<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1996
REGISTRATION NOS. 333-
AND 333- -
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
LOEWEN GROUP INTERNATIONAL, INC. THE LOEWEN GROUP INC.
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
DELAWARE BRITISH COLUMBIA
(State or other jurisdiction of incorporation or organization)
7261 7261
(Primary Standard Industrial Classification Code Number)
61-1264590 98-0121376
(I.R.S. Employer Identification Number)
50 EAST RIVERCENTER BOULEVARD 4126 NORLAND AVENUE
SUITE 800 BURNABY, BRITISH COLUMBIA
COVINGTON, KENTUCKY 41011 CANADA V5G 3S8
(606) 431-6663 (604) 299-9321
(Address, including zip or postal code, and telephone number, including
area code, of registrants' principal executive offices)
THE CORPORATION TRUST COMPANY TIMOTHY R. HOGENKAMP
1209 ORANGE STREET LOEWEN GROUP INTERNATIONAL, INC.
WILMINGTON, DELAWARE 19801 50 EAST RIVERCENTER BOULEVARD, SUITE 800
(302) 658-7581 COVINGTON, KENTUCKY 41011
(606) 431-6663
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
with copies to:
DWIGHT K. HAWES
VICE-PRESIDENT, FINANCE MICHELLE L. JOHNSON
THE LOEWEN GROUP INC. THELEN, MARRIN, JOHNSON & BRIDGES
4126 NORLAND AVENUE TWO EMBARCADERO CENTER, SUITE 2100
BURNABY, BRITISH COLUMBIA SAN FRANCISCO, CALIFORNIA 94111-3995
CANADA V5G 3S8
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7 3/4% Series 3 Senior
Guaranteed Notes due 2001
("Series 3 Exchange
Notes")................... $125,000,000 100% $125,000,000 $37,878.79
- ----------------------------------------------------------------------------------------------------
8 1/4% Series 4 Senior
Guaranteed Notes due 2003
("Series 4 Exchange
Notes")................... $225,000,000 100% $225,000,000 $68,181.81
- ----------------------------------------------------------------------------------------------------
Guarantees of Series 3
Exchange Notes and Series 4
Exchange Notes............ n/a n/a n/a n/a
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended.
---------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THE EXCHANGE NOTES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. EXCHANGE NOTES MAY NOT BE ISSUED NOR MAY +
+OFFERS TO EXCHANGE BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO EXCHANGE +
+NOR SHALL THERE BE ANY ISSUANCE OF EXCHANGE NOTES IN ANY STATE IN WHICH SUCH +
+OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER , 1996
LOEWEN GROUP INTERNATIONAL, INC.
OFFER TO EXCHANGE
$125,000,000 7 3/4% SERIES 3 SENIOR GUARANTEED NOTES (REGISTERED) DUE 2001
FOR
ALL OUTSTANDING 7 3/4% SERIES 3 SENIOR GUARANTEED NOTES DUE 2001
AND
$225,000,000 8 1/4% SERIES 4 SENIOR GUARANTEED NOTES (REGISTERED) DUE 2003
FOR
ALL OUTSTANDING 8 1/4% SERIES 4 SENIOR GUARANTEED NOTES DUE 2003
GUARANTEED BY
THE LOEWEN GROUP INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME
ON , 1996, UNLESS EXTENDED.
-----------
Loewen Group International, Inc., a Delaware corporation ("LGII"), hereby
offers (the "Exchange Offer"), upon the terms and subject to conditions set
forth in this prospectus ("Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange (i) up to an aggregate
principal amount of $125,000,000 of its 7 3/4% Series 3 Senior Guaranteed Notes
(Registered) due 2001 (the "Series 3 Exchange Notes") for up to an aggregate
principal amount of $125,000,000 of its outstanding 7 3/4% Series 3 Senior
Guaranteed Notes due 2001 (the "Series 3 Outstanding Notes") and (ii) up to an
aggregate principal amount of $225,000,000 of its 8 1/4% Series 4 Senior
Guaranteed Notes (Registered) due 2003 (the "Series 4 Exchange Notes" and,
together with the Series 3 Exchange Notes, the "Exchange Notes") for up to an
aggregate principal amount of $225,000,000 of its outstanding 8 1/4% Series 4
Senior Guaranteed Notes due 2003 (the "Series 4 Outstanding Notes" and,
together with the Series 3 Outstanding Notes, the "Outstanding Notes"). The
terms of the Series 3 Exchange Notes are identical in all material respects to
those of the Series 3 Outstanding Notes, and the terms of the Series 4 Exchange
Notes are identical in all material respects to those of the Series 4
Outstanding Notes, except for certain transfer restrictions and registration
rights relating to the Outstanding Notes and except for certain interest
provisions relating to such registration rights. The Exchange Notes will be
issued pursuant to, and entitled to the benefits of, the Indenture (as defined)
governing the Outstanding Notes. The Exchange Notes and the Outstanding Notes
are sometimes referred to collectively as the "Notes."
The Exchange Notes will be fully and unconditionally guaranteed, on a senior
basis (the "Guarantees"), by The Loewen Group Inc., a corporation under the
laws of British Columbia, Canada ("Loewen" or the "Guarantor" and, together
with its subsidiaries and associated entities, the "Company"). The Exchange
Notes and the Guarantees will be senior obligations of LGII and Loewen,
respectively, and will rank pari passu in right of payment with all senior
indebtedness of LGII and Loewen, respectively. Because other senior
indebtedness of LGII and Loewen is secured, the Exchange Notes and the
Guarantees, when issued, will be secured as described herein. However, the
holders of the Exchange Notes will not have an independent right to require the
Lien (as defined herein) secured by the Collateral (as defined herein) to
remain in place or to require any other security for the Exchange Notes. As at
September 30, 1996, the aggregate amount of outstanding Pari Passu Indebtedness
(as defined herein), including the Indebtedness (as defined herein) evidenced
by the Outstanding Notes, was approximately $1.1 billion. See "Description of
Exchange Notes" and "Description of Certain Other Indebtedness."
The Exchange Notes and the Guarantees will be effectively subordinated in
right of payment to all existing and future liabilities, including trade
payables, of the subsidiaries of LGII and Loewen. As at September 30, 1996, the
aggregate amount of Indebtedness of LGII's subsidiaries (excluding intercompany
Indebtedness) was approximately $109 million, and the aggregate amount of
Indebtedness of Loewen's subsidiaries other than LGII and its subsidiaries
(excluding intercompany Indebtedness) was approximately $6 million.
LGII will accept for exchange any and all Outstanding Notes that are properly
tendered in the Exchange Offer prior to 5:00 p.m., New York time, on ,
unless extended by LGII, in its sole discretion (the "Expiration Date").
Tenders of Outstanding Notes may be withdrawn at any time prior to 5:00 p.m.,
New York time, on the Expiration Date. If LGII terminates the Exchange Offer
and does not accept for exchange any Outstanding Notes with respect to the
Exchange Offer, LGII will promptly return the Outstanding Notes to the
tendering holders thereof. The Exchange Offer is not conditioned upon any
minimum principal amount of Outstanding Notes being tendered for exchange, but
is otherwise subject to certain customary conditions. The Outstanding Notes may
be tendered only in integral multiples of $1,000.
AS OF THE DATE OF THIS PROSPECTUS, LOEWEN IS THE SUBJECT OF AN UNSOLICITED
EXCHANGE OFFER BY SERVICE CORPORATION INTERNATIONAL. SEE "PROSPECTUS SUMMARY--
UNSOLICITED EXCHANGE OFFER BY SCI," "RISK FACTORS" AND "RECENT DEVELOPMENTS--
UNSOLICITED EXCHANGE OFFER BY SCI."
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED CAREFULLY IN CONNECTION WITH THE EXCHANGE OFFER.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
Interest on the Exchange Notes will accrue from the date of issuance thereof
and will be payable semi-annually on April 15 and October 15 of each year,
commencing on April 15, 1997. Holders of the Exchange Notes will receive
interest on April 15, 1997 from the date of initial issuance of the
Outstanding Notes. Interest on the Outstanding Notes accepted for exchange
will cease to accrue upon issuance of the respective Exchange Notes. The
Series 3 Exchange Notes will mature on October 15, 2001, and the Series 4
Exchange Notes will mature on October 15, 2003. The Series 3 Exchange Notes
will not be redeemable prior to maturity. The Series 4 Exchange Notes will be
redeemable at the option of LGII, in whole or in part, at any time on or after
October 15, 2000 at the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the redemption date. In the event of a Change of
Control (as defined herein), LGII will be obligated to make an offer to
purchase all of the Notes then outstanding at a purchase price equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to
the purchase date. In addition, LGII will be obligated to make an offer to
purchase Notes in the event of certain asset sales. See "Description of
Exchange Notes."
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of LGII and Loewen contained in the Registration Rights Agreement
dated October 4, 1996 (the "Registration Rights Agreement") by and among LGII
and Loewen and Smith Barney Inc., Alex. Brown & Sons Incorporated, Nesbitt
Burns Securities Inc., RBC Dominion Securities Corporation and Midland Walwyn
Capital Corporation, as the initial purchasers (the "Initial Purchasers") with
respect to the initial sale of the Outstanding Notes. Based on interpretations
by the staff of the Securities and Exchange Commission (the "Commission"),
LGII and Loewen believe that, except as described below, the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Outstanding Notes may be
offered for resale, resold and otherwise transferred by respective holders
thereof without further compliance with the registration and prospectus
delivery provisions of the Securities Act of 1933, as amended (the "Securities
Act"), provided that (i) such Exchange Notes are acquired in the ordinary
course of such holder's business and (ii) such holder does not intend to
participate in, has no arrangement or understanding with any person to
participate in, and is not engaged in and does not intend to engage in, a
distribution of the Exchange Notes. A holder of Outstanding Notes that is an
"affiliate" of LGII or Loewen within the meaning of Rule 405 under the
Securities Act or that is a broker-dealer who purchased Outstanding Notes from
the Company to resell pursuant to an exemption from registration (a) cannot
rely on such interpretations by the staff of the Commission, (b) will not be
permitted or entitled to tender such Outstanding Notes in the Exchange Offer,
and (c) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any sale or transfer of such
Outstanding Notes. In the event that applicable interpretations by the staff
of the Commission change or otherwise do not permit resales of the Exchange
Notes without compliance with the registration and prospectus delivery
requirements of the Securities Act, holders of Exchange Notes who transfer
Exchange Notes in violation of the prospectus delivery provisions of the
Securities Act or without an exemption from registration thereunder may incur
liability thereunder. The Company does not assume or indemnify holders against
such liability. Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
Prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a Prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received pursuant to the Exchange Offer in
exchange for Outstanding Notes that were acquired by such broker-dealer as a
result of market-making activities or other trading activities. LGII has
agreed that, for a period of 180 days after the Expiration Date, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. This Prospectus may not be used for any other offers to resell or
re-transfer any Exchange Notes, whether by a broker-dealer or otherwise. See
"Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the Notes.
There can be no assurance as to the liquidity of any markets that may develop
for the Exchange Notes, the ability of holders to sell the Exchange Notes or
the price at which holders would be able to sell the Exchange Notes. LGII does
not intend to list the Exchange Notes for trading on any national securities
exchange or over-the-counter market system. Future trading prices of the
Exchange Notes will depend on many factors including, among other things,
prevailing interest rates, the Company's operating results and the market for
similar securities. Certain of the Initial Purchasers have advised LGII that
they intend to make a market in the Exchange Notes offered hereby. However,
the Initial Purchasers are not obligated to do so and any market making may be
discontinued at any time without notice.
Neither LGII nor Loewen will receive any proceeds from the Exchange Offer.
LGII has agreed to pay the expenses incident to the Exchange Offer. No
underwriter is being used in connection with this Exchange Offer.
THIS PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
INTO SUCH DOCUMENTS) ARE AVAILABLE UPON REQUEST FROM THE CORPORATE SECRETARY
OF THE LOEWEN GROUP INC., 4126 NORLAND AVENUE, BURNABY, BRITISH COLUMBIA, V5G
3S8, CANADA; TELEPHONE (604) 299-9321. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1996.
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------
NO SECURITIES COMMISSION OR SIMILAR AUTHORITY IN CANADA HAS IN ANY WAY
PASSED UPON THE MERITS OF THE SECURITIES OFFERED HEREUNDER AND ANY
REPRESENTATION TO THE CONTRARY IS AN OFFENSE. THE SECURITIES OFFERED HEREUNDER
HAVE NOT BEEN AND WILL NOT BE QUALIFIED FOR SALE UNDER THE SECURITIES LAWS OF
CANADA AND, SUBJECT TO CERTAIN EXCEPTIONS, MAY NOT BE OFFERED OR SOLD IN
CANADA.
2
<PAGE>
AVAILABLE INFORMATION
LGII and Loewen have filed with the Commission a Registration Statement on
Form S-4 (together with any amendments, exhibits, annexes and schedules
thereto, the "Exchange Offer Registration Statement") pursuant to the
Securities Act and the rules and regulations thereunder, covering the Exchange
Notes and the Guarantees. This Prospectus does not include all of the
information set forth in the Exchange Offer Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. Statements made in the Prospectus as to the contents of any
contract, agreement or other document referred to in the Exchange Offer
Registration Statement are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange
Offer Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
Loewen is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by
Loewen may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices located
at Seven World Trade Center, Suite 1300, New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such material can be obtained by mail from the Public
Reference section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, reports, proxy
statements and other information that Loewen or LGII files with the Commission
electronically are contained in the Internet Web site maintained by the
Commission. The Commission's Web site address is http://www.sec.gov. The
Common shares without par value of Loewen ("Common Shares") are traded on the
New York Stock Exchange, The Toronto Stock Exchange and The Montreal Exchange
and the 6% Cumulative Redeemable Convertible First Preferred Shares, Series C
("Series C Preferred Shares") are traded on The Toronto Stock Exchange and The
Montreal Exchange. Reports, proxy statements and other information filed by
Loewen may be inspected at the offices of the New York Stock Exchange, at
20 Broad Street, New York, New York 10005, at the offices of The Toronto Stock
Exchange at The Exchange Tower, 2 First Canadian Place, Toronto, Ontario,
Canada M5X 1J2 and at the offices of The Montreal Exchange at 800 Victoria
Square, Montreal, Quebec, Canada H4Z 1A9.
3
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents heretofore filed by Loewen with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act (File No. 0-18429 for
filings prior to September 27, 1996; File No. 1-12163 for filings on or
subsequent to September 27, 1996) are hereby incorporated herein by reference:
(i) Loewen's Annual Report on Form 10-K for the year ended December 31, 1995
filed March 28, 1996 (as amended on Form 10-K/A filed June 20, 1996); (ii)
Loewen's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996
(filed May 15, 1996), June 30, 1996 (filed August 14, 1996) and September 30,
1996 (filed November 14, 1996); (iii) Loewen's Current Reports on Form 8-K
dated January 3, 1996, January 17, 1996, January 24, 1996, January 26, 1996,
February 6, 1996, February 12, 1996, February 27, 1996, March 4, 1996, March
13, 1996, March 20, 1996, March 26, 1996 (as amended on Forms 8-K/A, filed
June 11, 1996 and July 6, 1996), March 31, 1996, May 1, 1996, May 8, 1996, May
24, 1996, May 31, 1996, June 4, 1996, June 6, 1996, June 17, 1996, June 30,
1996, August 7, 1996, August 26, 1996 (as amended on Form 8-K/A, filed October
30, 1996), August 29, 1996, September 5, 1996, September 17, 1996, September
20, 1996, September 24, 1996, September 26, 1996, October 1, 1996, October 10,
1996, October 14, 1996, October 17, 1996, October 20, 1996, November 1, 1996
and November 3, 1996; and (iv) Loewen's Reports by Issuer of Securities Quoted
on Nasdaq Interdealer Quotation System on Form 10-C dated February 27, 1996
and March 20, 1996. All documents filed by Loewen pursuant to Section 13(a),
13(c), 14, or 15(d) of the Exchange Act after the date of this Prospectus and
prior to 180 days after the Expiration Date shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of
filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is incorporated
or deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
4
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus and certain documents incorporated herein by reference
contain or may contain both statements of historical fact and "forward-looking
statements" within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act. Examples of forward-looking statements
include: (i) projections of revenue, earnings, capital structure and other
financial items, (ii) statements of the plans and objectives of the Company or
its management, (iii) statements of future economic performance and (iv)
assumptions underlying statements regarding the Company or its business.
Important factors, risks and uncertainties that could cause actual results to
differ materially from any forward-looking statements ("Cautionary
Statements") are disclosed in certain documents incorporated by reference
herein and may be included in this Prospectus. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by the Cautionary
Statements.
FINANCIAL INFORMATION
All dollar amounts in this Prospectus are in United States dollars ("U.S.$"
or "$") unless otherwise indicated. References to "Cdn.$" are to Canadian
dollars.
The Company prepares its consolidated financial statements included in its
reports filed pursuant to the Exchange Act in accordance with accounting
principles generally accepted in Canada ("Canadian GAAP"). Differences between
Canadian GAAP and accounting principles generally accepted in the United
States ("U.S. GAAP"), as applicable to the Company, are explained in Note 21
to the consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, as amended (the
"1995 Consolidated Financial Statements"), and in Note 11 to the interim
consolidated financial statements included in the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996 (the "September 1996
Interim Consolidated Financial Statements"). The selected consolidated
financial data with respect to the Company included in this Prospectus is
presented on a Canadian GAAP and a U.S. GAAP basis.
Financial statements with respect to LGII also are prepared in accordance
with Canadian GAAP. The selected consolidated financial data with respect to
LGII included in this Prospectus is presented on a Canadian GAAP basis only.
Financial statements with respect to Neweol Investments Ltd. (see Note 1
thereto), a corporation under the laws of British Columbia and a wholly owned
subsidiary of Loewen ("Neweol"), and Loewen Finance (Wyoming) Limited
Liability Company, a Wyoming limited liability company in which all of the
membership interests are owned by Loewen and Neweol ("Loewen Finance"),
included in this Prospectus have been prepared in accordance with U.S. GAAP.
The consolidated financial statements of the Company for the year ended
December 31, 1993, and for prior years, were published in Canadian dollars.
Effective January 1, 1994, the Company adopted the United States dollar as its
reporting currency and, accordingly, has published its consolidated financial
statements for the year ended December 31, 1994 and subsequent periods in
United States dollars. Financial information relating to periods prior to
January 1, 1994 has been translated from Canadian dollars into United States
dollars as required by Canadian GAAP at the December 31, 1993 rate of
U.S.$1.00 = Cdn.$1.3217.
5
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus.
THE COMPANY
The Loewen Group Inc. operates the second-largest number of funeral homes and
cemeteries in North America and the largest number of funeral homes in Canada.
The Company also engages in the pre-need selling of funeral, cemetery and
cremation merchandise and services. As at 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, all located in the
United States.
UNSOLICITED EXCHANGE OFFER BY SCI
On September 17, 1996, Service Corporation International ("SCI") publicly
distributed a letter to Raymond L. Loewen, Chairman and Chief Executive Officer
of Loewen, in which SCI expressed an interest in discussing with Loewen a
stock-for-stock transaction that would value the Loewen Common Shares at $43
per share. On September 24, 1996, the Board of Directors of Loewen 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 Loewen. 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 Loewen 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 Commission a Registration Statement on Form S-4
(File No. 333-13391) relating to the Proposed Offer. On October 10, 1996, the
Loewen Board of Directors unanimously determined that the Proposed Offer was
inadequate and not in the best interests of Loewen and its shareholders. The
Loewen Board of Directors has recommended that the Loewen shareholders not
tender their shares, if and when the Proposed Offer is commenced. Also on
October 10, 1996, Loewen filed with the Commission a Schedule 14D-9 providing
certain information regarding the Proposed Offer and summarizing the reasons
why the Board of Directors recommended that the Loewen shareholders not tender
their shares. The Schedule 14D-9 was mailed to Loewen shareholders on or about
October 10, 1996. See "Recent Developments--Unsolicited Exchange Offer by SCI"
and "Legal Proceedings."
THE FUNERAL SERVICE INDUSTRY
The funeral service industry has a number of attractive characteristics.
Historically, the funeral service industry has had a low business risk compared
with most other businesses and has not been significantly affected by economic
or market cycles. According to the 1994 Business Failure Record published by
The Dun & Bradstreet Corporation, the average business failure rate in the
United States in 1994 was 86 per 10,000. The 1994 failure rate of the funeral
service and crematoria industry was 8 per 10,000, among the lowest of all
industries. Management believes this low failure rate is the result of a number
of factors, including customers' tendencies to make choices based on reputation
for quality service rather than price and the number of years required to
establish a caring reputation in the community.
In addition, future demographic trends are expected to contribute to the
continued stability of the funeral service industry. The U.S. Department of
Commerce, Bureau of the Census, projects that, reflecting the well-
6
<PAGE>
publicized "graying of America" as the baby boom generation reaches old age,
the number of deaths in the United States will grow at approximately 1.0%
annually from 1990 through 2010.
Finally, the funeral service industry in North America is highly fragmented,
consisting primarily of small, stable, family-owned businesses. Management
estimates that notwithstanding the increasing trend toward consolidation over
the last few years, only approximately 10% of the 23,500 funeral homes and
approximately 7% of the 11,000 cemeteries in North America are currently owned
and operated by the five largest publicly-traded North American funeral service
companies.
GROWTH STRATEGY
The Company capitalizes on these attractive industry fundamentals through a
growth strategy that emphasizes three principal components: (i) acquiring a
significant number of small, family-owned funeral homes and cemeteries; (ii)
acquiring "strategic" operations consisting predominantly of large, multi-
location urban properties that generally serve as platforms for acquiring
small, family-owned businesses in surrounding regions; and (iii) improving the
revenue and profitability of newly-acquired and established locations.
The first element of the Company's growth strategy is the acquisition of
small, family-owned funeral homes and cemeteries. Management believes that the
Company has a competitive advantage in this market due to its culture and its
well-known and understood reputation for honoring existing owners and staff.
The second element of the Company's growth strategy is the acquisition of
large, multi-location urban properties. In 1995, the Company's "strategic"
acquisitions included Osiris Holding Corporation ("Osiris"), a leading cemetery
operator in the United States, and MHI Group, Inc. ("MHI"), a publicly traded
company that operated 16 funeral homes and five cemeteries in Florida and
Colorado. In addition, in March 1996, the Company acquired certain assets from
S.I. Acquisition Associates, L.P. ("S.I."), which included 15 funeral homes,
two cemeteries and two insurance companies, all located in Louisiana.
The final element of the Company's growth strategy is its focus on enhancing
the revenue and profitability of newly-acquired and established operations.
Through the Company's integration process, newly-acquired funeral homes
typically show an immediate improvement in gross margin due in part to the
significant economies of scale available to the Company. Cemeteries typically
show an improvement in gross margin within the first year after acquisition.
Over time, the Company has continued to increase the revenue and profitability
of its established operations through the introduction of additional
merchandising, cost control programs and inflation based pricing. On an ongoing
basis, the Company also seeks to improve the market share and earnings of
established operations by helping local managers to market services more
effectively and to enhance the reputation of their operations in the community.
1996 FINANCINGS
In May 1996, LGII entered into a five-year $750 million revolving credit
facility with a syndicate of banks (the "1996 Revolving Credit Facility"). As
at November 1, 1996, the amount outstanding under the 1996 Revolving Credit
Facility was approximately $94 million. See "Description of Certain Other
Indebtedness."
Also in May 1996, Loewen, LGII and their senior lenders entered into the
Collateral Agreement (as defined herein) pursuant to which the Pari Passu
Indebtedness (as defined herein) held by the senior lenders is secured by,
among other things, a pledge for the benefit of such lenders of the shares held
by Loewen of substantially all of the subsidiaries in which Loewen directly or
indirectly holds more than a 50% voting or economic interest and all of the
financial assets of LGII (LGII does not have material assets other than
financial assets) (collectively, the "Collateral"). See "Description of Certain
Other Indebtedness." The Notes are subject to a covenant (the "Lien
Limitation") limiting Liens (as defined herein) to certain categories of Liens
described in
7
<PAGE>
the Indenture. In order to satisfy the Lien Limitation, the Lien secured by the
Collateral has to be shared equally and ratably with the holders of the
Indebtedness evidenced by the Notes. Therefore, the Outstanding Notes are, and
the Exchange Notes (when issued) will be, secured as described herein. However,
the holders of the Exchange Notes will not have an independent right to require
the Lien secured by the Collateral to remain in place or unchanged or to
require any other security for the Exchange Notes. As at September 30, 1996,
the aggregate amount of Pari Passu Indebtedness was approximately $1.1 billion.
In March 1996, Loewen completed a private placement of two series of senior
guaranteed notes (the "Series 1 and 2 Initial Notes") for aggregate gross
proceeds of $350 million (the "Series 1 and 2 Notes Offering"). On October 3,
1996, LGII consummated an offer to exchange the Series 1 and 2 Initial Notes
for senior guaranteed notes which are identical in all material respects to the
Series 1 and 2 Initial Notes except that they have been registered under the
Securities Act and, accordingly, are not subject to the same transfer
restrictions (the "Series 1 and 2 Registered Notes"). The Series 1 and 2
Registered Notes represent the same indebtedness that had been represented by
the Series 1 and 2 Initial Notes exchanged therefor.
Concurrently with the Series 1 and 2 Notes Offering, Loewen completed a
public offering in Canada and a simultaneous private placement in the United
States of an aggregate of 7,000,000 Common Shares and, in April 1996, sold an
additional 700,000 Common Shares (pursuant to the exercise of an over-allotment
option) for aggregate gross proceeds of approximately Cdn.$302 million
(U.S.$221 million) (the "1996 Equity Offering"). The proceeds of the Series 1
and 2 Notes Offering and the 1996 Equity Offering were used to pay down the
balance on certain bank indebtedness and for general corporate purposes
including acquisitions.
In January 1996, Loewen completed a public offering in Canada and a
simultaneous private placement in the United States of 8,800,000 Convertible
First Preferred Shares Series C Receipts (the "Series C Receipts") for gross
proceeds of Cdn.$220 million (U.S. $161 million) (the "1996 Preferred Share
Offering"). The gross proceeds were deposited with an escrow agent, and the net
proceeds were released to Loewen from time to time to fund acquisitions by
depositing with the escrow agent an equal dollar amount of Series C Preferred
Shares. By June 1996, 8,800,000 Series C Preferred Shares had been deposited
with the escrow agent and all of the net proceeds had been released to Loewen.
----------------
LGII was incorporated in 1987 under the laws of the State of Delaware. LGII's
principal executive offices are located at 50 East RiverCenter Boulevard,
Covington, Kentucky 41011; telephone (606) 431-6663. Loewen was incorporated in
1985 under the laws of the Province of British Columbia, Canada. Loewen's
principal executive offices are located at 4126 Norland Avenue, Burnaby,
British Columbia, Canada, V5G 3S8; telephone (604) 299-9321.
8
<PAGE>
THE EXCHANGE OFFER
The Exchange Notes.......... The form and terms of the Exchange Notes are
identical in all material respects to the terms
of the respective Outstanding Notes for which
they may be exchanged pursuant to the Exchange
Offer, except for certain transfer restrictions
and registration rights relating to the
Outstanding Notes and except for certain interest
provisions relating to such registration rights
described below under "Description of Exchange
Notes."
The Exchange Offer.......... LGII is offering to exchange (i) up to an
aggregate principal amount of $125,000,000 of its
7 3/4% Series 3 Senior Guaranteed Notes
(Registered) due 2001 for up to an aggregate
principal amount of $125,000,000 of its
outstanding 7 3/4% Series 3 Senior Guaranteed
Notes due 2001 and (ii) up to an aggregate
principal amount of $225,000,000 of its 8 1/4%
Series 4 Senior Guaranteed Notes (Registered) due
2003 for up to an aggregate principal amount of
$225,000,000 of its outstanding 8 1/4% Series 4
Senior Guaranteed Notes due 2003. Outstanding
Notes may be exchanged only in integral multiples
of $1,000.
Expiration Date; Withdrawal
of Tender.................. The Exchange Offer will expire at 5:00 p.m., New
York time, on , 1996, or such later date and
time to which it is extended by LGII, in its sole
discretion. The tender of Outstanding Notes
pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date. Any
Outstanding Notes not accepted for exchange for
any reason will be returned without expense to
the tendering holder thereof as promptly as
practicable after the expiration or termination
of the Exchange Offer.
Certain Conditions to the
Exchange Offer............. The Exchange Offer is subject to certain
customary conditions, which may be waived by
LGII. See "The Exchange Offer--Certain Conditions
to the Exchange Offer."
Procedures for Tendering
Outstanding Notes.......... Each holder of Outstanding Notes wishing to
accept the Exchange Offer must complete, sign and
date the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or
such facsimile, together with such Outstanding
Notes and any other required documentation to the
Exchange Agent (as defined herein) at the address
set forth herein. By executing the Letter of
Transmittal, each holder will represent to LGII
that, among other things, (i) any Exchange Notes
to be received by it will be acquired in the
ordinary course of its business, (ii) it is not
engaged in and does not intend to engage in a
distribution of the Exchange Notes and (iii) it
is not an "affiliate" of LGII or Loewen within
the meaning of Rule 405 under the Securities Act
or, if it is an affiliate of LGII or Loewen, it
will comply with the registration and prospectus
delivery requirements of the Securities Act to
the extent applicable.
Interest on the Exchange
Notes...................... The Series 3 Exchange Notes will bear interest at
the rate of 7 3/4% per annum and the Series 4
Exchange Notes will bear interest at the rate of
8 1/4% per annum, payable semi-annually on April
15 and
9
<PAGE>
October 15 of each year, commencing April 15,
1997, to holders of record of Exchange Notes at
the close of business on the immediately
preceding April 1 and October 1, respectively.
Holders of the Exchange Notes will receive
interest on April 15, 1997 from October 4, 1996.
Interest on the Outstanding Notes accepted for
exchange will cease to accrue upon issuance of
the respective Exchange Notes.
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Outstanding Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender such Outstanding Notes
in the Exchange Offer should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on its own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering its Outstanding Notes,
either make appropriate arrangements to register
ownership of the Outstanding Notes in its own
name or obtain a properly completed bond power
from the registered holder. The transfer of
registered ownership may take considerable time
and may not be able to be completed prior to the
Expiration Date.
Guaranteed Delivery
Procedures................. Holders of Outstanding Notes who wish to tender
their Outstanding Notes and whose Outstanding
Notes are not immediately available or holders of
Outstanding Notes who cannot deliver their
Outstanding Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent, prior to the
Expiration Date, must tender their Outstanding
Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer--
Guaranteed Delivery Procedures."
Registration Requirements... LGII has agreed to use its best efforts to
consummate the Exchange Offer. The Exchange Offer
will provide holders of the Outstanding Notes
with an opportunity to exchange their Outstanding
Notes for the Exchange Notes, which will be
issued without legends restricting the transfer
thereof. If applicable interpretations of the
staff of the Commission do not permit LGII to
effect the Exchange Offer, or in certain other
circumstances, LGII has agreed to file a shelf
registration statement covering resales of the
Outstanding Notes and to use its best efforts to
cause such shelf registration statement to be
declared effective under the Securities Act and,
subject to certain exceptions, to keep the shelf
registration statement effective for 180 days
after the effective date thereof.
Certain U.S. and Canadian
Federal Tax Considerations. For a discussion of certain U.S. and Canadian tax
considerations relating to the Exchange Notes,
see "Certain U.S. Federal Income Tax
Considerations" and "Certain Canadian Federal Tax
Considerations."
Use of Proceeds............. There will be no proceeds to LGII or Loewen from
the exchange of Notes pursuant to the Exchange
Offer.
Exchange Agent.............. Fleet National Bank is the Exchange Agent. The
address and telephone number of the Exchange
Agent are set forth in "The Exchange Offer--
Exchange Agent."
10
<PAGE>
SUMMARY DESCRIPTION OF THE EXCHANGE NOTES
Issuer...................... Loewen Group International, Inc.
Exchange Notes.............. $125 million principal amount of 7 3/4% Series 3
Senior Guaranteed Notes (Registered) due 2001
$225 million principal amount of 8 1/4% Series 4
Senior Guaranteed Notes (Registered) due 2003
Maturity Dates.............. The Series 3 Exchange Notes will mature on
October 15, 2001.
The Series 4 Exchange Notes will mature on
October 15, 2003.
Interest Payment Dates...... April 15 and October 15, commencing April 15,
1997
Ranking..................... The Exchange Notes and the Guarantees will be
senior obligations of LGII and Loewen,
respectively, and will rank pari passu in right
of payment with all other senior indebtedness of
LGII and Loewen, respectively. Because other
senior indebtedness is secured, the Exchange
Notes and the Guarantees, when issued, will be
secured as described herein. The Exchange Notes
will be subject to a Lien Limitation that limits
Liens to certain categories of Liens described in
the Indenture. The Collateral for the holders of
Pari Passu Indebtedness includes a pledge for the
benefit of such lenders of the shares of
substantially all of the subsidiaries in which
Loewen directly or indirectly holds more than a
50% voting or economic interest and all of the
financial assets of LGII (LGII does not have
material assets other than financial assets). In
order to satisfy the Lien Limitation, the Lien
secured by the Collateral has to be shared
equally and ratably with the holders of the
Indebtedness evidenced by the Notes. However, the
holders of the Exchange Notes will not have an
independent right to require the Lien secured by
the Collateral to remain in place or unchanged or
to require any other security for the Exchange
Notes. In the event that the Lien secured by the
Collateral is released, if other security for the
Exchange Notes is not provided, the Exchange
Notes will become unsecured senior obligations of
LGII and Loewen and will rank junior in right of
payment to all secured indebtedness of LGII and
Loewen. As at September 30, 1996, the aggregate
amount of Pari Passu Indebtedness, including the
Indebtedness evidenced by the Outstanding Notes,
was approximately $1.1 billion. The Exchange
Notes and related Guarantees will be effectively
subordinated in right of payment to all existing
and future liabilities, including trade payables,
of LGII's and Loewen's subsidiaries,
respectively. As at September 30, 1996, the
aggregate amount of Indebtedness of LGII's
subsidiaries (excluding intercompany
Indebtedness) was approximately $109 million, and
the aggregate amount of Indebtedness of Loewen's
subsidiaries other than LGII and its subsidiaries
(excluding intercompany Indebtedness) was
approximately $6 million.
Guarantees.................. The Exchange Notes will be fully and
unconditionally guaranteed on a senior basis, as
to principal and interest, by Loewen.
11
<PAGE>
Optional Redemption......... The Series 3 Exchange Notes will not be
redeemable prior to maturity. The Series 4
Exchange Notes will be redeemable at the option
of LGII, in whole or in part, at any time on or
after October 15, 2000 at a premium declining to
par in 2002, plus accrued and unpaid interest, if
any, to the redemption date.
Effect of Change of
Control..................... As of the date of this Prospectus, Loewen is the
subject of an unsolicited exchange offer. As a
result, certain actions that may be taken by SCI
or others could be deemed to be a Change of
Control (as defined herein). See "Unsolicited
Exchange Offer by SCI." In the event of a Change
of Control, LGII will be obligated to make an
offer to purchase the then outstanding Exchange
Notes at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the purchase date. In
addition, LGII will be obligated to make an offer
to purchase the Exchange Notes at a purchase
price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest, if
any, to the purchase date, with the net cash
proceeds of certain sales or other dispositions
of assets. To the extent it does not have
available funds to meet its purchase obligations,
LGII or the Guarantor may be required to seek
third-party financing to purchase the Exchange
Notes. There can be no assurance that LGII or the
Guarantor will be able to obtain such financing.
The term "Change of Control" is limited to
certain specified transactions and may not
include other events that might adversely affect
the financial condition of LGII or result in a
downgrade of the credit rating of the Exchange
Notes.
Certain Covenants........... The Indenture contains certain covenants by
Loewen and its Restricted Subsidiaries (as
defined herein and including LGII), including,
but not limited to, covenants with respect to
limitations on the following matters: (i) the
incurrence of additional indebtedness, (ii)
certain payments, including dividends and
investments, (iii) the creation of liens, (iv)
sales of assets and preferred stock, (v)
transactions with interested persons,
(vi) payment restrictions affecting subsidiaries,
(vii) sale-leaseback transactions and (viii)
mergers and consolidations. During any time that
the ratings assigned to the Notes by the Rating
Agencies (as defined herein) are no less than
BBB- and Baa3, the covenants described under (i),
(ii), (iv), (v) and (vi) above will be suspended.
See "Description of Exchange Notes--Certain
Covenants."
Increase in Interest Rate... The interest rate on the Exchange Notes is
subject to increase if, under certain
circumstances, (i) LGII and Loewen are not in
compliance with their obligations under the
Registration Rights Agreement or (ii) Loewen
fails to consummate equity transactions having
gross proceeds of at least $200,000,000 in the
aggregate prior to the first anniversary of the
consummation of this Offering. See "Description
of Exchange Notes--Equity Transactions" and
"Description of Exchange Notes--Penalty
Interest."
12
<PAGE>
THE LOEWEN GROUP INC.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(IN THOUSANDS OF U.S.$, EXCEPT PER SHARE DATA, OPERATING DATA AND RATIOS)
Set forth below are certain selected consolidated financial and other
data of the Company for the periods indicated. This information should be
read in conjunction with the Company's 1995 Consolidated Financial
Statements and other information included or incorporated by reference
herein. The selected consolidated financial data for each of the years in
the five year period ended December 31, 1995 are derived from the Company's
audited consolidated financial statements and notes thereto, which have
been prepared in accordance with Canadian GAAP. The selected consolidated
financial data for the nine months ended September 30, 1996 and 1995 are
derived from the unaudited September 1996 Interim Consolidated Financial
Statements, which in management's opinion include all adjustments,
consisting only of normal, recurring adjustments, necessary for a fair
presentation of the financial results for the interim periods. Interim
results are not necessarily indicative of the results that may be expected
for any other interim period or for a full year.
The financial results for the nine months ended September 30, 1996
include a $2.6 million of costs related to SCI's hostile takeover proposal.
See "Recent Developments--Unsolicited Exchange Offer by SCI" for a more
detailed description of the Proposed Offer and the costs related thereto.
The financial results for the year ended December 31, 1995 include
provisions for the costs of settlements of two significant legal
proceedings, litigation-related finance costs and certain additional legal
and general and administrative costs. See "Recent Developments--Litigation
Settlements" for a more detailed description of the settlements and "Recent
Developments--1995 Results" for a more detailed description of the costs
related thereto.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
CANADIAN GAAP --------------------- ----------------------------------------------------------
1996 1995 1995 1994(1) 1993(1) 1992(1) 1991(1)
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................. $ 647,693 $ 421,120 $ 599,939 $ 417,328 $ 303,011 $ 218,907 $ 162,605
Gross margin............ 237,382 161,042 226,808 158,854 115,118 83,708 63,087
Earnings from
operations............. 141,830 93,914 119,053 95,113 65,697 50,563 39,053
Net earnings (loss)..... 53,626 36,506 (76,684) 38,494 28,182 19,766 14,425
Basic earnings (loss)
per share(2)........... 0.84 0.82 (1.69) 0.97 0.77 0.59 0.46
Fully diluted earnings
(loss) per
share(2)(3)............ 0.84 0.82 (1.69) 0.97 0.76 0.58 0.46
OTHER FINANCIAL DATA:
Depreciation and
amortization........... $ 39,005 $ 28,698 $ 40,103 $ 28,990 $ 21,196 $ 16,059 $ 11,053
EBITDA(4)............... 182,650 123,428 (25,758) 124,103 86,893 66,622 50,106
Ratio of earnings to
fixed charges.......... 2.0x 2.2x -- (5) 2.5x 2.9x 2.6x 2.6x
Aggregate dividends
declared per Common
share.................. 0.120 0.050 0.050 0.070 0.045 0.030 0.015
<CAPTION>
AS AT SEPTEMBER 30, AS AT DECEMBER 31,
--------------------- ----------------------------------------------------------
1996 1995 1995 1994(1) 1993(1) 1992(1) 1991(1)
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............ $3,121,968 $1,997,795 $2,262,980 $1,326,275 $ 913,661 $ 675,111 $ 518,492
Total long-term
debt(6)................ 1,255,465 735,626 934,509 516,654 341,977 246,715 193,853
Preferred securities of
subsidiary............. 75,000 75,000 75,000 75,000 -- -- --
Shareholders' equity.... 1,044,560 653,226 614,682 411,139 325,890 236,317 172,394
OPERATING DATA:
Number of funeral home
locations(7)........... 939 768 815 641 533 451 365
Number of funeral
services............... 104,407 81,548 114,319 93,760 78,847 63,516 52,212
Number of
cemeteries(7).......... 271 174 179 116 70 38 23
</TABLE>
13
<PAGE>
(1) Certain of the comparative figures have been reclassified to conform to
the presentation adopted in 1995.
(2) Earnings (loss) per share reflect the two-for-one subdivision of Common
Shares in June 1991.
(3) Fully diluted earnings (loss) per share figures assume exercise, if
dilutive, of employee and other stock options effective on their dates of
issue and that the funds derived therefrom were invested at annual after-
tax rates of return ranging from 5.85% to 9.10%, in accordance with
Canadian GAAP.
(4) EBITDA represents net earnings (loss) before interest, dividends on
preferred securities of subsidiary, income taxes, depreciation and
amortization. EBITDA has been included solely to facilitate the
consideration of the covenants of the Indenture that are based, in part,
on EBITDA. In addition, the Company understands that EBITDA is used by
certain investors as one measure of the Company's historical ability to
service its debt. EBITDA data are not a measure of financial performance,
do not represent cash flow from operations, under generally accepted
accounting principles, and should not be considered as a substitute for
net earnings as an indicator of the Company's operating performance or for
cash flow as a measure of liquidity. Please refer to the Consolidated
Statements of Changes in Financial Position, which include information
regarding cash provided by and applied to operations, investing and
financing, and Management's Discussion and Analysis of Financial Condition
and Results of Operations, which discusses liquidity and capital resources
(including sources and uses of capital) in greater detail, both of which
appear in Loewen's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.
(5) The 1995 loss is not sufficient to cover fixed charges by a total of
$126,584 and as such the ratio of earnings to fixed charges has not been
computed. Reference is made to the Statement re Computation of Earnings to
Fixed Charges Ratio (Canadian GAAP), which is an exhibit to the Exchange
Offer Registration Statement.
(6) Total long-term debt comprises long-term debt, including current portion.
(7) The numbers of locations for 1994 and 1993 include adjustments and
consolidations related to prior periods.
14
<PAGE>
Had the Company's Consolidated Financial Statements been prepared in
accordance with U.S. GAAP (see Note 21 to the Company's 1995 Consolidated
Financial Statements and Note 11 to the September 1996 Interim Consolidated
Financial Statements), selected consolidated financial data would be as
follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
U.S. GAAP --------------------- ----------------------------------------------------
1996 1995(1) 1995 1994(1) 1993(1) 1992(1) 1991(1)
---------- ---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................. $ 647,570 $ 421,936 $ 599,939 $ 417,328 $308,402 $239,452 $185,993
Earnings from
operations............. 139,438 97,373 117,376 94,758 66,711 54,838 43,692
Earnings (loss) before
cumulative effect of
change in accounting
principles............. 53,772 37,086 (75,800) 39,652 28,912 21,330 15,893
Fully diluted earnings
(loss) per share before
cumulative effect of
change in accounting
principles(2).......... 0.82 0.81 (1.67) 0.98 0.77 0.62 0.50
OTHER FINANCIAL DATA:
EBITDA(3)............... 178,778 122,858 (26,967) 123,748 88,428 72,404 56,335
Ratio of earnings to
fixed charges.......... 2.0x 2.2x -- (4) 2.4x 2.9x 2.6x 2.5x
Aggregate dividends
declared per Common
share.................. 0.120 0.050 0.050 0.070 0.047 0.033 0.017
<CAPTION>
AS AT SEPTEMBER 30, AS AT DECEMBER 31,
--------------------- ----------------------------------------------------
1996 1995(1) 1995 1994(1) 1993(1) 1992(1) 1991(1)
---------- ---------- ---------- ---------- -------- -------- --------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets............ $3,281,426 $2,069,640 $2,345,874 $1,329,928 $921,342 $702,096 $592,666
Total long-term
debt(5)................ 1,255,465 735,626 894,509 516,654 341,977 256,577 221,736
Preferred securities of
subsidiary............. 75,000 75,000 75,000 75,000 -- -- --
Shareholders' equity.... 1,019,695 628,490 519,006 385,950 299,059 245,472 196,071
</TABLE>
- --------
(1) Certain of the comparative figures have been reclassified to conform to the
presentation adopted in 1995.
(2) Earnings (loss) per share reflects the two-for-one subdivision of Common
Shares in June 1991.
(3) EBITDA represents net earnings (loss) before interest, dividends on
preferred securities of subsidiary, income taxes, depreciation and
amortization. EBITDA has been included solely to facilitate the
consideration of the covenants of the Indenture that are based, in part, on
EBITDA. In addition, the Company understands that EBITDA is used by certain
investors as one measure of the Company's historical ability to service its
debt. EBITDA data are not a measure of financial performance, do not
represent cash flow from operations, under generally accepted accounting
principles, and should not be considered as a substitute for net earnings
as an indicator of the Company's operating performance or for cash flow as
a measure of liquidity. Please refer to the Consolidated Statements of
Changes in Financial Position, which include information regarding cash
provided by and applied to operations, investing and financing, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which discusses liquidity and capital resources (including
sources and uses of capital) in greater detail, both of which appear in
Loewen's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996.
(4) The 1995 loss is not sufficient to cover fixed charges by a total of
$128,261 and as such the ratio of earnings to fixed charges has not been
computed. Reference is made to the Statement re Computation of Earnings to
Fixed Charges Ratio (U.S. GAAP), which is an exhibit to the Exchange Offer
Registration Statement.
(5) Total long-term debt comprises long-term debt, including current portion.
15
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS OF U.S.$)
Loewen Group International, Inc. serves as the holding company for the United
States assets and operations of the Company (other than assets and operations
in Puerto Rico). At November 1, 1996, LGII's operations consisted of 823
funeral homes and 278 cemeteries. Loewen beneficially owns, directly or
indirectly, all of the outstanding common stock of LGII.
Set forth below are certain selected consolidated financial data relating to
LGII. The selected consolidated financial data for each of the years in the
five year period ended December 31, 1995 are derived from audited consolidated
financial statements of LGII, which have been prepared in accordance with
Canadian GAAP. The selected consolidated financial data for the nine months
ended September 30, 1996 and 1995 are derived from unaudited interim
consolidated financial statements of LGII, which in management's opinion
include all adjustments consisting only of normal, recurring adjustments,
necessary for a fair presentation of the financial results for the interim
periods. Interim results are not necessarily indicative of the results that may
be expected for any other interim period or for a full year.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
--------------------- -------------------------------------------------
1996 1995(1) 1995 1994(1) 1993(1) 1992(1) 1991(1)
---------- ---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................. $ 596,705 $ 378,842 $ 540,825 $ 365,458 $263,493 $190,047 $135,248
Gross margin............ 215,840 142,569 198,867 136,639 97,328 69,675 48,940
Earnings from
operations............. 131,662 59,432 75,715 84,390 59,462 44,910 29,297
Net earnings (loss)(2).. 12,311 (3,668) (127,353) 7,491 10,671 9,766 7,661
<CAPTION>
AS AT SEPTEMBER 30, AS AT DECEMBER 31,
--------------------- -------------------------------------------------
1996 1995 1995 1994(1) 1993(1) 1992(1) 1991(1)
---------- ---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.......... $ 227,880 $ 169,781 $ 184,289 $ 96,943 $ 81,028 $ 57,145 $ 49,028
Non-current assets...... 2,539,605 1,560,644 1,776,425 998,753 686,260 507,545 398,239
---------- ---------- ---------- ---------- -------- -------- --------
Total assets............ 2,767,485 1,730,425 1,960,714 1,095,696 767,288 564,690 447,267
Current liabilities..... 131,660 107,281 221,555 81,472 36,722 27,242 17,394
Long-term debt,
excluding current
portion................ 1,074,524 561,005 730,355 372,887 243,290 176,073 180,784
Other non-current
liabilities............ 1,256,472 821,004 891,354 396,534 324,964 251,734 149,214
Preferred securities of
subsidiary............. 75,000 75,000 75,000 75,000 -- -- --
Shareholders' equity.... 229,829 166,135 42,450 169,803 162,312 109,641 99,875
</TABLE>
- -------
(1) Certain of the comparative figures have been reclassified to conform to the
presentation adopted in 1995.
(2) Losses incurred during the year ended December 31, 1995 are as a result of
LGII recording the litigation settlements and additional intercompany
charges payable to Loewen. These intercompany charges are eliminated in the
consolidated financial statements of the Company.
16
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully prior to tendering Outstanding Notes in
the Exchange Offer.
HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION OF THE EXCHANGE NOTES
LGII and Loewen are holding companies with no significant independent
business operations. Accordingly, their primary sources of cash to meet debt
service and other obligations (including payments on the Notes) are dividends
and other payments from their respective subsidiaries. Consequently,
obligations of LGII and Loewen to their creditors, including holders of the
Notes, are effectively subordinated in right of payment and junior to all
liabilities (including trade payables) of their respective subsidiaries. As at
September 30, 1996, the aggregate amount of Indebtedness of LGII's
subsidiaries (excluding intercompany Indebtedness) was approximately $109
million, and the aggregate amount of indebtedness of Loewen's subsidiaries
other than LGII and its subsidiaries, (excluding intercompany Indebtedness)
was approximately $6 million.
POTENTIAL INSUFFICIENCY OF COLLATERAL; NO INDEPENDENT RIGHT TO SECURITY FOR
THE EXCHANGE NOTES
The Lien secured by the Collateral is shared equally and ratably by the
other holders of all Pari Passu Indebtedness, including the 1996 Revolving
Credit Facility and the Notes. See "Description of Certain Other
Indebtedness." There can be no assurance that the Collateral will be
sufficient to cover any payments due on the Exchange Notes. In addition, the
Collateral secures the Pari Passu Indebtedness, including the Exchange Notes,
only so long as it is required under the 1996 Revolving Credit Facility. The
Collateral could be released by the lenders under the 1996 Revolving Credit
Facility, in certain circumstances, without the approval of all the other
holders of Pari Passu Indebtedness, including the holders of the Exchange
Notes. The holders of the Exchange Notes have no independent right to require
the Lien secured by the Collateral to remain in place or to require any other
security for the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE; POSSIBLE ADVERSE EFFECT ON
TRADING MARKET FOR OUTSTANDING NOTES
Holders of Outstanding Notes who do not exchange their Outstanding Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer, as set forth in the legend thereon as a
consequence of the issuance of the Outstanding Notes pursuant to exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the
Outstanding Notes may not be offered or sold unless registered under the
Securities Act and applicable state laws, or pursuant to an exemption
therefrom. Subject to the obligation by LGII and Loewen to file a Shelf
Registration Statement covering resales of Outstanding Notes in certain
circumstances, LGII and Loewen do not intend to register the Outstanding Notes
under the Securities Act and, after consummation of the Exchange Offer, will
not be obligated to do so. In addition, any holders of Outstanding Notes who
tender in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Further, as a result of the Exchange Offer, it is expected
that a substantial decrease in the aggregate principal amount of Outstanding
Notes outstanding will occur. As a result, it is unlikely that a liquid
trading market will exist for the Outstanding Notes at any time. This lack of
liquidity will make transactions more difficult and may reduce the trading
price of the Outstanding Notes. See "The Exchange Offer" and "Description of
Exchange Notes--Registration Rights Agreement."
UNSOLICITED EXCHANGE OFFER BY SCI
On September 17, 1996, SCI publicly announced its desire to combine with
Loewen in a stock-for-stock transaction and on October 2, 1996, SCI further
announced that it intended to make an unsolicited exchange
17
<PAGE>
offer directly to Loewen's shareholders. The Company's results for the three
months and the nine months ended September 30, 1996 included expenses of
approximately $2.6 million of costs related to the hostile takeover proposal.
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. A protracted conflict with
SCI also may affect the Company's ability to attract and retain key employees
and may result in disruption to the Company's normal business operations. In
addition, several lawsuits have been filed relating to the Proposed Offer. See
"Recent Developments--Unsolicited Exchange Offer by SCI" and "Legal
Proceedings."
PENDING CLASS ACTIONS
The Company currently is involved in three class action lawsuits that have
been consolidated for pre-trial proceedings (the "Class Actions") which were
commenced against Loewen, LGII and certain affiliates and officers of the
Company when the price of the Common Shares fell in response to the
announcement of the Gulf National award (as defined). The Company has
determined that it is not possible to predict the final outcome of the Class
Actions, and that it is not possible to establish at this time a reasonable
estimate of possible damages, if any, or reasonably to estimate the range of
possible damages, if any, that may be awarded to the plaintiffs in the Class
Actions. Accordingly, the Company cannot predict whether the ultimate outcome
of the Class Actions (including settlement) will have a material adverse
effect on the Company's financial position, results of operations or
liquidity. See "Legal Proceedings."
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
There is no existing public market for the Exchange Notes, nor can there be
any assurance that a public market will develop. Certain of the Initial
Purchasers have advised LGII that they intend to make a market in the Exchange
Notes; however, the Initial Purchasers are not obligated to do so and any
market-making may be discontinued at any time without notice.
18
<PAGE>
RECENT DEVELOPMENTS
UNSOLICITED EXCHANGE OFFER BY SCI
On September 17, 1996, Service Corporation International publicly
distributed a letter to Raymond L. Loewen, Chairman and Chief Executive
Officer of Loewen, in which SCI expressed an interest in discussing with
Loewen a stock-for-stock transaction that would value the Common Shares at $43
per share. On September 24, 1996, the Board of Directors of Loewen unanimously
rejected the proposal. On October 2, 1996, SCI announced that it intended to
make an unsolicited exchange offer directly to the shareholders of Loewen.
SCI's announcement stated that SCI would offer holders of Common Shares $45
worth of common stock of New SCI, a newly organized holding company, and that
SCI would offer holders of Series C Preferred Shares $29.51 worth of New SCI
common stock. All Loewen shareholders also would be entitled to elect to
receive, in lieu of New SCI common stock, shares of a Canadian subsidiary of
New 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 Commission a Registration Statement on Form S-4 (File No. 333-
13391) relating to the Proposed Offer. On October 10, 1996, the Loewen Board
of Directors unanimously determined that the Proposed Offer was inadequate and
not in the best interests of Loewen and its shareholders. The Loewen Board of
Directors has recommended that the Loewen shareholders not tender their
shares, if and when the Proposed Offer is commenced. Also on October 10, 1996,
Loewen filed with the Commission a Schedule 14D-9 providing certain
information regarding the Proposed Offer and summarizing the reasons why the
Board of Directors recommended that the Loewen shareholders not tender their
shares. The Schedule 14D-9 was mailed to Loewen 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, the Board of Directors of Loewen, 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 Loewen 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 Loewen 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 Loewen to enter into
indemnification agreements with its directors and certain officers whereby
Loewen will agree to indemnify such persons against all costs, charges and
expenses incurred by reason of being a director or officer of Loewen.
Several lawsuits relating to the Proposed Offer have been filed. See "Legal
Proceedings--Derivative Suit" and "--Service Corporation International."
19
<PAGE>
1996 RESULTS TO DATE
For the nine months ended September 30, 1996, the Company reported that
consolidated revenue increased 54% to $647.7 million from $421.1 million for
the nine months ended September 30, 1995. Consolidated gross margin increased
47% to $237.4 million in 1996 from $161.0 million in 1995, with funeral gross
margin increasing 21% and cemetery gross margin increasing 141%. The Company's
results for the three months and the nine months ended September 30, 1996
included expenses of approximately $2.6 million of costs related to SCI's
hostile takeover proposal. Such costs reduced fully diluted earnings per share
for the three months ended September 30, 1996 by $0.04 cents per share.
ACQUISITION PROGRAM
From January 1, 1996 to November 1, 1996, the Company consummated
approximately $520 million of funeral home, cemetery and related acquisitions.
As at November 1, 1996, the Company has signed agreements for additional
acquisitions aggregating approximately $277 million, the majority of which the
Company expects to close 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 Company
may evaluate or negotiate potential acquisitions which, if consummated, may be
considered significant based on acquisition price. See "Business--Future
Acquisitions."
LITIGATION SETTLEMENTS
In November 1995, a Mississippi state court jury awarded J.J. O'Keefe, Sr.,
Gulf National Insurance Company and certain affiliates (collectively, "Gulf
National") $100 million in compensatory damages and $400 million in punitive
damages (the "Gulf National award") for claims arising out of a 1991 lawsuit
alleging breach of contract and related causes of action against Loewen, LGII
and two indirect subsidiaries (the "Company Defendants"). On January 29, 1996,
the parties agreed to settle the litigation. On February 1, 1996, Gulf
National and the Company Defendants executed a settlement agreement pursuant
to which, among other things, the parties agreed to a full mutual release of
all claims, and the Company Defendants agreed to deliver to Gulf National or
its designees $50 million in cash, 1.5 million Common Shares (the "Gulf
National Settlement Shares") and a promissory note in the amount of $80
million, payable over 20 years in equal annual installments of $4 million,
without interest (the "Gulf National settlement"). In connection with the
issuance of the Gulf National Settlement Shares, on February 9, 1996, Loewen,
LGII, Gulf National and certain other parties entered into a shareholders'
agreement, providing for, among other things, a price guarantee of $30 per
Common share in certain circumstances, a voting agreement and a right of first
refusal in favor of Loewen.
In April 1992, Provident American Corporation and a subsidiary (together,
"Provident") commenced a lawsuit against Loewen and LGII claiming compensatory
and punitive damages arising out of terminated negotiations relating to a pre-
need funeral insurance marketing arrangement. On February 12, 1996, Provident,
Loewen and LGII agreed to settle the litigation. On March 19, 1996, the
parties entered into a settlement agreement whereby, among other things, the
parties agreed to a full mutual release of all claims, and Provident received
from the Company one million Common Shares (the "Provident Settlement Shares")
and $3 million in cash (together with the Provident Settlement Shares, the
"Provident settlement").
1995 RESULTS
The results for the year ended December 31, 1995 were significantly affected
by the Gulf National award in November 1995 and the Gulf National and
Provident settlements during the first quarter of 1996. The related costs are
reflected primarily in the results for the three months ended December 31,
1995. For that period, the Company recorded a net loss of $113.2 million as
compared to net earnings of $11.4 million in the same period
20
<PAGE>
of 1994. For the year ended December 31, 1995, the Company recorded a net loss
of $76.7 million compared to net earnings of $38.5 million in 1994.
Consolidated revenue increased 43.8% to $599.9 million in the year ended
December 31, 1995 from $417.3 million in 1994, with funeral revenue increasing
25.1% and cemetery revenue increasing 126.4%. Consolidated gross margin
increased 42.8% to $226.8 million in 1995 from $158.9 million in 1994. As a
percentage of revenue, funeral gross margin increased to 41.5% in 1995 from
40.5% in 1994 and cemetery gross margin increased to 27.8% in 1995 from 24.3%
in 1994. As a result of the change in mix between funeral and cemetery
operations, the combined gross margin decreased to 37.8% in 1995 from 38.1%
for the same period in 1994.
Funeral revenue increased 25.1% to $442.8 million in 1995 compared with
$353.9 million in 1994, primarily due to acquisitions. The funeral revenue
from locations in operation for all of 1994 and 1995 ("Established Locations")
increased by $7.5 million while corresponding funeral gross margins increased
from 40.6% to 42.1%. With the implementation of merchandising programs and
inflation-based price increases, the Company was able to more than offset a
1.3% decline in the number of funeral services performed at Established
Locations.
Cemetery revenue increased 126.4% to $143.6 million in 1995 compared with
$63.4 million in 1994, primarily due to acquisitions. Cemetery gross margin
increased to 27.8% in 1995 from 24.3% in 1994, primarily as a result of
increased sales activity and the integration of acquisitions with a higher
cemetery gross margin. The cemetery revenue from Established Locations
increased by $12 million, while corresponding cemetery gross margins increased
from 26.6% to 29.0%, both principally due to a higher level of pre-need sales
at higher margins.
In addition to its focus on quality at-need funeral and cemetery services,
the Company provides advanced funeral and cemetery planning to the communities
it serves. In 1995, approximately 16.0% of the funeral services performed by
the Company were prearranged, an increase from 14.8% in 1994. During 1995, the
Company sold approximately 28,000 funeral services to families planning in
advance compared with approximately 24,000 funeral services in 1994. In 1995,
approximately 60.9% of the Company's cemetery revenue was generated from pre-
need cemetery planning compared with 53.1% in 1994. The Company expects that
approximately 66% of its cemetery revenue will be generated from pre-need
planning in 1996. Notes 1 and 4 to the Company's 1995 Consolidated Financial
Statements provide information regarding the accounting treatment of pre-need
sales.
Insurance revenue in 1995 was $13.6 million. The Company determined in 1995
that it would not, as previously planned, sell a life insurance subsidiary
which had been acquired in connection with a larger acquisition in 1994 with
the intent that it be sold. The subsidiary was accounted for at cost from the
date of acquisition to June 30, 1995. Beginning July 1, 1995, the Company
reported the operations of the life insurance subsidiary on a consolidated
basis. On March 26, 1996, the Company purchased certain net assets of S.I.
Acquisitions Associates, L.P., which included two insurance companies.
United States based operations contributed 91.3% of 1995 consolidated
revenue compared with 88.4% in 1994.
For the year ended December 31, 1995, general and administrative expenses
increased 94.7% to $67.7 million from $34.8 million in 1994. As a percentage
of consolidated revenue, general and administrative expenses in 1995 were
11.3% as compared with 8.3% in 1994. Included in general and administrative
expenses in 1995, and principally in the fourth quarter, are litigation,
acquisition and other expenses, including $10.8 million for professional fees
and other costs related to the Gulf National and Provident litigation and
settlements, and a $3.5 million write-off of acquisition costs. The remaining
increase in general and administrative expenses can be attributed to an
expansion of the Company's infrastructure as a result of the integration of
acquired operations.
Interest expense on long-term debt increased by $16.7 million in 1995
primarily as a result of additional borrowings by the Company to finance its
acquisitions. The Company's credit ratings were reduced as a result of
21
<PAGE>
the Gulf National award. Unless the credit ratings are raised to the
investment grade ratings applied to the Company prior to the Gulf National
award, the Company's cost of borrowing will be higher than that experienced in
1995.
The dividends on preferred securities of an associated entity, Loewen Group
Capital, L.P. ("LGC"), increased from $2.7 million to $7.1 million as a result
of the Monthly Income Preferred Securities (the "MIPS") issued by LGC in 1994
being outstanding for a full year. See Note 8 to the 1995 Consolidated
Financial Statements.
The Company recorded an aggregate expense of $165.0 million for the year
ended December 31, 1995 for the Gulf National and Provident settlements
announced on January 29, 1996 and February 12, 1996, respectively. The accrual
of $135.0 million for the Gulf National settlement consisted of (i) $50.0
million recorded in current liabilities in respect of a cash payment made in
February 1996, (ii) $45.0 million recorded in shareholders' equity for the
issue of the Gulf National Settlement Shares with a price guarantee of $30 per
share in certain circumstances, and (iii) $40.0 million recorded as long-term
debt representing the discounted value of a non-interest bearing promissory
note dated January 31, 1996 with payments of $4.0 million per annum over 20
years.
The accrual of $30 million for the Provident settlement consisted of (i)
$3.0 million recorded in current liabilities in respect of a payment made
March 19, 1996 and (ii) $27.0 million recorded in shareholders' equity for the
issue in March 1996 of the Provident Settlement Shares with a price guarantee
of $27 in certain circumstances.
The deferred income tax benefit of $60.3 million from the Gulf National and
Provident settlements has been recorded as a deferred income tax asset. Prior
to the tax recovery from the Gulf National and Provident settlements, income
taxes were $13.2 million, an effective rate of 32.0%, compared with $19.7
million in 1994, an effective rate of 33.9%. The decrease in the effective tax
rate in 1995 was primarily due to the expansion of the Company's international
financing arrangements. As a result of the above, the Company shows a net
income tax recovery of $47.2 million versus a net income tax expense of $19.7
million in 1994.
As a result of litigation during 1995 and the resulting Gulf National and
Provident settlements, litigation-related finance costs, aggregating $19.9
million, were expensed in 1995. These finance costs consisted of
(i) $7.4 million of finance costs incurred as a result of posting a $125
million bond in connection with the appeal of the Gulf National award, (ii)
$3.9 million for amendment of bank facilities due to litigation and write-off
of related existing deferred financing costs, and (iii) $8.6 million including
$7.1 million for the termination of interest rate agreements and a $1.5
million unrealized loss with respect to interest rate agreements entered into
in anticipation of a long-term debt issue that was aborted as a result of the
Gulf National award.
The cash provided from operations for 1995 decreased from $43.3 million to
$13.2 million primarily as a result of increased expenses associated with the
Gulf National litigation and increases in required working capital and other
non-cash balances arising from the additional cemetery operations. As at
December 31, 1995, there was a working capital deficiency arising from the $53
million accrual for the cash payments required to be made in 1996 under the
Gulf National and Provident settlements. The $50 million payment for the Gulf
National settlement was funded in 1996 by borrowings under the Company's
credit facilities. Cash provided from operations also reflects Common Shares
and debt to be issued under legal settlements which will be reflected as cash
applied to operations in 1996.
22
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Outstanding Notes generally were used
to repay indebtedness outstanding under the 1996 Revolving Credit Facility.
The amount by which the aggregate net proceeds exceeded the then outstanding
balance on the 1996 Revolving Credit Facility was approximately $46 million,
which amount was added to cash and marketable securities of the Company for
working capital and other general corporate purposes, including acquisitions
and interest and principal payments on other senior notes.
This Exchange Offer is intended to satisfy certain obligations of LGII and
Loewen under the Registration Rights Agreement. Neither LGII nor Loewen will
receive any proceeds from the issuance of the Exchange Notes offered hereby.
In consideration for issuing the Exchange Notes as contemplated in this
Prospectus, LGII will receive Outstanding Notes in like principal amount. The
form and terms of the Exchange Notes are identical in all material respects to
the form and terms of the respective Outstanding Notes, except as otherwise
described herein under "The Exchange Offer--Terms of the Exchange Offer." The
Outstanding Notes surrendered in exchange for Exchange Notes will be retired
and cancelled and cannot be reissued. Accordingly, issuance of the Exchange
Notes will not result in any increase in the outstanding debt of LGII or
Loewen.
CONSOLIDATED CAPITALIZATION
The following table sets forth the cash and marketable securities and total
capitalization of the Company (i) as at September 30, 1996, on a pro forma
basis adjusted to reflect the issuance of the Outstanding Notes, issued
October 4, 1996, and the application of the net proceeds therefrom to repay
indebtedness of approximately $300 million under the Company's 1996 Revolving
Credit Facility, with the remaining balance of $50 million added to cash and
marketable securities and (ii) as at such date, adjusted to reflect the
exchange of all of the Outstanding Notes for Exchange Notes pursuant to the
Exchange Offer. Because the Outstanding Notes surrendered in exchange for
Exchange Notes will be retired and cancelled and cannot be reissued, whether
none, some or all of the Exchange Notes are issued pursuant to the Exchange
Offer will not result in any change in the outstanding long-term debt of LGII
or Loewen.
<TABLE>
<CAPTION>
AS AT SEPTEMBER 30, 1996
---------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Cash and marketable securities.................... $ 74,885 $ 74,885
============ ============
Short-term debt, including current portion of
long-term debt................................... $ 79,438 $ 79,438
------------ ------------
Long-term debt
Outstanding Notes............................... 350,000 0
Exchange Notes.................................. 0 350,000
Senior Guaranteed Notes, Series 1 and 2......... 350,000 350,000
Senior Guaranteed Notes, Series A-E............. 246,600 246,600
1996 Revolving Credit Facility.................. 0 0
Canadian Revolver............................... 31,243 31,243
Term credit facilities.......................... 133,281 133,281
Other long-term debt............................ 194,841 194,841
Less current portion............................ (79,438) (79,438)
------------ ------------
Total long-term debt............................ 1,226,527 1,226,527
Preferred securities of subsidiary (1)............ 75,000 75,000
Total shareholders' equity........................ 1,044,560 1,044,560
------------ ------------
Total capitalization.............................. $ 2,425,525 $ 2,425,525
============ ============
</TABLE>
- --------
(1) Reference is made to Note 8 to the 1995 Consolidated Financial Statements
and Note 5 to the September 1996 Interim Consolidated Financial Statements
for particulars of the preferred securities of subsidiary.
23
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Outstanding Notes were sold by the Company on October 4, 1996 to the
Initial Purchasers, who then sold the Outstanding Notes to certain
institutional investors. In connection with the sale of the Outstanding Notes,
LGII and Loewen and the Initial Purchasers entered into the Registration
Rights Agreement, pursuant to which LGII and Loewen agreed (i) to file a
registration statement with respect to an offer to exchange the Outstanding
Notes for senior subordinated debt securities of LGII with terms substantially
identical to the Outstanding Notes (except that the Exchange Notes will not
contain terms with respect to transfer restrictions, registration rights and
penalty interest) within 45 days after the date of original issuance of the
Outstanding Notes and (ii) to use their best efforts to cause such
registration statement to become effective under the Securities Act within 180
days after such issue date. If applicable law or interpretations of the staff
of the Commission do not permit the Company to effect the Exchange Offer, or
if certain holders of the Outstanding Notes notify the Company that they are
not permitted to participate in, or would not receive freely tradable Exchange
Notes pursuant to, the Exchange Offer, the Company will use its best efforts
to cause to become effective a shelf registration statement with respect to
the resale of the Outstanding Notes (the "Shelf Registration Statement") and
to keep the Shelf Registration Statement effective until 180 days after the
effective date thereof. The interest rate on the Outstanding Notes is subject
to increase under certain circumstances if the Company is not in compliance
with its obligations under the Registration Rights Agreements. See
"Description of the Exchange Notes--Registration Rights Agreement." Unless the
context requires otherwise, the term "holder" with respect to the Exchange
Offer means the registered holder of Notes or any other person who has
obtained a properly completed bond power from a registered holder.
RESALE OF EXCHANGE NOTES
Based on interpretations by the staff of the Commission set forth in no
action letters issued to third-parties, LGII and Loewen believe that, except
as described below, Exchange Notes issued pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by respective holders
thereof without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that (i) such Exchange
Notes are acquired in the ordinary course of such holder's business and (ii)
such holder does not intend to participate in, has no arrangement or
understanding with any person to participate in, and is not engaged in and
does not intend to engage in, a distribution of the Exchange Notes. A holder
of Outstanding Notes that is an "affiliate" of LGII or Loewen within the
meaning of Rule 405 under the Securities Act or that is a broker-dealer that
purchased Outstanding Notes from the Company to resell pursuant to an
exemption from registration, (a) cannot rely on such interpretations by the
staff of the Commission, (b) will not be permitted or entitled to tender such
Outstanding Notes in the Exchange Offer and, (c) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of such Outstanding Notes. Any holder who
tenders in the Exchange Offer with the intention or for the purpose of
participating in a distribution of the Exchange Notes cannot rely on such
interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Unless an exemption from
registration is otherwise available, any such resale transaction should be
covered by an effective registration statement containing the selling security
holders information required by Item 507 of Regulation S-K under the
Securities Act.
This Prospectus may be used for an offer to resell, resale or other
retransfer of Exchange Notes only as specifically set forth herein. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Outstanding Notes, where such Outstanding Notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. See "Plan of Distribution."
24
<PAGE>
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, LGII will accept for exchange any and all
Outstanding Notes properly tendered and not withdrawn prior to 5:00 p.m., New
York time, on the Expiration Date. LGII will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of Outstanding
Notes surrendered pursuant to the Exchange Offer. Outstanding Notes may be
tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes will be the same as the form and
terms of the Outstanding Notes, except that the Exchange Notes will be
registered under the Securities Act and hence will not bear legends
restricting the transfer thereof. The Exchange Notes will evidence the same
debt as the Outstanding Notes. The Exchange Notes will be issued under and
entitled to the benefits of the Indenture, which also authorized the issuance
of the Outstanding Notes, such that the Series 3 Outstanding Notes and the
Series 3 Exchange Notes will be treated as a single series of senior notes
under the Indenture, and the Series 4 Outstanding Notes and the Series 4
Exchange Notes will be treated as a single series of senior notes under the
Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Outstanding Notes being tendered for exchange. Holders of
Outstanding Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer.
As of the date of this Prospectus, $350,000,000 aggregate principal amount
of the Outstanding Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is being sent to all registered holders of Outstanding
Notes. There will be no fixed record date for determining registered holders
of Outstanding Notes entitled to participate in the Exchange Offer.
LGII intends to conduct the Exchange Offer in accordance with the provisions
of the Registration Rights Agreement and the applicable requirements of the
Securities Act, and the rules and regulations of the Commission thereunder.
Outstanding Notes which are not tendered for exchange in the Exchange Offer
will remain outstanding and continue to accrue interest but will not retain
any rights under the Registration Rights Agreement.
LGII shall be deemed to have accepted for exchange properly tendered
Outstanding Notes when, as and if LGII shall have given oral or written notice
thereof to the Exchange Agent and complied with the applicable provisions of
the Registration Rights Agreement. The Exchange Agent will act as agent for
the tendering holders for the purposes of receiving the Exchange Notes from
LGII. LGII expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Outstanding Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions specified
below under "--Certain Conditions to the Exchange Offer."
Holders who tender Outstanding Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of
Outstanding Notes pursuant to the Exchange Offer. LGII will pay all charges
and expenses, other than certain applicable taxes described below, in
connection with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York time on ,
unless LGII, in its sole discretion, extends the Exchange Offer, in which case
the term "Expiration Date" shall mean the latest date and time to which the
Exchange Offer is extended.
In order to extend the Exchange Offer, LGII will notify the Exchange Agent
of any extension by oral or written notice and will mail to the registered
holders of Outstanding Notes an announcement thereof, each prior to 9:00 a.m.,
New York time, on the next business day after the then Expiration Date.
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<PAGE>
LGII reserves the right, in its sole discretion, (i) to delay accepting for
exchange any Outstanding Notes, to extend the Exchange Offer or to terminate
the Exchange Offer if any of the conditions set forth below under "--Certain
Conditions to the Exchange Offer" shall have occurred, shall exist or shall
not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders of Outstanding Notes. If
the Exchange Offer is amended in a manner determined by LGII to constitute a
material change, LGII and Loewen will promptly disclose such amendment by
means of a prospectus supplement that will be distributed to the registered
holders, and LGII will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the amendment and the manner
of disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
INTEREST ON THE EXCHANGE NOTES
The Series 3 Exchange Notes will bear interest at the rate of 7 3/4% per
annum and the Series 4 Exchange Notes will bear interest at the rate of 8 1/4%
per annum, payable semi-annually on April 15 and October 15 of each year,
commencing April 15, 1997, to holders of record on the immediately preceding
April 1 and October 1, respectively. Holders of the Exchange Notes will
receive interest on April 15, 1997 from the date of initial issuance of the
Outstanding Notes. Interest on the Outstanding Notes accepted for exchange
will cease to accrue upon issuance of the respective Exchange Notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, LGII will not be
required to accept for exchange, or exchange any Exchange Notes for, any
Outstanding Notes, and may terminate the Exchange Offer as provided herein
before the acceptance of any Outstanding Notes for exchange, if LGII
determines, in its reasonable discretion, that:
(a) an action or proceeding that might materially impair the ability of
LGII to proceed with the Exchange Offer is instituted or threatened in any
court or by or before any governmental agency with respect to the Exchange
Offer; or
(b) a law, statute, rule or regulation that might materially impair the
ability of LGII to proceed with the Exchange Offer is proposed, adopted or
enacted or an existing law, statute, rule or regulation is interpreted in a
manner that might materially impair the ability of LGII to proceed with the
Exchange Offer; or
(c) a governmental approval that LGII deems necessary for the
consummation of the Exchange Offer as contemplated hereby has not been
obtained.
LGII expressly reserves the right to amend or terminate the Exchange Offer,
and not to accept for exchange any Outstanding Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions of the Exchange
Offer specified above. LGII will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the Outstanding
Notes as promptly as practicable, such notice in the case of any extension to
be issued no later than 9:00 a.m., New York time, on the next business day
after the previously scheduled Expiration Date.
The foregoing conditions are for the sole benefit of LGII and may be
asserted by LGII regardless of the circumstances giving rise to any such
condition or may be waived by LGII in whole or in part at any time and from
time to time in its reasonable judgment. The failure by LGII at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, LGII will not accept for exchange any Outstanding Notes
tendered, and no Exchange Notes will be issued in exchange for any such
Outstanding Notes, if at such time any stop order shall be threatened or
26
<PAGE>
in effect with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended.
PROCEDURES FOR TENDERING
Only a holder of Outstanding Notes may tender such Outstanding Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or facsimile thereof, have the signature
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile to the Exchange
Agent prior to 5:00 p.m., New York time, on the Expiration Date. In addition,
either (i) Outstanding Notes must be received by the Exchange Agent along with
the Letter of Transmittal, or (ii) a timely confirmation of book-entry
transfer (a "Book-Entry Confirmation") of such Outstanding Notes, if such
procedure is available, into the Exchange Agent's account at the Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure
for book-entry transfer described below must be received by the Exchange Agent
prior to the Expiration Date, or (iii) the holder must comply with the
guaranteed delivery procedures described below. To be tendered effectively,
the Letter of Transmittal and other required documents must be received by the
Exchange Agent at the address set forth below under "The Exchange Offer--
Exchange Agent" prior to 5:00 p.m., New York time, on the Expiration Date.
The tender by a holder which is not withdrawn prior to 5:00 p.m., New York
time, on the Expiration Date will constitute an agreement between such holder
and LGII in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO LGII OR
LOEWEN. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR
SUCH HOLDERS.
Any beneficial owner whose Outstanding Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender, should contact the registered holder promptly and instruct such
registered holder of Outstanding Notes to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender on its own behalf, such
owner must, prior to completing and executing the Letter of Transmittal and
delivering such owner's Outstanding Notes, either make appropriate
arrangements to register ownership of the Outstanding Notes in such owner's
name or obtain a properly completed bond power from the registered holder of
Outstanding Notes. The transfer of registered ownership may take considerable
time and may not be able to be completed prior to the Expiration Date.
Each holder of Outstanding Notes who wishes to exchange Outstanding Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii)
it is not engaged in and does not intend to engage in a distribution of the
Exchange Notes and (iii) it is not an "affiliate" of LGII or Loewen, within
the meaning of Rule 405 under the Securities Act, or, if it is an affiliate of
LGII or Loewen, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case may be, must be guaranteed by an Eligible Institution (as
defined below) unless the Outstanding Notes tendered pursuant thereto are
tendered (i) by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible
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<PAGE>
Institution. If signatures on a Letter Transmittal or a notice of withdrawal,
as the case may be, are required to be guaranteed, such guarantor must be a
member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange
Act which is a member of one of the recognized signature guarantee programs
identified in the Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Outstanding Notes listed therein, such Outstanding Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Outstanding
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Outstanding Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
LGII, evidence satisfactory to LGII of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Outstanding Notes and withdrawal of tendered
Outstanding Notes will be determined by LGII in its sole discretion, which
determination will be final and binding. LGII reserves the absolute right to
reject any and all Outstanding Notes not properly tendered or any Outstanding
Notes if acceptance would, in the opinion of counsel for LGII, be unlawful.
LGII also reserves the right to waive any defects, irregularities or
conditions of tender as to particular Outstanding Notes. LGII's interpretation
of the terms and conditions of the Exchange Offer (including the instructions
in the Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of
Outstanding Notes must be cured within such time as LGII shall determine.
Although LGII intends to notify holders of defects or irregularities with
respect to tenders of Outstanding Notes, neither LGII, the Exchange Agent nor
any other person shall incur any liability for failure to give such
notification. Tenders of Outstanding Notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any
Outstanding Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In all cases, issuance of Exchange Notes for Outstanding Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of Outstanding Notes or a timely Book-
Entry Confirmation of such Outstanding Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility, a properly completed and duly executed
Letter of Transmittal and all other required documents. If any tendered
Outstanding Notes are not accepted for exchange for any reason set forth in
the terms and conditions of the Exchange Offer or if Outstanding Notes are
submitted for a greater principal amount than the holder desires to exchange,
such unaccepted or non-exchanged Outstanding Notes will be returned without
expense to the tendering holder thereof (or, in the case of Outstanding Notes
tendered by book-entry transfer into the Exchange Agent's account at the Book-
Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such non-exchanged Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Outstanding Notes at the Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Outstanding Notes by causing
the Book-Entry Transfer Facility to transfer such Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance
with
28
<PAGE>
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Outstanding Notes may be effected through book-entry transfer at
the Book-Entry Transfer Facility, the Letter of Transmittal or facsimile
thereof, with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at the address set forth below under "--Exchange Agent" on or prior to
the Expiration Date or, if the guaranteed delivery procedures described below
are to be complied with, within the time period provided under such
procedures. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Outstanding Notes and (i) whose Outstanding
Notes are not immediately available or (ii) who cannot deliver their
Outstanding Notes, the Letter of Transmittal or any other required documents
to the Exchange Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the registered number(s)
of such Outstanding Notes and the principal amount of Outstanding Notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within three (3) New York Stock Exchange trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof) and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Notes in proper form for
transfer or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within three (3) New York Stock Exchange trading days after
the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Outstanding Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York time, on the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
timely received by the Exchange Agent at one of the addresses set forth below
under "--Exchange Agent." Any such notice of withdrawal must specify the name
of the person having tendered the Outstanding Notes to be withdrawn, identify
the Outstanding Notes to be withdrawn (including the principal amount of such
Outstanding Notes), and (where certificates for Outstanding Notes have been
transmitted) specify the name in which such Outstanding Notes were registered,
if different from that of the withdrawing holder. If certificates for
Outstanding Notes have been delivered or otherwise identified to the Exchange
Agent, then, prior to the release of such certificates, the withdrawing holder
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If
Outstanding Notes have been tendered pursuant to the procedures for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Outstanding Notes and otherwise comply with the procedures of
such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by LGII, whose
determination shall be final and binding on all parties. Any Outstanding Notes
so withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Outstanding Notes which have been tendered
for exchange but which are not exchanged for any reason will be returned to
the holder thereof without cost to such holder (or, in the case of Outstanding
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry
29
<PAGE>
transfer procedures described above, such Outstanding Notes will be credited
to an account maintained with such Book-Entry Transfer Facility for the
Outstanding Notes) as soon as practicable after withdrawal, rejection of
tender or termination of the Exchange Offer. Properly withdrawn Outstanding
Notes may be retendered by following one of the procedures described under "--
Procedures for Tendering" above at any time on or prior to the Expiration
Date.
EXCHANGE AGENT
Fleet National Bank has been appointed as Exchange Agent of the Exchange
Offer. Questions and requests for assistance, requests for additional copies
of this Prospectus or the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
By Hand: By Registered or Certified Mail or
Courier:
Fleet National Bank Fleet National Bank
Corporate Trust Operations Corporate Trust Operations
777 Main Street, Lower Level 777 Main Street, Lower Level
Hartford, Connecticut 06115 CTMO 0224
Attn: Patricia Williams Hartford, Connecticut 06115
Attn: Patricia Williams
By Facsimile:
(860) 986-7908
(For Eligible Institutions Only)
Confirm by Telephone:
(860) 986-1271
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by LGII. The principal
solicitation is being made by mail; however, additional solicitation may be
made by telegraph, telephone or in person by officers and regular employees of
the Company.
LGII has not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to broker-dealers or others soliciting
acceptances of the Exchange Offer. LGII, however, will pay the Exchange Agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by LGII and are estimated in the aggregate to be approximately
$500,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, and
related fees and expenses.
TRANSFER TAXES
LGII will pay all transfer taxes, if any, applicable to the exchange of
Notes pursuant to the Exchange Offer. If, however, certificates representing
Outstanding Notes for principal amounts not tendered or accepted for exchange
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of Notes tendered, or if tendered Notes are
registered in the name of any person other than the person signing the Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Notes pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment
of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
30
<PAGE>
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Outstanding Notes who do not exchange their Outstanding Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer, as set forth in the legend thereon, as a
consequence of the issuance of the Outstanding Notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Outstanding Notes may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. LGII does not currently anticipate that it will register the Outstanding
Notes under the Securities Act. See "Risk Factors--Consequences of Failure to
Exchange; Possible Adverse Effect on Trading Market for Outstanding Notes."
31
<PAGE>
BUSINESS
OVERVIEW
The Company operates the second-largest number of funeral homes and
cemeteries in North America and the largest number of funeral homes in Canada.
The Company also engages in the pre-need selling of funeral, cemetery and
cremation merchandise and services. As at 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. See "--Growth Strategy."
Consideration paid for acquired operations totaled approximately $438
million for the nine months ended September 30, 1996, compared to
consideration of approximately $351 million for operations acquired during the
same period in 1995. Consideration paid for acquired operations totaled $265.6
million in 1994 and $487.9 million in 1995. Despite this growth, the Company
has maintained consistent margins, including a consolidated gross margin of at
least 36%.
The Company's management structure and remuneration practices are designed
to support and encourage entrepreneurial drive and individual responsibility.
Each funeral home and cemetery is operated as a distinct profit center, with
monthly and annual financial performance monitored by regional and corporate
management in accordance with budgeted projections. Local managers are given a
high degree of autonomy. The Company believes that its funeral home and
cemetery managers, as members of the local community, are best able to judge
how to conduct day-to-day operations in a manner consistent with the
established character of the particular firm and the needs of the community.
THE FUNERAL SERVICE INDUSTRY
The funeral service industry has a number of attractive characteristics.
Historically, the funeral service industry has had a low business risk
compared with most other businesses and has not been significantly affected by
economic or market cycles. According to the 1994 Business Failure Record
published by The Dun & Bradstreet Corporation, the average business failure
rate in the United States in 1994 was 86 per 10,000. The 1994 failure rate of
the funeral services and crematoria industry was 8 per 10,000, among the
lowest of all industries. Management believes this low failure rate is the
result of a number of factors, including customers' tendencies to select a
funeral home based on reputation for quality service rather than price and the
number of years required to establish a caring reputation in the community.
In addition, future demographic trends are expected to contribute to the
continued stability of the funeral service industry. The U.S. Department of
Commerce, Bureau of the Census, projects that, reflecting the well-publicized
"graying of America" as the baby boom generation reaches old age, the number
of deaths in the United States will grow at approximately 1.0% annually from
1990 through 2010. The following table reflects the actual or estimated number
of deaths in the United States and the percentage of the total United States
population over 65 and over 75.
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL POPULATION
DEATHS ----------------
(MILLIONS) OVER 65 OVER 75
---------- -------- --------
<S> <C> <C> <C>
1980.......................................... 1.99 11.3% 4.4%
1985.......................................... 2.09 11.8 4.8
1990.......................................... 2.15 12.5 5.2
1995 (est.)................................... 2.21 12.8 5.6
2000 (est.)................................... 2.36 12.8 6.1
2010 (est.)................................... 2.60 13.3 6.4
</TABLE>
- --------
Source: U.S. Department of Commerce, Bureau of the Census, Current Population
Reports: Population Estimates and Projections. Series P-25, 1018.
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<PAGE>
Finally, the funeral service industry in North America is highly fragmented,
consisting primarily of small, stable, family-owned businesses. Management
estimates that notwithstanding the increasing trend toward consolidation over
the last few years, only approximately 10% of the 23,500 funeral homes and
approximately 7% of the 11,000 cemeteries in North America currently are owned
and operated by the five largest publicly-traded North American funeral
service companies.
GROWTH STRATEGY
The Company capitalizes on the foregoing industry fundamentals through a
growth strategy that emphasizes three principal components: (i) acquiring a
significant number of small, family-owned funeral homes and cemeteries; (ii)
acquiring "strategic" operations consisting predominantly of large, multi-
location urban properties that generally serve as platforms for acquiring
small, family-owned businesses in surrounding regions; and (iii) improving the
revenue and profitability of newly-acquired and established locations.
The following table provides historical data on the Company's acquisition
program during the years ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1995 1994 1993
------ ------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Funeral homes acquired.................................... 177 110 83
Cemeteries acquired....................................... 64 46 33
Consideration............................................. $487.9 $265.6 $148.0
</TABLE>
From January 1 through November 1, 1996, the Company acquired 132 funeral
homes and 110 cemeteries for total consideration of approximately $520
million.
Family-Owned Businesses
The first element of the Company's growth strategy is the acquisition of
small, family-owned funeral homes and cemeteries. Management believes that the
Company has a competitive advantage in this market due to its culture and its
well-known and understood reputation for honoring existing owners and staff.
Strategic Acquisitions
The second element of the Company's growth strategy is the acquisition of
large, multi-location urban properties. The Company entered into commitments
for or consummated several "strategic" acquisitions during 1995.
Osiris
In March 1995, the Company purchased all of the outstanding shares of Osiris
Holding Corporation of Philadelphia, Pennsylvania which operated 22
cemeteries, four funeral home/cemetery combinations and one funeral home, all
located in the United States. The Osiris purchase has complemented the
Company's existing locations, as the Osiris locations were in markets in which
the Company did not have a strong presence. In addition, the Osiris
acquisition has provided the Company with an experienced cemetery management
team which will benefit the Company's other cemetery operations. The total
consideration for the transaction was $103.8 million plus additional
consideration of up to approximately $42 million payable to the former
shareholders of Osiris if certain performance related criteria are achieved
over a period of up to six years from the closing of the acquisition. For
financial reporting purposes, such additional consideration, if any, is
accrued as a liability once the likely outcome with respect to its payment is
determinable beyond a reasonable doubt. The Company has determined that, as at
December 31, 1995, the performance-related criteria would likely be met over
the term of the agreement and, accordingly, has allocated $35.3 million
representing the present value of
additional consideration to cemetery property and accrued a corresponding
liability of $35.3 million. The full
33
<PAGE>
amount of any unpaid contingent consideration will be immediately payable in
certain events, including the death, permanent disability, or termination of
employment without cause, of either of two former shareholders of Osiris who
are now part of the Company's senior management.
MHI
In September 1995, the Company acquired MHI Group, Inc., a public company
that operated 16 funeral homes and five cemeteries in Florida and Colorado.
The total cost of the acquisition was approximately $86 million.
S.I. Acquisition Associates, L.P.
In March 1996, the Company acquired from S.I. Acquisition Associates, L.P.
certain funeral, cemetery and insurance assets, including 15 funeral homes,
two cemeteries and two insurance companies, all located in Louisiana. The
total cost to the Company of the acquisition was approximately $145 million.
Investments with Blackstone
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 also
will 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 stock of RH Holdings and $86
million of preferred stock of RH Holdings with an annual payment-in-kind
dividend of 10%, respectively. 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.
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See Notes 3 and 9 to the September 1996 Interim Consolidated Financial
Statements for additional information regarding Prime and RH Holdings.
Growth through Integration
The final element of the Company's growth strategy is its focus on enhancing
the revenue and profitability of newly-acquired and established operations.
Through the Company's integration process, newly-acquired funeral homes
typically show an immediate improvement in gross margin due in part to the
significant economies of scale offered by the Company.
The Company believes that newly-acquired cemeteries will also show an
improvement in gross margin over time. Cemetery operations are predominantly
sales driven with a steady "at-need" revenue base. Management believes that
gross margins will increase as cost efficiencies are achieved and revenue is
enhanced through improved sales efforts.
The Company continues to increase the revenue and profitability of
established operations through the introduction of additional merchandising,
cost control programs and inflation based pricing. On an ongoing basis, the
Company also seeks to improve the market share and earnings of its established
operations by helping local managers to market services more effectively and
to enhance the reputation of their operations in the community.
FUTURE ACQUISITIONS
At the close of business on 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 Company
may evaluate or negotiate potential acquisitions, which, if consummated, may
be considered significant based on acquisition price.
ACQUISITION FUNDING
The timing and certainty of completion of acquisitions are based on many
factors, including the availability of financing. The Company will continue to
finance acquisitions with a combination of debt and equity offerings and
credit facilities. There can be no assurance that funds will be available to
complete all future acquisitions. Accordingly, there is no assurance that the
Company will complete any specific number or dollar amount of acquisitions in
a particular year.
The Company currently has a policy to include provisions in its acquisition
agreements requiring binding arbitration for disputes arising out of such
contracts. Under such policy, the arbitration provision may be modified or
omitted from an agreement with the consent of the Board of Directors in
circumstances that the Board of Directors deems appropriate. There can be no
assurance that the arbitration provision will be enforceable by the Company or
that the outcome of any arbitration would be more favorable to the Company
than the outcome of a court trial on the same facts and claims. Further,
acquisition agreements that involve payment of all or part of the purchase
price in Common Shares do not include the arbitration provision unless it is
modified to provide that such provision may not apply to alleged violations of
U.S. federal securities laws.
BUSINESS OPERATIONS
Funeral Homes
The Company's funeral homes offer a full range of funeral services, which
encompass the collection of remains, registration of death, professional
embalming, use of funeral home facilities, sale of caskets and related
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merchandise, transportation to a place of worship or funeral chapel for a
religious service and transportation to a cemetery or crematorium. To provide
the public with the opportunity to choose the service that is most appropriate
from both an emotional and financial perspective, the Company offers complete
funeral services (including caskets and related merchandise) at prices ranging
from approximately $750 to $7,500 (and averaging approximately $3,500).
Cremation rates vary considerably from one region of North America to
another. The Company has operations in regions with both high and low
cremation rates. As a percentage of total funeral services, cremations in
North America have been increasing by approximately 1% annually over the past
five years. However, because the number of deaths has been increasing,
industry information reflects that the number of caskets sold (typically
associated with a traditional funeral service) has remained constant. The
Company has proprietary programs to provide a full range of service
alternatives to families choosing cremation.
The services offered by funeral homes can be purchased at the time of death
("at-need") or in advance through a prearranged agreement ("pre-need").
Prearranged funeral services enable the family to select the type of service
and merchandise in advance at prices prevailing at the time of selection. The
Company believes that families in large urban markets are more aware of and
are more willing to purchase funeral products and services in advance. The
Company recognizes that the increasing demand for advanced funeral and
cemetery planning is a natural extension of the service and care it offers
families, and is committed to providing quality advanced funeral and cemetery
planning to the communities it serves.
As the Company has increased its presence in large urban markets, it has
significantly expanded its efforts to sell prearranged funeral services in
those markets. For example, the Company now has 20 regional marketing centers
that focus primarily on advanced funeral planning. In order to protect and
enhance its market share in these large urban markets, management believes
that the Company will need to continue to implement programs designed to
increase pre-need sales.
Payments made for pre-need contracts are either placed in trust by the
Company or are used on behalf of the purchaser of the pre-need contract to pay
premiums on life insurance policies under which the Company is designated the
beneficiary. At the date of performing a prearranged service, the Company
records as funeral revenue the amount originally trusted or the insurance
contract amount, together with all related accrued trust earnings and
increased insurance benefits.
Cemeteries
The Company's cemetery division assists families in making at-need and pre-
need arrangements and offers a complete line of cemetery products (including a
selection of burial spaces, burial vaults, lawn crypts, memorials, niches and
mausoleum crypts), the opening and closing of graves and cremation services.
The sale of cemetery pre-need arrangements is a significant component of the
cemetery operations. In 1995, 60.9% of cemetery revenue resulted from pre-need
sales, compared with 53.1% in 1994. The pre-need sale of interment rights and
other related products is recorded as revenue when customer contracts are
signed and, concurrently, related costs are recorded and an allowance is
established for customer cancellations and refunds based on management's
estimates of expected cancellations. Actual cancellation rates in the future
may result in a change in the estimate.
Insurance
The Company determined in 1995 that it would not, as previously planned,
sell a life insurance subsidiary which had been acquired in connection with a
larger acquisition in 1994 with the intent that it be sold. The subsidiary was
accounted for at cost from the date of acquisition to June 30, 1995. Beginning
July 1, 1995, the Company reported the operations of the life insurance
subsidiary on a consolidated basis. On March 26, 1996, the Company purchased
certain net assets of S.I. Acquisition Associates, L.P., which included two
insurance companies.
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COMPETITION
Competition generally arises from two sources in the funeral industry. Local
community competition is oriented towards gaining market share. The market
share of a single funeral home or cemetery in any community is primarily a
function of the name and reputation of that funeral home or cemetery. Market
share increases within a community are usually gained over a long period of
time due to the high component of goodwill. Modest and tasteful promotional
programs can help enhance community profile but typically do not increase
market share significantly.
The Company also faces significant competition in its acquisition program.
In the United States funeral service industry acquisition market, the
Company's competition includes SCI and Stewart Enterprises, Inc., both of
which are publicly-traded companies with significant United States operations.
Various smaller companies provide competition on a regional basis in the
United States. The Company also experiences competition on a local level from
operators who have focused on acquiring funeral home groupings in concentrated
geographic regions of the United States.
REGULATION
The funeral service industry is regulated primarily on a state and
provincial basis with a vast majority of jurisdictions requiring licensing and
supervision of individuals who provide funeral-related services. A number of
jurisdictions also regulate the sale of pre-need services and the
administration of any resulting trust funds or insurance contracts. In
addition, concerns regarding lack of competition have led a few jurisdictions
to enact legislation designed to encourage competition by restricting the
common ownership of funeral homes and related operations within a specific
geographic region.
The Company's United States operations must also comply with federal
legislation, including the laws administered by the Occupational Safety and
Health Administration, the Americans with Disabilities Act and the Federal
Trade Commission ("FTC") regulations. The FTC administers the Trade Regulation
Rule on Funeral Industry Practices, the purpose of which is to prevent unfair
or deceptive acts or practices in connection with the provision of funeral
goods or services.
ENVIRONMENT
Management believes that the Company's primary environmental risk arises
upon the acquisition of a funeral home or cemetery. The Company manages this
risk by conducting extensive environmental due diligence of all potential
acquisition candidates. Management endeavors to ensure that any environmental
issues which occur prior to acquisition of an operation are identified and
addressed in advance of acquisition or are covered by an appropriate indemnity
by the seller.
Management does not believe that an environmental problem at any single
location will have a material adverse effect on the Company's financial
results.
EMPLOYEES
At September 30, 1996, the Company employed over 13,000 people with
approximately 500 people employed at the Company's corporate offices.
Management believes that its relationship with employees is good. Fewer than
75 of the Company's employees are members of collective bargaining units. All
full-time and eligible part-time employees who have been employed by the
Company for more than 90 days are entitled to five Common Shares as part of
the Company's "Sharing The Vision" program.
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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 Loewen 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 (the "Underwriters") of LGC's 1994 offering of 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 Loewen
and the same individual defendants in the United States District Court for the
Southern District of Mississippi alleging Federal securities law violations
and related common law claims. On December 1, 1995, a class action lawsuit was
filed on behalf of a class of purchasers of the Company's securities against
Loewen, LGII, 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 Gulf National. The Pennsylvania class actions also
alleged failure to disclose the Company's potential liability in connection
with certain litigation with 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 Class Action Complaint: (i)
Loewen, LGII, LGC and the five individual defendants violated Sections 10(b)
and 20(a) and the implementing anti-fraud rules under the Exchange Act, (ii)
LGII, 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)
Loewen, 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
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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 Loewen's current directors and one former
director and against Loewen as a nominal defendant in the Los Angeles County
Superior Court. The plaintiff alleges, on behalf of himself and all of
Loewen'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, Loewen 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 Loewen 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 Loewen lacks standing to bring such an action on federal
antitrust grounds. SCI asserts a claim under Texas common law, based upon its
allegations that Loewen's actions have tortiously interfered with SCI's
"prospective business relationships" with Loewen's shareholders. As relief for
this assertion, SCI seeks an unspecified amount of damages for claimed
injuries resulting from Loewen'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 Loewen'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.
On October 10, 1996, Loewen, 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 Loewen would violate Section 7 of
the Clayton Act. According to the complaint, SCI's unsolicited offer for
control of Loewen, 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 "pre-need" basis, (iii) the sale of
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cemetery services, and (iv) the purchase of funeral homes, cemeteries and
crematoria. Loewen also accuses SCI and Equity Corporation International,
Inc., a competitor of Loewen in which SCI has a 40% interest, of conspiracy to
eliminate Loewen as a competitive force in the funeral services industry, in
violation of Section 1 of the Sherman Act. On October 10, 1996, Loewen 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, Loewen 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 Loewen'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 Loewen 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 Loewen from proceeding in
the New York Action (or elsewhere) until it had resolved Loewen'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
Loewen's motion to dismiss was held on November 6, 1996. Loewen has filed
formal objections to the Magistrate's Memorandum. As of November 15, 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 was held on November 14, 1996 but the
parties did not reach an agreement. 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 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.
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Rojas et al. On February 22, 1995, Juan Riveras Rojas, Leyda Rivera Vega,
the Conjugal Partnership constituted between them, and Carlos Rivera
Bustamente instituted a legal action against Loewen, LGII and a subsidiary in
the United States District Court for the District of Puerto Rico. The
complaint alleges that the defendants breached a contract and ancillary
agreements with the plaintiffs relating to the purchase of funeral homes and
cemeteries, and committed related torts. The plaintiffs seek compensatory
damages of $12,500,000, 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 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.
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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
effect on the Company's financial position, results of operation or liquidity.
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DESCRIPTION OF EXCHANGE NOTES
The Exchange Notes will be issued in two separate series under an indenture
dated as of October 1, 1996 (the "Indenture") between LGII, Loewen, as
guarantor of the obligations of LGII under the Indenture, and Fleet National
Bank, as trustee (the "Trustee"). The following summary of the material
provisions of the Indenture does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the provisions of the Indenture
(a copy of the form of which may be obtained from LGII or any of the Initial
Purchasers, upon request), including the definitions of certain terms
contained therein and those terms made part of the Indenture by reference to
the Trust Indenture Act of 1939, as amended (the "TIA"), as in effect on the
date of the Indenture. The definitions of certain capitalized terms used in
the following summary are set forth below under "--Certain Definitions."
GENERAL
The Exchange Notes and the Guarantees will be senior obligations of LGII and
Loewen, respectively, and will rank pari passu in right of payment with all
other senior indebtedness of LGII and Loewen, respectively. Because other
senior indebtedness is secured, the Exchange Notes and the Guarantees, when
issued, will be secured as described herein. The Exchange Notes will be
subject to a Lien Limitation that limits Liens to certain categories of Liens
described in the Indenture. The Collateral for the holders of the Pari Passu
Indebtedness includes a pledge for the benefit of such lenders of the shares
held by Loewen of substantially all of the subsidiaries in which Loewen
directly or indirectly holds more than a 50% voting or economic interest and
all of the financial assets of LGII (LGII does not have material assets other
than financial assets). In order to satisfy the Lien Limitation, the Lien
secured by the Collateral has to be shared equally and ratably with the
holders of the Indebtedness evidenced by the Exchange Notes. However, the
holders of the Exchange Notes will not have an independent right to require
the Lien secured by the Collateral to remain in place or unchanged or to
require any other security for the Exchange Notes. As at September 30, 1996,
the aggregate amount of Pari Passu Indebtedness was approximately $1.1
billion. The Exchange Notes and Guarantees are effectively subordinated in
right of payment to all existing and future liabilities, including trade
payables, of LGII's and Loewen's subsidiaries, respectively. As at September
30, 1996, the aggregate amount of Indebtedness of LGII's subsidiaries
(excluding intercompany Indebtedness) was approximately $109 million, and the
aggregate amount of Indebtedness of Loewen's subsidiaries other than LGII and
its subsidiaries (excluding intercompany Indebtedness) was approximately $6
million.
MATURITY, INTEREST AND PRINCIPAL
The Series 3 Exchange Notes will mature on October 15, 2001, and the Series
4 Exchange Notes will mature on October 15, 2003. Interest on the Series 3
Exchange Notes will accrue at the rate of 7 3/4% per annum, and interest on
the Series 4 Exchange Notes will accrue at the rate of 8 1/4% per annum.
Interest will be payable semi-annually on each April 15 and October 15,
commencing April 15, 1997, to the holders of record of Exchange Notes at the
close of business on the April 1 and October 1 immediately preceding such
interest payment date. Interest on the Exchange Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the original date of issuance (the "Issue Date"). Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
The Exchange Notes are not entitled to the benefit of any mandatory sinking
fund.
REDEMPTION AND OFFER TO PURCHASE
Optional Redemption. The Series 3 Exchange Notes will not be redeemable
prior to maturity. The Series 4 Exchange Notes will be redeemable at the
option of LGII, in whole or in part, at any time on or after October 15, 2000
on not less than 30 nor more than 60 days' prior notice, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest, if any, to the redemption date, if redeemed
during the 12-month period beginning October 15 of the years indicated below:
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<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000.............................................................. 104.125%
2001.............................................................. 102.063%
2002.............................................................. 100.000%
</TABLE>
If less than all of the Series 4 Exchange Notes are to be redeemed, the
particular Exchange Notes or portions thereof to be redeemed shall be selected
for redemption either (a) pro rata, by lot or by such other method as the
Trustee considers to be fair and appropriate or (b) in such manner as complies
with the requirements of the principal national securities exchange, if any,
on which the Series 4 Exchange Notes are listed. The amounts to be redeemed
shall be equal to $1,000 or any integral multiple thereof.
Offer to Repurchase in Certain Circumstances. LGII is obligated to make, and
the Guarantor will ensure that LGII makes (a) upon the occurrence of a Change
of Control, an offer to repurchase all outstanding Exchange Notes at a
purchase price of 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase, and (b) upon the occurrence
of certain sales or dispositions of assets (an "Asset Sale"), an offer to
repurchase Exchange Notes with a portion of the net cash proceeds thereof, at
a purchase price of 100% of the principal amount of the Exchange Notes, plus
accrued and unpaid interest, if any, to the date of purchase. In the event of
a Change of Control or an Asset Sale, there can be no assurance that LGII or
the Guarantor will have, or will be able to obtain, sufficient funds to
purchase all of the Exchange Notes or to pay the purchase price for all or any
portion of Exchange Notes that LGII or the Guarantor might be required to
purchase. See "--Certain Covenants; Change of Control" and "--Certain
Covenants; Disposition of Proceeds of Asset Sales."
Compliance with Securities Laws and Regulations. In the event of an offer to
repurchase Exchange Notes, LGII and the Guarantor will comply with Rule 14e-1
under the Exchange Act and any other applicable securities laws and
regulations thereunder.
CERTAIN COVENANTS
LGII and the Guarantor jointly and severally make the following covenants,
among others, in the Indenture.
Limitation on Indebtedness. The Guarantor will not, and will not permit any
of its Restricted Subsidiaries (including without limitation LGII) to,
directly or indirectly, create, incur, issue, assume, guarantee or in any
manner become directly or indirectly liable, contingently or otherwise, for
the payment of (collectively, to "incur") any Indebtedness (including, without
limitation, any Acquired Indebtedness) other than Permitted Indebtedness.
Notwithstanding the foregoing limitations, the Guarantor and LGII (and any
Wholly-Owned Subsidiary with respect to Seller Financing Indebtedness) will be
permitted to incur Indebtedness (including, without limitation, Acquired
Indebtedness) if at the time of such incurrence, and after giving pro forma
effect thereto, the Consolidated Fixed Charge Coverage Ratio of the Guarantor
is at least equal to 2.25:1.
Limitation on Restricted Payments. The Guarantor will not, and will not
permit any of its Restricted Subsidiaries (including without limitation LGII)
to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution or payment
on or in respect of Capital Stock of the Guarantor or any of its Restricted
Subsidiaries or any payment made to the direct or indirect holders (in
their capacities as such) of Capital Stock of the Guarantor or any of its
Restricted Subsidiaries (other than (x) dividends or distributions payable
solely in Capital Stock of the Guarantor (other than Redeemable Capital
Stock) or in options, warrants or other rights to purchase Capital Stock of
the Guarantor (other than Redeemable Capital Stock) and (y) dividends or
other distributions to the extent declared or paid to the Guarantor or any
Wholly-Owned Subsidiary of the Guarantor),
(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),
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(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Indebtedness that is subordinate or junior in right of
payment to the Senior Notes or Pari Passu Indebtedness (other than any such
subordinated or Pari Passu Indebtedness owned by the Guarantor or a Wholly-
Owned Subsidiary of the Guarantor) or
(d) make any Investment (other than any Permitted Investment) in any
person,
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as "Restricted Payments"), unless, at the
time of and after giving effect to the proposed Restricted Payment (the amount
of any such Restricted Payment, if other than cash, shall be the Fair Market
Value on the date of such Restricted Payment of the asset(s) proposed to be
transferred by the Guarantor or such Restricted Subsidiary, as the case may
be, pursuant to such Restricted Payment), (A) no Default or Event of Default
shall have occurred and be continuing, (B) immediately prior to and after
giving effect to such Restricted Payment, the Guarantor would be able to incur
$1.00 of additional Indebtedness pursuant to the covenant described under "--
Limitation on Indebtedness" above (assuming a market rate of interest with
respect to such additional Indebtedness) and (C) the aggregate amount of all
Restricted Payments declared or made from and after the 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, as
described in the last sentence of this paragraph) or (y) issue and sale of
other shares of Capital Stock (other than Redeemable Capital Stock) of the
Guarantor or LGII to any person (other than to a Related Obligor); (iii) so
long as no Default or Event of Default shall have occurred and be continuing,
any redemption, repurchase or other acquisition or retirement of Indebtedness
that is subordinate or junior in right of payment to the Senior Notes and the
Guarantee by exchange for, or out of the net cash proceeds of, a substantially
concurrent (x) capital 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
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Related Obligor); provided, however, that the amount of any such net proceeds
that are utilized for any such redemption, repurchase or other acquisition or
retirement shall be excluded from clause (C)(2) of the preceding paragraph; or
(2) Indebtedness of the Guarantor or LGII issued to any person (other than a
Related Obligor), so long as such Indebtedness is Pari Passu Indebtedness or
Indebtedness that is subordinate or junior in right of payment to the Senior
Notes and the Guarantee in the same manner and at least to the same extent as
the Indebtedness so purchased, exchanged, redeemed, acquired or retired; (iv)
so long as no Default or Event of Default shall have occurred and be
continuing, any redemption, repurchase or other acquisition or retirement of
Pari Passu Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to the Guarantor or LGII
from any person (other than a Related Obligor) or (y) issue and sale of
(1) Capital Stock (other than Redeemable Capital Stock) of the Guarantor or
LGII to any person (other than a Related Obligor); provided, however, that the
amount of any such net proceeds that are utilized for any such redemption,
repurchase or other acquisition or retirement shall be excluded from clause
(C)(2) of the preceding paragraph; or (2) Indebtedness of the Guarantor or
LGII issued to any person (other than a Related Obligor), so long as such
Indebtedness is Pari Passu Indebtedness or Indebtedness that is subordinate or
junior in right of payment to the Senior Notes and the Guarantee in the same
manner and at least to the same extent as the Indebtedness so purchased,
exchanged, redeemed, acquired or retired; (v) Investments constituting
Restricted Payments made as a result of the receipt of consideration that
consists of cash or Cash Equivalents from any Asset Sale made pursuant to and
in compliance with the covenant described under "--Disposition of Proceeds of
Asset Sales" below; (vi) so long as no Default or Event of Default has
occurred and is continuing, repurchases by the Guarantor of Common Stock of
the Guarantor from employees of the Guarantor or their authorized
representatives upon the death, disability or termination of employment of
such employees, in an aggregate amount not exceeding $10,000,000 in any
calendar year; (vii) Investments constituting Restricted Payments that are
permitted by subparagraphs (iv) and (v) of the proviso to the section entitled
"Limitation on Transactions with Interested Persons;" and (viii) the
declaration or the payment of dividends on, or the scheduled purchase or
redemption of, the Preferred Securities of a Special Finance Subsidiary or the
Series C Preferred Shares of the Guarantor. In computing the amount of
Restricted Payments previously made for purposes of clause (C) of the
preceding paragraph, Restricted Payments made under the preceding clauses (v),
(vi) and (vii) shall be included and those under clauses (i), (ii), (iii),
(iv) and (viii) shall not be so included. For purposes of this covenant only,
the term "Related Obligor" shall mean the Guarantor, LGII or a Restricted
Subsidiary of the Guarantor or LGII.
Limitation on Liens. The Guarantor will not, and will not permit any of its
Restricted Subsidiaries (including without limitation LGII) to, create, incur,
assume or suffer to exist any Liens of any kind against or upon any of its
property or assets, or any proceeds therefrom where the aggregate amount of
Indebtedness secured by any such Liens, together with the aggregate amount of
property subject to any Sale-Leaseback Transactions of the Guarantor and its
Restricted Subsidiaries (other than Permitted Sale-Leaseback Transactions),
exceeds 10% of the Guarantor's Consolidated Net Worth unless (x) in the case
of Liens securing Indebtedness that is subordinate or junior in right of
payment to the Exchange Notes, the Exchange 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 Exchange Notes are equally and ratably secured
except for (a) Liens existing as at the Measurement Date; (b) Liens securing
the Exchange Notes or the Guarantees; (c) Liens in favor of the Guarantor,
LGII or any Wholly-Owned Subsidiary; (d) Liens securing Indebtedness which is
incurred to refinance Indebtedness which has been secured by a Lien permitted
under the Indenture and which has been incurred in accordance with the
provisions of the Indenture; provided, however, that such Liens do not extend
to or cover any property or assets of the Guarantor or any of its Restricted
Subsidiaries not securing the Indebtedness so refinanced; and (e) Permitted
Liens.
Change of Control. Upon the occurrence of a Change of Control, LGII will be,
and the Guarantor will ensure that LGII will be, obligated to make an offer to
purchase (a "Change of Control Offer"), and shall purchase, on a Business Day
(the "Change of Control Purchase Date") not more than 60 nor less than 30 days
following the occurrence of the Change of Control, all of the then outstanding
Senior Notes properly tendered and not withdrawn at a purchase price (the
"Change of Control Purchase Price") equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date. The Change of
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<PAGE>
Control Offer is required to remain open for at least 20 Business Days and
until the close of business on the Change of Control Purchase Date.
If a Change of Control occurs and LGII fails to pay the Purchase Price for
all Exchange Notes properly tendered and not withdrawn, the Guarantor will be
obligated to purchase all such Exchange Notes at the Change of Control
Purchase Price on the Change of Control Purchase Date.
In order to effect such Change of Control Offer, LGII or the Guarantor, as
the case may be, shall, not later than the 30th day after the occurrence of
the Change of Control, mail to each holder of Exchange Notes notice of the
Change of Control Offer, which notice shall govern the terms of the Change of
Control Offer and shall state, among other things, the procedures that holders
of Exchange Notes must follow to accept the Change of Control Offer.
If a Change of Control were to occur, there can be no assurance that LGII or
the Guarantor would have sufficient funds to pay the purchase price for all
Exchange Notes that LGII or the Guarantor might be required to purchase. In
the event that LGII or the Guarantor were required to purchase Exchange Notes
pursuant to a Change of Control Offer, each of LGII and the Guarantor expect
that they would need to seek third-party financing to the extent they may not
have available funds to meet their purchase obligations. However, there can be
no assurance that LGII or the Guarantor would be able to obtain such financing
on favorable terms, if at all.
Neither LGII nor the Guarantor shall be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements applicable to a Change of Control Offer made by LGII and
purchases all Exchange Notes validly tendered and not withdrawn under such
Change of Control Offer.
In the event that a Change of Control occurs and LGII or the Guarantor is
required to purchase Exchange Notes as described above, LGII and the Guarantor
will comply with Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations thereunder.
With respect to the sale of assets referred to in the definition of Change
of Control, the phrase "all or substantially all" as used in such definition
varies according to the facts and circumstances of the subject transaction,
has no clearly established meaning under relevant law and is subject to
judicial interpretation. Accordingly, in certain circumstances there may be a
degree of uncertainty in ascertaining whether a particular transaction would
involve a disposition of "all or substantially all" of the assets of a person
and, therefore, it may be unclear whether a Change of Control has occurred and
whether the Exchange Notes are subject to a Change of Control Offer.
Disposition of Proceeds of Asset Sales. The Guarantor will not, and will not
permit any of its Restricted Subsidiaries (including without limitation LGII)
or First Capital Life Insurance Company of Louisiana, National Capital Life
Insurance Company, Security Industrial Insurance Company, Security Industrial
Fire Insurance Company or any successor 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, 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.
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When the aggregate amount of Excess Proceeds equals or exceeds $10,000,000,
the Guarantor shall cause LGII to make an offer to purchase (an "Asset Sale
Offer"), from all holders of the Exchange Notes, not more than 40 Business
Days thereafter, an aggregate principal amount of Exchange Notes equal to such
Excess Proceeds, at a price in cash equal to 100% of the outstanding principal
amount thereof plus accrued and unpaid interest, if any, to the purchase date.
To the extent that the aggregate principal amount of Exchange Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, LGII may use
such deficiency for general corporate purposes. If the aggregate principal
amount of Exchange Notes validly tendered and not withdrawn by holders thereof
exceeds the Excess Proceeds, Exchange Notes to be purchased will be selected
on a pro rata basis. Upon completion of such Asset Sale Offer, the amount of
Excess Proceeds shall be reset to zero.
In the event that an Asset Sale occurs and LGII or the Guarantor is required
to purchase Exchange Notes as described above, LGII and the Guarantor will
comply with Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations thereunder.
Limitation on Issuances and Sale of Preferred Stock by Restricted
Subsidiaries. The Guarantor (a) will not permit any of its Restricted
Subsidiaries (including, without limitation, LGII) to issue any Preferred
Stock (other than (i) Preferred Stock issued to the Guarantor or a Wholly-
Owned Subsidiary of the Guarantor and (ii) Preferred Securities of a Special
Finance Subsidiary); and (b) will not permit any person to own any Preferred
Stock of any Restricted Subsidiary of the Guarantor (other than (i) Preferred
Stock owned by the Guarantor or a Wholly-Owned Subsidiary of the Guarantor and
(ii) Preferred Securities of a Special Finance Subsidiary); provided, however,
that this covenant shall not prohibit the issuance and sale of (x) all, but
not less than all, of the issued and outstanding Capital Stock of any
Restricted Subsidiary of the Guarantor owned by the Guarantor or any of its
Restricted Subsidiaries in compliance with the other provisions of the
Indenture or (y) directors' qualifying shares or investments by foreign
nationals mandated by applicable law.
Limitation on Transactions with Interested Persons. The Guarantor will not,
and will not permit any of its Restricted Subsidiaries (including, without
limitation, LGII) to, directly or indirectly, enter into or suffer to exist
any transaction or series of related transactions (including, without
limitation, the sale, transfer, disposition, purchase, exchange or lease of
assets, property or services) with, or for the benefit of, any Affiliate of
the Guarantor or any beneficial owner (determined in accordance with the
Indenture) of 5% or more of the Common Shares of the Guarantor at any time
outstanding ("Interested Persons"), unless (a) such transaction or series of
related transactions are on terms that are no less favorable to the Guarantor
or such Restricted Subsidiary, as the case may be, than those which could have
been obtained in a comparable transaction at such time from persons who are
not Affiliates of the Guarantor or Interested Persons, (b) with respect to a
transaction or series of transactions involving aggregate payments or value
equal to or greater than $10,000,000, the Guarantor has obtained a written
opinion from an Independent Financial Advisor stating that the terms of such
transaction or series of transactions are fair to the Guarantor or its
Restricted Subsidiary, as the case may be, from a financial point of view and
(c) with respect to a transaction or series of transactions involving
aggregate payments or value equal to or greater than $2,500,000, the Guarantor
shall have delivered an officers' certificate to the Trustee certifying that
such transaction or series of transactions comply with the preceding clause
(a) and, if applicable, certifying that the opinion referred to in the
preceding clause (b) has been delivered and that such transaction or series of
transactions have been approved by a majority of the Board of Directors of the
Guarantor (including a majority of the disinterested directors); provided,
however, that this covenant will not restrict the Guarantor from (i) paying
dividends in respect of its Capital Stock permitted under the covenant
described under "--Limitation on Restricted Payments" above, (ii) paying
reasonable and customary fees to directors of the Guarantor or any Restricted
Subsidiary who are not employees of the Guarantor or any Restricted
Subsidiary, (iii) entering into transactions with its Wholly-Owned
Subsidiaries or permitting its Wholly-Owned Subsidiaries from entering into
transactions with other Wholly-Owned Subsidiaries of the Guarantor, (iv)
making loans or advances to senior officers and directors of the Guarantor or
any Restricted Subsidiary not in excess of $6,000,000 in the aggregate at any
one time outstanding, (v) guaranteeing loans made to officers and other
employees of the Guarantor and its Restricted Subsidiaries in connection with
the Guarantor's 1994 Management Equity Investment Plan not in
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<PAGE>
excess of $6,000,000 in the aggregate at any one time outstanding, (vi) making
loans or advances to officers, employees or consultants of the Guarantor and
its Restricted Subsidiaries for travel and moving expenses in the ordinary
course of business for bona fide business purposes of the Guarantor and its
Restricted Subsidiaries, (vii) making other loans or advances to officers,
employees or consultants of the Guarantor and its Restricted Subsidiaries in
the ordinary course of business for bona fide business purposes of the
Guarantor and its Restricted Subsidiaries not in excess of $10,000,000 in the
aggregate at any one time outstanding, (viii) making payments to officers or
employees of the Guarantor or its Restricted Subsidiaries pursuant to
obligations undertaken, at a time when such persons were not officers or
employees of the Guarantor or its Restricted Subsidiaries, in connection with
arms' length Asset Acquisitions or (ix) declaring or paying dividends on, or
purchasing or redeeming, the Preferred Securities of a Special Finance
Subsidiary.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Guarantor will not, and will not permit any of its
Restricted Subsidiaries (including, without limitation, LGII) to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any Restricted Subsidiary of
the Guarantor to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock or any other interest or
participation in, or measured by, its profits, (b) pay any Indebtedness owed
to the Guarantor or any other Restricted Subsidiary of the Guarantor, (c) make
loans or advances to, or any Investment in, the Guarantor or any other
Restricted Subsidiary of the Guarantor, (d) transfer any of its properties or
assets to the Guarantor or any other Restricted Subsidiary of the Guarantor or
(e) guarantee any Indebtedness of the Guarantor or any other Restricted
Subsidiary of the Guarantor, except for such encumbrances or restrictions
existing under or by reason of (i) applicable law, (ii) customary non-
assignment provisions of any contract or any lease governing a leasehold
interest of the Guarantor or any Restricted Subsidiary of the Guarantor, (iii)
customary restrictions on transfers of property subject to a Lien permitted
under the Indenture which could not materially adversely affect the
Guarantor's ability to satisfy its obligations under the Indenture and the
Exchange Notes, (iv) any agreement or other instrument of a person acquired by
the Guarantor or any Restricted Subsidiary of the Guarantor (or a Restricted
Subsidiary of such person) in existence at the time of such acquisition (but
not created in contemplation thereof), which encumbrance or restriction is not
applicable to any person, or the properties or assets of any person, other
than the person, or the properties or assets of the person, so acquired, (v)
provisions contained in any agreement or instrument relating to Indebtedness
which prohibit the transfer of all or substantially all of the assets of the
obligor thereunder unless the transferee shall assume the obligations of the
obligor under such agreement or instrument and (vi) encumbrances and
restrictions under Indebtedness in effect on the Issue Date (including under
the Notes) and encumbrances and restrictions in permitted refinancings or
replacements thereof which are no less favorable to the holders of the
Exchange Notes than those contained in the Indebtedness so refinanced or
replaced.
Limitation on Sale-Leaseback Transactions. The Guarantor will not, and will
not permit any of its Restricted Subsidiaries (including without limitation
LGII) to, enter into any Sale-Leaseback Transaction with respect to any
property of the Guarantor or any of its Restricted Subsidiaries where the
aggregate amount of property subject to such Sale-Leaseback Transactions,
together with the aggregate amount of Liens securing Indebtedness of the
Guarantor and its Restricted Subsidiaries (other than Permitted Liens),
exceeds 10% of the Guarantor's Consolidated Net Worth. Notwithstanding the
foregoing, the Guarantor and its Restricted Subsidiaries may enter into Sale-
Leaseback Transactions ("Permitted Sale-Leaseback Transactions") with respect
to property acquired or constructed after the Issue Date; provided that (a)
the Attributable Value of such Sale-Leaseback Transaction shall be deemed to
be Indebtedness of the Guarantor or such Restricted Subsidiary, as the case
may be, and (b) after giving pro forma effect to any such Sale-Leaseback
Transaction and the foregoing clause (a), the Guarantor would be able to incur
$1.00 of additional Indebtedness pursuant to the covenant described under "--
Limitation on Indebtedness" above (assuming a market rate of interest with
respect to such additional Indebtedness).
Limitation on Applicability of Certain Covenants. During any period of time
that (i) the ratings assigned to the Exchange Notes by each of S&P and Moody's
(collectively, the "Rating Agencies") are no less than
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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 entitled "Limitation on Indebtedness," "Limitation on
Restricted Payments," "Disposition of Proceeds of Asset Sales," "Limitation on
Issuances and Sale of Preferred Stock by Restricted Subsidiaries,"
"Limitations on Transactions with Interested Persons" and "Limitation on
Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries"
(collectively, the "Suspended Covenants"). If one or both Rating Agencies
withdraws its rating or downgrades its Investment Grade Rating, then
thereafter the Guarantor and its Restricted Subsidiaries will be subject, on a
prospective basis, to the Suspended Covenants (until the Rating Agencies have
again assigned Investment Grade Ratings to the Exchange Notes) and compliance
with the Suspended Covenants with respect to Restricted Payments made after
the time of such withdrawal or downgrade will be calculated in accordance with
the covenant entitled "Limitation on Restricted Payments" as if such covenant
had been in effect at all times after the Measurement Date.
Reporting Requirements. The Guarantor will file with the Commission, or if
not permitted or required to so file will deliver to the Trustee, the annual
reports, quarterly reports and other documents required to be filed with the
Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or not
the Guarantor has a class of securities registered under the Exchange Act. The
Guarantor will be required to file with the Trustee and provide to each Holder
within 15 days after it files them with the Commission (or if any such filing
is not permitted under the Exchange Act, 15 days after the Guarantor would
have been required to make such filing) copies of such reports and documents.
Rule 144A Information Requirement. If at any time the Guarantor is no longer
subject to the reporting requirements of the Exchange Act, it will furnish to
the Holders or beneficial holders of the Exchange Notes and prospective
purchasers of the Exchange Notes designated by the holders of the Exchange
Notes, upon their request, any information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
MERGER, SALE OF ASSETS, ETC.
The Guarantor will not, and will not permit LGII to, in any transaction or
series of transactions, merge or consolidate with or into, or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of
its properties and assets as an entirety to, any person or persons, and the
Guarantor will not permit any of its Restricted Subsidiaries (including
without limitation LGII) to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the properties and assets of the
Guarantor or LGII or the Guarantor and its Restricted Subsidiaries, taken as a
whole, or LGII and its Restricted Subsidiaries, taken as a whole, to any other
person or persons, unless at the time of and after giving effect thereto (a)
either (i) if the transaction or series of transactions is a merger or
consolidation, the Guarantor or LGII or the Restricted Subsidiary, as the case
may be, shall be the surviving person of such merger or consolidation, or
(ii) the person formed by such consolidation or into which the Guarantor, LGII
or such Restricted Subsidiary, as the case may be, is merged or to which the
properties and assets of the Guarantor, LGII or such Restricted Subsidiary, as
the case may be, are transferred (any such surviving person or transferee
person being the "Surviving Entity") shall be a corporation organized and
existing under the laws of the United States of America, any state thereof,
the District of Columbia, Canada or any province thereof and shall expressly
assume by a supplemental indenture executed and delivered to the Trustee, in
form reasonably satisfactory to the Trustee, all the obligations of the
Guarantor or LGII, as the case may be, under the Exchange Notes and the
Indenture, and in each case, the Indenture shall remain in full force and
effect; (b) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions),
no Default or Event of Default shall have occurred and be continuing and the
Guarantor, LGII or the Surviving Entity, as the case may be, after giving
effect to such transaction or series of transactions on a pro forma basis
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), could incur $1.00 of additional Indebtedness pursuant to the
covenant described under "--Certain Covenants; Limitation on Indebtedness"
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above (assuming a market rate of interest with respect to such additional
Indebtedness); and (c) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without limitation,
any Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction or series of transactions), the Consolidated
Net Worth of the Guarantor, LGII or the Surviving Entity, as the case may be,
is at least equal to the Consolidated Net Worth of the Guarantor or LGII, as
the case may be, immediately before such transaction or series of
transactions.
In connection with any consolidation, merger, transfer, lease, assignment or
other disposition contemplated hereby, the Guarantor or LGII, as the case may
be, shall deliver, or cause to be delivered, to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an officers' certificate and
an opinion of counsel, each stating that such consolidation, merger, transfer,
lease, assignment or other disposition and the supplemental indenture in
respect thereof comply with the requirements under the Indenture; provided,
however, that, solely for purposes of computing amounts described in subclause
(C) of the covenant described under "--Certain Covenants; Limitation on
Restricted Payments" above, any such successor person shall only be deemed to
have succeeded to and be substituted for the Guarantor or LGII, as the case
may be, with respect to periods subsequent to the effective time of such
merger, consolidation or transfer of assets.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Guarantor or LGII in accordance with the foregoing, in
which the Guarantor or LGII is not the continuing corporation, the successor
corporation formed by such a consolidation or into which the Guarantor or LGII
is merged or to which such transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Guarantor or
LGII, as the case may be, under the Indenture with the same effect as if such
successor corporation had been named as the Guarantor or LGII therein.
EVENTS OF DEFAULT
The following will be "Events of Default" with respect to each series of
Exchange Notes:
(i) default in the payment of the principal of or premium, if any, on any
Exchange Note of such series when the same becomes due and payable (upon
Stated Maturity, acceleration, optional redemption, required purchase,
scheduled principal payment or otherwise); or
(ii) default in the payment of an installment of interest on any of the
Exchange Notes of such series, when the same becomes due and payable, which
default continues for a period of 30 days; or
(iii) failure to perform or observe any other term, covenant or agreement
contained in the Exchange Notes of such series or the Indenture or the
Guarantee with respect to Exchange Notes of such series (other than a
default specified in clause (i) or (ii) above) and such default continues
for a period of 30 days after written notice of such default requiring the
Guarantor and LGII to remedy the same shall have been given (x) to the
Guarantor and LGII by the Trustee or (y) to the Guarantor, LGII and the
Trustee by holders of 25% in aggregate principal amount of the Senior Notes
of such series then outstanding; or
(iv) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the Guarantor or any Restricted Subsidiary of the Guarantor (including
without limitation LGII) then has outstanding Indebtedness in excess of
$20,000,000 (including senior notes of another series), individually or in
the aggregate, and either (a) such Indebtedness is already due and payable
in full or (b) such default or defaults have resulted in the acceleration
of the maturity of such Indebtedness; or
(v) one or more judgments, orders or decrees of any court or regulatory
or administrative agency of competent jurisdiction for the payment of money
in excess of $20,000,000, either individually or in the aggregate, shall be
entered against the Guarantor or any Restricted Subsidiary of the Guarantor
(including without limitation LGII) or any of their respective properties
and shall not be discharged or bonded against or stayed and there shall
have been a period of 60 days after the date on which any period for appeal
has expired and during which a stay of enforcement of such judgment, order
or decree shall not be in effect; or
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(vi) 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
(vii) the Guarantee with respect to such series ceases to be in full
force and effect or is declared null and void, or the Guarantor denies that
it has any further liability under the Guarantee with respect to such
series or gives notice to such effect (other than by reason of the
termination of the Indenture or the release of the Guarantee with respect
to such series in accordance with the Indenture) and such condition shall
have continued for a period of 60 days after written notice of such failure
(which notice shall specify the Default, demand that it be remedied and
state that it is a "Notice of Default") requiring the Guarantor and LGII to
remedy the same shall have been given (x) to the Guarantor and LGII by the
Trustee or (y) to the Guarantor, LGII and the Trustee by holders of at
least 25% in aggregate principal amount of the Senior Notes of either
series then outstanding; or
(viii) certain events of bankruptcy, insolvency or reorganization with
respect to the Guarantor or any Significant Subsidiary of the Guarantor
(including without limitation LGII) shall have occurred.
If an Event of Default (other than as specified in clause (viii) above)
shall occur and be continuing with respect to the Exchange Notes of either
series, the Trustee, by notice to the Guarantor and LGII, or the holders of at
least 25% in aggregate principal amount of the Exchange Notes of such series
then outstanding, by notice to the Trustee, the Guarantor and LGII, may
declare the principal of, premium, if any, and accrued and unpaid interest, if
any, on all of the outstanding Exchange Notes of such series due and payable
immediately, upon which declaration, all amounts payable in respect of the
Exchange Notes of such series shall be immediately due and payable. If an
Event of Default specified in clause (viii) above occurs and is continuing,
then the principal of, premium, if any, and accrued and unpaid interest, if
any, on all of the outstanding Exchange Notes of such series shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holder of Exchange Notes.
After a declaration of acceleration under the Indenture with respect to the
Exchange Notes of either series, but before a judgment or decree for payment
of the money due has been obtained by the Trustee, the holders of a majority
in aggregate principal amount of the outstanding Exchange Notes of such
series, by written notice to the Guarantor, LGII and the Trustee, may rescind
such declaration if (a) the Guarantor or LGII has paid or deposited with the
Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee
under the Indenture and the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, (ii) all overdue interest
on all Exchange Notes of such series, (iii) the principal of and premium, if
any, on any Exchange Notes of such series which have become due otherwise than
by such declaration of acceleration and interest thereon at the rate borne by
the Exchange Notes of such series, and (iv) to the extent that payment of such
interest is lawful, interest upon overdue interest and overdue principal at
the rate borne by the Exchange Notes of such series which has become due
otherwise than by such declaration of acceleration; (b) the rescission would
not conflict with any judgment or decree of a court of competent jurisdiction;
and (c) all Events of Default, other than the non-payment of principal of,
premium, if any, and interest on the Exchange Notes of such series that have
become due solely by such declaration of acceleration, have been cured or
waived.
Prior to the declaration of acceleration of the Exchange Notes of any
series, the holders of not less than a majority in aggregate principal amount
of the outstanding Exchange Notes of such series may on behalf of the holders
of all the Exchange Notes of such series waive any past defaults under the
Indenture, except a default in the payment of the principal of, premium, if
any, or interest on any Exchange Note of such series, or in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Exchange Note of such series
outstanding.
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No holder of any of the Exchange Notes of any series has any right to
institute any proceeding with respect to the Indenture or the Exchange Notes
of such series or any remedy thereunder, unless the holders of at least 25% in
aggregate principal amount of the outstanding Exchange Notes of such series
have made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as Trustee under the Exchange Notes of such series
and the Indenture, the Trustee has failed to institute such proceeding within
30 days after receipt of such notice and the Trustee, within such 30-day
period, has not received directions inconsistent with such written request by
holders of a majority in aggregate principal amount of the outstanding
Exchange Notes of such series. Such limitations do not apply, however, to a
suit instituted by a holder of a Exchange Note of such series for the
enforcement of the payment of the principal of, premium, if any, or interest
on such Senior Note on or after the respective due dates expressed in such
Exchange Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. Subject to the provisions of the Indenture relating to the duties of
the Trustee, whether or not an Event of Default shall occur and be continuing,
the Trustee under the Indenture is not under any obligation to exercise any of
its rights or powers under the Indenture at the request or direction of any of
the holders unless such holders shall have offered to the Trustee reasonable
security or indemnity. Subject to certain provisions concerning the rights of
the Trustee, the holders of not less than a majority in aggregate principal
amount of the outstanding Exchange Notes of any series have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee under the Indenture with respect to the Exchange Notes of such series.
If an Event of Default occurs and is continuing and is known to the Trustee,
the Trustee shall mail to each holder of the Exchange Notes notice of the
Event of Default within 30 days after obtaining knowledge thereof. Except in
the case of an Event of Default in payment of principal of, premium, if any,
or interest on any Exchange Notes, the Trustee may withhold the notice to the
holders of such Exchange Notes if a committee of its trust officers in good
faith determines that withholding the notice is in the interest of the holders
of the Exchange Notes.
LGII is required to furnish to the Trustee annual and quarterly statements
as to the performance by LGII of its obligations under the Indenture and as to
any default in such performance. LGII is also required to notify the Trustee
within ten days of any event which is, or after notice or lapse of time or
both would become, an Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
Each of the Guarantor and LGII may, at its option and at any time, terminate
the obligations of the Guarantor and LGII with respect to the outstanding
Exchange Notes of any series ("defeasance"). Such defeasance means that the
Guarantor and LGII shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Exchange Notes of such series,
except for (i) the rights of holders of outstanding Exchange Notes of such
series to receive payment in respect of the principal of, premium, if any, and
interest on such Exchange Notes when such payments are due, (ii) LGII's
obligations to issue temporary Exchange Notes of such series, register the
transfer or exchange of any Exchange Notes of such series, replace mutilated,
destroyed, lost or stolen Exchange Notes of such series and maintain an office
or agency for payments in respect of the Exchange Notes of such series, (iii)
the rights, powers, trusts, duties and immunities of the Trustee, and (iv) the
defeasance provisions of the Indenture. In addition, each of the Guarantor and
LGII may, at its option and at any time, elect to terminate the obligations of
the Guarantor and LGII with respect to certain covenants that are set forth in
the Indenture, some of which are described under "--Certain Covenants" above
(including the covenant described under "--Certain Covenants; Change of
Control" above) and any subsequent failure to comply with such obligations
shall not constitute a Default or Event of Default with respect to the
Exchange Notes of such series ("covenant defeasance").
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In order to exercise either defeasance or covenant defeasance, (i) LGII must
irrevocably deposit with the Trustee, in trust, for the benefit of the holders
of the Exchange Notes of such series, cash in United States dollars, U.S.
Government Obligations (as defined in the Indenture), or a combination
thereof, in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of,
premium, if any, and interest on the outstanding Exchange Notes of such series
to maturity (except lost, stolen or destroyed Exchange Notes of such series
which have been replaced or paid); (ii) the Guarantor or LGII shall have
delivered to the Trustee an opinion of counsel to the effect that the holders
of the outstanding Exchange Notes of such series will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such defeasance or covenant defeasance had not occurred (in the case of
defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax laws);
(iii) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit; (iv) such defeasance or covenant defeasance shall
not cause the Trustee to have a conflicting interest with respect to any
securities of LGII; (v) such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under, any
material agreement or instrument to which the Guarantor or LGII is a party or
by which it is bound; (vi) the Guarantor or LGII shall have delivered to the
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and (vii) the Guarantor or LGII shall have
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent under the Indenture to either
defeasance or covenant defeasance, as the case may be, have been complied
with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
of either series when (i) either (a) all the Notes of such series theretofore
authenticated and delivered (except lost, stolen or destroyed Notes of such
series which have been replaced or repaid and Notes of such series for whose
payment money has theretofore been deposited in trust or segregated and held
in trust by LGII and thereafter repaid to LGII or discharged from such trust)
have been delivered to the Trustee for cancellation or (b) all Notes of such
series have been called for redemption or otherwise become due and payable and
the Guarantor or LGII has irrevocably deposited or caused to be deposited with
the Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Notes of such series not theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, and interest on
the Notes of such series to the date of deposit together with irrevocable
instructions from the Guarantor or LGII directing the Trustee to apply such
funds to the payment thereof at maturity; (ii) the Guarantor and LGII have
paid all other sums payable under the Indenture by LGII; (iii) there exists no
Default or Event of Default under the Indenture; and (iv) the Guarantor or
LGII has delivered to the Trustee an officers' certificate and an opinion of
counsel stating that all conditions precedent under the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with.
AMENDMENTS AND WAIVERS
The Indenture will provide that the Guarantor and LGII, when authorized by a
Board Resolution, and the Trustee may amend, waive or supplement the Indenture
or the Exchange Notes without notice to or consent of any Holder: (a) to cure
any ambiguity, defect or inconsistency; (b) to comply with the provisions
described under "Merger, Sale of Assets, Etc." above; (c) to provide for
uncertificated Notes in addition to certificated Notes; (d) to comply with any
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the TIA; or (e) to make any change that
would provide any additional benefit or rights to the Holders or that does not
adversely affect the rights of any Holder. Notwithstanding the foregoing, the
Guarantor, the Trustee and LGII may not make any change that adversely affects
the rights of any Holder under the Indenture. Other modifications and
amendments of the Indenture may be made with the consent of the holders of not
less than a majority in aggregate principal amount of each series of the then
outstanding Notes, except that, without the consent of each holder of the
Exchange Notes affected thereby, no amendment may, directly or
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indirectly: (i) reduce the amount of Exchange Notes whose holders must consent
to any amendment; (ii) reduce the rate of or change the time for payment of
interest, including defaulted interest, on any Exchange Notes; (iii) change
the currency in which the Senior Notes are payable; (iv) reduce the principal
of or change the fixed maturity of any Exchange Notes, or change the date on
which any Exchange Notes may be subject to repurchase, or reduce the
repurchase price therefor; (v) make any Exchange Notes payable in money other
than that stated in the Exchange Notes; (vi) make any change in provisions of
the Indenture protecting the right of each holder of a Exchange Note to
receive payment of principal of and interest on such Exchange Note on or after
the date thereof or to bring suit to enforce such payment or permitting
holders of a majority in principal amount of the Exchange Notes of such series
to waive Defaults or Events of Default; (vii) subordinate in right of payment,
or otherwise subordinate, the Notes of such series to any other Indebtedness
or obligation of the Guarantor or LGII; or (viii) amend, alter, change or
modify the obligation of LGII to make and consummate a Change of Control Offer
in the event of a Change of Control or make and consummate an Asset Sale Offer
or waive any Default in the performance of any such offers or modify any of
the provisions or definitions with respect to any such offers.
REGISTRATION RIGHTS AGREEMENT
In the event that (i) due to a change in current interpretations by the
Commission, LGII determines that consummation of the Exchange Offer as
contemplated by the Registration Rights Agreement would violate applicable law
or applicable interpretations by the Commission, (ii) the Exchange Offer is
not for any other reason consummated within 210 days after the date on which
LGII delivered the Senior Notes to the Initial Purchasers (the "Closing Date")
or (iii) any holder or holders of $5,000,000 aggregate principal amount of
Notes, within 30 days after consummation of the Exchange Offer, notify LGII
that such holders (x) are prohibited by applicable law or Commission policy
from participating in the Exchange Offer, (y) may not resell Exchange Notes
acquired by them in the Exchange Offer to the public without delivering a
prospectus and that the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by
such holders or (z) are broker-dealers and hold Notes acquired directly from
LGII or an "affiliate" of LGII, within the meaning of Rule 405 under the
Securities Act, it is contemplated that the Guarantor and LGII will file a
Shelf Registration Statement covering resales (a) by all holders of
Outstanding Notes in the event LGII determines that the consummation of the
Exchange Offer would violate applicable law or interpretations by the
Commission pursuant to the foregoing clause (i) or the Exchange Offer is not
consummated within 210 days after the Closing Date pursuant to the foregoing
clause (ii), or (b) by the Initial Purchasers after consummation of the
Exchange Offer, if the Shelf Registration Statement is required solely
pursuant to the foregoing clause (iii), and will use their best efforts to
cause the Shelf Registration Statement to become effective and to keep the
Shelf Registration Statement effective for 180 days from the effective date
thereof. The Guarantor and LGII shall, if they file the Shelf Registration
Statement, provide to each holder of Notes covered by the Shelf Registration
Statement copies of the prospectus included therein and notify each such
holder when the Shelf Registration Statement has become effective. A holder
that sells Notes pursuant to a Shelf Registration Statement generally will be
required to be named as a selling security holder in the related prospectus
and to deliver a current prospectus to purchasers, and will be subject to
certain of the civil liability provisions under the Securities Act in
connection with such sales.
Under the Registration Rights Agreement, the Guarantor and LGII have agreed
to use their best efforts to: (i) file the Exchange Offer Registration
Statement or a Shelf Registration Statement with the Commission within 45 days
after the Closing Date, (ii) have such Exchange Offer Registration Statement
or Shelf Registration Statement declared effective by the Commission within
180 days after the Closing Date, and (iii) commence the Exchange Offer and
issue the Exchange Notes in exchange for all Outstanding Notes validly
tendered in accordance with the terms of the Exchange Offer prior to the close
of the Exchange Offer, or, in the alternative, cause the Shelf Registration
Statement to remain effective for 180 days from the effective date thereof.
Although the Guarantor and LGII intend to file the Exchange Offer Registration
Statement and, if required, a Shelf Registration Statement, there can be no
assurance that such registration statements will be filed or, if filed, that
either will become effective. Each holder of Notes, by virtue of being or
becoming so, will be bound by the provisions of the Registration Rights
Agreement that may require the holder to furnish notice or other
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information to the Guarantor and LGII as a condition to certain obligations of
the Guarantor and LGII to file a Shelf Registration Statement by a particular
date or to maintain its effectiveness for the prescribed 180-day period.
EQUITY TRANSACTIONS
Prior to the first anniversary of the Closing Date (the "Anniversary Date"),
the Guarantor expects to consummate equity transactions having aggregate gross
proceeds of at least $200,000,000.
PENALTY INTEREST
Additional interest ("Penalty Interest") shall be assessed on the Notes as
follows:
(i) (A) if the Exchange Offer Registration Statement or, in the event
that due to a change in current interpretations by the Commission the
Guarantor and LGII are not permitted to effect the Exchange Offer, a Shelf
Registration Statement is not filed within 45 days following the Closing
Date or (B) in the event that within 30 days after the consummation of the
Exchange Offer (the "prescribed time period"), any holder or holders of
$5,000,000 aggregate principal amount of Notes shall notify LGII that such
holders (x) are prohibited by applicable law or Commission policy from
participating in the Exchange Offer, (y) may not resell Exchange Notes
acquired by them in the Exchange Offer to the public without delivering a
prospectus and that the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by
such holders or (z) are broker-dealers and hold Notes acquired directly
from LGII or an "affiliate" of LGII or Loewen, within the meaning of Rule
405 under the Securities Act, if the Shelf Registration Statement is not
filed within 45 days after expiration of the prescribed time period, then
commencing on the 46th day after either the Closing Date or the expiration
of the prescribed time period, as the case may be, Penalty Interest shall
be accrued on the Notes over and above the accrued interest at a rate of
.50% per annum for the first 90 days immediately following the 46th day
after either the Closing Date or the expiration of the prescribed time
period, as the case may be, such Penalty Interest rate increasing by an
additional .25% per annum at the beginning of each subsequent 90-day
period;
(ii) if the Exchange Offer Registration Statement or a Shelf Registration
Statement is filed pursuant to clause (i) of the preceding paragraph and is
not declared effective within 180 days following either the Closing Date or
the expiration of the prescribed time period, as the case may be, then
commencing on the 181st day after either the Closing Date or the expiration
of the prescribed time period, as the case may be, Penalty Interest shall
be accrued on the Outstanding Notes over and above the accrued interest at
a rate of .50% per annum for the first 90 days immediately following the
181st day after either the Closing Date or the expiration of the prescribed
time period, as the case may be, such Penalty Interest rate increasing by
an additional .25% per annum at the beginning of each subsequent 90-day
period;
(iii) if either (A) the Guarantor and LGII have not exchanged Exchange
Notes for all Outstanding Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to 30 days after the date on which
the Exchange Offer Registration Statement was declared effective, or (B) if
applicable, a Shelf Registration Statement has been declared effective and
such Shelf Registration Statement ceases to be effective prior to 180 days
from its original effective date, then, subject to certain exceptions,
Penalty Interest shall be accrued on the Notes over and above the accrued
interest at a rate of .50% per annum for the first 60 days immediately
following the (x) 31st day after such effective date, in the case of
(A) above, or (y) the day such Shelf Registration Statement ceases to be
effective in the case of (B) above, such Penalty Interest rate increasing
by an additional .25% per annum at the beginning of each subsequent 60-day
period; and
(iv) if the Guarantor fails to consummate equity transactions having
gross proceeds of at least $200,000,000 in the aggregate prior to the
Anniversary Date, Penalty Interest shall accrue at a rate of .25% per annum
for the first 90 days following the Anniversary Date, such Penalty Rate
increasing by an additional .25% per annum at the beginning of each
subsequent 90-day period.
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provided, however, that the Penalty Interest rate on the Notes on account of
clauses (i), (ii) and (iii) above, may not exceed 1.5% per annum; provided
further that the Penalty Interest rate on the Notes on account of clause (iv)
above may not exceed 1.0% per annum; and provided further that Penalty
Interest on the Notes shall cease to accrue (1) upon the filing of the
Exchange Offer Registration Statement or a Shelf Registration Statement (in
the case of (i) above), (2) upon the effectiveness of the Exchange Offer
Registration Statement or a Shelf Registration Statement (in the case of (ii)
above), (3) upon the exchange of Exchange Notes for all Outstanding Notes
validly tendered in the Exchange Offer or upon the effectiveness of the Shelf
Registration Statement which had ceased to remain effective prior to 180 days
from its original effective date (in the case of (iii) above), or (4) upon
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 the Guarantor after the consummation of this Offering,
aggregate a minimum of $200,000,000 (in the case of (iv) above).
Any amounts of Penalty Interest due pursuant to clause (i), (ii), (iii) or
(iv) above will be payable in cash on the interest payment dates of the Notes.
The amount of Penalty Interest will be determined by multiplying the
applicable Penalty Interest rate by the principal amount of the Notes,
multiplied by a fraction, the numerator of which is the number of days such
Penalty Interest rate was applicable during such period (determined on the
basis of a 360-day year composed of twelve 30-day months), and the denominator
of which is 360.
The foregoing summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the provisions of the Registration Rights
Agreement. A copy of the Registration Rights Agreement may be obtained from
LGII, the Guarantor or any of the Initial Purchasers, upon request.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred
and is continuing, the Trustee will exercise such rights and powers vested in
it under the Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the TIA incorporated by reference therein
contain limitations on the rights of the Trustee thereunder, should it become
a creditor of the Guarantor or LGII, to obtain payment of claims in certain
cases or to realize on certain property received by it in respect of any such
claims, as security or otherwise. The Trustee is permitted to engage in other
transactions; provided, however, that if it acquires any conflicting interest
(as defined in the TIA) it must eliminate such conflict or resign.
GOVERNING LAW
The Indenture and the Exchange Notes will be governed by the laws of the
State of New York, without regard to the principles of conflicts of law.
CONSENT TO SERVICE AND JURISDICTION
Each of LGII and Loewen has appointed Thelen, Marrin, Johnson & Bridges, 330
Madison Avenue, New York, New York 10017, Attention: David P. Graybeal, Esq.,
as its authorized agent upon whom process may be served in any suit, action or
proceeding arising out of or based on the Indenture which may be instituted in
any federal or state court located in The City of New York, expressly consents
to the jurisdiction of any such court in respect of any such suit, action or
proceeding, and waives other requirements of or objections to personal
jurisdiction with respect thereto.
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CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a person (a) assumed or
created in connection with an Asset Acquisition from such person or (b)
existing at the time such person becomes a Restricted Subsidiary of any other
person.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person.
"Asset Acquisition" means (a) an Investment by the Guarantor or any
Restricted Subsidiary of the Guarantor (including without limitation LGII) in
any other person pursuant to which such person shall become a Restricted
Subsidiary of the Guarantor, or shall be merged with or into the Guarantor or
any Restricted Subsidiary of the Guarantor, (b) the acquisition by the
Guarantor or any Restricted Subsidiary of the Guarantor of the assets of any
person (other than a Restricted Subsidiary of the Guarantor) which constitute
all or substantially all of the assets of such person or (c) the acquisition
by the Guarantor or any Restricted Subsidiary of the Guarantor of any division
or line of business of any person (other than a Restricted Subsidiary of the
Guarantor).
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any person other than the Guarantor or
a Restricted Subsidiary of the Guarantor (including without limitation LGII),
in one or a series of related transactions, of (a) any Capital Stock of any
Restricted Subsidiary of the Guarantor (other than in respect of director's
qualifying shares or investments by foreign nationals mandated by applicable
law) or of First Capital Life Insurance Company of Louisiana, National Capital
Life Insurance Company, Security Industrial Insurance Company, Security
Industrial Fire Insurance Company or any successor 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 or assets acquired 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
aggregate Fair Market Value of $2,000,000 or less; and (ii) any sale,
issuance, conveyance, transfer, lease or other disposition of properties or
assets that is governed by the provisions described under "--Merger, Sale of
Assets, Etc." above.
"Attributable Value" means, as to any particular lease under which any
person is at the time liable other than a Capitalized Lease Obligation, and at
any date as at which the amount thereof is to be determined, the total net
amount of rent required to be paid by such person under such lease during the
initial term thereof as determined in accordance with GAAP, discounted from
the last date of such initial term to the date of determination at a rate per
annum equal to the discount rate which would be applicable to a Capitalized
Lease Obligation with a like term in accordance with GAAP. The net amount of
rent required to be paid under any such lease for any such period shall be the
aggregate amount of rent payable by the lessee with respect to such period
after excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges. In the
case of any lease which is terminable by the lessee upon the payment of a
penalty, such net amount shall also include the amount of such penalty, but no
rent shall be considered as required to be paid under such lease subsequent to
the first date upon which it may be so terminated. "Attributable Value" means,
as to a Capitalized Lease Obligation under which any person is at the time
liable and at any date as at which the amount thereof is to be determined, the
capitalized amount thereof that would appear on the face of a balance sheet of
such person in accordance with GAAP.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The City of New York,
State of New York or the city in which the Corporate Trust Office is located,
are authorized or obligated by law, regulation or executive order to close.
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"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of the Indenture,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness with
a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the Untied States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii)
certificates of deposit with a maturity of 180 days or less of any financial
institution that is not organized under the laws of the United States, any
state thereof or the District of Columbia that are rated at least A-1 by S&P
or at least P-1 by Moody's or at least an equivalent rating category of
another nationally recognized securities rating agency; (iv) repurchase
agreements and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the government of the
United States of America or issued by any agency thereof and backed by the
full faith and credit of the United States of America, in each case maturing
within 180 days from the date of acquisition; provided that the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions With Securities Dealers and Others, as
adopted by the Comptroller of the Currency on October 31, 1985; and (v) notes
held by the Guarantor or any Restricted Subsidiary (including without
limitation LGII) which were obtained by the Guarantor or such Restricted
Subsidiary in connection with Asset Sales (x) in the ordinary course of its
funeral home, cemetery or cremation businesses or (y) which were required to
be made pursuant to applicable federal or state law.
"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 Indenture, 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
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Board of Directors of the Guarantor or LGII (together with any new directors
whose election by such Board of Directors or whose nomination for election by
the shareholders or stockholders of the Guarantor or LGII was approved by a
vote of 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason (including the
failure of such individuals to be elected in a proxy contest involving a
solicitation of proxies) to constitute a majority of the Board of Directors of
the Guarantor or LGII then in office; or (d) the Guarantor or LGII is
liquidated or dissolved or adopts a plan of liquidation other than a
liquidation of LGII into the Guarantor.
"Collateral Agreement" means the Collateral Trust Agreement dated as of May
15, 1996, among Bankers Trust Company, as trustee, Loewen, LGII and various
other Subsidiaries.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted.
"Common Stock" means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however
designated and whether voting or nonvoting) of, such person's common stock,
whether outstanding at the Issue Date or issued after the Issue Date, and
includes, without limitation, all series and classes of such common stock.
"Consolidated Cash Flow Available for Fixed Charges" means, with respect to
any person for any period, (A) the sum of, without duplication, the amounts
for such period, taken as a single accounting period, of (a) Consolidated Net
Income, (b) consolidated depreciation, depletion, amortization and other non-
cash charges for such period, (c) Consolidated Interest Expense and
(d) Consolidated Income Tax Expense less (B) any non-cash items increasing
Consolidated Net Income for such period.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
person, the ratio of the aggregate amount of Consolidated Cash Flow Available
for Fixed Charges of such person for the full fiscal quarter immediately
preceding the date of the transaction (the "Transaction Date") giving rise to
the need to calculate the Consolidated Fixed Charge Coverage Ratio (such full
fiscal quarter being referred to herein as the "Prior Quarter") to the
aggregate amount of Consolidated Fixed Charges of such person for the Prior
Quarter. In
addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated Cash Flow Available for Fixed Charges" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to, without duplication, (a)
the incurrence of any Indebtedness of such person or any of its Restricted
Subsidiaries (and the application of the net proceeds thereof) during the
period commencing on the first day of the Prior Quarter to and including the
Transaction Date (the "Reference Period"), including, without limitation, the
incurrence of the Indebtedness giving rise to the need to make such
calculation (and the application of the net proceeds thereof), as if such
incurrence (and application) occurred on the first day of the Reference
Period, and (b) any Material Asset Sales or Material Asset Acquisitions
(including, without limitation, any Material Asset Acquisition giving rise to
the need to make such calculation as a result of such person or one of its
Restricted Subsidiaries (including any person who becomes a Restricted
Subsidiary as a result of the Material Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness) occurring during the
Reference Period, as if such Material Asset Sale or Material Asset Acquisition
occurred on the first day of the Reference Period. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (i)
interest on outstanding Indebtedness determined on a fluctuating basis as at
the Transaction Date and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; and (ii) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Reference Period. If such person or any of its Restricted
Subsidiaries directly or indirectly guarantees Indebtedness of a third person,
the above clause shall give effect to the incurrence of such guaranteed
Indebtedness as if such person or such Restricted Subsidiary had directly
incurred or otherwise assumed such guaranteed Indebtedness. For purposes of
this calculation, a Material Asset Acquisition is an Asset Acquisition which
is deemed by such
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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 at the end of the fiscal
quarter immediately preceding such date, as determined in accordance with
GAAP, less: (i) Intangible Assets and (ii) appropriate adjustments on account
of minority interests of other persons holding equity investments in
Restricted Subsidiaries, in the case of each of clauses (i) and (ii) above as
reflected on the consolidated balance sheet of the Guarantor and its
Restricted Subsidiaries as at the end of the fiscal quarter immediately
preceding such date.
"Consolidated Net Worth" means, with respect to any person at any date, the
consolidated stockholders' equity of such person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock of such person
and its Restricted Subsidiaries, as determined in accordance with GAAP.
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"Credit Agreements" means the 1996 Revolving Credit Facility, the Canadian
Revolver (as defined), the MEIP Loan (as defined) and the Canadian Term Loan
(as defined); in each case as any such instrument may be amended, supplemented
or otherwise modified from time to time, and any successor or replacement
facility. For a description of each of the Credit Agreements, see "Description
of Certain Indebtedness."
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Guarantor or any of its Restricted Subsidiaries against fluctuations in
currency values.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Event of Default" has the meaning set forth under "Events of Default"
herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any 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 resolutions of the Board of Directors
of the Guarantor delivered to the Trustee.
"Final Maturity Date" means October 15, 2001, with respect to the Series 3
Senior Notes, and October 15, 2003, with respect to the Series 4 Senior Notes.
"GAAP" means Canadian GAAP consistently applied until such time as the
Guarantor or LGII shall prepare their respective books of record in accordance
with U.S. GAAP at which time and all times thereafter GAAP shall mean U.S.
GAAP consistently applied.
"Guarantees" means the guarantees of the Senior Notes created pursuant to
the Indenture.
"guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantor" means The Loewen Group Inc., and shall include any successor
replacing such Guarantor pursuant to the Indenture, and thereafter means such
successor.
"Gulf National and Provident Litigation Expenses" means expenses of up to
$200,000,000 recorded by the Guarantor in its consolidated financial
statements for the year ended December 31, 1995 in connection with the conduct
and settlement of lawsuits brought against the Guarantor by (i) J.J. O'Keefe,
Sr., Gulf National Insurance Company and certain affiliates thereof before the
courts of the State of Mississippi and (ii) Provident American Corporation and
a subsidiary thereof before the United States District Court for the Eastern
District of Pennsylvania.
"Holder" means the person in whose name 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 person in connection with any
undrawn letters of credit, banker's acceptance or other similar credit
transaction, (b) all
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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 Indenture, and if such price is based upon, or
measured by, the fair market value of such Redeemable Capital Stock, such fair
market value shall be determined in good faith by the board of directors of
the issuer of such Redeemable Capital Stock. For purposes of this definition,
the term "Indebtedness" shall not include (i) Indebtedness of a Wholly-Owned
Subsidiary owed to and held by the Guarantor, LGII or another Wholly-Owned
Subsidiary, in each case which is not subordinate in right of payment to any
Indebtedness of such Subsidiary, except that (a) any transfer of such
Indebtedness by the Guarantor, LGII or a Wholly-Owned Subsidiary (other than
to the Guarantor, LGII or to a Wholly-Owned Subsidiary) and (b) the sale,
transfer or other disposition by the Guarantor, LGII or any Restricted
Subsidiary of the Guarantor or LGII of Capital Stock of a Wholly-Owned
Subsidiary which is owed Indebtedness of another Wholly-Owned Subsidiary such
that it ceases to be a Wholly-Owned Subsidiary of the Guarantor or LGII shall,
in each case, be an incurrence of Indebtedness by such Restricted Subsidiary
subject to the other provisions of the Indenture; and (ii) Indebtedness of the
Guarantor or LGII owed to and held by a Wholly-Owned Subsidiary of the
Guarantor or LGII which is unsecured and subordinate in right of payment to
the payment and performance of the Guarantor's or LGII's obligations under the
Indenture and the Senior Notes except that (a) any transfer of such
Indebtedness by a Wholly-Owned Subsidiary of the Guarantor or LGII (other than
to another Wholly-Owned Subsidiary of the Guarantor or LGII) and (b) the sale,
transfer or other disposition by the Guarantor or LGII or any Restricted
Subsidiary of the Guarantor or LGII of Capital Stock of a Wholly-Owned
Subsidiary which holds Indebtedness of the Guarantor or LGII such that it
ceases to be a Wholly-Owned Subsidiary shall, in each case, be an incurrence
of Indebtedness by the Guarantor or LGII, as the case may be, subject to the
other provisions of the Indenture.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Guarantor or LGII and (ii) which, in the
judgment of the Board of Directors of the Guarantor, is otherwise independent
and qualified to perform the task for which it is to be engaged.
"Interest Rate Protection Agreement" means any arrangement with any other
person whereby, directly or indirectly, such person is entitled to receive
from time to time periodic payments calculated by applying either a floating
or a fixed rate of interest on a stated notional amount in exchange for
periodic payments made by such person calculated by applying a fixed or a
floating rate of interest on the same notional amount and shall include,
without limitation, interest rate swaps, caps, floors, collars and similar
agreements.
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"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.
"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.
"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.
"Pari Passu Indebtedness" means Indebtedness of LGII or the Guarantor which
ranks pari passu in right of payment with the Senior Notes or the Guarantees,
as the case may be.
"Permitted Holders" mean (i) Raymond Loewen and Anne Loewen, taken together
and (ii) in the case of LGII, the Guarantor.
"Permitted Indebtedness" means, without duplication, each of the following:
(a) The Senior Notes and Indebtedness of the Guarantor evidenced by the
Guarantees;
(b) Indebtedness of the Guarantor and its Restricted Subsidiaries
(including without limitation LGII) outstanding on the Issue Date (other
than Indebtedness under the Credit Agreements);
(c) Indebtedness of LGII or the Guarantor, 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 less the Net Proceeds
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of any Asset Sale that are applied to repay, and permanently reduce the
commitments under, the Credit Agreements (as required by the terms
thereof);
(d) (i) Interest Rate Protection Obligations of the Guarantor covering
Indebtedness of the Guarantor and its Restricted Subsidiaries (including
without limitation LGII); (ii) Interest Rate Protection Obligations of any
Restricted Subsidiary of the Guarantor covering Indebtedness of such
Restricted Subsidiary; provided, however, that, in the case of either
clause (i) or (ii), (x) any Indebtedness to which any such Interest Rate
Protection Obligations relate bears interest at fluctuating interest rates
and is otherwise permitted to be incurred under this covenant and (y) the
notional principal amount of any such Interest Rate Protection Obligations
does not exceed the principal amount of the Indebtedness to which such
Interest Rate Protection Obligations relate;
(e) Indebtedness under Currency Agreements; provided, however, that in
the case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Guarantor and its
Restricted Subsidiaries (including without limitation LGII) outstanding
other than as a result of fluctuations in foreign currency exchange rates
or by reason of fees, indemnities and compensation payable thereunder;
(f) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within two business days of incurrence;
(g) Indebtedness incurred in respect of performance bonds or letters of
credit in lieu thereof provided in the ordinary course of business;
(h) Indebtedness of the Guarantor and its Restricted Subsidiaries
(including without limitation LGII) represented by letters of credit for
the account of the Guarantor and its Restricted Subsidiaries in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;
(i) Indebtedness of the Guarantor and its Restricted Subsidiaries
(including without limitation LGII) in addition to that described in
clauses (a) through (h) above, in an aggregate principal amount outstanding
at any time not exceeding $5,000,000; and
(j) (i) Indebtedness of the Guarantor the proceeds of which are used
solely to refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of the Guarantor and its Restricted Subsidiaries (including
without limitation LGII) and (ii) Indebtedness of any Restricted Subsidiary
of the Guarantor the proceeds of which are used solely to refinance
(whether by amendment, renewal, extension or refunding) Indebtedness of
such Restricted Subsidiary, in each case other than the Indebtedness
refinanced, redeemed or retired as described under "Use of Proceeds" herein
or incurred under clause (c), (d), (e), (f), (g), (h), or (i) of this
covenant; provided, however, that (x) the principal amount of Indebtedness
incurred pursuant to this clause (j) (or, if such Indebtedness provides for
an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the maturity thereof, the original issue
price of such Indebtedness) shall not exceed the sum of the principal
amount of Indebtedness so refinanced, plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of such Indebtedness or the amount of any premium reasonably
determined by the Board of Directors of the Guarantor as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated purchase, plus the amount of expenses in connection therewith,
(y) in the case of Indebtedness incurred by the Guarantor pursuant to this
clause (j) to refinance Pari Passu Indebtedness, such Indebtedness
constitutes Pari Passu Indebtedness.
"Permitted Investments" means any of the following: (i) Investments in any
Wholly-Owned Subsidiary of the Guarantor (including (a) LGII and (b) any
person that pursuant to such Investment becomes a Wholly-Owned Subsidiary of
the Guarantor) and any person that is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to, the Guarantor
or any Wholly-Owned Subsidiary of the Guarantor at the time such Investment is
made; (ii) Investments in Cash Equivalents; (iii) Investments in Currency
Agreements
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on commercially reasonable terms entered into by the Guarantor or any of its
Restricted Subsidiaries in the ordinary course of business in connection with
the operations of the business of the Guarantor or its Restricted Subsidiaries
to hedge against fluctuations in foreign exchange rates; (iv) loans or
advances to officers, employees or consultants of the Guarantor and its
Restricted Subsidiaries for travel and moving expenses in the ordinary course
of business for bona fide business purposes of the Guarantor and its
Restricted Subsidiaries; (v) other loans or advances to officers, employees or
consultants of the Guarantor and its Restricted Subsidiaries in the ordinary
course of business for bona fide business purposes of the Guarantor and its
Restricted Subsidiaries not in excess of $10,000,000 in the aggregate at any
one time outstanding; (vi) Investments in evidences of Indebtedness,
securities or other property received from another person by the Guarantor or
any of its Restricted Subsidiaries in connection with any bankruptcy
proceeding or by reason of a composition or readjustment of debt or a
reorganization of such person or as a result of foreclosure, perfection or
enforcement of any Lien in exchange for evidences of Indebtedness, securities
or other property of such person held by the Guarantor or any of its
Restricted Subsidiaries, or for other liabilities or obligations of such other
person to the Guarantor or any of its Restricted Subsidiaries that were
created, in accordance with the terms of the Indenture; (vii) Investments in
Interest Rate Protection Agreements on commercially 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;
(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
(i) not delinquent or (ii) 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);
(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;
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(h) any Lien on any asset securing Indebtedness incurred or assumed for
the purpose of financing all or any part of the cost of acquiring or
constructing such asset; provided, that such Lien attaches to such asset
concurrently with or within 18 months after the acquisition or completion
thereof;
(i) any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Guarantor or a
Restricted Subsidiary and not created in contemplation of such event;
(j) any Lien existing on any asset prior to the acquisition thereof by
the Guarantor or a Restricted Subsidiary and not created in contemplation
of such acquisition; and
(k) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of customs duties in connection with the
importation of goods; and
(l) any extension, renewal or replacement of any Lien permitted by the
preceding clauses (g), (h), (i) or (j) hereof in respect of the same
property or assets theretofore subject to such Lien in connection with the
extension, renewal or refunding of the Indebtedness secured thereby;
provided that (1) such Lien shall attach solely to the same property or
assets and (2) such extension, renewal or refunding of such Indebtedness
shall be without increase in the principal remaining unpaid as at the date
of such extension, renewal or refunding.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
charitable foundation, unincorporated organization, government or any agency
or political subdivision thereof.
"Preferred Securities" means, with respect to a Special Finance Subsidiary,
any securities of such Subsidiary treated for accounting purposes as an equity
security that has preferential rights to any other security of such person
with respect to dividends or redemptions or upon liquidation.
"Preferred Stock" means, with respect to any person, any Capital Stock of
such person that has preferential rights to any other Capital Stock of such
person with respect to dividends or redemptions or upon liquidation and any
Preferred Securities.
"Redeemable Capital Stock" means any shares of any class or series of
Capital Stock, that, either by the terms thereof, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise, is
or upon the happening of an event or passage of time would be, required to be
redeemed prior to the Stated Maturity with respect to the principal of any
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.
"Restricted Subsidiary" means any Subsidiary of the Guarantor other than an
Unrestricted Subsidiary.
"Sale-Leaseback Transaction" of any person means an arrangement with any
lender or investor or to which such lender or investor is a party providing
for the leasing by such person of any property or asset of such person which
has been or is being sold or transferred by such person after the acquisition
thereof or the completion of construction or commencement of operation thereof
to such lender or investor or to any person to whom funds have been or are to
be advanced by such lender or investor on the security of such property or
asset. The stated maturity of such arrangement shall be the date of the last
payment of rent or any other amount due under such arrangement prior to the
first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"S&P" means Standard & Poor's Corporation, and its successors.
"Seller Financing Indebtedness" means a purchase money Indebtedness issued
to the seller of a business or other assets for, and not in excess of, the
purchase price thereof.
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"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 by such person and one
or more Subsidiaries thereof and (ii) any other person (other than a
corporation), including, without limitation, a joint venture, in which such
person, one or more Subsidiaries thereof or such person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other person
performing similar functions). For purposes of this definition, any directors'
qualifying shares or investments by foreign nationals mandated by applicable
law shall be disregarded in determining the ownership of a Subsidiary.
"Unrestricted Subsidiary" means (i) First Capital Life Insurance Company of
Louisiana, National Capital Life Insurance Company, Security Industrial
Insurance Company, Security Industrial Fire Insurance Company or any successor
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 described under "--Certain Covenants; Limitation on
Restricted Payments" above, (y) its properties and assets, to the extent that
they secure Indebtedness, secure only Non-Recourse Indebtedness and (z) it has
no Indebtedness other than Non-Recourse Indebtedness. As used above, "Non-
Recourse Indebtedness" means Indebtedness as to which (i) neither the
Guarantor nor any of its Subsidiaries (other than the relevant Unrestricted
Subsidiary or another Unrestricted Subsidiary) (1) provides credit support
(including any undertaking, agreement or instrument which would constitute
Indebtedness), (2) guarantees or is otherwise directly or indirectly liable or
(3) constitutes the lender (in each case, other than pursuant to and in
compliance with the covenant described under "--Certain Covenants; Limitation
on Restricted Payments") and (ii) no default with respect to such Indebtedness
(including any rights which the holders thereof may have to take enforcement
action against the relevant Unrestricted Subsidiary or its assets) would
permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Guarantor or its Subsidiaries (other than Unrestricted
Subsidiaries) to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect a least a majority of the board of directors, managers or trustees of
any person (irrespective of whether or not, at the time, Capital Stock of any
other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Wholly-Owned Subsidiary" means (i) any Restricted Subsidiary of the
Guarantor of which 100% of the outstanding Capital Stock is owned by the
Guarantor or one or more Wholly-Owned Subsidiaries of the Guarantor or by the
Guarantor and one or more Wholly-Owned Subsidiaries of the Guarantor,
including LGII, or (ii) any Subsidiary, at least 66 2/3% of the outstanding
voting securities of which, and all of the outstanding shares entitled to
receive dividends or other distributions of which, shall at the time be owned
or controlled, directly or indirectly, by the Guarantor or one or more Wholly-
Owned Subsidiaries of the Guarantor or by the
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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.
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DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS
LGII has a $750 million secured revolving credit facility that matures in
May 2001. Amounts borrowed under the 1996 Revolving Credit Facility accrue
interest at certain alternative rates selected by LGII. As at November 1,
1996, the amount outstanding under the 1996 Revolving Credit Facility was $94
million, and such outstanding amount bore interest at 8.25% per annum. In
addition, as at November 1, 1996, letters of credit in an aggregate amount of
approximately $38 million have been issued.
Loewen 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. As at
November 1, 1996, Loewen had borrowed Cdn.$45 million under the Canadian
Revolver. A subsidiary of Loewen has a $107.6 million secured term credit
facility implemented in connection with the 1994 Management Equity Investment
Plan that will terminate in July 2000 (the "MEIP Loan"), which also was
amended in July 1996 to modify certain covenants to parallel the New Bank
Facility. Loewen has a Cdn.$35 million five-year term credit facility with a
bank syndicate that will terminate in January 2000 (the "Canadian Term Loan").
As at November 1, 1996, LGII had outstanding an aggregate principal amount
of $350 million of Series 1 and 2 Notes. The Series 1 and 2 Notes are
guaranteed by Loewen and represent the same indebtedness that had been
represented by the Series 1 and 2 Initial Notes exchanged therefor.
As at November 1, 1996, LGII and Loewen had outstanding an aggregate of
$246.6 million of senior notes (the "Series A-E Notes"). The Series A-E Notes,
which consist of five series issued in 1991, 1993 and 1994, bear interest at
rates ranging from 6.49% to 9.93%, and have terms of seven to ten years. Each
series of Series A-E Notes issued by LGII is guaranteed by Loewen, and each
series of Series A-E Notes issued by Loewen is guaranteed by LGII.
On May 31, 1996, Loewen, LGII and their senior lenders entered into a
collateral trust arrangement pursuant to which the senior lenders share the
Collateral on a pari passu basis. The Collateral includes a pledge for the
benefit of the senior lenders of (i) the shares held by Loewen of
substantially all of the subsidiaries in which Loewen directly or indirectly
holds more than a 50% voting or economic interest and (ii) all of the
financial assets of LGII (LGII does not have material assets other than
financial assets), and is held by a trustee for the equal and ratable benefit
of the various holders of the Pari Passu Indebtedness, including the lenders
under the 1996 Revolving Credit Facility, the Canadian Revolver, the MEIP Loan
and the Canadian Term Loan, as well as the holders of the Series A-E Notes,
the Series 1 and 2 Notes and the Notes.
The 1996 Revolving Credit Facility and the credit facilities that comprise
the Pari Passu Indebtedness contain various covenants, including covenants
restricting payment of dividends on Common and Preferred Shares, limiting
redemption or repurchase of shares, limiting disposition of assets, limiting
the amount of additional debt, limiting the amount of capital expenditures and
requiring the maintenance of specified financial ratios. As at September 30,
1996, Loewen was in compliance with all such covenants that were in effect at
that time.
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission set forth in no
action letters issued to third-parties, LGII and Loewen believe that, except
as described below, Exchange Notes issued pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by respective holders
thereof without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that (i) such Exchange
Notes are acquired in the ordinary course of such holder's business and (ii)
such holder does not intend to participate in, has no arrangement or
understanding with any person to participate in, and is not engaged in and
does not intend to engage in, a distribution of the Exchange Notes. A holder
of Outstanding Notes that is an "affiliate" of LGII or Loewen within the
meaning of Rule 405 under the Securities Act or that is a broker-dealer that
purchased Outstanding Notes from LGII to resell pursuant to an exemption from
registration (a)
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cannot rely on such interpretations by the staff of the Commission, (b) will
not be permitted or entitled to tender such Outstanding Notes in the Exchange
Offer and (c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or transfer of
such Outstanding Notes. Any holder who tenders Outstanding Notes in the
Exchange Offer with the intention or for the purpose of participating in a
distribution of the Exchange Notes cannot rely on such interpretation by the
staff of the Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. Unless an exemption from registration is otherwise
available, any such resale transaction should be covered by an effective
registration statement containing the selling security holders information
required by Item 507 of Regulation S-K under the Securities Act. To date, the
staff of the Commission has taken the position that a broken-dealer that has
acquired securities in exchange for securities that were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (a "Participating Broker-Dealer") may fulfill its prospectus
delivery requirements with the prospectus contained in an exchange offer
registration statement. Pursuant to the Registration Rights Agreement, LGII
has agreed to permit Participating Broker-Dealers and other persons, if any,
subject to similar prospectus delivery requirements to use this Prospectus in
connection with the resale of such Exchange Notes. LGII and Loewen have agreed
that, for a period of 180 days after the Expiration Date, they will make this
Prospectus, and any amendment or supplement to this Prospectus, available to
any broker-dealer that requests such documents in the Letter of Transmittal.
Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make
certain representations to LGII as set forth in "The Exchange Offer--
Procedures for Tendering." In addition, each holder who is a broker-dealer and
who receives Exchange Notes for its own account in exchange for Outstanding
Notes that were acquired by it as a result of market-making activities or
other trading activities, will be required to acknowledge that it will deliver
a prospectus in connection with any resale by its of such Exchange Notes.
Neither LGII nor Loewen will receive any proceeds from the issuance of the
Exchange Notes. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange
Notes that were received by it for its own account in connection with the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act, and any profit on any such resale of Exchange Notes and
any commissions or concessions received by any such persons may be deemed to
be "underwriting compensation" under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
LGII has agreed to pay all expenses incidental to the Exchange Offer other
than commissions and concessions of any brokers or dealers and will indemnify
holders of the Outstanding Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Registration Rights Agreement.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is the opinion of Thelen, Marrin, Johnson & Bridges LLP,
United States counsel to LGII and Loewen, as to the material United States
federal income tax consequences generally applicable to a U.S. Holder (as
defined) that exchanges Outstanding Notes for Exchange Notes in the Exchange
Offer and that holds the Outstanding Notes, and will hold the Exchange Notes,
as capital assets. The opinion also describes the principal United States
federal income tax consequences expected to result from the holding of
Exchange Notes by certain Non-U.S. Holders (as defined).
The opinion reflects counsel's interpretation of the provisions of the
United States Internal Revenue Code of 1986, as amended (the "Tax Code"),
applicable Treasury regulations thereunder, judicial authority and
administrative rulings and practices now in effect, as applied to the proposed
transactions. There can be no assurance that the Internal Revenue Service will
not take a different position concerning the consequences of the Exchange
Offer or the ownership or disposition of Exchange Notes or that any such
position would not be sustained. Thus, future legislative, judicial or
administrative changes or interpretations, which may or may not be
retroactive, could produce United States tax consequences different from those
expressed in counsel's opinion. The opinion does not discuss all aspects of
federal income taxation that may be relevant to a particular holder in light
of the holder's particular investment circumstances, or to certain types of
holders subject to special treatment under the federal income tax laws (for
example, life insurance companies, tax-exempt entities and dealers in
securities) and does not discuss any aspect of state, local or foreign tax
laws.
As used in this opinion, the term "U.S. Holder" means a beneficial owner of
Notes that, for United States federal income tax purposes, is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, or (iii) an estate or trust the income of which
is subject to United States federal income taxation regardless of its source.
The term "Non-U.S. Holder" means a beneficial owner of Notes that, for United
States federal income tax purposes, is not a U.S. Holder.
TAX CONSEQUENCES TO U.S. HOLDERS
Exchange Offer
The exchange of the Outstanding Notes for Exchange Notes pursuant to the
Exchange Offer will not be treated as an "exchange" for federal income tax
purposes because the exchange will not result in a significant modification of
LGII's and Loewen's obligations to the holders. Rather, the Exchange Notes
received by a holder of the Outstanding Notes will be treated as a
continuation of the Outstanding Notes in the hands of such holder. As a
result, there will be no federal income tax consequences to holders exchanging
the Outstanding Notes for the Exchange Notes pursuant to the Exchange Offer.
Interest
Except as provided below in respect of certain Additional Interest (as
described below), a holder of a Note will be required to report stated
interest on the Note as interest income in accordance with the holder's method
of accounting for tax purposes.
Under the tax rules relating to original issue discount ("OID"), holders of
debt instruments issued at a discount that exceeds a nominal amount may be
required to recognize taxable interest income prior to the receipt of cash.
The Outstanding Notes were issued without taxable OID. In the case of an
instrument with alternative payment schedules, the Treasury Regulations
relating to OID permit the accrual of OID to be determined under the payment
schedule that is significantly more likely than not to occur, as determined by
the issuer, so long as the timing and amount of the payments under each
possible payment schedule are known as of the issue date. Under certain
circumstances, including failure of the Company to register the Exchange Notes
on a timely basis
72
<PAGE>
pursuant to an effective registration statement, additional interest (the
"Additional Interest") will accrue on the Notes as described in "Description
of Exchange Notes--Registration Rights Agreement." The possibility that
Additional Interest may accrue on the Notes may be considered to result in one
or more alternative payment schedules. The Company determined that it was
significantly more likely than not that the Notes would be paid according to
their stated schedule. Accordingly the Company did not take Additional
Interest into account in concluding that the original Notes were issued
without OID. In the event that Additional Interest becomes payable on the
Notes, the Company will be required to redetermine the OID, if any, on such
Notes by treating the Notes as it they were newly issued on the date that the
right to Additional Interest first accrues.
Tax Basis in Outstanding Notes and Exchange Notes
A holder's tax basis in a Note will be the holder's purchase price for the
Note, increased for OID, if any, previously included in income by the holder
with respect to the Notes and not yet paid. If a holder of an Outstanding Note
exchanges the Outstanding Note for an Exchange Note pursuant to the Exchange
Offer, the tax basis of the Exchange Note immediately after such exchange
should equal the holder's tax basis in the Outstanding Note immediately prior
to the Exchange.
Disposition of Outstanding Notes or Exchange Notes
The sale, exchange, redemption or other disposition of a Note will be a
taxable event, except in the case of an exchange pursuant to the Exchange
Offer (see the above discussion), or certain exchanges in which gain or loss
is not recognized under the Code. A holder will recognize gain or loss equal
to the difference between (i) the amount of cash (plus the fair market value
of any property) received upon such sale, exchange, redemption or other
taxable disposition of the Outstanding Note or the Exchange Note (except to
the extent attributable to accrued interest) and (ii) the holder's adjusted
tax basis in such Outstanding Note or Exchange Note. Such gain or loss will be
capital gain or loss, and will be long term if the Note has been held for more
than one year at the time of the sale or other disposition. The holding period
of an Exchange Note will include the holding period of the Outstanding Note
surrendered in exchange therefor.
Purchasers of Notes at Other than Original Issuance Price
The foregoing does not discuss special rules that may affect the treatment
of purchasers that acquire Notes other than at par, including those provisions
of the Internal Revenue Code relating to the treatment of "market discount,"
"bond premium" and "amortizable bond premium." Any such purchaser should
consult its tax advisor as to the consequences to it of the acquisition,
ownership, and disposition of Notes.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
In the case of a Non-U.S. Holder, such Non-U.S. Holder will not be subject
to U.S. federal income tax, including U.S. withholding tax, on interest paid
or OID (if any) on the Notes under the "portfolio interest" exception,
provided that (i) the Non-U.S. Holder does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of the
Company entitled to vote, (ii) the Non-U.S. Holder is not (a) a bank receiving
interest or OID pursuant to a loan agreement entered into in the ordinary
course of its trade or business or (b) a controlled foreign corporation that
is related to the Company through stock ownership, (iii) such interest or OID
is not effectively connected with a United States trade or business, and (iv)
either (a) the beneficial owner of the Notes certifies to the Company or its
agent, under penalties of perjury, that the beneficial owner is a foreign
person and provides a completed IRS Form W-8 ("Certificate of Foreign Status")
or (b) a securities clearing organization, bank or other financial institution
which holds customers' securities in the ordinary course of its trade or
business (a "financial institution") and holds the Notes, certifies to the
Company or its agency, under penalties of perjury, that it has received Form
W-8 from the beneficial owner or that it has received from another financial
institution a Form W-8 and furnishes the payor with a copy thereof. If any of
the situations described in proviso (i), (ii) or (iv) of the preceding
sentence do not exist, then, except as described below for effectively
connected income, interest paid and OID, if any, on the Notes would be subject
to U.S.
73
<PAGE>
withholding tax at a 30% rate (or lower tax treaty rate as evidenced by an IRS
Form 1001 (Ownership Exemption or Reduced Rate Certificate)). If the income on
the Notes is effectively connected with a Non-U.S. Holder's conduct of a trade
or business within the United States, then, absent tax treaty protection, the
Non-U.S. Holder will be subject to U.S. federal income tax on such income in
essentially the same manner as a United States person and, in the case of a
foreign corporation, may also be subject to the U.S. branch profits tax.
On April 15, 1996, the Internal Revenue Service issued proposed Treasury
regulations setting forth revised procedures for claiming the benefit of the
portfolio interest exemption and treaty withholding rate reductions. If these
rules, which are proposed to take effect in 1998, are adopted in their current
form, non-U.S. holders of the Notes could continue to claim the benefit of the
portfolio debt exemption by filing a Form W-8 with the issuer. Form W-8 would
also be used to claim the benefit of applicable tax treaty provisions. In
addition, the existing procedures under which financial institutions are
permitted to provide certifications of foreign status on behalf of their non-
U.S. customers would be continued and expanded.
BACKUP WITHHOLDING
Unless a holder provides its correct taxpayer identification number
(employer identification number or social security number) to the Company and
certifies that such number is correct, under the federal income tax backup
withholding rules, 31% of (i) the interest paid on the Notes, and (ii)
proceeds of sale of the Notes, must be withheld and remitted to the United
States Treasury. However, certain holders (including, among others, certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. For a foreign individual to qualify as an exempt foreign
recipient, that holder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt foreign status. A Form W-8
filed to claim the benefit of the portfolio interest exception is generally
sufficient to prevent backup withholding in the case of an exempt foreign
recipient.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to withholding will be
reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained from the IRS.
CERTAIN CANADIAN FEDERAL TAX CONSIDERATIONS
The following is the opinion of Russell & DuMoulin, Canadian counsel to LGII
and Loewen, as to the material Canadian federal income tax consequences
generally applicable to an individual who is resident in the United States and
not in Canada who exchanges Outstanding Notes for Exchange Notes pursuant to
the Exchange Offer.
This opinion is based upon the current provisions of the Income Tax Act of
Canada (the "Tax Act"), the regulations thereunder and on counsel's
understanding of the current administrative practices of Revenue Canada
Customs, Excise and Taxation. The provisions of the Tax Act are subject to
income tax treaties to which Canada is a party, including the Canada-U.S.
Income Tax Convention (1980) (the "Tax Treaty"). This discussion is general
only and is not a substitute for independent advice from each Note holder's
own tax advisor.
There will be no Canadian income tax consequences to a holder of Outstanding
Notes in connection with the exchange of the Outstanding Notes for Exchange
Notes pursuant to the Exchange Offer.
Interest income paid by LGII will not subject holders of Exchange Notes to
any Canadian income taxes or withholding taxes. However, any payments made by
Loewen to or for the benefit of the holders of Exchange Notes pursuant to the
Guarantees will be subject to Canadian withholding tax to the extent such
payments represent payments made as, on account or in lieu of payment of
interest. Under the Tax Act and the Tax Treaty, the rate of such Canadian
withholding tax would be 15%.
74
<PAGE>
LEGAL MATTERS
The validity of the Exchange Notes, certain matters of New York law relating
to the Guarantees and certain statements as to United States taxation in the
Prospectus will be passed upon for LGII and Loewen by Thelen, Marrin, Johnson
& Bridges LLP. The validity of the Guarantees and certain statements as to
Canadian taxation and as to enforceability of certain civil liabilities
against the Guarantor in the Prospectus will be passed upon for Loewen by
Russell & DuMoulin.
EXPERTS
The annual consolidated financial statements of the Company incorporated by
reference in this Prospectus have been audited by KPMG, Chartered Accountants,
for the periods indicated in its report thereon, which is incorporated herein
by reference. Such financial statements have been so incorporated in reliance
on such report given on the authority of KPMG as experts in accounting and
auditing.
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES AGAINST GUARANTOR
Loewen is a corporation organized under and governed by the laws of the
Province of British Columbia, Canada. Certain of its directors, controlling
persons, and officers are residents of Canada, and all or a portion of the
assets of such persons and of Loewen are located outside the United States. As
a result, it may be difficult or impossible for United States holders of the
Notes seeking to enforce the Guarantor's obligations under the Guarantees to
effect service within the United States upon Loewen (although it may be
possible to effect service upon direct or indirect United States subsidiaries
of Loewen) and those directors or officers who are not residents of the United
States, or to realize in the United States upon judgments of courts of the
United States predicated upon the civil liability of such persons under the
Securities Act or the Exchange Act, to the extent such judgments exceed such
person's United States assets. Loewen has been advised by Russell & DuMoulin,
its Canadian counsel, that there is doubt as to the enforceability in Canada
against any of these persons, in original actions or in actions for
enforcement of judgments of United States courts, of liabilities predicated
solely on the Securities Act or the Exchange Act.
75
<PAGE>
FINANCIAL STATEMENTS OF CERTAIN SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LOEWEN GROUP INTERNATIONAL, INC.
Audited Financial Statements
Report of KPMG, Chartered Accountants................................... F- 3
Consolidated Balance Sheets as of December 31, 1994 and 1995............ F- 4
Consolidated Statements of Operations and Retained Earnings (Deficit)
for the years ended December 31, 1993, December 31, 1994 and December
31, 1995............................................................... F- 5
Consolidated Statements of Changes in Financial Position for the years
ended December 31, 1993, December 31, 1994 and December 31, 1995....... F- 6
Notes to Consolidated Financial Statements.............................. F- 7
Unaudited Interim Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1995 and September 30,
1996 (Unaudited)....................................................... F-30
Consolidated Statements of Operations and Retained Earnings (Deficit)
(Unaudited) for the three months ended September 30, 1995 and 1996, and
for the nine months ended September 30, 1995 and 1996.................. F-31
Consolidated Statements of Changes in Financial Position (Unaudited) for
the nine months ended September 30, 1995 and 1996...................... F-32
Notes to Interim Consolidated Financial Statements (Unaudited).......... F-33
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
Audited Consolidated Financial Statements
Report of KPMG, Chartered Accountants................................... F-49
Consolidated Balance Sheets as of December 31, 1994 and 1995............ F-50
Consolidated Statements of Operations and Retained Earnings for the
years ended December 31, 1994 and 1995................................. F-51
Consolidated Statements of Cash Flows for the years ended December 31,
1994 and 1995.......................................................... F-52
Notes to Consolidated Financial Statements.............................. F-53
Unaudited Interim Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1995 and September 30,
1996 (Unaudited)....................................................... F-60
Consolidated Statements of Operations and Retained Earnings (Unaudited)
for the three months ended September 30, 1995 and 1996, and for the
nine months ended September 30, 1995 and 1996.......................... F-61
Consolidated Statements of Cash Flows (Unaudited) for the nine months
ended September 30, 1995 and 1996...................................... F-62
Notes to Interim Consolidated Financial Statements (Unaudited).......... F-63
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
Audited Financial Statements
Report of Peat Marwick, Chartered Accountants........................... F-71
Balance Sheets as of December 31, 1994 and 1995......................... F-72
Statements of Income and Retained Earnings for the eight month period
ended December 31, 1994 and the year ended December 31, 1995........... F-73
Statements of Cash Flows for the eight month period ended December 31,
1994 and the year ended December 31, 1995.............................. F-74
Notes to Financial Statements........................................... F-75
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY (CONTINUED)
Unaudited Interim Financial Statements
Balance Sheets as of December 31, 1995 and September 30, 1996
(Unaudited)............................................................ F-77
Statements of Income and Retained Earnings (Unaudited) for the three
months ended September 30, 1995 and 1996, and for the nine months ended
September 30, 1995 and 1996............................................ F-78
Statements of Cash Flows (Unaudited) for the nine months ended September
30, 1995 and 1996...................................................... F-79
Notes to Interim Financial Statements (Unaudited)....................... F-80
</TABLE>
Financial statements of LGII, Neweol Investments Ltd. and of Loewen Finance
(Wyoming) Limited Liability Company are included in this Prospectus because
the outstanding shares of each of such companies constitute a "substantial
portion" of the Collateral for the Notes within the meaning of Rule 3-10 of
Regulation S-X.
F-2
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
AUDITORS' REPORT TO THE DIRECTORS
We have audited the consolidated balance sheets of Loewen Group
International, Inc. as at December 31, 1995 and 1994 and the consolidated
statements of operations and retained earnings (deficit) and changes in
financial position for each of the years in the three year period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December
31, 1995 and 1994 and the results of its operations and the changes in its
financial position for each of the years in the three year period ended
December 31, 1995, in accordance with generally accepted accounting principles
in Canada.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
February 26, 1996, except as to Note 12(b), which is as of
March 19, 1996 and Note 21, which is as of
March 26, 1996.
F-3
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Current assets
Cash and term deposits................................ $ 38,722 $ 10,698
Receivables, net of allowances........................ 115,079 66,254
Inventories........................................... 24,393 16,586
Prepaid expenses...................................... 6,095 3,405
---------- ----------
184,289 96,943
Prearranged funeral services............................ 190,687 129,987
Long-term receivables, net of allowances................ 164,382 66,551
Investments............................................. 1,016 14,409
Insurance invested assets............................... 97,024 --
Cemetery property, at cost.............................. 356,022 108,123
Property and equipment.................................. 463,392 356,135
Names and reputations................................... 382,784 290,292
Deferred income taxes................................... 58,645 --
Other assets............................................ 62,473 33,256
---------- ----------
$1,960,714 $1,095,696
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current indebtedness.................................. $ 38,546 $ 3,700
Accrued settlements................................... 53,000 --
Accounts payable and accrued liabilities.............. 70,959 38,593
Long-term debt, current portion....................... 59,050 39,179
---------- ----------
221,555 81,472
Loans and advances from affiliates...................... 522,854 209,666
Long-term debt.......................................... 730,355 372,887
Other liabilities....................................... 95,103 46,339
Insurance policy liabilities............................ 82,710 --
Deferred income taxes................................... -- 10,542
Deferred prearranged funeral services revenue........... 190,687 129,987
Preferred securities of subsidiary...................... 75,000 75,000
Shareholders' equity
Share capital......................................... 127,196 127,196
Retained earnings (Deficit)........................... (84,746) 42,607
---------- ----------
42,450 169,803
---------- ----------
$1,960,714 $1,095,696
========== ==========
</TABLE>
Commitments and contingencies (Notes 8, 12, 14, and 18)
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
Revenue
Funeral..................................... $ 389,124 $ 303,488 $ 236,494
Cemetery.................................... 138,137 61,970 26,999
Insurance................................... 13,564 -- --
---------- --------- ---------
540,825 365,458 263,493
Costs and expenses
Funeral..................................... 232,038 181,662 145,342
Cemetery.................................... 99,387 47,157 20,823
Insurance................................... 10,533 -- --
---------- --------- ---------
341,958 228,819 166,165
---------- --------- ---------
198,867 136,639 97,328
Expenses
General and administrative.................. 88,177 27,431 19,629
Depreciation and amortization............... 34,975 24,818 18,237
---------- --------- ---------
123,152 52,249 37,866
---------- --------- ---------
Earnings from operations...................... 75,715 84,390 59,462
Interest and financing fees paid to
affiliates, net.............................. 38,885 36,462 19,422
Interest on long-term debt.................... 39,325 26,429 18,478
Litigation related finance costs.............. 18,929 -- --
Legal settlements............................. 164,800 -- --
---------- --------- ---------
Earnings (loss) before dividends on preferred
securities of subsidiary and income taxes.... (186,224) 21,499 21,562
Dividends on preferred securities of
subsidiary................................... 7,088 2,678 --
---------- --------- ---------
Earnings (loss) before income taxes........... (193,312) 18,821 21,562
Income taxes
Current..................................... 11,898 9,143 7,461
Deferred.................................... (17,600) 2,187 3,430
Legal settlements........................... (60,257) -- --
---------- --------- ---------
(65,959) 11,330 10,891
---------- --------- ---------
Net earnings (loss) for the year.............. $ (127,353) $ 7,491 $ 10,671
Retained earnings, beginning of year.......... $ 42,607 $ 35,116 $ 24,445
---------- --------- ---------
Retained earnings (Deficit), end of year...... $ (84,746) $ 42,607 $ 35,116
========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings (loss)......................... $(127,353) $ 7,491 $ 10,671
Items not affecting cash
Depreciation and amortization............. 34,975 24,818 18,237
Deferred income taxes..................... (77,857) 2,187 3,430
Other..................................... 14,563 3,192 2,010
Loans and advances from affiliates to be
advanced and debt to be issued under legal
settlements................................ 111,800 -- --
Net changes in other non-cash balances...... (4,290) (30,375) (14,731)
--------- --------- ---------
(48,162) 7,313 19,617
--------- --------- ---------
Investing
Business acquisitions....................... (457,648) (261,992) (147,336)
Construction of new facilities.............. (13,359) (9,512) (5,589)
Investments, net............................ 2,707 (497) 57
Purchase of property and equipment.......... (15,055) (11,372) (9,527)
Proceeds on disposition of assets........... 3,335 4,004 3,083
Proceeds on disposition of insurance
operations................................. -- (4,304) --
Proceeds on transfer of Puerto Rico
operations to parent company............... -- 19,836 --
Other....................................... (35,320) (21,894) (7,938)
--------- --------- ---------
(515,340) (285,731) (167,250)
--------- --------- ---------
Financing
Issue of share capital...................... -- -- 42,000
Issue of preferred securities of
subsidiary................................. -- 75,000 --
Increase in long-term debt.................. 359,261 167,662 71,711
Reduction in long-term debt................. (47,292) (6,605) (7,829)
Loans and advances from affiliates.......... 241,388 33,257 44,402
Current note payable........................ 38,546 -- --
Other....................................... 3,323 3,090 (153)
--------- --------- ---------
595,226 272,404 150,131
--------- --------- ---------
Increase (decrease) in cash and cash
equivalents during the year.................. 31,724 (6,014) 2,498
Cash and cash equivalents, beginning of year.. 6,998 13,012 10,514
--------- --------- ---------
Cash and cash equivalents, end of year........ $ 38,722 $ 6,998 $ 13,012
========= ========= =========
Cash and cash equivalents include
Cash and term deposits...................... $ 38,722 $ 10,698 $ 16,312
Bank indebtedness, included in current
indebtedness............................... -- (3,700) (3,300)
--------- --------- ---------
$ 38,722 $ 6,998 $ 13,012
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated on February 25, 1987 under the laws of the
State of Delaware and is directly and indirectly a wholly owned subsidiary of
The Loewen Group Inc. ("Parent Company"). 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 consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada and generally conform with
those established in the United States, except as explained in Note 22. These
consolidated financial statements require the use of management estimates.
Basis of consolidation
The accounts of all subsidiary companies have been included in the
consolidated financial statements from their respective dates of acquisition
of control or formation. All subsidiaries are wholly owned at December 31,
1995 except for a few companies with small minority interests.
All significant inter-company balances and transactions have been eliminated
in the consolidated financial statements.
Prearranged funeral services
Prearranged funeral services provide for future funeral services generally
determined by prices prevailing at the time the contract is signed. The
payments made under the contract are either placed in trust or are used to pay
the premiums of life insurance policies under which the Company will be
designated as beneficiary. Except for insurance commissions and amounts not
required to be trusted which are used to defray initial costs of
administration, no income is recognized until the performance of a specific
funeral.
Trust fund principal amounts and insurance contract amounts, together with
trust fund investment earnings retained in trust and annual insurance
benefits, are deferred until the service is performed. The Company estimates
that trust fund investment earnings and annual insurance benefits exceed the
increase in cost over time of providing the related services. Upon performance
of the specific funeral service, the Company will recognize the trust fund
principal amount or insurance contract amount together with the accumulated
trust earnings and annual insurance benefits as funeral revenues. Direct
obtaining costs related to the sale of prearranged funeral services are
included in other assets and amortized over a period of ten years,
approximating the period the benefits are expected to be realized. Deferred
obtaining costs net of accumulated amortization at December 31, 1995 amounted
to $24,599,000 (1994--$15,051,000). Indirect obtaining costs relating to the
sale of prearranged funeral services are expensed in the period incurred.
Cemetery operations
Pre-need sales of cemetery interment rights and other related products and
services are recorded as revenue when customer contracts are signed with
concurrent recognition of related costs. Allowances for customer cancellations
and refunds are provided at the date of sale based on management's estimates
of expected cancellations. Actual cancellation rates in the future may result
in a change in estimate.
A portion of the proceeds from cemetery sales is generally required by law
to be paid into perpetual or endowment care trust funds. Cemetery revenue is
recorded net of the amount to be deposited to perpetual or endowment care
trust funds. Earnings of perpetual or endowment care trust funds are used to
defray the maintenance costs of cemeteries. Additionally, pursuant to state
law, a portion of the proceeds from the sale of pre-need merchandise and
services may also be required to be paid into trust funds which are recorded
as long-term receivables.
F-7
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
Insurance Operations
(a) INSURANCE INVESTED ASSETS
Bonds and other fixed-term securities are carried at amortized cost. Net
realized gains and losses are deferred and amortized to income over the
remaining term to maturity of the security sold. Equity securities are carried
at moving average market value. Net realized gains and losses on the disposal
of equity securities are deferred and amortized to income on a declining
balance basis.
(b) INSURANCE POLICY LIABILITIES
Insurance policy liabilities represent an estimate of the amount which,
together with future premiums and investment income, will be sufficient to pay
future benefits, dividends and expenses on insurance and annuity contracts.
Liabilities are computed using the policy premium method which involves the
use of estimates concerning such factors as mortality and morbidity rates,
future investment yields, future expense levels and rates of surrender.
Consequently, policy liabilities include reasonable provisions for adverse
deviations from those estimates. These assumptions may be revised if it is
determined that future experience will differ substantially from that
previously assumed.
Inventories
Inventories are valued at the lower of cost, determined primarily on a
specific identification basis or a first in first out basis, and net
realizable value.
Property and equipment
Property and equipment is recorded initially at cost and depreciated on a
straight-line basis over the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings and improvements......................... 10 to 40 years
Automobiles........................................ 6 years
Furniture, fixtures and equipment.................. 6 to 10 years
Computer hardware and software..................... 6 to 10 years
Leasehold improvements............................. over the term of the
lease plus one renewal
</TABLE>
Names and reputations
The amount paid for the names and reputations of operations acquired is
equivalent to the excess of the purchase price over the fair value of
identifiable net assets acquired, as determined by management. Amortization is
provided on a straight-line basis over 40 years. The Company monitors the
recoverability of names and reputations, as well as other long-lived assets,
based on projections of future undiscounted operating income and cash flow of
acquired businesses.
Covenants not to compete included with names and reputations on the
consolidated balance sheet represent amounts prepaid under non-competition
agreements with certain key management personnel of acquired operations.
Amortization of such prepaid covenants not to compete is provided on a
straight-line basis over the terms of the relevant agreements, typically ten
years.
F-8
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
Deferred finance costs
Deferred finance costs included in other assets on the consolidated balance
sheet represent the costs of negotiating and securing the Company's long-term
debt and preferred securities of subsidiary and are being amortized to
earnings on a straight-line basis over the respective term of the related
debt. These costs include legal fees, accounting fees, underwriting and agency
fees and other related costs.
Acquisition costs
The Company's policy is to capitalize direct acquisition costs incurred on
potential acquisitions. Upon completion of an acquisition, these costs are
allocated to the assets acquired and are subject to the accounting policies
outlined above. On certain acquisitions, a portion of the consideration is
contingent upon future operating results. Such consideration, if any, is
allocated to the assets acquired once determinable. Direct acquisition costs
related to acquisitions not completed are written off.
Derivative instruments
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 enters into interest rate swap agreements to manage interest rate
exposure on its long-term debt. The difference between the amounts paid and
received is accrued and accounted for as an adjustment to interest expense
over the life of the swap agreement.
The Company uses basic swap and option products to manage its exposure to
interest rate movements when anticipated financing transactions are probable
and the significant characteristics and expected terms are identified. Any
gain or loss as a result of the hedging is deferred and amortized as an
adjustment to interest expense over the life of the financing instrument
hedged. If at any point in time, a hedging transaction no longer meets the
criteria of a hedge, any gain or loss is recognized in current earnings.
The Company also uses foreign exchange forward contracts, options and
futures to hedge the Company's exposure to fluctuations in foreign exchange
rates. Gains or losses as a result of the hedge transaction are accounted for
as an adjustment to the related transaction.
Deferred income taxes
The Company follows the allocation method for accounting for income taxes.
Under this method recognition is given in the financial statements to the tax
effects of timing differences between income for financial statement and
income tax purposes. The differences arise primarily from provisions for legal
settlements and related costs, inter-company charges, depreciation,
amortization, deferred finance costs, direct marketing costs, provision for
bad debts and installment cemetery sales.
Recent accounting standards
Effective September, 1995, the Canadian Institute of Chartered Accountants
issued a pronouncement, "Financial Instruments", which prescribes certain
requirements for presentation of recognized financial instruments and
identifies the information to be disclosed about both recognized and
unrecognized financial instruments. The Company adopted this pronouncement
effective for 1995.
F-9
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
NOTE 2. CHANGES IN ACCOUNTING POLICY
During the year ended December 31, 1994, the Company changed its revenue
recognition policy with regard to pre-need sales of cemetery interment rights
and other related products. Previously revenue was recognized in accordance
with principles prescribed for sales of real estate.
NOTE 3. ACQUISITIONS
During the year ended December 31, 1995, the Company acquired 170 funeral
homes and 61 cemeteries. Included in these acquisitions is the purchase of all
of the outstanding shares of Osiris Holding Corporation
("Osiris") of Philadelphia, Pennsylvania on March 17, 1995, for approximately
$103,800,000, plus $35,260,000 representing the net present value of total
contingent payments of approximately $42,000,000 which the Company expects to
be payable over a six year period to the former shareholders of Osiris, two of
whom are officers of the Company, contingent on attaining certain performance
criteria. Prior to acquisition, Osiris operated 22 cemeteries, four funeral
home/cemetery combinations and one funeral home, all located in the United
States.
During the year ended December 31, 1994, the Company acquired 105 funeral
homes and 46 cemeteries in the United States.
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 as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Current assets.............................................. $ 15,630 $ 7,681
Prearranged funeral services................................ 61,114 21,686
Long-term receivables, net of allowances.................... 82,103 12,019
Investments................................................. 9,500 13,483
Cemetery property, at cost.................................. 251,857 58,523
Property and equipment...................................... 84,138 70,071
Names and reputations....................................... 98,497 124,442
Other assets................................................ 8,140 834
-------- --------
610,979 308,739
Current liabilities......................................... (15,556) (6,703)
Long-term debt.............................................. (10,087) (2,322)
Other liabilities........................................... (58,603) (14,820)
Deferred income taxes....................................... (7,971) (1,216)
Deferred prearranged funeral services revenue............... (61,114) (21,686)
-------- --------
$457,648 $261,992
======== ========
Consideration
Cash and debt, including assumed debt repaid at closing... $446,752 $259,905
Share capital of parent company........................... 10,896 2,087
-------- --------
Purchase Price.............................................. $457,648 $261,992
======== ========
</TABLE>
The following table reflects, on an unaudited pro-forma basis, the combined
results of the Company's operations acquired during the period ended December
31, 1995 as if all such acquisitions had taken place at the
F-10
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
beginning of the respective years 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 years presented, and is not intended to be a projection of future
results or trends.
<TABLE>
<CAPTION>
1995 1994
--------- --------
<S> <C> <C>
Revenues.................................................... $ 621,080 $518,076
Net earnings (loss)......................................... $(130,659) $ 6,062
</TABLE>
NOTE 4. PREARRANGED FUNERAL SERVICES
Included in the consolidated balance sheets at December 31, 1995, as
prearranged funeral services is $190,687,000 (1994--$129,987,000),
representing amounts deposited in accordance with state trusting laws with
various financial institutions together with accrued earnings. The Company
will receive the prearranged funeral trust amounts when the funeral services
are performed.
Amounts held in Prearranged funeral trusts
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Short-term investments..................................... $ 60,863 $ 41,473
Fixed maturities........................................... 98,919 59,694
Balanced mutual funds...................................... 26,589 26,429
Equity securities.......................................... 3,257 1,845
Other...................................................... 1,059 546
--------- ---------
$ 190,687 $ 129,987
========= =========
</TABLE>
As at December 31, 1995, total prearranged funeral trust assets were
approximately equal to market value. The weighted average rate of return on
the above prearranged funeral trust assets for the year ended December 31,
1995 was 4.9% (1994--4.9%).
NOTE 5. INVESTMENTS
<TABLE>
<CAPTION>
1995 1994
------- --------
<S> <C> <C>
(A) SUBSIDIARY HELD FOR RESALE
In 1994, the Company acquired a life insurance subsidiary
with the intent that it be sold. This investment was
carried at cost until June 30, 1995. Following the
Company's decision to retain this subsidiary and acquire
additional insurance operations, this subsidiary has been
accounted for on the consolidation basis effective July
1, 1995.................................................. -- 13,483
(B) OTHER, AT COST.......................................... 1,016 926
------- --------
$ 1,016 $ 14,409
======= ========
</TABLE>
F-11
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
NOTE 6. INSURANCE INVESTED ASSETS
<TABLE>
<CAPTION>
1995
------------------
CARRYING MARKET
VALUE VALUE
-------- ---------
<S> <C> <C>
Fixed maturities............................................ $ 78,895 $ 81,266
Equity securities........................................... 4,737 5,342
Short-term investments and other............................ 13,392 13,439
-------- ---------
$ 97,024 $ 100,047
======== =========
</TABLE>
The Company had $3,348,000 and $325,000 of unrealized gains and losses,
respectively, on these investments at December 31, 1995.
Maturities of fixed maturity securities, excluding mortgage-backed
securities and collateralized mortgage obligations, are estimated as follows:
$5,000,000 due in one year or less, $8,000,000 due in one to five years,
$21,000,000 due in five to ten years, and $13,000,000 due after ten years.
Maturities on an amortized cost basis are approximately the same as the market
value basis at December 31, 1995. The Company had approximately $32,000,000 in
mortgage-backed securities and collateralized mortgage obligations at December
31, 1995.
NOTE 7. LOANS AND ADVANCES FROM (TO) AFFILIATES
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Term loan from affiliated company
Interest at 9.83% due August 15, 1999.................... $206,000 $206,000
Term loan from affiliated company
Interest at 10.01% due August 15, 1999................... 199,650 --
Revolving credit loans from affiliated companies
Interest at prime plus 2% due in 1999.................... 35,351 40,529
Other demand loans from/(to) affiliates
Non-interest bearing and due on demand................... (1,866) 143
-------- --------
439,135 246,672
Demand loan to be advanced from parent company under legal
settlements.............................................. 71,800 --
Demand loan from/(to) parent company...................... 11,919 (37,006)
-------- --------
$522,854 $209,666
======== ========
</TABLE>
F-12
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
NOTE 8. LONG-TERM DEBT
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Senior guaranteed notes (unsecured)
$75,000,000 (1994 -- $100,000,000) Series A 9.70% due November 1, 1998
$42,850,000 (1994 -- $ 50,000,000) Series B 9.93% due November 1, 2001
$50,000,000 (1994 -- $ 50,000,000) Series E 6.49% due February 25, 2004
Repayment commenced November 1, 1995 for Series A and B, and February 25, 1998
for Series E in equal annual amounts to the respective due dates......................... $167,850 $200,000
Bank term credit facility bearing interest at floating rates, repayable July 15,
2000 and secured by Senior Exchangeable Debentures......................................... 116,007 121,286
Multicurrency revolving term credit facility (unsecured) of up to $400,000,000
(1994--$200,000,000) bearing interest at floating rates, repayable May 11, 2000,
see Note 8(a) and 21(b).................................................................... 348,000 46,000
Present value of amounts due under legal settlements discounted at an effective
interest rate of 7.75%, see Note 12(a)..................................................... 40,000 --
Present value of contingent consideration due to former shareholders of Osiris
discounted at an effective interest rate of 8.0%, see Note 3............................... 35,260 --
Other, principally arising from vendor financing of acquired operations or long-term
debt assumed on acquisition, bearing interest at fixed and floating rates varying
from 4.8% to 12.0%, certain of which are secured by assets of certain subsidiaries......... 82,288 44,780
-------- --------
789,405 412,066
Less current portion......................................................................... 59,050 39,179
-------- --------
$730,355 $372,887
======== ========
</TABLE>
(a) Certain of the above loan agreements contain various restrictive provisions,
including restricting payment by the Parent Company of dividends on Common
and Preferred shares, limiting redemption or repurchase by the Parent
Company of it's shares, limiting disposition of assets, limiting the amount
of additional debt, limiting the amount of capital expenditures and
maintaining specified financial ratios of the parent company and it's
subsidiaries.
A number of waivers have been granted by the Company's lenders. The waivers
have principally been obtained in connection with the Gulf National award
and settlement. The lenders under the Company's credit facilities have
granted waivers and amendments to take into account the effect of the Gulf
National and Provident settlements on the Company's financial results for
the year ended December 31, 1995. In addition, the lenders approved an
amendment of the multicurrency revolving term credit facility ("multi-
currency revolver") to include certain mandatory payments and conditions
on further borrowings. The waivers and amendments of the multicurrency
revolver and the five year bank term loan also provide that the Company will
grant security over all the assets of the Company, see Note 21(b).
(b) The Company also has a $100,000,000 short-term multicurrency revolving
credit facility maturing May 1996, with the lenders of the $400,000,000
multicurrency revolving facility. No balance was outstanding under this
facility at December 31, 1995, see Note 21(b).
(c) The Company incurred and paid approximately $42,000,000 of interest to
third parties during 1995, of which approximately $2,600,000 was
capitalized as cost of construction or development of cemetery property.
(d) 4,250,000 Common shares of the parent company were reserved upon adoption
by the parent company of the 1994 Management Equity Investment Plan (MEIP)
on June 15, 1994. Senior Exchangeable Debentures amounting to $127,670,000
were issued by the Company to a wholly-owned subsidiary formed to act as
F-13
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
agent for the MEIP. The Debentures are due July 15, 2001 and bear interest
at floating rates. Each $300.40 of principal amount of Debentures will be
exchangeable for one Convertible First Preferred share, Series B of the
Parent Company, each of which will be convertible into ten Common shares of
the Parent Company. As part of the MEIP, the present participants paid
$3,827,023 (1994--$3,890,000) for option rights to acquire $77,052,600
(1994--$77,804,000) of Debentures exercisable as to 50% in 1999, 25% in
2000 and 25% in 2001, of which $751,000 was paid by the Chairman of the
Company. If an option expires unexercised, the participant will receive a
refund without interest of the amount paid to acquire such option right. In
addition, the Chairman paid $2,253,000 for the right and obligation to
acquire $45,060,000 of Debentures with the same exercise dates.
(e) Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
1996............................................................. $ 59,050
1997............................................................. 51,903
1998............................................................. 52,812
1999............................................................. 29,133
2000............................................................. 500,396
Thereafter....................................................... 96,111
--------
$789,405
========
</TABLE>
NOTE 9. 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 the Company as its
general partner manages its business and affairs.
The MIPS are due August 31, 2024 and are subject to redemption at par at the
option of LGC, in whole or in part, from time to time, on or after August 31,
2004.
Holders of the MIPS will be entitled to receive cumulative dividends at an
annual rate of 9.45% of the liquidation preference of U.S. $25 per MIPS. The
dividends accrue from the date of original issuance and are payable monthly in
arrears.
The Company has the right to defer payment of dividends on the MIPS for one
or more periods, each not to exceed 60 consecutive months. In this event the
Parent Company may not declare or pay dividends on, or redeem, purchase or
acquire or make a liquidation payment with respect to any class of its capital
stock.
The Parent Company has guaranteed certain payment obligations of the Company
to LGC and of LGC to the MIPS holders. The guarantees are subordinated to all
liabilities of the Parent Company and are unsecured.
F-14
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
NOTE 10. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FAIR VALUE OF
FINANCIAL INSTRUMENTS
The Company's policy is not to use derivative instruments for speculation.
The Company does not trade in financial instruments and is not a party to
leveraged derivatives.
(a) SWAP AGREEMENTS AND INTEREST RATE OPTIONS
The Company has entered into swap agreements and interest rate options with
a number of different commercial banks and financial institutions to manage
its interest rate exposure on fixed rate long-term debt. At December 31, 1995,
such agreements included:
(1) An interest rate swap agreement with a commercial bank, having a
notional principal amount of $50,000,000 in which the Company will pay a
floating Libor based rate determined semi-annually (5.750% at December 31,
1995) and receive a fixed rate of 7.170%. The Company has entered into a
forward rate agreement with the same commercial bank, having a notional
principal amount of $50,000,000 in which the Company will receive a
floating Libor based rate determined on the same days as the original
interest rate swap agreement and pay a fixed rate of 5.705%. After
offsetting, the Company will receive a fixed rate of 1.465% under the
agreement expiring November 1996.
(2) Three interest rate swap agreements with commercial banks and financial
institutions, each having a notional principal amount of $25,000,000. The
Company will receive floating Libor based rates determined quarterly
(5.813%, 5.938% and 5.813% at December 31, 1995) and will pay fixed rates
of 5.755%, 6.200% and 6.190% under the agreements expiring June 1999, June
2000 and June 2001, respectively.
The Company is exposed to a credit loss in the event of non-performance by
the other parties to the interest rate swap agreements. However, the Company
does not anticipate non-performance by the counterparties.
F-15
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
(b) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, receivables, prearranged
funeral trust assets, current indebtedness, accrued settlements and accounts
payable and accrued liabilities approximates fair value due to the short-term
maturities of these instruments. Financial instruments with a carrying value
different from their fair value include:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------ -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(1) Financial assets
Insurance invested assets............. $ 97,024 $100,047 $ -- $ --
Investments
Practicable to estimate fair value.. $ 922 $ 922 $ -- $ --
Not practicable..................... 94 -- 14,409 --
Long-term receivables
Practicable to estimate fair value.. $ 84,126 $ 86,701 $ 12,614 $ 12,364
Not practicable..................... 80,256 -- 53,937 --
(2) Financial liabilities
Loans and advances from affiliate..... $522,854 $544,390 $209,666 $202,322
Long-term debt........................ $789,405 $801,829 $412,066 $409,175
Preferred securities of subsidiary.... $ 75,000 $ 70,125 $ 75,000 $ 74,250
(3) Derivative instruments (net
receivable/(payable))
Swap agreements....................... $ 88 $ (1,092) $ 64 $ 643
Futures contracts..................... $ (1,533) $ (1,533) $ -- $ --
</TABLE>
The fair value of certain investments and long-term receivables are
estimated based on quoted market prices. For certain long-term receivables,
fair value is estimated by discounting the future cash flows, including
interest payments, using rates currently available for investments of similar
terms and maturity. The long-term receivables for which it is not practicable
to estimate fair value comprise primarily installment receivables on cemetery
sales, which generally have terms of three to five years and bear interest
ranging from 8% to 15%.
The fair value of loans and advances from affiliates and long-term debt
subject to fixed interest rates is estimated by discounting the future cash
flows, including interest payments, using rates currently available for debt
of similar terms and maturity, based on the Company's credit standing and
other market factors. The fair value of loans and advances from affiliates and
long-term debt, subject to floating market rates, approximate their carrying
values. The fair value of the preferred securities of a subsidiary is
estimated based upon quoted market prices.
The fair value of the swap agreements is the estimated amount the
counterparty would receive or pay to hypothetically terminate or exchange the
agreements based on market factors. The fair value of futures contracts are
estimated based on quoted market prices. The fair value of futures contracts
represents the cost to close out the position.
(C) HEDGES OF ANTICIPATED TRANSACTIONS
During the year the Company hedged the interest rate risk of anticipated
transactions by entering into several interest rate agreements and selling
short treasury bonds and treasury note futures contracts. The Company
cancelled the anticipated transactions as a result of the Gulf National
litigation and wrote off
F-16
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
$6,400,000 of realized and $1,500,000 of unrealized losses on derivative
contracts intended to hedge. As at December 31, 1995, the Company sold short
577 March treasury note futures contracts with a notional amount of
$57,700,000. The unrealized loss at December 31, 1995, was accrued when the
Company abandoned the anticipated transaction as a result of the Gulf National
award.
NOTE 11. SHARE CAPITAL
(a) Authorized
3,000 Common shares with a par value of $0.01
(b) Issued and outstanding
<TABLE>
<CAPTION>
NUMBER OF
SHARES STATED VALUE
----------- -------------------------
1995 1994 1995 1994
----- ----- ------------ ------------
<S> <C> <C> <C> <C>
Common shares............................. 1,091 1,091 $ 11 $ 11
Contributed surplus....................... 127,195,603 127,195,603
------------ ------------
$127,195,614 $127,195,614
============ ============
</TABLE>
NOTE 12. LEGAL SETTLEMENTS
(a) Gulf National
In November 1995, a jury in the Circuit Court of the First Judicial District
of Hinds County, Mississippi, awarded J.J. O'Keefe, Sr., Gulf National
Insurance Company and certain affiliates (collectively, "Gulf National")
$100,000,000 in compensatory damages and $400,000,000 in punitive damages (the
"Gulf National award") in a lawsuit against the Parent Company, the Company
and two subsidiaries (the "Company Defendants") in which Gulf National claimed
breach of contract and related torts in connection with its allegations that
the Company failed to consummate certain business transactions. The Company
Defendants appealed the Gulf National award. On January 24, 1996, the
Mississippi Supreme Court ruled that in order to stay execution of the Gulf
National award pending the appeal thereof, the Company Defendants would be
required to post a supersedeas bond with the Circuit Court in an amount equal
to 125% of the judgment, or $625,000,000.
On February 1, 1996, the Company Defendants and Gulf National executed a
settlement agreement (the "Gulf National settlement") pursuant to which, among
other things, the parties entered into a full mutual release of all claims
against each other, and the Company Defendants agreed to deliver to Gulf
National or its designees $50,000,000 in cash, 1,500,000 Common shares of the
parent company (the "Gulf National Settlement Shares") and a promissory note
in the amount of $80,000,000 payable over 20 years in equal annual
installments of $4,000,000, without interest. In connection with the Gulf
National settlement, on February 9, 1996, the parent company, the Company,
Gulf National and various individuals and law firms that represented Gulf
National (collectively, the "Gulf National Shareholders") entered into an
agreement with respect to the Gulf National Settlement Shares (the
"Shareholders' Agreement"), pursuant to which, among other things, the Parent
Company agreed to file by September 1, 1996 a registration statement relating
to the Gulf National Settlement Shares with the Securities and Exchange
Commission (the "Commission") and to have such registration statement declared
effective by December 31, 1996. The Company also has agreed to pay to each
Gulf National Shareholder, upon due notice ("Notice") a per share price
guarantee amount in certain circumstances. The per share price guarantee
amount is equal to the amount, if any, by which $30 exceeds the weighted
average trading
F-17
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
price of the Common shares for the five consecutive trading days preceding the
date of Notice. The Company may elect to pay the aggregate price guarantee in
Common shares or cash. Notice may be delivered, and the Company is required to
pay the price guarantee, only with respect to a specified period commencing
February 14, 1997 (the "Determination Period"). The Company is relieved of its
obligation to make such payment if during the Determination Period the trading
price of the Common shares exceeds $30 for any five consecutive trading days,
provided that the registration statement has become effective before the
Determination Period or the Gulf National Shareholders have otherwise had an
opportunity to sell their Gulf National Settlement Shares during the
Determination Period. The Gulf National Shareholders have granted to the
Parent Company or its assignee a right of first refusal with respect to the
Gulf National Settlement Shares and have agreed, until February 9, 1998, to
vote the Gulf National Settlement Shares in accordance with the
recommendations of the Board of Directors of the Parent Company. The right of
first refusal does not apply in respect of any offers and sales at prices of
$30 or more per Common share during the Determination Period.
The Company has recorded a charge against its 1995 earnings in the amount of
$134,800,000 before taxes of $49,457,000 to account for the Gulf National
settlement. This amount represents the cash portion, the present value of the
non-interest bearing promissory note and the guaranteed value of Common shares
of the Parent Company to be issued.
(b) Provident Settlement
In 1992, Provident American Corporation and a subsidiary (collectively,
"Provident") filed a lawsuit against the Parent Company and the Company in the
United States District Court for the Eastern District of Pennsylvania alleging
breach of contract and related tort claims arising out of terminated
negotiations concerning a possible pre-need funeral insurance marketing
arrangement. The complaint requested compensatory damages in excess of $58.8
million and unspecified punitive damages, based on allegations that the loss
of the Parent Company's pre-need business had deprived the plaintiffs of
aggregate future profits of approximately $58,800,000 to $132,000,000.
On February 12, 1996, the Parent Company, the Company and Provident agreed
to settle the underlying litigation. On March 19, 1996, the parties signed a
formal settlement agreement (the "Provident settlement") and the Company
delivered $3,000,000 in cash to Provident and one million Common shares of the
Parent Company (the "Provident Settlement Shares") to Provident and a law firm
that represented Provident in the litigation (the "Provident Shareholders").
The Parent Company also agreed to file a registration statement relating to
the Provident Settlement Shares with the Commission by June 30, 1996, and the
Company agreed to pay to the Provident Shareholders for each Provident
Settlement Share, in cash or Common Shares, at the Company's election, the
amount, if any, by which $27 exceeds the weighted average trading price of the
Common Shares during the five consecutive trading days ending on the day
before the registration statement is declared effective. In addition,
Provident, the Parent Company and the Company entered into a full mutual
release of each other and affiliated entities.
The Company has recorded a charge against its 1995 earnings in the amount of
$30,000,000 before taxes of $10,800,000 to account for the Provident
settlement. The value assigned to the share portion is based on the guaranteed
share price.
F-18
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
NOTE 13. LITIGATION RELATED FINANCE COSTS
The Company has recorded a charge of $18,929,000 against its 1995 earnings
for finance costs as a result of litigation during 1995.
The litigation related finance costs included (i) approximately $7,100,000
for the costs of a letter of credit used in support of the supersedeas bond in
connection with the Gulf National award and which letter of credit
outstanding at December 31, 1995, was cancelled as a result of the Gulf
National settlement, (ii) approximately $3,900,000 for the costs incurred and
deferred costs written off in connection with waivers and amendments to the
Company's bank facilities as a result of the Gulf National award and
settlement, and (iii) approximately $7,900,000, see Note 10(b), for the costs
related to terminating the hedges of anticipated debt transactions cancelled
as a result of the Gulf National award.
NOTE 14. COMMITMENTS AND CONTINGENCIES
(a) Leases
At December 31, 1995, the Company was committed to operating lease payments
for premises, automobiles and office equipment in the following approximate
amounts:
<TABLE>
<CAPTION>
TOTAL
-------
<S> <C>
1996.............................................................. $ 7,506
1997.............................................................. 7,383
1998.............................................................. 6,424
1999.............................................................. 5,474
2000.............................................................. 4,761
Thereafter........................................................ 21,620
</TABLE>
Total rent expense for the year ended December 31, 1995 was $9,011,000
(1994--$8,536,000) (1993--$5,877,000).
(b) Covenants not to compete
In connection with various acquisitions, the Company has entered into non-
competition agreements ("covenants not to compete") with certain key
management personnel of operations acquired. The Company's payments under the
agreements may be made variously at closing or over future periods and are
expensed over the terms of the specific contracts. At December 31, 1995, the
agreements in place will result in future payments in the following
approximate amounts:
<TABLE>
<CAPTION>
TOTAL
--------
<S> <C>
1996............................................................. $ 14,533
1997............................................................. 14,725
1998............................................................. 13,771
1999............................................................. 12,624
2000............................................................. 13,083
Thereafter....................................................... 42,458
</TABLE>
F-19
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
(c) Litigation
SHAREHOLDER SUITS
On November 4, 1995, a class action lawsuit claiming violations of Federal
securities laws was filed on behalf of a class of purchasers of the Parent
Company's securities against the Parent Company and five officers, (four of
whom are directors), in the United States District Court for Eastern District
of Pennsylvania. The Company, LGC and the lead underwriters of the offering of
Monthly Income Preferred Securities ("MIPS") by LGC, were subsequently added
as defendants. The underwriters have indicated they will seek indemnity from
the Parent Company. On November 7, 1995, a class action lawsuit was filed on
behalf of a class of purchasers of the Parent Company's Common Shares against
the Parent Company and the same individual defendants in the United States
District Court for Southern District of Mississippi alleging Federal
securities law violations and related common law claims. On December 1, 1995,
a class action lawsuit was filed on behalf of a class of purchasers of the
Parent Company's securities against the Parent Company, the Company, LGC and
the same individual defendants in the United States District Court of the
Eastern District of Pennsylvania. All suits allege that the defendants failed
to disclose its anticipated liability in connection with the Gulf National
litigation and the Pennsylvania suits allege failure to disclose the potential
liability in connection with the Provident litigation. In each of the
foregoing claims, the plaintiffs seek compensatory money damages in an
unspecified amount, together with attorneys fees, expert fees and other costs
and disbursements and in addition, the November 7 action seeks unspecified
punitive damages. The longest class period specified is from April 16, 1993 to
November 1, 1995. Defendants in all three suits have petitioned the Judicial
Panel on Multidistrict Litigation to transfer and consolidate the three suits
in the Southern District of New York. A hearing of the defendants' petition
has been set for March 28, 1996. Pending the outcome of this hearing, the
three suits have been stayed. The Parent Company referred the claims to its
insurance carrier under its directors and officers insurance policy. On
February 9, 1996, the carrier denied coverage of the claim. There is no
coverage for the Company's or the Parent Company's liability (other than with
respect to indemnification of directors and officers) and defense under such
policy. The Company cannot predict at this time the extent to which any
settlement or litigation that may result from the claims will ultimately be
covered by insurance, if at all. The Company has determined that it is not
possible to predict the final outcome of these legal proceedings and that it
is not possible to establish a reasonable estimate of possible damages, if
any, or reasonably to estimate the range of possible damages that may be
awarded to the plaintiffs. Accordingly, no provision has been made in the
consolidated financial statements.
ROE ET AL
On October 25, 1995, Roe and 22 other plaintiffs filed a lawsuit against the
Company and Osiris in Florida Circuit Court in St. Petersburg, Florida. The
complaint, as amended to include a total of 42 families, alleges that in July
1992, employees of the Royal Palm Cemetery facility who were installing a
sprinkler line disturbed the remains in one section of the cemetery. Each
plaintiff is seeking damages in excess of $15,000 but counsel for the
plaintiffs has publicly stated that the claims will aggregate $42,000,000
($1,000,000 per family in the amended complaint). The Royal Palm Cemetery was
owned by Osiris, which was acquired by the Company in March 1995. The
insurance carrier for Osiris has assumed defence of these claims, subject to a
reservation of rights. The policy limit is $11,000,000. No provision has been
made for this lawsuit in the consolidated financial statements.
F-20
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
ROJAS ET AL
On February 22, 1995, Juan Rivera Rojas, Leyda Rivera Vega, the Conjugal
Partnership constituted between them, and Carlos Rivera Bustamante instituted
a legal action against the Parent Company, the Company 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 Rico
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. 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 to predict the final outcome of these legal proceedings and that it
is not possible to establish a reasonable estimate of possible damages, if
any, or reasonably to estimate the range of possible damages that may be
awarded to the plaintiffs. Accordingly, no provision has been made in the
consolidated financial statements.
OTHER
The Company is a party to other legal proceedings in the ordinary course of
its business but does not expect the outcome of any such proceedings to have a
material adverse affect on the Company's financial condition.
NOTE 15. RETIREMENT PLAN
The Company has a defined contribution retirement plan covering
substantially all employees. There are no required future contributions under
this plan in respect of past service.
The total expense for the retirement plan for the year ended December 31,
1995 was $1,514,000 (1994--$862,000).
NOTE 16. INCOME TAXES
The Company's effective income tax rate is derived as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ---- ----
% % %
<S> <C> <C> <C>
Combined United States federal and state income tax rate..... (39.7) 40.1 39.8
Tax benefits of legal settlements at lower rates............. 2.3 -- --
Non-deductible depreciation and amortization arising from
acquisitions................................................ 2.2 15.5 9.1
Other........................................................ 1.1 4.6 1.6
----- ---- ----
(34.1) 60.2 50.5
===== ==== ====
</TABLE>
F-21
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
NOTE 17. CHANGES IN OTHER NON-CASH BALANCES
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
(Increase) decrease in assets
Receivables, net of allowances.............. $ (22,595) $ (17,735) $ (10,379)
Inventories................................. (2,155) (182) (1,089)
Prepaid expenses............................ (1,702) 2,242 (1,628)
Amounts receivable from cemetery merchandise
trusts..................................... (11,206) (2,756) (1,170)
Installment contracts, net of allowances.... (23,353) (16,684) (4,305)
Insurance invested assets................... (6,917) -- --
Deferred charges............................ (11,786) (11,532) (1,511)
Increase (decrease) in liabilities
Accrued settlements......................... 53,000 -- --
Accounts payable and accrued liabilities.... 11,155 4,821 706
Cemetery long-term liabilities.............. 8,132 11,697 4,645
Insurance policy liabilities................ 3,033 -- --
Other changes in non-cash balances............ 104 (246) --
--------- --------- ---------
$ (4,290) $ (30,375) $ (14,731)
========= ========= =========
</TABLE>
NOTE 18. RELATED PARTIES
As part of the normal course of operations, the Company charters a jet
aircraft, a motor vessel and a helicopter at competitive market rates from
companies with which the Chairman of the Company is associated.
For the year ended December 31, 1995, the total cost of the charters amounted
to $1,051,389 (1994--$786,000), of which $108,924 (1994--$42,000), remains
outstanding at the year end.
Under agreement, certain costs are shared with related parties. During the
year, the Company was charged management fees by the Parent Company for
recovery of salary and overhead expenses. The total amount charged to general
and administrative expenses during the year was approximately $34,500,000
(1994--$3,661,000). Included in the total charge was approximately $23,250,000
related to the recovery of expenses for the years 1990 to 1994.
The Company has guaranteed indebtedness of participants of the 1994
Management Equity Investment Plan totaling approximately $3,500,000, see Note
8 (d).
During the fiscal year ended December 31, 1995, the Company paid
approximately $5,400,000 for insurance and other services to a related
company.
F-22
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
NOTE 19. SUPPLEMENTARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Receivables, net of allowances
Trade accounts........................................... $ 76,049 $ 51,739
Installment contracts.................................... 36,983 13,506
Other.................................................... 26,847 14,974
Unearned finance income.................................. (6,216) (1,481)
Allowances for contract cancellations and doubtful
accounts................................................ (18,584) (12,484)
-------- --------
$115,079 $ 66,254
======== ========
Long-term receivables, net of allowances
Notes receivable......................................... $ 17,492 $ 13,262
Amounts receivable from cemetery merchandise trusts...... 67,623 11,431
Installment contracts.................................... 108,225 53,204
Unearned finance income.................................. (18,438) (5,796)
Allowances for contract cancellations and doubtful
accounts................................................ (10,520) (5,550)
-------- --------
$164,382 $ 66,551
======== ========
Cemetery property, at cost
Developed land and lawn crypts........................... $ 79,119 $ 32,158
Undeveloped land......................................... 254,555 61,924
Mausoleums............................................... 22,348 14,041
-------- --------
$356,022 $108,123
======== ========
Property and equipment
Land..................................................... $102,659 $ 81,237
Building and improvements................................ 293,801 229,098
Automobiles.............................................. 44,589 25,581
Furniture, fixtures and equipment........................ 68,065 51,640
Computer hardware and software........................... 8,057 4,058
Leasehold improvements................................... 6,743 6,259
Accumulated depreciation and amortization................ (60,522) (41,738)
-------- --------
463,392 356,135
======== ========
</TABLE>
F-23
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Names and reputations
Names and reputations..................................... $359,830 $259,113
Covenants not to compete.................................. 60,919 56,748
Accumulated amortization.................................. (37,965) (25,569)
-------- --------
$382,784 $290,292
======== ========
Other assets
Deferred charges.......................................... $ 31,141 $ 26,649
Acquisitions in progress.................................. 25,225 3,971
Other..................................................... 6,107 2,636
-------- --------
$ 62,473 $ 33,256
======== ========
Accounts payable and accrued liabilities
Trade payables............................................ $ 42,753 $ 16,784
Interest.................................................. 4,231 4,173
Insurance, property and business taxes.................... 4,021 3,784
Other..................................................... 19,954 13,852
-------- --------
$ 70,959 $ 38,593
======== ========
Other liabilities
Cemetery long-term liabilities............................ $ 75,208 $ 25,640
Regional partnership liabilities.......................... 11,326 6,720
Participants' deposits in MEIP (Note 8(d))................ 6,080 6,143
Other..................................................... 2,489 7,836
-------- --------
$ 95,103 $ 46,339
======== ========
</TABLE>
F-24
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
NOTE 20. SEGMENTED INFORMATION
The following information corresponds to the Company's major industry
segments, all of which operate in North America.
<TABLE>
<CAPTION>
FUNERAL CEMETERY INSURANCE CORPORATE CONSOLIDATED
---------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Revenue
1995.................. $ 389,124 $138,137 $ 13,564 $ -- $ 540,825
1994.................. 303,488 61,970 -- -- 365,458
1993.................. 236,494 26,999 -- -- 263,493
Depreciation and
amortization
1995.................. $ 30,988 $ 2,114 $ 313 $ 1,560 $ 34,975
1994.................. 21,320 1,506 -- 1,992 24,818
1993.................. 16,055 847 -- 1,335 18,237
Earnings from operations
1995.................. $ 94,011 $ 23,619 $ 2,718 $(44,633) $ 75,715
1994.................. 105,166 12,122 -- (32,898) 84,390
1993.................. 80,194 5,947 -- (26,679) 59,462
Total assets
1995.................. $1,208,791 $575,501 $107,076 $ 69,346 $1,960,714
1994.................. 821,213 191,918 -- 82,565 1,095,696
1993.................. 631,758 121,564 -- 13,966 767,288
Capital expenditures
1995.................. $ 92,670 $ 16,915 $ -- $ 2,958 $ 112,543
1994.................. 76,221 13,370 -- 1,364 90,955
1993.................. 54,947 8,299 -- 387 63,633
</TABLE>
NOTE 21. SUBSEQUENT EVENTS
(a) Acquisitions
During the period from January 1, 1996 to March 26, 1996, the Company
acquired 48 funeral homes and 26 cemeteries. The aggregate cost of these
transactions was approximately $250,000,000. Included in these totals is the
March 26, 1996 acquisition from S.I. Acquisition Associates, L.P. of certain
net funeral, cemetery and insurance assets (the "Assets") for a purchase price
of approximately $140,000,000. The Assets include 15 funeral homes, two
cemeteries and two insurance companies, all of which are located in Louisiana.
As at March 26, 1996, the Company has committed to acquire certain funeral
homes, cemeteries and related operations, subject in most instances to certain
conditions including approval by the Company's Board of Directors. The
aggregate cost of these transactions, if completed, will be approximately
$228,000,000.
(b) Credit facilities
As a result of the Gulf National award and the Gulf National settlement, the
Company's ability to borrow further under its available credit facilities
currently is restricted. As at March 26, 1996, the Company had borrowed
$65,000,000 under the multicurrency revolver.
The Company may borrow up to $275,000,000 under the multicurrency revolver
to fund future acquisitions and up to $25,000,000 for working capital
purposes. Borrowings in excess of $300,000,000 require the approval
F-25
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
of members of the lending syndicate holding two thirds of the value of the
lending commitments outstanding. There can be no assurance that the requisite
approval for additional borrowings, if requested will be obtained.
The lenders under the multicurrency revolver and under one of the Company's
term loans have imposed an additional covenant to limit the Parent Company's
consolidated debt to $1,100,000,000. These lenders have also required the
Company to provide by April 30, 1996, collateral in the form of liens on the
property of the Company. The Company intends to retire the multicurrency
revolver in full prior to April 30, 1996 by drawing down the proposed bank
facility described below.
On February 14, 1996, the Company signed a commitment letter with a
commercial bank for a fully underwritten $750,000,000 secured revolving credit
facility with a term of five years. This facility is intended to replace the
multicurrency revolver. Completion of the bank facility is subject to the
satisfactory completion of a due diligence review and settlement of definitive
documentation.
The Parent Company has undertaken to place the shares of its subsidiaries
with a trustee to be held under a trust indenture as security for lenders
under the above facility, the five year bank term loan, the Senior Guaranteed
Notes and the 1996 Notes issued under the debt offering, described below. The
security will be shared ratably.
(c) Preferred share offering
On January 3, 1996, the Parent Company completed a public offering of
8,000,000 Convertible First Preferred Shares Series C Receipts ("Series C
Receipts") in Canada and a simultaneous private placement under Rule 144A in
the United States for aggregate gross proceeds of $200,000,000 Canadian. On
January 17, 1996, an additional 800,000 Series C Receipts were sold pursuant
to the exercise of the underwriters' over-allotment option for gross proceeds
of $20,000,000 Canadian. The net proceeds were deposited with an escrow agent.
The net proceeds will be released to the Parent Company from time to time by
issuing and depositing with the escrow agent an equal dollar amount of 6.00%
Cumulative Redeemable Convertible First Preferred Shares, Series C on
satisfaction of certain conditions, primarily the completion of acquisitions.
As at March 26, 1996, $125,271,000 Canadian (U.S.$91,874,000) had been
disbursed and $94,729,000 Canadian (U.S.$69,475,000) remained with the escrow
agent to fund future acquisitions.
(d) Common share and debt offerings
On March 20, 1996, the Parent Company completed a public offering of Common
shares of the Parent Company for estimated net proceeds of approximately
$263,000,000 Canadian (U.S.$193,000,000). The Parent Company used the net
proceeds to make a $100,000,000 capital contribution to fund the repayment of
indebtedness under the Company's multicurrency revolver. The Parent Company
has granted the underwriters an option to purchase up to an additional 700,000
Common shares at the offering price for a period expiring 30 days following
the date of closing of the Offering to cover over-allotments, if any.
On March 20, 1996, the Company completed a private placement of $350,000,000
of 1996 Notes in the United States. The 1996 Notes were fully guaranteed by
the Parent Company. Approximately $257,000,000 of the net proceeds of the debt
offering were used to repay indebtedness under the Company's multicurrency
revolver. The balance will be used for working capital and other corporate
purposes, including future acquisitions.
F-26
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
(e) Revolving Credit Facility with Parent Company
On March 19, 1996, the Company entered into a revolving credit facility (the
"Revolving Credit Loans") with the Parent Company, up to a maximum outstanding
principal amount of Canadian $135,000,000. The Revolving Credit Loans must be
fully repaid on or before June 30, 1999.
(f) Loan Agreement with Affiliated Company
On March 19, 1996, the Company entered into a loan agreement with an
affiliated company. The affiliated company has agreed to make the loan in no
more than seven installments to a maximum principal amount of $300,000,000.
(g) Common share issuance
In March 1996, the Company issued 117 Common shares to affiliated companies
for gross proceeds of $75,068,721.
NOTE 22. UNITED STATES ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") in Canada. These principles
differ in the following material respects from those in the United States as
summarized below:
(a) Earnings (loss) and retained earnings
<TABLE>
<CAPTION>
1995 1994 1993
--------- ------- --------
<S> <C> <C> <C>
Net earnings (loss) in accordance with Canadian
GAAP............................................ $(127,353) $ 7,491 $ 10,671
Effects of differences in accounting for:
Income taxes (c)................................ 1,028 1,296 280
--------- ------- --------
Earnings (loss) before cumulative effect of
changes in accounting principles................ (126,325) 8,787 10,951
Cumulative effect of change in accounting for
cemetery revenue recognition.................... -- 157 (157)
Cumulative effect of change in accounting for
income taxes (c)................................ -- -- (23,290)
--------- ------- --------
Net earnings (loss) in accordance with United
States GAAP..................................... (126,325) 8,944 (12,496)
Opening retained earnings in accordance with
United States GAAP.............................. 19,248 10,304 22,800
--------- ------- --------
Closing retained earnings in accordance with
United States GAAP.............................. $(107,077) $19,248 $ 10,304
========= ======= ========
</TABLE>
(b) Insurance invested assets
Under the United States GAAP, fixed maturity securities which the Company
has the positive intent and ability to hold to maturity are classified as
held-to-maturity and are carried at amortized cost. Fixed maturity securities
classified as held-to-maturity were approximately $23,000,000 at December 31,
1995. Fixed maturity and equity securities that are held with the objective of
trading to generate profits on short-term differences in price are carried at
fair value, with changes in fair value reflected in the results of operations.
At December 31, 1995, no securities were classified as trading. All other
fixed maturity and equity securities not classified as either held-to-maturity
or trading are classified as available-for-sale and carried at fair value
which was approximately $74,000,000 at December 31, 1995. Available-for-sale
securities may be sold in response to changes in interest rates and liquidity
needs. Unrealized holding gains and losses related to available-for-sale
investments, after deducting amounts allocable to income taxes, are reflected
as a separate component of stockholders' equity. There were no significant
unrealized gains or losses on securities available-for-sale as of December 31,
1995.
F-27
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
(c) Income taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("FAS 109"), Accounting for Income Taxes, for its
financial statement amounts presented under United States GAAP. Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. FAS 109
requires temporary differences to be tax-effected at current rates whereas
under Canadian GAAP, temporary differences are tax-effected at historic rates.
There was no effect of changes in tax rates during 1995.
As a result of the adoption of this standard at January 1, 1993, there was a
one time charge to earnings of $23,290,000. The cumulative effect of FAS 109
on the consolidated balance sheet at December 31, 1995 is an increase in
cemetery property and names and reputations of approximately $173,382,000
(1994--$34,965,000).
The Company's deferred tax liabilities under FAS 109 at December 31, are as
follows:
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Deferred tax liabilities
Cemetery property............................................ $161,587 $23,158
Property and equipment....................................... 42,132 40,856
Deferred costs related to prearranged funeral services....... 9,932 6,113
Other tax liabilities........................................ 14,872 2,712
-------- -------
Total deferred tax liabilities................................. 228,523 72,839
-------- -------
Deferred tax assets
Legal settlements............................................ 61,037 --
Intercompany management fees and interest.................... 20,584 --
Other tax assets, net of valuation allowance................. 11,508 5,551
-------- -------
Total deferred tax assets...................................... 93,129 5,551
-------- -------
Net deferred tax liabilities................................... $135,394 $67,288
======== =======
</TABLE>
The Company believes realization of its net deferred tax assets is more
likely than not. The Company's ability to realize its deferred tax assets is
based on several factors, including a presumption of future profitability in
certain jurisdictions and is subject to some degree of uncertainty.
(d) Recent United States accounting standards
Effective December 15, 1995, the Company adopted FAS 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
for United States GAAP reporting purposes. The Company has reviewed the
recovery of the long-lived assets and intangibles utilized in its operations,
including names and reputations. FAS 121 had no significant effect on the
Company's consolidated financial statements.
FAS 123, Accounting for Stock-Based Compensation is required to be
implemented by the Company effective January 1, 1996 for United States GAAP
reporting purposes. The Company does not expect the effect of this
pronouncement to be material to the consolidated financial statements.
F-28
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE CAPITAL
(e) Provision for legal settlements
In accordance with United States GAAP, the non-current portion of the
provision for legal settlements would be classified as a non-current accrued
liability of $40,000,000 rather than as long-term debt.
NOTE 23. COMPARATIVE FIGURES
Certain of the comparative figures have been reclassified to conform to the
presentation adopted in the current period.
F-29
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and term deposits............................ $ 23,724 $ 38,722
Receivables, net of allowances.................... 165,590 115,079
Inventories....................................... 28,224 24,393
Prepaid expenses.................................. 10,342 6,095
---------- ----------
227,880 184,289
Prearranged funeral services........................ 200,105 190,687
Long-term receivables, net of allowances............ 223,408 164,382
Investments......................................... 80,645 1,016
Insurance invested assets........................... 289,598 97,024
Cemetery property, at cost.......................... 516,674 356,022
Property and equipment.............................. 562,455 463,392
Names and reputations............................... 488,593 382,784
Deferred income taxes............................... 47,436 58,645
Other assets........................................ 118,691 62,473
---------- ----------
$2,755,485 $1,960,714
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current indebtedness.............................. $ -- $ 38,546
Accrued settlements............................... -- 53,000
Accounts payable and accrued liabilities.......... 90,923 70,959
Long-term debt, current portion................... 40,737 59,050
---------- ----------
131,660 221,555
Loans and advances from affiliates.................. 711,808 522,854
Long-term debt...................................... 1,074,524 730,355
Other liabilities................................... 124,450 95,103
Insurance policy liabilities........................ 208,109 82,710
Deferred prearranged funeral services revenue....... 200,105 190,687
Preferred securities of subsidiary.................. 75,000 75,000
Shareholders equity
Share capital..................................... 302,264 127,196
Retained earnings (Deficit)....................... (72,435) (84,746)
---------- ----------
229,829 42,450
---------- ----------
$2,755,485 $1,960,714
========== ==========
</TABLE>
Commitments and contingencies (Notes 3,7,8,9 and 11)
See accompanying notes to interim consolidated financial statements.
F-30
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS (DEFICIT) (UNAUDITED)
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ------------------
1996 1995 1996 1995
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenue
Funeral............................ $ 116,283 $ 93,903 $353,824 $278,554
Cemetery........................... 75,293 37,794 191,860 91,936
Insurance.......................... 22,959 8,352 51,021 8,352
--------- --------- -------- --------
214,535 140,049 596,705 378,842
Costs and expenses
Funeral............................ 72,903 57,247 213,037 164,242
Cemetery........................... 49,766 26,948 129,145 65,476
Insurance.......................... 16,708 6,555 38,683 6,555
--------- --------- -------- --------
139,377 90,750 380,865 236,273
--------- --------- -------- --------
75,158 49,299 215,840 142,569
Expenses
General and administrative......... 16,370 35,446 41,869 49,830
Management fees from Parent
Company........................... 2,924 1,543 8,773 5,236
Costs of legal proceedings......... -- 2,966 -- 2,966
Depreciation and amortization...... 12,434 9,890 33,536 25,105
--------- --------- -------- --------
31,728 49,845 84,178 83,137
--------- --------- -------- --------
Earnings (loss) from operations...... 43,430 (546) 131,662 59,432
Interest and financing fees paid to
affiliates, net..................... 16,694 8,361 43,926 26,709
Interest on long-term debt........... 19,901 12,162 53,457 27,230
--------- --------- -------- --------
Earnings (loss) before dividends on
preferred securities of subsidiary
and income taxes.................... 6,835 (21,069) 34,279 5,493
Dividends on preferred securities of
subsidiary.......................... 1,772 1,772 5,316 5,316
--------- --------- -------- --------
Earnings (loss) before income taxes.. 5,063 (22,841) 28,963 177
Income taxes
Current............................ 2,893 (8,621) 4,714 1,074
Deferred........................... 771 994 11,938 2,771
--------- --------- -------- --------
3,664 (7,627) 16,652 3,845
--------- --------- -------- --------
Net earnings (loss) for the period... $ 1,399 $ (15,214) $ 12,311 $ (3,668)
Retained earnings (Deficit),
beginning of period................. (73,834) 54,153 (84,746) 42,607
--------- --------- -------- --------
Retained earnings (Deficit), end of
period.............................. $ (72,435) $ 38,939 $(72,435) $ 38,939
========= ========= ======== ========
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-31
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION (UNAUDITED)
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings (loss)................................... $ 12,311 $ (3,668)
Items not affecting cash
Depreciation and amortization....................... 33,536 25,105
Deferred income taxes............................... 11,938 2,771
Other............................................... 20,298 6,274
Loans and advances from affiliates and debt issued under
legal settlements...................................... (111,800) --
Net changes in other non-cash balances.................. (169,072) (34,817)
--------- ---------
(202,789) (4,335)
--------- ---------
Investing
Business acquisitions................................. (428,629) (344,741)
Construction of new facilities........................ (8,560) (8,113)
Investments, net...................................... (76,629) (3,530)
Purchase of insurance invested assets................. (44,649) --
Proceeds on disposition of insurance invested assets.. 37,999 --
Purchase of property and equipment.................... (16,582) (10,742)
Proceeds on disposition of assets..................... 2,605 11,869
Other................................................. (13,014) (31,135)
--------- ---------
(547,459) (386,392)
--------- ---------
Financing
Issue of share capital................................ 175,069 --
Increase in long-term debt............................ 800,940 183,228
Reduction in long-term debt........................... (460,479) (13,241)
Loans and advances from affiliates.................... 260,098 245,144
Current note payable.................................. (38,546) --
Net proceeds of sale of receivables................... 18,393 --
Other................................................. (20,225) (900)
--------- ---------
735,250 414,231
--------- ---------
Increase (decrease) in cash and cash equivalents during
the period............................................. (14,998) 23,504
Cash and cash equivalents, beginning of period.......... 38,722 6,998
--------- ---------
Cash and cash equivalents, end of period................ $ 23,724 $ 30,502
--------- ---------
Cash and cash equivalents include
Cash and term deposits................................ $ 23,724 $ 34,502
Bank indebtedness, included in current indebtedness... -- (4,000)
--------- ---------
$ 23,724 $ 30,502
========= =========
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-32
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Loewen Group International, Inc. (the "Company") was incorporated on
February 25, 1987 under the laws of the State of Delaware and is directly and
indirectly a wholly owned subsidiary of The Loewen Group Inc. ("Parent
Company"). 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
only of normal recurring adjustments, which in management's opinion are
necessary for a fair presentation of the financial results for the interim
periods. The financial statements have been prepared on a basis consistent
with the accounting policies described in the Company's financial statements
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.
F-33
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
NOTE 2. ACQUISITIONS
During the nine months ended September 30, 1996, the Company acquired 115
funeral homes, 91 cemeteries and two insurance companies for a total
consideration of $428,629,000. 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.
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............................. $ 7,847 $ 12,333
Prearranged funeral services............... 15,665 41,940
Long-term receivables, net of allowances... 60,172 61,278
Investments................................ -- 10,018
Insurance invested assets.................. 185,971 --
Cemetery property, at cost................. 160,666 163,005
Property and equipment..................... 91,222 59,767
Names and reputations...................... 119,119 58,082
Other assets............................... 3,087 39,246
---------------- ---------------
643,749 445,669
Current liabilities........................ (8,323) (6,057)
Long-term debt............................. (22,659) (6,422)
Other liabilities.......................... (43,995) (40,085)
Insurance policy liabilities............... (125,207) --
Deferred income taxes...................... 729 (6,424)
Deferred prearranged funeral services
revenue................................... (15,665) (41,940)
---------------- ---------------
$ 428,629 $ 344,741
================ ===============
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------
1996 1995
---------------- ---------------
<S> <C> <C>
CONSIDERATION
Cash, including assumed debt repaid at
closing................................... $ 381,055 $ 321,278
Debt....................................... 35,924 15,663
Share capital of Parent Company............ 11,650 7,800
---------------- ---------------
$ 428,629 $ 344,741
================ ===============
</TABLE>
F-34
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
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....................................... $ 641,297 $ 508,598
Net earnings (loss)............................ $ 9,878 $ (4,381)
</TABLE>
NOTE 3. INVESTMENT IN PRIME SUCCESSION HOLDINGS, INC.
On August 26, 1996, the Company 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 the
Company 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 the Company can, without the consent of the other
party, sell or transfer its shares in Prime to a party other than to 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.
The Company accounts for its investment in common stock in Prime on the
equity method. Under the equity method, the Company 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, the Company's
earnings in Prime were approximately $380,000, consisting of an accrual of
approximately $515,000 attributable to the payment-in-kind dividend net of
approximately $135,000 representing the Company's proportionate share of the
loss attributable to common shares of Prime.
Under a Put/Call Agreement entered into by Blackstone and the Company, the
Company 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 the Company 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.
F-35
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
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 Parent Company, at the Parent
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 the Company exercising
their respective rights under the Put or the Call. It is not currently
possible to determine whether Blackstone or the Company 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.
The Company provides administrative services to Prime under an
Administrative Services Agreement for an annual fee of $250,000.
NOTE 4. LOANS AND ADVANCES FROM (TO) AFFILIATES
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Term loan from affiliated company
Interest at 11.50% due August 15, 1999.......... $590,040 $ --
Term loan from affiliated company
Interest at 9.83% due August 15, 1999........... -- 206,000
Term loan from affiliated company
Interest at 10.01% due August 15, 1999.......... -- 199,650
Revolving credit loans from affiliated companies
Interest at prime plus 2% due in 1999........... 13,476 35,351
Other demand loans from/(to) affiliates
Non-interest bearing and due on demand.......... 15,384 (1,866)
-------- --------
618,900 439,135
Demand loan to be advanced from Parent Company
under legal settlements........................... -- 71,800
Demand loan from parent company.................... 92,908 11,919
-------- --------
$711,808 $522,854
======== ========
</TABLE>
During the nine months ended September 30, 1996, the Company received
advances of $194,959,660 from an affiliate and made repayments on the
revolving credit loans of $35,401,000. Effective August 1, 1996, the notes
were amended, increasing the interest rate on the term loans and the revolving
credit loans to 11.5%.
F-36
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
NOTE 5. LONG-TERM DEBT
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Bank revolving credit agreements.................... $ 299,500 $348,000
Bank term loan agreements........................... 107,582 116,007
9.70% Series A senior amortizing notes due in 1998.. 75,000 75,000
9.93% Series B senior amortizing notes due in 2001.. 42,850 42,850
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....................................... 108,828 82,288
---------- --------
$1,115,261 $789,405
Less current portion................................ 40,737 59,050
---------- --------
$1,074,524 $730,355
========== ========
</TABLE>
In March 1996, the Company 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 Parent 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 11(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 a May 31,
1996, 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, its Parent Company 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 Parent Company of substantially all of the
subsidiaries in which the Parent Company directly or indirectly holds more
than a 50% voting or economic interest and (ii) all of the financial assets of
the Company (the Company 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 by the Parent Company of dividends on Common and Preferred shares,
limiting redemption or repurchase by the Parent Company of its shares,
limiting disposition of assets, limiting the amount of additional debt,
limiting the amount of capital expenditures and maintaining specified
financial ratios of the Parent Company and its subsidiaries.
F-37
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
NOTE 6. SHARE CAPITAL
In March 1996, the Company issued 117 Common shares to affiliated companies
for gross proceeds of $75,068,721. In March 1996, the Company received capital
contributions from affiliated companies totalling $100,000,000.
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 Parent Company
securities against the Parent Company and five individuals who were officers
of the Parent Company (four of whom were also directors) in the United States
District Court for the Eastern District of Pennsylvania. The Parent Company,
Loewen Group Capital, L.P. ("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 the Parent Company's Common shares against the Parent Company
and the same individual defendants in the United States District Court for the
Southern District of Mississippi alleging Federal securities law violations
and related common law claims. On December 1, 1995, a class action lawsuit was
filed on behalf of a class of purchasers of the Parent Company's securities
against the Company, the Parent Company, 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 Parent Company's periodic reports previously filed
with the Commission for additional information regarding the Parent 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, the Parent Company, 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) the Company, 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, the
Parent Company 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
F-38
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
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 Parent Company that they would seek indemnity
from the Parent Company for costs incurred. The Parent Company has agreed to
pay the Underwriters' costs through the date of dismissal. The Parent Company
expects that the Underwriters will seek further indemnity from the Parent
Company if any of the claims against the Underwriters are reinstated.
The Parent Company referred the claims to its insurance carrier under its
directors and officers insurance policy. On February 9, 1996, the carrier
denied coverage of the claim. The Parent Company believes that such denial was
improper. On March 21, 1996, the Parent Company commenced an action in British
Columbia Supreme Court seeking a declaration that the policy covers
indemnification with respect to the Class 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 Parent 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 Parent Company's
shareholders. See Note 8 for additional information.
On September 26, 1996, Jerry Krim filed a purported derivative and class
action against the Parent Company's current directors and one former director
and against the Parent Company as a nominal defendant in the Los Angeles County
Superior Court. The plaintiff alleges, on behalf of himself and all of the
Parent Company'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
property 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 RH Holdings proposed investment, (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 Parent 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 Parent 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 Parent Company's financial statements.
F-39
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
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
Parent 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 Parent
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 Parent Company's actions have tortiously interfered with SCI's
"prospective business relationships" with the Parent Company's shareholders.
As relief for this assertion, SCI seeks an unspecified amount of damages for
claimed injuries resulting from the Parent 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 Parent
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 Parent Company believes that the action is
without merit and intends to contest the action vigorously.
On October 10, 1996, the Company, the Parent Company and Ridge Chapels,
Inc., a subsidiary of the Company, 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
Parent Company would violate Section 7 of the Clayton Act. According to the
complaint, SCI's unsolicited offer for control of the Parent 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 Parent Company also accuses SCI
and Equity Corporation International, Inc., a competitor of the Parent Company
in which SCI has a 40% interest, of conspiracy to eliminate the Parent Company
as a competitive force in the funeral services industry, in violation of
Section 2 of the Sherman Act. On October 10, 1996, the Parent Company 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 Parent Company takes the position that irreparable harm
will result from SCI's further pursuit of its unsolicited exchange offer, and
accordingly, the Parent Company intends to prosecute its claims zealously.
On October 11, 1996, the Parent 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 Parent 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 Parent 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 Parent Company from
proceeding in the New York Action (or elsewhere) until it had resolved the
Parent 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 Parent Company's motion to dismiss was
F-40
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
held on November 6, 1996. The Parent 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
Parent 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 the
Company 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 the Company 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 Parent
Company as a defendant (on an alter ego theory) and includes claims for
negligent retention of certain cemetery employees. Each plaintiff identified in
the 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
the Company and in July 1996, Karen Schneider filed a lawsuit against Osiris
and the Company. 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 the Company, the Parent Company 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 Parent 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.
F-41
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
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 the Parent
Company. 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, the Company purchased all of the issued and outstanding
shares of Osiris, including the Esner Shares. In connection with the purchase,
the Company entered into an indemnification agreement whereby Messrs. Miller
and Shane agreed to indemnify and hold the Company 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 the Company as defendants. The second complaint alleges
breach of contract, fraud and related claims against Messrs. Miller and Shane,
and that the Company joined a civil conspiracy by acquiring Osiris. The
Executors request compensatory damages of $24,300,000 against the various
defendants, and seek punitive damages from Messrs. Miller and Shane. The two
cases have been consolidated by the Court. The Company 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.
F-42
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
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 Parent Company, in which
SCI expressed an interest in discussing with the Parent Company a stock-for-
stock transaction that would value the Common shares of the Parent Company at
$43 per share. On September 24, 1996, the Board of Directors of the Parent
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 Parent Company. SCI's announcement stated
that SCI would offer holders of Common shares of the Parent Company $45 worth
of common stock of New Service Corporation International, a newly organized
holding company ("New SCI") and the SCI would offer holders of Series C
Preferred shares $29.51 worth of New SCI common stock. All the shareholders of
the Parent 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 Parent Company unanimously determined that the
Proposed Offer is inadequate and not in the best interest of the Parent
Company and its shareholders. The Board of Directors of the Parent Company has
recommended that the shareholders of the Parent Company not tender their
shares, if and when the Proposed Offer is commenced.
Effective as of October 10, 1996, in or to attract and retain key executives
and managers of the Parent Company in the context of a threatened change in
control of the Parent Company, the Board of Directors of the Parent 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 executives and managers of the
Parent Company and LGII ("Executives"). With the exception of Mr. Loewen, each
of the executive officers 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 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 Parent 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 Parent Company
and LGII 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 Parent
Company authorized the Parent Company to enter into indemnification agreements
with certain of its directors and officers whereby the Parent Company will
agree to indemnify such persons against all costs, charges and expenses
incurred by reason of being a director or officer of the Parent Company.
The Parent 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
F-43
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
Parent 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 Parent
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 transaction 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
Parent 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 Parent Company has also retained Morrow & Co., Inc. ("Morrow") and D.F.
King & Co., Inc. ("King") to assist the Parent Company in connection with its
communications with its shareholders with respect to, and to provide other
services to the Parent Company in connection with the SCI hostile takeover
proposal. The Parent 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 Parent
Company has agreed to indemnify Morrow and King against certain liabilities
arising out of or in connection with their respective engagements.
The Parent Company has also retained Broadgate Consultants, Inc.
("Broadgate") as the Parent 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 Parent Company has agreed to indemnify
Broadgate against certain liabilities arising out of or in connection with its
engagement.
The Parent 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 INVESTMENTS IN ROSE HILLS HOLDINGS, INC.
On September 19, 1996, the Company 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 the Company for approximately $285,000,000,
including third party liabilities to be paid at closing and transaction costs.
The Company will acquire Common shares of RH Holdings for $9,000,000
representing 20.45% of RH Holdings' voting common stock. In addition, the
Company will acquire 100% of RH Holdings' non-voting preferred stock, with an
annual cumulative payment-in-kind dividend of 10%, for $86,000,000. The
Company'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 the
Company. As at September 30, 1996, the Company 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 the Company at closing and subsequently cancelled.
F-44
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
Blackstone will contribute approximately $35,000,000 in exchange for 79.55%
of RH Holdings' voting common stock. Blackstone and the Company 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 the Company can, without the consent of the other
party, sell or transfer its shares in RH Holdings to a party other than to an
affiliate of itself.
The Company's proposed investment will be accounted for under the equity
method whereby the Company 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 the Company, the Company 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 the Company
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 Parent Company, subject to certain
conditions at the Parent 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 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.
The Company 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 the
Company'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 the Parent Company,
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, the Company forfeits amounts previously paid or committed under letters
of credit. If the Company ultimately forfeits amounts previously paid or
committed under letters of credit, the Company would be required to write off
such amounts and related costs and expenses.
F-45
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
In addition, in the event there is a change in control of the Company or the
Parent Company prior to the consummation of the transaction 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. RELATED PARTY TRANSACTIONS
(a) Sale of receivables
On August 6, 1996, the Company entered into an agreement with an affiliate
to sell cemetery installment contract receivables for a net purchase price of
$18,393,000. The Company has recorded the sale at the gross amount of the
cemetery installment contract receivables net of an allowance for doubtful
accounts, unearned finance income and purchase discount.
Proceeds received by an affiliate from the collection of the receivables are
advanced directly to the Company as loans from an affiliate pursuant to a
Revolving Credit Facility entered into on August 1, 1996. Revolving credit
loans may be made up to a maximum of $250,000,000 and bear interest at the
Libor rate plus 300 basis points. Amounts outstanding under the Revolving
Credit Facility are due on demand on December 31, 1999. At September 30, 1996,
the Company has received advances of $1,334,000 from an affiliate pursuant to
the Facility.
(b) The Company incurred losses during the three months and nine months
ended September 30, 1995, which are as a result of recording additional
intercompany charges payable to the Parent Company. These expenses are
eliminated in the consolidated financial statements of the Parent Company.
NOTE 11. SUBSEQUENT EVENTS
(a) Acquisitions
During the period from October 1, 1996 to November 1, 1996, the Company
acquired seven funeral homes and 18 cemeteries. The aggregate cost of these
transactions was approximately $80,000,000.
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, the Company 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.
F-46
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
On October 4, 1996, the Company 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 the net proceeds to
the Company from the sale of these notes was used to repay indebtedness under
the Parent
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 12. 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 22 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 (loss) in accordance
with Canadian GAAP.................. $ 1,399 $ (15,214) $ 12,311 $ (3,668)
Effects of differences in accounting
for:
Insurance operations (see (c))..... (742) -- (1,433) --
Income taxes, including income tax
effects of the above.............. 549 363 1,386 632
-------- ---------- -------- --------
Net earnings (loss) in accordance
with U.S. GAAP...................... $ 1,206 $ (14,851) $ 12,264 $ (3,036)
======== ========== ======== ========
</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......................... $ 160,666 $ 48,421 $ 209,087
Present value of insurance policies
acquired................................. -- 15,785 15,785
Property and equipment.................... 91,222 297 91,519
Names and reputations..................... 119,119 6,752 125,871
Insurance policy liabilities.............. (125,207) (16,082) (141,289)
Deferred income tax asset (liability)..... 729 (55,173) (54,444)
</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.
F-47
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
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
shareholders' 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
$111,800,000 because loans and advances from affiliates and debt issued under
legal settlements would be considered non-cash transactions.
F-48
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholder
Neweol Investments Ltd.
We have audited the consolidated balance sheets of Neweol Investments Ltd.,
as defined in Note 1 to the financial statements, as at December 31, 1995 and
1994 and the consolidated statements of operations and retained earnings and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December
31, 1995 and 1994 and the results of its operations and its cash flows for the
years then ended, in accordance with generally accepted accounting principles
in the United States. As required by the Company Act of British Columbia, we
report that, in our opinion, these principles have been applied on a
consistent basis.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
August 15, 1996
F-49
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and term deposits............................. $ 81 $ 58
Receivables from affiliates........................ -- 117
Notes receivable from affiliates................... 24,831 7,595
-------- --------
24,912 7,770
Investment........................................... 35,717 26,250
Investments in affiliates............................ 6,367 9,464
Notes receivable from affiliates..................... 405,650 220,155
Other assets......................................... 291 94
-------- --------
$472,937 $263,733
======== ========
LIABILITIES AND SHAREHOLDER EQUITY
Current liabilities
Accounts payable and accrued liabilities........... $ 5,402 $ 1,239
Notes payable to affiliate......................... 4,275 --
-------- --------
9,677 1,239
Due to parent company................................ 168,982 157,575
Minority interest.................................... 8,508 4,250
Redeemable preferred shares
$1 Canadian par value, 500,000,000 shares
authorized,
77,200,000 shares issued and outstanding (1994--
nil).............................................. 56,598 --
Shareholder equity
Capital stock, no par value, 1,000,000 shares
authorized,
80,401 shares issued and outstanding (1994--301).. 214,539 88,177
Retained earnings.................................. 10,415 6,484
Foreign exchange adjustment........................ 4,218 6,008
-------- --------
229,172 100,669
-------- --------
$472,937 $263,733
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-50
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994
------------ -----------
<S> <C> <C>
Revenue from affiliate
Interest income.................................... $ 33,129 $ 7,599
Other revenue...................................... 1,201 471
------------ -----------
34,330 8,070
Expenses
General and administrative......................... 739 218
------------ -----------
Earnings from operations............................. 33,591 7,852
Equity in losses of investees........................ (19,444) --
Minority interest.................................... (564) (130)
------------ -----------
Earnings before income taxes......................... 13,583 7,722
Current income tax expense........................... 5,377 1,238
------------ -----------
Net earnings......................................... $ 8,206 $ 6,484
Dividends on redeemable preferred shares............. 4,275 --
------------ -----------
Net earnings available to Common shareholder......... 3,931 6,484
Retained earnings, beginning of year................. 6,484 --
------------ -----------
Retained earnings, end of year....................... $ 10,415 $ 6,484
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-51
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED STATEMENTS OF CASH FLOWS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994
----------- -----------
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings...................................... $ 8,206 $ 6,484
Items not affecting cash
Minority interest............................... 564 130
Equity in losses of investees................... 19,444 --
Net changes in other non-cash balances............ 7,779 5,159
----------- -----------
35,993 11,773
----------- -----------
Investing
Loans to affiliate................................ (216,886) (213,595)
Financing
Advances from Parent Company...................... 180,916 201,880
----------- -----------
Increase in cash and cash equivalents during the
year............................................... 23 58
Cash and cash equivalents, beginning of year........ 58 --
----------- -----------
Cash and cash equivalents, end of year.............. $ 81 $ 58
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-52
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT CAPITAL STOCK
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Neweol Investments Ltd. ("Neweol") was incorporated on November 6, 1992
under the federal laws of Canada and continued on June 3, 1993 under the laws
of the Province of British Columbia as a wholly owned subsidiary of The Loewen
Group Inc. ("Parent Company"). The principal activities of the Company, which
commenced operations in 1994, are to provide financing to other subsidiaries
of the Parent Company ("affiliates") and to hold investments in affiliated and
non-affiliated companies.
The consolidated financial statements have been prepared in United States
dollars in accordance with accounting principles generally accepted in the
United States. The consolidated financial statements require the use of
management estimates.
Basis of consolidation
The accompanying consolidated financial statements have been prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission and for inclusion in the registration statement on Form S-
4 of Loewen Group International, Inc. ("LGII") and the Parent Company.
These consolidated financial statements include Neweol's ownership interests
in its majority-owned consolidated subsidiaries, Loewen Finance (Wyoming)
Limited Liability Company ("LFW"), Loewen Trading Corporation, Eagle Financial
Associates, LLC, and 1096952 Ontario Limited, and its equity investment in its
affiliate LGII (collectively the "Company"). These interests constitute the
ongoing operations of Neweol subsequent to a reorganization that occurred on
July 19 and August 13, 1996. These consolidated financial statements exclude
certain subsidiaries of Neweol which were transferred to an affiliate
effective July 19 and August 13, 1996 and accordingly are not intended to be a
complete presentation of the historical consolidated financial position,
results of operations, and cash flows of Neweol. To the extent that Neweol's
interests in those subsidiaries were not transferred as a result of the
reorganization, such interests are reflected in the accompanying financial
statements.
All significant intercompany balances and transactions have been eliminated
from the consolidated financial statements.
Neweol has no operations independent of those carried on by its
subsidiaries. Neweol is dependent on future remittances from its subsidiaries
or capital contributions from its Parent Company to satisfy its obligations,
all of which are to affiliates.
Investments
The Company initially records investments acquired from third parties at
cost and investments acquired from entities under common control at the
transferor's carrying value. The Company follows the equity method of
accounting for investments where it has significant influence over the
investee. The excess of the Company's carrying value of the investment as
reported on the balance sheet and the underlying equity in the net assets of
Arbor Memorial Services Inc. ("Arbor") is amortized over the estimated
weighted average useful lives of the underlying assets and included in Equity
in losses and earnings of investees in the statements of operations and
retained earnings and cash flows.
Accounting for income taxes
The Company follows the asset and liability method of accounting for income
taxes. Deferred income taxes are recognized for the future tax effects of
temporary differences between the carrying amounts of assets and
F-53
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
liabilities for financial reporting purposes and the amounts used for income
tax purposes. Deferred tax assets and liabilities are measured using enacted
rates expected to apply to taxable income in the years in which these
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Foreign currency
The assets and liabilities of the Canadian operations have been translated
into United States dollars at the rates of exchange as at the balance sheet
dates, and revenues and expenses are translated at the average rates of
exchange for the periods of operation. Unrealized gains and losses arising
from the translation are deferred and are classified as "Foreign exchange
adjustment" within shareholder equity.
NOTE 2. NOTES RECEIVABLE FROM AFFILIATE
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Notes receivable from affiliate comprise the following:
Current
Revolving credit loans..................................... $ 24,831 $ 7,595
-------- --------
Long-term
Term loans due in 1999..................................... $206,000 $206,000
Term loans due in 2000..................................... 199,650 --
Other...................................................... -- 14,155
-------- --------
$405,650 $220,155
======== ========
</TABLE>
The loans have been advanced to LGII and are unsecured. The revolving credit
loans are due on demand. Interest is earned at rates ranging from 9.06% to
10.01% per annum on the term loans and at U.S. prime plus 2% on the revolving
credit loans. The total amount available under the revolving credit facility
is $30,000,000. The other notes receivable represent receivables from
subsidiaries that were transferred during the July 19, 1996 reorganization.
NOTE 3. INVESTMENT
The Company holds 680,225 Class A voting shares (1994--680,225) of Arbor
representing 26.93% (market value $11,220,721) and 2,057,752 Class B non-
voting shares (1994--1,563,350) representing 26.63% (market value
$33,189,548). This investment has been accounted for by the equity method
commencing January 1, 1995, the date the Company determined it had significant
influence over Arbor. Arbor's fiscal year end is October 31, 1995. Accordingly
the Company records its equity in the earnings of Arbor on a two month lag.
The Company's equity in the earnings of Arbor amounted to $1,391,000 in 1995.
Arbor is a Canadian funeral services company and at October 31, 1995, Arbor
had assets and liabilities of $287,617,000 and $188,837,000 respectively
(1994--$239,434,000 and $167,932,000 respectively).
NOTE 4. INVESTMENTS IN AFFILIATES
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Investments in affiliates
Investment in LGII.............................................. $6,367 $ --
Other........................................................... -- 9,464
------ ------
$6,367 $9,464
====== ======
</TABLE>
F-54
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On July 13, 1995, the Company acquired a 15% interest in LGII from the
Parent Company. LGII serves as the holding company for the Parent Company's
United States funeral, cemetery and insurance operations. This investment was
recorded at the Parent Company's carrying value of approximately $27,202,000.
The Company's equity in the loss of LGII amounted to $20,834,850 for the
period ended December 31, 1995. At December 31, 1995, LGII had assets and
liabilities of approximately $1,960,714,000 and $1,918,264,000 respectively.
LGII is subject to material legal proceedings and contingencies, as
described below:
Class Action Lawsuits
On November 4, 1995, a class action lawsuit claiming violations of Federal
securities laws was filed on behalf of a class of purchasers of securities
against the Parent Company and five officers (four of whom are directors) in
the United States District Court for the Eastern District of Pennsylvania.
LGII, Loewen Group Capital, L.P. ("LGC") and the lead underwriters
("Underwriters") of the 1994 offering of Monthly Income Preferred Securities
by LGII and LGC were subsequently added as defendants. On November 7, 1995, a
class action lawsuit was filed on behalf of a class of purchasers of Common
Shares against the Parent Company and the same individual defendants in the
United States District Court for the Southern District of Mississippi alleging
Federal securities law violations and related common law claims. On December
1, 1995, a class action lawsuit was filed on behalf of a class of purchasers
of the Parent Company's and LGC's securities against the Parent Company, LGII,
LGC and the same individual defendants in the United States District Court for
the Eastern District of Pennsylvania.
All of the Class Actions (collectively, the "Class Actions") allege that the
defendants failed to disclose the anticipated liability in connection with
certain litigation with J.J. O'Keefe, Sr., Gulf National Insurance Company and
certain affiliates (collectively, "Gulf National"). The Pennsylvania Class
Actions allege also failure to disclose the potential liability in connection
with certain litigation with Provident American Corporation and a subsidiary
(together, "Provident"). The lawsuits with Gulf National and Provident were
settled during the first quarter of 1996.
In each of the Class Actions, the plaintiffs seek compensatory money damages
in an unspecified amount, together with attorneys fees, expert fees and other
costs and disbursements. In addition, the Mississippi Class Action seeks
unspecified punitive damages. The longest class period specified is from April
16, 1993 to November 1, 1995. Pursuant to a Transfer Order filed April 15,
1996 by the Judicial Panel on Multidistrict Litigation, the Mississippi Class
Action was transferred to the Eastern District of Pennsylvania for
consolidation of pretrial proceedings with the two Pennsylvania Class Actions.
The plaintiffs are expected to file a consolidated amended complaint on or
before August 26, 1996. LGII expects that the claims in the consolidated
complaint will not differ substantially from the claims in each of the Class
Actions.
On June 11, 1996 all claims against the Underwriters were dismissed without
prejudice, by agreement of the parties. Prior to the dismissal, the
Underwriters had indicated to the Parent Company and LGII that they would seek
indemnity from the Parent Company and LGII for costs incurred. LGII has agreed
to pay the Underwriters costs through the date of dismissal. LGII expects that
the Underwriters will seek further indemnity if any of the claims against the
Underwriters are reinstated.
The Parent Company referred the claims to its insurance carrier under its
directors and officers insurance policy. On February 9, 1996 the carrier
denied coverage of the claim. The Parent Company believes that such denial was
improper. On March 21, 1996, the Parent Company commenced an action in British
Columbia Supreme Court seeking a declaration that the policy covers
indemnification with respect to the Class Actions. As at August 2, 1996, the
Supreme Court had not ruled on the action.
F-55
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
LGII cannot predict at this time the extent to which any settlement or
litigation that may result from these claims will ultimately be covered by
insurance, if at all. LGII has determined that it is not possible to predict
the final outcome of these legal proceedings and that it is not possible to
establish a reasonable estimate of possible damages, if any, or reasonably
estimate the range of possible damages that may be awarded to the plaintiffs.
Accordingly, no provision has been made in LGII's financial statements.
Roe, et al., Palladino et al., O'Sullivan and Schneider
In October 1995, Roe and 22 other families filed a lawsuit against LGII and
Osiris Holding Corporation in Florida Circuit Court in St. Petersburg. In
early April 1996, a related lawsuit, Palladino et al., was filed by eight
families against LGII and Osiris in Florida Circuit Court in St. Petersburg,
and was assigned to the same judge handling the Roe matter. In June 1996, the
Roe and Palladino lawsuits were consolidated and amended to include a total of
90 families (the "Consolidated Complaint") and in July 1996, the Palladino
lawsuit was dismissed. The gravamen of the Consolidated Complaint is that in
July 1992, employees of the Royal Palm Cemetery facility who were installing a
sprinkler line disturbed the remains of infants in one section of the
cemetery. The Consolidated complaint also names the Parent company as a
defendant (on an alter ego theory) and includes claims for negligent retention
of certain cemetery employees. Each plaintiff identified in the Consolidated
Complaint is seeking damages in excess of $15,000, but the Consolidated
Complaint alleges aggregate damages in excess of $40,000,000. In addition, in
May 1996, Sean M. O'Sullivan filed a lawsuit against Osiris and LGII and in
July 1996, Karen Schneider filed a lawsuit against Osiris and LGII. The
factual allegations underlying the O'Sullivan and Schneider complaint are
identical to those alleged in the Consolidated Complaint.
At the time the remains allegedly were disturbed, the Royal Palm Cemetery
was owned by Osiris. Osiris was acquired by LGII in March 1995. The insurance
carrier for Osiris has assumed the defense of these claims, subject to a
reservation of rights. The policy limit is $11,000,000. No provision with
respect to these lawsuits has been made in LGII's financial statements.
Rojas et al.
On February 22, 1995, Juan Rivera Rojas, Leyda Rivera Vega, the Conjugal
Partnership constituted between them, and Carlos Rivera Bustamente instituted
a legal action against the Parent Company, LGII and a subsidiary in the United
States District Court for the District of Puerto Rico. The complaint alleges
that the defendants breached a contract and ancillary agreements with the
plaintiffs relating to the purchase of funeral homes and cemeteries, and
committed related torts. The plaintiffs seek compensatory damages of
$12,500,000, and unspecified punitive damages (although LGII is advised by
counsel that there is no entitlement to punitive damages under Puerto Rican
law). LGII has filed a motion to dismiss the complaint on the grounds of
failure to join an indispensable party. In addition, LGII claims it has
suffered damages far in excess of the amount claimed by the plaintiffs as a
result of breach of contract and related torts on the part of the plaintiffs.
A subsidiary of LGII has filed a complaint seeking damages in excess of
$19,000,000 from the plaintiffs in the General Court of Justice of the
Commonwealth of Puerto Rico. LGII has determined that it is not possible to
predict the final outcome of these legal proceedings and that it is not
possible to establish a reasonable estimate of possible damages, if any, or
reasonably to estimate the range of possible damages that may be awarded to
the plaintiffs. Accordingly, no provision has been made in LGII's financial
statements.
Esner Estate
On February 1, 1995, Stuart B. Esner and Sandra Esner (the "Executors") as
co-executors for the Estate of Gerald F. Esner (the "Esner Estate") filed an
action in the Court of Common Pleas in Bucks County, Pennsylvania against
Osiris and a law firm that previously represented Osiris and its principal
shareholders, Gerald F. Esner, Lawrence Miller and William R. Shane. Messrs.
Miller and Shane currently are executive
F-56
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
officers of the Parent Company and LGII. The complaint alleged that Osiris
breached the terms of a Second Amended and Restated Shareholders' Agreement
among Messrs. Esner, Miller and Shane (the "Shareholders' Agreement") by
attempting to repurchase shares of Osiris held by the Esner Estate (the "Esner
Shares") without complying with the terms of the Shareholders' Agreement, and
that the law firm breached its fiduciary duty and committed malpractice in
connection with the drafting of the Shareholders' Agreement and its
representation of Esner and Osiris. The Executors asked the Court (i) to have
the value of Osiris reappraised pursuant to the terms of the Shareholders'
Agreement and (ii) to require Osiris to repurchase the Esner Shares pursuant
to a new appraisal and the alleged terms of the Shareholders' Agreement or,
alternatively, to pay the Esner Estate the fair value of the Esner Shares as
determined by the new appraisal.
On March 17, 1995, LGII purchased all of the issued and outstanding shares
of Osiris, including the Esner Shares. In connection with the purchase, LGII
entered into an indemnification agreement whereby Messrs. Miller and Shane
agreed to indemnify and hold LGII harmless with respect to any claims,
liabilities, losses and expenses, including reasonable attorneys' fees, in
connection with or arising from the Esner Estate litigation.
On April 9, 1996, the Executors filed a second complaint, which names
Messrs. Miller and Shane and LGII as defendants. The second complaint alleges
breach of contract, fraud and related claims against Messrs. Miller and Shane,
and that LGII joined in a civil conspiracy by acquiring Osiris. The Executors
request compensatory damages of $24,300,000 against the various defendants,
and seek punitive damages from Messrs. Miller and Shane. The two cases have
been consolidated by the Court. LGII has moved for a dismissal of the claims
against it for failure to state a claim upon which relief can be granted. That
motion has not yet been ruled upon. No provision with respect to these
lawsuits has been made in LGII's financial statements.
NOTE 5. INCOME TAXES
All income tax expense in 1995 and 1994 represents income taxes payable
outside Canada. Income tax differed from amounts computed by applying Canadian
federal and provincial income tax rates of 45.5% on earnings before income
taxes as a result of the following:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Expected income tax expense.................................. $ 6,180 $ 3,514
Foreign income taxed at lower rates.......................... (9,912) (2,283)
Equity in undistributed losses and earnings of investees..... 8,847 --
Other........................................................ 262 7
------- -------
$ 5,377 $ 1,238
======= =======
</TABLE>
NOTE 6. NOTES PAYABLE TO AFFILIATES AND DUE TO PARENT COMPANY
Notes payable to affiliates were issued in settlement of a preferred share
dividend and are due on demand. The amount due to the Parent Company has no
designated repayment terms. The notes payable to affiliates and due to Parent
Company are denominated in Canadian dollars and are non-interest bearing.
NOTE 7. REDEEMABLE PREFERRED SHARES
On January 31,1995 the authorized share capital of the Company was increased
by creating 500,000,000 non-voting Preferred shares with a par value of
Canadian $1.00 each. The holders of the preferred shares receive priority in
the payment of non-cumulative dividends, as declared annually by the directors
at a rate to be determined by resolution of the directors. Upon liquidation,
dissolution or wind-up, the preferred shareholders are entitled to
distribution equal to the redemption price before any assets of the Company
shall be distributed to
F-57
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the common shareholders. The preferred shares are redeemable at the Company's
option upon 21 days notice and retractable by the holder upon 120 days notice
at any time in whole or in part at the redemption price. The redeemable
preferred shares were issued upon the cancellation of 20,000 Common shares.
NOTE 8. CAPITAL STOCK
(a) Issued and outstanding
<TABLE>
<CAPTION>
NUMBER OF SHARES DOLLARS
-------------------------------------
1995 1994 1995 1994
---------- ---------------- -------
<S> <C> <C> <C> <C>
Common shares
Balance beginning of year............... 301 1 $ 88,177 $ 1
Issued during the year.................. 100,100 300 181,536 88,176
Repurchased by Company for cancellation
in exchange for redeemable preferred
shares................................. (20,000) -- (55,174) --
---------- ------ -------- -------
80,401 301 $214,539 $88,177
========== ====== ======== =======
</TABLE>
NOTE 9. RELATED PARTY TRANSACTIONS
The Company receives administrative support from the Parent Company at no
charge to the Company. Direct costs of the Company's operations are recorded
as expenses.
LFW is managed by an affiliated entity. General and administrative expenses
are primarily a result of amounts paid under this management agreement.
NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, receivables from affiliates, revolving loans
receivable, accounts payable and accrued liabilities approximate fair value
due to the short-term maturities of these instruments. Financial instruments
with a carrying value different from their fair value include:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------- -------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Investment in Arbor Memorial Services
Inc. ............................... $ 35,717 $ 44,410 $ 26,250 $ 26,997
Notes receivable from affiliate...... 405,650 427,186 206,000 198,656
Not practicable to estimate fair
value
Investment in affiliates........... 6,367 -- 9,464 --
Notes receivable from affiliate.... -- -- 14,155 --
Financial liabilities:
Not practicable to estimate fair
value
Notes payable to affiliates........ 4,275 -- -- --
Due to Parent company.............. 168,982 -- 157,575 --
Redeemable preferred shares........ 56,598 -- -- --
</TABLE>
F-58
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. NON-CASH TRANSACTIONS
The Company entered into the following non-cash transactions:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1995 1994
-------- -------
<S> <C> <C>
Investment in Arbor shares, funded through a capital
contribution from the Parent Company......................... $ -- $23,981
Investment in Arbor shares, funded by an increase in due to
Parent Company............................................... 7,338 3,368
Application of notes receivable and other transactions
reducing the balance due to Parent Company................... 23,619 --
Reduction of amount due to Parent Company upon issuance of
100,000 Common shares........................................ 154,334 --
Issuance of 77,200,000 Preferred shares and cancellation of
20,000 Common shares......................................... 55,174 --
Acquisition of 15% of Parent Company's interest in LGII's
Common shares in exchange for issuance of 100 Common shares.. 27,202 --
</TABLE>
In addition, as a result of the reorganization described in Note 1, the 1994
financial statements reflect capital contributions from the Parent Company of
$64,196,000, assets of $65,868,000 and a foreign exchange adjustment of
$1,672,000.
NOTE 12. SUBSEQUENT EVENTS
At various dates prior to April 30, 1996, the Company received approximately
$147,960,000 of advances from the Parent Company and $40,792,000 of capital
contributions from the Parent Company, which amounts were used primarily to
fund additional loans to LGII.
On May 9, 1996, the Company sold 13% of LFW to the Parent Company for the
Company's net book value of approximately $78,700,000. The Company's
percentage ownership in LFW was reduced to 85% as a result. No gain or loss
was recorded on the transaction.
At various dates in 1996, the Company increased its investment in LGII by an
aggregate amount of approximately $26,181,000, which amounts were financed
through capital contributions from the Parent Company. The Company's
percentage ownership in LGII remained the same as a result of these
transactions.
On May 31, 1996, the Company issued a guarantee and pledged the shares of
its subsidiaries as collateral to secure debt owed by the Parent Company and
LGII to their senior lenders. As of June 30, 1996, such indebtedness
aggregated $919,888,000. In connection with this transaction, the Company's
notes receivable from LGII were secured by LGII's financial assets and shares
of its subsidiaries and were subordinated to LGII's indebtedness to senior
lenders. On August 1, 1996, the Company and LGII amended the notes receivable
from LGII, increasing the interest rate on the notes to 11.5% per annum.
F-59
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and term deposits............................ $ 31 $ 81
Receivables, net of allowances.................... 17,323 --
Accrued interest receivable from affiliate........ 16,458 --
Notes receivable from affiliate................... -- 24,831
-------- --------
33,812 24,912
Investment.......................................... 37,212 35,717
Investments in affiliate............................ 34,587 6,367
Revolving credit loans.............................. 1,334 --
Notes receivable from affiliate..................... 590,040 405,650
Note receivable from Parent company................. 79,135 --
Other assets........................................ 829 291
-------- --------
$776,949 $472,937
======== ========
LIABILITIES AND SHAREHOLDER EQUITY
Current liabilities
Accounts payable and accrued liabilities.......... $ 2,055 $ 5,402
Due to affiliate.................................. 1,079 --
Notes payable to affiliate........................ 4,281 4,275
-------- --------
7,415 9,677
Due to Parent company............................... 286,016 168,982
Minority interest................................... 93,573 8,508
Redeemable preferred shares
$1 Canadian par value, 500,000,000 shares
authorized,
77,200,000 shares issued and outstanding......... 56,686 56,598
Shareholder equity
Capital stock, no par value, 1,000,000 shares
authorized,
80,401 shares issued and outstanding............. 281,512 214,539
Retained earnings................................. 47,854 10,415
Foreign exchange adjustment....................... 3,893 4,218
-------- --------
333,259 229,172
-------- --------
$776,949 $472,937
======== ========
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-60
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (UNAUDITED)
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ------------------
1996 1995 1996 1995
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenue from affiliates
Interest income................... $ 16,264 $ 10,222 $ 41,923 $ 22,740
Other revenue..................... 382 386 1,415 846
--------- --------- -------- --------
16,646 10,608 43,338 23,586
Expenses
General and administrative........ 261 209 966 516
--------- --------- -------- --------
Earnings from operations............ 16,385 10,399 42,372 23,070
Equity in earnings (losses) of
investees.......................... 844 (2,128) 3,473 (1,434)
Minority interest................... (2,180) (175) (3,760) (388)
--------- --------- -------- --------
Earnings before income taxes........ 15,049 8,096 42,085 21,248
Current income tax expense.......... 1,785 1,664 4,646 3,692
--------- --------- -------- --------
Net earnings........................ $ 13,264 $ 6,432 $ 37,439 $ 17,556
Retained earnings, beginning of
period............................. 34,590 17,608 10,415 6,484
--------- --------- -------- --------
Retained earnings, end of period.... $ 47,854 $ 24,040 $ 47,854 $ 24,040
========= ========= ======== ========
</TABLE>
See accompanying notes to interim consolidated financial statements
F-61
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1996 1995
-------- --------
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings............................................. $ 37,439 $ 17,556
Items not affecting cash
Minority interest...................................... 3,760 388
Equity in losses (earnings) of investees............... (3,473) 1,434
Net changes in other non-cash balances................... (16,969) 6,084
-------- --------
20,757 25,462
-------- --------
Investing
Loans to affiliate....................................... (194,960) (252,519)
Repayments of notes receivable from affiliate............ 35,401 46,113
Purchase of accounts receivable from affiliate........... (18,393) --
-------- --------
(177,952) (206,406)
-------- --------
Financing
Advances from Parent Company............................. 136,026 180,916
Repayment of advances from Parent Company................ (19,673) --
Capital contribution from the Parent Company............. 40,792 --
-------- --------
157,145 180,916
-------- --------
Decrease in cash and cash equivalents during the period.... (50) (28)
Cash and cash equivalents, beginning of period............. 81 58
-------- --------
Cash and cash equivalents, end of period................... $ 31 $ 30
======== ========
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-62
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
Neweol Investments Ltd. ("Neweol") was incorporated on November 6, 1992
under the federal laws of Canada and continued on June 3, 1993 under the laws
of the Province of British Columbia as a wholly owned subsidiary of The Loewen
Group Inc. ("Parent Company"). The principal activities of the Company, which
commenced in 1994, are to provide financing to affiliates and to hold
investments in affiliated and non-affiliated companies. The interim
consolidated financial statements (unaudited) include the accounts of those
subsidiary entities described in Basis of consolidation and reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial results for the interim periods. The
financial statements have been prepared on a basis consistent with the
accounting policies described in the Company's financial statements as of and
for the year ended December 31, 1995, and should be read in conjunction
therewith.
The interim consolidated financial statements (unaudited) have been prepared
in United States dollars in accordance with accounting principles generally
accepted in the United States.
Basis of consolidation
These interim consolidated financial statements have been prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and for inclusion in the registration statement on Form S-
4 of Loewen Group International, Inc. ("LGII") and the Parent Company. The
accompanying interim consolidated financial statements (unaudited) represent
Neweol Investment Ltd.'s interests in its majority-owned subsidiaries, Loewen
Finance (Wyoming) Limited Liability Company, Loewen Trading Corporation, Eagle
Financial Associates, LLC, and 1096952 Ontario Limited, and its equity
investment in its affiliate LGII, (collectively the "Company"). These
interests constitute the ongoing operations of Neweol subsequent to a
reorganization that occurred on July 19 and August 13, 1996. These interim
consolidated financial statements exclude certain subsidiaries of Neweol which
were transferred to an affiliate effective July 19 and August 13, 1996 and
accordingly are not intended to be a complete presentation of the historical
consolidated financial position, results of operations, and cash flows of
Neweol.
All significant intercompany balances and transactions have been eliminated
from the consolidated financial statements.
NOTE 2. PURCHASE OF RECEIVABLES
On August 6, 1996, the Company entered into an agreement to purchase
cemetery installment contract receivables from subsidiaries of LGII for a
total purchase price of $18,393,000. The Company has recorded the purchase at
the gross amount of the cemetery installment contract receivables net of the
allowance for doubtful accounts, unearned finance income and purchase
discount. The purchase discount and unearned finance income will be recognized
as interest income over the collection period of the contract receivables. At
September 30, 1996, the Company has recognized interest income of $264,000.
On August 1, 1996, the Company entered into a management and receivables
servicing agreement with an affiliate, Loewen Financial Corporation ("LFC"),
whereby LFC performs specified collection services on the receivables for a
management and servicing fee equal to 109.8% of their cost of servicing the
receivables.
Proceeds received by LFC from the collection of the receivables are advanced
directly to LGII as loans from the Company pursuant to a Revolving Credit
Facility entered into on August 1, 1996. Revolving credit loans may be made up
to a maximum of $250,000,000 and bear interest at the Libor rate plus 300
basis points, as computed by the Company at September 30, 1996. Amounts
outstanding under the Revolving Credit Facility are due on demand or December
31, 1999. As at September 30, 1996, the Company has advanced $1,334,000 to
LGII pursuant to the Facility.
F-63
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
NOTE 3. NON-CASH TRANSACTIONS
On May 9, 1996, the Company sold 13% of Loewen Finance (Wyoming) Limited
Liability Company to the Parent Company in exchange for a Note receivable of
approximately $107,800,000 Canadian ($78,700,000 US).
At various dates in 1996, the company increased its investment in LGII by an
aggregate amount of approximately $26,181,000 US, which amounts were financed
through capital contributions from the Parent Company.
NOTE 4. LEGAL PROCEEDINGS AND CONTINGENCIES OF LGII
LGII is subject to material legal proceedings and contingencies as described
below.
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 Parent Company
securities against the Parent Company and five individuals who were officers
of the Parent Company (four of whom were also directors) in the United States
District Court for the Eastern District of Pennsylvania. LGII, Loewen Group
Capital, L.P. ("LGC") and the lead underwriters of the 1994 offering of
Monthly Income Preferred Securities by LGII ("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 the
Parent Company's Common shares against the Parent Company and the same
individual defendants in the United States District Court for the Southern
District of Mississippi alleging Federal securities law violations and related
common law claims. On December 1, 1995, a class action lawsuit was filed on
behalf of a class of purchasers of the Parent Company's securities against the
Parent 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 Parent Company's anticipated liability in connection
with the Gulf National litigation. The Pennsylvania class actions also alleged
failure to disclose the potential liabilities in connection with the Provident
litigation. The Parent Company settled the lawsuits with Gulf National and
Provident during the first quarter of 1996.
Reference is made to the Parent Company's periodic reports previously filed
with the Commission for additional information regarding the Parent 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
Parent 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, 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 Parent 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.
F-64
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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 Parent Company that they would seek
indemnity from the Parent Company for costs incurred. The Parent Company has
agreed to pay the Underwriters' costs through the date of dismissal. The
Parent Company expects that the Underwriters will seek further indemnity from
the Parent Company if any of the claims against the Underwriters are
reinstated.
The Parent Company referred the claims to its insurance carrier under its
directors and officers insurance policy. On February 9, 1996, the carrier
denied coverage of the claim. The Parent Company believes that such denial was
improper. On March 21, 1996, the Parent Company commenced an action in British
Columbia Supreme Court seeking a declaration that the policy covers
indemnification with respect to the Class Action. As of the date hereto, the
Supreme Court has not ruled on the action. The Parent 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 Parent 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 consolidated financial statements of the Parent Company
or LGII.
Derivative Suit
On September 17, 1996, Service Corporation International ("SCI") publicly
announced its desire to combine with the Parent 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 Parent Company's
shareholders. See Note 5 for additional information.
On September 26, 1996, Jerry Krim filed a purported derivative and class
action against the Parent Company's current directors and one former director
and against the Parent Company as a nominal defendant in the Los Angeles
County Superior Court. The plaintiff alleges, on behalf of himself and all of
the Parent Company'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, the Parent Company and those
individual defendants upon whom
F-65
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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 Parent
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 Parent 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
Parent 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 Parent
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 Parent Company's actions have tortiously interfered with SCI's
"prospective business relationships" with the Parent Company's shareholders.
As relief for this assertion, SCI seeks an unspecified amount of damages for
claimed injuries resulting from the Parent 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 Parent
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 Parent Company believes that the action is
without merit and intends to contest the action vigorously.
On October 10, 1996, the Parent 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 preliminary and permanently from completing its unsolicited
exchange offer on the grounds that a combination of SCI and the Parent Company
would violate Section 7 of the Clayton Act. According to the complaint, SCI's
unsolicited offer for control of the Parent 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 Parent Company also accuses SCI and Equity
Corporation International Inc., a competitor of the Parent Company in which
SCI has a 40% interest of conspiracy to eliminate the Parent Company as a
competitive force in the funeral services industry, in violation of Section 1
of the Sherman Act. On October 10, 1996, the Parent Company filed Motions for
Expedited Discovery and for a Preliminary Injunction to enjoin the unsolicited
exchange offer. The Parent Company filed a Verified First Amended Complaint on
October 15, 1996. The Parent Company takes the position that irreparable harm
will result from SCI's further pursuit of its unsolicited exchange offer, and
accordingly, the Parent Company intends to prosecute its claims zealously.
On October 11, 1996, the Parent 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 Parent 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 Parent 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
F-66
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
Preliminary Injunction on October 28, 1996. Magistrate Judge Johnson
recommended that the District Court restrain the Parent Company from
proceeding in the New York Action (or elsewhere) until it had resolved the
Parent 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 Parent Company's motion to dismiss was held on
November 6, 1996. The Parent 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
Parent 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 Parent Company
as a defendant (on an alter ego theory) and includes claims for negligent
retention of certain cemetery employees. Each plaintiff identified in the
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 Parent 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 LGII'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 Parent Company, LGII and a subsidiary in the United
States District Court for the District of Puerto Rico. The complaint alleges
that the defendants breached a contract and ancillary agreements with the
plaintiffs relating to the purchase of funeral homes and cemeteries, and
committed related torts. The plaintiffs seek compensatory damages of
$12,500,000, and unspecified punitive damages (although LGII is advised by
counsel that there is no entitlement to punitive damages under Puerto Rican
law). LGII has filed a motion to dismiss the complaint on the grounds of
failure to join an indispensable party. In addition, LGII claims it has
suffered damages far in excess of the amount claimed by the plaintiffs as a
result of breach of contract and related torts on the part of the plaintiffs.
A subsidiary of LGII has filed a complaint seeking damages in excess of
$19,000,000 from the plaintiffs in the General Court of Justice of the
Commonwealth of Puerto Rico. LGII has determined that it is not possible at
this time to predict
F-67
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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
consolidated financial statements of the Parent Company or LGII.
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 Parent Company and
LGII. The complaint alleged that Osiris breached the terms of a Second Amended
and Restated Shareholders' Agreement among Messrs. Esner, Miller and Shane
(the "Shareholders' Agreement") by attempting to repurchase shares of Osiris
held by the Esner Estate (the "Esner Shares") without complying with the terms
of the Shareholders' Agreement, and that the law firm breached its fiduciary
duty and committed malpractice in connection with the drafting of the
Shareholders' Agreement and its representation of Esner and Osiris. The
Executors asked the Court (i) to have the value of Osiris reappraised pursuant
to the terms of the Shareholders' Agreement and (ii) to require Osiris to
repurchase the Esner Shares pursuant to a new appraisal and the alleged terms
of the Shareholders' Agreement or, alternatively, to pay the Esner Estate the
fair value of the Esner Shares as determined by the new appraisal.
On March 17, 1995, LGII purchased all of the issued and outstanding shares
of Osiris, including the Esner Shares. In connection with the purchase, LGII
entered into an indemnification agreement whereby Messrs. Miller and Shane
agreed to indemnify and hold LGII harmless with respect to any claims,
liabilities, losses and expenses, including reasonable 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 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
consolidated financial statements of the Parent Company or LGII.
Environmental contingencies and liabilities
LGII's operations are subject to numerous environmental laws, regulations
and guidelines adopted by various governmental authorities in the
jurisdictions in which LGII operates. Liabilities are recorded when
environmental liabilities are either known or considered probable and can be
reasonably estimated. LGII policies are designed to control environmental risk
upon acquisition through extensive due diligence and corrective measures taken
prior to acquisition. LGII believes environmental liabilities to be immaterial
individually and in the aggregate.
Other
LGII 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 LGII's
financial position, results of operation or liquidity.
F-68
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
NOTE 5. 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 Parent Company, in which
SCI expressed an interest in discussing with the Parent 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 Parent 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 Parent 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 Parent 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 Parent Company unanimously determined that the Proposed Offer is
inadequate and not in the best interests of the Parent Company and its
shareholders. The Board of Directors of the Parent Company has recommended
that the shareholders of the Parent 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 Parent Company in the context of a threatened
change in control of the Parent Company, the Board of Directors of the Parent
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 executives and managers of
the Parent Company and LGII ("Executives"). With the exception of Mr. Loewen,
each of the executive officers and managers 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 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 Parent 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 Parent Company
and LGII 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 Parent
Company authorized the Parent Company to enter into indemnification agreements
with certain of its directors and officers whereby the Parent Company will
agree to indemnify such persons against all costs, charges and expenses
incurred by reason of being a director or officer of the Parent Company.
The Parent 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 Parent Company
has agreed to pay advisory fees to Smith Barney and Nesbitt Burns ranging from
$1,000,000 to
F-69
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
$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 Parent 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 Parent 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 Parent Company has also retained Morrow & Co., Inc. ("Morrow") and D.F.
King & Co., Inc. ("King") to assist the Parent Company in connection with its
communications with its shareholders with respect to, and to provide other
services to the Parent Company in connection with the SCI hostile takeover
proposal. The Parent 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 Parent
Company has agreed to indemnify Morrow and King against certain liabilities
arising out of or in connection with their respective engagements.
The Parent Company has also retained Broadgate Consultants, Inc.
("Broadgate") as the Parent 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 Parent Company has agreed to indemnify
Broadgate against certain liabilities arising out of or in connection with its
engagement.
The Parent 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.
F-70
<PAGE>
AUDITORS' REPORT TO THE MEMBERS
We have audited the accompanying balance sheets of Loewen Finance (Wyoming)
Limited Liability Company as at December 31, 1995 and 1994 and the related
statements of income and retained earnings and cash flows for the year ended
December 31, 1995 and for the period April 27, 1994 to December 31, 1994. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Loewen Finance (Wyoming)
Limited Liability Company as at December 31, 1995 and 1994, and the results of
its operations and its cash flows for the year and period then ended in
conformity with generally accepted accounting principles.
/s/ Peat Marwick
Chartered Accountants
Bridgetown, Barbados
February 9, 1996
F-71
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash................................................ $ 106 $ 27,551
Accrued interest and prepaid expenses............... -- 34,019
Due from related companies.......................... 331,286 198,113
------------ ------------
$ 331,392 $ 259,683
Loans receivable from affiliated companies (note
3)................................................. 430,481,000 213,595,000
------------ ------------
Total Assets.................................... $430,812,392 213,854,683
============ ============
LIABILITIES AND MEMBERS' EQUITY
Due to affiliated companies......................... $ 148,685 $ 115,387
Taxes payable (note 6).............................. 5,286,973 1,238,272
------------ ------------
Total liabilities............................... 5,435,658 1,353,659
------------ ------------
MEMBERS' EQUITY
Capital (note 4)
100 units authorised, issued and outstanding........ 100 100
Additional contributions............................ 397,150,000 206,000,000
------------ ------------
Total capital................................... 397,150,100 206,000,100
Retained earnings................................... 28,226,634 6,500,924
------------ ------------
Total members' equity........................... 425,376,734 212,501,024
------------ ------------
Total Liabilities and Members' Equity........... $430,812,392 $213,854,683
============ ============
</TABLE>
See accompanying notes to financial statements
F-72
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1995 AND FOR THE EIGHT MONTH PERIOD ENDED DECEMBER 31,
1994
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Revenue
Interest on affiliated companies loans receivable... $33,128,490 $ 7,593,970
Less, foreign withholding tax....................... (5,040,470) (1,160,880)
----------- -----------
Interest (net of foreign withholding tax)........... 28,088,020 6,433,090
----------- -----------
Other revenue
Financial services (note 5)....................... 141,940 68,600
Other services.................................... 1,059,506 286,942
----------- -----------
1,201,446 355,542
----------- -----------
Total revenue..................................... 29,289,466 6,788,632
Expenses
Administrative and general.......................... 726,801 210,316
----------- -----------
Income before taxation................................ 28,562,665 6,578,316
Taxation.............................................. 336,031 77,392
----------- -----------
Net income for the year/period........................ $28,226,634 $ 6,500,924
Retained earnings, beginning of year/period........... 6,500,924 --
----------- -----------
34,727,558 6,500,924
Dividends paid........................................ 6,500,924 --
----------- -----------
Retained earnings, end of year/period................. $28,226,634 $ 6,500,924
=========== ===========
</TABLE>
See accompanying notes to financial statements
F-73
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995 AND FOR THE EIGHT MONTH PERIOD ENDED DECEMBER 31,
1994
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Operating Activities
Net income for the year/period.................. $ 28,226,634 $ 6,500,924
Add (deduct) changes in non-cash working capital
balances relating to operations:
Accrued interest and prepaid expenses......... 34,019 (34,019)
Due from related companies.................... (133,173) (198,113)
Due to related companies...................... 33,298 115,387
Taxes payable................................. 4,048,701 1,238,272
------------- -------------
Cash provided by operating activities....... 32,209,479 7,622,451
------------- -------------
Investing Activities
Loans receivable from affiliated companies...... (216,886,000) (213,595,000)
------------- -------------
Cash applied to investing activities........ (216,886,000) (213,595,000)
------------- -------------
Financing Activities
Capital contributions........................... 191,150,000 206,000,100
Dividends paid.................................. (6,500,924) --
------------- -------------
Cash provided by financing activities....... 184,649,076 206,000,100
------------- -------------
(Decrease) increase in cash during the
year/period.................................... (27,445) 27,551
Cash at beginning of year/period................ 27,551 --
------------- -------------
Cash at end of year/period...................... $ 106 $ 27,551
============= =============
</TABLE>
See accompanying notes to financial statements.
F-74
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(EXPRESSED IN U.S. DOLLARS)
1. GENERAL
The company was formed under the Wyoming Limited Liability Company Act on
March 30, 1994.
It was registered in Barbados as an external company under the provisions of
the Companies Act and conducts its principal activities as a licensee under the
International Business Companies Act. It commenced operations on August 4,
1994, after having obtained its IBC license on April 27, 1994.
The principal activity of the company is to act as a finance company.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of accounting
The company follows accrual basis accounting and in all material respects,
financial statements have been prepared in accordance with generally accepted
accounting principles in the U.S.A.
(b) Corporation tax
The company is subject to taxation in accordance with Section 10 of the
Barbados International Business Companies Act, at rates between 2.5% to 1.0 %.
For U.S. tax purposes the company is viewed as a fiscally transparent entity
whereby its income is deemed to be that of its partners.
3. LOANS RECEIVABLE FROM AFFILIATED COMPANIES
Loans receivable comprise the following:
<TABLE>
<CAPTION>
YEAR OF
SCHEDULED
REPAYMENT 1995 1994
--------- ------------- -------------
<S> <C> <C> <C>
Term loans............................ 1999 $ 206,000,000 $ 206,000,000
Term loans............................ 2000 199,650,000 --
------------- -------------
405,650,000 206,000,000
Revolving credit loans................ Demand 24,831,000 7,595,000
------------- -------------
$ 430,481,000 $ 213,595,000
============= =============
</TABLE>
Interest is earned at rates ranging from 9.06% to 10.01% per annum on the
term loans (1994--9.83% per annum) and at U.S. prime plus 2% on a quarterly
basis on the revolving credit loans (1994--U.S prime plus 2%).
F-75
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. CAPITAL
The capital of the company is divided into units with no par value. After
the initial capital contributions, members may by agreement make further
contributions in proportion to the units they hold. Changes in capital were as
follows:
<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
NUMBER AMOUNTS NUMBER AMOUNTS
UNITS: ------ ------------ ------ ------------
<S> <C> <C> <C> <C>
Outstanding, beginning of
year/period....................... 100 $ 100 -- $ --
Issued during year/period.......... -- -- 100 100
--- ------------ --- ------------
Outstanding, end of year/period.... 100 100 100 100
--- ------------ --- ------------
Contributions:
Balance, beginning of year/period.. 206,000,000 --
Additional during year/period...... 191,150,000 206,000,000
------------ ------------
Balance, end of year/period........ 397,150,000 206,000,000
------------ ------------
Total Capital.................... $397,150,100 $206,000,100
------------ ------------
</TABLE>
The company's units are held by:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Neweol Investments Ltd............................................ 98 98
The Loewen Group Inc. ............................................ 2 2
--- ---
Total........................................................... 100 100
=== ===
</TABLE>
5. FINANCIAL SERVICES
This amount represents facility and servicing fees pertaining to the
revolving credit loans referred to at Note 3 above.
6. TAXES PAYABLE
Taxes payable comprise the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Withholding tax on foreign source interest income.... $5,040,470 $1,160,880
Corporation tax...................................... 246,503 77,392
---------- ----------
$5,286,973 $1,238,272
========== ==========
</TABLE>
7. COMPARATIVE FIGURES
Certain of the comparative figures have been reclassified to conform with
the presentation adopted in the current year.
F-76
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
BALANCE SHEETS
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash................................................ $ 221 $ 106
Accrued interest receivable from affiliates......... 16,458,439 --
Due from affiliated companies....................... -- 331,286
------------ ------------
16,458,660 331,392
Loans receivable from affiliated companies.......... 590,039,660 430,481,000
------------ ------------
Total Assets...................................... $606,498,320 $430,812,392
============ ============
LIABILITIES AND MEMBERS' EQUITY
Due to affiliated companies......................... $ 347,313 $ 148,685
Taxes payable....................................... 2,036,672 5,286,973
------------ ------------
Total liabilities................................. 2,383,985 5,435,658
------------ ------------
Members' Equity
Capital (note 3)
100 units authorized, issued and outstanding........ 100 100
Additional contributions............................ 589,739,660 397,150,000
------------ ------------
Total capital..................................... 589,739,760 397,150,100
Retained earnings................................... 14,374,575 28,226,634
------------ ------------
Total members' equity............................. 604,114,335 425,376,734
------------ ------------
Total Liabilities and Members' Equity............. $606,498,320 $430,812,392
============ ============
</TABLE>
See accompanying notes to interim financial statements
F-77
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------- --------------------------------
1996 1995 1996 1995
---------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUE
Interest on affiliated
companies loans
receivable............. $ 15,991,104 $ 10,222,987 $ 41,650,389 $ 22,740,320
Less, foreign
withholding tax........ (1,615,102) (1,560,043) (4,215,703) (3,461,125)
---------------- ---------------- --------------- ---------------
Interest (net of foreign
withholding tax)....... 14,376,002 8,662,944 37,434,686 19,279,195
Other revenue
Financial services.... -- 75,000 89,244 106,063
Other services........ 382,130 311,023 1,325,908 740,432
---------------- ---------------- --------------- ---------------
382,130 386,023 1,415,152 846,495
---------------- ---------------- --------------- ---------------
Total revenue....... 14,758,132 9,048,967 38,849,838 20,125,690
EXPENSES
Administrative and
general................ 222,218 208,050 908,542 511,975
---------------- ---------------- --------------- ---------------
Income before taxation.. 14,535,914 8,840,917 37,941,296 19,613,715
Taxation................ 161,510 104,089 421,570 230,828
---------------- ---------------- --------------- ---------------
Net income for the
period................. 14,374,404 8,736,828 37,519,726 19,382,887
Retained earnings,
beginning of period.... 23,145,322 10,646,059 28,226,634 6,500,924
---------------- ---------------- --------------- ---------------
37,519,726 19,382,887 65,746,360 25,883,811
Dividends paid.......... (23,145,151) -- (51,371,785) (6,500,924)
---------------- ---------------- --------------- ---------------
Retained earnings, end
of period.............. $ 14,374,575 $ 19,382,887 $ 14,374,575 $ 19,382,887
================ ================ =============== ===============
</TABLE>
See accompanying notes to interim financial statements
F-78
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
STATEMENTS OF CASH FLOWS (UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income for the period................... $ 37,519,726 $ 19,382,887
Add (deduct) changes in non-cash working
capital balances relating to operations:
Accrued interest receivable from affiliate.. (16,458,439) 34,019
Due from affiliated companies............. 331,286 (30,444)
Due to affiliated companies............... 198,628 (111,888)
Taxes payable............................. (3,250,301) 2,453,983
--------------- ---------------
Cash provided by operating activities..... 18,340,900 21,728,557
--------------- ---------------
INVESTING ACTIVITIES
Loans advanced to affiliated companies...... (194,959,660) (252,519,000)
Loan repayments from affiliated companies... 35,401,000 46,113,000
--------------- ---------------
Cash applied to investing activities...... (159,558,660) (206,406,000)
--------------- ---------------
FINANCING ACTIVITIES
Capital contributions....................... 192,589,660 191,150,000
Dividends paid.............................. (51,371,785) (6,500,924)
--------------- ---------------
Cash provided by financing activities..... 141,217,875 184,649,076
--------------- ---------------
Increase (decrease) in cash during the
period..................................... 115 (28,367)
Cash at beginning of period................. 106 27,551
--------------- ---------------
Cash at end of period....................... $ 221 $ (816)
=============== ===============
</TABLE>
See accompanying notes to interim financial statements.
F-79
<PAGE>
LOEWEN FINANCE (WYOMING) LIMITED LIABILITY COMPANY
NOTES TO INTERIM FINANCIAL STATEMENTS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND THE YEAR ENDED DECEMBER 31, 1995
(EXPRESSED IN U.S. DOLLARS)
1. Basis of Presentation
The interim financial statements (unaudited) include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial results for the interim periods. The financial
statements have been prepared on a basis consistent with the accounting
policies described in the Company's financial statements as of, and for the
year ended December 31, 1995, and should be read in conjunction therewith.
2. Loans Receivable from Affiliated Companies
During the nine months ended September 30, 1996, the Company advanced
$194,959,660 to LGII and received repayments on the revolving credit loans of
$35,401,000. Effective August 1, 1996, the Company and LGII amended the notes,
increasing the interest rate on the term loans and the revolving credit loans
to 11.5%.
3. Capital
During the nine months ended September 30, 1996, the Company received capital
contributions of $192,589,660 (1995--$191,150,000). On May 9,1996, Neweol
Investments Ltd. sold 13 units of the Company to The Loewen Group Inc.
F-80
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER MADE HEREBY, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER OR A SOLICITATION
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER
OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS,
NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Information by Reference.......................... 4
Disclosure Regarding Forward-Looking Statements............................ 5
Financial Information...................................................... 5
Prospectus Summary......................................................... 6
Risk Factors............................................................... 17
Recent Developments........................................................ 19
Use of Proceeds............................................................ 23
Consolidated Capitalization................................................ 23
The Exchange Offer......................................................... 24
Business................................................................... 32
Legal Proceedings.......................................................... 38
Description of Exchange Notes.............................................. 43
Description of Certain Other Indebtedness.................................. 70
Plan of Distribution....................................................... 70
Certain U.S. Federal Income Tax Considerations............................. 72
Certain Canadian Federal Tax Considerations................................ 74
Legal Matters.............................................................. 75
Experts.................................................................... 75
Enforceability of Certain Civil Liabilities Against Guarantor.............. 75
Financial Statements of Certain Subsidiaries............................... F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOEWEN GROUP INTERNATIONAL, INC.
$125,000,000
7 3/4% SERIES 3 SENIOR GUARANTEED
NOTES (REGISTERED) DUE 2001
FOR
ALL OUTSTANDING
7 3/4% SERIES 3 SENIOR
GUARANTEED NOTES DUE 2001
AND
$225,000,000
8 1/4% SERIES 4 SENIOR GUARANTEED
NOTES (REGISTERED) DUE 2003
FOR
ALL OUTSTANDING
8 1/4% SERIES 4 SENIOR
GUARANTEED NOTES DUE 2003
GUARANTEED BY
THE LOEWEN GROUP INC.
[LOEWEN GROUP INTERNATIONAL, INC. LOGO APPEARS HERE]
--------
PROSPECTUS
--------
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
LGII
Section 145 of the Delaware General Corporation Law ("Delaware Law")
permits, subject to certain conditions, a corporation to indemnify its
directors, officers, employees and agents against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such director, officer, employee or agent in connection
with threatened, pending or completed actions, suits and proceedings (other
than actions by or in the right of the corporation ) in or to which any of
such persons is a party or is threatened to be made a party.
Section 5.01 of the By-laws of LGII provides that LGII may indemnify its
directors, officers, employees and agents to the fullest extent permitted by
Delaware Law, including the advancement of funds, provided that such person
acted in good faith and in a manner such person reasonably believed to be in
or not opposed to the best interests of LGII and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such person's conduct
was unlawful.
The Board of Directors of LGII has determined that the expenses of the
officers named in the Shareholder Suits incurred in defending the Shareholder
Suits should be paid by LGII from time to time in advance of the final
disposition of such proceedings, subject to each such individual entering into
an undertaking to repay all amounts paid by LGII if it is ultimately
determined that such individual is not entitled to be indemnified by LGII
under the Delaware General Corporation Law.
LOEWEN
Section 152 of the Company Act of British Columbia provides in part that:
A company may, with the approval of the court, indemnify a director or
former director of the company or a director or former director of a
corporation of which it is or was a shareholder, and his heirs and personal
representatives, against all costs, charges and expenses, including any amount
paid to settle an action or satisfy a judgment, actually and reasonably
incurred by him, including an amount paid to settle an action or satisfy a
judgment in a civil, criminal or administrative action or proceeding to which
he is made a party by reason of being or having been a director, including an
action brought by the company or corporation, if
(a) he acted honestly and in good faith with a view to the best interests of
the corporation of which his is or was a director; and
(b) in the case of a criminal or administrative action or proceeding, he had
reasonable grounds for believing that his conduct was lawful.
Part 19 of Loewen's Articles provides that Loewen shall indemnify its
directors generally in accordance with the provisions of Section 152 and that
Loewen shall indemnify its Secretary and any Assistant Secretary against all
costs, charges and expenses incurred that have arisen as a result of serving
Loewen in such capacity. The Articles further provide that Loewen may
indemnify any of its officers, employees or agents against all costs, charges
and expenses incurred as a result of acting as an officer, employee and agent
of Loewen.
Pursuant to indemnification agreements, Loewen has agreed to indemnify its
directors and certain officers against all costs, charges and expenses
incurred by reason of being a director or officer of Loewen. Loewen's duty to
indemnify is subject to court approval and conditioned upon the individual
acting honestly and in good faith with a view to the best interests of Loewen.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
Exhibit
Number Description
------- -----------
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY-HOLDERS, INCLUDING
INDENTURES
4.1 Indenture, dated as of October 1, 1996, by and between LGII,
Loewen and Fleet National Bank, as Trustee, with respect to
the Series 3 and 4 Notes (1)
4.2 Purchase Agreement dated October 1, 1996, made by and among
LGII, Loewen and Smith Barney Inc., Alex. Brown & Sons
Incorporated, Nesbitt Burns Securities Inc., RBC Dominion
Securities Corporation and Midland Walwyn Capital
Corporation (1)
4.3 Third Amendment to Operating Credit Agreement, dated for
reference July 15, 1996, among Loewen, LGII and Royal Bank
of Canada (1)
4.4 Amended and Restated Operating Credit Agreement, dated for
reference July 15, 1996, between Loewen and Royal Bank of
Canada (1)
4.5 Form of Senior Guarantee of LGII's Series 3 and 4 Notes (1)
4.6 Form of Global Series 3 and 4 Outstanding Note of LGII (1)
4.7 Form of Physical Series 3 and 4 Outstanding Note of LGII (1)
4.8 Form of Global Series 3 and 4 Exchange Note
4.9 Form of Physical Series 3 and 4 Exchange Note
4.10 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 as Trustee, with respect
to Senior Guaranteed Notes of LGII (2)
4.11 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 (3)
4.12 Receipt Agreement, dated as of January 3, 1996, for the
Cumulative Redeemable Convertible First Preferred Shares
Series C of Loewen (2)
4.13 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 (4)
4.14 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 (5)
4.15 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
(5)
4.16 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. (4)
4.17 MIPS Guarantee Agreement, dated August 15, 1994 (6)
4.18 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)
4.19 Exchange Acknowledgment by Loewen, with respect to the 1994
Exchangeable Floating Rate Debentures due July 15, 2001
issued by LGII, dated June 15, 1994 (4)
4.20 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)
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
4.21 Guaranty dated as of June 14, 1994 by Loewen in favor of the
MEIP Agent for the ratable benefit of the MEIP Banks (4)
4.22 Guaranty dated as of June 14, 1994 by LGII in favor of the
MEIP Agent for the ratable benefit of the MEIP Banks (4)
4.23 Security Agreement, dated as of June 14, 1994, by and
between LMIC and the MEIP Agent (4)
4.24 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 (4)
4.25 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 (4)
4.26 Guaranty Agreement by Loewen re Series E Notes, dated for
reference February 1, 1994 (4)
4.27 Guaranty Agreement by LGII re Series D Notes, dated for
reference April 1, 1993 (4)
4.28 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 (4)
4.29 Guaranty Agreement by Loewen re Series A Notes and Series B
Notes, dated for reference October 1, 1991 (4)
4.30 Guaranty Agreement by LGII re Series C Notes, dated for
reference October 1, 1991 (4)
4.31 Form of Senior Guarantee of LGII's Series 1 and 2 Notes (3)
4.32 Form of Global Series 1 and 2 Outstanding Note of LGII (2)
4.33 Form of Physical Series 1 and 2 Outstanding Note of LGII (2)
4.34 Form of Global Series 1 and 2 Exchange Note of LGII (3)
4.35 Form of Physical Series 1 and 2 Exchange Note of LGII (3)
4.36 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 (3)
4.37 Collateral Trust Agreement, dated as of May 15, 1996, among
Bankers Trust Company, as trustee, TLGI, LGII and various
other pledgers (3)
4.38 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 (3)
4.39 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 (3)
4.40 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 (3)
4.41 Loewen and LGII hereby agree to furnish to the Commission,
upon request, a copy of the instruments which define the
rights of holders of long-term debt of the Company. None of
such instruments not included as exhibits herein
collectively represents long-term debt in excess of 10% of
the consolidated total assets of the Company.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
5 OPINIONS RE LEGALITY
5.1 Opinion of Thelen, Marrin, Johnson & Bridges LLP as to the
legality of the Exchange Notes
5.2 Opinion of Russell & DuMoulin as to the legality of the
Guarantees with respect to the Exchange Notes
8 OPINIONS AS TO TAX MATTERS
8.1 Opinion of Thelen, Marrin, Johnson & Bridges LLP as to U.S.
federal tax matters
8.2 Opinion of Russell & DuMoulin as to Canadian federal tax
matters
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (1)(2)
12 STATEMENT RE COMPUTATION OF RATIOS
12.1 Statement re Computation of Earnings to Fixed Charges Ratio
(Canadian GAAP)
12.2 Statement re Computation of Earnings to Fixed Charges Ratio
(U.S. GAAP)
23 CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Thelen, Marrin, Johnson & Bridges LLP (included
in Exhibits 5.1 and 8.1)
23.2 Consent of Russell & DuMoulin (included in Exhibits 5.2 and
8.2)
23.3 Consent of KPMG
23.4 Consent of Price Waterhouse LLP
23.5 Consent of Richter, Usher & Vineberg
23.6 Consent of Altschuler, Melvion and Glasser LLP
23.7 Consents of Keith J. Schulte Accountancy Corporation
23.8 Consents of Hirsch, Oelbaum, Bram & Hanover
23.9 Consent of The Dun & Bradstreet Corporation
23.10 Consent of KPMG Peat Marwick LLP
23.11 Consent of KPMG
23.12 Consent of Peat Marwick
24 POWERS OF ATTORNEY
24.1 Loewen Group International, Inc. Powers of Attorney
(included on the signature pages to this Registration
Statement)
24.2 The Loewen Group Inc. Powers of Attorney (included on the
signature pages to this Registration Statement)
25 STATEMENT OF ELIGIBILITY OF TRUSTEE
99 ADDITIONAL EXHIBITS
99.1 Form of Transmittal Letter
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
- --------
(1) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, filed on November 14, 1996
(2) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1995, filed on March 28, 1996
(3) Incorporated by reference from the S-4 Registration Statement filed with
the Commission by LGII and Loewen (File Nos. 333-03135 and 333-03135-01)
on May 3, 1996, as amended
(4) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1994, filed on March 31, 1995
(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 with the Commission by Loewen and LGII, respectively,
(Nos. 33-81032 and 33-81034) on July 1, 1994, as amended
(b) Financial Statement Schedules
None.
II-4
<PAGE>
ITEM 22. UNDERTAKINGS
(a) Undertakings required by Item 512 of Regulation S-K
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) Loewen hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of
Loewen's annual report pursuant to Section 13(a) or Section 15(d)
of the Exchange Act that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(b) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Burnaby,
Province of British Columbia, on this 15th day of November, 1996.
Loewen Group International, Inc.,
a Delaware corporation
By: /s/ Raymond L. Loewen
---------------------------------
Raymond L. Loewen
Chairman of the Board and
Chief Executive Officer
The Loewen Group Inc., a corporation
under the laws of British Columbia
By: /s/ Raymond L. Loewen
---------------------------------
Raymond L. Loewen
Chairman of the Board and
Chief Executive Officer
II-6
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
POWERS OF ATTORNEY
Each person whose signature appears below hereby appoints Raymond L. Loewen,
Paul Wagler and Peter S. Hyndman, and each of them severally, acting alone and
without the other, his true and lawful attorney-in-fact with authority to
execute in the name of each such person, and to file with the Securities and
Exchange Commission, together with any exhibits thereto and other documents
therewith, any and all amendments (including without limitation post-effective
amendments) to this registration statement, and to sign any registration
statement for the same offering covered by this registration statement that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act,
necessary or advisable to enable the Registrant to comply with the Securities
Act and any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, which amendments may make such changes in this
registration statement as the aforesaid attorney-in-fact deems appropriate.
Pursuant to the requirements of the Securities Act, this amendment to the
registration statement on Form S-4 has been signed by the following persons in
the capacities and on the date indicated.
<TABLE>
<S> <C>
November 15, 1996 /s/ Raymond L. Loewen
- -------------- --------------------------------------------
Date Raymond L. Loewen
Chairman of the Board, Chief Executive
Officer and Director
(Principal Executive Officer)
November 15, 1996 /s/ Timothy R. Hogenkamp
- -------------- --------------------------------------------
Date Timothy R. Hogenkamp
President and Chief Operating Officer
and Director
(Principal Executive Officer)
November 15, 1996 /s/ Paul Wagler
- -------------- --------------------------------------------
Date Paul Wagler
Senior Vice-President, Finance and Chief
Financial Officer
(Principal Financial Officer)
November 15, 1996 /s/ William G. Ballantyne
- -------------- --------------------------------------------
Date William G. Ballantyne
Senior Vice-President, Financial Control
and Administration
(Principal Accounting Officer)
</TABLE>
II-7
<PAGE>
November 15, 1996 /s/ George M. Amato
- ------------- --------------------------------------------
Date George M. Amato
Director
November 15, 1996 /s/ Gordon S. Bigelow
- ------------- --------------------------------------------
Date Gordon S. Bigelow
Director
- ------------- --------------------------------------------
Date J.C. Carothers, Jr.
Director
- ------------- --------------------------------------------
Date H. Steven Childress
Director
November 15, 1996 /s/ Edward J. Fitzgerald
- ------------- --------------------------------------------
Date Edward J. Fitzgerald
Director
November 15, 1996 /s/ Honorine T. Flanagan
- ------------- --------------------------------------------
Date Honorine T. Flanagan
Director
November 15, 1996 /s/ Thomas F. Glodek
- ------------- --------------------------------------------
Date Thomas F. Glodek
Director
November 15, 1996 /s/ Earl A. Grollman
- ------------- --------------------------------------------
Date Earl A. Grollman
Director
November 15, 1996 /s/ Mary M. Howard
- ------------- --------------------------------------------
Date Mary M. Howard
Director
II-8
<PAGE>
November 15, 1996 /s/ Peter S. Hyndman
- ------------- --------------------------------------------
Date Peter S. Hyndman
Director
November 15, 1996 /s/ Albert S. Lineberry, Jr.
- ------------- --------------------------------------------
Date Albert S. Lineberry, Jr.
Director
November 15, 1996 /s/ Michael L. Loudon
- ------------- --------------------------------------------
Date Michael L. Loudon
Director
November 15, 1996 /s/ John E. Malletta, Sr.
- ------------- --------------------------------------------
Date John E. Malletta, Sr.
Director
November 15, 1996 /s/ Hoyt Mayes
- ------------- --------------------------------------------
Date Hoyt Mayes
Director
November 15, 1996 /s/ Lawrence Miller
- ------------- --------------------------------------------
Date Lawrence Miller
Director
November 15, 1996 /s/ J. David Mullins
- ------------- --------------------------------------------
Date J. David Mullins
Director
November 15, 1996 /s/ David F. Riemann
- ------------- --------------------------------------------
Date David F. Riemann
Director
November 15, 1996 /s/ Robert D. Russell
- ------------- --------------------------------------------
Date Robert D. Russell
Director
- ------------- --------------------------------------------
Date Michael L. Schweer
Director
II-9
<PAGE>
November 15, 1996 /s/ Bill Seale
- ------------- --------------------------------------------
Date Bill Seale
Director
November 15, 1996 /s/ William R. Shane
- ------------- -------------------------------------------
Date William R. Shane
Director
November 15, 1996 /s/ David J. Shipper
- ------------- --------------------------------------------
Date David J. Shipper
Director
November 15, 1996 /s/ Sandra C. Strong
- ------------- --------------------------------------------
Date Sandra C. Strong
Director
November 15, 1996 /s/ Robert L. Studley
- ------------- --------------------------------------------
Date Robert L. Studley
Director
- ------------- --------------------------------------------
Date Robert A. Weinstein
Director
November 15, 1996 /s/ John R. Wright, Sr.
- ------------- --------------------------------------------
Date John R. Wright, Sr.
Director
II-10
<PAGE>
THE LOEWEN GROUP INC.
POWERS OF ATTORNEY
Each person whose signature appears below hereby appoints Raymond L. Loewen,
Paul Wagler and Peter S. Hyndman, and each of them severally, acting alone and
without the other, his true and lawful attorney-in-fact with authority to
execute in the name of each such person, and to file with the Securities and
Exchange Commission, together with any exhibits thereto and other documents
therewith, any and all amendments (including without limitation post-effective
amendments) to this registration statement, and to sign any registration
statement for the same offering covered by this registration statement that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act,
necessary or advisable to enable the Registrant to comply with the Securities
Act and any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, which amendments may make such changes in this
registration statement as the aforesaid attorney-in-fact deems appropriate.
Pursuant to the requirements of the Securities Act, this amendment to the
registration statement on Form S-4 has been signed by the following persons in
the capacities and on the date indicated.
<TABLE>
<S> <C>
November 15, 1996 /s/ Raymond L. Loewen
- -------------- --------------------------------------------
Date Raymond L. Loewen
Chairman of the Board and Chief Executive
Officer and Director
(Principal Executive Officer)
November 15, 1996 /s/ Timothy R. Hogenkamp
- -------------- --------------------------------------------
Date Timothy R. Hogenkamp
President and Chief Operating Officer
and Director
(Principal Executive Officer)
November 15, 1996 /s/ Paul Wagler
- -------------- --------------------------------------------
Date Paul Wagler
Senior Vice-President, Finance and
Chief Financial Officer and Director
(Principal Financial Officer)
November 15, 1996 /s/ William G. Ballantyne
- -------------- --------------------------------------------
Date William G. Ballantyne
Senior Vice-President, Financial Control
and Administration
(Principal Accounting Officer)
</TABLE>
II-11
<PAGE>
November 15, 1996 /s/ Kenneth S. Bagnell
- --------------- ------------------------------------------------
Date Kenneth S. Bagnell
Director
November 15, 1996 /s/ The Honorable J. Carter Beese, Jr.
- --------------- ------------------------------------------------
Date The Honorable J. Carter Beese, Jr.
Director
November 15, 1996 /s/ Earl A. Grollman
- --------------- ------------------------------------------------
Date Earl A. Grollman
Director
November 15, 1996 /s/ Peter S. Hyndman
- --------------- ------------------------------------------------
Date Peter S. Hyndman
Director
November 15, 1996 /s/ Albert S. Lineberry, Sr.
- --------------- ------------------------------------------------
Date Albert S. Lineberry, Sr.
Director
November 15, 1996 /s/ Charles B. Loewen
- --------------- ------------------------------------------------
Date Charles B. Loewen
Director
November 15, 1996 /s/ Robert B. Lundgren
- --------------- ------------------------------------------------
Date Robert B. Lundgren
Director
November 15, 1996 /s/ James D. McLennan
- --------------- ------------------------------------------------
Date James D. McLennan
Director
November 15, 1996 /s/ Lawrence Miller
- --------------- ------------------------------------------------
Date Lawrence Miller
Director
November 15, 1996 /s/ Ernest G. Penner
- --------------- ------------------------------------------------
Date Ernest G. Penner
Director
November 15, 1996 /s/ The Right Honourable John N. Turner, P.C.,
C.C., Q.C.
- --------------- ------------------------------------------------
Date The Right Honourable John N. Turner, P.C., C.C.,
Q.C.
Director
II-12
<PAGE>
AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
The undersigned is Loewen's authorized representative in the United States.
November 15, 1996 /s/ Timothy R. Hogenkamp
- -------------- --------------------------------------------
Date Timothy R. Hogenkamp
II-13
<PAGE>
EXHIBIT 4.8
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 2.09
AND 2.10 OF THE INDENTURE.
LOEWEN GROUP INTERNATIONAL, INC.
% SERIES [ ]SENIOR GUARANTEED NOTES DUE [ ]
No. ______ $__________
CUSIP No.
LOEWEN GROUP INTERNATIONAL, INC., a corporation incorporated under the
laws of the State of Delaware (herein called the "Company", which term includes
any successor corporation under the Indenture hereinafter referred to), for
value received, hereby promises to pay to CEDE & Co. or registered assigns, the
principal sum of _______________ Dollars on [ ], 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.
<PAGE>
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 4, 1996, among the Company,
the Guarantor and the Initial Purchasers named therein (the "Registration Rights
Agreement"). The Registration Rights Agreement contains provisions permitting
an increase in the interest rate borne by this Global Note in the event of the
failure to file or to have declared effective an Exchange Offer Registration
Statement or Shelf Registration Statement (as such terms are defined in the
Registration Rights Agreement), or to consummate an Exchange Offer within
prescribed time periods specified in such Registration Rights Agreement.
Payment of the principal of, premium, if any, and interest on this
Global Note will be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan in The City of New York, or at such
other office or agency of the Company as may be maintained for such purpose, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however, that
payment of interest may be made at the option of the Company by check mailed to
the address of the person entitled thereto as such address shall appear on the
security register maintained by the Registrar.
Reference is hereby made to the further provisions of this Global Note
set forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, and a seal
has been affixed hereon, this Global Note shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
LOEWEN GROUP INTERNATIONAL, INC.
By:_______________________________
Name:
Title:
[SEAL APPEARS HERE]
Attest:
By:______________________
Title:
<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
<PAGE>
(Reverse of Global Note)
1. Indenture. This Global Note is one of a duly authorized series
---------
of Senior Notes of the Company designated as its % Series [ ] Senior
Guaranteed Notes due [ ] (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
national banking association, as trustee (herein called the "Trustee," which
term includes any successor Trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Trustee, the Guarantor and the Holders of the
Senior Notes, and of the terms upon which the Senior Notes are, and are to be,
authenticated and delivered.
All capitalized terms used in this 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.
- ---------------------------
/*/ Applicable only to Series 3 Senior Guaranteed Notes due 2001
-
/**/ Applicable only to Series 4 Senior Guaranteed Notes due 2003
--
<PAGE>
4. Offers to Purchase. Sections 4.11 and 4.12 of the Indenture provide
------------------
that upon the occurrence of a Change of Control and following certain Asset
Sales, and subject to further limitations contained therein, the Company shall
make an offer to purchase certain amounts of the Senior Notes in accordance with
the procedures set forth in the Indenture.
5. Defaults and Remedies. If an Event of Default shall occur and be
---------------------
continuing, the principal of all of the 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.
<PAGE>
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.
<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.
<TABLE>
<CAPTION>
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
- ---- --------------------- ---------------- --------
<S> <C> <C> <C>
____ _____________________ ________________ ________
____ _____________________ ________________ ________
____ _____________________ ________________ ________
____ _____________________ ________________ ________
____ _____________________ ________________ ________
____ _____________________ ________________ ________
____ _____________________ ________________ ________
____ _____________________ ________________ ________
</TABLE>
<PAGE>
EXHIBIT 4.9
LOEWEN GROUP INTERNATIONAL, INC.
% SERIES [ ] 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, 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 4, 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.
<PAGE>
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.
<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:
<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
<PAGE>
(Reverse of Note)
1. Indenture. This Note is one of a duly authorized series of
---------
Senior Notes of the Company designated as its % Series [ ] Senior
Guaranteed Notes due [ ] (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
national banking association, as trustee (herein called the "Trustee," which
term includes any successor Trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Trustee, the Guarantor and the Holders of the
Senior Notes, and of the terms upon which the Senior Notes are, and are to be,
authenticated and delivered.
All capitalized terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
No reference herein to the Indenture and no provisions of this Note or
of the Indenture shall alter or impair the obligation of the Company or the
Guarantor, which is absolute and unconditional, to pay the principal of,
premium, if any, and interest on this Note at the times, place and rate, and in
the coin or currency, herein prescribed.
2. Redemption. [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
- --------------------------
* Applicable only to Series 3 Senior Guaranteed Notes due 2001
** Applicable only to Series 4 Senior Guaranteed Notes due 2003
<PAGE>
therein, the Company shall make an offer to purchase certain amounts of the
Senior Notes in accordance with the procedures set forth in the Indenture.
5. Defaults and Remedies. If an Event of Default shall occur and be
---------------------
continuing, the principal of all of the 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.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF THELEN, MARRIN, JOHNSON & BRIDGES LLP]
November 15, 1996
Loewen Group International, Inc.
50 East RiverCenter Blvd., Suite 800
Covington, KY 41011
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia V5G 3S8
Canada
Ladies and Gentlemen:
We have acted as United States counsel for The Loewen Group Inc., a
corporation organized under the laws of British Columbia ("Loewen") and Loewen
Group International, Inc., a Delaware corporation ("LGII"), in connection with
the preparation and filing of the combined Registration Statement on Form S-4 to
be filed by Loewen and LGII with the Securities and Exchange Commission (the
"SEC") on November 18, 1996 and as may be further amended and supplemented (the
"Registration Statement"). The Registration Statement relates to (i) the
issuance of up to an aggregate principal amount of $125,000,000 7 3/4% Series 3
Senior Guaranteed Notes (Registered) due 2001 of LGII (the "Series 3 Exchange
Notes") in exchange for a like principal amount of its issued and outstanding 7
3/4% Series 3 Senior Guaranteed Notes due 2001 (the "Series 3 Outstanding
Notes"), (ii) the issuance of up to an aggregate principal amount of
$225,000,000 8 1/4% Series 4 Senior Guaranteed Notes (Registered) due 2003 of
LGII (the "Series 4 Exchange Notes") in exchange for a like principal amount of
its issued and outstanding 8 1/4% Series 4 Senior Guaranteed Notes due 2003 (the
"Series 4 Outstanding Notes"), (iii) the guarantee by Loewen of the Series 3
Exchange Notes (the "Series 3 Guarantee") and (iv) the guarantee by Loewen of
the Series 4 Exchange Notes (together with the Series 3 Guarantee, the
"Guarantees"). The Series 3 Outstanding Notes, Series 4 Outstanding Notes,
Series 3 Exchange Notes and Series 4 Exchange Notes and the Guarantees are
included in an Indenture dated October 1, 1996 (the "Indenture") by and between
Loewen, LGII and Fleet National Bank, as Trustee.
In this capacity, we have made such investigations and have reviewed
such other documents as we have deemed necessary or appropriate under the
circumstances, and have made such examinations of law as we have deemed
appropriate for purpose of giving the opinions expressed herein.
We also have been furnished with and have examined originals or
copies, certified or otherwise identified to our satisfaction, of all such
records of Loewen and LGII, agreements and other instruments, certificates of
officers and representative of Loewen and LGII, certificates
<PAGE>
Loewen Group International, Inc.
The Loewen Group Inc.
November 15, 1996
Page 2
of public officials and other documents as we have deemed necessary to require
as a basis for the opinions hereinafter expressed.
In making such examinations, we have assumed (i) the genuineness of
all signatures, (ii) the authenticity of all documents submitted to us as
originals; (iii) the conformity to original documents of all documents submitted
to us as certified copies or photocopies; (iv) the authority of all persons
signing documents examined by us except as to persons signing documents on
behalf of Loewen and LGII; (v) the identity and capacity of all individuals
acting or purporting to act as public officials; and (vi) the absence of
evidence extrinsic to the provisions of the Indenture that the respective
parties thereto intended a meaning contrary to that expressed by the provisions
of such agreements.
Based on the foregoing, we are of the opinion that:
(1) When the Series 3 Exchange Notes and the Series 4 Exchange Notes
(collectively, the "Exchange Notes") have been duly executed and authenticated
as provided in the Indenture, and delivered in exchange for the Series 3
Outstanding Notes and Series 4 Outstanding Notes as described in the
Registration Statement, the Exchange Notes will be valid and legally binding
obligations of LGII and will be entitled to the benefits of the Indenture,
subject to (a) limitations imposed by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting the enforcement of
creditors' rights generally, including, without limitation, laws relating to
fraudulent transfers or conveyances, preferences and equitable subordination,
and (b) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law), including without
limitation, an implied covenant of good faith and fair dealing.
(2) Assuming that the Guarantees and the Indenture have been
authorized by Loewen in accordance with the laws of British Columbia, when the
Guarantees are duly executed and delivered by Loewen in the manner contemplated
in the Registration Statement, the Guarantees will be valid and legally binding
obligations of Loewen, subject as to enforcement to bankruptcy, insolvency,
reorganization, moratorium, laws relating to fraudulent transfers or
conveyances, preferences and equitable subordination or similar laws relating to
or affecting the enforcement of creditors' rights generally, and general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), including without limitation, an implied
covenant of good faith and fair dealing.
We are authorized to engage in the practice of law only with respect
to the federal laws of the United States of America and the laws of the States
of California and New York and the General Corporate Law of the State of
Delaware and do not purport to be experts with respect to the laws of any other
jurisdiction, and we express no opinion as to the laws of any other state or
jurisdiction.
<PAGE>
Loewen Group International, Inc.
The Loewen Group Inc.
November 15, 1996
Page 3
We hereby consent to the filing of this opinion with the SEC as an
exhibit to the Registration Statement. We further consent to the use of our name
under the heading "Legal Matters" in the prospectus filed with the SEC as a part
of the Registration Statement.
Very truly yours,
/s/ Thelen, Marrin, Johnson & Bridges
THELEN, MARRIN, JOHNSON & BRIDGES
MLJ/WFO
<PAGE>
EXHIBIT 5.2
[LETTERHEAD OF RUSSELL & DUMOULIN]
Loewen Group International, Inc. November 15, 1996
50 East RiverCenter Boulevard
Covington, KY 41011 Matter No. LOE 20030
USA
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, BC V5G 3S8
Canada
Dear Sirs/Mesdames:
We have acted as British Columbia counsel for The Loewen Group Inc., a body
corporate organized under the laws of British Columbia ("Loewen") and Loewen
Group International, Inc., a Delaware corporation ("LGII") in connection with
the preparation of the combined Registration Statement on Form S-4 to be filed
by LGII and Loewen with the Securities and Exchange Commission (the "SEC") on
November 18, 1996 and as may be further amended and supplemented (the
"Registration Statement"), respecting (i) the guarantee (the "Series 3
Guarantee") by Loewen of 7 3/4% Series 3 Senior Guaranteed Notes (Registered)
due 2001 to be offered by LGII and (ii) the guarantee (the "Series 4 Guarantee")
by Loewen of 8 1/4% Series 4 Senior Guaranteed Notes (Registered) due 2003 to be
offered by LGII (the Series 3 Guarantee together with the Series 4 Guarantee,
the "Guarantees") pursuant to the Indenture dated as of October 1, 1996, (the
"Indenture") made by and among LGII, Loewen and Fleet National Bank, as Trustee.
In this capacity, we have made such investigations and have reviewed such other
documents as we have deemed necessary or appropriate under the circumstances,
and have made such examinations of law as we have deemed appropriate for the
purpose of giving the opinions expressed herein.
We also have been furnished with and have examined originals or copies,
certified or otherwise identified to our satisfaction, of all such records of
Loewen and LGII, agreements and other instruments, certificates of officers and
representatives of Loewen and LGII, certificates of public officials and other
documents as we have deemed necessary to require as a basis for the opinion
hereinafter expressed.
<PAGE>
-2-
In making such examinations, we have assumed (i) the genuineness of all
signatures; (ii) the authenticity of all documents submitted to us as originals;
(iii) the conformity to original documents of all documents submitted to us as
certified copies or photocopies; (iv) the authority of all persons signing
documents examined by us except as to persons signing documents on behalf of
Loewen and LGII; (v) the identity and capacity of all individuals acting or
purporting to act as public officials; (vi) the absence of evidence extrinsic to
the provisions of the Guarantees or the Indenture that the respective parties
thereto intended a meaning contrary to that expressed by the provisions of such
agreements; and (vii) that each of the Guarantees and the Indenture, when
executed and delivered, will be executed and delivered in substantially the
form in which such document was filed with the SEC as part of the Registration
Statement.
Based on the foregoing, we are of the opinion that:
1. The Guarantees and the Indenture have been authorized by Loewen in
accordance with the laws of British Columbia.
2. The statements in the prospectus included in the Registration Statement
(the "Prospectus") as to the enforceability of the Guarantees in Canada
under the heading "Enforceability of Certain Civil Liabilities Against
Guarantor" to the extent that such matters represent matters of law or
legal conclusions, are accurate and complete statements or summaries of the
matters set forth therein.
We express no opinions as to matters of law in jurisdiction other than the
Province of British Columbia and the laws of Canada applicable therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We further consent to the use of our name under the
headings "Legal Matters" and "Enforceability of Certain Civil Liabilities
Against Guarantor" in the prospectus filed with the SEC as a part of the
Registration Statement.
Yours truly,
RUSSELL & DuMOULIN
/s/ Russell & DuMoulin
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF THELEN, MARRIN, JOHNSON & BRIDGES LLP]
November 15, 1996
Loewen Group International, Inc.
Suite 800
50 East RiverCenter Blvd.
Covington, KY 41011
Ladies and Gentlemen:
We have acted as United States counsel for Loewen Group International,
Inc., a Delaware corporation (the "Company"), in connection with the preparation
of the Registration Statement on Form S-4 to be filed by the Company with the
Securities and Exchange Commission (the "SEC") on November 18, 1996 and as may
be further amended and supplemented respecting the offer by the Company to
exchange Series 3 Senior Guaranteed Notes (Registered) due 2001 (the "Series 3
Exchange Notes") for the Company's Series 3 Senior Guaranteed Notes due 2001
(the "Series 3 Outstanding Notes") and to exchange Series 4 Senior Guaranteed
Notes (Registered) due 2003 (the "Series 4 Exchange Notes") for the Company's
Series 4 Senior Guaranteed Notes due 2003 (the "Series 4 Outstanding Notes").
You have requested our opinion with respect to the accuracy of the
discussions included in the Registration Statement under the heading "Certain
U.S. Federal Income Tax Considerations."
In our capacity as United States counsel for the Company, we have been
furnished with and have examined originals or copies, certified or otherwise
identified to our satisfaction, of such records of the Company, agreements and
other instruments, certificates of officers and representative of the Company,
certificates of public officials and other documents as we have deemed necessary
to require as a basis for the opinion hereinafter expressed. In making such
examinations, we have assumed (i) the genuineness of all signatures, (ii) the
authenticity of all documents submitted to us as originals; (iii) the conformity
to original documents of all documents submitted to us as certified copies or
photocopies; (iv) the identity and capacity of all individuals acting or
purporting to act as public officials; (v) that all representations and
statements set forth in the documents submitted to us are true
<PAGE>
Loewen Group International, Inc.
November 15, 1996
Page 2
and correct; and (vi) that all obligations imposed by any of the documents
submitted to us are enforceable in accordance with their terms.
We have also made such investigations and have reviewed such other
documents as we have deemed necessary or appropriate under the circumstances,
and have made such examinations of law as we have deemed appropriate for purpose
of giving the opinions expressed herein.
All capitalized terms used without definition in this letter have the
same meaning as in the Registration Statement.
Based on the foregoing, we are of the following opinion:
The statements concerning United States taxation set forth in the
Registration Statement under the heading "Certain U.S. Federal Income Tax
Considerations," to the extent that such statements represent matters of law or
legal conclusions, describe the material United States federal income tax
consequences expected to result to a holder of Series 3 Outstanding Notes who
exchanges such notes for Series 3 Exchange Notes and to a holder of Series 4
Outstanding Notes who exchanges such notes for Series 4 Exchange Notes, subject,
however, to the limitation set forth in the Registration Statement that the
statements apply only to Notes held as capital assets and do not purport to
address all aspects of federal income taxation or all tax considerations that
may be relevant to all categories of potential purchasers.
Our opinion is based on the Internal Revenue Code of 1986, as amended;
applicable Treasury regulations thereunder; judicial authority and
administrative rulings and practices now in effect, changes to any of which
after the date of the Registration Statement could apply on a retroactive basis
and affect the consequences described in the Registration Statement.
<PAGE>
Loewen Group International, Inc.
November 15, 1996
Page 3
We hereby consent to the filing of this opinion with the SEC as an
exhibit to the Registration Statement. We further consent to the use of our name
under the heading "Legal Matters" in the prospectus filed with the SEC as a part
of the Registration Statement.
Very truly yours,
/s/ Thelen, Marrin, Johnson & Bridges
THELEN, MARRIN, JOHNSON & BRIDGES
JMM:JRB:rg
<PAGE>
EXHIBIT 8.2
[LETTERHEAD OF RUSSELL & DuMOULIN]
Loewen Group International, Inc. November 15, 1996
50 East RiverCenter Blvd., Suite 800
Covington, KY 41011 Matter No. LOE20030
U.S.A. Direct Line:
(604) 631-3142
Ladies and Gentlemen:
We have acted as Canadian counsel for Loewen Group International, Inc., a
Delaware corporation (the "Company"), and The Loewen Group Inc., a corporation
under the laws of British Columbia (the "Guarantor"), in connection with the
preparation of the Registration Statement on Form S-4 to be filed by the Company
with the Securities and Exchange Commission (the "SEC") on November 18, 1996 and
as may be further amended and supplemented (the "Registration Statement")
respecting the offer by the Company to exchange registered Series 3 and 4
Exchange Notes for the Company's outstanding Series 3 and 4 Notes, respectively.
You have requested our opinion with respect to the accuracy of the discussions
included in the Registration Statement under the heading "Certain Federal Income
Tax Considerations."
In our capacity as Canadian counsel for the Company, we have been furnished with
and have examined originals or copies, certified or otherwise identified to our
satisfaction, of such records of the Company, agreements and other instruments,
certificates of officers as representatives of the Company, certificates of
public officials and other documents as we have deemed necessary to require as a
basis for the opinion hereinafter expressed. In making such examinations, we
have assumed (i) the genuineness of all signatures; (ii) the authenticity of all
documents submitted to us as originals; (iii) the conformity to original
documents of all documents submitted to us as certified copies or photocopies;
(iv) the identity and capacity of all individuals acting or purporting to act as
public officials; (v) that all representations and statements set forth in the
documents submitted to us are true and correct; and (vi) that all obligations
imposed by any of the documents submitted to us are enforceable in accordance
with their terms.
We have also made such investigations and have reviewed such other documents as
we have deemed necessary or appropriate under the circumstances, and have made
such examinations of law as we have deemed appropriate for the purpose of giving
the opinions expressed herein.
<PAGE>
-2-
All capitalized terms used without definitions in this letter have the same
meaning as in the Registration Statement.
Based on the foregoing, we are of the opinion that, assuming the share exchanges
are made in accordance with the Exchange Offer and in the manner contemplated in
the Registration Statement, the statements concerning Canadian federal taxation
set forth in the Registration Statement under the heading "Certain Canadian
Federal Income Tax Considerations", to the extent that such statements represent
matters of law or legal conclusions, will represent an accurate description of
the material Canadian federal income tax consequences generally applicable to an
individual who is resident in the United States and not in Canada and who
exchanges Outstanding Notes for Exchange Notes pursuant to the Exchange Offer.
Our opinion is based on the current provisions of the Income Tax Act of Canada,
--------------
the regulations thereunder, our understanding of the current administrative
practices of Revenue Canada Customs, Excise and Taxation, income tax treaties to
which Canada is a party, including the Canada-U.S. Income Tax Convention (1980),
----------------------------------------
and existing judicial decisions, any of which could be changed at any time,
possibly on a retroactive basis. Any such changes could produce tax consequences
that could be different from the consequences described in the Registration
Statement. Our opinion is based on the assumptions described above, and if any
of such assumptions is incorrect, the tax consequences may be different from
the consequences described in the Registration Statement. Finally, our opinion
is not binding in any way on Revenue Canada Customs, Excise and Taxation or the
courts, which could reach conclusions as to the tax consequences that are
different from those described in the Registration Statement.
We hereby consent to the filing of this opinion with the SEC as an exhibit to
the Registration Statement. We further consent to the use of our name under the
heading "Legal Matters" and "Enforceability of Certain Civil Liabilities Against
Guarantor" in the prospectus filed with the SEC as a part of the Registration
Statement.
Yours truly,
RUSSELL & DuMOULIN
/s/ Frank S. Schober
- -----------------------------
Frank S. Schober
FSS/mwk
<PAGE>
EXHIBIT 12.1
THE LOEWEN GROUP INC.
COMPUTATION OF EARNINGS TO FIXED CHARGES RATIO
CANADIAN GAAP
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
-------------------------- ------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------------- ------------ --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before
income taxes........... $ 75,858 $ 53,662 $(123,862) $58,232 $43,896 $31,480 $24,140
Fixed charges included
in earnings (loss)
before income taxes:
Interest on long-term
debt................. 62,471 35,752 50,913 34,203 21,801 19,083 14,913
Amortization of
deferred finance
costs................ 1,816 1,133 1,512 1,139 832 580 433
Dividends on preferred
securities of
subsidiary........... 5,316 5,316 7,088 2,678 -- -- --
------------- ------------ --------- ------- ------- ------- -------
69,603 42,201 59,513 38,020 22,633 19,663 15,346
------------- ------------ --------- ------- ------- ------- -------
Earnings (loss)......... $ 145,461 $ 95,863 $ (64,349) $96,252 $66,529 $51,143 $39,486
============= ============ ========= ======= ======= ======= =======
Fixed charges:
Fixed charges included
in earnings before
income taxes......... $ 69,603 $ 42,201 $ 59,513 $38,020 $22,633 $19,663 $15,346
Capitalized interest.. 1,743 1,057 2,722 1,128 117 -- --
------------- ------------ --------- ------- ------- ------- -------
Total fixed charges..... $ 71,347 $ 43,258 $ 62,235 $39,148 $22,750 $19,663 $15,346
============= ============ ========= ======= ======= ======= =======
Ratio of earnings to
fixed
charges (1)............ 2.0x 2.2x -- 2.5x 2.9x 2.6x 2.6x
============= ============ ========= ======= ======= ======= =======
</TABLE>
- --------
(1) The 1995 loss is not sufficient to cover fixed charges by a total of
$126,584, and as such the ratio of earnings to fixed charges has not been
computed.
<PAGE>
EXHIBIT 12.2
THE LOEWEN GROUP INC.
COMPUTATION OF EARNINGS TO FIXED CHARGES RATIO
U.S. GAAP
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------ ------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- -------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before
income taxes........... $ 71,651 $ 52,632 $(125,539) $57,877 $44,374 $33,964 $26,634
Fixed charges included
in earnings (loss)
before income taxes:
Interest on long-term
debt................. $ 62,471 $ 35,752 $ 50,913 $34,203 $22,337 $20,874 $17,058
Amortization of
deferred finance
costs................ 1,816 1,133 1,512 1,139 852 634 495
Dividends on preferred
securities of
subsidiary........... 5,316 5,316 7,088 2,678 -- -- --
--------- -------- --------- ------- ------- ------- -------
69,603 42,201 59,513 38,020 23,189 21,508 17,553
--------- -------- --------- ------- ------- ------- -------
Earnings (loss)......... $ 141,254 $ 94,833 $ (66,026) $95,897 $67,563 $55,472 $44,187
========= ======== ========= ======= ======= ======= =======
Fixed charges:
Fixed charges included
in earnings before
income taxes......... $ 69,603 $ 42,201 $ 59,513 $38,020 $23,189 $21,508 $17,553
Capitalized interest.. 1,743 1,057 2,722 1,128 120 -- --
--------- -------- --------- ------- ------- ------- -------
Total fixed charges..... $ 71,347 $ 43,258 $ 62,235 $39,148 $23,309 $21,508 $17,553
========= ======== ========= ======= ======= ======= =======
Ratio of earnings to
fixed
charges (1)............ 2.0x 2.2x -- 2.4x 2.9x 2.6x 2.5x
========= ======== ========= ======= ======= ======= =======
</TABLE>
- --------
(1) The 1995 loss is not sufficient to cover fixed charges by a total of
$128,261, and as such the ratio of earnings to fixed charges has not been
computed.
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF KPMG]
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
The Loewen Group Inc.
Loewen Group International, Inc.
We consent to the use of our report, dated February 26, 1996, except as to Note
12(b), which is as of March 19, 1996 and Note 20, which is as of March 26, 1996,
relating to the consolidated balance sheets of The Loewen Group Inc. as at
December 31, 1995 and 1994, and the related consolidated statements of
operations, retained earnings, and changes in financial position for each of the
years in the three year period ended December 31, 1995, and related schedule,
which report is incorporated herein by reference and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
November 15, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of
Loewen Group International, Inc. and
The Loewen Group Inc.
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-4 of the Loewen Group
International, Inc. and The Loewen Group Inc. of our report dated June 16, 1995
with respect to the financial statements of MHI Group, Inc. as of April 30,
1995, and for each of the two years in the period ended April 30, 1995, which
appears as Exhibit No. 99.1 to The Loewen Group Inc. Form 8-K dated May 1, 1996.
/s/ PRICE WATERHOUSE, LLP
Tampa, Florida
November 15, 1996
<PAGE>
EXHIBIT 23.5
AUDITORS' CONSENT
The Board of Directors of
Loewen Group International, Inc.
and The Loewen Group Inc.
We consent to the incorporation by reference in the registration statement on
Form S-4 of Loewen Group International, Inc. and The Loewen Group Inc. of our
report dated February 27, 1996 with respect to the financial statements of
Paperman & Sons Inc. as of November 30, 1995 and for the eleven months then
ended included in the Current Report on Form 8-K of The Loewen Group Inc. dated
May 1, 1996.
/s/ Richter, Usher & Vineberg
Montreal, Quebec
November 15, 1996
<PAGE>
EXHIBIT 23.6
INDEPENDENT AUDITORS' CONSENT
We have issued our report dated July 26, 1995, accompanying the consolidated
financial statements of Weinstein Family Services, Inc. and Subsidiaries as of
and for the year ended April 30, 1995 included in the current report on Form 8-K
of The Loewen Group Inc. dated May 1, 1996, which is incorporated by reference
in this registration statement. We hereby consent to the incorporation by
reference in the registration statement on Form S-4 of the Loewen Group Inc. and
Loewen Group International, Inc. of the aforementioned report.
/s/ Altschuler, Melvoin and Glasser LLP
Chicago, Illinois
November 15, 1996
<PAGE>
EXHIBIT 23.7
[LETTERHEAD OF KEITH J. SCHULTE ACCOUNTANCY CORPORATION]
The Board of Directors of
Loewen Group International, Inc. and
The Loewen Group Inc.
We consent to the incorporation by reference in the registration statement on
Form S-4 of Loewen Group International, Inc. and The Loewen Group Inc. of our
report dated April 24, 1996, with respect to the financial statements of
Security Plus Mini & RV Storage, Inc. as of December 31, 1994 and for the year
then ended included in the Current Report on Form 8-K of The Loewen Group Inc.
dated May 1, 1996.
KEITH J. SCHULTE ACCOUNTANCY CORPORATION
BY: /s/ Keith J. Schulte
------------------------------------
Certified Public Accountant
Long Beach, California
November 15, 1996
<PAGE>
[LETTERHEAD OF KEITH J. SCHULTE ACCOUNTANCY CORPORATION]
The Board of Directors of
Loewen Group International, Inc. and
The Loewen Group Inc.
We consent to the incorporation by reference in the registration statement on
Form S-4 of Loewen Group International, Inc. and The Loewen Group Inc. of our
report dated April 24, 1996, with respect to the financial statements of
International Memorial Society, Inc. as of December 31, 1994 and for the year
then ended included in the Current Report on Form 8-K of The Loewen Group Inc.
dated May 1, 1996.
KEITH J. SCHULTE ACCOUNTANCY CORPORATION
BY: /s/ Keith J. Schulte
------------------------------------
Certified Public Accountant
Long Beach, California
November 15, 1996
<PAGE>
[LETTERHEAD OF KEITH J. SCHULTE ACCOUNTANCY CORPORATION]
The Board of Directors of
Loewen Group International, Inc. and
The Loewen Group Inc.
We consent to the incorporation by reference in the registration statement on
Form S-4 of Loewen Group International, Inc. and The Loewen Group Inc. of our
report dated April 24, 1996, with respect to the financial statements of Palm
Springs Mausoleum, Inc. as of December 31, 1994 and for the year then ended
included in the Current Report on Form 8-K of The Loewen Group Inc. dated May 1,
1996.
KEITH J. SCHULTE ACCOUNTANCY CORPORATION
BY: /s/ Keith J. Schulte
------------------------
Certified Public Accountant
Long Beach, California
November 15, 1996
<PAGE>
[LETTERHEAD OF HIRSCH, OELBAUM, BRAM & HANOVER]
EXHIBIT 23.8
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of
Loewen Group International, Inc. and
The Loewen Group Inc.
We consent to the incorporation by reference in the registration statement on
Form S-4 of Loewen Group International, Inc. and The Loewen Group Inc. of our
report, dated February 27, 1995 and April 23, 1996 as to Note 8, with respect to
the financial statements of Cemetery Gardens, Inc., as of December 31, 1994, and
for the year then ended included in the Current Report on Form 8-K of The Loewen
Group, Inc., dated May 1, 1996.
/s/ Hirsch, Oelbaum, Bram & Hanover, C.P.As., P.C.
New York, New York
November 15, 1996
<PAGE>
[LETTERHEAD OF HIRSCH, OELBAUM, BRAM & HANOVER]
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of
Loewen Group International, Inc. and
The Loewen Group Inc.
We consent to the incorporation by reference in the registration statement on
Form S-4 of Loewen Group International, Inc. and The Loewen Group Inc. of our
report, dated May 15, 1995 and, with respect to the financial statements of
Beverly Hills Cemetery Corporation, Inc., as of December 31, 1994, and for the
year then ended included in the Current Report on Form 8-K of The Loewen Group,
Inc., dated May 1, 1996.
/s/ Hirsch, Oelbaum, Bram & Hanover, C.P.As., P.C.
New York, New York
November 15, 1996
<PAGE>
Exhibit 23.9
[LOGO OF DUN AND BRADSTREET CORPORATION]
Joseph W. Duncan 187 Danbury Road, CT 06897
Vice president Tel. 212-883-3423
Corporate Economist and Chief Statistician Fax 212-834-4201
November 15, 1996
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Ladies and Gentlemen:
The undersigned hereby consents to the reference to The Dun and
Bradstreet Corporation in the Registration Statement on Form S-4 of the
Loewen Group International, Inc. and the Loewen Group, Inc.
Sincerely,
/s/ Joseph W. Duncan
Joseph W. Duncan
Vice President, Corporate Economist
& Chief Statistician
The Dun & Bradstreet Corporation
<PAGE>
EXHIBIT 23.10
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Loewen Group International, Inc.
The Loewen Group Inc.:
We consent to the incorporation by reference in the Registration Statements on
Form S-4 of Loewen Group International, Inc. and The Loewen Group Inc. of our
report dated May 31, 1996, with respect to the consolidated balance sheet of
Ourso Investment Corporation and subsidiaries as of December 31, 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the year then ended, which report appears in the Form 8-K/A No.2 of
The Loewen Group Inc. dated July 5, 1996.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
November 15, 1996
<PAGE>
EXHIBIT 23.11
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Neweol Investments Ltd.
We consent to the use of our report, dated August 15, 1996, relating to the
balance sheets of Neweol Investments Ltd., as defined in Note 1 to the financial
statements, as at December 31, 1995 and 1994 and the related statements of
operations, retained earnings, and cash flows for the years then ended, which
report is included herein.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
November 15, 1996
<PAGE>
Exhibit 23.12
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Loewen Finance (Wyoming) Limited Liability Company
We consent to the use of our report, dated February 29, 1996, relating to the
balance sheets of Loewen Finance (Wyoming) Limited Liability Company as at
December 31, 1995 and 1994 and the related statements of income and retained
earnings, and cash flows for the years then ended, which report is included
herein.
/s/ Peat Marwick
Chartered Accountants
Bridgetown, Barbados
November 15, 1996
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
----------
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
----------
/ / CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
FLEET NATIONAL BANK
---------------------------------------------------------
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Not applicable 04-317415
- ------------------------------- -----------------------------
(State of incorporation (I.R.S. Employer
if not a national bank) Identification No.)
One Monarch Place, Springfield, MA 01102
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Pat Beaudry, 777 Main Street, Hartford, CT 06115 (203) 728-2065
--------------------------------------------------------------
(Name, address and telephone number of agent for service)
Loewen Group International, Inc.
---------------------------------------------------
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Delaware 61-1264590
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 East RiverCenter Boulevard
Suite 80 Covington, Kentucky 41011
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
7 3/4% Series 3 Senior Guaranteed Notes due 2001
------------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject,
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise
corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor and underwriter. If the obligor or
any underwriter for the obligor is an affiliate of the trustee,
describe each such affiliation.
None with respect to the trustee.
Item 16. List of exhibits.
List below all exhibits filed as a part of this statement of
eligibility and qualification.
(1) A copy of the Articles of Association of the trustee as
now in effect.
(2) A copy of the Certificate of Authority of the trustee
to do business.
(3) A copy of the Certification of Fiduciary Powers of the
trustee.
(4) A copy of the By-Laws of the trustee as now in effect.
(5) Consent of the trustee required by Section 321(b)
of the Act.
(6) A copy of the latest Consolidated Reports of Condition
and Income of the trustee published pursuant to law or
the requirements of its supervising or examining authority.
NOTES
In as much as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base answers to Item 2, the answers to said Items are
based upon imcomplete information. Said Items may, however, be considered
correct unless amended by an amendment to this Form T-1.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement of
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Hartford, and State of
Connecticut, on the 12th day of November, 1996.
FLEET NATIONAL BANK,
AS TRUSTEE
By: /s/
-------------------------
Michael M. Hopkins
Its Vice President
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
----------
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
----------
/ / CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
FLEET NATIONAL BANK
---------------------------------------------------------
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Not applicable 04-317415
- ------------------------------- -----------------------------
(State of incorporation (I.R.S. Employer
if not a national bank) Identification No.)
One Monarch Place, Springfield, MA 01102
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Pat Beaudry, 777 Main Street, Hartford, CT 06115 (203) 728-2065
--------------------------------------------------------------
(Name, address and telephone number of agent for service)
Loewen Group International, Inc.
---------------------------------------------------
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Delaware 61-1264590
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 East RiverCenter Boulevard
Suite 80 Covington, Kentucky 41011
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
8 1/4% Series 3 Senior Guaranteed Notes due 2003
------------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject,
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise
corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor and underwriter. If the obligor or
any underwriter for the obligor is an affiliate of the trustee,
describe each such affiliation.
None with respect to the trustee.
Item 16. List of exhibits.
List below all exhibits filed as a part of this statement of
eligibility and qualification.
(1) A copy of the Articles of Association of the trustee as
now in effect.
(2) A copy of the Certificate of Authority of the trustee
to do business.
(3) A copy of the Certification of Fiduciary Powers of the
trustee.
(4) A copy of the By-Laws of the trustee as now in effect.
(5) Consent of the trustee required by Section 321(b)
of the Act.
(6) A copy of the latest Consolidated Reports of Condition
and Income of the trustee published pursuant to law or
the requirements of its supervising or examining authority.
NOTES
In as much as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base answers to Item 2, the answers to said Items are
based upon imcomplete information. Said Items may, however, be considered
correct unless amended by an amendment to this Form T-1.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement of
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Hartford, and State of
Connecticut, on the 12th day of November, 1996.
FLEET NATIONAL BANK,
AS TRUSTEE
By: /s/
-------------------------
Michael M. Hopkins
Its Vice President
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FLEET NATIONAL BANK
FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Fleet National Bank."
SECOND. The main office of the Association shall be in Springfield, Hampden
County Commonwealth of Massachusetts. The general business of the Association
shall be conducted at its main office and its branches.
THIRD. The board of directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of the shareholders at any annual or special meeting thereof.
Unless otherwise provided by the laws of the United States, any vacancy in the
board of directors for any reason, including an increase in the number thereof,
may be filled by action of the board of directors.
FOURTH. The annual meeting of the shareholders for the election of directors
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office or such other place as the board of
directors may designate, on the day of each year specified therefore in the
bylaws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the board of
directors.
FIFTH. The authorized amount of capital stock of this Association shall be
eight million five hundred thousand (8,500,000) shares of which three million
five hundred thousand (3,500,000) shares shall be common stock with a
par value of six and 25/100 dollars ($6.25) each, and of which five million
(5,000,000) shares without par value shall be preferred stock. The capital
stock may be increased or decreased from time to time, in accordance with
the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued or sold, nor
any right of subscription to any thereof other than such, if any, as the board
of directors, in its discretion, may from time to time determine and at such
price as the board of directors may from time to time fix.
<PAGE>
The board of directors of the Association is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide for the
issuance from time to time in one or more series of any number of the preferred
shares, and to establish the number of shares be included in each series, and
to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series. The authority of the board of
directors with respect to each series shall include, but not be limited to,
determination of the following:
a. The number of shares constituting that series and the distinctive
designation of that series;
b. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and whether they shall be
payable in preference to, or in another relation to, the dividends payable
to any other class or classes or series of stock;
c. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
d. Whether that series shall have conversion or exchange privileges, and,
if so, the terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in such
events as the board of directors shall determine;
e. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed,
the date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
f. Whether that series shall be entitled to the benefit of a sinking fund to
be applied to the purchase or redemption of shares of that series, and, if
so, the terms and amounts of such sinking fund;
g. The right of the shares of that series to the benefit of conditions and
restrictions upon the creation of indebtedness of the Association or any
subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Association or any subsidiary of
any outstanding stock of the Association;
h. The right of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Association and
whether such rights shall be in preference to, or in another relation to,
the comparable rights of any other class or classes or series of stock; and
i. Any other relative, participating, optional or other special rights,
qualifications, limitations or restrictions of that series.
Shares of any series of preferred stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of preferred stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the board of directors or as part of any other series or
preferred stock, all subject to the conditions and the restrictions adopted by
the board of directors providing for the issue of any series of preferred
stock and by the provisions of any applicable law.
Subject to the provisions of any applicable law, or except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of preferred stock, the holders of outstanding shares of common stock shall
exclusively possess voting power for the election of directors and for all
purposes, each holder of record of shares of common stock being entitled to one
vote for each share of common stock standing in his name on the books of the
Association.
Except as otherwise provided by the resolution or resolutions providing for the
issue of any series of preferred stock, after payment shall have been made to
the holders of preferred stock of the full amount of dividends to which they
shall be entitled pursuant to the resolution or resolutions providing for the
issue of any other series of preferred stock, the holders of common stock shall
be entitled, to the exclusion of the holders of preferred stock of any and all
series, to receive such dividends as from time to time may be declared by the
board of directors.
Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, in the event of any liquidation, dissolution
or winding up of the Association, whether voluntary or involuntary, after
payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of preferred stock the
holders of common stock shall be entitled, to the exclusion of the holders of
preferred stock of any and all series, to share, ratable according to the
number of shares of common stock held by them, in all remaining assets of the
Association available for distribution to its shareholders.
The number of authorized shares of any class may be increased or decreased by
the affirmative vote of the holders of a majority of the stock of the
Association entitled to vote.
<PAGE>
SIXTH. The board of directors shall appoint one of its members president of
this Association, who shall be chairman of the board, unless the board appoints
another director to be the chairman. The board of directors shall have the
power to appoint one or more vice presidents; and to appoint a secretary and
such other officers and employees as may be required to transact the business
of this Association.
The board of directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a board of
directors to do and perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first class mail, postage prepaid, mailed at
least ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.
TENTH. (a) Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the Association or is or was
serving at the request of the Association as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, limited
liability company, trust, or other enterprise, including service with respect
to an employee benefit plan, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the law of the state in which
the Association's ultimate parent company is incorporated, except as provided
in subsection (b). The aforesaid indemnity shall protect the indemnified
person against all expense, liability and loss (including attorney's fees,
judgements, fines ERISA excise taxes or penalties, and amounts paid in
settlement) reasonably incurred by such person in connection with such a
proceeding. Such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors, and administrators, but shall only cover such person's
period of service with the Association. The Association may, by action of its
Board of Directors, grant rights to indemnification to agents of the
Association and to any director, officer, employee or agent of any of its
subsidiaries with the same scope and effect as the foregoing indemnification
of directors and officers.
(b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no
person shall be indemnified hereunder by the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by a federal bank regulatory agency which proceeding or action
results in a final order assessing civil money penalties against that person,
requiring affirmative action by that person in the form of payments to the
Association, or removing or prohibiting that person from service with the
Association, and any advancement of expenses to that person in that proceeding
must be repaid; and (ii) no person shall be indemnified hereunder by the
Association and no advancement of expenses shall be made to any person
hereunder to the extent such indemnification or advancement of expenses would
violate or conflict with any applicable federal statute now or hereafter in
force or any applicable final regulation or interpretation now or hereafter
adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal
Deposit Insurance Corporation ("FDIC"). The Association shall comply with any
requirements imposed on it by any such statue or regulation in connection with
any indemnification or advancement of expenses hereunder by the Association.
With respect to proceedings to enforce a claimant's rights to indemnification,
the Association shall indemnify any such claimant in connection with such a
proceeding only as provided in subsection (d) hereof.
(c) Advancement of Expenses. The conditional right to indemnification
conferred in this section shall be a contract right and shall include the
right to be paid by the Association the reasonable expenses (including
attorney's fees) incurred in defending a proceeding in advance of its final
disposition (an "advancement of expenses"); provided, however, that an
advancement of expenses shall be made only upon (i) delivery to the Association
of a binding written undertaking by or on behalf of the person receiving the
advancement to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified in such proceeding,
including if such proceeding results in a final order assessing civil money
penalties against that person, requiring affirmative action by that person
in the form of payments to the Association, or removing or prohibiting that
person from service with the Association, and (ii) compliance with any other
actions or determinations required by applicable law, regulation or OCC or FDIC
interpretation to be taken or made by the Board of Directors of the Association
or other persons prior to an advancement of expenses. The Association shall
cease advancing expenses at any time its Board of Directors believes that any
of the prerequisites for advancement of expenses are no longer being met.
(d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the
section is not paid in full by the Association within thirty (30) days after
written claim has been received by the Association, the claimant may at any time
thereafter bring suit against the Association to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Association to recover an advancement of expenses pursuant
to the terms of an undertaking, the claimant shall be entitled to be paid also
the expense of prosecuting or defending such claim. It shall be a defense to
any such action brought by the claimant to enforce a right to indemnification
hereunder (other than an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any, has been tendered to the
Association) that the claimant has not met any applicable standard for
indemnification under the law of the state in which the Association's ultimate
parent company is incorporated. In any suit brought by the Association to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Association shall be entitled to recover such expenses upon a final
adjudication that the claimant has not met any applicable standard for
indemnification standard for indemnification under the law of the state in
which the Association's ultimate parent company is incorporated.
(e) Non-Exclusivity of Rights. The rights to indemnification and the
advancement of expenses conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquired under any statute,
agreement, vote of stockholders or disinterested directors or otherwise.
(f) Insurance. The Association may purchase, maintain, and make payment or
reimbursement for reasonable premiums on, insurance to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the law of
the state in which the Association's ultimate parent company is incorporated;
provided however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.
ELEVENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. The notice of any shareholders' meeting at
which an amendment to the articles of association of this Association is to be
considered shall be given as hereinabove set forth.
I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.
Secretary/Assistant Secretary
- --------------------------------------------------
Dated at , as of .
--------------------------------------- --------------------
Revision of February 15, 1996
<PAGE>
EXHIBIT 2
[LOGO]
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
that:
(1) The Comptroller of the Currency, pursuant to Revised Statutes
324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession,
custody and control of all records pertaining to the chartering, regulation and
supervision of all National Banking Associations.
(2) "Fleet National Bank", Springfield, Massachusetts
(Charter No. 1338), is a National Banking Association formed under the
laws of the United States and is authorized thereunder to transact the
business of banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at
the Treasury Department, in the City of
Washington and District of Columbia, this
14th day of August, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 2
[LOGO]
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
Certification of Fiduciary Powers
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
the records in this Office evidence "Fleet National Bank",
Springfield, Massachusetts, (Charter No. 1338), was granted, under the hand
and seal of the Comptroller, the right to act in all fiduciary capacities
authorized under the provisions of The Act of Congress approved
September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a. I further certify the
authority so granted remains in full force and effect.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
Office of the Comptroller of the Currency
to be affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia, this
4th day of April, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 4
AMENDED AND RESTATED BY-LAWS OF
FLEET NATIONAL BANK
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The regular annual meeting of the shareholders for
the election of Directors and the transaction of any other business that may
properly come before the meeting shall be held at the Main Office of the
Association, or such other place as the Board of Directors may designate, on
the fourth Thursday of April in each year at 1:15 o'clock in the afternoon
unless some other hour of such day is fixed by the Board of Directors.
If, from any cause, an election of Directors is not made on such day, the Board
of Directors shall order the election to be held on some subsequent day, of
which special notice shall be given in accordance with the provisions of law,
and of these bylaws.
Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the Board of Directors, the President, or any shareholders
owning not less than twenty-five percent (25%) of the stock of the Association.
Section 3. Notice of Meetings of Shareholders. Except as otherwise provided
by law, notice of the time and place of annual or special meetings of the
shareholders shall be mailed, postage prepaid, at least ten (10) days before
the date of the meeting to each shareholder of record entitled to vote thereat
at his address as shown upon the books of the Association; but any failure to
mail such notice to any shareholder or any irregularity therein, shall not
affect the validity of such meeting or of any of the proceedings thereat.
Notice of a special meeting shall also state the purpose of the meeting.
Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a
quorum for the transaction of business at every meeting of the shareholders
shall consist of not less than two-fifths (2/5) of the outstanding capital
stock represented in person or by proxy; less than such quorum may adjourn the
meeting to a future time. No notice need be given of an adjourned annual or
special meeting of the shareholders if the adjournment be to a definite place
and time.
Section 5. Votes and Proxies. At every meeting of the shareholders, each
share of the capital stock shall be entitled to one vote except as otherwise
provided by law. A majority of the votes cast shall decide every question
or matter submitted to the shareholder at any meeting, unless otherwise
provided by law or by the Articles of Association or these By-laws. Share-
holders may vote by proxies duly authorized in writing and filed with the
Cashier, but no officer, clerk, teller or bookeeper of the Association may act
as a proxy.
<PAGE>
Section 6. Nominations to Board of Directors. At any meeting of shareholders
held for the election of Directors, nominations for election to the Board of
Directors may be made, subject to the provisions of this section, by any share-
holder of record of any outstanding class of stock of the Association entitled
to vote for the election of Directors. No person other than those whose names
are stated as proposed nominees in the proxy statement accompanying the notice
of the meeting may be nominated as such meeting unless a shareholder shall have
given to the President of the Association and to the Comptroller of the
Currency, Washington, DC written notice of intention to nominate such other
person mailed by certified mail or delivered not less than fourteen (14) days
nor more than fifty (50) days prior to the meeting of shareholders at which
such nomination is to be made; provided, however, that if less than twenty-one
(21) days' notice of such meeting is given to shareholders, such notice of
intention to nominate shall be mailed by certified mail or delivered to said
President and said Comptroller on or before the seventh day following the day
on which the notice of such meeting was mailed. Such notice of intention to
nominate shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Association that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Association owned by the
notifying shareholder. In the event such notice is given, the proposed nominee
may be nominated either by the shareholder giving such notice or by any other
shareholder present at the meeting at which such nomination is to be made.
Such notice may contain the names of more than one proposed nominee, and if
more than one is named, any one or more of those named may be nominated.
Section 7. Action Taken Without a Shareholder Meeting. Any action requiring
shareholder approval or consent may be taken without a meeting and without
notice of such meeting by written consent of the shareholders.
ARTICLE II
DIRECTORS
Section 1. Number. The Board of Directors shall consist of such number of
shareholders, not less than five (5) nor more than twenty-five (25), as from
time to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled, or by the Board of Directors as
hereinafter provided.
Section 2. Mandatory Retirement for Directors. No person shall be elected a
director who has attained the age of 68 and no person shall continue to serve
as a director after the date of the first meeting of the stockholders of the
Association held on or after the date on which such person attains the age of
68; provided, however, that any director serving on the Board as of December
15, 1995 who has attanined the age of 65 on or prior to such date shall be
permitted to continue to serve as a director until the date of the first
meeting of the stockholders of the Association held on or after the date on
which such person attains the age of 70.
<PAGE>
Section 3. General Powers. The Board of Directors shall exercise all the
coporate powers of the Association, except as expressly limited by law, and
shall have the control, management, direction and dispositon of all its
property and affairs.
Section 4. Annual Meeting. Immediately following a meeting of shareholders
held for the election of Directors, the Cashier shall notify the directors-
elect who may be present of their election and they shall then hold a meeting
at the Main Office of the Association, or such other place as the Board of
Directors may designate, for the purpose of taking their oaths, organizing the
new Board, electing officers and transacting any other business that may come
before such meeting.
Section 5. Regular Meeting. Regular meetings of the Board of Directors shall
be held without notice at the Main Office of the Association, or such other
place as the Board of Directors may designate, at such dates and times as the
Board shall determine. If the day designated for a regular meeting falls on a
legal holiday, the meeting shall be held on the next business day.
Section 6. Special Meetings. A special meeting of the Board of Directors may
be called at anytime upon the written request of the Chairman of the Board, the
President, or of two Directors, stating the purpose of the meeting. Notice of
the time and place shall be given not later than the day before the date of the
meeting, by mailing a notice to each Director at his last known address, by
delivering such notice to him personally, or by telephoning.
Section 7. Quorum; Votes. A majority of the Board of Directors at the time
holding office shall constitute a quorum for the transaction of all business,
except when otherwise provided by law, but less than a quorum may adjourn
a meeting from time to time, and the meeting may be held, as adjourned, without
further notice. If a quorum is present when a vote is taken, the affirmative
vote of a majority of Directors present is the act of the Board of Directors.
Section 8. Action by Directors Without a Meeting. Any action requiring
Director approval or consent may be taken without a meeting and without notice
of such meeting by written consent of all the Directors.
Section 9. Telephonic Participation in Directors' Meetings. A Director or
member of a Committee of the Board of Directors may participate in a meeting of
the Board or of such Committee may participate in a meeting of the Board or of
such Committee by means of a conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear one
another, and participation in such a meeting shall constitute presence in person
at such a meeting.
Section 10. Vacancies. Vacancies in the Board of Directors may be filled by
the remaining members of the Board at any regular or special meeting of the
Board.
Section 11. Interim Appointments. The Board of Directors shall, if the share-
holders at any meeting for the election of Directors have determined a number
of Directors less than twenty-five (25), have the power, by affirmative vote of
the majority of all the Directors, to increase such number of Directors to not
more than twenty-five (25) and to elect Directors to fill the resulting
vacancies and to serve until the next annual meeting of shareholders or the
next election of Directors; provided, however, that the number of Directors
shall not be so increased by more than two (2) if the number last determined
by shareholders was fifteen (15) or less, or increased by more than four (4) if
the number last determined by shareholders was sixteen (16) or more.
Section 12. Fees. The Board of Directors shall fix the amount and direct the
payment of fees which shall be paid to each Director for attendance at any
meeting of the Board of Directors or of any Committees of the Board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The Board of Directors shall appoint from its
members an Executive Committee which shall consist of such number of persons as
the Board of Directors shall determine; the Chairman of the Board and the
President shall be members ex-officio of the Executive Committee with full
voting power. The Chairman of the Board or the President may from time to time
appoint from the Board of Directors as temporary additional members of the
Executive Committee, with full voting powers, not more than two members to serve
for such periods as the Chairman of the Board or the President may determine.
The Board of Directors shall designate a member of the Executive Committee to
serve as Chairman thereof. A meeting of the Executive Committee may be called
at any time upon the written request of the Chairman of the Board, the President
or the Chairman of the Executive Committee, stating the purpose of the meeting.
Not less than twenty four hours' notice of said meeting shall be given to each
member of the Committee personally, by telephoning, or by mail. The Chairman of
the Executive Committee or, in his absence, a member of the Committee chosen by
a majority of the members present shall preside at meetings of the Executive
Committee.
<PAGE>
The Executive Committee shall possess and may exercise all the powers of the
Board when the Board is not in session except such as the Board, only, by law,
is authorized to exercise; it shall keep minutes of its acts and proceedings
and cause same to be presented and reported at every regular meeting and at any
special meeting of the Board including specifically, all its actions relating
to loans and discounts.
All acts done and powers and authority conferred by the Executive Committee,
from time to time, within the scope of its authority, shall be deemed to be,
and may be certified as being, the acts of and under the authority of the
Board.
Section 2. Risk Management Committee. The Board shall appoint from its
members a Risk Management Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Risk
Management Committee to serve as Chairman thereof. It shall be the duty of the
Risk Management Committee to (a) serve as the channel of communication with
management and the Board of Directors of Fleet Financial Group, Inc. to assure
that formal processes supported by management information systems are in place
for the identification, evaluation and management of significant risks inherent
in or associated with lending activities, the loan portfolio, asset-liablity
management, the investment portfolio, trust and investment advisory activities,
the sale of nondeposit investment products and new products and services and
such additional activities or functions as the Board may determine from time
to time; (b) assure the formulation and adoption of policies approved by the
Risk Management Committee or Board governing lending activities, management of
the loan portfolio, the maintenance of an adequate allowance for loan and lease
losses, asset-liability management, the investment portfolio, the retail
sale of non-deposit investment products, new products and services and such
additional activities or functions as the Board may determine from time to time
(c) assure that a comprehensive independent loan review program is in place for
the early detection of problem loans and review significant reports of the loan
review department, management's responses to those reports and the risk
attributed to unresolved issues; (d) subject to control of the Board, exercise
general supervision over trust activities, the investment of trust funds, the
disposition of trust investments and the acceptance of new trusts and the terms
of such acceptance, and (e) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 3. Audit Committee. The Board shall appoint from its members and
Audit Committee which shall consist of such number as the Board shall determine
no one of whom shall be an active officer or employee of the Association or
Fleet Financial Group, Inc. or any of its affiliates. In addition, members of
the Audit Committee must not (i) have served as an officer or employee of the
Association or any of its affiliates at any time during the year prior to their
appointment; or (ii) own, control, or have owned or controlled at any time
during the year prior to appointment, ten percent (10%) or more of any
outstanding class of voting securities of the Association. At least two (2)
members of the Audit Committee must have significant executive, professional,
educational or regulatory experience in financial, auditing, accounting,
or banking matters. No member of the Audit Commitee may have significant
direct or indirect credit or other relationships with the Association, the
termination of which would materially adversely affect the Association's
financial condition or results of operations.
The Board shall designate a member of the Audit Committee to serve as Chairman
thereof. It shall be the duty of the Audit Committee to (a) cause a continuous
audit and examination to be made on its behalf into the affairs of the
Association and to review the results of such examination; (b) review
significant reports of the internal auditing department, management's responses
to those reports and the risk attributed to unresolved issues; (c) review the
basis for the reports issued under Section 112 of The Federal Deposit Insurance
Corporation Improvement Act of 1991; (d) consider, in consultation with the
independent auditor and an internal auditing executive, the adequacy of the
Association's internal controls, including the resolution of identified material
weakness and reportable conditions; (e) review regulatory communications
received from any federal or state agency with supervisory jurisdiction or
other examining authority and monitor any needed corrective action by
management; (f) ensure that a formal system of internal controls is in place
for maintaining compliance with laws and regulations; (g) cause an audit of the
Trust Department at least once during each calendar year and within 15 months
of the last such audit or, in liew thereof, adopt a continuous audit system and
report to the Board each calendar year and within 15 months of the previous
report on the performance of such audit function; and (h) perform such
additional duties and exercise such additional powers of the Board as the Board
may determine from time to time.
The Audit Committee may consult with internal counsel and retain its own
outside counsel without approval (prior or otherwise) from the Board or
management and obligate the Association to pay the fees of such counsel.
<PAGE>
Section 4. Community Affairs Committee. The Board shall appoint from its
members a Community Affairs Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Community
Affairs Committee to serve as Chairman thereof. It shall be the duty of the
Commmunity Affairs Committee to (a) oversee compliance by the Association with
the Community Reinvestment Act of 1977, as amended, and the regulations
promulgated thereunder; and (b) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 5. Regular Meetings. Except for the Executive Committee which shall
meet on an ad hoc basis as set forth in Section 1 of this Article, regular
meetings of the Committees of the Board of Directors shall be held, without
notice, at such time and place as the Committee or the Board of Directors may
appoint and as often as the business of the Association may require.
Section 6. Special Meetings. A Special Meeting of any of the Committees of
the Board of Directors may be called upon the written request of the Chairman
of the Board or the President, or of any two members of the respective
Committee, stating the purpose of the meeting. Not less than twenty-four
hours' notice of such special meeting shall be given to each member of the
Committee personally, by telephoning, or by mail.
Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees
of the Board of Directors may be called at the request of the Chairman of the
Board or the President, who shall state that an emergency exists, upon not
less than one hour's notice to each member of the Committee personally or by
telephoning.
Section 8. Action Taken Without a Committee Meeting. Any Committee of the
Board of Directors may take action without a meeting and without notice of such
meeting by resolution assented to in writing by all members of such Committee.
Section 9. Quorum. A majority of a Committee of the Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of such
Committee. If a quorum is not available, the Chairman of the Board or the
President shall have power to make temporary appointments to a Committee of-
members of the Board of Directors, to act in the place and stead of members who
temporarily cannot attend any such meeting; provided, however, that any
temporary appointment to the Audit Committee must meet the requirements for
members of that Committee set forth in Section 3 of this Article.
Section 10. Record. The committes of the Board of Directors shall keep a
record of their respective meetings and proceedings which shall be presented
at the regular meeting of the Board of Directors held in the calendar month
next following the meetings of the Committees. If there is no regular Board
of Directors meeting held in the calendar month next following the meeting of
a Committee, then such Committee's records shall be presented at the next
regular Board of Directors meeting held in a month subsequent to such Committee
meeting.
Section 11. Changes and Vacancies. The Board of Directors shall have power
to change the members of any Committee at any time and to fill vacancies on any
Committee; provided, however, that any newly appointed member of the Audit
Committee must meet the requirements for members of that Committee set forth in
Section 3 of this Article.
Section 12. Other Committees. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.
ARTICLE IV
WAIVER OF NOTICE OF MEETINGS
Section 1. Waiver. Whenever notice is required to be given to any shareholder,
Director, or member of a Committee of the Board of Directors, such notice may
be waived in writing either before or after such meeting by any shareholder,
Director or Committee member respectively, as the case may be, who may be
entitled to such notice; and such notice will be deemed to be waived by
attendance at any such meeting.
<PAGE>
ARTICLE V
OFFICERS AND AGENTS
Section 1. Officers. The Board shall appoint a Chairman of the Board and a
President, and shall have the power to appoint one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Cashier, a Secretary, an Auditor, a Controller, one or more Trust Officers and-
such other officers as are deemed necessary or desirable for the proper
transaction of business of the Association. The Chairman of the Board and the
President shall be appointed from members of the Board of Directors. Any two
or more offices, except those of President and Cashier, or Secretary, may be
held by the same person. The Board may, from time to time, by resolution
passed by a majority of the entire Board, designate one or more officers of the
Association or of an affiliate or of Fleet Financial Group, Inc. with power to
appoint one or more Vice Presidents and such other officers of the Association
below the level of Vice President as the officer or officers designated in such
resolution deem necessary or desirable for the proper transaction of the
business of the Association.
Section 2. Chairman of the Board. The chairman of the Board shall preside at
all meetings of the Board of Directors. Subject to definition by the Board of
Directors, he shall have general executive powers and such specific powers and
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors.
Section 3. President. The President shall preside at all meetings of the
Board of Directors if there be no Chairman or if the Chairman be absent.
Subject to definition by the Board of Directors, he shall have general
executive powers and such specific powers and duties as from time to time may
be conferred upon or assigned to him by the Board of Directors.
<PAGE>
Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the
Board and of the Executive Committee, and shall keep accurate minutes of their
meetings and of all meetings of the shareholders. He shall attend to the
giving of all notices required by these By-laws. He shall be custodian of the
corporate seal, records, documents and papers of the Association. He shall
have such powers and perform such duties as pertain by law or regulation to the
office of Cashier, or as are imposed by these By-laws, or as may be delegated
to him from time to time by the Board of Directors, the Chairman of the Board
or the President.
Section 5. Auditor. The Auditor shall be the chief auditing officer of the
Association. He shall continuously examine the affairs of the Association and
from time to time shall report to the Board of Directors. He shall have such
powers and perform such duties as are conferred upon, or assigned to him by
these By-laws, or as may be delegated to him from time to time by the Board
of Directors.
Section 6. Officers Seriatim. The Board of Directors shall designate from
time to time not less than two officers who shall in the absence or disability
of the Chairman or President or both, succeed seriatim to the duties and
responsibilities of the Chairman and President respectively.
Section 7. Clerks and Agents. The Board of Directors may appoint, from time
to time, such clerks, agents and employees as it may deem advisable for the
prompt and orderly transaction of the business of the Association, define
their duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the Chairman of the Board or the
President, or any other officer of the Association authorized by either of them
may appoint and dismiss all or any clerks, agents and employees and prescribe
their duties and the conditions of their employment, and from time to time
fix their compensation.
Section 8. Tenure. The Chairman of the Board of Directors and the President
shall, except in the case of death, resignation, retirement or disqualification
under these By-laws, or unless removed by the affirmative vote of at least two-
thirds of all of the members of the Board of Directors, hold office for the
term of one year or until their respective successors are appointed. Either
of such officers appointed to fill a vacancy occurring in an unexpired term
shall serve for such unexpired term of such vacancy. All other officers,
clerks, agents, attorneys-in-fact and employees of the Association shall hold
office during the pleasure of the Board of Directors or of the officer or
committee appointing them respectively.
ARTICLE VI
TRUST DEPARTMENT
Section 1. General Powers and Duties. All fiduciary powers of the Association
shall be exercised through the Trust Department, subject to such regulations as
the Comptroller of the Currency shall from time to time establish. The Trust
Department shall be to placed under the management and immediate supervision
of an officer or officers appointed by the Board of Directors. The duties of
all officers of the Trust Department shall be to cause the policies and
instructions of the Board and the Risk Management Committee with respect to the
trusts under their supervision to be carried out, and to supervise the due
performance of the trusts and agencies entrusted to the Association and under
their supervision, in accordance with law and in accordance with the terms of
such trusts and agencies.
<PAGE>
ARTICLE VII
BRANCH OFFICES
Section 1. Establishment. The Board of Directors shall have full power to
establish, to discontinue, or, from time to time, to change the location of any
branch office, subject to such limitations as may be provided by law.
Section 2. Supervision and Control. Subject to the general supervision and
control of the Board of Directors, the affairs of branch offices shall be
under the immediate supervision and control of the President or of such other
officer or officers, employee or employees, or other individuals as the Board
of Directors may from time to time determine, with such powers and duties as
the Board of Directors may confer upon or assign to him or them.
ARTICLE VIII
SIGNATURE POWERS
Section 1. Authorization. The power of officers, employees, agents and
attorneys to sign on behalf of and to affix the seal of the Association shall
be prescribed by the Board of Directors or by the Executive Committee or by
both; provided that the President is authorized to restrict such power of any
officer, employee, agent or attorney to the business of a specific department
or departments, or to a specific branch office or branch offices. Facsimile
signatures may be authorized.
<PAGE>
ARTICLE IX
STOCK CERTIFICATES AND TRANSFERS
Section 1. Stock Records. The Trust Department shall have custody of the
stock certificate books and stock ledgers of the Association, and shall make
all transfers of stock, issue certificates thereof and disburse dividends
declared thereon.
Section 2. Form of Certificate. Every shareholder shall be entitled to a
certificate conforming to the requirements of law and otherwise in such form
as the Board of Directors may approve. The certificates shall state on the
face thereof that the stock is transferable only on the books of the
Association and shall be signed by such officers as may be prescribed from time
to time by the Board of Directors or Executive Committee. Facsimile signatures
may be authorized.
Section 3. Transfers of Stock. Transfers of stock shall be made only on the
books of the Association by the holder in person, or by attorney duly
authorized in writing, upon surrender of the certificate therefor properly
endorsed, or upon the surrender of such certificate accompanied by a properly
executed written assignment of the same, or a written power of attorney to
sell, assign or transfer the same or the shares represented thereby.
Section 4. Lost Certificate. The Board of Directors or Executive Committee
may order a new certificate to be issued in place of a certificate lost or
destroyed, upon proof of such loss or destruction and upon tender to the
Association by the shareholder, of a bond in such amount and with or without
surety, as may be ordered, indemnifying the Association against all liability,
loss, cost and damage by reason of such loss or destruction and the issuance
of a new certificate.
Section 5. Closing Transfer Books. The Board of Directors may close the
transfer books for a period not exceeding thirty days preceding any regular
or special meeting of the shareholders, or the day designated for the payment
of a dividend or the allotment of rights. In lieu of closing the transfer
books the Board of Directors may fix a day and hour not more than thirty days
prior to the day of holding any meeting of the shareholders, or the day
designated for the payment of a dividend, or the day designated for the
allotment of rights, or the day when any change of conversion or exchange of
capital stock is to go into effect, as the day as of which shareholders
entitled to notice of and to vote at such meetings or entitled to such dividend
or to such allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, shall be determined, and
only such shareholders as shall be shareholders of record on the day and hour
so fixed shall be entitled to notice of and to vote at such meeting or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be.
ARTICLE X
THE CORPORATE SEAL
Section 1. Seal. The following is an impression of the seal of the
Association adopted by the Board of Directors.
ARTICLE XI
BUSINESS HOURS
Section 1. Business Hours. The main office of this Association and each
branch office thereof shall be open for business on such days, and for such
hours as the Chairman, or the President, or any Executive Vice President, or
such other officer as the Board of Directors shall from time to time
designate, may determine as to each office to conform to local custom and
convenience, provided that any one or more of the main and branch offices or
certain departments thereof may be open for such hours as the President, or
such other officer as the Board of Directors shall from time to time designate,
may determine as to each office or department on any legal holiday on which
work is not prohibited by law, and provided further that any one or more of
the main and branch offices or certain departments thereof may be ordered
closed or open on any day for such hours as to each office or department as
the President, or such other officer as the Board of Directors shall from time
to time designate, subject to applicable laws regulations, may determine when
such action may be required by reason of disaster or other emergency condition.
ARTICLE IX
CHANGES IN BY-LAWS
Section 1. Amendments. These By-laws may be amended upon vote of a majority
of the entire Board of Directors at any meeting of the Board, provided ten (10)
day's notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-law, as amended, is
consistent with the requirements of law and of the Articles of Association.
These By-laws may also be amended by the Association's shareholders.
A true copy
Attest:
Secretary/Assistant Secretary
- ---------------------------------------
Dated at , as of .
--------------------------------------- ----------------------
Revision of January 11, 1993
<PAGE>
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under the Indenture to be entered into between
Loewen Group International, Inc. and Fleet National Bank, as Trustee,
does hereby consent that, pursuant to Section 321(b) of the Trust Indenture
Act of 1939, reports of examinations with respect to the undersigned by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
FLEET NATIONAL BANK,
AS TRUSTEE
By /s/ Michael M. Hopkins
-------------------------------
Michael M. Hopkins
Its: Vice President
Dated:
<PAGE>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1999
Federal Financial Institutions Examination Council
- --------------------------------------------------------------------------------
[FEDERAL FINANCIAL Please refer to page i, [1]
INSTITUTIONS EXAMINATION Table of Contents, for
COUNCIL LOGO] the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(960630)
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1996 -----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Giro S. DeRosa, Vice President
-----------------------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and
Income (including the supporting schedules) have been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority
and are true to the best of my knowledge and belief.
/s/ Giro DeRosa
- --------------------------------------------------------------------------------
Signature of Officer Authorized to Sign Report
July 25, 1996
- --------------------------------------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate Federal
Reserve District Bank.
State Nonmember Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
National Banks: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- --------------------------------------------------------------------------------
FDIC Certificate Number | 0 | 2 | 4 | 9 | 9 | Banks should affix
--------------------- the address label
(RCRI 90150) in this space.
CALL NO. 196 31 06-30-96
STAR: 25-0590 00327 STCERT: 25-02490
FLEET NATIONAL BANK
ONE MONARCH PLACE
SPRINGFIELD, MA 01102
Board of Governors of the Federal Reserve System, Federal Deposit
Insurance Corporation, Office of the Comptroller of the Currency
<PAGE>
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
___ ___
FDIC Certificate Number | 0 | 2 | 4 | 9 | 9 | | Banks should affix the address label in this space. |
______________________
(RCRI 9050) CALL NO. 196 31 06-30-96
STBK: 25-0590 00327 STCERT: 25-02499
FLEET NATIONAL BANK
ONE MONARCH PLACE
SPRINGFIELD, MA 01102
|___ ___|
</TABLE>
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
FFIEC 031
Page i
/2/
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
________________________________________________________________________________
TABLE OF CONTENTS
SIGNATURE PAGE Cover
REPORT OF INCOME
Schedule RI--Income Statement...........................................RI-1,2,3
Schedule RI-A--Changes in Equity Capital....................................RI-4
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses..................................................................RI-4,5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority..........................................................RI-5
Schedule RI-D--Income from
International Operations..................................................RI-6
Schedule RI-E--Explanations...............................................RI-7,8
REPORT OF CONDITION
Schedule RC--Balance Sheet................................................RC-1,2
Schedule RC-A--Cash and Balances Due
From Depository Institutions..............................................RC-3
Schedule RC-B--Securities...............................................RC-3,4,5
Schedule RC-C--Loans and Lease Financing
Receivables:
Part I. Loans and Leases..............................................RC-6,7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only).....................................................RC-7a,7b
Schedule RC-D--Trading Assets and Liabilities
(to be completed only by selected banks)..................................RC-8
Schedule RC-E--Deposit Liabilities....................................RC-9,10,11
Schedule RC-F--Other Assets................................................RC-11
Schedule RC-G--Other Liabilities...........................................RC-11
Schedule RC-H--Selected Balance Sheet Items for
Domestic Offices.........................................................RC-12
Schedule RC-I--Selected Assets and Liabilities
of IBFs..................................................................RC-13
Schedule RC-K--Quarterly Averages..........................................RC-13
Schedule RC-L--Off-Balance Sheet Items...............................RC-14,15,16
Schedule RC-M--Memoranda................................................RC-17,18
Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets..............................................RC-19,20
Schedule RC-O--Other Data for Deposit
Insurance Assessments.................................................RC-21,22
Schedule RC-R--Regulatory Capital.......................................RC-23,24
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Condition and Income.....................................................RC-25
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)
DISCLOSURE OF ESTIMATED BURDEN
The estimated average burden associated with this information collection is
32.2 hours per respondent and is estimated to vary from 15 to 230 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the required
form, and completing the information collection, but exclude the time for
compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden
estimate and suggestions for reducing this burden should be directed to the
Office of Information and Regulatory Affairs, Office of Management and Budget,
Washington, D.C. 20503, and to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, National and State nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington,
D.C. 20429, toll free on (800) 688-FDIC (3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-1
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Consolidated Report of Income
for the period January 1, 1996 - June 30, 1996
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
<TABLE>
<CAPTION>
Schedule RI--Income Statement _________
| I480 |
______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________|_____________________|
<S> <C> <C>
1. Interest income: | ////////////////// |
a. Interest and fee income on loans: | ////////////////// |
(1) In domestic offices: | ////////////////// |
(a) Loans secured by real estate .................................................. | 4011 616,395 | 1.a.(1)(a)
(b) Loans to depository institutions .............................................. | 4019 588 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers ........... | 4024 286 | 1.a.(1)(c)
(d) Commercial and industrial loans ............................................... | 4012 562,807 | 1.a.(1)(d)
(e) Acceptances of other banks .................................................... | 4026 261 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ////////////////// |
(1) Credit cards and related plans ............................................ | 4054 9,643 | 1.a.(1)(f)(1)
(2) Other ..................................................................... | 4055 97,346 | 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions ........................ | 4056 0 | 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political | ////////////////// |
subdivisions in the U.S.: | ////////////////// |
(1) Taxable obligations ....................................................... | 4503 0 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations .................................................... | 4504 5,232 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices ........................................... | 4058 84,576 | 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 4059 1,981 | 1.a.(2)
b. Income from lease financing receivables: | ////////////////// |
(1) Taxable leases .................................................................... | 4505 75,341 | 1.b.(1)
(2) Tax-exempt leases ................................................................. | 4307 791 | 1.b.(2)
c. Interest income on balances due from depository institutions:(1) | ////////////////// |
(1) In domestic offices ............................................................... | 4105 914 | 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 4106 142 | 1.c.(2)
d. Interest and dividend income on securities: | ////////////////// |
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations ... | 4027 209,142 | 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: | ////////////////// |
(a) Taxable securities ............................................................ | 4506 0 | 1.d.(2)(a)
(b) Tax-exempt securities ......................................................... | 4507 2,953 | 1.d.(2)(b)
(3) Other domestic debt securities .................................................... | 3657 12,164 | 1.d.(3)
(4) Foreign debt securities ........................................................... | 3658 3,348 | 1.d.(4)
(5) Equity securities (including investments in mutual funds) ......................... | 3659 10,212 | 1.d.(5)
e. Interest income from trading assets.................................................... | 4069 360 | 1.e.
______________________
</TABLE>
____________
(1) Includes interest income on time certificates of deposit not held for
trading.
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
Dollar Amounts in Thousands | Year-to-date |
___________________________________________________________________________________ ______________
<S> <C> <C>
1. Interest income (continued) | RIAD Bil Mil Thou |
f. Interest income on federal funds sold and securities purchased | ////////////////// |
under agreements to resell in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4020 24,925 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ | 4107 1,719,407 | 1.g.
2. Interest expense: | ////////////////// |
a. Interest on deposits: | ////////////////// |
(1) Interest on deposits in domestic offices: | ////////////////// |
(a) Transaction accounts (NOW accounts, ATS accounts, and | ////////////////// |
telephone and preauthorized transfer accounts) .............. | 4508 8,583 | 2.a.(1)(a)
(b) Nontransaction accounts: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................... | 4509 133,915 | 2.a.(1)(b)(1)
(2) Other savings deposits .................................. | 4511 26,678 | 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ | 4174 88,690 | 2.a.(1)(b)(3)
(4) All other time deposits ................................. | 4512 214,225 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs .......................................... | 4172 50,022 | 2.a.(2)
b. Expense of federal funds purchased and securities sold under | ////////////////// |
agreements to repurchase in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4180 152,094 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading | ////////////////// |
liabilities, and other borrowed money ............................... | 4185 121,525 | 2.c.
d. Interest on mortgage indebtedness and obligations under | ////////////////// |
capitalized leases .................................................. | 4072 361 | 2.d.
e. Interest on subordinated notes and debentures ....................... | 4200 26,110 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... | 4073 822,203 | 2.f.
___________________________
3. Net interest income (item 1.g minus 2.f) ............................... | ////////////////// | RIAD 4074 | 897,204 | 3.
___________________________
4. Provisions: | ////////////////// |
___________________________
a. Provision for loan and lease losses ................................. | ////////////////// | RIAD 4230 | 21,672 | 4.a.
b. Provision for allocated transfer risk ............................... | ////////////////// | RIAD 4243 | 0 | 4.b.
___________________________
5. Noninterest income: | ////////////////// |
a. Income from fiduciary activities .................................... | 4070 144,614 | 5.a.
b. Service charges on deposit accounts in domestic offices ............. | 4080 111,736 | 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum | ////////////////// |
items 8.a through 8.d)............................................... A220 10,646 5.c.
d. Other foreign transaction gains (losses) ............................ | 4076 247 | 5.d.
e. Not applicable | ////////////////// |
f. Other noninterest income: | ////////////////// |
(1) Other fee income ................................................ | 5407 372,950 | 5.f.(1)
(2) All other noninterest income* ................................... | 5408 211,593 | 5.f.(2)
___________________________
g. Total noninterest income (sum of items 5.a through 5.f) ............. | ////////////////// | RIAD 4079 | 851,786 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. | ////////////////// | RIAD 3521 | 1 | 6.a.
b. Realized gains (losses) on available-for-sale securities ............ | ////////////////// | RIAD 3196 | 16,126 | 6.b.
___________________________
7. Noninterest expense: | ////////////////// |
a. Salaries and employee benefits ...................................... | 4135 322,146 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ////////////////// |
(excluding salaries and employee benefits and mortgage interest) .... | 4217 114,912 | 7.b.
c. Other noninterest expense* .......................................... | 4092 631,554 | 7.c.
___________________________
d. Total noninterest expense (sum of items 7.a through 7.c) ............ | ////////////////// | RIAD 4093 | 1,068,612 | 7.d.
___________________________
8. Income (loss) before income taxes and extraordinary items and other | ////////////////// |
___________________________
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)| ////////////////// | RIAD 4301 | 674,833 | 8.
9. Applicable income taxes (on item 8) .................................... | ////////////////// | RIAD 4302 | 280,303 | 9.
___________________________
10. Income (loss) before extraordinary items and other adjustments | ////////////////// |
___________________________
(item 8 minus 9) ....................................................... | ////////////////// | RIAD 4300 | 394,530 | 10.
_________________________________________________
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________ ______________
<S> <C> <C>
11. Extraordinary items and other adjustments: | ////////////////// |
a. Extraordinary items and other adjustments, gross of income taxes* . | 4310 0 | 11.a.
b. Applicable income taxes (on item 11.a)* ........................... | 4315 0 | 11.b.
c. Extraordinary items and other adjustments, net of income taxes | ////////////////// |__________________________
(item 11.a minus 11.b) ............................................ | ////////////////// | RIAD 4320 | 0 | 11.c.
12. Net income (loss) (sum of items 10 and 11.c) ......................... | ////////////////// | RIAD 4340 | 394,530 | 12.
_________________________________________________
</TABLE>
<TABLE>
<CAPTION>
__________
| I481 |
_______________
Memoranda | Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes .......................... | 4513 1,798 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 8) ............................................................... | 8431 20,910 | M.2.
3.-4. Not applicable | ////////////////// |
5. Number of full-time equivalent employees on payroll at end of current period (round to | //// Number |
nearest whole number) ........................................................................... | 4150 9,852 | M.5.
6. Not applicable | ////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push down | //// MM DD YY |
accounting this calendar year, report the date of the bank's acquisition ........................ | 9106 00/00/00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) | ////////////////// |
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): | //// Bil Mil Thou |
a. Interest rate exposures ...................................................................... | 8757 1,428 | M.8.a.
b. Foreign exchange exposures ................................................................... | 8758 9,218 | M.8.b.
c. Equity security and index exposures .......................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures ................................................................ | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ////////////////// |
a. Net increase (decrease) to interest income.....................................................| 8761 (5,575)| M.9.a.
b. Net (increase) decrease to interest expense ...................................................| 8762 (5,752)| M.9.b.
c. Other (noninterest) allocations ...............................................................| 8763 (172)| M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions).................................| A251 0 | M.10.
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses. _________
| I483 |
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of Condition | ////////////////// |
and Income ...................................................................................... | 3215 1,342,473 | 1.
2. Equity capital adjustments from amended Reports of Income, net* ................................. | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) ............................ | 3217 1,342,473 | 3.
4. Net income (loss) (must equal Schedule RI, item 12) ............................................. | 4340 394,530 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net .............................. | 4346 0 | 5.
6. Changes incident to business combinations, net .................................................. | 4356 4,161,079 | 6.
7. LESS: Cash dividends declared on preferred stock ................................................ | 4470 0 | 7.
8. LESS: Cash dividends declared on common stock ................................................... | 4460 490,634 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions | ////////////////// |
for this schedule) .............................................................................. | 4411 0 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ................ | 8433 (46,607)| 11.
12. Foreign currency translation adjustments ........................................................ | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) ........ | 4415 (1,003,722)| 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, | ////////////////// |
item 28) ........................................................................................ | 3210 4,357,119 | 14.
______________________
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
<TABLE>
<CAPTION>
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
__________
| I486 |
__________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4651 35,701 | 4661 8,412 | 1.a.
b. To non-U.S. addressees (domicile) ..................................... | 4652 0 | 4662 0 | 1.b.
2. Loans to depository institutions and acceptances of other banks: | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository institutions .................. | 4653 0 | 4663 0 | 2.a.
b. To foreign banks ...................................................... | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers ...... | 4655 2 | 4665 22 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4645 38,139 | 4617 19,005 | 4.a.
b. To non-U.S. addressees (domicile) ..................................... | 4646 0 | 4618 102 | 4.b.
5. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures: | ////////////////// | ////////////////// |
a. Credit cards and related plans ........................................ | 4656 1,137 | 4666 733 | 5.a.
b. Other (includes single payment, installment, and all student loans) ... | 4657 7,864 | 4667 2,681 | 5.b.
6. Loans to foreign governments and official institutions ................... | 4643 0 | 4627 0 | 6.
7. All other loans .......................................................... | 4644 826 | 4628 541 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ......................................... | 4658 3,729 | 4668 3,241 | 8.a.
b. Of non-U.S. addressees (domicile) ..................................... | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8) ......................................... | 4635 87,398 | 4605 34,737 | 9.
___________________________________________
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-B--Continued
Part I. Continued
Memoranda
__________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1-3. Not applicable | ////////////////// | ////////////////// |
4. Loans to finance commercial real estate, construction, and land | ////////////////// | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, items 4 and 7, above .............................. | 5409 383 | 5410 1,374 | M.4.
5. Loans secured by real estate in domestic offices (included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, item 1, above): | ////////////////// | ////////////////// |
a. Construction and land development ..................................... | 3582 189 | 3583 253 | M.5.a.
b. Secured by farmland ................................................... | 3584 145 | 3585 131 | M.5.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ..................... | 5411 2,650 | 5412 108 | M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties ...... | 5413 13,892 | 5414 1,231 | M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties ............. | 3588 837 | 3589 395 | M.5.d.
e. Secured by nonfarm nonresidential properties .......................... | 3590 17,988 | 3591 6,294 | M.5.e.
|_________________________________________|
</TABLE>
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income.......... | 3124 266,943 | 1.
2. Recoveries (must equal part I, item 9, column B above) ........................................ | 4605 34,737 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) ................................. | 4635 87,398 | 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......................... | 4230 21,672 | 4.
5. Adjustments* (see instructions for this schedule) ................................ ............ | 4815 636,497 | 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, | ////////////////// |
item 4.b) ..................................................................................... | 3123 872,451 | 6.
|____________________|
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
| I489 | -
____________ ________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Federal ....................................................................................... | 4780 N/A | 1.
2. State and local................................................................................ | 4790 N/A | 2.
3. Foreign ....................................................................................... | 4795 N/A | 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b) ............ | 4770 N/A | 4.
____________________________| |
5. Deferred portion of item 4 ........................................ | RIAD 4772 | N/A | ////////////////// | 5.
__________________________________________________
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-6
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs where international operations
account for more than 10 percent of total revenues, total assets, or net income.
Part I. Estimated Income from International Operations
__________
| I492 | -
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs: | ////////////////// |
a. Interest income booked ................................................................... | 4837 N/A | 1.a.
b. Interest expense booked .................................................................. | 4838 N/A | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs | ////////////////// |
(item 1.a minus 1.b) ..................................................................... | 4839 N/A | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked at domestic offices .. | 4840 N/A | 2.a.
b. Net interest income attributable to domestic business booked at foreign offices .......... | 4841 N/A | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ..................................... | 4842 N/A | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations .............................. | 4097 N/A | 3.a.
b. Provision for loan and lease losses attributable to international operations ............. | 4235 N/A | 3.b.
c. Other noninterest expense attributable to international operations ....................... | 4239 N/A | 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a | ////////////////// |
minus 3.b and 3.c) ....................................................................... | 4843 N/A | 3.d.
4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// |
adjustment (sum of items 1.c, 2.c, and 3.d) ................................................. | 4844 N/A | 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// |
the effects of equity capital on overall bank funding costs ................................. | 4845 N/A | 5.
6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// |
adjustment (sum of items 4 and 5) ........................................................... | 4846 N/A | 6.
7. Income taxes attributable to income from international operations as estimated in item 6 .... | 4797 N/A | 7.
8. Estimated net income attributable to international operations (item 6 minus 7) .............. | 4341 N/A | 8.
______________________
<CAPTION>
Memoranda ______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Intracompany interest income included in item 1.a above ..................................... | 4847 N/A | M.1.
2. Intracompany interest expense included in item 1.b above .................................... | 4848 N/A | M.2.
______________________
</TABLE>
<TABLE>
<CAPTION>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income booked at IBFs .............................................................. | 4849 N/A | 1.
2. Interest expense booked at IBFs ............................................................. | 4850 N/A | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items ................................................... | 5491 N/A | 3.a.
b. Fees and other noninterest income ........................................................ | 5492 N/A | 3.b.
4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs) ........................................................... | 4852 N/A | 4.
5. Other noninterest expense attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs) ............................................................................ | 4853 N/A | 5.
______________________
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-7
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
__________
| I495 | -
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains on other real estate owned ..................................................... | 5415 0 | 1.a.
b. Net gains on sales of loans .............................................................. | 5416 0 | 1.b.
c. Net gains on sales of premises and fixed assets .......................................... | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 5.f.(2): | ////////////////// |
_____________
d. | TEXT 4461 | Income on Mortgages Held for Resale | 4461 81,194 | 1.d.
e. | TEXT 4462 | Gain From Branch Divestitures | 4462 77,976 | 1.e.
___________
f. | TEXT 4463 |______________________________________________________________________________| 4463 | 1.f.
_____________
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets ................................................ | 4531 135,939 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net losses on other real estate owned .................................................... | 5418 0 | 2.b.
c. Net losses on sales of loans ............................................................. | 5419 0 | 2.c.
d. Net losses on sales of premises and fixed assets ......................................... | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 7.c: | ////////////////// |
_____________
e. | TEXT 4464 | Intercompany Corporate Support Function Charges | 4464 143,184 | 2.e.
___________
f. | TEXT 4467 | Intercompany Data Processing & Programming Charges | 4467 158,034 | 2.f.
___________
g. | TEXT 4468 |______________________________________________________________________________| 4468 | 2.g.
_____________
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and | ////////////////// |
applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe | ////////////////// |
all extraordinary items and other adjustments): | ////////////////// |
_____________
a. (1) | TEXT 4469 |__________________________________________________________________________| 4469 | 3.a.(1)
_____________
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a.(2)
_____________ ____________________________
b. (1) | TEXT 4487 |__________________________________________________________________________| 4487 | 3.b.(1)
_____________
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b.(2)
_____________ ____________________________
c. (1) | TEXT 4489 |__________________________________________________________________________| 4489 | 3.c.(1)
_____________
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c.(2)
____________________________
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, | ////////////////// |
item 2) (itemize and describe all adjustments): | ////////////////// |
_____________
a. | TEXT 4492 |______________________________________________________________________________| 4492 | 4.a.
___________
b. | TEXT 4493 |______________________________________________________________________________| 4493 | 4.b.
_____________
5. Cumulative effect of changes in accounting principles from prior years (from | ////////////////// |
Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
_____________
a. | TEXT 4494 |______________________________________________________________________________| 4494 | 5.a.
___________
b. | TEXT 4495 |______________________________________________________________________________| 4495 | 5.b.
_____________
6. Corrections of material accounting errors from prior years (from Schedule RI-A, | ////////////////// |
item 10) (itemize and describe all corrections): | ////////////////// |
_____________
a. | TEXT 4496 | 4496 | 6.a.
___________|______________________________________________________________________________
b. | TEXT 4497 4497 | 6.b.
____________|____________________________________________________________________________________________________
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-8
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-E--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
_____________
a. | TEXT 4498 | Fleet National Bank Surplus Distribution to FFG | 4498 (1,003,722) | 7.a.
__________________________________________________________________________________________| |
b. | TEXT 4499 | | 4499 | 7.b.
___________________________________________________________________________________________
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, | ////////////////// |
item 5) (itemize and describe all adjustments): | ////////////////// |
_____________ | |
a. | TEXT 4521 | 12/31/95 Ending Balance of Pooled Entities | 4521 | 8.a.
___________________________________________________________________________________________| |
b. | TEXT 4522 | | 4522 | 8.b.
___________________________________________________________________________________________| |
____________________
9. Other explanations (the space below is provided for the bank to briefly describe, | I498 | I499 | -
______________________
at its option, any other significant items affecting the Report of Income):
___
No comment |X| (RIAD 4769)
___
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-1
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.
Schedule RC--Balance Sheet
__________
| C400 | -
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1) ................................... | 0081 4,130,928 | 1.a.
b. Interest-bearing balances(2) ............................................................ | 0071 46,521 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. | 1754 257,441 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ | 1773 7,250,067 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices | ////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ////////////////// |
a. Federal funds sold ...................................................................... | 0276 17,428 | 3.a.
b. Securities purchased under agreements to resell ......................................... | 0277 0 | 3.b.
4. Loans and lease financing receivables: ____________________________| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) | RCFD 2122 | 31,278,251 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses ................... | RCFD 3123 | 872,451 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve ....................... | RCFD 3128 | 0 | ////////////////// | 4.c.
____________________________
d. Loans and leases, net of unearned income, | ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c) ..................................... | 2125 30,405,800 | 4.d.
5. Trading assets (from schedule RC-D )........................................................ | 3545 71,354 | 5.
6. Premises and fixed assets (including capitalized leases) ................................... | 2145 534,844 | 6.
7. Other real estate owned (from Schedule RC-M) ............................................... | 2150 34,546 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ... | 2130 0 | 8.
9. Customers' liability to this bank on acceptances outstanding ............................... | 2155 16,634 | 9.
10. Intangible assets (from Schedule RC-M) ..................................................... | 2143 2,283,414 | 10.
11. Other assets (from Schedule RC-F) .......................................................... | 2160 3,978,638 | 11.
12. Total assets (sum of items 1 through 11) ................................................... | 2170 49,027,615 | 12.
______________________
</TABLE>
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC--Continued
___________________________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
<S> <C> <C>
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, | /////////////////////// |
part I) ............................................................................... | RCON 2200 34,110,580 | 13.a.
____________________________
(1) Noninterest-bearing(1) ................................ | RCON 6631 10,202,036 | /////////////////////// | 13.a.(1)
(2) Interest-bearing ...................................... | RCON 6636 23,908,544 | /////////////////////// | 13.a.(2)
____________________________
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part II) .............................................................................. | RCFN 2200 1,745,663 | 13.b.
____________________________
(1) Noninterest-bearing ................................... | RCFN 6631 400 | /////////////////////// | 13.b.(1)
(2) Interest-bearing ...................................... | RCFN 6636 1,745,263 | /////////////////////// | 13.b.(2)
____________________________
14. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | /////////////////////// |
a. Federal funds purchased ............................................................... | RCFD 0278 4,302,800 | 14.a.
b. Securities sold under agreements to repurchase ........................................ | RCFD 0279 566,036 | 14.b.
15. a. Demand notes issued to the U.S. Treasury .............................................. | RCON 2840 14,411 | 15.a.
b. Trading liabilities (from Schedule RC-D) .............................................. | RCFD 3548 57,446 | 15.b.
16. Other borrowed money: | /////////////////////// |
a. With a remaining maturity of one year or less.......................................... | RCFD 2332 487,435 | 16.a.
b. With a remaining maturity of more than one year........................................ | RCFD 2333 893,259 | 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ........................... | RCFD 2910 11,561 | 17.
18. Bank's liability on acceptances executed and outstanding ................................. | RCFD 2920 16,634 | 18.
19. Subordinated notes and debentures ........................................................ | RCFD 3200 1,213,219 | 19.
20. Other liabilities (from Schedule RC-G) ................................................... | RCFD 2930 1,251,452 | 20.
21. Total liabilities (sum of items 13 through 20) ........................................... | RCFD 2948 44,670,496 | 21.
| /////////////////////// |
22. Limited-life preferred stock and related surplus ......................................... | RCFD 3282 0 | 22.
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus ............................................ | RCFD 3838 125,000 | 23.
24. Common stock ............................................................................. | RCFD 3230 19,487 | 24.
25. Surplus (exclude all surplus related to preferred stock).................................. | RCFD 3839 2,551,927 | 25.
26. a. Undivided profits and capital reserves ................................................ | RCFD 3632 1,693,408 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................ | RCFD 8434 (32,703)| 26.b.
27. Cumulative foreign currency translation adjustments ...................................... | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27) ........................................ | RCFD 3210 4,357,119 | 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, | /////////////////////// |
and 28) .................................................................................. | RCFD 3300 49,027,615 | 29.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the Number
most comprehensive level of auditing work performed for the bank by independent external __________________
auditors as of any date during 1995 ............................................................... | RCFD 6724 N/A | M.1.
__________________
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
____________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
__________
| C405 | -
_________________________________ ________
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin .................................................................... | 0022 3,402,522 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits .............. | ////////////////// | 0020 2,655,163 | 1.a.
b. Currency and coin .................................................... | ////////////////// | 0080 747,539 | 1.b.
2. Balances due from depository institutions in the U.S. ................... | ////////////////// | 0082 500,301 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ... | 0083 0 | ////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// |
in the U.S. (including their IBFs) ................................... | 0085 500,373 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks .. | ////////////////// | 0070 7,902 | 3.
a. Foreign branches of other U.S. banks ................................. | 0073 690 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks ........... | 0074 7,948 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks ................................. | 0090 265,916 | 0090 0 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, sum of items 1.a and 1.b) .................................. | 0010 4,177,449 | 0010 4,176,641 | 5.
___________________________________________
<CAPTION>
______________________
Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// |
column B above) .............................................................................. | 0050 453,780 | M.1.
______________________
</TABLE>
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
_______
| C410 | -
___________________________________________________________________________ ________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ......... | 0211 250 | 0213 250 | 1286 1,274,624 | 1287 1,252,546 | 1.
2. U.S. Government agency | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and corporation obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2) .............. | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3) ................... | 1294 0 | 1295 0 | 1297 498 | 1298 505 | 2.b.
_____________________________________________________________________________________
</TABLE>
_____________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued
_____________________________________________________________________________________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
3. Securities issued by states | ////////////////// |/ //////////////// | ////////////////// | ///////////////// |
and political subdivisions | ////////////////// |////////////////// | ////////////////// | ///////////////// |
in the U.S.: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. General obligations ......... | 1676 150,357 |1677 150,242 | 1678 0 | 1679 0 | 3.a.
b. Revenue obligations ......... | 1681 8,887 |1686 8,889 | 1690 0 | 1691 0 | 3.b.
c. Industrial development | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and similiar obligations .....| 1694 0 |1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Pass-through securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Guaranteed by | ////////////////// |////////////////// | ////////////////// | ///////////////// |
GNMA ....................... | 1698 0 |1699 0 | 1701 861,176 | 1702 852,929 | 4.a.(1)
(2) Issued by FNMA | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and FHLMC ................. | 1703 908 |1705 908 | 1706 4,854,605 | 1707 4,831,023 | 4.a.(2)
(3) Other pass-through | ////////////////// |////////////////// | ///////////////////| ///////////////// |
secruities ................. | 1709 4 |1710 4 | 1711 0 | 1713 0 | 4.a.(3)
b. Other mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (include CMO's, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
REMICs, and stripped | ////////////////// |////////////////// | ////////////////// | ///////////////// |
MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Issued or guaranteed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by FNMA, FHLMC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
or GNMA ............... | 1714 0 |1715 0 | 1716 0 | 1717 0 | 4.b.(1)
(2) Collateralized | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by MBS issued or | ////////////////// |////////////////// | ////////////////// | ///////////////// |
guaranteed by FNMA, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
FHLMC, or GNMA ........ | 1718 0 |1719 0 | 1731 0 | 1732 0 | 4.b.(2)
(3) All other mortgage- | ////////////////// |////////////////// | ////////////////// | //////////////// |
backed securities ..... | 1733 0 |1734 0 | 1735 518 | 1736 518 | 4.b.(3)
5. Other debt securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Other domestic debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities.................. | 1737 0 |1738 0 | 1739 817 | 1741 812 | 5.a.
b. Foreign debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities ................. | 1742 97,035 |1743 78,878 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Investments in mutual | ////////////////// |////////////////// | ////////////////// | ///////////////// |
funds ...................... | ////////////////// |////////////////// | 1747 0 | 1748 0 | 6.a.
b. Other equity securities | ////////////////// |////////////////// | ////////////////// | ///////////////// |
with readily determin- | ////////////////// |////////////////// | ////////////////// | ///////////////// |
able fair values ........... | ////////////////// |////////////////// | 1749 0 | 1751 0 | 6.b.
c. All other equity | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (1) ............. | ////////////////// |////////////////// | 1752 311,734 | 1753 311,734 | 6.c.
7. Total (sum of items 1 | ////////////////// |////////////////// | ////////////////// | ///////////////// |
through 6) (total of | ////////////////// |////////////////// | ////////////////// | ///////////////// |
column A must equal | ////////////////// |////////////////// | ////////////////// | ///////////////// |
Schedule RC, item 2.a) | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(total of column D must | ////////////////// |////////////////// | ////////////////// | ///////////////// |
equal Schedule RC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
item 2.b) ..................... | 1754 257,441 | 1771 239,171 | 1772 7,303,972 | 1773 7,250,067 | 7.
|__________________________________________________________________________________|
</TABLE>
____________
1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued
<CAPTION>
___________
Memoranda | C412 | -
___________ _________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Pledged securities(2) ......................................................................... | 0416 2,308,912 | M.1.
2. Maturity and repricing data for debt securities(2),(3),(4) (excluding those in | ////////////////// |
nonaccrual status): | ////////////////// |
a. Fixed rate debt securities with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | 0343 72,490 | M.2.a.(1)
(2) Over three months through 12 months .................................................... | 0344 77,125 | M.2.a.(2)
(3) Over one year through five years ....................................................... | 0345 2,734,577 | M.2.a.(3)
(4) Over five years ........................................................................ | 0346 2,925,207 | M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) ..... | 0347 5,809,399 | M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | 4544 531,365 | M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | 4545 855,010 | M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | 4551 0 | M.2.b.(3)
(4) Less frequently than every five years .................................................. | 4552 0 | M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)) .. | 4553 1,386,375 | M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt | ////////////////// |
securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus nonaccrual | ////////////////// |
debt securities included in Schedule RC-N, item 9, column C) ............................... | 0393 7,195,774 | M.2.c.
3. Not applicable | ////////////////// |
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included | ////////////////// |
in Schedule RC-B, items 3 through 5, column A, above) ......................................... | 5365 0 | M.4.
5. Not applicable | ////////////////// |
6. Floating rate debt securities with a remaining maturity of one year or less(2),(4) (included in | ////////////////// |
Memorandum items 2.b(1) through 2.b.(4) above)................................................. | 5519 3,700 | M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ////////////////// |
trading securities during the calendar year-to-date (report the amortized cost at date of sale | ////////////////// |
or transfer ................................................................................... | 1778 0 | m.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost ............................................................................. | 8780 0 | M.8.a.
b. Fair Value ................................................................................. | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in | ////////////////// |
Schedule RC-B, items 2, 3, and 5): | ////////////////// |
a. Amortized cost ............................................................................. | 8782 0 | M.9.a.
b. Fair Value ................................................................................. | 8783 0 | M.9.b.
----------------------
</TABLE>
____________
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-6
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
_________
Do not deduct the allowance for loan and lease losses from amounts | C415 | -
reported in this schedule. Report total loans and leases, net of unearned _________________________________|________|
income. Exclude assets held for trading. | (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate ........................................... | 1410 11,754,916 | ////////////////// | 1.
a. Construction and land development ................................... | ////////////////// | 1415 433,880 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements) ....................................................... | ////////////////// | 1420 2,172 | 1.b
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ................... | ////////////////// | 1797 2,022,596 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens ...................................... | ////////////////// | 5367 4,418,239 | 1.c.(2)(a)
(b) Secured by junior liens ..................................... | ////////////////// | 5368 492,952 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties ........... | ////////////////// | 1460 559,373 | 1.d.
e. Secured by nonfarm nonresidential properties ........................ | ////////////////// | 1480 3,825,704 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. ..................................... | ////////////////// | 1505 143,682 | 2.a.
(1) To U.S. branches and agencies of foreign banks .................. | 1506 0 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. ........................... | 1507 143,682 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S. ........................ | 1517 0 | 1517 12,345 | 2.b.
c. To banks in foreign countries ....................................... | ////////////////// | 1510 672 | 2.c.
(1) To foreign branches of other U.S. banks ......................... | 1513 149 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries ............................. | 1516 523 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers .... | 1590 5,889 | 1590 5,889 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ....................................... | 1763 12,446,547 | 1763 12,402,858 | 4.a.
b. To non-U.S. addressees (domicile) ................................... | 1764 83,521 | 1764 54,074 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks ....................................................... | 1756 0 | 1756 0 | 5.a.
b. Of foreign banks .................................................... | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper) ......... | ////////////////// | 1975 2,217,352 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans) ............................................. | 2008 161,652 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans).. | 2011 2,055,700 | ////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// |
foreign central banks) ................................................. | 2081 0 | 2081 0 | 7.
8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// |
subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// |
obligations) ........................................................... | 2107 167,100 | 2107 167,100 | 8.
9. Other loans ............................................................ | 1563 2,146,172 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured).. | ////////////////// | 1545 156,275 | 9.a.
b. All other loans (exclude consumer loans) ............................ | ////////////////// | 1564 1,989,897 | 9.b.
10. Lease financing receivables (net of unearned income) ................... | ////////////////// | 2165 2,300,055 | 10.
a. Of U.S. addressees (domicile) ....................................... | 2182 2,300,055 | ////////////////// | 10.a.
b. Of non-U.S. addressees (domicile) ................................... | 2183 0 | ////////////////// | 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ........ | 2123 0 | 2123 0 | 11.
12. Total loans and leases, net of unearned income (sum of items 1 through | ////////////////// | ////////////////// |
10 minus item 11) (total of column A must equal Schedule RC, item 4.a).. | 2122 31,278,251 | 2122 31,205,115 | 12.
___________________________________________
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page: RC-7
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-C--Continued
Part I. Continued
___________________________________________
| (Column A) | (Column B) |
| Consolidated | Domestic |
Memoranda | Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above .............. | 1496 0 | 1496 0 | M.1.
2. Loans and leases restructured and in compliance with modified terms | ////////////////// | ////////////////// |
(included in Schedule RC-C, part I, above and not reported as past due | ////////////////// | ////////////////// |
or nonaccrual in Schedule RC-N, Memorandum item 1): | ////////////////// | ////////////////// |
a. Loans secured by real estate: | ////////////////// | ////////////////// |
(1) To U.S. addressees (domicile) ................................... | 1687 511 | M.2.a.(1)
(2) To non-U.S. addressees (domicile) ............................... | 1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans | ////////////////// |
to individuals for household, family, and other personal expenditures)| 8691 0 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables | ////////////////// |
of non-U.S. addressees (domicile) included in Memorandum item 2.b | ////////////////// |
above ............................................................... | 8692 0 | M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those | ////////////////// |
in nonaccrual status): | ////////////////// |
a. Fixed rate loans and leases with a remaining maturity of: | ////////////////// |
(1) Three months or less ............................................ | 0348 10,215,575 | M.3.a.(1)
(2) Over three months through 12 months ............................. | 0349 369,421 | M.3.a.(2)
(3) Over one year through five years ................................ | 0356 3,479,742 | M.3.a.(3)
(4) Over five years ................................................. | 0357 5,791,166 | M.3.a.(4)
(5) Total fixed rate loans and leases (sum of | ////////////////// |
Memorandum items 3.a.(1) through 3.a.(4)) ....................... | 0358 19,855,904 | M.3.a.(5)
b. Floating rate loans with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently .................................... | 4554 8,960,876 | M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . | 4555 1,848,295 | M.3.b.(2)
(3) Every five years or more frequently, but less frequently than | ////////////////// |
annually ........................................................ | 4561 250,031 | M.3.b.(3)
(4) Less frequently than every five years ........................... | 4564 12,721 | M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) | ////////////////// |
through 3.b.(4)) ................................................ | 4567 11,071,923 | M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) | ////////////////// |
(must equal the sum of total loans and leases, net, from | ////////////////// |
Schedule RC-C, part I, item 12, plus unearned income from | ////////////////// |
Schedule RC-C, part I, item 11, minus total nonaccrual loans and | ////////////////// |
leases from Schedule RC-N, sum of items 1 through 8, column C) ...... | 1479 30,927,827 | M.3.c.
d. FLOATING RATE LOANS WITH A REMAINING MATURITY OF ONE YEAR OR LESS | ////////////////// |
(INCLUDED IN MEMORANDUM ITEMS 3.b.(1) THROUGH 3.b.(4) ABOVE)......... | A246 1,543,411 | M.3.d.
4. Loans to finance commercial real estate, construction, and land | ////////////////// |
development activities (NOT SECURED BY REAL ESTATE) included in | ////////////////// |
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) ........... | 2746 271,706 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, | ////////////////// |
above .................................................................. | 5369 0 | M.5.
| ////////////////// |_____________________
6. Adjustable rate closed-end loans secured by first liens on 1-4 family | ////////////////// | RCON Bil Mil Thou |
residential properties (included in Schedule RC-C, part I, item | ////////////////// | ___________________|
1.c.(2)(a), column B, page RC-6) ....................................... | ////////////////// | 5370 1.655.898 | M.6.
|_________________________________________|
</TABLE>
_____________________________
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplememtal Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-7a
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<S> <C>
Schedule RC-C--Continued
Part II. Loans to Small Businesses and Small Farms
Schedule RC-C, Part II is to be reported only with the June Report of Condition.
Report the number and amount currently outstanding as of June 30 of business loans with "original amounts" of $1,000,000 or less
and farm loans with "original amounts" of $500,000 or less. The following guidelines should be used to determine the "original
amount" of a loan: (1) For loans drawn down under lines of credit or loan commitments, the "original amount" of the loan is the
size of the line of credit or loan commitment when the line of credit or loan commitment was most recently approved, extended, or
renewed prior to the report date. However, if the amount currently outstanding as of the report date exceeds this size, the
"original amount" is the amount currently outstanding on the report date. (2) For loan participations and syndications, the
"original amount" of the loan participation or syndication is the entire amount of the credit originated by the lead lender.
(3) For all other loans, the "original amount" is the total amount of the loan at origination or the amount currently
outstanding as of the report date, whichever is larger.
Loans to Small Businesses
</TABLE>
<TABLE>
<S> <C>
1. Indicate in the appropriate box at the right whether all or substantially all of the dollar volume of your
bank's "Loans secured by nonfarm nonresidential properties" in domestic offices reported in Schedule RC-C,
part I, item 1.e, column B, and all or substantially all of the dollar volume of your bank's
"Commercial and industrial loans to U.S. addressees" in domestic offices reported in Schedule RC-C, __________
part I, item 4.a, column B, have original amounts of $100,000 or less (If your bank has no loans ________| C415 | -
outstanding in both of these two loan categories, place an "X" in the box marked "NO" and go to | RCON YES NO|
Item 5; otherwise, see instructions for further information.).................................. | 6999 | |///| x | 1.
___________________
If YES, complete items 2.a and 2.b below, skip items 3 and 4, and go to item 5.
If NO and your bank has loans outstanding in either loan category, skip items 2.a and 2.b,
complete items 3 and 4 below, and go to item 5. _____________________
| Number of Loans |
2. Report the total number of loans currently outstanding for each of the |____________________|
following Schedule RC-C, part I, loan categories: | RCON |/////////// |
a. "Loans secured by nonfarm nonresidential properties" in domestic | ////////////////// |
offices reported in Schedule RC-C, part I, item 1.e, column B....... | 5562 N/A | 2.a.
b. "Commercial and industrial loans to U.S. addressees" in domestic | ////////////////// |
offices reported in Schedule RC-C, part I, item 4.a, column B ...... | 5563 N/A | 2.b.
______________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
____________________ ____________________
Dollar Amounts in Thousands | RCON | ///////////| RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
3. Number and amount currently outstanding of "Loans secured by nonfarm | /////////////////////////////////////// | 1.
nonresidential properties" in domestic offices reported in Schedule RC-C | /////////////////////////////////////// | 1.a.
part I item 1.e, column B (sum of items 3.a through 3.c must be less | /////////////////////////////////////// |
or equal to Schedule RC-C, part I, item 1.e, column B): | /////////////////////////////////////// | 1.b
a. With original amounts of $100,000 or less ........................... | 5564 1,988 | 5565 76,370 | 3.a.
b. With original amounts of more than $100,000 through $250,000 ........ | 5566 2,805 | 5567 332,639 | 3.b.
c. With original amounts of more than $250,000 through $1,000,000 ...... | 5568 2,736 | 5569 952,476 | 3.c.
4. Number and amount currently outstanding of "Commercial and industrial | /////////////////////////////////////// |
loans to U.S. addressees" in domestic offices reported in Schedule RC-C, | /////////////////////////////////////// |
part I, item 4.a, column B (sum of items 4.a through 4.c must be less | /////////////////////////////////////// |
than or equal to Schedule RC-C, part I, item 4.a, column B): | /////////////////////////////////////// |
a. With original amounts of $100,000 or less ........................... | 5570 11,433 | 5571 337,759 | 4.a.
b. With original amounts of more than $100,000 through $250,000 ........ | 5572 2,127 | 5573 228,713 | 4.b.
c. With original amounts of more than $250,000 through $1,000,000 ...... | 5574 1,968 | 5575 601,126 | 4.c.
___________________________________________
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-7b
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-C -- Continued
Part II. Continued
Agricultural Loans to Small Farms
<TABLE>
<S> <C> <C>
5. Indicate in the appropriate box at the right whether all or substantially all of the
dollar volume of your bank's "Loans secured by farmland (including farm residential
and other improvements)" in domestic offices reported in Schedule RC-C, part I, item
1.b, column B, and all or substantially all of the dollar volume of your bank's
"Loans to finance agricultural production and other loans to farmers" in domestic
offices reported in Schedule RC-C, part I, item 3, column B, have original amounts
of $100,000 or less (If your bank has no loans outstanding in both of these two YES NO
loan categories, place an "X" in the box marked "NO" and do not complete items 7 _______________________
and 8; otherwise, see instructions for further information.)................................... | 6860 | | /// | X | 5.
|_____________________|
If YES, complete items 6.a and 6.b below and do not complete items 7 and 8.
If NO and your bank has loans outstanding in either loan category, skip items 6.a and 6.b
and complete items 7 and 8 below.
</TABLE>
<TABLE>
<S> <C>
______________________
| Number of Loans |
6. Report the total number of loans currently outstanding for each of the |____________________|
following Schedule RC-C, part I, loan categories: | RCON |//////////// |
a. "Loans secured by farmland (including farm residential and other |______| |
improvements)" in domestic offices reported in Schedule RC-C, part I, | ////////////////// |
item 1.b, column B........................................................ | 5576 N/A | 6.a.
b. "Loans to finance agricultural production and other loans to farmers" in | ////////////////// |
domestic offices reported in Schedule RC-C, part I, item 3, column B...... | 5577 N/A | 6.b.
|____________________|
</TABLE>
<TABLE>
<S> <C> <C>
_____________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
|_____________________|______________________|
Dollar Amounts in Thousands | RCON |/////////////| RCON Bil Mil Thou |
________________________________________________________________________________| ______| |_____________________ |
7. Number and amount currently outstanding of "Loans secured by farmland | ////////////////////////////////////////// |
(including farm residential and other improvements)" in domestic offices | ////////////////////////////////////////// |
reported in Schedule RC-C, part I, item 1.b, column B (sum of items 7.a | ////////////////////////////////////////// |
through 7.c must be less than or equal to Schedule RC-C, part I, item 1.b, | ////////////////////////////////////////// |
column B): | ////////////////////////////////////////// |
a. With original amounts of $100,000 or less............................... | 5578 18 | 5579 292 | 7.a.
b. With original amounts of more than $100,000 through $250,000............ | 5580 8 | 5581 850 | 7.b.
c. With original amounts of more than $250,000 through $500,000............ | 5582 4 | 5583 1,030 | 7.c.
8. Number and amount currently outstanding of "Loans to finance agricultural | ////////////////////////////////////////// |
production and other loans to farmers" in domestic offices reported in | ////////////////////////////////////////// |
Schedule RC-C, part I, item 3, column B (sum of items 8.a through 8.c | ////////////////////////////////////////// |
must be less than or equal to Schedule RC-C, part I, item 3, column B): | ////////////////////////////////////////// |
a. With original amounts of $100,000 or less............................... | 5584 46 | 5585 992 | 8.a.
b. With original amounts of more than $100,000 through $250,000............ | 5586 17 | 5587 1,877 | 8.b.
c. With original amounts of more than $250,000 through $500,000............ | 5588 4 | 5589 1,054 | 8.c.
|_____________________|______________________|
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-8
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).
__________
| C420 |
__________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou|
__________________________________________________________________________________________________| ________________________|
<S> <C> <C>
ASSETS | /////////////////////// |
1. U.S. Treasury securities in domestic offices ................................................ | RCON 3531 0 | 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage- | /////////////////////// |
backed securities) .......................................................................... | RCON 3532 0 | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... | RCON 3533 0 | 3.
4. Mortgage-backed securities (MBS) in domestic offices: | /////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... | RCON 3534 0 | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | /////////////////////// |
(include CMOs, REMICs, and stripped MBS) ................................................. | RCON 3535 0 | 4.b.
c. All other mortgage-backed securities ......................................................| RCON 3536 0 | 4.c.
5. Other debt securities in domestic offices ................................................... | RCON 3537 0 | 5.
6. Certificates of deposit in domestic offices ................................................. | RCON 3538 0 | 6.
7. Commercial paper in domestic offices ........................................................ | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices ..................................................... | RCON 3540 0 | 8.
9. Other trading assets in domestic offices .................................................... | RCON 3541 0 | 9.
10. Trading assets in foreign offices ........................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts: | /////////////////////// |
a. In domestic offices ...................................................................... | RCON 3543 66,696 | 11.a.
b. In foreign offices ....................................................................... | RCFN 3544 4,658 | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... | RCFD 3545 71,354 | 12.
<CAPTION>
___________________________
___________________________
| ///////// Bil Mil Thou |
LIABILITIES | ________________________|_
<S> <C> <C>
13. Liability for short positions ............................................................... | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts ................................................................................... | RCFD 3547 57,446 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... | RCFD 3548 57,446 | 15.
___________________________
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-9
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
__________
| C425 | -
______________________________________________________ ________
| | Nontransaction |
| Transaction Accounts | Accounts |
_________________________________________ ____________________
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
| accounts (including| demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs) |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
__________________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations .......... | 2201 8,615,650 | 2240 8,158,203 | 2346 22,594,478 | 1.
2. U.S. Government ...................................... | 2202 58,650 | 2280 58,605 | 2520 42,512 | 2.
3. States and political subdivisions in the U.S. ........ | 2203 818,151 | 2290 706,072 | 2530 702,686 | 3.
4. Commercial banks in the U.S. ......................... | 2206 836,005 | 2310 836,005 | 2550 771 | 4.
5. Other depository institutions in the U.S. ............ | 2207 221,571 | 2312 221,571 | 2349 2,968 | 5.
6. Banks in foreign countries ........................... | 2213 18,445 | 2320 18,445 | 2236 0 | 6.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) .................... | 2216 108 | 2300 108 | 2377 0 | 7.
8. Certified and official checks ........................ | 2330 198,585 | 2330 198,585 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a) ........................................... | 2215 10,767,165 | 2210 10,197,594 | 2385 23,343,415 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCON Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | ////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ......................... | 6835 2,735,425 | M.1.a.
b. Total brokered deposits ..................................................................... | 2365 1,636,611 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ////////////////// |
(1) Issued in denominations of less than $100,000 ........................................... | 2343 2,350 | M.1.c.(1)
(2) Issued EITHER in denominations of $100,000 OR in denominations greater than $100,000 | ////////////////// |
and participated out by the broker in shares of $100,000 or less ........................ | 2344 1,634,261 | M.1.c.(2)
d. MATURITY DATA FOR BROKERED DEPOSITS: | ////////////////// |
(1) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF LESS THAN $100,000 WITH A REMAINING | ////////////////// |
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.c.(1) ABOVE)................. | A243 171 | M.1.d.(1)
(2) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF $100,000 OR MORE WITH A REMAINING | ////////////////// |
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.b ABOVE)..................... | A244 509,265 | M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. | ////////////////// |
reported in item 3 above which are secured or collateralized as required under state law) ... | 5590 457,587 | M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must | ////////////////// |
equal item 9, column C above): | ////////////////// |
a. Savings deposits: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................................................... | 6810 10,738,339 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ................................................. | 0352 2,655,659 | M.2.a.(2)
b. Total time deposits of less than $100,000 ................................................... | 6648 7,247,099 | M.2.b.
c. Time certificates of deposit of $100,000 or more ............................................ | 6645 2,702,318 | M.2.c.
d. Open-account time deposits of $100,000 or more .............................................. | 6646 0 | M.2.d.
3. All NOW accounts (included in column A above) .................................................. | 2398 569,571 | M.3.
4. Not applicable
______________________
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-10
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
_________________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of | ////////////////// |
Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) | ////////////////// |
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: | ////////////////// |
(1) Three months or less.................................................................... | A225 1,684,248 | M.5.a.(1)
(2) Over three months through 12 months..................................................... | A226 3,493,722 | M.5.a.(2)
(3) Over one year........................................................................... | A227 2,002,999 | M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently............................................................ | A228 66,130 | M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly......................... | A229 0 | M.5.b.(2)
(3) Less frequently than annually........................................................... | A230 0 | M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 5.b.(1) through 5.b.(3) above)............... | A231 45,084 | M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates | ////////////////// |
of deposit of $100,000 or more and open-account time deposits of $100,000 or more) | ////////////////// |
(sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum | ////////////////// |
items 2.c and 2.d above):(1) | ////////////////// |
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | A232 534,657 | M.6.a.(1)
(2) Over three months through 12 months .................................................... | A233 754,429 | M.6.a.(2)
(3) Over one year through five years ....................................................... | A234 1,282,541 | M.6.a.(3)
(4) Over five years ........................................................................ | A235 36,761 | M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | A236 31,182 | M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | A237 37,950 | M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | A238 24,798 | M.6.b.(3)
(4) Less frequently than every five years .................................................. | A239 0 | M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above)............... | A240 19,186 | M.6.c.
______________________
</TABLE>
_______________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-11
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
______________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
Deposits of: | ////////////////// |
1. Individuals, partnerships, and corporations ................................................... | 2621 1,730,162 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................ | 2623 0 | 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs).... | 2625 0 | 3.
4. Foreign governments and official institutions (including foreign central banks) ............... | 2650 0 | 4.
5. Certified and official checks ................................................................. | 2330 0 | 5.
6. All other deposits ............................................................................ | 2668 15,501 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) .......................... | 2200 1,745,663 | 7.
Memorandum
Dollar Amounts in Thousands |RCFN Bil Mil Thou |
________________________________________________________________________________________________________________________
1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 above) |A245 1,745,263 | M.1.
______________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-F--Other Assets
__________
| C430 | -
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Income earned, not collected on loans ........................................................ | RCFD 2164 167,538 | 1.
2. Net deferred tax assets(1) ................................................................... | RCFD 2148 0 | 2.
3. Excess residential mortgage servicing fees receivable ........................................ | RCFD 5371 134,288 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2168 3,676,812 | 4.
_____________ ___________________________
a. | TEXT 3549 | Mortgages held for Resale | RCFD 3549 | 1,858,683 | /////////////////////// | 4.a.
_________________________________________________________________| | | |
___________
b. | TEXT 3550 |____________________________________________________| RCFD 3550 | | /////////////////////// | 4.b.
___________
c. | TEXT 3551 |____________________________________________________| RCFD 3551 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) ........................... | RCFD 2160 3,978,638 | 5.
___________________________
<CAPTION>
Memorandum ___________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes ............................... | RCFD 5610 0 | M.1.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-G--Other Liabilities
__________
| C435 | -
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2) ............................ | RCON 3645 58,011 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. | RCFD 3646 594,954 | 1.b.
2. Net deferred tax liabilities(1) .............................................................. | RCFD 3049 119,644 | 2.
3. Minority interest in consolidated subsidiaries ............................................... | RCFD 3000 0 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2938 478,843 | 4.
_____________ ___________________________
a. | TEXT 3552 |____________________________________________________| RCFD 3552 | | /////////////////////// | 4.a.
___________
b. | TEXT 3553 |____________________________________________________| RCFD 3553 | | /////////////////////// | 4.b.
___________
c. | TEXT 3554 |____________________________________________________| RCFD 3554 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... | RCFD 2930 1,251,452 | 5.
</TABLE>
____________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-12
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
__________
| C440 | -
____________ ________
| Domestic Offices |
____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Customers' liability to this bank on acceptances outstanding .................................... | 2155 16,634 | 1.
2. Bank's liability on acceptances executed and outstanding ........................................ | 2920 16,634 | 2.
3. Federal funds sold and securities purchased under agreements to resell .......................... | 1350 17,428 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase ...................... | 2800 4,868,836 | 4.
5. Other borrowed money ............................................................................ | 3190 1,380,694 | 5.
EITHER | ////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 2163 N/A | 6.
OR | ////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ....................... | 2941 1,669,058 | 7.
| ////////////////// |
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs) . | 2192 48,946,123 | 8.
| ////////////////// |
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and IBFs)| 3129 42,919,946 | 9.
______________________
</TABLE>
<TABLE>
<CAPTION>
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices. ______________________
| RCON Bil Mil Thou |
____________________
<S> <C> <C>
10. U.S. Treasury securities ....................................................................... | 1779 1,252,796 | 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed | ////////////////// |
securities) .................................................................................... | 1785 505 | 11.
12. Securities issued by states and political subdivisions in the U.S. ............................. | 1786 159,244 | 12.
13. Mortgage-backed securities (MBS): | ////////////////// |
a. Pass-through securities: | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1787 5,684,860 | 13.a.(1)
(2) Other pass-through securities ........................................................... | 1869 4 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1877 0 | 13.b.(1)
(2) All other mortgage-backed securities..................................................... | 2253 518 | 13.b.(2)
14. Other domestic debt securities ................................................................. | 3159 812 | 14.
15. Foreign debt securities ........................................................................ | 3160 97,035 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds ................................................................. | 3161 0 | 16.a.
b. Other equity securities with readily determinable fair values ............................... | 3162 0 | 16.b.
c. All other equity securities ................................................................. | 3169 311,734 | 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) .......... | 3170 7,507,508 | 17.
______________________
</TABLE>
<TABLE>
<CAPTION>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
EITHER | ////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank .............................. | 3051 0 | M.1.
OR | ////////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank ................................ | 3059 N/A | M.2.
______________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-13
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices. __________
| C445 | -
____________ ________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) ................. | 2133 0 | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, | ////////////////// |
column A) ..................................................................................... | 2076 0 | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) .... | 2077 0 | 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ..................................... | 2898 0 | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// |
part II, items 2 and 3) ....................................................................... | 2379 0 | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ..... | 2381 0 | 6.
______________________
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule RC-K--Quarterly Averages (1)
__________
| C455 | -
_________________ ________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
ASSETS | /////////////////////// |
1. Interest-bearing balances due from depository institutions .............................. | RCFD 3381 10,737 | 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ...... | RCFD 3382 6,349,267 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) ................... | RCFD 3383 155,938 | 3.
4. a. Other debt securities(2) ............................................................. | RCFD 3647 98,458 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock). | RCFD 3648 347,675 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3365 812,114 | 5.
6. Loans: | ///////////////////// // |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ...................................................................... | RCON 3360 31,884,320 | 6.a.(1)
(2) Loans secured by real estate ..................................................... | RCON 3385 14,940,513 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers .............. | RCON 3386 5,935 | 6.a.(3)
(4) Commercial and industrial loans .................................................. | RCON 3387 12,923,362 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ...... | RCON 3388 2,224,980 | 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............ | RCFN 3360 70,458 | 6.b.
7. Trading assets .......................................................................... | RCFD 3401 105,824 | 7.
8. Lease financing receivables (net of unearned income) .................................... | RCFD 3484 2,231,479 | 8.
9. Total assets (4) ........................................................................ | RCFD 3368 52,282,230 | 9.
LIABILITIES | /////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............ | RCON 3485 965,535 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................ | RCON 3486 9,210,475 | 11.a.
b. Other savings deposits ............................................................... | RCON 3487 3,907,216 | 11.b.
c. Time certificates of deposit of $100,000 or more ..................................... | RCON 3345 2,653,452 | 11.c.
d. All other time deposits .............................................................. | RCON 3469 7,513,443 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs.. | RCFN 3404 1,765,593 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3353 6,363,286 | 13.
14. Other borrowed money .................................................................... | RCFD 3355 2,670,145 | 14.
___________________________
</TABLE>
_______________
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each week of the
quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-14
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk. __________
| C460 | -
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unused commitments: | ////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | ////////////////// |
equity lines ............................................................................... | 3814 1,637,875 | 1.a.
b. Credit card lines .......................................................................... | 3815 32,940 | 1.b.
c. Commercial real estate, construction, and land development: | ////////////////// |
(1) Commitments to fund loans secured by real estate ....................................... | 3816 648,369 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... | 6550 383,022 | 1.c.(2)
d. Securities underwriting .................................................................... | 3817 0 | 1.d.
e. Other unused commitments ................................................................... | 3818 18,626,522 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. | 3819 2,337,268 | 2.
___________________________
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 158,029 | ////////////////// | 2.a.
___________________________
3. Performance standby letters of credit and foreign office guarantees ........................... | 3821 175,703 | 3.
a. Amount of performance standby letters of credit conveyed to | ////////////////// |
___________________________
others .......................................................... | RCFD 3822 | 12,580 | ////////////////// | 3.a.
___________________________
4. Commercial and similar letters of credit ...................................................... | 3411 176,335 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by | ////////////////// |
the reporting bank ............................................................................ | 3428 16,524 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// |
(nonaccepting) bank ........................................................................... | 3429 7,409 | 6.
7. Securities borrowed ........................................................................... | 3432 0 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified | ////////////////// |
against loss by the reporting bank) ........................................................... | 3433 0 | 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been treated as sold for | ////////////////// |
Call Report purposes: | ////////////////// |
a. FNMA and FHLMC residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3650 246,244 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3651 246,244 | 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3652 33,550 | 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3653 33,550 | 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3654 0 | 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3655 0 | 9.c.(2)
d. Small business obligations transferred with recourse under Section 208 of the | ////////////////// |
Riegle Community Development and Regulatory Improvement Act of 1994: | ////////////////// |
(1) Outstanding principal balance of small business obligations transferred | ////////////////// |
as of the report date................................................................... | A249 0 | 9.d.(1)
(2) Amount of retained recourse on these obligations as of the report date.................. | A250 0 | 9.d.(2)
10. When-issued securities: | ////////////////// |
a. Gross commitments to purchase .............................................................. | 3434 0 | 10.a.
b. Gross commitments to sell .................................................................. | 3435 0 | 10.b.
11. Spot foreign exchange contracts ............................................................... | 8765 622,366 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 3430 0 | 12.
a. | TEXT 3555 |______________________________________________________| RCFD 3555 | | ////////////////// | 12.a.
b. | TEXT 3556 |______________________________________________________| RCFD 3556 | | ////////////////// | 12.b.
___________
c. | TEXT 3557 |______________________________________________________| RCFD 3557 | | ////////////////// | 12.c.
_____________
d. | TEXT 3558 |______________________________________________________| RCFD 3558 | | ////////////////// | 12.d.
_____________ _______________________________________________
Dollar Amounts in Thousands RCFD Bil Mil Thou
_________________________________________________________________________________________________________________________
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC,item 28,"Total equity capital") | 5591 0 | 13.
_____________ __________________________
a. | TEXT 5592 |______________________________________________________| RCFD 5592 | | ////////////////// | 13.a.
___________
b. | TEXT 5593 |______________________________________________________| RCFD 5593 | | ////////////////// | 13.b.
___________
c. | TEXT 5594 |______________________________________________________| RCFD 5594 | | ////////////////// | 13.c.
_____________
d. | TEXT 5595 |______________________________________________________| RCFD 5595 | | ////////////////// | 13.d.
_____________
________________________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-15
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-L -- Continued
_____________
| C461 | -
_________________________________________ ____________________________|___________|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
| Contracts | Contracts | Contracts | Contracts |
|___________________|____________________|____________________|____________________|
Dollar Amounts in Thousands |Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou |
_______________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
| Off-balance Sheet Derivatives | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| Position Indicators | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
____________________________________| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
14. Gross amounts (e.g., notional | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
amounts) (for each column, sum of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
items 14.a through 14.e must equal | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
sum of items 15, 16.a, and 16.b): |___________________|____________________|___________________ |____________________|
a. Futures contracts ............. | 1,229,392 | 0 | 0 | 36,486 | 14.a.
|___________________|____________________|____________________|____________________|
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
|___________________|____________________|____________________|____________________|
b. Forward contracts ............. | 2,576,500 | 1,931,682 | 0 | 21,832 | 14.b.
|___________________|____________________|____________________|____________________|
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
|___________________|____________________|____________________|____________________|
c. Exchange-traded option contracts:| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
|___________________|____________________|____________________|____________________|
(1) Written options .......... | 0 | 0 | 0 | 0 | 14.c.(1)
|___________________|____________________|____________________|____________________|
| RCFD 8701 | RCFD 8702 | RCFD 8703 | RCFD 8704 |
|___________________|____________________|____________________|____________________|
(2) Purchased options ........ | 450,000 | 0 | 0 | 2,206 | 14.c.(2)
|___________________|____________________|____________________|____________________|
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
|___________________|____________________|____________________|____________________|
d. Over-the-counter option contracts: | //////////////////| ///////////////// | ///////////////// | //////////////// |
(1) Written options .......... | 1,324,980 | 3,887 | 0 | 0 | 14.d.(1)
|___________________|____________________|____________________|____________________|
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
|___________________|____________________|____________________|____________________|
(2) Purchased options ........ | 10,131,934 | 3,887 | 0 | 0 | 14.d.(2)
|___________________|____________________|____________________|____________________|
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
|___________________|____________________|____________________|____________________|
e. Swaps ............................ | 19,502,262 | 0 | 0 | 0 | 14.e.
|___________________|____________________|____________________|____________________|
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
|___________________|____________________|____________________|____________________|
15. Total gross notional amount of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading ......................... | 3,386,305 | 1,939,456 | 0 | 2,206 | 15.
|___________________|____________________|____________________|____________________|
| RCFD A126 | RFD A127 | RCFD 8723 | RCFD 8724 |
|___________________|____________________|____________________|____________________|
16. Total gross notional amount of | ///////////////// | //////////////// | ///////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
purposes other than trading: | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
|___________________|____________________|____________________|____________________|
a. Contracts marked to market ... | 4,202,500 | 0 | 0 | 36,486 | 16.a.
|___________________|____________________|____________________|____________________|
| RCFD 8725 | RCFD 8726 | RCF 8727 | RCFD 8728 |
|___________________|____________________|____________________|____________________|
b. Contracts not marked to market | 27,626,263 | 0 | 0 | 21,832 | 16.b.
|___________________|____________________|____________________|____________________|
| RCFD 8729 | RCFD 8730 | RFD 8731 | RCFD 8732 |
|___________________|____________________|____________________|____________________|
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-16
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-L -- Continued
<CAPTION>
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
___________________________________| Contracts | Contracts | Contracts | Contracts |
| Off-balance Sheet Derivatives |___________________|____________________|____________________|____________________|
| Position Indicators |RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
|_____________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
17. Gross fair values of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8733 29,782 | 8734 41,523 | 8735 0 | 8736 58 | 17.a.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8737 20,932 | 8738 36,511 | 8739 0 | 8740 0 | 17.a.(2)
b. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are marked | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8741 524 | 8742 0 | 8743 0 | 8744 1,452 | 17.b.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8745 2,834 | 8746 0 | 8747 0 | 8748 0 | 17.b.(2)
c. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are not | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
marked to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .................. | 8749 64,085 | 8750 0 | 8751 0 | 8752 100 | 17.c.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8753 111,703 | 8754 0 | 8755 0 | 8756 0 | 17.c.(2)
|__________________________________________________________________________________|
</TABLE>
<TABLE>
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
_________________________________________________________________________________________________________________________
<S> <C> <C>
1. -2. Not applicable | ////////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments | ////////////////// |
that are fee paid or otherwise legally binding) ................................................ | 3833 16,829,602 | M.3.
a. Participations in commitments with an original maturity | ////////////////// |
exceeding one year conveyed to others ................................|RCFD 3834 | 1,310,691 | ////////////////// | M.3.a.
________________________
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) issued | ////////////////// |
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above .............. | 3377 341,139 | M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that | ////////////////// |
have been securitized and sold without recourse (with servicing retained), amounts outstanding | ////////////////// |
by type of loan: | ////////////////// |
a. Loans to purchase private passenger automobiles (to be completed for the | ////////////////// |
September report only)....................................................................... | 2741 N/A | M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY)................................... | 2742 0 | M.5.b.
c. All other consumer installment credit (including mobile home loans)(to be completed for the | ////////////////// |
September report only........................................................................ | 2743 N/A | M.5.c
|____________________|
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-17
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9| _____________
| C465 |
_________|___________|
Schedule RC-M--Memoranda | |
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal | ////////////////// |
shareholders and their related interests ..................................................... | 6164 605,294 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of all | ////////////////// |
extensions of credit by the reporting bank (including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
___________________________| ////////////////// |
of total capital as defined for this purpose in agency regulations. | RCFD 6165 | 24 | ////////////////// |
___________________________| ////////////////// | 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) .................... | 3405 0 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract ...................................................... | 5500 28,855,729 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer ........................................................ | 5501 55,604 | 4.b.(1)
(2) Serviced without recourse to servicer ..................................................... | 5502 32,340,522 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract .................................................. | 5503 190,640 | 4.c.(1)
(2) Serviced under a special option contract .................................................. | 5504 38,282,672 | 4.c.(2)
d. Mortgages serviced under other servicing contracts ............................................ | 5505 8,508,320 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile) .................................................................... | 2103 16,297 | 5.a.
b. Non-U.S. addressees (domicile) ................................................................ | 2104 337 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing rights ..................................................................... | 3164 1,483,959 | 6.a.
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships ....................................................... | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets .................................................. | 5507 126,463 | 6.b.(2)
c. Goodwill ...................................................................................... | 3163 672,992 | 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ........................ | 2143 2,283,414 | 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or | ////////////////// |
are otherwise qualifying for regulatory capital purposes ...................................... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////////// |
redeem the debt ...................................................................................| 3295 75,000 | 7.
______________________
</TABLE>
- ------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-18
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-M--Continued ________________________
Dollar Amounts in Thousands | Bil Mil Thou|
_____________________________________________________________________________________________ |_______________________|
<S> <C> <C>
8. a. Other real estate owned: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | /////////////////////// |
(a) Construction and land development in domestic offices ....................... | RCON 5508 4,537 | 8.a.(2)(a)
(b) Farmland in domestic offices ................................................ | RCON 5509 0 | 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ....................... | RCON 5510 8,067 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices .......... | RCON 5511 740 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ....................... | RCON 5512 21,202 | 8.a.(2)(e)
(f) In foreign offices .......................................................... | RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ....... | RCFD 2150 34,546 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies ... | RCFD 5375 0 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ....... | RCFD 2130 0 | 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies ................ | RCFD 5376 0 | 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | /////////////////////// |
item 23, "Perpetual preferred stock and related surplus" ............................... | RCFD 3778 125,000 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// |
proprietary, private label, and third party products): | /////////////////////// |
a. Money market funds .................................................................. | RCON 6441 55,245 | 10.a.
b. Equity securities funds ............................................................. | RCON 8427 108,359 | 10.b.
c. Debt securities funds ............................................................... | RCON 8428 13,250 | 10.c.
d. Other mutual funds .................................................................. | RCON 8429 0 | 10.d.
e. Annuities ........................................................................... | RCON 8430 102,292 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through | /////////////////////// |
10.e. above) ........................................................................... | RCON 8784 150,100 | 10.f.
_________________________
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
| |
______________________
|Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou | |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
|1. Interbank holdings of capital instruments (to be completed for the December report only): | ////////////////// | |
| a. Reciprocal holdings of banking organizations' capital instruments ........................ | 3836 N/A | M.1.a. |
| b. Nonreciprocal holdings of banking organizations' capital instruments ..................... | 3837 N/A | M.1.b. |
______________________
| |
_________________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-19
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets
The FFIEC regards the information reported in __________
all of Memorandum item 1, in items 1 through 10, | C470 | -
column A, and in Memorandum items 2 through 4, ______________________________________________________ ________
column A, as confidential. | (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1245 | 1246 71,390 | 1247 223,962 | 1.a.
b. To non-U.S. addressees (domicile) ............ | 1248 | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and | ///// | ////////////////// | ////////////////// |
acceptances of other banks: | ///// | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | ///// | ////////////////// | ////////////////// |
institutions ................................. | 5377 | 5378 0 | 5379 0 | 2.a.
b. To foreign banks ............................. | 5380 | 5381 0 | 5382 0 | 2.b.
3. Loans to finance agricultural production and | ///// | ////////////////// | ////////////////// |
other loans to farmers .......................... | 1594 | 1597 385 | 1583 531 | 3.
4. Commercial and industrial loans: | ///// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1251 | 1252 11,945 | 1253 108,334 | 4.a.
b. To non-U.S. addressees (domicile) ............ | 1254 | 1255 0 | 1256 0 | 4.b.
5. Loans to individuals for household, family, and | ///// | ////////////////// | ////////////////// |
other personal expenditures: | ///// | ////////////////// | ///////////////// |
a. Credit cards and related plans ............... | 5383 | 5384 1,187 | 5385 669 | 5.a.
b. Other (includes single payment, installment, | ///// | ////////////////// | ////////////////// |
and all student loans) ....................... | 5386 | 5387 22,600 | 5388 8,465 | 5.b.
6. Loans to foreign governments and official | ///// | ////////////////// | ////////////////// |
institutions .................................... | 5389 | 5390 0 | 5391 0 | 6.
7. All other loans ................................. | 5459 | 5460 14,909 | 5461 1,919 | 7.
8. Lease financing receivables: | ///// | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ................ | 1257 | 1258 95 | 1259 6,544 | 8.a.
b. Of non-U.S. addressees (domicile) ............ | 1271 | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude other | ///// | ////////////////// | ////////////////// |
real estate owned and other repossessed assets) . | 3505 | 3506 0 | 3507 85,778 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 8.
________________________________________________________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
10. Loans and leases reported in items 1 | | | |
through 8 above which are wholly or partially | ///// | ////////////////// | ////////////////// |
guaranteed by the U.S. Government ............... | 5612 | 5613 18,447 | 5614 21,415 | 10.
a. Guaranteed portion of loans and leases | ///// | ////////////////// | ////////////////// |
included in item 10 above .................... | 5615 | 5616 18,250 | 5617 16,952 | 10.a.
________________________________________________________________
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-20
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Continued
__________
| C473 | -
______________________________________________________ ________
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
Memoranda | accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Restructured loans and leases included in | ///// | /////////////////// | ///////////////// |
Schedule RC-N, items 1 through 8, above (and not | ///// | //// | |
reported in Schedule RC-C, part I, Memorandum | ///// | //// | |
item 2) ......................................... | 1658 | 1659 | | M.1.
2. Loans to finance commercial real estate, | ///// | //// | |
construction, and land development activities | ///// | //// | |
(not secured by real estate) included in | ///// | /////////////////// | ///////////////// |
Schedule RC-N, items 4 and 7, above ............. | 6558 | 6559 826 | 6560 7,043 | M.2.
|____________________|____________________ |___________________
3. Loans secured by real estate in domestic offices | RCON | RCON Bil Mil Thou | RCON Bil Mil Thou|
|___________________ |____________________ ____________________
(included in Schedule RC-N, item 1, above): | ///// | ////////////////// | ////////////////// |
a. Construction and land development ............ | 2759 | 2769 1,100 | 3492 26,422 | M.3.a.
b. Secured by farmland .......................... | 3493 | 3494 161 | 3495 0 | M.3.b.
c. Secured by 1-4 family residential properties: | ///// | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by | ///// | ////////////////// | ////////////////// |
1-4 family residential properties and | ///// | ////////////////// | ////////////////// |
extended under lines of credit ........... | 5398 | 5399 5,114 | 5400 17,374 | M.3.c.(1)
(2) All other loans secured by 1-4 family | ///// | ////////////////// | ////////////////// |
residential properties ................... | 5401 | 5402 58,079 | 5403 75,430 | M.3.c.(2)
d. Secured by multifamily (5 or more) | ///// | ////////////////// | ////////////////// |
residential properties ....................... | 3499 | 3500 521 | 3501 12,491 | M.3.d.
e. Secured by nonfarm nonresidential properties . | 3502 | 3503 6,415 | 3504 92,245 | M.3.e.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other | ///// | ////////////////// |
commodity and equity contracts: | ///// | ////////////////// |
a. Book value of amounts carried as assets ...... | 3522 | 3528 0 | M.4.a.
b. Replacement cost of contracts with a | ///// | ////////////////// |
positive replacement cost .................... | 3529 | 3530 0 | M.4.b.
___________________________________________
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-21
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
______________________
Schedule RC-O--Other Data for Deposit Insurance Assessments | C475 |
|____________________|
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unposted debits (see instructions): | ////////////////// |
a. Actual amount of all unposted debits ...................................................... | 0030 216 | 1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits ................................... | 0031 N/A | 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ...................... | 0032 N/A | 1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits ..................................................... | 3510 216 | 2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits .................................. | 3512 N/A | 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ..................... | 3514 N/A | 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 3520 101,763 | 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in | ////////////////// |
Puerto Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// |
a. Demand deposits of consolidated subsidiaries .............................................. | 2211 206,111 | 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ................................. | 2351 20,089 | 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ...................... | 5514 8 | 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) .................. | 2229 0 | 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ..... | 2383 0 | 5.b.
c. Interest accrued and unpaid on deposits in insured branches | ////////////////// |
(included in Schedule RC-G, item 1.b) ..................................................... | 5515 0 | 5.c.
______________________
______________________
Item 6 is not applicable to state nonmember banks that have not been authorized by the | ////////////////// |
Federal Reserve to act as pass-through correspondents. | ////////////////// |
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// |
behalf of its respondent depository institutions that are also reflected as deposit liabilities| ////////////////// |
of the reporting bank: | ////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, item 4 or 5, column B)..... | 2314 0 | 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | ////////////////// |
item 4 or 5, column A or C, but not column B).............................................. | 2315 0 | 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) | ////////////////// |
a. Unamortized premiums ...................................................................... | 5516 769 | 7.a.
b. Unamortized discounts ..................................................................... | 5517 0 | 7.b.
______________________
_______________________________________________________________________________________________________________________________
| |
|8. To be completed by banks with "Oakar deposits." |
______________________
| Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of | ////////////////// | |
| the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)) .... | 5518 2,188,589 | 8. |
______________________
| |
_______________________________________________________________________________________________________________________________
______________________
9. Deposits in lifeline accounts ................................................................ | 5596 ///////////// | 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 8432 0 | 10.
______________________
______________
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction
accounts and all transaction accounts other than demand deposits.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-22
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-O--Continued
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for | ////////////////// |
certain reciprocal demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if reciprocal demand balances | ////////////////// |
between the reporting bank and savings associations were reported on a net basis | ////////////////// |
rather than a gross basis in Schedule RC-E .................................................. | 8785 0 | 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances | ////////////////// |
between the reporting bank and U.S. branches and agencies of foreign banks were | ////////////////// |
reported on a gross basis rather than a net basis in Schedule RC-E .......................... | A181 0 | 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of | ////////////////// |
collection were included in the calculation of net reciprocal demand balances between | ////////////////// |
the reporting bank and the domestic offices of U.S. banks and savings associations | ////////////////// |
in Schedule RC-E ............................................................................ | A182 0 | 11.c.
____________________
Memoranda (to be completed each quarter except as noted) Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________ ___________________________|____________________|
1. Total deposits in domestic offices of the bank (sum of Memorandum it ems 1.a. (1) and | ////////////////// |
1.b.(1) must equal Schedule RC, item 13.a): | ////////////////// |
a. Deposits accounts of $100,000 or less: | ////////////////// |
(1) amount of deposit accounts of $100,000 or less ....................................... | 2702 19,755,631 | M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number | ////////////////// |
completed for the June report only) .............................|RCON 3779 3,742,107 | ////////////////// | M.1.a.(2)
b. Deposit accounts of more than $100,000: | ////////////////// |
(1) Amount of deposit accounts of more than $100,000 ..................................... | 2710 14,354,949 | M.1.b.(1)
Number | ////////////////// |
(2) Number of deposit accounts of more than $100,000 ................|RCON 2722 27,062 | ////////////////// | M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by mutiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or
procedure for determining a better estimate of uninsured deposits than the ____________YES_______NO__
estimated described above .................................................................. | 6861| |///| x | M.2.a.
____________________
b. If the box marked YES has been checked, report the estimate of uninsured deposits |RCON Bil Mil Thou|
determined by using your bank's method or procedure .................................... | 5597 N/A | M.2.b.
_____________________________________________________________________________________________________________________________
| C477 | -
Person to whom questions about the Reports of Condition and Income should be directed: __________
PAMELA S. FLYNN, VICE PRESIDENT (401) 278-5194
___________________________________________________________________________________ ______________________________________
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-23
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Regulatory Capital
This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1995, must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets of less than
$1 billion must complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
<S> <C>
____________
| C480 | -
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed _____|__________|
only by banks with total assets of less than $1 billion. Indicate in the appropriate | YES NO |
box at the right whether the bank has total capital greater than or equal to eight percent___________ _______________
of adjusted total assets ............................................................... | RCFD 6056 | |////| | 1.
_____________________________
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan
and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked
NO has been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight
percent or that the bank is not in compliance with the risk-based capital guidelines.
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
|Subordinated Debt(1)| Other |
_________________________________________________________________ | and Intermediate | Limited- |
| NOTE: All banks are required to complete items 2 and 3 below | | Term Preferred | Life Capital |
| See optional worksheet for items 3.a through 3.f. | | Stock | Instruments |
|________________________________________________________________| ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments (original | | |
weighted average maturity of at least five years) with a remaining | | |
maturity of: | | |
a. One year or less ...................................................... | 3780 25,737 | 3786 0 | 2.a.
b. Over one year through two years ....................................... | 3781 737 | 3787 0 | 2.b.
c. Over two years through three years .................................... | 3782 10,745 | 3788 0 | 2.c.
d. Over three years through four years ................................... | 3783 0 | 3789 0 | 2.d.
e. Over four years through five years .................................... | 3784 0 | 3790 0 | 2.e.
f. Over five years ....................................................... | 3785 1,101,000 | 3791 0 | 2.f.
3. Amounts used in calculating regulatory capital ratios (report amounts | ////////////////// | ////////////////// |
determined by the bank for its own internal regulatory capital analyses): | ////////////////// | RCFD Bil Mil Thou |
a. Tier 1 capital......................................................... | ////////////////// | 8274 3,590,367 | 3.a.
b. Tier 2 capital......................................................... | ////////////////// | 8275 1,755,646 | 3.b.
c. Total risk-based capital............................................... | ////////////////// | 3792 5,346,013 | 3.c.
d. Excess allowance for loan and lease losses............................. | ////////////////// | A222 297,250 | 3.d.
e. Risk-weighted assets................................................... | ////////////////// | A223 45,718,856 | 3.e.
f. "Average total assets"................................................. | ////////////////// | A224 51,482,775 | 3.f.
___________________________________________
| (Column A) | (Column B) |
Items 4-9 and Memoranda items 1 and 2 are to be completed | Assets | Credit Equiv- |
by banks that answered NO to item 1 above and | Recorded | alent Amount |
by banks with total assets of $1 billion or more. | on the | of Off-Balance |
| Balance Sheet | Sheet Items(2) |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items assigned | | |
to the Zero percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Securities issued by, other claims on, and claims unconditionally | ////////////////// | ////////////////// |
guaranteed by, the U.S. Government and its agencies and other | ////////////////// | ////////////////// |
OECD central governments .......................................... | 3794 2,147,648 | ////////////////// | 4.a.(1)
(2) All other ......................................................... | 3795 1,115,265 | ////////////////// | 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3796 101,488 | 4.b.
___________________________________________
</TABLE>
_____
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-24
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Continued
___________________________________________
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Claims conditionally guaranteed by the U.S. Government and its | ////////////////// | ////////////////// |
agencies and other OECD central governments ....................... | 3798 714,375 | ////////////////// | 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Govern- | ////////////////// | ////////////////// |
ment and its agencies and other OECD central governments; by | ////////////////// | ////////////////// |
securities issued by U.S. Government-sponsored agencies; and | ////////////////// | ////////////////// |
by cash on deposit ................................................ | 3799 0 | ////////////////// | 5.a.(2)
(3) All other ......................................................... | 3800 8,774,345 | ////////////////// | 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3801 791,065 | 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3802 5,265,173 | ////////////////// | 6.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3803 409,680 | 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3804 31,799,547 | ////////////////// | 7.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3805 10,122,631 | 7.b.
8. On-balance sheet asset values excluded from the calculation of the | ////////////////// | ////////////////// |
risk-based capital ratio(2) .............................................. | 3806 83,713 | ////////////////// | 8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b and 4.c) .......................................... | 3807 49,900,066 | ////////////////// | 9.
___________________________________________
Memoranda
______________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
1.Current credit exposure across all off-balance sheet derivative contracts covered by the | ///////////////// |
risked-based capital standards .................................................................| 8764 135,825| M.1.
|___________________|
_____________________________________________________________________
| With a remaining maturity of |
|____________________________________________________________________|
| (Column A) | (Column B) | (Column C) |
| | | |
| One year or less | Over one year | Over five years |
| | through five years | |
|______________________|______________________|______________________|
|RCFD Tril Bil Mil Thou|RCFD Tril Bil Mil Thou|RCFD Tril Bil Mil Thou|
|______________________|______________________|______________________|
2. Notional principal amounts of | | | |
off-balance sheet derivative contracts(3):| | | |
a. Interest rate contracts ................. | 3809 8,320,956 | 8766 18,597,686 | 8767 801,055 | M.2.a.
b. Foreign exchange contracts .............. | 3812 1,578,420 | 8769 101,907 | 8770 0 | M.2.b.
c. Gold contracts .......................... | 8771 15,291 | 8772 0 | 8773 0 | M.2.c.
d. Other precious metals contracts ......... | 8774 8,748 | 8775 0 | 8776 0 | M.2.d.
e. Other commodity contracts ............... | 8777 0 | 8778 0 | 8779 0 | M.2.e.
f. Equity derivative contracts ............. | A000 0 | A001 0 | A002 0 | M.2.f.
|____________________________________________________________________|
</TABLE>
_________________
1) Do not report in column B the risk-weighted amount of
assets reported in column A.
2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of these
securities in items 4 through 7 above. Item 8 also includes on-balance sheet
asset values (or portions thereof) of off-balance sheet interest rate, foreign
exchange rate, and commodity contracts and those contracts (e.g., futures
contracts) not subject to risk-based capital. Exclude from item 8 margin
accounts and accrued receivables as well as any portion of the allowance for
loan and lease losses in excess of the amount that may be included in Tier 2
capital. 3) Exclude foreign exchange contracts with an original maturity of 14
days or less and all futures contracts.
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK
Address: ONE MONARCH PLACE Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
City, State, Zip: SPRINGFIELD, MA 01102 Page RC-25
FDIC Certificate No.: 02499
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Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on June 30, 1996
FLEET NATIONAL BANK SPRINGFIELD , MASSACHUSETTS
- ------------------- ----------------- -------------
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public.
BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE
STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL
BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS
IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE
MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks
choosing not to make a statement may check the "No comment" box below and
should make no entries of any kind in the space provided for the narrative
statement; i.e., DO NOT enter in this space such phrases as "No statement,"
"Not applicable," "N/A," "No comment," and "None."
The optional statement must be entered on this sheet. The statement should
not exceed 100 words. Further, regardless of the number of words, the
statement must not exceed 750 characters, including punctuation, indentation,
and standard spacing between words and sentences. If any submission should
exceed 750 characters, as defined, it will be truncated at 750 characters with
no notice to the submitting bank and the truncated statement will appear as the
bank's statement both on agency computerized records and in computer-file
releases to the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.
The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
__________________________________________________________________________
No comment |X| (RCON 6979) | c471 | C472 |-
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
/s/__Gero DeRosa_______________________________ ___7/25/96________
Signature of Executive Officer of Bank Date of Signature
<PAGE>
EXHIBIT 99.1
LOEWEN GROUP INTERNATIONAL, INC.
LETTER OF TRANSMITTAL
Offer to Exchange
7 3/4% Series 3 Senior Guaranteed Notes (Registered) due 2001
for Any and All Outstanding
7 3/4% Series 3 Senior Guaranteed Notes due 2001
and
8 1/4% Series 4 Senior Guaranteed Notes (Registered) due 2003
for Any and All Outstanding
8 1/4% Series 4 Senior Guaranteed Notes due 2003
Guaranteed By
The Loewen Group Inc.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK TIME ON _________ __, 199__
(THE "EXPIRATION DATE")
UNLESS EXTENDED BY LOEWEN GROUP INTERNATIONAL, INC.
EXCHANGE AGENT:
FLEET NATIONAL BANK
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<S> <C> <C>
By Registered or Certified
By Hand: By Facsimile: Mail or Courier:
Fleet National Bank (860) 986-7908 Fleet National Bank
Corporate Trust Operations (For Eligible Institutions Corporate Trust Operations
777 Main Street, Lower Level Only) 777 Main Street, Lower Level
Hartford, Connecticut 06115 CTMO 0224
Attn: Patricia Williams Confirm by Telephone: Hartford, Connecticut 06115
(860) 986-1271 Attn: Patricia Williams
</TABLE>
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission via a facsimile transmission to a number other than
as set forth above will not constitute a valid delivery.
---------------------------------
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
---------------------------------
<PAGE>
A. Acknowledgements, Representations and General Information
The undersigned acknowledges receipt of the Prospectus dated
_______________, 199_ (the "Prospectus") of Loewen Group International, Inc.
("LGII") and The Loewen Group Inc. ("Loewen") which, together with this Letter
of Transmittal (the "Letter of Transmittal"), describes LGII's offer (the
"Exchange Offer") to exchange its (i) $125,000,000 7 3/4% Series 3 Senior
Guaranteed Notes (Registered) due 2001 (the "Series 3 Exchange Notes") for a
like principal amount of its issued and outstanding 7 3/4% Series 3 Senior
Guaranteed Notes due 2001 (the "Series 3 Outstanding Notes"), and (ii)
$225,000,000 8 1/4% Series 4 Senior Guaranteed Notes (Registered) due 2003 (the
"Series 4 Exchange Notes") for a like principal amount of its issued and
outstanding 8 1/4% Series 4 Senior Guaranteed Notes due 2003 (the "Series 4
Outstanding Notes"). The terms of the Series 3 Exchange Notes and the Series 4
Exchange Notes (collectively, the "Exchange Notes") are identical in all
material respects (including principal amount, interest rate and maturity) to
the terms of the Series 3 Outstanding Notes and the Series 4 Outstanding Notes
(collectively, the "Outstanding Notes") for which they may be exchanged pursuant
to the Exchange Offer, except that the offering of the Exchange Notes will have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), and, therefore, the Exchange Notes will not bear legends restricting the
transfer thereof and will not provide for certain registration rights.
The undersigned has checked the appropriate boxes below and signed
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Exchange Offer.
Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned hereby tenders to LGII the principal amount of Outstanding Notes
as set forth in Section B below. Subject to, and effective upon, the acceptance
for exchange of the Outstanding Notes tendered herewith, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, LGII all right, title
and interest in and to such Outstanding Notes. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent as the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the undersigned in connection with the
Exchange Offer) to cause the Outstanding Notes to be assigned, transferred and
exchanged. The undersigned represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Outstanding Notes and to
acquire Exchange Notes issuable upon the exchange of such tendered Outstanding
Notes, and that, when the same are accepted for exchange, LGII will acquire good
and unencumbered title to the tendered Outstanding Notes, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or LGII to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Outstanding Notes or transfer ownership of such Outstanding Notes on
the account books maintained by the Depository Trust Company ("DTC").
The Exchange Offer is subject to certain conditions as set forth in
the Prospectus under the caption "The Exchange Offer." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, LGII), as more particularly set forth in the Prospectus, LGII may
not be required to exchange any of the Outstanding Notes tendered hereby
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and, in such event, the Outstanding Notes not exchanged will be returned to the
undersigned at the address shown below the signature of the undersigned.
The offer is not conditioned upon any minimum number of Outstanding
Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Outstanding
Notes will represent to LGII that (i) the Exchange Notes to be acquired in the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is such holder,
(ii) neither the holder of the Outstanding Notes nor any such other person is
engaged in, intends to participate in or has an arrangement or understanding
with any person to participate in, the distribution of such Exchange Notes and
(iii) neither the holder nor any such other person is an "affiliate" of LGII or
Loewen within the meaning of Rule 405 under the Securities Act. A tendering
holder that is a broker-dealer may participate in the Exchange Offer provided
that (i) such broker-dealer will receive Exchange Notes for its own account in
exchange for Outstanding Notes as a result of market-making activities or other
trading activities and (ii) such broker-dealer will acknowledge that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes received in respect of such
Outstanding Notes pursuant to the Exchange Offer. Additionally, by
acknowledging that such broker-dealer will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes, the undersigned is not deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The enclosed Instruction by Owner to Registered Holder and/or Book-
Entry Transfer Participant contains an authorization by the beneficial owners of
the Outstanding Notes for you to make the foregoing representations.
LGII will not pay any fee or commission to any broker or dealer or to
any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Outstanding Notes pursuant to the Offer. LGII will
pay or cause to be paid any transfer taxes payable on the transfer of
Outstanding Notes to it, except as otherwise provided in Instruction 5 of the
enclosed Letter of Transmittal.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE
YOU THE AGENT OF LOEWEN GROUP INTERNATIONAL, INC. OR FLEET NATIONAL BANK OR
AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN
CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE
STATEMENTS CONTAINED THEREIN.
Additional copies of the enclosed material may be obtained from the
Exchange Agent.
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<PAGE>
All authority herein conferred or agreed to be conferred shall survive
the death, bankruptcy or incapacity of the undersigned and every obligation of
the undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned. Tendered Outstanding
Notes may be withdrawn at any time prior to the Expiration Date.
Certificates for all Exchange Notes delivered in exchange for tendered
Outstanding Notes and any Outstanding Notes delivered herewith but not
exchanged, in each case registered in the name of the undersigned, shall be
delivered to the undersigned at the address shown below the signature of the
undersigned.
This Letter of Transmittal is to be used either if certificates for
Outstanding Notes are to be forwarded herewith or if delivery of Outstanding
Notes is to be made by book-entry transfer to an account maintained by the
Exchange Agent at DTC pursuant to the procedures set forth in "Procedures for
Tendering" in the Prospectus. Delivery of documents to a book-entry transfer
facility does not constitute delivery to the Exchange Agent.
Unless the context requires otherwise, the term "holder" for purposes
of this Letter of Transmittal means any person in whose name Outstanding Notes
are registered on the books of LGII or any other person who has obtained a
properly completed bond power from the registered holder or any person whose
Outstanding Notes are held of record by DTC who desires to deliver such
Outstanding Notes by book-entry transfer at DTC.
Holders whose Outstanding Notes are not immediately available or who
cannot deliver their Outstanding Notes and all other documents required hereby
to the Exchange Agent on or prior to the Expiration Date may tender their
Outstanding Notes according to the guaranteed delivery procedure set forth in
the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures."
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<PAGE>
B. Outstanding Notes to be Tendered
List below the Outstanding Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the Certificate Numbers and
Principal Amounts should be listed on a separate signed schedule affixed hereto.
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<CAPTION>
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DESCRIPTION OF OUTSTANDING NOTES TENDERED HEREWITH
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate
Principal
Amount Principal
Names(s) and Address(es) of Registered Certificate Represented Amount
Holder (s) (Please fill in) Number(s)* by Notes* Tendered**
$ $
- -----------------------------------------------------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Total $ $
========= =========
- -----------------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the full
aggregate principal amount represented by Outstanding Notes. See Instruction 2.
- -----------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
C. Method of Delivery
[_] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
DEPOSITORY TRUST COMPANY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:____________________________________________
The Depository Trust Company
Account Number:___________________________________________________________
Transaction Code Number:__________________________________________________
[_] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):_____________________________________________
Name of Eligible Institution that
Guaranteed Delivery:______________________________________________________
IF DELIVERED BY BOOK-ENTRY TRANSFER:
Account Number:___________________________________________________________
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:_____________________________________________________________________
Address:__________________________________________________________________
[_] CHECK HERE IF TENDERED NOTES ARE ENCLOSED HEREWITH.
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<PAGE>
D. SIGNATURES
TENDERING HOLDER(S) SIGN HERE
_______________________________________________________________________________
_______________________________________________________________________________
Signature(s) of Holder(s)
Dated:__________________________, 199__
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) for Outstanding Notes or by any person(s) authorized to become
registered holder(s) by endorsements and documents transmitted herewith or, if
the Outstanding Notes are held of record by DTC, the person in whose name such
Outstanding Notes are registered on the books of DTC. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please set forth the full title of such person.) See Instruction 3.
Name(s):_______________________________________________________________________
_______________________________________________________________________________
(Please Print)
Capacity (full title):_________________________________________________________
Address:_______________________________________________________________________
_______________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No.:___________________________________________________
Tax Identification No.:________________________________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 3)
Authorized Signature:__________________________________________________________
Name:__________________________________________________________________________
Title:_________________________________________________________________________
Address:_______________________________________________________________________
Name of Firm:__________________________________________________________________
Area Code and Telephone No.:___________________________________________________
Dated:__________________________, 199__
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<PAGE>
E. INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates
for all physically delivered Outstanding Notes or confirmation of any book-entry
transfer to the Exchange Agent's account at The Depository Trust Company of
Outstanding Notes tendered by book-entry transfer, as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
thereof, and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent at any of its addressee set forth herein on or
prior to the Expiration Date.
THE METHOD OF DELIVERY OF THIS TRANSMITTAL, THE OUTSTANDING NOTES AND
ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER AND,
EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS
RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES
SHOULD BE SENT TO LGII OR LOEWEN. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR SUCH HOLDERS.
Holders whose Outstanding Notes are not immediately available or who
cannot deliver their Outstanding Notes and all other required documents to the
Exchange Agent on or prior to the Expiration Date or comply with book-entry
transfer procedures on a timely basis may tender their Outstanding Notes
pursuant to the guaranteed delivery procedure set forth in the Prospectus under
"The Exchange Offer--Guaranteed Delivery Procedures." Pursuant to such
procedure: (i) such tender must be made through an Eligible Institution (as
defined therein); (ii) prior to the Expiration Date, the Exchange Agent must
have received from such Eligible institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the tendering holder, the
registered number(s) of such Outstanding Notes and the principal amount of
Outstanding Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within (3) three New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof) and any
other documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) all tendered Outstanding
Notes (or a confirmation of any book-entry transfer of such Outstanding Notes
into the Exchange Agent's account at DTC) as well as this Letter of Transmittal
and all other documents required by this Letter of Transmittal must be received
by the Exchange Agent within three (3) New York Stock Exchange trading days
after the date of execution of such letter, telegram or facsimile transmission,
all as provided in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures."
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<PAGE>
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to holders who wish to tender their Outstanding Notes according to
the guaranteed delivery procedures set forth above.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Outstanding Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS. Tenders of Outstanding Notes will be
accepted in all denominations of $1,000 and integral multiples in excess
thereof. If less than the entire principal amount of Outstanding Notes
evidenced by a submitted certificate is tendered, the tendering holder must fill
in the principal amount tendered in the box entitled "Principal Amount
Tendered." A newly issued certificate for the principal amount of Outstanding
Notes submitted but not tendered will be sent to such holder as soon as
practicable after the Expiration Date. All Outstanding Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
Tenders of Outstanding Notes pursuant to the Exchange Offer are
irrevocable, except that Outstanding Notes tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to 5:00 p.m., New York Time, on the
Expiration Date. To be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Exchange Agent.
Any such notice of withdrawal must specify the name of the person having
tendered the Outstanding Notes to be withdrawn, identify the Outstanding Notes
to be withdrawn (including the principal amount of such Outstanding Notes), and
(where certificates for Outstanding Notes have been transmitted) specify the
name in which such Outstanding Notes were registered, if different from that of
the withdrawing holder. If certificates for Outstanding Notes have been
delivered or otherwise identified to the Exchange Agent, then, prior to the
release of such certificates, the withdrawing holder must also submit the serial
numbers of the particular certificates to be withdrawn and a signed notice of
withdrawal with signatures guaranteed by an Eligible Institution unless such
holder is an Eligible Institution. If Outstanding Notes have been tendered
pursuant to the procedures for book-entry transfer described above, any notice
of withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Outstanding Notes and
otherwise comply with the procedures of such facility. Any Outstanding Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Outstanding Notes that have been tendered
for exchange but that are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Outstanding Notes
tendered by book-entry transfer into the Exchange Agent's account at the Book-
Entry Transfer Facility pursuant to the book-entry transfer procedures described
above, such Outstanding Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Outstanding Notes) as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Outstanding Notes may be retendered by following one
of the procedures described in the Prospectus under the caption "The Exchange
Offer--Procedures for Tendering" at any time on or prior to the Expiration Date.
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3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered holder(s) of the Outstanding Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of
certificates without alteration, enlargement or any change whatsoever.
If any of the Outstanding Notes tendered hereby are owned of record by
two or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Outstanding Notes registered in different names are
tendered, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
Outstanding Notes.
When this Letter of Transmittal is signed by the registered holder or
holders of Outstanding Notes listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Outstanding Notes listed, such Notes must be
endorsed or accompanied by separate written instruments of transfer or exchange
in form satisfactory to LGII and duly executed by the registered holder, in
either case signed exactly as the name or names of the registered holder or
holders appear(s) on the Outstanding Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by LGII, proper evidence satisfactory
to LGII of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution unless the Outstanding Notes are tendered: (i) by a
registered holder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on this Letter of Transmittal;
or (ii) for the account of any Eligible Institution. See Instruction 4 below.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable spaces, the name and address to which the Exchange
Notes or substitute Outstanding Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal (or in the case of
tender of the Outstanding Notes through DTC, if different from DTC). In the case
of issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
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<PAGE>
5. TRANSFER TAXES. LGII will pay all transfer taxes, if any, applicable
to the transfer and exchange of Outstanding Notes to it or its order pursuant to
the Exchange Offer. If, however, certificates representing Outstanding Notes
for principal amounts not tendered or accepted for exchange are to be delivered
to, or are to be registered or issued in the name of, any person other than the
registered holder of the Outstanding Notes tendered hereby, or if tendered
Outstanding Notes are registered in the name of any person other than the person
signing the Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the transfer of Outstanding Notes to LGII or its order
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other person) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exception therefrom is not submitted herewith with the Letter of Transmittal the
amount of such transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Outstanding Notes listed in this Letter
of Transmittal.
6. WAIVER OF CONDITIONS. LGII reserves the absolute right to waive, in
whole or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
7. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any holder whose
Outstanding Notes have been mutilated, lost, stolen, or destroyed should contact
the Exchange Agent at the address indicated below for further instructions.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent
at the address and telephone number set forth on the front page of this Letter
of Transmittal. In addition, all questions relating to the Exchange Offer, as
well as requests for assistance or additional copies of the Prospectus and this
Letter of Transmittal, may be directed to Martin Carsky at The Loewen Group
Inc., 4126 Norland Avenue, Burnaby, British Columbia V5G 3S8; telephone 604-293-
6486; facsimile: 604-473-7305.
9. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of Letters of Transmittal or
Outstanding Notes will be resolved by LGII, whose determination will be final
and binding. LGII reserves the absolute right to reject any or all Letters of
Transmittal or tenders that are not in proper form or the acceptance of which
would, in the opinion of LGII's counsel, be unlawful. LGII also reserves the
right to waive any irregularities or conditions of tender as to the particular
Outstanding Notes covered by any Letter of Transmittal or tendered pursuant to
such letter. None of LGII, the Exchange Agent or any other person will be under
any duty to give notification of any defects or irregularities in tenders or
incur any liability for failure to give any such notification. LGII's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in this Letter of Transmittal) shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Outstanding Notes must be cured within such time as LGII shall
determine. Although LGII intends to notify holders of defects or irregularities
with respect to tenders of Outstanding Notes, neither LGII, the Exchange Agent
nor any other person shall incur any liability for failure to give such
notification. Tenders of Outstanding Notes will not be deemed to have been made
until such
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<PAGE>
defects or irregularities have been cured or waived. Any Outstanding Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned by
the Exchange Agent to the tendering holders, unless otherwise provided in this
Letter of Transmittal, as soon as practicable following the Expiration Date.
10. DEFINITIONS. Capitalized terms used in this Letter of Transmittal and
not otherwise defined have the meanings given in the Prospectus.
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 1, 3, (SEE INSTRUCTION 1, 3,
AND 4 HEREIN) AND 4 HEREIN)
To be completed ONLY if To be completed ONLY if
certificates for Outstanding Notes in certificates for Outstanding Notes in
a principal amount not tendered are to a principal amount not tendered are
be issued in the name of, or the not accepted for purchase or the
Exchange Notes issued pursuant to the Exchange Notes issued pursuant to the
Exchange Offer are to be issued to the Exchange Offer are to be sent to
order of, someone other than the someone other than the person or
person or persons whose signature(s) persons whose signature(s) appear(s)
appear(s) within this Letter of within this Letter of Transmittal or
Transmittal or issued to an address issued to an address different from
different from that shown in the box that shown in the box entitled
entitled "Description of Outstanding "Description of Outstanding Notes
Notes Tendered Herewith" within this Tendered Herewith" within this Letter
Letter of Transmittal, or if of Transmittal.
Outstanding Notes tendered by book-
entry transfer that are not accepted
for purchase are to be credited to an
account maintained at DTC.
Name_________________________________ Name_________________________________
(Please Print) (Please Print)
Address______________________________ Address______________________________
(Please Print) (Please Print)
_____________________________________ _____________________________________
(Zip Code) (Zip Code)
_____________________________________ _____________________________________
Taxpayer Identification or Taxpayer Identification or
Social Security Number Social Security Number
-------------------------------
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF
(TOGETHER WITH CERTIFICATES FOR OUTSTANDING NOTES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY
MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK TIME, ON THE
EXPIRATION DATE.
-------------------------------
-12-
<PAGE>
EXHIBIT 99.2
LOEWEN GROUP INTERNATIONAL, INC.
NOTICE OF GUARANTEED DELIVERY
OFFER TO EXCHANGE
7 3/4% SERIES 3 SENIOR GUARANTEED NOTES (REGISTERED) DUE 2001
FOR ANY AND ALL OUTSTANDING
7 3/4% SERIES 3 SENIOR GUARANTEED NOTES DUE 2001
AND
8 1/4% SERIES 4 SENIOR GUARANTEED NOTES (REGISTERED) DUE 2003
FOR ANY AND ALL OUTSTANDING
8 1/4% SERIES 4 SENIOR GUARANTEED NOTES DUE 2003
GUARANTEED BY
THE LOEWEN GROUP, INC.
Registered holders of (i) outstanding 7 3/4% Series 3 Senior
Guaranteed Notes due 2001 ("Series 3 Outstanding Notes") who wish to tender
their Series 3 Outstanding Notes in exchange for a like principal amount of 7
3/4% Series 3 Senior Guaranteed Notes (Registered) due 2001 and/or (ii)
outstanding 8 1/4% Series 4 Senior Guaranteed Notes due 2003 ("Series 4
Outstanding Notes" and, together with the Series 3 Outstanding Notes, the
"Outstanding Notes") who wish to tender their Series 4 Outstanding Notes for a
like principal amount of 8 1/4% Series 4 Senior Guaranteed Notes (Registered)
due 2003, in each case whose Outstanding Notes are not immediately available or
who cannot deliver their Outstanding Notes and Letter of Transmittal (and any
other documents required by the Letter of Transmittal) to Fleet National Bank
(the "Exchange Agent") prior to 5:00 p.m. New York time on __________, 199__,
may use this Notice of Guaranteed Delivery or one substantially equivalent
hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by
facsimile transmission (receipt confirmed by telephone and an original delivered
by guaranteed overnight delivery) or mail to the Exchange Agent. See "The
Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus.
The Exchange Agent for the Exchange Offer is:
FLEET NATIONAL BANK
<TABLE>
<S> <C> <C>
By Registered or Certified
By Hand: By Facsimile: Mail or Courier:
Fleet National Bank (860) 986-7908 Fleet National Bank
Corporate Trust Operations (For Eligible Institutions Corporate Trust Operations
777 Main Street, Lower Level Only) 777 Main Street, Lower Level
Hartford, Connecticut 06115 CTMO 0224
Attention: Patricia Williams Confirm by Telephone: Hartford, Connecticut 06115
(860) 986-1271 Attention: Patricia Williams
</TABLE>
<PAGE>
Delivery of this Notice of Guaranteed Delivery to an address other
than as set forth above or transmission of instructions via a facsimile
transmission to a number other than as set forth above will not constitute a
valid delivery.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution, such signature guarantee must appear in
the applicable space provided on the Letter of Transmittal for Guarantee of
Signatures.
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, hereby guarantees to deliver to
the Exchange Agent at one of its addresses set forth above, the certificates
representing the Outstanding Notes, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal within three (3) New York Stock Exchange, Inc. trading days after
the date of execution of this Notice of Guaranteed Delivery.
Name of Firm:_______________________ _____________________________________
(Authorized Signature)
Address:____________________________ Title:_______________________________
____________________________________ Name:________________________________
(Including Zip Code) (Please type or print)
Telephone Number:___________________ Date:________________________________
(Including Area Code)
NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED
DELIVERY. NOTES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL
-2-
