800
---------- ----------
$ 437,789 $ 351,377
---------- ----------
---------- ----------
</TABLE>
Insurance invested assets consist primarily of fixed maturities including
collateralized mortgage obligations of approximately $111,700,000 and
mortgage-backed securities of approximately $9,200,000 as part of the life
insurance portfolio of S.I.
The following table reflects, on an unaudited pro-forma basis, the combined
results of the Company's operations acquired during the period ended September
30, 1996 as if all such acquisitions had taken place at the beginning of the
respective periods presented. Appropriate adjustments have been made to reflect
the accounting basis used in recording these acquisitions. This pro-forma
information does not purport to be indicative of the results of operations that
would have resulted had the acquisitions been in effect for the entire periods
presented, and is not intended to be a projection of future results or trends.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenues.............................................................. $ 693,830 $ 554,941
Net earnings.......................................................... $ 51,313 $ 36,064
Basic earnings per share.............................................. $ 0.79 $ 0.65
Fully diluted earnings per share...................................... $ 0.78 $ 0.64
</TABLE>
NOTE 3. INVESTMENT IN PRIME SUCCESSION HOLDINGS, INC.
On August 26, 1996, Loewen Group International, Inc. ("LGII") acquired 235
Common shares of Prime Succession Holdings, Inc. ("Prime") for $16,000,000,
representing 23.5% of Prime's voting common stock, and 100% of Prime's
non-voting preferred stock for $62,000,000. A 10% cumulative annual
payment-in-kind dividend is payable on the preferred stock.
Blackstone Capital Partners II Merchant Banking Fund L.P. and certain
affiliates (together, "Blackstone") acquired 765 Common shares, representing
76.5% of Prime's voting common stock, for $52,000,000. Blackstone and LGII have
the right to designate five and three nominees, respectively, to the Prime Board
of Directors. Blackstone controls the strategic operating, investing and
financing policies of Prime.
Neither Blackstone nor LGII can, without the consent of the other party,
sell or transfer its shares in Prime to a party other than an affiliate of
itself.
Prime is the largest privately-held funeral services company in North
America, with 146 funeral homes and 16 cemeteries across the United States.
LGII accounts for its investment in common stock in Prime on the equity
method. Under the equity method, LGII records its proportionate share of the net
earnings (loss) of Prime after deducting the payment-in-kind dividend. For the
period August 26, 1996 to September 30, 1996, LGII's earnings in Prime were
approximately $380,000, consisting of an accrual of approximately $515,000
attributable to the
-5-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 3. INVESTMENT IN PRIME SUCCESSION HOLDINGS, INC. (CONTINUED)
payment-in-kind dividend net of approximately $135,000, representing LGII's
proportionate share of the loss attributable to common shares of Prime.
Under a Put/Call Agreement entered into by Blackstone and LGII, LGII has the
option to acquire ("Call") Blackstone's common stock interest in Prime
commencing on the fourth anniversary of the acquisition, and for a period of two
years thereafter, at a price calculated pursuant to the Put/Call Agreement.
Blackstone has the option to sell ("Put") its common stock interest to LGII
commencing on the sixth anniversary of the acquisition, and for a period of two
years thereafter, at a price calculated pursuant to the Put/Call Agreement.
The prices calculated for the Call and the Put are based on a formula that
calculates the equity value attributable to Blackstone's common stock interest.
The calculated equity value is determined at the Put or Call date based on a
multiple of earnings before interest, taxes, depreciation and amortization
("EBITDA"), after deduction of certain liabilities. The multiple to be applied
to EBITDA is also determined through a formula which is based on future EBITDA.
Any payment to Blackstone under the Call or the Put may be in the form of cash
or common stock of the Company, at the Company's option.
Upon a Call, Blackstone will receive, at a minimum, a return of its original
investment and a 24.1% return per annum thereon regardless of the calculated
equity value. Any additional equity value attributable to Blackstone's common
stock interest is determined on the basis of a formula set forth in the Put/Call
Agreement.
Upon a Put by Blackstone, there is no guaranteed return to Blackstone. Any
payment to Blackstone is limited to Blackstone's share of the calculated equity
value based on a formula set forth in the Put/Call Agreement.
Any payment to Blackstone is subject to Blackstone or LGII exercising their
respective rights under the Put or the Call. It is not currently possible to
determine whether Blackstone or LGII will exercise such rights. Furthermore, any
amount to be paid pursuant to the Put is dependent on calculated equity value
which is based primarily on EBITDA of future periods. Accordingly, it is not
possible at this date to estimate the future amount that may be payable to
Blackstone on the exercise of the Put or the Call.
LGII provides administrative services to Prime under an Administrative
Services Agreement for an annual fee of $250,000.
-6-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 4. LONG-TERM DEBT
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Bank revolving credit agreements.................................................... $ 330,743 $ 379,488
Bank term loan agreements........................................................... 133,281 141,666
9.70% Series A and C senior amortizing notes due in 1998............................ 93,750 93,750
9.93% Series B senior amortizing notes due in 2001.................................. 42,850 42,850
9.62% Series D senior amortizing notes due in 2003.................................. 60,000 60,000
6.49% Series E senior amortizing notes due in 2004.................................. 50,000 50,000
7.50% Senior notes due in 2001...................................................... 225,000 --
8.25% Senior notes due in 2003...................................................... 125,000 --
Present value of notes issued under legal settlements............................... 42,042 40,000
Contingent consideration payable on acquisitions.................................... 39,459 35,260
Other, principally arising from vendor financing of acquired operations or long-term
debt assumed on acquisitions...................................................... 113,340 91,495
------------- ------------
$ 1,255,465 $ 934,509
Less current portion................................................................ 79,438 69,671
------------- ------------
$ 1,176,027 $ 864,838
------------- ------------
------------- ------------
</TABLE>
In March 1996, LGII consummated a private placement of senior notes in the
United States for gross proceeds of $350,000,000. In conjunction with the
placement of the senior notes, the Company closed out an anticipatory hedge
resulting in a gain of $2,821,000 which will be amortized as a reduction of
interest expense over the life of the notes. See Note 10(b) regarding the
subsequent exchange of these notes for notes registered under the Securities Act
of 1933 ("Securities Act").
The Company's primary revolving credit agreement was entered into on May 31,
1996 by LGII and provides for borrowings of up to $750,000,000 with a maturity
of May 29, 2001. Initial borrowings under this facility were used to repay in
full and retire a previous $400,000,000 revolving credit facility. At September
30, 1996, $299,500,000 was outstanding under the Company's primary revolving
credit agreement.
On May 31, 1996, the Company, LGII and their senior lenders entered into a
collateral trust arrangement whereby senior lenders would share certain
collateral on a pari passu basis. This collateral is held by a trustee for the
equal and ratable benefit of the various holders of senior indebtedness. This
group consists of lenders under bank revolving credit agreements, the bank term
loans, and the senior notes. At September 30, 1996, the indebtedness owed to the
senior lenders, including holders of letters of credit, aggregated
$1,097,000,000.
The collateral includes (i) a pledge for the benefit of the senior lenders
of the shares held by the Company of substantially all of the subsidiaries in
which the Company 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).
The above credit facilities and note agreements contain various restrictive
provisions, including change in control provisions, provisions 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 maintaining
specified financial ratios.
-7-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 5. PREFERRED SECURITIES OF SUBSIDIARY
On August 15, 1994, 3,000,000 9.45% Cumulative Monthly Income Preferred
Securities, Series A (MIPS) were issued by Loewen Group Capital, L.P. (LGC) in a
public offering for an aggregate amount of U.S. $75,000,000. LGC is a limited
partnership and LGII as its general partner manages its business and affairs.
LGII serves as the holding company for United States assets and operations of
the Company. The consolidated financial statements of LGII are prepared in
accordance with Canadian generally accepted accounting principles and are
presented in United States dollars.
Summarized financial data for LGII are presented as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1996 1995* 1996 1995*
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income statement information
Total revenue.................................................. $ 214,535 $ 140,049 $ 596,705 $ 378,842
Gross profit................................................... 75,158 49,299 215,840 142,569
Earnings from operations....................................... 43,430 24,570 131,662 85,105
Net earnings (loss)............................................ 1,399 (15,214) 12,311 (3,668)
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Balance sheet information
Current assets.................................................................... $ 227,880 $ 184,289
Non-current assets................................................................ 2,539,605 1,776,425
------------- ------------
Total assets...................................................................... 2,767,485 1,960,714
Current liabilities............................................................... 131,660 221,555
Non-current liabilities........................................................... 2,405,996 1,696,709
------------- ------------
Total liabilities................................................................. $ 2,537,656 $1,918,264
Shareholders' equity.............................................................. 229,829 42,450
</TABLE>
*Losses incurred during the three months and nine months ended September 30,
1995, are as a result of LGII recording additional intercompany charges payable
to the Company. These expenses are eliminated in the consolidated financial
statements of the Company.
NOTE 6. SHARE CAPITAL
In January 1996, the Company 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 for gross proceeds of $220,000,000
Canadian (U.S.$161,000,000). The gross proceeds were deposited with an escrow
agent and were subsequently exchanged for 8,800,000 Series C Preferred shares,
and all of the net proceeds were released to the Company. A holder of Series C
Preferred shares will have the right at any time before January 1, 2003, to
convert each Series C Preferred share into that number of Common shares
determined by dividing Cdn. $25.00 by Cdn. $38.125. Thereafter, a holder of
Series C Preferred shares will have the right on January 1, 2003, and on the
first business day of each quarter thereafter, to convert all or part of such
Series C Preferred shares into that number of Common shares determined by
dividing Cdn. $25.00 plus accued and unpaid dividends by the greater of Cdn.
$3.00 and 95% of the Current Market Price (as defined) on the date of
conversion.
The Series C Preferred Shares will not be redeemable by the Company prior to
July 1, 1999.
-8-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 6. SHARE CAPITAL (CONTINUED)
On or after July 1, 1999, the Series C Preferred shares will be redeemable
by the Company, upon giving not less than 30 days' notice, at a redemption price
equal to Cdn. $25.00 per share together with accrued and unpaid dividends. Prior
to July 1, 2001, the redemption will only be effected by the issuance of Common
shares, determined by dividing the redemption price by the greater of Cdn. $3.00
and 95% of the Current Market Price at the date of redemption. On and after July
1, 2001, the redemption may be effected by the issuance of Common shares or
payment of a cash amount.
In March 1996, the Company completed a public offering in Canada and a
simultaneous private placement in the United States of 7,000,000 Common shares
for aggregate gross proceeds of $275,000,000 Canadian (U.S.$201,000,000). In
April 1996, the underwriters of the March 1996 offering exercised an option to
purchase an additional 700,000 Common shares from the Company. The net proceeds
of approximately $27,000,000 Canadian (U.S.$20,000,000) from the exercise of the
option were used for working capital and other corporate purposes, including
acquisitions.
During the nine months ended September 30, 1996, the Company issued
1,823,882 options under its employee stock option plans. At September 30, 1996,
stock options were outstanding in respect of 4,414,881 Common shares of the
Company.
NOTE 7. LEGAL PROCEEDINGS AND CONTINGENCIES
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 the Company and five individuals who were officers of the
Company (four of whom were also directors) in the United States District Court
for the Eastern District of Pennsylvania. LGII, LGC 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 the 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 Company's securities against the Company, LGII, LGC
and the same individual defendants in the United States District Court for the
Eastern District of Pennsylvania.
The complaints with respect to the class actions alleged that the defendants
failed to disclose the Company's anticipated liability in connection with the
Gulf National litigation. The Pennsylvania class actions also alleged 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.
Reference is made to the Company's periodic reports previously filed with
the Commission for additional information regarding the Company's settlements
with Gulf National and Provident.
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. On September 16, 1996, the plaintiffs filed
a Consolidated and Amended Class Action Complaint (the "Consolidated Class
Action Complaint"). Procedurally, the Consolidated Class Action Complaint
supersedes the complaints filed in the class actions. Plaintiffs allege three
causes of action in the Consolidated Action Complaint: (i) the Company, LGII,
LGC and the five individual defendants violated Sections 10(b) and 20(a) and the
implementing anti-fraud rules under the Securities Exchange Act of 1934
("Exchange Act"), (ii) LGII,
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<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 7. LEGAL PROCEEDINGS AND CONTINGENCIES (CONTINUED)
LGC and three of the five individual defendants violated Sections 11 and 15 of
the Securities Act in connection with the MIPS offering and (iii) the Company,
LGII and LGC made material misstatements in connection with the MIPS offering in
violation of Sections 12(2) and 15 of the Securities Act. Plaintiffs seek
compensatory money damages in an unspecified amount, together with attorneys
fees, expert fees and other costs and disbursements. Punitive damages are not
sought.
The defendants filed their Answer to the Consolidated Class Action Complaint
on November 1, 1996, in which they have denied the material allegations and
raised certain affirmative defenses. The parties have commenced discovery.
The parties have stipulated to the provisional certification of plaintiff
classes consisting of: (i) all purchasers of Common shares or MIPS on an
American stock exchange or in public offerings during the period from April 16,
1993 through November 1, 1995, with respect to the Exchange Act claims; and (ii)
all persons who purchased MIPS pursuant to the public offering in August 1994,
with respect to the Securities Act claims. Defendants have retained all rights
to conduct discovery on class issues and to move to modify the class definitions
or to decertify the classes. Plaintiffs have agreed to stay all proceedings,
including all discovery, relating to disclosures about the Provident litigation.
Plaintiffs have the right to lift the stay upon written notice, which must be
provided 90 days before the end of discovery or the beginning of trial.
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
Action. As of the date hereto, 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 with respect to the class actions has been made in the
Company's consolidated financial statements.
DERIVATIVE SUIT
On September 17, 1996, Service Corporation International ("SCI") publicly
announced its desire to combine with the Company in a stock-for-stock
transaction and, on October 2, 1996, SCI further announced that it intended to
make an unsolicited exchange offer directly to the Company's shareholders. See
Note 8 for additional information.
On September 26, 1996, Jerry Krim filed a purported derivative and class
action against the Company's current directors and one former director and
against the Company as a nominal defendant in the Los Angeles County Superior
Court. The plaintiff alleges, on behalf of himself and all of the Company's
current and former shareholders, that the defendants "improperly responded to an
offer by
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<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 7. LEGAL PROCEEDINGS AND CONTINGENCIES (CONTINUED)
SCI to combine the two companies," refused to negotiate with SCI, agreed to pay
an inflated price for the Rose Hills properties in Los Angeles, adopted a
supposed "poison pill" supermajority voting provision requiring 75% approval of
a merger, and adopted a Shareholders Protection Rights Plan, each allegedly in
violation of the directors' fiduciary duties. Plaintiff seeks preliminary and
permanent injunctive relief that would, among other things, (i) require the
defendants to cooperate with any person having a bona fide interest in proposing
a transaction and take certain other actions that allegedly would "maximize
shareholder value," (ii) enjoin the Shareholders Protection Rights Plan in its
entirety, (iii) enjoin the consummation of the Rose Hills transaction, (iv)
enjoin the supermajority voting requirements, (v) require an accounting for
unspecified damages, and (vi) compensate the plaintiffs for their fees and
costs. On October 17, 1996, the Court denied the plaintiff's motion for
expedited discovery. On November 8, 1996, the Company and those individual
defendants upon whom service had purportedly been made appeared specially and
moved to quash service of the summons for lack of jurisdiction or, in the
alternative, to dismiss or stay the action on grounds of FORUM NON CONVENIENS.
The Company believes that the action is without merit and intends to contest the
action vigorously, if it should proceed. No provision with respect to this
lawsuit has been made in the Company's financial statements.
SERVICE CORPORATION INTERNATIONAL
On October 2, 1996, SCI filed an action in the United States District Court
for the Southern District of Texas (the "Texas Action"), alleging that the
Company falsely suggested to its shareholders that it has standing to bring an
action to block or impede SCI's unsolicited exchange offer on federal antitrust
grounds. SCI also seeks a declaratory judgment that the Company lacks standing
to bring such an action on federal antitrust grounds. SCI asserts a claim under
Texas common law, based upon its allegations that the Company's actions have
tortiously interfered with SCI's "prospective business relationships" with the
Company's shareholders. As relief for this assertion, SCI seeks an unspecified
amount of damages for claimed injuries resulting from the Company's alleged
interference with these prospective relationships. In an amended complaint filed
October 3, 1996, SCI also alleges that the foregoing actions, as well as the
Company's alleged failure to disclose certain information respecting the Prime
Succession and Rose Hills transactions, constitute violations of Section 14(e)
of the Exchange Act. As relief, SCI seeks an injunction against future
violations of that statute. The Company believes that the action is without
merit and intends to contest the action vigorously.
On October 10, 1996, the Company, LGII and Ridge Chapels, Inc., a subsidiary
of LGII, commenced an action in the United States District Court for the Eastern
District of New York (the "New York Action"), seeking to enjoin SCI
preliminarily and permanently from completing its unsolicited exchange offer on
the grounds that a combination of SCI and the Company would violate Section 7 of
the Clayton Act. According to the complaint, SCI's unsolicited offer for control
of the Company, if successful, may substantially lessen competition in numerous
local markets for (i) the sale of funeral services, (ii) the sale of funeral
services on a "preneed" basis, (iii) the sale of cemetery services, and (iv) the
purchase of funeral homes, cemeteries and crematoria. The Company also accuses
SCI and Equity Corporation International, Inc., a competitor of the Company in
which SCI has a 40% interest, of conspiracy to eliminate the Company as a
competitive force in the funeral services industry, in violation of Section 1 of
the Sherman Act. On October 10, 1996, the Company filed Motions for Expedited
Discovery and for a Preliminary Injunction to enjoin the unsolicited exchange
offer. The Company filed a Verified First Amended Complaint on October 15, 1996.
The Company takes the position that irreparable harm will result from SCI's
further pursuit of its unsolicited exchange offer, and accordingly, the Company
intends to prosecute its claims zealously.
-11-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 7. LEGAL PROCEEDINGS AND CONTINGENCIES (CONTINUED)
On October 11, 1996, the Company moved to dismiss or stay the Texas Action.
On October 15, 1996, SCI moved to dismiss, stay or transfer the New York Action,
and a hearing was held on that motion on October 17, 1996, at the conclusion of
which the District Court denied SCI's motion. On October 23, 1996, Magistrate
Judge Caden of the District Court entered a Memorandum and Order allowing
expedited discovery with respect to the Company's motion for a preliminary
injunction. On October 29, 1996, the District Court overruled the objections of
SCI to the Magistrate Judge's Order but stayed commencement of discovery
proceedings, which stay has been extended by stipulation until the resolution of
the pending motions in the Texas Actions described below.
On October 21, 1996, SCI filed a Motion for Preliminary Injunction in the
Texas Action, seeking to enjoin the Company from pursuing its antitrust claims
in any forum other than the federal District Court in Texas. The matter was
referred to Magistrate Judge Johnson, who issued a Memorandum Recommending Entry
of a Preliminary Injunction on October 28, 1996. Magistrate Judge Johnson
recommended that the District Court restrain the Company from proceeding in the
New York Action (or elsewhere) until it had resolved the Company's pending
motion to dismiss. In a telephone conference on October 28, 1996, the District
Court declined to enter any injunctive relief at that time. A hearing on the
Company's motion to dismiss was held on November 6, 1996. The Company has filed
formal objections to the Magistrate's Memorandum. As of November 13, 1996, no
rulings have been issued on the motions pending in the Texas Action.
No provision with respect to these legal proceedings has been made in the
Company'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 ("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 Roe Complaint"), and in July 1996, the
Palladino lawsuit was dismissed. In October 1996, a Fifth Amended Complaint
("Complaint") was filed bringing the number of plaintiff families to 150. The
gravamen of the 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 specific claims include tortious
interference with a dead body (intentional and grossly negligent conduct so
extreme and outrageous as to imply malice) and negligent infliction of emotional
distress. The Complaint also names the Company as a defendant (on an alter ego
theory) and includes claims for negligent retention of certain cemetery
employees. Each plaintiff identified in the Complaint is seeking damages in
excess of $15,000, but the Complaint alleges aggregate damage in excess of
$40,000,000. A mediation of this matter has been scheduled for November 14,
1996. Plaintiffs' counsel has made a written settlement demand of $10,500,000
for purposes of the mediation. 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
Complaint. Schneider has been named in the Complaint and it is expected that the
Schneider lawsuit will be dismissed shortly.
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
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<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 7. LEGAL PROCEEDINGS AND CONTINGENCIES (CONTINUED)
defense of these claims, subject to a reservation of rights. The policy limit is
$11,000,000. 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 the 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 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 the
Company 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.
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 with respect to this lawsuit has been made in the
Company's consolidated financial statements.
ESNER ESTATE
On February 1, 1995, Stuart B. Esner and Sandra Esner (the "Executors") as
co-executor 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 the 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 attorney's 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 a civil conspiracy by acquiring Osiris. The Executors
request compensatory damages of $24,300,000 against the various defendants, and
seek punitive damages
-13-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 7. LEGAL PROCEEDINGS AND CONTINGENCIES (CONTINUED)
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.
ENVIRONMENTAL CONTINGENCIES AND LIABILITIES
The Company's operations are subject to numerous environmental laws,
regulations and guidelines adopted by various governmental authorities in the
jurisdictions in which the Company operates. Liabilities are recorded when
environmental liabilities are either known or considered probable and can be
reasonably estimated. The Company policies are designed to control environmental
risk upon acquisition through extensive due diligence and corrective measures
taken prior to acquisition. The Company believes environmental liabilities to be
immaterial individually and in the aggregate.
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 other proceedings,
individually or in the aggregate, to have a material adverse affect on the
Company's financial position, results of operation or liquidity.
NOTE 8. HOSTILE TAKEOVER PROPOSAL BY SERVICE CORPORATION INTERNATIONAL
On September 17, 1996, SCI publicly distributed a letter to Raymond L.
Loewen, Chairman and Chief Executive Officer of the Company, in which SCI
expressed an interest in discussing with the Company a stock-for-stock
transaction that would value the Common shares at $43 per share. On September
24, 1996, the Board of Directors of the Company unanimously rejected the
proposal. On October 2, 1996, SCI announced that it intended to make an
unsolicited exchange offer (the "Proposed Offer") directly to the shareholders
of the Company. SCI's announcement stated that SCI would offer holders of Common
shares $45 worth of common stock of New Service Corporation International, a
newly organized holding company ("New SCI") and that SCI would offer holders of
Series C Preferred shares $29.51 worth of New SCI common stock. All the
shareholders of the Company would also be entitled to elect to receive, in lieu
of New SCI common stock, shares of a Canadian subsidiary of New SCI ("Canadian
SCI") that would be exchangeable for, and are intended to be equivalent to,
shares of New SCI common stock. On October 3, 1996, New SCI and Canadian SCI
filed with the Securities and Exchange Commission a Registration Statement on
Form S-4 (File No. 333-13391) relating to the Proposed Offer. On October 10,
1996, the Board of Directors of the Company unanimously determined that the
Proposed Offer is inadequate and not in the best interests of the Company and
its shareholders. The Board of Directors of the Company has recommended that the
shareholders of the Company not tender their shares, if and when the Proposed
Offer is commenced.
Effective as of October 10, 1996, in order to attract and retain key
executives and managers of the Company in the context of a threatened change in
control of the Company, the Board of Directors of the Company, upon the
recommendation of the Compensation Committee thereof, approved the execution of
individual change-in-control severance agreements ("Severance Agreements") with
approximately 80 of the Company's executives and managers ("Executives"). With
the exception of Mr. Loewen, each of the executive officers of the Company will
be entering into such a Severance Agreement. Under each Severance Agreement, if
there is a "change in control" (as defined), an Executive becomes entitled to
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<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 8. HOSTILE TAKEOVER PROPOSAL BY SERVICE CORPORATION INTERNATIONAL
(CONTINUED)
severance pay amounting to one to three years' compensation, and certain other
benefits during the "Severance Period" (as defined), if the Executive's
employment terminates for any reason other than "cause" (as defined) or if the
Executive terminates his or her employment for certain specified reasons. Each
Severance Agreement also provides that the Executive is entitled to a retention
bonus if the Executive remains employed by the Company for 30 days after a
change in control. Benefits under the Severance Agreements can be reduced in
certain circumstances.
In addition, the Board of Directors of the Company adopted a
change-in-control severance compensation plan ("Severance Plan") that is
designed to provide certain benefits to full-time salaried employees of the
Company whose principal duties include corporate or regional management
responsibilities. Under the Severance Plan, upon a "change in control" (as
defined), each of the participants is entitled to a severance payment if, within
24 months after a change in control, the participant is terminated other than by
reason of death, voluntary termination or retirement, or for "Just Cause" (as
defined). Benefits payable under the Severance Plan can be reduced in certain
circumstances.
Effective as of October 10, 1996, the Board of Directors of the Company
authorized the Company to enter into indemnification agreements with certain of
its directors and officers whereby the Company will agree to indemnify such
persons against all costs, charges and expenses incurred by reason of being a
director or officer of the Company.
The Company has retained Smith Barney Inc. ("Smith Barney") and Nesbitt
Burns Inc. ("Nesbitt Burns") as its financial advisors in connection with SCI's
hostile takeover proposal and related matters. The Company has agreed to pay
advisory fees to Smith Barney and Nesbitt Burns ranging from $1,000,000 to
$5,000,000 and $500,000 to $3,000,000, respectively, payable in cash upon
withdrawal of any SCI acquisition proposal. In addition, each of Smith Barney
and Nesbitt Burns will be paid a transaction fee (against which the advisory fee
will be credited), payable upon consummation of an extraordinary corporate
transaction involving the Company, equal to a percentage of the transaction
value ranging, in the case of Smith Barney, from 2% for transactions having a
transaction value of $25,000,000 or less to 0.2% for transactions having a
transaction value of $10,000,000,000 or more, subject to a minimum transaction
fee of $500,000 and, in the case of Nesbitt Burns, 1.25% for transactions having
a transaction value of $25,000,000 or less to 0.133% for transactions having a
transaction value of $10,000,000,000 or more, subject to a minimum transaction
fee of $312,500. The Company has also agreed to reimburse Smith Barney and
Nesbitt Burns for travel and other out-of-pocket expenses and to indemnify Smith
Barney and Nesbitt Burns against certain liabilities, including liabilities
under United States and Canadian securities laws, arising out of their
engagement.
The Company has also retained Morrow & Co., Inc. ("Morrow") and D.F. King &
Co., Inc. ("King") to assist the Company in connection with its communications
with its shareholders with respect to, and to provide other services to the
Company in connection with the SCI hostile takeover proposal. The Company has
agreed to pay Morrow and King reasonable and customary compensation for their
respective services and to reimburse them for their respective out-of-pocket
expenses in connection therewith. The Company has agreed to indemnify Morrow and
King against certain liabilities arising out of or in connection with their
respective engagements.
The Company has also retained Broadgate Consultants, Inc. ("Broadgate") as
the Company's public relations advisor in connection with the SCI hostile
takeover proposal. Broadgate will receive reasonable and customary compensation
for its services and reimbursement of out-of-pocket expenses in connection
therewith. The Company has agreed to indemnify Broadgate against certain
liabilities arising out of or in connection with its engagement.
-15-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 8. HOSTILE TAKEOVER PROPOSAL BY SERVICE CORPORATION INTERNATIONAL
(CONTINUED)
The Company has expensed approximately $2,615,000 for costs incurred in
connection with the SCI hostile takeover proposal including the minimum amounts
payable to its financial advisors and estimated fees for legal and other
professional services provided through September 30, 1996.
NOTE 9. PROPOSED INVESTMENT IN ROSE HILLS HOLDINGS, INC.
On September 19, 1996, LGII and Blackstone entered into an agreement to form
a new company Rose Hills Holdings, Inc. ("RH Holdings"), which will concurrently
acquire through a wholly-owned subsidiary, Rose Hills Acquisition Corp.
("RHAC"), the cemetery related assets and liabilities of Rose Hills Memorial
Park Association, which represents the largest single location cemetery in the
United States, as well as the separately owned mortuary operations of Roses,
Inc. (together "Rose Hills"). RHAC will acquire Rose Hills and properties to be
contributed by LGII for approximately $285,000,000, including third party
liabilities to be paid at closing and transaction costs.
LGII will acquire Common shares of RH Holdings for $9,000,000 representing
20.45% of RH Holdings' voting common stock. In addition, LGII will acquire 100%
of RH Holdings' non-voting preferred stock, with a cumulative annual
payment-in-kind dividend of 10%, for $86,000,000. LGII's total investment of
$95,000,000 will consist of $72,000,000 in cash and 14 funeral homes and two
combination funeral homes and cemetery properties located in California valued
at $23,000,000, which will be contributed by LGII. As at September 30, 1996,
LGII has paid $2,000,000 in cash and has posted letters of credit for
$23,000,000 which letters of credit will be returned to LGII at closing and
subsequently cancelled.
Blackstone will contribute approximately $35,000,000 in exchange for 79.55%
of RH Holdings' voting common stock. Blackstone and LGII have the right to
designate five and three nominees, respectively, to the RH Holdings Board of
Directors. Blackstone will control the strategic operating, investing and
financing policies of RH Holdings.
Neither Blackstone nor LGII can, without the consent of the other party,
sell or transfer its shares in RH Holdings to a party other than an affiliate of
itself.
LGII's proposed investment will be accounted for under the equity method
whereby LGII will record its proportionate share of net earnings (loss) of RH
Holdings after deducting payment-in-kind dividends.
Under terms agreed upon by Blackstone and LGII, LGII will have the option to
Call Blackstone's common stock interest in RH Holdings commencing on the fourth
anniversary of the acquisition, and for a period of two years thereafter, at a
price to be calculated pursuant to the terms of the agreement. Blackstone will
have the option to Put its common stock interest to LGII commencing on the sixth
anniversary of the acquisition, and for the period of two years thereafter, at a
price calculated pursuant to the agreement.
The prices for the Call and Put will be based on a formula that calculates
the equity value attributable to Blackstone's common stock interest. The
calculated equity value will be determined at the Put or Call date based on a
multiple of EBITDA, after deduction of certain liabilities. The multiple to be
applied to EBITDA will also be determined through a formula which is based on
future EBITDA. Any payment to Blackstone under the Call or the Put may be in the
form of cash or the stock of the Company, subject to certain conditions, at the
Company's option.
Upon a Call, Blackstone will receive at a minimum, a return of its original
investment and a 22.5% return per annum thereon regardless of the calculated
equity value. Any additional equity attributable to
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<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 9. PROPOSED INVESTMENT IN ROSE HILLS HOLDINGS, INC. (CONTINUED)
Blackstone common stock interest will be determined on the basis of a formula
set forth in the Put/Call Agreement.
Upon a Put by Blackstone, there will be no guaranteed return to Blackstone.
Any payment to Blackstone will be limited to Blackstone's share of the
calculated equity value based on a formula set forth in the terms of the
agreement.
Any payment to Blackstone will be subject to Blackstone or the Company
exercising their respective rights under the Put or the Call.
LGII will provide various management and administrative services to RHAC and
subsidiaries under an Administrative Services Agreement. If the Administrative
Services Agreement becomes terminable by Blackstone due to LGII's material
breach thereof or other failure to comply in any material respect, Blackstone
under the Put will receive at a minimum, a return of its original investment and
a 25% return per annum thereon which increases to 27.5% in the event of a change
in control of the Company or LGII regardless of the calculated equity value.
The proposed investment which is expected to be completed by late November
1996, is subject to a number of conditions, including the ability of RHAC to
obtain financing. Until December 13, 1996, RHAC can elect not to proceed with
the transaction if RHAC determines that financing cannot be obtained. In such
event, LGII forfeits amounts previously paid or committed under letters of
credit. If LGII ultimately forfeits amounts previously paid or committed under
letters of credit, LGII would be required to write off such amounts and related
costs and expenses.
In addition, in the event there is a change in control of the Company or
LGII prior to consummation of the transactions and the transactions are not
consummated by March 31, 1997, the Company will be required to pay a termination
fee of $10,000,000 to Blackstone.
See Note 7 regarding the derivative suit pertaining to the proposed
investment in RH Holdings.
NOTE 10. SUBSEQUENT EVENTS
(A) ACQUISITIONS
During the period from October 1, 1996 to November 1, 1996, the Company
acquired eight funeral homes and 18 cemeteries. The aggregate cost of these
transactions was approximately $81,000,000.
As at November 1, 1996, the Company has committed to acquire certain funeral
homes and related operations, excluding the proposed investment in Rose Hills,
subject in most instances to certain conditions including approval by the
Company's Board of Directors. The aggregate cost of these transactions will be
approximately $277,000,000.
(B) DEBT FINANCINGS
On October 3, 1996, LGII consummated an offer to exchange the 7.50% and the
8.25% senior guaranteed notes issued in March 1996 (the "Series 1 and 2 Notes")
for notes which are identical in all material respects to the Series 1 and 2
Notes except that they have been registered under the Securities Act and,
accordingly, will not be subject to the same transfer restrictions. The
registered notes represent the same indebtedness that had been represented by
the Series 1 and 2 Notes exchanged therefor.
On October 4, 1996, LGII consummated a private placement of two additional
series of senior guaranteed notes in the United States for gross proceeds of
$350,000,000. Approximately $301,000,000 of
-17-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 10. SUBSEQUENT EVENTS (CONTINUED)
the net proceeds to LGII from the sale of these notes was used to repay
indebtedness under the Company's primary revolving credit agreement. The balance
of the net proceeds was used for working capital and other corporate purposes
including acquisitions and interest payments on existing senior notes.
NOTE 11. UNITED STATES ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") in Canada. These principles
differ from GAAP in the United States as described in Note 21 of the Company's
consolidated financial statements for the year ended December 31, 1995, and as
discussed below.
The major differences between Canadian and U.S. GAAP during the period from
January 1, 1996 to September 30, 1996 results from the application of Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes and for
insurance operations, the effects of which are summarized below:
(A) EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net earnings in accordance with Canadian GAAP.................... $ 16,914 $ 10,109 $ 53,626 $ 36,506
Effects of differences in accounting for:
Insurance operations (see (c))................................. (742) -- (1,433) --
Stock options.................................................. -- (35) -- (100)
Income taxes, including income tax effects of the above........ 627 368 1,579 680
---------- ---------- ---------- ----------
Net earnings in accordance with U.S. GAAP........................ $ 16,799 $ 10,442 $ 53,772 $ 37,086
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
(B) ACQUISITIONS
The effect of acquisitions during the nine months ended September 30, 1996
at dates of purchase, as reported in Note 2, would be affected as follows:
<TABLE>
<CAPTION>
CANADIAN GAAP DIFFERENCE U.S. GAAP
--------------- ---------- -----------
<S> <C> <C> <C>
Cemetery property....................................................... $ 161,975 $ 47,518 $ 209,493
Present value of insurance policies acquired............................ -- 15,785 15,785
Property and equipment.................................................. 97,573 297 97,870
Names and reputations................................................... 121,865 7,892 129,757
Insurance policy liabilities............................................ (125,207) (16,082) (141,289)
Deferred income tax asset (liability)................................... 722 (55,410) (54,688)
</TABLE>
(C) INSURANCE OPERATIONS
PRESENT VALUE OF INSURANCE POLICIES
Under U.S. GAAP, the Company recognizes an asset that represents the
actuarially-determined present value of the projected future profits of the
insurance in-force at dates of acquisition. Canadian GAAP does not recognize
such an asset. The asset is being amortized to insurance expense over the
estimated life of the insurance in-force at the date of acquisition.
-18-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 11. UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED)
DEFERRED POLICY ACQUISITION COSTS
Under U.S. GAAP, the Company defers costs related to the production of new
business which consist principally of commissions, certain underwriting and
agency expenses, and the costs of issuing policies. Deferred policy acquisition
costs are amortized over the expected premium-paying periods of the related
policies. Canadian GAAP does not permit deferral of such costs. At September 30,
1996, the deferred acquisition costs were approximately $3,200,000.
INSURANCE POLICY LIABILITIES
Insurance policy liabilities, which represent liabilities for future
insurance policy benefits, are accounted for under U.S. GAAP using the net level
premium method which involves different actuarial assumptions and methodologies
than the policy premium method used for Canadian GAAP. In addition, under
Canadian GAAP, all actuarial assumptions are re-evaluated on a periodic basis,
resulting in adjustments to insurance policy liabilities and insurance costs and
expenses. Under U.S. GAAP, assumptions established at the time a policy is
written are locked in and only revised if it is determined that future
experience will worsen from that previously assumed.
(D) UNREALIZED GAINS AND LOSSES
Under U.S. GAAP, investments (including insurance invested assets)
classified as available for sale are carried at market value, with unrealized
holding gains and losses being reflected as a separate component of shareholder
equity net of deferred income taxes. Accordingly, at September 30, 1996,
insurance invested assets would decrease by $2,059,000 and shareholders' equity
would decrease by $1,336,000 (which is net of deferred income taxes).
(E) STATEMENT OF CASH FLOWS
Cash applied to operations and cash provided by financing would decrease by
$109,590,000 because shares and debt issued for legal settlements and declared
but unpaid Preference share dividends would be considered non-cash transactions.
(F) EARNINGS PER SHARE
The number of shares in thousands, used in the calculation of earnings per
share for the nine months ended September 30, 1996 and 1995 were 56,604 (1995 -
45,610) for primary earnings per share and 57,455 (1995 - 45,764) for fully
diluted earnings per share.
The number of shares in thousands, used in the calculation of earnings per
share for the three months ended September 30, 1996 and 1995 were 60,141 (1995 -
49,166) for primary earnings per share and 60,641 (1995 - 49,320) for fully
diluted earnings per share.
The earnings per share under U.S. GAAP are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary earnings per share............................. $ 0.24 $ 0.21 $ 0.84 $ 0.81
Fully diluted earnings per share....................... $ 0.24 $ 0.21 $ 0.82 $ 0.81
</TABLE>
-19-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
All figures are in United States dollars unless otherwise indicated. The
"Company" refers to The Loewen Group Inc., a corporation organized under the
laws of British Columbia, Canada ("TLGI"), and its subsidiaries and associated
entities. This report, other documents that are publicly disseminated by the
Company and oral statements that are made on behalf of the Company contain or
may contain both statements of historical fact and forward-looking statements.
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. See Part II, Item 5, Other Information, for
additional information regarding forward-looking statements, including a list of
important factors, risks and uncertainties that could cause actual results to
differ materially from any forward-looking statements.
INTRODUCTION
THE COMPANY
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 November 1, 1996, the Company operated
946 funeral homes throughout North America. This included 827 funeral homes in
the United States (including locations in Puerto Rico) and 119 funeral homes in
Canada. In addition, as at such date, the Company operated 283 cemeteries in the
United States and six cemeteries in Canada. As at the close of business on
November 1, 1996, the Company had negotiated agreements for the acquisition of a
further 89 funeral homes and 91 cemeteries in the United States.
The funeral service industry has a number of attractive characteristics.
Historically the funeral service industry has had a low business failure risk
compared with most other businesses and has not been significantly affected by
economic or market cycles. 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 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.
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 operations. As a result of
the successful implementation of this strategy, the Company has grown
significantly. Managing the Company's growth is critical to profitability, and
will continue to be one of the most important responsibilities and challenges
facing the Company.
On September 17, 1996, Service Corporation International ("SCI") publicly
announced its desire to combine with the Company in a stock-for-stock
transaction and on October 2, 1996, SCI further announced that it intended to
make an unsolicited exchange offer ("Proposed Offer") directly to the Company's
shareholders. The Board of Directors has recommended that the shareholders of
the Company not tender their shares, if and when SCI's offer is commenced. See
Part II, Item 1, Legal Proceedings, for certain information regarding lawsuits
filed in connection with the Proposed Offer, and see Part II, Item 5, Other
Information, for additional information regarding the Proposed Offer and certain
related matters.
-20-
<PAGE>
The Company's results for the three months and the nine months ended
September 30, 1996 included expenses of approximately $2.6 million representing
costs incurred to date in connection with the Proposed Offer. As discussed in
more detail below, such costs reduced fully diluted earnings per share for the
three months ended September 30, 1996 by $0.04 cents per share. To the extent
that the Company continues to incur significant costs in connection with the
Proposed Offer, the Company's earnings will be adversely affected.
RESULTS OF OPERATIONS
The Company's operations are directly affected by the level of recent
acquisitions and the performance of established operations. Detailed below for
the three months and the nine months ended September 30, 1996 and the
corresponding periods in the prior year are the Company's operating results
expressed in dollar amounts as well as relevant percentages. Revenue, gross
margin and expenses other than income taxes are presented as a percentage of
revenue. Income taxes are presented as a percentage of earnings before income
taxes.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
(MILLIONS OF (PERCENT)
DOLLARS)
<S> <C> <C> <C> <C>
REVENUE
Funeral........................................................... $ 130.8 $ 106.3 56.5% 69.3%
Cemetery.......................................................... 77.7 38.8 33.6 25.3
Insurance......................................................... 23.0 8.4 9.9 5.4
--------- --------- --------- ---------
Total........................................................... 231.5 153.5 100.0% 100.0%
--------- --------- --------- ---------
--------- --------- --------- ---------
GROSS MARGIN
Funeral........................................................... $ 50.3 $ 42.5 38.5% 40.0%
Cemetery.......................................................... 26.7 11.0 34.3 28.4
Insurance......................................................... 6.3 1.8 27.2 21.5
--------- ---------
Total........................................................... 83.3 55.3 36.0 36.0
EXPENSES
General and administrative........................................ 19.1 13.2 8.2 8.6
Costs relating to hostile takeover proposal....................... 2.6 -- 1.2 --
Costs of legal proceedings........................................ -- 2.6 -- 1.7
Depreciation and amortization..................................... 14.3 11.2 6.2 7.3
--------- ---------
EARNINGS FROM OPERATIONS............................................ 47.3 28.3 20.4 18.4
Interest on long-term debt........................................ 22.9 11.8 9.9 7.7
Dividends on preferred securities of subsidiary................... 1.8 1.8 0.7 1.1
--------- ---------
EARNINGS BEFORE INCOME TAXES........................................ 22.6 14.7 9.8 9.6
Income taxes...................................................... 6.5 4.7 28.7 32.2
Equity earnings in associated companies........................... (0.8) (0.1) (0.3) (0.1)
--------- ---------
NET EARNINGS........................................................ $ 16.9 $ 10.1 7.3% 6.6%
--------- ---------
--------- ---------
</TABLE>
Consolidated revenue increased 50.8% to $231.5 million for the three months
ended September 30, 1996 from $153.5 million for the same period in 1995, with
funeral revenue increasing 23.1% and cemetery revenue increasing 99.8%.
Consolidated gross margin increased 50.6% to $83.3 million in 1996 from $55.3
million in 1995, with funeral gross margin increasing 18.6% and cemetery gross
margin increasing 141.3%. As a percentage of revenue, consolidated gross margin
remained constant at 36.0% for the three months ended September 30, 1996 and
1995.
-21-
<PAGE>
Funeral revenue increased to $130.8 million for the three months ended
September 30, 1996 from $106.3 million for the same period in 1995, due to
acquisitions. For locations in operation for all of the three months ended
September 30, 1995 and 1996, ("Existing Locations") the gross margin decreased
to 39.9% from 40.8% as a result of a decrease in revenue of $1.0 million and a
$0.2 million increase in costs. The result of the lower margins for Existing
Locations combined with the impact of acquired operations with lower margins
decreased the consolidated funeral gross margin to 38.5% in 1996 from 40.0% in
1995.
Cemetery revenue increased to $77.7 million for the three months ended
September 30, 1996 from $38.8 million for the same period in 1995, primarily due
to acquisitions. Cemetery gross margin increased to 34.3% in 1996 from 28.4% in
1995 principally as a result of a higher level of pre-need sales and a shift to
increased sales of interment services. Historically, many of the Company's
cemeteries had focused their marketing activities primarily on the pre-need sale
of cemetery interment rights and related merchandise. Recently, management has
implemented programs designed to provide existing pre-need cemetery customers,
who are already committed to Company owned cemeteries, and new customers with
the ability to purchase interment services on a pre-need basis. The cemetery
revenue from locations in operation for all of the three months ended September
30, 1995 and 1996 increased by $38.7 million while the corresponding cemetery
gross margin increased to 34.3% from 28.7%, both principally as a result of a
higher level of pre-need sales and a shift to increased sales of pre-need
interment services.
Insurance revenue increased to $23.0 million for the three months ended
September 30, 1996 from $8.4 million for the same period in 1995. The increase
was due primarily to the continued integration of the March 26, 1996 acquisition
of certain net assets of S.I. Acquisition Associates, L.P. ("S.I.") for
approximately $150 million (including related costs), which assets included two
insurance companies. The increase in the gross margin for insurance operations
to 27.2% for the three months ended September 30, 1996 over previous quarters in
1996 reflects primarily the impact of certain non-recurring revisions to
actuarial assumptions in the amount of $1.6 million as well as continuing
improvements in operating performance.
United States based operations contributed 93.7% of the consolidated revenue
for the three months ended September 30, 1996 compared with 92.2% for the same
period in 1995.
General and administrative expenses for the three months ended September 30,
1996 increased to $19.1 million from $13.2 million for the same period in 1995.
The increase in general and administrative expenses is primarily a result of the
expansion of the Company's infrastructure necessary to integrate acquired
operations, particularly in the cemetery division. Interest expense on long-term
debt increased by $11.1 million, primarily as a result of additional borrowings
by the Company to finance its acquisitions and capital expenditures.
The costs relating to the hostile takeover proposal by SCI are composed
primarily of financial advisory and legal fees. See Note 8 to the Company's
September 30, 1996 Financial Statements for more information regarding such
costs. To the extent that the Company continues to incur significant costs
relating to the hostile takeover proposal, the Company's earnings will be
adversely affected.
Income taxes were $6.5 million for the three months ended September 30,
1996, resulting in an effective tax rate of 28.7% compared to $4.7 million for
the same period in 1995, and an effective tax rate of 32.2%. The decrease in the
effective tax rate for the three months ended September 30, 1996 is a result of
changes made to align the effective year-to-date tax rate to the expected annual
tax rate for 1996, offset by the non-deductible costs relating to the hostile
takeover proposal. The expected annual tax rate is declining due to the
expansion of the Company's international financing arrangements.
Net earnings increased 67.3% to $16.9 million for the three months ended
September 30, 1996 from $10.1 million for the same period in 1995. For the three
months ended September 30, 1996, fully diluted earnings per share ("EPS")
increased 25.0% to $0.25 per share from $0.20 per share for the same period in
1995. EPS did not increase as significantly as net earnings primarily as a
result of the increased number of Common shares without par value ("Common
Shares") outstanding and the effect of dividends on TLGI's
-22-
<PAGE>
6.00% Cumulative Redeemable Convertible First Preferred Shares, Series C
("Series C Preferred Shares").
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
(MILLIONS OF (PERCENT)
DOLLARS)
<S> <C> <C> <C> <C>
REVENUE
Funeral........................................................... $ 397.8 $ 317.2 61.4% 75.3%
Cemetery.......................................................... 198.9 95.5 30.7 22.7
Insurance......................................................... 51.0 8.4 7.9 2.0
--------- --------- --------- ---------
Total........................................................... 647.7 421.1 100.0% 100.0%
--------- --------- --------- ---------
--------- --------- --------- ---------
GROSS MARGIN
Funeral........................................................... $ 159.9 $ 132.2 40.2% 41.7%
Cemetery.......................................................... 65.1 27.0 32.7 28.3
Insurance......................................................... 12.4 1.8 24.2 21.5
--------- ---------
Total............................................................. 237.4 161.0 36.7 38.2
EXPENSES
General and administrative........................................ 54.0 35.4 8.3 8.4
Costs related to hostile takeover proposal........................ 2.6 -- 0.5 --
Cost of legal proceedings......................................... -- 3.0 -- 0.7
Depreciation and amortization..................................... 39.0 28.7 6.0 6.8
--------- ---------
EARNINGS FROM OPERATIONS............................................ 141.8 93.9 21.9 22.3
Interest on long-term debt........................................ 62.5 35.8 9.7 8.5
Dividends on preferred securities of subsidiary................... 5.3 5.3 0.8 1.3
--------- ---------
EARNINGS BEFORE INCOME TAXES........................................ 74.0 52.8 11.4 12.5
Income taxes...................................................... 22.2 17.1 30.0 32.5
Equity earnings in associated companies........................... (1.8) (0.8) (0.3) (0.2)
--------- ---------
NET EARNINGS........................................................ $ 53.6 $ 36.5 8.3% 8.7%
--------- ---------
--------- ---------
</TABLE>
Consolidated revenue increased 53.8% to $647.7 million for the nine months
ended September 30, 1996 from $421.1 million for the same period in 1995, with
funeral revenue increasing 25.4% and cemetery revenue increasing 108.2%.
Consolidated gross margin increased 47.4% to $237.4 million in 1996 from $161.0
million in 1995, with funeral gross margin increasing 21.0% and cemetery gross
margin increasing 140.8%. As a percentage of revenue, consolidated gross margin
decreased to 36.7% for the nine months ended September 30, 1996 from 38.2% for
the comparable period in 1995. The decrease in the consolidated gross margin was
due to the increased proportion of cemetery and insurance revenue with
associated lower margins and the decrease in funeral gross margin.
Funeral revenue increased to $397.8 million for the nine months ended
September 30, 1996 from $317.2 million for the same period in 1995, due to
acquisitions. For locations in operation for all of the nine months ended
September 30, 1995 and 1996, ("Existing Locations") the gross margin decreased
to 41.5% from 42.1% as a result of a decrease in revenue of $0.3 million and a
$1.5 million increase in costs. The result of the lower margins for Existing
Locations combined with the impact of acquired operations with lower margins
decreased the consolidated funeral gross margin to 40.2% in 1996 from 41.7% in
1995.
Cemetery revenue increased to $198.9 million for the nine months ended
September 30, 1996 from $95.5 million for the same period in 1995, primarily due
to acquisitions. Cemetery gross margin increased to 32.7% in 1996 from 28.3% in
1995 principally as a result of a higher level of pre-need sales and a shift to
increased sales of interment services.
-23-
<PAGE>
The cemetery revenue from locations in operation for all of the nine months
ended September 30, 1995 and 1996 increased by $103.4 million while the
corresponding cemetery gross margin increased to 32.7% from 28.3%, both
principally due to a higher level of pre-need sales and a shift to increased
sales of pre-need interment services.
Insurance revenue was $51.0 million for the nine months ended September 30,
1996 from $8.4 million for the same period in 1995 partially due to the fact
that the Company did not record insurance revenue for the six months ended June
30, 1995. During that period, the Company owned a life insurance subsidiary
acquired in connection with a 1994 acquisition but because the Company intended
to dispose of the subsidiary, revenue was not consolidated or identified
separately. Beginning July 1, 1995, the Company reported the operations of the
subsidiary on a consolidated basis. The remaining increase is due to the
continued integration of the March 26, 1996 acquisition of certain net assets of
S.I.. The increase in the gross margin for insurance operations to 24.2% for the
nine months ended September 30, 1996 over previous quarters in 1996 reflects
primarily the impact of certain non-recurring revisions to actuarial assumptions
in the amount of $3.2 million as well as continuing improvements in operating
performance.
United States based operations contributed 93.3% of the consolidated revenue
for the nine months ended September 30, 1996 compared with 90.9% for the same
period in 1995.
General and administrative expenses for the nine months ended September 30,
1996 increased to $54.0 million from $35.4 million for the same period in 1995.
The increase in general and administrative expenses is primarily a result of the
expansion of the Company's infrastructure due to the integration of acquired
operations, particularly in the cemetery division. Interest expense on long-term
debt increased by $26.7 million, primarily as a result of additional borrowings
by the Company to finance its acquisitions and capital expenditures.
Income taxes were $22.2 million for the nine months ended September 30,
1996, resulting in an effective tax rate of 30.0% compared to $17.1 million for
the same period in 1995, and an effective tax rate of 32.5%. The decrease in the
effective tax rate for the nine months ended September 30, 1996 is a result of
changes made to align the effective year-to-date tax rate to the expected annual
tax rate for 1996. The expected annual tax rate is declining due to the
expansion of the Company's international financing arrangements.
Net earnings increased 46.9% to $53.6 million for the nine months ended
September 30, 1996 from $36.5 million for the same period in 1995. For the nine
months ended September 30, 1996, EPS increased 2.4% to $0.84 per share from
$0.82 per share for the same period in 1995. EPS did not increase as
significantly as net earnings primarily as a result of the increased number of
Common Shares outstanding and the effect of dividends on TLGI's Series C
Preferred Shares. Management's EPS goal for the 1996 fiscal year is $1.30-$1.40
before costs relating to the hostile takeover proposal by SCI. See Part II, Item
5.
ACQUISITIONS, INVESTMENTS AND CAPITAL EXPENDITURES
The Company acquired 124 funeral homes, 92 cemeteries and two insurance
companies during the nine months ended September 30, 1996 for consideration of
approximately $438 million through 124 separate acquisition transactions. Of
these acquisitions, 115 funeral homes, 91 cemeteries and the two insurance
companies were located in the United States and the balance were located in
Canada. Included in these acquisitions is the March 1996 purchase of 15 funeral
homes, two cemeteries and two insurance companies from S.I. for approximately
$150 million (including related costs). As a result of this acquisition, the
Company recorded approximately $186 million of insurance invested assets and
approximately $125 million of insurance policy liabilities. During the nine
months ended September 30, 1995, the Company acquired 130 funeral homes and 58
cemeteries for consideration of approximately $351 million.
As of November 1, 1996, the Company had signed agreements, some of which are
non-binding, for the acquisition of 89 additional funeral homes and 91
additional cemeteries aggregating approximately $277 million. The Company
expects to close a majority of such acquisitions prior to the end of 1996. In
addition, in the ordinary course of its business, the Company continually is in
the process of evaluating or negotiating prospective acquisitions in competition
with other potential purchasers. From time to time, the
-24-
<PAGE>
Company may evaluate or negotiate potential acquisitions, which, if consummated,
may be considered significant based on acquisition price.
From time to time, the Company may dispose of non-core assets or businesses
acquired in conjunction with the acquisition of funeral homes and cemeteries. In
addition, the Company expects to continue to combine or sell a small number of
locations in order to utilize its resources to produce a better return from its
assets.
On September 20, 1996, the Company announced that LGII and Blackstone
Capital Partners II Merchant Banking Fund L.P. ("Blackstone") had formed a new
company, Rose Hills Holdings, Inc. ("RH Holdings") which will concurrently
acquire through a wholly-owned subsidiary, Rose Hills Acquisition Corp., the
cemetery and mortuary operations and assets of The Rose Hills Memorial Park
Association and Roses, Inc., of Los Angeles (together, "Rose Hills") for
approximately $240 million. The principal assets of Rose Hills are the Rose
Hills Memorial Park, the largest cemetery in North America, and a mortuary that
serves more families annually than any other single mortuary location in the
United States. Blackstone will contribute $35 million to RH Holdings, for which
it will receive a controlling interest in RH Holdings. Blackstone will also
control the Board of Directors of RH Holdings. LGII will contribute $72 million
in cash and an affiliate of LGII will contribute 14 funeral homes and two
combination funeral homes/ cemetery operations located in Los Angeles and Orange
counties that are valued at $23 million, for which LGII and the affiliate will
receive $9 million of common and $86 million of preferred stock with an annual
payment-in-kind dividend of 10%, respectively, of RH Holdings. The remainder of
the $240 million purchase price will be funded with debt from banks and other
financial institutions. The $240 million purchase price, together with the $23
million in contributed properties, repayment of certain indebtedness and
transaction costs, bring the aggregate transaction costs to $285 million. The
transaction, which is expected to close by late November 1996, is subject to a
number of conditions, including the availability of financing. LGII may be
required to forfeit amounts previously paid, including amounts issued under
letters of credit, in certain circumstances if the transaction is not
consummated.
On August 26, 1996, Prime Succession Holdings, Inc. ("Prime"), a company
formed by Blackstone and LGII, acquired the shares of Prime Succession, Inc.,
the largest privately-held funeral services company in North America, with 146
funeral homes and 16 cemeteries in 20 states, for approximately $295 million.
Blackstone contributed approximately $52 million, for which it received a
controlling interest in Prime. Blackstone also controls the Board of Directors
of Prime. LGII contributed $78 million and received $16 million in common stock
and $62 million of preferred stock with an annual payment-in-kind dividend of
10%.
With respect to each of RH Holdings and Prime, LGII has a call option that
can be exercised on the fourth anniversary of the respective closing dates and
for two years thereafter, whereby LGII can acquire Blackstone's interest in RH
Holdings or Prime, as the case may be. In addition, Blackstone has a put option
that can be exercised beginning on the sixth anniversary of the respective
closing dates and for two years thereafter, whereby Blackstone can require LGII
to acquire Blackstone's interest in RH Holdings or Prime, as the case may be.
The option price, in each case, is based on a formula involving earnings before
interest taxes, depreciation and amortization.
See Notes 3 and 9 to the Company's September 30, 1996 Financial Statements
for additional information regarding RH Holdings and Prime, including further
discussions of the put and call options.
LIQUIDITY AND CAPITAL RESOURCES
The Company plans to fund future acquisitions through a combination of debt
and equity offerings and borrowings under its credit facilities (described
below). The Company believes that cash flow from operations generally will be
sufficient to meet working capital and short-term liquidity requirements for
current operations and to fund interest payments and dividends on outstanding
Common and preferred shares. The Company plans to finance principal repayments
on debt primarily through the issue of additional debt or borrowings under
revolving credit facilities and plans to ensure available financing well
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in advance of scheduled principal repayment dates, thereby protecting the
Company's liquidity and maintaining its financial flexibility.
The Company's objective is to maintain its long-term debt/equity ratio, on
average, in a range of 1.0:1 to 1.5:1. Due to the timing of its ongoing
acquisition program, the Company's long-term debt/equity ratio typically will
rise to the high end of the range, and then will be reduced substantially by an
equity issue. At September 30, 1996 the Company's long-term debt/equity ratio
was 1.2:1.
The Company's balance sheet at September 30, 1996 , as compared to December
31, 1995, reflects changes principally from acquisitions during 1996 as
described further in Note 2 to the Company's September 30, 1996 Financial
Statements. The Company's statement of changes in financial position for the
nine months ended September 30, 1996 reflects cash applied to operations of $165
million, primarily as a result of legal settlements of $165 million recorded in
1995 but funded in the first quarter of 1996.
During 1995 and 1996 the Company significantly expanded its cemetery
pre-need sales programs. Cemetery pre-need sales typically are structured with
low initial cash payments by the customer. The balance due is recorded as an
installment contract receivable and the future liability for merchandise as an
other liability. The increase in the level of pre-need sales has resulted in an
increase in both current and long-term receivables and other liabilities.
1996 DEBT AND EQUITY OFFERINGS
In January 1996, TLGI completed a public offering (the "1996 Preferred Share
Offering") in Canada and a simultaneous private placement in the United States
of 8,800,000 Series C Preferred Shares for gross proceeds of Cdn.$220 (U.S.$161)
million. The gross proceeds were deposited with an escrow agent. The net
proceeds were released to the Company from time to time to fund acquisitions by
depositing with the escrow agent an equal dollar amount of 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 the
Company. Each Series C Preferred Share is convertible into .6557 of a Common
share at the option of the holder of Series C Preferred Shares, subject to
certain conditions. See Note 6 to the Company's September 30, 1996 Financial
Statements for additional information regarding the Series C Preferred Shares.
In March 1996, Loewen Group International, Inc. ("LGII") consummated a
private placement of two series of senior guaranteed notes (the "Series 1 and 2
Notes") in the United States for gross proceeds of $350 million (the "Series 1
and 2 Senior Notes Offering"). Concurrently with the 1996 Senior Notes Offering,
TLGI 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 (U.S.$221)
million (the "1996 Equity Offering"). The proceeds of the Series 1 and 2 Senior
Notes Offering and the 1996 Equity Offering were used to pay down the balance on
the Multi-Currency Revolver (described below) and for general corporate purposes
including acquisitions.
On October 3, 1996, LGII consummated an offer to exchange the Series 1 and 2
Notes for senior guaranteed notes which are identical in all material respects
to the Series 1 and 2 Notes except that they have been registered under the
Securities Act and, accordingly, will not be subject to the same transfer
restrictions (the "Series 1 and 2 Exchange Notes"). The Series 1 and 2 Exchange
Notes represent the same indebtedness that had been represented by the Series 1
and 2 Notes exchanged therefor.
On October 4, 1996, LGII consummated a private placement of two additional
series of senior guaranteed notes (the "Series 3 and 4 Notes") in the United
States for gross proceeds of $350 million (the "Series 3 and 4 Senior Notes
Offering"). Approximately $301 million of the net proceeds to LGII from the sale
of the Series 3 and 4 Senior Notes Offering was used to repay indebtedness under
the 1996 Revolving Credit Facility (described below). The balance of the net
proceeds will be used for working capital and other corporate purposes,
including acquisitions and interest repayments on existing senior notes.
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DEBT
On May 31, 1996, LGII entered into a five-year $750 million secured
revolving credit facility (the "1996 Revolving Credit Facility") with a
syndicate of banks.
The Company also has a Cdn.$50 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 1996 Revolving Credit Facility. A
subsidiary of the Company has a $108 million secured term loan 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 1996 Revolving Credit Facility. The Company
has a Cdn.$35 million five-year term loan that will terminate in January 2000
(the "Canadian Term Loan").
LGII had a $400 million unsecured multi-currency revolving credit facility
with a bank syndicate that was scheduled to mature in May 2000 (the
"Multi-Currency Revolver"). LGII also had a $100 million 364-day unsecured
multi-currency revolving credit facility with the same syndicate of banks that
expired on May 10, 1996. On May 31, 1996 the Multi-Currency Revolver was repaid
in full and retired.
As at September 30, 1996, LGII and TLGI had outstanding an aggregate of
$246.6 million of senior amortizing notes, issued in five series (Series A
through Series E) in 1991, 1993, and 1994 (the "Series A-E Senior Notes"). The
Series A-E Senior Notes bear interest at rates ranging from 6.49% to 9.93% and
have initial terms of seven to ten years.
In addition, as at September 30, 1996, LGII had outstanding $350 million of
1996 Senior Notes. The 1996 Senior Notes were issued in two series. One series,
in the aggregate principal amount of $225 million bears interest at the rate of
7.5% and has a five-year term, and the other series, in the aggregate principal
amount of $125 million, bears interest at the rate of 8.25% and has a seven-year
term.
On May 31, 1996, the Company, LGII and their senior lenders entered into a
collateral trust arrangement whereby the senior lenders would share certain
collateral on a PARI PASSU basis. This collateral includes (i) a pledge for the
benefit of the senior lenders of the shares held by TLGI of substantially all of
the subsidiaries in which TLGI 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). The collateral is
held by a trustee for the equal and ratable benefit of the various holders of
senior indebtedness. This senior lending group consists of the lenders under the
1996 Revolving Credit Facility, the Canadian Revolver, the MEIP Loan, and the
Canadian Term Loan as well as the holders of certain letters of credit, the
Series A-E Senior Notes, the Series 1 and 2 Notes and the Series 3 and 4 Notes.
The above credit facilities and loan agreements contain various restrictive
provisions, including provisions 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 maintaining specified financial ratios.
INTEREST RATE RISK MANAGEMENT
The Company enters into derivative transactions with financial institutions
only as hedges of other financial transactions and not for speculative purposes.
The Company's policies do not allow leveraged transactions and are designed to
minimize credit and concentration risk with counter-parties. The Company's
practice is to use swaps and options to manage its exposure to interest rate
movements. Going forward, the Company's strategy is to maintain an average of
between 60% and 80% of its debt subject to fixed interest rates, although at any
point in time during a period the percentage of debt subject to fixed interest
rates may be higher or lower. The Company also uses futures and options to fix
the interest rate of anticipated financing transactions in advance. All
derivatives are entered into as hedges based on several criteria, including the
timing, size and term of the anticipated transaction. Any gain or loss from an
effective hedging transaction is deferred and amortized over the life of the
financing transaction as an adjustment to interest expense.
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PART II
ITEM 1. LEGAL PROCEEDINGS.
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 TLGI and five individuals who were officers of the Company
(four of whom were also directors) in the United States District Court for the
Eastern District of Pennsylvania. LGII, Lowen Group Capital, L.P. ("LGC") and
the lead underwriters (the "Underwriters") of LGC's 1994 offering of Monthly
Income Preferred Securities ("MIPS") 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 TLGI 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 TLGI, LGII, LGC and the same
individual defendants in the United States District Court for the Eastern
District of Pennsylvania.
The complaints with respect to the class actions alleged that the defendants
failed to disclose the Company's 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 also alleged failure to disclose the Company's potential liability in
connection with certain litigation with Provident American Corporation and a
subsidiary (together, "Provident"). The Company settled the lawsuits with Gulf
National and Provident during the first quarter of 1996.
Reference is made to the Company's periodic reports previously filed with
the Commission for additional information regarding the Company's settlements
with Gulf National and Provident.
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. On September 16, 1996, the plaintiffs filed
a Consolidated and Amended Class Action Complaint (the "Consolidated Class
Action Complaint"). Procedurally, the Consolidated Class Action Complaint
supersedes the complaints filed in the class actions. Plaintiffs allege three
causes of action in the Consolidated Action Complaint: (i) TLGI, LGII, LGC and
the five individual defendants violated Sections 10(b) and 20(a) and the
implementing anti-fraud rules under the Securities Exchange Act of 1934
("Exchange Act"), (ii) LGII, LGC and three of the five individual defendants
violated Sections 11 and 15 of the Securities Act of 1933 ("Securities Act") in
connection with the MIPS offering and (iii) TLGI, LGII and LGC made material
misstatements in connection with the MIPS offering in violation of Sections
12(2) and 15 of the Securities Act. Plaintiffs seek compensatory money damages
in an unspecified amount, together with attorneys fees, expert fees and other
costs and disbursements. Punitive damages are not sought.
The defendants filed their Answer to the Consolidated Class Action Complaint
on November 1, 1996, in which they have denied the material allegations and
raised certain affirmative defenses. The parties have commenced discovery.
The parties have stipulated to the provisional certification of plaintiff
classes consisting of: (i) all purchasers of Common shares or MIPS on an
American stock exchange or in public offerings during the period from April 16,
1993 through November 1, 1995, with respect to the Exchange Act claims; and (ii)
all persons who purchased MIPS pursuant to the public offering in August 1994,
with respect to the Securities Act claims. Defendants have retained all rights
to conduct discovery on class issues and to move to modify the class definitions
or to decertify the classes. Plaintiffs have agreed to stay all proceedings,
including all discovery, relating to disclosures about the Provident litigation.
Plaintiffs have the right to lift the stay upon written notice, which must be
provided 90 days before the end of discovery or the beginning of trial.
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
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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
Action. As of the date hereto, 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 with respect to the class actions has been made in the
Company's consolidated financial statements.
DERIVATIVE SUIT
On September 26, 1996, Jerry Krim filed a purported derivative and class
action against TLGI's current directors and one former director and against the
TLGI as a nominal defendant in the Los Angeles County Superior Court. The
plaintiff alleges, on behalf of himself and all of the TLGI's current and former
shareholders, that the defendants "improperly responded to an offer by SCI to
combine the two companies," refused to negotiate with SCI, agreed to pay an
inflated price for the Rose Hills properties in Los Angeles, adopted a supposed
"poison pill" supermajority voting provision requiring 75% approval of a merger,
and adopted a Shareholders Protection Rights Plan, each allegedly in violation
of the directors' fiduciary duties. Plaintiff seeks preliminary and permanent
injunctive relief that would, among other things, (i) require the defendants to
cooperate with any person having a bona fide interest in proposing a transaction
and take certain other actions that allegedly would "maximize shareholder
value," (ii) enjoin the Shareholders Protection Rights Plan in its entirety,
(iii) enjoin the consummation of the Rose Hills transaction, (iv) enjoin the
supermajority voting requirements, (v) require an accounting for unspecified
damages, and (vi) compensate the plaintiffs for their fees and costs. On October
17, 1996, the Court denied the plaintiff's motion for expedited discovery. On
November 8, 1996, TLGI and those individual defendants upon whom service had
purportedly been made appeared specially and moved to quash service of the
summons for lack of jurisdiction or, in the alternative, to dismiss or stay the
action on grounds of FORUM NON CONVENIENS. The Company believes that the action
is without merit and intends to contest the action vigorously, if it should
proceed. No provision with respect to this lawsuit has been made in the
Company's financial statements.
SERVICE CORPORATION INTERNATIONAL
On October 2, 1996, SCI filed an action in the United States District Court
for the Southern District of Texas (the "Texas Action"), alleging that TLGI
falsely suggested to its shareholders that it has standing to bring an action to
block or impede SCI's unsolicited exchange offer on federal antitrust grounds.
SCI also seeks a declaratory judgment that TLGI lacks standing to bring such an
action on federal antitrust grounds. SCI asserts a claim under Texas common law,
based upon its allegations that TLGI's actions have tortiously interfered with
SCI's "prospective business relationships" with TLGI's shareholders. As relief
for this assertion, SCI seeks an unspecified amount of damages for claimed
injuries resulting from TLGI's alleged interference with these prospective
relationships. In an amended complaint filed October 3, 1996, SCI also alleges
that the foregoing actions, as well as TLGI's alleged failure to disclose
certain information respecting the Prime and Rose Hills transactions, constitute
violations of Section 14(e) of the Exchange Act. As relief, SCI seeks an
injunction against future violations of that statute. The Company believes that
the action is without merit and intends to contest the action vigorously.
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On October 10, 1996, TLGI, LGII and Ridge Chapels, Inc., a subsidiary of
LGII, commenced an action in the United States District Court for the Eastern
District of New York (the "New York Action"), seeking to enjoin SCI
preliminarily and permanently from completing its unsolicited exchange offer on
the grounds that a combination of SCI and TLGI would violate Section 7 of the
Clayton Act. According to the complaint, SCI's unsolicited offer for control of
TLGI, if successful, may substantially lessen competition in numerous local
markets for (i) the sale of funeral services, (ii) the sale of funeral services
on a "preneed" basis, (iii) the sale of cemetery services, and (iv) the purchase
of funeral homes, cemeteries and crematoria. TLGI also accuses SCI and Equity
Corporation International, Inc., a competitor of TLGI in which SCI has a 40%
interest, of conspiracy to eliminate TLGI as a competitive force in the funeral
services industry, in violation of Section 1 of the Sherman Act. On October 10,
1996, TLGI filed Motions for Expedited Discovery and for a Preliminary
Injunction to enjoin the unsolicited exchange offer and filed a Verified First
Amended Complaint on October 15, 1996. The Company takes the position that
irreparable harm will result from SCI's further pursuit of its unsolicited
exchange offer, and accordingly, the Company intends to prosecute its claims
zealously.
On October 11, 1996, TLGI moved to dismiss or stay the Texas Action. On
October 15, 1996, SCI moved to dismiss, stay or transfer the New York Action,
and a hearing was held on that motion on October 17, 1996, at the conclusion of
which the District Court denied SCI's motion. On October 23, 1996, Magistrate
Judge Caden of the District Court entered a Memorandum and Order allowing
expedited discovery with respect to TLGI's motion for a preliminary injunction.
On October 29, 1996, the District Court overruled the objections of SCI to the
Magistrate Judge's Order but stayed commencement of discovery proceedings, which
stay has been extended by stipulation until the resolution of the pending
motions in the Texas Actions described below.
On October 21, 1996, SCI filed a Motion for Preliminary Injunction in the
Texas Action, seeking to enjoin TLGI from pursuing its antitrust claims in any
forum other than the federal District Court in Texas. The matter was referred to
Magistrate Judge Johnson, who issued a Memorandum Recommending Entry of a
Preliminary Injunction on October 28, 1996. Magistrate Judge Johnson recommended
that the District Court restrain TLGI from proceeding in the New York Action (or
elsewhere) until it had resolved TLGI's pending motion to dismiss. In a
telephone conference on October 28, 1996, the District Court declined to enter
any injunctive relief at that time. A hearing on TLGI's motion to dismiss was
held on November 6, 1996. TLGI has filed formal objections to the Magistrate's
Memorandum. As of November 13, 1996, no rulings have been issued on the motions
pending in the Texas Action.
No provision with respect to these legal proceedings has been made in the
Company'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 ("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 Roe Complaint"), and in July 1996, the
Palladino lawsuit was dismissed. In October 1996, a Fifth Amended Complaint
("Complaint") was filed bringing the number of plaintiff families to 150. The
gravamen of the 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 specific claims include tortious
interference with a dead body (intentional and grossly negligent conduct so
extreme and outrageous as to imply malice) and negligent infliction of emotional
distress. The Complaint also names the Company as a defendant (on an alter ego
theory) and includes claims for negligent retention of certain cemetery
employees. Each plaintiff identified in the Complaint is seeking damages in
excess of $15,000, but the Complaint alleges aggregate damage in excess of
$40,000,000. A mediation of this matter has been scheduled for November 14,
1996. Plaintiffs' counsel has made a written settlement demand of $10,500,000
for purposes of the mediation. In addition, in May 1996, Sean M. O'Sullivan
filed a lawsuit against Osiris
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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 Complaint. Schneider has been named in the
Complaint and it is expected that the Schneider lawsuit will be dismissed
shortly.
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 $11,000,000. 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 TLGI, 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 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 the Company 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. 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 with respect to this lawsuit has been made in the Company's
consolidated financial statements.
ESNER ESTATE
On February 1, 1995, Stuart B. Esner and Sandra Esner (the "Executors") as
co-executor 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 the 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 attorney's 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 a civil conspiracy by acquiring Osiris. The Executors
request compensatory damages of $24,300,000 against the various defendants, and
seek punitive damages
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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.
ENVIRONMENTAL CONTINGENCIES AND LIABILITIES
The Company's operations are subject to numerous environmental laws,
regulations and guidelines adopted by various governmental authorities in the
jurisdictions in which the Company operates. Liabilities are recorded when
environmental liabilities are either known or considered probable and can be
reasonably estimated. The Company policies are designed to control environmental
risk upon acquisition through extensive due diligence and corrective measures
taken prior to acquisition. The Company believes environmental liabilities to be
immaterial individually and in the aggregate.
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 other proceedings,
individually or in the aggregate, to have a material adverse affect on the
Company's financial position, results of operation or liquidity.
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ITEM 5. OTHER INFORMATION.
HOSTILE TAKEOVER PROPOSAL BY SERVICE CORPORATION INTERNATIONAL
On September 17, 1996, SCI publicly distributed a letter to Raymond L.
Loewen, Chairman and Chief Executive Officer of TLGI, in which SCI expressed an
interest in discussing with TLGI a stock-for-stock transaction that would value
the Common Shares at $43 per share. On September 24, 1996, the Board of
Directors of TLGI unanimously rejected the proposal. On October 2, 1996, SCI
announced that it intended to make an unsolicited exchange offer (the "Proposed
Offer") directly to the shareholders of TLGI. SCI's announcement stated that SCI
would offer holders of Common Shares $45 worth of common stock of New Service
Corporation International, a newly organized holding company ("New SCI") and
that SCI would offer holders of Series C Preferred Shares $29.51 worth of New
SCI common stock. All TLGI shareholders would also be entitled to elect to
receive, in lieu of New SCI common stock, shares of a Canadian subsidiary of New
SCI ("Canadian SCI") that would be exchangeable for, and are intended to be
equivalent to, shares of New SCI common stock. On October 3, 1996, New SCI and
Canadian SCI filed with the Securities and Exchange Commission a Registration
Statement on Form S-4 (File No. 333-13391) relating to the Proposed Offer. On
October 10, 1996, the TLGI Board of Directors unanimously determined that the
Proposed Offer was inadequate and not in the best interests of TLGI and its
shareholders. The TLGI Board of Directors has recommended that the TLGI
shareholders not tender their shares, if and when the Proposed Offer is
commenced. Also on October 10, 1996, TLGI filed with the Securities and Exchange
Commission a Schedule 14D-9 providing certain information regarding the Proposed
Offer and summarizing the reasons why the Board of Directors recommended that
the TLGI shareholders not tender their shares. The Schedule 14D-9 was mailed to
TLGI shareholders on or about October 10, 1996.
Effective as of October 10, 1996, in order to attract and retain key
executives and managers of the Company in the context of a threatened change in
control of the Company, the Board of Directors of the Company, upon the
recommendation of the Compensation Committee thereof, approved the execution of
individual change-in-control severance agreements ("Severance Agreements") with
approximately 80 of the Company's executives and managers ("Executives"). With
the exception of Mr. Loewen, each of the executive officers of TLGI will be
entering into such a Severance Agreement. Under each Severance Agreement, if
there is a "change in control" (as defined), an Executive becomes entitled to
severance pay amounting to one to three years' compensation and certain other
benefits during the "Severance Period" (as defined), if the Executive's
employment terminates for any reason other than "cause" (as defined) or if the
Executive terminates his or her employment for certain specified reasons. Each
Severance Agreement also provides that the Executive is entitled to a retention
bonus if the Executive remains employed by the Company for 30 days after a
change in control. Benefits under the Severance Agreements can be reduced in
certain circumstances.
In addition, the Board of Directors adopted a change-in-control severance
compensation plan ("Severance Plan") that is designed to provide certain
benefits to full-time salaried employees of the Company whose principal duties
include corporate or regional management responsibilities. Under the Severance
Plan, upon a "change in control" (as defined), each of the participants is
entitled to a severance payment if, within 24 months after a change in control,
the participant is terminated other than by reason of death, voluntary
termination or retirement, or for "Just Cause" (as defined). Benefits payable
under the Severance Plan can be reduced in certain circumstances.
Effective as of October 10, 1996, the Board authorized TLGI to entered into
indemnification agreements with certain of its directors and officers whereby
TLGI will agree to indemnify such persons against all costs, charges and
expenses incurred by reason of being a director or officer of TLGI.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
Management has established a 1996 EPS goal of $1.30-$1.40 and a 1997 EPS
goal of $1.65-$1.75, both before the effect of costs relating to the hostile
takeover proposal by SCI. Management believes that acquisitions will aggregate
approximately $600 million in 1996 and approximately $750 million in 1997. The
-33-
<PAGE>
foregoing statements and certain other statements made in this Form 10-Q, in
other filings made with the Commission, and elsewhere (including oral statements
made on behalf of the Company) are forward-looking statements within the meaning
of Section 27A(i) of the Securities Act of 1933, as amended, and Section 21E(i)
of the Securities Exchange Act of 1934, as amended. Shareholders and potential
investors are hereby cautioned that certain events or circumstances could cause
actual results to differ materially from those estimated, projected or
predicted. In addition, forward-looking statements are based on management's
knowledge and judgment as of the date that such statements are made. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
The following important factors, among others, could cause the Company's
EPS, acquisition levels and other future results to differ materially from
estimates, predictions or projections included in forward-looking statements.
1. ACQUISITION LEVELS. The funeral services industry acquisition market is
extremely competitive. The Company's competition for acquisitions includes SCI
and Stewart Enterprises, Inc., both of which are publicly-traded companies with
significant United States operations. Aggressive pricing by the Company's
competitors, particularly for strategic operations, may result in increased
acquisition costs. The timing and certainty of completion of potential
acquisitions are based on many factors, including the availability of financing.
There can be no assurance that funds will be available to complete all future
acquisitions, and there can be no assurance that the Company will complete any
specific number of dollar amount or acquisitions in a particular year.
2. REVENUE. The most significant component of increases in revenue is the
level of acquisitions, discussed above. In addition, revenue is affected by the
volume of services rendered, and the mix and pricing of services and products
sold. The foregoing may be affected by fluctuations in the number of deaths,
competitive pricing strategies, pre-need sales and other sales programs
implemented by the Company.
3. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses were 8.3% of consolidated revenue for the first nine months of 1996.
Management's goal is that general and administrative expenses for the 1996
fiscal year will be 8.0% of consolidated revenue. While the Company has
implemented various cost control measures, no assurances can be made that such
measures will be successful.
4. LEGAL PROCEEDINGS. The Company's 1995 results were materially and
adversely affected by the unanticipated outcome of certain legal proceedings.
There currently are material legal proceedings pending against the Company. The
Company is unable to predict the outcome of such proceedings at this time.
5. EFFECTS OF THE HOSTILE TAKEOVER PROPOSAL BY SCI. Although the Company
is unable to predict the effects of the hostile takeover proposal by SCI, such
effects may include a decrease in earnings as a result of the payment of costs
including certain advisory and legal fees, a decrease in the Company's ability
to attract and retain key employees and disruptions to the Company's normal
business operations.
6. OTHER. EPS and consolidated financial results also may be affected by
(i) the ability of the Company to manage its growth by implementing appropriate
management and administrative support structures, (ii) margins achieved by
newly-acquired and established operations, (iii) the cost of the Company's
financing arrangements (including interest rates on long-term debt), (iv) the
number of Common Shares outstanding, (v) competition, (vi) the Company's
effective tax rate, (vii) the accounting treatment of acquisitions and the
valuation of assets and (viii) changes in applicable accounting principles and
governmental regulations.
-34-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------ --------------------------------------------------------------------------
<C> <S>
3 CHARTER DOCUMENTS
3.1 Certificate of Incorporation, issued by the British Columbia Registrar
of Companies (the "Registrar") on October 30, 1985 (1)
3.2 Altered Memorandum of The Loewen Group Inc. ("Loewen"), filed with the
Registrar on June 21, 1996 (2)
3.3 Articles of Loewen, restated, filed with the Registrar on March 1, 1988,
as amended on March 30, 1988, April 21, 1988, May 19, 1989, May 28,
1992, May 20, 1993, June 29, 1994, December 21, 1995 and February 7,
1996 (3)
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY-HOLDERS, INCLUDING INDENTURES
4.1 Indenture, dated as of October 1, 1996, by and between Loewen, Loewen
Group International, Inc. ("LGII"), and Fleet National Bank, as Trustee,
with respect to the Series 3 and 4 Notes
4.2 Purchase Agreement, dated October 1, 1996, made by and between LGII,
Loewen and Smith Barney Inc., Alex. Brown & Sons Incorporated, Nesbitt
Burns Securities Inc., RBC Dominion Securities Corporation and Midland
Walwyn Capital Corporation
4.3 Third Amendment to Operating Credit Agreement, dated for reference July
15, 1996, among Loewen, LGII and Royal Bank of Canada.
4.4 Amended and Restated Operating Credit Agreement, dated for reference
July 15, 1996, between Loewen and Royal Bank of Canada.
4.5 Form of Senior Guarantee of LGII's Series 3 and 4 Notes (included in
Exhibit 4.1)
4.6 Form of Global Series 3 and 4 Outstanding Note of LGII (included in
Exhibit 4.1)
4.7 Form of Physical Series 3 and 4 Outstanding Note of LGII (included in
Exhibit 4.1)
4.8 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 and 2
Senior Guaranteed Notes of LGII (3)
4.9 Purchase Agreement, dated as of March 13, 1996, by and between LGII,
Loewen and Smith Barney Inc., Alex. Brown & Sons Incorporated, Morgan
Stanley & Co. Incorporated, Nesbitt Burns Securities Inc. and RBC
Dominion Securities Corporation (4)
4.10 Receipt Agreement, dated as of January 3, 1996, for the Cumulative
Redeemable Convertible First Preferred Shares Series C of Loewen (3)
4.11 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 (1)
4.12 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)
4.13 Multicurrency Credit Agreement, dated as of May 11, 1995, by and between
LGII, as borrower, Loewen, as guarantor, the banks named therein as
lenders
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ --------------------------------------------------------------------------
and The First National Bank of Chicago, as agent for the banks named
therein as lenders (5)
<C> <S>
4.14 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. (1)
4.15 MIPS Guarantee Agreement, dated August 15, 1994 (6)
4.16 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 (6)
4.17 Exchange Acknowledgment by Loewen, with respect to the 1994 Exchangeable
Floating Rate Debentures due July 15, 2001 issued by LGII, dated June
15, 1994 (1)
4.18 Amended and Restated 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")
4.19 Guaranty dated as of June 14, 1994 by Loewen in favor of the MEIP Agent
for the ratable benefit of the MEIP Banks (1)
4.20 Guaranty dated as of June 14, 1994 by LGII in favor of the MEIP Agent
for the ratable benefit of the MEIP Banks (1)
4.21 Security Agreement, dated as of June 14, 1994, by and between LMIC and
the MEIP Agent (1)
4.22 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 (1)
4.23 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 (1)
4.24 Guaranty Agreement by Loewen re Series E Notes, dated for reference
February 1, 1994 (1)
4.25 Guaranty Agreement by LGII re Series D Notes, dated for reference April
1, 1993 (1)
4.26 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 (1)
4.27 Guaranty Agreement by Loewen re Series A Notes and Series B Notes, dated
for reference October 1, 1991 (1)
4.28 Guaranty Agreement by LGII re Series C Notes, dated for reference
October 1, 1991 (1)
4.29 Form of Senior Guarantee of LGII's Series 1 and 2 Notes (3)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ --------------------------------------------------------------------------
<C> <S>
4.30 Form of Global Series 1 and 2 Outstanding Note of LGII (3)
4.31 Form of Physical Series 1 and 2 Outstanding Note of LGII (3)
4.32 Form of Global Series 1 and 2 Exchange Note of LGII (4)
4.33 Form of Physical Series 1 and 2 Exchange Note of LGII (4)
4.34 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)
4.35 Collateral Trust Agreement, dated as of May 15, 1996, among Bankers
Trust Company, as trustee, TLGI, LGII and various other pledgers (4)
4.36 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)
4.37 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)
4.38 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)
4.39 Loewen hereby agrees 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.
10 MATERIAL CONTRACTS
10.1 Asset Purchase Agreement, dated as of March 26, 1996, by and between
Loewen Louisiana Holdings, Inc. and S.I. Acquisition Associates, L.P.
(3)
10.2 Asset Purchase Agreement, dated as of March 26, 1996, by and between
LLI, Inc., and LLPC, Inc. and S.I. Acquisition Associates, L.P. (3)
10.3 Settlement Agreement and Mutual General Release effective as of February
12, 1996, entered into on March 19, 1996, by and between Provident
American Corporation, Provident Indemnity Life Insurance Company, Loewen
and LGII (3)
10.4 Settlement Agreement, dated as of February 1, 1996, by and between
Loewen, LGII and affiliated entities and J.J. O'Keefe, Sr., Gulf
National Life Insurance Company and affiliated entities (3)
10.5 Shareholders' Agreement, dated as of February 9, 1996, by and between
Loewen, LGII J.J. O'Keefe, Sr., Gulf National Life Insurance Company and
affiliated entities, and certain individuals and law firms named therein
(3)
10.6 Undertaking by Raymond L. Loewen and Anne Loewen, dated as of January 3,
1996 (3)
10.7 Registration Rights Agreement, dated as of March 20, 1996, by and
between LGII, Loewen and the Initial Purchasers named therein (3)
10.8 Stock Purchase Agreement, dated as of March 16, 1995, by and between
Osiris Holding Corporation and LGII (7)
*10.9 Employee Stock Option Plan (United States), as restated and amended as
at September 19, 1995 (3)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ --------------------------------------------------------------------------
<C> <S>
*10.10 Employee Stock Option Plan (Canada), as restated and amended as at
September 19, 1995 (3)
*10.11 1994 Outside Director Compensation Plan as amended as on April 7, 1995
(3)
*10.12 1994 Management Equity Investment Plan (the "MEIP") (1)
*10.13 Form of Executive Agreement executed by participants in the MEIP (1)
*10.14 Employment Agreement, dated October 9, 1991, by and between Loewen and
Timothy A. Birch (1)
*10.15 Employment Agreement, dated March 21, 1990, by and between Loewen and
David FitzSimmons (1)
*10.16 Employment Agreement, dated April 12, 1991, by and between Loewen and
Dwight Hawes (1)
*10.17 Employment Agreement, dated August 19, 1988, by and between Loewen and
Tim Hogenkamp (1)
*10.18 Employment Agreement, dated March 6, 1990, by and between Loewen and
Peter S. Hyndman (1)
*10.19 Employment Agreement, dated March 17, 1995, by and between Loewen, LGII
and Lawrence Miller (1)
*10.20 Employment Agreement, dated December 18, 1990, by and between Loewen and
Peter W. Roberts (1)
*10.21 Employment Agreement, dated March 17, 1995, by and between Loewen and
William R. Shane (1)
*10.22 Employment Agreement, dated April 27, 1993, by and between Loewen and
A.M. Bruce Watson (1)
*10.23 Employment Agreement, and Covenant Not to Compete, dated November 14,
1990, by and between LGII and Albert S. Lineberry, Sr. (1)
*10.24 Consulting Agreement, dated July 18, 1994, by and between Loewen and
Charles B. Loewen, Loewen Group International, Inc., and Corporate
Services International Inc. (1)
*10.25 Employment Agreement, dated December 15, 1994, by and between Loewen and
Robert O. Wienke (3)
*10.26 Severance Agreement, dated June 15, 1995, by and between Loewen and
Robert Garnett (3)
*10.27 Employment Letter, dated March 10, 1995, by Raymond L. Loewen to Paul
Wagler
*10.28 Employment Agreement, dated April 30, 1996, by and between Loewen and
Grant Ballantyne
*10.29 Employment Agreement, dated May 1, 1996, amended July 18, 1996 by and
between Loewen and Douglas J. McKinnon
*10.30 Resignation and Release Agreement, effective June 30, 1996, by and
between Loewen, LGII and Robert O. Wienke.
*10.31 Form of Indemnification Agreement with Outside Directors (8)
*10.32 Form of Indemnification Agreement with Officers (8)
*10.33 Form of The Loewen Group Inc. Severance Agreement (8)
*10.34 The Loewen Group Inc. Severance Pay Plan (8)
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
27 FINANCIAL DATA SCHEDULE
</TABLE>
-38-
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ --------------------------------------------------------------------------
<C> <S>
99 ADDITIONAL EXHIBITS
99.1 Stock Purchase Agreement, dated as of June 14, 1996, by and among Prime
Succession, Inc., the other individuals or entities listed on the
signature pages thereof, Loewen and Blackhawk Acquisition Corp. (9)
99.2 Put/Call Agreement, dated as of August 26, 1996 among Blackstone Capital
Partners II Merchant Banking Fund L.P., Blackstone Offshore Capital
Partners II L.P., Blackstone Family Investment Partnership II L.P., PSI
Management Direct L.P., LGII and Loewen (9)
99.3 Stockholders' Agreement, dated as of August 26, 1996, among Prime
Succession, Inc. (to be renamed Prime Succession Holdings, Inc.),
Blackstone Capital Partners II Merchant Banking Fund L.P., Blackstone
Offshore Capital Partners II L.P., Blackstone Family Investment
Partnership II L.P., PSI Management Direct L.P. and LGII (9)
</TABLE>
- ------------
* Compensatory plan or management contract
(1) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1994, filed on March 31, 1995
(2) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed on August 15, 1996
(3) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1995, filed on March 28, 1996, as amended
(4) Incorporated by reference from the S-4 Registration Statement filed with
LGII and Loewen (Nos. 333-03135 and 333-03135-01) with the Commission on May
3, 1996, as amended
(5) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995, filed on May 11, 1995
(6) Incorporated by reference from the combined Form F-9/F-3 Registration
Statements filed by the Loewen and LGII, respectively, (Nos. 33-81032 and
33-81034) with the Commission on July 1, 1994, as amended on July 11, 1994
and August 2, 1994
(7) Incorporated by reference from Loewen's Periodic Report on Form 8-K/A No. 1
dated April 18, 1995, filed May 5, 1995
(8) Incorporated by reference from Loewen's Solicitation/Recommendation
Statement on Schedule 14D-9 filed on October 10, 1996, as amended
(9) Incorporated by reference from Loewen's Periodic Report on Form 8-K dated
August 26, 1996, filed October 12, 1996 and amended October 30, 1996
-39-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONT.)
(b) Reports on Form 8-K
The following Current Reports on Form 8-K were filed by Loewen during the
subject quarter:
<TABLE>
<CAPTION>
DATE OF REPORT ITEM NUMBER DESCRIPTION
- --------------------------- --------------------------- ------------------------------------------------------
<S> <C> <C>
March 26, 1996 (amended Item 5. Other Events Consolidated financial statements of Ourso Investment
June 10, 1996, amended Corporation and subsidiaries (collectively, "Ourso")
July 6, 1996) and unaudited pro forma financial information
concerning the Registrant's acquisition of Ourso
March 31, 1996 (filed July Item 5. Other Events Unaudited Pro-Forma Consolidated Statement of
6, 1996) Operations of the Registrant for the three months
ended March 31, 1996
June 30, 1996 (filed Item 5. Other Events Unaudited Pro-Forma Consolidated Statement of
September 4, 1996) Operations of the Registrant for the six months months
ended June 30, 1996
August 7, 1996 (filed Item 5. Other Events Press release announcing earnings for the second
August 9, 1996) quarter of 1996
August 29, 1996 (filed Item 5. Other Events Press release announcing the completion of the Prime
September 3, 1996) Succession Inc. transaction
September 5, 1996 (filed Item 5. Other Events Press release announcing the Registrant's plans to
September 6, 1996) list Common shares on the New York Stock Exchange
September 17, 1996 (filed Item 5. Other Events Press release announcing that the Registrant's Board
September 19, 1996) of Directors will review the takeover proposal of
Service Corporation International
September 20, 1996 (filed Item 5. Other Events Press release announcing Registrant's and Blackstone
September 23, 1996) Capital Partners' entering into an agreement to
acquire the cemetery and mortuary operations and
assets of The Rose Hills Memorial Park Association and
Roses, Inc.
September 24, 1996 (filed Item 5. Other Events Press release announcing the Registrant's Board of
September 27, 1996) Directors' unanimous rejection of Service Corporation
International's unsolicited takeover proposal
</TABLE>
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Loewen
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
THE LOEWEN GROUP INC.
<TABLE>
<S> <C>
Date: November 13, 1996 By: /s/ Paul Wagler
--------------------------------------------
Name: Paul Wagler
Title: Senior Vice-President, Finance
and Chief Financial Officer
Date: November 13, 1996 By: /s/ William G. Ballantyne
--------------------------------------------
Name: William G. Ballantyne
Title: Senior Vice-President, Financial Control
and Administration
(Chief Accounting Officer)
</TABLE>
-41-
<PAGE>
- --------------------------------------------------------------------------------
------------------
LOEWEN GROUP INTERNATIONAL, INC., as Issuer
THE LOEWEN GROUP INC., as Guarantor
and
FLEET NATIONAL BANK, as Trustee
------------------
INDENTURE
Dated as of October 1, 1996
------------------
$500,000,000
Senior Guaranteed Notes
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Incorporation by Reference of Trust Indenture Act . . . . . . 16
1.03. Rules of Construction . . . . . . . . . . . . . . . . . . . . 17
ARTICLE TWO
THE SENIOR NOTES
2.01. Issuance of Senior Notes. . . . . . . . . . . . . . . . . . . 17
2.02. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . 19
2.03. Execution and Authentication. . . . . . . . . . . . . . . . . 20
2.04. Registrar and Paying Agent. . . . . . . . . . . . . . . . . . 20
2.05. Paying Agent To Hold Money in Trust . . . . . . . . . . . . . 20
2.06. Noteholder Lists. . . . . . . . . . . . . . . . . . . . . . . 21
2.07. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . 21
2.08. Replacement Notes . . . . . . . . . . . . . . . . . . . . . . 21
2.09. Book-Entry Provisions for Global Note . . . . . . . . . . . . 22
2.10. Special Transfer Provisions.. . . . . . . . . . . . . . . . . 23
2.11. Form of Certificates to Be Delivered. . . . . . . . . . . . . 24
2.12. Outstanding Senior Notes. . . . . . . . . . . . . . . . . . . 25
2.13. Treasury Notes. . . . . . . . . . . . . . . . . . . . . . . . 26
2.14. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . 26
2.15. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . 26
2.16. Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . 26
2.17. CUSIP Number. . . . . . . . . . . . . . . . . . . . . . . . . 27
2.18. Deposit of Moneys . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE THREE
REDEMPTION OF SENIOR NOTES
3.01. Notices to the Trustee. . . . . . . . . . . . . . . . . . . . 27
3.02. Selection of Senior Notes To Be Redeemed. . . . . . . . . . . 27
3.03. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . 27
3.04. Effect of Notice of Redemption. . . . . . . . . . . . . . . . 28
3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . . 28
3.06. Senior Notes Redeemed or Purchased in Part. . . . . . . . . . 29
ARTICLE FOUR
COVENANTS
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
i
<PAGE>
Page
----
4.01. Payment of Senior Notes . . . . . . . . . . . . . . . . . . . 29
4.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . 29
4.03. Corporate Existence . . . . . . . . . . . . . . . . . . . . . 30
4.04. Payment of Taxes and Other Claims . . . . . . . . . . . . . . 30
4.05. Maintenance of Properties; Insurance; Books and Records;
Compliance with Law . . . . . . . . . . . . . . . . . . . . . 30
4.06. Compliance Certificate. . . . . . . . . . . . . . . . . . . . 31
4.07. Limitation on Indebtedness. . . . . . . . . . . . . . . . . . 31
4.08. Limitation on Restricted Payments . . . . . . . . . . . . . . 32
4.09. Limitation on Issuances and Sale of Preferred Stock by
Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . 34
4.10. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . 34
4.11. Change of Control . . . . . . . . . . . . . . . . . . . . . . 34
4.12. Disposition of Proceeds of Asset Sales. . . . . . . . . . . . 36
4.13. Limitation on Transactions with Interested Persons. . . . . . 38
4.14. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries. . . . . . . . . . . . . . . . . . . . 39
4.15. Limitations on Sale-Leaseback Transactions. . . . . . . . . . 39
4.16. Limitation on Applicability of Certain Covenants. . . . . . . 39
4.17 Commission Reports. . . . . . . . . . . . . . . . . . . . . . 40
4.18. Rule 144A Information Requirement . . . . . . . . . . . . . . 40
4.19. Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . 40
ARTICLE FIVE
SUCCESSOR CORPORATION
5.01. When LGII May Merge, etc. . . . . . . . . . . . . . . . . . . 40
5.02. Successor Substituted.. . . . . . . . . . . . . . . . . . . . 41
ARTICLE SIX
REMEDIES
6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . 42
6.02. Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . 43
6.03. Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . 44
6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . 44
6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . 44
6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . 45
6.07. Right of Holders To Receive Payment . . . . . . . . . . . . . 45
6.08. Collection Suit by Trustee. . . . . . . . . . . . . . . . . . 45
6.09. Trustee May File Proofs of Claims . . . . . . . . . . . . . . 46
6.10. Priorities. . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . 46
6.12. Restoration of Rights and Remedies. . . . . . . . . . . . . . 46
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
ii
<PAGE>
Page
----
ARTICLE SEVEN
TRUSTEE
7.01. Duties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . 48
7.03. Individual Rights of Trustee. . . . . . . . . . . . . . . . . 48
7.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . . . 48
7.05. Notice of Default . . . . . . . . . . . . . . . . . . . . . . 49
7.06. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . 49
7.07. Reports by Trustee to Holders . . . . . . . . . . . . . . . . 49
7.08. Compensation and Indemnity. . . . . . . . . . . . . . . . . . 49
7.09. Replacement of Trustee. . . . . . . . . . . . . . . . . . . . 50
7.10. Successor Trustee by Merger, etc. . . . . . . . . . . . . . . 51
7.11. Eligibility; Disqualification . . . . . . . . . . . . . . . . 51
7.12. Preferential Collection of Claims Against LGII. . . . . . . . 51
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
8.01. Termination of the Obligations of LGII and the Guarantor. . . 51
8.02. Legal Defeasance and Covenant Defeasance. . . . . . . . . . . 52
8.03. Application of Trust Money. . . . . . . . . . . . . . . . . . 55
8.04. Repayment to LGII or Guarantor. . . . . . . . . . . . . . . . 55
8.05. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . 55
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
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Page
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
9.01. Without Consent of Holders. . . . . . . . . . . . . . . . . . 56
9.02. With Consent of Holders . . . . . . . . . . . . . . . . . . . 56
9.03. Compliance with Trust Indenture Act . . . . . . . . . . . . . 57
9.04. Revocation and Effect of Consents . . . . . . . . . . . . . . 57
9.05. Notation on or Exchange of Senior Notes . . . . . . . . . . . 58
9.06. Trustee May Sign Amendments, etc. . . . . . . . . . . . . . . 58
ARTICLE TEN
GUARANTEE OF SENIOR NOTES
10.01. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.02. Execution and Delivery of Guarantee . . . . . . . . . . . . . 59
10.03. Interest Act (Canada).. . . . . . . . . . . . . . . . . . . . 60
ARTICLE ELEVEN
MISCELLANEOUS
11.01. Trust Indenture Act of 1939 . . . . . . . . . . . . . . . . . 60
11.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.03. Communication by Holders with Other Holders . . . . . . . . . 61
11.04. Certificate and Opinion as to Conditions Precedent. . . . . . 61
11.05. Statements Required in Certificate or Opinion . . . . . . . . 61
11.06. Rules by Trustee, Paying Agent, Registrar . . . . . . . . . . 62
11.07. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 62
11.08. Consent to Service of Process.. . . . . . . . . . . . . . . . 62
11.09. No Interpretation of Other Agreements . . . . . . . . . . . . 62
11.10. No Recourse Against Others. . . . . . . . . . . . . . . . . . 62
11.11. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.12. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . 63
11.13. Separability. . . . . . . . . . . . . . . . . . . . . . . . . 63
11.14. Table of Contents, Headings, etc. . . . . . . . . . . . . . . 63
11.15. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . 63
SIGNATURES
EXHIBIT A Form of Global Note
EXHIBIT B Form of Physical Note
EXHIBIT C Form of Senior Guarantee
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
iv
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INDENTURE, dated as of October 1, 1996, between Loewen Group
International, Inc., a Delaware corporation ("LGII"), The Loewen Group Inc., a
body corporate organized under and governed by the laws of the Province of
British Columbia, Canada (the "Guarantor") and Fleet National Bank, a national
banking association as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other
party and, except as otherwise provided herein, for the equal and ratable
benefit of the Holders of LGII's Guaranteed Senior Notes (the "Senior Notes"),
guaranteed by the Guarantor.
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
1.01. DEFINITIONS.
"1996 Revolving Credit Facility" means the $750,000,000 Credit
Agreement, dated as of May 15, 1996, among LGII, as borrower, TLGI, as
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.
"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.
"Agent Members" shall have the meaning set forth in Section 2.09.
"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 directors'
qualifying shares or investments by foreign nationals mandated by applicable
law) or of First Capital Life Insurance Company of Louisiana, National Capitol
Life Insurance Company, Security Industrial Insurance Company, Security
Industrial Fire Insurance Company or any successors to such Subsidiaries; (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 properties and assets sold 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 (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
<PAGE>
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 of Article IV.
"Asset Sale Offer" shall have the meaning set forth in Section 4.12.
"Asset Sale Offer Price" shall have the meaning set forth in
Section 4.12.
"Asset Sale Purchase Date" shall have the meaning set forth in
Section 4.12.
"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 of 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 of 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.
"Bankruptcy Law" means Title 11 of the United States Code or any
similar law for the relief of debtors.
"Board of Directors" means the board of directors of LGII or the
Guarantor, as the case may be, or any duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of LGII or the Guarantor, as the case may
be, to have been duly adopted by the Board of Directors of LGII or the
Guarantor, as the case may be, and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
"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.
"Canadian Revolver" means CDN $50,000,000 Operating Credit Agreement
dated August 15, 1994, as amended on July 15, 1996, among The Loewen Group Inc.,
Loewen Group International, Inc. and Royal Bank of Canada.
"Canadian Term Loan" means CDN $35,000,000 Credit Agreement dated as
of January 12, 1995 between The Loewen Group Inc. and Loewen Group
International, Inc. and Dresdner Bank Canada.
"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.
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"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 the amount of any 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 United 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.
"Change of Control" means the occurrence on or after the Measurement
Date 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 provisions hereof, 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
3
<PAGE>
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.
"Change of Control Offer" shall have the meaning set forth in
Section 4.11.
"Change of Control Purchase Date" shall have the meaning set forth in
Section 4.11.
"Collateral Agreement" means the Collateral Trust Agreement, dated as
of May 15, 1996, among Bankers Trust Company, as trustee, the Guarantor, LGII
and various other Subsidiaries.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, or if at any time after the execution of the Indenture
such Commission is not existing and performing the applicable duties now
assigned to it, then the body or bodies performing such duties at such time.
"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 period 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 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
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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 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 of the
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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.
"Consolidation" means, with respect to any person, the consolidation
of the accounts of such person and each of its Subsidiaries if and to the extent
the accounts of such person and each of its Restricted Subsidiaries would
normally be consolidated with those of such person, all in accordance with GAAP.
The term "consolidated" shall have a meaning correlative to the foregoing.
"Control" means, with respect to any specified person, the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Corporate Trust Office" means the corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
principally administered, which on the date hereof is located in Hartford,
Connecticut.
"covenant defeasance" shall have the meaning set forth in
Section 8.02.
"Credit Agreements" means the 1996 Revolving Credit Facility, the
Canadian Revolver, the MEIP Facility and the Canadian Term Loan; 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.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Depositary" means The Depositary Trust Company, its nominees and
their respective successors.
"Event of Default" has the meaning set forth under Section 6.01
herein.
"Excess Proceeds" shall have the meaning set forth in Section 4.12.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" refers to any Exchange Notes containing terms
substantially identical to the Initial Notes (except that (i) such Exchange
Notes shall not contain terms with respect to transfer restrictions and
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shall be registered under the Securities Act, and (ii) certain provisions
relating to an increase in the stated rate of interest thereon shall be
eliminated) that are issued and exchanged for the Initial Notes in accordance
with the Exchange Offer, as provided for in the Registration Rights Agreement.
"Exchange Offer" means the offer by LGII to the Holders of the Initial
Notes to exchange all of the Initial Notes for Exchange Notes, as provided for
in the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset, 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 a Board Resolution of the
Guarantor delivered to the Trustee.
"GAAP" means accounting principles generally accepted in Canada
consistently applied until such time as the Guarantor or LGII shall prepare
their respective books of record in accordance with accounting principles
generally accepted in the United States ("U.S. GAAP") at which time and all
times thereafter GAAP shall mean U.S. GAAP consistently applied.
"Global Note" shall have the meaning set forth in Section 2.01.
"Guarantee" shall mean the guarantee of the Senior Notes by the
Guarantor created pursuant to Article 10.
"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.
"Guarantor" shall mean The Loewen Group, Inc., and shall include any
successor replacing such Guarantor pursuant to the provisions hereof, 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" or "Noteholder" means the person in whose name a Senior 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
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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
the provisions hereof, 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 hereof; 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 provisions hereof 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 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 hereof.
"Indenture" means this Indenture, as amended, modified or supplemented
from time to time, and shall include the form and terms of particular series of
Senior Notes established as contemplated hereby.
"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.
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"Initial Notes" refers to Senior Notes initially issued under this
Indenture and distributed in transactions exempt from registration under the
Securities Act prior to the exchange of such Senior Notes for Exchange Notes.
"interest" means, with respect to any Senior Note, the amount of all
interest accruing on such Senior Note, including all interest accruing
subsequent to the occurrence of any events specified in Sections 6.01(f) and (g)
or which would have accrued but for any such event, whether or not such claims
are allowable under applicable law.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Senior Notes, as set forth therein.
"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 under any 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.
"Issue Date" means the issue date specified in the securities of each
series except as otherwise provided in Section 2.01.
"legal defeasance" shall have the meaning set forth in Section 8.02.
"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 Senior Note, the date on
which any principal of such Senior Note becomes due and payable as therein or
herein provided, whether at the Stated Maturity with respect to such principal
or by declaration of acceleration, call for redemption or purchase or otherwise.
"Measurement Date" means March 20, 1996.
"MEIP Facility" means the 1994 Management Equity Investment Plan
("MEIP") Credit Agreement, dated as of June 14, 1994, as amended and restated as
of May 15, 1996, by and between Loewen Management Investment Corporation, in its
capacity as agent for LGII the Guarantor, the banks listed therein and Wachovia
Bank of Georgia, N.A., as agent.
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"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.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the Chief Operating Officer, the President, any Executive Vice
President, any Senior Vice President, any Vice President, the Chief Financial
Officer, the Treasurer, the Secretary or the Controller of LGII or the
Guarantor, as the case may be.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer or Assistant Secretary of LGII or the
Guarantor, as the case may be, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to LGII.
"Pari Passu Indebtedness" means Indebtedness of LGII or the Guarantor
which ranks PARI PASSU in right of payment with the Senior Notes or the
Guarantee, as the case may be.
"Paying Agent" has the meaning set forth in Section 2.04, except that,
for the purposes of Section 4.11 and Section 4.12 and Articles Three and Eight,
the Paying Agent shall not be LGII or a Subsidiary of LGII or any of their
respective Affiliates.
"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 Series 3 Senior Notes, the Series 4 Senior Notes and
Indebtedness of the Guarantor evidenced by its Guarantee with respect to
the Series 3 Senior Notes and the Series 4 Senior Notes;
(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 or LGII, as the case may be, under
the Credit Agreements in an aggregate principal amount at any one time
outstanding not to exceed $750,000,000
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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 on the Issue Date or
Indebtedness 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 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
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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 this Indenture;
(vii) Investments in Interest Rate Protection 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 Guarantor and its Restricted Subsidiaries to hedge against
fluctuations in interest rates; and (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) 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 and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
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(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;
(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 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.
"Physical Note" shall have the meaning set forth in Section 2.01.
"Predecessor Notes" means, with respect to any particular Senior Note,
every previous Senior Note evidencing all or a portion of the same debt as that
evidenced by such particular Senior Note; and, for the purposes of this
definition, any Senior Notes authenticated and delivered under Section 2.08
hereof in exchange for mutilated Notes or in lieu of lost, destroyed or stolen
Senior Notes, shall be deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Senior Notes.
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"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.
"principal" means, with respect to any debt security, the principal of
the security plus, when appropriate, the premium, if any, on the security and
any interest on overdue principal.
"Private Placement Legend" shall have the meaning set forth in Section
2.02.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
"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
Senior Note or is redeemable at the option of the holder thereof at any time
prior to any such Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to any such Stated Maturity.
"Redemption Date" means, with respect to any Senior Note to be
redeemed, the date fixed by LGII for such redemption pursuant to this Indenture
and the terms of the Senior Notes.
"Redemption Price" means, with respect to any Senior Note to be
redeemed, the price fixed for such redemption pursuant to the terms of this
Indenture and the Senior Notes.
"Registrar" has the meaning set forth in Section 2.04.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of October 4, 1996, among LGII, the Guarantor and the
Initial Purchasers.
"Registration Statement" means the Registration Statement as defined
in the Registration Rights Agreement.
"Related Obligor" has the meaning set forth in Section 4.08.
"Restricted Payments" has the meaning set forth in Section 4.08.
"Restricted Subsidiary" means any Subsidiary of the Guarantor other
than an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"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 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.
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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.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"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.
"Senior Notes" means the securities that are issued under this
Indenture, as amended or supplemented from time to time pursuant to this
Indenture.
"Series 3 Exchange Notes" has the meaning given in Section 2.01.
"Series 3 Initial Notes" means the $125,000,000 aggregate principal
amount of LGII's 7 3/4% Series 3 Senior Guaranteed Notes due 2001 issued
pursuant to this Indenture on October 4, 1996.
"Series 3 Senior Notes" means the $125,000,000 aggregate principal
amount of LGII's Series 3 Senior Guaranteed Notes dated October 4, 1996, which
are divided into two sub-series of Senior Notes: the Series 3 Initial Notes and
the Series 3 Exchange Notes.
"Series 4 Exchange Notes" has the meaning given in Section 2.01.
"Series 4 Initial Notes" means the $225,000,000 aggregate principal
amount of LGII's 8 1/4% Series 4 Senior Guaranteed Notes due 2003 issued
pursuant to this Indenture on October 4, 1996.
"Series 4 Senior Notes" means the $225,000,000 aggregate principal
amount of LGII's Series 4 Senior Guaranteed Notes dated October 4, 1996, which
are divided into two sub-series of Senior Notes: the Series 4 Initial Notes and
the Series 4 Exchange Notes.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"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 Senior Note or
any installment of interest thereon, the date specified in such Senior Note as
the fixed date on which the principal of such Senior 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
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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.
"Surviving Entity" shall have the meaning set forth in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the Issue Date.
"Trust Officer" means any officer in the Corporate Trust
Administration of the Trustee or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above-designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture until a
successor replaces such party (or any previous successor) in accordance with the
provisions of this Indenture, and thereafter means such successor.
"U.S. Government Obligations" shall have the meaning set forth in
Section 8.02.
"Unrestricted Subsidiary" means (i) First Capital Life Insurance
Company of Louisiana, National Capital Life Insurance Company, Security
Industrial Insurance Company, Security Industrial Fire Insurance Company or any
successors to such Subsidiaries 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 contained in Section 4.08, (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 contained in Section 4.08 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.
"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 at 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
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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.
1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"INDENTURE SECURITIES" means the Senior Notes and the Guarantee;
"INDENTURE SECURITY HOLDER" means a Noteholder or Holder;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and
"OBLIGOR" on the indenture securities means LGII, the Guarantor or any
other obligor on the Senior Notes or the Guarantee.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
1.03. RULES OF CONSTRUCTION.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) words in the singular include the plural, and words in the plural
include the singular.
(b) "or" is not exclusive;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision; and
(e) all references to "$" or "dollars" shall refer to the lawful
currency of the United States of America.
ARTICLE TWO
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THE SENIOR NOTES
2.01. ISSUANCE OF SENIOR NOTES.
The aggregate principal amount of Senior Notes which may be
outstanding at any time under this Indenture may not exceed $500,000,000 at any
time, except to the extent permitted by Section 2.08. The Senior Notes may be
issued in one or more series. Upon the execution and delivery of this Indenture
and the Guarantee, Series 3 Senior Notes in an aggregate principal amount of
$125,000,000 and Series 4 Senior Notes in an aggregate principal amount of
$225,000,000 may be executed by LGII and delivered to the Trustee for
authentication. From time to time thereafter LGII may, without limitation, also
issue additional Senior Notes of the same tenor as the Series 3 Senior Notes or
the Series 4 Senior Notes, as the case may be, under this Indenture so that such
additional Senior Notes, together with either the Series 3 Senior Notes or the
Series 4 Senior Notes, as the case may be, shall form a single series; PROVIDED
that with respect to any such additional Senior Notes the Issue Date may be the
date of the purchase and sale of such additional Senior Notes and interest
thereon shall accrue as and from the Issue Date thereof.
The Series 3 Senior Notes are divided into the following two sub-
series, which collectively form one series of Senior Notes: (i) LGII's 7 3/4%
Series 3 Senior Guaranteed Notes due 2001, issued on October 4, 1996 (the
"Series 3 Initial Notes") and (ii) LGII's 7 3/4% Series 3 Senior Guaranteed
Notes (Registered) due 2001 (the "Series 3 Exchange Notes"). A Holder of Series
3 Initial Notes, upon surrender of the certificate representing such Series 3
Initial Notes pursuant to the Exchange Offer, shall be entitled to receive in
exchange therefor a certificate representing Series 3 Exchange Notes, which
shall evidence the same debt as had been evidenced by the Series 3 Initial Notes
so surrendered. Absent repurchase, the aggregate principal amount of Series 3
Senior Notes shall be $125,000,000, irrespective of whether all, some or none of
the Series 3 Initial Notes are exchanged in the Exchange Offer.
The Series 4 Senior Notes are divided into the following two sub-
series, which collectively form one series of Senior Notes: (i) LGII's 8 1/4%
Series 4 Senior Guaranteed Notes due 2003, issued on October 4, 1996 (the
"Series 4 Initial Notes") and (ii) LGII's 8 3/4% Series 4 Guaranteed Notes
(Registered) due 2003 (the "Series 4 Exchange Notes"). A Holder of Series 4
Initial Notes, upon surrender of the certificate representing such Series 4
Initial Notes pursuant to the Exchange Offer, shall be entitled to receive in
exchange therefor a certificate representing Series 4 Exchange Notes, which
shall evidence the same debt as had been evidenced by the Series 4 Initial Notes
so surrendered. Absent redemption or repurchase, the aggregate principal amount
of Series 4 Senior Notes shall be $225,000,000, irrespective of whether all,
some or none of the Series 4 Initial Notes are exchanged in the Exchange Offer.
The Senior Notes of each series and the Trustee's certificate of
authentication thereon shall be in substantially the form of Exhibits A and B
hereto, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with any applicable law
or with the rules of any securities exchange or as may, consistently herewith,
be determined by the Officers executing such Senior Notes, as evidenced by their
execution thereof. The Senior Notes of each series shall be issuable only in
registered form without coupons and only in denominations of $1,000 and integral
multiples thereof.
The definitive Senior Notes and the Guarantee shall be printed,
typewritten, lithographed or engraved or produced by any combination of these
methods or may be produced in any other manner permitted by the rules of any
securities exchange on which the Senior Notes of such series may be listed, all
as determined by the officers executing such Senior Notes, as evidenced by their
execution of such Senior Notes. Each Senior Note shall be dated the date of its
authentication.
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Initial Notes offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global Senior Notes
substantially in the form set forth in Exhibit A hereto (the "Global Note")
deposited with, or on behalf of, the Depositary or with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the
Global Note may from time to time be increased or decreased by adjustments made
on the records of the Depositary or its nominee, or of the trustee, as custodian
for the Depositary or its nominee, as hereinafter provided.
Initial Notes offered and sold other than as described in the
preceding paragraph shall be issued in the form of permanent certificated Senior
Notes in registered form in substantially the form set forth in Exhibit B hereto
(the "Physical Notes"). Senior Notes issued pursuant to Section 2.09 in
exchange for interests in the Global Note shall be in the form of Physical
Notes.
The terms and provisions contained in the form of the Senior Notes,
annexed hereto as Exhibits A and B, shall constitute, and are hereby expressly
made, a part of this Indenture and, to the extent applicable, LGII and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
2.02. RESTRICTIVE LEGENDS. Unless and until (i) an Initial Note
is sold under an effective Registration Statement or (ii) an Initial Note is
exchanged for an Exchange Note in connection with an effective Registration
Statement, in each case as provided for in the Registration Rights Agreement,
then the Global Note and each Physical Note shall bear the legend set forth
below (the "Private Placement Legend") on the face thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A)
TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
THE TRUSTEE), (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
Each Global Note, whether or not an Initial Note, shall also bear the
following legend on the face thereof:
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
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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.
2.03. EXECUTION AND AUTHENTICATION.
Two Officers shall execute the Senior Notes of each series on behalf
of LGII by either manual or facsimile signature. LGII's seal shall be
impressed, affixed, imprinted or reproduced on the Senior Notes.
If an Officer whose signature is on a Senior Note no longer holds that
office at the time the Trustee authenticates the Senior Note or at any time
thereafter, the Senior Note shall be valid nevertheless.
A Senior Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Senior Note.
Such signature shall be conclusive evidence that the Senior Note has been
authenticated under this Indenture.
The Trustee shall authenticate Senior Notes for original issue upon
receipt of an Officers' Certificate signed by two Officers of LGII directing the
Trustee to authenticate the Senior Notes and certifying that all conditions
precedent to the issuance of the Senior Notes contained herein have been
complied with.
With the prior written approval of LGII, the Trustee may appoint an
authenticating agent acceptable to LGII to authenticate Senior Notes. Unless
limited by the terms of such appointment, an authenticating agent may
authenticate Senior Notes whenever the Trustee may do so. Each reference in
this Indenture to authentication by the Trustee includes authentication by such
agent. Such authenticating agent shall have the same rights as the Trustee in
any dealings hereunder with LGII or with any of LGII's Affiliates.
2.04. REGISTRAR AND PAYING AGENT.
LGII shall maintain an office or agency (which shall be located in the
Borough of Manhattan, The City of New York, State of New York) where Senior
Notes of each series may be presented for registration of transfer or for
exchange (the "Registrar"), an office or agency (which shall be located in the
Borough of Manhattan, The City of New York, State of New York) where Senior
Notes may be presented for payment of principal, premium, if any, and interest
(the "Paying Agent") and an office or agency where notices and demands to or
upon LGII in respect of the Senior Notes and this Indenture may be served. The
Registrar shall keep a register of the Senior Notes and of their transfer and
exchange. LGII may have one or more co-Registrars and one or more additional
paying agents. The term "Paying Agent" includes any additional paying agent.
Except as otherwise expressly provided in this Indenture, LGII or any Affiliate
thereof may act as Paying Agent.
LGII shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall incorporate
the provisions of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such Registrar or Paying Agent. LGII shall notify the
Trustee of the name and address of any such Registrar or Paying Agent. If LGII
fails to maintain a Registrar, Paying Agent or
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agent for service of notices and demands, or fails to give the foregoing notice,
the Trustee shall act as such and shall be entitled to appropriate compensation
in accordance with Section 7.08.
LGII initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Senior Notes.
2.05. PAYING AGENT TO HOLD MONEY IN TRUST.
Each Paying Agent shall hold in trust for the benefit of Holders or
the Trustee all money held by the Paying Agent for the payment of principal of,
or interest on, the Senior Notes (whether such money has been distributed to it
by LGII or any other obligor on the Senior Notes), and LGII (or any other
obligor on the Senior Notes) and the Paying Agent shall notify the Trustee of
any default by LGII (or any other obligor on the Senior Notes) in making any
such payment. If LGII or an Affiliate of LGII acts as Paying Agent, it shall
segregate the money and hold it as a separate trust fund. LGII at any time may
require a Paying Agent to distribute all money held by it to the Trustee and
account for any funds disbursed and the Trustee may at any time during the
continuance of any Payment Default with respect to the Senior Notes, upon
written request to a Paying Agent, require such Paying Agent to pay all money
held by it to the Trustee and to account for any funds distributed. Upon doing
so, the Paying Agent (other than an obligor on the Senior Notes or the
Guarantee) shall have no further liability for the money so paid over to the
Trustee.
2.06. NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is
not the Registrar, LGII shall furnish to the Trustee at least ten Business Days
before each Interest Payment Date and at such other times as the Trustee may
request in writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Holders, which list may be
conclusively relied upon by the Trustee.
2.07. TRANSFER AND EXCHANGE.
When Senior Notes of any series are presented to the Registrar or a
co-Registrar with a request to register the transfer of such Senior Notes or to
exchange such Senior Notes for an equal principal amount of Senior Notes of
other authorized denominations, the Registrar or co-Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transaction are met; PROVIDED, HOWEVER, that the Senior Notes surrendered for
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to LGII and the Registrar or co-
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing. To permit registrations of transfers and exchanges, LGII shall
execute and the Trustee shall authenticate Senior Notes at the Registrar's or
co-Registrar's request. No service charge shall be made for any transfer,
exchange or redemption, but LGII may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchanges or transfers pursuant to Sections 2.02, 2.07, 2.10, 4.12,
4.13 or 9.05). The Registrar or co-Registrar shall not be required to register
the transfer of or exchange of any Senior Note (i) during a period beginning at
the opening of business 15 days before the mailing of a notice of redemption of
Senior Notes and ending at the close of business on the day of such mailing and
(ii) selected for redemption in whole or in part pursuant to Article Three,
except the unredeemed portion of any Senior Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book-entry system maintained by the
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Holder of such Global Note (or its agent), and that ownership of a beneficial
interest in the Senior Note shall be required to be reflected in a book entry.
2.08. REPLACEMENT NOTES.
If a mutilated Senior Note is surrendered to the Trustee or if the
Holder of a Senior Note claims that the Senior Note has been lost, destroyed or
wrongfully taken, LGII shall issue and the Trustee shall authenticate a
replacement Senior Note if the Trustee's requirements are satisfied. If
required by the Trustee or LGII, such Holder must provide an indemnity bond or
other indemnity, sufficient in the judgment of both LGII and the Trustee, to
protect LGII, the Trustee or any Paying Agent or Registrar from any loss which
any of them may suffer if a Senior Note is replaced. LGII may charge such
Holder for its reasonable, out-of-pocket expenses in replacing a Senior Note,
including reasonable fees and expenses of counsel. Every replacement Senior
Note is an additional obligation of LGII and the Guarantor.
2.09. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTE. (a) The Global Note
initially shall (i) be registered in the name of the Depositary for such Global
Note or the nominee of such Depositary, (ii) be deposited with, or on behalf of,
the Depositary or with the Trustee, as custodian for such Depositary, and (iii)
bear legends as set forth in Section 2.02. Members of, or participants in, the
Depositary ("Agent Members") shall have no rights under this Indenture with
respect to any Global Note held on their behalf by the Depositary, or the
Trustee as its custodian, or under the Global Note, and the Depositary may be
treated by LGII, the Trustee and any agent of LGII or the Trustee as the
absolute owner of such Global Note for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent LGII, the Trustee or any agent of
LGII or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or shall impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder of any Senior Note.
(b) Transfers of the Global Note shall be limited to transfers of
such Global Note in whole, but not in part, to the Depositary, its successors or
their respective nominees. Interests of beneficial owners in the Global Note
may be transferred in accordance with the rules and procedures of the Depositary
and the provisions of Section 2.10. In addition, Physical Notes shall be issued
to all beneficial owners in exchange for their beneficial interests in the
Global Note if (i) the Depositary notifies LGII that it is unwilling or unable
to continue as Depositary for the Global Note and a successor depositary is not
appointed by LGII within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depositary.
(c) In connection with any transfer of a portion of the beneficial
interest in the Global Note pursuant to Section 2.09(b) to beneficial owners who
are required to hold Physical Notes, the Registrar shall reflect on its books
and records the date and a decrease in the principal amount of the Global Note
in an amount equal to the principal amount of the beneficial interest in the
Global Note to be transferred, and LGII shall execute, and the Trustee shall
authenticate and deliver, one or more Physical Notes of like tenor and amount.
(d) In connection with the transfer of the entire Global Note to
beneficial owners pursuant to Section 2.09(b), the Global Note shall be deemed
to be surrendered to the Trustee for cancellation, and LGII shall execute, and
the Trustee shall authenticate and deliver, to each beneficial owner identified
by the Depositary in exchange for its beneficial interest in the Global Note an
equal aggregate principal amount of Physical Notes of authorized denominations.
(e) Any Physical Note delivered in exchange for an interest in the
Global Note pursuant to subsection (c) or subsection (d) of this Section shall,
except as otherwise provided by paragraph (d) of Section
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2.10, bear the applicable legend regarding transfer restrictions applicable to
the Physical Notes set forth in Section 2.02.
(f) The Holder of the Global Note may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Senior Notes.
(g) QIBs that are beneficial owners of interests in a Global Note may
receive Physical Notes (which shall bear the Private Placement Legend if
required by Section 2.02) in accordance with the procedures of the Depositary.
In connection with the execution, authentication and delivery of such Physical
Notes, the Registrar shall reflect on its books and records a decrease in the
principal amount of the relevant Global Note equal to the principal amount of
such Physical Notes and LGII shall execute and the Trustee shall authenticate
and deliver one or more Physical Notes having an equal aggregate principal
amount.
2.10. SPECIAL TRANSFER PROVISIONS. Unless and until (i) an
Initial Note is sold under an effective Registration Statement, or (ii) an
Initial Note is exchanged for an Exchange Note in connection with the Exchange
Offer, in each case pursuant to the Registration Rights Agreement, the following
provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Note to any institutional "accredited investor"
(as defined in subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act) that is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Initial
Note, whether or not such Initial Note bears the Private Placement
Legend, if (x) the requested transfer is at least three years after
the original issue date of the Initial Notes or (y) the proposed
transferee has delivered to the Registrar a certificate substantially
in the form set forth in Section 2.11; and
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar
of (x) the certificate and opinion, if any, required by paragraph (i)
and (y) instructions given in accordance with the Depositary's and the
Registrar's procedures therefor, the Registrar shall reflect on its
books and records the date and a decrease in the principal amount of
the Global Note in an amount equal to the principal amount of the
beneficial interest in the Global Note to be transferred, and LGII
shall execute, and the Trustee shall authenticate and deliver, one or
more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Physical Note to a QIB
(excluding Non-U.S. Persons):
(i) If the Senior Note to be transferred consists of (A)
Physical Notes, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Initial Note stating, or has otherwise
advised LGII and the Registrar in writing, that the sale has been made
in compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Senior Note
stating, or has otherwise advised LGII and the Registrar in writing,
that it is a QIB, that it is purchasing the Senior Note for its own
account or an account with respect to which it exercises sole
investment discretion (the beneficial owner of which is a QIB) and
that it and any such sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding LGII
as it has requested pursuant to Rule 144A or has determined
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not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A or (B) an
interest in the Global Note, the transfer of such interest may be
affected only through the book entry system maintained by the
Depositary.
(ii) If the proposed transferor is an Agent Member, and the
Initial Note to be transferred consists of Physical Notes, upon
receipt by the Registrar of the documents referred to in clause (i)
and instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount at maturity
of the Global Note in an amount equal to the principal amount at
maturity of the Physical Notes to be transferred, and the Trustee
shall cancel the Physical Note so transferred.
(c) Private Placement Legend. Upon the registration of transfer,
exchange or replacement of Senior Notes not bearing the Private Placement
Legend, the Registrar shall deliver Senior Notes that do not bear the Private
Placement Legend. Upon the registration of transfer, exchange or replacement of
Senior Notes bearing the Private Placement Legend, the Registrar shall deliver
only Senior Notes that bear the Private Placement Legend unless the condition of
paragraph (a)(i)(x) of this Section 2.10 exists or (ii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to LGII and the
Trustee to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act.
(d) General. By its acceptance of any Senior Note bearing the
Private Placement Legend, each Holder of such a Senior Note acknowledges the
restrictions on transfer of such Senior Note set forth in this Indenture and in
the Private Placement Legend and agrees that it will transfer such Senior Note
only as provided in this Indenture.
The Registrar shall retain until such time as no Senior Notes remain
Outstanding copies of all letters, notices and other written communications
received pursuant to Section 2.09 or this Section 2.10. LGII shall have the
right to inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable written
notice to the Registrar.
2.11. FORM OF CERTIFICATES TO BE DELIVERED.
Form of Certificate to be Delivered in Connection with Transfers to
Non-QIB Institutional Accredited Investors.
Loewen Group International, Inc.
50 East RiverCenter Boulevard
Suit 800
Covington, Kentucky 41011
Ladies and Gentlemen:
We are delivering this letter in connection with our proposed purchase
of Senior Guaranteed Notes (the "Senior Notes") of Loewen Group International,
Inc. a Delaware corporation ("LGII"), guaranteed by The Loewen Group Inc., a
body corporate under the laws of the Province of British Columbia. We hereby
confirm that:
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(i) we are an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act") (an "Accredited Investor");
(ii) any purchase of Senior Notes by us will be for our own account
or for the account of one or more other Accredited Investors as to which we
exercise sole investment discretion;
(iii) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of
purchasing Senior Notes and we and any accounts for which we are acting are
able to bear the economic risks of and an entire loss of our or their
investment in the Senior Notes;
(iv) we are not acquiring Senior Notes with a view to any
distribution thereof in a transaction that would violate the Securities Act
or the securities laws of any state of the United States or any other
applicable jurisdiction; PROVIDED that the disposition of our property and
the property of any accounts for which we are acting as fiduciary shall
remain at all times within our and their control; and
(v) we acknowledge that the Senior Notes have not been registered
under the Securities Act and that none of the Senior Notes may be offered
or sold within the United States or to, or for the benefit of, U.S. persons
except as set forth below.
We agree, on our own behalf and on behalf of each account for which we
acquire any Senior Notes, that, for a period of three years after the original
issuance of the Senior Notes, such Senior Notes may be offered, resold, pledged
or otherwise transferred only (i) to LGII or any of its subsidiaries, (ii)
inside the United States to a person whom we reasonably believe to be a
qualified institutional buyer (as defined in Rule 144A under the Securities Act)
in compliance with Rule 144A under the Securities Act, (iii) inside the United
States to a person we reasonably believe to be an Accredited Investor that,
prior to such transfer, furnished to the trustee under the Indenture relating to
the Senior Notes (the "Trustee") a signed letter containing certain
representations and agreements (a form of which can be obtained from the
Trustee), (iv) pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available), or (v) pursuant to an effective
registration statement under the Securities Act, and, in each case, in
accordance with any applicable securities laws of any state of the United
States.
We understand that the Trustee will not be required to accept for
registration of transfer any Senior Notes acquired by us, except upon
presentation of evidence satisfactory to LGII and the Trustee that the foregoing
restrictions on transfer have been complied with. We further understand that
the Senior Notes purchased by us will be in the form of definitive physical
certificates and that such certificates will bear a legend reflecting the
substance of this paragraph. We further agree to provide to any person
acquiring any of the Senior Notes from us a notice advising such person that
resales of the Senior Notes are restricted as stated herein and that
certificates representing the Senior Notes will bear a legend to that effect.
We acknowledge that you, LGII, the Trustee and others will rely upon
our acknowledgments, representations and agreements set forth herein, and we
agree to notify you promptly in writing if any of our acknowledgments,
representations or agreements herein cease to be accurate and complete.
We represent to you that we have full power to make the foregoing
acknowledgments, representations and agreements on our own behalf and on behalf
of any investor account for which we are acting as a fiduciary or agent.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
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_______________________________________
(Name of Purchaser)
By: ________________________________
Name:
Title:
Address:
2.12. OUTSTANDING SENIOR NOTES.
Senior Notes outstanding at any time are all the Senior Notes that
have been authenticated by the Trustee except those canceled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding. A Senior Note does not cease to be outstanding because LGII or any
of its Affiliates holds the Senior Note.
If a Senior Note is replaced pursuant to Section 2.07 (other than a
mutilated Senior Note surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Senior
Note is held by a BONA FIDE purchaser. A mutilated Senior Note ceases to be
outstanding upon surrender of such Senior Note and replacement thereof pursuant
to Section 2.07.
If on a Redemption Date or a Maturity Date the Paying Agent (other
than LGII or an Affiliate of LGII) holds cash or U.S. Government Obligations
sufficient to pay all of the principal and interest due on the Senior Notes
payable on that date, and is not prohibited from paying such cash or U.S.
Government Obligations to the Holders of such Senior Notes pursuant to the terms
of this Indenture, then on and after that date such Senior Notes cease to be
outstanding and interest on them shall cease to accrue.
2.13. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Senior Notes have concurred in any direction, waiver or consent, Senior Notes
owned by LGII or any of its Affiliates shall be disregarded, except that, for
the purposes of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Senior Notes that the Trustee knows
or has reason to know are so owned shall be disregarded.
2.14. TEMPORARY NOTES.
Until definitive Senior Notes are prepared and ready for delivery,
LGII may prepare and the Trustee shall authenticate temporary Senior Notes.
Temporary Senior Notes shall be substantially in the form of definitive Senior
Notes but may have variations that LGII considers appropriate for temporary
Senior Notes. Without unreasonable delay, LGII shall prepare and the Trustee
shall authenticate definitive Senior Notes in exchange for temporary Senior
Notes. Until such exchange, temporary Senior Notes shall be entitled to the
same rights, benefits and privileges as definitive Senior Notes.
2.15. CANCELLATION.
LGII at any time may deliver Senior Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Senior Notes surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent
(other than LGII or an Affiliate of LGII), and no one else, shall promptly
cancel and, at the written direction of LGII, shall dispose of all Senior Notes
surrendered for transfer, exchange, payment or cancellation. Subject to
Section 2.08, LGII may
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not issue new Senior Notes to replace Senior Notes that it has paid or delivered
to the Trustee for cancellation. If LGII shall acquire any of the Senior Notes,
such acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Senior Notes unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.15.
2.16. DEFAULTED INTEREST.
If LGII defaults on a payment of interest on the Senior Notes of any
series, it shall pay the defaulted interest, plus (to the extent permitted by
law) any interest payable on the defaulted interest, in accordance with the
terms hereof, to the persons who are Holders on a subsequent special record
date, which date shall be at least five Business Days prior to the payment date.
LGII shall fix such special record date and payment date in a manner
satisfactory to the Trustee. At least 15 days before such special record date,
LGII shall mail to each Holder a notice that states the special record date, the
payment date and the amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid.
2.17. CUSIP NUMBER.
LGII in issuing the Senior Notes of each series may use a "CUSIP"
number with respect to each such series (if then generally in use), and if so,
the Trustee may use the CUSIP numbers in notices of redemption or exchange as a
convenience to Holders; PROVIDED, HOWEVER, that any such notice may state that
no representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Senior Notes, and that reliance may be placed
only on the other identification numbers printed on the Senior Notes. LGII will
promptly notify the Trustee of any change in the CUSIP number.
2.18. DEPOSIT OF MONEYS.
On or before each Interest Payment Date and Maturity Date, LGII shall
deposit with the Trustee or Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date or
Maturity Date, as the case may be, in a timely manner which permits the Paying
Agent to remit payment to the Holders on such Interest Payment Date or Maturity
Date, as the case may be.
ARTICLE THREE
REDEMPTION OF SENIOR NOTES
3.01. NOTICES TO THE TRUSTEE
Each series of Senior Notes may provide that such series of Senior
Notes is redeemable in whole or in part at the option of LGII. If LGII is
permitted to redeem Senior Notes of any series pursuant to the terms of such
series of Senior Notes, it shall notify the Trustee of the Redemption Date and
principal amount of Senior Notes to be redeemed.
LGII shall notify the Trustee by an Officer's Certificate, stating
that such redemption will comply with the provisions hereof and of such series
of Senior Notes, of any redemption at least 45 days before the Redemption date.
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3.02. SELECTION OF SENIOR NOTES TO BE REDEEMED.
If less than all the Senior Notes of any series are to be redeemed,
the particular Senior Notes or portions thereof to be redeemed shall be selected
from the outstanding Senior Notes of such series not previously called for
redemption either (x) pro rata, by lot or by such other method as the Trustee
considers to be fair and appropriate or (y) in such manner as complies with the
requirements of the principal national securities exchange, if any, on which the
Senior Notes being redeemed are listed. The amounts to be redeemed shall be
equal to $1,000 or any integral multiple thereof.
The Trustee shall promptly notify LGII and the Registrar in writing of
the Senior Notes selected for redemption and, in the case of any Senior Notes
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Senior Notes shall relate, in
the case of any Senior Note redeemed or to be redeemed only in part, to the
portion of the principal amount of such Senior Note which has been or is to be
redeemed.
3.03. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Senior Notes to be redeemed, at the address of such
Holder appearing in the Senior Note register maintained by the Registrar.
All notices of redemption shall identify the Senior Notes to be
redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(c) that, unless LGII defaults in making the redemption payment,
interest on Senior Notes called for redemption ceases to accrue
on and after the Redemption Date, and the only remaining right of
the Holders of such Senior Notes is to receive payment of the
Redemption Price upon surrender to the Paying Agent of the Senior
Notes redeemed;
(d) if any Senior Note is to be redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple
thereof) of such Senior Note to be redeemed and that on and after
the Redemption Date, upon surrender for cancellation of such
original Senior Note to the Paying Agent, a new Senior Note or
Senior Notes in the aggregate principal amount equal to the
unredeemed portion thereof will be issued without charge to the
Holder;
(e) that Senior Notes called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price and the name and
address of the Paying Agent;
(f) the CUSIP number, if any, relating to such Senior Notes, but no
representation is made as to the correctness or accuracy of any
such CUSIP numbers; and
(g) the paragraph of the Senior Notes pursuant to which the Senior
Notes are being redeemed.
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Notice of redemption of Senior Notes to be redeemed at the election of
LGII shall be given by LGII or, at LGII's written request, by the Trustee in the
name and at the expense of LGII.
3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Senior Notes called for
redemption become due and payable on the Redemption Date and at the Redemption
Price. Upon surrender to the Paying Agent, such Senior Notes called for
redemption shall be paid at the Redemption Price plus accrued and unpaid
interest to the Redemption Date.
3.05. DEPOSIT OF REDEMPTION PRICE.
On or prior to any Redemption Date, LGII shall deposit with the Paying
Agent an amount of money in same day funds sufficient to pay the Redemption
Price of, and accrued interest on, all the Senior Notes or portions thereof
which are to be redeemed on that date, other than Senior Notes or portions
thereof called for redemption on that date which have been delivered by LGII of
the Trustee for cancellation.
If LGII complies with the preceding paragraph, then, unless LGII
defaults in the payment of such Redemption Price, interest on the Senior Notes
to be redeemed will cease to accrue on and after the applicable Redemption Date,
whether or not such Senior Notes are presented for payment. If any Senior Note
called for redemption shall not be so paid upon surrender thereof for
redemption, the principal, premium, if any, and, to the extent lawful, accrued
and unpaid interest thereon shall, until paid, bear interest from the Redemption
Date at the rate provided in the Senior Notes.
3.06. SENIOR NOTES REDEEMED OR PURCHASED IN PART.
Upon surrender to the Paying Agent of a Senior Note which is to be
redeemed in part, LGII shall execute, the Guarantor shall Guarantee and the
Trustee shall authenticate and deliver to the Holder of such Senior Note without
service charge, a new Senior Note or Senior Notes (accompanied by a notation of
Guarantee duly endorsed by the Guarantor), of any authorized denomination as
requested by such Holder in aggregate principal amount equal to, and in exchange
for, the unredeemed portion of the principal of the Senior Note so surrendered
that is not redeemed.
ARTICLE FOUR
COVENANTS
Each of LGII and the Guarantor hereby jointly and severally covenant
as follows, from and after the Closing Date and continuing so long as any amount
remains unpaid on any Senior Note:
4.01. PAYMENT OF SENIOR NOTES.
Each of LGII and the Guarantor will pay, or cause to be paid, the
principal of and interest on the Senior Notes of each series on the dates and in
the manner provided in the Senior Notes and this Indenture. An installment of
principal or interest shall be considered paid on the date due if the Trustee or
Paying Agent (other than LGII, the Guarantor, a Subsidiary of LGII, the
Guarantor or any Affiliate thereof) holds on that date money designated and set
aside for and sufficient to pay the installment in a timely manner and is not
prohibited from paying such money to the Holders of the Senior Notes pursuant to
the terms of this Indenture.
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LGII or the Guarantor, as the case may be, will pay interest on
overdue principal at the rate and in the manner provided in the Senior Notes; it
shall pay interest on overdue installments of interest at the same rate and in
the same manner, to the extent lawful.
4.02. MAINTENANCE OF OFFICE OR AGENCY.
LGII will maintain in the Borough of Manhattan, The City of New York,
an office or agency where Senior Notes of each series may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon LGII in respect of the Senior Notes and this
Indenture may be served. LGII will give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time LGII shall fail to maintain any such required office or agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee as set forth in Section 11.02.
LGII may also from time to time designate one or more other offices or
agencies where the Senior Notes may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; PROVIDED,
HOWEVER, that no such designation or rescission shall in any manner relieve LGII
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. LGII will give prompt written notice
to the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
LGII hereby initially designates the office of the Trustee located at
Shawmut Trust Company of New York, c/o First Chicago Trust Co. of New York, 14
Wall Street, 8th Floor, Window No. 2, in the Borough of Manhattan, City of New
York 10005, as such office of LGII in accordance with this Section 4.02.
4.03. CORPORATE EXISTENCE.
Subject to Article Five, each of LGII and the Guarantor shall do or
cause to be done all things necessary to and will cause each Restricted
Subsidiary to, preserve and keep in full force and effect the corporate or
partnership existence and rights (charter and statutory), licenses and/or
franchises of the Guarantor and the Restricted Subsidiaries (including, without
limitation, LGII); PROVIDED, HOWEVER, that the Guarantor and the Restricted
Subsidiaries shall not be required to preserve any such rights, licenses or
franchises if the Board of Directors of the Guarantor shall reasonably determine
that (x) the preservation thereof is no longer desirable in the conduct of the
business of the Guarantor and its Subsidiaries taken as a whole and (y) the loss
thereof is not materially adverse to either the Guarantor and its Subsidiaries
taken as a whole or to the ability of LGII or the Guarantor to otherwise satisfy
its obligations hereunder.
4.04. PAYMENT OF TAXES AND OTHER CLAIMS.
Each of LGII and the Guarantor will pay or discharge or cause to be
paid or discharged, before the same shall become delinquent, (a) all taxes,
assessments and governmental charges levied or imposed upon the Guarantor or any
of its Restricted Subsidiaries (including, without limitation, LGII) or upon the
income, profits or property of the Guarantor or any of its Restricted
Subsidiaries, and (b) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a Lien upon the property of the Guarantor or any
Restricted Subsidiary of the Guarantor; PROVIDED, HOWEVER, that neither LGII nor
the Guarantor shall be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim the amount, applicability
or validity of which is being contested in good faith by appropriate proceedings
and for which adequate provision has been made or where the failure to effect
such payment or discharge is not adverse in any material respect to the
Guarantor.
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4.05. MAINTENANCE OF PROPERTIES; INSURANCE; BOOKS AND RECORDS;
COMPLIANCE WITH LAW.
(a) Each of LGII and the Guarantor shall, and shall cause each of its
Restricted Subsidiaries (including, without limitation, LGII) to, cause all
properties and assets to be maintained and kept in good condition, repair and
working order (reasonable wear and tear excepted) and supplied with all
necessary equipment, and shall cause to be made all necessary repairs, renewals,
replacements, additions, betterments and improvements thereto, as shall be
reasonably necessary for the proper conduct of its business; PROVIDED, HOWEVER,
that nothing in this Section 4.05(a) shall prevent the Guarantor or any of its
Restricted Subsidiaries from discontinuing the operation and maintenance of any
of its properties or assets if such discontinuance is, in the judgment of the
Board of Directors of the Guarantor or such Restricted Subsidiary, desirable in
the conduct of its business and if such discontinuance is not materially adverse
to either the Guarantor and its Subsidiaries taken as a whole or the ability of
LGII or the Guarantor to otherwise satisfy its obligations hereunder.
(b) Each of LGII and the Guarantor shall, and shall cause each of its
Restricted Subsidiaries (including, without limitation, LGII) to, maintain with
financially sound and reputable insurers such insurance as may be required by
law (other than with respect to any environmental impairment liability insurance
not commercially available) and such other insurance to such extent and against
such hazards and liabilities, as is customarily maintained by companies
similarly situated (which may include self-insurance in the same form as is
customarily maintained by companies similarly situated).
(c) Each of LGII and the Guarantor shall, and shall cause each of its
Restricted Subsidiaries (including, without limitation, LGII) to, keep proper
books of record and account, in which full and correct entries shall be made of
all business and financial transactions of the Guarantor and each Restricted
Subsidiary of the Guarantor and reflect on its financial statements adequate
accruals and appropriations to reserves, all in accordance with GAAP
consistently applied to the Guarantor and its Subsidiaries taken as a whole.
(d) Each of LGII and the Guarantor shall and shall cause each of its
Restricted Subsidiaries (including, without limitation, LGII) to comply with all
statutes, laws, ordinances, or government rules and regulations to which it is
subject, non-compliance with which would materially adversely affect the
business, earnings, properties, assets or condition (financial or otherwise) of
the Guarantor and its Subsidiaries taken as a whole.
4.06. COMPLIANCE CERTIFICATE.
(a) Each of LGII and the Guarantor will deliver to the Trustee within
60 days after the end of each of the Guarantor's first three fiscal quarters and
within 90 days after the end of the Guarantor's fiscal year an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default under this Indenture by LGII or the Guarantor or an event which, with
notice or lapse of time or both, would constitute a default by LGII or the
Guarantor under any Pari Passu Indebtedness that occurred during such fiscal
period. If they do know of such a Default, Event of Default or default, the
certificate shall describe any such Default, Event of Default or default and its
status. The first certificate to be delivered pursuant to this Section 4.06(a)
shall be for the first fiscal quarter of the Guarantor beginning after the Issue
Date. The Guarantor shall also deliver a certificate to the Trustee at least
annually from its principal executive, financial or accounting officer as to his
or her knowledge of LGII's and the Guarantor's compliance with all conditions
and covenants under this Indenture and LGII's, such compliance to be determined
without regard to any period of grace or requirement of notice provided herein
or therein.
(b) The Guarantor shall deliver to the Trustee within 90 days after
the end of each fiscal year a written statement by LGII's and the Guarantor's
independent chartered accountants stating (A) that their
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audit examination has included a review of the terms of this Indenture and the
Senior Notes as they relate to accounting matters, and (B) whether, in
connection with their audit examination, any Default or Event of Default under
this Indenture or an event which, with notice or lapse of time or both, would
constitute a default under any Pari Passu Indebtedness has come to their
attention and, if such a Default, Event of Default or a default under any Pari
Passu Indebtedness has come to their attention, specifying the nature and period
of existence thereof; PROVIDED, HOWEVER, that, without any restriction as to the
scope of the audit examination, such independent certified public accountants
shall not be liable by reason of any failure to obtain knowledge of any such
Default, Event of Default or a default under any Pari Passu Indebtedness that
would not be disclosed in the course of an audit examination conducted in
accordance with GAAP.
(c) Each of LGII and the Guarantor will deliver to the Trustee as
soon as possible, and in any event within 10 days after LGII and/or the
Guarantor, as the case may be, becomes aware or should reasonably have become
aware of the occurrence of any Default, Event of Default or an event which, with
notice or lapse of time or both, would constitute a default by LGII and/or the
Guarantor, as the case may be, under any Indebtedness, an Officers' Certificate
specifying such Default, Event of Default or default and what action LGII and/or
the Guarantor, as the case may be, is taking or proposes to take with respect
thereto.
4.07. 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.
4.08. 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),
(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
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(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 Section 4.07 (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
Measurement 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 Measurement 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 Measurement 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 Measurement Date PLUS (3) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the Measurement 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) 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 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
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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 Section 4.12; (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 Section 4.13; 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 Section 4.08 only, the
term "Related Obligor" shall mean the Guarantor, LGII or a Restricted Subsidiary
of the Guarantor or LGII.
4.09. 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 this Indenture or (y) directors'
qualifying shares or investments by foreign nationals mandated by applicable
law.
4.10. 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 Senior
Notes, the Senior 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 Measurement Date; (b) Liens securing the Senior Notes or the
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Guarantee; (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 provisions of
this 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.
4.11. 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 of each series properly tendered and not withdrawn at a purchase
price (the "Change of Control Purchase Price") equal to 101% of the principal
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.
Notice of a Change of Control Offer shall be mailed by LGII not later
than the 30th day after the date of occurrence of the Change of Control to the
Holders of Senior Notes at their last registered addresses with a copy to the
Trustee and the Paying Agent. The Change of Control Offer shall remain open
from the time of mailing for at least 20 Business Days and until 5:00 p.m., New
York City time, on the Change of Control Purchase Date. The notice, which shall
govern the terms of the Change of Control Offer, shall include such disclosures
as are required by law and shall state:
(a) that the Change of Control Offer is being made pursuant to this
Section 4.11 and that all Senior Notes validly tendered into the Change of
Control Offer and not withdrawn will be accepted for payment;
(b) the purchase price (including the amount of accrued interest, if
any) for each Senior Note, the Change of Control Purchase Date and the date
on which the Change of Control Offer expires;
(c) that any Senior Note not tendered for payment will continue to
accrue interest in accordance with the terms thereof;
(d) that, unless LGII shall default in the payment of the purchase
price, any Senior Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Purchase Date;
(e) that Holders electing to have Senior Notes purchased pursuant to
a Change of Control Offer will be required to surrender their Senior Notes
to the Paying Agent at the address specified in the notice prior to 5:00
p.m., New York City time, on the Change of Control Purchase Date and must
complete any form of letter of transmittal proposed by LGII and reasonably
acceptable to the Trustee and the Paying Agent;
(f) that Holders of Senior Notes will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York
City time, on the Change of Control Purchase Date, a tested telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Senior Notes the Holder delivered for purchase, the
Senior Note certificate number (if any) and a statement that such Holder is
withdrawing its election to have such Senior Notes purchased;
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(g) that Holders whose Senior Notes are purchased only in part will
be issued Senior Notes equal in principal amount to the unpurchased portion
of the Senior Notes surrendered;
(h) the instructions that Holders must follow in order to tender
their Senior Notes; and
(i) information concerning the business of LGII and the Guarantor,
the most recent annual and quarterly reports of the Guarantor filed with
the Commission pursuant to the Exchange Act (or, if the Guarantor is not
then permitted to file any such reports with the Commission, the comparable
reports prepared pursuant to Section 4.17), a description of material
developments in the business of LGII and the Guarantor, information with
respect to PRO FORMA historical financial information after giving effect
to such Change of Control and such other information concerning the
circumstances and relevant facts regarding such Change of Control Offer as
would be material to a Holder of Senior Notes in connection with the
decision of such Holder as to whether or not it should tender Senior Notes
pursuant to the Change of Control Offer.
On the Change of Control Purchase Date, LGII shall (i) accept for
payment Senior Notes or portions thereof validly tendered pursuant to the Change
of Control Offer, (ii) deposit with the Paying Agent money, in immediately
available funds, sufficient to pay the purchase price of all Senior Notes or
portions thereof so tendered and accepted and (iii) deliver to the Trustee the
Senior Notes so accepted together with an Officers' Certificate setting forth
the Senior Notes or portions thereof tendered to and accepted for payment by
LGII. The Paying Agent shall promptly mail or deliver to the Holders of Senior
Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail or deliver to such Holders a new
Senior Note equal in principal amount to any unpurchased portion of the Senior
Note surrendered. Any Senior Notes not so accepted shall be promptly mailed or
delivered by LGII to the Holder thereof. LGII will publicly announce the
results of the Change of Control Offer not later than the first Business Day
following 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
obliged to purchase all such Senior Notes at the Change of Control Purchase
Price on the Change of Control Purchase Date in compliance with the requirements
applicable to a Change of Control Offer made by LGII.
LGII shall not 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 a
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.
LGII and the Guarantor will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act, and any other securities laws
or regulations in connection with the repurchase of Senior Notes pursuant to a
Change of Control Offer.
4.12. DISPOSITION OF PROCEEDS OF ASSET SALES.
(a) 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,
Security Industrial Insurance Company, Security Industrial Fire Insurance
Company or any successors to such Subsidiaries 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,
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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.
(b) 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 each series 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 (the Asset Sale Offer Price").
(c) Notice of an Asset Sale Offer shall be mailed by LGII to all
Holders of Senior Notes not less than 20 Business Days nor more than 40
Business Days before the Asset Sale Purchase Date at their last registered
address with a copy to the Trustee and the Paying Agent. The Asset Sale Offer
shall remain open from the time of mailing for at least 20 Business Days and
until at least 5:00 p.m., New York City time, on the Asset Sale Purchase Date.
The notice, which shall govern the terms of the Asset Sale Offer, shall include
such disclosures as are required by law and shall state:
(1) that the Asset Sale Offer is being made pursuant to this
Section 4.12;
(2) the Asset Sale Offer Price (including the amount of accrued
interest, if any) for each Senior Note, the Asset Sale Purchase Date and
the date on which the Asset Sale Offer expires;
(3) that any Senior Note not tendered or accepted for payment will
continue to accrue interest in accordance with the terms thereof;
(4) that, unless LGII shall default in the payment of the Asset Sale
Offer Price, any Senior Note accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest after the Asset Sale Purchase
Date;
(5) that Holders electing to have Senior Notes purchased pursuant to
an Asset Sale Offer will be required to surrender their Senior Notes to the
Paying Agent at the address specified in the notice prior to 5:00 p.m., New
York City time, on the Asset Sale Purchase Date and must complete any form
of letter of transmittal proposed by LGII and reasonably acceptable to the
Trustee and the Paying Agent;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than 5:00 p.m., New York City time, on the
Asset Sale Purchase Date, a tested telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Senior Notes
the Holder delivered for purchase, the Senior Note certificate number (if
any) and a statement that such Holder is withdrawing its election to have
such Senior Notes purchased;
(7) that if Senior Notes in a principal amount in excess of the
Holder's PRO RATA share of the amount of Excess Proceeds are tendered
pursuant to the Asset Sale Offer, LGII shall purchase Senior Notes on a PRO
RATA basis among the Senior Notes tendered (with such adjustments as may be
deemed
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appropriate by LGII so that only Senior Notes in denominations of $1,000 or
integral multiples of $1,000 shall be acquired);
(8) that Holders whose Senior Notes are purchased only in part will
be issued new Senior Notes equal in principal amount to the unpurchased
portion of the Senior Notes surrendered;
(9) the instructions that Holders must follow in order to tender
their Senior Notes; and
(10) information concerning the business of LGII and the Guarantor,
the most recent annual and quarterly reports of the Guarantor filed with
the Commission pursuant to the Exchange Act (or, if the Guarantor is not
permitted to file any such reports with the Commission, the comparable
reports prepared pursuant to Section 4.17), a description of material
developments in the business of LGII and the Guarantor, information with
respect to PRO FORMA historical financial information after giving effect
to such Asset Sale and Asset Sale Offer and such other information
concerning the circumstances and relevant facts regarding such Asset Sale
Offer as would be material to a Holder of Senior Notes in connection with
the decision of such Holder as to whether or not it should tender Senior
Notes pursuant to the Asset Sale Offer.
(11) On the Asset Sale Purchase Date, LGII shall (i) accept for
payment, on a PRO RATA basis, Senior Notes or portions thereof tendered
pursuant to the Asset Sale Offer, (ii) deposit with the Paying Agent money,
in immediately available funds, in an amount sufficient to pay the Asset
Sale Offer Price of all Senior Notes or portions thereof so tendered and
accepted and (iii) deliver to the Trustee the Senior Notes so accepted
together with an Officers' Certificate setting forth the Senior Notes or
portions thereof tendered to and accepted for payment by LGII. The Paying
Agent shall promptly mail or deliver to Holders of Senior Notes so accepted
payment in an amount equal to the Asset Sale Offer Price, and the Trustee
shall promptly authenticate and mail or deliver to such Holders a new
Senior Note equal in principal amount to any unpurchased portion of the
Senior Note surrendered. Any Senior Notes not so accepted shall be
promptly mailed or delivered by LGII to the Holder thereof. LGII will
publicly announce the results of the Asset Sale Offer not later than the
first Business Day following the Asset Sale 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 or the Guarantor,
as the case may be, may use such deficiency for general corporate purposes.
Upon completion of such Asset Sale Offer, the amount of Excess Proceeds
shall be reset to zero. For purposes of this Section 4.12, the Trustee
shall act as Paying Agent.
(12) LGII and the Guarantor will comply, to the extent applicable,
with the requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the repurchase of Senior
Notes pursuant to the Asset Sale Offer.
4.13. 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 (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, after the passage of
time or upon the happening of an event) of 5% or more of the Common Shares 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
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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 Officer's 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 has 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 Section 4.08, (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 or
any 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 tone 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 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.
4.14. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING 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 provisions of this Indenture which could not
materially adversely affect the Guarantor's ability to satisfy its obligations
under the provisions of this 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
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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.
4.15. LIMITATIONS 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 4.07
(assuming a market rate of interest with respect to such additional
Indebtedness).
4.16. LIMITATION ON APPLICABILITY OF CERTAIN COVENANTS.
During any period of time that (i) the ratings assigned to the Senior
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 to the covenants contained in Sections 4.07, 4.08, 4.09, 4.12, 4.13 and
4.14 (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
contained in Section 4.07 as if such covenant had been in effect at all times
after the Measurement Date.
4.17 COMMISSION REPORTS.
The Guarantor shall file with the Commission, or if not permitted or
required to so file will deliver to the Trustee, the annual reports, quarterly
reports and the information, documents and other reports 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. In accordance with the provisions of TIA Section 314(a), the Guarantor
shall file with the Trustee and provide to each Holder, within 15 days after it
files them with the Commission (or if 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. The Guarantor also shall comply with the other
provisions of TIA Section 314(a). In addition, the Guarantor shall cause its
annual reports to stockholders and any quarterly or other financial reports
furnished by it to stockholders generally to be filed with the Trustee and
mailed no later than the date such materials are mailed or made available to the
Guarantor's stockholders, to the Holders at their addresses as set forth in the
register of securities maintained by the Registrar.
4.18. RULE 144A INFORMATION REQUIREMENT.
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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.
4.19. WAIVER OF STAY, EXTENSION OR USURY LAWS.
Each of LGII and the Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit or forgive LGII
or the Guarantor, as the case may be, from paying all or any portion of the
principal of, premium, if any, or interest on the Senior Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) each of LGII and the Guarantor hereby expressly
waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE FIVE
SUCCESSOR CORPORATION
5.01. WHEN LGII MAY MERGE, ETC.
(a) 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, the due and punctual payment of the
principal of, premium, if any, and interest on all the Senior Notes and the
performance and observance of every covenant and obligation of this Indenture
and the Senior Notes on the part of the Guarantor or LGII, as the case may
be, to be performed or observed and, in each case, this 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
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transaction or series of transactions), could incur $1.00 of additional
Indebtedness pursuant to Section 4.07 (assuming a market rate of interest
with respect to such additional Indebtedness); (c) 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), 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; and (d) the Guarantor, LGII or
the Surviving Entity, as the case may be, shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each in form and
substance reasonably satisfactory to the Trustee, each stating that such
consolidation, merger, sale, assignment, conveyance, transfer, lease or other
disposition and, if a supplemental indenture is required in connection with
such transaction or series of transactions, such supplemental indenture,
complies with this Indenture and that all conditions precedent herein
provided for relating to such transaction or series of transactions have been
complied with; PROVIDED, HOWEVER, that solely for purposes of computing
amounts described in subclause (C) of Section 4.08, 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.
5.02. SUCCESSOR SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Guarantor or LGII in accordance with Section 5.01 hereof, the
successor person or persons formed by such consolidation or into which the
Guarantor or LGII is merged or the successor person to which such sale,
assignment, conveyance, transfer, lease or other disposition 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 this Indenture and the Senior
Notes with the same effect as if such successor had been named as the Guarantor
or LGII, as the case may be, herein; PROVIDED, HOWEVER, that solely for purposes
of computing amounts described in subclause (C) of Section 4.08, 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.
ARTICLE SIX
REMEDIES
6.01. EVENTS OF DEFAULT.
An "Event of Default" with respect to each series of Senior Notes
means any of the following events:
(a) default in the payment of the principal of or premium, if any, on
any Senior Note of such series when the same becomes due and payable (upon
Stated Maturity, acceleration, optional redemption, required purchase,
scheduled principal payment or otherwise); or
(b) default in the payment of an installment of interest on any of
the Senior Notes of such series, when the same becomes due and payable, and
any such Default continues for a period of 30 days; or
(c) failure to perform or observe any other term, covenant or
agreement contained in the Senior Notes of such series or the Guarantee
with respect to Senior Notes of such series or pursuant to
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the provisions of this Indenture (other than Defaults specified in clause
(a) or (b) 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 (i) to the Guarantor and LGII by the Trustee
or (ii) to Guarantor, LGII and the Trustee by Holders of at least 25% in
aggregate principal amount of the Senior Notes of such series then
outstanding; or
(d) 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 (i) such Indebtedness is already due and payable
in full or (ii) such default or defaults have resulted in the acceleration
of the maturity of such Indebtedness; or
(e) 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
(f) either (i) the collateral agent under the Collateral Agreement 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 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
(g) the Guarantor or any Significant Subsidiary of the Guarantor
pursuant to or under or within the meaning of any Bankruptcy Law:
(1) commences a voluntary case or proceeding;
(2) consents to the entry of an order for relief
against it in an involuntary case or proceeding;
(3) consents to the appointment of a Custodian of it
or for all or substantially all of its property;
(4) makes a general assignment for the benefit of its
creditors; or
(5) shall generally not pay its debts when such debts
become due or shall admit in writing its inability to pay its debts
generally; or
a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(1) is for relief against the Guarantor or any Significant
Subsidiary of the Guarantor in an involuntary case or proceeding,
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(2) appoints a Custodian of the Guarantor or any Significant
Subsidiary of the Guarantor for all or substantially all of its
properties, or
(3) orders the liquidation of the Guarantor or any Significant
Subsidiary of the Guarantor,
and in each case the order or decree remains unstayed and in effect for 60
days; or
(a) 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 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.
Subject to the provisions of Sections 7.01 and 7.02, the Trustee shall
not be charged with knowledge of any Default or Event of Default unless written
notice thereof shall have been given to a Trust Officer at the Corporate Trust
Office of the Trustee by LGII, the Guarantor, the Paying Agent, any Holder, any
holder of Indebtedness or any of their respective agents.
6.02. ACCELERATION.
If an Event of Default (other than as specified in Section 6.01(g) or
6.01(h)) occurs and is continuing with respect to the Senior Notes of any
series, the Trustee, by written notice to the Guarantor and LGII, or the Holders
of at least 25% in aggregate principal amount of the Senior Notes of such series
then outstanding, by written 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 Senior Notes of such series to be due and payable
immediately, upon which declaration, all amounts payable in respect of the
Senior Notes of such series shall be immediately due and payable. If an Event
of Default specified in Section 6.01(g) or 6.01(h) occurs and is continuing,
then the principal of, premium, if any, and accrued and unpaid interest, if any,
on all of the Senior Notes 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 Senior Notes.
After a declaration of acceleration hereunder with respect to the
Senior 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 Senior 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 amounts due the Trustee under Section 7.08 and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, (ii) all overdue interest on all Senior Notes
of such series, (iii) the principal of and premium, if any, on any Senior Notes
of such series which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Senior Notes of such
series, and (iv) to the extent that payment of such interest is lawful, interest
upon overdue interest and overdue principal which has become due otherwise than
by such declaration of acceleration at the rate borne by the Senior Notes of
such series; (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 Senior
Notes of such series that has become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 6.04.
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No such rescission shall affect any subsequent Default or Event of
Default or impair any right subsequent therein.
6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, premium, if any, or interest on the Senior Notes or to
enforce the performance of any provision of the Senior Notes or this Indenture.
All rights of action and claims under this Indenture or the Senior
Notes may be enforced by the Trustee even if it does not possess any of the
Senior Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of
any other remedy. All available remedies are cumulative to the extent permitted
by law.
6.04. WAIVER OF PAST DEFAULTS.
Subject to the provisions of Section 6.07 and 9.02, the Holders of not
less than a majority in aggregate principal amount of the outstanding Senior
Notes of any series by notice to the Trustee may, on behalf of the Holders of
all the Senior Notes of any such series, waive any existing Default or Event of
Default and its consequences, except a Default or Event of Default specified in
Section 6.01(a) or (b) or in respect of any provision hereof which cannot be
modified or amended without the consent of the Holder so affected pursuant to
Section 9.02. When a Default or Event of Default is so waived, it shall be
deemed cured and shall cease to exist.
6.05. CONTROL BY MAJORITY.
The Holders of not less than a majority in aggregate principal amount
of the outstanding Senior Notes shall 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, PROVIDED, HOWEVER,
that the Trustee may refuse to follow any direction (a) that conflicts with any
rule of law or this Indenture, (b) that the Trustee determines may be unduly
prejudicial to the rights of another Noteholder, or (c) that may expose the
Trustee to personal liability unless the Trustee has been provided reasonable
indemnity against any loss or expense caused by its following such direction;
and PROVIDED, FURTHER, that the Trustee may take any other action deemed proper
by the Trustee that is not inconsistent with such direction.
6.06. LIMITATION ON SUITS.
No Holder of any Senior Notes of any series shall have any right to
institute any proceeding or pursue any remedy with respect to this Indenture or
the Senior Notes of such series unless:
(1) the Holder gives written notice to the Trustee of a continuing
Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of the
outstanding Senior Notes of such series make a written request to the
Trustee to pursue the remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee reasonable indemnity against any loss, liability or expense;
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(4) the Trustee does not comply with the request within 30 days after
receipt of the request and the offer and, if requested, provision of
indemnity; and
(5) during such 30-day period the Holders of a majority in aggregate
principal amount of the outstanding Senior Notes do not give the Trustee a
direction which is inconsistent with the request;
The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of principal of, premium, if any, or
accrued interest on, such Senior Note on or after the respective due dates set
forth in such Senior Note.
A Holder may not use this Indenture to prejudice the rights of any
other Holders or to obtain priority or preference over such other Holders.
6.07. RIGHT OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision in this Indenture, the right of
any Holder of a Senior Note to receive payment of the principal of, premium, if
any, and interest on such Senior Note, on or after the respective Stated
Maturities expressed in such Senior Note, or to bring suit for the enforcement
of any such payment on or after the respective Stated Maturities, is absolute
and unconditional and shall not be impaired or affected without the consent of
the Holder.
6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in clause (a) or (b) of Section 6.01
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against LGII, the Guarantor or any other obligor
on the Senior Notes for the whole amount of principal of, premium, if any, and
accrued interest remaining unpaid, together with interest on overdue principal
and, to the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the Senior
Notes and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
6.09. TRUSTEE MAY FILE PROOFS OF CLAIMS.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Guarantor, LGII or
the Subsidiaries of the of the Guarantor and LGII (or any other obligor upon the
Senior Notes), their creditors or their property and shall be entitled and
empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel, and any other amounts due the
Trustee under Section 7.08. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Senior Notes or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
6.10. PRIORITIES.
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If the Trustee collects any money pursuant to this Article Six, it
shall pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.08;
Second: to the Holders for interest accrued on the Senior Notes,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Senior Notes for interest;
Third: to the Holders for principal amounts (including any premium)
owing under the Senior Notes, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Senior Notes for
principal (including any premium); and
Fourth: the balance, if any, to LGII or the Guarantor, as the case
may be.
The Trustee, upon prior written notice to LGII, may fix a record date
and payment date for any payment to Noteholders pursuant to this Section 6.10.
6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may in its discretion require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to any suit by the Trustee, any suit by a
Holder pursuant to Section 6.07, or a suit by Holders of more than 10% in
aggregate principal amount of the outstanding Senior Notes.
6.12. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Senior Note or the Guarantee and
such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case LGII, the Guarantor, the Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
ARTICLE SEVEN
TRUSTEE
7.01. DUTIES.
(a) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default,
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(1) the Trustee need perform only such duties as are specifically set
forth in this Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
(1) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05;
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01 hereof and the provisions of TIA Section 315:
(a) the Trustee may rely on any document reasonably believed by it to
be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 11.04 and 11.05. The Trustee
shall not be liable for any action it takes or omits to take in good faith
in reliance on such certificate or opinion.
(c) the Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) the Trustee shall not be liable for any action taken or omitted
by it in good faith and reasonably believed by it to be authorized or
within the discretion, rights or powers conferred upon it by this Indenture
other than any liabilities arising out of its own negligence.
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(e) the Trustee may consult with counsel of its own choosing and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection in respect of any action taken,
omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit.
(g) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may
be incurred therein or thereby.
7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee, any Paying Agent, Registrar or any other agent of LGII or
the Guarantor, in its individual or any other capacity, may become the owner or
pledgee of Senior Notes and, subject to Sections 7.11 and 7.12 and TIA Sections
310 and 311, may otherwise deal with LGII, the Guarantor and their Subsidiaries
with the same rights it would have if it were not the Trustee, Paying Agent,
Registrar or such other agent.
7.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representations as to the validity or sufficiency
of this Indenture or of the Senior Notes or of the Guarantee, it shall not be
accountable for LGII's use or application of the proceeds from the Senior Notes,
it shall not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee and it shall not be responsible for any
statement in the Senior Notes other than the Trustee's certificate of
authentication.
7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
Default or Event of Default within 30 days thereafter; PROVIDED, HOWEVER, that,
except in the case of a Default in the payment of the principal of, premium, if
any, or interest on any Senior Note, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee of the board of directors or a committee of the directors of the
Trustee and/or Trust Officers in good faith determines that the withholding of
such notice is in the interest of the Holders.
7.06. MONEY HELD IN TRUST.
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required herein
or by law. The Trustee shall not be under any liability for interest on any
moneys received by it hereunder, except as the Trustee may agree with LGII.
7.07. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall, to the extent that any of the
events described in TIA Section 313(a) shall have occurred
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within the previous twelve months, but not otherwise, mail to each Holder a
brief report dated as of such May 15 that complies with TIA Section 313(a). The
Trustee also shall comply with TIA Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
mailed to LGII and filed with the Commission and each securities exchange, if
any, on which the Senior Notes are listed.
LGII shall notify the Trustee in writing if the Senior Notes become
listed on any securities exchange.
7.08. COMPENSATION AND INDEMNITY.
LGII and the Guarantor covenant and agree to pay the Trustee from time
to time reasonable compensation for its services. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. LGII and the Guarantor shall reimburse the Trustee upon request for all
reasonable disbursements, expenses and advances incurred or made by it. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's agents and counsel.
LGII and the Guarantor shall indemnify the Trustee for, and hold it
harmless against, any loss or liability incurred by it arising out of or in
connection with the administration of this trust and its rights or duties
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder. The Trustee shall notify LGII and the Guarantor
promptly of any claim asserted against the Trustee for which it may seek
indemnity. LGII and the Guarantor shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and LGII and
the Guarantor shall pay the reasonable fees and expenses of such counsel. LGII
and the Guarantor need not pay for any settlement made without its prior written
consent. LGII and the Guarantor need not reimburse any expense or indemnify
against any loss or liability to the extent incurred by the Trustee through its
negligence, bad faith or willful misconduct.
To secure the payment obligations of LGII and the Guarantor in this
Section 7.08, the Trustee shall have a Lien prior to the Senior Notes on all
assets held or collected by the Trustee, in its capacity as Trustee, except
assets held in trust to pay principal of, premium, if any, or interest on
particular Senior Notes.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 6.01(g) or (h), the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The obligations of LGII and the Guarantor under this Section 7.08 and
any Lien arising hereunder shall survive the resignation or removal of any
trustee, the discharge of the obligations of LGII and the Guarantor pursuant to
Article Eight and/or the termination of this Indenture.
7.09. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying LGII. The Holders of a
majority in principal amount of the outstanding Senior Notes may remove the
Trustee by so notifying LGII and the Trustee and may appoint a successor trustee
with LGII's prior written consent. LGII may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.11;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
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(c) a receiver or other public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, LGII shall notify each Holder of such event
and shall promptly appoint a successor Trustee. The Trustee shall be entitled
to payment of its fees and reimbursement of its expenses while acting as
Trustee, and to the extent such amounts remain unpaid, the Trustee that has
resigned or has been removed shall retain the Lien afforded by Section 7.08.
Within one year after the successor Trustee takes office, the Holders of a
majority in principal amount of the outstanding Senior Notes may, with LGII's
prior written consent, appoint a successor Trustee to replace the successor
Trustee appointed by LGII.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to LGII. Immediately after that, the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the Lien provided in Section 7.08, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Noteholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, of LGII or the
Holders of at least 10% in principal amount of the outstanding Senior Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.11, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.09, the obligations of LGII and the Guarantor under Section 7.08 shall
continue for the benefit of the retiring Trustee.
7.10. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall, if such resulting, surviving or transferee corporation or national
banking association is otherwise eligible hereunder, be the successor Trustee.
7.11. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Sections 310(a)(1) and 310(a)(5) and which
shall have a combined capital and surplus of at least $50,000,000. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of federal, state, territorial or District of Columbia
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
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7.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST LGII.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). If the present or any
future Trustee shall resign or be removed, it shall be subject to TIA Section
311(a) to the extent provided therein.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
8.01. TERMINATION OF THE OBLIGATIONS OF LGII AND THE GUARANTOR.
Each of LGII and the Guarantor may terminate its obligations under the
Senior Notes of any series and this Indenture, except those obligations referred
to in the penultimate paragraph of this Section 8.01, if all Senior Notes of
such series previously authenticated and delivered (other than destroyed, lost
or stolen Senior Notes which have been replaced or paid or Senior Notes for
whose payment money has theretofore been deposited with the Trustee or the
Paying Agent in trust or segregated and held in trust by LGII and thereafter
repaid to LGII, as provided in Section 8.04) have been delivered to the Trustee
for cancellation and the Guarantor or LGII has paid all sums payable by it
hereunder, or if:
(a) either (i) pursuant to Article Three, LGII shall have given
notice to the Trustee and mailed a notice of redemption to each Holder of
the redemption of all of the Senior Notes of such series under arrangements
satisfactory to the Trustee for the giving of such notice or (ii) all
Senior Notes of such series have otherwise become due and payable
hereunder;
(b) the Guarantor or LGII shall have irrevocably deposited or caused
to be deposited with the Trustee or a trustee reasonably satisfactory to
the Trustee, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee, as trust funds in trust solely for
the benefit of the Holders for that purpose, money in such amount as is
sufficient without consideration of reinvestment of such interest, to pay
principal of, premium, if any, and interest on the outstanding Senior Notes
of such series to maturity or redemption, as certified in a certificate of
a nationally recognized firm of independent public accountants; PROVIDED
that the Trustee shall have been irrevocably instructed to apply such money
to the payment of said principal, premium, if any, and interest with
respect to the Senior Notes of such series;
(c) no Default or Event of Default with respect to this Indenture or
the Senior Notes of such series shall have occurred and be continuing on
the date of such deposit or shall occur as a result of such deposit and
such deposit will not result in a breach or violation of, or constitute a
default under, any other instrument to which LGII or the Guarantor is a
party or by which it is bound;
(d) LGII or the Guarantor shall have paid all other sums payable by
it hereunder;
(e) LGII or the Guarantor shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent providing for the termination of LGII's and the
Guarantor's obligation under the Senior Notes of such series, the related
Guarantee and this Indenture have been complied with.
Notwithstanding the foregoing paragraph, LGII's obligations in
Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02 and 7.08 and the Guarantor's
obligations in respect thereof shall survive until the Senior Notes of
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such series are no longer outstanding pursuant to Section 2.12. After the
Senior Notes of such series are no longer outstanding, LGII obligations in
Sections 7.08, 8.03, 8.04 and 8.05 and the Guarantor's obligations in respect
thereof Guarantor or LGII, as the case may be, shall survive.
After such delivery or irrevocable deposit the Trustee upon request
shall acknowledge in writing the discharge of LGII's and the Guarantor's
obligations under the Senior Notes of such series except for those surviving
obligations specified above.
8.02. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
(a) Each of LGII and the Guarantor may, at its option by Board
Resolution of the Board of Directors of the Guarantor or LGII, as the case may
be, at any time, with respect to the Senior Notes of any series, elect to have
either paragraph (b) or paragraph (c) below be applied to the outstanding Senior
Notes of such series upon compliance with the conditions set forth in
paragraph (d).
(b) Upon LGII's or the Guarantor's exercise under paragraph (a) of
the option applicable to this paragraph (b), LGII and the Guarantor shall be
deemed to have been released and discharged from its obligations with respect to
the outstanding Senior Notes of any series on the date the conditions set forth
below are satisfied (hereinafter, "legal defeasance"). For this purpose, such
legal defeasance means that LGII shall be deemed to have paid and discharged the
entire indebtedness represented by the outstanding Senior Notes of such series,
which shall thereafter be deemed to be "outstanding" only for the purposes of
paragraph (e) below and the other Sections of and matters under this Indenture
referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Senior Notes and this Indenture insofar as such Senior
Notes are concerned (and the Trustee, at the expense of LGII, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (i) the rights of
Holders of outstanding Senior Notes of such series to receive solely from the
trust fund described in paragraph (d) below and as more fully set forth in such
paragraph, payments in respect of the principal of, premium, if any, and
interest on such Senior Notes when such payments are due, (ii) LGII's
obligations with respect to such Senior Notes under Sections 2.06, 2.07 and
4.02, and, with respect to the Trustee, under Section 7.08 and the Guarantor's
obligations in respect thereof, (iii) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and (iv) this Article Eight. Subject to
compliance with this Section 8.02, LGII may exercise its option under this
paragraph (b) notwithstanding the prior exercise of its option under
paragraph (c) below with respect to the Senior Notes of such series.
(c) Upon the exercise by LGII and the Guarantor under paragraph (a)
of the option applicable to this paragraph (c), each of LGII and the Guarantor
shall be released and discharged from its obligations under any covenant
contained in Article Five and in Sections 4.07 through 4.17 with respect to the
outstanding Senior Notes of any series on and after the date the conditions set
forth below are satisfied (hereinafter, "covenant defeasance"), and the Senior
Notes of such series shall thereafter be deemed to be not "outstanding" for the
purpose of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the outstanding
Senior Notes, LGII and the Guarantor may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under
Section 6.01(c), but, except as specified above, the remainder of this Indenture
and such Senior Notes shall be unaffected thereby.
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(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Senior Notes of any
series:
(1) LGII shall irrevocably have deposited or caused to be deposited
with the Trustee (or another trustee satisfying the requirements of
Section 7.11 who shall agree to comply with the provisions of this
Section 8.02 applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Senior Notes,
(x) cash, in United States dollars, in an amount or (y) direct non-callable
obligations of, or non-callable obligations guaranteed by, the United
States of America for the payment of which guarantee or obligation the full
faith and credit of the United States is pledged ("U.S. Government
Obligations") maturing as to principal, premium, if any, and interest in
such amounts of cash, in United States dollars, and at such times as are
sufficient without consideration of any reinvestment of such interest, to
pay principal of, premium, if any, and interest on the outstanding Senior
Notes of such series not later than one day before the due date of any
payment, or (z) a combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge and which shall be applied by the Trustee (or other qualifying
trustee) to pay and discharge principal of, premium, if any, and interest
on the outstanding Senior Notes of such series (except lost, stolen or
destroyed Senior Notes which have been replaced or repaid) on the Maturity
Date thereof or otherwise in accordance with the terms of this Indenture
and of such Senior Notes; PROVIDED, HOWEVER, that the Trustee (or other
qualifying trustee) shall have received an irrevocable written order from
LGII instructing the Trustee (or other qualifying trustee) to apply such
money or the proceeds of such U.S. Government Obligations to said payments
with respect to the Senior Notes of such series;
(2) no Default or Event of Default or event which with notice or
lapse of time or both would become a Default or an Event of Default with
respect to the Senior Notes of such series shall have occurred and be
continuing on the date of such deposit or, insofar as Section 6.01(a) is
concerned, at any time during the period ending on the 91st day after the
date of such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(3) such legal defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest with respect to any securities of
LGII or the Guarantor;
(4) such legal defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a Default or Event of Default
under, this Indenture or any other material agreement or instrument to
which LGII or the Guarantor is a party or by which it is bound;
(5) in the case of an election under paragraph (b) above, LGII shall
have delivered to the Trustee an Opinion of Counsel stating that (x) LGII
has received from, or there has been published by, the Internal Revenue
Service a ruling or (y) since the date of this Indenture, there has been a
change in the applicable Federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that, the Holders
of the outstanding Senior Notes of such series will not recognize income,
gain or loss for Federal income tax purposes as a result of such legal
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 legal defeasance had not occurred;
(6) in the case of an election under paragraph (c) above, LGII shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the outstanding Senior Notes of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of such
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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 covenant defeasance had not occurred;
(7) in the case of an election under either paragraph (b) or (c)
above, an Opinion of Counsel to the effect that, (x) the trust funds will
not be subject to any rights of any other holders of Indebtedness of LGII
or the Guarantor, and (y) after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable Bankruptcy
Law; PROVIDED, HOWEVER, that if a court were to rule under any such law in
any case or proceeding that the trust funds remained property of LGII or
the Guarantor, no opinion needs to be given as to the effect of such laws
on the trust funds except the following: (A) assuming such trust funds
remained in the Trustee's possession prior to such court ruling to the
extent not paid to Holders of Senior Notes of such series, the Trustee will
hold, for the benefit of the Holders of Senior Notes of such series, a
valid and enforceable security interest in such trust funds that is not
avoidable in bankruptcy or otherwise, subject only to principles of
equitable subordination, (B) the Holders of Senior Notes of such series
will be entitled to receive adequate protection of their interests in such
trust funds if such trust funds are used, and (C) no property, rights in
property or other interests granted to the Trustee or the Holders of Senior
Notes of such series in exchange for or with respect to any of such funds
will be subject to any prior rights of any other person, subject only to
prior Liens granted under Section 364 of Title 11 of the U.S. Bankruptcy
Code (or any section of any other Bankruptcy Law having the same effect),
but still subject to the foregoing clause (B); and
(8) LGII shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that (x) all conditions precedent
provided for relating to either the legal defeasance under paragraph (b)
above or the covenant defeasance under paragraph (c) above, as the case may
be, have been complied with and (y) if any other Indebtedness of LGII or
the Guarantor shall then be outstanding or committed, such legal defeasance
or covenant defeasance will not violate the provisions of the agreements or
instruments evidencing such Indebtedness.
(e) All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this paragraph (e), the "Trustee") pursuant to paragraph (d)
above in respect of the outstanding Senior Notes of such series shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Senior Notes and this Indenture, to the payment, either directly or through any
Paying Agent (other than LGII or any Affiliate of LGII) as the Trustee may
determine, to the Holders of such Senior Notes of all sums due and to become due
thereon in respect of principal, premium and interest, but such money need not
be segregated from other funds except to the extent required by law.
LGII shall, and the Guarantor shall cause LGII to pay and indemnify
the Trustee against any tax, fee or other charge imposed on or assessed against
the U.S. Government Obligations deposited pursuant to paragraph (d) above or the
principal, premium, if any, and interest received in respect thereof other than
any such tax, fee or other charge which by law is for the account of the Holders
of the outstanding Senior Notes of such series.
Anything in this Section 8.02 to the contrary notwithstanding, the
Trustee shall deliver or pay to LGII from time to time upon the request, in
writing, by LGII any money or U.S. Government Obligations held by it as provided
in paragraph (d) above which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent legal defeasance or covenant
defeasance.
8.03. APPLICATION OF TRUST MONEY.
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The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Sections 8.01 and 8.02, and shall apply the
deposited money and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of principal of, premium, if any, and
interest on the Senior Notes of each series.
8.04. REPAYMENT TO LGII OR GUARANTOR.
Subject to Sections 7.08, 8.01 and 8.02, the Trustee shall promptly
pay to LGII or if deposited with the Trustee by the Guarantor, to the Guarantor,
upon receipt by the Trustee of an Officers' Certificate, any excess money,
determined in accordance with Section 8.02, held by it at any time. The Trustee
and the Paying Agent shall pay to LGII or the Guarantor, upon receipt by the
Trustee or the Paying Agent, as the case may be, of an Officers' Certificate,
any money held by it for the payment of principal, premium, if any, or interest
that remains unclaimed for two years after payment to the Holders is required;
PROVIDED, HOWEVER, that the Trustee and the Paying Agent before being required
to make any payment may, but need not, at the expense of LGII cause to be
published once in a newspaper of general circulation in The City of New York or
mail to each Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein, which shall be at least 30
days from the date of such publication or mailing, any unclaimed balance of such
money then remaining will be repaid to LGII. After payment to LGII or the
Guarantor, Holders entitled to money must look solely to LGII and the Guarantor
for payment as general creditors unless an applicable abandoned property law
designates another person, and all liability of the Trustee or Paying Agent with
respect to such money shall thereupon cease.
8.05. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
and only then LGII's and the Guarantor's obligations under this Indenture and
the Senior Notes of such series shall be revived and reinstated as though no
deposit had been made pursuant to this Indenture until such time as the Trustee
is permitted to apply all such money or U.S. Government Obligations in
accordance with this Indenture; PROVIDED, HOWEVER, that if LGII or the Guarantor
has made any payment of principal of, premium, if any, or interest on any Senior
Notes of such series because of the reinstatement of its obligations, LGII or
the Guarantor, as the case may be, shall be subrogated to the rights of the
Holders of such Senior Notes to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
9.01. WITHOUT CONSENT OF HOLDERS.
LGII, when authorized by a Board Resolution of its Board of Directors,
and the Trustee may amend, waive or supplement this Indenture or the Senior
Notes without notice to or consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Article Five;
(c) to provide for uncertificated Senior Notes in addition to
certificated Senior Notes;
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(d) to comply with any requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA;
(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 above, the Trustee and LGII may not make any
change that adversely affects the rights of any Holders hereunder. LGII shall
be required to deliver to the Trustee an Opinion of Counsel stating that any
such change made pursuant to paragraph (a) or (e) of this Section 9.01 does not
adversely affect the rights of any Holder.
9.02. WITH CONSENT OF HOLDERS.
Subject to Section 6.04, LGII, when authorized by a Board Resolution
of its Board of Directors, and the Trustee may amend this Indenture or the
Senior Notes with the written consent of the Holders of not less than a majority
in aggregate principal amount of each series of the Senior Notes then
outstanding, and the Holders of not less than a majority in aggregate principal
amount of the Senior Notes of such series then outstanding by written notice to
the Trustee may waive future compliance by LGII or the Guarantor with any
provision of this Indenture, the Guarantee or the Senior Notes.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(a) reduce the percentage in outstanding aggregate principal amount
of such series of Senior Notes the Holders of which must consent to an
amendment, supplement or waiver of any provision of this Indenture, the
Guarantee or the Senior Notes;
(b) reduce or change the rate or time for payment of interest on any
Senior Note;
(c) change the currency in which any Senior Note, or any premium or
interest thereon, is payable;
(d) reduce the principal amount outstanding of or extend the fixed
maturity of any Senior Note or alter the redemption provisions with respect
thereto;
(e) waive a default in the payment of the principal of, premium, if
any, or interest on, or redemption or an offer to purchase required
hereunder with respect to, any Senior Note;
(f) make the principal of, premium, if any, or interest on any Senior
Note payable in money other than that stated in the Senior Note;
(g) modify this Section 9.02 or Section 6.04 or Section 6.07;
(h) 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 the offer with respect to any Asset Sale or modify any
of the provisions or definitions with respect thereto;
(i) modify or change any provision of this Indenture affecting the
subordination or ranking of the Senior Notes or the Guarantee in a manner
adverse to the Holders;
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(j) impair the right to institute suit for the enforcement of any
payment on or with respect to the Senior Notes of such series.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, LGII shall mail to the Holder of each Senior Note affected
thereby, with a copy to the Trustee, a notice briefly describing the amendment,
supplement or waiver. Any failure of LGII to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
amendment, supplement or waiver.
9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment of or supplement to this Indenture, the Guarantee or
each series of the Senior Notes shall comply with the TIA as then in effect.
9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder is a continuing consent by such Holder and every subsequent
Holder of that Senior Note or portion of that Senior Note that evidences the
same debt as the consenting Holder's Senior Note, even if notation of the
consent is not made on any Senior Note. However, any such Holder or subsequent
Holder may revoke the consent as to his Senior Note or portion of a Senior Note
prior to such amendment, supplement or waiver becoming effective. Such
revocation shall be effective only if the Trustee receives the notice of
revocation before the date the amendment, supplement or waiver becomes
effective. Notwithstanding the above, nothing in this paragraph shall impair
the right of any Holder under Section 316(b) of the TIA.
LGII may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
second and third sentences of the immediately preceding paragraph, those persons
who were Holders at such record date (or their duly designated proxies), and
only those persons, shall be entitled to consent to such amendment, supplement
or waiver or to revoke any consent previously given, whether or not such persons
continue to be Holders after such record date. Such consent shall be effective
only for actions taken within 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder; unless it makes a change described in any of clauses (a)
through (j) of Section 9.02; if it makes such a change, the amendment,
supplement or waiver shall bind every subsequent Holder of a Senior Note or
portion of a Senior Note that evidences the same debt as the consenting Holder's
Senior Note.
9.05. NOTATION ON OR EXCHANGE OF SENIOR NOTES.
If an amendment, supplement or waiver changes the terms of a Senior
Note of any series, the Trustee shall (in accordance with the specific direction
of LGII) request the Holder of the Senior Note to deliver it to the Trustee.
The Trustee shall (in accordance with the specific direction of LGII) place an
appropriate notation on the Senior Note about the changed terms and return it to
the Holder. Alternatively, if LGII or the Trustee so determines, LGII in
exchange for the Senior Note shall issue and the Trustee shall authenticate a
new Senior Note
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that reflects the changed terms. Failure to make the appropriate notation or
issue a new Senior Note shall not affect the validity and effect of such
amendment, supplement or waiver.
9.06. TRUSTEE MAY SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article Nine if the amendment, supplement or waiver does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not, sign it. In signing or refusing to
sign such amendment, supplement or waiver, the Trustee shall be entitled to
receive, and shall be fully protected in relying upon, an Officers' Certificate
and an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver is authorized or permitted by this Indenture, that it is
not inconsistent herewith and that it will be valid and binding upon LGII in
accordance with its terms.
ARTICLE TEN
GUARANTEE OF SENIOR NOTES
10.01. GUARANTEE.
Subject to the provisions of this Article Ten, the Guarantor hereby
unconditionally guarantees to each Holder of a Senior Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Senior
Notes or the obligations of LGII to the Holders or the Trustee hereunder or
thereunder, that: (a) the principal of, premium, if any, and interest on the
Senior Notes will be duly and punctually paid in full when due, whether at
maturity, by acceleration or otherwise, and interest on the overdue principal
and (to the extent permitted by law) interest, if any, on the Senior Notes and
all other obligations of LGII to the Holders or the Trustee hereunder or
thereunder (including fees, expenses or other) will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Senior Notes, the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at Stated Maturity, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed, or failing
performance of any other obligation of LGII to the Holders, for whatever reason,
the Guarantor will be obligated to pay, or to perform or cause the performance
of, the same immediately. An Event of Default under this Indenture or the
Senior Notes shall constitute an event of default under this Guarantee, and
shall entitle the Holders of Senior Notes to accelerate the obligations of the
Guarantor hereunder in the same manner and to the same extent as the obligations
of LGII.
The Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Senior Notes or this Indenture, the absence of any action to enforce the same,
any waiver or consent by any holder of the Senior Notes with respect to any
provisions hereof or thereof, the recovery of any judgment against LGII, any
action to enforce the same, whether or not a Guarantee is affixed to any
particular Senior Note, or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. The
Guarantor hereby waives the benefit of diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of LGII, any right to require a proceeding first against LGII, protest, notice
and all demands whatsoever and covenants that its Guarantee will not be
discharged except by complete performance of the obligations contained in the
Senior Notes, this Indenture and this Guarantee. If any Holder or the Trustee
is required by any court or otherwise to return to LGII, or any custodian,
trustee, liquidator or other similar official acting in relation to LGII, any
amount paid by LGII to the Trustee or such Holder, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. The
Guarantor further agrees that, as between it, on the one hand, and the
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Holders of Senior Notes and the Trustee, on the other hand, (a) subject to this
Article Ten, the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six hereof for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (b) in
the event of any acceleration of such obligations as provided in Article Six
hereof, such obligations (whether or not due and payable) shall forthwith become
due and payable by the Guarantor for the purpose of this Guarantee.
This Guarantee shall remain in full force and effect and continue to
be effective should any petition be filed by or against LGII for liquidation or
reorganization, should LGII become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or any
significant part of LGII's assets, and shall, to the fullest extent permitted by
law, continue to be effective or be reinstated, as the case may be, if at any
time payment and performance of the Senior Notes are, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or returned
by any obligee on the Senior Notes, whether as a "voidable preference,"
"fraudulent transfer" or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, Senior Notes shall, to the fullest
extent permitted by law, be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.
No stockholder, officer, director, employer or incorporator, past,
present or future, as such, shall have any personal liability under this
Guarantee by reason of his, her or its status as such stockholder, officer,
director, employer or incorporator.
The Guarantee constitutes a guarantee of payment and ranks pari passu
in right of payment to all unsecured senior indebtedness of the Guarantor.
10.02. EXECUTION AND DELIVERY OF GUARANTEE.
To further evidence the Guarantee set forth in Section 10.01, the
Guarantor hereby agrees that a notation on the Guarantee, substantially in the
form included in Exhibit C hereto, shall be endorsed on each Senior Note
authenticated and delivered by the Trustee after the Guarantee is executed by
either manual or facsimile signature of Officers of the Guarantor. The validity
and enforceability of the Guarantee shall not be affected by the fact that it is
not affixed to any particular Senior Note.
The Guarantor hereby agrees that its Guarantee set forth in Section
10.01 shall remain in full force and effect notwithstanding any failure to
endorse on each Senior Note a notation of the Guarantee.
If an Officer of the Guarantor whose signatures is on this Indenture
or a Senior Note no longer holds that office at the time the Trustee
authenticates the Senior Note or at any time thereafter, the Guarantor's
Guarantee of such Senior Note shall be valid nevertheless.
The delivery of any Senior Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Guarantee
set forth in this Indenture on behalf of the Guarantor.
10.03. INTEREST ACT (CANADA).
If and to the extent that the laws of Canada are applicable to any
amounts payable by the Guarantor under this Indenture that are characterized as
interest by any applicable authority, for purposes of disclosure under the
Interest Act (Canada), the yearly rate of interest for any period less than one
year to which interest at a stated rate computed on the basis of a year of 360
days consisting of twelve 30-day months is equivalent is the stated rate
multiplied by a fraction of which (a) the numerator is the product of (i) the
actual
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number of days in the calendar year in which the first day of the relevant
period falls and (ii) the sum of (A) the product of (x) 30 and (y) the number of
complete months elapsed in the relevant period and (B) the actual number of days
elapsed in any incomplete month in the relevant period, and (b) the denominator
is the product of (i) 360 and (ii) the actual number of days in the relevant
period.
ARTICLE ELEVEN
MISCELLANEOUS
11.01. TRUST INDENTURE ACT OF 1939.
This Indenture is subject to the provisions of the TIA that are
required to be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions.
If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or excluded,
as the case may be.
11.02. NOTICES.
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first class mail, postage prepaid,
addressed as follows:
If to LGII or the Guarantor to:
Loewen Group International, Inc.
50 East River Center Boulevard
Suite 800
Covington, KY 41011
With a copy to:
The Loewen Group Inc.
4126 Norland Ave.
Burnaby, British Columbia
Canada V56358
If to the Trustee to:
Fleet National Bank
777 Main Street
Hartford, CT 06115
Attention: Corporate Trust Administration
The parties hereto by notice to the other parties may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed, postage prepaid, to a Holder,
including any notice delivered in connection with TIA Section 310(b), TIA
Section 313(c), TIA Section 314(a) and TIA Section 315(b), shall be mailed by
first
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class mail to such Holder at the address of such Holder as it appears on the
Senior Notes register maintained by the Registrar and shall be sufficiently
given to such Holder if so mailed within the time prescribed. Copies of any
such communication or notice to a Holder shall also be mailed to the Trustee.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Holders.
Except for a notice to the Trustee, which is deemed given only when received, if
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Senior Notes.
The obligors, the Trustee, the Registrar and any other person shall have the
protection of TIA Section 312(c).
11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by LGII or the Guarantor to the
Trustee to take any action under this Indenture, such obligor shall furnish to
the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that the person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statement or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
opinion as to whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; PROVIDED, HOWEVER, that
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
11.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules for action by or at a meeting of
Noteholders. The Paying Agent or Registrar may make reasonable rules for its
functions.
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11.07. GOVERNING LAW.
The laws of the State of New York shall govern this Indenture, the
Guarantees and the Senior Notes without regard to principles of conflicts of
law. The Trustee, LGII, the Guarantor and the Holders agree to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Indenture, the Guarantee or the Senior Notes.
11.08. CONSENT TO SERVICE OF PROCESS.
Each of LGII and the Guarantor irrevocably (a) agrees that any legal
suit, action or proceeding arising out of or based upon this Indenture and the
Senior Notes issued hereunder may be instituted in any federal or state court
located in the City of New York, (b) waives, to the fullest extent it may
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such proceeding, and (c) submits to the nonexclusive
jurisdiction of such courts in any such suit, action or proceeding. Each of
LGII and the Guarantor has appointed Thelen, Marrin, Johnson & Bridges, 330
Madison Avenue, New York, New York 10017, Attention: David P. Graybeal, Esq.,
as its authorized agent (the "Authorized Agent") upon whom process may be served
in any suit, action or proceeding arising out of or based on this 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
suit, action or proceeding, and waives any other requirements of or objections
to personal jurisdiction with respect thereto. Such appointment shall be
irrevocable. Each of LGII and the Guarantor agrees to take any and all action,
including the filing of any and all documents and instruments, that may be
necessary to continue such appointment in full force and effect as aforesaid.
Service of process upon the Authorized Agent and written notice of such service
to LGII and the Guarantor shall be deemed, in every respect, effective service
of process upon LGII and the Guarantor. Notwithstanding the foregoing,
designation of an authorized agent does not constitute submission to
jurisdiction or consent to service or process in any legal action or proceeding
predicated on United States federal or state securities laws.
11.09. NO INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of LGII, the Guarantor or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
11.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or Affiliate, as such, of
LGII or the Guarantor shall not have any liability for any obligations of LGII
under the Senior Notes or this Indenture or for any obligations of the Guarantor
under the Guarantee or for any claim based on, in respect of or by reason of,
such obligations or their creation. Each Holder by accepting a Senior Note
waives and releases all such liability.
11.11. SUCCESSORS.
All agreements of each of LGII and the Guarantor in this Indenture and
the Senior Notes and the Guarantee shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.
11.12. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all such executed copies together
represent the same agreement.
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11.13. SEPARABILITY.
In case any provision in this Indenture, the Guarantee or the Senior
Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, and a Holder shall have no claim therefor against any party
hereto.
11.14. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
11.15. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Senior Notes, express or implied,
shall give to any person, other than the parties hereto and their successors
hereunder, and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
LOEWEN GROUP INTERNATIONAL, INC.
By: /s/ Dwight K. Hawes
------------------------------
Name: Dwight K. Hawes
Title: Vice-President, Finance
[CORPORATE SEAL]
Attest:
By: /s/ Peter S. Hyndman
-------------------------------
Title: Corporate Secretary
THE LOEWEN GROUP INC.
By: /s/ Dwight K. Hawes
------------------------------
[CORPORATE SEAL] Name: Dwight K. Hawes
Title: Vice-President, Finance
Attest:
By: /s/ Peter S. Hyndman
-------------------------------
Title: Corporate Secretary
FLEET NATIONAL BANK,
as Trustee
By: /s/ Michael M. Hopkins
-----------------------------
Name: Michael M. Hopkins
Title: Vice President
[CORPORATE SEAL]
Attest:
By: /s/ Mark A. Forgetta
-------------------------------
Title: Vice President
65
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EXHIBIT A
THIS GLOBAL NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS GLOBAL NOTE RESELL OR OTHERWISE TRANSFER THIS GLOBAL
NOTE EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE), (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS GLOBAL NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND.
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.
% SENIOR GUARANTEED NOTES DUE [ ]
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
A-1
<PAGE>
assigns, the principal sum of _______________ Dollars on [ ], at the
office or agency of the Company referred to below, and to pay interest thereon
on ________ and __________, in each year, commencing on ________________,
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.
If the Guarantor fails to consummate equity transactions having gross
proceeds of at least $200,000,000 in the aggregate prior to [
], additional interest ("Penalty Interest") shall accrue at a rate of .25% per
annum for the first 90 days following such anniversary date, increasing by an
additional .25% per annum at the beginning of each subsequent 90-day period;
PROVIDED, HOWEVER, that such Penalty Interest may not exceed 1.0% per annum; and
PROVIDED FURTHER, that such Penalty Interest shall cease to accrue upon the
consummation by the Guarantor of an equity transaction, the gross proceeds of
which, together with the gross proceeds of all other equity transactions
consummated by it after [ ] are equal to or greater than
$200,000,000.
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 [ ] or [ ]
(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 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 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 Holders of Global 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
Global 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 Global Note is entitled to the benefits of a
Registration Rights Agreement, dated as of October __, 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.
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<PAGE>
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.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
LOEWEN GROUP INTERNATIONAL, INC.
By: _______________________________
Name:
Title:
[SEAL]
Attest:
By ______________________
Title:
A-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Global Notes of the series designated therein
referred to in the within-mentioned Indenture.
FLEET NATIONAL BANK,
as TRUSTEE
By ______________________________
Authorized Officer
A-4
<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 % Senior Guaranteed Notes
due [ ] (the "Senior Notes"), which may be issued under an indenture (herein
called the "Indenture") dated as of [ ], 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, a [ ], 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 Senior 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 Senior
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 Senior Note at the times, place and rate,
and in the coin or currency, herein prescribed.
2. REDEMPTION. [The Senior Notes will not be redeemable at the
option of the Company.]
[(a) OPTIONAL REDEMPTION. The Senior Notes are subject to redemption,
at the option of the Company, as a whole or in part, in principal amounts of
$1,000 or any integral multiple of $1,000, at any time on or after
[ ] upon not less than 30 nor more than 60 days' prior notice at
the following Redemption Prices (expressed as percentages of the principal
amount) if redeemed during the 12-month period beginning [ ] of the years
indicated below:
Redemption
Year Price
---- ----------
_________%
_________%
_________%
plus accrued and unpaid interest, if any, to the Redemption Date, all as
provided in the Indenture.
(b) PARTIAL REDEMPTION. In the event of redemption of this Senior
Note in part only, a new Senior Note or Senior Notes for the unredeemed portion
hereof shall be issued in the name of the Holder hereof upon the cancellation
hereof.]
3. GUARANTEE. This Senior 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.
A-5
<PAGE>
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 Senior 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 of such series, to waive
compliance by the Company with certain provisions of the Indenture and certain
past Defaults under the Indenture and this Senior Note and their consequences.
Any such consent or waiver by or on behalf of the Holder of this Senior Note
shall be conclusive and binding upon such Holder and upon all future Holders of
this Senior 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 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 Senior Note is registrable on the
security register of the Company, upon surrender of this Senior 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 Senior 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 Senior Note is registered as the owner hereof for all purposes,
whether or not this Senior 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 Senior 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.
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<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 Prin-
an Interest in, the cipal Amount of Notation
Date Global Note this Global Note Made By
- ---- ------------ -----------------------------------------------
- ---- ---------------------- --------------- --------
- ---- ---------------------- --------------- --------
- ---- ---------------------- --------------- --------
- ---- ---------------------- --------------- --------
- ---- ---------------------- --------------- --------
- ---- ---------------------- --------------- --------
- ---- ---------------------- --------------- --------
- ---- ---------------------- --------------- --------
A-7
<PAGE>
EXHIBIT B
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR"), (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS NOTE RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE
ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
LOEWEN GROUP INTERNATIONAL, INC.
% SENIOR GUARANTEED NOTES DUE [ ]
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 [ ], at the office or agency
of the Company referred to below, and to pay interest thereon on ________ and
__________, in each year, commencing on ________________, 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.
If the Guarantor fails to consummate equity transactions having gross
proceeds of at least $200,000,000 in the aggregate prior to [ ],
additional interest ("Penalty Interest") shall accrue at a rate of .25% per
annum for the first 90 days following such anniversary date, increasing by an
additional .25% per annum at the beginning of each subsequent 90-day period;
PROVIDED, HOWEVER, that such Penalty Interest may not exceed 1.0% per annum; and
PROVIDED FURTHER, that such Penalty Interest shall cease to accrue upon the
consummation by the Guarantor of an equity transaction, the gross proceeds of
which, together with the gross proceeds of all other equity transactions
consummated by it after [ ] are equal to or greater than
$200,000,000.
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 Physical Note (or one
or more Predecessor Notes) is registered at the close of business on the Regular
Record Date for such interest,
B-1
<PAGE>
which shall be [ ] or [ ] (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 Physical 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 Physical
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 Senior 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 Senior 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 Physical Note is entitled to the benefits of a
Registration Rights Agreement, dated as of October __, 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 Physical 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
Physical 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 Physical
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 Physical Note shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
B-2
<PAGE>
IN WITNESS WHEREOF, the
Company has caused this instrument to be duly executed under its corporate seal.
Dated:
LOEWEN GROUP INTERNATIONAL, INC.
By:__________________________
Name:
Title:
[SEAL]
Attest:
By ___________________
Title:
B-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Physical Notes of the series designated therein
referred to in the within-mentioned Indenture.
FLEET NATIONAL BANK,
as TRUSTEE
By: ___________________________
Authorized Officer
B-4
<PAGE>
(Reverse of Note)
1. INDENTURE. This Note is one of a duly authorized series of
Senior Notes of the Company designated as its % Senior Guaranteed Notes
due [ ] (the "Senior Notes"), which may be issued under an indenture (herein
called the "Indenture") dated as of [ ], 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, a [ ], 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. [The Senior Notes will not be redeemable at the
option of the Company.]
[(a) OPTIONAL REDEMPTION. The Senior Notes are subject to redemption,
at the option of the Company, as a whole or in part, in principal amounts of
$1,000 or any integral multiple of $1,000, at any time on or after
[ ] upon not less than 30 nor more than 60 days' prior notice at
the following Redemption Prices (expressed as percentages of the principal
amount) if redeemed during the 12-month period beginning [ ] of the years
indicated below:
Redemption
Year Price
---- -------------
_________%
_________%
_________%
plus accrued and unpaid interest, if any, to the Redemption Date, all as
provided in the Indenture.
(b) PARTIAL REDEMPTION. In the event of redemption of this Note in
part only, a new Senior Note or Senior Notes for the unredeemed portion hereof
shall be issued in the name of the Holder hereof upon the cancellation hereof.]
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.
B-5
<PAGE>
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 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 of such series, to waive
compliance by the Company with certain provisions of the Indenture and certain
past Defaults under the Indenture and this Senior 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.
B-6
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Senior Note and the Guarantee purchased by
the Company pursuant to Section 4.11 or 4.12 of the Indenture, check the
appropriate box:
Section 4.11 [ ]
Section 4.12 [ ]
If you wish to have a portion of this Senior Note purchased by the
Company pursuant to Section 4.11 or 4.12 of the Indenture, state the amount:
$___________
Date: Your Signature: ________________________
(Sign exactly as your
name appears on the
other side of this
Senior Note)
Signature Guarantee:____________________
B-7
<PAGE>
EXHIBIT C
SENIOR GUARANTEE
For value received, the undersigned hereby unconditionally guarantees
to the Holder of this Senior Note the payments of principal of, premium, if any,
and interest on this Senior Note in the amounts and at the time when due and
interest on the overdue principal, premium, if any, and interest, if any, of
this Senior 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 Senior Note and the Trustee, all in accordance with and subject
to the terms and limitations of this Senior 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
Senior 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 Senior Note, by accepting the same, agrees to and
shall be bound by such provisions.
C-1
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this instrument to be
duly executed under its corporate seal.
Dated:
THE LOEWEN GROUP INC.
By:
Name:
Title:
[CORPORATE SEAL]
Attest:
By______________________
Title:
C-2
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Senior Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Senior Note to
________________________________________________________________________________
(Insert assignee's social security or tax ID number) ___________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
________________________________________________________________________________
agent to transfer this Senior Note on the books of the Company. The agent may
substitute another to act for him.
________________________________________________________________________________
Date: _____________ Your signature:___________________________________
(Sign exactly as your name
appears on the other side of
this Senior Note)
Signature Guarantee:____________________________________________________________
<PAGE>
$350,000,000
LOEWEN GROUP INTERNATIONAL, INC.
SENIOR GUARANTEED NOTES
$125,000,000 7 3/4% SERIES 3 SENIOR GUARANTEED NOTES DUE 2001
$225,000,000 8 1/4% SERIES 4 SENIOR GUARANTEED NOTES DUE 2003
PAYMENT OF PRINCIPAL AND INTEREST
UNCONDITIONALLY GUARANTEED BY
THE LOEWEN GROUP INC.
PURCHASE AGREEMENT
October 1, 1996
Smith Barney Inc.
Alex. Brown & Sons Incorporated
Nesbitt Burns Securities Inc.
RBC Dominion Securities Corporation
Midland Walwyn Capital Corporation
c/o Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Loewen Group International, Inc., a Delaware corporation ("LGII"),
proposes to issue and sell to the several purchasers listed in Schedule I hereto
(the "Initial Purchasers") $350,000,000 aggregate principal amount of its Senior
Guaranteed Notes, consisting of $125,000,000 7 3/4% Series 3 Senior Guaranteed
Notes due 2001 (the "Series 3 Notes") and $225,000,000 8 1/4% Series 4 Senior
Guaranteed Notes due 2003 (the "Series 4 Notes", together with the Series 3
Notes, the "Senior Notes"). The Senior Notes will be unconditionally guaranteed
as to principal and interest on a senior basis (the "Guarantee", and together
with the Senior Notes, the "Securities") by The Loewen Group Inc., a corporation
under the laws of British Columbia, Canada (the "Guarantor" and, together with
its subsidiaries and associated entities, the "Company"). The Senior Notes will
<PAGE>
be issued pursuant to the provisions of an Indenture to be dated as of
October 1, 1996 (the "Indenture") among LGII, the Guarantor and Fleet National
Bank, as trustee (the "Trustee").
The sale of the Senior Notes to the Initial Purchasers will be made
without registration under the Securities Act of 1933, as amended (the "Act"),
in reliance on the exemption provided by Section 4(2) of the Act. Initial
Purchasers of the Senior Notes and their direct and indirect transferees will be
entitled to the benefits of a Registration Rights Agreement, to be dated as of
October 4, 1996 (the "Registration Rights Agreement") and to be substantially in
the form attached hereto as Exhibit A.
In connection with the sale of the Senior Notes, LGII and the
Guarantor have prepared a preliminary offering memorandum dated September 27,
1996 (the "Preliminary Memorandum") and a final offering memorandum dated the
date of this Agreement (the "Final Memorandum" and, with the Preliminary
Memorandum, each a "Memorandum") for the information of the Initial Purchasers
and for delivery to the prospective purchasers of the Senior Notes. Each
Memorandum includes a description of the Senior Notes, the Guarantee, the terms
of the offering, the business of LGII and the Guarantor and certain material
developments relating to LGII and the Guarantor.
Section 1. REPRESENTATIONS AND WARRANTIES.
Each of LGII and the Guarantor represents and warrants to each of the
Initial Purchasers that:
(a) Each Memorandum with respect to the Senior Notes has been
prepared by LGII and the Guarantor for use by the Initial Purchasers in
connection with resales exempt from registration under the Act. No order
or decree preventing the use of the Preliminary Memorandum or the Final
Memorandum or any amendment or supplement thereto, or any order asserting
that the transactions contemplated by this Agreement are subject to the
registration requirements of the Act has been issued and no proceeding for
that purpose has commenced or is pending or, to the knowledge of LGII or
the Guarantor, is contemplated.
(b) The Preliminary Memorandum did not, as of its date, and the Final
Memorandum will not, in the form used by the Initial Purchasers to confirm
sales of the Senior Notes and as of the Closing Date (as defined herein),
contain any untrue statement of a material
2
<PAGE>
fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that this representation and warranty shall
not apply to any statements or omissions in either Memorandum made in
reliance on and in conformity with information furnished to LGII or to the
Guarantor in writing by or on behalf of an Initial Purchaser expressly for
use therein.
(c) The documents incorporated by reference in each Memorandum (the
"Incorporated Documents"), when they were filed (or, if any amendment with
respect to any such document was filed, when such document was filed),
conformed in all material respects to the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and did not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and any further Incorporated
Documents will, when so filed, conform in all material respects to the
requirements of the Exchange Act and will not contain an untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(d) The financial statements of the Guarantor, and the related notes
thereto, included in the Final Memorandum present fairly the consolidated
financial position of the Guarantor and its consolidated subsidiaries as of
the dates indicated and the results of their operations and the changes in
its consolidated cash flows for the periods specified; and, except as may
be noted therein, said financial statements have been prepared in
compliance with accounting principles generally accepted in Canada, applied
on a consistent basis.
(e) Since the respective dates as of which information is given in
the Final Memorandum, there has not occurred any change, or any development
involving a prospective change, that would have a material adverse effect
on the condition (financial or other), business, properties, net worth or
results of operations of the Company as a whole (a "Material Adverse
Effect") otherwise than as set forth or contemplated in the Final
Memorandum.
(f) The Guarantor is a corporation duly organized, validly existing,
and in good standing under
3
<PAGE>
the laws of the Province of British Columbia, Canada with full corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Final Memorandum; LGII is a corporation
duly organized, validly existing, and in good standing under the laws of
the state of Delaware with full corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Final Memorandum; each of LGII and the Guarantor is duly registered or
qualified to conduct its business and is in good standing in each
jurisdiction where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the
failure so to register or qualify would not have a Material Adverse Effect.
(g) Osiris Holding Corporation is a corporation duly organized,
validly existing and in good standing in the jurisdiction of its
incorporation; Loewen (Texas) L.P. is a limited partnership, duly formed,
validly existing and in good standing in the jurisdiction of its
organization; each of Osiris Holding Corporation and Loewen (Texas) L.P.
(each a "Significant Subsidiary" and collectively, the "Significant
Subsidiaries") has full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Final Memorandum, and is duly registered or qualified to conduct its
business and is in good standing in each jurisdiction where the nature of
its properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify would not
have a Material Adverse Effect; all the outstanding shares of capital stock
of Osiris Holding Corporation and all of the issued partnership interests
of Loewen (Texas) L.P. have been duly authorized and validly issued and,
with respect to Osiris Holding Corporation, are fully paid and
nonassessable and, with respect to the limited partnership interests of
Loewen (Texas) L.P., not subject to assessment by Loewen (Texas) L.P. for
additional capital contributions, and are owned by LGII or the Guarantor,
directly or indirectly, free and clear of any lien, adverse claim, security
interest, equity or encumbrance (except as provided in the Collateral
Agreement (as defined in the Indenture)).
(h) Other than as set forth or contemplated in the Final Memorandum,
there are no legal or governmental proceedings pending or, to the knowledge
of LGII or the Guarantor, contemplated by governmental authorities or
threatened by others, to which LGII, the
4
<PAGE>
Guarantor or any of their respective subsidiaries is or may be a party or
to which any property of LGII, the Guarantor or any of their respective
subsidiaries is or may be the subject which, if determined adversely to
LGII, the Guarantor or any of their respective subsidiaries, would
individually or in the aggregate have a Material Adverse Effect, and there
are no agreements, contracts, indentures, leases or other instruments
relating to LGII or the Guarantor that are required to be described in each
Memorandum that are not described therein. The descriptions of the terms
of any such contracts or documents contained in the Final Memorandum are
correct in all material respects.
(i) The Securities have been duly authorized by each of LGII and,
when executed by LGII and the Guarantor, and authenticated by the Trustee
in accordance with the Indenture and delivered to the Initial Purchasers
against payment therefor in accordance with the terms hereof, will have
been validly issued and delivered and will constitute valid and binding
obligations of each of LGII and the Guarantor entitled to the benefits of
the Indenture and enforceable in accordance with their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors' rights generally and equitable principles.
(j) The Indenture has been duly authorized by LGII and the Guarantor
and, when executed and delivered by LGII and the Guarantor, will (assuming
due authorization, execution and delivery by the Trustee) constitute a
valid and binding agreement of LGII and the Guarantor, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally and equitable principles.
(k) This Agreement has been duly authorized, executed and delivered
by each of LGII and the Guarantor and constitutes a valid and binding
agreement of each of LGII and the Guarantor, except as rights to indemnity
and contribution hereunder may be limited by applicable law.
(l) The Registration Rights Agreement has been duly authorized by
LGII and the Guarantor, and, upon execution and delivery by LGII and the
Guarantor, will be a valid and binding agreement of LGII and the Guarantor,
enforceable in accordance with its terms subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting
5
<PAGE>
creditors' rights generally and equitable principles of and except as any
rights to indemnity and contribution may be limited by applicable law.
(m) Other than as set forth or contemplated in each Memorandum, none
of LGII, the Guarantor or any of the Significant Subsidiaries is (i) in
violation of its certificate or articles of incorporation or by-laws, or
other organizational documents, (ii) in violation of any law, ordinance,
administrative or governmental rule or regulation applicable to LGII, the
Guarantor or any of the Significant Subsidiaries or of any decree of any
court or governmental agency or body having jurisdiction over LGII, the
Guarantor or any of the Significant Subsidiaries or any of their respective
properties (except where any such violation or violations in the aggregate
would not have a Material Adverse Effect), or (iii) in default in any
material respect in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any material agreement, indenture, lease or other
instrument to which LGII, the Guarantor or any of the Significant
Subsidiaries is a party or by which any of them or any of their respective
properties may be bound, and no condition or state of facts exists, which
with the passage of time or the giving of notice or both, would constitute
such a default (except where any such default or defaults in the aggregate
would not have a Material Adverse Effect).
(n) Neither the issuance and sale of the Securities nor the
performance by each of LGII and the Guarantor of its obligations under the
Securities, the Indenture, this Agreement and the Registration Rights
Agreement, nor the consummation of the transactions herein and therein
contemplated, (i) requires any consent, approval, authorization or other
order of or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or official
(except such as may be required for compliance with state securities or
Blue Sky laws of various jurisdictions) or (ii) conflicts or will conflict
with or constitutes or will constitute a breach of, or a default under, the
certificate or articles of incorporation or bylaws, or other organizational
documents, of LGII, the Guarantor or any of the Significant Subsidiaries or
(iii) conflicts or will conflict with or constitutes or will constitute a
breach of, or a default under, any agreement, indenture, mortgage, deed of
trust, loan agreement, lease or other instrument to which LGII or the
6
<PAGE>
Guarantor or any of the Significant Subsidiaries is a party or by which
LGII or the Guarantor or any of the Significant Subsidiaries is bound or to
which any of their respective properties is subject, nor will any such
action result in any violation of any law, ordinance, administrative or
governmental rule or regulation applicable to LGII, the Guarantor or any of
the Significant Subsidiaries or of any decree of any court or governmental
agency or body having jurisdiction over LGII, the Guarantor or any of the
Significant Subsidiaries or any of their respective properties.
(o) Except as set forth in each Memorandum (or any amendment or
supplement thereto), subsequent to the respective dates as to which such
information is given in each Memorandum (or any amendment or supplement
thereto), neither LGII nor the Guarantor nor any of the Significant
Subsidiaries has incurred any liability or obligation, direct or
contingent, or entered into any transaction not in the ordinary course of
business, that is material to the Company, and there has not been any
change in the capital stock of LGII, or material increase in the short-term
debt or long-term debt of LGII, the Guarantor or any of the Significant
Subsidiaries, or any development having, or which may reasonably be
expected to have, a Material Adverse Effect.
(p) The accountants, KPMG, who have certified or shall certify the
financial statements of the Guarantor included in the Final Memorandum, are
independent public accountants.
(q) None of LGII, the Guarantor and any affiliate (as defined in Rule
501(b) of Regulation D under the Act, an "Affiliate") of LGII or the
Guarantor has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any security
(as defined in the Act) which is or will be integrated with the sale of the
Senior Notes in a manner that would require the registration under the Act
of the Senior Notes, or (ii) engaged in any form of general solicitation or
general advertising in connection with the offering of such Senior Notes
(as those terms are used in Regulation D under the Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act,
it being understood that, for purposes of this representation only, the
Initial Purchasers shall not be deemed Affiliates or agents of LGII or the
Guarantor.
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<PAGE>
(r) LGII, the Guarantor and the Significant Subsidiaries have filed
all tax returns required to be filed, which are material to the Company,
which returns are true and correct in all material respects, and neither
LGII, the Guarantor nor any Significant Subsidiary is in default in the
payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto.
(s) None of LGII, the Guarantor and the Significant Subsidiaries is
an "investment company" or an entity "controlled" by an investment
company," as such terms are defined in the Investment Company Act of 1940,
as amended.
(t) Assuming compliance by the Initial Purchasers with their
representations and agreements under Section 3 hereof, it is not necessary
in connection with the offer, sale and delivery of the Senior Notes in the
manner contemplated by this Agreement to register the Senior Notes under
the Act or to qualify the Indenture under the Trust Indenture Act of 1939,
as amended.
(u) Each of LGII and the Guarantor has complied with all applicable
provisions of Section 517.075, Florida Statutes relating to doing business
with the Government of Cuba or with any person or affiliate located in
Cuba.
Section 2. PURCHASE AND DELIVERY.
Upon the basis of the representations and warranties herein contained
and subject to the conditions hereinafter stated, LGII agrees to issue and sell
the Senior Notes to the several Initial Purchasers as hereinafter provided, and
each Initial Purchaser agrees to purchase, severally and not jointly, from LGII
the respective principal amount of Senior Notes set forth opposite such
Purchaser's name in Schedule I hereto at a price (the "Purchase Price") equal to
(i) in the case of the Series 3 Notes, $122,444,557 and (ii) in the case of the
Series 4 Notes, $220,211,476 plus, in each case, accrued interest, if any, from
October 4, 1996 to the date of payment and delivery.
Payment for the Senior Notes shall be made to LGII by wire transfer in
immediately available funds to the account of LGII specified to Smith Barney
Inc. on the Business Day prior to the time of closing, such payment to be made
at 9:00 A.M., New York City time on October 4, 1996, or at such other time on
the same or such other date, not
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<PAGE>
later than the fifth Business Day thereafter, as the Initial Purchasers and LGII
may agree upon in writing. The time and date of such payment are referred to
herein as the "Closing Date." As used herein, the term "Business Day" means any
day other than a day on which banks are permitted or required to be closed in
New York City.
Payment for the Senior Notes shall be made against delivery to the
Initial Purchasers for their respective accounts of the Senior Notes. The
Senior Notes will be evidenced by a single global note in definitive form (the
"Global Note") and/or by additional definitive notes, and will be registered, in
the case of the Global Note, in the name of Cede & Co. as nominee of The
Depository Trust Company ("DTC"), and in the other cases, in such names and in
such denominations as the Initial Purchasers shall request in writing not later
than two full Business Days prior to the Closing Date with any transfer taxes
payable in connection with the transfer to the Initial Purchasers of the Senior
Notes duly paid by LGII. The certificates for the Senior Notes will be made
available for inspection by the Initial Purchasers at the office of the Trustee,
777 Main Street, Hartford, Connecticut 06115, not later than 1:00 P.M., New York
City time, on the Business Day prior to the Closing Date.
Section 3. Offering of the Senior Notes;
RESTRICTIONS ON TRANSFER
LGII understands that the Initial Purchasers intend (i) to offer
privately their respective portions of the Senior Notes as soon after this
Agreement has become effective as in the judgment of the Initial Purchasers is
advisable and (ii) initially to offer the Senior Notes upon the terms and
conditions set forth in the Final Memorandum.
Each of LGII and the Guarantor confirm that it has authorized the
Initial Purchasers, subject to the restrictions set forth below, to distribute
copies of the Final Memorandum in connection with the offering of the Senior
Notes. Each Initial Purchaser hereby makes to LGII the following
representations and agreements:
(i) it is a qualified institutional buyer within the meaning of Rule
144A under the Act; and
(ii) (A) it will not solicit offers for, or offer to sell, the Senior
Notes by any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Act and (B) it
will solicit offers
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for the Senior Notes only from, and will offer the Securities only to,
persons who it reasonably believes to be (1) "qualified institutional
buyers" within the meaning of Rule 144A under the Act or (2) institutional
"accredited investors" as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Act, who provide it a letter in the form of Annex A
to the Final Memorandum.
Section 4. COVENANTS OF LGII AND THE GUARANTOR.
Each of LGII and the Guarantor covenants and agrees with the several
Initial Purchasers as follows:
(a) To furnish to the Initial Purchasers, without charge, during the
period mentioned in paragraph (c) below, as many copies of the Final
Memorandum and the Incorporated Documents (including any supplements and
amendments thereto) as the Initial Purchasers may reasonably request.
(b) During the period mentioned in paragraph (c) below, before
distributing any amendment or supplement to the Final Memorandum, to
furnish to the Initial Purchasers a copy of the proposed amendment or
supplement for review and not to distribute any such proposed amendment or
supplement to which the Initial Purchasers reasonably object.
(c) If, at any time prior to the completion of the initial placement
of the Senior Notes, any event shall occur as a result of which it is
necessary to amend or supplement the Final Memorandum in order to make the
statements therein, in the light of the circumstances when the Final
Memorandum is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Final Memorandum to comply with law,
forthwith to prepare and furnish, at the expense of LGII, to the Initial
Purchasers and to the dealers (whose names and addresses the Initial
Purchasers will furnish to LGII) to which Senior Notes may have been sold
by the Initial Purchasers and to any other dealers upon request, such
amendments or supplements to the Final Memorandum as may be necessary so
that the statements in the Final Memorandum as so amended or supplemented
will not, in the light of the circumstances when the Final Memorandum is
delivered to a purchaser, be misleading or so that the Final Memorandum
will comply with law.
(d) To endeavor to qualify the Senior Notes for offer and sale under
the state securities or Blue Sky
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laws of such jurisdictions as the Initial Purchasers shall reasonably
request and to continue such qualification in effect so long as reasonably
required for distribution of the Senior Notes and to pay all fees and
expenses (including fees and disbursements of counsel to the Initial
Purchasers) reasonably incurred in connection with such qualification and
in connection with the determination of the eligibility of the Senior Notes
for investment under the laws of such jurisdictions as the Initial
Purchasers may designate.
(e) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate, and to cause any Affiliate not to sell, offer for sale, or
solicit offers to buy or otherwise negotiate, in respect of any security
(as defined in the Act) which could be integrated with the sale of the
Senior Notes in a manner which would require the registration under the Act
of such Senior Notes.
(f) Not to solicit any offer to buy or offer or sell the Senior Notes
by means of any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act.
(g) While the Senior Notes remain outstanding and are "restricted
securities" within the meaning of Rule 144(a)(3) under the Act, during any
period in which the Guarantor is not subject to Section 13 or 15(d) under
the Exchange Act, to make available to the Initial Purchasers and any
holder of Senior Notes in connection with any sale thereof and any
prospective purchaser of Senior Notes, in each case upon request,
information with respect to the Guarantor, as specified in, and meeting the
requirements of, Rule 144A(d)(4) under the Act (or any successor thereto).
(h) Not to be or become at any time prior to the expiration of three
years after the Closing Date, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act of 1940, as
amended.
(i) Not to sell or to cause any of LGII's "affiliates" (as defined in
Rule 144(a)(1) under the Act) to sell, any Senior Notes acquired by LGII or
any such affiliate except (i) to LGII, a subsidiary of LGII or any employee
pension, benefit or welfare plan of
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LGII or (ii) pursuant to an effective registration statement under the Act.
(j) To include information substantially in the form set forth in
Exhibit B hereto in the Final Memorandum.
(k) Without the prior written consent of Smith Barney Inc., during
the period beginning from the date hereof and continuing to and including
the date 90 days after this Agreement (the "Lock-up Period"), not to,
directly or indirectly, offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or
dispose of any debt securities of or guaranteed by LGII or the Guarantor
which are substantially similar to the Senior Notes, or any debt securities
of LGII or the Guarantor which are convertible into or exchangeable for
securities of LGII or the Guarantor which are substantially similar to the
Senior Notes, except for securities issued in exchange for the Senior Notes
pursuant to the Registration Rights Agreement.
(l) Whether or not the sale of Senior Notes is consummated, to pay
all costs and expenses incident to the performance of its obligations
hereunder, including without limiting the generality of the foregoing, all
costs and expenses (i) incident to the preparation, issuance, execution,
authentication and delivery of the Securities, including any fees and
expenses of the Trustee, (ii) incident to the preparation, printing and
distribution of each Memorandum (including in each case all exhibits,
amendments and supplements thereto), (iii) incurred in connection with the
registration or qualification and determination of eligibility for
investment of the Senior Notes under the laws of such jurisdictions as the
Initial Purchasers may designate, including the fees and disbursements of
counsel for the Initial Purchasers in connection with such qualification),
(iv) in connection with any listing of the Senior Notes, (v) in connection
with the printing (including word processing and duplication costs) and
delivery of this Agreement, the Indenture, the Preliminary and Supplemental
Blue Sky Memoranda and the furnishing to Initial Purchasers and dealers of
copies of each Memorandum, including mailing and shipping, as herein
provided, (vi) payable to rating agencies in connection with the rating of
the Senior Notes and (vii) payable to counsel for LGII and the Guarantor
for their fees and disbursements incurred in connection with the offering
and sale of the Senior Notes, including any opinions required to be
rendered by such
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counsel hereunder. It is understood, however, that except as provided in
this Section and Section 6 hereof or as otherwise agreed, the Initial
Purchasers will pay all of their own costs and expenses, including the fees
of their counsel and transfer taxes on resale of any of the Senior Notes by
them.
(m) Except as stated in this Agreement and in each Memorandum, not to
take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation
of the price of the Senior Notes to facilitate the sale or resale of the
Senior Notes. Except as permitted by the Act, LGII and the Guarantor will
not distribute any offering material in connection with resales of the
Senior Notes exempt from registration under the Act.
(n) To comply with all of the terms and conditions of the
Registration Rights Agreement, and all agreements set forth in the
representations letter of LGII to DTC relating to the approval of the
Senior Notes by DTC for `book entry' transfer.
(o) Prior to any registration of the Senior Notes pursuant to the
Registration Rights Agreement, or at such earlier time as may be so
required, to qualify the Indenture under the Trust Indenture Act of 1939,
as amended, and to enter into any necessary supplemental indentures in
connection therewith.
(p) To use its best efforts to permit the Senior Notes to be
designated PORTAL securities in accordance with the rules and regulations
adopted by the National Association of Securities Dealers, Inc. relating to
trading in the PORTAL Market.
Section 5. CONDITIONS TO CLOSING.
The several obligations of the Initial Purchasers hereunder are
subject to the performance by each of LGII and the Guarantor of its obligations
hereunder and to the following additional conditions:
(a) The representations and warranties of each of LGII and the
Guarantor contained herein shall be true and correct on and as of the
Closing Date as if made on and as of the Closing Date and each of LGII and
the Guarantor shall have complied with all agreements and all conditions on
its part to be performed or satisfied hereunder at or prior to the Closing
Date.
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(b) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, there shall not have occurred any
downgrading, nor shall any notice have been given of (i) any intended
or potential downgrading or (ii) any review or possible change that
does not indicate an improvement, in the rating accorded any
securities of or guaranteed by LGII or the Guarantor by any
"nationally recognized statistical rating organization", as such term
is defined for purposes of Rule 436(g)(2) under the Act.
(c) Since the respective dates as of which information is given in
the Final Memorandum, there shall not have occurred (i) any change, or any
development involving a prospective change, that would have a Material
Adverse Effect otherwise than as set forth or contemplated in each
Memorandum, the effect of which in the judgment of the Initial Purchasers
makes it impracticable or inadvisable to proceed with the offering or the
delivery of the Senior Notes on the terms and in the manner contemplated in
each Memorandum, or (ii) any material change in the capital stock of LGII
or the Guarantor or any material increase in the short-term or long-term
debt of the Company (other than in the ordinary course of business) from
that set forth or contemplated in the Final Memorandum.
(d) The Initial Purchasers shall have received on and as of the
Closing Date certificates of LGII and the Guarantor signed by the chief
executive officer and the chief financial officer of each of LGII and the
Guarantor (or such other officers as are acceptable to you) satisfactory to
the Initial Purchasers to the effect set forth in subsections (a), (b) and
(c)(ii) of this Section and to the further effect that there has not
occurred any change, or any development involving a prospective change,
that would have a Material Adverse Effect otherwise than as set forth or
contemplated in each Memorandum.
(e) You shall have received on the Closing Date an opinion of Davis
Polk & Wardwell, counsel for the Initial Purchasers, with respect to this
Agreement, the Securities being delivered on the Closing Date, each
Memorandum, and other related matters as you may reasonably request, and
such counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters.
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(f) You shall have received on the Closing Date an opinion of Russell
& DuMoulin, Canadian counsel for the Guarantor, dated the Closing Date, in
form and substance satisfactory to the Initial Purchasers, to the effect
that:
(i) the Guarantor has been duly incorporated and is validly
existing as a corporation under the Company Act of British Columbia
and is in good standing with respect to the filing of its annual
returns with the office of the Registrar of Companies for the Province
of British Columbia, with full corporate power and authority to own,
lease and operate its properties and conduct its business as described
in each Memorandum;
(ii) with such exceptions as are not material, the Guarantor has
been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each jurisdiction
in Canada in which it owns or leases properties, or conducts any
business, so as to require such qualification and in which the failure
to so qualify would have a Material Adverse Effect (such counsel being
entitled to rely in respect of the opinion in this subparagraph (ii)
upon opinions of other counsel and upon certificates of public
officials or officers of the Guarantor, provided that such counsel
shall state that he believes that both you and he are justified in so
relying upon such opinions and certificates);
(iii) to the best of such counsel's knowledge and other than as
set forth in each Memorandum, as amended or supplemented, if
applicable, there are no legal or governmental proceedings pending or
contemplated by governmental authorities or threatened by others to
which the Guarantor or any of its subsidiaries is or may be a party or
to which any property of the Guarantor or any of its subsidiaries is
or may be the subject which, if determined adversely to the Guarantor
or any of its subsidiaries, would individually or in the aggregate
have a Material Adverse Effect; and such counsel has not received
notice that any such proceeding or investigations are contemplated by
governmental authorities or threatened by others;
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(iv) the Guarantor has the corporate power and authority to
enter into this Agreement, the Registration Rights Agreement and the
Indenture and each of this Agreement, the Registration Rights
Agreement and the Indenture has been duly authorized, executed and
delivered by the Guarantor (to the extent execution and delivery is
governed by the laws of British Columbia);
(v) the Guarantor has the corporate power and authority to
execute the Guarantee and the Guarantee has been duly authorized,
executed and delivered by the Guarantor (to the extent execution and
delivery is governed by the laws of British Columbia);
(vi) other than as set forth in each Memorandum, the Guarantor
is not in violation of its organizational documents or, to the best of
such counsel's knowledge, in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which the Guarantor is a party or by which
it or any of its properties is bound that is material to the Company
or to the holders of the Senior Notes; neither the issuance, sale and
delivery of the Securities nor the performance by the Guarantor of its
obligations under the Securities, the Indenture, this Agreement and
the Registration Rights Agreement nor the consummation of the
transactions herein and therein contemplated, conflicts or will
conflict with or constitutes or will constitute a breach of or a
default under, any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument known to such counsel to which
the Guarantor is a party or by which the Guarantor is bound or to
which any of the property or assets of the Guarantor is subject, nor
will any such action result in any violation of the provisions of the
organizational documents of the Guarantor or any statute or any
order, rule or regulation of any court or governmental agency or body
of the Province of British Columbia or Canada applicable therein
having jurisdiction over the Guarantor or its properties;
(vii) no consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or
body of
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the Province of British Columbia or Canada applicable therein is
required for the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement and
the Indenture except as have been obtained;
(viii) no stamp duty, registration or documentary taxes, duties
or similar charges are payable under the laws of the Province of
British Columbia or the laws of Canada applicable therein in
connection with the authorization, execution and delivery of this
Agreement and the Indenture;
(ix) under the laws of the Province of British Columbia and the
laws of Canada applicable therein and under the practice of the courts
of the Province of British Columbia, all as at the date hereof, such
courts would give effect to the choice by the Guarantor of New York
law as the law governing this Agreement, the Indenture or the
Securities subject to proof of such laws as a question of fact,
provided that a court of British Columbia will not recognize or apply
any law of the State of New York to the extent, if any, that such law
is found by the court:
A. to be procedural in nature;
B. to be of a revenue, expropriatory or penal nature; or
C. to be inconsistent with public policy in British Columbia;
(x) the Initial Purchasers are each entitled to sue as plaintiff
in the courts of the Province of British Columbia for the enforcement
of their rights against the Guarantor in respect of this Agreement,
PROVIDED that, in the case of any Initial Purchaser which is a
corporation that carries on business in British Columbia, such
corporation is duly registered to carry on such business under the
Company Act (British Columbia). Subject to the foregoing, access to
the courts of the Province of British Columbia will not be subject to
any conditions which are not applicable to nationals or residents of
Canada or domestic corporations, except that the furnishing of
security for costs in such proceedings may be required; and
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(xi) a court of competent jurisdiction in British Columbia will
entertain suit upon a final and conclusive judgment in personam on the
merits respecting the enforcement of this Agreement or the Indenture,
against the Guarantor for a sum certain in money by any federal or
state court located in the City of New York that is not impeachable as
void or voidable under the internal laws of the State of New York, and
will enforce such judgment in such suit without reconsideration of the
merits, PROVIDED that:
A. service of process is made in compliance with the provisions
of this Agreement or the Indenture, as applicable;
B. such judgment is not obtained by fraud or in violation of
the rules of natural justice and that the enforcement
thereof would not be inconsistent with public policy, as
such term is understood under the laws of British Columbia;
C. the enforcement of such judgment does not constitute,
directly or indirectly, the enforcement of foreign revenue,
expropriatory or penal laws;
D. no new admissible evidence relevant to the action is
discovered prior to the rendering of judgment by such court
in British Columbia;
E. an action to enforce the judgment is commenced within six
years of the date of the judgment;
F. such judgment, if a default judgment, does not contain any
manifest error on the face of such judgment; and
G. enforcement would not be contrary to any order made by the
Attorney-General of Canada under the FOREIGN
EXTRATERRITORIAL MEASURES ACT (CANADA) or any order made by
the Competition Tribunal under the COMPETITION ACT (CANADA)
in respect of certain judgments (as therein defined). At
the date thereof, no such orders are outstanding which would
affect the enforcement of any such judgment.
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In rendering such opinions, such counsel may rely (A) as to
matters involving the application of the federal laws of the United States
or the laws of the State of New York, upon the opinion of Thelen, Marrin,
Johnson & Bridges described below, and (B) as to matters of fact, to the
extent such counsel deems proper, on certificates of responsible officers
of the Guarantor and LGII and certificates or other written statements of
officials of jurisdictions having custody of documents respecting the
corporate existence or good standing of the Guarantor.
(g) You shall have received on the Closing Date an opinion of Thelen,
Marrin, Johnson & Bridges, U.S. counsel for LGII and the Guarantor, in form
and substance satisfactory to the Initial Purchasers, to the effect that:
(i) LGII has been duly incorporated and is validly existing
as a corporation in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and
authority to own its properties and conduct its business as
described in each Memorandum;
(ii) LGII has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification, other than
where the failure to be so qualified or in good standing would not
have a Material Adverse Effect;
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(iii) Osiris Holding Corporation has been duly incorporated and
is validly existing as a corporation under the laws of its
jurisdiction of incorporation; Loewen (Texas) L.P. is a limited
partnership duly formed and validly existing under the laws of its
jurisdiction of organization; each Significant Subsidiary has full
corporate power and authority to own its properties and conduct its
business as described in each Memorandum and has been duly qualified
as a foreign corporation or limited partnership for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or conducts any
business, so as to require such qualification, other than where the
failure to be so qualified and in good standing would not have a
Material Adverse Effect; and all of the outstanding shares of capital
stock of Osiris Holding Corporation and all of the issued partnership
interests of Loewen (Texas) L.P. have been duly and validly authorized
and issued, are fully paid and, with respect to Osiris Holding
Corporation, are non-assessable and, with respect to the limited
partnership interests of Loewen (Texas), L.P., not subject to
assessment by Loewen (Texas), L.P. for additional contributions, and
(except for any directors' qualifying shares in the case of Osiris
Holding Corporation) are owned directly or indirectly by the
Guarantor, free and clear of all liens, encumbrances, equities or
claims (except as provided in the Collateral Agreement);
(iv) to the best of such counsel's knowledge and other than as
set forth or contemplated in each Memorandum, as amended or
supplemented, if applicable, there are no legal or governmental
proceedings pending or contemplated by governmental authorities or
threatened by others to which the Guarantor, LGII or any of the
Significant Subsidiaries is or may be a party or to which any property
of the Guarantor, LGII or any of the Significant Subsidiaries is or
may be the subject which, if determined adversely to the Guarantor,
LGII or any of the Significant Subsidiaries, would individually or in
the aggregate have a Material Adverse Effect; and such counsel has not
received notice that any such proceeding or investigations are
contemplated by governmental authorities or threatened by others;
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(v) this Agreement has been duly authorized, executed and
delivered by LGII and (assuming that the Guarantor has the corporate
power and authority to enter into this Agreement and that this
Agreement has been duly authorized, executed and delivered by the
Guarantor) is a valid and binding agreement of LGII and the Guarantor,
except as rights to indemnity and contribution hereunder may be
limited by applicable law;
(vi) the Registration Rights Agreement has been duly authorized
by LGII and (assuming that the Guarantor has the corporate power and
authority to enter into the Registration Rights Agreement and that the
Registration Rights Agreement has been duly authorized, executed and
delivered by the Guarantor) will, upon execution and delivery by LGII
and the Guarantor, be a valid and binding agreement of LGII and the
Guarantor, enforceable in accordance with its terms subject to
applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights generally and equitable
principles and except as any rights to indemnity and contribution may
be limited by applicable law;
(vii) the Senior Notes have been duly authorized, executed and
delivered by LGII and (assuming that the Guarantor has the corporate
power and authority to execute the Guarantee and that the Guarantee
has been duly authorized, executed and delivered by the Guarantor) the
Securities, when duly authenticated in accordance with the terms of
the Indenture and delivered to and paid for by the Initial Purchasers
in accordance with the terms of this Agreement, will constitute valid
and binding obligations of LGII and the Guarantor entitled to the
benefits of the Indenture, enforceable in accordance with their terms,
subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights generally and
equitable principles;
(viii) the Indenture has been duly authorized, executed and
delivered by LGII and (assuming the Guarantor has the corporate power
and authority to enter into the Indenture and that the Indenture has
been duly authorized, executed and delivered by the Guarantor)
constitutes a valid and binding agreement of LGII and the
21
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Guarantor, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights generally and equitable
principles;
22
<PAGE>
(ix) neither LGII nor any of the Significant Subsidiaries is in
violation of or in default under its organizational documents or, to
the best of such counsel's knowledge, in default in the performance of
any material obligation, agreement or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
instrument known to such counsel to which LGII or any of the
Significant Subsidiaries is a party or by which it or any of them or
any of their respective properties is bound, except as may be
disclosed in each Memorandum or where such violations and defaults
individually and in the aggregate would not have a Material Adverse
Effect; neither the issuance and sale of the Senior Notes nor the
performance by LGII and the Guarantor of their obligations under the
Securities, the Indenture and this Agreement nor the consummation of
the transactions herein and therein contemplated, to the best of such
counsel's knowledge, conflicts or will conflict with or constitutes or
will constitute a breach of, or a default under, the organizational
documents or any material agreement, indenture, mortgage, deed of
trust, loan agreement, lease or other instrument known to such counsel
to which the Guarantor, LGII or any of the Significant Subsidiaries is
a party or by which the Guarantor, LGII or any of the Significant
Subsidiaries is bound or to which any of the property or assets of the
Guarantor, LGII or any of the Significant Subsidiaries is subject,
which conflict, breach or default would have a Material Adverse Effect
or, except as disclosed in each Memorandum, will result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Guarantor, LGII or the Significant
Subsidiaries under any such agreement, indenture, lease or other
instrument; nor will any such action result in any violation of any
existing law, regulation, ruling (assuming compliance with all
applicable state securities and Blue Sky laws, as to which counsel
need not express any opinion), judgment, injunction, order or decree
known to such counsel, and applicable to LGII, the Guarantor or any of
the Significant Subsidiaries or any of their respective properties,
which violation would have a Material Adverse Effect, nor will any
such action, to the best of such counsel's knowledge, result in any
violation of any order, rule or regulation of any court or
governmental agency or body having jurisdiction
23
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over LGII or any of its subsidiaries or any of their respective
properties;
(x) no consent, approval, authorization or other order, or
registration or filing with any court, regulatory body, administrative
agency or other governmental body, agency or official in the United
States is required for the issuance and sale of the Securities or the
consummation of the other transactions contemplated by this Agreement
or the Indenture, except (i) as have been obtained and (ii) such
consents, approvals, authorizations, registrations or qualifications
as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Senior Notes by
the Initial Purchasers, as to which such counsel need not express any
opinion;
(xi) based upon the representations, warranties and agreements
of LGII and the Guarantor in Sections 1(q), 4(e), 4(f) and 4(g)
hereof, and of the Initial Purchasers in Section 3 hereof, it is not
necessary in connection with the offer, sale and delivery of the
Senior Notes to the Initial Purchasers under this Agreement or in
connection with the initial resale of such Senior Notes by the Initial
Purchasers in accordance with Section 2 of this Agreement to register
the Securities under the Act or to qualify the Indenture under the
Trust Indenture Act of 1939, as amended;
(xii) the Senior Notes satisfy the requirements set forth in
Rule 144A(d)(3) under the Act;
(xiii) none of LGII, the Guarantor or any Significant Subsidiary
is, and, after the issuance and sale of the Senior Notes none of LGII,
the Guarantor or any of the Significant Subsidiaries will be, an
"investment company" or an entity "controlled" by an "investment
company" required to register under the Investment Company Act of
1940, as amended;
(xiv) the Incorporated Documents (except for financial
statements and the notes thereto and the schedules and other financial
and statistical data included therein, as to which such counsel need
not express any opinion), when filed with the Securities and Exchange
Commission, conformed in all material respects to the requirements of
the
24
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Exchange Act and the rules and regulations thereunder; such counsel
has no reason to believe that any of the Incorporated Documents
(except as aforesaid), when such documents were so filed, contained
any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(xv) the statements in each Memorandum, insofar as they are
descriptions of contracts, agreements or other legal documents, or
refer to statements of law or legal conclusions, are accurate in all
material respects and present fairly the information required to be
shown; and
(xvi) such counsel believes that (except for the financial
statements included therein as to which such counsel need express no
belief) each Memorandum did not, as of its date of issuance, and that
(except as aforesaid) the Final Memorandum does not, as amended or
supplemented, if applicable, as of the Closing Date, contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering their opinions as aforesaid, counsel may, as to factual
matters, rely upon written certificates or statements of officers of LGII
and the Guarantor and, as to matters of law, may rely upon an opinion or
opinions, each dated the Closing Date, of other counsel retained by LGII or
the Guarantor as to the laws of any jurisdiction other than the United
States or the State of New York, PROVIDED that (1) each such other counsel
is reasonably acceptable to the Initial Purchasers, (2) such reliance is
expressly authorized by each opinion so relied upon and a copy of each such
opinion is delivered to the Initial Purchasers and is, in form and
substance, reasonably satisfactory to them and their counsel, and (3)
counsel shall state in their opinion that they believe that they and the
Initial Purchasers are justified in relying thereon.
(h) You shall have received letters addressed to you dated the date
hereof and the Closing Date from KPMG in form and substance satisfactory to
you, containing statements and information of the type
25
<PAGE>
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and the financial and statistical
information contained in each Memorandum.
(i) You shall have received the Registration Rights Agreement
executed by LGII and the Guarantor.
(j) The Senior Notes shall have been designated PORTAL securities in
accordance with the rules and regulations adopted by the National
Association of Securities Dealers, Inc. relating to trading in the PORTAL
Market.
(k) No order or decree preventing the use of the Final Memorandum or
any amendment or supplement thereto, or any order asserting that the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act shall have been issued and no proceeding for that
purpose shall have commenced or be pending or, to the knowledge of LGII or
the Guarantor, contemplated.
(l) LGII and the Guarantor shall have furnished or caused to be
furnished to the Initial Purchasers such further certificates and documents
as the Initial Purchasers shall have requested. All such opinions,
certificates, letters and other documents will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and
substance to the Initial Purchasers and counsel for the Initial Purchasers.
Any certificate or document signed by any officer of LGII or the Guarantor
and delivered to the Initial Purchasers, or to counsel for the Initial
Purchasers, shall be deemed a representation and warranty by LGII and the
Guarantor to the Initial Purchasers as to the statements made therein.
Section 6. INDEMNIFICATION AND CONTRIBUTION.
(a) Each of LGII and the Guarantor agrees to indemnify and hold
harmless you and each person, if any, who controls you within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act from and
against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon
any untrue statement or alleged untrue statement of a material fact
contained in each Memorandum or in any amendment or supplement thereto, or
arising out of or based upon any omissions or alleged omission to state
therein a material fact required to be stated therein or
26
<PAGE>
necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or expenses arise out of or are
based upon any untrue statement or omission or alleged untrue statement or
omission which has been made therein or omitted therefrom in reliance upon
and in conformity with the information relating to such Initial Purchaser
furnished in writing to LGII by or on behalf of any Initial Purchaser
expressly for use in connection therewith; PROVIDED, however, that the
indemnification contained in this paragraph (a) with respect to any
Preliminary Memorandum shall not inure to the benefit of any Initial
Purchaser (or to the benefit of any person controlling such Initial
Purchaser) on account of any such loss, claim, damage, liability or expense
arising from the sale of the Senior Notes by such Initial Purchaser to any
person if a copy of the Final Memorandum or any amendment or supplement
thereto shall not have been delivered or sent to such person and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in the Preliminary Memorandum was corrected in the
Final Memorandum or any amendment or supplement thereto provided that LGII
has delivered the Final Memorandum or any amendment or supplement thereto
to the several Initial Purchasers in requisite quantity on a timely basis
to permit such delivery or sending.
(b) If any action, suit or proceeding shall be brought against any
Initial Purchaser or any person controlling any Initial Purchaser in
respect of which indemnity may be sought against LGII or the Guarantor,
such Initial Purchaser or such controlling person shall promptly notify
LGII and/or the Guarantor, and LGII and/or the Guarantor, as the case may
be, shall assume the defense thereof, including the employment of counsel
and payment of all fees and expenses. Such Initial Purchaser or any such
controlling person shall have the right to employ separate counsel in any
such action, suit or proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Initial Purchaser or such controlling person unless (i) LGII and/or the
Guarantor, as the case may be, has agreed in writing to pay such fees and
expenses, (ii) both LGII and the Guarantor have failed to assume the
defense and employ counsel, or (iii) the named parties to any such action,
suit or proceeding (including any impleaded parties) include both such
Initial Purchaser or such controlling person and LGII and/or the Guarantor,
as the case may be, and such Initial Purchaser or such
27
<PAGE>
controlling person shall have been advised by its counsel in writing
that representation of such indemnified party and LGII and/or the
Guarantor, as the case may be, by the same counsel would be
inappropriate under applicable standards of professional conduct
(whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them
(in which case LGII or the Guarantor shall not have the right to assume
the defense of such action, suit or proceeding on behalf of such Initial
Purchaser or such controlling person). It is understood, however, that
LGII and/or the Guarantor, as the case may be, shall, in connection with
any one such action, suit or proceeding or separate but substantially
similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of only
one separate firm of attorneys (in addition to any local counsel) at any
time for all such Initial Purchasers and controlling persons not having
actual or potential differing interests with you or among themselves,
which firm shall be designated in writing by Smith Barney Inc., and that
all such fees and expenses shall be reimbursed as they are incurred.
LGII and/or the Guarantor, as the case may be, shall not be liable for
any settlement of any such action, suit or proceeding effected without
its written consent, but if settled with such written consent, or if
there be a final judgment for the plaintiff in any such action, suit or
proceeding, LGII and/or the Guarantor, as the case may be, agree to
indemnify and hold harmless any Initial Purchaser, to the extent
provided in the preceding paragraph, and any such controlling person
from and against any loss, claim, damage, liability or expense by reason
of settlement or judgment.
(c) Each Initial Purchaser agrees, severally and not jointly, to
indemnify and hold harmless LGII and/or the Guarantor, each of their
respective directors and officers, and any person who controls LGII or the
Guarantor within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act, to the same extent as the foregoing indemnity from LGII
and the Guarantor to each Initial Purchaser, but only with respect to
information relating to such Initial Purchaser furnished in writing by or
on behalf of such Initial Purchaser expressly for use in either Memorandum,
or any amendment or supplement thereto. If any action, suit or proceeding
shall be brought against LGII, the Guarantor, any of their respective
directors or officers, or any such controlling persons based on
28
<PAGE>
either Memorandum, or any amendment or supplement thereto, and in respect
of which indemnity may be sought against any Initial Purchaser pursuant to
this paragraph (c), such Initial Purchaser shall have the rights and duties
given to LGII and the Guarantor by paragraph (b) above (except that if LGII
and/or the Guarantor, as the case may be, shall have assumed the defense
thereof such Initial Purchaser shall not be required to do so, but may
employ separate counsel therein and participate in the defense thereof, but
the fees and expenses of such counsel shall be at such Purchaser's
expense), and LGII, the Guarantor, their respective directors and officers,
and any such controlling persons shall have the rights and duties given to
the Initial Purchasers by paragraph (b) above.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities
or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by LGII and/or the Guarantor on the one hand and
the Initial Purchasers on the other hand from offering of the Senior Notes,
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative
fault of LGII and/or the Guarantor on the one hand and the Initial
Purchasers on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative benefits
received by LGII and/or the Guarantor on the one hand and the Initial
Purchasers on the other hand shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses and
without duplication) received by LGII and/or the Guarantor bear to the
total discounts and commissions received by the Initial Purchasers, in each
case as set forth in the table on the cover page of the Final Memorandum.
The relative fault of LGII and/or the Guarantor on the one hand and the
Initial Purchasers on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
29
<PAGE>
relates to information supplied by LGII and/or the Guarantor on the one
hand or by the Initial Purchasers on the other hand and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(e) LGII, the Guarantor and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 6
were determined by a pro rata allocation (even if the Initial Purchasers
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in paragraph (d) above. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities
and expenses referred to in paragraph (d) above shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or proceeding.
Notwithstanding the provisions of this Section 6, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which
the total price of the Senior Notes offered and distributed by it exceeds
the amount of any damages which such Initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to
contribute pursuant to this Section 6 are several in proportion to the
respective numbers of Senior Notes set forth opposite their names in
Schedule I hereto and not joint.
(f) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 6
30
<PAGE>
shall be paid by the indemnifying party to the indemnified party as such
losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 6 and the
representations and warranties of LGII and the Guarantor set forth in this
Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Initial Purchaser or
any person controlling any Initial Purchaser, LGII, the Guarantor, each of
LGII's and the Guarantors respective directors or officers or any person
controlling LGII or the Guarantor, (ii) acceptance of any Senior Notes and
payment therefor hereunder, and (iii) any termination of this Agreement. A
successor to any Initial Purchaser or any person controlling any Initial
Purchaser, LGII, the Guarantor, each of LGII's and the Guarantor's
respective directors or officers, or any person controlling LGII or the
Guarantor, shall be entitled to the benefits of the indemnity, contribution
and reimbursement agreements contained in this Section 6.
Section 7. TERMINATION. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Initial Purchaser to LGII or the Guarantor, by notice to LGII, if prior to the
Closing Date, (i) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange, The Toronto Stock Exchange, The Montreal
Exchange or the Nasdaq National Market shall have been suspended or materially
limited, (ii) a general moratorium on commercial banking activities in New York
or Canada shall have been declared by either federal, state or provincial
authorities, or (iii) there shall have occurred any outbreak or escalation of
hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions, the effect of which on the
financial markets of the United States or Canada is such as to make it, in your
judgment, impracticable or inadvisable to commence or continue the offering of
the Senior Notes.
Notice of such termination may given by telegram, telecopy or
telephone and shall be subsequently confirmed by letter.
Section 8. MISCELLANEOUS.
(a)(i) If any Initial Purchaser shall default in its obligation to
purchase the Senior Notes which it has agreed to purchase hereunder on the
Closing Date, you may in your discretion arrange for you or another party
or other parties to purchase such Senior Notes on
31
<PAGE>
the terms contained herein. If within thirty-six hours after such default
by any Initial Purchaser you do not arrange for the purchase of such Senior
Notes, then LGII shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to you
to purchase such Senior Notes on such terms. In the event that, within the
respective prescribed periods, you notify LGII that you have so arranged
for the purchase of such Senior Notes, LGII notifies you that it has so
arranged for the purchase of such Senior Notes, you or LGII shall have the
right to postpone the Closing for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in the Final
Memorandum, or in any other documents or arrangements, and LGII agrees to
prepare promptly any amendments or supplements to the Final Memorandum
which in your opinion may thereby be made necessary. The term "Purchaser"
as used in this Agreement shall include any person substituted under this
Section with like effect as if such person had originally been a party to
this Agreement with respect to such Senior Notes.
(ii) If, after giving effect to any arrangements for the purchase of
the Senior Notes of a defaulting Initial Purchaser or Purchasers by you and
LGII as provided in subsection (i) above, the aggregate number of such
Senior Notes which remains unpurchased does not exceed 11% of the aggregate
number of all the Senior Notes to be purchased at the Closing, then LGII
shall have the right to require each non-defaulting Initial Purchaser to
purchase the number of Senior Notes which such Initial Purchaser agreed to
purchase hereunder at the Closing and, in addition, to require each non-
defaulting Initial Purchaser to purchase its pro rata share (based on the
number of Senior Notes which such Initial Purchaser agreed to purchase
hereunder) of the Senior Notes of such defaulting Initial Purchaser or
Purchasers for which such arrangements have not been made; but nothing
herein shall relieve a defaulting Initial Purchaser from liability for its
default.
(iii) If, after giving effect to any arrangements for the purchase of
the Senior Notes of a defaulting Initial Purchaser or Purchasers by you and
LGII as provided in subsection (i) above, the aggregate number of such
Senior Notes which remains unpurchased exceeds 11% of the aggregate number
of all the Senior Notes to be purchased at the Closing, or if LGII shall
not exercise the right described in subsection (ii) above to require non-
defaulting Initial Purchasers to purchase Senior Notes of a defaulting
Initial Purchaser
32
<PAGE>
or Purchasers, then this Agreement shall thereupon terminate, without
liability on the part of any non-defaulting Initial Purchaser or LGII,
except for the expenses to be borne as provided in Section 4(l) hereof and
the indemnity and contribution agreements in Section 6 hereof; but nothing
herein shall relieve a defaulting Initial Purchaser from liability for its
default.
(b) If this Agreement shall be terminated pursuant to Section 8(a)
hereof, neither LGII nor the Guarantor shall be under any liability to any
Initial Purchaser except as provided in Section 4(l) and Section 6 hereof;
but, if for any other reason any Senior Notes are not delivered by or on
behalf of LGII as provided herein, LGII or the Guarantor will reimburse the
Initial Purchasers through you for all out-of-pocket expenses approved in
writing by you, including fees and disbursements of counsel, reasonably
incurred by the Initial Purchasers in making preparations for the purchase,
sale and delivery of the Senior Notes not so delivered but LGII and the
Guarantor shall then be under no further liability to any Initial Purchaser
in respect of the Senior Notes not so delivered except as provided in
Section 4(l) and Section 6 hereof.
(c) In all dealings hereunder, Smith Barney Inc. may act on behalf of
each of the Initial Purchasers, and the parties hereto shall be entitled to
act and rely upon any statement, request, notice or agreement on behalf of
any Initial Purchaser made or given by Smith Barney Inc.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Initial Purchasers shall be delivered to Smith
Barney Inc., 388 Greenwich Street, New York, New York 10013, Attention:
Syndicate Department; if to LGII shall be delivered to Loewen Group
International, Inc., 50 East RiverCenter Boulevard, Suite 800, Covington,
KY 41011, Attention: Vice-President, Finance; and if to the Guarantor shall
be delivered to The Loewen Group Inc., 4126 Norland Avenue, Burnaby,
British Columbia, Canada, Attention: Vice-President, Finance.
(d) This Agreement shall be binding upon, and inure solely to the
benefit of, the Initial Purchasers, LGII, the Guarantor and, to the extent
provided in Section 6, each person who controls LGII, the Guarantor or any
Initial Purchaser, and their respective heirs, executors, administrators,
successors and assigns, and,
33
<PAGE>
solely to the extent permitted in Section 4(g), to the holders from time to
time of the Senior Notes, and no other person shall acquire or have any
right under or by virtue of this Agreement. No purchaser of any of the
Senior Notes from any Initial Purchaser shall be deemed a successor or
assign by reason merely of such purchase.
(e) Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when banks in New York City are
open for business.
Section 9. CONSENT TO SERVICE OF PROCESS. Each of LGII and the
Guarantor irrevocably (a) agrees that any legal suit, action or proceeding
arising out of or based upon this Agreement and the Indenture or the
transactions contemplated hereby may be instituted in any federal or state court
located in the City of New York, (b) waives, to the fullest extent it may
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such proceeding, and (c) submits to the nonexclusive
jurisdiction of such courts in any such suit, action or proceeding. Each of
LGII and the Guarantor has appointed Thelen, Marrin, Johnson & Bridges, 330
Madison Avenue, New York, NY 10017, Attention: David P. Graybeal, Esq., as its
authorized agent (the "Authorized Agent") upon whom process may be served in any
such action arising out of or based on this Agreement or the transactions
contemplated hereby which may be instituted in any federal or state court
located in the City of New York by any Initial Purchaser or by any person who
controls any Initial Purchaser, expressly consents to the jurisdiction of any
such court in respect of any such action, and waives any other requirements of
or objections to personal jurisdiction with respect thereto. Such appointment
shall be irrevocable. Each of LGII and the Guarantor agrees to take any and all
action, including the filing of any and all documents and instruments, that may
be necessary to continue such appointment in full force and effect as aforesaid.
Service of process upon the Authorized Agent and written notice of such service
to LGII and the Guarantor shall be deemed, in every respect, effective service
of process upon LGII and the Guarantor. Notwithstanding the foregoing,
designation of an authorized agent does not constitute submission to
jurisdiction or consent to service of process in any legal action or proceeding
predicated on United States federal or state securities laws.
Section 10. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
34
<PAGE>
This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
35
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us counterparts hereof, and upon the acceptance hereof by you,
this letter and such acceptance hereof shall constitute a binding agreement
among each of the Initial Purchasers, LGII and the Guarantor.
Very truly yours,
LOEWEN GROUP INTERNATIONAL, INC.
By: /s/ D. Hawes
------------------------------
Name: D. Hawes
Title: VP Finance
THE LOEWEN GROUP INC.
By: /s/ D. Hawes
------------------------------
Name: D. Hawes
Title: VP Finance
Accepted as of the date hereof:
SMITH BARNEY INC.
ALEX. BROWN & SONS INCORPORATED
NESBITT BURNS SECURITIES INC.
RBC DOMINION SECURITIES CORPORATION
MIDLAND WALWYN CAPITAL CORPORATION
By: SMITH BARNEY INC.
By: /s/ M. Del Giudice
----------------------------
Name: Michael D. Del Giudice
Title: Vice President
On behalf of each of the Initial Purchasers
<PAGE>
THIRD AMENDMENT TO OPERATING CREDIT AGREEMENT
DATED FOR REFERENCE JULY 15, 1996
AMONG: THE LOEWEN GROUP INC., a British Columbia company having its head
office at 4126 Norland Avenue, Burnaby, British Columbia, Canada,
V5G 3S8
AND: LOEWEN GROUP INTERNATIONAL, INC., a Delaware corporation having an
office at 50 East RiverCenter Boulevard, Suite 800, Covington,
Kentucky, U.S.A., 41011
AND: ROYAL BANK OF CANADA, a Canadian chartered bank having its head
office in the City of Montreal, Quebec, Canada and a branch office
at 1025 West Georgia Street, Vancouver, British Columbia, Canada,
V6E 3N9
<PAGE>
THIS THIRD AMENDMENT TO OPERATING CREDIT AGREEMENT is dated for reference
July 15, 1996
AMONG: THE LOEWEN GROUP INC., a British Columbia company having its head
office at 4126 Norland Avenue, Burnaby, British Columbia, Canada,
V5G 3S8
AND: LOEWEN GROUP INTERNATIONAL, INC., a Delaware corporation having an
office at 50 East RiverCenter Boulevard, Suite 800, Covington,
Kentucky, U.S.A., 41011
AND: ROYAL BANK OF CANADA, a Canadian chartered bank having its head
office in the City of Montreal, Quebec, Canada and a branch office
at 1025 West Georgia Street, Vancouver, British Columbia, Canada,
V6E 3N9
W H E R E A S:
A. The parties to this agreement entered into an operating credit
agreement dated for reference August 15, 1994 ("Operating Credit Agreement").
B. The Operating Credit Agreement was amended by a First Amendment to
Operating Credit Agreement dated for reference June 30, 1995 and by an
acknowledged letter of amendment dated October 19, 1995 (collectively,
"Amending Agreements").
C The parties have agreed to amend and restate the Operating Credit
Agreement as amended by the Amending Agreements as provided in this agreement
("Third Amendment Agreement").
WITNESSETH THAT in consideration of the mutual covenants and
agreements herein, the parties covenant and agree as follows:
1. INTERPRETATION
1.1 Words with an initial capital letter which are not otherwise
defined in the Third Amendment Agreement have the meaning defined in the
Operating Credit Agreement as amended by the Amending Agreements and as
further amended and restated by the Third Amendment Agreement.
1.2 The Third Amendment Agreement shall be construed in accordance
with and governed by the laws of the Province of British Columbia and the
laws of Canada applicable in that Province.
1.3 Wherever the singular or the masculine are used in the Third
Amendment Agreement, the same shall be deemed to include the plural or the
feminine or vice versa and a body politic or corporate where the context or
the parties so require.
<PAGE>
-2-
1.4 Unless otherwise specified all statements of, or reference to,
dollar amounts in the Third Amendment Agreement without currency
specification shall refer to Canadian Funds.
2. REPRESENTATIONS AND WARRANTIES
Each of the Borrower and LGII represents and warrants to Royal
that the execution and delivery of the Third Amendment Agreement will not:
a) contravene a provision of any regulation, order or permit applicable
to it or cause a conflict with or contravention of its constating
documents;
b) cause a breach of or constitute a default under any agreement or
instrument to which it is a party or by which it is bound including:
i) the 1996 Credit Agreement;
ii) the MEIP Credit Agreement;
iii) the Note Agreements, and
iv) the Collateral Trust Agreement;
c) require any consent or approval (except such as have been obtained
or waived, as the case may be) under any agreement or instrument to
which it is a party or by which it is bound including the Agreements
referred to in Section 2(b).
3. AMENDMENT AND RESTATEMENT
If the conditions set forth in Section 4 of the Third Amendment
Agreement have been met or waived prior to or on July 31, 1996 then, as of the
Effective Time:
a) the Operating Credit Agreement as amended by the Amending
Agreements shall be totally amended and restated by the agreement
entitled "Loewen 1996 Operating Credit Agreement" attached as
Exhibit A and the schedules attached thereto, and
b) LGII shall not be a party to the amended and restated Operating
Credit Agreement.
4. CONDITIONS PRECEDENT TO EFFECTIVE TIME
Royal shall have no obligation to amend and restate the Operating
Credit Agreement as amended by the Amending Agreements and proposed to be
amended and restated by this Third Amendment Agreement unless Royal shall
have received:
a) the Third Amendment Agreement duly executed by the Borrower;
<PAGE>
-3-
b) confirmation from counsel for the Borrower that Royal's name is
entered under Class A Secured Indebtedness on Schedules 1 and 5 of
the Collateral Trust Agreement and that the execution and delivery
of the Third Amendment Agreement and the Loewen 1996 Operating
Credit Agreement attached as Exhibit A will not affect such
registration, and
c) a favourable opinion from counsel for the Borrower (in form and
content satisfactory to Royal and its counsel) as to the due
authorization, execution and delivery by the Borrower of the
Third Amendment Agreement and the validity and enforceability
thereof.
5. GENERAL
5.1 The Third Amendment Agreement may be executed in any number of
counterparts with the same effect as if all parties had all signed the same
document. All counterparts will be construed together and will constitute one
and the same agreement.
5.2 The Third Amendment Agreement shall be effective as of 10:00 a.m.
local Vancouver time, July 15, 1996 ("Effective Time") if on or prior to July
31, 1996 or such earlier or later time or date as may be agreed between the
Borrower, LGII and Royal, Royal shall have received the documents and opinions
described in Section 4.
5.3 The Third Amendment Agreement shall be read and construed together
with the Operating Credit Agreement as amended and by the Amending Agreements
as one document and shall be included in the definition of "Agreement" in
Section 1.1 of the Operating Credit Agreement as amended by the Amending
Agreements.
The Third Amendment Agreement has been executed as of July 31, 1996.
THE CORPORATE SEAL of THE )
LOEWEN GROUP INC. was hereunto affixed )
in the presence of: )
)
/s/ Dwight K. Hawes ) C/S
- ---------------------- )
Dwight K Hawes, )
Vice-President, Finance )
)
)
THE CORPORATE SEAL of )
LOEWEN GROUP INTERNATIONAL, )
INC. was hereunto affixed in the )
presence of: )
)
/s/ Dwight K. Hawes ) C/S
- ---------------------- )
Dwight K Hawes, )
Vice-President, Finance )
<PAGE>
-4-
)
)
)
ROYAL BANK OF CANADA )
)
By: /s/ Gerald W. Derbyshire )
---------------------------- )
Gerald W. Derbyshire )
Senior Account Manager )
)
)
By: /s/ Rosanne Bubas )
---------------------------- )
Rosanne Bubas )
Account Manager )
<PAGE>
AMENDED AND RESTATED
LOEWEN 1996 OPERATING CREDIT AGREEMENT
DATED FOR REFERENCE
JULY 15, 1996
(AMENDING AND RESTATING THE
OPERATING CREDIT AGREEMENT DATED
FOR REFERENCE AUGUST 15, 1994, AS AMENDED
BY A FIRST AMENDMENT TO OPERATING
CREDIT AGREEMENT DATED FOR
REFERENCE JUNE 30, 1995 AND
AN ACKNOWLEDGED LETTER OF AMENDMENT
DATED OCTOBER 19, 1995)
BETWEEN:
THE LOEWEN GROUP INC.
AND:
ROYAL BANK OF CANADA
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TABLE OF CONTENTS
PAGE
Description of Parties 1
Recitals 1
PART I INTERPRETATION 1
Paragraph 1.1 Definitions 1
Paragraph 1.2 Applicable Law 23
Paragraph 1.3 Severability 23
Paragraph 1.4 Successors and Assigns 23
Paragraph 1.5 Included Words 23
Paragraph 1.6 Headings and Marginal References 23
Paragraph 1.7 Cross References 23
Paragraph 1.8 Use of Word "Including" 23
Paragraph 1.10 Expiration of Summary of Principal Terms
and Conditions 24
Paragraph 1.11 Currency 24
Paragraph 1.12 Payment Dates and Interest Calculation 24
Paragraph 1.13 Accounting Terms 24
Paragraph 1.14 Schedules 24
PART II REPRESENTATIONS AND WARRANTIES 25
PART III THE CREDIT FACILITY 27
Paragraph 3.1 Establishment of the Credit Facility 27
Paragraph 3.2 Nature of the Credit Facility 27
Paragraph 3.3 Currencies and Other Options Under the Credit Facility 27
Paragraph 3.4 Treasury Contracts 27
Paragraph 3.5 Interest on Advances Under the Credit Facility 28
Paragraph 3.6 Interest and Fee Rate Adjustments 28
Paragraph 3.7 Interest on Eurocurrency Advances Spanning
More Than One Applicable Interest Rate 29
Paragraph 3.8 Interest Act of Canada 29
Paragraph 3.9 Manner of Making Advances 29
Paragraph 3.10 Notice for Canadian Advances and U.S. Advances
Under the Credit Facility 30
Paragraph 3.11 Notice for Eurocurrency Advances Under the
Credit Facility 30
Paragraph 3.12 Eurocurrency Notice Particulars 30
Paragraph 3.13 Conversions of Borrowings 30
Paragraph 3.14 Payment of Interest on Eurocurrency Advances 31
Paragraph 3.15 Default Interest 32
Paragraph 3.16 Indemnity for Out-of-Pocket Expenses 32
Paragraph 3.17 Effective Time for Part III Notices 32
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ii
Paragraph 3.18 Increased Costs 32
Paragraph 3.19 Borrower's Option on Receipt of Certificate 33
Paragraph 3.20 Increased Cost Limitation 34
Paragraph 3.21 Eurocurrency Funds Not Available 34
Paragraph 3.22 Payment of Compensation Amount 35
Paragraph 3.23 Borrower's Right to Revolve the Credit Facility 35
Paragraph 3.24 Repayment of Credit Facility 35
Paragraph 3.25 Currency of All Payments 35
Paragraph 3.26 Borrower's Right to Cancel Available Amount of
Credit Facility 36
Paragraph 3.27 Standby Fees 36
Paragraph 3.28 Standby Fees Waived 36
Paragraph 3.29 Evidence of Indebtedness 36
Paragraph 3.30 Substitute Basis of Borrowing for Eurocurrency
Advances 37
Paragraph 3.31 Illegality for Eurocurrency Advances 37
Paragraph 3.32 Agreement Letters of Credit and Guarantee Letters 38
Paragraph 3.33 Exchange Rate Fluctuations 39
Paragraph 3.34 Determination of Available Amount of the Credit
Facility 39
PART IV BANKERS' ACCEPTANCES 39
PART V SECURITY FOR BORROWINGS 42
PART VI CREDIT FACILITIES CONDITIONS PRECEDENT 42
Paragraph 6.1 Conditions Precedent to Initial Borrowings 42
Paragraph 6.2 Conditions Precedent to Subsequent Borrowings 45
PART VII COVENANTS OF THE BORROWER 45
Paragraph 7.1 Covenants 45
- Positive Covenants 45
- Negative Covenants 47
- Reporting Covenants 48
- Financial Covenants 49
PART VIII EVENTS OF DEFAULT 51
Paragraph 8.1 Definition of Event of Default 51
Paragraph 8.2 Remedies 53
Paragraph 8.3 Outstanding Guarantee Letters, Agreement
Letters of Credit, Etc., on Acceleration Debt 53
Paragraph 8.4 Remedies Cumulative 54
Paragraph 8.5 Waivers 54
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iii
Paragraph 8.6 Application of Payments Following Acceleration 54
PART IX GENERAL 54
Paragraph 9.1 Waiver or Modification 54
Paragraph 9.2 Amendments and Waiver Procedures 55
Paragraph 9.3 Successors and Assigns 55
Paragraph 9.4 Time of the Essence 55
Paragraph 9.5 Further Assurances 55
Paragraph 9.6 Set-Off 55
Paragraph 9.7 Judgement Currency 56
Paragraph 9.8 Account Debit Authorization 56
Paragraph 9.9 Expenses 56
Paragraph 9.10 Survival of Representations and Warranties 56
Paragraph 9.11 Notice Procedure 57
Paragraph 9.12 Notice Received 57
Paragraph 9.13 Indemnity 57
Paragraph 9.14 Counterparts 57
Paragraph 9.15 Reasonable Consent or Approval of the Parties 57
Paragraph 9.16 Entire Agreement 57
Execution 58
Schedule A Interest and Fee Rates
Schedule B Outstanding Litigation
Schedule C Indebtedness Existing on March 31, 1996
Schedule D Officers' Compliance Certificate
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THIS AMENDED AND RESTATED OPERATING CREDIT AGREEMENT entitled, "LOEWEN 1996
OPERATING CREDIT AGREEMENT" is dated for reference July 15, 1996.
BETWEEN: THE LOEWEN GROUP INC., a British Columbia company having its head
office at 4126 Norland Avenue, Burnaby, British Columbia, Canada
V5G 3S8
AND: ROYAL BANK OF CANADA, a Canadian chartered bank having its head
office in the City of Montreal, Quebec, Canada and a branch office
at 1025 West Georgia Street, Vancouver, British Columbia, Canada
W H E R E A S:
A. Royal, the Borrower and LGII entered into the Original Operating Credit
Agreement;
B. The Original Operating Credit Agreement was amended by a First Amendment
to Operating Credit Agreement dated for reference June 30, 1995 and an
acknowledged letter of amendment dated October 19, 1995;
C. LGII, as borrower, and the Borrower, as guarantor, entered into the 1996
Credit Agreement and became parties to the Collateral Trust Agreement pursuant
to which the lenders under the 1996 Credit Agreement became secured creditors
of LGII;
D. Royal became a secured party under the Collateral Trust Agreement in
respect of advances under the Original Operating Credit Agreement, as amended,
and has terminated and released all of those certain guarantees provided by
LGII, Loewen Financial Corporation and Neweol Finance B.V. in respect of the
Original Operating Credit Agreement, as amended;
E. Royal, the Borrower and LGII have agreed that the Original Operating
Credit Agreement, as amended, shall be amended and restated to set forth the
revised terms and conditions which are to govern the Credit Facility and which
release LGII as a party to the amended and restated Original Operating Credit
Agreement.
WITNESSETH THAT in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto covenant and agree each with the
other as follows:
PART I
INTERPRETATION
1.1 DEFINITIONS
Where used in the Agreement, the following terms shall have the
following meanings:
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PART I
INTERPRETATION
1.1 DEFINITIONS
Where used in the Agreement, the following terms shall have the
following meanings:
a) "1996 CREDIT AGREEMENT" means the Credit Agreement dated as of
May 15, 1996 among LGII, as the borrower, TLGI, as a guarantor, the
lenders named therein, as the lenders, Goldman, Sachs & Co., as
the documentation agent, and Bank of Montreal as letter of credit
issuer, swing line lender and agent, as amended, restated,
supplemented or otherwise modified;
b) "ACQUISITION" means any transaction, or any series of related
transactions, by which the Borrower or any of its Subsidiaries:
i) acquires any going business or all or substantially all of the
assets of any firm, corporation, limited liability company,
partnership or other Person, or (as applicable) any operation
or division thereof which constitutes a going business, whether
through purchase of assets, merger or otherwise, or
ii) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a
majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election
of directors (other than securities having such power only by
reason of the happening of a contingency) or a majority (by
percentage or voting power) of the outstanding partnership
interests of a partnership, membership interests of a limited
liability company, or other ownership interests of any Person;
c) "ADDITIONAL AMOUNT" shall have the meaning ascribed thereto in
Section 3.18;
d) "ADJUSTED EBITDA" means at any time for the four-quarter period
then most recently ended the sum of:
i) EBITDA of the Borrower and LGII and the other Subsidiaries for
such four-quarter period determined on a consolidated basis,
plus
ii) EBITDA for such four-quarter period of all Persons acquired
by the Borrower, LGII or the other Subsidiaries during the
six-month period ending on the last day of such four-quarter
period (but only to the extent the Acquisitions of such Persons
constituted Permitted Acquisitions), less
iii) all amounts included in the foregoing Section (ii) to the
extent such amounts are included in the foregoing Section (i)
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provided that EBITDA of any such acquired Person shall be
determined on the basis of actual EBITDA for such acquired Person
as set forth in the financial statements of such acquired Person,
which financial statements shall be (x) audited for the portion of
such four-quarter period which falls within the most recently ended
fiscal year of such acquired Person ended prior to the date on
which such Person became a Subsidiary of the Borrower, LGII or
another Subsidiary and unaudited for the portion of such
four-quarter period which falls after the end of the most recently
ended fiscal year of such acquired Person ended prior to the date
on which such Person became a Subsidiary of the Borrower, LGII or
another Subsidiary if the total consideration payable in connection
with such Acquisition is in excess of US$25,000,000, and (y)
unaudited for such four-quarter period if the total consideration
payable in connection with such Acquisition is US$25,000,000 or
less;
e) "ADVANCES" means Canadian Advances, Eurocurrency Advances and
U.S. Advances;
f) "AFFILIATE" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with
such Person. A Person shall be deemed to control another Person if
the controlling Person owns 10% or more of any class of voting
securities (or other ownership interests) of the controlled Person
or possesses, directly or indirectly, the power to direct or cause
the direction of the management or policies of the controlled
Person, whether through ownership of stock by contract or
otherwise;
g) "AGREEMENT" means this amended and restated committed operating
credit agreement entitled, "Loewen 1996 Operating Credit Agreement"
dated for reference July 15, 1996, as amended, restated, modified,
supplemented, extended or renewed from time to time;
h) "AGREEMENT LETTERS OF CREDIT" means letters of credit issued by
Royal pursuant to Section 3.32;
i) "ANNOUNCEMENT DATE" means the date on which any of the Rating
Agencies announces a rating change which will increase or decrease
the rates of interest, acceptance fees, standby fees and other fees
and amounts payable by the Borrower pursuant to the Agreement;
j) "BANKERS' ACCEPTANCES" means Drafts in multiples of not less than
$100,000 or US$100,000, as the case may be, Face Amount and
aggregating immediately following availment on any day at least
$500,000, or US$500,000, as the case may be, each for periods of
not less than one month nor more than one year (excluding in each
case days of grace) drawn by the Borrower (or, in the case of Jumbo
Bankers' Acceptances, drawn by Royal on behalf of the Borrower) in
Canadian Funds or U.S. Funds, as the case may be, and accepted as
provided in Part IV;
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k) "BANKING DAY" means a day which is both a Business Day and a day on
which dealings in U.S. Funds by and between banks in the London,
England interbank market may be conducted;
l) "BORROWER" means The Loewen Group Inc., its successors and
permitted assigns;
m) "BORROWER'S LINES OF BUSINESS" means the lines of business
conducted as of the date of the 1996 Credit Agreement by the
Borrower or LGII or any of their respective Subsidiaries and shall
include the making by the Borrower, LGII or any of their
Subsidiaries, from time to time, of equity and debt investments in,
or to, Persons which are engaged primarily in any one or more of
the funeral, funeral home, cemetery and funeral-related insurance
businesses;
n) "BORROWING" means a utilization by the Borrower of the Credit
Facility by way of Canadian Advances, U.S. Advances or Eurocurrency
Advances, and, if an advance has been made by Royal with respect to
Bankers' Acceptances, Agreement Letters of Credit and Guarantee
Letters, the utilization by the Borrower of Canadian Advances or
U.S. Advances, as the case may be, in respect of such Bankers'
Acceptances, Agreement Letters of Credit and Guarantee Letters and
"Borrowings" means the aggregate of such utilizations;
o) "BORROWING OPTION" means any of the borrowing options available to
the Borrower pursuant to Section 3.3;
p) "BRANCH OF ACCOUNT" means the account of the Borrower established
by and to be maintained at Royal's main branch in New Westminster,
British Columbia or elsewhere as may be agreed between the Borrower
and Royal;
q) "BREAKAGE COSTS" means any cost, liability or termination payment
incurred or owed to Royal as a result of the termination of a
Treasury Contract;
r) "BUSINESS DAY" means a day, excluding Saturday and Sunday, on which
banking institutions are open for business in Toronto, Ontario,
Canada and Vancouver, British Columbia, Canada;
s) "CANADIAN ADVANCE" means any advance or conversion under the Credit
Facility requested by the Borrower in Canadian Funds and advanced
by Royal in Canadian Funds or determined as such pursuant to
Section 4.12;
t) "CANADIAN FUNDS" and "CDN$" means lawful currency of Canada;
u) "CAPITAL LEASE" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of
such Person prepared in accordance with GAAP;
v) "CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capital Leases which would be
shown as a
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liability on a balance sheet of such Person prepared in accordance
with GAAP;
w) "CDOR RATE" means that annual rate of interest equal to the
average "BA 1 Month" interest rates for Canadian Funds bankers'
acceptances displayed and identified as such on the "Reuters
Screen CDOR Page" (as defined by International Swap Dealer
Association, Inc., as modified and amended from time to time) as
of 10:00 a.m. local time at Toronto, Ontario on any particular day
and, if such day is not a Business Day, then on the immediately
preceding Business Day (as adjusted by Royal after 10:00 a.m.
local time at Toronto, Ontario to reflect any error in a posted
rate of interest or in the posted average annual rate of
interest). If such rates are not available on the Reuters Screen
CDOR Page on any particular day, then the CDOR Rate on that day
shall be calculated as the arithmetic mean of the 30 day rates
applicable to Canadian Funds bankers' acceptances quoted by three
major Canadian Schedule I chartered banks as of 10:00 a.m. local
time at Toronto, Ontario on such day, or if such day is not a
Business Day, then on the immediately preceding Business Day. The
three major Canadian Schedule I chartered banks shall, unless the
Borrower and Royal otherwise agree, be Canadian Imperial Bank of
Commerce, Royal and The Toronto-Dominion Bank;
x) "CHARTER" means, as the context requires, the constating documents
of the Borrower, and includes any amendments thereto;
y) "CHIEF FINANCIAL OFFICER" means that person responsible for
reporting to the board of directors of the Borrower on the
financial condition and performance of the Borrower and its
Subsidiaries, or any person designated as such;
z) "CLASS B INVESTED AMOUNT" has the meaning specified in the Pooling
and Servicing Agreement dated as of November 15, 1994, among The
First National Bank of Atlanta, doing business as Wachovia Bank
Card Services, as seller, Wachovia Bank of Georgia, N.A., as
servicer and Banc One Columbus, N.A., as trustee;
aa) "CLOSING DATE" means July 31, 1996 or such earlier or later date
as the parties hereto may agree upon in writing;
ab) "COLLATERAL TRUST AGREEMENT" means the agreement named as such
dated as of May 15, 1996 among Bankers Trust Company, as trustee,
the Borrower, LGII and various other pledgors as amended or
modified and in effect from time to time;
ac) "COLLATERAL TRUST SECURITY" means the security afforded to Class A
Secured Parties (as defined in the Collateral Trust Agreement)
pursuant to the provisions of the Collateral Trust Agreement;
ad) "COMPENSATION AMOUNT" means an amount equal to any loss, expense
or costs incurred by Royal as a direct result of prepayment of a
Eurocurrency
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Advance, whether by way of repayment or conversion, prior to the
Eurocurrency Maturity Date, including any costs incurred in
maintaining or redeploying deposits obtained by Royal to fund such
Eurocurrency Advance;
ae) "CONSOLIDATED CAPITALIZATION" means at any time of determination,
the sum of:
i) the Consolidated Indebtedness of the Borrower at such time, and
ii) the Consolidated Net Worth of the Borrower at such time;
af) "CONSOLIDATED FIXED CHARGES" means, for any period, without
duplication, the sum of the amounts for such period of:
i) Consolidated Interest Charges, and
ii) the product of:
A. the aggregate amount of dividends and other distributions
paid or accrued during such period in respect of:
(1) preferred stock of the Borrower, LGII or any other
Subsidiary (but exclusive of preferred stock issued to
the Borrower or an Affiliate of the Borrower), and
(2) capital stock of the Borrower which is or may be
redeemable or convertible into debt prior to the
Maturity Date, and
B. for each such dividend or distribution, a multiplier, the
numerator of which is one and the denominator of which is
one minus the then current combined federal, provincial,
state and local statutory tax rate of the Borrower and its
Subsidiaries determined on a consolidated basis, such
multiplier to be expressed as a decimal, provided that the
multiplier in Section (ii)B. shall be deemed to be one if
such dividend or other distribution described in the
preceding Section (ii)A. is fully tax deductible;
ag) "CONSOLIDATED FIXED CHARGES COVERAGE RATIO" means, with respect to
a Transaction Date (hereinafter defined), the ratio of (x) EBITDA
for the full fiscal quarter immediately preceding the date of the
transaction ("TRANSACTION DATE") giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio (such full
fiscal quarter period being referred to herein as the "PRIOR
QUARTER") to (y) the amount of Consolidated Fixed Charges for the
Prior Quarter. In addition to and without limitation of the
foregoing, for purposes of this definition, "EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving
effect on a pro forma basis for the period of such calculation to,
without duplication, the incurrence of any Indebtedness of the
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Borrower or any of its Subsidiaries (and the application of the
net proceeds thereof) during the period commencing on the first
day of the Prior Quarter to and including the Transaction Date
("REFERENCE PERIOD"), including 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. Furthermore, in calculating Consolidated Fixed Charges for
purposes of determining the denominator (but not the numerator) of
Consolidated Fixed Charges 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) interest on any Indebtedness which is actually incurred on the
Transaction Date and which may optionally be determined at an
interest rate based upon a factor of a prime, base, reference
or similar rate, a eurocurrency interbank offered rate, or
other rates, shall be deemed to have been in effect during the
Reference Period at the interest rate in effect on the
Transaction Date.
If the Borrower or any of its Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, this definition shall
give effect to the incurrence of such guaranteed Indebtedness as
if the Borrower or such Subsidiary had directly incurred or
otherwise assumed such guaranteed Indebtedness;
ah) "CONSOLIDATED INDEBTEDNESS" means, at any time of determination,
without duplication, all Indebtedness of the Borrower, LGII and
the Subsidiaries of the Borrower and LGII at such time determined
on a consolidated basis in accordance with GAAP (to the extent
GAAP is applicable thereto);
ai) "CONSOLIDATED INTEREST CHARGES" means, for any period, all
interest calculated on a consolidated basis (including the
interest component of Capitalized Lease Obligations and Synthetic
Lease Obligations), and all amortization of debt discount and
expense on all Indebtedness of the Borrower and LGII and their
respective Subsidiaries for such period;
aj) "CONSOLIDATED NET INCOME" for any period shall mean the gross
revenues of the Borrower and LGII and the other Subsidiaries for
such period less all expenses and other proper charges (including
taxes on income), determined on a consolidated basis after
eliminating earnings or losses attributable to outstanding
Minority Interests, but excluding in any event:
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i) any gains or losses on the sale or other disposition of Investments
or fixed or capital assets, and any taxes on such excluded gains
and any tax deductions or credits on account of any such excluded
losses;
ii) the proceeds of any life insurance policy;
iii) net earnings and losses of any Subsidiary accrued prior to the date
it became a Subsidiary;
iv) net earnings and losses of any corporation (other than a
Subsidiary) substantially all the assets of which have been
acquired in any manner by the Borrower or any Subsidiary, realized
by such corporation prior to the date of such acquisition;
v) net earnings and losses of any corporation (other than a
Subsidiary) with which the Borrower or a Subsidiary shall have
consolidated or which shall have merged into or amalgamated with
the Borrower or a Subsidiary prior to the date of such
consolidation, merger or amalgamation;
vi) net earnings of any business entity (other than a Subsidiary) in
which the Borrower or any Subsidiary has an ownership interest
unless such net earnings shall have actually been received by the
Borrower or such Subsidiary in the form of cash distributions;
vii) any portion of the net earnings of any Subsidiary which for any
reason is unavailable for payment of dividends to the Borrower or
any other Subsidiary;
viii) earnings resulting from any reappraisal, revaluation or write-up of
assets;
ix) any deferred or other credit representing any excess of the equity
in any Subsidiary at the date of the acquisition thereof over the
amount invested in such Subsidiary;
x) any gain or loss arising from the acquisition of any securities of
the Borrower or any Subsidiary;
xi) any reversal of any contingency reserve, except to the extent that
provision for such contingency reserve shall have been made from
income arising during such period, and
xii) any other unusual or extraordinary gain;
ak) "CONSOLIDATED NET WORTH" means, as of the date of any determination
thereof, the sum of the amount of the shareholders' equity of the
Borrower and LGII and the other Subsidiaries as would be shown on
the consolidated balance
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sheet of the Borrower and LGII and the other Subsidiaries determined on a
consolidated basis in accordance with GAAP, which in any event shall
include:
i) the MIPS Issue, and
ii) the amount of all preferred stock of the Borrower and LGII and
all Subsidiaries of the Borrower and LGII to the extent such
preferred stock is not redeemable at the option of the holder
for cash or indebtedness for any reason, and which shall exclude
the amount of all preferred stock of the Borrower and LGII and
all Subsidiaries of the Borrower and LGII to the extent such
preferred stock is redeemable at the option of the holder for
cash or indebtedness for any reason;
al) "CONSOLIDATED TANGIBLE NET WORTH" means, as of the date of any
determination thereof, as to any Person, the Consolidated Net
Worth of such Person, less the sum of the value, as set forth or
reflected on the most recent consolidated balance sheet of such
Person and its consolidated Subsidiaries, prepared in accordance
with GAAP, of:
i) any surplus resulting from any write-up of assets subsequent
to December 31, 1995;
ii) all assets which would be treated as intangible assets for balance
sheet presentation purposes under GAAP, including goodwill (whether
representing the excess of cost over book value of assets acquired,
or otherwise) trademarks, trade names, service marks, copyrights,
patents and technologies, names and reputations, covenants not to
compete, organization or developmental expenses, and unamortized
debt discount and expense;
iii) to the extent not included in Section (ii) of this definition, any
amount at which shares of capital stock of such Person and its
consolidated Subsidiaries appear as an asset on the balance sheet
of such Person and its consolidated Subsidiaries;
iv) loans or advances or proceeds of Letters of Credit provided to
stockholders, directors, officers or employees of such Person or its
Subsidiaries as contemplated by clause (d) of the definition of
"Consolidated Tangible Net Worth" set out in section 1.1 of the
1996 Credit Agreement, and
v) to the extent not included in Section (ii) of this definition,
deferred expenses;
am) "CONTINGENT OBLIGATION" of a Person means any agreement, undertaking
or arrangement by which such Person assumes, guarantees, endorses,
contingently agrees to purchase or provide funds for the payment of,
or otherwise becomes or is contingently liable upon, the obligation
or liability of any other Person, or agrees to maintain the net worth
or working capital or other financial
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condition of any other Person, or otherwise assures any creditor of
such other Person against loss, including, in the case of the
Borrower, the P. Coutu Guarantee, and any comfort letter, operating
agreement, take-or-pay contract or reimbursement obligation arising
pursuant to a Letter of Credit (including any Agreement Letter of
Credit), provided that notwithstanding the foregoing, the WLSP
Contingent Obligation shall not constitute a Contingent Obligation
of the Borrower, LGII or any other Subsidiary for any purpose under
the Agreement so long as the Class B Invested Amount at least equals
US$12,000,000;
an) "CORPORATE DISTRIBUTION" in respect of any company shall mean
i) dividends or other distributions on capital stock of the company
(except dividends or other distributions payable solely in shares of
capital stock), and
ii) the redemption, retirement or acquisition of such stock or of
warrants, rights or other options to purchase such stock (except
when solely in exchange for such stock);
ao) "CREDIT FACILITY" means the committed operating credit facility in the
principal amount of $50,000,000 Canadian Funds or Equivalent Amount in
U.S. Funds established by Royal in favour of the Borrower pursuant to
Section 3.1;
ap) "CURRENCIES" means Canadian Funds or U.S. Funds;
aq) "DEFAULT" means an event described as such in Article VIII of the
1996 Credit Agreement;
ar) "DRAFT" means a commercial draft of Royal in its prescribed form made by
the Borrower in accordance with the provisions of Part IV of the Agreement;
as) "DRAWDOWN DATE" means, with respect to a Eurocurrency Advance, a Banking
Day, and in all other respects, a Business Day, on which a Borrowing is
advanced to or converted by the Borrower or renewed by Royal;
at) "EBITDA" for any period shall mean the sum of Consolidated Net Income
during such period, plus (to the extent deducted in determining
Consolidated Net Income):
i) all provisions for any income or similar taxes paid or accrued by
the Borrower and LGII and the other Subsidiaries during such period;
ii) depreciation, depletion and amortization for such period;
iii) other non-cash charges, and
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iv) Consolidated Interest Charges of the Borrower and LGII and the
other Subsidiaries during such period determined in accordance with
GAAP,
provided that for the fourth quarter of 1995 for all purposes under the
Agreement, EBITDA of the Borrower, LGII and the other Subsidiaries on a
consolidated basis shall be deemed to be US$50,028,000;
au) "EQUITY PLACEMENT" means the offering by the Borrower during the first
calendar quarter of 1996 of common shares of the Borrower pursuant to
which not less than $150,000,000 of net proceeds was realized by the
Borrower;
av) "EQUIVALENT AMOUNT" means at any time on any date, the amount in
U.S. Funds or Canadian Funds, as the case may be, which would
result from the conversion of Canadian Funds to a given amount of
U.S. Funds or U.S. Funds to a given amount of Canadian Funds, as
the case may be, determined on the basis of the Spot Buying Rate.
If the date for determination of an Equivalent Amount is not a
Business Day, the applicable rate shall be the Spot Buying Rate
quoted for the immediately preceding Business Day;
aw) "EUROCURRENCY ADVANCE" means any advance, renewal or conversion
under the Credit Facility requested by the Borrower in or to
Eurocurrency Funds and advanced, renewed or made in Eurocurrency
Funds by Royal;
ax) "EUROCURRENCY FUNDS" mean U.S. Funds for which London Interbank
Offered Rates are quoted by leading banks in the London, England
interbank market;
ay) "EUROCURRENCY INTEREST PERIOD" means, with respect to a
Eurocurrency Advance, that period selected by the Borrower for a
Eurocurrency Advance to be outstanding, (if the Borrower fails to
select a period it shall be deemed to be for a period of one
month) which period shall be not less than one month nor more
than twelve months nor extend to a date later than the Maturity
Date, commencing with the Drawdown Date and ending on the
Eurocurrency Maturity Date;
az) "EUROCURRENCY MATURITY DATE" means the last day of a Eurocurrency
Interest Period;
ba) "EVENT OF DEFAULT" means any event set forth in Section 8.1 of the
Agreement;
bb) "FACE AMOUNT" means the amount at maturity for which a Bankers'
Acceptance is drawn;
bc) "FAIR VALUE" means the value of the relevant asset determined in
an arm's length transaction conducted in good faith between an
informed and willing buyer and an informed and willing seller
under no compulsion to buy;
bd) "FINANCIAL UNDERTAKING" means:
<PAGE>
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i) any repurchase obligation or liability of the Borrower or any of
its Subsidiaries with respect to accounts or notes receivable sold
by the Borrower or any of its Subsidiaries;
ii) any liability under any sale and leaseback transaction which does
not create a liability on the consolidated balance sheet of the
Borrower and its Subsidiaries;
iii) obligations arising with respect to any other transaction which is
the functional equivalent of or takes the place of borrowing but
which does not constitute a liability on the consolidated balance
sheets of the Borrower and its Subsidiaries, or
iv) net liabilities under any agreements, devices or arrangements
designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates
applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, interest rate exchange
agreements, forward currency exchange agreements, interest rate cap
or collar protection agreements, forward rate currency or interest
rate options;
be) "FIRST PREFERRED SERIES C RECEIPTS" means the 8,800,000 Convertible
First Preferred Shares Series C Receipts ($220,000,000) issued by the
Borrower pursuant to the terms of a prospectus dated December 21, 1995
each such Receipt at that time representing entitlement to 1/10 of a
6.00% Cumulative Redeemable Convertible First Preferred Share, Series C,
of the Borrower;
bf) "GAAP" means the generally accepted accounting principles as generally
applied by the Borrower as at December 31, 1995 and thereafter the
generally accepted accounting principles in effect from time to time
of the Canadian Institute of Chartered Accountants including those set
out in the Canadian Institute of Chartered Accountant's Handbook, as
the same are generally applicable to public companies in the same
industry in Canada until such time as the Borrower and LGII shall prepare
their respective books of record and account in accordance with generally
accepted accounting principles (U.S.A.) at which time and at all times
thereafter, GAAP shall mean generally accepted accounting principles
(U.S.A.);
bg) "G/L FEE" means the fee for Guarantee Letters charged by Royal as set
forth in Section 3.32(b);
bh) "GOVERNMENTAL APPROVAL" means any authorization, permit, approval, grant,
licence, consent, right, privilege, registration, filing, order,
commitment, judgement, direction, ordinance, decree or like instrument
or affirmation issued or granted by any Governmental Body;
bi) "GOVERNMENTAL BODY" means, as the context requires, any government,
parliament, legislature, regulatory authority, agency, tribunal,
department,
<PAGE>
-13-
commission, board or court or other law, regulation or rule making entity
(including a Minister of the Crown) having or purporting to have
jurisdiction on behalf of the U.S.A., Mexico, Canada, or any other nation,
any state or province, a municipality, a region, a district, any
subdivision thereof or other lawful authority;
bj) "GUARANTEE LETTERS" means letters of guarantee issued by Royal pursuant
to Section 3.32;
bk) "INDEBTEDNESS" means, without duplication, a Person's:
i) obligations for borrowed money;
ii) obligations representing the deferred purchase price of Property or
services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade);
iii) obligations, whether or not assumed, secured by Liens on or payable
out of the proceeds or production from Property now or hereafter
owned or acquired by such Person;
iv) obligations which are evidenced by notes, acceptances, or other
instruments (but exclusive of notes, bills and cheques presented in
the ordinary course of business by such Person to banks for
collection or deposit);
v) Capitalized Lease Obligations;
vi) Contingent Obligations;
vii) Financial Undertakings;
viii) Synthetic Lease Obligations;
ix) Securitization Obligations; and
x) obligations under or in connection with Letters of Credit
(including, with respect to the Borrower, any Agreement Letter
of Credit)
but excluding, in any event:
A. amounts payable by such Person in respect of covenants not to
compete, and
B. with reference to the Borrower, LGII and the other Subsidiaries,
all obligations of the Borrower, LGII and the other Subsidiaries
of the character referred to in this definition
<PAGE>
-14-
to the extent owing to the Borrower, LGII or any other Subsidiary;
bl) "INTEREST DETERMINATION DATE" means, with respect to a Eurocurrency
Advance, a Banking Day which is the second immediately preceding Banking
Day prior to a Drawdown Date;
bm) "INTEREST COVERAGE RATIO" means that ratio determined by dividing EBITDA
for the most recently ended period of four consecutive fiscal quarters by
Consolidated Interest Charges for the most recently ended period of four
consecutive fiscal quarters;
bn) "Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable
arising in the ordinary course of business on terms customary in the
trade), deposit account or contribution of capital by such Person to any
other Person or any investment in, or purchase or other acquisition of,
the stock, partnership interests, notes, debentures or other securities
of any other Person made by such Person;
bo) "Judgement Currency" shall have the meaning ascribed thereto in
Section 9.7;
bp) "Jumbo Bankers' Acceptances" has the meaning set forth in Section 4.9;
bq) "L/C FEE" means the fee for Agreement Letters of Credit charged by Royal
as set forth in Section 3.32(b);
br) "LETTER OF CREDIT" means a letter of credit or similar instrument which
is issued upon the application of the Borrower or a Subsidiary or in
respect of which the Borrower or a Subsidiary is an account party or in
any way liable;
bs) "LGII" means Loewen Group International, Inc., a Delaware corporation,
and its successors;
bt) "LGII TREASURY CONTRACT" means any Treasury Contract made available to
LGII by Royal or arranged by Royal through the facilities of Royal's
Capital Markets, Treasury, Toronto, Ontario, Canada;
bu) "LIEN" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, security interest, deposit arrangement,
encumbrance or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including
the interest of a vendor or lessor under any conditional sale or other
title retention agreement);
bv) "LOAN DOCUMENTS" means the Collateral Trust Agreement and the instruments,
agreements, certificates, papers and other documents provided for or
contemplated therein;
<PAGE>
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bw) "LONDON INTERBANK OFFERED RATE" means with respect to a particular
Eurocurrency Advance, the rate of interest (rounded up, if necessary,
to the nearest whole multiple of one sixteenth of one percent) at which
Royal, in accordance with its normal practice, would be prepared to offer
to leading banks in the London interbank market for delivery on the first
day of the particular Eurocurrency Interest Period and for a period equal
to such Eurocurrency Interest Period based on the number of days comprised
therein, deposits in U.S. Funds of comparable amounts to be outstanding
during such Eurocurrency Interest Period, at or prior to 9:00 a.m. local
time at Vancouver, British Columbia on the second Banking Day prior to
the Drawdown Date;
bx) "MATERIAL ADVERSE EFFECT" means a material adverse effect on:
i) the business, Property, financial condition, results of operations,
or prospects of the Borrower, LGII and the other Subsidiaries taken
as a whole;
ii) the ability of the Borrower to perform its obligations under the
Loan Documents, or
iii) the validity or enforceability of any of the Loan Documents or the
rights or remedies of Royal thereunder,
by) "MATURITY DATE" means July 15, 1999 or a date or dates later than such
date as may from time to time be established by the Borrower and Royal
as the date on which Borrowings together with interest, fees and any
other amounts due under the Agreement are to be repaid;
bz) "MEIP CREDIT AGREEMENT" means the agreement dated as of June 14, 1994
entitled, "1994 MEIP Credit Agreement" among the Borrower, LGII, Loewen
Management Investment Corporation, as agent for LGII, the lenders which
are parties thereto and Wachovia Bank of Georgia, N.A., as agent for the
lenders, as amended, restated, supplemented or otherwise modified from
time to time;
ca) "MINORITY INTERESTS" means any shares of stock of any class of a
Subsidiary (other than directors' qualifying shares as required by law
or shares of stock having no right to vote or receive dividends) that
are not owned by the Borrower and/or one or more of its Subsidiaries.
Minority Interests shall be valued by valuing Minority Interests
constituting preferred stock at the voluntary or involuntary liquidating
value of such preferred stock, whichever is greater, and by valuing
Minority Interests constituting common stock at the book value of capital
and surplus applicable thereto adjusted, if necessary, to reflect any
changes from the book value of such common stock required by the
foregoing method of valuing Minority Interests in preferred stock;
cb) "MIPS ISSUE" means the 9.45% Cumulative Monthly Income Preferred
Securities, Series A issued by Loewen Group Capital, LP.;
<PAGE>
-16-
cc) "NOTE AGREEMENTS" means the agreements dated for reference October 1, 1991,
September 1, 1993 and February 1, 1994 and the indenture dated March 20,
1996 and any and all other warrant agreements or note agreements entered
into from time to time by the Borrower or LGII or either of them, and the
relevant holders of the notes issued and sold thereunder, in each case as
may be amended, supplemented or other wise modified from time to time;
cd) "ORIGINAL OPERATING CREDIT AGREEMENT" means the operating credit agreement
for S30,000,000 or the Equivalent Amount in U.S. Funds dated for reference
August 15, 1994 among Royal, the Borrower and LGII;
ce) "P. COUTU GUARANTEE" means the guarantee provided by the Borrower to
Royal guaranteeing the obligations to Royal of P. Coutu Funeral Chapels Ltd.
and any amendments, supplements or replacements thereof;
cf) "PERMITTED ACQUISITION" means any Acquisition (but only to the extent
such Acquisition does not involve lines of business which are outside the
Borrower's Lines of Business, unless the Acquisition of such lines which
are outside the Borrower's Lines of Business would, at the time of the
Acquisition and after giving effect thereto, be permitted as Investments
under Section 7.16 (o) of the 1996 Credit Agreement made by the Borrower,
LGII or any other Subsidiary from a willing seller or other willing
transferor where such Acquisition is not contested by such seller or
transferor at any time during the pendency of such Acquisition, provided
that:
i) either (x) the Borrower or LGII has in place before it executes any
binding agreement or other binding writing by which it agrees to
proceed with the Acquisition (whether or not subject to conditions)
sufficient funds which are committed and available (which may
include the availability of revolving loans under the 1996 Credit
Agreement {but only to the extent no Default or Unmatured Default,
[as defined in the 1996 Credit Agreement], would occur after then
giving effect to the borrowing necessary to fund such Acquisition}
and provided that for any third-party commitment such commitment is
otherwise permitted under the 1996 Credit Agreement), to fund the
full amount of the cash consideration for such Acquisition, or (y)
such agreement or other writing contains a condition to closing of
the Borrower or LGII based upon the ability of the Borrower or LGII
to raise funds for the Acquisition, and
ii) all contractual arrangements evidencing such Acquisition include
provisions subjecting the parties to arbitration except to the extent
the Board of Directors of the Borrower or LGII (or an authorized
subcommittee thereof, a majority of whose members consist of
directors who are not employees of the Borrower, LGII or any other
Subsidiary) shall either make an express determination to the
contrary or shall approve the Acquisition pursuant to valid action
which
<PAGE>
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expressly contemplates the absence of such an arbitration
provision in the contractual arrangements evidencing such
Acquisition;
cg) "PERMITTED ENCUMBRANCES" means:
i) liens for taxes, assessments or governmental charges or levies not
at the time due and delinquent or the validity of which is being
contested at the time by the Borrower or any of its Subsidiaries in
good faith provided that Royal is satisfied and has been provided
with such security as it may have required to ensure that such
contestation will involve no forfeiture of any property of the
Borrower or any of its Subsidiaries and provided further that if
the aggregate amount of such liens, assessments or charges is not
in excess of $50,000 Royal need not be so satisfied and security
need not be provided;
ii) the lien of any judgement rendered or claim filed against the
Borrower or any of its Subsidiaries which it shall be contesting in
good faith, provided that Royal is satisfied or security has been
provided to ensure that contestation will involve no forfeiture of
any of the property of the Borrower or any of its Subsidiaries and
provided further that if the aggregate amount of any such judgement
or claim is not in excess of $50,000, Royal need not be so
satisfied and security not be provided;
iii) undetermined or inchoate liens and charges, including construction
liens, liens incidental to current operations of the Borrower or
any of its Subsidiaries which have not at such time been filed
pursuant to law against the Borrower or any of its Subsidiaries or
which relate to obligations neither due nor delinquent;
iv) restrictions, including land use contracts and covenants,
easements, rights-of-way and mortgages thereof, servitudes,
undersurface rights or other similar rights in land granted to or
reserved by any Persons or minor defects or irregularities in
title, all of which in the aggregate do not, in the opinion of
Royal materially impair the usefulness of the property subject to
any such restriction, easement, right-of-way, servitude or other
similar rights in land to the Primary Business;
v) security given to a public utility or any Governmental Body in
connection with the operations of the Borrower or any of its
Subsidiaries in the ordinary course of their respective businesses;
vi) the reservations, limitations, provisos and conditions, if any,
expressed in any original grants from the Crown;
vii) Purchase Money Obligations;
viii) lease obligations entered into by the Borrower or any of its
Subsidiaries with arm's length third parties in respect of
machinery and
<PAGE>
-18-
equipment (including motor vehicles, office equipment, photocopiers,
telephones and telecopier machines) used in the ordinary course of
business by the Borrower or any of its Subsidiaries, provided the
underlying financial obligations with respect thereto are not
capitalized as a liability by the Borrower or any of its
Subsidiaries in accordance with GAAP;
ix) the security agreement made as of June 14, 1994 by Loewen
Management Investment Corporation as agent for LGII, and Wachovia
Bank of Georgia, N.A. in its capacity as agent for certain lenders,
granting a security interest in the 1994 Exchangeable Floating Rate
Debenture (No. 1) due July 15, 2001 in the principal amount of
US $127,670,000, and
x) the Collateral Trust Agreement;
ch) "PERMITTED RECEIVABLES SECURITIZATION" means any transaction (or series
of transactions) effected by the Borrower or LGII or any Subsidiary
of (x) the Borrower pursuant to which the Borrower, LGII or such Subsidiary
either sells or otherwise transfers (including sales or transfers using
one or more SPVs) or (y) grants a security interest in, assets of one or
more of the Borrower, LGII and the other Subsidiaries consisting of
Receivables and Receivables Related Assets provided that the aggregate
Securitization Obligations (without duplication) of the Borrower, LGII the
Subsidiaries and any such SPVs in connection with all Permitted
Receivables Securitizations shall not exceed US $100,000,000 at any time
outstanding;
ci) "PERSON" means any natural person, corporation, limited liability
company, firm, joint venture, partnership, association, enterprise, trust
or other entity or organization, or any government or political subdivision
or any agency, department or instrumentality thereof;
cj) "PRIMARY BUSINESS" means the primary business of the Borrower and its
Subsidiaries, or any one of them, as the context requires, taken as a
whole, namely the ownership and professional management and operation of
funeral homes, crematoria, cemeteries, ambulance services, flower shops
and other related businesses and services including the pre-need selling
of funeral, cemetery and crematorium services and the provision of
funeral services and insurance;
ck) "PRIME RATE" means the rate of interest per annum in effect from time
to time that is equal to the greater of:
i) the floating annual rate of interest announced from time to time by
Royal as its reference rate then in effect for determining interest
rates on Canadian dollar commercial loans in Canada by Royal in all
cases adjusting automatically on the effective date of any change
to such rate
<PAGE>
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without the necessity of any notice to the Borrower upon each
announced change to such rate, and
ii) the CDOR Rate plus 1.0% per annum;
cl) "PROPERTY" means any and all property of a Person whether real,
personal, tangible, intangible, or mixed, of such Person, or other
assets owned, leased or operated by such Person;
cm) "PURCHASE MONEY OBLIGATIONS" means:
i) any Lien existing and assumed at the time of acquisition by the
Borrower or any of its Subsidiaries on any property acquired from
arm's length third parties after the date hereof;
ii) any Lien on any property owned by the Borrower or any of its
Subsidiaries on the Closing Date or acquired by the Borrower or
any of its Subsidiaries from arm's length third parties after
the Closing Date to secure the whole or any part of the
purchase price of such property or monies borrowed to pay such
purchase price;
iii) any Lien in respect of any property acquired from arm's length
third parties by the Borrower or any of its Subsidiaries after
the Closing Date, and
iv) any extensions, renewals, replacements, substitutions or
refinancing of any Lien described in Section (i), Section (ii)
and Section (iii) above provided that the principal amount of
the indebtedness secured thereby outstanding on the date of
the extension, renewal, replacement, substitution or refinancing
is not increased to an amount greater than the amount outstanding
on the date the Lien was first granted or assumed on the
property;
provided that the aggregate of the amounts due under any Lien
referred to above
A. is secured only by the property so acquired and not by any
other assets and may be discharged or caused to be discharged
upon payment in full of the amount permitted to be secured
under Section (i) to Section (iv) inclusive above;
B. shall have been incurred or assumed within the limitations
provided in the Agreement, and
C. does not exceed at any time 7.5% of Consolidated Net Worth at
such time
<PAGE>
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and, in addition to the foregoing Liens, any Lien given to secure
Indebtedness of the Borrower, LGII or any Subsidiary of the Borrower
provided that the aggregate of the amounts due under any such Liens at
any time shall not exceed US$5,000,000 or the Equivalent Amount in
Canadian Funds;
cn) "RATING AGENCIES" means Moody's Investors Service, Inc., Standard &
Poor's Rating Services, a division of McGraw-Hill Companies, Inc. and
Duff & Phelps Credit Rating Co.;
co) "RECEIVABLES" means all rights of the Borrower, LGII or any Subsidiary
to payments from Persons other than the Borrower and its Subsidiaries
(whether constituting accounts, chattel paper, instruments, general
intangibles or otherwise, and including the right to payment of any
interest or finance charges);
cp) "RECEIVABLES RELATED ASSETS" means:
i) any rights arising under the documentation governing or
relating to Receivables (including rights in respect of Liens
securing such Receivables and other credit support in respect
of such Receivables);
ii) any collections, recoveries and proceeds of such Receivables and
any lockboxes or accounts in which such proceeds are deposited;
iii) spread accounts and other similar accounts (and any amounts on
deposit therein) established in connection with a Permitted
Receivables Securitization;
iv) any warranty, indemnity, dilution and other intercompany claim
arising out of documents relating to a Permitted Receivables
Securitization, and
v) other assets which are customarily transferred or in respect of
which security interests are customarily granted in connection
with asset securitization transactions involving accounts
receivable;
cq) "REGULATORY AUTHORITY" means the Ontario Securities Commission, The
Toronto Stock Exchange, the British Columbia Securities Commission,
the United States Securities and Exchange Commission or any
successor agency to any of the foregoing or any other Canadian or
United States federal, state or provincial securities exchange or
securities trading system or any Canadian or United States national
stock exchange;
cr) "REPORT" means each financial statement, report, notice or proxy
statement sent by the Borrower or LGII to shareholders generally as a
matter of corporate governance including annual information forms and
10-K reports and each regular report, registration statement or
prospectus filed by the Borrower, LGII or any Subsidiary with any
Regulatory Authority if any such
<PAGE>
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regular report, registration statement or prospectus contains any
information about facts or events which has or would be capable of
having a material adverse effect on the Primary Business;
cs) "ROYAL" means Royal Bank of Canada, its successors and permitted
assigns;
ct) "SECURITIZATION OBLIGATIONS" of a Person means the outstanding
purchaser's investment or outstanding capital or other principal
equivalent that purchasers or other investors are entitled to
receive in respect of any securitization or other sale or
asset-backed financing of Receivables of such Person or its
Affiliates effected by such Person;
cu) "SPOT BUYING RATE" means the Bank of Canada noon rate for Canadian
Funds against U.S. Funds or U.S. Funds against Canadian Funds (as
quoted or published from time to time by the Bank of Canada), as the
case may be, on the relevant date of determination;
cv) "SPV" means a corporation, trust, partnership or other special
purpose Person established by the Borrower or its Subsidiaries or
any combination of them solely for the purpose of implementing a
Permitted Receivables Securitization;
cw) "SUBSIDIARY" of a Person means:
i) any corporation more than 50% of the outstanding securities having
ordinary voting power of which, or more than 50% of the economic
benefits associated with all outstanding securities of which,
shall at the time be owned or controlled, directly or indirectly,
by such Person or by one or more of its Subsidiaries or by such
Person and one or more of its Subsidiaries, or
ii) any partnership, association, limited liability company, joint
venture or similar business organization more than
50% of the ownership interests having ordinary voting power of
which, or more than 50% of the economic benefits associated with
all outstanding ownership interests of which, shall at the time
be so owned or controlled.
Unless otherwise expressly provided, all references in the Agreement
to a "Subsidiary" shall mean a Subsidiary of the Borrower;
cx) "SUFFICIENT COPIES" means three copies or such other reasonable
number of copies of reports, financial statements, certificates and
other material required to be delivered by the Borrower to Royal
pursuant to the Agreement as advised by Royal from time to time in
writing;
cy) "SYNTHETIC LEASE" of a Person means any lease of Property by such
Person as lessee which under GAAP would or may be treated as a true
operating lease
<PAGE>
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but which under tax law or commercial law is treated as secured
Indebtedness of such Person and not as a true lease;
cz) "SYNTHETIC LEASE OBLIGATIONS" of a Person means the aggregate funded
amount under all Synthetic Leases to which such Person is a party as
lessee;
da) "TREASURY CONTRACTS" means any agreement entered into by the Borrower
to control, fix or regulate currency exchange fluctuations or the rate
or rates of interest payable on borrowings and includes interest rate
swaps, interest rate agreements, caps, collars, floors, futures or
hedging agreements and other like money market facilities and any
combination thereof or options on any of the foregoing;
db) "TRUSTEE" means Bankers Trust Company or any successor duly appointed
under the Collateral Trust Agreement;
dc) "UNMATURED DEFAULT" means an event which but for the lapse of time
or the giving of notice, or both, would constitute a Default;
dd) "U.S.A." means the United States of America;
de) "U.S. ADVANCE" means any advance or conversion under the Credit
Facility requested by the Borrower in U.S. Funds and advanced by
Royal in U.S. Funds or determined as such pursuant to Section 4.12;
df) "U.S. BASE RATE" means the annual rate of interest announced from
time to time by Royal as its reference rate then in effect for
determining interest rates on United States dollar commercial loans
in Canada by Royal;
dg) "U.S. FUNDS" and "US$" means lawful currency of the U.S. in same day
immediately available funds, or, if such funds are not available, the
form of money of the U.S.A. that is customarily used in the
settlement of international banking transactions on the day
payment is due;
dh) "VOTING SHARES" means shares of any class entitled to vote in all
circumstances;
di) "WLSP CONTINGENT OBLIGATION" means the joint and several liability of
Neweol Finance B.V. to repay the US$160,273,742 Zero Coupon Note dated
November 1, 1994, executed by WLSP Investment Partners I, a
partnership formed under the laws of Switzerland, and payable to
Wachovia Bank of Georgia, N.A.;
dj) "WHOLLY-OWNED SUBSIDIARY" of a Person means:
i) any Subsidiary all of the outstanding voting securities of which
shall at the time be owned or controlled, directly or indirectly,
by such Person or one or more Wholly-Owned Subsidiaries of such
Person, or by such
<PAGE>
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Person and one or more Wholly-owned Subsidiaries of such Person,
or
ii) any partnership, association, joint venture or similar business
organization 100% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled.
1.2 APPLICABLE LAW
The Agreement shall be construed in accordance with and governed by
the laws of the Province of British Columbia and the laws of Canada
applicable in that Province.
1.3 SEVERABILITY
If any one or more of the provisions contained in the Agreement is
invalid, illegal or unenforceable in any respect in any jurisdiction, the
validity, legality and enforceability of such provision shall not in any way
be affected or impaired thereby in any other jurisdiction and the validity,
legality and enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
1.4 SUCCESSORS AND ASSIGNS
The Agreement shall enure to the benefit of and be binding on each
of the parties to the Agreement and its respective successors and permitted
assigns.
1.5 INCLUDED WORDS
Wherever the singular or the masculine are used in the Agreement,
the same shall be deemed to include the plural or the feminine or vice versa
and a body politic or corporate where the context or the parties so require.
1.6 HEADINGS AND MARGINAL REFERENCES
The division of the Agreement into paragraphs and subparagraphs and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of the Agreement.
1.7 CROSS REFERENCES
Unless otherwise stated, a reference in the Agreement to a numbered
or lettered paragraph, subparagraph or schedule refers to the paragraph,
subparagraph or schedule bearing that number or letter in the Agreement.
1.8 USE OF WORD "INCLUDING"
The word "including", when following any general term or statement,
is not to be construed as limiting the general term or statement to the
specific terms or matters set
<PAGE>
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forth immediately following such word or to similar items or matters, but
such general term or statement shall rather be construed as referring to all
items or matters that could reasonably fall within the broadest possible
scope thereof.
1.9 EXPIRATION OF SUMMARY OF
PRINCIPAL TERMS AND CONDITIONS
On the Closing Date, all of the terms and conditions of the "Summary
of Principal Terms and Conditions/Operating Credit Facility - Draft 8", dated
June 7, 1996 circulated to the Borrower and LGII by Royal in connection with
the development of the Credit Facility (except for any terms contained in the
summary requiring the payment of fees to Royal which terms shall remain in
full force and effect until such fees have been paid) shall be deemed to be
merged herein and to expire and shall thereafter have no force and effect.
1.10 CURRENCY
Unless otherwise specified all statements of, or reference to,
dollar amounts in the Agreement without currency specification shall mean
Canadian Funds.
1.11 PAYMENT DATES AND INTEREST CALCULATION
If the date for a payment to Royal of any sum owing hereunder or the
date of advance, renewal or conversion of any sum by Royal hereunder is not,
in the case of Eurocurrency Funds, a Banking Day, and, in all other cases, a
Business Day, such payment, advance, renewal or conversion, as the case may
be, shall, except in some circumstances as hereafter provided in respect of
Eurocurrency Funds, be due or made upon the next immediately succeeding
Banking Day or Business Day, as the case may be. In the case of Eurocurrency
Funds if the immediately succeeding Banking Day is in the next following
month, the date for payment, renewal or conversion shall be the next
immediately preceding Banking Day. Interest shall be payable for the day a
Canadian Advance, Eurocurrency Advance or U.S. Advance is made but not for
the day of any payment of the amount paid if payment is received by Royal
prior to 10:00 a.m. local time at Vancouver, British Columbia.
1.12 ACCOUNTING TERMS
Accounting terms which are not specifically defined herein shall
have the meaning accorded and shall be construed in accordance with GAAP
unless any change in GAAP shall alter the result of any financial covenant or
test or any other accounting determination to be computed or made hereunder
in which case the Borrower and Royal agree that such covenant, test or other
determination shall continue to be computed or made on the basis of GAAP as
in effect prior to such change.
1.13 SCHEDULES
The Schedules to the Agreement shall form an integral part of the
Agreement, and are as follows:
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Schedule A - Interest and Fee Rates
Schedule B - Outstanding Litigation
Schedule C - Indebtedness Existing on March 31, 1996
Schedule D - Officers' Compliance Certificate
PART II
REPRESENTATIONS AND WARRANTIES
2.1 The Borrower represents and warrants to Royal as set forth in this
Part II of the Agreement. All representations and warranties shall survive all
Borrowings and no investigation at any time made by or on behalf of Royal shall
diminish in any respect whatsoever its right to rely thereon.
2.2 The Borrower is a corporation, duly incorporated, validly existing,
in good standing with respect to the filing of annual returns under the laws
of the Province of British Columbia and is duly qualified, in good standing
and authorized to do business in all jurisdictions where the character of the
properties owned by it or the nature of the business transacted by it makes
such qualification necessary. The Borrower has all requisite corporate power
and authority to own its properties, has obtained or will obtain, all
material Government Approvals required at the date hereof, to carry on its
business as now conducted and proposed to be conducted and to enter into and
perform its obligations under the Agreement and all instruments and
agreements delivered pursuant hereto and thereto.
2.3 The Agreement and every instrument or agreement delivered pursuant
hereto or thereto has been duly and validly authorized by all requisite
actions by the Borrower and each of such documents has been duly executed by
the Borrower and when delivered will be a legal, valid and binding obligation
of the Borrower enforceable in accordance with its respective terms save as
enforcement may be limited by:
a) applicable bankruptcy, insolvency, moratorium, reorganization and
similar laws at the time in effect affecting the rights of creditors
generally;
b) equitable principles which may limit the availability of certain
remedies, including the remedy of specific performance, and
c) the inability of the courts of Canada to give judgement for payment in
foreign currencies.
2.4 The execution, delivery and performance of the Agreement by the
Borrower will not contravene any provision of any regulation, order or permit
applicable to it or cause a conflict with or contravention of its Charter or
cause a breach of or constitute a default under or require any consent under
any agreement or instrument to which it is party or by which it is bound
except such as have been obtained.
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2.5 Neither the Borrower nor any of its Subsidiaries is in default under
any agreement or instrument to which it is a party in any way which
materially adversely affects the Primary Business and there are no suits or
judicial proceedings or proceedings before any governmental commission, board
or other agency pending or to the knowledge of the Borrower threatened which
involve a significant risk of a judgement or liability which, if satisfied,
would have a materially adverse effect upon the financial position of the
Primary Business or the ability of the Borrower and its Subsidiaries to meet
their respective obligations under the Agreement and the Loan Documents, as
the case may be.
2.6 The Borrower has all leases, licences, permits and consents as are
essential for the due carrying on of its business in the manner in which it is
carried on and all such leases, licences, permits and consents are in full
force and effect and no proceedings relating thereto are pending or known to
the Borrower to be threatened in any way which materially adversely affects
the Primary Business.
2.7 Neither the Borrower nor any of its Subsidiaries is in default in any
way which materially adversely affects the Primary Business under any guarantee,
bond, debenture, note or other instrument evidencing any indebtedness or under
the terms of any instrument pursuant to which any of the foregoing has been
issued or made and delivered and to the knowledge of the Borrower there exists
no state of facts which, after notice or lapse of time or both or otherwise,
would constitute such a default in any way which materially adversely affects
the Primary Business.
2.8 The Borrower has disclosed to Royal in writing all facts known to it
which materially adversely affect, or to the knowledge of the Borrower so far
as it can now reasonably foresee, are likely to materially adversely affect the
Primary Business and the prospects, financial or otherwise, of the Primary
Business or the ability of the Borrower to perform its obligations under the
Agreement, or any agreements or instruments delivered pursuant hereto or
thereto.
2.9 All consents, approvals, authorizations, declarations,
registrations, filings, notices and other actions whatsoever required as at
the date hereof in connection with the execution and delivery by the Borrower
of the Agreement and all agreements or instruments delivered pursuant hereto
or thereto, and the consummation of the transactions contemplated hereby,
have been obtained, made or taken.
2.10 The Borrower has furnished Royal with its most recent audited
consolidated financial statements for the fiscal year ended December 31,
1995, all such financial statements have been prepared in accordance with
GAAP consistently applied during such period, except as stated therein or in
the notes thereto, the consolidated balance sheet as therein contained
presents fairly the financial position of the Borrower and its Subsidiaries
as at the date thereof, and each statement of earnings and retained earnings
therein contained presents fairly the results of the Borrower's operations
for the period indicated.
2.11 The Borrower has furnished Royal with its quarterly consolidated
unaudited financial statements for the fiscal quarter ended March 31, 1996 and
since that date (a) there has been no change in the financial condition of the
Borrower and its Subsidiaries as shown on the consolidated balance sheet of the
Borrower as at that date, other than in the
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ordinary course of business, and any such change in the ordinary course of
business has not been materially adverse to the Primary Business except as
disclosed to Royal, and (b) the Primary Business has not been materially
adversely affected as a result of any act or event including fire, explosion,
casualty, flood, drought, riot, storm, condemnation, act of God, accident,
labour trouble, expropriation or act of any Governmental Body.
2.12 Neither the financial statements referred to above nor any other
statement or report furnished to Royal by or on behalf of the Borrower in
connection with the negotiation or confirmation of the transactions contemplated
herein contain, as at the time such statements were furnished, any untrue
statement of a material fact or any omission of a material fact necessary to
make the statements contained therein not misleading, and all such statements
and reports, taken as a whole together with the Agreement do not contain any
untrue statement of material fact or omit a material fact necessary to make
the statements contained therein not misleading.
PART III
THE CREDIT FACILITY
3.1 ESTABLISHMENT OF THE CREDIT FACILITY
Relying on each of the representations and warranties set out in
Part II and subject to the terms and conditions set forth herein, Royal
agrees to make available to the Borrower the Credit Facility to be used by
the Borrower for its general corporate purposes.
3.2 NATURE OR THE CREDIT FACILITY
Unless terminated earlier pursuant to Section 8.2, the Credit
Facility shall be available to the Borrower up to the stated principal amount
on a continuing and revolving basis until the Maturity Date except for
cancellation of the available amount of the Credit Facility made available
pursuant to Section 8.2(b).
3.3 CURRENCIES AND OTHER OPTIONS UNDER THE CREDIT FACILITY
Subject to the provisions of the Agreement, the Borrower may, at its
option, utilize the Credit Facility by way of Canadian Advances, U.S.
Advances, Guarantee Letters, Agreement Letters of Credit or, if available,
Eurocurrency Advances or Bankers' Acceptances.
3.4 TREASURY CONTRACTS
The Borrower may request that Royal enter into Treasury Contracts
with the Borrower from time to time. Royal may decline such request or may
agree to enter into Treasury Contracts provided:
a) the Borrower agrees to the terms and conditions of the current
"International Swap Dealers Association, Inc.'s Interest Rate and
Currency Exchange Agreement" or such other similar or standard form
of agreement appropriate
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to the type of Treasury Contract requested by the Borrower as may be
required by Royal and accepted by the Borrower and enters into and
delivers such agreement to Royal;
b) the Borrower agrees that if there is any inconsistency at any time
between the terms of the Agreement and the terms of any Treasury
Contract, the terms of the Treasury Contract shall prevail.
3.5 INTEREST ON ADVANCES UNDER THE CREDIT FACILITY
The Borrower shall pay to Royal at the Branch of Account interest
on Advances from Royal at the rates determined by reference to the rates and
pricing formulas set forth in Schedule A. Interest shall be calculated and
paid as follows:
a) Canadian Advances shall bear interest in Canadian Funds which
interest shall accrue from day to day while such advances are
outstanding and shall be computed on the basis of a year of 365
days and for actual days elapsed and shall be payable and compounded
monthly in arrears on the 20th day of each month or such other date
as may be agreed to by the Borrower and Royal;
b) U.S. Advances shall bear interest in U.S. Funds which interest shall
accrue from day to day while such advances are outstanding and shall
be computed on the basis of a year of 365 days and for actual days
elapsed and shall be payable and compounded monthly in arrears on the
20th day of each month or such other date as may be agreed to by the
Borrower and Royal,
c) Eurocurrency Advances shall bear interest in U.S. Funds which
interest shall accrue from day to day while such advances are
outstanding and shall be computed on the basis of a year of 360 days
and for actual days elapsed and shall be payable as set forth in
Section 3.14.
3.6 INTEREST AND FEE RATE ADJUSTMENT
The adjustments to rates of interest and the acceptance fees
prescribed in Section 3.5 and Section 4.14 respectively resulting from
changes, if any, to the ratings by the Rating Agencies shall be effective and
payable from and including the Announcement Date. If an adjustment of
interest rates or acceptance fees is required because Royal or the Borrower
were not immediately aware of an announced change by a Rating Agency, such
adjustment shall be made by Royal and shall be retroactive to the
Announcement Date. The Borrower agrees to pay to Royal its due share of, and
Royal agrees to repay to the Borrower its due share of, any interest or fee
rate adjustments resulting from a retroactive adjustment of Rating Agency
ratings which shall be paid by Royal or the Borrower, as the case may be, on
or before the fifth day following Royal's calculation of and advice to the
Borrower of the amount owing.
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3.7 INTEREST ON EUROCURRENCY ADVANCES SPANNING MORE THAN ONE APPLICABLE
INTEREST RATE
If the Borrower takes a Eurocurrency Advance before the date of an
increase or decrease in a percentage rate of interest to be added to the
London Interbank Offered Rate to be paid on Eurocurrency Advances which
Eurocurrency Advance matures after the date of the said increase or decrease
in the rate of interest, the rates of interest for the Eurocurrency Interest
Periods of the said Eurocurrency Advance shall be calculated by using the
interest rates applicable from time to time for the number of days the
Eurocurrency Advance is outstanding during the respective interest rate
periods.
3.8 INTEREST ACT OF CANADA
For the purpose of the Interest Act of Canada, the yearly rate of
interest to which interest calculated on the basis of a year of 360 or 365
days is equivalent, is the rate of interest determined as herein provided
multiplied by the number of days in such year divided by 360 or 365, as the
case may be.
3.9 MANNER OF MAKING ADVANCES
Advances under the Credit Facility (other than deemed advances in
relation to Bankers' Acceptances, Agreement Letters of Credit and Guarantee
Letters) shall be disbursed to the Borrower by Royal crediting the Branch of
Account or elsewhere as may be agreed to between the Borrower and Royal.
3.10 NOTICE FOR CANADIAN ADVANCES AND
U.S. ADVANCES UNDER THE CREDIT FACILITY
The Borrower shall give to Royal the following notices of its
intention to take a Canadian Advance or a U.S. Advance which advances must be
for the stated minimum amounts and multiples:
a) the Borrower may request from Royal Canadian Advances or U.S.
Advances in amounts of less than $10,000,000 or US$10,000,000 or
any lesser whole multiple of $100,000 or US$100,000, as the case may
be, on the requested Drawdown Date,
b) the Borrower may request from Royal Canadian Advances or U.S.
Advances in amounts of $10,000,000 or US$10,000,000 or any greater
whole multiple of $100,000 or US$100,000, as the case may be, on the
Business Day before the requested Drawdown Date,
and any such notice shall specify the amount of the requested Canadian
Advance or U.S. Advance, as the case may be, and the Drawdown Date and Royal
shall make the advance on the requested Drawdown Date, unless that date is
not a Business Day, in which case the requested Advance shall be made on the
next following Business Day.
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3.11 NOTICE FOR EUROCURRENCY
ADVANCES UNDER THE CREDIT FACILITY
The Borrower shall give the following prior irrevocable notice to
Royal before the time stipulated in Section 3.17 of its intention to take
Eurocurrency Advances:
a) for Eurocurrency Advances for aggregate amounts of less than
US$10,000,000 no notice prior to the Interest Determination
Date is required,
b) at least one Banking Day's notice prior to the Interest
Determination Date in the case of Eurocurrency Advances for
aggregate amounts of US$10,000,000 or more.
3.12 EUROCURRENCY NOTICE PARTICULARS
Each such notice under Section 3.11 shall specify:
a) the amount of each Eurocurrency Advance requested by the Borrower,
which shall be in minimum amounts of US$500,000;
b) the Drawdown Date, and
c) the Eurocurrency Interest Period for which the London Interbank
Offered Rate is to be applied.
Unless Royal is unable to make a Eurocurrency Advance because Eurocurrency
Funds are not available to it, it shall make the requested Eurocurrency
Advance in accordance with the notice requesting the same and shall advise
the Borrower on the Interest Determination Date of its London Interbank
Offered Rate.
3.13 CONVERSIONS OF BORROWINGS
The Borrower may upon giving notice to Royal of its intention to
effect a conversion, convert all or any portion of its Borrowings from one
Borrowing Option to another Borrowing Option, provided that:
a) Borrowings in Canadian Funds plus the Equivalent Amount in Canadian
Funds of Borrowings in U.S. Funds after a conversion do not exceed
the available amount under the Credit Facility;
b) a conversion involving Eurocurrency Funds is in a minimum amount
of US$500,000 and a conversion involving Bankers' Acceptances is in
a minimum amount of $500,000 or US$500,000, as the case may be, or
any greater amount in whole multiples of $100,000 or US$100,000, as
the case may be;
c) a Eurocurrency Advance may be converted only on its Eurocurrency
Maturity Date (unless Royal has agreed to a conversion prior to such
date and the Borrower has paid the Compensation Amount determined by
Royal and
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advised the Borrower) and if the Borrower fails to notify Royal as
to conversion or renewal of a maturing Eurocurrency Advance as
required hereunder it shall be deemed for all purposes to be a
U.S. Advance on its Eurocurrency Maturity Date;
d) the Borrower shall not be entitled to convert to Eurocurrency Funds
unless such Eurocurrency Funds are available in accordance with
Section 3.21;
e) any Bankers' Acceptance may be converted only on the maturity date
thereof and provided the Borrower gives Royal the same notice of
request for conversion as specified in Section 4.3;
f) the Borrower shall give to Royal notice for conversion of all or a
portion of its Borrowings, which notice shall be governed by the same
terms established for requests for advances under Section 3.10 and
Section 3.11, and shall specify:
i) the amount of Borrowings to be converted,
ii) the Drawdown Date, and
iii) the Borrowing Option sought by the Borrower and, if the Borrowing
Option is Eurocurrency Advances, the Eurocurrency Interest Period
together with the Drawdown Date, and, if the Borrowing Option is
Canadian Advances, whether the conversion is to Bankers'
Acceptances and if so, the number of days to maturity of the
Bankers' Acceptances;
g) if the conversion is from one currency to a different
currency, the Borrower shall have repaid or shall, at the time
of the conversion, contemporaneously repay to Royal the full amount
advanced under the Borrowing Option being converted. Any such
repayment shall be in the currency of the Advance being repaid.
Subject to the foregoing, including the availability of Eurocurrency Funds,
if the conversion request referred to in Section 3.13(f) specifies a
conversion into Eurocurrency Funds, Royal shall make the requested
Eurocurrency Advance in accordance with the conversion request.
3.14 PAYMENT OF INTEREST ON EUROCURRENCY ADVANCES
Interest on a Eurocurrency Advance for a Eurocurrency Interest
Period of three months or less shall be paid on the Eurocurrency Maturity
Date. If a Eurocurrency Interest Period exceeds three months, interest shall
be paid every three months (not in advance) during the Eurocurrency Interest
Period, until the Eurocurrency Maturity Date, upon which date the balance of
interest thereon shall be paid.
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3.15 DEFAULT INTEREST
Default interest shall be paid on all interest, fees and other
amounts payable hereunder which are overdue. Default interest with respect to
interest, fees and other amounts payable in Canadian Funds shall be at the
Prime Rate per annum and with respect to interest, fees and other amounts
payable in U.S. Funds shall be at the U.S. Base Rate per annum, as the case
may be. Default interest on overdue interest, fees and other amounts shall be
compounded monthly and shall be paid on demand both before and after
maturity, default and judgement. Default interest shall be computed from and
including the date interest, fees or any other amounts payable pursuant to the
Agreement become due and shall be paid for so long as such amount or amounts
remains unpaid.
3.16 INDEMNITY FOR OUT-OF-POCKET EXPENSES
The Borrower agrees to indemnify Royal against any out-of-pocket
loss or expense which it may sustain or incur as a consequence of the
Borrower's failure to effect, release, repay or prepay a Borrowing as
specified in any notice of Borrowing delivered by the Borrower pursuant to
the Agreement.
3.17 EFFECTIVE TIME FOR PART III NOTICES
For the purposes of Part III and Section 4.3, notices from the
Borrower to Royal must be received by Royal prior to 12:00 noon local time
at Vancouver, British Columbia in respect of all Borrowing Options other
than Eurocurrency Advances and prior to 10:00 am. local time at Vancouver,
British Columbia in respect of Eurocurrency Advances to be effective on the
date on which they are given. Notices received after that local time will
take effect from the next Banking Day or Business Day, as the case may be.
3.18 INCREASED COSTS
Subject to Section 3.20, if, after the Closing Date, the
implementation or introduction of or any change in any applicable law,
regulation, treaty, or official directive or regulatory requirement now or
hereafter in effect (whether or not having the force of law), or any change
in the interpretation or application thereof by any court or by any judicial
or governmental authority charged with the interpretation or administration
thereof, or if compliance by Royal with any request from any central bank or
other fiscal, monetary, or other authority (whether or not having the force
of law):
a) subjects Royal to any tax, changes the basis of taxation of payments
due to Royal or increases any existing tax, on payments of principal,
interest, or other amounts payable by the Borrower to Royal under the
Agreement (except for taxes on the overall net income of Royal
imposed by the jurisdiction in which it is incorporated or resident
or from which it is acting for the purposes of the Agreement,
including taxes on capital or other similar taxes);
b) imposes, modifies, or deems applicable any reserve, special
deposit, capital adequacy, regulatory, or similar requirement
(including a requirement which affects Royal's allocation of capital
resources) against assets or liabilities held
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by, or deposits in or for the account of, or loans by, or any
other acquisition of funds for loans or commitments to fund loans
or obligations concerning any Bankers' Acceptances accepted by
Royal, or
c) imposes on Royal any other condition with respect to the Agreement,
and the result of (a), (b) or (c) is, in the reasonable determination of
Royal acting in good faith, to increase the cost to Royal or to reduce the
income receivable by Royal in respect of a Borrowing or standby fees
payable, or to reduce the rate of return on the overall capital of Royal, the
Borrower shall, upon receipt of a certificate from Royal as described below
("Certificate"), pay to Royal that amount which compensates Royal for such
additional cost or reduction in income ("Additional Amount") from the date of
the Certificate. The Borrower will pay the Additional Amount to Royal on the
next following 20th day of the month or such other date as may be agreed to
by the Borrower and Royal and on the 20th day of each month or such other
date as may be agreed to by the Borrower and Royal thereafter until the
earlier of (a) the date on which the Additional Amount has been paid in full,
and (b) the date on which the Borrower has repaid and/or converted all
Borrowings with respect to which a Certificate has been delivered. Royal
shall deliver a Certificate to the Borrower which shall set forth the amount
of the Additional Amount and the basis for its calculation and will, in the
absence of manifest error, be conclusive evidence of the amount of the
Additional Amount. Royal will use its reasonable efforts to reduce the amount
of the Additional Amount payable hereunder provided that Royal will have no
obligation to expend its own funds, to suffer any economic hardship or to
take any action detrimental to its interest in connection therewith.
3.19 BORROWER'S OPTION ON RECEIPT OF CERTIFICATE
If Royal delivers the Certificate and the Borrower has paid the
Additional Amount required to be paid by the Certificate in accordance with
the Certificate, then, with respect to Canadian Advances or U.S. Advances, at
any time thereafter, and, with respect to Eurocurrency Advances or Bankers'
Acceptances, on the maturity thereof, and in all cases, with two Business
Days' prior written irrevocable notice to Royal, the Borrower may:
a) within 60 days, prepay in full without bonus or penalty all
Borrowings with respect to which a Certificate has been delivered,
interest, fees and other amounts payable hereunder provided:
i) each prepayment shall be in the same minimum amounts as
required for advance or acceptance of the currency or basis of
Borrowing being prepaid;
ii) all prepayments shall permanently reduce by a like amount, the
amount of the Credit Facility, determined in Canadian Funds
immediately following each prepayment, thereafter available for
Borrowings. The amount of each prepayment shall, for the
purpose of determining the amount of the Credit Facility
available for Borrowings, be calculated in Canadian Funds
regardless of the currency of the advance or basis of Borrowing;
<PAGE>
iii) the Borrower may designate whether the prepayment is to be
applied to Canadian Advances, Eurocurrency Advances, U.S. Advances
or Bankers' Acceptances provided that:
A. prepayments may be applied to a Bankers' Acceptance only if
the prepayment is to be made on a date on which the Bankers'
Acceptance becomes due, and
B. prepayments may be applied to a Eurocurrency Advance only
if the prepayment is made on the Eurocurrency Maturity Date
for the Eurocurrency Advance prepaid or if the prepayment
is accompanied by the Compensation Amount determined by the
Royal of the subject Eurocurrency Advance and provided to
the Borrower at its request prior to any such prepayment;
b) convert those Borrowings with respect to which the Certificate has
been delivered to another basis of Borrowing in accordance with the
Agreement.
3.20 INCREASED COST LIMITATION
Royal agrees that:
a) the increased costs payable by the Borrower pursuant to Section 3.18
or Section 4.17 shall not include:
i) those resulting from any law, regulation, treaty, or official
directive or regulatory requirement or amendments thereto of
which Royal had knowledge prior to the Closing Date;
ii) any penalty or other charges payable by Royal due to its
failure to pay or delay in paying any amount required to be
paid by it referred to in Section 3.18(a) or Section 4.17;
b) it will not charge the Borrower for any increased costs payable by it
referred to in Section 3.18 or Section 4.17 if it is not at the same
time passing similar costs on to substantially all of its customers
to whom Royal is, by agreement, entitled to pass on such costs;
c) it will use all reasonable efforts to minimize amounts payable by
the Borrower hereunder including all reasonable efforts to obtain
refunds or credits.
3.21 EUROCURRENCY FUNDS NOT AVAILABLE
Eurocurrency Advances shall be made hereunder to the extent that
Eurocurrency Funds are readily and lawfully available to Royal on the dates
upon which the Borrower requests Eurocurrency Advances for the Eurocurrency
Interest Periods and in the amounts requested.
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3.22 PAYMENT OF COMPENSATION AMOUNT
If the Borrower prepays, repays or converts a Eurocurrency Advance or
if pursuant to Section 8.1 Royal converts a Eurocurrency Advance on a date
earlier than the Eurocurrency Maturity Date, the Borrower shall forthwith pay
to Royal the Compensation Amount.
3.23 BORROWER'S RIGHT TO REVOLVE THE CREDIT FACILITY
In addition to the Borrower's right to cancel the available amount of
the Credit Facility pursuant to Section 3.26 the Borrower may from time to
time reduce its Borrowings by making repayments to Royal which the Borrower
may re-borrow subject to the terms of the Agreement, provided that:
a) repayments and re-borrowings of Canadian Advances, U.S. Advances or
Eurocurrency Advances, as the case may be, shall be in the same
minimum amounts and whole multiples as prescribed for a Borrowing;
b) repayments and re-borrowings of Eurocurrency Advances may only be
made on the Eurocurrency Maturity Date of the Eurocurrency Advance
being repaid unless the Borrower pays the Compensation Amount as
contemplated in Section 3.22;
c) the Borrower gives Royal the same prior irrevocable notice prior to
a proposed repayment date that it is required to give pursuant to
Section 3.10 in relation to a requested Drawdown Date for taking a
Canadian Advance or U.S. Advance, as the case may be.
3.24 REPAYMENT OF CREDIT FACILITY
Subject to Section 8.2, the Borrower may utilize the Credit Facility
on a continuing basis until the Maturity Date on which date the Borrower
shall repay to Royal the whole of the outstanding amount of the Credit
Facility together with interest, fees and other amounts due hereunder to such
date including the Face Amounts of all Bankers' Acceptances and the amounts
of all Guarantee Letters, Agreement Letters of Credit or Eurocurrency
Advances issued pursuant to the Agreement which have not matured or expired.
3.25 CURRENCY OF ALL PAYMENTS
All repayments made by the Borrower pursuant to the Agreement shall
be made in the currency of the advance being repaid. The Borrower may
designate whether repayments are to be applied to Canadian Advances, U.S.
Advances, Eurocurrency Advances or Bankers' Acceptances. Repayments may be
applied to a Banker's Acceptance only to the extent that the repayment is to
be made on a date of which a Banker's Acceptance becomes due and is in an
amount equal to the amount of the Bankers' Acceptance then due. Repayments
may be applied to Eurocurrency Advances only:
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a) if such repayment is made on the Eurocurrency Maturity Date for the
Eurocurrency Advance repaid, or
b) if such repayment is made on a date other than the Eurocurrency
Maturity Date for the Eurocurrency Advance which is in effect being
prepaid, if the Borrower pays the Compensation Amount as provided in
Section 3.22.
3.26 BORROWER'S RIGHT TO CANCEL AVAILABLE AMOUNT OF CREDIT FACILITY
If the Borrower delivers to Royal three Business Days prior
irrevocable notice, the Borrower may cancel the available amount of the
Credit Facility or a portion thereof in minimum increments of $5,000,000 or
any greater amount in whole multiples of $100,000. Such cancellation shall be
effective on the later of the effective Business Day set out in such notice
and the third Business Day after such notice. Any such amount so cancelled
shall permanently reduce the available amount of the Credit Facility
thereafter available for Borrowings by a like amount.
3.27 STANDBY FEES
Subject to Section 3.28, the Borrower shall pay to Royal standby
fees on the amount of the Credit Facility not utilized by the Borrower. In
determining the amount of the Credit Facility not utilized by the Borrower,
advances of U.S. Funds shall be deemed to be the Equivalent Amount thereof in
Canadian Funds. The standby fee shall be paid in Canadian Funds calculated on
a daily basis and shall be at the rates for standby fees set forth in
Schedule A (computed on the basis of a year of 365 days) on the portion of
the Credit Facility determined in Canadian Funds not utilized, accruing from
and including the Closing Date. Standby fees shall be paid monthly, in
arrears, on the third Business Day after each month end.
3.28 STANDBY FEES WAIVED
If Royal elects not to make further advances pursuant to
Section 8.2(a) the Borrower shall cease to be obligated to pay standby fees
from the Business Day next following the effective date of such termination.
3.29 EVIDENCE OF INDEBTEDNESS
Royal shall open and maintain on its books at its Branch of Account,
accounts and records evidencing Borrowings and other amounts owing by the
Borrower to Royal under the Agreement. Royal shall record therein the amount
of each Borrowing made available by way of Canadian Advances, U.S. Advances
and Eurocurrency Advances and each payment of principal and interest on
account thereof and shall record Guarantee Letters, Agreement Letters of
Credit and Bankers' Acceptances issued, accepted, purchased and cancelled by
it and all other amounts becoming due to it under the Agreement including
interest, acceptance fees, standby fees, G/L Fees, L/C Fees and other fees
and amounts and all payments on account thereof. Such accounts and records
maintained by Royal shall constitute, in the absence of manifest error, PRIMA
FACIE evidence of the indebtedness of the Borrower to Royal pursuant to the
Agreement, the date Royal made
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each Borrowing available to the Borrower and the amounts the Borrower has
paid from time to time on account of principal and interest on the
Borrowings, acceptance fees, standby fees, G/L Fees, L/C Fees and other fees
and amounts payable pursuant to the Agreement and all other amounts owing
hereunder.
3.30 SUBSTITUTE BASIS OF BORROWING FOR EUROCURRENCY ADVANCES
If Royal determines, acting reasonably, (which determination shall
be final, conclusive, and binding upon the Borrower) that:
a) adequate and fair means do not exist for ascertaining the rate of
interest on a Eurocurrency Advance;
b) the cost to Royal of making, funding, or maintaining Eurocurrency
Advances does not accurately reflect the effective cost to it
thereof or that the costs to it are increased or the income
receivable by it is reduced in respect of a Eurocurrency Advance;
c) the making or the rollover of any Eurocurrency Advance or a
portion of any Eurocurrency Advance by it has become
impracticable by reason of circumstances which materially and
adversely affect the London interbank market, or
d) deposits in U.S. dollars are not available to it in the London
interbank market in sufficient amounts in the ordinary course
of business during the applicable Eurocurrency Interest Period
for it to make, fund, or maintain the Eurocurrency Advance
during such Eurocurrency Interest Period,
then Royal may promptly notify the Borrower in writing of such determination
setting forth the basis of its determination and Royal shall not thereafter
be obligated to provide such Eurocurrency Advance. The Borrower shall, within
ten days of receipt of notice of Royal's determination, notify Royal as to the
substitute basis of Borrowing available under the Agreement which it has
selected for such Eurocurrency Advance. If the Borrower has not so notified
Royal, such Eurocurrency Advance shall automatically be converted to a U.S.
Advance for all purposes under the Agreement at the Eurocurrency Maturity Date
or the Drawdown Date, as the case may be.
3.31 ILLEGALITY FOR EUROCURRENCY ADVANCES
If the introduction of or any change in applicable law, regulation,
treaty, or official directive, or regulatory requirement (whether or not
having the force of law), or the interpretation or application thereof by any
court or by any governmental or other authority or entity charged with the
administration thereof, or if a judicial decision is rendered, which now or
hereafter makes it unlawful, or prohibited for Royal (as determined by Royal
in its sole and absolute discretion, acting reasonably) to make, fund, or
maintain any Eurocurrency Advance or any portion thereof or to perform its
obligations with respect to Eurocurrency Advances under the Agreement, Royal
may, by written notice to the Borrower, suspend its obligations under the
Agreement with respect to such Eurocurrency Advance affected by
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such illegality or prohibition for the duration of the period of such
illegality or prohibition and the Borrower shall repay such Eurocurrency
Advance forthwith (or at the end of such period as Royal in its sole and
absolute discretion, acting reasonably, may determine), together with all
accrued but unpaid interest, fees, costs and Compensation Amount as may be
applicable to the date of payment or the Borrower may convert, without
novation, such Borrowings or a portion thereof together with accrued interest
to the date of conversion (or without such accrued interest if the Borrower
elects to pay the same to Royal) into such other Borrowing Options as the
Borrower may request by not more than two Banking Days notice to Royal. For
the period from the date of such notice until the Borrower elects to convert
to another Borrowing Option, the Borrowing affected by such illegality or
prohibition shall, if not repaid, be converted into a U.S. Advance.
3.32 AGREEMENT LETTERS OF CREDIT AND GUARANTEE LETTERS
Royal may permit the Borrower to utilize the Credit Facility to
obtain from it Agreement Letters of Credit and Guarantee Letters in Canadian
Funds or U.S. Funds, provided that:
a) if an Agreement Letter of Credit or Guarantee Letter is issued by
Royal for the account of the Borrower, the amount, determined in
Canadian Funds, of the face amount of such Agreement Letter of
Credit or Guarantee Letter shall, for the purpose of calculating
the available amount for use by the Borrower of the Credit
Facility, be deemed to be a utilization of the Credit Facility
for the amount of and for the term of such Agreement Letter
of Credit or Guarantee Letter;
b) the Borrower will pay to Royal a fee determined by reference to
the rates and pricing formula set forth in Schedule A calculated
on the face amount determined in Canadian Funds of each Agreement
Letter of Credit and Guarantee Letter calculated on the basis of
the number of days (with thirty days as the minimum number of days)
a particular Agreement Letter of Credit or Guarantee Letter will be
outstanding. G/L Fees and L/C Fees shall be paid in Canadian Funds
by the Borrower to Royal in advance of the issue thereof for the
first three months or less and thereafter every three months or such
lesser period;
c) the Borrower will execute and deliver to Royal its standard form
of application and agreement concerning Agreement Letters of Credit
and Guarantee Letters and the Borrower agrees to comply therewith
and be bound thereby. If any of the terms of Royal's standard form
of application and agreement conflict with the Agreement, the terms
of the Agreement shall prevail, and
d) all other reasonable out-of-pocket disbursements and costs
incurred by Royal in relation to the issuance of or payment
pursuant to any Agreement Letter of Credit or Guarantee Letter
issued on behalf of the Borrower shall be repaid to Royal by
advances under the Credit Facility if such funds are
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available thereunder and, if not available thereunder, shall be
repaid upon demand to the Borrower from Royal.
Royal shall pay on each Agreement Letter of Credit and Guarantee Letter in
accordance with its terms, whereupon the amount of such payment shall be
deemed for all purposes to be a Canadian Advance or U.S. Advance, as the case
may be. The Borrower acknowledges to Royal that Royal has the sole discretion
to refuse to make Agreement Letters of Credit and Guarantee Letters
available to the Borrower.
3.33 EXCHANGE RATE FLUCTUATIONS
If, due to exchange rate fluctuations or for any other reason,
Borrowings in Canadian Funds calculated by Royal on the first Business Day
of each month are in excess of the Credit Facility Royal may, if it wants
the Borrower to reduce such excess, forthwith advise the Borrower, requesting
a reduction of the excess. The Borrower shall, if so requested by Royal, within
three Business Days of such request, provide to Royal full cash collateral in
the amount of such excess or otherwise repay a portion of Borrowings from
Royal in an amount equal to or greater than such excess. The rate of exchange
to determine the amount of such excess shall be the Spot Buying Rate.
3.34 DETERMINATION OF AVAILABLE
AMOUNT OF THE CREDIT FACILITY
The available amount of the Credit Facility shall always be
determined in Canadian funds with Borrowings by way of Eurocurrency Advances
and U.S. Advances and amounts guaranteed in U.S. Funds by Guarantee Letters or
Agreement Letters of Credit denominated in U.S. Funds converted to Canadian
Funds by determining the Equivalent Amount of any such amounts.
PART IV
BANKERS' ACCEPTANCES
4.1 Subject to Section 4.3, and provided the Borrower has not been
notified by Royal by at least one Business Day preceding the proposed date
for issuance of a Bankers' Acceptance that, because general market conditions
have caused it to become impracticable to accept Drafts, it is no longer
accepting Drafts in the ordinary course of business, the Borrower may utilize
the Credit Facility by issuing Bankers' Acceptances. Each Bankers' Acceptance
accepted by Royal shall be deemed to be a utilization of the Credit Facility
for the term of such Bankers' Acceptance in an amount equal to the Face
Amount.
4.2 For the purposes of the Agreement, the Face Amount of a Bankers'
Acceptance shall be used when calculations are made to determine the amount
of Borrowings.
4.3 The Borrower shall give Royal the following irrevocable notice
prior to presenting its Drafts for acceptance:
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a) prior to 9:00 a.m. local time at Vancouver, British Columbia on
the Business Day of presentation for Bankers' Acceptances
aggregating less than Cdn$ or US$10,000,000;
b) prior to 9:00 a.m. local time at Vancouver, British Columbia two
Business Days immediately preceding the Business Day of
presentation for Bankers' Acceptances aggregating Cdn$ or
US$10,000,000 or more.
The Borrower shall also notify Royal by giving the same prior notice of the
method it proposes for payment of Bankers' Acceptances on maturity as set out
in Section 4.12.
4.4 The Borrower shall execute and deliver to Royal its form of
undertaking with respect to Bankers' Acceptances and, if applicable, Royal's
form of authorization and undertaking in respect of Jumbo Bankers'
Acceptances and, to the extent any such authorization or undertaking is not
inconsistent with the provisions of the Agreement, agrees to comply
therewith. All Drafts presented by the Borrower for acceptance pursuant to
Section 4.1 shall be drawn on Royal's prescribed form.
4.5 The Borrower shall execute and deliver to Royal a supply of Drafts
and Royal shall only deal with them in accordance herewith. Royal shall not
be responsible or liable for its failure to accept a Draft as required
hereunder if the cause of the failure is, in whole or in part, due to the
failure of the Borrower to provide such instruments to Royal on a timely
basis, nor shall Royal be liable for any damage, loss or other claim arising
by reason of any loss or improper use of such instrument except a loss or
improper use arising by reason of the negligence or wilful act of Royal.
Royal agrees to use its best efforts to advise the Borrower in a timely
manner when it requires additional executed Drafts.
4.6 In case any authorized signatory of the Borrower whose signatures
shall appear on the pre-signed Drafts shall cease to have such authority
before the creation of a Bankers' Acceptance with respect to such Draft, such
signature shall nevertheless be valid and sufficient for all purposes as if
such authority had remained in force at the time of such creation.
4.7 Royal will date the Drafts as required and shall, forthwith after
acceptance, deliver the stamped Draft to the Borrower or, in accordance with
the Borrower's instructions, to a person designated in writing by the
Borrower. Royal is under no obligation to purchase a Bankers' Acceptance for
its own account.
4.8 Drafts delivered by the Borrower to Royal to be held by it need only
be held in safekeeping with the same degree of care as if they were Royal's
property. If executed but incomplete Drafts are delivered to Royal, it may
complete the same on behalf of the Borrower and in accordance with its
instructions following a request from the Borrower to accept a Draft.
4.9 As an alternative to the Borrower providing a supply of Drafts to
Royal the Borrower may request that Royal draw Drafts on behalf of the
Borrower ("Jumbo Bankers' Acceptances"). If the Borrower has delivered to
Royal its forms of undertaking and authorization in respect of Jumbo Bankers'
Acceptances Royal may draw Drafts on behalf
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of the Borrower and complete such Drafts in accordance with the Borrower's
requests from time to time.
4.10 Each Bankers' Acceptance shall be issued and shall mature on a
Business Day.
4.11 If the Borrower fails to provide to Royal the notice required by
Section 4.3 or, having given notice of its intention to present a Draft for
acceptance or to convert from or to Bankers' Acceptances, fails to act in
accordance with such notice, then, Royal, in its discretion, may decline to
accept Bankers' Acceptances presented without notice.
4.12 Subject to the notice of method of payment of maturing Bankers'
Acceptances required by Section 4.3, the Borrower may provide for payment for
each Bankers' Acceptance issued by it by payment to Royal of the Face Amount
thereof by 10:00 a.m. local time at Vancouver, British Columbia on the
maturity date of the Bankers' Acceptance at Royal's Branch of Account. If the
Borrower fails to provide payment to Royal of an amount equal to the Face
Amount of a Bankers' Acceptance on its maturity, then Royal shall pay the
Face Amount of such Bankers' Acceptance which payment shall be determined for
all purposes to be a Canadian Advance if the Bankers' Acceptance was
denominated in Canadian Funds and a U.S. Advance if the Bankers' Acceptance
was denominated in U.S. Funds.
4.13 The Borrower shall not claim from Royal any days of grace for the
payment at maturity of any Bankers' Acceptances.
4.14 As an acceptance fee for the acceptance by Royal of the Borrower's
Drafts against the Credit Facility the Borrower shall pay in advance to Royal
at or prior to the time of such acceptance an acceptance fee at the rates set
forth in Schedule A calculated in relation to the Face Amount of each
Bankers' Acceptance and on the basis of the number of days from and including
the date of acceptance to and including the day immediately preceding the
date of maturity.
4.15 In the event of the acceptance by Royal of a Bankers' Acceptance
before the date of a change of the rates for acceptance fees as set forth in
Schedule A which Bankers' Acceptance matures or becomes due and payable after
such date, the acceptance fee shall be calculated by using the applicable
rates for Bankers' Acceptances for the number of days the Bankers' Acceptance
is outstanding during the fee period. Royal shall calculate the amount, if
any, of any adjustment to the rates of acceptance fees resulting from the
application of this Section 4.15 and shall advise the Borrower of the amount
of any such adjustment which shall be paid by it to Royal or by Royal to the
Borrower by debiting or crediting the account of a Borrower, as the case may
be.
4.16 Acceptance fees in respect of Bankers' Acceptances denominated in
Canadian Funds shall be payable in Canadian Funds computed on the basis of a
year of 365 days and in respect of Bankers' Acceptances denominated in U.S.
Funds shall be payable in U.S. Funds computed on the basis of a year of 360
days. Acceptance Fees shall be adjusted from time to time in accordance with
Section 3.6.
4.17 If at any time any reserve requirement in respect of Bankers'
Acceptances is imposed upon Royal by any Canadian governmental regulatory
authority which results in
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an increase in the net cost to Royal of maintaining the Bankers' Acceptances
outstanding, and Royal has not claimed an Additional Amount from the Borrower
pursuant to Section 3.18 in relation to outstanding Bankers' Acceptances, it
shall have the right, subject to Section 3.20, after giving notice to the
Borrower, to adjust the amount of the acceptance fee as necessary to
compensate it for such cost increase if it imposes a similar adjustment on
all acceptance fees then in effect with other borrowers, and the Borrower
shall pay to Royal at Royal's Branch of Account the amount of any such
adjustment upon receipt of written notice thereof from Royal, which notice
shall include details of Royal's calculations of the effect of such reserve
requirements on its acceptance fees. The Borrower shall have the right to
review the accuracy of such calculations.
4.18 No Banker's Acceptance shall mature on a date which is beyond the
Termination Date.
PART V
SECURITY FOR BORROWINGS
5.1 SECURITY FOR BORROWINGS
As general and continuing security for the performance of all
obligations of the Borrower hereunder and the prompt payment when due by the
Borrower of its Borrowings under the Credit Facility and interest thereon and
all other money for the time being and from time to time owing by the
Borrower hereunder including fees, Breakage Costs, standby fees and other
fees, default interest and the Borrower's guarantee of LGII's Breakage Costs,
the Borrower shall confirm to Royal the continued designation of the
Agreement as Class A Secured Indebtedness (as defined in the Collateral Trust
Agreement) pursuant to the Collateral Trust Agreement, and entry on Schedule
1 of the Collateral Trust Agreement and the continued validity and
enforceability of the Collateral Trust Security.
PART VI
CREDIT FACILITY CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT TO INITIAL BORROWINGS
Royal shall not be obliged to make an initial advance of the Credit
Facility or to accept an initial Draft presented by the Borrower pursuant to
Part IV, whichever shall first occur unless, on the Closing Date, all
representations and warranties contained in Part II are true and correct, no
Event of Default has occurred and is continuing and on each of the following
conditions being satisfied:
a) the execution by the Borrower and delivery to Royal or
confirmation of the prior execution and delivery and continued
efficacy of the Collateral Trust Security and the completion of
all such registrations, recordings and filings of or with respect
to the Loan Documents and the delivery of all such documents
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as in the opinion of counsel to Royal are necessary or
appropriate to render effective the security intended to be
created thereby and to preserve and protect the rights of
Royal thereunder;
b) delivery by the Borrower to Royal of the following:
i) duly executed copies of the Agreement together with all
documents which the Borrower has covenanted to deliver under
the Agreement and any other documents or instruments as in
the opinion of counsel to Royal are reasonably necessary or
appropriate to render effective the Agreement;
ii) a certificate of good standing of the Borrower;
iii) a certified copy of a resolution or resolutions of the board
of directors of the Borrower authorizing the Borrower to
execute, deliver and perform its obligations under the
Agreement and the instruments, agreements, certificates,
papers and other documents contemplated therein and the
manner in which and by whom the foregoing documents are to be
executed and delivered;
iv) an incumbency certificate of the Borrower setting forth the
names of its directors and officers and specimen signatures
of the individuals who sign the Agreement and the
instruments, agreements, certificates, papers and other
documents provided for or contemplated therein;
v) a certificate of a responsible officer of the Borrower, to
the effect that, on the Closing Date, no Event of Default has
occurred which is continuing;
vi) a favourable opinion of counsel for the Borrower (in form and
content satisfactory to the solicitors for Royal) to the
effect that:
A. the Borrower validly exists as a company under the
British Columbia Companies Act and is, according to
the records of the Registrar of Companies for the
Province of British Columbia, in good standing with
respect to the filing of its annual returns;
B. the Borrower has the corporate power and capacity to
borrow money in the manner contemplated by the
Agreement and to enter into, observe and perform the
terms and obligations on its part to be observed and
performed under the Agreement;
C. the Borrower has duly authorized, executed and
delivered the Agreement, the Agreement constitutes a
valid and binding obligation of the Borrower and is
enforceable against the
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Borrower in accordance with its terms, save as
enforcement may be limited by:
(1) applicable bankruptcy, insolvency, moratorium,
reorganization and similar laws at the time in
effect affecting the rights of creditors
generally;
(2) equitable principles which may limit the
availability of certain remedies, including the
remedy of specific performance;
(3) the inability of the courts of Canada to give
judgement for payment in foreign currencies or
for payment of the additional amounts referred to
in Section 9.7;
(4) such other appropriate qualifications as counsel
for Royal will accept, and
D. so far as they are aware in their capacity as counsel
for the Borrower in respect of this transaction, there
are no actions, proceedings or investigations pending
or threatened which question the validity of the
Agreement,
and, in addition, dealing with such other matters
incidental to the transactions contemplated by the
Agreement and the Loan Documents as Royal may reasonably
and properly require;
vii) except as set forth on Schedule B, there is no litigation,
arbitration, governmental investigation, proceeding or
inquiry pending or, to the knowledge of any of the officers
of the Borrower or LGII, threatened against or affecting the
Borrower or any other Subsidiary which could have a
Material Adverse Effect, or for which there is reasonable
likelihood that the Borrower or any Subsidiary would make a
payment, whether in settlement or otherwise, in excess of
US$50,000,000 and that other than any liability incident to
such litigation, arbitration or proceedings, none of the
Borrower or any other Subsidiary has any material
contingent liabilities not provided for or disclosed in the
financial statements;
viii) an opinion of Messrs. Bull, Housser & Tupper, counsel for
Royal (in form and content satisfactory to Royal but
subject to the usual assumptions and qualifications) to the
effect that the Agreement has been executed by the Borrower
and delivered to Royal;
ix) an undertaking of the Borrower, in form and content
satisfactory to Royal and its solicitors, to repay or cause
to be repaid by September 15, 1996 all indebtedness to
Royal of 3144569 Canada Inc. and Paperman & Sons Inc.
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6.2 CONDITIONS PRECEDENT TO SUBSEQUENT BORROWINGS
It shall be a condition of each Borrowing that the representations
and warranties contained in Part II shall be true on and as of the date of
each Borrowing and that Royal is satisfied that there has been no material
adverse change in the financial condition or operation of the Borrower. The
Borrower will, upon request of Royal, deliver to Royal a certificate or
certificates of an officer on behalf of the Borrower to that effect.
PART VII
COVENANTS OF THE BORROWER
7.1 The Borrower covenants and agrees with Royal as follows:
POSITIVE COVENANTS
a) that it will duly and punctually pay or cause to be paid all
amounts required to be paid by it to Royal pursuant to the
Agreement, including principal, interest, fees for Bankers'
Acceptances, standby fees, Breakage Costs, fees for Treasury
Contracts, G/L Fees and L/C Fees and any other amounts on the
day, at the place, in the Currencies and in the manner set forth
herein;
b) that it will duly observe and perform or cause to be observed and
performed each and all of the covenants and agreements required
by it to be performed and observed as set forth in the Agreement;
c) that it will, and it will cause each of its Subsidiaries, to at
all times keep adequately insured by reputable insurers all
assets and property in a manner and for amounts consistent with
its current practices, and shall duly and punctually pay all
premiums and other sums of money for maintaining such insurance;
d) that it will give to Royal prompt notice of any Event of Default
or any event that with notice or elapse of time may be an Event
of Default;
e) that it will, and it will cause each of its Subsidiaries to, file
all material tax returns including income tax returns,
corporation capital tax returns and other tax filings in all
required jurisdictions;
f) that it will, and it will cause each of its Subsidiaries to, pay
all material taxes (except taxes in dispute which are being
contested in good faith) including any interest and penalties and
to pay or make adequate reserves for the ultimate payment of any
tax payment which is being contested;
g) that it will, and it will cause each of its Subsidiaries to,
actively and diligently contest or cause to be contested in good
faith, by appropriate and timely proceedings, or effect a timely
and provident settlement of any action, suit,
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litigation or other proceeding the result of which could be
expected to have a material adverse effect on the financial
condition or operations of the Primary Business;
h) that it will give to Royal prompt notice of any event of default
under the Note Agreements or under the 1996 Credit Agreement;
i) that it will, and it will cause each of its Subsidiaries to,
observe and comply at all times with the provisions of all
applicable laws, regulations, bylaws, ordinances and orders of any
Governmental Body dealing in relation to its respective business
with pollution of the environment, toxic and hazardous materials
and waste and other environmental hazards, except in cases where
the failure to observe or comply will not materially adversely
affect the Primary Business, and, from time to time, upon
reasonable request by Royal, will provide to Royal evidence
satisfactory to Royal acting reasonably of such observance and
compliance. The Borrower shall also provide to Royal notice of any
material investigations, control orders, stop orders, injunctions,
prosecutions or other regulatory procedures and lawsuits by any
Governmental Body relating to pollution of the environment;
j) that it will permit from time to time, as reasonably requested by
Royal, any Person designated by Royal to examine (upon reasonable
notice having been given) its books and financial records and will
cause the Chief Financial Officer, or such other senior officer as
may be appropriate, to discuss and explain, as the case may be, any
of its affairs, finances and accounts and to provide such other
information pertaining to its business as the said representative
may reasonably require;
k) that it will, and it will cause each of its Subsidiaries to, comply
in all material respects with all laws, rules, regulations, orders,
writs, judgements, injunctions, decrees or awards to which it may
be subject;
l) that it will, and it will cause each of its Subsidiaries to,
maintain in full force and effect all leases, licences, permits,
consents and regulatory approvals necessary for the due carrying on
of their respective businesses except that, in the case of any
Subsidiary, the failure to maintain such leases, licences, permits,
consents and regulatory approvals could not, when taken together
with all similar failures by such Subsidiary and each other
Subsidiary, reasonably be expected to have a Material Adverse
Effect;
m) that it will comply and it will cause LGII and each of their
respective Subsidiaries to comply in all material respects with
those provisions of Article III of the Collateral Trust Agreement
which govern the granting and maintenance of the first priority
security interest in favour of the Trustee for the equal and
ratable benefit of all Senior Secured Parties (as defined in the
Collateral Trust Agreement);
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n) that it will, and it will cause each of its Subsidiaries to carry
on and conduct its respective business in substantially the same
manner and in substantially the same fields of enterprise as
conducted on the Closing Date and to do all things necessary to
remain duly incorporated, validly existing and in good standing as
a domestic corporation in its jurisdiction of incorporation and to
maintain all requisite authority to conduct its business in each
jurisdiction in which its business requires it to be so authorized;
NEGATIVE COVENANTS
o) that it will not, without the prior written consent of Royal, nor
will it permit any of its Subsidiaries to, merge, amalgamate, enter
into any corporate reorganization or otherwise modify its
respective corporate structure in any way which would materially
adversely affect the asset base or cash flow of the Primary
Business;
p) that it will not, nor will it permit any of its Subsidiaries to
make any Acquisition of any Person other than a Permitted
Acquisition;
q) that it will not, nor will it permit any of its Subsidiaries to
create, incur or suffer to exist any Indebtedness; except:
i) normal day to day trade credit arrangements;
ii) Borrowings and guarantees under the Agreement, Agreement
Letters of Credit, Guarantee Letters, Bankers' Acceptances
and utilization of the facilities availed under the 1996
Credit Agreement;
iii) Indebtedness existing as of the close of business on March
31, 1996 set out in Schedule C;
iv) Indebtedness secured by Permitted Encumbrances;
v) additional indebtedness permitted under the 1996 Credit
Agreement which may include but is not limited to:
A. the proforma Consolidated Fixed Charges Coverage Ratio of at
least equal to 2.25:1 as provided therein, if applicable;
B. any additional indebtedness of any Subsidiaries, other than
LGII, provided such additional indebtedness does not exceed
10.0% of Consolidated Net Worth, and
C. subject to giving pro forma effect thereto, any additional
indebtedness of the Borrower or any of its Subsidiaries,
provided that Consolidated Indebtedness does not, after
including any such indebtedness, exceed 60.0% of Consolidated
Capitalization;
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r) that it will not without the prior written consent of Royal, nor
will it permit any of its Subsidiaries to, grant, create, assume,
suffer or permit any Lien on any of its respective assets or
operations except for Permitted Encumbrances, Liens granted by the
Borrower or any Subsidiary in favour of the Borrower or any
Subsidiary, as the case may be, Liens arising in connection with
any sale of accounts receivable or other comparable financial
assets permitted under the 1996 Credit Agreement, and Liens
permitted under Section 7.18(a) of the 1996 Credit Agreement;
s) that it will not, nor will it permit any of its Subsidiaries (other
than an SPV in connection with a Permitted Receivables
Securitization), to enter into any agreement or other arrangement
under the terms of which the Borrower or any Subsidiary (other than
any such SPV) would be restricted from performing its respective
obligations under the Collateral Trust Agreement, the 1996 Credit
Agreement, the Agreement or any other loan document to which it is
a party;
t) that it will not, nor will it permit any of its Subsidiaries to
create, incur or suffer to exist obligations to make payments in
respect of covenants not to compete, determined in the aggregate
for LGII and all Subsidiaries, and payable during any one fiscal
year, except as permitted under the 1996 Credit Agreement;
u) that it will not, nor will it permit any Subsidiary to either
declare, make or incur any liability to make any Corporate
Distribution, except as permitted under the 1996 Credit Agreement;
v) that it will not, nor will it permit any Subsidiary to make or
suffer to exist any investment or commitment except as permitted
under the 1996 Credit Agreement;
w) that it will not, nor will it permit any of its Subsidiaries to
lease, sell, or otherwise dispose of Property, except as permitted
under the 1996 Credit Agreement;
x) that it will not, nor will it permit LGII without the consent of
Royal, to amend or consent to any amendment of any of the
provisions of the 1996 Credit Agreement or the Collateral Trust
Agreement specifically cross referenced, directly or indirectly, in
the Agreement;
y) that it will not, without the consent of Royal, amend in any
material way the 1996 Credit Agreement or the Collateral Trust
Agreement;
REPORTING COVENANTS
z) that it will, and it will cause each of its Subsidiaries, to at all
times keep or cause to be kept proper books of account and that it
will furnish to Royal within 120 days after the close of each
fiscal year Sufficient Copies of its
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annual consolidated audited financial statements which shall
contain no material qualifications as to the scope of their
examination except as to the furnishing of information to them,
and, except for the year end fiscal quarter, within 60 days of the
close of each fiscal quarter Sufficient Copies of each of:
i) its quarterly consolidated unaudited financial statements
including a balance sheet and a statement of profit and loss;
ii) quarterly consolidated unaudited financial statements for the
Canadian operations of the Borrower;
iii) quarterly consolidated unaudited financial statements for the
U.S.A. operations of the Borrower, and
iv) that it will, and it will cause LGII to, contemporaneously
with the filing or registering of any Report by it or LGII or
any of their respective Subsidiaries with any Regulatory
Authority, send or cause to be sent Sufficient Copies of each
Report to Royal;
aa) that it will deliver to Royal within 60 days of the end of each
fiscal quarter (except for its last fiscal quarter in which case
within 120 days of the end of such fiscal quarter) a compliance
certificate signed by its Chief Financial Officer and in
substantially the same form attached as Schedule D which sets forth
the calculations of the amounts and ratios comprised in the
financial covenants set out in Section 7.1(ac) to Section 7.1(ag),
inclusive. The certificate shall also certify to the best of the
Chief Financial Officer's knowledge after diligent inquiry as at
the quarter end referred to in the certificate that, except as
disclosed, no Event of Default has occurred nor has any event
occurred which with the giving of notice or the passage of time or
both would constitute an Event of Default, and the covenants
contained in the Agreement have not been breached and that no
facts exist which would reasonably be expected to result in a
breach of such covenants during the next fiscal quarter of the
Borrower;
ab) that it will, and it will cause LGII to deliver to Royal
contemporaneously with delivery to the Lenders pursuant to the 1996
Credit Agreement, Sufficient Copies of all summaries, lists, copies
of notices or claims and other relevant documents required to be
provided by the Borrower or LGII, as the case may be, to the Lenders
pursuant to Sections 7.1(h), 7.1(k), 7.1(m) and 7.1(n) of the 1996
Credit Agreement;
Financial Covenants
ac) that it will maintain at all times a Consolidated Net Worth
(excluding the cumulative effect of currency translation
adjustments) of at least the sum of:
i) Consolidated Net Worth (excluding the cumulative effect of
currency translation adjustments) as of December 31, 1995,
plus
<PAGE>
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ii) the net proceeds to the Borrower from consummation of the Equity
Placement and the issuance by the Borrower from time to time of
preferred stock in exchange for the First Preferred Series C
Receipts pursuant to the terms thereof, plus
iii) the sum of 50% of Consolidated Net Income for each fiscal
quarter ended after January 1, 1996 (but only to the extent that,
in the case of any such fiscal quarter, Consolidated Net Income
for such fiscal quarter is at least $1.00), plus
iv) 66-2/3% of the aggregate amount of the net cash proceeds
received by the Borrower and Subsidiaries from the
issuance or sale on and after January 1, 1996 (other than sales or
issuance to the Borrower or any other Subsidiary and other than
pursuant to the Equity Placement or in connection with the
issuance by the Borrower from time to time of preferred stock in
exchange for the First Preferred Series C Receipts pursuant to the
terms thereof) of capital stock of the Borrower or Indebtedness of
the Borrower or any other Subsidiary which has been converted into
capital stock of the Borrower;
ad) that it will maintain at all times a Consolidated Tangible Net Worth
of at least $150,000,000 (excluding the cumulative effect of
currency translation adjustments);
ae) that it will not permit the ratio of Consolidated Indebtedness
to Consolidated Capitalization at any time to exceed 0.60 to 1.00;
af) that it will maintain, at all times:
i) an Interest Coverage Ratio of not less than 2.75 to 1.00, and
ii) a ratio of EBITDA for the most recently ended fiscal quarter
to Consolidated Interest Charges for such fiscal quarter of not
less than 1.50 to 1.00;
ag) that it will not permit the ratio of Consolidated Indebtedness to
Adjusted EBITDA, for the most recently ended period of four
consecutive fiscal quarters, to be greater than:
i) 5.50 to 1.00, at any time through to and including December
31, 1996, or
ii) 5.00 to 1.00, at any time after December 31, 1996.
<PAGE>
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PART VIII
EVENTS OF DEFAULT
8.1 DEFINITION OF EVENT OF DEFAULT
The occurrence of any one or more of the following events
constitutes an Event of Default hereunder:
a) if the Borrower makes default in any payment of principal when
the same becomes due under the Agreement and such default shall
have continued for three Business Days after notice has been
given by Royal to the Borrower;
b) if the Borrower makes default in any payment of interest, G/L Fees,
L/C Fees, fees, Compensation Amount, Additional Amount or like
payments when the same become due under the Agreement and such
default shall have continued for a period of five days after notice
has been given by Royal to the Borrower,
c) if the Borrower makes, suffers or permits a default in observing
or performing any covenant or condition of the Agreement, any
Treasury Contract or any other agreement with Royal and such
default shall have continued for a period of ten days after notice
in writing has been given by Royal to the Borrower specifying such
default;
d) if there is a default by the Borrower or any of its Subsidiaries
which results in the acceleration of payment by the Borrower or
any of its Subsidiaries of Indebtedness in excess of US$5,000,000
or the Equivalent Amount in Canadian Funds or concerning its
performance or the performance of any of its Subsidiaries of other
covenants or conditions of Indebtedness in excess of US$5,OOO,OOO
or the Equivalent Amount in Canadian Funds which results in
demand or the acceleration of maturity of such Indebtedness;
e) if any representation, warranty or statement made by the Borrower
herein or in any certificate furnished in connection with or
pursuant to the Agreement shall prove to be or to have been
incorrect on the date as of which it was made in any respect
materially adverse to Royal, in Royal's discretion;
f) if an order be made or an effective resolution be passed for the
winding-up of the Borrower or any of its Subsidiaries (other than
a Subsidiary of the Borrower which does not materially adversely
affect the Primary Business) or if the Borrower or any of its
Subsidiaries on its own behalf shall make an assignment for the
benefit of its creditors or if the Borrower or any of its
Subsidiaries shall be declared bankrupt or if a custodian or
receiver be appointed under any bankruptcy act or code or if a
compromise or arrangement is proposed by the Borrower or any of
its Subsidiaries to creditors or any class of creditors, or if a
receiver, receiver-manager or other officer with like powers
shall be appointed, or if an encumbrancer shall take possession
of the property of the Borrower or any of its Subsidiaries or any
<PAGE>
-52-
part thereof (in all of such cases other than a Subsidiary of
the Borrower which does not materially adversely affect the
Primary Business), which is, in the opinion of Royal, material
to the Primary Business or if a distress or execution or any
similar process be levied or enforced against a substantial or
essential part of such property and remain unsatisfied for a
period of thirty days, unless such distress, execution or
similar process is in good faith disputed by the Borrower or
any such Subsidiary and, if so required by Royal, the Borrower
or any such Subsidiary gives adequate security to Royal to pay
in full the amount claimed;
g) if a writ of execution, attachment or similar process has been
issued or levied against all, or a substantial portion of, the
property of the Borrower in connection with any judgement
against the Borrower in any amount which materially
affects the property of the Borrower, and no application has
been brought to stay such writ of execution, attachment or
similar process which application has, in the reasonable
opinion of Royal, a reasonable chance of success;
h) if there is an event of default under any of the Note Agreements,
the 1996 Credit Agreement or under the MEIP Credit Agreement
which results in the acceleration of the maturity of any of
the Notes or acceleration of the indebtedness owing under
the 1996 Credit Agreement or under the MEIP Credit Agreement
and any such acceleration shall not have been rescinded or
annulled in accordance with the provisions of the applicable
Note Agreement, the 1996 Credit Agreement or the MEIP Credit
Agreement, as the case may be;
i) if the Collateral Trust Agreement shall fail to remain in
full force or effect, or any action shall be taken to
discontinue or to assert the invalidity or unenforceability of
the Collateral Trust Agreement, or any pledgor thereunder shall
fail to perform its obligations under or otherwise comply with
any of the terms or provisions of the Collateral Trust
Agreement, or any pledgor thereunder shall deny that it has any
further liability under the Collateral Trust Agreement, or
shall give notice to such effect, or any portion of the shares
of stock pledged, or security interests granted, pursuant to
the Collateral Trust Agreement shall cease to be validly
perfected in favour of the Trustee for the benefit of the
secured parties under the Collateral Trust Agreement, or
(except as otherwise provided in the Collateral Trust Agreement
and except to the extent such pledged shares represent Minority
Interests and excepting shares of Subsidiaries in respect of
which acquisition conditions or requirements have not been
completed) such pledged shares shall fail to represent 100% of
the outstanding shares of stock of the Subsidiaries whose
shares of stock are subject to the Collateral Trust Agreement.
<PAGE>
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8.2 REMEDIES
Upon the occurrence of any Event of Default and at any time
thereafter, provided the Event of Default has not been waived by Royal or the
Borrower has not theretofore remedied all outstanding Events of Default
within the prescribed time period, Royal may, by notice to the Borrower:
a) terminate its obligations hereunder to make any further advances or
conversions under the Credit Facility or to accept Drafts of the
Borrower or to enter into Treasury Contracts;
b) declare Borrowings under the Credit Facility, interest, fees, costs
including Breakage Costs and any other moneys owing to it under the
Agreement by the Borrower, including amounts owing or liabilities
in respect of Bankers' Acceptances which have not yet matured and
Agreement Letters of Credit and Guarantee Letters, to be
immediately due and payable on the date which is twenty Business
Days after Royal delivers such notice to the Borrower, or, that
earlier date on or after delivery of such notice when Royal
determines that the Loan Documents or the Primary Business may be
materially prejudiced, endangered or adversely affected
("Acceleration Date") and such monies and liabilities shall
forthwith become due and payable on the Acceleration Date without
presentment, demand, protest or other notice of any kind to the
Borrower, all of which are hereby expressly waived;
c) enforce all rights and remedies granted under the Loan Documents
provided however that any such enforcement shall not be commenced
until on or after the Acceleration Date;
d) convert any portion of the Credit Facility denominated in
Eurocurrency Funds together with unpaid interest thereon, into U.S.
Funds or Canadian Funds;
e) terminate any Treasury Contracts in accordance with their
respective terms.
The Borrower expressly acknowledges and agrees that the date which is twenty
Business Days after Royal delivers such notice to the Borrower affords and will
afford a reasonable period of time to make payment of the outstanding balance
advanced under the Credit Facility, interest, fees, Breakage Costs, costs and
other monies owing by the Borrower under the Agreement. Royal acknowledges and
agrees that interest, if any, earned or received by it as a result of the
redeployment or other application of monies paid by the Borrower pursuant to a
demand made under Section 8.2(b) in respect of Banker's' Acceptances, Guarantee
Letters or Agreement Letters of Credit which have not yet matured shall be
credited or otherwise applied for the benefit of the Borrower.
8.3 OUTSTANDING GUARANTEE LETTERS, AGREEMENT LETTERS OF CREDIT, ETC., ON
ACCELERATION DATE
If there are Guarantee Letters, Agreement Letters of Credit or
Bankers' Acceptances outstanding on the Acceleration Date the Borrower shall
at such time deposit
<PAGE>
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(at interest to be credited to the Borrower at the Royal's rate for term
deposits appropriate to the currency, amount and terms of any such Guarantee
Letters, Agreement Letters of Credit or Bankers' Acceptances, as the case may
be,) in cash collateral accounts to be opened and maintained by Royal amounts in
Canadian Funds, U.S. Funds or both, as the case may be, equal to the aggregate
of the Face Amounts of all such unmatured Bankers' Acceptances and the amount of
the Guarantee Letters or Agreement Letters of Credit, as the case may be.
Amounts held in such cash collateral accounts shall be applied by Royal to the
payment of maturing Bankers' Acceptances and payment obligations, if any,
pursuant to Guarantee Letters and Agreement Letters of Credit, as the case may
be, and any balances in such accounts shall be applied to repay other
obligations of the Borrower in accordance with the provisions of the Agent.
8.4 REMEDIES CUMULATIVE
No remedy conferred on Royal is intended to be exclusive. Each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or equity or by statute or
otherwise. The exercise or commencement of exercise by Royal of any one or more
of such remedies shall not preclude the simultaneous or later exercise by Royal
of any or all other such remedies.
8.5 WAIVERS
Royal may, by written instrument at any time and from time to time
waive any breach by the Borrower of any of the covenants or Events of Default
herein. No course of dealing between the Borrower and Royal nor any delay in
exercising any rights hereunder or under any of the Loan Documents shall operate
as a waiver of any rights of Royal.
8.6 APPLICATION OF PAYMENTS FOLLOWING ACCELERATION
After any acceleration of payment of Borrowings pursuant to the
Agreement, Royal may apply any monies received by it towards repayment of
Borrowings under the Credit Facility as it deems appropriate.
PART IX
GENERAL
9.1 WAIVER OR MODIFICATION
No failure or delay on the part of Royal in exercising any right,
power or privilege hereunder shall impair such right, power or privilege or
operate as a waiver thereof nor shall any single or partial exercise of such
right, power or privilege preclude any further exercise thereof or the exercise
of any other right, power or privilege hereunder. The rights and remedies herein
provided are cumulative and not exclusive of any rights and remedies provided by
law.
<PAGE>
-55-
9.2 AMENDMENT AND WAIVER PROCEDURES
No amendment, modification or waiver of any condition of the
Agreement or consent to any departure by the Borrower therefrom shall, in any
event, be effective unless the same shall be in writing signed by Royal. No
notice to or demand on the Borrower shall by reason thereof entitle the Borrower
to any other or further notice or demand in similar or other circumstances
unless specifically provided for in the Agreement.
9.3 SUCCESSORS AND ASSIGNS
The Agreement shall be binding upon and enure to the benefit of the
Borrower and Royal and their respective successors and permitted assigns. The
Borrower shall not, without the prior written consent of Royal, assign any
rights or obligations with respect to the Agreement, the Loan Documents, any
Bankers' Acceptances, Guarantee Letters, Agreement Letters of Credit or any
other agreement or document contemplated under the Agreement.
9.4 TIME OF THE ESSENCE
Time shall be of the essence hereof.
9.5 FURTHER ASSURANCES
The Borrower will do, execute and deliver, or will cause to be done,
executed and delivered, all such further acts, documents (including
certificates, declarations, affidavits, reports and opinions) and things as
Royal may reasonably require for the purpose of giving effect to the Agreement.
9.6 SET-OFF
In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights Royal is authorized at
any time or from time to time without notice to the Borrower or to any other
Person, any such notice being expressly waived by the Borrower, to set-off,
compensate and to appropriate and to apply any and all deposits, matured or
unmatured, general or special, held for or in the name of the Borrower and
any other indebtedness or liability at any time owing or payable by Royal to
or for the credit of or the account of the Borrower against and on account of
the obligations and liabilities of the Borrower due and payable to Royal
under the Agreement including all claims of any nature or description arising
out of or connected with the Agreement, irrespective of currency and whether
or not Royal has made any demand under the Agreement and although these
obligations, liabilities or claims of the Borrower are contingent or
unmatured. Royal and the Borrower acknowledge and agree that this paragraph
is not intended to create and shall not be construed as creating and does not
create a security interest in any Property of the Borrower.
<PAGE>
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9.7 JUDGEMENT CURRENCY
If for the purposes of obtaining judgement in any court in any
jurisdiction or for any other purpose hereunder it becomes necessary to convert
into the currency of such jurisdiction ("Judgement Currency") any amount due
hereunder in any currency other than the Judgement Currency, then such
conversion shall be made at the rate of exchange prevailing on the Business Day
before the day on which judgement is given. For such purpose "rate of exchange"
means the spot rate at which Royal, on the relevant date at or about 1200 hours
Toronto, Ontario local time, would be prepared to sell a similar amount of such
currency in Toronto, Ontario against the Judgement Currency. In the event that
there is a change in the rate of exchange prevailing between the Business Day
before the day on which the judgement is given and the date of payment of the
amount due, the Borrower shall, on the date of payment, pay such additional
amounts (if any) as may be necessary to ensure that the amount paid on such
date is the amount in the Judgement Currency which, when converted at the rate
of exchange prevailing on the date of payment, is the amount then due under the
Agreement in such other currency. Any additional amount due from the Borrower
under this paragraph shall be due as a separate debt and shall not be affected
by judgement being obtained for any other sums due under or in respect of the
Agreement.
9.8 ACCOUNT DEBIT AUTHORIZATION
The Borrower authorizes and directs Royal to automatically debit,
by mechanical, electronic or manual means, the bank accounts of the Borrower
maintained with Royal for all amounts payable under the Agreement, including but
not limited to the repayment of principal and the payment of interest, fees and
all charges for the keeping of such bank accounts.
9.9 EXPENSES
All statements, certificates, opinions and other documents or
information required to be furnished to Royal by the Borrower under the
Agreement shall be supplied by the Borrower without cost to Royal. In
addition, the Borrower agrees to pay promptly to Royal on demand, all
reasonable legal fees and other reasonable expenses which are incurred from
time to time by Royal in respect of the documentation, preparation,
registration, negotiation, execution and administration of the Agreement and
Loan Documents (including any value added, goods and services, business
transfer tax or other similar taxes payable in connection with the execution,
delivery or enforcement of the Agreement and Loan Documents) provided
pursuant to the Agreement, and all expenses which are incurred from time to
time by Royal in respect of the enforcement of the Agreement and Loan
Documents.
9.10 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties made in Part II shall survive the
execution and delivery of the Agreement, the Loan Documents and the Closing
Date and continue in full force and effect until the full payment and
satisfaction of all monies due hereunder.
<PAGE>
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9.11 NOTICE PROCEDURE
Any demand, request, notice or consent to be given under the
Agreement shall be in writing and shall be given by delivering or faxing the
same (and if faxed will be effective if immediately followed by delivery of such
written demand, request, notice or consent) addressed as indicated opposite the
names of the signatories on the signature pages of the Agreement. Any party
hereto may by notice given in the manner provided herein change its address for
notice under the Agreement.
9.12 NOTICE RECEIVED
Any such demand, request, notice or consent sent as aforesaid shall
be deemed to have been received by the party to whom it is addressed upon
delivery, if delivered, or if such date of delivery is not a Business Day on the
next following Business Day, and the next Business Day following transmission if
sent by telecopy.
9.13 INDEMNITY
The Borrower hereby indemnifies and holds harmless Royal from all
losses, damages, reasonable expenses and liabilities sustained or incurred by
Royal as a result of any default hereunder by the Borrower or any written
misrepresentation in connection herewith.
9.14 COUNTERPARTS
The Agreement may be executed in any number of counterparts with the
same effect as if all parties had all signed the same document. All counterparts
will be construed together and will constitute one and the same agreement.
9.15 REASONABLE CONSENT OR APPROVAL OF THE PARTIES
The parties hereto acknowledge and confirm that:
a) where any of them is required to exercise its discretion or grant
its approval or consent pursuant to a provision in the Agreement,
it shall act reasonably in the exercise of its discretion and will
not unreasonably withhold or delay the granting of its approval or
consent, and
b) the Borrower may rely on any consent, approval, calculation or
determination provided to it by Royal pursuant to the Agreement.
9.16 ENTIRE AGREEMENT
Save as provided herein and in the instruments and documents
contemplated or provided for hereunder, the Agreement contains the whole
agreement between the parties with respect to the Credit Facility and there are
no other terms, conditions, representations or warranties with respect thereto
except as contained herein.
<PAGE>
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IN WITNESS WHEREOF the parties hereto have caused the
Agreement to be duly executed on July 31, 1996.
THE CORPORATE SEAL of THE ) The Loewen Group Inc.
LOEWEN GROUP INC. was hereunto ) 4126 Norland Avenue
affixed in the presence of: ) Burnaby, B.C. V5G 3S8
) Attn. Vice-President,
) Finance
__________________________ ) with a copy to Vice-President, Law
Dwight K. Hawes ) (at the above address)
) Tel: (604) 299-9321
) Fax: (604) 473-7305 C/S
)
)
)
)
)
ROYAL BANK OF CANADA )
)
By:_______________________ )
Gerald W. Derbyshire ) Royal Bank of Canada
Senior Account Manager ) Corporate Banking
) Multinational
) 36th Floor
) 1055 West Georgia Street
By:______________________ ) Vancouver, B.C.
Rosanne Bubas ) V6E 3S5
Account Manager ) Tel: (604) 665-4111
) Fax: (604) 665-6465
)
)
)
<PAGE>
U.S. $121,300,000
AMENDED AND RESTATED
1994 MEIP CREDIT AGREEMENT
DATED AS OF
JUNE 14, 1994
AMONG
LOEWEN MANAGEMENT INVESTMENT CORPORATION,
IN ITS CAPACITY AS AGENT FOR LOEWEN
GROUP INTERNATIONAL, INC.,
THE LOEWEN GROUP INC.,
THE BANKS LISTED HEREIN
AND
WACHOVIA BANK OF GEORGIA, N.A.,
AS AGENT
AS AMENDED AND RESTATED AS OF MAY 15, 1996
<PAGE>
TABLE OF CONTENTS
AMENDED AND RESTATED
1994 MEIP CREDIT AGREEMENT
PAGE
ARTICLE I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS . . . . . . . . . . . . . .22
SECTION 1.03. REFERENCES. . . . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 1.04. USE OF DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . .22
SECTION 1.05. TERMINOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . .22
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 2.01. COMMITMENTS TO LEND . . . . . . . . . . . . . . . . . . . . . .23
SECTION 2.02. METHOD OF BORROWING . . . . . . . . . . . . . . . . . . . . . .23
SECTION 2.03. NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 2.04. MATURITY OF LOANS . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 2 05. INTEREST RATES. . . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 2.06. FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 2.07. MANDATORY REDUCTION AND TERMINATION OF COMMITMENTS. . . . . . .27
SECTION 2.08. OPTIONAL PREPAYMENTS. . . . . . . . . . . . . . . . . . . . . .27
SECTION 2.09. MANDATORY PREPAYMENTS . . . . . . . . . . . . . . . . . . . . .28
SECTION 2.10. GENERAL PROVISIONS AS TO PAYMENTS . . . . . . . . . . . . . . .28
SECTION 2.11. COMPUTATION OF INTEREST AND FEES. . . . . . . . . . . . . . . .31
ARTICLE III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
SECTION 3.01. CONDITIONS TO FIRST BORROWING . . . . . . . . . . . . . . . . .31
SECTION 3.02. CONDITIONS TO ALL BORROWINGS. . . . . . . . . . . . . . . . . .32
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 4.01. CORPORATE EXISTENCE AND POWER . . . . . . . . . . . . . . . . .33
SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION. . .33
SECTION 4.03. BINDING EFFECT. . . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 4.04. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . .33
SECTION 4 05. NO LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 4.06. COMPLIANCE WITH ERISA . . . . . . . . . . . . . . . . . . . . .34
SECTION 4.07. COMPLIANCE WITH LAWS; PAYMENT OF TAXES. . . . . . . . . . . . .34
SECTION 4.08. SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 4.09. INVESTMENT COMPANY ACT. . . . . . . . . . . . . . . . . . . . .35
SECTION 4.10. PUBLIC UTILITY HOLDING COMPANY ACT. . . . . . . . . . . . . . .35
SECTION 4.11. OWNERSHIP OF PROPERTY; LIENS. . . . . . . . . . . . . . . . . .35
SECTION 4.12. NO DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 4.13. FULL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 4.14. ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . .36
SECTION 4.15. CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 4.16. MARGIN STOCK. . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 4.17. INSOLVENCY. . . . . . . . . . . . . . . . . . . . . . . . . . .37
ARTICLE V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
SECTION 5.01. INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . .38
SECTION 5.02. INSPECTION OF PROPERTY, BOOKS AND RECORDS . . . . . . . . . . .41
(i)
<PAGE>
SECTION 5.03. INTEREST CHARGES COVERAGE . . . . . . . . . . . . . . . . . . .41
SECTION 5.04. MINIMUM CONSOLIDATED TANGIBLE NET WORTH . . . . . . . . . . . .42
SECTION 5.05. MINIMUM CONSOLIDATED NET WORTH. . . . . . . . . . . . . . . . .42
SECTION 5.06. DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . .42
SECTION 5.07. LOANS OR ADVANCES . . . . . . . . . . . . . . . . . . . . . . .43
SECTION 5.08. INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . .43
SECTION 5.09. LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
SECTION 5.10. MAINTENANCE OF EXISTENCE. . . . . . . . . . . . . . . . . . . .47
SECTION 5.11. DISSOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . .47
SECTION 5.12. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS . . . . . . . . . .47
SECTION 5.13. USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . .48
SECTION 5.14. COMPLIANCE WITH LAWS; PAYMENT OF TAXES. . . . . . . . . . . . .48
SECTION 5.15. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .48
SECTION 5.16. CHANGE IN FISCAL YEAR . . . . . . . . . . . . . . . . . . . . .48
SECTION 5.17. MAINTENANCE OF PROPERTY . . . . . . . . . . . . . . . . . . . .48
SECTION 5.18. ENVIRONMENTAL NOTICES . . . . . . . . . . . . . . . . . . . . .48
SECTION 5.19. ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . .49
SECTION 5.20. ENVIRONMENTAL RELEASE . . . . . . . . . . . . . . . . . . . . .49
SECTION 5.21. MORE RESTRICTIVE AGREEMENTS; LIENS; MORE FAVORABLE PRICING. . .49
SECTION 5.22. TRANSACTIONS WITH AFFILIATES. . . . . . . . . . . . . . . . . .49
SECTION 5.23. ACQUISITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .50
SECTION 5.24 MAXIMUM CONSOLIDATED INDEBTEDNESS TO CONSOLIDATED
CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . .50
SECTION 5.25 MAXIMUM CONSOLIDATED INDEBTEDNESS TO ADJUSTED EBITDA. . . . . .50
SECTION 5.26. INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . . . . . . .50
SECTION 5.27. COVENANTS NOT TO COMPETE. . . . . . . . . . . . . . . . . . . .51
SECTION 5.28. PLEDGE OF STOCK AND GRANT OF SECURITY INTEREST IN
CERTAIN ASSETS. . . . . . . . . . . . . . . . . . . . . . . . .51
SECTION 5.29. SUBSIDIARIES' STOCK . . . . . . . . . . . . . . . . . . . . . .52
SECTION 5.30. SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . .54
SECTION 5.31. PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . .54
SECTION 5.32. ADDITIONAL NEGATIVE PLEDGE. . . . . . . . . . . . . . . . . . .55
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
SECTION 6.01. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . .56
SECTION 6.02. NOTICE OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . .60
ARTICLE VII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
SECTION 7.01. APPOINTMENT; POWERS AND IMMUNITIES. . . . . . . . . . . . . . .61
SECTION 7.02. RELIANCE BY AGENT . . . . . . . . . . . . . . . . . . . . . . .61
SECTION 7.03. DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .62
SECTION 7.04. RIGHTS OF AGENT AS A BANK . . . . . . . . . . . . . . . . . . .62
SECTION 7.05. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . .62
SECTION 7.06. CONSEQUENTIAL DAMAGES . . . . . . . . . . . . . . . . . . . . .63
SECTION 7.07. PAYEE OF NOTE TREATED AS OWNER. . . . . . . . . . . . . . . . .63
SECTION 7.08. NONRELIANCE ON AGENT AND OTHER BANKS. . . . . . . . . . . . . .63
SECTION 7.09. FAILURE TO ACT. . . . . . . . . . . . . . . . . . . . . . . . .63
SECTION 7.10. RESIGNATION OR REMOVAL OF AGENT . . . . . . . . . . . . . . . .63
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. . . .65
SECTION 8.02. ILLEGALITY. . . . . . . . . . . . . . . . . . . . . . . . . . .65
SECTION 8.03. INCREASED COST AND REDUCED RETURN . . . . . . . . . . . . . . .66
SECTION 8.04. BASE RATE LOANS SUBSTITUTED FOR EURO-DOLLAR LOANS . . . . . . .67
SECTION 8.05. COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . .67
SECTION 8.06. REPLACEMENT OF BANKS. . . . . . . . . . . . . . . . . . . . . .68
(ii)
<PAGE>
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
SECTION 9.01. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
SECTION 9.02. NO WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . .69
SECTION 9.03. EXPENSES; DOCUMENTARY TAXES . . . . . . . . . . . . . . . . . .69
SECTION 9.04. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . .69
SECTION 9.05. SETOFF; SHARING OF SETOFFS. . . . . . . . . . . . . . . . . . .70
SECTION 9.06. AMENDMENTS AND WAIVERS. . . . . . . . . . . . . . . . . . . . .71
SECTION 9.07. NO MARGIN STOCK COLLATERAL. . . . . . . . . . . . . . . . . . .72
SECTION 9.08. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . .72
SECTION 9.09. CONFIDENTIALITY.. . . . . . . . . . . . . . . . . . . . . . . .74
SECTION 9.10. REPRESENTATION BY BANKS . . . . . . . . . . . . . . . . . . . .74
SECTION 9.11. OBLIGATIONS SEVERAL . . . . . . . . . . . . . . . . . . . . . .74
SECTION 9.12. GEORGIA LAW . . . . . . . . . . . . . . . . . . . . . . . . . .75
SECTION 9.13. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . .75
SECTION 9.15. INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . .75
SECTION 9.16. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION . . . . . . . . .75
SECTION 9.17. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . .76
SECTION 9.18. CANADIAN INTEREST PROVISIONS. . . . . . . . . . . . . . . . . .76
SECTION 9.19. COLLATERAL TRUST AGREEMENT. . . . . . . . . . . . . . . . . . .76
SECTION 9.20. SPECIAL PROVISION RELATING TO THIS AMENDMENT
AND RESTATEMENT . . . . . . . . . . . . . . . . . . . . . . . .77
EXHIBIT A Form of Note
EXHIBIT B Form of Opinion of Counsel for the Borrower, TLGI and the other
Guarantors
EXHIBIT C Form of Opinion of Special Counsel for the Agent
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Notice of Borrowing
EXHIBIT F Form of Compliance Certificate
EXHIBIT G Form of Closing Certificate
EXHIBIT H Form of Guaranty
EXHIBIT I Form of Security Agreement
Schedule 1 Disclosure Schedule
Schedule 2 Applicable Margin Schedule
Schedule 3 Senior Obligations Schedule
Schedule 4 Pledged Shares Subject to Transfer Restrictions
(iii)
<PAGE>
AMENDED AND RESTATED
1994 MEIP CREDIT AGREEMENT
LOEWEN MANAGEMENT INVESTMENT CORPORATION, IN ITS CAPACITY AS AGENT FOR
LOEWEN GROUP INTERNATIONAL, INC., THE LOEWEN GROUP INC., the BANKS listed on the
signature pages hereof and WACHOVIA BANK OF GEORGIA, N.A., as Agent, are parties
to that certain 1994 MEIP CREDIT AGREEMENT, dated as of June 14, 1994, as
amended from time to time to the date hereof (the "ORIGINAL AGREEMENT"), and
hereby amend and restate the Original Agreement as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. The terms as defined in this Section 1.01
shall, for all purposes of this Agreement and any amendment hereto (except as
herein otherwise expressly provided or unless the context otherwise requires),
have the meanings set forth herein:
"ACQUISITION" means any transaction, or any series of related
transactions, by which TLGI or any of its Subsidiaries (a) acquires any going
business or all or substantially all of the assets of any firm, corporation,
limited liability company, partnership or other Person, or (as applicable) any
operation or division thereof which constitutes a going business, whether
through purchase of assets, merger or otherwise or (b) directly or indirectly
acquires (in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
partnership interests of a partnership, membership interests of a limited
liability company, or other ownership interests of any Person.
"ADDITIONAL COLLATERAL" means any collateral granted to the Collateral
Agent pursuant to the Collateral Trust Agreement as security for the Obligations
and the other Senior Obligations described therein.
"ADJUSTED EBITDA" shall mean at any time for the four-quarter period
then most recently ended the sum of (a) EBITDA of TLGI and LGII and the other
Subsidiaries for such four-quarter period determined on a consolidated basis,
PLUS (b) EBITDA for such four-quarter period of all Persons acquired by TLGI,
LGII or the other Subsidiaries during the six-month period ending on the last
day of such four-quarter period (but only to the extent the Acquisitions of such
Persons constituted Permitted Acquisitions), LESS (c) all amounts included in
the foregoing clause (b) to the extent such amounts are included in the
foregoing clause (a); PROVIDED that EBITDA of any such acquired Person shall be
determined on the basis of actual EBITDA for such acquired Person as set forth
in the financial statements of such acquired Person, which financial statements
shall be (x) audited for the portion of such four-quarter
<PAGE>
period which falls within the most recently ended fiscal year of such acquired
Person ended prior to the date on which such Person became a Subsidiary of TLGI,
LGII or another Subsidiary and unaudited for the portion of such four-quarter
period which falls after the end of the most recently ended fiscal year of such
acquired Person ended prior to the date on which such Person became a Subsidiary
of TLGI, LGII or another Subsidiary if the total consideration payable in
connection with such Acquisition is in excess of $25,000,000, and (y) unaudited
for such four-quarter period if the total consideration payable in connection
with such Acquisition is $25,000,000 or less.
"ADJUSTED LONDON INTERBANK OFFERED RATE" has the meaning set forth in
Section 2.05(b)
"AFFILIATE" means, as to any Person, (i) any Person that directly, or
indirectly through one or more intermediaries, controls such Person (a
"CONTROLLING PERSON"), (ii) any Person (other than such Person or a Subsidiary
of such Person) which is controlled by or is under common control with a
Controlling Person, or (iii) any Person (other than a Subsidiary of such Person)
of which such Person owns, directly or indirectly, 10% or more of the common
stock or equivalent equity interests. As used herein, the term "control" means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGENT" means Wachovia Bank of Georgia, N.A., a national banking
association organized under the laws of the United States of America, in its
capacity as agent for the Banks hereunder, and its successors and permitted
assigns in such capacity.
"AGENT'S LETTER AGREEMENT" means that certain letter agreement, dated
as of May 4, 1994 between the Borrower and the Agent relating to the structure
of the Loans, and certain fees from time to time payable by the Borrower to the
Agent, together with all amendments and modifications thereto.
"AGREEMENT" means this Amended and Restated 1994 MEIP Credit
Agreement, together with all amendments and supplements hereto.
"AGREEMENT ACCOUNTING PRINCIPLES" means GAAP as in effect from time to
time, applied in a manner consistent with that used in preparing the financial
statements referred to in Section 4.04.
"APPLICABLE MARGIN" means a per annum rate determined from time to
time by reference to TLGI's senior unsecured (except, if applicable, pursuant to
the Collateral Trust Agreement) and unenhanced long-term debt rating as
specified on SCHEDULE 2 hereto. Any change in the Applicable Margin resulting
from a change in TLGI's debt ratings will take effect as of the date of the debt
ratings change.
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"APPROVED SALE" means any sale of property pledged to the Collateral
Agent under the terms of the Collateral Trust Agreement (i) which is expressly
permitted by the terms of Section 5.12(b) and with respect to which TLGI and the
Borrower shall have delivered to the Agent prior to consummation of such sale a
certificate from an authorized officer certifying that both immediately before
and after giving effect to such sale, no Default shall have occurred and be
continuing, or (ii) which is otherwise approved by the Required Banks.
"ASSIGNEE" has the meaning set forth in Section 9.08(c).
"ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance
executed in accordance with Section 9.08(c) in substantially the form attached
hereto as EXHIBIT D.
"AUTHORITY" has the meaning set forth in Section 8.02.
"BANK" means each bank listed on the signature pages hereof as having
a Commitment, and its successors and assigns.
"BANK OF MONTREAL CREDIT AGREEMENT" means that certain U.S.
$750,000,000 Credit Agreement, dated as of May 15, 1996, among LGII, as
Borrower, TLGI, as a Guarantor, the Lenders parties thereto, as Lenders,
Goldman, Sachs & Co., as Documentation Agent, and the Bank of Montreal, as
Agent, together with all amendments or modifications thereto.
"BASE RATE" means for any Base Rate Loan for any day, the rate per
annum equal to the higher as of such day of (i) the Prime Rate, and (ii)
one-half of one percent (0.5%) above the Federal Funds Rate. For purposes of
determining the Base Rate for any day, changes in the Prime Rate shall be
effective on the date of each such change.
"BASE RATE LOAN" means a Loan to be made as a Base Rate Loan pursuant
to the applicable Notice of Borrowing, Section 2.02(f), or Article VIII, as
applicable.
"BORROWER" means Loewen Group International, Inc., a Delaware
corporation, acting by and through its agent, Loewen Management Investment
Corporation, and its successors and permitted assigns.
"BORROWING" means a borrowing hereunder consisting of Loans made to
the Borrower at the same time by the Banks pursuant to Article II. A Borrowing
is a "BASE RATE BORROWING" if such Loans are Base Rate Loans or a "EURO-DOLLAR
BORROWING" if such Loans are Euro-Dollar Loans.
"CANADIAN DOLLARS" and "C$" means the lawful money of Canada.
"CANADIAN GAAP" means, at any time, generally accepted accounting
principles in Canada at such time.
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<PAGE>
"CANADIAN PLAN" means a pension plan provided by TLGI or any of its
Subsidiaries incorporated under the laws of Canada (or any of its provinces).
"CAPITALIZED LEASE" of a Person means any lease of property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"CAPITAL STOCK" means, as to any Person, any nonredeemable capital
stock of such Person or any Consolidated Subsidiary of such Person, whether
common or preferred.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. Section 9601 ET SEQ. and its implementing
regulations and amendments.
"CERCLIS" means the Comprehensive Environmental Response Compensation
and Liability Inventory System established pursuant to CERCLA.
"CHANGE OF LAW" shall have the meaning set forth in Section 8.02.
"CLASS B INVESTED AMOUNT" has the meaning ascribed thereto in the
Pooling and Servicing Agreement dated as of November 15, 1994, among The First
National Bank of Atlanta, d/b/a Wachovia Bank Card Services, as seller,
Wachovia, as servicer, and Banc One Columbus, N.A., as trustee.
"CLOSING CERTIFICATE" has the meaning set forth in Section 3.01(e).
"CLOSING DATE" means June 14, 1994.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code.
"COLLATERAL" shall have the meaning ascribed thereto in the Security
Agreement and shall also include any other collateral given to secure the
Obligations, including without limitation any Additional Collateral.
"COLLATERAL AGENT" means Bankers Trust Company and its successors in
the capacity of trustee under the Collateral Trust Agreement.
"COLLATERAL TRUST AGREEMENT" means that certain Collateral Trust
Agreement, dated as of May 15, 1996, and executed by TLGI, LGII, all Pledgor
Subsidiaries and the
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<PAGE>
Collateral Agent, as such Collateral Trust Agreement may be amended or modified
and is in effect from time to time.
"COMMITMENT" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages hereof, as such amount may
be reduced from time to time pursuant to Section 2.07 or Section 6.01.
"COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.01(d).
"CONSOLIDATED CAPITALIZATION" means at any time of determination, the
sum of (a) the Consolidated Indebtedness of TLGI at such time, and (b) the
Consolidated Net Worth of TLGI at such time.
"CONSOLIDATED DISTRIBUTABLE AMOUNT" means, at any time of
determination, the sum of,
(a) $10,000,000, plus
(b) 50% of Consolidated Net Income (or if such Consolidated Net
Income is a deficit figure, then minus 100% of such deficit) determined on a
cumulative basis for the period commencing on January 1, 1996, and ending on the
date of determination, plus
(c) 33-1/3% of the aggregate amount of the net cash proceeds
received by TLGI and LGII and their respective Subsidiaries from the issuance or
sale on or after January 1, 1996 (other than sales or issuances to TLGI or LGII
or any of their respective Subsidiaries, and other than the Equity Placement and
the issuance, at any time, of preferred stock by TLGI in exchange for the First
Preferred Series C Receipts) of the capital stock of TLGI or Indebtedness of
TLGI, LGII or any of their respective Subsidiaries which has been converted into
capital stock of TLGI.
"CONSOLIDATED FIXED CHARGES" means, for any period, without
duplication, the sum of the amounts for such period of (i) Consolidated Interest
Charges and (ii) the product of (a) the aggregate amount of dividends and other
distributions paid or accrued during such period in respect of (1) preferred
stock of TLGI, LGII or any other Subsidiary (but exclusive of preferred stock
issued to TLGI or an Affiliate of TLGI) and (2) capital stock of TLGI which is
or may be redeemable or convertible into debt prior to the Termination Date and
(b) for each such dividend or distribution, a multiplier, the numerator of which
is one and the denominator of which is one minus the then current combined
federal, provincial, state and local statutory tax rate of TLGI and its
Subsidiaries determined on a consolidated basis, such multiplier to be expressed
as a decimal, PROVIDED, HOWEVER, that the multiplier in clause (ii)(b) shall be
deemed to be one if such dividend or other distribution described in the
preceding clause (ii)(a) is fully tax deductible.
"CONSOLIDATED FIXED CHARGES COVERAGE RATIO" means, with respect to a
Transaction Date (hereinafter defined), the ratio of (x) EBITDA for the full
fiscal quarter
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<PAGE>
immediately preceding the date of the transaction (the "TRANSACTION DATE")
giving rise to the need to calculate the Consolidated Fixed Charges Coverage
Ratio (such full fiscal quarter period being referred to herein as the "PRIOR
QUARTER") to (y) the amount of Consolidated Fixed Charges for the Prior Quarter.
In addition to and without limitation of the foregoing, for purposes of this
definition, "EBITDA" and "CONSOLIDATED FIXED CHARGES" shall be calculated after
giving effect on a PRO FORMA basis for the period of such calculation to,
without duplication, the incurrence of any Indebtedness of TLGI or any of its
Subsidiaries (and the application of the net proceeds thereof) during the 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. Furthermore, in
calculating "CONSOLIDATED FIXED CHARGES" for purposes of determining the
denominator (but not the numerator) of "CONSOLIDATED FIXED CHARGES 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) interest on any Indebtedness which is actually incurred on the Transaction
Date and which may optionally be determined at an interest rate based upon a
factor of a prime, base, reference or similar rate, a eurocurrency interbank
offered rate, or other rates, shall be deemed to have been in effect during the
Reference Period at the interest rate in effect on the Transaction Date. If TLGI
or any of its Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, this definition shall give effect to the incurrence of such
guaranteed Indebtedness as if TLGI or such Subsidiary had directly incurred or
otherwise assumed such guaranteed Indebtedness.
"CONSOLIDATED INDEBTEDNESS" means, at any time of determination,
without duplication, all Indebtedness of TLGI, LGII and the Subsidiaries of TLGI
and LGII at such time determined on a consolidated basis in accordance with GAAP
(to the extent GAAP is applicable thereto).
"CONSOLIDATED INTEREST CHARGES" for any period shall mean on a
consolidated basis all interest (including the interest component of Capitalized
Lease Obligations and Synthetic Lease Obligations), and all amortization of debt
discount and expense on all Indebtedness of TLGI and LGII and their Subsidiaries
for such period.
"CONSOLIDATED NET INCOME" for any period shall mean the gross revenues
of TLGI and LGII and the other Subsidiaries for such period less all expenses
and other proper charges (including taxes on income), determined on a
consolidated basis after eliminating earnings or losses attributable to
outstanding Minority Interests, but excluding in any event:
(a) any gains or losses on the sale or other disposition of
Investments or fixed or capital assets, and any taxes on such excluded
gains and any tax deductions or credits on account of any such excluded
losses;
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<PAGE>
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Subsidiary accrued prior to
the date it became a Subsidiary;
(d) net earnings and losses of any corporation (other than a
Subsidiary) substantially all the assets of which have been acquired in any
manner by TLGI or any Subsidiary, realized by such corporation prior to the
date of such acquisition;
(e) net earnings and losses of any corporation (other than a
Subsidiary) with which TLGI or a Subsidiary shall have consolidated or
which shall have merged into or amalgamated with TLGI or a Subsidiary prior
to the date of such consolidation, merger or amalgamation;
(f) net earnings of any business entity (other than a
Subsidiary) in which TLGI or any Subsidiary has an ownership interest
unless such net earnings shall have actually been received by TLGI or such
Subsidiary in the form of cash distributions;
(g) any portion of the net earnings of any Subsidiary which for
any reason is unavailable for payment of dividends to TLGI or any other
Subsidiary;
(h) earnings resulting from any reappraisal, revaluation or
write-up of assets;
(i) any deferred or other credit representing any excess of the
equity in any Subsidiary at the date of the acquisition thereof over the
amount invested in such Subsidiary;
(j) any gain or loss arising from the acquisition of any
securities of TLGI or any Subsidiary;
(k) any reversal of any contingency reserve, except to the
extent that provision for such contingency reserve shall have been made
from income arising during such period; and
(l) any other unusual or extraordinary gain.
"CONSOLIDATED NET WORTH" means, as of the date of any determination
thereof, the sum of the amount of the shareholders' equity of TLGI and LGII and
the other Subsidiaries as would be shown on the consolidated balance sheet of
TLGI and LGII and the other Subsidiaries determined on a consolidated basis in
accordance with GAAP, which in any event shall include (x) the MIPS and (y) the
amount of all preferred stock of TLGI and LGII and all Subsidiaries of TLGI and
LGII to the extent that such preferred stock is not redeemable at the option of
the holder for cash or indebtedness for any reason, and which shall exclude the
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<PAGE>
amount of all preferred stock of TLGI and LGII and all subsidiaries of TLGI and
LGII to the extent that such preferred stock is redeemable at the option of the
holder for cash or indebtedness for any reason.
"CONSOLIDATED SUBSIDIARY" means at any date, as to any Person, any
Subsidiary of such Person or other entity the accounts of which, in accordance
with GAAP, would be consolidated with those of such Person in its consolidated
financial statements as of such date.
"CONSOLIDATED TANGIBLE NET WORTH" means, as of any date of
determination thereof, as to any Person, the Consolidated Net Worth of such
Person, less the sum of the value, as set forth or reflected on the most recent
consolidated balance sheet of such Person and its Consolidated Subsidiaries,
prepared in accordance with GAAP, of:
(a) any surplus resulting from any write-up of assets subsequent
to December 31, 1995;
(b) all assets which would be treated as intangible assets for
balance sheet presentation purposes under GAAP, including without limitation
goodwill (whether representing the excess of cost over book value of assets
acquired, or otherwise), trademarks, trade names, service marks, copyrights,
patents and technologies, names and reputations, covenants not to compete,
organization or development expenses and unamortized debt discount and expense;
(c) to the extent not included in (b) of this definition, any
amount at which shares of capital stock of such Person appear as an asset on the
balance sheet of such Person and its Consolidated Subsidiaries;
(d) loans or advances to stockholders, directors, officers or
employees of such Person or its Subsidiaries; and
(e) to the extent not included in (b) of this definition,
deferred expenses.
"CONSOLIDATED TOTAL ASSETS" means, at any time, as to any Person, the
total assets of such Person and its Consolidated Subsidiaries, determined on a
consolidated basis, as set forth or reflected on the most recent consolidated
balance sheet of such Person and its Consolidated Subsidiaries, prepared in
accordance with GAAP.
"CONTINGENT OBLIGATION" of a Person means any agreement, undertaking
or arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreements, take-or-pay contract or reimbursement obligation arising pursuant to
a
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letter of credit; PROVIDED, HOWEVER, that notwithstanding the foregoing, the
WLSP Contingent Obligation shall not constitute a Contingent Obligation of TLGI,
LGII or any other Subsidiary for any purpose under this Agreement so long as the
Class B Invested Amount at least equals $12,000,000.
"CONTROLLED GROUP" means, as to any Person, all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with such Person or any of
its Subsidiaries, are treated as a single employer under Section 414 of the
Code.
"DEBT DEFERRING" means the offering by LGII during the first calendar
quarter of 1996 of not less than $200,000,000 principal amount of LGII's
long-term debt.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DEFAULT RATE" means, with respect to any Loan, on any day, the sum of
2% plus the then highest interest rate (including the Applicable Margin) which
may be applicable to any Loans hereunder (irrespective of whether any such type
of Loans are actually outstanding hereunder).
"DISTRIBUTION" in respect of any corporation shall mean (a) dividends
or other distributions on capital stock of the corporation (except dividends or
other distributions payable solely in shares of capital stock), and (b) the
redemption, retirement or acquisition of such stock or of warrants, rights or
other options to purchase such stock (except when solely in exchange for such
stock).
"DISTRIBUTION DATE" shall have the meaning set forth in Section 5.06.
"DOLLARS" or "$" means dollars in lawful currency of the United States
of America.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in Georgia are authorized by law to close.
"DUFF & PHELPS" means Duff & Phelps Credit Rating Co.
"EAGLE" means Eagle Financial Associates, LLC, a Delaware limited
liability company and a Wholly-Owned Subsidiary of TLGI.
"EBITDA" for any period shall mean the sum of (a) Consolidated Net
Income during such period, plus (to the extent deducted in determining
Consolidated Net Income), (b) all provisions for any income or similar taxes
paid or accrued by TLGI and LGII and the other Subsidiaries during such period,
(c) depreciation, depletion and amortization for such period,
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(d) other non-cash charges, and (e) Consolidated Interest Charges of TLGI and
LGII and the other Subsidiaries during such period determined in accordance with
GAAP; PROVIDED that for the fourth quarter of 1995 for all purposes under this
Agreement, EBITDA of TLGI, LGII and the other Subsidiaries on a consolidated
basis shall be deemed to be $50,028,000.
"ENVIRONMENTAL AUTHORITY" means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.
"ENVIRONMENTAL AUTHORIZATIONS" means, as to any Person, all licenses,
permits, orders, approvals, notices, registrations or other legal prerequisites
for conducting the business of such Person or any Subsidiary required by any
Environmental Requirement.
"ENVIRONMENTAL JUDGMENTS AND ORDERS" means all judgments, decrees or
orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent, or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement, whether or not incorporated in a judgment,
decree or order.
"ENVIRONMENTAL LIABILITIES" means any liabilities, whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.
"ENVIRONMENTAL NOTICES" means notice from any Environmental Authority
or by any other person or entity, of possible or alleged noncompliance with or
liability under any Environmental Requirement, including without limitation any
complaints, citations, demands or requests from any Environmental Authority or
from any other person or entity for correction of any violation of any
Environmental Requirement or any investigations concerning any violation of any
Environmental Requirement.
"ENVIRONMENTAL PROCEEDINGS" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"ENVIRONMENTAL RELEASES" means releases as defined in CERCLA or under
any applicable state or local environmental law or regulation.
"ENVIRONMENTAL REQUIREMENTS" means, as to any Person, any legal
requirement relating to health, safety or the environment and applicable to such
Person, any Subsidiary of such Person or any of their respective Properties,
including but not limited to any such requirement under CERCLA or similar state
legislation and all federal, state and local laws, ordinances, regulations,
orders, writs, decrees and common law.
"EQUITY PLACEMENT" means the offering by TLGI during the first
calendar quarter of 1996 of common shares in TLGI pursuant to which not less
than C$150,000,000 of net proceeds was realized by TLGI.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
dealings in Dollar deposits are carried out in the London interbank market.
"EURO-DOLLAR LOAN" means a Loan to be made as a Euro-Dollar Loan
pursuant to the applicable Notice of Borrowing.
"EURO-DOLLAR RESERVE PERCENTAGE" has the meaning set forth in Section
2.05(b).
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXISTING CREDIT AGREEMENTS" means (a) the $400,000,000 Amended and
Restated Multicurrency Credit Agreement dated as of May 11, 1995, among TLGI,
LGII, the financial institutions parties thereto as lenders and The First
National Bank of Chicago, as agent, as amended, supplemented or otherwise
modified prior to the date hereof, (b) the $100,000,000 Multicurrency Credit
Agreement dated as of May 11, 1995, among TLGI, LGII, the financial institutions
parties thereto as lenders and The First National Bank of Chicago, as agent, as
amended, restated, supplemented or otherwise modified prior to the date hereof
and (c) the line of credit letter agreement, dated March 18, 1996, between LGII,
as borrower, and Bank of Montreal, as lender.
"FAIR VALUE" means the value of the relevant asset determined in an
arm's-length transaction conducted in good faith between an informed and willing
buyer, under no compulsion to buy, and an informed and willing seller, under no
compulsion to sell.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be determined is not a Domestic Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Domestic
Business Day as so published on the next succeeding Domestic Business Day, and
(ii) if such rate is not so published for any day, the Federal Funds Rate for
such day shall be the average rate charged to the Agent on such day on such
transactions, as determined by the Agent.
"FINANCE SUBSIDIARY" means any captive finance Subsidiary of TLGI that
(i) buys accounts receivable or other financial assets of any Affiliate of TLGI,
(ii) makes loans or otherwise extends credit to any such Affiliates, or (iii)
succeeds to any or all of the business of LFW or Eagle or otherwise engages in
finance activities similar to the finance activities engaged in by LFW or Eagle
from time to time.
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"FINANCIAL UNDERTAKING" of a Person means (a) any repurchase
obligation or liability of such Person or any of its Subsidiaries with respect
to accounts or notes receivable sold by such Person or any of its Subsidiaries,
(b) any liability under any sale and leaseback transactions which do not create
a liability on the consolidated balance sheet of such Person and its
Subsidiaries, (c) obligations arising with respect to any other transaction
which is the functional equivalent of or takes the place of borrowing but which
does not constitute a liability on the consolidated balance sheet of such Person
and its Subsidiaries, or (d) net liabilities under any agreements, devices or
arrangements designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates applicable to
such party's assets, liabilities or exchange transactions, including, but not
limited to, interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options.
"FIRST PREFERRED SERIES C RECEIPTS" means the 8,800,000 Convertible
First Preferred Shares Series C Receipts (C$220,000,000) issued by TLGI pursuant
to the terms of that certain Prospectus, dated December 21, 1995, each such
Receipt representing entitlement to 1/10 of a 6.00% Cumulative Redeemable
Convertible First Preferred Share, Series C, of TLGI.
"GAAP" means the generally accepted accounting principles as generally
applied by TLGI as at December 31, 1995, and thereafter, Canadian GAAP until
such time as TLGI and LGII shall prepare their respective books of record and
account in accordance with U.S. GAAP, at which time and at all times thereafter,
"GAAP" shall mean U.S. GAAP.
"GUARANTIES" means, individually and collectively, (i) each of those
certain respective Guaranty Agreements, dated as of June 14, 1994, guaranteeing
payment of the obligations of the Borrower to the Banks, each being
substantially in the form of EXHIBIT H, executed and delivered by TLGI and LGII,
respectively, to the Agent, for the ratable benefit of the Banks, together with
all amendments and supplements thereto, (ii) each Pledgor Subsidiary Guaranty,
and (iii) any other guaranty agreement delivered to the Agent or the Collateral
Agent by a Guarantor for the purpose of guaranteeing the obligations of the
Borrower under any of the Loan Documents, together with all amendments and
supplements thereto.
"GUARANTORS" means, individually and collectively, (i) TLGI, (ii)
LGII, (iii) all Pledgor Subsidiaries and (iv) any other Person that may from
time to time Guarantee the obligations of the Borrower to the Agent and the
Banks.
"HAZARDOUS MATERIALS" includes, without limitation, (a) solid or
hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. Section 6901 ET SEQ. and its implementing regulations and
amendments, or in any applicable state or local law or regulation, (b)
"hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or
in any applicable state or local law or regulation, (c) gasoline, or any
other petroleum product or by-product, including, crude oil or any fraction
thereof, or (d) pesticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in
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any applicable state or local law or regulation, as each such Act, statute or
regulation may be amended from time to time.
"INDEBTEDNESS" of a Person means, without duplication, such Person's
(a) obligations for borrowed money, (b) obligations representing the deferred
purchase price of property or services (other than accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade), (c) obligations, whether or not assumed, secured by Liens on or payable
out of the proceeds or production from property now or hereafter owned or
acquired by such Person, (d) obligations which are evidenced by notes,
acceptances, or other instruments (but exclusive of notes, bills and checks
presented in the ordinary course of business by such Person to banks for
correction or deposit), (e) Capitalized Lease Obligations, (f) Synthetic Lease
Obligations, (g) Securitization Obligations, (h) Financial Undertakings, (i)
Contingent Obligations, and (j) obligations under or in connection with letters
of credit; but excluding, in any event, (x) amounts payable by such Person in
respect of covenants not to compete, and (y) with reference to TLGI, LGII and
the other Subsidiaries, all obligations of TLGI, LGII and the other Subsidiaries
of the character referred to in this definition to the extent owing to TLGI,
LGII or any other Subsidiary.
"INITIAL FUNDING DATE" shall have the meaning ascribed thereto in
Section 2.01.
"INTEREST PERIOD" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the first, third or sixth month thereafter, as
the Borrower may elect in the applicable Notice of Borrowing; PROVIDED THAT:
(a) any Interest Period (subject to paragraph (c) below) which would
otherwise end on a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall,
subject to paragraph (c) below, end on the last Euro-Dollar Business Day of
the appropriate subsequent calendar month; and
(c) no Interest Period may be selected which begins before the
Termination Date and would otherwise end after the Termination Date.
(2) with respect to each Base Rate Borrowing, the period commencing
on the date of such Borrowing and ending on the next occurring second Domestic
Business Day following the 15th day (or, if such 15th day is not a Domestic
Business Day, the next succeeding Domestic Business Day) of each calendar month;
PROVIDED, THAT, any Interest Period scheduled to end after the Termination Date
shall end on the Termination Date.
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"INVESTMENT" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade), deposit account or contribution of capital by such Person to any other
Person or any investment in, or purchase or other acquisition of, the stock,
partnership interests, notes, debentures or other securities of any other Person
made by such Person.
"INVESTMENT OPTION AGREEMENT" means any and all, as the context shall
require, of those certain Investment Option Agreements and the Purchase
Agreement (entered into with Raymond L. Loewen), each entered into on or about
June 15, 1994 between the Borrower, LGII and the participants named therein.
"LENDING OFFICE" means, as to each Bank, its office located at its
address set forth on the signature pages hereof (or identified on the signature
pages hereof as its Lending Office) or such other office as such Bank may
hereafter designate as its Lending Office by notice to the Borrower and the
Agent.
"LFW" means Loewen Finance (Wyoming) Limited Liability Company, a
Wyoming limited liability company and a Wholly-Owned Subsidiary of TLGI.
"LGII" means Loewen Group International, Inc., a Delaware corporation,
and its successors and permitted assigns.
"LGII DEBENTURES" shall mean any and all, as the context shall
require, of those certain 1994 Exchangeable Floating Rate Debentures due July
15, 2001 issued by LGII to the Borrower on or about even date herewith having an
aggregate principal balance in an amount equal to $127,670,000, together with
all replacements thereof and substitutions therefor.
"LIEN" means any lien (statutory or other), mortgage, pledge,
hypothecation, security interest, charge, assignment, deposit arrangement,
encumbrance or other security agreement or arrangement of any kind or nature
whatsoever (including, without limitation, the interest of a vendor or lessor
under any conditional sale, Capitalized Lease or other title retention
agreement).
"LOAN" means a Base Rate Loan or a Euro-Dollar Loan and "LOANS" means
Base Rate Loans or Euro-Dollar Loans, or any or all of them, as the context
shall require.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranties, the
Security Agreement, the Collateral Trust Agreement, any other document
evidencing, relating to or securing the Loans or the Guaranties, and any other
document or instrument delivered from time to time in connection with this
Agreement, the Notes, the Collateral Trust Agreement or the Loans, as such
documents and instruments may be amended or supplemented from time to time.
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"LOEWEN FINANCIAL" means Loewen Financial Corporation, a company
incorporated under the laws of Barbados, and its successors and permitted
assigns.
"LOEWEN MANAGEMENT" means Loewen Management Investment Corporation, a
Delaware corporation and a Wholly-Owned Subsidiary of LGII.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.05(b).
"MAJOR ACQUISITION" means any Acquisition of any Person which had
either (x) gross revenues in excess of $5,000,000 for the fiscal year of such
Person most recently ended at the time of closing of such Acquisition or (y)
total assets in excess of $5,000,000 as of the end of the fiscal year of such
Person most recently ended at the time of closing of such Acquisition.
"MARGIN STOCK" means "margin stock" as defined in Regulations G, T, U
or X.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, Property, financial condition, results of operations, or prospects of
TLGI, LGII and the other Subsidiaries taken as a whole, (b) the ability of TLGI,
the Borrower or LGII to perform their respective obligations under the Loan
Documents, or (c) the validity or enforceability of any of the Loan Documents or
the rights or remedies of the Agent, the Collateral Agent or the Lenders
thereunder, and "MATERIAL ADVERSE EFFECT" shall include, without limitation, the
occurrence at any time of a Material Judgment Event; PROVIDED, HOWEVER, that at
any time a determination of whether a Material Adverse Effect has occurred is to
be made under the terms of this Agreement, such determination shall be made
without taking into account the effect upon the business, Property, financial
condition, results of operations or prospects of any of TLGI, LGII or their
respective Subsidiaries at any time prior to the date of determination of (x)
O'KEEFE V. THE LOEWEN GROUP. INC., Civ. No. 91-67-423, filed in the Circuit
Court of the First Judicial District of Hinds County, Mississippi (and all
claims, litigation and proceedings pending or threatened which are related
thereto) and PROVIDENT AMERICAN CORPORATION V. THE LOEWEN GROUP, INC., No.
92-1964, filed in the United States District Court for the Eastern District of
Pennsylvania (and all claims, litigation and proceedings pending or threatened
which are related thereto) or (y) any settlements of such cases, made on or
prior to December 31, 1995, or which as of December 31, 1995 were expected to be
made after December 31, 1995.
"MATERIAL JUDGMENT EVENT" means a judgment, award or other order shall
be entered (whether or not such judgment, award or other order is bonded,
stayed, contested or appealable) against any of TLGI, LGII or any of their
respective Subsidiaries at any time when the amount of such judgment, award or
order, when added to the aggregate amount of all other judgments, awards and
orders which at such time shall have been entered against any of TLGI, LGII or
any of their respective Subsidiaries without having been finally satisfied in
full or vacated, shall be in excess of $100,000,000.
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"MINORITY INTERESTS" means any shares of stock of any class of a
Subsidiary (other than directors' qualifying shares as required by law or shares
of stock having no right to vote or receive dividends) that are not owned by
TLGI and/or one or more of its Subsidiaries. Minority Interests shall be valued
by valuing Minority Interests constituting preferred stock at the voluntary or
involuntary liquidating value of such preferred stock, whichever is greater, and
by valuing Minority Interests constituting common stock at the book value of
capital and surplus applicable thereto adjusted, if necessary, to reflect any
changes from the book value of such common stock required by the foregoing
method of valuing Minority Interests in preferred stock.
"MIPS" means the 9.45% Cumulative Monthly Income Preferred
Securities, Series A, issued by Loewen Group Capital, L.P. and the related
Series A Junior Subordinated Debentures issued by LGII and purchased by Loewen
Group Capital, L.P. with the proceeds of the sale of the 9.45% Cumulative
Monthly Income Preferred Securities, Series A.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"NEWEOL" means Neweol Finance B.V., a corporation incorporated under
the laws of the Netherlands, and its successors and permitted assigns.
"NOTE AGREEMENTS" means the agreements dated for reference October 1,
1991, September 1, 1993, and February 1, 1994, the indenture dated March 20,
1996, and any and all other warrant agreements and/or note agreements from time
to time entered into by LGII, TLGI, or either of them, and the relevant holders
of the notes issued and sold thereunder, together with all amendments and
supplements thereto.
"NOTES" means promissory notes of the Borrower, substantially in the
form of EXHIBIT A, evidencing the obligation of the Borrower to repay the Loans,
together with all amendments, consolidations, modifications, renewals, and
supplements thereto.
"NOTICE OF BORROWING" has the meaning set forth in Section 2.02.
"OBLIGATIONS" means all unpaid principal of and accrued and unpaid
interest on the Loans, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the Banks
or to any Bank, the Agent or any indemnified party hereunder arising under the
Loan Documents.
"PARTICIPANT" has the meaning set forth in Section 9.08(b).
"PARTICIPATING EMPLOYEE" means any and all, as the context shall
require, of the employees (including, without limitation, Raymond L. Loewen)
that are parties to the Investment Option Agreements.
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"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED ACQUISITION" means any Acquisition (but only to the extent
such Acquisition does not involve lines of business which are outside of the
TLGI Lines of Business, unless the Acquisition of such lines which are outside
of the TLGI Lines of Business would, at the time of the Acquisition and after
giving effect thereto, be permitted as Investments under SECTION 5.08(o)) made
by TLGI, LGII or any other Subsidiary from a willing seller or other willing
transferor where such Acquisition is not contested by such seller or transferor
at any time during the pendency of such Acquisition; PROVIDED, that (i) either
(x) TLGI or LGII has in place before it executes any binding agreement or other
binding writing by which it agrees to proceed with the Acquisition (whether or
not subject to conditions) sufficient funds which are committed and available
(which may include the availability of Loans under this Agreement (but only to
the extent no Default or Event of Default would occur after then giving effect
to the borrowing necessary to fund such Acquisition), and provided that for any
third-party commitment such commitment is otherwise permitted under this
Agreement), to fund the full amount of the cash consideration for such
Acquisition, or (y) such agreement or other writing contains a condition to
closing of TLGI or LGII based upon the ability of TLGI or LGII to raise funds
for the Acquisition, and (ii) all contractual arrangements evidencing such
Acquisition include provisions subjecting the parties to arbitration except to
the extent the Board of Directors of TLGI or LGII (or an authorized subcommittee
thereof, a majority of whose members consist of directors who are not employees
of TLGI, LGII or any other Subsidiary) shall either make an express
determination to the contrary or shall approve the Acquisition pursuant to valid
action which expressly contemplates the absence of such an arbitration provision
in the contractual arrangements evidencing such Acquisition.
"PERMITTED RECEIVABLES SECURITIZATION" means any transaction (or
series of transactions) effected by TLGI or LGII or any Subsidiary of TLGI
pursuant to which TLGI, LGII or such Subsidiary either (x) sells or otherwise
transfers (including sales or transfers using one or more SPV's), or (y) grants
a security interest in, assets of one or more of TLGI, LGII and the other
Subsidiaries consisting of Receivables and Receivables Related Assets; PROVIDED,
HOWEVER, that the aggregate Securitization Obligations (without duplication) of
TLGI, LGII, the Subsidiaries and any such SPV's in connection with all Permitted
Receivables Securitization shall not exceed $100,000,000 at any time
outstanding.
"PERSON" means an individual, a corporation, a partnership, a limited
liability company, an unincorporated association, a trust or any other entity or
organization, including, but not limited to, a government or political
subdivision or an agency or instrumentality thereof.
"PLAN" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of any
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member of the Controlled Group or (ii) maintained pursuant to a collective
bargaining agreement or any other arrangement under which more than one employer
makes contributions and to which a member of the Controlled Group is then making
or accruing an obligation to make contributions or has within the preceding 5
plan years made contributions.
"PLEDGOR SUBSIDIARIES" means, at any time, each Subsidiary of TLGI or
LGII which at such time is party to the Collateral Trust Agreement as a pledgor
of capital stock or other equity interests or, in the case of LGII, certain
assets of LGII, held by it on the terms specified in the Collateral Trust
Agreement.
"PLEDGOR SUBSIDIARY GUARANTY" mean the guaranty of each Pledgor
Subsidiary set forth in the Collateral Trust Agreement.
"PRIME RATE" refers to that interest rate so denominated and set by
Wachovia from time to time as an interest rate basis for borrowings. The Prime
Rate is but one of several interest rate bases used by Wachovia. Wachovia lends
at interest rates above and below the Prime Rate.
"PROPERTY" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"RECEIVABLES" means all rights of TLGI, LGII or any Subsidiary to
payments from Persons other than TLGI and its Subsidiaries (whether constituting
accounts, chattel paper, instruments, general intangibles or otherwise, and
including the right to payment of any interest or finance charges).
"RECEIVABLE PROGRAM ASSETS" means (a) all Receivables which are
described as being transferred by TLGI or its Subsidiaries pursuant to a
Permitted Receivables Securitization, (b) all Receivables Related Assets, and
(c) all collections (including recoveries) and other proceeds of the assets
described in the foregoing clauses.
"RECEIVABLES RELATED ASSETS" means (i) any rights arising under the
documentation governing or relating to Receivables (including rights in respect
of liens securing such Receivables and other credit support in respect of such
Receivables), (ii) any collections, recoveries and proceeds of such Receivables
and any lockboxes or accounts in which such proceeds are deposited, (iii) spread
accounts and other similar accounts (and any amounts on deposit therein)
established in connection with a Permitted Receivables Securitization, (iv) any
warranty, indemnity, dilution and other intercompany claim arising out of
documents relating to a Permitted Receivables Securitization and (v) other
assets which are customarily transferred or in respect of which security
interests are customarily granted in connection with asset securitization
transactions involving accounts receivable.
"REDEEMABLE PREFERRED STOCK" of any Person means any preferred stock
issued by such Person which is at any time prior to the Termination Date either
(i) mandatorily
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redeemable (by sinking fund or similar payments or otherwise) or (ii) redeemable
at the option of the holder thereof; PROVIDED, THAT, any such preferred stock
which is redeemable only for common stock shall not be deemed to be Redeemable
Preferred Stock for purposes hereof.
"REGIONAL PARTNER" means any Subsidiary, all of the outstanding shares
entitled to receive dividends of which, shall at the time be owned or
controlled, directly or indirectly, by TLGI or a Subsidiary of TLGI.
"REGULATION G" means Regulation G of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"REGULATION T" means Regulation T of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"REGULATION X" means Regulation X of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"REQUIRED BANKS" means at any time Banks having at least 66 2/3% of
the aggregate amount of the Commitments or, if the Commitments are no longer in
effect, Banks holding at least 66 2/3% of the aggregate outstanding principal
amount of the Notes.
"SECURED PARTIES" means the Banks, the Persons specified on SCHEDULE 3
hereto as Secured Parties, and, to the extent designated by the Borrower from
time to time in a writing delivered to the Agent and the Collateral Agent, all
other Persons who from time to time hold Senior Obligations which are secured
pursuant to the Collateral Trust Agreement; PROVIDED, HOWEVER, that no Secured
Parties (except those listed on SCHEDULE 3) shall be placed within the class to
which the Banks belong from time to time under the terms of the Collateral Trust
Agreement unless the Required Banks shall have given their affirmative approval
thereof.
"SECURITIZATION OBLIGATIONS" of a Person means the outstanding
purchaser's investment or outstanding capital or other principal equivalent that
purchasers or other investors are entitled to receive in respect of any
securitization or other sale or asset-backed financing of Receivables of such
Person or its Affiliates effected by such Person.
"SECURITY AGREEMENT" means that certain Security Agreement,
substantially in the form of EXHIBIT I, dated as of June 14, 1994, made by the
Borrower in favor of the Agent for the ratable benefit of the Banks, together
with all amendments and supplements thereto.
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"SENIOR OBLIGATIONS" means (i) the Obligations, (ii) the Indebtedness
described on SCHEDULE 3 hereto, (iii) the obligations of TLGI or LGII under any
and all interest rate or currency exchange swaps, caps, collars, floors or other
similar transactions, or options on any of the foregoing, entered into by TLGI
or LGII and having a term of at least two years from the date of entry into, and
(iv) the unpaid principal of and accrued and unpaid interest on (together with
all accrued and unpaid fees and expenses related to) Indebtedness for borrowed
money incurred by TLGI, LGII or any Subsidiary with a maturity of at least two
years from its date of issuance (or in the case of revolving Indebtedness, with
a term of at least two years from the date of execution of the documentation
governing such revolving Indebtedness), which is not secured except pursuant to
the Collateral Trust Agreement and which by its terms is not subordinated
(except as expressly provided in the Collateral Trust Agreement) to the
Obligations or any other senior indebtedness of TLGI, LGII or such Subsidiary,
respectively.
"SPV" means a corporation, trust, partnership or other special purpose
Person established by TLGI and/or its Subsidiaries solely for the purpose of
implementing a Permitted Receivables Securitization.
"STANDARD & POORS" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.
"SUBSIDIARY" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person. Unless
otherwise specified, Subsidiary shall mean a Subsidiary of TLGI.
"SUBSTANTIAL PORTION" means, as to any Person, with respect to the
Property of such Person and its Subsidiaries, Property that has a Fair Value
representing more than 5.0% of Consolidated Tangible Net Worth of such Person
determined as of the end of the fiscal quarter of such Person most recently
ended prior to the date on which such determination is made.
"SYNTHETIC LEASE" of a Person means any lease of Property by such
Person as lessee which under GAAP would or may be treated as a true operating
lease but which under tax law or commercial law is treated as secured
Indebtedness of such Person and not as a true lease.
"SYNTHETIC LEASE OBLIGATIONS" of a Person means the aggregate funded
amount under all Synthetic Leases to which such Person is party as lessee.
"TERMINATION DATE" means July 15, 2000, unless such date is otherwise
extended pursuant to Section 2.04.
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"THIRD PARTIES" means, as to any Person, all lessees, sublessees,
licensees and other users of the real property of such Person, excluding those
users of such real property in the ordinary course of such Person's business and
on a temporary basis.
"TLGI" means The Loewen Group Inc., a corporation incorporated under
the laws of the province of British Columbia, Canada, and its successors and
permitted assigns.
"TLGI LINES OF BUSINESS" means the lines of business conducted as of
the date of this Agreement by TLGI or LGII or any of their Subsidiaries and
shall include the making by TLGI, LGII or any of their Subsidiaries, from time
to time, of equity and debt investments in, or to, Persons which are engaged
primarily in any one or more of the funeral, funeral home, cemetery and
funeral-related insurance businesses.
"TRANFEREE" has the meaning set forth in Section 9.08(d).
"UNFUNDED VESTED LIABILITIES" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable benefits under such Plan exceeds (ii) the fair market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the Controlled Group to the PBGC
or the Plan under Title IV of ERISA.
"UNUSED COMMITMENT" means at any date, with respect to any Bank, an
amount equal to its Commitment less the aggregate outstanding principal amount
of its Loans.
"U.S. GAAP" means, at any time, generally accepted accounting
principles in the United States of America at such time.
"WACHOVIA" means Wachovia Bank of Georgia, N.A., a national banking
association, and its successors.
"WHOLLY-OWNED SUBSIDIARY" of a Person means (a) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (b) any partnership, association, joint venture
or similar business organization 100% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled; PROVIDED,
THAT, although a Regional Partner shall be deemed to be a Wholly-Owned
Subsidiary for purposes hereof, a Regional Partner of a Regional Partner shall
not be deemed to be a Wholly-Owned Subsidiary of such Regional Partner.
"WLSP CONTINGENT OBLIGATION" means the joint and several liability of
Neweol to repay the WLSP Zero Coupon Note.
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"WLSP ZERO COUPON NOTE" means the Zero Coupon Note in the original
principal amount of $125,000,000 (but growing to $160,273742 at its January 1,
1998 Maturity Date) dated November 1, 1994, executed by WLSP Investment Partners
I, a partnership formed under the laws of Switzerland, and payable to Wachovia.
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all terms of an accounting character used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared, in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by TLGI's independent public accountants or otherwise required by a
change in GAAP) with the most recent audited consolidated financial statements
of TLGI and its Consolidated Subsidiaries delivered to the Banks unless with
respect to any such change concurred in by TLGI's independent public accountants
or required by GAAP, in determining compliance with any of the provisions of
this Agreement or any of the other Loan Documents: (i) TLGI or the Borrower
shall have objected to determining such compliance on such basis at the time of
delivery of such financial statements, or (ii) the Required Banks shall so
object in writing within 30 days after the delivery of such financial
statements, in either of which events such calculations shall be made on a basis
consistent with those used in the preparation of the latest financial statements
as to which such objection shall not have been made (which, if objection is made
in respect of the first financial statements delivered under Section 5.01
hereof, shall mean the financial statements referred to in Section 4.04). To the
extent that for purposes of computing any financial covenant or test or making
any other accounting determination hereunder, any amount denominated in one
currency must be converted into another currency, such conversion shall be made
in a manner that accords with the currency conversion policies and procedures,
as in effect on the Closing Date, used in preparing the financial statements of
TLGI and its Consolidated Subsidiaries on the basis of which the relevant
computations or determinations are or will be made, unless the Required Banks
shall have specified an alternative basis for making such conversions.
SECTION 1.03. REFERENCES. Unless otherwise indicated, references in this
Agreement to "Articles", "Exhibits", "Schedules", "Sections" and other
Subdivisions are references to articles, exhibits, schedules, sections and other
subdivisions hereof.
SECTION 1.04. USE OF DEFINED TERMS. All terms defined in this Agreement
shall have the same defined meanings when used in any of the other Loan
Documents, unless otherwise defined therein or unless the context shall require
otherwise.
SECTION 1.05. TERMINOLOGY. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural, and the plural shall
include the singular. Titles of Articles and Sections in this Agreement are for
convenience only, and neither limit nor amplify the provisions of this
Agreement.
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ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS TO LEND. Each Bank severally agrees, on the
terms and conditions set forth herein, to make the entire amount of its
Commitment available to the Borrower on the Closing Date or at such later date
on which the conditions set forth in Section 3.01 shall have been satisfied (the
"INITIAL FUNDING DATE"), which Initial Funding Date shall occur on or before
July 15, 1994. Subsequent to the Initial Funding Date, each Bank severally
agrees, on the terms and conditions set forth herein, to make Loans to the
Borrower from time to time before the Termination Date for the purpose of
repaying outstanding Loans at the end of an Interest Period; PROVIDED, that,
immediately after each such Loan is made, the aggregate principal amount of
Loans by such Bank shall not exceed the amount of its Commitment. Each Borrowing
under this Section shall be in an aggregate principal amount of $5,000,000 or
any larger multiple of $1,000,000 (except that any such Borrowing may be in the
aggregate amount of the Unused Commitments) and shall be made from the several
Banks ratably in proportion to their respective Commitments. Within the
foregoing limits, the Borrower may borrow under this Section, repay or, to the
extent permitted by Section 2.09, prepay Loans and reborrow under this Section
(for the purpose of repaying outstanding Loans) at any time before the
Termination Date.
SECTION 2.02. METHOD OF BORROWING. (a) The Borrower shall give the Agent
notice (a "NOTICE OF BORROWING"), which shall be substantially in the form of
EXHIBIT E, prior to 12:00 P.M. (Atlanta, Georgia time) at least 1 Domestic
Business Day before each Base Rate Borrowing and at least 3 Euro-Dollar Business
Days before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be Base Rate
Loans or Euro-Dollar Loans, and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank's ratable share of
such Borrowing and such Notice of Borrowing shall not thereafter be revocable by
the Borrower.
(c) Not later than 1:00 P.M. (Atlanta, Georgia time) on the date of
each Borrowing, each Bank shall (except as provided in paragraph (d) of this
Section) make
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available its ratable share of such Borrowing, in Federal or other funds
immediately available in Atlanta, Georgia, to the Agent at its address referred
to in Section 9.01. Unless the Agent determines that any applicable condition
specified in Article III has not been satisfied, the Agent will make the funds
so received from the Banks available to the Borrower at the Agent's aforesaid
address. Unless the Agent receives notice from a Bank, at the Agent's address
referred to in or specified pursuant to Section 9.01, no later than 4:00 P.M.
(local time at such address) on the Domestic Business Day before the date of a
Borrowing stating that such Bank will not make a Loan in connection with such
Borrowing, the Agent shall be entitled to assume that such Bank will make a Loan
in connection with such Borrowing and, in reliance on such assumption, the Agent
may (but shall not be obligated to) make available such Bank's ratable share of
such Borrowing to the Borrower for the account of such Bank. If the Agent makes
such Bank's ratable share available to the Borrower and such Bank does not in
fact make its ratable share of such Borrowing available on such date, the Agent
shall be entitled to recover such Bank's ratable share from such Bank or the
Borrower (and for such purpose shall be entitled to charge such amount to any
account of the Borrower maintained with the Agent), together with interest
thereon for each day during the period from the date of such Borrowing until
such sum shall be paid in full at a rate per annum equal to the rate at which
the Agent determines that it obtained (or could have obtained) overnight Federal
funds to cover such amount for each such day during such period, PROVIDED that
any such payment by the Borrower of such Bank's ratable share and interest
thereon shall be without prejudice to any rights that the Borrower may have
against such Bank. If the Agent does not exercise its option to advance funds
for the account of such Bank, it shall forthwith notify the Borrower of such
decision.
(d) If any Bank makes a new Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Loan from such Bank, such
Bank shall apply the proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being borrowed and
the amount being repaid shall be made available by such Bank to the Agent as
provided in paragraph (c) of this Section, or remitted by the Borrower to the
Agent as provided in Section 2.10, as the case may be.
(e) Notwithstanding anything to the contrary contained in this
Agreement, no Euro-Dollar Borrowing may be made (if the Banks elected to make
Loans for a Borrowing notwithstanding Section 3.02) if a Default or an Event of
Default shall be in existence.
(f) In the event that a Notice of Borrowing fails to specify whether
the Loans comprising such Borrowing are to be Base Rate Loans or Euro-Dollar
Loans, such Loans shall be made as Base Rate Loans. If the Borrower is otherwise
entitled under this Agreement to repay any Loans maturing at the end of an
Interest Period applicable thereto with the proceeds of a new Borrowing, and the
Borrower fails to repay such Loans using its own moneys and fails to give a
Notice of Borrowing in connection with such new Borrowing, a new Borrowing shall
be deemed to be made on the date such Loans mature in an amount equal to the
principal amount of the Loans so maturing, and the Loans comprising such new
Borrowing shall be Base Rate Loans.
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(g) Notwithstanding anything to the contrary contained herein, there
shall not be more than 4 Interest Periods in effect at any given time.
SECTION 2.03. NOTES. (a) The Loans of each Bank shall be evidenced by a
single Note payable to the order of such Bank for the account of its Lending
Office in an amount equal to the original principal amount of such Bank's
Commitment.
(b) Upon receipt of each Bank's Note pursuant to Section 3.01, the
Agent shall deliver such Note to such Bank. Each Bank shall record, and prior to
any transfer of its Note shall endorse on the schedule forming a part thereof
appropriate notations to evidence the date, amount and maturity of each Loan
made by it, the date and amount of each payment of principal made by the
Borrower with respect thereto and whether such Loan is a Base Rate Loan or
Euro-Dollar Loan, and such schedule shall, absent manifest error, constitute
rebuttable presumptive evidence of the principal amount owing and unpaid on such
Bank's Note; PROVIDED that the failure of any Bank to make any such recordation
or endorsement shall not affect the obligation of the Borrower hereunder or
under the Notes or the ability of any Bank to assign its Notes. Each Bank is
hereby irrevocably authorized by the Borrower so to endorse its Notes and to
attach to and make a part of any Note a continuation of any such schedule as and
when required.
SECTION 2.04. MATURITY OF LOANS. (a) Each Loan included in any Borrowing
shall mature, and the principal amount thereof shall be due and payable, on the
last day of the Interest Period applicable to such Borrowing; PROVIDED, THAT, in
the case of a Base Rate Loan which is prepaid prior to the end of the Interest
Period (except to the extent set forth to the contrary in Section 2.09)
therefor, interest shall not be due and payable with respect to same until that
date which was scheduled to be the last day of the Interest Period applicable
thereto.
(b) Notwithstanding the foregoing, the outstanding principal amount of
the Loans, if any, together with all accrued but unpaid interest thereon, if
any, shall be due and payable on July 15, 2000, unless the Termination Date is
otherwise extended by the Banks, in their sole and absolute discretion. Upon the
written request of the Borrower, which request shall be delivered to the Agent
on or before May 15, 2000 (but not before March 15, 2000), the Banks shall have
the option (without any obligation whatsoever so to do) of extending the
Termination Date for an additional one-year period. In the event that a Bank
chooses not the extend the Termination Date for such an additional one-year
period, notice shall be given by such Bank to the Borrower and the Agent on or
before June 15, 2000; provided, that the Termination Date shall not be extended
with respect to any of the Banks unless the Required Banks are willing to extend
the Termination Date and (x) the remaining Banks shall purchase ratable
assignments (without any obligation so to do) from such terminating Bank (in the
form of an Assignment and Acceptance) in accordance with their respective
percentage of the remaining Commitment; PROVIDED, THAT, such Banks shall be
provided such opportunity (which opportunity shall allow such Banks at least 15
Domestic Business Days in which to make a decision) prior to the Borrower
finding another bank pursuant to the immediately succeeding clause (y); and,
PROVIDED, FURTHER, THAT, should any of the remaining Banks elect not to purchase
such an assignment, then, such other remaining Banks shall be entitled to
purchase an
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assignment from any Terminating Bank which includes the ratable interest that
was otherwise available to such non-purchasing remaining Bank or Banks, as the
case may be, (y) the Borrower shall find another bank, acceptable to the Agent,
willing to accept an assignment from such terminating Bank (in the form of an
Assignment and Acceptance) or (z) the Borrower shall reduce the Commitments in
an amount equal to the sum of the Commitments of all such terminating Banks.
SECTION 2.05. INTEREST RATES. (a) Each Base Rate Loan shall bear interest
on the outstanding principal amount thereof, for each day from the date such
Loan is made until it becomes due, at a rate per annum equal to the Base Rate
for such day plus the Applicable Margin. Such interest shall be payable for each
Interest Period on the last day thereof. Any overdue principal of and, to the
extent permitted by applicable law, overdue interest on any Base Rate Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the Default Rate.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the sum of the Applicable Margin plus the applicable Adjusted
London Interbank Offered Rate for such Interest Period. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than 3 months, at intervals of 3 months after the first day
thereof. Any overdue principal of and, to the extent permitted by law, overdue
interest on any Euro-Dollar Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the Default Rate.
The "ADJUSTED LONDON INTERBANK OFFERED RATE" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the
applicable London Interbank Offered Rate for such Interest Period by (ii) 1.00
minus the Euro-Dollar Reserve Percentage.
The "LONDON INTERBANK OFFERED RATE" applicable to any Euro-Dollar
Loan means for the Interest Period of such Euro-Dollar Loan, the rate per annum
determined on the basis of the offered rate for deposits in Dollars of amounts
equal or comparable to the principal amount of such Euro-Dollar Loan offered for
a term comparable to such Interest Period, which rates appear on the Reuters
Screen LIBO Page as of 11:00 A.M., London time, 2 Euro-Dollar Business Days
prior to the first day of such Interest Period, provided that (i) if more than
one such offered rate appears on the Reuters Screen LIBO Page, the "London
Interbank Offered Rate" will be the arithmetic average (rounded upward, if
necessary, to the next higher 1/100th of 1%) of such offered rates; (ii) if no
such offered rates appear on such page, the "London Interbank Offered Rate" for
such Interest Period will be the arithmetic average (rounded upward, if
necessary, to the next higher 1/100th of 1%) of rates quoted by not less than 2
major banks in New York City, selected by the Agent, at approximately 10:00
A.M., New York City time, 2 Euro-Dollar Business Days prior to the first day of
such Interest Period, for deposits in Dollars offered to leading European banks
for a period comparable to such Interest Period in an amount comparable to the
principal amount of such Euro-Dollar Loan.
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"EURO-DOLLAR RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
any Bank to United States residents). The Adjusted London Interbank Offered Rate
shall be adjusted automatically on and as of the effective date of any change in
the Euro-Dollar Reserve Percentage.
(c) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
Banks by telecopier of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(d) After the occurrence and during the continuance of a Default, the
principal amount of the Loans (and, to the extent permitted by applicable law,
all accrued interest thereon) may, at the election of the Required Banks, bear
interest at the Default Rate.
SECTION 2.06. FEES. (a) The Borrower shall pay to the Agent, for the
ratable account of each Bank, a closing fee equal to the product of (i) 0.00125
multiplied by (ii) the aggregate principal amount of the Commitments.
(b) The Borrower shall pay to the Agent, for the account and sole
benefit of the Agent, such fees and other amounts at such times as set forth in
the Agent's Letter Agreement.
SECTION 2.07. MANDATORY REDUCTION AND TERMINATION OF COMMITMENTS. (a) The
Commitments shall terminate on the Termination Date and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable on
such date.
(b) The aggregate amount of the Commitments shall be reduced by the
amount of each payment required to be made by the Borrower pursuant to Section
2.09 and payments made pursuant to Section 2.08 (except to the extent that a new
Borrowing is made on the same date as any optional prepayment made pursuant to
Section 2.08). Each such reduction shall be applied to reduce the Commitments
of the several Banks ratably.
SECTION 2.08 OPTIONAL PREPAYMENTS. (a) The Borrower may, upon at least 1
Domestic Business Days' notice to the Agent, prepay any Base Rate Borrowing in
whole at any time, or from time to time in part in amounts aggregating at least
$1,000,000 or any larger multiple of $500,000 (or any lesser amount equal to the
remaining outstanding principal balance of the Loans) by paying the principal
amount to be prepaid together, in the case of a Euro-Dollar Loan which may be
prepaid pursuant to Section 8.02, with accrued interest
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thereon to the date of prepayment. Each such optional prepayment shall be
applied to prepay ratably the Base Rate Loans of the several Banks included in
such Base Rate Borrowing.
(b) Except as provided in Section 8.02, the Borrower may not prepay
all or any portion of the principal amount of any Euro-Dollar Loan prior to the
expiration of the applicable Interest Period.
(c) Upon receipt of a notice of prepayment pursuant to this Section
2.08, the Agent shall promptly notify each Bank of the contents thereof and of
such Bank's ratable share of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.09. MANDATORY PREPAYMENTS. (a) On each date on which the
Commitments are reduced pursuant to Section 2.07, the Borrower shall repay or
prepay such principal amount of the outstanding Loans, if any (together with
interest accrued thereon), as may be necessary so that after such payment the
aggregate unpaid principal amount of the Loans does not exceed the aggregate
amount of the Commitments as then reduced.
(b) The Borrower shall repay or prepay such principal amount of the
outstanding Loans (together with interest accrued thereon) (i) immediately, with
respect to Base Rate Loans and (ii) at the end of the then current Interest
Period with respect to Euro-Dollar Loans, an amount equal to 100% of the
proceeds (x) actually received from a Participating Employee due to the exercise
of his or her rights under an Investment Option Agreement and (y) that would
have been received from a Participating Employee (who shall be presumed for
purposes hereof to have been fully vested) who forfeited his or her then
remaining rights under the relevant Investment Option Agreement if such
Participating Employee had actually exercised such rights on the date such
rights were forfeited and such rights have not been transferred to a new or
existing Participating Employee within 90 days of such forfeiture.
SECTION 2.10. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 1:00 P.M. (Atlanta, Georgia time) on the date when
due, in Federal or other funds immediately available in Atlanta, Georgia, to the
Agent at its address referred to in Section 9.01. The Agent will promptly (and
in any event within one Domestic Business Day following its receipt of same)
distribute to each Bank its ratable share of each such payment received by the
Agent for the account of the Banks.
(b) Whenever any payment of principal of, or interest on, the Base
Rate Loans or of fees hereunder shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day.
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(c) All payments of principal, interest and fees and all other amounts
to be made by the Borrower pursuant to this Agreement with respect to any Loan
or fee relating thereto shall be paid without deduction for, and free from, any
tax, imposts, levies, duties, deductions, or withholdings of any nature now or
at anytime hereafter imposed by any governmental authority or by any taxing
authority thereof or therein excluding in the case of each Bank, taxes imposed
on or measured by its net income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Bank (as the case may be) is organized
or any political subdivision thereof and, in the case of each Bank, taxes
imposed on its income, and franchise taxes imposed on it, by the jurisdiction
of such Bank's applicable Lending Office or any political subdivision thereof
(all such non-excluded taxes, imposts, levies, duties, deductions or
withholdings of any nature being "TAXES"). In the event that the Borrower is
required by applicable law to make any such withholding or deduction of Taxes
with respect to any Loan or fee or other amount, the Borrower shall pay such
deduction or withholding to the applicable taxing authority, shall promptly
furnish to any Bank in respect of which such deduction or withholding is made
all receipts and other documents, if any, evidencing such payment and shall pay
to such Bank additional amounts as may be necessary in order that the amount
received by such Bank after the required withholding or other payment shall
equal the amount such Bank would have received had no such withholding or other
payment been made. If no withholding or deduction of Taxes are payable in
respect to any Loan or fee relating thereto, the Borrower shall furnish, at such
Bank's request, a certificate from each applicable taxing authority or an
opinion of counsel acceptable to such, in either case stating that such payments
are exempt from or not subject to withholding or deduction of Taxes. If the
Borrower fails to provide such original or certified copy of a receipt
evidencing payment of Taxes or certificate(s) or opinion of counsel of
exemption, the Borrower hereby agrees to compensate such Bank for, and indemnify
them with respect to, the tax consequences of the Borrower's failure to provide
evidence of tax payments or tax exemption.
Each Bank agrees, as soon as practicable after request by the Borrower
to do so, to file all appropriate forms and take other appropriate action to
obtain a certificate or other appropriate document from the appropriate
governmental authority in the jurisdiction imposing the relevant taxes,
establishing that it is entitled to receive payments of principal and interest
under this Agreement and the Notes without deduction and free from withholding
of any Taxes imposed by such jurisdiction; PROVIDED, THAT, if it is unable, for
any reason, to establish such exemption, or to file such forms and, in any
event, during such period of time as such request for exemption is pending, the
Borrower shall nonetheless remain obligated under the terms of the immediately
preceding paragraph.
At least five Domestic Business Days prior to the first date on which
interest or fees are payable hereunder for the account of any Bank, each Bank
that is not incorporated under the laws of the United States of America, or a
state thereof, agrees that it will deliver to each of the Borrower and the Agent
two duly completed copies of United States Internal Revenue Service Form 1001 or
4224, certifying in either case that such Bank is entitled to receive payments
under this Agreement and the Notes without deduction or withholding of any
United States federal income taxes. Each Bank which so delivers a Form 1001 or
4224 further
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undertakes to deliver to each of the Borrower and the Agent two additional
copies of such form (or any successor form or related form as may from time to
time be required under applicable law) on or before the date that such form
expires (currently, three successive calendar years for Form 1001 and one
calendar year for Form 4224) or becomes obsolete or after the occurrence of any
event requiring a change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent, in each case certifying that such Bank
is entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes, unless an
event (including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Bank from duly completing and delivering any such form with respect to it and
such Bank advises the Borrower and the Agent that it is not capable of receiving
payments without any deduction or withholding of United States federal income
tax.
In the event any Bank receives a refund of any Taxes paid by the
Borrower pursuant to this Section 2.10(c), it will pay to the Borrower the
amount of such refund promptly upon receipt thereof; PROVIDED, HOWEVER, if at
any time thereafter it is required to return such refund, the Borrower shall
promptly repay to it the amount of such refund.
Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower and the Banks
contained in this Section 2.10(c) shall be applicable with respect to any
Participant, Assignee or other Transferee, and any calculations required by such
provisions (i) shall be made based upon the circumstances of such Participant,
Assignee or other Transferee, and (ii) constitute a continuing agreement and
shall survive the termination of this Agreement and the payment in full or
cancellation of the Notes.
SECTION 2.11. COMPUTATION OF INTEREST AND FEES. Interest on Base Rate Loans
(i) determined by reference to the Prime Rate, shall be computed on the basis of
a year of 365/366 days and (ii) determined by reference to the Federal Funds
Rate, shall be computed on the basis of a year of 360 days, and in each case
paid for the actual number of days elapsed (including the first day but
excluding the last day). Interest on Euro-Dollar Loans shall be computed on the
basis of a year of 360 days and paid for the actual number of days elapsed,
calculated as to each Interest Period from and including the first day thereof
to but excluding the last day thereof.
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ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. CONDITIONS TO FIRST BORROWING. The obligation of each
Bank to make a Loan on the occasion of the first Borrowing is subject to the
satisfaction of the conditions set forth in Section 3.02 and receipt by the
Agent of the following (in sufficient number of counterparts (except as to
the Notes) for delivery of a counterpart to each Bank and retention of one
counterpart by the Agent):
(a) from each of the parties hereto of either (i) a duly executed
counterpart of this Agreement signed by such party or (ii) a facsimile
transmission stating that such party has duly executed a counterpart
of this Agreement and sent such counterpart to the Agent;
(b) a duly executed Note for the account of each Bank complying
with the provisions of Section 2.03;
(c) an opinion letter (together with any opinions of local
counsel relied on therein) of Thelen, Marrin, Johnson & Bridges,
counsel for the Borrower and the Guarantors (including, without
limitation, TLGI), dated as of the Closing Date, substantially in the
form of EXHIBIT B and covering such additional matters relating to the
transactions contemplated hereby as the Agent or any Bank may
reasonably request;
(d) an opinion of Jones, Day, Reavis & Pogue, special counsel for
the Agent, dated as of the Closing Date, substantially in the form of
EXHIBIT C and covering such additional matters relating to the
transactions contemplated hereby as the Agent may reasonably request;
(e) a certificate (the "CLOSING CERTIFICATE") substantially in
the form of EXHIBIT G, dated as of the Closing Date, signed by a
principal financial officer of the Borrower, to the effect that (i) no
Default has occurred and is continuing on the date of the first
Borrowing and (ii) the representations and warranties of the Borrower
contained in Article IV are true on and as of the date of the first
Borrowing hereunder, except to the extent that any such representation
or warranty is stated to relate solely to an earlier date, in which
case such representation or warranty shall be true and correct on and
as of such earlier date;
(f) duly executed Guaranties from each of the Guarantors;
(g) a duly executed Security Agreement;
(h) a certified copy of the agency agreement (together with all
other material documents and instruments related thereto) between the
Borrower and LGII;
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(i) all documents which the Agent or any Bank may reasonably
request relating to the existence of the Borrower and the Guarantors,
the corporate authority for and the validity of this Agreement, the
Notes and the other Loan Documents, and any other matters relevant
hereto or thereto, all in form and substance satisfactory to the
Agent, including, without limitation, a certificate of incumbency of
each of the Borrower and the Guarantors, signed by the respective
Secretary or an Assistant Secretary of each of the Borrower and the
Guarantors, certifying as to the names, true signatures and incumbency
of the officer or officers of each of the Borrower and the Guarantors
authorized to execute and deliver the Loan Documents, and certified
copies of the following items for each of the Borrower and the
Guarantors: (i) the Certificate of Incorporation, (ii) the Bylaws,
(iii) a certificate of existence from the appropriate jurisdiction,
(iv) good standing certificates from the appropriate jurisdictions,
and (v) the action taken by the Board of Directors authorizing the
execution, delivery and performance of this Agreement, the Notes and
the other Loan Documents to which it is a party;
(j) a Notice of Borrowing; and
(k) receipt of the fees payable to (i) the Banks pursuant to
Section 2.06 and (ii) the Agent pursuant to the Agent's Letter
Agreement.
SECTION 3.02. CONDITIONS TO ALL BORROWINGS. The obligation of each
Bank to make a Loan on the occasion of each Borrowing is subject to the
satisfaction of the following conditions:
(a) receipt by the Agent of a Notice of Borrowing;
(b) the fact that, immediately before and after such Borrowing,
no Default shall have occurred and be continuing;
(c) the fact that the representations and warranties of the
Borrower and TLGI contained in Article IV of this Agreement and the
other Loan Documents shall be true on and as of the date of such
Borrowing, except to the extent that any such representation or
warranty is stated to relate solely to an earlier date, in which case
such representation or warranty shall be true and correct on and as of
such earlier date; and
(d) the fact that, immediately after such Borrowing, the
aggregate outstanding principal amount of the Loans of each Bank will
not exceed the amount of its Commitment.
Each Borrowing hereunder shall be deemed to be a representation and warranty
by the Borrower on the date of such Borrowing as to the truth and accuracy of
the facts specified in paragraphs (b), (c) and (d) of this Section.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower and TLGI each represent and warrant that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. Each of LGII and TLGI is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, is duly qualified to transact
business in every jurisdiction where, by the nature of its business, such
qualification is necessary, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO
CONTRAVENTION. The execution, delivery and performance by each of the
Borrower, LGII and TLGI of this Agreement, the Notes and the other Loan
Documents to which it is a party (i) are within its corporate powers, (ii)
have been duly authorized by all necessary corporate action, (iii) require no
action by or in respect of or filing with, any governmental body, agency or
official, (iv) do not contravene, or constitute a default under, any
provision of applicable law or regulation or of its certificate of
incorporation (or in the case of TLGI, its similar constituting documents) or
by-laws or of any agreement, judgment, injunction, order, decree or other
instrument binding upon it or any of its Subsidiaries, and (v) do not result
in the creation or imposition of any Lien on any asset of LGII or TLGI or any
of LGII's or TLGI's respective Subsidiaries.
SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of the Borrower, LGII and TLGI enforceable in accordance
with its terms, and the Notes and the other Loan Documents to which any of
the Borrower, LGII or TLGI is a party, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations
of the Borrower, LGII and TLGI, as applicable, enforceable in accordance with
their respective terms, PROVIDED that the enforceability hereof and thereof
is subject in each case to general principles of equity (regardless of
whether considered in equity or at law) and to bankruptcy, insolvency and
similar laws affecting the enforcement of creditors' rights generally.
SECTION 4.04. FINANCIAL INFORMATION. (a) The consolidated balance
sheet of TLGI as of December 31, 1995 and the related consolidated statements
of income, shareholders' equity and cash flows for the Fiscal Year then
ended, reported on by KPMG Peat Marwick Thorne, copies of which have been
delivered to each of the Banks, and the unaudited consolidated financial
statements of TLGI for the interim period ended March 31, 1996, copies of
which have been delivered to each of the Banks, fairly present, in conformity
with GAAP, the consolidated financial position of TLGI and its Consolidated
Subsidiaries as of such dates and their consolidated results of operations
and cash flows for such periods stated.
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(b) Since December 31, 1995 there has been no event, act,
condition or occurrence having a Material Adverse Effect.
SECTION 4.05. NO LITIGATION. There is no action, suit or proceeding
pending, or to the knowledge of the Borrower or TLGI threatened, against or
affecting any of the Borrower, LGII or TLGI or any of their respective
Subsidiaries before any court or arbitrator or any governmental body, agency
or official which could reasonably be expected to have or cause a Material
Adverse Effect or which in any manner draws into question the validity of or
could impair the ability of the Borrower, LGII, TLGI or any of the other
Guarantors to perform their respective obligations under, this Agreement, the
Notes or any of the other Loan Documents.
SECTION 4.06. COMPLIANCE WITH ERISA. (a) Each of LGII and TLGI and
each member of the Controlled Group have fulfilled their respective
obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and are in compliance in all material respects with the
presently applicable provisions of ERISA and the Code, and have not incurred
any liability to the PBGC or a Plan under Title IV of ERISA which has not
been paid in full.
(b) The Unfunded Vested Liabilities of all Plans (other than
Multiemployer Plans) do not in the aggregate exceed $1,000,000. Neither TLGI
nor LGII, nor any other member of the Controlled Group has incurred, or is
reasonably expected to incur, any withdrawal liability to Multiemployer Plans
in excess of $5,000,000 in the aggregate.
(c) Each Canadian Plan is registered under, and is in compliance
with, the Income Tax Act (Canada), applicable provincial pensions litigation
and all other applicable requirements of law and regulations and all reports,
returns and filing required to be made thereunder have been made. The
Canadian Plans have been at all times administered in accordance with their
terms and the provisions of all applicable requirements of law and
regulations. There are no unfunded liabilities under the Canadian Plans and,
without limiting the generality of the foregoing, there is no going concern
unfunded actuarial liability, past service unfunded actuarial liability or
solvency deficiency. Neither the TLGI nor any Subsidiary has received any
payment of surplus from any of the Canadian Plans, other than payments
received after January 1, 1988 with the approval of all necessary pension
regulatory and taxation authorities.
SECTION 4.07. COMPLIANCE WITH LAWS; PAYMENT OF TAXES. Each of LGII,
TLGI and their respective Subsidiaries are in compliance in all material
respects with all applicable laws, regulations and similar requirements of
governmental authorities, except where such compliance is being contested in
good faith through appropriate proceedings. There have been filed on behalf
of each of LGII, TLGI and their respective Subsidiaries all Federal, state
and local income, excise, property and other tax returns which are required
to be filed by them and all taxes due pursuant to such returns or pursuant to
any assessment received by or on behalf of LGII, TLGI or any such Subsidiary
have been paid. The charges, accruals and reserves on the
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books of each of LGII, TLGI and their respective Subsidiaries in respect of
taxes or other governmental charges are, in the opinion of TLGI and the
Borrower, adequate.
SECTION 4.08. SUBSIDIARIES. Each of LGII's and TLGI's Subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, is duly qualified to transact
business in every jurisdiction where, by the nature of its business, such
qualification is necessary, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted, except, with respect to any Subsidiary of TLGI
other than LGII, where the failure to be in good standing, qualified to do
business or have such governmental licenses, authorizations, consents and
approvals could not reasonably be expected to have or cause a Material
Adverse Effect. Neither LGII nor TLGI has any Subsidiaries except for those
Subsidiaries listed on SCHEDULE 1, which accurately sets forth each such
Subsidiary's complete name and jurisdiction of incorporation. All of the
issued and outstanding shares of capital stock of the Subsidiaries of TLGI
and LGII listed on SCHEDULE 1 hereto, together with the most recent update,
if any, delivered pursuant to Section 5.01(l), have been duly authorized and
issued and are fully paid and non-assessable and, except as set forth in
Section 5.29, have been duly and validly pledged under the Collateral Trust
Agreement and delivered to the Collateral Agent pursuant to the terms of the
Collateral Trust Agreement.
SECTION 4.09. INVESTMENT COMPANY ACT. Neither the Borrower, LGII or
TLGI, nor any of their respective Subsidiaries, is an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
SECTION 4.10. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the
Borrower, LGII or TLGI, nor any of their respective Subsidiaries, is a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act
of 1935, as amended.
SECTION 4.11. OWNERSHIP OF PROPERTY; LIENS. Each of TLGI and its
Consolidated Subsidiaries (including, without limitation, LGII) has title to
its Properties sufficient for the conduct of its business, and none of such
property is subject to any Lien except as permitted in Section 5.09.
SECTION 4.12. NO DEFAULT. Neither TLGI nor any of its Consolidated
Subsidiaries (including, without limitation, LGII) is in default under or
with respect to any agreement, instrument or undertaking to which it is a
party or by which it or any of its property is bound which could have or
cause a Material Adverse Effect. No Default or Event of Default has occurred
and is continuing.
SECTION 4.13. FULL DISCLOSURE. No written information, exhibit or
report prepared and furnished by TLGI, LGII, the Borrower or any other
Subsidiary to the Agent or to any Bank in connection with the negotiation of,
or compliance with, the Loan Documents, taken as a whole, contained any
material misstatement of fact or omitted to state a material fact
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or any fact necessary to make the statements contained therein not
misleading. The Borrower, LGII and/or TLGI have disclosed to the Banks in
writing any and all facts which could reasonably be expected to have or cause
a Material Adverse Effect.
SECTION 4.14. ENVIRONMENTAL MATTERS. (a) Neither LGII nor TLGI, nor
any of their respective Subsidiaries, is subject to any Environmental
Liability which could reasonably be expected to have or cause a Material
Adverse Effect and neither LGII nor TLGI, nor any of their respective
Subsidiaries, has been designated as a potentially responsible party under
CERCLA or under any state statute similar to CERCLA. None of the Properties
owned by LGII, TLGI or any of their respective Subsidiaries has been
identified on any current or proposed (i) National Priorities List under 40
C.F.R. Section 300, (ii) CERCLIS list or (iii) any list arising from a state
statute similar to CERCLA.
(b) No Hazardous Materials have been or are being used,
produced, manufactured, processed, treated, recycled, generated, stored,
disposed of, managed or otherwise handled at, or shipped or transported to or
from any of the Properties owned by LGII, TLGI or any of their respective
Subsidiaries or are otherwise present at, on, in or under the Properties
owned by LGII, TLGI or any of their respective Subsidiaries, or, to the best
knowledge of the Borrower and TLGI, at or from any adjacent site or facility,
except for Hazardous Materials, such as cleaning solvents, pesticides and
other materials used, produced, manufactured, processed, treated, recycled,
generated, stored, disposed of, managed, or otherwise handled in minimal
amounts in the ordinary course of business in compliance with all applicable
Environmental Requirements.
(c) Each of LGII, TLGI and their respective Subsidiaries has
procured all Environmental Authorizations necessary for the conduct of its
business, and is in compliance with all Environmental Requirements in
connection with the operation of the Properties owned by LGII, TLGI or any of
their respective Subsidiaries, as applicable, and LGII's, TLGI's and each of
their respective Subsidiary's respective businesses.
SECTION 4.15. CAPITAL STOCK. All Capital Stock, debentures, bonds,
notes and all other securities of LGII and TLGI and their respective
Subsidiaries presently issued and outstanding are validly and properly issued
in accordance with all applicable laws, including, but not limited to, the
"Blue Sky" laws of all applicable states and the federal securities laws.
Except as set forth in Section 4.08 hereof, the issued shares of Capital
Stock of each of LGII's and TLGI's Wholly-Owned Subsidiaries are owned by
LGII or TLGI, as applicable, free and clear of any Lien or adverse claim. At
least a majority of the issued shares of Capital Stock of each of LGII's and
TLGI's other Subsidiaries (other than Wholly-Owned Subsidiaries) is owned by
the LGII or TLGI, as applicable, free and clear of any Lien or adverse claim.
SECTION 4.16. MARGIN STOCK. Neither LGII, TLGI nor any of their
respective Subsidiaries is engaged principally, or as one of its important
activities, in the business of purchasing or carrying any Margin Stock, and
no part of the proceeds of any Loan will be used to purchase or carry any
Margin Stock or to extend credit to others for the purpose of
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purchasing or carrying any Margin Stock, or be used for any purpose which
violates, or which is inconsistent with, the provisions of Regulation X.
SECTION 4.17. INSOLVENCY. After giving effect to the execution and
delivery of the Loan Documents and the making of the Loans under this
Agreement, neither the Borrower nor any of the Guarantors (including, without
limitation, TLGI and LGII) will be "insolvent," within the meaning of such
term as defined in Section 101 of Title 11 of the United States Code or
Section 2 of the Uniform Fraudulent Transfer Act, or any other applicable
state law pertaining to fraudulent transfers, as each may be amended from
time to time, or be unable to pay its debts generally as such debts become
due, or have an unreasonably small capital to engage in any business or
transaction, whether current or contemplated.
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ARTICLE V
COVENANTS
Each of the Borrower and TLGI agrees that, so long as any Bank has any
Commitment hereunder or any amount payable hereunder or under any Note
remains unpaid:
SECTION 5.01. INFORMATION. The Borrower and/or TLGI will deliver to
each of the Banks:
(a) as soon as available and in any event within 120 days after
the end of each fiscal year of TLGI, a consolidated balance sheet of TLGI and
its Consolidated Subsidiaries as of the end of such fiscal year and the
related consolidated statements of income, shareholders' equity and cash
flows for such fiscal year, setting forth in each case in comparative form
the figures for the previous fiscal year, all audited by independent public
accountants of nationally recognized standing, with such audit to be free of
exceptions and qualifications not acceptable to the Required Banks;
(b) as soon as available and in any event within 120 days after
the end of each fiscal year of LGII, a consolidated balance sheet of LGII and
its Consolidated Subsidiaries as of the end of such fiscal year and the
related consolidated and consolidating statements of income, shareholders'
equity and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all such
consolidated statements having been audited by independent public accountants
of nationally recognized standing, with such audit to be free of exceptions
and qualifications not acceptable to the Required Banks;
(c) as soon as available and in any event within 60 days after
the end of each of the first 3 fiscal quarters of each fiscal year of TLGI, a
consolidated balance sheet of TLGI and its Consolidated Subsidiaries as of
the end of such fiscal quarter and the related statement of income and
statement of cash flows for such fiscal quarter and for the portion of the
fiscal year ended at the end of such fiscal quarter, setting forth in each
case in comparative form the figures for the corresponding fiscal quarter and
the corresponding portion of the previous fiscal year, all certified (subject
to normal year-end adjustments) as to fairness of presentation, GAAP and
consistency by the chief financial officer or the chief accounting officer of
TLGI;
(d) simultaneously with the delivery of each set of financial
statements referred to in paragraphs (a) and (c) above, a certificate,
substantially in the form of EXHIBIT F (a "COMPLIANCE CERTIFICATE"), of the
chief financial officer or the chief accounting officer of LGII or TLGI (i)
setting forth in reasonable detail the calculations required to establish
whether LGII and TLGI were in compliance with the requirements of Sections
5.03 through 5.09, inclusive, 5.12, and 5.24 through 5.27, inclusive, on the
date of such financial statements and (ii) stating whether any Default exists
on the
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date of such certificate and, if any Default then exists, setting forth the
details thereof and the action which LGII or TLGI, as applicable, is taking
or proposes to take with respect thereto;
(e) simultaneously with the delivery of each set of annual
financial statements referred to in paragraph (a) and (b) above, a statement
of the firm of independent public accountants which reported on such
statements, in accordance with the standards of Section 8600 of the CICA
Handbook, to the effect that under any of Sections 2.09, 5.03 through 5.09
inclusive, 5.21, 5.22, or 5.24 through 5.27, inclusive, nothing has come to
their attention to cause them to believe that any Default existed on the date
of such financial statements;
(f) within 5 Domestic Business Days after either LGII or TLGI
becomes aware of the occurrence of any Default, a certificate of the chief
financial officer or the chief accounting officer of LGII or TLGI, as
applicable, setting forth the details thereof and the action which LGII or
TLGI, as applicable, is taking or proposes to take with respect thereto;
(g) promptly upon the sending thereof to the shareholders of TLGI
generally, copies of all financial statements, reports and proxy statements
so sent;
(h) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and annual, quarterly or monthly reports which
LGII and/or TLGI shall have filed with the Securities and Exchange Commission
(or any other securities commission, exchange or governing authority
therefor);
(i) if and when any member of the Controlled Group of LGII and/or
TLGI (i) gives or is required to give notice to the PBGC of any "reportable
event" (as defined in Section 4043 of ERISA) with respect to any Plan which
might constitute grounds for a termination of such Plan under Title IV of
ERISA, or knows that the plan administrator of any Plan has given or is
required to give notice of any such reportable event, a copy of the notice of
such event given or required to be given to the PBGC; (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA, a copy of
such notice; or (iii) receives notice from the PBGC under Title IV of ERISA
of an intent to terminate or appoint a trustee to administer any Plan, a copy
of such notice; PROVIDED, THAT, none of the foregoing shall require notice if
the occurrence of same could not reasonably be expected to give rise to a
Default;
(j) within 180 days after the end of each of TLGI's fiscal years,
a copy of the management letter prepared by TLGI's accountants in connection
with the preparation of TLGI's consolidated financial statements;
(k) so long as the WLSP Contingent Obligation or the WLSP Zero
Coupon Note remains outstanding, the Borrower shall deliver, or cause Neweol
to deliver, to
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each of the Banks, within 30 days following the end of each calendar quarter,
a report specifying the Class B Invested Amount as of the end of such
calendar quarter;
(l) together with the financial statements delivered pursuant to
Section 5.01(a), a current list of all of the Subsidiaries of each of TLGI
and LGII, setting forth their respective jurisdictions of incorporation, the
percentage of their respective capital stock owned by TLGI, LGII and the
other Subsidiaries, and the net worth (after adjustments for intercompany
balances) determined by TLGI on a consistent basis for each such Subsidiary
as of a date reasonably proximate to the date of such list (which list shall
note with respect to each Subsidiary any changes of greater than $5,000,000
in such net worth of such Subsidiary since the date of the last list of
Subsidiaries delivered pursuant to this Section 5.01(l));
(m) together with the financial statements delivered pursuant to
Sections 5.01(a), (b) and (c), a summary prepared by an authorized officer of
TLGI setting forth the status of all Acquisitions by TLGI, LGII or any of
their respective Subsidiaries for which (i) a letter of intent (or other
documentation evidencing the intent of the parties to proceed with such
Acquisition, including, without limitation, a definitive purchase agreement)
has been executed by the parties during the period covered by such financial
statements and continuing through the date of such summary, or (ii) such
Acquisition has closed or otherwise been consummated during the period
covered by such financial statements and continuing through the date of such
summary, which summary shall include (x) a statement of the aggregate
consideration paid to date and expected to be paid at any time thereafter in
connection with such Acquisitions, calculated separately for the matters
described in the foregoing clauses (i) and (ii), and (y) a list of all
Acquisitions for which a provision subjecting the parties to arbitration was
not contained in the documentation governing the Acquisition;
(n) together with the financial statements delivered pursuant to
Sections 5.01(a), (b) and (c), a detailed summary prepared by an authorized
officer of TLGI (x) specifying all committed lines of credit to which TLGI,
LGII or any Subsidiary of TLGI or LGII are a party as of the date of such
summary, identifying the total commitment and total outstandings under each
such line of credit and the purposes thereof, and stating whether such lines
of credit are purportedly secured under the terms of the Collateral Trust
Agreement or otherwise, and (y) for each Finance Subsidiary, identifying each
Finance Subsidiary which has been formed since the date of the last summary
delivered pursuant to this Section 5.01(n), and describing any material
changes in the capitalization, assets, or business and activities of each
Finance Subsidiary since the date of the last summary delivered pursuant to
this Section 5.01(n);
(o) promptly upon the occurrence thereof, written notice of the
occurrence of (i) any payment, or any group of payments (whether or not
related), whether in settlement or otherwise, in excess of $50,000,000, which
at any time are expected to be made by TLGI, LGII or any Subsidiary of either
of them in connection with any
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litigation, arbitration, governmental investigation, proceeding or inquiry,
whether individually or in the aggregate (it being understood that TLGI and
LGII, in lieu of separately identifying each such expected payment, may group
such payments to the extent deemed necessary to protect confidentiality), (ii)
any development, financial or otherwise, which could reasonably be expected to
have a Material Adverse Effect, and (iii) any change in the practices and
procedures of TLGI and LGII in effect on the date of the Bank of Montreal Credit
Agreement regarding acquisitions and litigation (which practices and procedures
have been described prior to the date of this Agreement by representatives of
TLGI and LGII to the Agent and the Banks) which notice, in each of the foregoing
cases, shall be given promptly and in any event within five Business Days after
TLGI, LGII or the relevant Subsidiary becomes aware of the payment, development,
determination or change;
(p) together with the financial statements delivered pursuant to Sections
5.01(a), (b) and (c), TLGI and LGII shall provide a report, prepared as of the
last day of each calendar quarter, (x) identifying in reasonable detail all
litigation, arbitrations, governmental investigations and proceedings pending
or, to the knowledge of any authorized officer, threatened against or affecting
TLGI, LGII, or any other Subsidiary for which the claim or matter involves an
amount in excess of $1,000,000, and (y) for all such litigation, arbitrations,
governmental investigations and proceedings for which the claim or matter
involves an amount in excess of $10,000,000, briefly summarizing the matter
(including whether resolution of the matter could come before a jury),
identifying the relief sought and the amount of the claim, and specifying
whether the claim is covered by insurance.
(q) from time to time such additional information regarding the financial
position or business of LGII, TLGI and their respective Subsidiaries as the
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. INSPECTION OF PROPERTY, BOOKS AND RECORDS. Each of LGII and
TLGI will (i) keep, and cause each of its respective Subsidiaries to keep,
proper books of record and account in which full, true and correct entries in
conformity with GAAP shall be made of all dealings and transactions in relation
to its business and activities; and (ii) permit, and cause each of its
respective Subsidiaries to permit, representatives of any Bank at such Bank's
expense prior to the occurrence of a Default and at the Borrower's expense after
the occurrence of a Default to visit and inspect any of their respective
properties, to examine and make abstracts from any of their respective books and
records and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants. Each of
the Borrower and TLGI agrees to cooperate and assist in such visits and
inspections, in each case at such reasonable times and as often as may
reasonably be desired.
SECTION 5.03. INTEREST CHARGES COVERAGE. TLGI will at all times maintain
(a) a ratio of EBITDA for the most recently ended period of four consecutive
fiscal quarters to Consolidated Interest Charges for such period of four
consecutive fiscal quarters of not less
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than 2.75 to 1.00 and (b) a ratio of EBITDA for the most recently ended fiscal
quarter to Consolidated Interest Charges for such fiscal quarter of not less
than 1.50 to 1.00.
SECTION 5.04. MINIMUM CONSOLIDATED TANGIBLE NET WORTH. TLGI will maintain
at all times a Consolidated Tangible Net Worth (excluding the cumulative effect
of currency translation adjustments) of at least $150,000,000.
SECTION 5.05. MINIMUM CONSOLIDATED NET WORTH. TLGI will maintain at all
times a Consolidated Net Worth (excluding the cumulative effect of currency
translation adjustments) of at least the sum of:
(a) Consolidated Net Worth (excluding the cumulative effect of
currency translation adjustments) as of December 31, 1995, plus
(b) the net proceeds to LGII from consummation of the Equity
Placement and the issuance by TLGI from time to time of preferred stock in
exchange for the First Preferred Series C Receipts pursuant to the terms
thereof, plus
(c) the sum of 50% of Consolidated Net Income for each fiscal
quarter ended after January 1, 1996 (but only to the extent that, in the
case of any such fiscal quarter, Consolidated Net Income for such fiscal
quarter is at least $1.00), plus
(d) 66-2/3% of the aggregate amount of the net cash proceeds
received by TLGI and LGII and the other Subsidiaries from the issuance or
sale on and after January 1, 1996 (other than sales or issuances to TLGI or
LGII or any other Subsidiary and other than pursuant to the Equity
Placement or in connection with the issuance by TLGI from time to time of
preferred stock in exchange for the First Preferred Series C Receipts
pursuant to the terms thereof) of Capital Stock of TLGI or Indebtedness of
TLGI, LGII or any other Subsidiary which has been converted into capital
stock of TLGI.
SECTION 5.06. DISTRIBUTIONS. TLGI will not, nor will it permit LGII or any
other Subsidiary to, declare or make or incur any liability to make any
Distributions, except: (i) dividends payable in the Capital Stock of TLGI, LGII
or such other Subsidiary; (ii) Distributions to TLGI, a Regional Partner or a
Wholly-Owned Subsidiary of TLGI or a Regional Partner; (iii) Distributions made
by an SPV to TLGI, LGII or a Subsidiary in connection with a Permitted
Receivables Securitization; and (iv) other Distributions (in addition to those
described in the clauses (i), (ii) and (iii)) so long as, immediately after
giving effect to the declaration thereof in the case of dividends or the making
thereof in the case of other proposed Distributions (the date of such event
being referred to hereinafter as the "DISTRIBUTION DATE"), (x) the aggregate
amount of Restricted Payments declared in the case of dividends or made in the
case of other Restricted Payments pursuant to this clause (iv), during the
period from and after January 1, 1996, to and including the Distribution Date
would not exceed the Consolidated Distributable Amount as of the Distribution
Date, and (y) no Default shall have occurred and be continuing.
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For purposes of making the foregoing computations, the amount of any
Distribution declared, paid or distributed in property or assets of TLGI or LGII
or any other Subsidiary shall be deemed to be the greater of the book value or
Fair Value (as determined in good faith by the board of directors of TLGI) of
such property or assets as of the date of declaration in the case of a dividend
and the date of payment in the case of any other Distribution.
SECTION 5.07. LOANS OR ADVANCES. Neither TLGI nor any of its
Subsidiaries (including, without limitation, LGII) shall make loans or advances
to any Person except: (i) loans or advances to employees not exceeding
$5,000,000 in the aggregate principal amount outstanding at any time, in each
case made in the ordinary course of business and consistent with practices
existing on the Closing Date, (ii) deposits required by government agencies or
public utilities, and (iii) loans or advances which constitute Investments
permitted by Section 5.08; provided that after giving effect to the making of
any loans, advances or deposits permitted by this Section, no Default shall be
in existence.
SECTION 5.08. INVESTMENTS. TLGI and LGII will not, nor will either permit
any of its Subsidiaries to, make or suffer to exist any Investment or commitment
therefor except:
(a) Investments (i) in existence as of the close of business
on December 31, 1995, and described in SCHEDULE 1 hereto or (ii) arising on
or after January 1, 1996, but only to the extent expressly described on
SCHEDULE 1 hereto;
(b) Investments by TLGI or LGII or any Subsidiary in and to (i)
any Subsidiary (other than Loewen Management or any other Subsidiary not
engaged in one or more of the TLGI Lines of Business), including any
Investment in a corporation which, after giving effect to such Investment,
will become a Subsidiary (other than as specified in the foregoing
parenthetical), (ii) Loewen Management, but only to the extent of the
aggregate initial par value of the capital stock thereof issued to LGII
upon the incorporation of Loewen Management, and (iii) any other Person
provided that such Person is engaged primarily in one or more of the TLGI
Lines of Business;
(c) Investments in property or assets to be used in the
ordinary course of business of TLGI and LGII and the other Subsidiaries
conducted as described in Section 5.10 of this Agreement;
(d) Investments in commercial paper maturing in 270 days or
less from the date of issuance which, at the time of acquisition by TLGI or
LGII or any other Subsidiary, is accorded one of the two highest commercial
paper ratings by Standard & Poor's or Moody's or any other United States
nationally recognized credit rating agency of similar standing;
(e) Investments in direct obligations of the United States, any
agency or instrumentality of the United States, the federal government of
Canada or any agency or instrumentality of the federal government of
Canada, the payment or
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guarantee of which constitutes a full faith and credit obligation of the
United States or Canada, as the case may be, in either case maturing in
three years or less from the date of acquisition thereof;
(f) Investments in direct obligations of any Province of Canada
or any municipality within a Province of Canada or any State or
municipality within the United States maturing in three years or less from
the date of acquisition thereof which, in any such case, at the time of
acquisition by TLGI or LGII or any other Subsidiary, is accorded one of the
two highest long-term debt ratings by Standard & Poor's or Moody's or any
other United States nationally recognized credit rating agency of similar
standing;
(g) Investments in certificates of deposit or bankers'
acceptances with a maturity of under one year issued by a bank or trust
company organized under the laws of the United States or any State thereof,
Canada or any Province thereof, Japan or any member of the European Union,
having capital, surplus and undivided profits aggregating at least
$100,000,000 and having a short-term unsecured debt rating of at least
"P-1" by Moody's or "A-l" by Standard & Poor's;
(h) Investments in money market and auction rate preferred
stock issued by Persons organized under the laws of the United States of
America or any State thereof or of Canada or any Province thereof rated "A"
or better by Standard & Poor's or "A" or better by Moody's, or an
equivalent rating by any other United States nationally recognized credit
rating agency of similar standing;
(i) Investments in mutual funds investing in assets described
in clause (d), (e), (f) or (g) above which in any such case would be
classified as a current asset in accordance with U.S. GAAP and which are
managed by a fund manager of recognized United States or Canadian national
standing and having share capital of at least $100,000,000 or having at
least $250,000,000 under management;
(j) Investments of funds received by TLGI or LGII or any other
Subsidiary in the ordinary course of business, which funds are required to
be held in trust for the benefit of others by TLGI, LGII or such
Subsidiary, as the case may be, and which funds do not constitute assets or
liabilities of TLGI or LGII or any other Subsidiary;
(k) Investments of funds by any Subsidiary which is engaged in
the insurance business which are invested and managed by such Subsidiary in
the ordinary course of its regulated insurance business and insurance
operations;
(l) Investments constituting Permitted Acquisitions;
(m) Investments in promissory notes issued and options granted
by purchasers of cemetery properties sold by the Borrower or any of its
Affiliates (but
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only to the extent permitted by Section 5.12(b)(v)); PROVIDED, HOWEVER,
that such promissory notes are issued and such options are granted on
commercially reasonable terms and the aggregate outstanding principal
amount of such promissory notes at any time shall not exceed $100,000,000,
and PROVIDED, FURTHER, that for each such Investment, the related sale and
such Investment have not been challenged, or threatened to be challenged,
by any Governmental Authority;
(n) Investments in SPV's and in Receivables Program Assets in
connection with Permitted Receivables Securitizations; and
(o) other Investments (in addition to those permitted by
clauses (a) through (n) above) so long as immediately after giving effect
to the making of any such Investment the aggregate amount of all
outstanding Investments made pursuant to this Section 5.08(o) would not
exceed 3% of Consolidated Net Worth;
PROVIDED, HOWEVER, that notwithstanding any provision to the contrary herein,
none of TLGI, LGII or any Subsidiary of either shall make any Investment in any
Person effectively located outside of the United States or Canada if after
giving effect to such Investment, the aggregate amount of Investments of TLGI,
LGII or any Subsidiary of either in any Persons effectively located outside of
the United States or Canada would exceed an amount equal to 5% of Consolidated
Net Worth. For the purpose of any computation required to be made pursuant to
this Agreement, Investments shall be valued at lower of the cost or Fair Value
thereof as of the date of computation.
SECTION 5.09. LIENS. TLGI and LGII will not, nor will either permit any
Subsidiary of either to, create, incur or suffer to exist any Lien in, of or on
the Property of TLGI, LGII or such Subsidiary, as applicable, except:
(a) Liens granted to the Agent or the Collateral Agent for the
benefit of the Banks or the other Secured Parties pursuant to the Loan
Documents;
(b) Liens for taxes, assessments or governmental charges or
levies on its Property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good
faith and by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books;
(c) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due
or which are being contested in good faith by appropriate proceedings and
for which adequate reserves shall have been set aside on its books;
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(d) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions or other social
security or retirement benefits, or similar legislation except ERISA;
(e) utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not
in any material way affect the same or interfere with the use thereof in
the business of TLGI, LGII or any other Subsidiary;
(f) Liens existing as of the close of business on December 31,
1995, and described in SCHEDULE 1 hereto or (ii) created or incurred on or
after January 1, 1996, but only to the extent expressly described on
SCHEDULE 1 hereto;
(g) Liens created or incurred after December 31, 1995, given to
secure Indebtedness incurred or assumed by TLGI or any Subsidiary of TLGI
in connection with the acquisition or construction of property or assets
useful and intended to be used in carrying on the business of TLGI or such
Subsidiary, including Liens existing on such property or assets at the time
of acquisition or construction thereof or at the time of acquisition by
TLGI or such Subsidiary of an interest in any business entity then owning
such property or assets, whether or not such existing Liens were given to
secure the consideration for the property or assets to which they attach,
subject to the requirements that (i) the Lien shall attach solely to the
fixed assets acquired or purchased by TLGI or such Subsidiary, (ii) the
Lien shall have been created or incurred within 180 days after the date of
acquisition or completion of construction of such property or assets, and
(iii) all such Indebtedness shall have been incurred or assumed within the
limitations provided in Section 5.26, and provided that Liens shall be
permitted under this Section 5.09(g) only to the extent that the aggregate
amount of Indebtedness of TLGI and its Subsidiaries outstanding at any time
which is secured by Liens described in either Section 5.09(f) or this
Section 5.09(g) shall not exceed 7.5% of Consolidated Net Worth at such
time;
(h) Liens on Receivables and Receivables Related Assets arising
in connection with any Permitted Receivables Securitization;
(i) Liens granted to TLGI, a Regional Partner or a Wholly-Owned
Subsidiary of TLGI or a Regional Partner by any Subsidiary (other than
LGII);
(j) in addition to Liens permitted by the preceding clause (g),
Liens given to secure Indebtedness of TLGI, LGII or any Subsidiary of TLGI,
PROVIDED that the aggregate amount of Indebtedness outstanding at any time
which is secured thereby shall not exceed $5,000,000; and
(k) any extension, renewal or replacement of any Lien permitted
by the preceding clauses (f) and (g) hereof in respect of the same property
or assets theretofore
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subject to such Lien in connection with the extension, renewal or refunding
of the Indebtedness secured thereby; PROVIDED that (i) such Lien shall
attach solely to the same property or assets and (ii) such extension,
renewal or refunding of such Indebtedness shall be without increase in the
principal remaining unpaid as of the date of such extension, renewal or
refunding.
SECTION 5.10. MAINTENANCE OF EXISTENCE. Each of LGII and TLGI shall, and
shall cause each of their respective Subsidiaries to, maintain its corporate
existence and carry on its business in substantially the same manner and in
substantially the same fields as such business is now carried on and maintained
(provided, that Subsidiaries of TLGI (other than LGII or Loewen Management) may
be dissolved from time to time so long as their assets shall be distributed to
other Subsidiaries of TLGI).
SECTION 5.11. DISSOLUTION. Neither LGII, TLGI nor any of their respective
Subsidiaries shall suffer or permit dissolution or liquidation either in whole
or in part (provided, that Subsidiaries of TLGI (other than LGII or Loewen
Management) may be dissolved from time to time so long as their assets shall be
distributed to other Subsidiaries of TLGI) or redeem or retire any shares of its
own stock or that of any of its Subsidiaries, except through corporate
reorganization to the extent permitted by Section 5.12.
SECTION 5.12. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. (a) TLGI and
LGII will not, nor will either permit any Subsidiary of it to, merge, amalgamate
or consolidate with or into any other Person, except that (i) a Subsidiary
(other than LGII) may merge with TLGI, LGII, a Regional Partner or a
Wholly-Owned Subsidiary of TLGI or a Regional Partner, subject to the further
condition that if TLGI or LGII is a party to any such permitted merger, TLGI or
LGII, as applicable, shall be the surviving corporation and (ii) a Regional
Partner or a Wholly-Owned Subsidiary of TLGI or a Regional Partner incorporated
under the laws of Canada or any Province thereof may amalgamate with another
Regional Partner or Wholly-Owned Subsidiary of TLGI or a Regional Partner
incorporated under the laws of Canada or any Province thereof, it being
understood that neither TLGI nor LGII may so amalgamate.
(b) TLGI and LGII will not, nor will either permit any
Subsidiary of it to, lease, sell or otherwise dispose of its Property to any
other Person except for (i) sales of inventory in the ordinary course of
business, (ii) leases, sales or other dispositions of its property to a Regional
Partner or a Wholly-Owned Subsidiary of TLGI or a Regional Partner (provided
that if any such property is subject to the Collateral Trust Agreement, then
such lease, sale or other disposition shall be permissible hereunder only to the
extent that the lessee or transferee thereof shall have executed documentation
satisfactory to the Agent maintaining the security interest in the property in
favor of the Collateral Agent for the benefit of the Banks and the other Secured
Parties), (iii) other sales or other dispositions of its property subject to the
requirement that the net proceeds of each such sale or other disposition of
property are reinvested, within 180 days following consummation of such sale or
other disposition, in the business of TLGI, LGII and the Subsidiaries of either
as conducted in accordance with the requirements of Section 5.10, and that
immediately before and after giving effect to such sale, no Default or Event of
Default shall have occurred and be continuing, (iv) Permitted
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Receivables Securitizations, and (v) sales of cemetery properties (provided that
such sales (w) are on commercially reasonable terms, (x) occur within 30 days of
the acquisition by TLGI, LGII or a Subsidiary of such cemetery property, (y)
give rise to an Investment of the type described in, and permitted by, Section
5.08(m), and (z) do not involve cemetery properties with an aggregate Fair Value
in excess of $50,000,000 for all such cemetery properties sold in any calendar
year).
SECTION 5.13. USE OF PROCEEDS. The proceeds of the Loans will be used by
the Borrower to finance approximately 95.0% of the purchase price of the LGII
Debentures. No portion of the proceeds of the Loans will be used by the Borrower
or any Subsidiary thereof (i) in connection with, whether directly or
indirectly, any tender offer for, or other acquisition of, stock of any
corporation with a view towards obtaining control of such other corporation,
(ii) directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock, or (iii) for any purpose
in violation of any applicable law or regulation.
SECTION 5.14. COMPLIANCE WITH LAWS; PAYMENT OF TAXES. Each of LGII and TLGI
will, and will cause each of its respective Subsidiaries and each member of the
Controlled Group to, comply with applicable laws (including but not limited to
ERISA), regulations and similar requirements of governmental authorities
(including but not limited to PBGC), except where the necessity of such
compliance is being contested in good faith through appropriate proceedings.
Each of LGII and TLGI will, and will cause each of its Subsidiaries to, pay
promptly when due all taxes, assessments, governmental charges, claims for
labor, supplies, rent and other obligations which, if unpaid, might become a
lien against the property of LGII, TLGI or any of their respective Subsidiaries,
except liabilities being contested in good faith and against which, if requested
by the Agent, LGII and/or TLGI, as applicable, will set up reserves in
accordance with GAAP.
SECTION 5.15. INSURANCE. Each of LGII and TLGI will maintain, and will
cause each of its Subsidiaries to maintain (either in the name of LGII, TLGI or
in such Subsidiary's own name), with financially sound and reputable insurance
companies, insurance on all its property in at least such amounts and against at
least such risks as are usually insured against in the same general area by
companies of established repute engaged in the same or similar business.
SECTION 5.16. CHANGE IN FISCAL YEAR. Neither LGII nor TLGI will change its
Fiscal Year without the consent of the Required Banks.
SECTION 5.17. MAINTENANCE OF PROPERTY. Each of LGII and TLGI shall, and
shall cause each of the Subsidiaries to, maintain all of its Properties and
assets in good condition, repair and working order, ordinary wear and tear
excepted.
SECTION 5.18. ENVIRONMENTAL NOTICES. Each of LGII and/or TLGI shall furnish
to the Banks and the Agent prompt written notice of all Environmental
Liabilities, pending, threatened or anticipated Environmental Proceedings,
Environmental Notices, Environmental
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Judgments and Orders, and Environmental Releases at, on, in, under or in any way
affecting the Properties of LGII, TLGI or any of their respective Subsidiaries
or any adjacent property, which could reasonably be expected to have or cause a
Material Adverse Effect, and all facts, events, or conditions that could lead to
any of the foregoing.
SECTION 5.19. ENVIRONMENTAL MATTERS. Each of LGII, TLGI and its
Subsidiaries will not, and will not permit any Third Party to, use, produce,
manufacture, process, treat, recycle, generate, store, dispose of, manage at, or
otherwise handle, or ship or transport to or from its Properties any Hazardous
Materials except for Hazardous Materials such as cleaning solvents, pesticides
and other similar materials used, produced, manufactured, processed, treated,
recycled, generated, stored, disposed, managed, or otherwise handled in minimal
amounts in the ordinary course of business in material compliance with all
applicable Environmental Requirements.
SECTION 5.20. ENVIRONMENTAL RELEASE. Each of LGII and TLGI agrees that upon
the occurrence of an Environmental Release at or on any of the Properties of
LGII, TLGI or any of their respective Subsidiaries it will act immediately to
investigate the extent of, and to take appropriate remedial action to eliminate,
such Environmental Release, whether or not ordered or otherwise directed to do
so by any Environmental Authority.
SECTION 5.21. MORE RESTRICTIVE AGREEMENTS; LIENS; MORE FAVORABLE PRICING.
Notwithstanding the provisions of Section 5.09, none of LGII, TLGI or any of its
Subsidiaries shall at any time after November 27, 1995, directly or indirectly,
provide the benefit of any lien, guaranty or other arrangement intended as
security (other than letters of credit issued under the Bank of Montreal Credit
Agreement and any such lien, guaranty or other arrangement now outstanding or
permitted pursuant to the terms of this Agreement) or any more restrictive
financial or other covenant than that contained in this Agreement to any holder
of any senior indebtedness of LGII, TLGI, or any such Subsidiary unless the
Obligations hereunder shall have been equally and ratably secured thereby or the
Banks hereunder shall have received the benefit of such more restrictive
covenant, as the case may be. The Borrower and each of the Guarantors agrees
that, if, after May 15, 1996, there is an increase in any of the contractual
interest rates or any additional fees are payable under the Bank of Montreal
Credit Agreement, then the interest rates under this Agreement shall increase
proportionally and any such additional fees shall become payable under this
Agreement, as applicable, in each case effective on the same date as such
increase or additional fee becomes effective under the Bank of Montreal Credit
Agreement, automatically, and without further amendment or action.
SECTION 5.22. TRANSACTIONS WITH AFFILIATES. TLGI will not, nor will it
permit LGII or any other Subsidiary of TLGI to, enter into any transaction
(including, without limitation, the purchase or sale of any Property or service)
with, or make any payment or transfer to, any Affiliate of TLGI, LGII or any
such other Subsidiary of TLGI except in the ordinary course of business and
pursuant to the reasonable requirements of TLGI's, LGII's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to TLGI, LGII or
such Subsidiary than TLGI, LGII or such Subsidiary would obtain in a comparable
arms-length transaction; PROVIDED, HOWEVER that the foregoing terms of this
Section 5.22 shall not
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apply to (i) transactions between or among TLGI, any Wholly-Owned Subsidiary of
TLGI and any Regional Partner and (ii) transactions with an SPV which are
related to a Permitted Receivables Securitization.
SECTION 5.23. ACQUISITIONS. TLGI and LGII will not, nor will either permit
any subsidiary of either to, make any Acquisition of any Person other than a
Permitted Acquisition.
SECTION 5.24. MAXIMUM CONSOLIDATED INDEBTEDNESS TO CONSOLIDATED
CAPITALIZATION. TLGI will not permit the ratio of Consolidated Indebtedness to
Consolidated Capitalization at any time to exceed 0.60 to 1.00.
SECTION 5.25. MAXIMUM CONSOLIDATED INDEBTEDNESS TO ADJUSTED EBITDA. TLGI
will not permit the ratio of Consolidated Indebtedness for the most recently
ended period of four consecutive fiscal quarters of TLGI to Adjusted EBITDA for
such period of four consecutive fiscal quarters (x) to be greater than 5.50 to
1.00 at any time through and including December 31, 1996 or (y) to be greater
than 5.00 to 1.00 at any time after December 31, 1996.
SECTION 5.26 INDEBTEDNESS. TLGI and LGII will not, nor will either permit
any Subsidiary of it to, create, incur or suffer or exist any Indebtedness,
except:
(a) the Obligations;
(b) the obligations outstanding from time to time under the Bank
of Montreal Credit Agreement;
(c) Indebtedness (i) existing as of the close of business on
December 31, 1995, and described in SCHEDULE 1 hereto or (ii) incurred on
or after January 1, 1996, but only to the extent expressly described on
SCHEDULE 1 hereto;
(d) Rentals other than Capitalized Lease Obligations and
Synthetic Lease Obligations;
(e) Indebtedness of TLGI, LGII or any Subsidiary of TLGI owing
to TLGI, LGII or any Subsidiary of TLGI;
(f) subject to the final paragraph of this Section 5.26
(measured at the time of initial investment by a purchaser or other
investor in Receivables Program Assets, but not at the time of reinvestment
of proceeds thereof in other Receivables Program Assets), Indebtedness of
TLGI, LGII or any Subsidiary in connection with a Permitted Receivables
Securitization;
(g) subject to the final paragraph of this Section 5.26, additional
Indebtedness of any Subsidiaries of TLGI (other than LGII), provided that
such
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Indebtedness, when added to the aggregate outstanding Indebtedness of all
such Subsidiaries which is described on SCHEDULE 1 hereto, does not at any
time exceed 10.0% of Consolidated Net Worth at such time; and
(h) subject to the final paragraph of this Section 5.26,
additional Indebtedness issued or incurred by TLGI or LGII, provided that
after giving effect thereto and the application of the proceeds thereof,
Consolidated Indebtedness would not exceed 60% of Consolidated
Capitalization.
Notwithstanding the foregoing, but subject to the last two sentences
of this paragraph, any Indebtedness otherwise permitted under any of the
foregoing Sections 5.26(f), (g) and (h) shall not be permitted unless at the
time of the incurrence of such Indebtedness, and after giving PRO FORMA effect
thereto, the Consolidated Fixed Charges Coverage Ratio is at least equal to
2.25:1.00. (The acquisition by TLGI or any of its Subsidiaries of a new
Subsidiary which is obligated in respect of any Indebtedness shall be deemed for
purposes of this Section to be the incurrence of such Indebtedness by such new
Subsidiary on the date it becomes a Subsidiary of TLGI.) During any period of
time that (i) the ratings assigned to the senior unsecured long-term
Indebtedness of TLGI by each of Standard & Poor's 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 restriction contained in the first sentence of this paragraph
shall not be applicable. If one or both Rating Agencies withdraws its rating or
downgrades its Investment Grade Rating, then thereafter the restriction
contained in the first sentence of this paragraph shall be applicable on a
prospective basis until both of the Rating Agencies thereafter assign Investment
Grade Ratings to the senior unsecured and unenhanced long-term Indebtedness of
TLGI.
SECTION 5.27. COVENANTS NOT TO COMPETE. TLGI and LGII will not, nor will
either permit any Subsidiary of either to, create, incur or suffer to exist
obligations to make payments in respect of covenants not to compete, determined
in the aggregate for TLGI, LGII and the Subsidiaries of each, and payable during
any one fiscal year, in excess of 5% of the gross revenues of TLGI, LGII and
all such Subsidiaries for such fiscal year.
SECTION 5.28. PLEDGE OF STOCK AND GRANT OF SECURITY INTEREST IN CERTAIN
ASSETS. (a) TLGI and LGII will, and will cause each respective Pledgor
Subsidiary of it to, pledge all outstanding shares of capital stock and other
equity interests of any Subsidiary of TLGI or LGII (other than any SPV which
engages in a Permitted Receivables Securitization) held by it or held by any
Subsidiary (other than any SPV which engages in a Permitted Receivables
Securitization) of it from time to time (including, in the case of TLGI, LGII),
and LGII shall grant a security interest in all of its financial assets
(including, without limitation, accounts receivable and bank accounts), in each
case pursuant to the terms of the Collateral Trust Agreement. All such shares of
capital stock and other equity interests shall be pledged, and all such security
interests shall be granted, solely to secure the Obligations and any other
Senior Obligations outstanding from time to time; PROVIDED, HOWEVER that such
pledges of capital stock and other equity interests, and such grants of security
interests, shall secure the Senior
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Obligations (other than the Obligations and such other Senior Obligations as are
designated on SCHEDULE 3 hereto) only to the extent that the Borrower shall have
so elected and given notice thereof to the Collateral Agent and the Agent.
Within 60 days of the date of closing for each Major Acquisition of a Person,
TLGI and LGII shall deliver to the Agent an opinion of counsel addressed to the
Agent and the Banks to the effect that all ownership interests in such Person
acquired in such Major Acquisition have been duly and validly subjected to the
lien granted to the Collateral Agent under the terms of the Collateral Trust
Agreement and that all actions to perfect such lien have been duly and validly
taken, such opinions to be satisfactory to the Agent in form and substance.
(b) Neither TLGI nor LGII, nor any Subsidiary of either, will
consent or agree to, or acquiesce in, any modification or amendment of the
Collateral Trust Agreement, unless such modification or amendment shall have
been previously consented to in writing by the Agent and the Required Banks.
(c) Neither TLGI nor LGII, nor any Subsidiary of either, will
consent or agree to, or acquiesce in, any release of any Collateral pledged to
the Collateral Agent pursuant to the Collateral Trust Agreement, unless such
release of Collateral shall have previously been consented to by the Agent and
the Banks or is otherwise permitted under the Collateral Trust Agreement in
connection with an Approved Sale.
SECTION 5.29. SUBSIDIARIES' STOCK. (a) TLGI and LGII will cause:
(i) each Canadian Subsidiary incorporated under the laws
of British Columbia, the shares of which are Pledged Shares under the
Collateral Trust Agreement, to ensure that its constating documents do
not contain any restrictions on a transfer of such Pledged Shares
pursuant to the due exercise of the Trustee's powers under the
Collateral Trust Agreement;
(ii) the board of directors of each Canadian Subsidiary
incorporated under the laws of Nova Scotia or Prince Edward Island,
the shares of which are Pledged Shares under the Collateral Trust
Agreement, to pass a resolution consenting to a transfer of such
Pledged Shares pursuant to the due exercise of the Trustee's powers
under the Collateral Trust Agreement; and
(iii) the directors and shareholders of each Canadian
Subsidiary incorporated under the federal laws of Canada, or the laws
of Quebec, Ontario, Manitoba, Saskatchewan or Alberta, the shares of
which are Pledged Shares under the Collateral Trust Agreement, to
execute and deliver a unanimous shareholders agreement to the Trustee
providing for the consent of the shareholders to a transfer of such
Pledged Shares pursuant to the due exercise of the Trustee's powers
under the Collateral Trust Agreement.
(b) Except as set out in clauses (i) and (ii) below, TLGI and
LGII will, and will cause each U.S. Subsidiary the shares of which are Pledged
Shares under the
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Collateral Trust Agreement to, take any and all actions necessary to ensure that
there are no restrictions on a transfer of such Pledged Shares pursuant to the
due exercise of the Trustee's powers under the Collateral Trust Agreement,
except with respect to any and all restrictions under Applicable Law. The
foregoing sentence does not apply to:
(i) the interests of TLGI, LGII or any Pledgor Subsidiary
in any limited partnership or limited liability company where the
restriction is required to preserve the tax status of the entity; and
(ii) the shares listed in Part I of SCHEDULE 4 hereto.
(c) TLGI and LGII will pledge, or will cause the Subsidiary
owning such shares or equity interest to pledge, to the Collateral Agent under
the Collateral Trust Agreement, the shares of capital stock of (or other equity
interest in) the Subsidiaries listed in Part II of SCHEDULE 4, promptly upon the
release or termination of any existing prior pledge of or other existing
restriction upon the transfer of such shares.
(d) TLGI and LGII will use their best efforts to obtain a pledge
to the Collateral Agent pursuant to the Collateral Trust Agreement, of any and
all shares of capital stock of (or other equity interest in) the Subsidiaries
listed in Part III of SCHEDULE 4, which shares are held by a Regional Partner or
other secondary holding company, and shall further pledge to the Collateral
Agent its shares in any such Regional Partner or other secondary holding
company.
(e) TLGI and LGII will pledge, or will cause the Subsidiary
owning such shares or equity interest to pledge, to the Collateral Agent under
the Collateral Trust Agreement, any and all shares of the capital stock of (or
other equity interest in) any inactive Subsidiary, at such time as any of such
inactive Subsidiaries shall have total assets in excess of $50,000 or all of
such inactive Subsidiaries shall have total assets in excess of $1,000,000 in
the aggregate.
(f) TLGI and LGII will, and will cause their respective
Subsidiaries to, on or before July 30, 1996, obtain any and all consents,
deliver any and all documents and take any and all actions necessary to
authorize or otherwise complete or perfect the pledge to the Collateral Agent
under the Collateral Trust Agreement of the capital stock of (or other equity
interest in) the Subsidiaries listed in Part IV of SCHEDULE 4.
(g) TLGI and LGII will, and will cause their respective
Subsidiaries to, on or before January 15, 1997, obtain any and all consents,
deliver any and all documents and take any and all actions necessary to
authorize or otherwise complete or perfect the pledge to the Collateral Agent
under the Collateral Trust Agreement of the capital stock of (or other equity
interest in) the Subsidiaries listed in Part V of SCHEDULE 4.
(h) TLGI and LGII will, and will cause their respective
Subsidiaries to, structure any and all future Acquisitions such that there shall
be no restriction on the ability
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of TLGI, LGII or any such Subsidiary to pledge any capital stock or equity
interests so acquired.
Unless otherwise expressly provided herein, the actions described in
this Section 5.29 must be completed with respect to any Subsidiary no later than
90 days after any of such Subsidiary's shares become Pledged Shares under the
Collateral Trust Agreement.
The terms "PLEDGED SHARES", "TRUSTEE" and "APPLICABLE LAW", as used in
this Section 5.29 have the meanings specified in the Collateral Trust Agreement.
SECTION 5.30. SUBSIDIARIES. TLGI and LGII will not permit any of their
respective Subsidiaries (other than LGII in the case of TLGI's Subsidiaries) at
any time to (i) issue any preferred stock of any type or nature (provided that
such limitation shall not apply to any Subsidiary which has no operations and
exists solely as a special purpose finance entity, and provided further that
such limitation shall not prohibit the issuance of preferred stock to TLGI or
any Wholly-Owned Subsidiary of TLGI), or (ii) except in the case of an SPV which
engages in a Permitted Receivables Securitization, agree by contract or
otherwise to any restriction on the right and ability of such Subsidiary to
declare and pay dividends and make other distributions to its shareholders
(other than the restrictions set forth in this Agreement and the other Loan
Documents). TLGI and LGII will not permit any Indebtedness owed by them to any
Subsidiaries to be secured pursuant to the Collateral Trust Agreement unless (a)
the Subsidiary to which such Indebtedness is owed is a Finance Subsidiary which
is a Wholly-Owned Subsidiary, (b) the security interest in such Indebtedness is
subordinated in accordance with the terms and conditions of the Collateral Trust
Agreement, (c) all shares of capital stock or other equity interests of such
Subsidiary are pledged under the terms of the Collateral Trust Agreement, (d)
such Subsidiary has no obligations other than Indebtedness owed to TLGI or LGII
or an Affiliate of TLGI, and other than obligations to purchase accounts
receivable or other financial assets of an Affiliate of TLGI, (e) such
Subsidiary has no material assets other than Indebtedness owed to it by TLGI or
LGII or an Affiliate of TLGI, and other than the accounts receivable and other
financial assets described in the foregoing clause (d), and (f) such Subsidiary
has no activities or operations other than the issuance of its capital stock or
other equity interests and the purchase and administration of the accounts
receivable and other financial assets described in the foregoing clause (d), and
other than the holding by it of Indebtedness, accounts receivable and other
financial assets described in the foregoing clause (e).
SECTION 5.31. PREPAYMENTS. TLGI and LGII will not, nor will either permit
any Subsidiary of it to, either directly or indirectly, voluntarily redeem,
retire or otherwise pay prior to its scheduled maturity, or accelerate the
maturity of, Indebtedness of TLGI or LGII or any such Subsidiary, other than (a)
Indebtedness arising hereunder or under other credit facilities or Permitted
Receivables Securitizations of a revolving nature, (b) Indebtedness between or
among TLGI, LGII or any Subsidiary and (c) other Indebtedness so long as such
Indebtedness either (i) (A) was incurred in connection with an Acquisition and
(B) is prepaid within 180 days of the closing of such Acquisition or (ii) (A) is
prepaid in full and (B) does
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not exceed $10,000,000 (such limitation to apply to each individual prepayment
pursuant to this clause (ii) and not in the aggregate).
SECTION 5.32. ADDITIONAL NEGATIVE PLEDGE. TLGI and LGII will not, nor will
either permit any Subsidiary of it (other than an SPV in connection with a
Permitted Receivables Securitization) to, enter into any agreement or other
arrangement under the terms of which TLGI, LGII or any Subsidiary of TLGI or
LGII (other than any such SPV) would be restricted from (i) performing its
respective obligations under the Collateral Trust Agreement or any other Loan
Document to which it is a party or (ii) providing a guaranty to the Agent, the
Collateral Agent or the Banks.
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ARTICLE VI
DEFAULTS
SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following events
("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any
Loan or shall fail to pay any interest on any Loan within 3 Domestic
Business Days after such interest shall become due, or shall fail to
pay any fee or other amount payable hereunder within 3 Domestic
Business Days after such fee or other amount becomes due; or
(b) either the Borrower or TLGI shall fail to observe or perform
any covenant contained in Sections 5.01, 5.02(ii), 5.03 to 5.14,
inclusive, or Sections 5.21 to 5.32, inclusive; or
(c) either the Borrower or TLGI shall fail to observe or perform
any covenant or agreement contained or incorporated by reference in
this Agreement (other than those covered by paragraph (a) or (b) above)
and such failure shall not have been cured within 30 days after the
earlier to occur of (i) written notice thereof has been given to the
Borrower by the Agent at the request of any Bank or (ii) the Borrower
or TLGI otherwise becomes aware of any such failure; or
(d) any representation, warranty, certification or statement made
by the Borrower, TLGI or any other Guarantor in Article IV of this
Agreement or in any of the Loan Documents shall prove to have been
incorrect or misleading in any material respect when made (or deemed
made); or
(e) TLGI, LGII or any of their respective Subsidiaries shall fail
to make any payment in respect of Indebtedness outstanding in an
aggregate amount equal to or exceeding $5,000,000 (other than the
Notes) when due or within any applicable grace period; or
(f) any event or condition shall occur which results in the
acceleration of the maturity of Indebtedness outstanding in an
aggregate amount equal to or exceeding $5,000,000 of TLGI, LGII or any
of their respective Subsidiaries (including, without limitation, any
required mandatory prepayment or "put" of such Indebtedness to LGII or
any Subsidiary) or enables (or, with the giving of notice or lapse of
time or both, would enable) the holders of such Indebtedness or
commitment or any Person acting on such holders' behalf to accelerate
the maturity thereof or terminate any such commitment (including,
without limitation, any required mandatory prepayment or "put" of such
Indebtedness to TLGI, LGII or any of their respective Subsidiaries) or
any "Default" or "Unmatured Default" occurs under (and as defined in)
the Bank of Montreal Credit Agreement; or
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(g) TLGI or any of its Subsidiaries shall (i) have an order for
relief entered with respect to it under the United States bankruptcy
laws as now or hereafter in effect or cause or allow any similar event
to occur under any bankruptcy or similar law or laws for the relief of
debtors as now or hereafter in effect in any other jurisdiction, (ii)
make an assignment for the benefit of creditors, (iii) apply for, seek,
consent to, or acquiesce in, the appointment of a receiver, custodian,
trustee, examiner, liquidator, monitor or similar official for it or
any Substantial Portion of its Property, (iv) institute any proceeding
seeking an order for relief under the United States bankruptcy laws as
now or hereafter in effect or seeking to adjudicate it a bankrupt or
insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or any of
its property or its debts under any law relating to bankruptcy,
insolvency or reorganization or compromise of debt or relief of debtors
as now or hereafter in effect in any jurisdiction including, without
limitation, any application under The Bankruptcy and Insolvency Act
(Canada) or The Companies' Creditors Arrangement Act (Canada), the
filing of a proposal or notice under The Bankruptcy and Insolvency Act
(Canada) or any organization, arrangement or compromise of debt under
the laws of its jurisdiction of incorporation or fail to promptly file
an answer or other pleading denying the material allegations of any
such proceeding filed against it, (v) take any corporate action to
authorize or effect any of the foregoing actions set forth in this
Section 6.01(g) or (vi) fail to contest in good faith any appointment
or proceeding described in Section 6.01(h); or
(h) without the application, approval or consent of TLGI or any
of its Subsidiaries, a receiver, custodian, trustee, examiner,
liquidator or similar official shall be appointed (either privately or
by a court) for TLGI or any of its Subsidiaries or any Substantial
Portion of its or their Property, or a proceeding described in Section
6.01(g)(iv) shall be instituted against TLGI or any of its Subsidiaries
and such appointment continues undischarged or such proceeding
continues undismissed or unstayed for a period of 30 consecutive days;
or
(i) one or more of the following events shall have occurred and
created a potential liability for TLGI, LGII or any member of the
Controlled Group, whether singularly or in the aggregate, in excess of
$5,000,000: either TLGI or LGII or any member of their respective
Controlled Group shall fail to pay when due any material amount which
it shall have become liable to pay to the PBGC or to a Plan under Title
IV of ERISA; or notice of intent to terminate a Plan or Plans shall be
filed under Title IV of ERISA by TLGI or LGII or any member of their
respective Controlled Group, any plan administrator or any combination
of the foregoing; or the PBGC shall institute proceedings under Title
IV of ERISA to terminate or to cause a trustee to be appointed to
administer any such Plan or Plans or a proceeding shall be instituted
by a fiduciary of any such Plan or Plans to enforce Section 515 or
4219(c)(5) of ERISA and such proceeding shall not have been dismissed
within 30 days thereafter; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that
any such Plan or Plans must be terminated; or TLGI or LGII or any other
member
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of their respective Controlled Group shall have been notified by the
sponsor of a Multiemployer Plan that it has incurred withdrawal
liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer
Plans by TLGI, LGII or any other member of the Controlled Group as
withdrawal liability (determined as of the date of such notification),
exceeds $5,000,000 or requires payments exceeding $1,000,000 per annum;
or
(j) one or more judgments or orders for the payment of money in
an aggregate amount in excess of $5,000,000 shall be rendered against
TLGI, LGII or any of their respective Subsidiaries and such judgment or
order shall continue unsatisfied or unstayed for a period of 30 days; or
(k) a federal tax lien shall be filed against TLGI, LGII or any
of their respective Subsidiaries under Section 6323 of the Code or a
lien of the PBGC shall be filed against TLGI, LGII or any Subsidiary
under Section 4068 of ERISA and in either case such lien shall remain
undischarged for a period of 25 days after the date of filing; or
(l) (i) any Person (other than Mr. and Mrs. Raymond L. Loewen,
their lineal descendants, and any trusts established for any of them)
or two or more Persons acting in concert shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of 20%
or more of the outstanding shares of the voting stock of TLGI; or (ii)
as of any date a majority of the Board of Directors of TLGI consists of
individuals who were not either (A) directors of TLGI as of the
corresponding date of the previous year, (B) selected or nominated to
become directors by the Board of Directors of TLGI of which a majority
consisted of individuals described in clause (A), or (C) selected or
nominated to become directors by the Board of Directors of TLGI of
which a majority consisted of individuals described in clause (A) and
individuals described in clause (B); or
(m) LGII shall cease to be a Wholly-Owned Subsidiary of TLGI; or
(n) the occurrence of any event, act, occurrence, or condition
which the Required Banks determine either does or has a reasonable
probability of causing a Material Adverse Effect; or
(o) (i) any "Event of Default" shall occur under any of the other
Loan Documents, (ii) any of the other Loan Documents (including,
without limitation, any of the Guaranties) shall cease to be
enforceable, (iii) the Borrower or any Guarantor shall assert that
either this Agreement or any of the other Loan Documents (including,
without limitation, any of the Guaranties) is unenforceable, or (iv)
any Guarantor shall fail to perform any of its respective obligations
under any Loan Document to which it is a party; or
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(p) The breach by TLGI, LGII or any of their respective
Subsidiaries in the performance of any of its obligations under (a) the
final settlement agreement entered into by TLGI, LGII and certain of
their Affiliates in connection with the settlement of the judgment
entered by the Circuit Court of the First Judicial District of Hinds
County, Mississippi in the case of O'KEEFE, ET AL. V. THE LOEWEN GROUP,
INC. ET AL., Civil Action 91-67-423 or (b) any instruments or
agreements related to such final settlement agreement; or
(q) Any Guaranty shall fail to remain in full force or
effect, or any action shall be taken to discontinue or to assert the
invalidity or unenforceability of any Guaranty, or any Guarantor shall
fail to perform its obligations under or otherwise comply with any of
the terms or provisions of any Guaranty to which it is a party, or any
Guarantor shall deny that it has any further liability under any
Guaranty to which it is a party, or shall give notice to such effect; or
(r) The Collateral Trust Agreement shall fail to remain in
full force or effect, or any action shall be taken to discontinue or to
assert the invalidity or unenforceability of the Collateral Trust
Agreement, or any pledgor thereunder shall fail to perform its
obligations under or otherwise comply with any of the terms or
provisions of the Collateral Trust Agreement, or any pledgor thereunder
shall deny that it has any further liability under the Collateral Trust
Agreement, or shall give notice to such effect, or any portion of the
shares of stock pledged, or security interests granted, pursuant to the
Collateral Trust Agreement shall cease to be validly perfected in favor
of the Agent and the Banks, or (except as otherwise provided in the
Collateral Trust Agreement and except to the extent such pledged shares
represent Minority Interests) such pledged shares shall fail to
represent 100% of the outstanding shares of stock of the Subsidiaries
whose shares of stock are subject to the Collateral Trust Agreement; or
(s) A Material Judgment Event shall have occurred and 90
days shall have passed without one or more judgments, awards or other
orders giving rise to such Material Judgment Event having been vacated
such that on such 90th day the aggregate amount of all judgments,
awards and orders entered against any of TLGI, LGII or any of their
respective Subsidiaries which shall have been outstanding for at least
90 days without having been finally satisfied in full or vacated shall
be in excess of $100,000,000.
then, and in every such event, the Agent shall (i) if requested by the
Required Banks, by notice to the Borrower terminate the Commitments and they
shall thereupon terminate, and (ii) if requested by the Required Banks, by
notice to the Borrower declare the Notes (together with accrued interest
thereon) to be, and the Notes shall thereupon become, immediately due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower, together with interest at the
Default Rate accruing on the principal amount thereof from and after the date
of such Event of Default; PROVIDED that if any Event of Default specified in
paragraph (g) or (h) above occurs with respect to the Borrower, without any
notice to the Borrower or any other act by the Agent or the Banks, the
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Commitments shall thereupon terminate and the Notes (together with accrued
interest thereon) shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower together with interest thereon at the Default Rate accruing on the
principal amount thereof from and after the date of such Event of Default.
Notwithstanding the foregoing, the Agent shall have available to it all other
remedies at law or equity, and shall exercise any one or all of them at the
request of the Required Banks.
SECTION 6.02. NOTICE OF DEFAULT. The Agent shall give notice to the
Borrower of any Default under Section 6.01(c) promptly upon being requested to
do so by any Bank and shall thereupon notify all the Banks thereof.
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ARTICLE VII
THE AGENT
SECTION 7.01. APPOINTMENT; POWERS AND IMMUNITIES. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Loan Documents with such powers as are specifically delegated to
the Agent by the terms hereof and thereof, together with such other powers as
are reasonably incidental thereto. The Agent: (a) shall have no duties or
responsibilities except as expressly set forth in this Agreement and the other
Loan Documents, and shall not by reason of this Agreement or any other Loan
Document be a trustee for any Bank; (b) shall not be responsible to the Banks
for any recitals, statements, representations or warranties contained in this
Agreement or any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any Bank under, this Agreement or
any other Loan Document, or for the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
any other document referred to or provided for herein or therein or for any
failure by the Borrower or TLGI to perform any of its obligations hereunder or
thereunder; (c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder or under any other Loan Document except to the
extent requested by the Required Banks, and then only on terms and conditions
reasonably satisfactory to the Agent, and (d) shall not be responsible for any
action taken or omitted to be taken by it hereunder or under any other Loan
Document or any other document or instrument referred to or provided for herein
or therein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care. The
provisions of this Article VII are solely for the benefit of the Agent and the
Banks, and neither the Borrower nor TLGI shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement and under the other Loan Documents, the Agent shall
act solely as agent of the Banks and does not assume and shall not be deemed to
have assumed any obligation towards or relationship of agency or trust with or
for the Borrower or TLGI. The duties of the Agent shall be ministerial and
administrative in nature, and the Agent shall not have by reason of this
Agreement or any other Loan Document a fiduciary relationship in respect of any
Bank.
SECTION 7.02. RELIANCE BY AGENT. The Agent shall be entitled to rely upon
any certification, notice or other communication (including any thereof by
telephone, telefax, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants or
other experts selected by the Agent. As to any matters not expressly provided
for by this Agreement or any other Loan Document, the Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and
thereunder in accordance with instructions signed by the Required Banks, and
such instructions of the Required Banks in any action taken or failure to act
pursuant thereto shall be binding on all of the Banks.
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SECTION 7.03. DEFAULTS. The Agent shall not be deemed to have knowledge
of the occurrence of a Default or an Event of Default (other than the nonpayment
of principal of or interest on the Loans) unless the Agent has received notice
from a Bank or the Borrower specifying such Default or Event of Default and
stating that such notice is a "Notice of Default". In the event that the Agent
receives such a notice of the occurrence of a Default or an Event of Default,
the Agent shall give prompt notice thereof to the Banks. The Agent shall give
each Bank prompt notice of each nonpayment of principal of or interest on the
Loans whether or not it has received any notice of the occurrence of such
nonpayment. The Agent shall (subject to Section 9.06) take such action hereunder
with respect to such Default or Event of Default as shall be directed by the
Required Banks, provided that, unless and until the Agent shall have received
such directions, the Agent may (but shall not be obligated to) take such action
(other than (x) accelerating the obligations evidenced by the Notes, (y)
terminating the Commitments or (z) instituting foreclosure proceedings against
the Collateral), or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Banks.
SECTION 7.04. RIGHTS OF AGENT AS A BANK. With respect to the Loans
made by it, Wachovia in its capacity as a Bank hereunder shall have the same
rights and powers hereunder as any other Bank and may exercise the same as
though it were not acting as the Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include Wachovia in its individual
capacity. The Agent may (without having to account therefor to any Bank)
accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with the Borrower (and any of its
Affiliates) as if it were not acting as the Agent, and the Agent may accept
fees and other consideration from the Borrower (in addition to any agency
fees and arrangement fees heretofore agreed to between the Borrower and the
Agent) for services in connection with this Agreement or any other Loan
Document or otherwise without having to account for the same to the Banks.
SECTION 7.05. INDEMNIFICATION. Each Bank severally agrees to indemnify
the Agent, to the extent the Agent shall not have been reimbursed by the
Borrower, ratably in accordance with its Commitment, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including, without limitation, counsel fees and disbursements)
or disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of this Agreement or any other Loan Document or any other documents contemplated
by or referred to herein or therein or the transactions contemplated hereby or
thereby (excluding, unless an Event of Default has occurred and is continuing,
the normal administrative costs and expenses incident to the performance of its
agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or any such other documents; PROVIDED, HOWEVER that no Bank shall be
liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the Agent. If any indemnity furnished to the
Agent for any purpose shall, in the opinion of the Agent, be insufficient or
become impaired, the Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished.
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SECTION 7.06. CONSEQUENTIAL DAMAGES. NEITHER THE AGENT NOR ANY BANK SHALL
BE RESPONSIBLE OR LIABLE TO ANY BANK, THE BORROWER, TLGI, LGII OR ANY OTHER
PERSON OR ENTITY FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY
BE ALLEGED AS A RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 7.07. PAYEE OF NOTE TREATED AS OWNER. The Agent may deem and treat
the payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof shall have been
filed with the Agent and the provisions of Section 9.08(c) have been satisfied.
Any requests, authority or consent of any Person who at the time of making such
request or giving such authority or consent is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee or assignee of that
Note or of any Note or Notes issued in exchange therefor or replacement thereof.
SECTION 7.08. NONRELIANCE ON AGENT AND OTHER BANKS. Each Bank agrees that
it has, independently and without reliance on the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower, TLGI and the other Guarantors and decision
to enter into this Agreement and that it will, independently and without
reliance upon the Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under this Agreement or
any of the other Loan Documents. The Agent shall not be required to keep itself
informed as to the performance or observance by the Borrower or TLGI of this
Agreement or any of the other Loan Documents or any other document referred to
or provided for herein or therein or to inspect the properties or books of the
Borrower or any other Person. Except for notices, reports and other documents
and information expressly required to be furnished to the Banks by the Agent
hereunder or under the other Loan Documents, the Agent shall not have any duty
or responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Borrower or any
other Person (or any of their Affiliates) which may come into the possession of
the Agent.
SECTION 7.09. FAILURE TO ACT. Except for action expressly required of the
Agent hereunder or under the other Loan Documents, the Agent shall in all cases
be fully justified in failing or refusing to act hereunder and thereunder unless
it shall receive further assurances to its satisfaction by the Banks of their
indemnification obligations under Section 7.05 against any and all liability and
expertise which may be incurred by the Agent by reason of taking, continuing to
take, or failing to take any such action.
SECTION 7.10. RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment
and acceptance of a successor Agent as provided below, the Agent may resign at
any time by giving notice thereof to the Banks and the Borrower and the Agent
may be removed at any time with or without cause by the Required Banks. Upon any
such resignation or removal, the Required Banks shall have the right to appoint
a successor Agent. If no successor Agent shall
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have been so appointed by the Required Banks and shall have accepted such
appointment within 30 days after the retiring Agent's notice of resignation or
the Required Banks' removal of the retiring Agent, then the retiring Agent may,
on behalf of the Banks, appoint a successor Agent. Any successor Agent shall be
a bank which has a combined capital and surplus of at least $500,000,000. Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article VII shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent
hereunder.
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ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR.
If on or prior to the first day of any Interest Period:
(a) the Agent determines that deposits in Dollars (in the applicable
amounts) are not being offered in the relevant market for such Interest
Period, or
(b) the Required Banks advise the Agent that the London Interbank
Offered Rate, as reasonably determined by the Agent, will not adequately
and fairly reflect the cost to such Banks of funding Euro-Dollar Loans
for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make
Euro-Dollar Loans shall be suspended. After the Agent has provided notice to
the Borrower in connection with this Section 8.01, unless the Borrower notifies
the Agent on or before the date of any such relevant Euro-Dollar Borrowing for
which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, such Borrowing shall instead be made as a Base Rate
Borrowing.
SECTION 8.02. ILLEGALITY. If, after the date hereof, the adoption of
any applicable law, rule or regulation, or any change in any applicable law,
rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof (any such agency
being referred to as an "Authority" and any such event being referred to as a
"Change of Law"), or compliance by any Bank (or its Lending Office) with any
request or directive (whether or not having the force of law) of any Authority
shall make it unlawful or impossible for any Bank (or its Lending Office) to
make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the
Agent, the Agent shall forthwith give notice thereof to the other Banks and
the Borrower, whereupon until such Bank notifies the Borrower and the Agent
that the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans shall be suspended. Before
giving any notice to the Agent pursuant to this Section, such Bank shall
designate a different Lending Office if such designation will avoid the need
for giving such notice and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. If such Bank shall reasonably
determine that it may not lawfully continue to maintain and fund any of its
outstanding Euro-Dollar Loans to maturity and shall so specify in such notice,
the Borrower shall immediately prepay in full the then outstanding principal
amount of each Euro-Dollar Loan of such Bank, together with accrued interest
thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower
shall borrow a Base Rate Loan in an equal principal amount from such Bank (on
which interest and principal shall be payable contemporaneously with the
related Euro-Dollar Loans of the other Banks), and such Bank shall make such a
Base Rate Loan.
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SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If after the date
hereof, a Change of Law or compliance by any Bank (or its Lending Office) with
any request or directive (whether or not having the force of law) of any
Authority:
(i) shall subject any Bank (or its Lending Office) to any tax,
duty or other charge with respect to its Loans, Notes, or its
obligation to make Loans, or shall change the basis of taxation of
payments to any Bank (or its Lending Office) of the principal of or
interest on its Loans or any other amounts due under this Agreement in
respect of its Loans or its obligation to make Loans (except for
changes in the rate of tax on the overall net income of such Bank, or
any other tax having the same practical effect as a tax on the overall
net income of such Bank, or its Lending Office imposed by the
jurisdiction in which such Bank's principal executive office or Lending
Office is located or engaged in business); or
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation.
any such requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding with respect to any Euro-Dollar Loan any
such requirement included in an applicable Euro-Dollar Reserve
Percentage) against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Lending Office); or
(iii) shall impose on any Bank (or its Lending Office) or on the
United States market or the London interbank market any other condition
affecting its Loans, Notes, or its obligation to make Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Loan, or to reduce the amount
of any sum received or receivable by such Bank (or its Lending Office) under
this Agreement or under its Notes with respect thereto, by an amount reasonably
determined by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such increased
cost or reduction.
(b) If any Bank shall have determined that after the date hereof
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof, or compliance by any Bank (or its Lending Office) or any
Person controlling such Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any Authority, has or would
have the effect of reducing the rate of return on such Bank's or such
controlling Person's capital as a consequence of its obligations hereunder to a
level below that which such Bank or such controlling Person could have achieved
but for such adoption, change or compliance (taking into consideration such
Bank's or such controlling Person's policies with respect to capital adequacy)
by an amount reasonably determined by such Bank or such controlling Person to be
material, then from time to time, within 15 days after demand by such Bank or
such
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controlling Person, the Borrower shall pay to such Bank such additional amount
or amounts as will compensate such Bank or such controlling Person for such
reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of
any event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth in reasonable detail the
additional amount or amounts to be paid to it hereunder shall constitute
rebuttable presumptive evidence of the amounts to be paid in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
(d) The provisions of this Section 8.03(i) shall be applicable with
respect to any Participant, Assignee or other Transferee, and any calculations
required by such provisions shall be made based upon the circumstances of such
Participant, Assignee or other Transferee and (ii) shall constitute a continuing
agreement and shall survive the termination of this Agreement and the payment in
full or cancellation of the Notes.
SECTION 8.04. BASE RATE LOANS SUBSTITUTED FOR EURO-DOLLAR LOANS. If (i)
the obligation of any Bank to make or maintain Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation
under Section 8.03, and the Borrower shall, by at least 5 Euro-Dollar Business
Days' prior notice to such Bank through the Agent, have elected that the
provisions of this Section shall apply to such Bank, then, unless and until
such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank as
Euro-Dollar Loans shall be made instead as Base Rate Loans (in all cases
interest and principal on such Loans shall be payable contemporaneously
with the related Euro-Dollar Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay such
Euro-Dollar Loans shall be applied to repay its Base Rate Loans instead.
SECTION 8.05. COMPENSATION. Upon the request of any Bank, delivered to
the Borrower and the Agent, the Borrower shall pay to such Bank such amount or
amounts as shall compensate such Bank for any loss, cost or expense incurred by
such Bank as a result of:
(a) any payment or prepayment (pursuant to Section 8.02 or
otherwise) of a Euro-Dollar Loan on a date other than the last day of an
Interest Period for such Loan; or
(b) any failure by the Borrower to borrow a Euro-Dollar Loan on
the date for the Euro-Dollar Borrowing of which such Euro-Dollar Loan is a part
specified in the
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applicable Notice of Borrowing delivered pursuant to Section 2.02; such
compensation to include, without limitation, an amount equal to the excess, if
any, of (x) the amount of interest which would have accrued on the amount so
paid or prepaid or not prepaid or borrowed for the period from the date of such
payment, prepayment or failure to prepay or borrow to the last day of the then
current Interest Period for such Euro-Dollar Loan (or, in the case of a failure
to prepay or borrow, the Interest Period for such Euro-Dollar Loan which would
have commenced on the date of such failure to prepay or borrow) at the
applicable rate of interest for such Euro-Dollar Loan provided for herein over
(y) the amount of interest (as reasonably determined by such Bank) such Bank
would have paid on deposits in Dollars of comparable amounts having terms
comparable to such period placed with it by leading banks in the London
interbank market.
SECTION 8.06. REPLACEMENT OF BANKS. So long as no Default shall be in
existence or reasonably may be foreseen by the Borrower (which conditions shall
be evidenced by a certificate of the Borrower to such effect delivered to the
Agent), if the Agent or any Bank shall have delivered a notice to the Borrower
either (x) pursuant to Section 8.01, to the effect that it cannot fund or
maintain Euro-Dollar Loans or (y) pursuant to Section 8.03, seeking any amount
of compensation which shall reasonably be deemed by the Borrower to be a
material amount, the Borrower shall have the right, subject to the terms and
conditions set forth in Section 9.08(c), to replace any Bank (a "REMOVED BANK")
hereunder, upon 30 days' prior written notice to the Agent and the Removed
Bank, by designating an assignee for such Bank (a "REPLACEMENT BANK") to
purchase the Removed Bank's share of outstanding Loans and to assume the
Removed Bank's obligations to the Borrower under this Agreement; PROVIDED,
THAT, any Replacement Bank must be reasonably acceptable to the Agent (and, in
any event, may not be an Affiliate of the Borrower). Subject to the foregoing,
any such Removed Bank hereby agrees to assign (in the form of an Assignment and
Acceptance) without recourse to the Replacement Bank its share of outstanding
Loans, and to delegate to the Replacement Bank its obligations to the Borrower
under this Agreement and its future obligations to the Agent under this
Agreement. Upon such sale and delegation by the Removed Bank and the purchase
and assumption by the Replacement Bank, and compliance with the provisions of
Section 9.08(c), the Removed Bank shall cease to be a "Bank" hereunder and the
Replacement Bank shall become a "Bank" under this Agreement; PROVIDED, HOWEVER,
that any Removed Bank shall continue to be entitled to the indemnification
provisions contained elsewhere herein.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telecopier or
similar writing) and shall be given to such party at its address or telecopier
number set forth on the signature pages hereof or such other address or
telecopier number as such party may hereafter specify for the purpose by notice
to each other party. Each such notice, request or other communication shall be
effective (i) if given by telecopier, when such telecopy is transmitted to the
telecopier number specified in this Section and the appropriate confirmation is
received, (ii) if given by mail, 72 hours after such communication is deposited
in the mails with first class postage prepaid, addressed as aforesaid or (iii)
if given by any other means, when delivered at the address specified in this
Section; PROVIDED that notices to the Agent under Article II or Article VIII
shall not be effective until received.
SECTION 9.02. NO WAIVERS. No failure or delay by the Agent or any Bank in
exercising any right, power or privilege hereunder or under any Note or other
Loan Document shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. EXPENSES; DOCUMENTARY TAXES. The Borrower shall pay (i) all
out-of-pocket expenses of the Agent, including fees and disbursements of special
counsel for the Banks and the Agent, in connection with the preparation of this
Agreement and the other Loan Documents, any waiver or consent hereunder or
thereunder or any amendment hereof or thereof or any Default or alleged Default
hereunder or thereunder and (ii) if a Default occurs, all out-of-pocket expenses
incurred by the Agent and the Banks, including fees and disbursements of
counsel, in connection with such Default and collection and other enforcement
proceedings resulting therefrom, including out-of-pocket expenses incurred in
enforcing this Agreement and the other Loan Documents. The Borrower shall
indemnify the Agent and each Bank against any transfer taxes, documentary taxes,
assessments or charges made by any Authority by reason of the execution and
delivery of this Agreement or the other Loan Documents.
SECTION 9.04. INDEMNIFICATION. The Borrower shall indemnify the Agent,
the Banks and each affiliate thereof and their respective directors,
officers, employees and agents from, and hold each of them harmless against,
any and all losses, liabilities, claims or damages to which any of them may
become subject, insofar as such losses, liabilities, claims or damages arise
out of or result from any actual or proposed use by the Borrower of the
proceeds of any extension of credit by any Bank hereunder or breach by the
Borrower of this Agreement or any other Loan Document or from any
investigation, litigation (including, without limitation, any actions taken
by the Agent or any of the Banks to enforce this Agreement or any of the
other Loan Documents) or other proceeding (including, without
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limitation, any threatened investigation or proceeding) relating to the
foregoing, and the Borrower shall reimburse the Agent and each Bank, and each
affiliate thereof and their respective directors, officers, employees and
agents, upon demand for any expenses (including, without limitation, legal fees)
incurred in connection with any such investigation or proceeding; but excluding
any such losses, liabilities, claims, damages or expenses incurred by reason of
the gross negligence or willful misconduct of the Person to be indemnified.
SECTION 9.05. SETOFF; SHARING OF SETOFFS. (a) The Borrower agrees that the
Agent and each Bank shall have a lien for all indebtedness and obligations owing
to them from the Borrower upon all deposits or deposit accounts, of any kind, or
any interest in any deposits or deposit accounts thereof, now or hereafter
pledged, mortgaged, transferred or assigned to the Agent or any such Bank or
otherwise in the possession or control of the Agent or any such Bank for any
purpose for the account or benefit of the Borrower and including any balance of
any deposit account or of any credit of the Borrower with the Agent or any such
Bank, whether now existing or hereafter established, hereby authorizing the
Agent and each Bank at any time or times with or without prior notice to apply
such balances or any part thereof to such of the indebtedness and obligations
owing by the Borrower to the Banks and/or the Agent then past due and in such
amounts as they may elect, and whether or not the collateral, if any, or the
responsibility of other Persons primarily, secondarily or otherwise liable may
be deemed adequate. For the purposes of this paragraph, all remittances and
property shall be deemed to be in the possession of the Agent or any such Bank
as soon as the same may be put in transit to it by mail or carrier or by other
bailee.
(b) Each Bank agrees that if it shall, by exercising any right of
setoff or counterclaim or otherwise, receive payment of a proportion of the
aggregate amount of principal and interest owing with respect to the Note held
by it which is greater than the proportion received by any other Bank in respect
of the aggregate amount of all principal and interest owing with respect to the
Note held by such other Bank, the Bank receiving such proportionately greater
payment shall purchase such participations in the Notes held by the other Banks
owing to such other Banks, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with respect to the
Notes held by the Banks owing to such other Banks shall be shared by the Banks
pro rata; PROVIDED that (i) nothing in this Section shall impair the right of
any Bank to exercise any right of setoff or counterclaim it may have and to
apply the amount subject to such exercise to the payment of indebtedness of the
Borrower other than its indebtedness under the Notes, and (ii) if all or any
portion of such payment received by the purchasing Bank is thereafter recovered
from such purchasing Bank, such purchase from each other Bank shall be rescinded
and such other Bank shall repay to the purchasing Bank the purchase price of
such participation to the extent of such recovery together with an amount equal
to such other Bank's ratable share (according to the proportion of (x) the
amount of such other Bank's required repayment to (y) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Borrower agrees, to the fullest extent it may effectively do so under applicable
law, that any holder of a participation in a Note, whether or not acquired
pursuant to the foregoing arrangements, may exercise rights of setoff or
counterclaim and other rights with respect to such participation as
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fully as if such holder of a participation were a direct creditor of the
Borrower in the amount of such participation.
SECTION 9.06. AMENDMENTS AND WAIVERS. (a) Any provision of this Agreement,
the Notes or any other Loan Documents may be amended or waived if, but only if,
such amendment or waiver is in writing and is signed by the Borrower, TLGI and
the Required Banks (and, if the rights or duties of the Agent are affected
thereby, by the Agent); PROVIDED that, no such amendment or waiver shall, unless
signed by all Banks, (i) change the Commitment of any Bank or subject any Bank
to any additional obligation, (ii) change the principal of or rate of interest
on any Loan or any fees hereunder, (iii) change the date fixed for any payment
of principal of or interest on any Loan or any fees hereunder, (iv) change the
amount of principal, interest or fees due on any date fixed for the payment
thereof, (v) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Notes, or the percentage of Banks, which shall be
required for the Banks or any of them to take any action under this Section or
any other provision of this Agreement, (vi) change the manner of application of
any payments made under this Agreement or the Notes, (vii) prior to the
appointment of Enforcement Representatives under (and as defined in) the
Collateral Trust Agreement, release or substitute all or any substantial part of
the Collateral held under the Collateral Trust Agreement as security for the
Loans other than in connection with an Approved Sale, (viii) release or
substitute all or any substantial portion of any other Collateral held as
security for the Loans, or (ix) release any guaranty given to support payment of
the Loans. Notwithstanding anything to the contrary contained herein, the Agent
shall release the Collateral at such times and to the extent required by the
Security Agreement.
(b) Following the appointment of any Enforcement Representatives
under (and as defined in) the Collateral Trust Agreement, the Banks and the
Agent agree that any instructions or directions to be given by the Banks to the
Enforcement Representatives appointed by the Banks shall be valid if given by
action of the Required Banks and any action to be taken by them with respect to
enforcement or other remedies shall be taken solely in accordance with the terms
of the Collateral Trust Agreement. The Banks and the Agent further agree (unless
otherwise approved by all of the Banks) that any vote to be taken by the Banks
under the terms of the Collateral Trust Agreement (whether involving the release
of collateral pledged thereunder, enforcement actions, amendments, waivers or
otherwise) shall be taken solely by the Agent casting votes on behalf of each
Bank, such votes to be cast identically by the Agent on behalf of each Bank and
to be based upon the actions (if any) of the Banks taken pursuant to, and in
accordance with, the terms of this Agreement.
(c) The Borrower will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement unless each Bank shall be informed thereof by the Borrower and shall
be afforded an opportunity of considering the same and shall be supplied by the
Borrower with sufficient information to enable it to make an informed decision
with respect thereto. Executed or true and correct copies of any waiver or
consent effected pursuant to the provisions of this Agreement shall be delivered
by the Borrower to each Bank forthwith following the date on which the same
shall have been executed and delivered by the requisite percentage of Banks. The
Borrower will
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not, directly or indirectly, pay or cause to be paid any remuneration, whether
by way of supplemental or additional interest, fee or otherwise, to any Bank (in
its capacity as such) as consideration for or as an inducement to the entering
into by such Bank of any waiver or amendment of any of the terms and provisions
of this Agreement unless such remuneration is concurrently paid, on the same
terms, ratably to all such Banks.
SECTION 9.07. NO MARGIN STOCK COLLATERAL. Each of the Banks represents to
the Agent and each of the other Banks that it in good faith is not, directly or
indirectly (by negative pledge or otherwise), relying upon any Margin Stock as
collateral in the extension or maintenance of the credit provided for in this
Agreement.
SECTION 9.08. SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that neither the Borrower nor TLGI
may assign or otherwise transfer any of its respective rights or obligations
under this Agreement.
(b) Any Bank may at any time sell to one or more Persons (each a
"PARTICIPANT") participating interests in any Loan owing to such Bank, any Note
held by such Bank, any Commitment hereunder or any other interest of such Bank
hereunder. In the event of any such sale by a Bank of a participating interest
to a Participant, such Bank's obligations under this Agreement shall remain
unchanged, such Bank shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of any such Note for all purposes
under this Agreement, and the Borrower and the Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. In no event shall a Bank that sells a
participation be obligated to the Participant to take or refrain from taking any
action hereunder except that such Bank may agree that it will not (except as
provided below), without the consent of the Participant, agree to (i) the change
of any date fixed for the payment of principal of or interest on the related
loan or loans, (ii) the change of the amount of any principal, interest or fees
due on any date fixed for the payment thereof with respect to the related loan
or loans, (iii) the change of the principal of the related loan or loans, (iv)
any change in the rate at which either interest is payable thereon or (if the
Participant is entitled to any part thereof) fee is payable hereunder from the
rate at which the Participant is entitled to receive interest or fee (as the
case may be) in respect of such participation, (v) the release or substitution
of all or any substantial part of the collateral (if any) held as security for
the Loans (other than as contemplated by the Security Agreement), or (vi) the
release of any Guarantee given to support payment of the Loans. Each Bank
selling a participating interest in any Loan, Note, Commitment or other interest
under this Agreement shall, within 10 Domestic Business Days of such sale,
provide the Borrower and the Agent with written notification stating that such
sale has occurred and identifying the Participant and the interest purchased by
such Participant. The Borrower agrees that each Participant shall be entitled to
the benefits of Article VIII with respect to its participation in Loans
outstanding from time to time.
(c) Any Bank may at any time assign to one or more banks or
financial institutions (each an "Assignee") all, or a proportionate part of all,
of its rights and obligations
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under this Agreement, the Notes and the other Loan Documents, and such Assignee
shall assume all such rights and obligations, pursuant to an Assignment and
Acceptance, executed by such Assignee, such transferor Bank and the Agent (and,
in the case of an Assignee that is not then a Bank, unless a Default shall be in
existence, by the Borrower); provided that (i) no interest may be sold by a Bank
pursuant to this paragraph (c) unless the Assignee shall agree to assume ratably
equivalent portions of the transferor Bank's Commitment, (ii) the amount of the
Commitment and Loans subject to such assignment shall be equal to $5,000,000 (or
any larger multiple of $1,000,000), and (iii) unless a Default shall be in
existence, no interest may be sold by a Bank pursuant to this paragraph (c) to
any Assignee that is not then a Bank (or an affiliate of a Bank) without the
consent of the Borrower and the Agent, which consent shall not be unreasonably
withheld. Upon (A) execution of the Assignment and Acceptance by such transferor
Bank, such Assignee, the Agent and (if applicable) the Borrower, (B) delivery of
an executed copy of the Assignment and Acceptance to the Borrower and the Agent,
(C) payment by such Assignee to such transferor Bank of an amount equal to the
purchase price agreed between such transferor Bank and such Assignee, and (D)
payment of a processing and recordation fee of $5,000 to the Agent, such
Assignee shall for all purposes be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank under this Agreement to the same extent
as if it were an original party hereto with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by the Borrower, the Banks or the Agent shall be required. Upon the
consummation of any transfer to an Assignee pursuant to this paragraph (c), the
transferor Bank, the Agent and the Borrower shall make appropriate arrangements
so that, if required, a new Note is issued to such Assignee.
(d) Subject to the provisions of Section 9.09, the Borrower
authorizes each Bank to disclose to any Participant, Assignee or other
transferee (each a "Transferee") and any prospective Transferee any and all
financial information in such Bank's possession concerning the Borrower which
has been delivered to such Bank by the Borrower pursuant to this Agreement or
which has been delivered to such Bank by the Borrower in connection with such
Bank's credit evaluation prior to entering into this Agreement.
(e) No Transferee shall be entitled to receive any greater payment
under Section 8.03 than the transferor Bank would have been entitled to receive
with respect to the rights transferred, unless such transfer is made with the
Borrower's prior written consent or by reason of the provisions of Section 8.02
or 8.03 requiring such Bank to designate a different Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
(f) If any interest in any Loan Document is transferred to any
Transferee which is organized under the laws of any jurisdiction other than The
United States of America or any State thereof, the transferor Bank shall cause
such Transferee, concurrently with the effectiveness of such transfer, to comply
with the provisions of Section 2.10.
(g) Anything in this Section 9.08 to the contrary notwithstanding,
any Bank may assign and pledge all or any portion of the Loans and/or
obligations owing to it to any
-73-
<PAGE>
Federal Reserve Bank or the United States Treasury as collateral security
pursuant to Regulation A of the Board of Governors of the Federal Reserve
System and any Operating Circular issued by such Federal Reserve Bank, provided
that any payment in respect of such assigned Loans and/or obligations made by
the Borrower to the assigning and/or pledging Bank in accordance with the terms
of this Agreement shall satisfy the Borrower's obligations hereunder in respect
of such assigned Loans and/or obligations to the extent of such payment. No
such assignment shall release the assigning and/or pledging Bank from its
obligations hereunder.
SECTION 9.09. CONFIDENTIALITY. Each Bank agrees to exercise
commercially reasonable efforts to keep any information delivered or made
available by the Borrower or TLGI to it which is clearly indicated to be
confidential information, confidential from anyone other than persons employed
or retained by such Bank who are or are expected to become engaged in
evaluating, approving, structuring or administering the Loans; PROVIDED,
HOWEVER that nothing herein shall prevent any Bank from disclosing such
information (i) to any other Bank, (ii) upon the order of any court or
administrative agency, (iii) upon the request or demand of any regulatory
agency or authority having jurisdiction over such Bank, (iv) which has been
publicly disclosed, (v) to the extent reasonably required in connection with
any litigation to which the Agent, any Bank or their respective affiliates may
be a party, (vi) to the extent reasonably required in connection with the
exercise of any remedy hereunder, (vii) to such Bank's legal counsel and
independent auditors and (viii) to any actual or proposed Participant, Assignee
or other Transferee of all or part of its rights hereunder which has agreed in
writing to be bound by the provisions of this Section 9.09; PROVIDED, THAT,
should disclosure of any such confidential information be required by virtue
of clause (ii) of the immediately preceding sentence, any relevant Bank shall
promptly notify the Borrower or TLGI, as applicable, of same so as to allow the
Borrower or TLGI, as applicable, to seek a protective order or to take any
other appropriate action; PROVIDED, FURTHER, THAT, no Bank shall be required to
delay compliance with any directive to disclose any such information so as to
allow the Borrower or TLGI, as applicable, to effect any such action.
SECTION 9.10. REPRESENTATION BY BANKS. Each Bank hereby represents that
it is a commercial lender or financial institution which makes Loans in the
ordinary course of its business and that it will make its Loans hereunder for
its own account in the ordinary course of such business; PROVIDED, HOWEVER
that, subject to Section 9.08, the disposition of the Note or Notes held by
that Bank shall at all times be within its exclusive control.
SECTION 9.11. OBLIGATIONS SEVERAL. The obligations of each Bank
hereunder are several, and no Bank shall be responsible for the obligations or
commitment of any other Bank hereunder. Nothing contained in this Agreement
and no action taken by the Banks pursuant hereto shall be deemed to constitute
the Banks to be a partnership, an association, a joint venture or any other
kind of entity. The amounts payable at any time hereunder to each Bank shall be
a separate and independent debt, and each Bank shall be entitled to protect and
enforce its rights arising out of this Agreement or any other Loan Document and
it shall not be necessary for any other Bank to be joined as an additional
party in any proceeding for such purpose.
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<PAGE>
SECTION 9.12. GEORGIA LAW. This Agreement and each Note shall be
construed in accordance with and governed by the law of the State of Georgia.
SECTION 9.13. SEVERABILITY. In case any one or more of the provisions
contained in this Agreement, the Notes or any of the other Loan Documents
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby and shall be
enforced to the greatest extent permitted by law.
SECTION 9.14. INTEREST. In no event shall the amount of interest due or
payable hereunder or under the Notes exceed the maximum rate of interest
allowed by applicable law, and in the event any such payment is inadvertently
made to any Bank by the Borrower or inadvertently received by any Bank, then
such excess sum shall be credited as a payment of principal, unless the
Borrower shall notify such Bank in writing that it elects to have such excess
sum returned forthwith. It is the express intent hereof that the Borrower not
pay and the Banks not receive, directly or indirectly in any manner whatsoever,
interest in excess of that which may legally be paid by the Borrower under
applicable law.
SECTION 9.15. INTERPRETATION. No provision of this Agreement or any of
the other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
SECTION 9.16. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION. The
Borrower, TLGI (a) and each of the Banks and the Agent irrevocably waives any
and all right to trial by jury in any legal proceeding (including, without
limitation, any counterclaim) arising out of this Agreement, any of the other
Loan Documents, or any of the transactions contemplated hereby or thereby, (b)
submits to the nonexclusive personal jurisdiction in the State of Georgia, the
courts thereof and the United States District Courts sitting therein, for the
enforcement of this Agreement, the Notes and the other Loan Documents, (c)
waives any and all personal rights under the law of any jurisdiction to object
on any basis (including, without limitation, inconvenience of forum) to
jurisdiction or venue within the State of Georgia for the purpose of litigation
to enforce this Agreement, the Notes or the other Loan Documents, and (d)
agrees that service of process may be made upon it in the manner prescribed in
Section 9.01 for the giving of notice to the Borrower. Nothing herein
contained, however, shall prevent the Agent from bringing any action or
exercising any rights against any security and against the Borrower or TLGI
personally, and against any assets of the Borrower or TLGI, within any other
state or jurisdiction.
SECTION 9.17. COUNTERPARTS. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
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<PAGE>
SECTION 9.18. CANADIAN INTEREST PROVISIONS. (a) Notwithstanding any
other provision of this Agreement, if and to the extent that the laws of Canada
are applicable to interest payable under this Agreement, no interest on the
Loans will be payable in excess of that permitted by the laws of Canada. If the
effective annual rate of interest, calculated in accordance with generally
accepted actuarial practices and principles, would exceed 60% (or such other
rate as the Parliament of Canada may determine from time to time as the
criminal rate) on the credit advanced, then:
(i) the amount of any charges for the use of money, expenses,
fees, bonuses, commissions or other charges payable in connection
therewith will be reduced to the extent necessary to eliminate such
excess;
(ii) any remaining excess that has been paid will be credited
towards repayment of the principal amount; and
(iii) any overpayment that may remain after such crediting will
be returned forthwith on demand.
In this subparagraph (a) the terms "interest", "criminal rate" and "credit
advanced" have the meanings ascribed to them in s. 347 of the Criminal Code
of Canada.
(b) If and to the extent that the laws of Canada are
applicable to interest payable under this Agreement, for the purpose of the
Interest Act (Canada) the yearly rate of interest to which interest
calculated on the basis of a 360 or 365 day year is equivalent, is the rate
of interest determined as herein provided multiplied by the number of days
in such year divided by 360 or 365, as the case may be.
SECTION 9.19. COLLATERAL TRUST AGREEMENT. (a) Each Bank hereby
irrevocably appoints the Agent as its Secured Party Representative under (and
as defined in) the Collateral Trust Agreement to serve for so long as the
Agent shall be the Agent hereunder.
(b) Whenever the Banks shall be entitled to vote on the
selection of one or more Enforcement Representatives under (and as defined
in) the Collateral Trust Agreement, the Agent shall cast on behalf of all of
the Banks all of the votes to which the Banks are entitled for (x) such
natural person as the Agent shall select (who may be, but need not be, an
employee or officer of the Agent), and (y) such other natural persons, if
any, as shall have been selected by a vote of the Required Banks; PROVIDED
THAT by a vote of the Required Banks any such Enforcement Representative
(including the Enforcement Representative selected by the Agent) may be
replaced.
(c) Any actions, including votes, to be taken by the Banks
under the terms of the Collateral Trust Agreement (whether in respect of
releases of collateral, enforcement actions, amendments, waivers or
otherwise) shall in all respects be subject to the terms of this Agreement
(including, without limitation, Section 9.06).
-76-
<PAGE>
SECTION 9.20. SPECIAL PROVISION RELATING TO THIS AMENDMENT AND
RESTATEMENT. (a) This Amended and Restated Credit Agreement shall be
effective upon receipt by the Agent of the following items which shall be in
form and substance satisfactory to the Agent:
(i) counterparts of this Agreement duly executed by the
Borrower and TLGI;
(ii) counterparts of the Confirmation of Guaranties duly
executed by each of TLGI and LGII in favor of the Agent;
(iii) counterparts of the Collateral Trust Agreement,
duly executed by each party thereto, together with duly executed
counterparts of each document, certificate, instrument or
opinion required to be delivered in connection therewith or with
the delivery of collateral thereunder, which in the case of any
opinions or certificates shall include the Agent and the Banks
as additional addressees (or shall otherwise satisfactorily
provide that the Agent and the Banks shall be entitled to rely
on such certificates or opinions).
(iv) an opinion of counsel to the Borrower and the
Guarantors as to the due execution and enforceability of this
Agreement and the Confirmation of Guaranties;
(v) a certificate of the Borrower, TLGI and each other
Guarantor as to the due authorization, execution and delivery of
this Amended and Restated Agreement and the truth of the
representation and warranties hereunder;
(vi) evidence that any and all guaranties and other
contingent obligations of Loewen Financial and Neweol with
respect to all Indebtedness of TLGI, LGII and each other
Subsidiary arising under the Note Agreements, the Existing
Credit Agreements and any other obligations of TLGI and LGII
have been fully released and terminated;
(vii) payment of all amounts due to the Agent and/or the
Banks pursuant to those certain letters of agreement dated May
14, 1996 from the Bank to the Borrower and TLGI;
(viii) evidence of the execution, delivery and
effectiveness of the Bank of Montreal Credit Agreement; and
(ix) such other documents as the Agent or the Banks
shall request.
(b) This Amended and Restated Credit Agreement may be executed in
any number of counterparts, all of which shall be deemed to constitute but one
original and shall be binding upon all parties, their successors and permitted
assigns.
-77-
<PAGE>
(c) References to the Original Agreement contained in any Loan
Document shall be deemed to be a reference to such agreement as amended and
restated hereby.
(d) The following Schedules and Exhibits to the Original
Agreement are being added or replaced by this Amendment and Restatement:
Schedule 1
Schedule 2
Schedule 3
Schedule 4
Exhibit E
Exhibit F
(e) The following schedules to the Original Agreement are being
deleted by this Amendment and Restatement:
Schedule 4.08
Schedule 4. 15
Schedule 5.09(a)
(f) The Borrower hereby acknowledges that the Notes and the
Security Agreement are and shall remain in full force and effect, and hereby
ratifies, confirms and approves the Notes and the Security Agreement and all of
the terms and provisions thereof, and agrees that each of the Notes and the
Security Agreement constitutes the valid and binding obligation of the
Borrower, enforceable by the Agent and the Banks in accordance with its terms.
-78-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, under seal, by their respective authorized officers as of the day
and year first above written.
LOEWEN MANAGEMENT INVESTMENT
CORPORATION, IN ITS CAPACITY AS AGENT
FOR LOEWEN GROUP INTERNATIONAL, INC.
By: /s/ Peter S. Hyndman
------------------------------------
Name: Peter S. Hyndman
----------------------------------
Title: Assistant Secretary
----------------------------------
(CORPORATE SEAL)
c/o Loewen Group International, Inc.
4126 Norland Avenue
Burnaby, British Columbia
Canada V5G 3S8
Attention: Vice President, Finance
Telecopier number: (604) 473-7305
THE LOEWEN GROUP INC.
By: /s/ Peter S. Hyndman
------------------------------------
Name: Peter S. Hyndman
----------------------------------
Title: Vice-President, Law and
Corporate Secretary
----------------------------------
(CORPORATE SEAL)
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia
Canada V5G 3S8
Attention: Vice President, Finance
Telecopier number: (604) 473-7305
<PAGE>
COMMITMENT WACHOVIA BANK OF GEORGIA, N.A.,
AS AGENT AND AS A BANK
$61,300,000.00
By: /s/ John A. Whitner
------------------------------------
Name: John A. Whitner
----------------------------------
Title: Vice President
----------------------------------
(SEAL)
LENDING OFFICE
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: U.S. Corporate Group
Telecopier number: (404) 332-6898
Confirmation number: (404) 332-6738
<PAGE>
COMMITMENT ROYAL BANK OF CANADA
$25,000,000.00 By: /s/ Karen T. Hull
------------------------------------
Name: KAREN T. HULL
----------------------------------
Title: MANAGER, CORPORATE BANKING
----------------------------------
(SEAL)
LENDING OFFICE
Grand Cayman (North America No. 1) Branch
c/o New York Branch
Financial Square, 23rd Floor
New York, New York 10005-3531
Attention: Manager, Loans Administration
Telephone number: (212) 428-6311
Facsimile number: (212) 428-2372
with a copy to:
One North Franklin Street
Suite 700
Chicago, Illinois 60606
Attention: Karen T. Hull
Telephone number: (312) 551-1617
Facsimile number: (312) 551-0805
<PAGE>
COMMITMENT THE FIRST NATIONAL BANK OF
CHICAGO
$15,000,000.00 By: /s/ Catherine V. Frank
------------------------------------
Name: Catherine V. Frank
----------------------------------
Title: AVP
----------------------------------
(SEAL)
LENDING OFFICE
The First National Bank of Chicago
Suite 0324 Chicago, Illinois 60670
Attention: Ms. Martha McGuire
Telecopier number: (312) 732-2991
Confirmation number: (312) 732-7093
<PAGE>
COMMITMENT BANK OF MONTREAL, CHICAGO BRANCH
$10,000,000.00 By: /s/ Michael D. Pincus
------------------------------------
Name: MICHAEL D. PINCUS
----------------------------------
Title: MANAGING DIRECTOR
----------------------------------
(SEAL)
LENDING OFFICE
Bank of Montreal, Chicago Branch
115 S. LaSalle Street, 11W
Chicago, Illinois 60603
Attention: Ms. Mary V. Roney
Telecopier number: (312) 750-6057
Confirmation number: (312) 750-3888
<PAGE>
COMMITMENT STAR BANK, N.A.
$10,000,000.00 By: /s/ R. Neltner
------------------------------------
Name:
-----------------------------------
Title: VP
----------------------------------
(SEAL)
LENDING OFFICE
Star Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
Attention: Mr. Richard W. Neltner
Telecopier number: (513) 632-2068
Confirmation number: (513) 632-4073
TOTAL COMMITMENTS:
$121,300,000.00
<PAGE>
10th March, 1995
Mr. Paul Wagler
BY FAX:
Dear Paul:
Thank you for our excellent meeting this morning. Further to our discussions I
herewith give you a formal offer as follows:
Position: Executive Vice President Finance
Salary: 1st year - $250,000 Cdn pro-rated for 1995
2nd year - $300,000 Cdn
Bonus: 50% of salary pro-rated in 1995.
Stock Options: 40,000 shares vested over our normal period which is either
5 or 7 years.
It is my understanding that you should be available full time in 2 weeks and
possibly sooner.
It is also my understanding that you should be available to meet with Alex Brown
Wednesday afternoon at approximately 2:00 p.m., to be confirmed by Janet, and
join us for a dinner cruise with the Alex Brown people Wednesday night. I also
understand that you will join us for our Thursday 7:30 a.m. tax brainstorming
meeting on our boat.
Please call me at home this weekend re acceptance.
Bruce, Dwight and I feel very positive about you joining our dynamic company and
being a vital part of a dynamic team.
Most Sincerely,
/s/ Raymond Loewen
Ray Loewen
Chairman & CEO
<PAGE>
April 30, 1996
STRICTLY PRIVATE AND CONFIDENTIAL
Mr. Grant Ballantyne
Dear Grant:
I am pleased to confirm your proposed employment arrangement with The
Loewen Group Inc. and subsidiaries (the "Company") in accordance with the
following terms and conditions:
1. You are employed as Senior Vice-President Financial Control and
Administration, with employment commencing on May 6, 1996.
2. Your agreed duties and responsibilities will be those described in the
attached job description (Schedule "A").
3. Your compensation (in Canadian dollars) will be made up of the following:
(a) A beginning annual base salary of $ 235,000 per annum payable on the
Company's normal payroll basis. Your salary will be subject to review
on January 1 of each year with any increases subject to the sole
discretion of the Company.
(b) Inclusion on all Company fringe benefit programs provided to
Executives at your level in the Company, including: Group Life
Insurance, Accidental Death and Dismemberment Insurance, RRSP, Dental,
Medical, Extended Health, and Long Term Disability. Costs of these
benefits are to be shared between you and the Company in the same
manner as with other Senior Executives.
(c) Four weeks vacation per annum.
(d) Reasonable operating expenses for your automobile including gas, oil,
insurance and maintenance.
(e) The provision of an employee stock option benefit pursuant to the
Company's employee stock option plan whereby you will have an option
to purchase a total of
<PAGE>
30,000 common shares of the Company, vesting in equal annual amounts
of 6,000 shares over a five year period at a per share price which is
the market price of the shares at the close of trade on the day before
we enter into the stock option agreement. Your rights to purchase
will vest at 12 month intervals commencing on the date of the stock
option agreement. Such rights shall expire with respect to all shares
ten years from the date of the option agreement.
(f) You will be eligible to participate in the bonus program offered to
Senior Executives of the Company. For reference purposes your target
bonus is 30% of your prorated annual salary based on performance
criteria for Senior Executives.
For 1996, the Company has substituted stock options for cash
bonuses. Accordingly, you will be issued 2,500 options when
other Executive bonus options are issued and on the same vesting,
terms, and pricing conditions.
It is further understood that there is no guarantee of a bonus in
any succeeding year, and any subsequent annual bonus entitlement
shall be solely as the Company in its sole discretion may advise.
The granting of the options referred to in 3(e) and (f) are
subject to the signing of a formal option agreement and the
approval of the Compensation Committee of the Loewen Board of
Directors.
4. The Company will provide and pay for a cellular telephone and any
appropriate computer equipment for business purposes.
5. The Company will reimburse you for reasonable and prudent expenses incurred
directly in relation to your duties, upon presentation of receipts or
invoices in support.
6. The Company will reimburse you for all reasonable relocation costs on the
move for you and your spouse from Toronto to Vancouver. These costs
include: real estate commission on the sale of your existing home, moving,
transportation, temporary accommodation in Vancouver, and legal costs on
selling and buying your residences. The total costs to be reimbursed will
not exceed $45,000.
In addition, if required, the Company will provide you with bridge
financing interest-free, for up to $100,000 for a maximum period of six
months, to assist you with the purchase of your Vancouver residence.
7. (a) This Agreement may be terminated by the Company for cause at any time
by providing written notice. "Cause" shall include: gross negligence;
dishonesty; incompetence; your material failure or inability to
perform your duties and responsibilities hereunder; any activity or
inactivity by you that materially and
<PAGE>
adversely affects the business operations or image of the Company or
its affiliates; or any other material breach by you of this Agreement.
(b) This Agreement may be terminated at any time by either party without
cause, on six months written notice. In the event of termination by
the Company, the Company shall provide normal salary and related
fringe benefits for six months from the date of termination.
8. In consideration of the stock option benefit provided to you in
paragraph 3(e) herein, you covenant as follows: upon termination of this
agreement by either party for any reason you will not, directly or
indirectly, for a period of twelve months from termination, compete with
the Company in the funeral, cemetery or related businesses anywhere in the
United States or Canada. In providing this covenant you acknowledge that
the acquisition and general activities of the Company extend across the
United States and Canada; that the Company is engaged in an intensely
competitive industry; that the Company's main competitors seek acquisitions
and operate competing businesses throughout the United States and Canada;
and that your employment duties and knowledge cover both the United States
and Canada.
"Compete" includes serving as an employee, shareholder, officer, director,
consultant or advisor, directly or indirectly, and includes the giving of
financial assistance or acting as broker, directly or indirectly.
"Business" includes the either direct or indirect research or negotiation
for, acquisition, development or operation of funeral homes, cemeteries and
related businesses, including but not limited to the related businesses of
funeral and cemetery insurance of all types.
9. With respect to your duties and responsibilities on behalf of the Company:
(a) At all times you will act in the best interests of the Company; you
will engage in no activity which is detrimental or prejudicial to the
Company, its reputation, or any of its business;
(b) At no time will you represent, directly or indirectly, parties or
interests that are prejudicial to or in conflict with the best
interests of the Company, its operations, or the Company's acquisition
program;
(c) You will at all times act honestly and faithfully in carrying out the
Company's instructions;
(d) You will at all times represent the Company in a professional manner
and use your best efforts to promote the Company's interests.
<PAGE>
10. During the currency of this Agreement and following its termination you
will at all times keep strictly confidential all internal, private
information, data, materials and knowledge relating to the Company or its
business; nor during such times will you make any unauthorized use of any
proprietary information, data or analysis of the Company, or of specific
corporate opportunities developed or in the process of development by the
Company.
11. This letter confirms the Company's agreement with this employment proposal.
To confirm your acceptance of and agreement with the employment proposal as
outlined in this letter, please sign both copies and return one copy for
our records, keeping a copy for yourself. This mutually signed letter will
then constitute the employment agreement between us.
We look forward to your joining our Company.
Yours truly,
THE LOEWEN GROUP INC.
Per: /s/ Douglas J. McKinnon
ACCEPTED AND AGREED as of
this 6th day of May, 1996.
/s/ William G. Ballantyne
Attachment
<PAGE>
Schedule "A"
JOB DESCRIPTION
Senior Vice-President Financial Control and Administration
DUTIES AND RESPONSIBILITIES (Located in Burnaby, British Columbia and reporting
to the Executive Vice-President):
- - Corporate budgeting and accounting.
- - Tax accounting.
- - Ontario Securities Commission and Securities Exchange Commission financial
reporting.
- - Corporate consolidations.
- - Internal and external auditing.
- - Management information systems.
- - Information support to Legal and Treasury.
- - Such other duties or responsibilities or projects as the Chief Executive
Officer may assign.
- - Responsibilities may involve considerable travel.
<PAGE>
May 01, 1996
Amended July 18, 1996
STRICTLY PRIVATE AND CONFIDENTIAL
Mr. Douglas J. McKinnon
Dear Doug:
I am pleased to confirm your employment arrangement with The Loewen Group
Inc. and subsidiaries (the "Company") in accordance with the following terms and
conditions:
1. You are employed as Executive Vice-President as of May 01, 1996.
2. Your agreed duties and responsibilities will be those described in the
attached job description (Schedule "A").
3. Your compensation (in Canadian dollars) will be made up of the
following:
(a) A beginning annual base salary of US $300,000 (CDN $408,000)
per annum payable on the Company's normal payroll basis. Your salary
will be subject to review on January 1 of each year with any increases
subject to the sole discretion of the Company.
(b) Inclusion on all Company fringe benefit programs provided to
Executives at your level in the Company, including: Group Life
Insurance, Accidental Death and Dismemberment Insurance, RRSP, Dental,
Medical, Extended Health, and Long Term Disability. Costs of these
benefits are to be shared between you and the Company in the same
manner as with other Senior Executives.
(c) Four weeks vacation per annum.
(d) Reasonable operating expenses for your automobile including
gas, oil, insurance, maintenance and a car allowance of $800.00 per
month.
<PAGE>
-2-
(e) The provision of an employee stock option benefit pursuant to
the Company's employee stock option plan whereby you will have an
option to purchase a total of 50,000 common shares of the Company,
vesting in equal annual amounts of 10,000 shares over a five year
period at a per share price which is the market price of the shares at
the close of trade on the day before we enter into the stock option
agreement. Your rights to purchase will vest at 12 month intervals
commencing on the date of the stock option agreement. Such rights
shall expire with respect to all shares ten years from the date of the
option agreement.
(f) You will be eligible to participate in the bonus program
offered to Senior Executives of the Company for reference purposes
your target bonus is 60% of your prorated annual salary based on
performance criteria for Senior Executives.
For 1996, the Company has substituted stock options for cash bonuses.
Accordingly, you will be issued stock options when other Executive
bonus options are issued and on the same vesting, term, and pricing
conditions.
It is further understood that there is no guarantee of a bonus in any
succeeding year, and any subsequent annual bonus entitlement shall be
solely as the Company in its sole discretion may advise.
The granting of the options referred to in 3(e) and (f) are subject to
the signing of a formal option agreement and the approval of the
Compensation Committee of the Loewen Board of Directors.
4. The Company will provide and pay for a cellular telephone and any
appropriate computer equipment for business purposes.
5. The Company will reimburse you for reasonable and prudent expenses
incurred directly in relation to your duties, including membership dues and
costs related to your existing membership in the Terminal City Club, upon
presentation of receipts or invoices in support.
6. The Company will reimburse you for your annual professional dues.
7. (a) This Agreement may be terminated by the Company for cause at
any time by providing written notice. "Cause" shall include: gross
negligence; dishonesty; incompetence; your material failure or
inability to perform your duties and responsibilities hereunder; any
activity or inactivity by you that materially and adversely affects
the business operations or image of the Company or its affiliates; or
any other material breach by you of this Agreement.
(b) This Agreement may be terminated at any time by either party
without cause, on six months written notice. In the event of
termination by the Company,
<PAGE>
-3-
the Company shall provide normal salary and related fringe benefits for six
months from the date of termination.
8. In consideration of the stock option benefit provided to you in
paragraph 3(e) herein, you covenant as follows: upon termination of this
agreement by either party for any reason you will not, directly or
indirectly, for a period of twelve months from termination, compete with
the Company in the funeral, cemetery or related businesses anywhere in the
United States or Canada. In providing this covenant you acknowledge that
the acquisition and general activities of the Company extend across the
United States and Canada; that the Company is engaged in an intensely
competitive industry; that the Company's main competitors seek acquisitions
and operate competing businesses throughout the United States and Canada;
and that your employment duties and knowledge cover both the United States
and Canada.
"Compete" includes serving as an employee, shareholder, officer, director,
consultant or advisor, directly or indirectly, and includes the giving of
financial assistance or acting as broker, directly or indirectly.
"Business" includes the either direct or indirect research or negotiation
for, acquisition, development or operation of funeral homes, cemeteries and
related businesses, including but not limited to the related businesses of
funeral and cemetery insurance of all types.
9. With respect to your duties and responsibilities on behalf of the
Company:
(a) At all times you will act in the best interests of the
Company; you will engage in no activity which is detrimental or
prejudicial to the Company, its reputation, or any of its business;
(b) At no time will you represent, directly or indirectly, parties
or interests that are prejudicial to or in conflict with the best
interests of the Company, its operations, or the Company's acquisition
program;
(c) You will at all times act honestly and faithfully in carrying
out the Company's instructions;
(d) You will at all times represent the Company in a professional
manner and use your best efforts to promote the Company's interests.
10. During the currency of this Agreement and following its termination
you will at all times keep strictly confidential all internal, private
information, data, materials and knowledge relating to the Company or its
business; nor during such times will you make any unauthorized use of any
proprietary information, data or analysis of the Company, or of specific
corporate opportunities developed or in the process of development by the
Company.
<PAGE>
-4-
11. This letter confirms the Company's agreement with this employment
proposal. To confirm your acceptance of and agreement with the employment
proposal as outlined in this letter, please sign both copies and return one
copy for our records, keeping a copy for yourself. This mutually signed
letter will then constitute the employment agreement between us.
We look forward to your joining our Company.
Yours truly,
THE LOEWEN GROUP INC.
Per: /s/ Raymond Loewen
ACCEPTED AND AGREED as of
this 1st day of May, 1996
/s/ Douglas J. McKinnon
Attachment
<PAGE>
Schedule "A"
JOB DESCRIPTION
Executive Vice-President
DUTIES AND RESPONSIBILITIES (Located in Burnaby, British Columbia and reporting
to the Chairman and Chief Executive Officer.):
- - To supervise and direct the Senior Vice-President Financial Control and
Administration.
- - To supervise and direct the Vice-President Legal and Corporate Secretary.
- - To provide assistance and direction to the rest of the Senior Management
team in accordance with company policy and procedures.
- - To assist the Chief Executive Officer in the performance of his duties as
and when required.
- - Such other duties or responsibilities or projects as the Chief Executive
Officer or Board of Directors or your immediate superior may assign.
- - Responsibilities may involve considerable travel.
<PAGE>
EXHIBIT 10.30
RESIGNATION AND RELEASE AGREEMENT
This Resignation and Release Agreement (hereinafter the
"Agreement") is entered into by and between Robert O. Wienke ("Employee") and
The Loewen Group Inc. ("TLG") and Loewen Group International, Inc. ("LGII")
(hereinafter, TLG and LGII shall be collectively referred to as "Loewen").
WITNESSETH
WHEREAS, Employee currently is employed by Loewen in the capacity
of Senior Vice President, Law and General Counsel and currently serves as a
member of the Board of Directors of LGII; and
WHEREAS, Employee and Loewen desire to enter into this Agreement to
resolve all matters and issues existing between them, without incurring the
costs associated with litigation; and
WHEREAS, nothing contained in this Agreement is intended in any
manner to be an admission of liability on the part of Loewen or any of its
past or present employees, officers, or directors;
NOW THEREFORE, for and in consideration of the promises and mutual
covenants and agreements hereinafter set forth, the parties intending to be
legally bound do hereby agree as follows:
1. RESIGNATION. Employee agrees to resign from his position of
Senior Vice President, Law and General Counsel of Loewen and to resign from
his membership on the Board of Directors of LGII. The effective dates of
such resignations shall be June 30, 1996. Employee will continue to receive
through June 30, 1996, all of the compensation and benefits now
1
<PAGE>
received by Employee.
2. CONTINUATION OF EMPLOYMENT. Loewen and Employee agree that,
notwithstanding the resignations outlined in paragraph 1, Employee will
continue in Loewen's employment until June 30, 2000, at which time his
employment will terminate. Between the effective date of the resignations
referred to in paragraph 1 and June 30, 2000, Employee shall provide and
stand ready to provide consulting, advisory, and legal services, similar to
and consistent with the nature of services provided as Senior Vice President
of Law and General Counsel, from time to time upon the request of, and at the
direction of, Loewen, on a basis not to exceed 40 hours per month at places
and times mutually convenient to Employee and Loewen. During this
continuation of employment until June 30, 2000, Employee shall be free to
accept other employment, on a temporary, part-time, or full-time basis, with
entities that do not compete with Loewen or to engage in the private practice
of law full-time or part-time. As compensation, regardless of whether Loewen
requests or directs Employee to perform any consulting, advisory, and legal
services work, Employee shall be paid at the rate of $16,666 per month, with
the first payment due on June 30, 1996 (or on the date which is two business
days after the date on which the Agreement becomes effective and enforceable
under paragraph 19, whichever date is later), and the final payment due on
May 30, 2000. These monthly payments shall be subject to applicable
withholding taxes.
3. DEATH OR DISABILITY OF EMPLOYEE. If Employee shall become
disabled or die before completion of the payments required pursuant to
paragraph 2 hereof, the Company will make such payments, at the time and in
the manner specified in paragraph 2, to Employee or to the benefit of the
person or person designated in writing by Employee to the Company, or if
2
<PAGE>
Employee fails to so designate any person or shall have revoked all such
designations, to the executors or administrators of Employee's estate.
4. RELEASE OF ALL CLAIMS. Employee, for himself, his agents,
attorneys, heirs, administrators, executors and assigns, and anyone acting or
claiming on his or their joint or several behalf, hereby releases, forever
discharges, and covenants never to sue Loewen, its employees and former
employees, officers, directors, stockholders, agents, affiliates,
subsidiaries, parent and subsidiary corporations, successors and assigns,
from and on any and all claims, causes of action, demands, damages, costs,
expenses, liabilities or other losses whatsoever that in any way arise from,
grow out of or are related to any aspect of Employee's dealings and
relationship with Loewen, including but not limited to any matter related to
his employment with Loewen prior to June 30, 1996, the change in status
thereof as of June 30, 1996 (as specified in paragraph 1), and rights or
claims arising under the Age Discrimination in Employment act and the Older
Workers Benefit Protection Act (42 U.S.C. Sections 621 ET SEQ.), the
Employee Retirement Income Security Act (29 U.S.C. Sections 301 ET SEQ.),
and any other federal, state or other governmental law, administrative
regulation, or common law doctrine.
5. RELEASE OF ALL CLAIMS. Loewen, for itself, its agents,
attorneys, parent and subsidiary corporations, successors, affiliates,
directors, officers, agents, stockholders, employees and former employees and
assigns, and anyone acting or claiming on it or their joint or several
behalf, hereby releases, forever discharges, and covenants never to sue
Employee, his agents, attorneys, heirs, administrators, executors, successors
and assigns, from and on any and all claims, causes of action, demands,
damages, costs, expenses, liabilities or other losses whatsoever that in any
way arise from, grow out of or are related to any aspect of Employee's
3
<PAGE>
dealings and relationship with Loewen, including but not limited to any
matter related to his employment with Loewen prior to June 30, 1996, the
change in status thereof as of June 30, 1996 (as specified in paragraph 1),
and any other federal, state or other governmental law, administrative
regulation, or common law doctrine.
6. REEMPLOYMENT OR FUTURE ASSOCIATION. Employee hereby agrees
that, after the termination of his employment in accordance with paragraph 2,
on June 30, 2000, he shall not seek reinstatement or apply for future
employment with Loewen or any of its affiliates or subsidiaries, and that
neither Loewen nor any of its affiliates shall be obligated to consider
Employee for employment.
7. CONFIDENTIALITY. Employee agrees that the existence, terms,
and conditions of this Agreement, (other than the fact that Employee is
continuing as an employee and advisor to Loewen for the term hereof) and any
and all underlying communications and negotiations in connection with or
leading to this Agreement, are confidential and that he will not disclose any
such matters to any individual or entity without the prior written consent of
Loewen; provided, however, that disclosures by Employee regarding the
existence, terms and conditions of this Agreement may be made to Employee's
attorneys, accountants, and advisors for personal and tax purposes, and also
to the extent required by a final and binding court order or other compulsory
process. Upon Employee's receipt of any order, subpoena or other compulsory
process demanding production or disclosure of this Agreement or of any of the
terms of this agreement, Employee agrees to promptly notify Loewen in writing
of the requested disclosure, including the proposed date of the disclosure,
the reason for the requested disclosure and the identity of the individual or
entity requesting the disclosure, if possible, no later than ten
4
<PAGE>
business days prior to the date that such disclosure is to be made. Employee
agrees not to oppose any action that Loewen might take with respect to any
such request or demand for production or disclosure. In the event of a
disclosure by Employee in violation of the terms of this Agreement, Loewen
shall have, in addition to any claims for damages, the right to seek
injunctive relief or specific performance of this Agreement to prevent any
continuing or future breach of the confidentiality provision of this
Agreement. Employee agrees that the obligations of this paragraph shall be
binding upon his agents and representatives, including his attorneys.
8. NONDISPARAGEMENT. Employee and Loewen agree that neither
Employee nor Executive Management of Loewen shall discuss in a disparaging or
defamatory manner any aspect of Employee's employment with Loewen. Employee
agrees not to discuss with any third parties, in a disparaging or defamatory
manner, any of Loewen's employees, or any aspect of Loewen's or Employee's
business. The parties also agree that, if Loewen decides to issue a press
release regarding Employee's change in status, as stated in paragraphs 1 and
2, such press release will take the form of that attached as Exhibit A. The
parties further agree that Loewen will provide to prospective employers
seeking references regarding Employee the reference letter attached as
Exhibit B. Finally, the parties agree that Employee, and Loewen to the
extent that it so desires, may disseminate the notice attached as Exhibit C.
9. FUTURE COOPERATION. Employee agrees to fully and completely
cooperate with Loewen with respect to any litigation that is pending against
Loewen and any claim or action that may be filed against Loewen in the
future. This cooperation shall include making himself available at
reasonable times and places for interviews, reviewing documents, testifying
in a deposition or a legal proceeding, and providing advice to Loewen in
preparing defenses to any pending or
5
<PAGE>
potential future claims against Loewen.
10. INDEMNITY. Loewen agrees to advance the cost of defense
against and, to the extent allowed by Delaware law, to indemnify Employee and
hold him harmless against any reasonable costs, reasonable expenses including
attorneys' fees, judgments, or damages incurred by Employee in respect of any
suit or action brought against Employee or Loewen or any affiliate by virtue
of Employee's position as having been an Officer or Director of Loewen
including but not limited to (i) any shareholder class action suits or
shareholder derivative actions or suits, or (ii) other actions or suits
against Loewen or Employee in which Employee is additionally joined or
threatened to be joined as a Defendant by virtue of Employee's position as
having been an Officer or Director of Loewen or (iii) any action or suit by
any third party in which Employee may be a witness or potential witness.
Pursuant to and as part of this indemnity, Loewen will use its active and
good faith efforts to cause Employee to enjoy coverage under Loewen's
Directors' and Officers' Liability Insurance or Executive Protection Policy,
and participate in all rights of indemnity or advance of expenses made
available to Officers or Directors of Loewen.
This indemnity will not extend to include (i) any action or
inaction by Employee of which Loewen was unaware and which constitutes
willful misconduct by Employee or which, if Loewen was aware of such willful
misconduct, the same had not been approved by Loewen; (ii) any action or
inaction by Employee occurring outside of the dates of his employment with
Loewen; and (iii) any indemnification not permitted by Delaware law.
11. MEDICAL BENEFITS. Loewen agrees that, during Employee's
employment with Loewen as provided in paragraph 2, it shall provide Employee
and his family with full medical insurance
6
<PAGE>
benefit coverage based upon Employee's most recent election of coverage prior
to the execution of the Agreement. Loewen will provide such medical
insurance benefit coverage to Employee at the same cost that Employee
incurred prior to execution of the Agreement. The medical insurance benefit
coverage shall continue until (i) Employee has commenced full-time employment
with another party who will provide Employee with comparable and similar
medical coverage for himself and his family at comparable cost and (ii) any
"pre-existing conditions" exceptions to such new medical coverage for cancer
or other conditions have been eliminated. The parties understand that any
such new employment that would otherwise be considered "full-time" shall not
be considered less than "full-time" simply because of Employee's ongoing
responsibilities to provide Loewen with consulting, advisory, and legal
services pursuant to this Agreement.
12. REIMBURSEMENT FOR RELOCATION EXPENSES. Loewen will reimburse
Employee in the amount of $136,000 for real estate brokerage costs incurred
by Employee in connection with his move to Cincinnati. This payment will by
made on or before July 9, 1996, provided that the Agreement has become
effective and enforceable under paragraph 19; otherwise, the payment will be
made within two business days of the date the Agreement does become effective
and enforceable under paragraph 19.
13. FORGIVENESS OF LOAN. Loewen hereby forgives, releases and
discharges any and all Employee's obligations under a certain $25,000
unsecured demand promissory note that Employee provided to Loewen in
connection with a loan to cover Employee's relocation costs associated with
his move to Cincinnati.
14. REIMBURSEMENT INTEREST PAYMENT. Loewen will reimburse
Employee in the
7
<PAGE>
amount of $16,000 for interest on indebtedness incurred by Employee in
connection with his relocation to Cincinnati. This payment will be made on
or before July 9, 1996, provided that the Agreement has become effective and
enforceable under paragraph 19; otherwise, the payment will be made within
two business days of the date the Agreement does become effective and
enforceable under paragraph 19.
15. OUTPLACEMENT SERVICES. Loewen will pay for the following
outplacement services from April 1, 1996 through September 30, 1996 upon
presentation of bills by Employee:
a. Secretarial services provided by an outside entity,
including telephone, postage, etc., up to $2,000 per
month.
b. Consultant: Roy Gillespie up to $1,000 per month.
c. Office expenses provided by an outside entity, up to
$1,000 per month.
d. Additional expenses for additional employment
consultants, employment and legal seminars including
travel expenses to said seminars up to $2,000 per month.
Any shortfall below the above monthly limits for each category will be added
on a cumulative basis to subsequent months' limits for the corresponding
categories. In addition, Loewen will provide Employee voice mail facilities
in its Covington, KY headquarters during the term of his employment as
specified in paragraph 2.
16. STOCK OPTIONS. Employee's Option Agreement with TLG, dated
December 13, 1994, shall continue in full force and effect, and the Options,
as defined in the Option Agreement, shall continue to be exercisable by
Employee, on the schedule set forth in the Option Agreement; provided,
however, Employee and Loewen further hereby agree, and the Option Agreement
is hereby amended to reflect, that the Option Agreement shall terminate 45
days after
8
<PAGE>
June 30, 2000.
17. MEIPS. Employee's Investment Option Agreement, dated June 15,
1994, shall continue in full force and effect, and accordingly on June 15,
1996, an additional 21,000 units shall vest to Employee's benefit, resulting
in a total of 42,000 units vested to Employee's benefit as of June 15, 1996,
of participation in the TLG 1994 Management Equity Investment Plan provided,
however, Employee and Loewen further hereby agree, and the Investment Option
Agreement is hereby amended to reflect, that no additional units of
participation in the Management Equity Investment Plan shall vest after
June 30, 1996.
18. GOOD FAITH AND NONCOMPETITION OBLIGATION. In the course of
his duties pursuant to this Agreement, Employee agrees to do all reasonable
things to promote and foster the best interests and good will of Loewen and
its business. At no time during the term of this Agreement shall Employee,
directly or indirectly, engage in any business activity that competes with
Loewen or its current business. Both parties reciprocally agree that an
express obligation and duty of good faith shall apply to each party as to all
aspects of this Agreement.
19. ACKNOWLEDGEMENT. Employee acknowledges receipt of the original
of this agreement on June 28, 1996. Employee acknowledges and agrees that
the Agreement provides him with compensation and other benefits to which he
otherwise would not be entitled. Employee further acknowledges and
understands that he shall have a period of 21 days from the date on which he
received the Agreement to consider and decide whether to accept and sign the
Agreement. He further acknowledges and understands that, while it is his
right to accept and sign the Agreement during the 21 day period, he is under
no obligation to do so. Should Employee decide to accept and sign the
Agreement, (a) he shall have the right to revoke the
9
<PAGE>
agreement within seven days following the date on which he signed it and (b)
the Agreement shall not become effective or enforceable until such seven day
period has expired without revocation.
20. NO ADMISSION OF LIABILITY. The parties hereby acknowledge and
agree that neither Loewen nor its officers, agents, or employees, by
providing the financial and other consideration described above and by
entering into this Agreement, has admitted to any unlawful conduct or
liability to Employee.
21. VOLUNTARY EXECUTION. Employee hereby acknowledges that he is
executing this Agreement voluntarily and of his own free will and that he
fully understands the terms of this Agreement. Employee acknowledges that he
has reviewed this Agreement fully and discussed its terms with his Legal
counsel prior to its execution.
22. CONTROLLING LAW. This Agreement shall be construed under and
governed by the laws of Kentucky.
23. NO ASSIGNMENT OF CLAIMS. Employee hereby represents and
warrants that he has not previously assigned or purported to assign or
transfer to any person or entity any of the claims or causes of action herein
released.
24. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between Employee and Loewen with respect to the subject matter of
this Agreement, and there are no other written or oral agreements,
understandings, or arrangements except as set forth herein. The terms of
this agreement may not be modified or waived except in writing signed by the
parties hereto. The invalidation of any provision contained in this
Agreement shall not affect the validity of any other provision.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, in counterpart originals or otherwise, in the presence of
competent witnesses as of the dates set forth below.
THE LOEWEN GROUP, INC.
By: /s/ Timothy R. Hogenkamp
---------------------------------
/s/ Stephanie Tuerck Its: Timothy R. Hogenkamp
- --------------------------- --------------------------------
Witness
Date: 7/8/96 Date: 7/8/96
---------------------- -------------------------------
LOEWEN GROUP INTERNATIONAL, INC.
By: /s/ Timothy R. Hogenkamp
/s/ Stephanie Tuerck --------------------------------
- ---------------------------
Witness Its: Timothy R. Hogenkamp
--------------------------------
Date: Date: 7/17/96
--------------------- --------------------------------
ROBERT O. WIENKE
/s/ Eumie Kang
- -----------------------------
Witness
/s/ Robert O. Wienke
-------------------------------------
Date: 6/28/96
------------------------
Date: June 28, 1996
-------------------------------
11
<PAGE>
EXHIBIT 11
THE LOEWEN GROUP INC.
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic
Net earnings........................................................ $ 16,914 $ 10,109 $ 53,626 $ 36,506
Cumulative preferred share dividends................................ (2,410) -- (6,433) --
--------- --------- --------- ---------
Net earnings available to Common shareholders....................... 14,504 10,109 47,193 36,506
Weighted average shares outstanding................................. 58,956 47,909 55,960 44,353
Basic earnings per share............................................ $ 0.25 $ 0.21 $ 0.84 $ 0.82
--------- --------- --------- ---------
--------- --------- --------- ---------
Fully diluted
Net earnings available to Common shareholders....................... $ 14,504 $ 10,109 $ 47,193 $ 36,506
Add: imputed earnings from dilutive options, net of tax effect...... 138 257 431 599
--------- --------- --------- ---------
Fully diluted net earnings.......................................... $ 14,642 $ 10,366 $ 47,624 $ 37,105
Weighted average shares outstanding................................. 58,956 47,909 55,960 44,353
Shares issuable upon assumed conversion of dilutive options......... 704 1,945 731 1,148
--------- --------- --------- ---------
Fully diluted shares................................................ 59,660 49,854 56,691 45,501
--------- --------- --------- ---------
Fully diluted earnings per share.................................... $ 0.25 $ 0.20 $ 0.84 $ 0.82
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 24,385
<SECURITIES> 0
<RECEIVABLES> 208,754
<ALLOWANCES> 26,219
<INVENTORY> 31,624
<CURRENT-ASSETS> 248,059
<PP&E> 757,912
<DEPRECIATION> 100,471
<TOTAL-ASSETS> 3,121,968
<CURRENT-LIABILITIES> 182,547
<BONDS> 0
75,000
0
<COMMON> 794,525
<OTHER-SE> 92,889
<TOTAL-LIABILITY-AND-EQUITY> 3,121,968
<SALES> 647,693
<TOTAL-REVENUES> 647,693
<CGS> 410,311
<TOTAL-COSTS> 410,311
<OTHER-EXPENSES> 95,552
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,471
<INCOME-PRETAX> 74,043
<INCOME-TAX> 22,232
<INCOME-CONTINUING> 53,626
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,626
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.84
</TABLE>
