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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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THE LOEWEN GROUP INC.
(Name of Subject Company)
THE LOEWEN GROUP INC.
(Name of Person(s) Filing Statement)
COMMON SHARES, WITHOUT PAR VALUE
(AND ASSOCIATED SHARE PURCHASE RIGHTS)
6.00% CUMULATIVE REDEEMABLE CONVERTIBLE FIRST
PREFERRED SHARES, SERIES C, WITHOUT PAR VALUE
(Title of Class of Securities)
54042L100
54042L407
(CUSIP Number of Class of Securities)
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Peter S. Hyndman
Vice President, Law and Corporate Secretary
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia
Canada V5G 3S8
(604) 299-9321
(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person(s) Filing Statement)
WITH A COPY TO:
Lyle G. Ganske, Esq.
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
(216) 586-3939
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is The Loewen Group Inc., a corporation
incorporated under the laws of British Columbia, Canada (the "Company"). The
address of the principal executive offices of the Company is 4126 Norland
Avenue, Burnaby, British Columbia, Canada V5G 3S8. The titles of the classes of
equity securities to which this Schedule 14D-9 relates are (i) the Common
Shares, without par value, of the Company (the "Common Shares"), including the
associated Rights (as defined below; except where the context otherwise
requires, the Rights and the Common Shares are referred to collectively as the
"Shares"), and (ii) the 6.00% Cumulative Redeemable Convertible First Preferred
Shares, Series C, without par value, of the Company (the "Preferred Shares").
The Company is the parent of Loewen Group International, Inc. ("LGII"), a
Delaware corporation and the principal holding company for the Company's United
States assets. The address of the principal executive offices of LGII is 50 East
RiverCenter Boulevard, Suite #800, Covington, Kentucky 41011.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule 14D-9 relates to the proposed exchange offers (the "Second SCI
Proposal") announced on October 2, 1996, and disclosed in a Registration
Statement on Form S-4 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "Commission") on October 3, 1996, by New Service
Corporation International, a Delaware corporation ("New SCI"), and SCI Holdings
Canada, Inc., a company incorporated under the laws of British Columbia, Canada
("Canadian SCI"), each a wholly owned subsidiary of Service Corporation
International, a Texas corporation ("SCI"). The proposed exchange offers
contemplated by the Second SCI Proposal have not yet commenced.
According to information contained in the Registration Statement, the Second
SCI Proposal would be an offer to exchange shares of common stock, par value
$0.01 per share, of New SCI (the "New SCI Common Stock"), or, at the election of
each Company shareholder, exchangeable shares, without par value, of Canadian
SCI (the "Exchangeable Shares") for (i) all of the outstanding Common Shares and
associated share purchase rights (the "Rights") issued pursuant to the
Shareholder Protection Rights Plan Agreement, dated as of April 20, 1990,
between the Company and The Royal Trust Company as Rights Agent, as amended by
the Amendments thereto made as of May 24, 1990 and April 7, 1994 (the "Rights
Plan"), and (ii) all of the outstanding Preferred Shares. According to
information contained in the Registration Statement, each Share held by the
Company's shareholders could be tendered in exchange for a number of shares of
New SCI Common Stock or a number of Exchangeable Shares of Canadian SCI equal to
the Share Exchange Ratio (as defined below), and each Preferred Share held by
the Company's shareholders could be tendered in exchange for a number of shares
of New SCI Common Stock or a number of Exchangeable Shares of Canadian SCI equal
to the Preferred Share Exchange Ratio (as defined below). As used in this
Schedule 14D-9, except where the context otherwise requires, references to "SCI"
mean, collectively, SCI, New SCI, Canadian SCI and their respective
subsidiaries.
According to information contained in the Registration Statement, the "Share
Exchange Ratio" is the quotient (rounded to the nearest 1/100,000) determined by
dividing $45.00 by the average of the high and low sales prices as reported on
the New York Stock Exchange Composite Tape (the "SCI Average Price") of the
common stock of SCI, par value $1.00 per share ("SCI Common Stock"), on each of
the twenty consecutive trading days ending with the third trading day
immediately preceding the Expiration Date (as defined in the Registration
Statement); provided, however, that the Share Exchange Ratio shall not be
greater than 1.76471. According to information contained in the Registration
Statement, the "Preferred Share Exchange Ratio" is the product of (i) the Share
Exchange Ratio and (ii) .65574; provided, however, that the Preferred Share
Exchange Ratio shall not be greater than 1.15719. The Share Exchange Ratio and
the Preferred Share Exchange Ratio are referred to collectively as the "Exchange
Ratios."
Pursuant to the Exchange Ratios, according to information contained in the
Registration Statement, if the SCI Average Price is greater than or equal to
$25.50, each Share that is validly tendered and not
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withdrawn on or prior to the Expiration Date will be exchanged for $45.00 of New
SCI Common Stock and each Preferred Share that is validly tendered and not
withdrawn on or prior to the Expiration Date will be exchanged for $29.51 of New
SCI Common Stock. If the SCI Average Price is less than $25.50, each such Share
will be exchanged for less than $45.00 of New SCI Common Stock and each such
Preferred Share will be exchanged for less than $29.51 of New SCI Common Stock.
According to the Registration Statement, the principal executive offices of
New SCI and SCI are located at 1929 Allen Parkway, Houston, Texas 77019.
According to the Registration Statement, the principal executive offices of
Canadian SCI are located at 3789 Royal Oak Avenue, Burnaby, British Columbia,
Canada V5G 3MI.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above, which information is incorporated
herein by reference.
(b) The Company leases a funeral home owned by SCI located in each of
Bellevue, Kirkland and Redmond, Washington. Pursuant to a lease agreement with
respect to these properties, the Company pays to SCI annual rentals, including
percentage rent, of approximately $140,000. The lease agreement expires in
January 2005.
SCI's Provident subsidiary provides capital financing to independent funeral
home and cemetery operators. From time to time, according to information
contained in the Registration Statement, Provident has had loans outstanding to
certain borrowers who sold their businesses to the Company or its affiliates. In
such cases, according to information contained in the Registration Statement,
Provident's loans were fully repaid in connection with the sales of such
businesses except for one loan which remains outstanding. At August 30, 1996,
this loan had an outstanding balance of $1,319,982, an interest rate of 9.25
percent, and a maturity date of May 1, 1998. The obligor on the loan is 50
percent owned by a corporation in which the Company has an equity interest. The
Company also has an equity interest in a guarantor of this loan.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of the Company's Directors and executive
officers are described on pages 15-20 and 32-34 of the proxy statement (the
"1996 Proxy Statement"), dated April 9, 1996, sent by the Company to its
shareholders in connection with the Company's Annual General Meeting of the
holders of Common Shares held on May 16, 1996. A copy of these pages of the 1996
Proxy Statement is filed as Exhibit 19 to this Schedule 14D-9 and is
incorporated herein by reference. Except as described in this Schedule 14D-9, to
the knowledge of the Company, as of the date hereof, there are no material
contracts, agreements, arrangements or understandings, or any actual or
potential conflicts of interest, between the Company or its affiliates and (i)
the Company, its executive officers, Directors or affiliates, or (ii) SCI or its
executive officers, directors or affiliates.
Effective as of October 10, 1996, in order to attract and retain key
executives and managers of the Company in the context of a threatened change in
control of the Company, the Board of Directors of the Company (the "Board"),
upon the recommendation of the Compensation Committee thereof, approved the
execution of individual change-in-control severance agreements (the "Severance
Agreements") with approximately 80 of the Company's and LGII's executives
(including each of the Company's executive officers other than Raymond L.
Loewen, the Company's Chairman and Chief Executive Officer) and managers (each,
an "Executive"). A copy of the form of Severance Agreement is filed as Exhibit
41 to this Schedule 14D-9 and is incorporated herein by reference. The following
summary of the form of Severance Agreement does not purport to be complete and
is qualified in its entirety by reference to the form of Severance Agreement.
The Severance Agreements will become operative only upon a change in control
of the Company. A "change in control" is defined in the Severance Agreements as
having occurred when: (i) the Company merges with, or sells all or substantially
all its assets to, another corporation, less than two-thirds of the
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voting shares of which are owned by stockholders of the Company immediately
prior to such merger or sale; (ii) a report is filed under specified provisions
of the United States securities laws disclosing that any "person" (other than
Raymond L. Loewen and certain related persons) has become the "beneficial owner"
(as each such term is defined in the Severance Agreements) of 25% or more of the
Company's voting stock; (iii) the Company reports under specified provisions of
the United States securities laws that a change in control has occurred; or (iv)
within any two-year period, a majority of the Directors of the Company at the
beginning of such period (not including persons approved by at least two-thirds
of the Directors of the Company still in office who were Directors of the
Company at the beginning of such period) cease to be Directors of the Company.
Under the Severance Agreement, an Executive will be entitled to severance
pay if, during the period commencing upon the change in control and ending upon
the earliest to occur of (i) two years after the change in control or (ii) the
death of the Executive (the "Severance Period"), the Executive is terminated by
the Company for any reason other than "cause" (as defined in the Severance
Agreements) or if the Executive terminates his own employment for, among other
reasons, (x) a material reduction in duties, responsibilities or compensation,
or (y) a relocation of the Executive or the Executive's principal work location
more than 25 miles from the location thereof prior to the change in control. In
addition, certain of the Executives (including each of the executive officers of
the Company who are parties to the Severance Agreements) may terminate their
employment for any reason or without reason during the 30-day period immediately
following the first anniversary of the first occurrence of a change in control
and receive the severance benefits provided under the Severance Agreements. On
each anniversary of the change in control, the Severance Period may be extended
for an additional year.
If (i) an Executive remains employed by the Company or a subsidiary thereof
for 30 days after a change in control or (ii) the Executive's employment with
the Company or a subsidiary thereof is terminated due to the death or permanent
disability of the Executive following a change in control but prior to the 31st
day following a change in control, the Executive will be entitled to receive a
lump-sum retention bonus payment equal to one-third, one-half, two-thirds or one
times (as specified on a case-by-case basis, depending on the Executive's
position) the sum of the Executive's base salary and target annual bonus. If the
Executive's employment is terminated with rights to receive severance benefits,
the Executive will be entitled to receive (i) a lump-sum severance payment equal
to (A) one, one and one-half, two or three times (as specified on a case-by-case
basis, depending on the Executive's position) the sum of the Executive's base
salary and target annual bonus minus (B) any amount actually paid to the
Executive as a retention bonus, as described above, and (ii) employee health and
welfare benefits for a period of 12, 18, 24 or 36 months (as specified on a
case-by-case basis, depending on the Executive's position). In the case of each
of the Company's executive officers, the multiples described above are either
two-thirds or one for purposes of determining retention bonus payments and two
or three for purposes of determining lump sum severance payments, and the
continuation period for employee health and welfare benefits is either 24 or 36
months.
The Severance Agreements provide that the payments and benefits available to
an Executive under the Severance Agreements will be reduced if and to the extent
such reduction would result in the Executive receiving greater after-tax
payments and benefits.
In addition, in an effort to protect all or a substantial portion of the
Company's and LGII's salaried employees in the event of a change in control,
effective as of October 10, 1996, the Board also authorized the adoption of a
change-in-control severance compensation plan (the "Severance Plan"). A copy of
the Severance Plan has been filed as Exhibit 42 to this Schedule 14D-9 and is
incorporated herein by reference. This summary of the Severance Plan does not
purport to be complete and is qualified in its entirety by reference to the text
of the Severance Plan.
Certain full-time salaried employees of the Company and LGII whose principal
duties include corporate or regional management responsibilities (other than
executive officers of the Company and other Executives who are parties to the
Severance Agreements) are eligible to participate in the Severance
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Plan. The Severance Plan becomes operative only upon a change in control of the
Company. A "change in control" is defined in the Severance Plan as having
occurred when: (i) a report is filed under specified provisions of the United
States securities laws disclosing that any "person" (other than Raymond L.
Loewen and certain related persons) has become the "beneficial owner" (as each
such term is defined in the Severance Plan) of 25% or more of the Company's
voting stock or (ii) such other event as the Board may, in its sole discretion,
by majority vote determine to constitute a change in control of the Company.
Once the Severance Plan becomes operative, each of the participants is
entitled to a severance payment if, within 24 months after a change in control
of the Company, the participant is terminated other than by reason of death,
voluntary termination or retirement, or for "Just Cause" (as such term is
defined in the Severance Plan). The amount of the severance payment is dependent
upon the participant's length of service with the Company or its subsidiaries.
Generally, participants will receive two weeks pay for each full year of
service, subject to a minimum of 12 weeks and a maximum of 52 weeks pay. The
amount of severance awards payable under the Severance Plan to any particular
participant will be reduced by an amount equal to any other severance payment
paid or payable by the Company or, if applicable, a subsidiary thereof, to such
participant under any other severance agreement or arrangement or requirement of
law.
The Severance Plan provides that the severance payments available to a
participant under the Severance Plan will be reduced to the extent necessary, if
any, so that no portion of such payment will constitute an "excess parachute
payment" under United States income tax laws.
Effective as of October 10, 1996, the Board authorized the Company to enter
into indemnification agreements (the "Indemnification Agreements") with certain
of its Directors and officers whereby the Company will agree to indemnify such
persons against all costs, charges and expenses incurred by reason of being a
Director or officer of the Company. The Company'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 the Company. Copies of the forms
of Indemnification Agreements have been filed as Exhibits 39-40 to this Schedule
14D-9 and the foregoing description is qualified in its entirety by reference to
the text of the Indemnification Agreements, which are incorporated herein by
reference.
As of October 9, 1996, the Company has granted stock options to purchase an
aggregate of 4,367,375 Common Shares to management and employees of the Company.
In 1996, the number of such options granted was 1,845,255.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION. AS MORE FULLY DISCUSSED BELOW, THE BOARD OF DIRECTORS
OF THE COMPANY HAS DETERMINED THAT THE SECOND SCI PROPOSAL IS INADEQUATE AND NOT
IN THE BEST INTERESTS OF THE COMPANY OR THE HOLDERS OF EACH OF THE COMMON SHARES
AND THE PREFERRED SHARES. ACCORDINGLY, THE BOARD RECOMMENDS THAT ALL OF THE
COMPANY'S SHAREHOLDERS REJECT THE SECOND SCI PROPOSAL AND, WHEN AND IF THE
PROPOSED EXCHANGE OFFERS ARE COMMENCED, NOT TENDER THEIR SHARES.
On September 17, 1996, the Company received an unsolicited letter from L.
William Heiligbrodt, President and Chief Operating Officer of SCI, proposing a
combination of the Company and SCI (the "First SCI Proposal"). A copy of the
letter is filed as Exhibit 1 to this Schedule 14D-9 and is incorporated herein
by reference. The First SCI Proposal contemplated a stock for stock exchange
accounted for as a pooling-of-interests, in which the Company's shareholders
would receive, in exchange for their Common Shares, securities valued at $43.00
per share. The First SCI Proposal stated that it had not been approved by SCI's
Board of Directors. The First SCI Proposal further stated that after conducting
a due diligence review, SCI "may be in a position to increase the consideration"
that the shareholders of the Company would receive in the proposed exchange.
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On September 17, 1996, at a regularly scheduled meeting convened for other
purposes at which the First SCI Proposal was communicated to the Board, the
Board discussed the First SCI Proposal and conducted a preliminary discussion of
its terms and conditions. At the meeting, the Board's legal advisors advised the
Board members of their fiduciary duties in responding to the First SCI Proposal.
The Board requested its legal advisors and Smith Barney Inc. ("Smith Barney"),
who participated in the meeting, to review carefully the First SCI Proposal and
to prepare a detailed analysis for discussion of such proposal at a meeting of
the Board to be held on September 24, 1996. A copy of the press release relating
to the Board's action is filed as Exhibit 6 to this Schedule 14D-9 and is
incorporated herein by reference.
On September 18, 1996, the Company received a letter from SCI stating that
SCI's Board of Directors had approved the First SCI Proposal. A copy of the
letter is filed as Exhibit 2 to this Schedule 14D-9 and is incorporated herein
by reference.
On September 20, 1996, the Board held an informational telephonic conference
call, together with Smith Barney and Nesbitt Burns Inc. ("Nesbitt Burns"), the
Company's financial advisors (together, the "Financial Advisors"), to discuss
the First SCI Proposal.
On September 24, 1996, the Board met to consider the First SCI Proposal and
related matters and reviewed with management and the Company's legal and
Financial Advisors, among other things, the terms and conditions of the First
SCI Proposal; the financial condition, performance and future prospects of the
Company as an independent, stand-alone entity; the long-term financial and
strategic objectives of the Company, including the Company's long-term business
and financial plan; and other related matters, including, without limitation, an
oral opinion of each of the Financial Advisors to the effect that, as of such
date, the consideration proposed to be offered in the First SCI Proposal was
inadequate from a financial point of view. After carefully considering the First
SCI Proposal, the Board decided to reject the proposal and approved the delivery
of the following letter to Mr. Heiligbrodt:
September 24, 1996
Mr. L. William Heiligbrodt
President
Service Corporation International
1929 Allen Parkway
Houston, TX 77219-0548
Dear Mr. Heiligbrodt:
The Board of Directors of The Loewen Group Inc. has asked me to
advise you of the decision that the Loewen Board has made in response to
the unsolicited takeover proposal that we received from Service
Corporation International on Tuesday, September 17, 1996.
The Loewen Board has unanimously rejected the SCI proposal. SCI
should understand that the Loewen Board of Directors takes its fiduciary
duty to act in the best interests of the Company and our shareholders
very seriously. We are fully committed to maximizing the long-term value
for our shareholders. After extensive review of our business and
financial plans, as well as a thorough and careful study of our
excellent prospects for significant continued growth in revenues and
profitability in the future, the Loewen Board of Directors has
unanimously concluded that the best way to maximize value for our
shareholders is through the continued implementation of the Company's
long-term business plan as an independent company.
Sincerely,
Raymond L. Loewen
Chairman and
Chief Executive Officer
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A copy of the press release announcing the Board's decision with respect to
the First SCI Proposal is filed as Exhibit 8 to this Schedule 14D-9 and is
incorporated herein by reference. A copy of the letter to the Company's
shareholders communicating the Board's decision is filed as Exhibit 3 to this
Schedule 14D-9 and is incorporated herein by reference.
On October 2, 1996, SCI announced its intention to make the Second SCI
Proposal. A copy of the press release issued by SCI announcing the terms of the
Second SCI Proposal is filed as Exhibit 11 to this Schedule 14D-9. Pursuant to
the Second SCI Proposal, holders of Common Shares and holders of Preferred
Shares may be offered the opportunity to exchange their shares for shares of New
SCI Common Stock or Exchangeable Shares, as discussed more fully in Item 2 of
this Schedule 14D-9.
The description of the Second SCI Proposal set forth in the Registration
Statement states that it is not conditioned on achieving pooling-of-interests
accounting but that SCI may be willing to increase the consideration payable in
exchange for the Shares and the Preferred Shares by an unspecified amount if SCI
and the Company were to enter into a negotiated agreement providing for the
combination of SCI and the Company in a transaction that would qualify for
pooling treatment.
The Second SCI Proposal is subject to numerous conditions, including, among
other things: (i) there being validly tendered and not withdrawn prior to the
expiration of the Second SCI Proposal (x) a number of Shares which, together
with the Shares beneficially owned by SCI, constitutes at least 75% of the
Common Shares outstanding on a fully diluted basis and (y) a number of Preferred
Shares which, together with the Preferred Shares beneficially owned by SCI,
constitutes at least 75% of the Preferred Shares outstanding on a fully diluted
basis; (ii) approval of (x) the corporate reorganization of SCI by a vote of the
holders of at least two-thirds of the outstanding SCI Common Stock eligible to
vote and (y) the issuance of stock pursuant to the Second SCI Proposal and
related transactions by a vote of the holders of at least a majority of the
outstanding SCI Common Stock present and voting at a meeting of such holders;
(iii) SCI being satisfied in its sole discretion that the Company has redeemed
all outstanding Rights or that the Rights are invalid or inapplicable to the
Second SCI Proposal and SCI's proposed second-step merger or that the Rights
Plan does not affect the Second SCI Proposal and related transactions; (iv) the
resignation of at least a majority of the incumbent members of the Board and the
election or designation of persons designated by SCI to constitute a majority of
the Board; (v) the satisfaction of all requirements pursuant to (x) the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (y) the
Competition Act of Canada and (z) the approval of the minister responsible for
the Investment Canada Act, in each case with respect to the Second SCI Proposal
and related transactions; and (vi) consummation of the corporate reorganization
of SCI.
On October 2, 1996, the Company announced that it would review the Second
SCI Proposal and respond in due course. A copy of the press release relating to
that announcement is filed as Exhibit 12 to this Schedule 14D-9 and is
incorporated herein by reference. At such time, the Company also requested that
management, together with the Company's legal advisors and Financial Advisors,
carefully review the Second SCI Proposal and prepare a detailed analysis for
discussion of such proposal at the next meeting of the Board.
On October 3, 1996, the Company's transfer agent and registrar received a
request pursuant to Canadian laws for a copy of the Company's shareholder list.
On October 10, 1996, the Board met to consider the Second SCI Proposal and
related matters and reviewed with management and the Company's legal advisors
and Financial Advisors, among other things, the terms and conditions of the
Second SCI Proposal; the financial condition, performance and future prospects
of the Company as an independent, stand-alone entity and other related matters,
including, without limitation, a written opinion of each of the Financial
Advisors to the effect that, as of such date, the Share Exchange Ratio and the
Preferred Share Exchange Ratio were inadequate from a financial point of view.
At that meeting, the Board also reviewed an update on the long-term business and
financial plan of the Company.
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After taking into account these matters, the Board determined by unanimous
vote (with one director not present) that the Second SCI Proposal is inadequate
and not in the best interests of the Company or its shareholders.
ACCORDINGLY, THE COMPANY'S BOARD HAS DETERMINED THAT THE SECOND SCI PROPOSAL
IS INADEQUATE AND NOT IN THE BEST INTERESTS OF THE COMPANY OR THE HOLDERS OF
EACH OF THE COMMON SHARES AND THE PREFERRED SHARES. THEREFORE, THE BOARD
RECOMMENDS THAT ALL OF THE COMPANY'S SHAREHOLDERS REJECT THE SECOND SCI PROPOSAL
AND, WHEN AND IF THE PROPOSED EXCHANGE OFFERS ARE COMMENCED, NOT TENDER THEIR
SHARES.
The Board believes that the best means of maximizing long-term value for
shareholders is through continued implementation of the Company's long-term
business plan as an independent company.
A copy of the press release relating to the Board's recommendations is filed
as Exhibit 13 to this Schedule 14D-9 and is incorporated herein by reference.
(b) REASONS FOR THE RECOMMENDATION. In addition to the factors set forth
above and considered by the Board in reaching its conclusions with respect to
the First SCI Proposal and the Second SCI Proposal described in Item 4(a) above,
the Board considered a number of factors, including, but not limited to, the
following:
(i) the significant growth of the Company over the past several years,
its reputation as a provider of superior services to persons and families in
need and its position as an industry leader, and the Company's prospects for
significant continued growth in revenues and profitability in the future;
(ii) the Board's familiarity with, and review of, the Company's
business, financial condition, results of operations, current business
strategy and future prospects, including the nature of the markets in which
the Company operates and their attractive growth prospects, the Company's
position in such markets and the historical and current market prices for
the Shares. In this regard, the Board noted the Company's financial
performance in recent years, including its 41.5% revenue increase and 36.8%
earnings increase (on a compounded annual basis) over the last five years
(excluding the Gulf National and Provident settlements and related costs)
and that, to date in 1996, the Company has closed or signed approximately
$730 million in acquisitions, not including the recent strategic investments
the Company has made in Rose Hills and Prime Succession;
(iii) the opportunistic timing of the Second SCI Proposal, which seeks to
exploit the Company's recent stock price in relation to historic trading
patterns;
(iv) the Board's review, based in part on presentations by the Financial
Advisors and Company management, of (a) publicly available information
concerning the strategy, business, operations, earnings and financial
condition of SCI both on a historical and prospective basis and (b) the
historical market price of SCI Common Stock. In this regard, the Board noted
that SCI's acquisition strategies and techniques are very different from
those of the Company, that an integration of the strategies and techniques
of the Company and SCI may be difficult, and that a combination of the two
companies would create a company with significantly different
characteristics from those the Company currently enjoys. Further, the Board
believes that the Company has significantly expanded its acquisition program
in recent years and that many acquisition targets have shown a preference
for acquisition by the Company rather than by SCI;
(v) a comparison, based upon recent analysts' earnings estimates for the
Company and SCI for the fiscal years 1996-1998, of the earnings per share
attributable to the Shares (a) if the Company remained an independent entity
and (b) on a pro forma per share equivalent basis giving effect to a
combination of the Company and SCI;
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(vi) the current and prospective economic, regulatory and competitive
environment facing the funeral services industry, including the Company and
SCI, including, among other things, the unprecedented consolidation
currently underway;
(vii) the Company's past success in competing with SCI for acquisitions
of funeral homes, cemeteries and related businesses during a period of rapid
consolidation in the funeral services industry;
(viii) the Board's commitment to protecting the best interests of the
Company and its shareholders and the maximization of shareholder value;
(ix) presentations by the Financial Advisors concerning the Company and
the financial aspects of the Second SCI Proposal, including the written
opinions, dated October 10, 1996, of each of the Financial Advisors to the
effect that, as of the date of such opinions and based upon and subject to
certain matters stated therein, the Share Exchange Ratio and the Preferred
Share Exchange Ratio were inadequate, from a financial point of view, to the
holders of Shares and Preferred Shares, respectively (other than SCI and its
affiliates) (copies of the written opinions of Smith Barney and Nesbitt
Burns, which set forth the assumptions made, matters considered and
limitations on the review undertaken in connection with such opinions, are
included as Exhibits 17 and 18, respectively, to this Schedule 14D-9 and
should be read carefully in their entirety);
(x) the Board's belief, based in part on the factors referred to above,
that the Exchange Ratios pursuant to the Second SCI Proposal do not reflect
the current value inherent in the Company or the significant value that will
be created for shareholders through the continued implementation of the
Company's long-term business plan as an independent entity, including the
continued acquisition of funeral homes and cemeteries in the United States
and in Canada;
(xi) the Board's belief that while SCI disclosed that it intended to
account for the transaction on a pooling-of-interests basis, it is highly
unlikely that such pooling-of-interests treatment could be achieved upon
consummation of the Second SCI Proposal and the second step transaction;
(xii) the disruptive effect that consummation of the Second SCI Proposal
would have on the Company's employees, suppliers, customers, the funeral
services industry and the communities where the Company operates;
(xiii) the significant conditions accompanying the Second SCI Proposal,
including the following: (A) there being validly tendered and not withdrawn
prior to the expiration of the Second SCI Proposal (x) a number of Shares
which, together with the Shares beneficially owned by SCI, constitutes at
least 75% of the Shares outstanding on a fully diluted basis and (y) a
number of Preferred Shares which, together with the Preferred Shares
beneficially owned by SCI, constitutes at least 75% of the Preferred Shares
outstanding on a fully diluted basis; (B) approval of the corporate
reorganization of SCI by a vote of the holders of at least two-thirds of the
outstanding SCI Common Stock, eligible to vote at a meeting of such holders,
and of the issuance of offered stock pursuant to the Second SCI Proposal and
related transactions by a vote of the holders of at least a majority of the
outstanding SCI Common Stock present and voting at a meeting of such
holders; (C) SCI being satisfied in its sole discretion that the Company has
redeemed all outstanding Rights, or that the Rights are invalid or
inapplicable to the Second SCI Proposal and SCI's proposed second-step
merger or that the Rights Plan does not affect the Second SCI Proposal and
related transactions; (D) the resignation of at least a majority of the
incumbent members of the Board and the election or designation of persons
designated by SCI to constitute a majority of the Board; (E) the
satisfaction of all requirements pursuant to (x) the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, (y) the Competition Act of
Canada and (z) the approval of the minister responsible for the
8
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Investment Canada Act, in each case with respect to the Second SCI Proposal
and related transactions; (F) consummation of the corporate reorganization
of SCI; and (G) other numerous conditions to the consummation of the
exchange offers;
(xiv) the Board's assessment, based in part on the advice of counsel, of
the likelihood that SCI would obtain all regulatory approvals necessary to
consummate the Second SCI Proposal. The Board believes that there are
significant antitrust issues relating to a combination of the Company and
SCI, both in Canada and in the United States, which issues create
significant uncertainty as to whether the conditions of the Second SCI
Proposal will be met. In that regard, the Board noted that the Second SCI
Proposal is conditioned on there not being threatened, instituted or pending
any action by any domestic or foreign governmental entity or by any other
person seeking to impose any limitations upon the ownership or operation by
SCI of any portion of the business or assets of the Company;
(xv) the Board's belief that the structure of the Second SCI Proposal
unfairly prejudices Canadian shareholders in that the Exchangeable Shares
provide a tax deferral for a maximum of ten years to Canadian shareholders,
while United States shareholders are offered an indefinite tax deferral;
(xvi) the Board's view that the Second SCI Proposal is coercive in
nature, because (A) Company shareholders who exchange their Shares or
Preferred Shares pursuant to the Second SCI Proposal will be eligible for
tax-free treatment, but U.S. shareholders who do not exchange their Shares
or Preferred Shares pursuant to the Second SCI Proposal may be faced with
adverse tax consequences, (B) Company shareholders who do not exchange their
Shares or Preferred Shares pursuant to the Second SCI Proposal may not be
afforded dissent rights in connection with a proposed second step
transaction, and (C) the consummation of the Second SCI Proposal would
reduce the number of holders of Shares and Preferred Shares and the number
of Shares and Preferred Shares that might otherwise trade publicly and,
depending on the number of Shares and Preferred Shares purchased pursuant to
the Second SCI Proposal, could (x) adversely affect the liquidity and market
value of the remaining Shares and Preferred Shares held by the public, (y)
pose a risk that the Shares and Preferred Shares will no longer be eligible
for continued listing on the New York Stock Exchange, the Toronto Stock
Exchange or the Montreal Exchange, as the case may be, adversely affecting
the respective markets for the Shares and Preferred Shares and (z) terminate
the registration of the Shares and Preferred Shares under applicable United
States and Canadian securities laws, which would reduce the information
required to be furnished to holders of Shares and Preferred Shares pursuant
to such securities laws.
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Second SCI Proposal,
the Board did not find it practicable to, and did not, quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination and recommendation. In addition, individual members of the Board
may have given different weight to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Smith Barney as its financial advisor in connection
with the Second SCI Proposal and related matters. Pursuant to the terms of Smith
Barney's engagement, the Company has agreed to pay Smith Barney for its services
(i) an advisory fee of up to $5 million, payable in cash upon withdrawal of any
SCI acquisition proposal and (ii) a transaction fee (against which the advisory
fee will be credited), payable upon consummation of an extraordinary corporate
transaction involving the Company, equal to a percentage of transaction value
(including liabilities assumed) ranging from 2% for transactions having a
transaction value of $25 million or less to 0.20% for transactions having a
transaction value of $10 billion or more, subject to a minimum transaction fee
of $500,000.
The Company has also agreed (i) to reimburse Smith Barney for travel and
other out-of-pocket expenses (including the fees and expenses of its legal
counsel) and (ii) to indemnify Smith Barney and
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<PAGE>
certain related parties against certain liabilities, including liabilities under
United States and Canadian securities laws, arising out of Smith Barney's
engagement. In the ordinary course of business, Smith Barney and its affiliates
may actively trade or hold the securities of the Company and SCI for their own
account or for the account of customers and, accordingly, may at any time hold a
long or short position in such securities.
The Company has retained Nesbitt Burns as its financial advisor in
connection with the Second SCI Proposal and related matters. Pursuant to the
terms of Nesbitt Burns' engagement, the Company has agreed to pay Nesbitt Burns
for its services (i) an advisory fee of up to $3 million, payable in cash upon
withdrawal of any SCI acquisition proposal and (ii) a transaction fee (against
which the advisory fee will be credited), payable upon consummation of an
extraordinary corporate transaction involving the Company, equal to a percentage
of transaction value (including liabilities assumed) ranging from 1.25% for
transactions having a transaction value of $25 million or less to 0.133% for
transactions having a transaction value of $10 billion or more, subject to a
minimum transaction fee of $312,500.
The Company has also agreed (i) to reimburse Nesbitt Burns for travel and
other reasonable out-of-pocket expenses (including the fees and expenses of its
legal counsel) and (ii) to indemnify Nesbitt Burns and certain related parties
against certain liabilities arising under United States and Canadian securities
laws, arising out of Nesbitt Burns' engagement. In the ordinary course of
business, Nesbitt Burns and its affiliates may actively trade or hold the
securities of the Company and SCI for their own account or for the account of
customers and, accordingly, may at any time hold a long or short position in
such securities.
The Company has retained Morrow & Co., Inc. ("Morrow") and D.F. King & Co.,
Inc. ("D.F. King") to assist the Company in connection with its communications
with its shareholders with respect to, and to provide other services to the
Company in connection with, the Second SCI Proposal. Both Morrow and D.F. King
will receive reasonable and customary compensation for their respective services
and reimbursement of their respective out-of-pocket expenses in connection
therewith. The Company has agreed to indemnify each of Morrow and D.F. King
against certain liabilities arising out of or in connection with their
respective engagements.
The Company has retained Broadgate Consultants, Inc. ("Broadgate") as the
Company's public relations advisor in connection with the Second SCI Proposal.
Broadgate will receive reasonable and customary compensation for its services
and reimbursement of out-of-pocket expenses in connection therewith. The Company
has agreed to indemnify Broadgate against certain liabilities arising out of or
in connection with its engagement.
Except as set forth in this schedule 14D-9, neither the Company nor any
person acting on its behalf has employed, retained or compensated any other
person to make any solicitations or recommendations to shareholders on its
behalf concerning the Second SCI Proposal.
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ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Within the past 60 days, the following executive officers, Directors,
affiliates or subsidiaries executed transactions in the Company's Shares as
shown in the following table:
<TABLE>
<CAPTION>
NUMBER NATURE OF PRICE
DATE NAME OF OFFICER OR DIRECTOR OF SHARES TRANSACTION PER SHARE
- - --------- --------------------------- --------- ------------ ---------------
<C> <S> <C> <C> <C>
8/22/96 Peter S. Hyndman 3,000 Acquired (Cdn) $16.88
8/23/96 100 Disposed 40.45
200 Disposed 40.40
1,700 Disposed 40.30
1,000 Disposed 40.50
9/3/96 1,000 Acquired 16.88
1,000 Disposed 40.00
8/21/96 Timothy A. Birch 300 Disposed (U.S.) $29.50
8/22/96 1,000 Disposed 29.50
8/23/96 5,700 Disposed 29.50
9/10/96 1,000 Disposed 31.25
9/17/96 Peter A. Wiesner 2,000 Acquired (Cdn) $34.75
200 Acquired 32.50
2,000 Disposed 54.00
200 Disposed 54.05
</TABLE>
In addition, during the past 60 days certain executive officers also (i)
purchased Shares, via periodic payroll deductions, pursuant to the Company's
Employee Stock Purchase Plans and (ii) contributed, via periodic payroll
deductions, to a fund that invests in Shares pursuant to either the Company's
401(k) Plan (for United States employees) or Retirement Savings Plan (for
Canadian employees).
In addition, during the past 60 days the Company has issued an aggregate of
88,378 Shares in connection with two acquisitions.
Except as disclosed in this Schedule 14D-9, to the knowledge of the Company,
no transactions in the Shares have been effected within the past 60 days by the
Company or any executive officer, Director, affiliate or subsidiary of the
Company.
(b) To the knowledge of the Company, its executive officers, Directors,
affiliates and subsidiaries do not presently intend to tender, pursuant to the
Second SCI Proposal, any Shares or Preferred Shares that are held of record or
are beneficially owned by such persons. The foregoing does not include any
Shares or Preferred Shares over which, or with respect to which, any such
executive officer, Director, or affiliate acts in a fiduciary or representative
capacity or is subject to the instructions of a third party with respect to such
tender.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a)-(b) At the meetings of the Board held on September 17, September 20,
September 24, and October 10, 1996, the Board considered and reviewed the
feasibility and desirability of exploring a variety of possible actions in light
of the First SCI Proposal and the Second SCI Proposal. As stated in Item 4
above, the Board believes, based on the factors described therein, that the
Exchange Ratios are inadequate, from a financial point of view. Accordingly, the
Board believes that the Company's shareholders would be best served through
continued implementation of the Company's long-term business plan as an
independent entity and recommends that the Company's shareholders reject the
Second SCI Proposal, when and if it is commenced.
Notwithstanding the Board's firm conviction in making this recommendation,
the Board may consider possible actions that could lead to, and involve,
negotiations that may result in (i) an extraordinary
11
<PAGE>
transaction, such as a merger or reorganization involving the Company or any of
its subsidiaries, (ii) a purchase, sale or transfer of a material amount of the
assets of the Company or any of its subsidiaries, (iii) a tender offer for or
other acquisition of securities by or of the Company or (iv) a material change
in the present capitalization or dividend policy of the Company.
In the opinion of the Board, premature disclosure of the possible terms of
any transaction of the type described above or the parties thereto might
jeopardize the initiation or continuation of such discussions or negotiations.
Accordingly, the Board, on October 10, 1996, adopted a resolution instructing
management not to disclose the possible terms of any such transactions, or the
parties thereto, unless and until an agreement in principle relating thereto has
been reached or such disclosure is otherwise required under applicable law.
There can be no assurance that any of the foregoing will result in any
transaction, or that a transaction other than one of the types described herein
will not be authorized or consummated. The initiation or continuation of any of
the foregoing may also be dependent upon the future actions of SCI with respect
to the Second SCI Proposal. The proposal, authorization, announcement or
consummation of any transaction of the type referred to in this Item 7 could
adversely affect or result in withdrawal of the Second SCI Proposal.
Except as described in this Schedule 14D-9, the Company is not engaged in
any negotiation in response to the Second SCI Proposal that relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization
involving the Company or any of its subsidiaries, (ii) a purchase, sale or
transfer of a material amount of the assets of the Company or any of its
subsidiaries, (iii) a tender offer for or other acquisition of securities by or
of the Company or (iv) a material change in the present capitalization or
dividend policy of the Company.
Except as described in this Schedule 14D-9, there are no transactions, Board
resolutions, agreements in principle or signed contracts in response to the
Second SCI Proposal that relate to or would result in one or more of the matters
referred to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) LITIGATION. JERRY KRIM V. BAGNELL, ET AL., No. VC022997 (Cal. Sup. Ct.
L.A. Cty. - S.E. Dist.). On September 26, 1996, the Company received notice that
Jerry Krim filed a purported derivative and class action against the Company's
current Directors and one former director and against the Company as a nominal
defendant. To the Company's knowledge, no defendant has been served as of the
date of this filing. The plaintiff alleges, on behalf of himself and all of the
Company's current and former shareholders, that the defendants "improperly
responded to an offer by Service Corp. International . . . 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
the 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 that would "maximize shareholder
value," (ii) enjoin the Rights Plan in its entirety, (iii) enjoin the
consummation of the Rose Hills acquisition, (iv) enjoin the supermajority voting
requirement, (v) require an accounting for unspecified damages, and (vi)
compensate the plaintiffs for their fees and costs. A copy of the complaint is
filed as Exhibit 14 to this Schedule 14D-9 and incorporated herein by reference.
The Company believes that the action is without merit and intends to contest the
action vigorously.
SERVICE CORPORATION INTERNATIONAL V. THE LOEWEN GROUP INC., ET AL., No.
4-96-3269 (S.D. Tex.). On October 2, 1996, SCI filed this action alleging that
the Company falsely suggested to the Company's shareholders that it has standing
to bring an action to block or impede the Second SCI Proposal on federal
antitrust grounds. SCI seeks a declaratory judgment that the Company lacks
standing to bring such an action on federal antitrust grounds. SCI asserts a
claim under Texas common law, based upon its
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<PAGE>
allegations that the Company's actions have tortiously interfered with SCI's
"prospective business relationships" with the Company's shareholders. As relief
for this assertion, SCI seeks an unspecified amount of damages for claimed
injuries resulting from the Company's alleged interference with these
prospective relationships. In an amended complaint, SCI also alleges that the
foregoing actions constitute violations of Section 14(e) of the Securities
Exchange Act of 1934. As relief, SCI seeks an injunction against future similar
statements. A copy of the amended complaint is filed as Exhibit 15 to this
Schedule 14D-9 and incorporated herein by reference. The Company believes that
the action is without merit and intends to contest the action vigorously.
THE LOEWEN GROUP INC., LOEWEN GROUP INTERNATIONAL, INC. AND RIDGE CHAPELS,
INC. V. SERVICE CORPORATION INTERNATIONAL, INC., NEW SERVICE CORPORATION
INTERNATIONAL AND EQUITY CORPORATION INTERNATIONAL, INC. On October 10, 1996,
the Company, LGII and Ridge Chapels, Inc., a subsidiary of LGII, commenced an
action seeking to enjoin SCI preliminarily and permanently from completing its
unsolicited takeover on the grounds that it violates Section 7 of the Clayton
Act and Section 1 of the Sherman Act. According to the Company's complaint,
SCI's unsolicited offer for control of the Company, if successful, may
substantially lessen competition in numerous local markets for (i) the sale of
funeral services, (ii) the sale of funeral services on a "pre-need" basis, (iii)
the sale of cemetery services, and (iv) the purchase of funeral homes,
cemeteries and crematoria. The Company also accuses SCI and Equity Corporation
International, Inc., a competitor of the Company in which SCI has a 40%
interest, of conspiracy to eliminate the Company as a competitive force in the
funeral services industry. The Company takes the position that irreparable harm
will result from SCI's further pursuit of its unsolicited takeover, and,
accordingly, the Company intends to prosecute its claims zealously. A copy of
the complaint is filed as Exhibit 16 to this Schedule 14D-9 and incorporated
herein by reference.
(b) ADMINISTRATIVE PROCEEDINGS. Certain federal and state governmental
authorities are investigating whether consummation of the Second SCI Proposal
would tend substantially to lessen competition or tend to create a monopoly in
several segments of the funeral services industry.
On October 1, 1996, the Federal Trade Commission ("FTC") requested data from
the Company in connection with the FTC's investigation of the Second SCI
Proposal, including information with respect to all funeral homes and cemeteries
in which the Company and SCI have a financial interest. The FTC's request seeks
detailed information about all regional market overlaps between the Company (and
its affiliates) and SCI (and its affiliates). A copy of the Company's press
release regarding the FTC investigation is included as Exhibit 10 to this
Schedule 14D-9 and is incorporated hereby by reference.
On September 27, 1996, the Company received a civil investigative demand
("CID") from the Attorney General's Office of the State of Florida. The CID
indicates that the Antitrust Section of the Attorney General's Office is
investigating the potential impact of the First SCI Proposal and the Second SCI
Proposal on pricing of funeral services, cemeteries and related products, the
effect on Medicare/ Medicaid, and the market concentration for cemeteries and
funeral homes in the State of Florida. A copy of the Company's press release
regarding this investigation is included as Exhibit 9 to this Schedule 14D-9 and
is incorporated herein by reference. In the Registration Statement, SCI
indicates that it has received a similar CID from the Attorney General of the
State of Florida.
The Company has also received numerous other requests for information from
states' attorneys general. On September 27, 1996, the Office of the Attorney
General of the State of New York requested data from the Company in connection
with an investigation of the First SCI Proposal and the Second SCI Proposal. On
October 2, 1996, the Office of the Attorney General of the State of Hawaii
requested data from the Company in connection with an investigation of the
Second SCI Proposal. On October 3, 1996, the Office of the Attorney General for
the State of Texas requested information from the Company in connection with an
investigation of the Second SCI Proposal. On October 4, 1996, the Office of the
Attorney General of the State of California requested information from the
Company in connection with an investigation of the Second SCI Proposal. On
October 9, 1996, the Attorney General of the State of
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<PAGE>
Tennessee requested information from the Company in connection with an
investigation of the Second SCI Proposal.
Under United States antitrust law, the FTC, certain private plaintiffs, or
one or more states' attorneys general may seek a preliminary or permanent
injunction in federal court restraining an acquisition that has the effect of
substantially lessening competition or that may tend to create a monopoly.
In addition, the Company understands that the Director of Investigation and
Research (the "DIR") of the Canadian Competition Bureau is investigating the
effects of the Second SCI Proposal under the Competition Act of Canada and, in
particular, is investigating whether consummation of the Second SCI Proposal is
likely to prevent or lessen competition substantially in the funeral services
industry in Canada. The Company received a request for certain information from
the DIR and, based on discussions with the DIR and other representatives of the
Competition Bureau, the Company expects to receive additional requests for
information in the future.
If the DIR finds that consummation of the Second SCI Proposal is likely to
prevent or lessen competition substantially, the DIR may commence proceedings
under the substantive merger provisions of the Competition Act of Canada before
an administrative tribunal of the Canadian government known as the Competition
Tribunal. If such proceedings were commenced, the Competition Tribunal may make
an order directing SCI not to proceed with the Second SCI Proposal or a part
thereof. In any such application, the DIR has the ability to seek, and the
Competition Tribunal has the authority to grant, such interim order as it
considers appropriate, including an injunction which would have the effect of
prohibiting SCI from consummating the Second SCI Proposal pending disposition of
the principal application. The Competition Tribunal could also make other
remedial orders on such an application. The DIR may apply for an interim order
even if a principal application has not been filed provided the prerequisites to
the issuance of such an interim order under the Competition Act of Canada are
satisfied.
(c) SHAREHOLDER PROTECTION RIGHTS PLAN. On April 20, 1990, the Board
approved the Rights Plan, which was confirmed by the Company's shareholders in
accordance with the provisions of the Rights Plan at the annual meeting of
Shareholders on May 24, 1990 and re-confirmed for an additional five year period
at the annual meeting of Shareholders on May 17, 1995. The Rights Plan is
currently set to expire on April 20, 2000. A copy of the Rights Plan has been
attached as Exhibit 36 to this Schedule 14D-9. This summary of the Rights Plan
does not purport to be complete and is qualified in its entirety by reference to
the text of the Rights Plan, which is incorporated herein by reference. Certain
capitalized terms used below without definition are used as defined in the
Rights Plan.
The Rights Plan is intended to discourage unfair takeover bid tactics and to
give the Board time, if there is an unsolicited bid, to pursue alternatives to
maximize shareholder value. To preserve the shareholders' right to consider
take-over bids on a fully-informed basis, the Rights Plan provides that a
bidder's position may be substantially diluted if it does not either make a
"Permitted Bid" directly to all shareholders or negotiate with the Board for a
waiver of the Rights Plan's provisions.
Unless and until the Rights "separate", each Common Share carries one Right,
which is evidenced by the share certificate and is transferable only along with
the Common Share.
The Rights would separate upon:
(1) the tenth day after the date of first public announcement of a
Take-over Bid or the intention of any person (other than the Company or a
subsidiary of the Company) to make a Take-over Bid, other than a Permitted
Bid;
(2) the tenth day after the date of first public announcement of facts
indicating that any person has become the Beneficial Owner of 20% or more of
the outstanding Common Shares (unless otherwise exempt under the Rights
Plan);
14
<PAGE>
(3) a Flip-over Transaction or Event, which is generally either:
a. a business combination whereby the Common Shares would be
changed; or
b. a sale of more than 50% of the consolidated assets of the
Company; or
(4) such earlier or later date as may be determined by the Board acting
in good faith; provided that, if the foregoing results in the Separation
Time being prior to the Record Time, the Separation Time shall be the Record
Time.
At its meeting on October 10, 1996, the Board determined in good faith that
it is desirable in the circumstances of the Second SCI Proposal (as it may be
amended from time to time) that the occurrence of the Separation Time be
deferred to a date to be determined by the Board of Directors in their
discretion. Accordingly, the Board resolved that, for purposes of the Second SCI
Proposal (as it may be amended from time to time), the Separation Time shall be
the close of business on the tenth day after the earliest of the (i) Stock
Acquisition Date, (ii) the occurrence or commencement of a Flip-over Transaction
or Event (as described above) and (iii) such date as may be determined in good
faith by the Board upon prior written notice to the Rights Agent.
In the case of a Take-over Bid (so long as a Flip-in Event has not
occurred), each Right would entitle the holder (other than the bidder) to
acquire one Common Share for the Exercise Price; in the other cases described
above, each Right would entitle the holder (other than the bidder) to acquire
for the Exercise Price, Common Shares (in the case of a Flip-in Event) or common
shares of the combined entity or purchaser (in the case of a Flip-over
Transaction or Event) having a Market Price of two times the Exercise Price. The
Exercise Price is currently Cdn. $125 and is subject to anti-dilution
provisions.
Under the Rights Plan, a Flip-in Event will occur ten days after the
acquisition of Beneficial Ownership of more than 20% of the Common Shares
except:
a. by way of a Permitted Bid;
b. by an acquiror who obtains a waiver from the Board;
c. as a result of the death of a Beneficial Owner of Common
Shares;
d. by a person who held more than 20% of the Common Shares on
April 20, 1990, who is "grandfathered" subject to a number of
restrictions (a "Grandfathered Person"); or
e. by registered pension plans whose governing legislation does
not permit them to hold more than 30% of Common Shares and who
acquire shares independently for investment.
A "Permitted Bid" is a take-over bid that complies with all applicable
securities laws and is:
(1) for all Common Shares and to all holders, wherever resident;
(2) made by a bidder who (with related parties) does not own more than
5% of the Common Shares (unless the bidder owned at least that percentage on
April 20, 1990); and
(3) conditioned upon approval by a majority of the votes cast by
"Independent Shareholders" (those other than certain shareholders who have
acquired more than 20% of the Common Shares or who have made a Takeover-Bid,
their Associates, Affiliates or persons acting jointly or in concert with
them), and expire no earlier than five business days after the shareholders'
meeting called to consider it.
To the Company's knowledge, the only "Grandfathered Persons" are Raymond L.
Loewen and Anne Loewen. The holdings of a Grandfathered Person can be increased
by up to 2% of the Common Shares without causing a Flip-in Event to occur.
Someone who acquires Common Shares as a result of the death of a Grandfathered
Person or who buys all of the Common Shares Beneficially Owned by a
Grandfathered
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<PAGE>
Person would also be a Grandfathered Person, but to make a Permitted Bid such a
buyer would have to offer the other holders of Common Shares consideration at
least equal to that paid to the selling Grandfathered Person.
(d) RECENT DEVELOPMENTS. OFFERING OF $125,000,000 7 3/4% SERIES 3 SENIOR
GUARANTEED NOTES (DUE 2001) AND $225,000,000 8 1/4% SERIES 4 SENIOR GUARANTEED
NOTES (DUE 2003). On October 4, 1996, LGII successfully completed an offering of
$350 million of senior guaranteed notes (the "Senior Notes"). The repayment of
principal and interest on the Senior Notes is guaranteed by the Company.
Approximately $301 million of the net proceeds to LGII from the sale of the
Senior Notes was used to repay indebtedness under LGII's five-year $750 million
revolving credit facility. The balance of the net proceeds will be used for
working capital and other corporate purposes, including acquisitions and
interest and principal payments on existing senior notes. The completion by LGII
of this refinancing provides enhanced flexibility to the Company, contributing
to the implementation of its long-term business plan.
(e) CAUTIONARY STATEMENT. In addition to the historical information
contained herein, this Schedule 14D-9 contains forward-looking statements with
respect to the business of the Company. The actual results of the Company's
business may differ significantly from those discussed in such forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, the ability to continue the successful implementation of the
Company's long-term business and financial plan, including growth by
acquisitions, failure to achieve the Company's stated 1996 and 1997 earnings per
share goals, the Company's ability to attract and retain key employees in the
face of a possible change in control, disruptions to the Company's business
caused by the pendency of the Second SCI Proposal and related legal proceedings,
the continued receptiveness of the Company's customers to its services and
products, as well as general business, economic and competitive conditions.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
<TABLE>
<S> <C> <C>
Exhibit 1 -- Letter from L. William Heiligbrodt to Raymond L. Loewen, dated September 17,
1996.
Exhibit 2 -- Letter from L. William Heiligbrodt to Raymond L. Loewen, dated September 18,
1996.
Exhibit 3 -- Letter to Shareholders from Raymond L. Loewen, dated September 24, 1996.
Exhibit 4 -- Letter to L. William Heiligbrodt from Raymond L. Loewen, dated September 24,
1996.
Exhibit 5 -- [Intentionally omitted].
Exhibit 6 -- Press Release issued by Loewen, dated September 17, 1996.
Exhibit 7 -- [Intentionally omitted].
Exhibit 8 -- Press Release issued by Loewen, dated September 24, 1996.
Exhibit 9 -- Press Release issued by Loewen, dated September 27, 1996.
Exhibit 10 -- Press Release issued by Loewen, dated October 1, 1996.
Exhibit 11 -- Press Release issued by SCI, dated October 2, 1996.
Exhibit 12 -- Press Release issued by Loewen, dated October 2, 1996.
Exhibit 13* -- Press Release issued by Loewen, dated October 10, 1996.
Exhibit 14 -- Complaint in KRIM V. BAGNELL, ET AL. (Superior Court of the State of
California).
Exhibit 15 -- First Amended Complaint in SERVICE CORPORATION INTERNATIONAL V. THE LOEWEN GROUP
INC. (United States District Court for the Southern District of Texas).
Exhibit 16 -- Complaint in THE LOEWEN GROUP INC., ET AL. V. SERVICE CORPORATION INTERNATIONAL,
ET AL. (United States District Court for the Eastern District of New York).
Exhibit 17* -- Opinion letter of Smith Barney Inc. to Loewen Board of Directors, dated October
10, 1996.
Exhibit 18* -- Opinion letter of Nesbitt Burns Inc. to Loewen Board of Directors, dated October
10, 1996.
Exhibit 19 -- Pages 15 - 20 and 32 - 34 of The Loewen Group Inc. Proxy Statement, dated April
9, 1996.
Exhibit 20 -- The Loewen Group Inc. Employee Stock Option Plan (United States).
Exhibit 21 -- The Loewen Group Inc. Employee Stock Option Plan (Canada).
Exhibit 22 -- Form of The Loewen Group Inc. Employee Stock Option Plan Agreement (Directors of
Loewen Group International, Inc.).
Exhibit 23 -- Form of The Loewen Group Inc. Employee Stock Option Plan Agreement (Directors of
subsidiaries).
Exhibit 24 -- Form of The Loewen Group Inc. Employee Stock Option Plan Agreement (employees).
Exhibit 25 -- The Loewen Group Inc. Employee Share Purchase Plan (United States).
Exhibit 26 -- The Loewen Group Inc. Employee Share Purchase Plan (Canada).
Exhibit 27 -- The Loewen Group Inc. 1994 Management Equity Investment Plan.
Exhibit 28 -- Form of The Loewen Group Inc. 1994 Management Equity Investment Plan Investment
Option Agreement.
Exhibit 29 -- The Loewen Group Inc. Supplement to 1994 Management Equity Investment Plan.
Exhibit 30 -- The Loewen Group Inc. Addendum to 1994 Management Equity Investment Plan.
Exhibit 31 -- Form of The Loewen Group Inc. Management Equity Investment Plan Borrowing
Agreement.
Exhibit 32 -- Form of The Loewen Group Inc. Management Equity Investment Plan Executive
Agreement.
Exhibit 33 -- Form of The Loewen Group Inc. Management Equity Investment Plan 1994
Exchangeable Floating Rate Debenture due July 15, 2001.
Exhibit 34 -- The Loewen Group Inc. 1994 Outside Director Compensation Plan.
Exhibit 35 -- The Loewen Group Inc. Employee Stock Bonus Plan.
Exhibit 36 -- The Loewen Group Inc. Shareholder Protection Rights Plan Agreement and
Amendments.
Exhibit 37 -- Employment Agreement with Timothy R. Hogenkamp.
Exhibit 38 -- [Intentionally omitted].
Exhibit 39 -- Form of Indemnification Agreement with Outside Directors.
Exhibit 40 -- Form of Indemnification Agreement with Officers.
Exhibit 41 -- Form of The Loewen Group Inc. Severance Agreement.
Exhibit 42 -- The Loewen Group Inc. Severance Pay Plan.
</TABLE>
- - ------------------------
* Exhibits distributed to Shareholders.
17
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Schedule 14D-9 is true, complete
and correct.
THE LOEWEN GROUP INC.
By: /s/ Peter S. Hyndman______________
Name: Peter S. Hyndman
Title: Vice President, Law and
Corporate Secretary
Dated: October 10, 1996
18
<PAGE>
EXHIBIT 1
[SCI Letterhead]
September 17, 1996
L. William Heiligbrodt
President
Mr. Raymond L. Loewen
Chairman of the Board and Chief Executive Officer
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia, Canada
Dear Mr. Loewen:
As you know, I have tried to reach you several times since September 11. While
your office has assured me that you received my messages, my calls have not been
returned. In view of that, and in view of the importance of this matter, I am
sending this letter.
I would like to discuss with you a combination of our two companies. The
combination would involve a stock-for-stock exchange accounted for as a pooling
which values Loewen Group at US$43 per share. We believe that this transaction
can be structured in a manner that is tax-free to both companies and (except for
a relatively nominal amount in the case of U.S. stockholders) to the U.S. and
Canadian stockholders of Loewen Group.
I think you and your Board and stockholders would agree that our proposal is a
generous one, resulting in the following premiums for Loewen Group stockholders:
- 45.9% above the price at which Loewen Group stock traded 30 days ago;
- 39.3% above the price at which Loewen Group stock traded one week ago;
and
- 27.4% above the price at which Loewen Group stock is currently
trading.
This represents an opportunity for your stockholders to collect excellent value,
by any measure, for their shares. In addition, and importantly, since your
stockholders would be receiving stock, they would continue to participate in
Loewen Group's business as well as share in the upside of our business.
Thus, in essence, your stockholders would:
<PAGE>
- continue their investment in our industry;
- get an immediate, and very significant, increase in the market value
of their investment;
- get that immediate and substantial increase on an essentially tax free
basis; and
- diversify their risk by participating in a much larger number of
properties.
This is a "win-win" situation for you and your stockholders.
Finally, with respect to consideration, I would note also that our proposal is
based on public information. After a due diligence review, we may be in a
position to increase the consideration that your stockholders would receive.
We, of course, recognize that our businesses overlap in various locations. We
have carefully reviewed this matter and are convinced that competition issues
can be cured by selected divestitures without impairment of the value that a
combination would achieve for the stockholders of our two companies.
I would very much like to discuss any and all aspects of our proposal directly
with you and your Board of Directors. We believe you and they will recognize
the tremendous benefit to your stockholders of our proposal. Our proposal is
conditioned upon approval of our Board and upon negotiation of mutually
satisfactory agreements providing for a combination on a pooling basis.
We hope that after you meet with us, you will similarly determine that the
transaction should be pursued. We look forward to hearing from you.
In view of the importance of this matter, we are simultaneously releasing this
letter to the press.
Sincerely,
/s/ William Heiligbrodt
cc: Board of Directors of The Loewen Group, Inc.
<PAGE>
EXHIBIT 2
[SCI Letterhead]
September 18, 1996
Mr. Raymond L. Loewen
Chairman and Chief Executive Officer
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia
CANADA
Dear Ray:
We are pleased to confirm to you that the Board of Directors of
Service Corporation International today approved the proposal that we made to
you yesterday. Our Board is enthusiastic about this transaction, and firmly
believes that a combination of our two businesses in the manner that we proposed
is in the best interests of your and our stockholders. We believe that after
consideration, you and your Board will reach the same conclusion.
In this regard, we note the enthusiastic reaction of your stockholders
to our proposal, reflected in both the post-announcement price of your stock and
the comments of stockholders and analysts. We agree with Greg Capelli of
Chicago Corp.: "This is a real winner for both companies' shareholders." In
the words of Todd Richter of Dean Witter Reynolds: "It's a perfect strategic
fit."
Ray, we at SCI would strongly prefer to communicate with you and your
team in person, rather than by letter. We believe that much more can be
accomplished through forthright dialogue.
We remind you that our valuation is based on public information, and
we may be able to increase our offer after a review of non-public information.
Please give me a call. I look forward to hearing from you.
Sincerely,
L. William Heiligbrodt
cc: Board of Directors
of The Loewen Group Inc.
<PAGE>
EXHIBIT 3
[Loewen Letterhead]
September 24, 1996
To Our Shareholders:
The Board of Directors of The Loewen Group Inc. has asked me to report to
you on the decisions that it has made in response to the proposal announced by
Service Corporation International on Tuesday, September 17, 1996.
After extensive deliberations, through discussion, and careful analysis by
the Board, in consultation with its financial and legal advisors, the Board has
unanimously rejected SCI's proposal and determined that it is not in the best
interests of shareholders. In rejecting the proposal, the Board considered many
factors and unanimously concluded that the best way to maximize value for our
shareholders is through the continued implementation of the Company's long-term
business plan as an independent company.
The Board firmly believes:
-- As the emerging leader in the funeral home and cemetery industry,
Loewen has a very bright future for continued growth. During the
past five years, Loewen's revenues and earnings have experienced
the highest growth rates of public companies in our industry,
41.5% and 36.8%, respectively, on a compound annual basis,
excluding extraordinary items. This record growth has been
accomplished through both our internal management practices and
external growth through acquisitions.
-- Loewen is the preferred acquiror in our rapidly consolidating
industry. Year-to-date, Loewen has signed or completed
approximately 196 acquisitions aggregating over approximately
US$715 million in transaction value, excluding our significant,
and innovative, investments with Blackstone Capital Partners in
Prime Succession Inc. and in Rose Hills Memorial Park, which have
transaction values of approximately US$295 million and US$240
million, respectively. It is also important to emphasize that
our growing number of acquisitions continue to meet or exceed our
acquisition targets.
Please note that Prime Succession, the fourth-largest funeral home and
cemetery business in North America, and Rose Hills, the number one single
location funeral home and cemetery in the U.S., as well as Blackstone, one
of the premier
<PAGE>
merchant banking firms in the world, had their choice of industry partners for
these major acquisitions, and they all chose Loewen.
-- We are not surprised that SCI is attempting to acquire Loewen and
eliminate your Company as its most formidable competitor in the
North American markets. SCI has become frustrated by its inability
to compete effectively for the most significant and highly
attractive growth opportunities in our industry. Furthermore, the
Loewen Board of Directors believes that the SCI proposal, and the
manner in which it was presented, raises serious questions about
SCI's motives in presenting its proposal at this time.
-- Our great success in growing Loewen's revenues and profits is
clearly attributable to the outstanding corporate culture that we
have created. The superior quality of our people, our management
and employees at all levels of our Company, has been the major
driver of our success. Our demonstrated record of caring for our
employees, our customers and the communities that we serve,
distinguishes Loewen admirably from our competition. Loewen
enjoys the best reputation in our industry, and we know the
takeover proposed by SCI will enhance our position, relative to
SCI, and further motivate potential sellers within our industry
to deal increasingly with Loewen.
You should understand that the Board takes its fiduciary duty to act in the
best interests of shareholders very seriously and is committed to maximizing
long-term shareholder value. With regard to the SCI proposal, the Board
received advice from our financial advisors, Smith Barney Inc. and Nesbitt Burns
Inc., that in their opinion the proposal for a stock-for-stock exchange which
values Loewen's common stock at US$43 per share is inadequate from a financial
point of view.
When I founded this company 11 years ago, I knew then that if our Company
stayed on the right track, long-term investors would be richly rewarded. Our
goals and objectives are ambitious, but realistic and achievable. In the first
half of 1996 alone, revenues increased 45% and earnings increased 39%.
Loewen's rapid growth in earnings per share has been long recognized in the
capital markets and has been rewarded by a substantial increase in our stock
market valuation over the years. We believe our prospects for significant
continued growth in
2
<PAGE>
revenues and profitability in the future will continue, as we implement our
business plans as an independent company.
Very truly yours,
Raymond L. Loewen
Chairman and Chief Executive Officer
3
<PAGE>
EXHIBIT 4
[Loewen Letterhead]
September 24, 1996
Mr. L. William Heiligbrodt
President
Service Corporation International
1929 Allen Parkway
Houston, TX 77219-0548
Dear Mr. Heiligbrodt:
The Board of Directors of The Loewen Group Inc. has asked me to advise you
of the decision that the Loewen Board has made in response to the unsolicited
takeover proposal that we received from Service Corporation International on
Tuesday, September 17, 1996.
The Loewen Board has unanimously rejected the SCI proposal. SCI should
understand that the Loewen Board of Directors takes its fiduciary duty to act in
the best interests of the Company and our shareholders very seriously. We are
fully committed to maximizing the long-term value for our shareholders. After
extensive review of our business and financial plans, as well as a thorough and
careful study of our excellent prospects for significant continued growth in
revenues and profitability in the future, the Loewen Board of Directors has
unanimously concluded that the best way to maximize value for our shareholders
is through the continued implementation of the Company's long-term business plan
as an independent company.
Sincerely,
Raymond L. Loewen
Chairman and Chief Executive Officer
<PAGE>
EXHIBIT 5
[INTENTIONALLY OMITTED]
<PAGE>
EXHIBIT 6
Loewen Group To Review Unsolicited Proposal
-------------------------------------------
in Due Course
-------------
VANCOUVER, British Columbia, Sept. 17 -- The Loewen Group Inc.
(Nasdaq: LWNG) announced that the Loewen Board of Directors will review the
proposal received today from Service Corporation International and response
in due course.
SOURCE: The Loewen Group Inc.
CONTACT: Thomas C. Franco or Rohit J. Menezes of Broadgate Consultants,
212-229-2222
<PAGE>
EXHIBIT 7
[INTENTIONALLY OMITTED]
<PAGE>
EXHIBIT 8
Loewen Group Board Unanimously Rejects Service Corporation Proposal
-------------------------------------------------------------------
Company's Financial Advisors Find Proposal Inadequate;
------------------------------------------------------
Board Finds Proposal Unacceptable
---------------------------------
and an Attempt to Eliminate Competition in North America
--------------------------------------------------------
CINCINNATI, Ohio, Sept. 24 -- The Loewen Group Inc. (Nasdaq: LWNG)
announced today that its Board of Directors has unanimously rejected the
unsolicited takeover proposal from Service Corporation International (SCI)
that was issued on September 17, 1996. The announcement was made by Raymond
L. Loewen, chairman of the Board and chief executive officer of The Loewen
Group, in a letter to shareholders and a letter to L. William Heiligbrodt of
SCI. Copies of both letters are attached.
"The Loewen Board of Directors has unanimously concluded that the best way
to maximize value for our shareholders is through the continued implementation
of the Company's long-term business plan as an independent company," Mr. Loewen
stated in his letter to shareholders.
Mr. Loewen stated that the Board firmly believes:
-- As the emerging leader in the funeral home and cemetery industry,
Loewen has a very bright future for continued growth.
-- Loewen is clearly the preferred acquirer in its industry -- as
indicated by its recent partnerships with Blackstone Group to acquire
two of the industry's premier assets, Prime Succession and Rose Hills
Memorial Park.
-- SCI clearly intends to eliminate its most formidable competitor in the
North American marketplace, diminishing the opportunities for
independent funeral home and cemetery operators to effectively address
their succession planning needs.
-- Loewen's record of success in growing revenues and profits is
primarily attributable to the outstanding corporate culture that
Loewen has created.
Citing Loewen's 41.5% revenue increase and 36.8% earnings increase over the
last five years (on a compounded annual basis excluding extraordinary items),
Mr. Loewen stated, "I am very optimistic about our ability to build shareholder
value in the future as we execute Loewen's growth plans."
Mr. Loewen emphasized that Loewen's Board takes its fiduciary duty to act
in the best interests of the Company and its shareholders very seriously and is
committed to maximizing long-term shareholder value. He also pointed out in his
letter to shareholders that the Company's financial advisors, Smith Barney Inc.
and Nesbitt Burns Inc., have advised the Board that in their opinion SCI's
proposal for a stock-for-stock exchange, which values Loewen's common stock at
US$43, is inadequate from a financial point of view.
Mr. Loewen also stated: "Our demonstrated record of caring for our
employees, our customers and the communities we serve distinguishes Loewen
admirably from our competition." He reminded shareholders that the Loewen
reputation continues to enhance the Company's ability to attract potential
sellers within the industry, as well as outside partners such as the Blackstone
Group.
"The Loewen Board of Directors believes that the SCI proposal, and the
manner in which it was presented, raises serious questions about SCI's motives
in presenting its proposal at this time. Moreover, this bid has reaffirmed
throughout the industry the clear-cut longstanding distinctions between Loewen
and SCI," Mr. Loewen added.
With offices in Vancouver, Cincinnati, and Philadelphia. The Loewen Group
employs over 13,000 people. Since the first of the year, the Company has closed
or signed approximately US$715 million in acquisitions not including the Rose
Hills and Prime Succession transactions valued at over US$535 million. More
than 90 percent of the Company's revenue is generated in the United States. The
Company recently announced its intention to list its shares on the New York
Stock Exchange.
Statements contained in this press release and attached shareholders'
letter that are not historical in nature may be forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Reference is made to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996 which includes certain important factors that should be
considered in connection with an evaluation of forward-looking statements.
<PAGE>
EXHIBIT 9
VANCOUVER, British Columbia, Sept. 27 -- The Loewen Group Inc.
(Nasdaq: LWNG) announced today that it has received a civil subpoena from
the State of Florida Attorney General's Office for documents in connection
with the Antitrust Section's investigation of the proposed acquisition
of Loewen by Service Corporation International.
Raymond L. Loewen, chairman of the board and chief executive officer of The
Loewen Group said, "We welcome the scrutiny of the Florida attorney general's
office and other state regulators as well, since SCI clearly intends to
eliminate its most formidable competitor in the North American marketplace."
The subpoena suggests a wide ranging investigation into the potential
impact of the proposed acquisition on pricing, Medicare/Medicaid issues and
market concentration for cemeteries and funeral homes in the State of Florida.
SOURCE The Loewen Group
CONTACT: David A. Laundy of The Loewen Group Inc., 604-293-7857; or Thomas
C. Franco or Christopher G. Tofalli of Broadgate Consultants, Inc., 212-229-2222
<PAGE>
EXHIBIT 10
FTC Seeks Information From Loewen Group
---------------------------------------
In Connection With Probe of Service Corporation Proposal
--------------------------------------------------------
October 1, 1996 -- The Loewen Group Inc. (Nasdaq: LWNG) announced today that
its attorneys have been contacted by the Federal Trade Commission (FTC) in
connection with an investigation of the proposed acquisition of Loewen Group
by Service Corporation International (NYSE: SRV) (SCI). VANCOUVER, B.C.,
Oct. 1
According to the Company, the FTC has requested data on all of the Loewen
Group's funeral homes and cemeteries, including all properties in which the
Company has a financial interest.
The Company also noted that the FTC's request includes detailed information
about regional market overlap between Loewen Group and SCI properties, including
any properties in which either company has a financial interest.
CONTACT: David A. Laundy of The Loewen Group Inc., 604-293-7857; or Thomas
C. Franco of Broadgate Consultants, Inc., 212-229-2222.
<PAGE>
EXHIBIT 11
Service Corp. Offers to Acquire Loewen Group for $45-Share
----------------------------------------------------------
(The following is a reformatted version of a press release issued by Service
Corporation.)
Service Corporation International Announces Exchange Offer to Acquire
---------------------------------------------------------------------
All Outstanding Shares of The Loewen Group Inc.
-----------------------------------------------
HOUSTON, TEXAS, October 2, 1996 -- Service Corporation International (SCI)
today announced that it intends to take its offer to acquire The Loewen Group
Inc. (Loewen) directly to Loewen shareholders through an exchange offer.
Holders of Loewen common stock will be offered the opportunity to exchange their
shares for U.S. $45.00 worth of common stock of New Service Corporation
International (New SCI), or, at the election of each Loewen shareholder, U.S.
$45.00 worth of exchangeable stock of a Canadian subsidiary of New SCI. The
exchangeable shares will be convertible into, and are intended to be the
economic and voting equivalent of, shares of New SCI common stock. Holders of
Loewen Series C preferred stock will be offered the opportunity to exchange
their shares for U.S. $29.51 worth of New SCI common stock of such exchangeable
shares.
Prior to the exchange of Loewen stock in the offer, SCI intends to
reorganize so that New SCI, a newly organized Delaware holding company, will
become the publicly held company instead of SCI, and SCI will become a wholly-
owned subsidiary of New SCI. Accordingly, as a result of the reorganization,
the stockholders of SCI will become stockholders of New SCI on a one share for
one share basis, and the New SCI common stock will be listed on the NYSE.
The Board of Directors of SCI has unanimously authorized the exchange
offer. The exchange offer will not be conditioned on achieving pooling-of-
interests accounting. SCI would be willing to increase the consideration
payable in exchange for Loewen common and preferred stock if SCI and Loewen were
to enter into a negotiated agreement providing for the combination of SCI and
Loewen on the basis of pooling-of-interests accounting. The amount of any such
increase would depend upon the discussions among the parties.
The exact number of New SCI shares and exchangeable shares that may be
exchanged for Loewen common and preferred shares will be determined based on the
trading price of SCI's stock on the 20 consecutive trading days ending three
days prior to the expiration of the offer, provided that not more than 1,76471
shares will be issued in exchange for each share of Loewen's common stock and
not more than 1,15719 shares will be issued in exchange for each share of
Loewen's Series C preferred stock. The exchange offer is intended to be tax
free to Loewen's U.S. holders who elect New SCI common stock and to Loewen's
Canadian holders who elect exchangeable shares.
<PAGE>
2
The terms and conditions of the offer are to be set forth in a registration
statement that will be filed promptly with the Securities and Exchange
Commission. The exchange offer will commence after the registration statement
is declared effective by the SEC. The exchange offer will be conditioned upon,
among other things, the tendering for exchange of at least 75% of the
outstanding shares of Loewen common and 75% of the Loewen preferred stock, each
on a fully diluted basis, the redemption or inapplicability of Loewen's "poison
pill", the resignation of at least a majority of Loewen's incumbent directors
and their replacement with SCI nominees, receipt of all necessary governmental
and regulatory approvals and consents, and approval by SCI stockholders of SCI's
reorganization and the issuance of shares in the exchange offer.
In addition, SCI announced that it filed an action in the U.S. District
Court for the Southern District of Texas, located in Houston, seeking a
declaration that Loewen does not have standing to seek to block the exchange
offer under the antitrust laws. The complaint also alleges that Loewen has
tortiously interfered with SCI's prospective business relationship with Loewen
shareholders by making misleading statements about SCI's business and by failing
to make full disclosure of the terms of Loewen's recently announced transactions
with Rose Hills Memorial Park and Mortuary and with Prime Succession Inc.
This news release is neither an offer to exchange nor a solicitation of an
offer to exchange shares of capital stock of New SCI, SCI or any of its
subsidiaries. Such securities may not be sold or exchanged nor may offers to
buy or exchange be accepted prior to the time the registration statement becomes
effective.
Service Corporation International is the largest funeral home and cemetery
organization in the world, with 2,832 funeral service locations, 331 cemeteries
and 146 crematoria as of June 30, 1996. SCI provides funeral and cemetery
services in North America, Europe and the Pacific Rim. SCI's stock is traded on
the New York Stock Exchange. The company's ticker symbol is SRV.
Contact:
George R. Champagne
(713) 525-5546
Todd A. Matherne
(713) 525-5243
Abernathy MacGregor Group
(212) 371-5999
Josle Frank/Dan Katcher
(Mgs)
<PAGE>
EXHIBIT 12
Loewen Group Board to Review Service Corporation
------------------------------------------------
Announcement
------------
VANCOUVER, British Columbia, Oct. 2 -- The Loewen Group Inc. (NYSE: LWN)
announced today that the Loewen Board of Directors will review Service
Corporation International's (SCI) October 2 announcement concerning an
exchange offer and will respond in due course.
The Company also said that it has asked its legal and financial advisors to
review SCI's announcement in light of the regulatory, industry and financial
issues posed by SCI's bid.
"The Company will advise its shareholders of our position as to the offer
following the Board meeting," stated Raymond L. Loewen, chairman and chief
executive officer. "We ask our shareholders to take no action with respect to
their shares until the Company's position has been announced."
SOURCE The Loewen Group Inc.
CONTACT: David A. Laundy of The Loewen Group Inc., 604-293-7857; or Thomas
C. Franco of Broadgate Consultants, Inc., 212-229-2222
LANGUAGE: ENGLISH
LOAD-DATE: October 3, 1996
<PAGE>
EHIBIT 13
LOEWEN BOARD UNANIMOUSLY REJECTS SERVICE CORPORATION
EXCHANGE OFFER PROPOSAL
* SCI'S Second Proposal Termed Inadequate
* Loewen Holders Urged Not To Tender If and When Bid Is Made
* Federal Antitrust Lawsuit Filed Against SCI and Equity Corporation
International
VANCOUVER, October 10, 1996 -- The Loewen Group Inc. (NYSE, TSE, ME: LWN)
today announced that following a thorough and careful analysis and
discussions with its financial and legal advisors, its Board of Directors has
unanimously determined that the exchange offer proposed by Service
Corporation International (SCI) is inadequate and not in the best interests
of the Company or its shareholders. The Board recommended that the Company's
shareholders not tender their shares, if and when the proposed offer is
commenced. The Company also announced that today it filed an antitrust
lawsuit in the United States District Court for the Eastern District of New
York against SCI and Equity Corporation International, Inc., of which SCI
owns approximately 40%.
The Board determined by unanimous vote of the directors present that the
best way to maximize value for shareholders is through continued
implementation of the Company's long-term business plan as an independent
company. The Board believes the Company will continue to build shareholder
value through growth, especially growth through acquisitions, and through
enhanced profitability.
In rejecting SCI's proposed exchange offer, the Board relied, in part, on
written inadequacy opinions from Smith Barney Inc. and Nesbitt Burns Inc.,
the Company's financial advisors.
In a letter to shareholders, Raymond L. Loewen, chairman and chief
executive officer, noted that the Company would continue to execute its
business plan. "We have the right strategy, and it's working. We have the
right team and a reputation as a provider of superior services. We're in the
right industry at the right time. And we have built a strong foundation for
significant growth in revenues and profitability in the future."
Mr. Loewen also told shareholders that "SCI's proposal is subject to
significant conditions, including: the tendering of 75% each of Loewen's
outstanding common and preferred shares; SCI shareholder approval of the
corporate reorganization of SCI and the issuance of shares in connection with
the proposal; and the elimination of Loewen's Shareholder Protection Rights
Plan. These conditions are in addition to the satisfaction of all U.S. and
Canadian regulatory concerns, including antitrust issues."
In reviewing SCI's proposal, Mr. Loewen noted that the Board considered
the regulatory, industry and financial issues it raises, including these
factors:
- - - SCI CLEARLY WANTS TO BUY LOEWEN ON THE CHEAP, FOLLOWING AN UNFORTUNATE
AND UNJUSTIFIED JURY VERDICT IN MISSISSIPPI. This one-time event, which
depressed Loewen's share price but not its ability to grow, provided SCI with
an opportunity to grab Loewen at a price that the Board has again determined
is simply not in the best interests of the Company or its shareholders.
<PAGE>
- - - SCI CLEARLY WANTS TO BE 'THE PREFERRED BUYER' IN THE INDUSTRY... BUT
CAN'T, BECAUSE LOEWEN ALREADY IS. SCI's acquisition strategies and
techniques are very different than those of Loewen, and an integration of
the strategies and techniques of the Company and SCI may be difficult,
resulting in an entity with significantly different characteristics than
Loewen currently enjoys. Since the first of the year, Loewen has closed or
signed approximately $730 million in acquisitions. That is on top of the
Company's investments with The Blackstone Group, one of the premier merchant
banking firms in the world, to acquire Prime Succession Inc. and Rose Hills
Memorial Park Association, two of the most prized assets in the industry, for
an aggregate of $535 million. Loewen has in recent years significantly
expanded its acquisition program, and acquisition targets have shown a
preference for acquisition by Loewen rather than SCI.
- - - SCI CLEARLY INTENDS TO ELIMINATE COMPETITION IN A RAPIDLY CONSOLIDATING
INDUSTRY. The anti-competitive effects of the proposal have already
prompted regulatory scrutiny in several states, including New York, Florida,
Hawaii, Texas, California and Tennessee and from the Federal Trade
Commission. In addition, the Canadian Competition Bureau is investigating
the effects of the proposal under the Canadian Competition Act, and in that
respect has made a request for information from the Company. As a result of
the significant antitrust issues relating to the combination of the Company
and SCI, both in Canada and in the U.S., there is significant uncertainty as
to whether the conditions of the SCI proposal will be met.
Separately, the Company said that to retain and attract key executives and
managers in the context of a threatened takeover of Loewen, the Board
authorized the adoption of retention and severance plans to be applicable in
the event of a change in control of the Company. Mr. Loewen noted that this
precaution is a prudent and appropriate step given the anxieties and
uncertainties resulting from the threat of a hostile takeover.
With respect to the Federal court antitrust action against SCI and Equity
Corporation International, the Company said that its lawsuit alleges SCI's
proposed acquisition would, if successful, substantially lessen competition
in the markets for locally-offered funeral and cemetery services, "pre-need"
funeral services, and the funeral home and cemetery acquisition markets. The
complaint alleges that SCI and Equity Corporation International are
"co-conspirators" in actions that are designed to eliminate Loewen as a
competitive factor. The complaint also alleges that if SCI were to acquire
Loewen, SCI would own or have investment in all but one of the companies that
currently are competing as consolidators in numerous local markets throughout
the United States.
"Unfortunately, the hostile takeover bid by SCI for Loewen will reduce
competition. We hope that regulatory agencies will carefully scrutinize this
proposed transaction; we think they will reach the same conclusion we have,"
said R.W. Breece, Sr. a well-known independent industry figure and former
President of the North Carolina Funeral Directors Association. Mr. Breece is
owner of Rogers and Breece Funeral Home of Fayetville, North Carolina.
With corporate offices in Vancouver, The Loewen Group employs over 13,000
people, and operates 931 funeral homes and 271 cemeteries across the United
States and Canada. More than 90 percent of the Company's revenue is
generated in the United States . Over the past five years, Loewen has
generated compounded annual revenue and earnings growth, excluding the Gulf
National and Provident legal settlements, of 41.5% and 36.8% respectively.
<PAGE>
###
Contacts: David A. Laundy
The Loewen Group Inc.
(604) 293-7857
Thomas C. Franco
Broadgate Consultants, Inc.
(212) 229-2222
<PAGE>
EXHIBIT 14
Kevin J. Yourman (147159)
WEISS & YOURMAN
10940 Wilshire Blvd.
24th Floor
Los Angeles, California
Tel: 310/208-2800
Joseph H. Weiss
WEISS & YOURMAN
319 Fifth Avenue
New York, New York
Tel: 212/532-4171
Jules Brody
STULL, STULL & BRODY
6 East 45th Street
New York, New York 10017
Tel: 212/687-7230
Harvey Greenfield
LAW FIRM OF HARVEY GREENFIELD
10 East 40th Street
New York, New York 10016
Tel: 212/679-0600
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN AND FOR THE COUNTY OF LOS ANGELES
SOUTHEAST DISTRICT
JERRY KRIM, on behalf of himself ) Civil Action No.
and all others similarly situated, )
)
Plaintiff, )
)
-against- )
)
KENNETH S. BAGNELL, JOHN C. )
BEESE, JR., EARL A. GROLLMAN, ) Class and Derivative
TIMOTHY R. HOGENKAMP, HAROLD E. ) Action
HUGHES, PETER S. HYNDMAN, ALBERT )
S. LINEBERRY, SR., CHARLES E. )
LOEWEN, RAYMOND L. LOEWEN, )
ROBERT B. LUNDGREN, JAMES D. )
MCLENNAN, ERNEST G. PENNER, JOHN N.)
TURNER, PAUL WAGLER, ALEXANDER M. )
WATSON, ) JURY TRIAL DEMANDED
)
Defendants, )
)
-and- )
)
THE LOEWEN GROUP, INC., )
)
Nominal Defendant. )
___________________________________)
2
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Plaintiff, by his attorneys, alleges on information and belief, except
those allegations which pertain to the named plaintiff or to his attorneys
(which are alleged on personal knowledge), as follows:
SUMMARY OF ACTION
1. Plaintiff brings this action as a class action on behalf of all
persons and entities, other than the defendants, who are, and at relevant times
have been, holders of the common stock of The Loewen Group Inc. ("Loewen Group,"
or the "Company"). Plaintiff also brings this action as a derivative action on
behalf of Loewen Group. This action is brought against the directors and
officers of Loewen to enjoin breaches of fiduciary duty, including the purchase
of properties in Los Angeles, which are intended to thwart any takeover of the
Company, as more fully described below.
2. In particular, defendants have improperly responded to an offer by
Service Corp. International ("Service Corp.") to combine the two companies,
involving a stock-for-stock exchange which values Loewen Group at $43 per share,
or $2.8 billion, a substantial premium above its trading price, by rejecting the
Service Corp. offer, refusing to negotiate with Service Corp., and agreeing to
pay an inflated price of $240 million for property in Los Angeles. Indeed, by
the admission of the Company's own Chairman and Chief Executive Officer, the
Board of Loewen Group has acted "passionately" and would not feel any pressure
to even consider selling the Company at even an offer as high as $52 a share.
3
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3. Such action and inaction represent an effort by the Individual
Defendants to entrench themselves in office so that they may continue to receive
the substantial salaries, compensation and other benefits and perquisites of
their offices.
4. The Individual Defendants are abusing their fiduciary positions of
control over Loewen Group to thwart legitimate attempts to acquire the Company
and are seeking to entrench themselves in the management of the Company. The
actions of the Individual Defendants constitute a breach of their fiduciary
duties to: maximize shareholder value, consider the interests of the public
shareholders over their own interests, respond reasonably and on informed basis
to BONA FIDE offers for Loewen Group, and not waste corporate assets.
PARTIES
5. Plaintiff Jerry Krim is and at all relevant times has been the
owner of common stock of defendant Loewen Group.
6. Defendant Loewen Group is a corporation organized and existing
under the laws of British Columbia with its principal executive offices at 4126
Norland Avenue, Burnaby, British Columbia, V5G 3S8 Canada. The Company
currently maintains offices in Whittier, California. The Company operates the
second-largest number of funeral homes and cemeteries in North America and the
largest number of funeral homes in Canada. In addition to providing services at
the time of need, the company also makes funeral, cemetery and cremation
arrangements on a pre-need basis. As of March 15, 1996, the Company operated
847 funeral homes throughout the United States. This included 738 funeral homes
in
4
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the United States and 109 funeral homes in Canada. In addition, as of such
date, the Company operated 197 cemeteries in the United States and 6 cemeteries
in Canada. As of the close of business on March 15, 1996, the Company had
negotiated agreements for the acquisition of a further 75 funeral homes and 70
cemeteries in the United States and three funeral homes in Canada.
7. Defendant Kenneth S. Bagnell ("Bagnell") is and at all relevant
times has been a director of the Company.
8. Defendant John C. Beese, Jr. ("Beese") is and at all relevant
times has been a director of the Company. Beese is a member of the Audit
Committee and the Corporate Governance Committee of Loewen Group.
9. Defendant Earl A. Grollman ("Grollman") is and at all relevant
times has been a director of the Company.
10. Defendant Timothy R. Hogenkamp ("Hogenkamp") is and at all
relevant times has been a director of the Company. Hogenkamp is and at all
relevant times has been the President and Chief Operating Officer of the
Company.
11. Defendant Harold E. Hughes ("Hughes") is and at all relevant
times has been a director of the Company.
12. Defendant Peter S. Hyndman ("Hyndman") is and at all relevant
times has been a director of the Company. Hyndman is and at all relevant times
has been Vice-President, Law and Corporate Secretary of the Company.
13. Defendant Albert S. Lineberry, Sr. ("Lineberry") is and at all
relevant times has been a director of the company.
5
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14. Defendant Charles B. Loewen ("C. Loewen") is and at all relevant
times has been a director of the Company. In July 1994, the Company entered
into a consulting agreement with C. Loewen and a corporation of which C. Loewen
is an employee, officer and director. Under the terms of the Agreement, C.
Loewen agreed to provide, from time to time, advice on financial planning,
financial presentation, audit and other matters relating to compensation,
corporate governance and policy, in exchange for a lump-sum payment to be made
for such services in each of 1994 and 1995 which lump-sum payment is, in each
case, in lieu of certain Directors' fees. C. Loewen is Chairman of the
Company's Audit Committee, Chairman of the Company's Compensation Committee and
a member of the Corporate Governance Committee of Loewen Group.
15. Defendant Raymond L. Loewen ("R. Loewen") is and at all relevant
times has been a director of the Company. R. Loewen is and at all relevant
times has been Chairman of the Board and Chief Executive Officer of the Company.
R. Loewen is the beneficial holder of 15.15% of the common stock of Loewen
Group.
16. Defendant Robert B. Lundgren ("Lundgren") is and at all relevant
times has been a director of the Company. Lundgren is also a member of the
Audit Committee of Loewen Group.
17. Defendant James D. McLennan ("McLennan") is and at all relevant
times has been a director of the Company. McLennan is a member of the Corporate
Governance Committee and a member of the Compensation Committee of Loewen Group.
6
<PAGE>
18. Defendant Ernest G. Penner ("Penner") is and at all relevant
times has been a director of the Company. Penner is also a member of the
Compensation Committee of Loewen Group.
19. Defendant John N. Turner ("Turner") is and at all relevant times
has been a director of the Company. Turner is also a member of the Audit
Committee, a member of the Compensation Committee and Chairman of the Corporate
Governance Committee of Loewen Group.
20. Defendant Paul Wagler ("Wagler") is and at all relevant times has
been a director of the Company. Wagler is also and at all relevant times has
been Senior Vice-President, Finance and Chief Financial Officer of the Company.
21. Defendant Alexander M. Watson ("Watson") is and at all relevant
times has been a director of the Company. Watson is and at all relevant times
has been Executive Vice-President of the Company.
22. The persons named in paragraphs 7 through 21 above shall be
collectively referred to herein as the "Individual Defendants."
23. Defendants, Bagnell, Beese, Grollman, Hughes, Lundgren, Penner,
Loewen, Turner, Lineberry and McLennan ("outside directors") were entitled to an
annual retainer of $18,500 for 1995. In addition, each of these outside
Directors was entitled to $1,500 for attendance in person at a meeting (Board or
committee of the Board), $250 for attendance by telephone at a meeting (Board or
committee of the Board), $5,000 per annum for being a member of a committee of
the Board, and $1,500 per annum
7
<PAGE>
for chairing a committee of the Board. Pursuant to the 1994 Outside Director
Compensation Plan, outside Directors may elect to have some or all of their fees
paid in Common shares and in, certain circumstances, options to purchase Common
shares of the Company. Outside Directors also receive a grant of 2,000 options
upon initially being elected or appointed to the Board of Directors. Directors
are reimbursed their travel expenses for attending meetings of the Board and its
committees.
24. The Individual Defendants, by reason of their corporate
directorships (and in the case of defendants Hogenkamp, Hyndman, R. Loewen,
Wagler and Watson, their executive positions), stand in a fiduciary position
relative to the Company and the Company's shareholders, which fiduciary
relationship, at all times relevant herein, required the Individual Defendants
to exercise their best judgment, and to act in a prudent manner, and in the best
interests of the Company and the Company's shareholders. They were and are
required to use their ability to control and manage the Company in a fair, just
and equitable manner; to act in furtherance of the best interests of the Company
and the Company's shareholders; to refrain from abusing their positions of
control; and not to favor their own interests at the expense of the Company and
the Company's shareholders.
25. Each Individual Defendant herein is sued individually as a
conspirator and as an aider and abettor, as well as in his capacity as an
officer and/or director of the Company, and the liability of each arises from
the fact that he has engaged
8
<PAGE>
in all or part of the unlawful acts, plans, schemes, or transactions complained
of herein.
CLASS ACTION ALLEGATIONS
26. Plaintiff brings this action on his own behalf and as a class
action, pursuant to California Code of Civil Procedure Section 382, on behalf of
all stockholders of the Company (except the defendants herein and any person,
firm, trust, corporation, or other entity related to or affiliated with any of
the defendants) and their successors in interest, who are or will be threatened
with injury arising from defendants' actions as more fully described herein.
This suit seeks, INTER ALIA, preliminary and permanent injunctive relief, as
well as damages.
27. This action is properly maintained as a class action.
28. The Class is so numerous that joinder of all members is
impracticable. There were 50,046,035 shares of Loewen Group common stock
outstanding as of March 15, 1996, which shares are traded on NASDAQ. The record
holders of Loewen Group common stock can be easily determined from the stock
transfer journals maintained by Loewen Group or its agents.
29. A class action is superior to other methods for the fair and
efficient adjudication of the claims herein asserted and no unusual difficulties
are likely to be encountered in the management of this class action. The
likelihood of individual Class members prosecuting separate claims is remote.
30. There are questions of law and fact which are common to the Class
and which predominate over questions affecting
9
<PAGE>
any individual Class member. The common questions include, INTER ALIA, the
following:
(a) whether defendants have breached their fiduciary duties by engaging in
concerted and continual action to entrench themselves in their
lucrative positions at the expense of Loewen Group's public
stockholders;
(b) whether defendants are unlawfully impeding takeover attempts at the
expense of Loewen Group's public stockholders, including, but not
limited to, the failure of defendants to seriously consider and
negotiate the transaction proposed by Service Corp. as more fully
described below;
(c) whether defendants have failed and will fail to negotiate in good
faith with prospective purchasers of the Company;
(d) whether defendants are preventing plaintiff and the other members of
the Class from receiving the maximum value per share that could be
received from a BONA FIDE offer for the Company; and
(e) whether the plaintiff and other members of the Class would be
irreparably damaged were the defendants not enjoined from the conduct
described hereinbelow.
31. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of the plaintiff are typical of the claims of other members of the Class, and
plaintiff has the same
10
<PAGE>
interests as the other members of the Class. Plaintiff is an adequate
representative of the Class.
32. The prosecution of separate actions by individual members of the
Class would create the risk of inconsistent or varying adjudications and might
establish incompatible standards of conduct for defendants. Further, such
individual prosecution might create adjudications with respect to individual
members of the Class that would, as a practical matter, be dispositive of the
interests of the other members not parties to the adjudications or which might
substantially impair or impede their ability to protect their interests.
33. Defendants have acted or refused to act on grounds generally
applicable to the Class, and have caused injury to the Class, and preliminary
and final injunctive relief on behalf of the Class as a whole is thus
appropriate.
DERIVATIVE ACTION ALLEGATIONS
34. Plaintiff brings this action derivatively in the right and for
the benefit of Loewen Group. Plaintiff will fairly and adequately represent and
protect the interests of Loewen Group and its other shareholders.
35. Plaintiff has not made a demand upon the Board of Directors of
Loewen Group to institute this action, or an action asserting claims asserted in
this action, because, under the circumstances, demand is not required, is
unnecessary and would be futile for the following reasons:
(a) This action names as defendants the entire Board of Directors of
Loewen Group which agreed to pay an inflated price
11
<PAGE>
for property in Los Angeles in an effort to thwart a possible takeover of the
Company;
(b) This action names as defendants the entire Board of Directors of
Loewen Group which voted to reject Service Corp's offer, refused to negotiate
with Service Corp., acted "passionately" in response to the offer, and has
openly represented that it would not feel any pressure to even consider selling
the Company at even an offer as high as $52 a share;
(c) This action names as defendants the entire Board of Directors
which voted to institute a Shareholders' Rights Plan in an effort to thwart a
possible takeover of the Company;
(d) This action names as defendants the entire Board of Directors
which voted to adopt a "poison pill" that stipulates that any sale of the
Company must be approved by investors representing 75% of the outstanding
shares;
(e) Thus, it is apparent that defendants have been aware of the
wrongs forming the basis of the claims alleged herein, but have chosen not to
protect Loewen Group and have acquiesced and/or failed to take action with
respect to these claims because any such action would require them to sue
themselves, their friends, and their business associates;
(f) Because of their participation in the wrongs alleged herein, the
defendants are in no position to prosecute this action. Each of them is in an
irreconcilable conflict of interest regarding the prosecution of this action,
and cannot exercise the requisite independence necessary to make good faith
business judgments; and
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(g) All the members of the Board of Directors have a conflict of
interest because of the financial compensation received from the Company in
their capacity as officers and/or directors.
SUBSTANTIVE ALLEGATIONS
36. On or about September 17, 1996, Service Corp. announced that it
sent a letter to Raymond L. Loewen, Chairman of the Board and Chief Executive
Officer of Loewen Group proposing a business combination between the two
companies. The letter read as follows:
September 17, 1996
Mr. Raymond L. Loewen
Chairman of the Board and Chief Executive Officer
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia, Canada
Dear Dr. Loewen:
As you know, I have tried to reach you several times since September
11. While your office has assured me that you received my messages, my
calls have not been returned. In view of that, and in view of the
importance of this matter, I am sending this letter.
I would like to discus with you a combination of our two companies.
The combination would involve a stock-for-stock exchange accounted for as a
pooling which values Loewen Group at US$43 per share. We believe that this
transaction can be structured in a manner that is tax-free to both
companies and (except for a relatively nominal amount in the case of U.S.
stockholders) to the U.S. an Canadian stockholders of Loewen Group.
I think you and your Board and stockholders would agree that our
proposal is a generous one, resulting in the following premiums for Loewen
Group stockholders:
-- 48.9% above the price at which Loewen Group stock traded 30 days
ago;
-- 39.3% above the price at which Loewen Group stock traded one week
ago; and
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<PAGE>
-- 27.4% above the price at which Loewen Group stock is currently
trading.
This represents an opportunity for your stockholders to realize
excellent value, by any measure, for their shares. In addition, and
importantly, since your stockholders would be receiving stock, they would
continue to participate in Loewen Group's business as well as share in the
upside of our business.
Thus, in essence, your stockholders would:
-- continue their investment in our industry;
-- get an immediate, and very significant, increase in the market
value of their investment;
-- get that immediate and substantial increase on an essentially tax
free basis; and
-- diversify their risk by participating in a much larger number of
properties.
This is a "win-win" situation for you and your stockholders.
Finally, with respect to consideration, I would note also that our
proposal is based on public information. After a due diligence review, we
may be in a position to increase the consideration that your stockholders
would receive.
We, of course, recognize that our businesses overlap in various
locations. We have carefully reviewed this matter and are convinced that
competition issues can be cured by selected divestures without impairment
of the values that a combination would achieve for the stockholders of our
two companies.
I would very much like to discuss any and all aspects of our proposal
directly with you and your Board of Directors. We believe you and they
will recognize the tremendous benefit to your stockholders of our proposal.
Our proposal is conditioned upon approval of our Board and upon negotiation
of mutually satisfactory agreements providing for a combination on a
pooling basis.
We hope that after you meet with us, you will similarly determine that
the transaction should be pursued. We look forward to hearing from you.
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In view of the importance of this matter, we are simultaneously
releasing this letter to the press.
Sincerely,
William Heiligbrodt
cc: Board of Directors of The Loewen Group Inc.
37. In explaining the transaction, Robert L. Waltrip, Chairman of the
Board and Chief Executive Officer of Service Corp., said, "This proposal will
create a combined company with unparalleled resources and management depth,
benefitting the client families, employees and shareholders of both
institutions." If completed, the transaction would result in an entity
comprised of approximately 3,750 funeral homes, and 600 cemeteries worldwide.
L. William Heiligbrodt, President and Chief Operating Officer of Service Corp.,
noted, "The edition of Loewen's properties will open Service Corp. to new
markets and further enhance the company's long term growth potential. Due to
significant opportunities, the combination represents an exciting opportunity
for both companies' shareholders to benefit."
38. On September 20, 1996, Loewen Group announced that a new company
formed in partnership with Blackstone Capital Partners II Merchant Banking Fund
L.P. has entered into a definitive agreement to acquire the cemetery, mortuary
operations and assets of The Rose Hill Memorial Park Association and The Rose
Hills Company, Inc., of Los Angeles ("Rose Hill") for $240 million. Among Rose
Hills' operations and assets are Rose Hills Memorial Park, and its mortuary. As
part of the transaction, 14 funeral homes and two combination funeral
home/cemetery operations
15
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currently owned by Loewen Group in Los Angeles and Orange Counties will be
integrated into the new company.
39. The $240 million which the defendants agreed to pay for Rose Hill
is an inflated price designed to thwart any proposed takeover by making any
takeover of Loewen Group less attractive and too costly for a potential
acquiror.
40. On September 24, 1996, the Board of Directors of Loewen Group
rejected the Service Corp. offer, without any attempt at negotiation. As
reported by THE WALL STREET JOURNAL on September 25, 1996, Raymond Loewen, the
Chairman and Chief Executive of the Company, said "The board does not have an
appetite to sell the company." Indeed, as reported by THE WALL STREET JOURNAL
on September 26, 1996, "Loewen Group Inc.'s chairman and chief executive officer
vowed to fight a proposed takeover by Service Corp. International, even if the
Houston funeral-services concern substantially sweetens its offer of $2.8
billion in stock." The article stated that Mr. Loewen said in a conference call
with analysts and major investors that even an offer as high as $52 a share, 21%
higher than Service Corp.'s current $43 a share offer, would not place him or
Loewen Group's Board under any pressure to consider selling. It quoted
Mr. Loewen as stating that the Company's Board had "passionately" rejected
Service Corp.'s offer.
41. On September 25, 1996, Service Corp. announced that, although the
Board of Directors of Loewen Group has rejected Service Corp.'s offer, Service
Corp. remains committed to pursuing
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<PAGE>
a combination of the two companies and will actively explore ways to complete
the transaction.
42. Robert L. Waltrip, Chairman of the Board and Chief Executive
Officer of Service Corp. said, "We are disappointed that the Loewen Board of
Directors rejected our proposal without ever returning our calls or seeking more
information from us. The actions of the Loewen Board simply deprive its
stockholders of the opportunity to receive prompt value for their shares."
43. L. William Heiligbrodt, President and Chief Operating Officer of
Service Corp. said, "We believe our $43 per share proposal provides superior
value for Loewen shareholders. Our proposal provides Loewen shareholders with a
48.9% premium above the price at which Loewen stock traded 30 days prior to the
date of our proposal. In addition, since Loewen stockholders would be receiving
stock, they would continue to participate in Loewen's business as well as share
in the upside of our business."
44. Mr. Heiligbrodt continued, "In light of the Loewen Board's
apparent disregard for the financial welfare of its independent stockholders, we
have scheduled a Board meeting for Tuesday, October 1, to review all options
available to enable us to consummate this transaction."
45. In 1990, the Company instituted a Shareholders' Rights Plan (the
"Rights Plan"), which is triggered by the acquisition of 20% or more of the
Company's outstanding stock. The provisions of the Rights Plan seek to make any
unfriendly takeover of the Company too costly for a potential acquiror. Under
terms of the Rights Plan, any hostile suitor that acquires
17
<PAGE>
20 percent of Loewen Group's shares could trigger a shareholder rights plan,
allowing Loewen Group's holders to acquire stock at a 50 percent discount to
market prices. In other words, the acquiror would cause the issuance of
millions of new Loewen Group shares, causing massive dilution and a financial
debacle for the would-be purchaser.
46. The Rights Plan was enacted by the Individual Defendants in order
to deter competitive bidding for Loewen Group and to entrench themselves in
office. The Rights Plan has the effect of restraining and impairing the ability
of Loewen Group's shareholders to affect corporate policy and to freely
structure the makeup of the Board. The Rights Plan, among other things, impedes
shareholder ability to accumulate shares and to associate together to replace
incumbent management, oppose management decisions, or otherwise affect corporate
policy through stockholder resolutions. The Rights an thus effectively shifts
control of the destiny of the Company from its shareholders to its directors.
Such a burden imposes upon the directors an even more heightened responsibility
to discharge their fiduciary responsibilities fairly and impartially in order to
maximize shareholder value. Defendants have, however, breached such fiduciary
duty, as more particularly described herein.
47. Another Loewen Group "poison pill" stipulates that any sale of
the Company must be approved by investors representing 75% of the outstanding
shares ("Supermajority Voting Requirement"). Although Canadian courts have been
willing to
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override such "Supermajority" voting rules, Service Corp. faces an uphill
battle.
48. This Supermajority Voting Requirement was enacted by the
Individual Defendants in order to deter competitive bidding for Loewen Group and
to entrench themselves in office. This Supermajority Voting Requirement has the
effect of restraining and impairing the ability of Loewen Group's public
shareholders to affect corporate policy and to freely structure the makeup of
the Board. The Supermajority Voting Requirement, among other things, impedes
shareholder ability to accumulate shares and to associate together to replace
incumbent management, oppose management decisions, or otherwise affect corporate
policy through stockholder resolutions. The Supermajority Voting Requirement
thus effectively shifts control of the destiny of the Company from its
shareholders to its directors. Such a burden imposes upon the directors an even
more heightened responsibility to discharge their fiduciary responsibilities
fairly and impartially in order to maximize shareholder value. Defendants have,
however, breached such fiduciary duty, as more particularly described herein.
49. The Individual Defendants have at all times been fiduciaries of
Loewen Group shareholders. As set forth herein, they have breached and continue
to breach their fiduciary duties to Loewen Group's shareholders to maximize the
value of their shares, in order to entrench themselves in office and to continue
receiving their compensation, fees and emoluments of their respective positions.
The Individual Defendants have failed to act independently to protect the
interests of Loewen Group's
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public shareholders, to consider seriously all BONA FIDE offers for the Company,
to inform themselves fully about such BONA FIDE offers, and to conduct fair and
active bidding procedures or other mechanisms for checking the market and
ensuring that the highest possible price is achieved.
50. The Individual Defendants have breached their fiduciary duties
by, among other things, failing and refusing to meet with representatives of
Service Corp. to negotiate in good faith, undertaking steps to thwart and
discourage the Service Corp. offer, refusing to take those steps necessary to
ensure that Loewen Group's shareholders will receive the maximum value for their
shares of Loewen Group stock, refusing to consider seriously the pending offer,
agreeing to acquire Rose Hill at an exorbitant price and failing to announce any
true auction or open bidding procedures best calculated to maximize shareholder
value.
51. Plaintiff and the other members of the Class have been and will
be damaged in that they have not and will not receive their fair proportion of
the value of Loewen Group's assets and businesses, and have been and will be
prevented from obtaining a fair price for their shares of the Company's common
stock.
52. Unless enjoined by this Court, the Individual Defendants will
continue to breach their fiduciary duties owed to plaintiff, the other members
of the Class and to the Company, and will entrench themselves in their corporate
offices, all to the irreparable harm of the Class and the Company, as aforesaid.
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53. Only through the exercise of this Court's equitable powers can
plaintiff, the Class and the Company be fully protected from the immediate and
irreparable injury which defendants' actions threaten to inflict. Defendants
are precluding the shareholders' enjoyment of the full economic value of their
investments by failing to proceed expeditiously and in good faith to evaluate
and pursue a premium acquisition offer which would provide consideration for all
shares at a very attractive price.
54. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the other members of the Class, and
will prevent the sale of Loewen Group at a substantial premium, all to the
irreparable harm of plaintiff and the other members of the Class.
55. Plaintiff, the Class and the Company have no adequate remedy at
law.
WHEREFORE, plaintiff demands judgment, as follows:
A. Declaring this to be a proper class action and certifying
plaintiff as a Class representative;
B. Ordering the Individual Defendants to carry out their fiduciary
duties to plaintiff and the other members of the Class by announcing their
intention to:
1. cooperate fully and negotiate with any person or entity,
including Service Corp., having a BONA FIDE interest in proposing any
transaction which would maximize shareholder value, including, but not limited
to, a buyout or takeover of the Company;
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2. undertake an appropriate evaluation of Loewen Group's worth
as a merger/acquisition candidate;
3. take all appropriate steps to enhance Loewen Group's value
and attractiveness as a merger/acquisition candidate;
4. take all appropriate steps to effectively expose Loewen Group
to the marketplace in an effort to create an active auction for Loewen Group;
5. act independently so that the interests of Loewen Group's
public stockholders will be protected; and
6. adequately ensure that no conflicts of interest exist between
Individual Defendants' own interests and their fiduciary obligation to maximize
stockholder value or, if such conflicts exist, to ensure that all conflicts are
resolved in the best interests of Loewen Group's public stockholders;
C. Declaring this to be a proper derivative action;
D. Preliminarily and permanently enjoining the implementation of the
Company's Rights Plan and the delivery of Rights thereunder;
E. Preliminarily and permanently enjoining the implementation of the
Company's Supermajority Voting Requirement;
F. Preliminary and permanently enjoining the consummation of the Ross
Hill acquisition and any other extraordinary corporate transactions pending the
Individual Defendant's compliance with their fiduciary obligations as set forth
in paragraph "B" herein:
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G. Ordering the Individual Defendants, jointly and severally, to
account to plaintiff, the other members of the Class and the Company for all
damages suffered and to be suffered by them as a result of the act and
transactions alleged herein;
H. Awarding plaintiff the costs and disbursements of the action,
including a reasonable allowance for plaintiff's attorneys' and experts' fees;
and
I. Granting such other and further relief as may be just and proper.
Dated: September 26, 1996
WEISS & YOURMAN
By: ___________________________
Kevin J. Yourman (147159)
10940 Wilshire Blvd.
24th Floor
Los Angeles, California
Tel: 310/205-2800
Joseph H. Weiss
WEISS & YOURMAN
319 Fifth Avenue
New York, New York
Tel: 212/532-4171
Jules Brody
STULL, STULL & BRODY
6 East 45th Street
New York, New York 10017
Tel: 212/687-7230
Harvey Greenfield
LAW FIRM OF HARVEY
GREENFIELD
10 East 40th Street
New York, New York 10016
Tel: 212/679-0600
Attorneys for Plaintiff
23
<PAGE>
EXHIBIT 15
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
SERVICE CORPORATION )
INTERNATIONAL, )
)
Plaintiff, )
)
V. ) CIVIL ACTION NO. H-96-3269
)
THE LOEWEN GROUP INC., )
LOEWEN GROUP, INC., AND )
LOEWEN GROUP INTERNATIONAL, INC., )
)
Defendants.
FIRST AMENDED COMPLAINT
Plaintiff Service Corporation International ("SCI"), by its attorneys,
alleges upon knowledge with respect to itself and its own acts, and upon
information and belief as to all other matters, as follows:
NATURE OF ACTION
1. This action for declaratory relief, injunctive relief and damages
is brought to forestall efforts by Defendants The Loewen Group Inc., Loewen
Group, Inc. and Loewen Group International, Inc., (collectively "the Loewen
Defendants") to injure SCI by disseminating false and misleading information to
The Loewen Group Inc. ("Loewen") shareholders, who are considering whether to
accept a tender offer SCI has announced it intends to make to Loewen's
shareholders (the "Tender Offer").
2. Further, as alleged in detail below, since SCI initially proposed
a business combination with Loewen, the Loewen Defendants have embarked on an
<PAGE>
ongoing campaign to create the impression that they can block or impede any such
business combination under the federal antitrust laws. The purpose of this
campaign is to thwart or hamper, through prohibited or illegal means, SCI's
consummation of a business combination with Loewen by causing Loewen
shareholders to make ill-informed decisions with respect to the Tender Offer and
influence them not to participate in such an offer. Accordingly, SCI seeks a
declaratory judgment pursuant to the Declaratory Judgment Act, 28 U.S.C.
Sections 2201 ET SEQ., that the Loewen Defendants in fact have no standing to
institute any federal antitrust action seeking to block or impede SCI's offer.
3. In addition, the Loewen Defendants' actions constitute
tortious interference with SCI's prospective business relationships with
Loewen's shareholders. Accordingly, SCI seeks monetary relief for the
damages it has suffered as a result of the Loewen Defendants' tortious
interference with SCI's prospective business relationships.
4. SCI seeks injunctive relief to prevent the Loewen Defendants
from continuing to publish or otherwise disseminate false, misleading,
deceptive, or manipulative material statements regarding SCI, the proposed
Tender Offer, or any other matter in connection with the proposed Tender
Offer. SCI also seeks injunctive relief to prevent the Loewen Defendants
from omitting any material facts regarding SCI, the proposed Tender Offer, or
any business transaction that is in any way connected with the proposed
Tender Offer.
PARTIES AND SERVICE
5. Plaintiff SCI is a Texas corporation with its principal place of
business in Houston, Texas. SCI is an owner and operator of funeral homes,
cemeteries, and crematoria.
2
<PAGE>
6. Defendant The Loewen Group Inc. is a British Columbia (Canada)
corporation with its principal executive offices in Burnaby, British
Columbia. Loewen is also an owner and operator of funeral homes and
cemeteries, some 27 of which are located in this District. Service may be
made on Loewen by international registered mail and under the terms of the
Hague Convention for Service Abroad of Extrajudicial Documents. The
recipient central authority for such service request is: Ministry of the
Attorney General for British Columbia, Office of the Deputy Minister, Fifth
Floor, 910 Government Street, Victoria, British Columbia, Canada, V8V 1X4.
The address for The Loewen Group Inc. is: 4126 Norland Avenue, Burnaby,
British Columbia, Canada V5G 3S8. The appropriate fees for affecting such
service have been tendered by SCI, and SCI requests that return of service be
implemented on SCI at its address: 1929 Allen Parkway, Houston, Texas,
77019, U.S.A.
7. Defendant Loewen Group, Inc. is a Kentucky corporation doing
business in the State of Texas. It does not maintain a registered officer or
agent and it can be served with process by serving the Secretary of State for
the State of Texas at the Capitol Building, 1019 Brazos, Room 105, Austin,
Texas 78701.
8. Defendant Loewen Group International, Inc. is a Delaware
corporation doing business in the State of Texas. It does not maintain a
registered office or agent and it can be served with process by serving the
Secretary of State for the State of Texas at the Capitol Building, 1019
Brazos, Room 105, Austin, Texas 78701.
3
<PAGE>
JURISDICTION AND VENUE
9. This Court has jurisdiction over this action pursuant to 15
U.S.C. Section 4, 15 U.S.C. Section 25, 15 U.S.C. Section 78aa (Section 27 of
the Securities Exchange Act of 1934), 28 U.S.C. Section 1331, and 28 U.S.C.
Section 1332.
10. Venue is proper in this District under 15 U.S.C. Section 15, 15
U.S.C. Section 22, 15 U.S.C. Section 78aa, and 28 U.S.C. Section 1391(b).
11. The amount in controversy exceeds the jurisdictional minimum
amount for this Court.
12. This District is a particularly appropriate forum for this
action. Among other things: SCI is a Texas corporation with its corporate
headquarters and significant business operations in this District; the Loewen
Defendants conduct business in this District; SCI's proposed business
combination with Loewen was conceived and planned in this District; a majority
of the books, records, and documents that are relevant to any antitrust
objections to the SCI offer that the Loewen Defendants might attempt to raise
are located in this District; and a majority of the likely witnesses with
respect to any such objections are likewise located in this District.
SCI'S OFFER TO ACQUIRE LOEWEN STOCK
13. On September 17, 1996, SCI proposed to Loewen a combination of
the two companies by means of a stock-for-stock exchange that would value
Loewen's stock at $43 per share -- a value approximately 49% above the price of
Loewen stock the month before the offer was announced.
14. On September 24, 1996, Loewen's Chairman, Raymond L. Loewen wrote
to SCI, stating that the Loewen board had rejected SCI's officer and contending
4
<PAGE>
that Loewen shareholders would receive "maximize[d]" value for their investment
through implementation of Loewen's "long-term business plan as an independent
company" rather than through acceptance of SCI's offer.
15. Following the rejection of its proposal, on October 1, 1996, the
SCI Board of Directors authorized the commencement of an exchange offer for all
outstanding shares of Loewen at an exchange ratio that would value Loewen stock
at $45.00 per share.
16. On October 3, 1996, SCI is filing its registration statement with
respect to the proposed Tender Offer. The registration statement sets forth the
terms of the proposed Tender Offer, the price offered, the duration of the offer
and the percentage sought.
17. The proposed Tender Offer was anticipated by the Loewen
Defendants and Loewen shareholders as a result of the letter to Loewen dated
September 17, 1996 and sent from SCI to Loewen, and the concomitant public
announcement.
LOEWEN'S ACTIONS FORMING THE BASIS OF THE SUIT
18. Not content to allow its shareholders to decide for themselves
whether to participate in SCI's Tender Offer for Loewen stock, Loewen has
embarked upon a concerted effort to thwart, through prohibited and illegal
means, SCI's consummation of a business combination with Loewen. As set forth
below, Loewen has repeatedly stated that there are federal antitrust objections
to a combination between SCI and Loewen, and insinuated that Loewen could take
action to block or impede SCI's offer on the basis of those purported
objections.
5
<PAGE>
19. In addition, Loewen has attempted to discredit SCI and its
business practices through dissemination of misleading, false and malicious
remarks regarding SCI's business practices. As set forth below, these remarks
have been published or released intentionally, with the sole purpose of
thwarting SCI's Tender Offer.
20. Loewen also has purposefully and intentionally omitted material
information about certain recently announced transactions in order to
artificially inflate the price of its stock in an effort to block the proposed
Tender Offer.
LOEWEN'S CAMPAIGN TO MISLEAD ITS
SHAREHOLDERS AS TO THE VALIDITY AND ADEQUACY OF SCI'S TENDER OFFER
21. On September 24, 1996, in announcing the Loewen board's rejection
of SCI's offer, Mr. Loewen was quoted on the PR Newswire as stating that "SCI
clearly intends to eliminate its most formidable competitor in the North
American marketplace, diminishing the opportunities for independent funeral home
and cemetery operators."
22. That same day, Loewen sent a letter to its shareholders,
characterizing SCI's offer as an "attempt[] to . . . eliminate [Loewen] as its
most formidable competitor in the North American markets" and stating that the
Loewen board has "serious questions about SCI's motives."
23. On September 25, 1996, in a conference call on the Dow Jones
Investor Network, Mr. Loewen continued, asserting that "I honestly can't believe
that our Federal Trade Commission . . . would allow this kind of a transaction
to take place, to take a major competitor out of the business. I can't believe
it." Mr. Loewen then concluded the call by stating that "[i]f they were to
eliminate us, clearly the price of acquisitions would go down significantly; I
am sure the regulators would take that into
6
<PAGE>
consideration" and that "I'm sure the industry . . . would rise up in arms
before it would ever get to that point."
24. Mr. Loewen reiterated these insinuations in the September 26,
1996 edition of the FINANCIAL POST, claiming yet again that "SCI is trying to
eliminate a competitor" and asserting that, "if the U.S. Federal Trade
Commission has any teeth at all, it will not allow SCI to gobble up its major
competitor."
25. Loewen's campaign has since become even more transparent: on
September 27, 1996, Reuters reported Loewen as stating that "it believes
antitrust concerns would be a major obstacle to the takeover"; and THE NEW YORK
TIMES quoted Mr. Loewen to the effect that "[i]t is clear that our competitors
out of Texas do not like competition."
26. Two days later, on September 29, 1996, both Reuters and the PR
Newswire published references by Mr. Loewen to the purported "anticompetitive
effects of the proposed acquisition," and a spokesman for Loewen was quoted by
Bloomberg as saying that "a combination of the two companies would limit the
number of acquirers" of cemeteries and funeral homes.
27. Mr. Loewen also has stated that the Loewen board did not merely
reject the SCI offer, but "passionately rejected" the offer, indicating that
Loewen intends to engage in a vigorous effort to block or impede the proposed
business combination.
28. Among other things, these statements were intended to create
the impression among Loewen shareholders and the public that the Loewen
Defendants have the ability to institute an action to block or impede SCI's
offer as a claimed violation of the federal antitrust laws under any number
of potential theories, including
7
<PAGE>
the theory that the acquisition would eliminate competition in a "market"
for control of independently owned funeral homes and cemeteries. In fact,
the statements have had this effect: at least one financial analyst has
expressed the view that "he would not be surprised to see Loewen
attempt . . . legal road blocks" (First Call Research Network,
September 30, 1996).
29. In fact, however, the Loewen Defendants cannot institute an
action seeking to block or impede SCI's offer as a claimed violation of the
federal antitrust laws. Relying on the Supreme Court's decision in CARGILL
V. MONFORT OF COLORADO, INC., 479 U.S. 104 (1986), a number of courts,
including the United States Court of Appeal for the Fifth Circuit, have held
expressly that a target company does not suffer "antitrust injury" sufficient
to confer standing to sue under the federal antitrust laws, because the
target company will suffer a loss of independent whether or not the takeover
violates antitrust principles. Moreover, the principal antitrust theory that
Loewen has advanced is entirely without merit because, among other things,
"the death care industry acquisition market is extremely competitive" (Loewen
10-Q, for quarter ending June 30, 1996), there are no barriers to entry to
any such "market," and the "market" for the acquisition of funeral homes and
cemeteries is not a relevant market for purposes of antitrust law.
30. Further, Loewen intentionally has misrepresented the business
practices of SCI. Mr. Loewen was quoted: "It would be very hard for me to
sell to a company that has a history of slashing and burning." He has
referred to SCI in a manner designed to depict SCI as a cold, mirthless
scavenger. These comments have been made with the express intent of
vilifying SCI in the eyes of Loewen's shareholders and the market in general
in the hopes of rallying shareholders to reject the Tender Offer.
8
<PAGE>
LOEWEN HAS FAILED TO DISCLOSE MATERIAL INFORMATION REGARDING ITS
MOST RECENT BUSINESS DEALINGS IN AN EFFORT TO ARTIFICIALLY INFLATE THE VALUE OF
ITS STOCK
31. In its press releases and other public statements, Loewen
consistently has touted its recent acquisitions of funeral homes and
cemeteries, indicating that such acquisitions will substantially enhance its
earnings per share and long-term value to Loewen shareholders. Loewen's
press releases and other public statements have contained glowing
descriptions of the acquisition of Prime Succession Inc. ("Prime Succession")
by ajoint venture between Loewen and Blackstone Capital Partner II Merchant
Banking Fund L.P. ("Blackstone"), which was completed on August 29,1 996.
Loewen's descriptions of the Prime Succession acquisition contain material
misstatements and omissions, and were made knowingly and intentionally by
Loewen to inflate artificially the price of its stock in connection with the
proposed SCI Tender Offer.
32. On August 29, 1996, Loewen issued a joint press release with
Blackstone disclosing certain terms of the acquisition of Prime Succession.
The press release disclosed that Loewen received a call option to purchase
Blackstone's interest in Prime Succession after four and six years. The
exercise price of this call option has never been disclosed. More
importantly, the press release discloses that Blackstone received a put
option which entitles Blackstone to force Loewen to purchase its interest in
Prime Succession at a formula price. The method of determining the exercise
price of Blackstone's put option and the exercise date of such option have
never been disclosed.
33. By failing to disclose (i) the exercise price of its call option,
and (ii) the exercise date and the method of determining the exercise price of
Blackstone's put option, Loewen's recent statements regarding the acquisition of
Prime Succession are materially misleading. Such information is necessary for
Loewen shareholders to assess
9
<PAGE>
whether the acquisition of Prime Succession actually will increase Loewen's
value. Loewen knowingly has made such material misstatements and omissions
in order to inflate artificially the price of its stock in connection with
the proposed Tender Offer and to rally the support of its shareholders in
opposition to such offer.
34. On September 20, 1996, three days after receiving notice that
SCI desired to acquire Loewen, Loewen and Blackstone issued a press release
stating that the parties had begun a new venture and had entered into a
definitive agreement to acquire the cemetery and mortuary operations and
assets of The Rose Hills Memorial Park Association and Roses, Inc. ("Rose
Hills") for $240 million. The press release states that Loewen has a call
option to purchase Blackstone's equity interest in Rose Hills after four
years. The exercise price for this call option has never been disclosed.
Furthermore, the press release does not disclose whether Blackstone has a put
option to force Loewen to purchase its interest in Rose Hills. On
information and belief based upon an analysis conducted by the First Call
Research Network and upon a Loewen source quoted in newspaper descriptions of
the transaction, SCI believes that a put option exists, but the terms and
conditions of such option have not been disclosed to Loewen's shareholders.
35. In the September 20 press release and in other statements to
the press, Loewen consistently has touted its acquisition of Rose Hills,
indicating that such acquisition will enhance substantially its earnings per
share and long-term value to Loewen shareholders. Loewen, however, has never
disclosed (i) the exercise price of its call option to purchase Blackstone's
interest to Rose Hills, or (ii) whether Blackstone has a put option to force
Loewen to purchase its interest in Rose Hills. Such information is
10
<PAGE>
necessary for Loewen shareholders to assess whether the acquisition of Rose
Hills actually will increase Loewen's value. Consequently, such descriptions
of the Rose Hills acquisition contain material misstatements and omissions,
and were made knowingly by Loewen to inflate artificially the price of its
stock in connection with the proposed Tender Offer and to rally the support
of its share holders in opposition to the offer.
36. Loewen also has consistently referred to both the Rose Hills
and Prime Succession acquisitions as examples of Loewen's value and financial
strength and has indicated that the promise of these acquisitions should lead
Loewen shareholders to reject the proposed Tender Offer. Such statements
include statements made by Mr. Loewen to the Dow Jones News Service and on a
national broadcast of CNBC on October 2, 1996, in response to and in
connection with SCI's announcement that it intends to commence the Tender
Offer. The press releases and other public statements regarding these
transactions are intentionally misleading as to the value of these
transactions to Loewen and do not contain material information regarding
important aspects of these transactions. These misstatements and omissions
are purposeful, and have been committed with the express manipulative intent
of artificially inflating the value of Loewen's stock in connection with the
proposed Tender Offer and thwarting the proposed Tender Offer.
INJURY TO SCI CAUSED BY LOEWEN'S CAMPAIGN
37. SCI does not know whether -- notwithstanding their lack of
standing to sue -- the Loewen Defendants in fact intend to attempt to institute
an action to block or impede SCI's offer under the federal antitrust laws.
Loewen's efforts to create the impression that the Loewen Defendants can do so,
however, have injured and continue
11
<PAGE>
to threaten to injure SCI even apart from any actual attempt by the Loewen
Defendants to institute such an action:
(a) In order to be successful, SCI's offer will have to be
accepted by a substantial majority of the holders of Loewen's stock.
Loewen's efforts to call into question the ability of SCI to consummate a
business combination with Loewen by creating the impression that the Loewen
Defendants have the capacity to block it under the federal antitrust laws
have created, and threaten to continue to create, confusion, cause Loewen
shareholders to make ill-informed decisions, and influence them not to
participate in SCI's offer, thereby preventing SCI from gaining the necessary
acceptances.
(b) Loewen's shareholders moreover, are especially susceptible to
Loewen's misinformation campaign. Loewen -- as a Canadian company -- has
many shareholders who are not located in the United States and who are
consequently particularly unfamiliar with the intricacies of American
antitrust laws.
(c) Indeed, the press has already reported that "some concern" has
been raised "on Wall Street about potential antitrust issues" regarding an
SCI-Loewen combination (Reuters, September 20, 1996) and that "[t]raders"
have "cited potential antitrust issues" as grounds for uncertainty about the
SCI offer (Reuters, September 17, 1996).
(d) Loewen is aware of the foregoing, and Loewen's desire to
create confusion and spread misinformation, thereby influencing its
shareholders to decline to participate in SCI's offer, has been its principal
motivation for engaging in the conduct described above.
12
<PAGE>
(e) Loewen's misstatements and omissions as to the value of the
Prime Succession and Rose Hills acquisitions were made in connection with the
proposed Tender Offer and are also damaging because they artificially inflate
the value of Loewen's stock and give Loewen's shareholders a false belief
that their stock is worth more than it actually is. As a result, they may
reject SCI's proposed Tender Offer based on such misstatements and omissions.
FIRST CLAIM FOR RELIEF
38. Plaintiff repeats and realleges paragraphs 1 through 37 as if
set forth herein.
39. Loewen has undertaken, and is continuing to undertake, efforts
to create the impression among Loewen shareholders that the Loewen Defendants
have standing to bring an action to block or impeded SCI's exchange offer
under the federal antitrust laws.
40. Contrary to the impression Loewen seeks to create, the Loewen
Defendants do not have standing to institute any action seeking to block or
impede a business combination of SCI and Loewen under any antitrust theory.
41. Whether the Loewen Defendants actually intend to attempt to
institute such action, their efforts to create the impression that they have
the ability to do so threatens SCI with immediate irreparable injury by
misleading Loewen shareholders about the validity and legality of the SCI
offer, thereby causing them to make ill-informed decisions with respect to
that offer and discouraging them from participating in it.
13
<PAGE>
42. By reason of the foregoing, an actual controversy exists
between SCI and the Loewen Defendants regarding the conduct set forth above.
43. Pursuant to 28 U.S.C. Section 2201, SCI is therefore entitled
to declaratory relief from this Court.
SECOND CLAIM FOR RELIEF
44. ASCI repeats and realleges paragraphs 1 through 43 as if set
forth herein.
45. Loewen's actions and efforts have been designed to thwart or
hamper, through prohibited and illegal means, SCI's consummation of
reasonably probable stock purchases from individual Loewen stockholders.
These actions have not been taken for the purpose of enhancing the real value
of Loewen's stock; but rather to inflate artificially the value of Loewen's
stock, and thus entrench the position and prestige of Mr. Loewen and Loewen
management.
46. Loewen's actions and statements were made knowingly and with
the intent to interfere with the prospective business relations between SCI
and individual Loewen stockholders.
47. Loewen can offer no legal justification for its actions.
48. SCI has been damaged by the Loewen Defendants' tortious
interference with SCI's prospective business relations with individual Loewen
stockholders.
14
<PAGE>
THIRD CLAIM FOR RELIEF
49. SCI repeats and realleges allegations in paragraphs 1 through 48
as if fully set forth herein.
50. Loewen's actions from September 17, 1996 constitute willful,
intentional and knowing violations of Section 14(e) of the Securities Exchange
Act of 1934, 15 U.S.C. Section 78n(e). The relevant portion of Section 14(e)
states:
It shall be unlawful for any person to make any untrue statement
of a material fact or omit to state any material fact necessary
in order to make the statements made, in the light of the
circumstances under which they are made, not misleading, or to
engage in any fraudulent, deceptive, or manipulative acts or
practices in connection with any tender offer or request or
invitation for tenders, or any solicitation of security holders
in opposition to or in favor of any such offer, request, or
invitation.
The purpose of this section is to guarantee full information and full
disclosure to the market and more specifically to the shareholders in
connection with a tender offer. Section 14(e) mandates a level playing field
between the target and the offeror so that the shareholders can make informed
decisions regarding their investments.
51. Loewen has violated Section 14(e) by its misleading and
deceptive statements regarding the possible antitrust violations SCI's offer
might raise, and that the Loewen Defendants have standing to block or impede
the proposed Tender Offer under the antitrust laws.
52. The Loewen Defendants have violated Section 14(e) by making
material misstatements and omissions, with respect to, among other things,
the Rose Hills and Prime Succession transactions, thereby preventing the
market and the shareholders from obtaining the information necessary to make
a full and informed decision regarding SCI's proposed Tender Offer.
15
<PAGE>
53. The Loewen Defendants have violated Section 14(e) by making
statements to the press regarding the joint purchases of Rose Hills and Prime
Succession that are misleading and contain material omissions.
54. Loewen also has violated Section 14(e) as a result of its
negative comments regarding the business practices of SCI. Loewen's
president has made repeated comments to the press that SCI "has a history of
slashing and burning," and that SCI is perceived within the death care
industry as a heavy-handed, authoritarian company. These comments are
unfounded, deceptive, malicious and materially misleading.
55. These statements were all made in anticipation of and in
connection with the SCI Tender Offer, and such statements are deceptive,
materially misleading, and manipulative. Such statements were made with the
intent to confuse Loewen shareholders and the market in general by making the
Tender Offer appear less attractive and to injure SCI. Accordingly, such
statements violate Section 14(e) of the Securities Exchange Act of 1934, and
Loewen should be prohibited from making any further deceptive and malicious
statements.
56. Accordingly, SCI requests this Court to preliminarily and
permanently enjoin the Loewen Defendants from any further violations of
Section 14(e) in connection with SCI's ongoing Tender Offer, to order the
Loewen Defendants to correct any previous misleading and manipulative
statements, and to fully disclose all material matters in any communications
to its shareholders or the investing public in connection with the proposed
Tender Offer.
16
<PAGE>
WHEREFORE, Plaintiff SCI seeks judgment as follows:
A. Declaring that the Loewen Defendants lack stating to
institute, and accordingly may not institute, any action seeking to block or
impede any SCI exchange offer for Loewen stock under any theory of federal
antitrust law;
B. Awarding SCI damages for the Loewen Defendants' tortious
interference with SCI prospective business relations;
C. Preliminarily and permanently enjoining the Loewen Defendants
from violating Section 14(e) of the Securities Exchange Act of 1934;
D. Awarding plaintiff its costs of suit, including reasonable
attorneys' fees; and
E. Granting plaintiff such other and further relief as the Court
may deem just and proper.
DATED: October __, 1996
Respectfully submitted,
----------------------------------------
John L. Hill, Jr.
State Bar No. 00000027
3400 Texas Commerce Tower
Houston, Texas 77002
(713) 226-1200
(713) 223-3717 (Fax)
ATTORNEY-IN-CHARGE FOR PLAINTIFF
SERVICE CORPORATION INTERNATIONAL
17
<PAGE>
OF COUNSEL:
LIDDELL, SAPP, ZIVLEY,
HILL & LaBOON, L.L.P.
Jess H. Hall, Jr.
State Bar No 08783000
D. Mitchell McFarland
State Bar No. 13597700
Harold K. Watson
State Bar No. 20938500
Jeff Weems
State Bar No. 21072600
James E. Essig
State Bar No. 06671900
3400 Texas Commerce Tower
Houston, Texas 77002
(713) 226-1200
(713) 223-3717 Facsimile
18
<PAGE>
EXHBIT 16
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NEW YORK
THE LOEWEN GROUP INC. )
4126 Norland Avenue )
Burnaby British Columbia )
V5G 3S8, ) Civil Action No.:
)
and )
)
LOEWEN GROUP INTERNATIONAL, INC. )
50 East River Center Boulevard )
Covington, Kentucky 41011, )
)
and ) VERIFIED COMPLAINT
)
RIDGE CHAPELS, INC. )
405 91st Street )
Brooklyn, New York 11209 )
)
Plaintiffs, )
)
v. )
)
SERVICE CORPORATION INTERNATIONAL, INC. )
1929 Allen Parkway )
Houston, Texas 77019, )
)
and )
)
EQUITY CORPORATION INTERNATIONAL, INC. )
415 South First Street )
Suite 210 )
Lufkin, Texas 75901 )
)
and )
)
NEW SERVICE CORPORATION INTERNATIONAL, INC., )
c/o its Statutory Agent )
Corporation Trust Company )
1209 Orange Street )
Wilmington, DE 19801 )
)
Defendants. )
<PAGE>
Plaintiffs The Loewen Group Inc. ("TLGI"), Loewen Group International,
Inc. ("LGII") and Ridge Chapels, Inc. ("Ridge") complain against defendants
Service Corporation International, Inc. ("SCI") and Equity Corporation
International, Inc. ("ECI"), as follows:
JURISDICTION
1. This action is brought to enjoin violations of, and obtain relief
under, Sections 4, 12 and 16 of the Clayton Act, 15 U.S.C. Sections 15, 22 and
26, to prevent and restrain violations by SCI of Section 7 of that Act, 15
U.S.C. Section 18, and to prevent and restrain violations by SCI and ECI of
Section 1 of the Sherman Act, 15 U.S.C. Section 1. Jurisdiction is based upon
28 U.S.C. Section 1331 and 28 U.S.C. Section 1337(a). Venue is proper in this
district under 15 U.S.C. Section 22 and 28 U.S.C. Section 1391(b).
THE PLAINTIFFS
2. Plaintiff TLGI is a corporation that is incorporated under the
laws of the province of British Columbia, Canada, with its principal place of
business located at 4126 Norland Avenue, Burnaby, British Columbia.
3. Plaintiff LGII is a corporation that is incorporated under the
laws of the State of Delaware, with its principal place of business located at
50 East River Center Boulevard, Covington, Kentucky 41011. TLGI owns 90% of the
stock of LGII.
4. TLGI, through entities owned directly or indirectly by its
subsidiary LGII (together, "TLGI/LGII"), as of September 20, 1996, owned and
operated more than 814 funeral homes, and 265 cemeteries in the United States.
TLGI/LGII is the second largest owner and operator of funeral homes, cemeteries
and crematoria in the United States. LGII also owns approximately 23% of the
voting securities of Prime Succession, Inc. ("Prime"), which, as of September
30, 1996, owned 146 funeral homes and 16 cemeteries in
2
<PAGE>
the United States. LGII has the contractual right to acquire the remainder of
Prime's outstanding voting securities in approximately four years.
5. LGII, through subsidiary corporations, owns and operates 12
funeral homes and one cemetery in this judicial district.
6. Plaintiff Ridge is a corporation that is incorporated under the
laws of the State of New York, with its principal place of business located at
405 91st Street, Brooklyn, New York 11209. LGII owns all of the stock of Ridge.
Ridge owns and operates a funeral home at that location.
DEFENDANTS SERVICE CORPORATION INTERNATIONAL, INC. AND
NEW SERVICE CORPORATION INTERNATIONAL, INC.
7. Defendant SCI is a corporation that is incorporated under the
laws of the State of Texas, with its principal place of business located at 1929
Allen Parkway, Houston, Texas 77019.
8. Defendant New Service Corporation International, Inc. ("New SCI")
is a wholly owned subsidiary of SCI, incorporated under the laws of the State of
Delaware. SCI incorporated New SCI on September 30, 1996. No principal place
of business has yet been established for New SCI.
9. On information and belief, SCI, or its subsidiaries as of July
30, 1996, owned and operated 2,832 funeral homes, 331 cemeteries and 146
crematoria throughout the world. SCI is the largest owner and operator of
funeral homes, cemeteries and crematoria in the United States, owning and
operating approximately 920 funeral homes and 300 cemeteries in this country.
SCI described itself in its 1995 Annual Report as "the world's largest death
care provider" and "the acknowledged leader" of the industry, indicating that it
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"expands by acquiring existing funeral homes and cemeteries" and that fiscal
1995 marked "the most dramatic expansion . . . in its history."
10. SCI operates a global network of funeral homes, cemeteries and
crematoria, including approximately 20 funeral homes in this judicial district.
SCI directs all relevant activities of its death care subsidiaries and operates
its death care subsidiaries, including those in this district, as part of an
overall enterprise. As SCI states in its 1995 Annual Report, SCI supplements
the local efforts of its operating companies "by maintaining a support staff of
specialists at its Houston headquarters . . . in the areas of demographics,
marketing and advertising; legal matters, including regulatory compliance and
governmental affairs; plus training, construction and public relations." SCI is
transacting business in this district and is found in this district through the
direction and operation of its death care subsidiaries located in this district.
SCI is also directing its exchange offer, as described below, to residents of
this district.
11. SCI is currently subject to at least three Federal Trade
Commission ("FTC") consent orders, pursuant to which SCI is prohibited for
periods of time extending into the next century from acquiring funeral home
operations in specified markets in at least Georgia, Tennessee, Arkansas and
California.
DEFENDANT EQUITY CORPORATION INTERNATIONAL, INC.
12. Defendant ECI is a corporation that is organized under the laws
of the State of Delaware, with its principal place of business located at 415
South First Street, Suite 210, Lufkin, Texas 75901. According to published
reports, ECI owns and operates 163 funeral homes and 62 cemeteries in 23 states.
ECI is the fourth largest publicly-traded death care company in this country.
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13. Although holding themselves out as independent competitors, SCI
and ECI have very close relationships, and have engaged in conduct from which
joint rather than independent action may be inferred. This conduct includes,
INTER ALIA, the following:
a. SCI, in cooperation with an individual named James P. Hunter,
III, organized ECI in 1990, by spinning off the assets of an SCI division that
consisted at the time of 71 funeral homes and three cemeteries.
b. Hunter was an employee of SCI at the time of the spin-off, and
headed the division that held the assets that were spun off to ECI.
c. On information and belief, SCI currently owns approximately
40% of the voting securities of SCI.
d. On information and belief, a director of SCI, T. Craig Benson,
is also a director of ECI.
e. Thomas R. McDade, who, on information and belief, is a
director of ECI, has appeared as counsel of record for SCI in the lawsuit filed
in the U.S District Court for the Southern District of Texas by SCI against TLGI
and LGII relating to the takeover attempt that is the subject of this lawsuit,
and, on information and belief, is regular counsel to SCI.
f. Many of the other officers and directors of ECI have prior
employment relationships, or other strong ties with ECI.
g. SCI has used ECI as a repository for many of the funeral homes
and cemeteries that the FTC has required SCI to divest under the consent orders
described above, and now operates those funeral homes and cemeteries in markets
in which SCI also operates funeral homes and/or cemeteries.
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h. SCI and ECI have teamed together to compete against LGII for
the acquisition of funeral homes and cemeteries. LGII recently outbid SCI and
ECI to acquire CMS West, a Pennsylvania-based operator of seven funeral homes
and 28 cemeteries.
i. In situations in which SCI and ECI appeared to have both been
interested in bidding to acquire funeral homes or cemeteries, one but not the
other has actually submitted proposals.
j. On September 21, 1996, it was reported in the NEW YORK TIMES
that SCI was upset at TLGI/LGII in the aftermath of being outbid by LGII for
Rose Hills, one of the largest cemeteries and mortuaries in the country, for
"overpaying for funeral home operations and cemeteries". L. William
Herligbrodt, SCI's President stated: "this [activity] was one of the things
that spurred us forward--what other kinds of transactions this company [LGII]
might do." ECI's chief executive officer told BUSINESS WEEK that "[i]f Loewen's
out of the picture, we can bring a little more rationale to the acquisition
table for all of us."
14. The actions of New SCI, and SCI on its own and in combination with
its co-conspirator ECI, are designed to eliminate TLGI/LGII as a competitive
factor in numerous markets across the United States.
15. Defendant ECI, as a co-conspirator of SCI as alleged below, is
subject to personal jurisdiction in this district.
THE PROPOSED TAKEOVER
16. On October 1, 1996, SCI announced its intention to launch a
stock-for-stock exchange offer, pursuant to which SCI intends to offer to
acquire all of the voting securities of TLGI. Under the plan, New SCI would
issue the stock to be exchanged for the TLGI shares. By this lawsuit,
plaintiffs seek to enjoin that proposed acquisition on the
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grounds that SCI's proposed acquisition of TLGI may lessen competition or tend
to create a monopoly in several lines of commerce in the United States in
violation of the anti-merger provisions of Section 7 of the Clayton Act, 15
U.S.C. Section 18. Further, by this lawsuit, plaintiffs seek to enjoin SCI and
its co-conspirator, ECI, from conspiring to eliminate TLGI/LGII as a competitor
in various markets across the United States in violation of Section 1 of the
Sherman Act.
17. In the wake of SCI's announcement of its proposed acquisition, a
state antitrust enforcement agency, the Attorney General's Office for the State
of Florida, has issued civil document subpoenas to investigate the antitrust
issues raised by SCI's proposed acquisition. In addition, antitrust enforcement
agencies in California, Hawaii, New York Tennessee and Texas have asked LGII for
information as they investigate the antitrust issues raised by the proposed
acquisition and, upon information and belief, the FTC is investigating the
proposed transaction as well.
RELEVANT MARKETS
18. "Funeral services" are a group of services provided at the death
of an individual, including the provision of a ceremony commemorating the life
of the deceased, at which ceremony the body of the deceased is usually present;
this group of services may include, but is not limited to: the removal of the
body from the place of death; its embalming or other preparation; making
available a place for visitation and viewing and for the conduct of a funeral
service; and the arrangement for and conveyance of the body to a cemetery or
crematory for final disposition. Funeral service providers are regulated by
federal and state agencies. There are no substitutes to the consumer for the
group of services that are known as funeral services.
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19. There are numerous lines of commerce within which SCI, ECI and
plaintiffs compete and/or potentially compete, for purposes of the antitrust
claims in this action:
a. One of the relevant lines of commerce within which to
analyze the effects of SCI's proposed acquisition of TLGI is the provision of
funeral services on an "at-need" basis. "At-need" funeral services, as more
fully described below, are those that are purchased just before or just after
the death of the person to be interred or cremated.
b. A second relevant line of commerce within which to analyze
the effects of SCI's proposed acquisition of TLGI is the provision of "pre-need"
funeral services. "Pre-need" funeral services, as more fully described below,
are those that are purchased significantly in advance of the time that they are
required to be provided.
c. A third relevant line of commerce within which to analyze
the effects of SCI's proposed acquisition of TLGI is the operation of
cemeteries, or places for the permanent interment of an individual's body after
the completion of funeral services.
d. A fourth relevant line of commerce within which to analyze
the effects of SCI's proposed acquisition of TLGI is the market for the purchase
of funeral homes, cemeteries and crematoria (i.e., "death care providers").
20. The above-described product lines are sold or purchased in local
geographic markets, consisting of all or parts of various cities, towns,
counties and metropolitan areas, as well as smaller political subunits and local
areas, across the United States, as more particularly described below. These
local markets are the relevant geographic markets for purposes of this lawsuit.
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21. The violations of law alleged herein occurred in, and have
direct, substantial and foreseeable effects on, interstate commerce. Among
other things, purchasers of funeral and cemetery services are solicited and
procured from across state lines; bodies are shipped in interstate commerce;
goods and services used in funeral and cemetery services are procured and
shipped across state lines; acquisitions of funeral homes and cemeteries are
made from across state lines; telephones, mail and other instrumentalities of
interstate commerce are used in the conduct of the death care business; and
financing for funeral services and for the acquisition of funeral homes and
cemeteries is provided from across state lines.
DESCRIPTION OF THE INDUSTRY
A. THE NATURE OF FUNERAL AND CEMETERY SERVICES.
22. Funerals are among the most costly purchases made by Americans.
In 1995, Americans spent over $7 billion on funeral service purchases. The
average adult funeral today costs approximately $4,000, excluding cemetery
charges.
23. Funeral homes traditionally have been owned and operated as sole
proprietorships or family businesses, or otherwise by small groups of
individuals, who may own one or a few funeral homes or cemeteries in a single
community. Funeral homes and cemeteries typically market and provide their
services to individuals who reside in a local area proximate to the property.
B. THE PRODUCT MARKET FOR THE SALE OF "AT-NEED" FUNERAL SERVICES.
24. Funeral services are purchased either just before or just after a
person's death ("at-need"), or well in advance of a person's death ("pre-need").
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25. Funeral services are typically purchased on an "at-need" basis by
family members or relatives of the deceased. Purchasers of "at-need" services
ordinarily must find a provider on relatively short notice, at a time of
personal sorrow and stress, and when there is often a need to remove the body
from the place of death and prepare it for burial.
26. The consumer of "at-need" funeral services initiates the sales
transaction when the need arises, rather than in response to direct
solicitations by funeral service providers. In many states, solicitation of
sales of "at-need" services is prohibited by law.
27. The "at-need" purchaser provides immediate revenue to the
provider by paying in cash, either from insurance proceeds, available funds or
funds advanced on credit.
C. THE PRODUCT MARKET FOR THE SALE OF "PRE-NEED" FUNERAL SERVICES.
28. Consumers are becoming more aware of the benefits of planning for
funeral services in advance. By making purchases on a "pre-need" basis,
consumers are able to achieve the peace of mind of knowing that their funeral
has been provided for; they are also able to eliminate the emotional strain of
requiring their loved ones to make death care plans at the time of need.
29. Funeral services are typically purchased on a "pre-need" basis by
the person whose death later will be involved. "Pre-need" purchases do not
involve the same time pressures as "at-need" purchases because the services do
not actually have to be delivered until some unknown future date. By purchasing
funeral services on a "pre-need" basis, a consumer is able to select the desired
service and merchandise in advance at prices taht are established at the time of
selection and do not increase.
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30. The "pre-need" purchase is often made in response to sales
solicitation by providers, rather than at the initiation of the purchaser.
Essentially, firms sell "pre-need" services as a way of financing the purchase
of funeral services. The purchase is funded by the creation of a trust account
or the purchase of an insurance policy or annuity. The "pre-need" marketer does
not receive the funds from either the trust or the insurance policies until the
death of the consumer.
31. The primary marketers of "pre-need" services today are the large
funeral home consolidators such as SCI and LGII. Concentration is higher in
markets for the sale of "pre-need" funeral services than for "at-need" services
because independent funeral home operators that are competing in the markets for
"at-need" funeral services usually do not compete in "pre-need" markets. There
are costs, such as the cost of assembling and then paying a dedicated
commissioned sales force, that limit the ability of independent funeral home
operators to market funeral services on a "pre-need" basis.
32. SCI has reported that, at the end of 1995, the combined face value
of all prearranged funeral commitments represented over $2.3 billion in future
revenues to the company. During 1995, as a result of its "pre-need" sales
efforts, SCI generated sales commitments for more than $371 million worth of
merchandise and services which SCI will supply in coming years.
33. LGII generated sales commitments for more than $100 million worth
of merchanduse and services which LGII will supply in coming years. LGII has
expanded its "pre-need" sales efforts as it has increased its presence in large
urban areas.
34. LGII and SCI currently compete in the sale of "pre-need" funeral
services in numerous concentrated local geographic markets. Competition between
SCI and LGII in
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the Los Angeles area, in particular, is intense and is likely to increase (in
the absence of the proposed SCI transaction) now that LGII has announced its
proposed investment in Rose Hills, which may be the largest single combination
funeral home and cemetery operation in the country. This acquisition increases
LGII's market potential in the Los Angeles area as LGII expands its "pre-need"
marketing there.
35. Marketing of "pre-need" services is particularly heavy in Los
Angeles County, California; Houston, Texas; and Southeastern Florida, all areas
of significant overlap between SCI and LGII operations.
36. "Pre-need" sales of funerals have increased substantially over the
past several years. The sale of "pre-need" funerals is expected to increase
still more in the future, and indeed is expected to be the focus of future
growth in the funeral services industry.
D. GEOGRAPHIC MARKETS FOR DEATH CARE SERVICES AND PROVIDERS.
37. Competition for the sale of funeral and cemetery services and for
the purchase of death care providers, typically occurs in local markets across
the United States, generally consisting of towns or small-to-medium sized
cities, metropolitan areas or counties, as well as in sections of larger cities
or counties, or even groups of smaller cities or communities. These local
geographic markets reflect the reality that purchasers do not usually seek to
purchase funeral and cemetery services from sellers that are located far from
the residence or home community of the deceased.
38. There are several reasons for the local nature of competition in
these lines of commerce. Relationships with funeral directors and funeral homes
are often long-standing ones. Consumers routinely purchase funeral services
from a funeral home that
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previously had provided those services to a family member or friend, typically
in the same community. Further, in the case of "at-need" services, family
members often must find a provider while under personal stress and on very short
notice. Generally, there is a desire to have funeral services conducted at a
location that is convenient to the family and friends of the deceased.
Consumers also seek cemetery lots at locations that are typically near the place
of residence of the deceased.
39. The fact that large consolidators such as SCI and LGII market
their services under the names of the local companies that they have acquired,
rather than under their own names, confirms the local nature of the geographic
markets that are involved.
40. Competition in the purchase of funeral homes and cemeteries also
takes place in local markets. The identity of potential interested purchasers
will vary from location to location. Local market factors significantly affect
purchase prices. Those factors include real estate prices in the area, sales
prices of other local market businesses in the area, economic conditions in the
area and sales prices of other funeral homes or cemeteries in the area. The
fact that each funeral home or cemetery is a unique property also makes
competition for the purchase of such properties inherently local.
E. BARRIERS TO ENTRY.
41. There are significant barriers to entry into the funeral services
and cemetery businesses. It takes many years for a funeral home to establish
the reputation within a community that is necessary to compete effectively in
the local area within which the funeral home conducts business. As SCI
explained in its 1995 annual report, the funeral services industry has "high
entry costs" and requires "a lengthy period of time . . . to build a local
clientele." ECI has stated in its 1995 Form 10-K that "[t]he death care
industry is
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characterized by significant barriers to the establishment of a new funeral home
or cemetery."
42. There are large capital costs associated with the building of new
funeral homes and the establishment of cemeteries. Entry on a small scale is
particularly difficult because small competitors are unable to realize the
substantial efficiencies and economies of scale available to large consolidators
such as SCI and TLGI/LGII. Further, local regulations and zoning requirements
make it difficult to build new funeral homes or cemeteries or crematoria in
local communities, and thus inhibit timely entry into local markets. A vast
majority of jurisdictions require the licensing and supervision of individuals
who provide funeral-related services.
F. SCI AND TLGI/LGII ARE THE MAJOR COMPETITORS IN NUMEROUS LOCAL MARKETS
FOR THE AFFECTED LINES OF COMMERCE.
43. In most local areas, funeral services providers and cemetery
operators face competition from only a few competitors. Many local markets
across the country are highly concentrated.
44. SCI and TLGI/LGII are major competitors in the provision of
"at-need" funeral services in numerous markets throughout the United States.
Those local geographic markets include, but are not limited to: Brooklyn, New
York; Pinellas County, Florida, and Clearwater, Florida and surrounding area;
the areas surrounding Cocoa, Titusville and Merritt Island, Florida; eastern
Dade County, Florida; northeast Broward County and Ft. Lauderdale, Florida;
southeast Palm Beach County, Florida; the areas surrounding Naples and Marco
Island, Florida; Tallahassee, Florida; Escambia County, Florida; Fulton County,
Georgia; Chatham County, Georgia; Glynn and Camden Counties, Georgia; Augusta,
Georgia; Bartow County, Georgia; Portland, Oregon metropolitan area; Salem,
Oregon; the
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areas surrounding San Bernardino, Colton and Ontario, California; southwestern
San Diego County and the Chula Vista/Imperial Beach/ San Diego areas and Lemon
Grove/El Cajone, California areas; Los Angeles County, California; Covina,
California; Dimond, California; southeastern Cameron County, Texas; western
Cameron County, Texas; Houston, Texas and the southwestern, southeastern and
northwestern sections of the Houston, Texas metropolitan areas; the Raleigh,
North Carolina metropolitan area; the Charlotte, North Carolina metropolitan
area; Granite Falls, North Carolina; Greensboro, North Carolina; Kernersville,
North Carolina; Anchorage Borough, Alaska; Oahu, Hawaii; Chicago, Illinois; the
Knoxville, Tennessee metropolitan area; and Lynchburg, Virginia.
45. SCI and TLGI/LGII are the major competitors in "pre-need" funeral
services in numerous markets throughout the United States. Those local
geographic markets include those set forth in the preceding Paragraph.
46. SCI and TLGI/LGII are the major competitors in the provision of
cemetery services in numerous markets throughout the United States. Those local
geographic markets include: Denver, Colorado; Pueblo, Colorado; Portland,
Oregon; North King County, Washington; Orange County, California; Paducah,
Kentucky and Ashland, Kentucky.
47. An acquisition of TLGI/LGII by SCI would significantly increase
the already high concentration in these and numerous other local markets in the
sale of funeral and cemetery services. Any such increase in local market
concentration would enhance the likelihood that competition would diminish.
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G. THE GROWTH OF CONSOLIDATORS.
48. The funeral services and cemeteries businesses are undergoing
rapid and dramatic consolidation. A small number of large, multinational firms,
known as "consolidators," are competing for the purchase of independent and
small chains of funeral homes and cemeteries. The two largest consolidators
today are SCI and TLGI/LGII.
49. There are efficiencies that can be achieved when a consolidator
owns more than one funeral home in a local area. Certain elements are necessary
for a funeral home operation, including hearses and limousines; preparation
facilities and administration; and purchasing and personnel. By organizing
funeral homes in an area into a "cluster," the consolidator is able to lower the
overall costs of each of the funeral homes in the cluster.
50. Cluster operations allow a funeral home operator to reduce staff
and resources that, when operated by independent operators, are underutilized.
For example, a chain funeral home operator with multiple facilities in a
particular area may consolidate all embalming operations into a single facility
for the entire area, eliminating those that had existed in individual homes.
Similarly, a chain operator may be able to use a smaller number of hearses,
dispatched throughout a region, to serve the function previously filled by one
or more individual vehicles at each home. There are also purchasing
efficiencies that can be achieved, for example, for caskets and vehicle fleets,
and substantial savings that can be realized from the consolidation of
administratiave and support functions.
51. There are only a limited number of firms that engage in
large-scale consolidation in the funeral home industry. SCI and LGII are the
two largest consolidators, actively competing with one another for properties as
they become available.
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52. On information and belief, SCI, in 1995, acquired 1,263 funeral
homes, 99 cemeteries, and 30 crematoria throughout the world including
approximately 234 funeral homes and cemeteries in the United States. As SCI has
publicly stated, SCI is engaged in "an aggressive expansion program." On
information and belief, SCI has acquired over 400 funeral homes and cemeteries
since 1992.
53. TLGI/LGII, in 1995, acquired 177 funeral homes, 64 cemeteries in
North America. TLGI/LGII has acquired about 600 funeral homes and over 200
cemeteries in North America since the early 1990s.
54. TLGI/LGII has focused in particular upon consolidation
opportunities in the United States. TLGI/LGII is one of the industry's more
efficient firms, focusing not only on acquisitions, but on controlling its
operating expenses. Thus, TLGI/LGII plays a vital role as a low-cost domestic
operator of funeral homes and cemeteries.
55. The third largest consolidator in the United States is Stewart
Corporation International ("Stewart"), which, on information and belief, has
only approximately 275 properties in the United States, and is thus far smaller
than either SCI or LGII. Stewart is less than one-sixth the size of SCI, and
less than one-fifth the size of LGII in terms of numbers of facilities.
56. ECI, a defendant in this action, is the fourth largest
consolidator with approximately 150 properties in the United States. As alleged
herein, ECI is 40% owned by SCI, and acts in concert with SCI in the funeral
homes and cemeteries business.
57. Carriage Funeral Services is the fifth largest consolidator, with
approximately 50 funeral homes in the United States. SCI, at a minimum, has
debt investments in Carriage.
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58. In 1995, SCI acquired Gibraltar Mausoleum Corporation, which was
one of the major consolidators in the country.
59. If SCI were to acquire TLGI, SCI would own or have investments in
all but one of the companies that currently are competing as consolidators in
numerous local markets throughout the United States. The remaining
consolidator, Stewart, would be approximately one-eighth the size of the
combined SCI/TLGI operator. SCI would also inherit an approximately 23%
investment in Prime, and an option to purchase the rest of Prime, another
consolidator in which LGII currently has an investment.
60. SCI and TLGI/LGII have competed and are now competing aggressively
against each other for the acquisition of funeral homes and cemeteries
throughout the United States. LGII has outbid SCI for the acquisition of
funeral homes on a number of occasions.
61. Competition between SCI and LGII in the purchase of funeral homes
and cemeteries is graphically illustrated by the two firms' attempts to purchase
Rose Hills Memorial Park and Rose Hills Mortuary in Whittier, California. SCI
opened the bidding for the properties with an indication of interest in the
$180-210 million range. LGII entered the competition with an indication of
interest below that of SCI's. When Rose Hills engaged investment bankers to
assist in the sale, SCI made a firm bid of $220 million and indicated that it
could increase. LGII bid a range of $220-250 million. LGII ultimately
prevailed, purchasing the properties for $240 million through its investment in
its acquisition corporation, Tudor Acquisition Corporation. No other firms
competed against SCI and TLGI for the Rose Hills properties once the indications
of interest exceeded $200 million. Rose Hills' prior owners plainly benefited
from the competition between SCI and LGII to acquire those properties.
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62. The intense competition between the two firms is no secret to the
industry or outside observers: "industry analysts said the [proposed]
acquisition [by SCI of TLGI] could have a secondary favorable impact for Service
Corp. [I.E., SCI] by absorbing another thirsty acquirer." (WALL ST. JOURNAL,
September 18, 1996, at A-3.)
63. Competition between SCI and TLGI/LGII for the acquisition of
funeral homes and cemeteries has benefited the independent owners of those homes
and cemeteries, because the bidding between SCI and TLGI/LGII has increased the
prices that independent owners have received for their properties. TLGI/LGII
has been instrumental in setting market prices for the acquisition of funeral
homes and cemeteries in local areas. In the absence of the actual and
threatened competition that SCI has faced from TLGI/LGII, independent funeral
home owners likely would have been forced to accept lower bids for their
properties. Other funeral home operators would have determined not to sell
their properties.
64. SCI understands that competition for TLGI/LGII has benefited
independent funeral home operators. As noted above, SCI criticized TLGI/LGII
for "overpaying for funeral home operations and cemeteries," and was
"spurred...forward [by] what other kinds of transactions this company
[TLGI/LHII] might do." As also noted above, ECI observed that TLGI/LGII's being
"out of the picture" would bring "more rationale to the acquisition table for
all of us."
65. In the wake of SCI's proposed acquisition of TLGI, LGII has
received numerous requests from independent funeral home operators who are
seeking bids from LGII to acquire their properties, prior to any SCI acquisition
of TLGI. Those owners plainly fear that any acquisition of TLGI by SCI would
depress the value of their funeral homes.
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66. SCI's proposed acquisition of TLGI/LGII will eliminate TLGI/LGII
as a direct competitor in the market for the acquisition of funeral homes and
cemeteries. If SCI is permitted to restrain the competitiveness of TLGI/LGII by
acquiring TLGI, consumers of funeral and cemetery services will suffer. When no
longer faced with the threat that the only other major competing purchaser might
acquire an attractive property, SCI is likely to be less aggressive in pursuing
the acquisition of those properties that it wants for itself, and will not be
pursuing at all the acquisition of those properties that LGII alone might have
targeted for purchase. At a minimum, the rate of consolidation is very likely
to decrease. The spread of efficient and low-cost operations will be impeded,
and consumers will be denied the benefits that flow from modernization and
clustering. In many local markets, SCI will no longer have to concern itself
with the presence of a competitor capable of achieving the same efficiencies by
acquiring and consolidating death care providers. In the absence of such a
competitor, consumers of funeral and cemetery services are not as likely to
benefit from efficiency-driven price competition as soon as or to the extent
that they would benefit if TLGI/LGII were not eliminated as an alternative
purchaser of funeral homes and cemeteries. Owners of funeral homes and
cemeteries will also be injured by the withdrawal of TLGI/LGII as an independent
competitor in the purchase of their businesses in that they will not receive as
much consideration for their businesses as they would have received if SCI had
not acquired TLGI.
67. If SCI is permitted to acquire TLGI, SCI will eliminate a
potential competitor in those local markets where SCI is enjoined by FTC consent
order from acquiring funeral homes and cemeteries. Thus, by acquiring TLGI, SCI
would be able to
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protect its market power in those markets where the FTC has determined that SCI
is enjoined from further acquisitions.
68. If SCI is permitted to acquire TLGI, SCI will cause TLGI/LGII to
restrain their own competitiveness, and thereby reduce competition in all of the
relevant markets described above.
COUNT ONE -- SECTION 7 OF THE CLAYTON ACT
VIOLATION ALLEGED
69. TLGI/LGII repeat and reallege each of the foregoing allegations,
as if fully rewritten herein.
70. The effect of the acquisition of TLGI by SCI may be substantially
to lessen competition or tend to create a monopoly, in violation of Section 7 of
the Clayton Act, in each of the following lines of commerce:
a. the sale of "at-need" funeral services in at least the local
geographic markets specified in paragraph 44, above;
b. the sale of "pre-need" funeral services in at least the local
geographic markets specified in paragraph 45, above;
c. the sale of cemetery services in at least the local geographic
markets specified in paragraph 46, above;
d. the purchase of funeral homes and cemeteries in, at a minimum,
each of the local geographic markets specified above, and additionally, in local
geographic markets into which LGII would have expanded in competition against
SCI.
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COUNT TWO -- SECTION 1 OF THE SHERMAN ACT
71. TLGI/LGII repeat and reallege each of the foregoing allegations,
as if fully rewritten herein.
72. SCI and ECI have conspired to restrain trade in violation of
Section 1 of the Sherman Act, by assisting SCI in its efforts to acquire TLGI
and thus endeavoring to eliminate TLGI/LGII as a competitive factor in at least
the numerous markets alleged in paragraphs 44-46, above.
PUBLIC INTEREST
73. The acquisition of TLGI by SCI, if not preliminarily and
permanently enjoined, will injure the public interest and result in irreparable
harm to that interest as follows:
a. Competition may be immediately and substantially lessened
and a monopoly may tend to be created in violation of Section 7 of the Clayton
Act, in the multitude of lines of commerce set forth above;
b. Concentration in those lines of commerce will be increased
and the tendency toward concentration will be accelerated;
c. Barriers to entry in those lines of commerce will be
increased; and
d. Competition will be adversely affected by the conspiracy
between SCI and ECI in violation of Section 1 of the Sherman Act.
74. In addition, members of the public will be injured in the event
immediate injunctive relief is not granted for the reason that the investing
public will be required to make decisions with respect to the purchase, sale and
tender of TLGI stock in a
22
<PAGE>
volatile market without full appreciation of the antitrust implications of the
transaction contemplated by the SCI offer.
IRREPARABLE HARM
75. If TLGI and LGII are not provided with the preliminary injunction
requested, TLGI and its shareholders will also be injured and suffer irreparable
harm, as follows:
a. SCI's activities have caused and will continue to cause
serious dislocation in the conduct of TLGI's normal business in that, as a
result of the uncertainty regarding the future management of TLGI, the conduct
of TLGI's business and the management of its investments have been and will be
impaired;
b. TLGI's relationship with its customers and suppliers have
been and will continue to be damaged by the uncertainties generated by SCI's
activities;
c. TLGI's working relationship with its employees and the
morale of said employees have been and will continue to be impaired by the
uncertainties generated by SCI's activities;
d. TLGI has already been and will continue to be subjected to
litigation arising by reason of SCI's tender offer, and may be subjected to
potential treble damage liability because of the illegality of the proposed
acquisition;
e. The assets and operations of TLGI and SCI will become
commingled, and its personnel will be dispersed or discharged, thus making it
impossible to restore TLGI fully to its present independent status if the
proposed acquisition is eventually held to be illegal; and
23
<PAGE>
f. SCI will acquire a "listening line" to TLGI's trade secrets,
business strategies and confidential business operations, thereby affording SCI
an unfair and significant competitive advantage over TLGI even if SCI is able to
divest TLGI if the proposed merger is later held to be illegal.
76. TLGI and LGII have no adequate remedy at law.
PRAYER
WHEREFORE, plaintiffs pray:
1. That defendants SCI's and New SCI's above-described acquisitions
and proposed acquisitions of TLGI stock be adjudged violations of Section 7 of
the Clayton Act and Section 1 of the Sherman Act.
2. That it be adjudged that SCI and ECI have participated in a
conspiracy to restrain trade in violation of Section 1 of the Sherman Act.
3. That it be determined that TLGI and its stockholders will be
irreparably harmed by any further acquisition of TLGI stock by SCI or New SCI
prior to adjudication of this action on the merits.
4. That, pending final adjudication of the merits of this action,
defendants, SCI and New SCI, and their directors, officers and employees and
their subsidiaries, and all other persons acting in concert with or on behalf of
said defendant, be temporarily restrained and preliminarily enjoined, jointly
and severally, from directly or indirectly:
a. acquiring or attempting to acquire any shares of TLGI stock;
b. making or attempting to make any tender offer or request or
invitation for tenders of any shares of TLGI stock;
c. voting in person or by proxy any shares of TLGI stock;
24
<PAGE>
d. exercising or attempting to exercise, directly or
indirectly, any influence upon the management of TLGI; and
e. taking any other steps in furtherance of their unlawful plan
to purchase the stock or acquire control of TLGI.
5. That SCI and New SCI be required to divest itself of any and all
TLGI stock it may own beneficially or of record.
6. That it be declared and decreed that TLGI is entitled to refuse
to transfer on its books any TLGI stock purchased by the defendants or their
affiliates or any of them and to refuse to recognize the vote with respect to
any security purchased by defendants or their affiliates or any of them.
7. The TLGI be granted such other and further relief as this Court
may deem just and proper.
8. That TLGI recover from defendant the cost of this suit and
reasonable attorney's fees incurred by it.
Respectfully submitted,
----------------------------------------
George T. Manning
Michael Templeton
Jones Day Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
(212) 326-3939
Attorneys for Plaintiff
25
<PAGE>
OF COUNSEL:
John W. Edwards II
Thomas Demitrack
John M. Majoras
Jones Day Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
(216) 586-3939
J. Kevin Cogan
Jones Day Reavis & Pogue
1900 Huntington Center
Columbus, Ohio 43215
(614) 469-3939
26
<PAGE>
VERIFICATION
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
Now personally comes the undersigned, on this 10th day of October,
1996 and says that he is President of the Northeast Division of Loewen Group
International, Inc., one of the Plaintiffs in the above-entitled and numbered
cause; that he has read the above and foregoing Complaint, that he is authorized
and qualified in all respects to make this verification and to act on behalf of
Plaintiff corporations; and that every statement of fact contained herein is the
best of his personal knowledge and belief true and correct, or is based on
information provided by others that he believes to be reliable.
-----------------------------------
George Amato
Sworn to before me and subscribed in my presence this
_____ day of October, 1996.
-----------------------------------
Notary Public
<PAGE>
EXHIBIT 17
[Smith Barney Letterhead]
October 10, 1996
The Board of Directors
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, B.C. VSG 3S8
CANADA
Members of the Board:
You have requested our opinion with respect to the adequacy, from a financial
point of view, of the consideration proposed to be offered by Service
Corporation International ("SCI") to the holders of the common shares and the
preferred shares of The Loewen Group Inc. ("LWN") as set forth in a
Registration Statement on Form S-4 filed with the Securities and Exchange
Commission on October 3, 1996 (the "SCI Registration Statement") by New
Service Corporation International ("New SCI") and SCI Holdings Canada, Inc.
("Canadian SCI"), each wholly owned subsidiaries of SCI, pursuant to which
SCI has proposed to offer to exchange (i) for each outstanding Common Share,
without par value, of LWN (the "LWN Common Shares"), including associated
common share purchase rights, that number of shares of the common stock, par
value $0.01 per share, of New SCI (the "New SCI Common Stock") or, at the
election of the holder thereof, that number of exchangeable shares, without
par value, of Canadian SCI (the "Canadian SCI Exchangeable Shares"), equal to
the quotient determined by dividing U.S. $45.00 by the average of the high
and low sales prices of the common stock, par value $1.00 per share, of SCI
(the "SCI Common Stock"), as reported on the New York Stock Exchange
Composite Tape, on each of the 20 consecutive trading days ending with the
third trading day immediately preceding the expiration date of the proposed
exchange offer (the "Share Exchange Ratio"); provided that the Share Exchange
Ratio will not be greater than 1.76471 and (ii) for each outstanding 6.00%
Cumulative Redeemable Convertible First Preferred Share, Series C, without
par value, of LWN (the "LWN Preferred Shares"), that number of shares of New
SCI Common Stock or, at the election of the holder thereof, that number of
Canadian SCI Exchangeable Shares, equal to the product of (i) the Share
Exchange Ratio and (ii) 0.65574 (the "Preferred Share Exchange Ratio");
provided that the Preferred Share Exchange Ratio will not be greater than
1.15719 (such proposed exchange offer, the "SCI Proposed Exchange Offer").
In arriving at our opinion, we reviewed the SCI Registration Statement and
held discussions with certain senior officers, directors and other
representatives and advisors of LWN concerning the business, operations and
prospects of LWN. We examined certain publicly available business and
financial information relating to LWN as well as certain financial forecasts
and other data for LWN which were provided to or otherwise discussed with us
by the management of LWN. We reviewed the financial terms of the SCI Proposed
Exchange Offer in relation to, among other things: current and historical
market prices and trading volumes of the LWN Common Shares and the LWN
Preferred Shares; the historical and projected earnings and other operating
data of LWN; and the capitalization and financial condition of LWN. We also
considered, to the extent publicly available, the financial terms of certain
other similar transactions recently effected which we considered relevant in
evaluating the SCI Proposed Exchange Offer and analyzed certain financial,
stock market and other publicly available information relating to the
businesses of other companies whose operations we considered relevant in
evaluating those of LWN. In addition to the foregoing,
<PAGE>
The Board of Directors
The Loewen Group Inc.
October 10, 1996
Page 2
we conducted such other analyses and examinations and considered such other
financial, economic and market criteria as we deemed appropriate in arriving
at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed
by or discussed with us. With respect to financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with
us, we have discussed with the management of LWN, and with your consent have
relied on, various operational and financial assumptions as to the future
financial performance of LWN. We have not made or been provided with an
independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of LWN nor have we made any physical inspection of the
properties or assets of LWN. In connection with our engagement, we have not
been requested to approach, and have not approached or held discussions with,
third parties to solicit indications of interest in the acquisition of all or
a part of LWN. Our opinion is necessarily based upon information available to
us, and financial, stock market and other conditions and circumstances
existing and disclosed to us, as of the date hereof.
Smith Barney has been engaged to render financial advisory services to LWN in
connection with the SCI Proposed Exchange Offer and certain related matters
and will receive a fee for our services. In the ordinary course of our
business, we and our affiliates may actively trade or hold the securities of
LWN and SCI for our own account or for the account of our customers and,
accordingly, may at any time hold a long or short position in such
securities. We have in the past provided and are currently providing
financial advisory and investment banking services to LWN unrelated to the
SCI Proposed Exchange Offer, and have received and will receive compensation
for such services.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of LWN in its evaluation of the SCI
Proposed Exchange Offer, and our opinion is not intended to be and does not
constitute a recommendation to any shareholder with respect to the SCI
Proposed Exchange Offer. Our opinion may not be published or otherwise used
or referred to, nor shall any public reference to Smith Barney be made,
without our prior written consent.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of
the opinion that, as of the date hereof, the Share Exchange Ratio and the
Preferred Share Exchange Ratio are inadequate, from a financial point of
view, to the holders of LWN Common Shares and to the holders of LWN Preferred
Shares, respectively (other than SCI and its affiliates).
Very truly yours,
/s/ Smith Barney Inc.
SMITH BARNEY INC.
<PAGE>
EXHIBIT 18
[Nesbitt Burns Letterhead]
October 10, 1996
The Board of Directors
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia
V5G 3S8
Members of the Board:
You have requested our opinion (our "Opinion") with respect to the adequacy,
from a financial point of view, of the consideration to be received by
holders of common shares and preferred shares of The Loewen Group Inc.
("LWN") pursuant to a proposed stock-for-stock exchange offer (the "Second
SCI Proposal"), as disclosed in a Registration Statement on Form S-4 (the
"Registration Statement") filed with the Securities and Exchange Commission
on October 3, 1996 by New Service Corporation International ("New SCI") and
SCI Holdings Canada, Inc. ("SCI Canada"), each wholly-owned subsidiaries of
Service Corporation International ("SCI"), which exchange offer SCI
represents values the outstanding common shares of LWN (the "LWN Common
Shares") at U.S. $45.00 per share and the outstanding 6.00% Cumulative
Redeemable Convertible First Preferred Shares, Series C (the "LWN Preferred
Shares") at U.S. $29.51 per share, subject to adjustment in certain
circumstances described below. We have utilized these represented values in
arriving at our Opinion.
According to the Registration Statement, SCI proposes to offer to exchange
(i) for each outstanding LWN Common Share, including associated common share
purchase rights, that number of shares of the common stock, par value U.S.
$0.01 per share, of New SCI (the "New SCI Common Stock") or, at the election
of the holder thereof, that number of exchangeable shares, without par value,
of SCI Canada (the "Canadian SCI Exchangeable Shares"), equal to the quotient
determined by dividing U.S. $45.00 by the average of the high and low sales
prices of the common stock, par value U.S. $1.00 per share, of SCI (the "SCI
Common Stock"), as reported on the New York Stock Exchange Composite Tape, on
each of the 20 consecutive trading days ending with the third trading day
immediately preceding the expiration date of the proposed exchange offer (the
"Share Exchange Ratio"); provided that the Share Exchange Ratio will not be
greater than 1.76471 and (ii) for each outstanding LWN Preferred Share, that
number of shares of New SCI Common Stock or, at the election of the holder
thereof, that number of Canadian SCI Exchangeable Shares, equal to the
product of (i) the Share Exchange Ratio and (ii) 0.65574 (the "Preferred
Share Exchange Ratio"); provided that the Preferred Share Exchange Ratio will
not be greater than 1.15719.
In arriving at our Opinion, we reviewed the Registration Statement and held
discussions with certain senior officers, directors and other representatives
and advisors of LWN concerning the businesses, operations and prospects of
LWN. We examined certain publicly available business and financial
information relating to LWN as well as certain financial forecasts and other
historical and forecast data for LWN which were provided to or otherwise
discussed with us by the management of LWN. We reviewed the financial terms
of the Second SCI Proposal in relation to, among other things: current and
historical market prices and trading volumes of the LWN Common Shares and the
LWN Preferred Shares; the historical and projected earnings of LWN and other
operating data of LWN; and the capitalization and financial condition of LWN.
We also considered, to the extent publicly available, the financial terms of
certain other
1 FIRST CANADIAN PLACE, 4TH FLOOR, P.O. BOX 150, TORONTO, ONTARIO MSX 1H3
(416) 359-4000
<PAGE>
THE BOARD OF DIRECTORS
THE LOEWEN GROUP INC.
OCTOBER 10, 1996
PAGE 2
similar transactions recently effected which we considered relevant in
evaluating the transaction contemplated by the Second SCI Proposal and
analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of LWN. In addition to the
foregoing, we conducted such other analyses and examinations and considered
such other financial, economic and market criteria as we deemed appropriate
in arriving at our Opinion.
In rendering our Opinion, we have assumed and relied, without independent
verification, upon the accuracy, fair representation and completeness of all
financial and other information, data, advice, opinions and representations
publicly available or furnished to or otherwise reviewed by or discussed with
us and our Opinion is conditional upon such accuracy, fairness and
completeness. With respect to financial forecasts and other information
provided to or otherwise reviewed by or discussed with us by management of
LWN, we have discussed with the management of LWN, and with your consent have
relied on, various operational and financial assumptions as to the future
financial performance of LWN. Subject to the exercise of professional
judgment and except as expressly described herein, we have not attempted to
verify independently the accuracy or completeness of any such information,
data, advice, opinions and representations.
We have not made or been provided with an independent evaluation of the
assets or liabilities (contingent or otherwise) of LWN nor have we made any
physical inspection of the properties or assets of LWN. In connection with
our engagement, we have not been requested to approach, and have not
approached or held discussions with, third parties to solicit indications of
interest in the acquisition of all or a part of LWN. Our Opinion is
necessarily rendered on the basis of information available to us including
financial and securities markets, economic and general business and financial
conditions and other conditions and circumstances existing and disclosed to
us, as at the date hereof. Our Opinion is also based upon the condition and
prospects, financial and otherwise, of LWN as they were reflected in the
information and documents reviewed by us and as they were represented to us
in our discussions with management of LWN. In our analyses and in connection
with the preparation of our Opinion, we made numerous assumptions with
respect to industry performance, general business, market and economic
conditions and other matters, many of which are beyond the control of any
party involved.
Nesbitt Burns is one of Canada's largest investment banking firms, with
operations in all facets of corporate and government finance, mergers and
acquisitions, equity and fixed income sales and trading, investment research
and investment management. The Opinion expressed herein is the opinion of
Nesbitt Burns and the form and content herein have been approved for release
by a committee of its directors, each of whom is experienced in merger,
acquisition, divestiture and valuation matters.
Nesbitt Burns has been engaged to render financial advisory services to LWN
in connection with the Second SCI Proposal and certain related matters and
will receive a fee for our services. We have not been engaged to prepare,
and have not prepared, a valuation of LWN or any of its material assets and
our Opinion should not be construed as such. In the ordinary course of our
business, we and certain of our affiliates may actively trade the securities
of LWN or SCI for our own account or for the account of our customers and,
accordingly, may at any time hold a long or short position in such
securities. We have in the past provided certain financial advisory and
investment banking services to LWN, unrelated to the Second SCI Proposal,
including acting as lead manager on recent equity financing transactions, and
have received and
<PAGE>
THE BOARD OF DIRECTORS
THE LOEWEN GROUP INC.
OCTOBER 10, 1996
PAGE 3
will receive compensation for such services. The Bank of Montreal is Nesbitt
Burns' controlling shareholder and is the lead bank on certain of LWN's
various credit facilities.
Our advisory services and the Opinion expressed herein are provided for the
information of the Board of Directors of LWN in its evaluation of the Second
SCI Proposal and our Opinion is not intended to be and does not constitute a
recommendation to any shareholder with respect to the Second SCI Proposal.
Our Opinion may not be published or otherwise used or referred to, nor shall
any public reference to Nesbitt Burns be made, without our prior written
consent.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Share Exchange Ratio and
the Preferred Share Exchange Ratio are inadequate, from a financial point of
view, to the holders of LWN Common Shares and to the holders of LWN Preferred
Shares, respectively (other than SCI and its affiliates).
Yours truly,
/s/ Nesbitt Burns Inc.
NESBITT BURNS INC.
<PAGE>
EXHIBIT 19
EXECUTIVE COMPENSATION
The following table sets forth compensation earned during the last three
fiscal years by the Chief Executive Officer and the Company's four most highly
compensated executive officers other than the Chief Executive Officer who served
as executive officers at the end of 1995 (such five officers are collectively
called "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
(1)
------------------------------------------------------------
Awards
----------------
Other Annual Securities Under All Other
Salary Bonus* Compensation Options Granted Compensation
Name and Principal Position Year ($) ($) ($)(2) (#)(3) (3)
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Raymond L. Loewen 1995 546,528 nil --- nil 5,283(4)
Chairman of the Board of Chief 1994 466,794 439,335 --- 2,000,000 5,309
Executive Officer 1993 424,485 227,052 --- 250,000 11,408
- - --------------------------------------------------------------------------------------------------------------------------------
Timothy R. Hogenkamp 1995 269,230 nil --- nil 59,678(5)
President and Chief 1994 258,750 187,500 --- 300,000 59,379
Operating Officer 1993 192,112 75,730 --- 25,000 9,661
- - --------------------------------------------------------------------------------------------------------------------------------
A.M. Bruce Watson 1995 240,385 nil --- nil 5,499(6)
Executive 1994 214,583 120,000 --- 260,000 5,020
Vice-President(7) 1993 103,905 34,161 38,577(8) 58,500 6,878
- - --------------------------------------------------------------------------------------------------------------------------------
Robert O. Wienke 1995 288,461 nil 136,000(9) 150,000 2,119(10)
Senior Vice-President, Law and 1994 nil nil nil 100,000 nil
General Counsel(11) 1993 n/a n/a n/a n/a n/a
- - --------------------------------------------------------------------------------------------------------------------------------
Peter S. Hyndman 1995 236,462 --- --- nil 131(4)
Vice-President, Law and 1994 198,688 --- --- 25,000 2,361
Corporate Secretary 1993 188,772 37,901 --- nil 5,107
- - --------------------------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* See Report on Executive Compensation below.
Notes:
(1) The Company has not granted any Restricted Shares or Restricted Share
Units, Stock Appreciation Rights or Long-Term Incentive Plan Payouts to the
Named Executive Officers.
(2) In accordance with SEC rules, the value of perquisites and other personal
benefits, securities or property for each Named Executive Officer that does
not exceed the lesser of $50,000 and 10% of the total of the annual salary
and bonus is not reported herein.
(3) For the year 1994 in the case of Messrs. Loewen, Hogenkamp, Watson and
Hyndman and for the year 1995 in the case of Mr. Wienke, the securities are
Common Shares of the Company underlying the options and certain purchase
rights granted under the 1994 Management Equity Investment Plan, which is
described in the Report on Executive Compensation below. Absent
extraordinary circumstances, such options and purchase rights do not begin
to become exercisable until June 1999. All other grants were made under
the Company's stock option plans.
(4) Company contribution to the Company's pension plan and group registered
retirement savings plan applicable to Canadian-based senior officers.
(5) Consists of $42,500 (forgiveness of indebtedness), $10,840 (imputed
interest on non-interest-bearing loan), $5,762 (matching contribution to
401(k) Plan) and $576 (life insurance premiums paid by the Company).
(6) Consists of $4,923 (matching contributions to 401(k) Plan) and $576 (life
insurance premiums paid by the Company).
(7) Mr. Watson commenced employment with the Company on June 1, 1993.
(8) Consists of $33,123 (moving expenses paid by or on behalf of Mr. Watson)
and $5,454 (income tax return preparation).
(9) Pre-approved real estate brokerage and other moving and relocation expenses
incurred in connection with Mr. Wienke's relocation to the Cincinnati area.
(10) Consists of $1,543 (imputed interest on non-interest-bearing loan) and $576
(life insurance premiums paid by the Company).
(11) Mr. Weinke became Senior Vice-President, Law and General Counsel effective
March 22, 1995. From December 13, 1994 to March 22, 1995, Mr. Wienke
served as Executive Vice-President, Corporate Development & Law. Prior to
January 1, 1995, Mr. Wienke was a partner in the law firm Ross & Hardies in
Chicago, Illinois.
<PAGE>
The following table sets forth individual grants of stock options by
the Company during the last fiscal year to the Named Executive Officers.
OPTION GRANTS DURING THE
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
Number of % of Total Market Value Potential Marketable
Securities Options of Securities Value of Assumed
Underlying Counted to Underlying Annual Rates of Share
Options Employees Exercise or Base Options on the Price Appreciated for
Granted in Fiscal Price Date of Grant Expiration Option Time
Name ($) Year ($/Security) ($/Security) Date ------------------------------
3% ($) 17% ($)
<S> <C> <C> <C> <C> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------------------------------------
Raymond L. Loewen nil n/a n/a n/a n/a n/a n/a
- - -----------------------------------------------------------------------------------------------------------------------------------
Timothy R. Hogenkamp nil n/a n/a n/a n/a n/a n/a
- - -----------------------------------------------------------------------------------------------------------------------------------
A.M. Bruce Watson nil n/a n/a n/a n/a n/a n/a
- - -----------------------------------------------------------------------------------------------------------------------------------
Robert O. Wienke 150,000 (1) 13.83 U.S. $30.040(2) U.S.$27.250(2) July 15, 2001 U.S.$1,047,799 U.S.$2,933,230
- - -----------------------------------------------------------------------------------------------------------------------------------
Peter S. Hyndman nil n/a n/a n/a n/a n/a n/a
- - -----------------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The securities are Common shares underlying options granted under the 1994
Management Equity Investment Plan, which is described in the Report on
Executive Compensation below. Absent extraordinary circumstances, such
options do not begin to become exercisable until June 1999.
(2) The exercise price is 125% of the weighted average trading price of the
Common shares for the five consecutive trading days ending April 8, 1994.
Such weighted average trading price was U.S. $74.032. The date of grant
was April 3, 1995.
The following table sets forth certain information regarding options held
by the Named Executive Officers as of December 31, 1995.
AGGREGATED OPTION EXERCISES DURING THE YEAR ENDED DECEMBER 31, 1995
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised
Options at Value of Unexercised in-the-Money
December 31, 1995($) Options at December 31, 1995 ($)(1)
----------------------------------------------------------------------
Securities
Acquired Aggregate
Name at Value
Exercise($) Exercised($) Exercisable Unexercisable(2) Exercisable Unexercisable
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Raymond L. Loewen nil nil 480,000 2,370,000 Cdn. $8,123,100 Cdn. $5,108,900
- - ------------------------------------------------------------------------------------------------------------------------------------
Timothy R. Hogenkamp nil nil 34,000 331,000 U.S. $299,392 U.S. $230,328
- - ------------------------------------------------------------------------------------------------------------------------------------
A.M. Bruce Watson nil nil 23,400 295,100 U.S. $134,424 U.S. $201,636
- - ------------------------------------------------------------------------------------------------------------------------------------
Robert O. Weinke nil nil 20,000 230,000 U.S. $38,760 U.S. $155,040
- - ------------------------------------------------------------------------------------------------------------------------------------
Peter S. Hyndman 2,000 Cdn. $60,300 11,000 12,000 Cdn. $192,445 Cdn. $209,940
2,000 Cdn. $62,240
5,000 Cdn. $175,600
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The closing price of the Common shares on December 29, 1995 on The Toronto
Stock Exchange was Cdn. $34.375 and on the Nasdaq National Market was U.S.
$25.313. These columns set forth the market value less the exercise price.
(2) Includes the Common shares underlying options and certain purchase rights
granted pursuant to the 1994 Management Equity Investment Plan, which is
described in the Report on Executive Compensation below. These options and
purchase rights were not in-the-money as of December 31, 1995.
2
<PAGE>
PENSION BENEFITS
The Company does not have any defined benefit or actuarial pension plans.
The Company does have defined contribution pension plans and in Canada, a group
registered retirement savings plan.
The estimated aggregate cost to the Company for the year ended December 31,
1995 of pension benefits under the Company's pension plan applicable to
Canadian-based senior officers of the Company and the Company's group registered
retirement savings plan for senior officers was $17,666.
The estimated aggregate cost to the Company for the year ended December 31,
1995 of pension benefits under the Company's pension plan applicable to United
States-based senior officers of the Company was $59,553. Annual discrimination
testing (that is to say, the testing of the entitlement of higher compensated
employees against the entitlement of lower compensated employees) did not give
rise to any adjustments for 1995. Accordingly, no sums were refunded to United
States-based senior officers as a result of such testing for 1995. Refunded
sums with respect to 1994 and 1993 represent compensation to such officers and
were included in the amounts set out above in the Summary Compensation Table (as
to the portions paid to Named Executive Officers).
EMPLOYMENT CONTRACTS
The following Named Executive Officers have written employment agreements
with the Company: Timothy R. Hogenkamp, A.M. Bruce Watson and Robert O. Weinke.
The agreements outline duties and responsibilities, initial compensation and
related benefits, including bonuses and initial stock option grants. The
agreements for Messrs. Hogenkamp, Watson and Weinke do not specify a term of
years. Mr. Hogenkamp's agreement is terminable by the Company upon six months'
notice. Each of Messrs. Watson's and Weinke's agreements are terminable by the
Company, in which case the Company would provide such person with normal salary
and related benefits for a further six months; however, if Mr. Wienke's
agreement is terminated by the Company without cause within the first two years
of his employment, the Company will provide Mr. Wienke with normal salary and
related benefits for a further twelve months. Except as set forth above, the
Company does not have any compensatory plans or arrangements with any of the
Named Executive Officers that relate to or would result from such person's
termination of employment or from a change in control of the Company or a change
in such person's responsibilities following a change in control.
Each of the participants in the 1994 Management Equity Investment Plan,
including Messrs. Loewen, Hogenkamp, Watson, Wienke and Hyndman, has entered
into an Executive Agreement with the Company or a Subsidiary (the "Executive
Agreement"). The Executive Agreement includes certain obligations of a
participant with respect to his conduct during the term of employment, and
includes a confidentiality agreement and a covenant not to compete that is
effective for two years immediately following the date of termination of
employment. The Executive Agreement does not include any compensatory
provisions.
COMPOSITION OF THE COMPENSATION COMMITTEE
The Chairman of the Compensation Committee is Charles B. Loewen, an outside
Director of the Company. Charles B. Loewen is not related to Raymond L. Loewen
or Anne Loewen. Reference is made to CERTAIN TRANSACTIONS for a description of
the former relationship of Charles B. Loewen to Loewen, Ondestje, McCutcheon
Limited, an investment dealer. The other members of the Compensation Committee
for the fiscal year ended December 31, 1995 were James D. McLennan, Ernest G.
Penner and The Right Honourable John N. Turner, P.C., C.C., Q.C. The
Compensation Committee met four times in 1995. All members are outside
Directors of the Company.
REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee. The Compensation Committee reviews and recommends, for
approval by the Board of Directors, the Company's executive compensation
policies and the compensation to be paid to the executive officers, with the
following exception. Any awards made to executive officers pursuant to the
Company's stock plans are made by the Compensation Committee
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(and approval of the full Board of Directors will not be sought) in order to
qualify such awards for an exemption from certain "short-swing" profits
liability rules under United States securities laws.
COMPENSATION PHILOSOPHY
The Company's executive compensation program is designed to provide
incentives for the enhancement of shareholder value, for the successful
implementation of the Company's business plan and for continuous improvement in
corporate and personal performance. The program is based on a pay-for-
performance philosophy and consists of three components: base salary, an annual
incentive (bonus) paid in cash and long-term equity based incentives.
The program's overall objectives are:
1. to align the interests of management with those of shareholders;
2. to integrate compensation with the Company's business objectives;
3. to attract and retain qualified executives critical to the success of
the Company;
4. to provide fair and competitive compensation; and
5. to reward both corporate and individual performance.
Annual and long-term incentives are designed to give executives incentives
to increase shareholder value. Annual incentives are tied to earnings per share
growth and long-term incentives are tied to share price increases. These
criteria link a significant portion of executive officer compensation to the
long-term performance of the Company.
The Compensation Committee also considers the relationship between
aggregate executive remuneration and revenues. The Compensation Committee
expects that, as the Company continues to grow, aggregate remuneration for
executive officers will increase. However, the Compensation Committee believes
that it is appropriate to set levels of executive remuneration such that
aggregate executive remuneration, as a percentage of revenues, is stable or
decreases as the Company grows.
BASE SALARY
In general, an executive's base salary is determined by a subjective
assessment of his or her responsibilities and sustained performance. In 1993,
the Company hired an independent consultant to review the Company's existing
compensation structure and to make recommendations on a long-term compensation
philosophy for the Company. The consultant provided an extensive report that
included compensation information from the Company's principal competitors
(Service Corporation International and Stewart Enterprises, Inc.), as well as
sixteen public companies that had similar growth objectives. The report also
included recommendations for cash compensation levels and for incentives
appropriate to a growth company. After considering the recommendations made by
the consultant, the Compensation Committee proposed a significant restructuring
of the Company's compensation structure for executive officers. The components
of the restructuring were implemented in 1993.
Generally, the Compensation Committee intends to set base salaries between
the 50th and 75th percentile of salaries paid by comparable companies to
similarly-positioned executives, and to pay generous annual cash bonuses when
earnings per share targets are met or exceeded. In setting base salaries for
1995, the Compensation Committee reviewed compensation information for 18 United
States-based, public, growth-oriented companies identified in an independent
consultant's report ("Comparable Companies"). The Compensation Committee gave
particular weight to compensation information relating to Service Corporation
International and Stewart Enterprises, Inc., both of which are large, publicly-
held funeral service companies with significant United States operations.
In 1995, the Compensation Committee obtained research data from Frederick
W. Cook & Co., Inc. and Smith Barney Inc. with respect to compensation levels
for the Chief Executive Officer and for the top five executives in
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relation to the compensation of the Chief Executive Officer, based on surveys of
approximately 68 reasonably comparable companies. The studies provided analyses
of compensation based on a series of different factors, including growth in
equity, revenue and income and number of employees. Such information will be
used to set 1996 base salary levels for the Company's executive officers. The
Company intends to continue to set base salaries at between the 50th to 75th
percentile of salaries paid by the surveyed companies.
ANNUAL INCENTIVES
The Company's executive officers are eligible for annual cash bonuses.
Annual bonus awards are generally based on attainment of specified performance
levels related to the Company's achievement of targeted net earnings per share.
This establishes a strong link between executive compensation and the Company's
operating performance.
In general, annual incentive goals have been established in the following
manner. An individual executive's annual incentive opportunity expressed as a
percentage of base salary, is established at the beginning of a fiscal year.
Usually two earnings per share targets are posted. Failure to reach the lower
of the targets results in no annual incentive payment. A higher incentive is
earned if the higher target is reached. In accordance with this policy in early
1995, the Compensation Committee determined that no bonus would be paid if the
increase in fully-diluted earnings per share from 1994 to 1995 were less than
20%, that a bonus would be paid if the increase in fully-diluted earnings per
share from 1994 to 1995 were between 20% and 25%, and that a significant bonus
would be paid if a higher fully-diluted earnings per share target, namely a more
than a 25% increase from 1994 to 1995 were achieved.
Notwithstanding an extraordinary commitment of time and effort for the
benefit of the Company by executive officers in 1995, the 1995 earnings per
share targets were not met because of the costs of legal settlements, litigation
related finance costs and related general and administrative costs, and thus the
1995 bonuses for certain executive officers were not awarded. In January 1996,
the Compensation Committee determined that later in 1996 it would consider
whether it would be appropriate, in light of the extraordinary commitment of
time and effort by executive officers, to provide such executives with an
opportunity to be awarded a bonus based on a subsequent increase in shareholder
value.
LONG-TERM INCENTIVES
An important objective of long-term incentives is to encourage executive
officers to acquire a meaningful ownership interest in the Company over a period
of time and as a result focus executive officers' attention on the long-term
interests of the Company and its shareholders.
Certain executive officers participate in the 1994 Management Equity
Investment Plan ("MEIP"), which was approved by the Shareholders at the annual
general meeting of the Company held on May 16, 1994. The purpose of the MEIP is
two-fold: first, to provide a cost-effective financing program for the
Company's U.S. Subsidiaries and second, to provide an opportunity for designated
key employees to participate in the long-term growth of the Company. The MEIP
requires participants (including executive officers) to pay an aggregate of $6.4
million to a U.S. Subsidiary of the Company in exchange for the right (in either
the form of an option or a purchase agreement) to ultimately acquire, upon a
further aggregate payment of $121.3 million, an aggregate of 4.25 million Common
shares beginning in 1999. This right is exercisable as to 50% in 1999, 25% in
2000 and 25% in 2001. The effective purchase price for the Common shares was
set at $30.040, which is 25% higher than the weighted average trading price of
the Common shares for the five consecutive trading days ended April 8, 1994. If
a participant does not exercise his right to acquire the Common shares, then his
portion of the sum of $6.4 million paid is refundable to him. Through December
31, 1995, rights relating to an aggregate of 4,065,000 Common shares were
outstanding under the MEIP.
Executive officers also are eligible to participate in the Company's
Employee Stock Option Plans. In light of the grants made to executive officers
under the MEIP, options granted under the Employee Stock Option Plans during
1995 to executive officers who also participate in the MEIP were minimal.
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CHIEF EXECUTIVE OFFICER'S COMPENSATION
The Chief Executive Officer's base salary for 1995 was determined after
reviewing the available base salary information for the chief executive officers
of the Comparable Companies. The Compensation Committee determined that, in
light of the level of compensation paid to the chief executive officers of the
Comparable Companies and, considering the Compensation Committee's subjective
evaluation of the Chief Executive Officer's performance, the Chief Executive
Officer's salary for 1995 should be increased to $546,528.
For the reasons discussed above, under the caption "Annual Incentives", no
bonus for 1995 was awarded to the Chief Executive Officer.
The Chief Executive Officer participates in the MEIP pursuant to which, in
June 1994 he received options to ultimately acquire 500,000 Common shares and
purchase agreement rights by which he has the option to ultimately acquire 1.5
million Common shares. The Chief Executive Officer did not receive any option
grants in 1995.
POLICY WITH RESPECT TO DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the United States Internal Revenue Code of 1986, as
amended (the "Code"), governs the deductibility of discretionary, incentive-
based compensation in excess of $1 million paid annually to the Chief Executive
Officer and certain other highly-paid executive officers.
The Company believes that the MEIP and the Company's employee stock option
plans qualify for an exception from the $1 million limitation. The Company's
incentive cash bonus program currently does not so qualify, but the Company does
not anticipate that this will result in any significant cost. The Compensation
Committee will continue to monitor the impact of Section 162(m) and will
recommend modification to the Company's compensation program in the future if
appropriate.
Submitted by the Compensation Committee:
Charles B. Loewen, Chairman
James D. McLennan
Ernest G. Penner
The Rt. Hon. John N. Turner, P.C., C.C., Q.C.
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AMENDMENT OF EMPLOYEE STOCK OPTION PLANS
BACKGROUND
Because of the Company's continued significant growth and expansion in
North America, the Board of Directors has determined that it would be prudent to
increase the number of Common shares reserved for option grants under its
Employee Stock Option Plan (United States) (the "U.S. Plan") and under its
Employee Stock Option Plan (Canada) (the "Canadian Plan" and, together with the
U.S. Plan, the "Plans"). On April 2, 1996 the Board of Directors unanimously
approved amendments to the Plans to increase the number of Common shares
issuable under the U.S. Plan by 650,000 (from 2,750,000 to 3,400,000) and under
the Canadian Plan by 350,000 (from 1,350,000 to 1,700,000) which amendments have
been conditionally approved by The Toronto Stock Exchange and the Montreal
Exchange under the policies of such exchanges.
Under such policies, each of the amendments must be approved by a simple
majority vote of disinterested Shareholders.
INCREASE IN COMMON SHARES
Management believes that providing employees with an opportunity to acquire
an equity interest in the Company effectively aligns the interest of those
employees and the Shareholders.
Historically, the Company has granted options under the Plans for two
important purposes: (i) to selected employees as an incentive component of
compensation, and (ii) to certain new employees, who typically join the Company
in connection with an acquisition, in order to provide them with an immediate
incentive to develop and promote the business and financial success of the
Company.
During 1995, the Company acquired 170 funeral homes and 61 cemeteries in
the United States and 7 funeral homes and 3 cemeteries in Canada. The Company
believes that acquisitions in 1996 and 1997 will be at or above the level of
1995 acquisitions (although no assurances in this regard can be given). The
Board of Directors believes it would be prudent to increase the number of Common
shares available under the Plans to ensure that the Company is in a position to
grant options to selected employees (including certain employees of newly-
acquired locations).
APPROVAL
The amendment to increase the number of Common shares available under each
of the Plans require the approval of a majority of the votes cast by
disinterested Shareholders. To the best of the Company's knowledge, the number
of votes attaching to the Common shares that will not be counted for the
purposes of determining whether the required level of Shareholder approval of
the U.S. Plan has been obtained is 209,502, and the number of votes attaching to
the Common shares that will not be counted for the purposes of determining
whether the required level of shareholder approval of the Canadian Plan has been
obtained is 8,313,626.
The Board of Directors believes the Plans are a key component of incentive-
based compensation for selected employees and are an important feature of the
Company's acquisition program.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED, AND RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR, THE AMENDMENT TO INCREASE THE NUMBER OF COMMON SHARES
AVAILABLE UNDER THE U.S. PLAN BY 650,000 SHARES.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED, AND RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR, THE AMENDMENT TO INCREASE THE NUMBER OF COMMON SHARES
AVAILABLE UNDER THE CANADIAN PLAN BY 350,000 SHARES.
The full text of the Plans can be obtained from the Corporate Secretary of
the Company at the Company's principal executive office at 4126 Norland Avenue,
Burnaby, British Columbia, Canada V5G 3S8.
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CERTAIN ADDITIONAL INFORMATION REGARDING THE PLANS
GENERAL
Under the Plans, employees of the Company are eligible to be granted
options to purchase Common shares. As of December 31, 1995 approximately 4,422
persons were eligible to participate in the U.S. Plan (employees who are
residents of the United States and its territories) and approximately 598
persons were eligible to participate in the Canadian Plan.
The Plans are administered by the Compensation Committee of the Board of
Directors. The number of options granted to selected employees is determined by
the Compensation Committee. The Compensation Committee also determines certain
terms and conditions of options granted.
OPTION AGREEMENT
Each optionee under the Plans is required to enter into a separate option
agreement, which sets forth, among other things, the number of options granted,
the specific exercise price and the vesting conditions, within the following
parameters: (i) the exercise price of an option may not be less than the
closing price of the Common shares on the trading day immediately prior to the
grant date, as quoted on the Nasdaq National Market (for options granted under
the U.S. Plan) or on The Toronto Exchange (for options granted under the
Canadian Plan); and (ii) in no event may an option terminate later than 10 years
after the grant date.
EXERCISE OF OPTION
An optionee may exercise an option by delivering to the Company a duly
completed Notice of Exercise together with full payment, by cash or check, for
the Common shares being purchased under the option and any taxes required to be
withheld and collected from the optionee.
ALLOCATION OF OPTIONS IN 1995
The potential benefit to be received by an optionee is dependent on
increases in the price of the Common shares prior to the exercise of the option.
Accordingly, the ultimate dollar value of options is not currently
ascertainable. At April 1, 1996, the closing price of the Common shares on the
Nasdaq National Market was U.S. $29.500 and on The Toronto Stock Exchange was
Cdn. $40.000.
The following table sets forth certain information with respect to options
granted in 1995 under each of the Plans to the current executive officers of the
Company as a group and to all employees of the Company as a group, including
officers who are not executive officers of the Company. Directors who are not
employees are not eligible to receive options under the Plans.
EMPLOYEE STOCK OPTION PLANS
<TABLE>
<CAPTION>
COMMON SHARES
GROUP RANGE OF EXERCISE PRICES UNDERLYING OPTIONS
- - ----- ------------------------ ------------------
<S> <C> <C>
Employee Stock Option Plan (United States)
Executive Officer Group . . . . . . . . . . . . . . . . . . . U.S. $ 28.500 360,000
Non-Executive Officer Employee Group . . . . . . . . . . . . U.S. $ 24.875 -- U.S. $ 41.250 420,779
Employee Stock Option Plan (Canada) 40,000
Executive Officer Group . . . . . . . . . . . . . . . . . . . Cdn. $ 37.375 114,070
Non-Executive Officer Employee Group . . . . . . . . . . . . Cdn. $ 35.375 -- Cdn. $ 53.500
</TABLE>
The options granted in 1995 generally become exercisable in five equal
annual increments beginning one year after the grant date.
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<PAGE>
UNITES STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal anticipated United States
federal income tax consequences of the grant and exercise of an option to and by
an optionee who is resident in the United States. It is based on the current
provisions of the U.S. Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder. This discussion is general only and is not a
substitute for independent advice from an individual's own tax advisor.
An optionee will not recognize any taxable income at the time an option is
granted. Upon exercise of an option, an optionee generally will recognize
ordinary income, for United States income tax purposes, equal to the excess, if
any, of the then fair market value of the Common shares acquired over the
exercise price of the option. Any taxable income recognized in connection with
the exercise of an option will be subject to tax withholding by the optionee's
employer.
The employer of the optionee generally will be entitled to United States
income tax deductions to the extent and in the year that ordinary income is
recognized by the optionee in the circumstances described above.
When an optionee sells Common shares acquired pursuant to the exercise of
an option, any difference between the sale price and the Optionee's tax basis in
the Common shares will be treated as capital gain or loss.
Dividends payable on Common shares out of earnings and profits are ordinary
income taxable at ordinary income rates. An optionee may be permitted to credit
Canadian withholding taxes against the portion of United States income tax
liability attributable to such dividends.
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EXHIBIT 20
THE LOEWEN GROUP INC.
EMPLOYEE STOCK OPTION PLAN (UNITED STATES)
(RESTATED AND AMENDED AS AT APRIL 7, 1994 AND FURTHER AMENDED AS AT
APRIL 7, 1995, SEPTEMBER 19, 1995 AND APRIL 2, 1996)
SECTION 1 - GENERAL
(a) The purpose of the Employee Stock Option Plan (United States) (the "Plan")
is to promote the interests of The Loewen Group Inc. (the "Company") by:
(i) furnishing Eligible Employees (as defined below) with greater
incentive to develop and promote the business and financial success of
the Company; and
(ii) further associate the interests of Eligible Employees with those
of the shareholders of the Company by encouraging such employees to
acquire share ownership in the Company.
(b) The Plan is not qualified under Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code") and is not subject to any of the provisions of
the Employment Retirement Income Security Act of 1974.
(c) Any questions concerning the Plan should be directed to the Corporate
Secretary of the Company, at the Company's principal executive office located at
4126 Norland Avenue, Burnaby, British Columbia, Canada V5G 3S8, telephone
number (604) 299-9321.
(d) The Plan shall be governed by, and construed in accordance with, the laws
of the province of British Columbia.
SECTION 2 - ELIGIBILITY
(a) Under the Plan, employees of the Company or any of its direct or indirect
subsidiaries ("Subsidiaries") who are residents of the United States or its
territories (the "Eligible Employees") are eligible to be granted options
("Options") to purchase Common shares without par value of the Company
("Shares").
(b) The Compensation Committee of the Company (the "Committee") or such officer
as the Committee may designate shall determine from time to time those Eligible
Employees to be granted Options under the Plan, and the number of Shares subject
to each such Option. Each grant of an Option pursuant to the Plan shall be
evidenced by a stock option agreement ("Option Agreement") executed by the
employee to whom the Option is granted (the "Optionee") and the Company. Each
Option Agreement shall incorporate such terms and conditions as the Committee,
in its discretion, deems consistent with the terms of the Plan.
<PAGE>
(c) Each Option Agreement shall specify the dates upon which all or any
installment of the Option will be exercisable. An Option may be exercised
when installments vest at any time and from time to time thereafter with
respect to all or a portion of the Shares covered by such vested
installments. In addition, if an Offer (as hereinafter defined) is made, the
Board of Directors, or Committee, may while the Offer remains outstanding:
(i) determine that each Option granted by the Company to purchase
Shares shall, notwithstanding any vesting period or deferral of the
right to exercise otherwise applicable, be immediately exercisable
effective on and after a date declared by the Board of Directors, or
Committee, to be an advanced exercise date ("Advanced Exercise Date");
and
(ii) rescind any declaration of an Advanced Exercise Date but no such
rescission shall affect the validity of the exercise of such Option if
validly exercised on or after a particular Advanced Exercise Date and
before the date of rescission of the declaration of the particular
Advanced Exercise Date.
For the purposes hereof, "Offer" means an offer to acquire the Shares made to
the holders of the Company's Shares where the Shares which are the subject of
the offer to purchase, together with the offeror's then presently owned Shares,
will in the aggregate exceed twenty percent (20%) of the outstanding Shares of
the Company and where two or more persons or companies make offers jointly or in
concert or intending to exercise jointly or in concert any voting rights
attaching to the Shares to be acquired, then the Shares owned by each of them
shall be included in the calculation of the percentage of the Shares of the
Company owned by each of them. Paragraphs (i) and (ii) shall apply to each
Option granted or to be granted by the Company, which is outstanding at the time
of any such declaration regardless of the date of grant thereof, provided that
all other terms and conditions of the Option shall continue to apply and nothing
herein shall operate to extend, enlarge or revise any Option which has expired,
has been exercised, has been cancelled or otherwise has ceased to exist.
SECTION 3 - NUMBER OF SHARES SUBJECT TO PLAN
(a) The number of Shares issuable pursuant to the exercise of Options
after the effective date of the restatement and amendment of the Plan is limited
as follows:
(i) subject to adjustment pursuant to Section 9, the aggregate number
of Shares issuable pursuant to Options under the Plan shall not exceed
3,400,000 Shares (including 1,178,457 Shares under Options previously
granted but not exercised as of April 7, 1994); and
(ii) the number of Shares reserved for issuance to any one person
pursuant to options (whether granted under this Plan or otherwise)
shall not exceed 5% of the total issued and outstanding Shares on a
non-diluted basis.
<PAGE>
(b) The maximum number of Shares for which Options are granted after the
effective date of restatement and amendment of the Plan in any one calendar year
under the Plan to any one Eligible Employee shall not exceed 300,000 Shares,
subject to adjustment pursuant to Section 9.
(c) If an Option granted under the Plan expires for any reason without
being exercised in full, the number of Shares that would have been issuable upon
the exercise of such Option shall continue to be available under the Plan.
(d) Subject to the maximum limits described in subsections (a) and (b)
above, the Board of Directors of the Company (the "Board") shall reserve the
number of Shares required to honor Options granted from time to time to
Optionees pursuant to the Plan, and shall reserve from time to time additional
Shares, if any, to ensure that a sufficient number of Shares are available for
purchase under Options granted in the future.
SECTION 4 - ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Committee which shall be
comprised of two or more members of the Board who are "outside directors" within
the meaning of Section 162(m) of the United States Internal Revenue Code of
1986, as amended; provided, however, that, with respect to Options that may be
granted to Eligible Employees who are not subject to Section 16 of the United
States Securities Exchange Act of 1934, as amended, the Committee may delegate
its responsibilities to a subcommittee consisting of one or more executive
officers of the Company. The address of the Committee is care of the Company's
principal executive office at 4126 Norland Avenue, Burnaby, British Columbia,
Canada, V5G 3S8.
(b) The Committee shall have all powers and discretion necessary or
appropriate to administer the Plan, consistent with and subject to the
parameters set forth in the Plan, including but not limited to the power (1) to
determine from time to time the Eligible Employees to be granted Options under
the Plan, (2) to determine the number of Shares subject to each Option granted
under the Plan, (3) to set or amend the terms of each Option Agreement, (4) to
interpret the Plan, (5) to adopt such rules or guidelines as it deems
appropriate to administer the Plan, and (6) to make all other decisions, and
take or cause to be taken all other actions, relating to the operation of the
Plan. The Committee's determinations under the Plan shall be final and binding
on all persons. No member of the Committee shall be liable to any person for
any action or decision made in good faith in connection with the performance of
the Committee's duties or the exercise of its powers under the Plan.
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SECTION 5 - OPTION PRICE AND EXERCISABILITY
(a) The exercise price of an Option shall not be less than the closing
price of a Share on the trading day immediately prior to the date of grant, as
quoted on The Toronto Stock Exchange (with respect to Options denominated in
Canadian currency) and on the Nasdaq National Market or a United States national
securities exchange or quotation system on which the Shares are then traded
(with respect to Options denominated in United States currency).
(b) Except as otherwise provided in an Option Agreement, no Options shall
be exercised by an Optionee until at least 6 months after the date of the grant.
An Optionee may exercise an Option by delivering to the Company a duly completed
form of notice of such exercise together with full payment for the Shares being
purchased under the Option. The form of notice must identify the Option being
exercised, state the exercise price, be signed by the Optionee and be dated the
date of exercise. The Company shall promptly notify the Optionee as to any
taxes required to be withheld and collected from the Optionee. Unless otherwise
provided in the Option Agreement or consented to by the Company, payment for the
Shares must be made in the currency in which the Option is denominated.
(c) The sale of the Shares to the Optionee shall be deemed to have
occurred, and the Optionee shall be deemed to be the holder of such Shares, on
the date that both the form of notice and the payment in a manner acceptable to
the Company of the exercise price and any applicable taxes have been received by
the Company. A certificate representing the Shares acquired by the Optionee
shall be issued and delivered to the Optionee by the Company as soon is
reasonably possible after the sale.
SECTION 6 - TERMINATION OF OPTIONS
(a) Any Option granted pursuant to the Plan shall terminate upon the
earlier of: (i) ten years after the date of grant; and (ii) such event(s) of
termination as are provided in the Option Agreement or as are determined from
time to time by the Committee.
(b) A change in the duties or position of the Optionee, or the transfer of
the Optionee from one position with the Company to another, or the transfer of
an Optionee from one employer to another employer shall not trigger the
termination of such Optionee's Option so long as such Optionee remains a bona
fide employee of the Company or any Subsidiary.
SECTION 7 - NON-TRANSFERABILITY OF OPTIONS
Except as hereafter provided, an Option granted under the Plan may not
be transferred, pledged or assigned otherwise than by will or the laws of
descent and distribution and may be exercised only by the Optionee during his or
her lifetime. Options
4
<PAGE>
that are exercisable at the date of an Optionee's death may be exercised by the
Optionee's heirs entitled thereto or by the administrator or the executor or
trustee of his or her last will and testament. Any such exercise may not take
place after the earlier of: (i) the expiration of the Option in accordance with
Section 6(a)(i) above; and (ii) two years after the date of the Optionee's death
without the prior written consent of the Company.
SECTION 8 - TERMINATION OR AMENDMENT
Subject to regulatory approval and, where required, approval of the
shareholders of the Company, the Committee may, at any time and for any reason,
amend or terminate the Plan, subject to ratification by the Board. The Plan
shall remain in effect until it is terminated by the Committee, subject to
ratification by the Board. No Options may be granted under the Plan after its
termination, but no termination or amendment of the Plan shall affect any
previously granted Option.
SECTION 9 - PROTECTION AGAINST DILUTION
The Committee shall adjust the number of Shares covered by the Plan
and any Option in a manner it considers equitable to reflect any change in the
capitalization of the Company including, but not limited to, such changes as
stock dividends, consolidations and subdivisions of shares or changes resulting
from an amalgamation of the Company with one or more corporations. No
fractional shares or rights to acquire a fractional share will be created as a
result of an adjustment made pursuant to this section. The Committee shall also
adjust the exercise price under any Option in a manner it considers equitable if
the number of Shares covered by the Option is adjusted pursuant to this section.
SECTION 10 - RIGHTS AS SHAREHOLDERS
An Optionee shall have no rights as a shareholder (including the right
to vote and to receive dividends) of the Company with respect to Shares covered
by Options until such participant becomes the holder of record of such Shares.
SECTION 11 - COMPLIANCE WITH CERTAIN U.S. SECURITIES LAWS
With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), transactions under the Plan
are intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the 1934 Act. If any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.
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SECTION 12 - RESTRICTIONS ON RESALE
Under United States federal law, Shares purchased pursuant to Options
granted under the Plan by Optionees who are not "affiliates" of the Company
within the meaning of the Securities Act of 1933, as amended (the "Act"),
generally may be resold without registration or other restriction under the Act.
Generally, Shares purchased by "affiliates" pursuant to Options granted under
the Plan may not be resold to the public in the United States without
registration under the Act, except pursuant to an exemption from such
registration. One such exemption from registration is Rule 144 under the Act,
which permits resales by affiliates so long as certain volume, manner of sale
and other requirements have been satisfied. An "affiliate" is a person who
directly or indirectly controls, or is controlled by, or is under common control
with, the Company.
SECTION 13 - GENERAL LIMITATIONS
Neither the Plan nor any Option granted hereunder is to be interpreted
as giving any person a right to remain an employee of the Company or any of its
Subsidiaries. The Company and its Subsidiaries reserve the right to terminate
anyone's service at any time, with or without cause, and neither the Plan nor
any Option granted hereunder affects that right. THE EMPLOYEE ASSUMES THE RISK
OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE SHARES.
6
<PAGE>
EXHIBIT 21
THE LOEWEN GROUP INC.
EMPLOYEE STOCK OPTION PLAN (CANADA)
(RESTATED AND AMENDED AS AT APRIL 7, 1994 AND FURTHER AMENDED AS AT
APRIL 7, 1995, SEPTEMBER 19, 1995 AND APRIL 2, 1996)
SECTION 1 - GENERAL
(a) The purpose of the Employee Stock Option Plan (Canada) (the "Plan")
is to promote the interests of The Loewen Group Inc. (the "Company") by:
(i) furnishing Eligible Employees (as defined below) with greater
incentive to develop and promote the business and financial success of
the Company; and
(ii) further associate the interests of Eligible Employees with
those of the shareholders of the Company by encouraging such employees
to acquire share ownership in the Company.
(b) Any questions concerning the Plan should be directed to the Corporate
Secretary of the Company, at the Company's principal executive office located
at 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8, telephone
number (604) 299-9321.
(c) The Plan shall be governed by, and construed in accordance with, the
laws of the province of British Columbia.
SECTION 2 - ELIGIBILITY
(a) Under the Plan, employees of the Company or any of its direct or
indirect subsidiaries ("Subsidiaries") who are residents of Canada ("Eligible
Employees") are eligible to be granted options ("Options") to purchase Common
shares without par value of the Company ("Shares").
(b) The Compensation Committee of the Company (the "Committee") or such
officer as the Committee may designate shall determine from time to time
those Eligible Employees to be granted Options under the Plan, and the number
of Shares subject to each such Option. Each grant of an Option pursuant to
the Plan shall be evidenced by a stock option agreement ("Option Agreement")
executed by the employee to whom the Option is granted (the "Optionee") and
the Company. Each Option Agreement shall incorporate such terms and
conditions as the Committee, in its discretion, deems consistent with the
terms of the Plan.
(c) Each Option Agreement shall specify the dates upon which all or any
instalment of the Option will be exercisable. An Option may be exercised
when instalments vest at any time and from time to time thereafter with
respect to all or a portion of the Shares covered by such vested
installments. In addition, if an Offer (as hereinafter defined) is made, the
Board of Directors, or Committee, may while the Offer remains outstanding:
(i) determine that each Option granted by the Company to purchase
Shares shall, notwithstanding any vesting period or deferral of the
right to
<PAGE>
exercise otherwise applicable, be immediately exercisable effective
on and after a date declared by the Board of Directors, or Committee,
to be an advanced exercise date ("Advanced Exercise Date"); and
(ii) rescind any declaration of an Advanced Exercise Date but no
such rescission shall affect the validity of the exercise of such
Option if validly exercised on or after a particular Advanced Exercise
Date and before the date of rescission of the declaration of the
particular Advanced Exercise Date.
For the purposes hereof, "Offer" means an offer to acquire the Shares made to
the holders of the Company's Shares where the Shares which are the subject of
the offer to purchase, together with the offeror's then presently owned
Shares, will in the aggregate exceed twenty percent (20%) of the outstanding
Shares of the Company and where two or more persons or companies make offers
jointly or in concert or intending to exercise jointly or in concert any
voting rights attaching to the Shares to be acquired, then the Shares owned
by each of them shall be included in the calculation of the percentage of the
Shares of the Company owned by each of them. Paragraphs (i) and (ii) shall
apply to each Option granted or to be granted by the Company, which is
outstanding at the time of any such declaration regardless of the date of
grant thereof, provided that all other terms and conditions of the Option
shall continue to apply and nothing herein shall operate to extend, enlarge
or revise any Option which has expired, has been exercised, has been
cancelled or otherwise has ceased to exist.
SECTION 3 - NUMBER OF SHARES SUBJECT TO PLAN
(a) The number of Shares issuable pursuant to the exercise of Options
after the effective date of restatement and amendment of the Plan is limited
as follows:
(i) subject to adjustment pursuant to Section 9, the aggregate
number of Shares issuable pursuant to Options under the Plan shall not
exceed 1,700,000 Shares (including 1,051,025 Shares under Options
previously granted but not exercised as of April 7, 1994); and
(ii) the number of Shares reserved for issuance to any one
person pursuant to options (whether granted under this Plan or
otherwise) shall not exceed 5% of the total issued and outstanding
Shares on a non-diluted basis.
(b) The maximum number of Shares for which Options are granted after the
effective date of restatement and amendment of the Plan in any one calendar
year under the Plan to any one Eligible Employee shall not exceed 300,000
Shares, subject to adjustment pursuant to Section 9.
(c) If an Option granted under the Plan expires for any reason without
being exercised in full, the number of Shares that would have been issuable
upon the exercise of such Option shall continue to be available under the
Plan.
(d) Subject to the maximum limits described in subsections (a) and (b)
above, the Board of Directors of the Company (the "Board") shall reserve the
number of Shares required to honour Options granted from time to time to
Optionees pursuant to the Plan,
<PAGE>
and shall reserve from time to time additional Shares, if any, to ensure that
a sufficient number of Shares are available for purchase under Options
granted in the future.
SECTION 4 - ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Committee which shall be
comprised of two or more members of the Board who are "outside directors"
within the meaning of Section 162(m) of the United States Internal Revenue
Code of 1986, as amended; provided, however, that, with respect to Options
that may be granted to Eligible Employees who are not subject to Section 16
of the United States Securities Exchange Act of 1934, as amended, the
Committee may delegate its responsibilities to a subcommittee consisting of
one or more executive officers of the Company. The address of the Committee
is care of the Company's principal executive office at 4126 Norland Avenue,
Burnaby, British Columbia, Canada, V5G 3S8.
(b) The Committee shall have all powers and discretion necessary or
appropriate to administer the Plan, consistent with and subject to the
parameters set forth in the Plan, including but not limited to the power (1)
to determine from time to time the Eligible Employees to be granted Options
under the Plan, (2) to determine the number of Shares subject to each Option
granted under the Plan, (3) to set or amend the terms of each Option
Agreement, (4) to interpret the Plan, (5) to adopt such rules or guidelines
as it deems appropriate to administer the Plan, and (6) to make all other
decisions, and take or cause to be taken all other actions, relating to the
operation of the Plan. The Committee's determinations under the Plan shall be
final and binding on all persons. No member of the Committee shall be liable
to any person for any action or decision made in good faith in connection
with the performance of the Committee's duties or the exercise of its powers
under the Plan.
SECTION 5 - OPTION PRICE AND EXERCISABILITY
(a) The exercise price of an Option shall not be less than the closing
price of the Shares as quoted on The Toronto Stock Exchange on the trading
day immediately prior to the date of the grant.
(b) Except as otherwise provided in an Option Agreement, no Options shall
be exercised by an Optionee for at least 6 months after the date of the
grant. An Optionee may exercise an Option by delivering to the Company a
duly completed form of notice of such exercise together with full payment for
the Shares being purchased under the Option. The form of notice must
identify the Option being exercised, state the exercise price, be signed by
the Optionee and be dated the date of exercise. The Company shall promptly
notify the Optionee as to any taxes required to be collected from the
Optionee. Unless otherwise provided in the Option Agreement or consented to
by the Company, payment for the Shares must be made in the currency in which
the Option is denominated.
(c) The sale of the Shares to the Optionee shall be deemed to have
occurred, and the Optionee shall be deemed to be the holder of such Shares,
on the date that both the form of notice and the payment in a manner
acceptable to the Company of the exercise
3
<PAGE>
price and any applicable taxes have been received by the Company. A
certificate representing the Shares acquired by the Optionee shall be issued
and delivered to the Optionee by the Company as soon as is reasonably
possible after the sale.
SECTION 6 - TERMINATION OF OPTIONS
(a) Any Option granted pursuant to the Plan shall terminate upon the
earlier of: (i) ten years after the date of grant; and (ii) such event(s) of
termination as are provided in the Option Agreement or as are determined from
time to time by the Committee.
(b) A change in the duties or position of the Optionee, or the transfer
of the Optionee from one position with the Company to another, or the
transfer of an Optionee from one employer to another employer shall not
trigger the termination of such Optionee's Option so long as such Optionee
remains a bona fide employee of the Company or any Subsidiary.
SECTION 7 - NON-TRANSFERABILITY OF OPTIONS
Except as hereafter provided, an Option granted under the Plan may not
be transferred, pledged or assigned otherwise than by will or the laws of
descent and distribution and may be exercised only by the Optionee during the
Optionee's lifetime. Options that are exercisable at the date of an
Optionee's death may be exercised by the Optionee's heirs entitled thereto or
by the administrator or the executor or trustee of his or her last will and
testament. Any such exercise may not take place after the earlier of: (i) the
expiration of the Option in accordance with Section 6(a)(i) above; and (ii)
two years after the date of the Optionee's death without the prior written
consent of the Company.
SECTION 8 - TERMINATION OR AMENDMENT
Subject to regulatory approval and, where required, approval of the
shareholders of the Company, the Committee may, at any time and for any
reason, amend or terminate the Plan, subject to ratification by the Board.
The Plan shall remain in effect until it is terminated by the Committee,
subject to ratification by the Board. No Options may be granted under the
Plan after its termination, but no termination or amendment of the Plan shall
affect any previously granted Option.
4
<PAGE>
SECTION 9 - PROTECTION AGAINST DILUTION
The Committee shall adjust the number of Shares covered by the Plan and
any Option in a manner which it considers equitable to reflect any change in
the capitalization of the Company including, but not limited to, such changes
as stock dividends, consolidations and subdivisions of shares or changes
resulting from an amalgamation of the Company with one or more corporations.
No fractional shares or rights to acquire a fractional share will be created
as a result of an adjustment made pursuant to this section. The Committee
shall also adjust the exercise price under any Option in a manner it
considers equitable if the number of Shares covered by the Option is adjusted
pursuant to this section.
SECTION 10 - RIGHTS AS SHAREHOLDERS
An Optionee shall have no rights as a shareholder (including the right to
vote and to receive dividends) of the Company with respect to Shares covered by
Options until such participant becomes the holder of record of such Shares.
SECTION 11 - SECURITIES REGULATION
Where necessary to effect an exemption from the registration or
distribution requirements applicable to the Options or the Shares under
applicable securities laws or policies, the Committee may take such action or
require such action or agreement by any Optionee as may from time to time be
necessary to comply with such applicable securities laws and policies. The
directors may decline to grant some or all of the Options or to issue some or
all of the Shares pursuant to the Plan unless the grant of such Options or
the issuance of such Shares is exempt from such requirements, upon the advice
of counsel to the Company.
SECTION 12 - GENERAL LIMITATIONS
Neither the Plan nor any Option granted hereunder is to be interpreted as
giving any person a right to remain an employee of the Company or any of its
Subsidiaries. The Company and its Subsidiaries reserve the right to
terminate anyone's service at any time, with or without cause, and neither
the Plan nor any Option granted hereunder affects that right.
THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS
IN THE PRICE OF THE SHARES.
5
<PAGE>
EXHIBIT 22
THIS OPTION AGREEMENT is made as of
the day of ,199 .
BETWEEN:
THE LOEWEN GROUP INC., a body corporate duly incorporated and existing
under the laws of the Province of British Columbia and having its
principal place of business at 4126 Norland Avenue, Burnaby, British
Columbia, Canada, V5G 3S8, or nominee,
(the "Company")
OF THE FIRST PART
AND:
, a director of Loewen Group International, Inc. the
wholly owned United States subsidiary of the Company ("LGII"),
residing in Houston.
(the "Optionee")
OF THE SECOND PART
WHEREAS:
A. The Company has adopted an Employee Stock Option Plan (the "Option
Plan") for the purpose of promoting the interests of the Company by furnishing
certain of its employees and directors (whether directors of Company or LGII),
as designated from time to time by the Company, with greater incentive to
develop and promote the business and financial success of the Company and by
furthering the identity of interest of such
<PAGE>
-2-
employees or directors with those of the shareholders generally of the Company,
through share ownership in the Company;
B. The Optionee is a bona fide director of LGII; and
C. The Company considers that the grant to the Optionee of options
pursuant to the Option Plan will serve the purposes and assist in achieving the
objectives of the Option Plan.
NOW THEREFORE, in consideration of the premises and the mutual
covenants set out below and for other good and valuable consideration, the
parties agree as follows:
SECTION 1 - DEFINITIONS
In this Agreement:
(a) "directors" means the Board of Directors of the Company, as
constituted from time to time;
(b) "Option" means any option to acquire Shares granted hereby;
(c) "Option Period" means, with respect to any Option, the period within
which the Option may be exercised;
(d) "Personal Representative" of an Optionee means any trustee in
bankruptcy of such Optionee, any receiver or receiver-manager of the
property of such Optionee, any assignee for the benefit of the
creditors of such Optionee, any execution creditor of such Optionee,
the heir, executor, administrator, successor, legal representative,
assign or committee of such Optionee, or any other person who stands
in a like relationship to such Optionee;
(e) "Option Plan" means the Employee Stock Option Plan adopted by the
Company as of November 21, 1986, as amended or modified from time to
time pursuant to the terms thereof;
(f) "Shares" means the Common Shares in the capital stock of the Company.
<PAGE>
-3-
SECTION 2 - GRANT, PRICE
(a) Subject to the provisions of this Agreement, the Company hereby grants
to the Optionee the Options listed below, which Options are
exercisable in the manner and on the terms set out in this Agreement:
(i) an option to acquire 1,000 Shares exercisable at any time
commencing after the date that is 12 months after the date of
this Agreement and terminating as provided in Section 3; and
(ii) an option to acquire 1,000 Shares exercisable at any time
commencing after the date that is 24 months after the date of
this Agreement and terminating as provided in Section 3;
(b) The exercise price for the Options will be $ per share,
dollars.
SECTION 3 - TERMINATION OF OPTION
Each Option will expire and terminate at 11:59 p.m. (Pacific Standard
time) upon the earliest to occur of the following:
(a) the day which is ten years after the date of this Agreement;
(b) forty-five (45) days after the day the Optionee ceases to be a
director of LGII;
(c) the day that the Optionee is declared bankrupt or makes any assignment
for the benefit of his creditors, or the day of the appointment of a
receiver or receiver-manager of the property of the Optionee; or
(d) the day after a court appoints a committee of the estate of the
Optionee on the grounds that he is incapable, by reason of physical or
mental infirmity, of managing his affairs.
<PAGE>
-4-
SECTION 4 - NON-TRANSFERABILITY OF OPTION
Options are not transferable. Options that, at the date of Optionee's
death, are exercisable in accordance with the terms of Section 2 of this
Agreement, may be exercised by the Optionee's heirs or administrator or the
executor or Trustee of his last will and testament as soon as is legally
possible after the Optionee's death. Any such exercise may not take place more
than two years after the date of the Optionee's death without the prior written
consent of the Company, such consent not to be unreasonably withheld.
SECTION 5 - EXERCISE
(a) Subject to the terms and conditions of this Agreement, an Option may
be exercised only by delivering to the Company, on any day within the
Option Period in respect of that Option, written notice of such
exercise. The notice will be signed by the Optionee and dated the
date of exercise, will identify the Option being exercised, and state
the exercise price pursuant to clause 2(b) preceding.
(b) Each notice referred to in this section will be accompanied by full
payment for the Shares being acquired under the Option, which payment
will be made in lawful money of Canada or the United States as the
case may be.
(c) The delivery of notice and the required payment in respect of a
validly exercisable Option will, provided they are in compliance with
this section, constitute a sale on the date of delivery of the notice,
and the Company so declares and agrees.
(d) A certificate representing the Shares acquired by the Optionee will be
issued and delivered to the Optionee by the Company as soon as
practicable after receipt of the notice and payment.
SECTION 6 - ADJUSTMENT OF THE NUMBER OF SHARES
The directors will adjust the number of Shares covered by any Option
in a manner which is equitable to reflect any change in the capitalization of
Company including, but not limited to, such changes as stock dividends,
consolidations and subdivisions of shares or changes resulting from an
amalgamation of the Company with one or more corporations. If any adjustment
under this section would create a fractional share or a right to acquire a
<PAGE>
-5-
fractional share, such fractional share will be disregarded and the number of
Shares covered by any Option will be the next lower whole number of Shares,
rounding all fractions downward. The directors will adjust the exercise price
under any Option in an equitable manner if the number of Shares covered by the
Option is adjusted pursuant to this section. Each adjustment made by the
directors pursuant to this section will be conclusive and binding on the Company
and the Optionee.
SECTION 7 - COVENANTS AND AGREEMENTS OF THE COMPANY
The Company will reserve or cause to be reserved for allotment from
time to time out of the authorized but unissued Shares of the Company sufficient
Shares for issue to the Optionee under all Options.
SECTION 8 - ADMINISTRATION OF THE OPTION PLAN
The Options have been granted pursuant to the Option Plan administered
by the Board of Directors of the Company.
SECTION 9 - SPOUSES OF OPTIONEES
If, upon the occurrence of one or more of the following events:
(a) the execution of a separation agreement between the Optionee and his
spouse (as defined in any applicable legislation);
(b) the making of a declaratory judgement that the Optionee and his spouse
have no reasonable prospect of reconciliation with each other;
(c) the making of an order for dissolution of the marriage of the Optionee
or the judicial separation of the Optionee from his spouse; or
(d) the making of an order declaring the marriage of the Optionee null and
void,
or any similar event, there ensues any legal action to which the spouse of the
Optionee seeks an order of the court declaring that such spouse is entitled to
an interest in any
<PAGE>
-6-
Option granted hereby, then the Optionee will do all things reasonably necessary
in order to ensure that his spouse will not obtain such an order, including
indicating to the court his willingness to compensate his spouse for not
obtaining such interest by offering to allow to such spouse a greater share of
other family assets of equivalent value.
SECTION 10 - NOTICES
Any notice relating to this Agreement will be in writing and will be
deemed to have been delivered if mailed by prepaid registered mail or certified
mail:
(a) if to the Optionee, to his address as shown above, or upon notice of
another address for the purposes of this Agreement, then to such other
address as the Optionee will have most recently advised the Company by
notice in writing given hereunder, and
(b) if to the Company, to the Company's address as shown above, or to such
other address as the Company will have most recently advised the
Optionee by notice in writing given hereunder.
Any notice will be deemed to have been delivered to the party to whom it is
addressed, if delivered, when delivered, and if mailed, on the third business
day (exclusive of Saturdays, Sundays and statutory holidays) after the same is
mailed as aforesaid provided that if, due to a disruption in mail service
because of a labour dispute or for any other reason at the place of mailing or
at its addressed destination or any intermediate point through which the mail is
shipped, the mail is not picked up, dealt with, transmitted or delivered in its
ordinary course, then a notice mailed as aforesaid will not be deemed to be
delivered as aforesaid but will be deemed to be delivered when actually
received.
SECTION 11 - SEVERABILITY OF INVALID PROVISIONS
If all or any part of any provision of this Agreement should be found
and determined to be invalid, illegal or unenforceable, the remainder of this
Agreement will continue to be binding on the parties as if the provision or part
thereof had been deleted from this Agreement.
<PAGE>
-7-
SECTION 12 - ASSIGNMENT
This Agreement may not be assigned in whole or in part by the
Optionee.
SECTION 13 - BURDEN AND BENEFIT
This Agreement will be binding upon the parties hereto and will enure
to the benefit of and be binding upon the successors and assigns of the Company
and will be binding upon the heirs, successors, legal representatives,
executors, administrators and assigns of the Optionee. The Optionee
acknowledges that all covenants of the Optionee hereunder will bind his Personal
Representative, and any notices required or permitted to be delivered hereunder
to the Optionee will be deemed to be delivered if delivered to or by the
Personal Representative of the Optionee in accordance with the Provisions of
this Agreement.
SECTION 14 - SECURITIES LAWS
Upon exercise of the rights granted under this Agreement, the Optionee
agrees that he will acquire Shares for investment only and will not transfer any
Shares acquired pursuant to this Agreement so as to result in a distribution in
violation of any applicable federal and state securities laws. The Optionee
understands and agrees that any shares which may be issued pursuant to this
Agreement may have such legends and restrictions on them and be subject to such
stop-transfer instructions as the Company determines to be necessary or
appropriate, and further agrees to execute such agreements regarding transfer of
such Shares as the Company or its counsel may deem advisable. The Optionee
agrees that the Company shall not be required to register any Shares acquired by
the Optionee and that the Optionee may be required to hold such Shares
indefinitely in the absence of registration or an exemption from registration
under applicable securities laws.
SECTION 15 - TIME
Time will be of the essence in this Agreement.
<PAGE>
-8-
SECTION 16 - LAW GOVERNING
This Agreement will be governed by, and construed in accordance with,
the laws of the Province of British Columbia, Canada.
SECTION 17 - INTERPRETATION OF AGREEMENT
Unless the context otherwise requires, words importing the singular
include the plural and vice versa and words importing gender include all
genders.
IN WITNESS WHEREOF, the Company has affixed its corporate seal in the
presence of its authorized officers and the Optionee has hereunto set his hand
and seal, all as of the year and day first above written.
BY THE COMPANY:
THE COMMON SEAL OF THE )
COMPANY was hereunto )
affixed in the presence of: ) C/S
)
)
- - -----------------------------)
Director )
BY THE OPTIONEE:
SIGNED AND DELIVERED )
by )
in the presence of: )
)
)
- - -----------------------------) ----------------------------------------------
Signature )
)
- - -----------------------------)
Name )
)
- - -----------------------------)
Address )
)
<PAGE>
-9-
- - -----------------------------)
Occupation )
<PAGE>
EXHIBIT 23
THIS OPTION AGREEMENT is made as of
the day of , 199 .
BETWEEN:
THE LOEWEN GROUP INC., a body corporate duly incorporated and existing
under the laws of the Province of British Columbia and having its
principal place of business at 4126 Norland Avenue, Burnaby, British
Columbia, Canada, V5G 3S8, or nominee,
(the "Company")
OF THE FIRST PART
AND:
, a director of a subsidiary of the Company, residing in .
(the "Optionee")
OF THE SECOND PART
WHEREAS:
A. The Company has adopted a Stock Option Plan (the "Option Plan") for
the purpose of promoting the interests of the Company by furnishing certain of
its directors or directors of a subsidiary, as designated from time to time by
the Company, with greater incentive to develop and promote the business and
financial success of the Company and by furthering the identity of interest of
such directors with those of the shareholders generally of the Company, through
share ownership in the Company;
<PAGE>
-2-
B. The Optionee is a bona fide director of the Company or one of its
subsidiaries; and
C. The Company considers that the grant to the Optionee of options
pursuant to the Option Plan will serve the purposes and assist in achieving the
objectives of the Option Plan.
NOW THEREFORE, in consideration of the premises and the mutual
covenants set out below and for other good and valuable consideration, the
parties agree as follows:
SECTION 1 - DEFINITIONS
In this Agreement:
(a) "directors" means the Board of Directors of the Company, as
constituted from time to time;
(b) "Option" means any option to acquire Shares granted hereby;
(c) "Option Period" means, with respect to any Option, the period within
which the Option may be exercised;
(d) "Personal Representative" of an Optionee means any trustee in
bankruptcy of such Optionee, any receiver or receiver-manager of the
property of such Optionee, any assignee for the benefit of the
creditors of such Optionee, any execution creditor of such Optionee,
the heir, executor, administrator, successor, legal representative,
assign or committee of such Optionee, or any other person who stands
in a like relationship to such Optionee;
(e) "Option Plan" means the Employee Stock Option Plan adopted by the
Company as of November 21, 1986, as amended or modified from time to
time pursuant to the terms thereof;
(f) "Shares" means the Common Shares in the capital stock of the Company.
<PAGE>
-3-
SECTION 2 - GRANT, PRICE
(a) Subject to the provisions of this Agreement, the Company hereby grants
to the Optionee the Options listed below, which Options are
exercisable in the manner and on the terms set out in this Agreement:
(i) an option to acquire Shares exercisable at any time
commencing after the date that is months after the date of
this Agreement and terminating as provided in Section 3; and
(ii) an option to acquire Shares exercisable at any time
commencing after the date that is months after the date of
this Agreement and terminating as provided in Section 3;
(b) The exercise price for the Options will be $ per share,
dollars.
SECTION 3 - TERMINATION OF OPTION
Each Option will expire and terminate at 11:59 p.m. (Pacific Standard
time) upon the earliest to occur of the following:
(a) the day which is ten years after the date of this Agreement;
(b) forty-five (45) days after the day the Optionee ceases to be a
director of the Company;
(c) the day that the Optionee is declared bankrupt or makes any assignment
for the benefit of his creditors, or the day of the appointment of a
receiver or receiver-manager of the property of the Optionee; or
(d) the day after a court appoints a committee of the estate of the
Optionee on the grounds that he is incapable, by reason of physical or
mental infirmity, of managing his affairs.
<PAGE>
-4-
SECTION 4 - NON-TRANSFERABILITY OF OPTION
Options are not transferable. Options that, at the date of Optionee's
death, are exercisable in accordance with the terms of Section 2 of this
Agreement, may be exercised by the Optionee's heirs or administrator or the
executor or Trustee of his last will and testament as soon as is legally
possible after the Optionee's death. Any such exercise may not take place more
than two years after the date of the Optionee's death without the prior written
consent of the Company, such consent not to be unreasonably withheld.
SECTION 5 - EXERCISE
(a) Subject to the terms and conditions of this Agreement, an Option may
be exercised only by delivering to the Company, on any day within the
Option Period in respect of that Option, written notice of such
exercise. The notice will be signed by the Optionee and dated the
date of exercise, will identify the Option being exercised, and state
the exercise price pursuant to clause 2(b) preceding.
(b) Each notice referred to in this section will be accompanied by full
payment for the Shares being acquired under the Option, which payment
will be made in lawful money of Canada or the United States as the
case may be.
(c) The delivery of notice and the required payment in respect of a
validly exercisable Option will, provided they are in compliance with
this section, constitute a sale on the date of delivery of the notice,
and the Company so declares and agrees.
(d) A certificate representing the Shares acquired by the Optionee will be
issued and delivered to the Optionee by the Company as soon as
practicable after receipt of the notice and payment.
SECTION 6 - ADJUSTMENT OF THE NUMBER OF SHARES
The directors will adjust the number of Shares covered by any Option
in a manner which is equitable to reflect any change in the capitalization of
Company including, but not limited to, such changes as stock dividends,
consolidations and subdivisions of shares or changes resulting from an
amalgamation of the Company with one or more corporations. If any adjustment
under this section would create a fractional share or a right to acquire a
<PAGE>
-5-
fractional share, such fractional share will be disregarded and the number of
Shares covered by any Option will be the next lower whole number of Shares,
rounding all fractions downward. The directors will adjust the exercise price
under any Option in an equitable manner if the number of Shares covered by the
Option is adjusted pursuant to this section. Each adjustment made by the
directors pursuant to this section will be conclusive and binding on the Company
and the Optionee.
SECTION 7 - COVENANTS AND AGREEMENTS OF THE COMPANY
The Company will reserve or cause to be reserved for allotment from
time to time out of the authorized but unissued Shares of the Company sufficient
Shares for issue to the Optionee under all Options.
SECTION 8 - ADMINISTRATION OF THE OPTION PLAN
The Options have been granted pursuant to the Option Plan administered
by the Board of Directors of the Company.
SECTION 9 - SPOUSES OF OPTIONEES
If, upon the occurrence of one or more of the following events:
(a) the execution of a separation agreement between the Optionee and his
spouse (as defined in any applicable legislation);
(b) the making of a declaratory judgement that the Optionee and his spouse
have no reasonable prospect of reconciliation with each other;
(c) the making of an order for dissolution of the marriage of the Optionee
or the judicial separation of the Optionee from his spouse; or
(d) the making of an order declaring the marriage of the Optionee null and
void,
or any similar event, there ensues any legal action to which the spouse of the
Optionee seeks an order of the court declaring that such spouse is entitled to
an interest in any
<PAGE>
-6-
Option granted hereby, then the Optionee will do all things reasonably necessary
in order to ensure that his spouse will not obtain such an order, including
indicating to the court his willingness to compensate his spouse for not
obtaining such interest by offering to allow to such spouse a greater share of
other family assets of equivalent value.
SECTION 10 - NOTICES
Any notice relating to this Agreement will be in writing and will be
deemed to have been delivered if mailed by prepaid registered mail or certified
mail:
(a) if to the Optionee, to his address as shown above, or upon notice of
another address for the purposes of this Agreement, then to such other
address as the Optionee will have most recently advised the Company by
notice in writing given hereunder, and
(b) if to the Company, to the Company's address as shown above, or to such
other address as the Company will have most recently advised the
Optionee by notice in writing given hereunder.
Any notice will be deemed to have been delivered to the party to whom it is
addressed, if delivered, when delivered, and if mailed, on the third business
day (exclusive of Saturdays, Sundays and statutory holidays) after the same is
mailed as aforesaid provided that if, due to a disruption in mail service
because of a labour dispute or for any other reason at the place of mailing or
at its addressed destination or any intermediate point through which the mail is
shipped, the mail is not picked up, dealt with, transmitted or delivered in its
ordinary course, then a notice mailed as aforesaid will not be deemed to be
delivered as aforesaid but will be deemed to be delivered when actually
received.
SECTION 11 - SEVERABILITY OF INVALID PROVISIONS
If all or any part of any provision of this Agreement should be found
and determined to be invalid, illegal or unenforceable, the remainder of this
Agreement will continue to be binding on the parties as if the provision or part
thereof had been deleted from this Agreement.
<PAGE>
-7-
SECTION 12 - ASSIGNMENT
This Agreement may not be assigned in whole or in part by the
Optionee.
SECTION 13 - BURDEN AND BENEFIT
This Agreement will be binding upon the parties hereto and will enure
to the benefit of and be binding upon the successors and assigns of the Company
and will be binding upon the heirs, successors, legal representatives,
executors, administrators and assigns of the Optionee. The Optionee
acknowledges that all covenants of the Optionee hereunder will bind his Personal
Representative, and any notices required or permitted to be delivered hereunder
to the Optionee will be deemed to be delivered if delivered to or by the
Personal Representative of the Optionee in accordance with the Provisions of
this Agreement.
SECTION 14 - SECURITIES LAWS
Upon exercise of the rights granted under this Agreement, the Optionee
agrees that he will acquire Shares for investment only and will not transfer any
Shares acquired pursuant to this Agreement so as to result in a distribution in
violation of any applicable federal and state securities laws. The Optionee
understands and agrees that any shares which may be issued pursuant to this
Agreement may have such legends and restrictions on them and be subject to such
stop-transfer instructions as the Company determines to be necessary or
appropriate, and further agrees to execute such agreements regarding transfer of
such Shares as the Company or its counsel may deem advisable. The Optionee
agrees that the Company shall not be required to register any Shares acquired by
the Optionee and that the Optionee may be required to hold such Shares
indefinitely in the absence of registration or an exemption from registration
under applicable securities laws.
SECTION 15 - TIME
Time will be of the essence in this Agreement.
<PAGE>
-8-
SECTION 16 - LAW GOVERNING
This Agreement will be governed by, and construed in accordance with,
the laws of the Province of British Columbia, Canada.
SECTION 17 - INTERPRETATION OF AGREEMENT
Unless the context otherwise requires, words importing the singular
include the plural and vice versa and words importing gender include all
genders.
IN WITNESS WHEREOF, the Company has affixed its corporate seal in the
presence of its authorized officers and the Optionee has hereunto set his hand
and seal, all as of the year and day first above written.
BY THE COMPANY:
THE COMMON SEAL OF THE )
COMPANY was hereunto )
affixed in the presence of: ) C/S
)
- - ----------------------------- )
Director )
BY THE OPTIONEE:
SIGNED AND DELIVERED )
by )
in the presence of: )
)
- - ----------------------------- ) ------------------------------------------
Signature )
)
- - ----------------------------- )
Name )
)
- - ----------------------------- )
Address )
<PAGE>
-9-
)
- - ----------------------------- )
Occupation )
<PAGE>
EXHIBIT 24
THIS OPTION AGREEMENT is made as of
the day of , 199 .
BETWEEN:
THE LOEWEN GROUP INC., a body corporate duly incorporated and existing
under the laws of the Province of British Columbia and having its
principal place of business at 4126 Norland Avenue, Burnaby, British
Columbia, Canada, V5G 3S8, or nominee,
(the "Company")
OF THE FIRST PART
AND:
, an employee of the Company or LGII (as hereinafter defined),
residing in
(the "Optionee")
OF THE SECOND PART
WHEREAS:
A. The Optionee is a bona fide employee of the Company or its wholly
owned United States subsidiary Loewen Group International, Inc. ("LGII");
B. The Company has adopted an Employee Stock Option Plan (the "Option
Plan") for the purpose of promoting the interests of the Company by furnishing
certain of its employees (or employees of LGII), as designated from time to time
by the Company, with greater incentive to develop and promote the business and
financial success of the Company and by furthering the identity of interest of
such employees or directors with those
<PAGE>
-2-
of the shareholders generally of the Company, through share ownership in the
Company; and
C. The Company considers that the grant to the Optionee of options
pursuant to the Option Plan will serve the purposes and assist in achieving the
objectives of the Option Plan.
NOW THEREFORE, in consideration of the premises and the mutual
covenants set out below and for other good and valuable consideration, the
parties agree as follows:
SECTION 1 - DEFINITIONS
In this Agreement:
(a) "directors" means the Board of Directors of the Company, as
constituted from time to time;
(b) "Option" means any option to acquire Shares granted hereby;
(c) "Option Period" means, with respect to any Option, the period within
which the Option may be exercised;
(d) "Personal Representative" of an Optionee means any trustee in
bankruptcy of such Optionee, any receiver or receiver-manager of the
property of such Optionee, any assignee for the benefit of the
creditors of such Optionee, any execution creditor of such Optionee,
the heir, executor, administrator, successor, legal representative,
assign or committee of such Optionee, or any other person who stands
in a like relationship to such Optionee;
(e) "Option Plan" means the Employee Stock Option Plan adopted by the
Company as of November 21, 1986, as amended or modified from time to
time pursuant to the terms thereof;
(f) "Shares" means the Common Shares in the capital stock of the Company.
<PAGE>
-3-
SECTION 2 - GRANT, PRICE
(a) Subject to the provisions of this Agreement, the Company hereby grants
to the Optionee the Options listed below, which Options are
exercisable in the manner and on the terms set out in this Agreement:
(i) an option to acquire Shares exercisable at any time
commencing after the date that is months after the date of
this Agreement and terminating as provided in Section 3;
(ii) an option to acquire Shares exercisable at any time
commencing after the date that is months after the date of
this Agreement and terminating as provided in Section 3;
(iii) an option to acquire Shares exercisable at any time
commencing after the date that is months after the date
of this Agreement and terminating as provided in Section 3;
(iv) an option to acquire Shares exercisable at any time
commencing after the date that is months after the date of
this Agreement and terminating as provided in Section 3; and
(v) an option to acquire Shares exercisable at any time
commencing after the date that is months after the date of
this Agreement and terminating as provided in Section 3.
(b) The exercise price for the Options will be $ per share,
dollars.
SECTION 3 - TERMINATION OF OPTION
Each Option will expire and terminate at 11:59 p.m. (Pacific Standard
time) upon the earliest to occur of the following:
(a) the day which is ten years after the date of this Agreement;
(b) forty-five (45) days after the day the Optionee ceases to be an
employee of the Company or LGII;
<PAGE>
-4-
(c) the day that the Optionee is declared bankrupt or makes any assignment
for the benefit of his creditors, or the day of the appointment of a
receiver or receiver-manager of the property of the Optionee; or
(d) the day after a court appoints a committee of the estate of the
Optionee on the grounds that he is incapable, by reason of physical or
mental infirmity, of managing his affairs.
SECTION 4 - NON-TRANSFERABILITY OF OPTION
Options are not transferable. Options that, at the date of Optionee's
death, are exercisable in accordance with the terms of Section 2 of this
Agreement, may be exercised by the Optionee's heirs or administrator or the
executor or Trustee of his last will and testament as soon as is legally
possible after the Optionee's death. Any such exercise may not take place more
than two years after the date of the Optionee's death without the prior written
consent of the Company, such consent not to be unreasonably withheld.
SECTION 5 - EXERCISE
(a) Subject to the terms and conditions of this Agreement, an Option may
be exercised only by delivering to the Company, on any day within the
Option Period in respect of that Option, written notice of such
exercise. The notice will be signed by the Optionee and dated the
date of exercise, will identify the Option being exercised, and state
the exercise price pursuant to clause 2(b) preceding.
(b) Each notice referred to in this section will be accompanied by full
payment for the Shares being acquired under the Option, which payment
will be made in lawful money of Canada or the United States as the
case may be.
(c) The delivery of notice and the required payment in respect of a
validly exercisable Option will, provided they are in compliance with
this section, constitute a sale on the date of delivery of the notice,
and the Company so declares and agrees.
<PAGE>
-5-
(d) A certificate representing the Shares acquired by the Optionee will be
issued and delivered to the Optionee by the Company as soon as
practicable after receipt of the notice and payment.
SECTION 6 - ADJUSTMENT OF THE NUMBER OF SHARES
The directors will adjust the number of Shares covered by any Option
in a manner which is equitable to reflect any change in the capitalization of
Company including, but not limited to, such changes as stock dividends,
consolidations and subdivisions of shares or changes resulting from an
amalgamation of the Company with one or more corporations. If any adjustment
under this section would create a fractional share or a right to acquire a
fractional share, such fractional share will be disregarded and the number of
Shares covered by any Option will be the next lower whole number of Shares,
rounding all fractions downward. The directors will adjust the exercise price
under any Option in an equitable manner if the number of Shares covered by the
Option is adjusted pursuant to this section. Each adjustment made by the
directors pursuant to this section will be conclusive and binding on the Company
and the Optionee.
SECTION 7 - COVENANTS AND AGREEMENTS OF THE COMPANY
The Company will reserve or cause to be reserved for allotment from
time to time out of the authorized but unissued Shares of the Company sufficient
Shares for issue to the Optionee under all Options.
SECTION 8 - ADMINISTRATION OF THE OPTION PLAN
The Options have been granted pursuant to the Option Plan administered
by the Compensation Committee of the Board of Directors of the Company.
SECTION 9 - SPOUSES OF OPTIONEES
If, upon the occurrence of one or more of the following events:
<PAGE>
-6-
(a) the execution of a separation agreement between the Optionee and his
spouse (as defined in any applicable legislation);
(b) the making of a declaratory judgement that the Optionee and his spouse
have no reasonable prospect of reconciliation with each other;
(c) the making of an order for dissolution of the marriage of the Optionee
or the judicial separation of the Optionee from his spouse; or
(d) the making of an order declaring the marriage of the Optionee null and
void,
or any similar event, there ensues any legal action to which the spouse of the
Optionee seeks an order of the court declaring that such spouse is entitled to
an interest in any Option granted hereby, then the Optionee will do all things
reasonably necessary in order to ensure that his spouse will not obtain such an
order, including indicating to the court his willingness to compensate his
spouse for not obtaining such interest by offering to allow to such spouse a
greater share of other family assets of equivalent value.
SECTION 10 - NOTICES
Any notice relating to this Agreement will be in writing and will be
deemed to have been delivered if mailed by prepaid registered mail or certified
mail:
(a) if to the Optionee, to his address as shown above, or upon notice of
another address for the purposes of this Agreement, then to such other
address as the Optionee will have most recently advised the Company by
notice in writing given hereunder, and
(b) if to the Company, to the Company's address as shown above, or to such
other address as the Company will have most recently advised the
Optionee by notice in writing given hereunder.
Any notice will be deemed to have been delivered to the party to whom it is
addressed, if delivered, when delivered, and if mailed, on the third business
day (exclusive of Saturdays, Sundays and statutory holidays) after the same is
mailed as aforesaid provided that if, due to a disruption in mail service
because of a labour dispute or for any other reason at the place of mailing or
at its addressed destination or any intermediate point through which the
<PAGE>
-7-
mail is shipped, the mail is not picked up, dealt with, transmitted or delivered
in its ordinary course, then a notice mailed as aforesaid will not be deemed to
be delivered as aforesaid but will be deemed to be delivered when actually
received.
SECTION 11 - SEVERABILITY OF INVALID PROVISIONS
If all or any part of any provision of this Agreement should be found
and determined to be invalid, illegal or unenforceable, the remainder of this
Agreement will continue to be binding on the parties as if the provision or part
thereof had been deleted from this Agreement.
SECTION 12 - ASSIGNMENT
This Agreement may not be assigned in whole or in part by the
Optionee.
SECTION 13 - BURDEN AND BENEFIT
This Agreement will be binding upon the parties hereto and will enure
to the benefit of and be binding upon the successors and assigns of the Company
and will be binding upon the heirs, successors, legal representatives,
executors, administrators and assigns of the Optionee. The Optionee
acknowledges that all covenants of the Optionee hereunder will bind his Personal
Representative, and any notices required or permitted to be delivered hereunder
to the Optionee will be deemed to be delivered if delivered to or by the
Personal Representative of the Optionee in accordance with the Provisions of
this Agreement.
SECTION 14 - SECURITIES LAWS
Upon exercise of the rights granted under this Agreement, the Optionee
agrees that he will acquire Shares for investment only and will not transfer any
Shares acquired pursuant to this Agreement so as to result in a distribution in
violation of any applicable federal and state securities laws. The Optionee
understands and agrees that any shares which may be issued pursuant to this
Agreement may have such legends and restrictions on them and be subject to such
stop-transfer instructions as the Company
<PAGE>
-8-
determines to be necessary or appropriate, and further agrees to execute such
agreements regarding transfer of such Shares as the Company or its counsel may
deem advisable. The Optionee agrees that the Company shall not be required to
register any Shares acquired by the Optionee and that the Optionee may be
required to hold such Shares indefinitely in the absence of registration or an
exemption from registration under applicable securities laws.
SECTION 15 - TIME
Time will be of the essence in this Agreement.
SECTION 16 - LAW GOVERNING
This Agreement will be governed by, and construed in accordance with,
the laws of the Province of British Columbia, Canada.
SECTION 17 - INTERPRETATION OF AGREEMENT
Unless the context otherwise requires, words importing the singular
include the plural and vice versa and words importing gender include all
genders.
IN WITNESS WHEREOF, the Company has affixed its corporate seal in the
presence of its authorized officers and the Optionee has hereunto set his hand
and seal, all as of the year and day first above written.
BY THE COMPANY:
THE COMMON SEAL OF THE )
COMPANY was hereunto )
affixed in the presence of: ) C/S
)
)
Director )
<PAGE>
-9-
BY THE OPTIONEE:
SIGNED AND DELIVERED )
by )
in the presence of: )
)
)
Signature )
)
)
Name )
)
)
Address )
)
)
Occupation )
<PAGE>
EXHIBIT 25
THE LOEWEN GROUP INC.
EMPLOYEE SHARE PURCHASE PLAN (UNITED STATES)
(RESTATED AND AMENDED AS AT APRIL 7, 1994 AND FURTHER AMENDED AS AT
APRIL 7, 1995)
SECTION 1 - GENERAL
(a) The purpose of the Employee Share Purchase Plan (United States) (the
"Plan") is to provide a convenient method for employees of The Loewen Group Inc.
(the "Company") and its direct or indirect subsidiaries ("Subsidiaries") who are
residents of the United States or its territories to participate in the share
ownership of the Company, or to increase their share ownership in the Company.
Under the Plan, as of such dates as the Board of Directors of the Company (the
"Board") may fix during each calendar year ("Commencement Dates"), the Company
will offer to Eligible Employees (as defined below) an opportunity to purchase
Common shares of the Company ("Shares") via payroll deductions over the
subsequent 12 months. The amendments and restatements described herein shall
take effect on the first Commencement Date following the date hereof.
(b) The Plan is not qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code") and is not subject to any of the
provisions of the Employment Retirement Income Security Act of 1974.
(c) Any questions concerning the Plan should be directed to the Corporate
Secretary of the Company, at the Company's principal executive offices located
at 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8, telephone
number (604) 299-9321.
(d) All dollar amounts are in United States dollars. The Plan will be
governed by, and construed in accordance with, the laws of the Province of
British Columbia.
SECTION 2 - ELIGIBILITY
(a) An employee of the Company or its Subsidiaries who is a resident of
the United States or its territories is eligible to participate in the Plan if
he or she is a regularly scheduled full-time employee who: (i) works at least
20 hours per week on a regular basis, (ii) has completed the three month
probationary period of service with the Company or any of its Subsidiaries, and
(iii) has reached the age of majority in the place of his or her residence (an
"Eligible Employee"). Any employee who either (a) beneficially owns more than
10% of the Shares of the Company or (b) beneficially owns the right to vote more
than 10% of such Shares, is not eligible to participate in the Plan. In
addition, a director of the Company or its Subsidiaries who is not otherwise an
Eligible Employee is not eligible to participate in the Plan.
<PAGE>
(b) The number of Shares an Eligible Employee elects to purchase at any
Commencement Date will reduce the maximum number of Shares he or she may
purchase at any subsequent Commencement Dates during the same calendar year.
(c) An Eligible Employee may elect to begin participation in the Plan on a
Commencement Date by providing the Company or the Eligible Employee's employer
with a duly completed Payroll Deduction Authorization Form on or before a date
fixed by the Board (the "Application Date") following the applicable
Commencement Date. An employee's participation ends on the earlier of the date
the Plan is terminated by the Company and the date the employee discontinues
payroll deductions as outlined under Section 5 below.
(d) The Plan is intended to provide for broad-based employee participation
as contemplated by the U.S. Internal Revenue Code section 410(b).
SECTION 3 - PURCHASE PRICE
The purchase price per Share is the Current Market Price (as hereinafter
defined) for the Shares. "Current Market Price" means the weighted average
closing price per Share for the Shares for the five consecutive trading days
immediately preceding the applicable Commencement Date, as reported by the
Nasdaq National Market or any United States national securities exchange or
quotation system on which the Shares are traded.
SECTION 4 - LIMITATIONS
(a) The aggregate number of Shares that may be issued under the Plan shall
not exceed 800,000 Shares. Subject to the foregoing, Eligible Employees will be
entitled make elections to purchase such number of Shares in a calendar year
that the Board determines from time to time. Currently, the maximum number of
Shares that an Eligible Employee may elect to purchase in each calendar year is:
(i) 500, if such Eligible Employee earns an annual base salary of $25,000 or
more as of the applicable Commencement Date, or (ii) 350, if such Eligible
Employee earns an annual base salary of less than $25,000 as of the applicable
Commencement Date. The current minimum number of Shares that an Eligible
Employee may elect to purchase in any calendar year is 25, and each Eligible
Employee may only elect to purchase Shares in multiples of 25.
(b) So long as all other conditions described herein have been satisfied,
each participant in the Plan will receive a share certificate evidencing the
Shares purchased pursuant to the Plan as soon as is reasonably possible after
the day the last payroll deduction is made in respect of the purchase of such
Shares.
(c) If during the period between the day an election is made by a
participant to purchase Shares and the day a share certificate for such Shares
is to be issued in such participant's name there is an amalgamation or other
reorganization of the Company or a stock dividend is paid on the Shares, the
number of Shares issued to the participant will be adjusted to take into account
such amalgamation or other reorganization or stock dividend,
<PAGE>
as the case may be.
SECTION 5 - PAYROLL DEDUCTIONS
(a) At the time a participant files his or her Payroll Deduction
Authorization Form, the Company will determine the fixed dollar amount to be
deducted and withheld from the participant's paycheck (the "Deducted Amount") on
each pay day during the time the employee is a participant in the Plan. This
amount will be determined by multiplying the number of Shares elected to be
purchased by the participant at a Commencement Date by the Current Market Price,
and dividing such amount by the number 24 for participants having 24 pay periods
per year, or by the number of pay periods per year for participants having a
different number of pay periods per year. The Deducted Amount for each
Commencement Date that an employee chooses to participate will then be added to
determine the participant's total payroll deduction amount.
(b) A participant may at any time discontinue payroll deductions. Any
discontinuance of payroll deductions must be made by delivering written notice
of such discontinuance to the Company at least two weeks before the effective
date of such discontinuance.
(c) Where a participant elects to discontinue payroll deductions, or where
his or her employment with the Company or any of its Subsidiaries ceases for any
reason before the last of the applicable payroll deductions has been made, the
participant may elect to either (i) pay the remaining amount owing at the time
of discontinuance or cessation of employment and receive a share certificate
issued in his or her name, or (ii) have all payroll deductions made to that time
returned to him or her without interest. If discontinuance of payroll
deductions occurs and the participant continues to be an employee of the Company
or any of its direct or indirect Subsidiaries, the participant may not re-enter
the Plan prior to the next Commencement Date; provided, however that if the
participant is an "executive officer" within the meaning of Rule 16a-1(f) under
the Exchange Act of 1934, as amended, such participant may not re-enter the Plan
until at least six months after the effective date of such discontinuance.
(d) At any time after a participant's first payroll deduction is made,
such participant may elect to pay the remaining portion of the aggregate
purchase price payable for the Shares being purchased as of the relevant
Commencement Date.
SECTION 6 - COSTS
The Company will pay all costs of establishing and maintaining the Plan.
All brokers' commissions on the sale of Shares by a participant will be paid by
the participant. The participant also must pay all taxes associated with the
purchase and sale of the Shares.
3
<PAGE>
SECTION 7 - ADMINISTRATION
The Plan will be administered by the Board. The Board will be vested with
full authority to make, administer, and interpret such rules and regulations as
it deems necessary to administer the Plan, and any determination, decision, or
action of the Board in connection with the construction, interpretation,
administration, or application of the Plan will be final, conclusive, and
binding upon all participants and any and all persons claiming under or through
any participant. The Board may delegate any or all of its authority hereunder
to such committee as it may designate. A committee appointed by the Board in
accordance with the provisions of this Section may consist of both Board and
non-Board members. The address of the Board is in care of the Company's
principal executive office, 4126 Norland Avenue, Burnaby, British Columbia,
Canada, V5G 3S8.
SECTION 8 - AMENDMENT OR DISCONTINUANCE OF THE PLAN
Subject to regulatory approval and, where required, approval of the
shareholders of the Company, the Board will have the right to amend, modify, or
terminate the Plan at any time on 30 days written notice to all participants,
delivered to each participant in care of the place of business where such
participant reports to work, PROVIDED HOWEVER that no such termination or
amendment will adversely affect the current participation by the participant in
the Plan.
SECTION 9 - NOTICES
All notices or other communications by a participant to the Company under
or in connection with the Plan will be deemed to have been duly given when
received by the Company at its principal executive office, 4126 Norland Avenue,
Burnaby, British Columbia, Canada, V5G 3S8, Attention: Corporate Secretary. All
notices or other communications by the Company to a participant under or in
connection with the Plan will be deemed to have been duly given when delivered
by the Company to the participant care of the place of business where such
participant reports to work.
SECTION 10 - RISK
EACH EMPLOYEE ASSUMES THE RISK OF ANY MARKET
FLUCTUATIONS IN THE PRICE OF THE SHARES.
SECTION 11 - SECURITIES REGULATION
AND TAX WITHHOLDING
(a) Under United States federal law, Shares purchased pursuant to the Plan
by participants who are not "affiliates" of the Company within the meaning of
the Securities Act of 1933, as amended (the "Act"), generally may be resold
without registration or other restriction under the Act. Generally Shares
purchased by "affiliates" pursuant to the Plan may not be resold to the public
in the United States without registration under the Act, except pursuant to an
exemption from such registration. One such exemption from
4
<PAGE>
registration is Rule 144 under the Act, which permits resales by affiliates so
long as certain volume, manner of sale and other requirements have been
satisfied. An "affiliate" is a person who directly or indirectly controls, or
is controlled by, or is under common control with, the Company.
(b) No Shares will be issued pursuant to the Plan unless the Shares are
registered or qualified under appropriate securities laws, or the issuance of
the Shares is exempt therefrom in the opinion of the Board upon the advice of
counsel to the Company.
(c) The Board may take all such measures as it deems appropriate to ensure
that the Company's obligations under the withholding provisions under tax laws
applicable to the Company and other provisions of applicable laws are satisfied
with respect to the issuance of Shares pursuant to the Plan.
(d) Issuance, transfer or delivery of certificates for Shares purchased
pursuant to the Plan may be delayed, at the discretion of the Board, until it is
satisfied that the applicable requirements of securities and tax laws have been
met. If for any reason the Company is unable to deliver certificates for
Shares, its only obligation will be to return without interest all payroll
deductions made.
(e) With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), transactions under the Plan
are intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the 1934 Act. If any provision of the Plan or action by the
Board fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Board.
SECTION 12 - RIGHTS AS SHAREHOLDERS
A participant shall have no rights as a shareholder (including the right to
vote and to receive dividends) of the Company with respect to Shares elected to
be purchased under the Plan until such participant has completed the last
payroll deduction in respect of such Shares.
SECTION 13 - ASSIGNMENT/SUCCESSORS
The rights of a participant under the Plan may not be transferred other
than by will or as a result of the laws of descent and distribution. Except as
so provided, the rights and obligations of the Company and participants pursuant
to the Plan will be binding upon and inure to the benefit of such parties and
their successors and assigns.
5
<PAGE>
EXHIBIT 26
THE LOEWEN GROUP INC.
EMPLOYEE SHARE PURCHASE PLAN (CANADA)
(RESTATED AND AMENDED AS AT APRIL 7, 1994 AND FURTHER AMENDED
AS AT APRIL 7, 1995)
SECTION 1 - PURPOSE OF THE PLAN
The purpose of the Employee Share Purchase Plan (Canada) (the "Plan") of
The Loewen Group Inc. (the "Company") is to provide a convenient method for
employees of the Company or any of its direct or indirect subsidiaries (the
"Subsidiaries") who are residents of Canada to participate in the share
ownership of the Company, or to increase their share ownership in the Company.
Under the Plan, as of such dates as the Board of Directors of the Company (the
"Board") may fix during each calendar year (the "Commencement Dates"), the
Company will offer to Eligible Employees (as defined below) an opportunity to
purchase Common shares of the Company ("Shares") via payroll deduction over the
subsequent 12 months. All dollar amounts referred to in the Plan are in
Canadian funds.
SECTION 2 - PARTICIPATION
(a) An employee of the Company or its Subsidiaries who is a resident of Canada
is eligible to participate in the Plan if he or she is a regularly scheduled
full-time employee who (i) works at least 20 hours per week on a regular basis,
(ii) has completed the three month probationary period of service with the
Company or any of its Subsidiaries, and (iii) has reached the age of majority in
the place of his or her residence (an "Eligible Employee"). Any employee who
beneficially owns more than 10% of the issued and outstanding Shares or
exercises control or direction over more than 10% of the Shares is not eligible
to participate under the Plan. In addition, a director of the Company or its
Subsidiaries who is not otherwise an Eligible Employee is not eligible to
participate in the Plan. Participation in the Plan will in no way constitute
any form of agreement or understanding binding on the Company, express or
implied, that the Company or its Subsidiaries will employ a participant for any
length of time.
(b) An Eligible Employee may elect to begin participation in the Plan on a
Commencement Date by providing the Company with a duly completed Payroll
Deduction Authorization Form on or before a date fixed by the Board (the
"Application Date") following the applicable Commencement Date.
(c) An Eligible Employee becomes a participant when he or she completes, signs,
and files with the Company on or before the Application Date following the
applicable Commencement Date, a Payroll Deduction Authorization Form authorizing
the Company to deduct and withhold funds from his or her pay cheques to purchase
Shares under the Plan. An employee's participation ends on the earlier of the
date the Plan is terminated by the Company and the date the employee
discontinues payroll deductions.
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(d) The Plan is intended to provide for broad-based employee participation as
contemplated by United States Internal Revenue Code section 410(b).
SECTION 3 - LIMITATIONS
(a) The aggregate number of Shares that may be issued under the Plan shall not
exceed 800,000 Shares. Subject to the foregoing, Eligible Employees will be
entitled to make elections to purchase such number of Shares in a calendar year
that the Board determines from time to time. Currently, Eligible Employees
earning an annual salary of $25,000 or more are entitled to make elections to
purchase no more than 500 Shares in each calendar year, and Eligible Employees
earning an annual salary that is less than $25,000 are entitled to make
elections to purchase no more than 350 Shares in each calendar year. The
current minimum amount of Shares an Eligible Employee may elect to purchase in
any calendar year is 25 Shares, and each Eligible Employee may only elect to
purchase Shares in multiples of 25 Shares.
(b) If during the period between the day an election is made by a participant
to purchase Shares and the day a share certificate for such Shares is to be
issued in such participant's name there is an amalgamation or other
reorganization of the Company or a stock dividend is paid on the Shares, the
number of Shares issued to the participant will be adjusted to take into account
such amalgamation or other reorganization or stock dividend, as the case may be.
SECTION 4 - PURCHASE PRICE
The purchase price per Share is the Current Market Price (as hereinafter
defined) for the Shares. "Current Market Price" means the weighted average
closing price per Share on The Toronto Stock Exchange for the Shares for the
five consecutive trading days immediately preceding the applicable Commencement
Date.
SECTION 5 - PAYROLL DEDUCTIONS
(a) At the time a participant files his or her Payroll Deduction Authorization
Form, the Company shall determine the fixed dollar amount to be deducted and
withheld from his or her pay cheque (the "Deducted Amount") on each pay day
during the time he or she is a participant in the Plan. This amount will be
determined by multiplying the number of Shares elected to be purchased by the
participant at a Commencement Date by the Current Market Price, and dividing
such amount by the number 24 for participants having 24 pay periods per year, or
by the number of pay periods per year for participants having a different number
of pay periods per year. The Deducted Amount for each Commencement Date that an
employee chooses to participate will then be added to determine the
participant's total payroll deduction amount.
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(b) Each participant in the Plan will receive a share certificate evidencing
the Shares purchased pursuant to the Plan as soon as is reasonably possible
after the day the last payroll deduction is made in respect of the purchase of
such Shares.
(c) A participant may at any time discontinue his or her payroll deductions. A
participant may re-enter the Plan on any subsequent Commencement Date, provided,
however, that if the participant is an "executive officer" within the meaning of
Rule 16a-1(f) of the United States Securities Exchange Act of 1934, as amended,
such participant may not re-enter the Plan until at least six months after the
effective date of such discontinuance. Any change in or discontinuance of a
payroll deduction must be made by delivering written notice of such change or
discontinuance to the Company at least 2 weeks before the effective date of such
change or discontinuance.
(d) Where a participant discontinues payroll deductions or his or her
employment with the Company or any of its Subsidiaries ceases for any reason
before the last payroll deduction for a 12 month period has been made, the
participant may elect to either (i) pay the remaining amount owing at the time
of discontinuance or cessation of employment and receive a share certificate
issued in his or her name; or (ii) have all payroll deductions made to that time
returned to him or her without interest.
(e) At any time after a participant's first payroll deduction is made, such
participant may elect to pay the remaining portion of the aggregate purchase
price payable for the Shares being purchased as of the relevant Commencement
Date.
SECTION 6 - COSTS
The Company shall pay all costs of establishing and maintaining the Plan.
All brokers' commissions on the sale of Shares delivered to a participant in
accordance with the provisions of the Plan shall be paid by the participant.
The participant also must pay all taxes associated with the purchase and sale of
the Shares.
SECTION 7 - AMENDMENT OR DISCONTINUANCE OF THE PLAN
(a) Subject to obtaining the necessary regulatory approvals and, where
required, the approval of the shareholders of the Company, the Board shall have
the right to amend, modify, or terminate the Plan at any time on 30 days written
notice to all participants delivered to each participant in care of the place of
business where such participant reports to work, PROVIDED HOWEVER that no such
termination or amendment will adversely affect the current participation by the
participant in the Plan.
(b) In the event of termination of the Plan, each participant will have the
option to pay the remainder owing at that time and to receive a share
certificate evidencing the Shares
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purchased as soon as is reasonably possible thereafter, or to have his or her
payments returned to him or her, without interest.
SECTION 8 - ADMINISTRATION
The Plan shall be administered by the Board. The Board shall be vested
with full authority to make, administer, and interpret such rules and
regulations as it deems necessary to administer the Plan, and any determination,
decision, or action of the Board in connection with the construction,
interpretation, administration, or application of the Plan will be final,
conclusive, and binding upon all participants and any and all persons claiming
under or through any participant. The Board may delegate any or all of its
authority hereunder to such committee as it may designate. A committee
appointed by the Board may consist of both Board and non-Board members.
SECTION 9 - NOTICES
All notices or other communications by a participant to the Company under
or in connection with the Plan shall be deemed to have been duly given when
received by the Company at its principal executive office, 4126 Norland Avenue,
Burnaby, British Columbia, Canada, V5G 3S8, Attention: Corporate Secretary. All
notices or other communications by the Company to a participant under or in
connection with the Plan shall be deemed to have been duly given when delivered
by the Company to the participant care of the place of business where such
participant reports to work.
SECTION 10 - LIMITATIONS ON SALE OF SHARES PURCHASED UNDER THE PLAN
The Plan is intended to provide Shares for investment and not for resale.
The Company does not, however, intend to restrict or influence any employee in
the conduct of his or her own affairs. After all payroll deductions have been
made and a share certificate has been issued, an employee, therefore, may sell
Shares purchased under the Plan at any time he or she chooses, subject to
compliance with any applicable securities laws. THE EMPLOYEE ASSUMES THE RISK
OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE SHARES.
SECTION 11 - RIGHTS AS SHAREHOLDERS
A participant shall have no rights as a shareholder (including the right to
vote and to receive dividends) of the Company with respect to Shares elected to
be purchased under the Plan until such participant has completed the last
payroll deduction in respect of such Shares.
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SECTION 12 - SECURITIES REGULATION
(a) No Shares shall be issued pursuant to the Plan unless the Shares are issued
in compliance with the registration and prospectus requirements of applicable
securities laws, or the issuance of the Shares is exempt from such requirements
in the opinion of counsel to the Company.
(b) Issuance, transfer or delivery of certificates for Shares purchased
pursuant to the Plan may be delayed, at the discretion of the Board until it is
satisfied that the applicable requirements of securities and income tax laws
have been met. If for any reason the Company is unable to deliver certificates
for Shares, its only obligation will be to return without interest all payroll
deductions made.
(c) With respect to persons subject to Section 16 of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the 1934 Act. If any provision of the Plan or action by the
Board fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Board.
SECTION 13 - APPLICABLE LAW
The Plan shall be governed by, and construed in accordance with, the laws
of the province of British Columbia.
SECTION 14 - ASSIGNMENT/SUCCESSORS
The rights of a participant under the Plan may not be transferred other
than by will or as a result of the laws of descent and distribution. Except as
so provided, the rights and obligations of the Company and participants pursuant
to the Plan will be binding upon and inure to the benefit of such parties and
their successors and assigns.
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EXHIBIT 27
THE LOEWEN GROUP INC.
1994 MANAGEMENT EQUITY INVESTMENT PLAN
ARTICLE I.
PURPOSE
The purpose of the 1994 Management Equity Investment Plan of The
Loewen Group Inc. (the "Company") is primarily to provide the Company's wholly
owned U.S. subsidiary, Loewen Group International, Inc. ("LGII"), with a cost-
effective financing program through the issuance of senior exchangeable debt and
secondarily to provide an incentive opportunity for selected key employees of
LGII's direct and indirect U.S. subsidiaries to participate in any long-term
appreciation in the Company's shares, thereby enhancing incentives to work in
the shareholders' best interests and encouraging such employees to focus on
long-term returns for the Company.
Under the Plan, a new issue of senior exchangeable debentures of LGII
will be issued to a wholly owned special purpose subsidiary of LGII. The
special purpose subsidiary, acting as the agent of LGII, will finance
approximately 95% of the purchase price of the debentures through third-party
financing, including without limitation the issuance of senior bank debt. The
remaining purchase price of the debentures (approximately 5%) will be financed
through the sale to certain key employees of LGII's direct and indirect U.S.
subsidiaries of rights (and in some instances obligations) to purchase the
debentures. The third-party debt will be guaranteed by the Company and LGII.
Proceeds from the sale of debentures to key employees will be used to retire the
third-party debt. The debentures will be exchangeable for a new series of
convertible preferred shares of the Company which, in turn, will be convertible
into common shares of the Company.
ARTICLE II.
DEFINITIONS
As used herein, the following terms have the meanings set forth below
unless the context clearly indicates to the contrary:
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means a committee of two or more members of the Board
who are not employees of the Company or any of its subsidiaries and who are
appointed by the Board to administer the Plan.
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(c) "Common Shares" means the Common Shares, without par value, of
the Company.
(d) "Company" means The Loewen Group Inc.
(e) "Convertible Preferred Shares" means the Convertible First
Preferred Shares, Series B, of the Company.
(f) "Debentures" means the 1994 Exchangeable Floating Rate Debentures
due [June 1, 2001] of LGII.
(g) "Exchange Notice" means (i) an exercise and exchange notice
pursuant to which a Participant exercises a right to purchase Debentures under
an Investment Option Agreement and instructs that Debentures held on behalf of
the Participant be exchanged for Convertible Preferred Shares or (ii) an
exchange notice whereby a holder of Debentures acquired under a Purchase
Agreement instructs that such Debentures be exchanged, in whole or in part, for
Convertible Preferred Shares.
(h) "Funding Agent" means Loewen Management Investment Corporation, a
wholly owned special purpose subsidiary of LGII.
(i) "Investment Option Agreement" means an agreement pursuant to
which an Option is issued to a Participant.
(j) "Investment Option Amount" means $50 per $1,000 principal amount
of the Debentures specified in the related Investment Option Agreement.
(k) "LGII" means Loewen Group International Inc., a wholly owned U.S.
subsidiary of the Company.
(l) "Option" means the Participant's option to purchase the principal
amount of Debentures specified in the related Investment Option Agreement.
(m) "Participant" means any employee of any direct or indirect U.S.
subsidiary of LGII designated as a "Participant" pursuant to Article V of this
Plan.
(n) "Plan" means the 1994 Management Equity Investment Plan.
(o) "Purchase Agreement" means the agreement of Funding Agent to
sell, and of a Participant to purchase, the principal amount of Debentures
specified therein. A Participant shall pay an amount equal to $50 per $1,000
principal amount of Debentures upon execution of the Purchase Agreement, and
shall be obligated to deliver an additional amount equal to the Purchase Price
of the Debentures on the date or dates specified in the Purchase Agreement upon
which the purchase of Debentures thereunder is to occur.
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(p) "Purchase Price" means an amount equal to $950 per $1,000
principal amount of the Debentures purchased by a Participant upon the exercise
of all or part of such Participant's Option or performance of all or part of any
Purchase Agreement.
ARTICLE III.
DEBENTURES, CONVERTIBLE PREFERRED
SHARES AND COMMON SHARES SUBJECT TO THE PLAN
(a) The aggregate principal amount of Debentures which may be sold to
Participants pursuant to the Plan is limited to $_____ million. In addition,
the maximum aggregate principal amount of Debentures which may be sold to any
single Participant pursuant to an Investment Option Agreement is limited to
$______ million and the maximum aggregate principal amount of Debentures which
may be sold to any single Participant pursuant to a Purchase Agreement is $___
million. The maximum number of Common Shares which may be issued under the Plan
is limited to _____ shares.
(b) At the same time that Debentures are sold to the Funding Agent,
the Funding Agent and LGII will enter into an Investment Option Agreement and/or
Purchase Agreement with each Participant.
(c) The Company has initially reserved for issuance, upon exchange of
the Debentures, an aggregate of _____ authorized Convertible Preferred Shares
and has initially reserved for issuance, upon conversion of the Convertible
Preferred Shares, an aggregate of _______ authorized Common Shares. The Company
will provide the Participants with an acknowledgment of its agreement to issue
Convertible Preferred Shares in exchange for Debentures.
(d) The Common Shares to be delivered upon conversion of the
Convertible Preferred Shares will be made available at the direction of the
Committee either from authorized but unissued Common Shares or from previously
issued Common Shares held by the Company in its treasury.
ARTICLE IV.
ADMINISTRATION OF THE PLAN
(a) The Plan will be administered by the Committee in its sole
discretion. The Committee has and may exercise, in its sole discretion, such
powers and authority of the Board as may, in the Committee's sole discretion, be
necessary or appropriate for the Committee to carry out its functions as
described in the Plan and/or in any document or documents authorized by the
Board to be entered into by the Company in order to implement the Plan. The
Committee is authorized to interpret the
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Plan and to determine, in its sole discretion, the forms and the terms and
provisions of the respective Investment Option Agreements, Purchase Agreements,
Debentures and Exchange Notices (including, without limitation, determining the
period or periods of continuous employment of the Participant with LGII or any
direct or indirect U.S. subsidiary of LGII necessary before the Option or
installments thereof shall become exercisable). In addition, the Committee in
its sole discretion, is authorized to make all other determinations and approve
all other documents, instruments and forms necessary or advisable for Plan
administration. It shall not be necessary that the forms and the terms and
conditions of any of the aforesaid be identical with respect to each
Participant, and the Committee shall have the power and authority to approve, in
its sole discretion, changes in each of such documents, instruments and forms as
they relate to any one or more Participants. The Committee, in its sole
discretion, may accelerate the vesting and/or exercisability of all or a part of
a Participant's Option prior to the Expiration Date. The Committee is also
authorized, in its sole discretion, to prescribe, amend, and rescind rules and
regulations relating to the Plan. Notwithstanding the foregoing, the Committee
may not change the minimum exchange price with respect to the Debentures or the
privileges and rights attached to the Convertible Preferred Shares, any such
change requiring approval by the Board. All interpretations, determinations,
and actions by the Committee will be final, conclusive and binding upon all
parties.
(b) the Committee, in its sole discretion, may authorize guarantees
of third-party loans to Participants in connection with the acquisition of
Options (but not Purchase Agreements) by such Participants on such terms as the
Committee shall, in its sole discretion, determine.
(c) Notwithstanding the foregoing provisions of this Article IV or
any provision of this Plan to the contrary, any agreement to which LGII or
Funding Agent is a party, any modification or amendment of any such agreement,
and any action required to be taken by LGII or Funding Agent, shall be effective
only pursuant to the authority of the Board of Directors of LGII of Funding
Agent or pursuant to other valid corporate action of such corporation.
(d) No member of the Board or the Committee will be liable for any
action taken, any failure to act or any determination made by such member, the
Board or the Committee with respect to the Plan, any Debenture or Convertible
Preferred Shares or Common Shares or any Investment Option Agreement or Purchase
Agreement executed pursuant to the Plan, except for bad faith or wilful
misconduct.
ARTICLE V.
ELIGIBILITY
The Committee shall in its sole discretion select the employees of
LGII's direct and indirect U.S. subsidiaries who may participate in the Plan and
determine the aggregate principal amount of Debentures which may be purchased by
each Participant.
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Participants shall be selected from among the key employees of such subsidiaries
taking into consideration position, performance, compensation level and such
other factors as the Committee deems relevant. Each Investment Option Agreement
and Purchase Agreement may include such terms and conditions not inconsistent
with the Plan as the Committee may determine.
ARTICLE VI.
TERMS AND CONDITIONS OF AGREEMENTS
The terms and conditions of the Investment Option Agreements and
Purchase Agreements shall be as set forth in the form approved by the Committee.
The Investment Option Agreements and Purchase Agreements will be issued upon
payment by the Participants of the amounts specified therein.
ARTICLE VII.
TERMS AND CONDITIONS AND DELIVERY OF DEBENTURES
The terms and conditions of the Debentures shall be approved by the
Committee. Debentures will be sold to a Participant upon receipt of the
relevant Exchange Notice and upon payment of the specified Purchase Price on the
Debentures.
ARTICLE VIII.
TERMS AND CONDITIONS AND
DELIVERY OF CONVERTIBLE PREFERRED SHARES
The terms and conditions of the Convertible Preferred Shares are as
set forth in the form of Special Rights and Restrictions Attached to the
Convertible Preferred Shares on file at the office of the Company. Convertible
Preferred Shares shall be issued to a Participant upon execution and delivery of
the relevant Exchange Notice.
ARTICLE IX.
GENERAL PROVISIONS
(a) Nothing in the Plan or in any instrument executed pursuant to the
Plan will (i) confer upon any Participant any right to continue in the employ of
the Company or its subsidiaries or affect the right of the Company or its
subsidiaries to terminate the employment of any Participant at any time with or
without cause or
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(ii) affect the rights of a Participant under any employment contract or benefit
plan of the Company or its subsidiaries. Neither the employment status nor the
salary or compensation of an employee will be impaired by a decision by an
employee not to participate in the Plan.
(b) No Investment Option Agreement, Purchase Agreement, Debenture,
Convertible Preferred Shares or Common Shares will be issued pursuant to this
Plan unless and until all then applicable requirements imposed by U.S.,
Canadian, state and provincial securities and other laws, rules and regulations
and by any regulatory agencies having jurisdiction, and by any stock exchanges
upon which the Common Shares may be listed, have been fully met. As a condition
precedent to the issuance of shares of Common Shares or Convertible Preferred
Shares, as appropriate, pursuant to an Exchange Notice, the Company may require
the Participant to take any reasonable action to meet such requirements. The
Company shall not be obligated to undertake the registration or qualification of
any Debentures, Common Shares or Convertible Preferred Shares under any
applicable securities laws.
(c) The Company or any of its direct and indirect U.S. subsidiaries
may make such provisions as it deems appropriate to withhold any taxes that the
Company or such subsidiary determines it is required to withhold in connection
with any transaction contemplated by the Plan.
(d) All references to dollars in this Plan shall be deemed to refer
to U.S. dollars.
ARTICLE X.
FUNDING AGENT
Funding Agent will act solely as agent on behalf of LGII with respect
to the offer and sale of the Investment Option Agreements and Purchase
Agreements and the third-party financing, including evidences of indebtedness
issued for the purpose of financing, in part, the initial purchase of the
Debentures and with respect to the acquisition, holding and transfer of
Debentures pursuant to the Plan.
ARTICLE XI.
AMENDMENT AND TERMINATION
(a) The Board will have the power, in its sole discretion, to amend,
suspend or terminate the Plan at any time.
(b) No amendment, suspension or termination of the Plan will, without
the consent of the Participant affected, impair or adversely affect any right of
a
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Participant under outstanding Investment Option Agreements or Purchase
Agreements previously issued under the Plan; provided, however, that if the Plan
is not approved by the shareholders of the Company pursuant to Article XII
hereof, the rights of any Participant under an Investment Option Agreement or
Purchase Agreement shall terminate and all amounts paid by such Participant in
respect of such agreement shall be promptly refunded without interest.
ARTICLE XII.
EFFECTIVE DATE OF PLAN AND DURATION OF PLAN
This Plan will become effective upon adoption by the Committee,
approval by The Toronto Stock Exchange and The Montreal Exchange and approval by
a "disinterested shareholder vote" (in accordance with the requirements of The
Toronto Stock Exchange and The Montreal Exchange) at a meeting of the
shareholders of the Company. Unless previously terminated or extended, the Plan
will terminate when no Debentures or Convertible Preferred Shares remain
outstanding.
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EXHIBIT 28
______________ principal amount _____________________________
of Debentures the "Participant"
INVESTMENT OPTION AGREEMENT, made as of this 15th day of June, 1994, among
LOEWEN GROUP INTERNATIONAL, INC. (the "Company"), LOEWEN MANAGEMENT INVESTMENT
CORPORATION, a wholly owned subsidiary of the Company acting as agent for the
Company ("LMIC"), and the above-named Participant.
WHEREAS, the Compensation Committee of the Board of Directors of the
Company's parent corporation, The Loewen Group Inc. ("TLGI") has adopted The
Loewen Group Inc. 1994 Management Equity Investment Plan (the "Plan") to provide
an incentive to designated employees of the Company's direct and indirect U.S.
subsidiaries to continue employment and to work in the best interests of the
TLGI's shareholders by offering the employees the opportunity to make an
investment that will increase the employees' participation in the potential
appreciation of TLGI's Common Shares (the "Common Shares");
WHEREAS, the Participant is employed by a direct or indirect U.S.
subsidiary of the Company in a key capacity and the committee designated by
TLGI's Board of Directors to administer the Plan (the "Committee") has
designated the Participant as an eligible employee under the Plan;
WHEREAS, in connection with the Plan, the Company is issuing and selling to
LMIC an issue of 1994 Exchangeable Floating Rate Debentures due July 15, 2001
(the "Debentures"), which will be exchangeable for Convertible First Preferred
Shares, Series B, of TLGI (the "Convertible Preferred Shares"), which in turn
will be convertible into Common Shares; and
WHEREAS, LMIC, in its capacity as agent for the Company, has agreed to sell
to the Participant an investment option to purchase from LMIC a specified
principal amount of the Debentures and the Participant has agreed to purchase
such option from LMIC.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties hereto agree as follows:
1. SALE AND PURCHASE OF OPTION. LMIC hereby sells, and the Participant
hereby purchases, an investment option (the "Option") evidenced by this
Investment Option Agreement entitling the Participant to purchase from LMIC the
principal amount of Debentures indicated above (the "Option Debentures"), at a
purchase price equal to $95,000 per $100,000 principal amount of Option
Debentures (the "Purchase Price"). The Option is not intended to be an
incentive stock option.
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2. INVESTMENT OPTION AMOUNT FOR THE OPTION. Simultaneously with the
Participant's execution and delivery of this Investment Option Agreement, the
Participant has delivered to LMIC $5,000 per $100,000 principal amount of the
Option Debentures, representing the purchase price of the Option (the
"Investment Option Amount").
3. RESTRICTIONS ON EXERCISE OF THE OPTION.
(a) EXERCISABILITY. Except as otherwise provided herein, the Option
may not be exercised, in whole or in part, at any time prior to the fifth
anniversary of the date of this Investment Option Agreement. Thereafter, the
Option may be exercised beginning on the fifth anniversary of the date hereof
with respect to 50% of the principal amount of the Option Debentures, and
beginning on each of the sixth and seventh anniversaries of the date hereof with
respect to an additional 25% of the principal amount of the Option Debentures.
(b) ACCELERATED EXERCISABILITY. Notwithstanding Section 3(a), but
subject to Sections 3(c) and 3(d), the Option shall vest in full and may be
exercised immediately upon the occurrence of any Accelerated Vesting Event as
defined in Exhibit A hereto.
(c) EXPIRATION. The Option may not be exercised on or after, and
shall expire on, June 15, 2001 or such earlier date as is provided herein (the
"Expiration Date").
(d) SECURITIES LAWS. The Participant confirms that the Participant
will not make any distribution of Option Debentures purchased pursuant to any
exercise of the Option, the Convertible Preferred Shares into which such Option
Debentures are exchangeable or the Common Shares into which such Convertible
Preferred Shares are convertible, in violation of applicable securities laws.
4. REPURCHASE OF THE OPTION.
(a) DISCRETIONARY REPURCHASE. In the event the weighted average
trading price of the Common Shares for any five consecutive days on which such
shares are traded on NASDAQ/NMS exceeds $75.00 per share (as adjusted to reflect
any stock split, stock dividend or similar event) during the term hereof, LMIC
may repurchase the Option (and all other options outstanding under investment
option agreements entered into pursuant to the Plan), in whole, 20 business days
after notice to the Participant specifying LMIC's determination to repurchase
the Option and the date of repurchase. The repurchase shall be effected by
paying the Participant an amount equal to the Investment Option Amount
applicable to the unexercised portion of the Option; PROVIDED, HOWEVER, that in
such event the Option shall become exercisable in full (except to the extent
that any portion of the Option has been forfeited pursuant to Section 5) and the
Participant shall have the right to exercise the unexercised portion of the
Option
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within 18 business days after the date of such notice. Upon repurchase, the
then unexercised portion of the Option shall expire.
(b) REPURCHASE UPON REDEMPTION OF DEBENTURES. In the event the
Debentures are redeemed by the Company pursuant to Section 3(a) of the
Debentures, LMIC shall repurchase the unexercised portion of the Option on the
date of such redemption by paying the Participant an amount equal to the
Investment Option Amount applicable to the unexercised portion of the Option.
(c) REPURCHASE FOLLOWING EXPIRATION. Unless sooner repurchased
pursuant to Section 4(a) or 4(b), LMIC shall repurchase the Option, in whole, on
the Expiration Date by paying the Participant an amount equal to the Investment
Option Amount applicable to the unexercised portion of the Option.
5. TERMINATION OF EMPLOYMENT. If the Participant is no longer employed
with the Company or any of its direct or indirect U.S. subsidiaries for any
reason whatsoever, including death or disability, the unexercised portion of the
Option shall be forfeited except to the extent that the Option has become
nonforfeitable as follows: the Option shall become nonforfeitable with respect
to 14% of the Option Debentures on each of the first five anniversaries of the
date hereof and with respect to an additional 15% of the Option Debentures on
the sixth and seventh anniversaries of the date hereof, provided that the
Participant is employed by the Company or any of its subsidiaries on such date.
The Participant (or the Participant's estate in the event of Participant's
death) shall be entitled (until the Expiration Date and subject to Sections 3
and 4) to exercise the nonforfeited portion of the Option to the extent not
previously exercised. The Investment Option Amount with respect to any portion
of the Option Debenture forfeited pursuant to this Section 5 shall be refunded
to the Participant, without interest, within 20 business days after the date on
which the Participant terminates employment.
6. EXERCISE.
(a) GENERAL. The Option may be exercised by the Participant as a
whole or from time to time in part by completion and delivery to LMIC of a
notice (together with any documents specified therein) in one of several forms
to be prescribed by LMIC depending on whether the Participant proposes to pay
the Purchase Price for the Debentures being purchased in cash or with the prior
consent of LMIC, by application of the proceeds from a simultaneous conversion
of Debentures into Convertible Preferred Shares and then into Common Shares and
the sale of all or a portion of such Common Shares (provided such sale is
permitted under applicable securities laws). Upon exercise of the Option the
Participant will be required to pay to LMIC an amount equal to the Purchase
Price (I.E., $95,000 for each $100,000 principal amount of Option Debentures
being purchased). Each exercise of the Option shall be made with respect to no
less than $50,000 principal amount of Option Debentures unless
3
<PAGE>
the remaining principal amount of Debentures purchasable under the Option is
less than such amount.
(b) COMPLIANCE WITH LAWS. Notwithstanding anything herein to the
contrary, no Debentures, Convertible Preferred Shares or Common Shares will be
issued hereunder unless and until all the applicable requirements imposed by
U.S., Canadian, state and provincial securities and other laws, rules and
regulations and by any regulatory agencies having jurisdiction have been met.
Neither the Company, LMIC nor TLGI shall be obligated to undertake the
registration or qualification of Debentures, Convertible Preferred Shares or
Common Shares under any applicable securities laws.
(c) SCHEDULE. Upon each exercise of the Option, the Participant will
be required to submit to LMIC the Participant's copy of this Investment Option
Agreement for notation by LMIC on the schedule annexed hereto of the principal
amount of Option Debentures purchased, the date of exercise and the remaining
principal amount of Option Debentures for which the Option may be exercised.
When the Option has been fully exercised, the Participant's copy of this
Investment Option Agreement will be marked cancelled. Upon any repurchase of
the Option, the Participant will be required to deliver the Participant's copy
of this Investment Option Agreement to LMIC for similar marking.
7. EXCHANGE. Exchange of Debentures acquired by a Participant upon
exercise of the Option shall be effected by completion and delivery to the
Company of an exchange notice (together with the documents specified therein) in
the form prescribed by the Company. Participant shall be required to exchange
any Debentures acquired pursuant to this Agreement for Convertible Preferred
Shares, and each notice relating to the exercise of the Option hereunder shall
include a statement that Participant elects to exchange the Debentures acquired
pursuant to the Option for Convertible Preferred Shares. Each such exchange
shall be effected immediately upon the purchase or the Debenture by Participant.
Participant shall not be required to convert Convertible Preferred Shares
acquired pursuant to such exchange into Common Shares. To the extent that the
exchange of Debentures would result in the issuance of fractional shares, the
Participant shall be entitled only to receive cash equal to the market value of
such fractional shares.
8. MISCELLANEOUS.
(a) NO RIGHT TO CONTINUED EMPLOYMENT. Neither this Investment Option
Agreement nor the Plan shall be construed as giving the Participant any right to
be retained in the employ of TLGI, the Company or any of their direct or
indirect subsidiaries.
(b) NON-TRANSFERABILITY. Except as provided in Section 5, the Option
is exercisable only by the Participant during his or her lifetime and neither
this Investment
4
<PAGE>
Option Agreement nor the Option may be sold, pledged, assigned, hypothecated or
transferred in any manner.
(c) TAX WITHHOLDING. The Company and its subsidiaries shall have the
right to require the Participant to remit to the Company, prior to the delivery
of any certificate or certificates for Debentures, Convertible Preferred Shares
or Common Shares or the payment of any money or other property, an amount
sufficient to satisfy any tax withholding requirements.
(d) AMENDMENT. This Investment Option Agreement may not be modified,
amended or waived in any manner except by an instrument in writing signed by
each of the parties hereto. The waiver by any party of compliance with any
provision of this Investment Option Agreement by any other party shall not
operate or be construed as a waiver of any other provision of this Investment
Option Agreement, or of any subsequent breach by such party of a provision of
this Investment Option Agreement.
(e) NOTICE OF CERTAIN EVENTS. The Company shall provide the
Participant with a copy of any notice required to be given to holders of
Debentures pursuant to the terms of the Debentures. Any such notice shall be
provided to the Participant at the same time such notice is required to be
provided to holders of Debentures.
(f) MAINTENANCE OF AN OFFICE. This Investment Option Agreement may
be submitted for exercise of the Option and notices or demands to or upon LMIC
in respect hereof may be served at the offices of Loewen Group Inc. in
Covington, Kentucky. LMIC will advise the Participant of any change in the
location of such office.
(g) NOTICES. Except as otherwise provided herein, every notice or
other communication relating to this Investment Option Agreement shall be in
writing, and shall be mailed or delivered to the party for whom it is intended
at such address as may from time to time be designated by such party in a notice
mailed or delivered to the other party as herein provided; PROVIDED, HOWEVER,
that unless and until some other address shall be so designated, all notices or
communications by the Company to the Participant may be given to the Participant
personally or may be mailed to the address noted under the Participant's
signature below. Any notice or other communication given by personal delivery
shall be conclusively deemed to have been delivered on the day of actual
delivery thereof and, if given by registered mail, on the third business day
following the deposit thereof in the mail and, if given by electronic
communication, on the day of transmittal thereof if given during the normal
business hours of the recipient and on the business day during which such normal
business hours next occur if not given during such hours on any day. Any notice
given by electronic communication shall be confirmed by mail or personal
delivery as noted above.
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(h) HEADINGS. The headings of paragraphs herein are included solely
for convenience of reference and shall not affect the meaning or interpretation
of any of the provisions of this Investment Option Agreement.
(i) GOVERNING LAW. This Investment Option Agreement is to be
governed by and interpreted in accordance with the laws of New York.
(j) ACKNOWLEDGMENT OF AGENCY. The parties hereto acknowledge that
LMIC is acting as agent on behalf of the Company and is issuing and selling the
Option and is acquiring, holding and transferring the Debentures, in its
capacity as such pursuant to the terms of this Investment Option Agreement and
the Plan. Accordingly, the rights and obligations of
LMIC hereunder shall be regarded as direct rights and obligations of the Company
for all purposes hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Investment Option
Agreement as of the day and year first above written.
LOEWEN GROUP INTERNATIONAL, INC.
By:
----------------------------------------------
Title:
----------------------------------------
Address:
--------------------------------------
--------------------------------------
--------------------------------------
LOEWEN MANAGEMENT INVESTMENT
CORPORATION
By:
----------------------------------------------
Title:
----------------------------------------
Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------------------
Participant
Address:
--------------------------------------
<PAGE>
--------------------------------------
--------------------------------------
--------------------------------------------------
Social Security or Tax I.D. Number
6
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SCHEDULE
RECORD OF OPTION EXERCISES
--------------------------
Principal Amount of Remaining Principal
Debentures Purchased Amount of Debentures
DATE PURSUANT TO OPTION SUBJECT TO OPTION
- - ---- -------------------- --------------------
NOTATION MADE BY
- - ----------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
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EXHIBIT A
Accelerated Vesting Events
An "Accelerated Vesting Event" shall be deemed to have occurred upon (i) an
Event of Default under the Debentures, (ii) either Section 3.1 or Section 3.2 of
the Shareholder Rights Plan dated April 20, 1990 of TLGI, as amended, becoming
applicable, or (iii) the acquisition of 25% or more of the Common Shares by any
person other than Raymond L. Loewen.
<PAGE>
EXHIBIT 29
THE LOEWEN GROUP INC.
SUPPLEMENT TO THE
1994 MANAGEMENT EQUITY INVESTMENT PLAN
INCOME TAX CONSEQUENCES
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The discussion under this heading summarizes the principal United
States federal income tax consequences to a Participant who is an employee of a
subsidiary of LGII and who is resident in the United States and is not resident
in Canada of the (i) grant and exercise of an Option, (ii) the exchange of
Debentures acquired by the exercise of an Option for Convertible Preferred
Shares, (iii) the conversion of Convertible Preferred Shares into Common Shares
and (iv) the holding and disposition of Common Shares. It is based on the
current provisions of the Internal Revenue Code of 1986 and the regulations
thereunder and on counsel's understanding of the current administrative
practices of the Internal Revenue Service. This discussion is general only and
is not a substitute for independent advice from an individual's own tax advisor.
In addition, the income tax consequences may differ for a Participant who enters
into a Purchase Agreement.
A Participant will not recognize any taxable income at the time an
Option is granted.
TLGI believes that the transfer of Convertible Preferred Shares to a
Participant upon the exercise of an Option should be treated as a transfer of a
single item of property subject to Section 83 of the Internal Revenue Code,
which governs the taxation of property transferred in connection with the
performance of services. If this is the case, upon the exercise of an Option
and the simultaneous exchange of the Debentures for Convertible Preferred
Shares, a Participant should recognize ordinary income equal to the excess of
the fair market value of the Convertible Preferred Shares over the amount paid
for the Convertible Preferred Shares, including the price paid to acquire the
Option and the amount paid upon exercise of the Option. A Participant who
exercises an Option is generally subject to (i) income tax and the Medicare
portion of FICA taxes on the ordinary income recognized by the Optionee, and
(ii) the Old Age, Survivors and Disability portion of FICA taxes to the extent
that such Optionee's total compensation (including income from the exercise of
the Option) does not exceed the FICA wage base. Other employment taxes may also
apply. The Participant must pay to the Participant's employer the amount of all
taxes which must be withheld in connection with exercise of the Option.
Assuming that Section 83 applies only at the time of exercise of the
Option as described above, a Participant generally should not recognize income
upon the conversion of Convertible Preferred Shares into Common Shares. The
Participant's tax basis in the Common Shares will be identical to his basis in
the Convertible Preferred Shares, I.E., the fair market value of the Convertible
Preferred Shares at the time the Option was exercised. Upon a disposition of
the Common Shares, any difference between the sale price and the Participant's
tax basis in the Common Shares generally should be treated as capital gain or
loss, and will qualify for long-term capital gain or loss treatment if the
Common Shares have been held for more than one year following the exercise of
the Option. Capital losses may generally be used to offset capital gains and
are available to offset up to $3,000 of ordinary income in a given taxable year.
Individuals may carry forward unused capital losses indefinitely. If a
Participant disposes of Convertible Preferred Shares prior to the conversion of
such Shares into Common Shares, the Participant generally should recognize
capital gain or loss equal to the difference between the net proceeds of the
sale and the Participant's tax basis in the Convertible Preferred Shares.
The Internal Revenue Service could take the position that the exercise
of an Option represents the transfer of two separate items of property--a debt
instrument and a separate option to acquire Common Shares--subject to separate
tax treatment under Section 83. In such case, any gain recognized at the time
of exercise of the Option would be limited to the excess, if any, of the fair
market value of the
<PAGE>
Debenture (without regard to the value of the option element) over the amount
paid. The subsequent conversion of the Convertible Preferred Shares into Common
Shares also would be subject to Section 83, and at that time the Participant
would recognize ordinary income equal to the excess of the fair market value of
the Common Shares over the fair market value of the Debenture at the time the
Option was exercised. Although there can be no assurances in this regard, TLGI
does not believe that such position, if asserted by the Internal Revenue
Service, would be sustained by the courts.
The Participant's employer generally should be entitled to a tax
deduction corresponding in amount and time to the Participant's recognition of
ordinary income in the circumstances described above, provided, among other
things, that such deduction meets the test of reasonableness, is an ordinary and
necessary business expense and is not an "excess parachute payment" within the
meaning of Section 280G of the Internal Revenue Code and that any applicable
withholding requirements are satisfied.
CANADIAN TAX CONSEQUENCES
The discussion under this heading summarizes the probable principal
Canadian federal income tax consequences of participation in the Investment
Option Agreement under the MEIP, including the purchase of an Option, the
acquisition of Debentures on the exercise of the Option the exchange of
Debentures for Convertible Preferred Shares and the exchange of Convertible
Preferred Shares into Common shares of the Company. This summary does not
discuss the Canadian tax consequences of participation in the MEIP under the
Purchase Agreement, which are applicable only to Raymond L. Loewen.
This summary applies to a Participant who is resident in the U.S. and
is not resident in Canada, or who is resident in Canada and is not resident in
the U.S. It is based on the current provisions of the INCOME TAX ACT of Canada
(the "Tax Act"), the regulations thereunder and on counsels' understanding to
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 summary assumes that the Company will continue to be a
public corporation for purposes of the Tax Act, and that any Convertible
Preferred Shares or Common shares of the Company acquired by a Participant who
is resident in Canada (collectively, the "Shares") constitute capital property
to the Participant. Shares so acquired will generally be considered to
constitute capital property unless the Participant either holds the Shares in
the course of carrying on a business or has acquired the Shares in a transaction
or transaction considered to be an adventure in the nature of trade. This
discussion is general only and is not a substitute for independent advice from a
Participant's own tax advisor.
U.S. RESIDENT PARTICIPANTS
A Participant who is resident in the U.S. and is not resident in
Canada will not be subject to Canadian income tax on either the acquiring or
exercising of an Option or on the acquiring, holding or disposing of Debentures
or Shares acquired pursuant to the MEIP.
Under the Tax Act and the Tax Treaty, Canadian withholding tax will
apply on any dividends on Shares paid by the Company to a Participant who is the
beneficial owner of the dividends and resident in the U.S. for U.S. tax
purposes.
CANADIAN RESIDENT PARTICIPANTS
A Participant who is resident in Canada will not recognize income at
the time of acquiring an Option.
Neither the Company nor any of its Subsidiaries will be entitled to a
deduction for Canadian tax purposes at any time in respect of the grant or
exercise of an Option by a Participant.
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A Participant who exercises an Option and acquires Debentures and is
required immediately to exchange the Debentures for Convertible Preferred Shares
will likely have to recognize income for Canadian tax purposes equal to the
amount by which the fair market value of the Convertible Preferred Shares
acquired (determined as at the time of their acquisition) exceed the aggregate
principal amount of the Debentures to which the Option relates. The cost to the
Participant of the Convertible Preferred Shares received on the exchange will be
the fair market value of the Convertible Preferred Shares acquired. Where
possible, the Company will be required to withhold tax in respect of such
income.
Although the matter is not entirely free from doubt, a Participant may
be entitled to deduct, in computing taxable income for the year in which the
Option is exercised, one-quarter of the amount required to be included in
income, if the following conditions are met:
(a) the Participant deals at arm's length with the Company, and
(b) pursuant to an undertaking entered into at the time of becoming a
Participant under the MEIP, the Participant is required
immediately to convert into Common shares any Convertible
Preferred Shares acquired upon an exchange of Debentures.
A Participant will not realize income or a capital gain or capital
loss on the conversion of Convertible Preferred Shares into Common shares.
The cost to the Participant of the Common shares so acquired will be
the amount that was the cost to that participant of the Convertible Preferred
Shares which were so converted.
Upon a disposition of Shares acquired by a Participant who is resident
in Canada to a purchaser other than the Company, the Participant will recognize
a capital gain (or capital loss) equal to the amount by which the proceeds of
disposition exceed (or are exceeded by) the adjusted cost based to the
Participant of the Shares so disposed of. The adjusted cost base of such Shares
will equal the cost to the Participant of the Shares averaged with the cost of
all such Shares of the same class already owned by the Participant. Three-
quarters of any capital gains realized by a Participant will be required to be
included in income for Canadian tax purposes.
If an Option expires unexercised, a Participant who receives a refund
of the amount paid to acquire the Option will not realize income or a capital
gain or capital loss for Canadian tax purposes.
MEIP ADMINISTRATOR
The following persons are the present members of the MEIP
Administrator:
Charles Barnard Loewen
Ernest Glenn Penner
James Dudley McLennan
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ARCHIVE HISTORY OF
DC1L0924
Document Date Draft
- - -------- ---- -----
DC1LS230 6/8/94
4
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EXHIBIT 30
THE LOEWEN GROUP INC.
ADDENDUM TO
1994 MANAGEMENT EQUITY INVESTMENT PLAN
This Addendum describes the investment options (the "Options") offered for
sale to certain key employees of subsidiaries of Loewen Group International,
Inc. ("LGII") under the 1994 Management Equity Investment Plan (the "MEIP").
The MEIP was approved by the Board of Directors of The Loewen Group Inc.
("TLGI") in March 1994, and by the shareholders of TLGI in May 1994.
The complete terms and conditions of the MEIP are set forth in the 1994
Management Equity Investment Plan and the forms of Investment Option Agreement
and Exchangeable Floating Rate Debenture Due 2001 that have been delivered to
each Participant. Additional copies of such documents are available upon
request at the office of the committee that administers the MEIP (the "MEIP
Administrator").
The MEIP also provides for the execution of a Purchase Agreement by Raymond
L. Loewen, LGII and Loewen Management Investment Corporation ("LMIC"), a wholly-
owned subsidiary of LGII (the "Purchase Agreement"). This Addendum does not
provide information regarding the Purchase Agreement.
The term "Company" refers to TLGI and its subsidiaries. All dollars
amounts herein are in Untied States dollars, unless otherwise indicated.
OVERVIEW
Under the MEIP, LGII will sell $127.7 million of Exchangeable Floating Rate
Debentures due July 15, 2001 ("Debentures") to LMIC. LMIC will finance 95% of
the acquisition amount of the Debentures, approximately $121.3 million, through
a syndicate of third-party lenders. The remaining 5% of the acquisition amount
of the Debentures, approximately $6.4 million, will be financed as follows: (i)
LMIC will sell to the eligible employers who have elected to participate in the
MEIP ("Participants") approximately $4.15 million of Options; and (ii) Raymond
L. Loewen will pay LMIC $2.25 million as a down payment under the Purchase
Agreement.
The consideration paid by a Participant for an Option will be equal to 5%
of the aggregate principal amount of the Debentures to which the Option relates.
Absent certain extraordinary circumstances, beginning in 1999 the
Participants will have the right to exercise Options to purchase Debentures.
When acquired by a Participant, each $300.40 of Debentures must be exchanged
immediately for one
<PAGE>
Convertible First Preferred Share, Series B, of TLGI (the "Convertible Preferred
Shares"). Convertible Preferred Shares obtained by Participants resident in the
United States ("U.S. Participants") will be convertible at any time, in the
discretion of such holder, into TLGI Common shares without par value ("Common
Shares") on a 1:10 basis. For certain tax reasons applicable only to Canadian
residents, Convertible Preferred Shares obtained by Participants resident in
Canada ("Canadian Participants") will be converted immediately into Common
Shares on a 1:10 basis.
The discussion in this Addendum assumes that Convertible Preferred Shares
obtained by each United States and Canadian Participant will be converted
immediately into Common Shares.
QUESTIONS AND ANSWERS ABOUT THE MEIP
1. WHAT IS THE PURPOSE OF THE MEIP?
The MEIP gives you an opportunity to share in increases in the market value
of the Common Shares above the amount paid to exercise your Options. This
benefits the Company because it gives selected key employees incentive to work
for the Company's long-term financial success and in the shareholders' best
interest. In addition, the MEIP is a cost-effective way for the Company to
raise money for LGII's capital needs.
2. HOW DOES THE MEIP WORK?
An Option gives you the right to acquire Common Shares during the next
seven years. In order to acquire the Common Shares, you first must exercise
your Option, as described below. Upon exercise of your Option, you receive
Debentures that are immediately exchanged for Convertible Preferred Shares. If
you are a U.S. Participant, you Convertible Preferred Shares may be converted
from time to time, at your discretion, into Common Shares. If you are a
Canadian Participant, your Convertible Preferred Shares will be converted
immediately into Common Shares.
The amount you pay to acquire Common Shares under the MEIP is set when you
buy your Option. You pay only 5% of this amount when you purchase your Option
and the balance when you exercise your Option. The MEIP has been designed,
however, so that you may simultaneously exercise your Option, sell the Common
Shares and pay the remaining 95% to the Company, along with any selling expenses
and tax withholdings, out of the proceeds of the sale of the Common Shares. You
will receive the difference between the market value of the Common Shares on the
date of sale and the amount you paid to acquire the Common Shares under the
MEIP, less any related selling and tax withholding expenses.
The following is an example of how the MEIP would operate, using the
conversion price of $30.04 per share of Common Shares, a future market value per
share of $35.00, $36.00 and $37.00 at the date of exercise of the Option in each
of 1999, 2000 and 2001, respectively, and an Option to acquire 50,000 Common
Shares.
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Amounts you Pay
- - ---------------
$ 75,100 = Amount you pay in June 1994 to acquire Option
$ 713,450 = Amount you pay in June 1999 to exercise 50% of Option
($751,000 less $37,550)
$ 356,725 = Amount you pay in June 2000 to exercise 25% of Option
($375,500 less $18,775)
$ 356,725 = Amount you pay in June 2001 to exercise 25% of Option
($375,500 less $18,775)
$ 1,502,000 = Total amount you pay
-----------
Amounts you Receive
- - -------------------
$ 875,000 = Amount you receive in June 1999 upon sale of 25,000
Common Shares
$ 450,000 = Amount you receive in June 2000 upon sale of 12,500
Common Shares
$ 462,500 = Amount you receive in June 2001 upon sale of 12,500
Common Shares
$ 1,787,500 = Total amount you receive
-----------
Profit
- - ------
$285,500 = Amounts you pay less amounts you receive (does not
account for selling expenses or taxes)
NOTE: YOUR PROFIT INCREASES SIGNIFICANTLY AS THE MARKET VALUE OF THE COMMON
SHARES INCREASES. FOR EXAMPLE, IF THE MARKET PRICES IN THE ABOVE
EXAMPLES WERE $50 IN 1999, $51 IN 2000 AND $52 IN 2001, THE PROFIT WOULD
BE $1,035,500. IF THE MARKET PRICES WERE $60 IN 1999, $61 IN 2000 AND
$62 IN 2001, THE PROFIT WOULD BE $1,535,500. IF THE MARKET PRICES WERE
$70 IN 1999, $71 IN 2000 AND $72 IN 2001, THE PROFIT WOULD BE $2,035,500.
3. WHAT ARE THE ADVANTAGES OF THE MEIP?
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The MEIP allows you to share in long-term increases in the market value of
the Common Shares with a relatively small initial investment. The MEIP allows
you to pay only 5% of your initial cost to acquire the Common Shares under the
MEIP a the time you purchase your Option. If the market value of the Common
Shares increases above your cost to acquire the Common Shares under the MEIP,
you then have the right to pay the remaining 95% out of the proceeds when you
sell the Common Shares at a profit. If the market value of the Common Shares
does not increase above your cost to acquire it, the Company will refund your
initial investment in June 2001, without interest.
4. WHO IS ELIGIBLE TO PARTICIPATE IN THE MEIP?
The MEIP Administrator has selected 28 key employees who are eligible to
participate.
5. HOW DO I BECOME A PARTICIPANT?
To become a Participant, you enter into an investment option agreement (the
"Investment Option Agreement"), which describes the terms of your Option. You
also pay the "Investment Option Amount" (the 5% "down payment") of $50 per
$1,000 principal amount of Debentures specified in your Investment Option
Agreement (which is equal to $1.50 per Common Share) when you acquire an Option.
6. WHAT IS THE MAXIMUM NUMBER OF COMMON SHARES A PARTICIPANT CAN ACQUIRE
UNDER THE MEIP?
Each Participant may acquire Options that ultimately will provide for the
number of Common Shares allocated to such Participant by the MEIP Administrator.
No Participant may acquire an Option that ultimately will provide for more than
500,000 Common Shares. The total number of Common Shares subject to the MEIP is
4,250,000. 2,750,000 Common Shares are designated for issuance pursuant to
Options, and 1,500,000 Common Shares are designated for issuance pursuant to the
Purchase Agreement.
6. WHEN WILL I BE ABLE TO EXERCISE MY OPTION?
You may not exercise your Option until June 1999 unless there is an
Accelerated Vesting Event. SEE QUESTION 15. Beginning on June 15, 1999, you
may exercise your Option for 50% of the shares of Common Shares related to your
Option. You may exercise your Option for an additional 25% beginning on June
15, 2000, and for the remaining 25% beginning on June 15, 2001.
7. WHAT IS THE EXERCISE PRICE I PAY?
When you exercise your Option, you will pay a minimum exercise price of
$285.38 per Debenture ($300.40 less $15.02 previously paid), which is exchanged
immediately for one Convertible Preferred Share. Each Convertible Preferred
Share is immediately
4
<PAGE>
convertible into 10 Common Shares. In essence, upon exercise you will pay
$28.54 ($30.04 less $1.50 previously paid) per Common Share.
8. HOW DO I EXERCISE MY OPTION AND ACQUIRE COMMON SHARES?
To exercise your Option and acquire Common Shares, you deliver the
documents required under the MEIP to the Company, giving the Company notice of
your intent to exercise and specifying the number of Common Shares you wish to
purchase. The office of the Senior Vice President, Law and Corporate Secretary
will provide you with the proper forms. You may exercise all or any portion of
your Option that is exercisable, but you must purchase a minimum of $50,000 face
amount of Debentures, or all the remaining Debentures if fewer than $50,000.
9. HOW MAY I PAY FOR MY STOCK WHEN I EXERCISE MY COMPANY OPTION?
Although you may pay the Option exercise amount in cash, you may also
simultaneously exercise your Option and sell the Common Shares. In these
circumstances, your exercise price will be paid from a portion of the proceeds
you receive upon sale of the Common Shares. To use this payment method, you
deliver your exercise and conversion notices to the Company with instructions to
(a) sell the Common Shares you receive upon exercise and conversion and (b) give
the Company a sufficient amount from the sale proceeds to pay the exercise price
plus any federal, state and local withholding tax obligations and other fees and
expenses. You also may pay the exercise price in cash or with a bank certified
or cashier's check in the amount of the exercise price.
10. ARE THERE LIMITATIONS ON THE SALE OF THE COMMON SHARES PURCHASED UNDER THE
MEIP?
Generally, you may sell the Common Shares received upon exercise of your
Option at any time you choose. If you are an affiliate of TLGI, your resale may
be subject to certain limitations. SEE QUESTION 22. At the time of resale of
the Common Shares, certain provisions of Section 16 of the United States
Securities Exchange Act of 1934 ("Exchange Act") may apply to you. SEE QUESTION
23.
11. WHAT ABOUT TAXES?
The Company is required to withhold certain taxes when you exercise your
Option. For Participants who are U.S. residents, this amount generally ranges
from 28% to 34%, depending on the Participant's state of residence. This
percentage is applied to the amount of ordinary income realized when the Option
is exercised (generally, the fair market value of the Common Shares on the
exercise date less your basis in the Common Shares). You must pay this amount
to the Company before any share certificates will be delivered to you. Because
of this withholding requirement, you may want to sell at least enough Common
Shares to cover your tax withholding obligation.
5
<PAGE>
12. HOW DOES MY OPTION VEST?
Your Option will vest (I.E. become nonforfeitable) if you are no longer
employed by the Company in accordance with the following schedule:
June 15, 1995 14%
June 15, 1996 14%
June 15, 1997 14%
June 15, 1998 14%
June 15, 1999 14%
June 15, 2000 15%
June 15, 2001 15%
If your employment with the Company terminates before your Option is fully
vested, TLGI will refund the price you paid with respect to the unvested portion
of your Option. SEE QUESTION 14. If an "Accelerated Vesting Event" occurs,
your Option will fully vest at that time. SEE QUESTION 15.
13. WHAT HAPPENS TO MY OPTION IF MY EMPLOYMENT TERMINATES?
If your employment terminates before June 15, 2001 for any reason,
including retirement, death or permanent disability, your Option will be
repurchased by the Company upon termination at the price you paid for it to the
extent it has not vested (I.E. become nonforfeitable) in accordance with the
schedule in Question 13. You (or your estate or beneficiary) will continue to
participate in the MEIP and will be able to exercise your Option (to the extent
vested) in accordance with the exercise schedule described in Question 7 and the
terms of the MEIP. The MEIP and the Investment Option Agreement do not confer
any right to continued employment with the Company.
14. WHAT HAPPENS IF THERE IS AN "ACCELERATED VESTING EVENT"?
Under the MEIP, an "Accelerated Vesting Event" occurs if there is: (i) an
event of default under the Debentures, (ii) a change of control that causes
certain provisions of the Shareholder Protection Rights Plan to become
applicable or (iii) someone other than Raymond L. Loewen acquires 25% or more of
the Common Shares. If an Accelerated Vesting Event occurs, then your Options
immediately vest in full and become fully exercisable.
6
<PAGE>
15. IF THERE IS A STOCK SPLIT, A REVERSE STOCK SPLIT, A STOCK DIVIDEND OR
EXCHANGE OF THE COMMON SHARES, WHAT IS THE EFFECT ON THE MEIP AND THE
COMMON SHARES I RECEIVE UPON EXERCISE?
The amount of Common Shares you ultimately are entitled to receive when you
exercise your Option will be adjusted proportionately to account for these
events.
16. MAY THE COMPANY REPURCHASE MY INVESTMENT OPTION?
Under the MEIP, if the weighted average trading price of the Common Shares
for any five consecutive days on which such shares are traded on Nasdaq National
Market exceeds $75.00 per shares (as adjusted to reflect any stock split, stock
dividend or similar event) then LMIC may repurchase your Option (and all other
Options) upon giving you 20 business days' notice. However, upon giving such
notice, the Options would immediately vest in full and become fully exercisable
(except to the extent part of an Option has been forfeited because of a
termination of employment), and you would be entitled to exercise your Option
and to receive Common Shares.
LMIC is required to refund the amount you paid for your Option, without
interest or premium, if you have not exercised your Option by June 15, 2001, or
if there is a default under the Debentures.
17. MAY I WITHDRAW FROM THE MEIP?
No. The MEIP is designed to give you an opportunity to take advantage of
the long-term appreciation of the Common Shares with a minimum initial
investment. If you choose not to exercise your Option, it will be repurchased
from you on June 15, 2001. You should consider this a long-term investment and,
therefore, you should consider carefully the economic risk related to this
investment.
18. MAY I ASSIGN OR TRANSFER MY RIGHTS UNDER THE MEIP?
No. The rights granted to you under the MEIP are yours alone and your
Investment Option is not transferable. You may designate a person who can
exercise your rights if you die before your Option has been exercised. To
designate a person, or to change your designation, you must give the MEIP
Administrator written notice of the designation.
19. WHEN DOES MY OPTION EXPIRE?
Your Option expires on June 15, 2001.
20. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES TO PARTICIPANTS?
Please see "Income Tax Consequences" contained in the Supplement for a
description of the general tax rules relating to the MEIP.
7
<PAGE>
21. ARE THERE ANY OTHER RESTRICTIONS ON RESELLING COMMON SHARES?
Common Shares acquired pursuant to the MEIP may be resold through a broker
in Canada without restriction. If a Participant resells Common Shares through a
broker in the United States, certain restrictions may apply if the Participant
is an "affiliate" of TLGI. Generally, the Securities and Exchange Commission
("SEC") presumes that an executive officer of TLGI is an "affiliate."
Under SEC Rule 144, "affiliates" of TLGI are subject to the following
limitations when they resell Common Shares through a United States broker:
1. Sales must be made in unsolicited brokerage transactions or to market
makers.
2. Sales volume is limited during any three month period to the greater
of 1% of the outstanding shares or the weekly average trading volume for the
last four weeks on the Nasdaq National Market.
3. If sales in any three month period exceed 500 shares or result in
proceeds in excess of $10,000, a Form 144 must be filed with the SEC and Nasdaq
National Market at or before the time the sell order is placed with a broker or
the sale is made to a market maker.
Typically, a United States broker will be familiar with Rule 144 and will
take care of filing the Form 144 for you.
22. IF I AM AN OFFICER SUBJECT TO SECTION 16 OF THE EXCHANGE ACT, HOW AM I
TREATED DIFFERENTLY?
Section 16 of the Exchange Act requires insiders (executive officers,
directors and more than 10% holders) of certain public companies to report
purchases and sales of company securities to the SEC. In addition, Section 16
requires those insiders to disgorge profits made on non-exempt purchases and
sales made within a six month period.
TLGI CURRENTLY IS NOT SUBJECT TO SECTION 16. HOWEVER, TLGI MAY BECOME
SUBJECT TO SECTION 16 AT SOME POINT IN THE FUTURE. IN THIS EVENT, THE
"INSIDERS" OF TLGI WOULD BE SUBJECT TO SECTION 16.
If TLGI becomes subject to Section 16 in the future, any person who is
deemed to be an "executive officer" should consult with the Senior Vice
President, Law, General Counsel and Corporate Secretary of TLGI and/or his legal
advisor prior to exercising an Option and disposing of Common Shares.
Under Section 16, there is no exemption for disposition of Common Shares
acquired pursuant to the exercise of an Option. Accordingly, if Section 16
applies,
8
<PAGE>
dispositions of Common Shares will be matched with any acquisitions of Common
Shares made within six months, and any resulting profit would be required to be
disgorged to TLGI.
23. WHO ADMINISTERS THE MEIP?
The MEIP Administrator is a committee of TLGI's Board of Directors that has
been appointed by the Board to administer the MEIP. The MEIP Administrator has
the authority to interpret the MEIP and establish or amend rules and regulations
for administering the MEIP. It also has the authority to determine all matters
relating to the Options. The present members of the MEIP Administrator are
listed in the Supplement. The address of the MEIP Administrator and each member
is c/o TLGI's principal executive offices located at 4126 Norland Avenue,
Burnaby, British Columbia, Canada V5G 3S8, telephone number (604) 299-9321.
24. MAY THE MEIP BE CHANGED OR DISCONTINUED?
TLGI's Board of Directors expects that the MEIP will continue as described
until no Debentures or Convertible Preferred Shares remain outstanding.
However, the Board of Directors may amend, suspend or terminate the MEIP at any
time. If the MEIP is amended, suspended or terminated, your rights under an
outstanding Option may not be adversely affected without your consent.
25. WILL TLGI BUY BACK COMMON SHARES PURCHASED UNDER THE MEIP?
TLGI has no obligation to buy Common Shares purchased under the MEIP.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the SEC by TLGI, are hereby
incorporated by reference herein:
(i) TLGI's latest annual report, filed pursuant to Section 13(a) or
15(d) of the United States Securities Exchange Act of 1934, as amended (the
"Exchange Act");
(ii) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by TLGI document referred
to in (i) above; and
(iii) The description of TLGI's Common Shares contained in a registration
statement filed under the Exchange Act, including any amendment or report filed
for the purpose of updating such description.
All documents subsequently filed by TLGI with the SEC pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act shall be deemed to be
incorporated by
9
<PAGE>
reference herein and to be a part hereof from the date of filing (except that no
document shall be deemed to be incorporated by reference if filed with the SEC
after the filing of a post-effective amendment which deregisters securities
subject to the MEIP then remaining unsold).
Upon written or oral request, TLGI shall provide without charge to each
person to whom a copy of the MEIP has been delivered a copy of any or all of the
documents referred to above (other than exhibits to such documents, unless such
exhibits are specifically incorporated by reference into the information that
the MEIP incorporates) and any other documents required to be delivered pursuant
to SEC Rule 428(b) under the Act. Requests should be directed to the Corporate
Secretary of TLGI, at TLGI's principal executive offices located at 4126 Norland
Avenue, Burnaby, British Columbia, Canada V5G 3S8, telephone number (604) 299-
9321.
10
<PAGE>
EXHIBIT 31
Wachovia Bank Maturity Master Note WACHOVIA
of Georgia, N.A. Non Revolving
FOR VALUE RECEIVED, _______________________________________ (hereinafter
called the "Borrower"), hereby promises to pay on _______________, 19__ to the
order of WACHOVIA BANK OF GEORGIA, N.A., (hereinafter called the "Lender"), the
principal sum of $________________ or so much thereof as may be outstanding
under the Line of Credit as hereinafter defined, to be opened pursuant to the
terms of this Note, at the principal office of Lender in Atlanta, Georgia, or
such other place as Lender may direct in writing, in legal tender of the United
States, with interest thereon from the date of advance until paid at the rate
hereinafter set forth:
[COMPLETE APPLICABLE PARAGRAPH]
Interest shall accrue at the rate of _____% per annum.
or
Interest shall accrue at the rate per annum of ____% in excess of the Prime
Rate. For purposes of this Note the term "Prime Rate" refers to that
interest rate so denominated and set by the Lender from time to time as an
interest rate basis for borrowings. The Prime Rate is one of several
interest rate bases used by the Lender. The Lender lends at interest rates
above and below the Prime Rate. The rate of interest on this Note shall
change each time the Prime Rate changes, on the date on which the change in
the Prime Rate is effective.
On the date hereof, the rate of interest on this Note, expressed in simple
interest terms, is ____% per annum. Interest shall be due and payable
____________________, in arrears, commencing on ____________, 19__ and
continuing on the ______ day of each ________________ consecutive calendar month
thereafter.
Notwithstanding the foregoing, after final maturity or earlier acceleration of
this Note, interest on the unpaid balance of this Note shall accrue and be
payable on demand at the rate per annum equal to 150% of the interest rate that
would have been otherwise applicable to this Note if it had not so matured or
been accelerated. Interest shall be computed daily on the outstanding principal
amount of this Note on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first but excluding the last). At
Borrower's election, Borrower may prepay this Note in whole or in part at any
time. All partial prepayments will be applied first to accrued but unpaid
interest and any excess shall be applied to the unpaid principal.
Borrower has paid Lender a non-refundable fully earned fee of
__________________.
Upon execution of this Note, a line of credit (the "Line of Credit") shall be
opened by Lender so that so long as an event of default (as hereinafter defined)
does not exist, Borrower may borrow from time to time up to the maximum
aggregate principal amount outstanding of ______________ Dollars ($___________).
In the event Borrower shall prepay or repay any amounts borrowed hereunder such
amounts cannot be reborrowed. Advances to Borrower under the Line of Credit
shall be evidenced by this Note. Lender, at its sole discretion, is hereby
authorized to make advances under this Note upon telephonic communication of the
borrowing request from any person representing himself or herself to be Borrower
or in the event Borrower is a partnership or corporation, a duly authorized
officer or representative of Borrower. Each such telephonic request for
borrowing shall be confirmed by Borrower in a writing delivered to Lender no
later than five (5) days after such telephonic request; provided, however, that
the absence of such written confirmation shall in no way diminish Borrower's
liability to repay such advance. Each advance hereunder shall be made by means
of a credit to Borrower's account with Lender.
<PAGE>
Borrower understand and agrees that the commitment of Lender hereunder shall be
subject to review by Lender from time to time and Lender may, with or without
cause and without notice to Borrower, terminate the Line of Credit and refuse
any request of Borrower for further advances pursuant thereto.
To secure the indebtedness evidenced by this Note, together with any extensions
or renewals thereof, in whole or in part, as well as all other indebtedness,
obligations and liabilities of Borrower to Lender, now existing or hereafter
incurred or arising (hereinafter sometimes referred to collectively as the
"Obligations"), Borrower does hereby grant to Lender a security interest in and
security title to, the following described property:
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
now owned or hereafter acquired or arising, together with any and all additions
and accessions thereto or replacements thereof, returned or unearned premiums
from any insurance written in connection with this Note and any products and/or
proceeds of any of the foregoing. However, Lender does not have a security
interest in any goods acquired by Borrower for personal, family or household
purposes more than 10 days after the date of this Note, unless such goods are
added to or attached to the Collateral (as hereinafter defined).
In addition, Borrower hereby grants to Lender a security interest in and
security title to (i) all other property of Borrower of every kind or
description now or hereafter in the possession or control of Lender for any
reason, including, without limitation, all cash, stock or other dividends and
all proceeds thereof, and all rights to subscribe for securities incident
thereto and any substitutions or replacements for, or other rights in connection
with, any of the Collateral and (ii) any balance or deposit accounts of
Borrower, whether such accounts be general or special, or individual or multiple
party, and upon all drafts, notes, or other items deposited for collection by
Borrower with Lender, and Lender may at any time, without demand or notice
appropriate and apply any of such to the payment of any of the Obligations,
whether or not due. All property described in this paragraph and the one above
in which Borrower has granted to Lender a security interest or security title
hereunder is hereinafter collectively referred to as the "Collateral".
If at any time the Collateral described above or hereafter pledged as security
for any of the Obligations, shall be or become unsatisfactory to Lender or
should Lender deem itself insecure, Borrower will immediately furnish such
further Collateral to be held by Lender as if originally pledged hereunder or
make such payment on account as will be satisfactory to Lender.
Upon (i) any failure of any Obligor (which term shall include each Borrower,
endorser, surety or guarantor of this Note) to perform any agreement or promise
hereunder or to pay any Obligation whatsoever to Lender when due; (ii) any
warranty, representation or statement made or furnished to Lender by or on
behalf of Borrower in connection with the extension of credit evidenced by this
Note proving to have been false in any material respect when made or furnished;
(iii) any loss, theft, substantial damage, destruction, sale, foreclosure or
encumbrance to or of any of the Collateral, or the making of any levy, seizure
or attachment thereof or thereon or the rendering of any judgment or lien or
garnishment or attachment against any Obligor or his property, whether actual or
threatened; (iv) the death, dissolution, termination of existence, insolvency,
business failure, appointment of a receiver of any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding under any bankruptcy or insolvency laws, state or federal, by or
against Borrower or any other Obligor; (v) any discontinuance or termination of
any guaranty of any of the Obligations by a guarantor; or (vi) Lender deeming
itself insecure or the Collateral in danger of misuse, misappropriation or
confiscation (the events described in (i) through (vi) may be referred to herein
as event(s) of default; Lender's obligation to extend financing under the Line
of Credit shall immediately cease and upon the occurrence of any event of
default, or at any time thereafter (such event of default not having been
previously cured), Lender at its option may declare all of the Obligations to be
immediately due and payable, all without notice or demand. Upon the occurrence
of any event of default, or at any time thereafter (such event of default not
having been previously cured), in addition to and independent of the right to
accelerate the maturity of this Note and any other rights of Lender under this
Note or any other agreement with Borrower, Lender shall have the remedies of a
secured party under the
2
<PAGE>
Uniform Commercial Code of Georgia, as amended from time to time (the "Code"),
including without limitation thereto, the right to take possession of the
Collateral, or the proceeds thereof and to sell or otherwise dispose thereof,
and for this purpose, to sign in the name of Borrower any transfer, conveyance
or instrument necessary or appropriate in order for Lender to sell or dispose of
any of the Collateral, and Lender may, so far as Borrower can give authority
therefor, enter upon the premises on which the Collateral or any part thereof
may be situated and remove the same therefrom, without being liable in any way
to Borrower on account of entering any premises. Lender may require Borrower to
assemble the Collateral and make the Collateral available to Lender at a place
to be designated by Lender which is reasonably convenient to both parties. The
right is expressly granted to Lender to transfer at any time to itself or its
nominee any Collateral held hereunder and to receive the income therefrom and
hold the same as security herefor, or to apply it to any of the Obligations.
Unless the Collateral is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market, Lender shall give Borrower
written notice of the time and place of any public sale thereof or of the time
after which any private sale or other intended disposition thereof is to be
made. The requirement of sending reasonable notice shall be met if such notice
is mailed, postage prepaid, or otherwise given, to Borrower at the last address
shown on Lender's records at least five days before such disposition.
If Lender endeavors to collect all or any portion of the indebtedness evidenced
by this Note by or through an attorney-at-law, Borrower shall pay to Lender (i)
attorneys' fees in an amount equal to 15% of the principal and interest unpaid
on this Note and (ii) all costs of collection.
The rights of Lender specified herein shall be in addition to, and not in
limitation of Lender's rights under the Code, or any other statute or rules of
law conferring rights similar to those conferred by the Code, and under the
provisions of any other instrument executed by Borrower to Lender, and any
rights or remedies of Lender may be exercised or taken in any order or sequence
whatsoever, at the sole option of Lender.
The security agreement set forth herein and the security interest in the
Collateral created hereby shall only terminate when all of the Obligations have
been paid in full. No waiver by Lender of any default shall be effective unless
in writing nor operate as a waiver of any other default or of the same default
on a future occasion. All rights of Lender hereunder shall inure to the benefit
of its successors and assigns, and all Obligations of Borrower shall bind the
heirs, legal representatives, successors and assigns of Borrower.
Each Obligor hereby severally waives presentment, demand, protest and notice of
demand and dishonor, protect and non-payment, and any other notice required by
law relative hereto which may be so waived and any and all rights Borrower may
have to notice prior to seizure of personal property by the Lender having an
interest in such property of Borrower. Each Obligor agrees that (i) this Note
may be renewed or extended, (ii) any other Obligor may be released by Lender
from liability, (iii) any Collateral may be released or substituted or reduced,
(iv) Lender may compromise or receive less than the amount due on any
Collateral, (v) Lender may grant any other indulgence to any other Obligor
without notice to Obligor, and (vi) Lender may proceed against any Obligor
without first proceeding against Borrower or any other Obligor, or against any
Collateral, all without affecting Obligor's liability to Lender.
This Note, and the rights and obligations of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Georgia.
As used herein, the term "Borrower" shall mean each of the undersigned, jointly
and severally.
3
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Note to be signed and sealed this
day of , 19 .
- - ------ ----------- --
If Borrower is a corporation:
--------------------------------------------------
Name of Corporation
By:
--------------------------------------------------
Title:
[CORPORATE SEAL]
Attest:
-----------------------------------------------
Sec./Asst. Sec.
If Borrower is a partnership:
--------------------------------------------------
Name of Partnership [SEAL]
By:
--------------------------------------------------
General Partner
By:
--------------------------------------------------
General Partner
If Borrower is an individual/sole
proprietor:
[SEAL]
- - ----------------------------------- --------------------------------------
Borrower's Social Security Number Signature
[SEAL]
- - ----------------------------------- --------------------------------------
Borrower's Social Security Number Signature
<PAGE>
EXHIBIT 32
EXECUTIVE AGREEMENT
THIS EXECUTIVE AGREEMENT is made as of the _____ day of _______, 1995.
BETWEEN:
THE LOEWEN GROUP INC. and its subsidiaries, bodies corporate and
having an office at 4126 Norland Avenue, Burnaby, British Columbia,
Canada V5G 3S8 or at Suite 800, 50 East River Center Boulevard,
Covington, Kentucky 41011
(together the "COMPANY")
OF THE FIRST PART:
AND:
------------------------------------------
of
---------------------------------------
------------------------------------------
(the "EXECUTIVE")
OF THE SECOND PART.
WHEREAS:
A. Executive is employed by Company in a senior executive or management
capacity;
B. Executive has senior duties and responsibilities in connection with the
conduct of Company's business which places Executive in a special and
uncommon classification of employees;
C. Executive, by virtue of his/her position, has extraordinary access to
Company's confidential and proprietary business information;
D. Company has developed a new equity incentive program for executives
described generally as the management equity investment program ("MEIP");
the MEIP will be in addition to existing employment benefits provided to
Executive;
E. Executive, by virtue of his/her position and of his/her level of
performance, is eligible to be considered for participation in the MEIP;
F. A condition of Executive's continuing participation in the MEIP is the
continuance by Executive of his/her level of performance as at the date
hereof.
<PAGE>
- 2 -
G. A condition of Executive being able to participate in the MEIP is the
Executive entering into this Executive Agreement, it being the mutual wish
of Executive and Company that there be a clear understanding between the
parties upon the matters following;
NOW THEREFORE this Agreement witnesses that in consideration of the
premises and of the mutual benefits and obligations hereinafter expressed and of
other good and valuable consideration (the benefit and sufficiency of which
being hereby acknowledged) the parties agree, each with the other, as follows:
1. The parties hereby acknowledge and confirm their agreement with the content
of Recitals A through G preceding.
2. Executive hereby confirms his/her request to participate in the MEIP and
Company hereby confirms acceptance of Executive's participation in the
MEIP. Particulars of such participation shall be as confirmed from time to
time between Company and Executive.
3. As part of Executive's fiduciary duties to Company, Executive agrees that
during his/her employment by Company, Executive shall promptly disclose in
writing to Company all information, ideas, concepts, improvements, or
discoveries whether or not reduced to practise, which are conceived,
developed, made or acquired by Executive, either individually or jointly
with others, and which relate to the business, products or services of
Company.
4. As part of Executive's fiduciary duties to Company, Executive agrees to
protect and safeguard Company's proprietary or confidential information,
ideas, concepts, improvements, discoveries and inventions and shall not,
either during his/her employment by Company or thereafter, directly or
indirectly, use for his/her own benefit or for the benefit of another or
disclose to another any of such proprietary or confidential information,
ideas, concepts, improvements, discoveries or inventions of Company.
5. In addition to the other obligations agreed to by Executive in this
Agreement, Executive agrees that during his/her employment by Company and
for the two years following the termination of his/her employment for any
reason he/she shall not at any time, directly or indirectly, induce,
entice, or solicit any employee of Company to leave his/her employment.
6. (a) Executive acknowledges and agrees that he/she serves in a special
capacity for Company and, as such, is not engaged in a common calling.
<PAGE>
- 3 -
(b) Executive hereby covenants with Company that from the date hereof
until two years immediately following the date of termination of
employment of Executive for any reason, Executive shall not in any of
the business territories in which Company or any of its subsidiaries
is presently or at the time of termination conducting business,
directly or indirectly, for his/her own account, or as a partner,
member, employee, consultant, advisor or agent of any partnership or
joint venture, or as a trustee, officer, director, shareholder,
employee, consultant, advisor or agent of any corporation, trust, or
other business organization or entity, own, manage, join, participate
in, encourage, support, finance, be engaged in, have an interest in,
give financial assistance or advice to, permit his/her name to be used
in connection with or be concerned in any way in the ownership,
management, operation or control of, or be connected in any manner
with any business which is or may be in the funeral, mortuary,
crematory, cemetery, ambulance, burial or funeral or cemetery
insurance business (including pre-arrangement or pre-need), or any
business related to any of the foregoing.
(c) Executive acknowledges and agrees that this covenant not to compete is
necessary and fundamental to the business of Company, is not contrary
to the public interest, and that covenants not to compete are an
important and recognized part of the funeral and cemetery businesses.
(d) Executive agrees that the remedy of Company in law for damages for any
actual or threatened breach of this Agreement by Executive would be
inadequate and that accordingly Company in the event of actual or
threatened breach shall be entitled to specific performance hereof,
injunctive relief, or both, by temporary or permanent injunction or
other appropriate judicial remedy, writ or order.
7. This Agreement is in addition to and does not replace, preempt or affect
any other agreements between Executive and Company. Nothing in the MEIP or
in this Agreement shall confer upon Executive the right to continued
employment with the Company or the right to participate in any other
present or future benefit plan that the Company presently offers or may
offer to certain of its employees.
8. This Agreement shall survive and remain in effect despite any future
modifications or termination of the MEIP.
9. Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision hereof is held by a court of competent jurisdiction to be
prohibited or invalid, such prohibition or invalidity shall not affect the
remaining provisions of this Agreement. In the event, a court of competent
jurisdiction shall determine in whole that the
<PAGE>
- 4 -
covenants contained in Section 6 above are invalid or unenforceable for any
reason, Executive and Company hereby request that such court reform the
provisions hereof in a manner to cause such covenants herein to be
enforceable as closely as possible to the way in which they were originally
written.
10. The provisions of this Agreement shall be construed in accordance with
______________ law and _____________ shall be the venue for adjudication of
any dispute relating to this Agreement.
11. This Agreement may be amended only by written instrument signed by both
parties.
EXECUTED by the parties hereto as of the day and year first above written.
THE LOEWEN GROUP INC.
BY:
---------------------------
SIGNED by the Executive )
in the presence of: )
)
)
- - ---------------------------- )
Signature )
)
- - ---------------------------- )
Name )
)
- - ---------------------------- ) -----------------------
Address )
)
- - ---------------------------- )
)
)
- - ---------------------------- )
Occupation )
<PAGE>
EXHIBIT 33
LOEWEN GROUP INTERNATIONAL, INC.
1994 Exchangeable Floating Rate Debenture
due July 15, 2001
$__________ No. _______
Dated: ___________
LOEWEN GROUP INTERNATIONAL, INC., a Delaware corporation (the "Company"),
for value received hereby promises to pay to the holder of this debenture named
on the signature page hereof, or its registered assigns, the principal sum
specified above, on July 15, 2001, in such coin or currency of the United States
of America as at the time of payment is legal tender for the payment of public
and private debts, and to pay interest thereon, computed on the principal
balance outstanding from the date hereof until paid in full, on the dates and in
the amounts specified in Section 2 below.
1. THE DEBENTURES.
This Debenture is one of a duly authorized issue of securities of the
Company designated as its Exchangeable Floating Rate Debentures due July 15,
2001, and limited in authorized aggregate principal amount to $127,670,000 (the
"Debentures"). The entire authorized amount of Debentures is being issued and
sold in the first instance to Loewen Management Investment Corporation, a
Delaware corporation ("LMIC"). In acquiring, holding and transferring the
Debentures, LMIC is acting as agent on behalf of the Company and is acquiring,
holding and transferring the Debentures in its capacity as such pursuant to the
terms of the 1994 Management Equity Investment Plan (the "Plan") of the
Company's parent corporation, The Loewen Group Inc. ("Parent"), a body corporate
pursuant to the laws of British Columbia. LMIC is acquiring, holding and
transferring the Debentures subject to the right of employees of the Company's
direct and indirect U.S. subsidiaries designated as participants under the Plan
(the "Participants"), to purchase the Debentures from LMIC, upon the terms and
subject to the satisfaction of certain conditions specified in the separate
Investment Option Agreements dated as of June 15, 1994 among the Company, LMIC
and the Participants named therein (the "Investment Option Agreements") and the
Purchase Agreement dated as of June 15, 1994, among the Company, LMIC and the
Participant named therein (the "Purchase Agreement"). Unless otherwise
indicated herein, capitalized terms used in this Debenture shall have the
meanings assigned to them in the Plan.
2. INTEREST.
Interest on this Debenture shall be payable quarterly in arrears on
the last day of March, June, September and December, at a rate of interest which
is equal to the "Prime Rate" for U.S. dollar loans as announced from time to
time by Wachovia Bank of
<PAGE>
Georgia, N.A. Notwithstanding the foregoing, so long as this Debenture is held
by LMIC, such interest rate shall be adjusted upwards or downwards, as
appropriate, from time to time, so that the interest payments received by LMIC
are equal to the interest payments then payable by LMIC with respect to the
third-party debt incurred by LMIC in connection with the acquisition of the
Debentures.
3. REDEMPTION.
(a) MANDATORY REDEMPTION. So long as this Debenture is held by LMIC,
upon the occurrence of an Event of Default (as defined in Section 12 hereof),
the Company shall redeem this and all other Debentures held by LMIC twenty (20)
business days after the occurrence of such Event of Default.
(b) REDEMPTION UPON FORFEITURE. In the event a Participant's rights
under an Investment Option Agreement or Purchase Agreement are forfeited in
whole or in part as a result of the Participant's termination of employment with
the Company and its subsidiaries, the Company may at any time thereafter redeem
the portion of the Debentures with respect to which the Participant's rights are
forfeited.
(c) REDEMPTION OF DEBENTURE HELD BY A PARTICIPANT. So long as this
Debenture is held by a Participant (i) at any time upon any determination by the
Company to redeem the principal amount of this Debenture or (ii) upon the
occurrence of an Event of Default, the Company shall (A) by first class mail, or
by hand delivery, give written notice (within 5 business days after the
occurrence of an Event of Default in the case of a redemption pursuant to clause
(ii)) to the Participant specifying the principal amount of this Debenture to be
redeemed and the date fixed for such redemption, which date shall be 15 business
days following the date of such notice; and (B) redeem the principal amount of
this Debenture at par, together with any accrued and unpaid interest.
4. EXCHANGE.
All or any portion of the principal amount of this Debenture may be
exchanged by or on behalf of a Participant, and only a Participant (except as
provided in Section 16 of this Debenture), upon the terms and subject to the
conditions specified herein, in the Exchange Acknowledgment of Parent dated June
15, 1994 (the "Exchange Acknowledgment"), and in the Investment Option Agreement
or Purchase Agreement to which such Participant is a party into Convertible
Preferred Shares of Parent, at an initial exchange price for Convertible
Preferred Shares equal to $300.40 principal amount of Debentures per Convertible
Preferred Share. The exchange price for Convertible Preferred Shares will be
subject to adjustment in order to prevent any dilution or enlargement of the
exchange privilege and exchange applicable to this Debenture. No adjustments
shall be made for accrued interest on the exchange of any principal amount of
Debentures or for dividends or distributions on the issuance of any Convertible
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<PAGE>
Preferred Shares upon conversion. In order to exchange any principal amount of
Debentures for Convertible Preferred Shares of Parent: (a) a Participant must
deliver (i) an exercise notice specifying such Participant's intention to
purchase the principal amount of Debenture specified therein pursuant to the
exercise of an Option and have the Debenture so purchased immediately exchanged
on such Participant's behalf into Convertible Preferred Shares in accordance
with the terms hereof and thereof, or (ii) an exchange notice specifying such
Participant's intention to exchange a principal amount of Debenture previously
purchased by the Participant pursuant to a Purchase Agreement and specified
therein for Convertible Preferred Shares of Parent in accordance with the terms
hereof and thereof; (b) the Debentures shall be surrendered to the Company at
its designated office set forth in Section 9; and (c) if required by the
Company, appropriate endorsements or transfer documents shall be furnished to
the Company. In the event of exchange of this Debenture in part only, a new
Debenture for the unexchanged portion hereof will be issued in the name of the
holder of this Debenture upon the cancellation hereof.
5. RECLASSIFICATIONS, MERGERS, SALE OF ASSETS, ETC.
In case of any reclassification or change of outstanding Convertible
Preferred Shares of Parent (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or in case of any consolidation or merger of the
Parent with or into another corporation (other than a consolidation or merger in
which the Parent is the continuing corporation and which does not result in any
reclassification or change of outstanding Convertible Preferred Shares), or in
case of any sale, lease or conveyance of the property of the Parent as an
entirety or substantially as a entirety, the holders of the Debentures then
outstanding shall have the right thereafter to convert such Debentures into the
kind and amount of shares and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale, lease or conveyance by a
holder of the number of Convertible Preferred Shares of the Parent for which
such Debentures could have been exchanged immediately prior to such
reclassification, change, consolidation, merger, sale, lease or conveyance
(assuming such holder of Convertible Preferred Shares failed to exercise any
rights of election and received per share the kind and amount of shares and
other securities and property received per share by a plurality of non-electing
shares). Thereafter the kind and amount of shares and other securities and
property receivable upon exchange of any Debentures shall be subject to
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 5. The provisions of this Section 5
shall similarly apply to successive reclassification, changes, consolidation,
mergers, sales, leases or conveyances. The provisions of this Section 5 shall
not apply if waived by the affirmative vote at a meeting called for that
purpose, or by the written consent with or without a meeting, of the holders of
at least two-thirds of the principal amount of Debentures then outstanding.
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<PAGE>
6. PRIOR NOTICE OF CERTAIN EVENTS. In case:
(a) the Parent shall declare a dividend (or any other
distribution) on its Convertible Preferred Shares (other than cash
dividends and dividends payable in Convertible Preferred Shares); or
(b) the Parent shall authorize the granting to the holders of
its Convertible Preferred Shares of rights or warrants to subscribe
for or purchase any shares of any class or of any other rights or
warrants; or
(c) of any reclassification of the Convertible Preferred Shares
of the Parent (other than a subdivision or combination of the
outstanding Convertible Preferred Shares, or a change in par value, or
from par value to no par value, or from no par value to par value), or
of any consolidation or merger to which the Parent is a party for
which approval of any shareholders of the Parent is required, or of
the sale, lease or conveyance of all or substantially all of the
assets of the Parent; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Parent;
then the Company shall mail or cause to be mailed to each holder of Debentures
at such holder's last address appearing on the registration books of the
Company, as promptly as possible but in any event at least 15 days prior to the
applicable date hereinafter specified (or the last date upon which a holder of
Debentures may retroactively exchange such Debentures with effect at or prior to
such other date, if the Company shall make effective provision for and notify
holders of such retroactive exchange), a notice stating (i) the date on which a
record is to be taken for the purpose of such dividend, distribution, rights or
warrants or, if a record is not to be taken, the date as of which the holders of
Convertible Preferred Shares of record to be entitled to such dividend,
distribution, rights or warrants are to be determined, or (ii) the date on which
such reclassification, consolidation, merger, sale, lease, conveyance,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Convertible Preferred Shares of
record shall be entitled to exchange their Convertible Preferred Shares for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, lease, conveyance, dissolution, liquidation or
winding up.
7. LIMITED REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) COMMON SHARES AND CONVERTIBLE PREFERRED SHARES RESERVED FOR
ISSUANCE. A total of 425,000 Convertible Preferred Shares of the Parent have
been duly authorized and reserved solely for issuance upon the exercise by the
Participants of their rights to convert Debentures into Convertible Preferred
Shares of Parent and, a total of
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<PAGE>
4,250,000 Common Shares of Parent have been duly authorized and reserved,
including treasury shares, solely for issuance upon the exercise by the
Participants of their rights to convert Convertible Preferred Shares into Common
Shares all in accordance with the terms of the Plan.
(b) DEBENTURES. The Debentures, when issued and sold by the Company to
LMIC, will be duly authorized, issued and delivered, and will be the legal,
valid and binding obligations of the Company, free and clear of any lien,
security interest, or option (except for any Option evidenced by an Investment
Option Agreement and the purchase obligation evidenced by the Purchase
Agreement) with respect thereto or any other charge or encumbrance.
8. NO SUBORDINATION.
The obligations of the Company under this Debenture shall rank PARI
PASSU with the other obligations of the Company except for obligations which are
expressly subordinated to the obligations of the Company under this Debenture.
9. MAINTENANCE OF OFFICE.
Loewen Group Inc., as agent for the Company, will maintain an office
in the United States of America, where Debentures may be presented or
surrendered for payment or exchanged, registration of transfer or exchange, and
where notices or demands to or upon the Company in respect of Debentures may be
served. The initial office of such agent shall be located at Suite 800, 50 East
River Center Boulevard, Covington, Kentucky 41001. The Company or such agent
will give prompt written notice to the registered holders of the Debentures of
any change in the location of such office or agency.
The Company or its agent will maintain a register at such office or agency
in which the Company shall provide for the registration of the Debentures and of
transfers of the Debentures. Prior to due presentment of any Debentures for
registration of transfer, the Company and any agent of the Company may treat the
person in whose name such Debenture is registered as the owner of such Debenture
for the purpose of receiving payment of principal and interest on such Debenture
and for all other purposes whatsoever.
At the option of the holder, Debentures may be exchanged for other
Debentures of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Debentures at such office or agency. Whenever any
Debentures are so surrendered for exchange, the Company shall execute and
deliver the Debentures which the holder making the exchange is entitled to
receive.
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<PAGE>
If this Debenture has been mutilated, lost, destroyed or wrongfully taken,
the Company will issue a replacement Debenture, provided that the requirements
of Section 8 of the Uniform Commercial Code are met. If required by the
Company, the holder of this Debenture will deliver an indemnity bond sufficient
in the judgment of the Company to protect the Company or any agent from any loss
which any of them may incur if this Debenture is replaced. The Company will
charge the holder for any expense incurred by it in replacing this Debenture.
All Debentures issued upon any replacement or upon any registration of
transfer or exchange of the Debentures shall be the valid obligations of the
Company, evidencing the same debt and entitled to the same benefits as the
Debentures surrendered upon such replacement or registration of transfer or
exchange as the case may be.
10. MERGERS AND CONSOLIDATION.
The Company shall not consolidate with or merge into, or transfer all
or substantially all of its assets to another corporation unless (a) the
transaction is approved by the Board of Directors of the Company, and (b) the
successor corporation assumes, by written agreement, all the obligations of the
Company under the Debentures, the Investment Option Agreements and the Purchase
Agreement. Thereafter all such obligations of the predecessor corporation shall
terminate.
11. AMENDMENT AND WAIVER.
The provisions of the Debentures may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it (including acts or omissions which otherwise would give the
holders of the Debentures the right to accelerate the maturity thereof), only if
the Company has obtained the written consent of the holders of a majority of the
aggregate principal amount of all of the Debentures at the time outstanding;
PROVIDED, HOWEVER, that no such action or omission shall change (a) the exchange
price for Convertible Preferred Shares, other than to prevent dilution or
enlargement of the exchange privilege, (b) the rate at which interest accrues on
any Debentures or the times at which such interest becomes payable (in the
absence of acceleration of the maturity thereof), or (c) any provision relating
to the scheduled payments of principal of the amount of principal to be paid on
any Debenture (in the absence of acceleration of the maturity thereof), without
the unanimous written consent of the holders of 100% in principal amount of all
of the Debentures then outstanding; PROVIDED, FURTHER, that no consent of any
person other than the Participants shall be required to be obtained in order to
amend any provision relating to the exchange of any Debenture. Without the
consent of any holder of a Debenture, the Company may amend the provisions of
the Debentures to cure any ambiguity, omission, defect of inconsistency or to
make any change that does not materially adversely affect the rights of such
holder.
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<PAGE>
12. EVENTS OF DEFAULT; ACCELERATION.
If any of the following events shall occur and be continuing (each an
"Event of Default"):
(a) The Company defaults in the payment of any installments of
interest on any Debenture when the same becomes due and payable, and such
default shall remain unremedied for a period of five days; or
(b) The Company defaults in the payment of any installment of
principal on any Debenture when the same becomes due and payable at
maturity, upon redemption, or otherwise; or
(c) The Company fails to perform or observe any other term, covenant
or agreement contained in the Debentures on its part to be performed or
observed, and any such failure shall remain unremedied for 30 days after
written notice thereof shall have been given to the Company by the holders
of a majority of the aggregate principal amount of the Debentures then
outstanding; or
(d) The Company pursuant to or within the meaning of any Bankruptcy
Law (as defined below);
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a Custodian (as defined
below) of it or for all or substantially all of its property, or
(iv) makes a general assignment for the benefit of its creditors;
or
(e) A court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company in an involuntary case,
and such order or decree shall continue for a period of 60 days
undismissed, discharged or unbonded.
(ii) appoints a Custodian of the Company or for all or
substantially all of the Company's property and such order or decrees
shall continue for a period of 60 days undismissed, undischarged or
unbonded, or
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<PAGE>
(iii) orders the liquidation of the Company, and such order
remains unstayed and in effect for a period of 60 days undismissed,
undischarged or unbonded;
then the holders of a majority of the aggregate principal amount of the
Debentures then outstanding may, by a notice in writing to the Company, declare
the unpaid principal of, and accrued interest on, the Debentures to be
immediately due and payable and thereupon the unpaid principal of, and accrued
interest on, the Debentures shall be immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived by the Company, and the holders of the Debentures may exercise
all other remedies available to them hereunder, or under applicable law;
PROVIDED, HOWEVER, in the case of an Event of Default arising under Section
12(d) or 12(e) above, acceleration of the Debentures shall occur automatically
and all amounts owing under the Debentures shall be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are expressly waived by the Company.
For the purposes of this Section 12, the term "Bankruptcy Law" shall mean
Title 11 U.S. Code or any similar Federal or state law for the relief of
debtors, and the term "Custodian" shall mean any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
Notwithstanding any of the foregoing provisions of this Section 12, the
holders of a majority of the aggregate principal amount of the Debentures then
outstanding, may waive an existing default or Event of Default and its
consequences, except for any Event of Default pursuant to Sections 12(d) or
12(e) hereof the waiver of which requires the consent of the holders of 100% of
the outstanding Debentures, at any time prior to the commencement of any remedy.
When a default or an Event of Default is waived, it is cured and stops
continuing.
13. NO WAIVER; REMEDIES.
No failure on the part of the holder of this Debenture to exercise,
and no delay in exercising, any right under this Debenture, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
14. NO RECOURSE AGAINST OTHERS.
No director, officer, employee or shareholder, as such, of the Company
or the Parent shall have any liability for any obligations of the Company under
the Debentures, the Investment Option Agreements or the Purchase Agreements.
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<PAGE>
15. GOVERNING LAW.
This Debenture shall be construed in accordance with and be governed
by the laws of the State of New York.
16. RESTRICTIONS ON TRANSFER.
This Debenture shall not be sold, pledged, assigned, hypothecated or
otherwise transferred by the holder of this Debenture except in accordance with
the next sentence. The Debenture may be pledged or assigned by LMIC and, upon
purchase of this Debenture by a Participant pursuant to the Purchase Agreement,
this Debenture may be pledged as security to a lending institution for the
purpose of financing the purchase price of such Debenture, subject to compliance
with applicable securities laws and delivery to the Company of a legal opinion
satisfactory to the Company with respect to such compliance.
LOEWEN GROUP INTERNATIONAL, INC.
By:
----------------------------------------------
Title:
----------------------------------------
LOEWEN MANAGEMENT INVESTMENT CORPORATION
The "holder"
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EXHIBIT 34
THE LOEWEN GROUP INC.
1994 OUTSIDE DIRECTOR COMPENSATION PLAN
(AS AMENDED ON APRIL 7, 1995)
SECTION 1. PURPOSE
The purpose of the 1994 Outside Director Compensation Plan (the "Plan") is to
promote the interests of The Loewen Group Inc. (the "Company") by attracting and
retaining qualified individuals who are neither employees nor officers of the
Company or a Subsidiary (as defined below) to serve as directors of the Company
or a Subsidiary. The Plan is intended to further align the interests of outside
directors with the shareholders of the Company, thereby promoting long-term
growth and performance of the Company.
SECTION 2. DEFINITIONS
"ANNUAL FEES" means (i) the annual retainer, (ii) fees for serving on a
Committee and (iii) fees for serving as Chairman of a Committee, to be paid by
the Company to a Company Participant during the 1994 Period or any Service
Period, at the rates determined by the Board of Directors in advance of such
period.
"BOARD OF DIRECTORS" means the Board of Directors of the Company.
"COMMITTEE" means a committee of the Board of Directors.
"COMMON SHARES" means the Common shares of the Company.
"COMPANY" means The Loewen Group Inc., a body corporate under the laws of
British Columbia, Canada.
"COMPANY PARTICIPANT" means an individual duly elected or appointed as a
director of the Company who is not also an officer or employee of the Company or
any Subsidiary.
"DETERMINATION DATE" means (i) with respect to Common Shares issued and Options
granted pursuant to Section 5, the first day of the Service Period to which the
Election with respect to Annual Fees relates; provided, however, that with
respect to the Service Period beginning January 1, 1995, the Determination Date
shall be December 29, 1994; (ii) with respect to Common Shares issued and
Options granted pursuant to Section 6(b), July 1, 1994; and (iii) with respect
to Options granted pursuant to Section 7, the first day of the first full
calendar month that a Participant first serves as a director; provided, however,
that if the Determination Date is not a day on which the TSE is open for
trading, the Determination Date shall be the next day on which such trading
occurs.
"DIRECTORS' SHARES" means Common Shares issued in accordance with Section 5(b).
"ELECTION" means an election made in accordance with Section 5(a).
<PAGE>
"GRANT DATE" means the date that an Option is granted.
"MEETING FEES" means the aggregate fee compensation actually earned by a Company
Participant (but not yet paid) for attending in person Board of Directors and
Committee meetings during a Service Period.
"OPTION" means an option to acquire Common Shares granted pursuant to
Section 5(c), Section 6(c) or Section 7.
"PARTICIPANT" means a Company Participant or a Subsidiary Participant.
"PLAN" means the 1994 Outside Director Compensation Plan.
"SECURITIES LAWS" means the securities laws of the United States, Canada, the
states and territories of the United States, the provinces and territories of
Canada, the securities laws of the jurisdiction of residence of any Subsidiary
Participant, and applicable laws, rules and regulations promulgated thereunder.
"SERVICE PERIOD" means an annual period determined by the Board of Directors,
which annual period shall be January 1 through December 31 until such time as
the Board of Directors designates a different annual period.
"SHARE PRICE" means (i) with respect to Common Shares, the weighted average of
the closing prices of the Common Shares on the five trading days immediately
preceding the Determination Date (the "Weighted Average Closing Price") or (ii)
with respect to Options, the greater of (A) the weighted average of the trading
prices of the Common Shares on the Determination Date and (B) the Weighted
Average Closing Price. The Share Price with respect to Common Shares issued or
Options granted to a Participant who is a resident of any country other than the
United States shall be determined with reference to the closing prices or
trading prices, as the case may be, on the TSE. The Share Price with respect to
Common Shares issued or Options granted to a Participant who is a resident of
the United States shall be determined with reference to the closing prices or
trading prices, as the case may be, on The Nasdaq National Market (or, if the
Common Shares are not traded on The Nasdaq National Market, any United States
national securities exchange on which the Common Shares are traded).
"SPECIAL 1994 ELECTION" means an election made pursuant to Section 6(a).
"SUBSIDIARY" means a direct or indirect subsidiary of the Company.
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"SUBSIDIARY PARTICIPANT" means an individual duly elected or appointed as a
director of a Subsidiary who is (i) not an officer or employee of the Company or
any Subsidiary or (ii) not a resident of the United States or Canada.
"TSE" means The Toronto Stock Exchange.
"1994 PERIOD" means the service period commencing January 1, 1994 and ending
December 31, 1994.
"1994 MEETING FEES" means the aggregate fee compensation actually earned by a
Company Participant (but not yet paid) for attending in person Board of
Directors and Committee meetings during the 1994 Period.
SECTION 3. ADMINISTRATION
The Plan shall be administered by the Board of Directors or a Committee.
SECTION 4. COMMON SHARES SUBJECT TO THE PLAN
The total number of Common Shares that may be issued under the Plan shall not
exceed 250,000. The number of Common Shares reserved for issuance to any one
person pursuant to options (whether granted under this Plan or otherwise) shall
not exceed 5% of the total issued and outstanding Common Shares on a non-diluted
basis. If any Options granted under this Plan are surrendered before exercise
or lapse without exercise, in whole or in part, then the Common Shares reserved
therefor shall continue to be available under the Plan.
SECTION 5. ELECTION; DIRECTORS' SHARES; TANDEM GRANT
(a) ELECTION. Not later than six months prior to the first day of a Service
Period (or such longer or shorter period of time as may be permitted by Rule
16b-3 under the Securities Exchange Act of 1934 (the "1934 Act")), each Company
Participant may, by filing a written election with the Company, direct the
Company to pay to such Company Participant, in the form of Common Shares and
Options, some or all of the Annual Fees payable to such Company Participant for
the related Service Period. Once an Election is filed with the Company, it
shall be effective, shall be irrevocable, and shall remain in effect until the
end of the Service Period to which it relates. In such election the Company
Participant may, but shall not be required to, direct the Company to pay to such
Company Participant, in the form of Common Shares and Options, some or all of
the Meeting Fees for the immediately preceding Service Period (or, in the case
of the first Service Period following the 1994 Period, the 1994 Meeting Fees).
The sum of the Annual
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<PAGE>
Fees and the Meeting Fees as to which an Election has been made shall be
referred to together as the "Numerator."
(b) DIRECTORS' SHARES. The number of Common Shares to be issued shall be equal
to the Numerator to which the Election relates, divided by the Share Price as at
the Determination Date. Such Directors' Shares shall be issued as soon as is
reasonably possible after last day of the Service Period. Cash shall be paid in
lieu of fractional shares.
(c) TANDEM GRANT OF OPTIONS. Any Company Participant who makes an Election
also shall receive a grant of Options to acquire that number of Common Shares
equal to the number of Directors' Shares or such lesser number as shall be
required in order to permit the recipient to qualify as a disinterested person
as provided under Rule 16b-3(c)(2)(i) under the 1934 Act.
SECTION 6. SPECIAL 1994 ELECTION; SHARES; OPTIONS
(a) SPECIAL 1994 ELECTION. Not later than June 15, 1994, each Company
Participant may, by filing a written election with the Company, direct the
Company to pay Annual Fees payable (but not yet paid) to such Company
Participant with respect to the 1994 Period in the form of Common Shares and
Options. Such election shall be irrevocable and shall remain in effect until
December 31, 1994.
(b) 1994 SHARES. The number of Common Shares to be issued shall be equal to
the Annual Fees payable (but not yet paid) with respect to the 1994 Period to
which the election in section 6(a) relates divided by the Share Price as at the
Determination Date. A certificate representing such Common Shares shall be
issued as soon as is reasonably possible after the 1994 Period. Cash shall be
paid in lieu of fractional shares.
(c) 1994 OPTIONS. Any Company Participant who makes an election pursuant to
Section 6(a) with respect to the 1994 Period shall also receive a grant of
Options to acquire that number of Common Shares equal to the number of Common
Shares determined in accordance with Section 6(b) above.
SECTION 7. INITIAL ONE-TIME GRANT
On the first day of the first full calendar month after the date on which a
Company Participant is initially elected or appointed to the Board of Directors,
such Company Participant shall receive an initial grant of 2,000 Options. In
addition, the Board of Directors or the Committee, as the case may be, shall
have the discretion to make an initial grant of up to 2,000 Options to a
Subsidiary Participant, as of the first day of the first
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full calendar month after the date on which a Subsidiary Participant is
initially elected or appointed to a Subsidiary board of directors.
SECTION 8. OPTION AGREEMENT
Each Option granted under the provisions of this Plan shall be evidenced by an
option agreement ("Option Agreement") in such form as may be approved by the
Board of Directors, which agreement shall be duly executed and delivered on
behalf of the Company and by the Participant to whom such Option is granted.
The Option Agreement shall contain such terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Board of Directors.
SECTION 9. TERMS OF OPTIONS
(a) EXERCISE PRICE. The Option exercise price shall be the Share Price.
(b) TERM. Each Option shall expire ten years after the Grant Date.
(c) VESTING; EXERCISE. Each Option Agreement shall specify the dates upon
which all or any installment of the Option will be exercisable. An Option may
be exercised when installments vest and at any time and from time to time
thereafter with respect to all or a portion of the Common Shares covered by such
vested installments. In addition, if an Offer (as hereinafter defined) is made,
the Board of Directors may while the Offer remains outstanding:
(i) determine that each Option granted by the Company to
purchase Common Shares shall, notwithstanding any vesting period or
deferral of the right to exercise otherwise applicable, be immediately
exercisable effective on and after a date declared by the Board of
Directors, or Committee, to be an advanced exercise date ("Advanced
Exercise Date"); and
(ii) rescind any declaration of an Advanced Exercise Date but no
such rescission shall affect the validity of the exercise of such
Option if validly exercised on or after a particular Advanced Exercise
Date and before the date of rescission of the declaration of the
particular Advanced Exercise Date.
For the purposes hereof, "Offer" means an offer to acquire the Shares made to
the holders of the Company's Shares where the Shares which are the subject of
the offer to purchase, together with the offeror's then presently owned Shares,
will in the aggregate exceed twenty percent (20%) of the outstanding Shares of
the Company and where two or more persons or companies make offers jointly or in
concert or intending to exercise
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<PAGE>
jointly or in concert any voting rights attaching to the Shares to be acquired,
then the Shares owned by each of them shall be included in the calculation of
the percentage of the Shares of the Company owned by each of them.
Paragraphs (i) and (ii) shall apply to each Option granted or to be granted by
the Company, which is outstanding at the time of any such declaration regardless
of the date of grant thereof, provided that all other terms and conditions of
the Option shall continue to apply and nothing herein shall operate to extend,
enlarge or revise any Option which has expired, has been exercised, has been
cancelled or otherwise has ceased to exist.
(d) PAYMENT. An Option shall be exercised by delivery of a written notice
of such exercise to the Company at its principal executive office, together with
full payment of the aggregate exercise price for the Common Shares with respect
to which the Option is exercised.
(e) SHARE ISSUANCE. Upon payment of the aggregate exercise price, the
Company shall issue the Common Shares so acquired as soon as is reasonably
possible.
SECTION 10. OPTIONS NOT TRANSFERABLE
Except as hereafter provided, an Option granted under the Plan may not be
transferred, pledged or assigned otherwise than by will or the laws of descent
and distribution and may be exercised only by the Participant during the
Participant's lifetime.
SECTION 11. PROTECTION AGAINST DILUTION
The Board of Directors shall adjust the number of Common Shares covered by the
Plan and any Option in a manner which it considers equitable to reflect any
change in the capitalization of the Company including, but not limited to, such
changes as stock dividends, consolidations and subdivisions of shares or changes
resulting from an amalgamation of the Company with one or more corporations. No
fractional shares or rights to acquire a fractional share will be created as a
result of an adjustment made pursuant to this section. The Board of Directors
shall also adjust the exercise price under any Option in a manner which it
considers equitable if the number of Common Shares covered by the Option is
adjusted pursuant to this section.
SECTION 12. EFFECT OF TERMINATION OF DIRECTORSHIP
(a) DEATH. In the event of the death of a Participant, the Participant's
personal legal representatives (the "Successors") may exercise any Options
previously issued to the Participant, to the extent that such Options are
exercisable at the date of death, but no further vesting shall occur. Absent
the prior written consent of the Board of Directors, the Successors must
exercise any such Option prior to the earlier to occur of (i) two
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years after the date of death and (ii) the expiration date of the Option. With
respect to Common Shares issuable pursuant to Section 5(b), 6(b) or 9(e), a
certificate representing such Common Shares shall be issued as soon as is
reasonably possible after the last day of the Service Period or 1994 Period, as
the case may be, to which such Common Shares relate. No Options shall be issued
with respect to the 1994 Period or Service Period during which the Company
Participant's death occurs.
(b) TERMINATION BY BOARD RESOLUTION. If a Participant's directorship is
terminated by resolution of the Board of Directors or the board of directors of
a Subsidiary, all Options previously issued to such person shall expire as
determined by the Board of Directors. The Board of Directors shall also
determine the extent, if at all, that such Company Participant shall receive any
Common Shares or Options with respect to the 1994 Period or Service Period, as
the case may be, during which such termination occurs.
(c) OTHER TERMINATION. In the event a Participant's directorship is
terminated for any reason other than by death or by resolution, the Participant
may exercise any Options previously issued to the Participant, to the extent
that such Options are exercisable on the termination date, but no further
vesting shall occur. The Participant must exercise any such Options prior to
the earlier to occur of (i) forty-five days after the date of termination and
(ii) the expiration date of the Option. With respect to Common Shares issuable
pursuant to Section 5(b), 6(b) or 9(e), a certificate representing such Common
Shares shall be issued as soon as is reasonably possible after the last day of
the Service Period or 1994 Period, as the case may be, to which such Common
Shares relate. No additional Options shall be issued with respect to the 1994
Period or Service Period during which such termination occurs.
SECTION 13. RESTRICTIONS ON ISSUANCE OF SHARES
The Company shall have no obligation to issue any Common Shares or deliver any
certificate representing Common Shares until the following conditions shall be
satisfied:
(i) At the time of the issue, (A) such shares effectively shall
have been registered or qualified by prospectus, as the case may be,
under applicable Securities Laws as now in force or hereafter amended
or (B) counsel for the Company shall have given an opinion that such
shares are exempt from registration or qualification by prospectus, as
the case may be, under Securities Laws as now in force or hereafter
amended; and
(ii) the Company shall have complied with all regulations imposed
by the Nasdaq National Market and any stock exchange upon which the
Common Shares are then listed.
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In addition, any such certificate shall bear such restrictive legends as the
Company determines are necessary or desirable, from time to time, in order to
comply with applicable Securities Laws and all regulations imposed by the Nasdaq
National Market and any stock exchange upon which the Common Shares are then
listed.
SECTION 14. TERMINATION OR AMENDMENT
Subject to regulatory approval and, where required, approval of the shareholders
of the Company, the Board of Directors may, at any time and for any reason,
amend or terminate the Plan; provided, however, that Section 7 of this Plan
shall not be amended more than once during any six month period, except any
amendments which may be required by the Internal Revenue Code of 1986, the
Employee Retirement Income Security Act, or the rules thereunder. The Plan
shall remain in effect until it is so terminated by the Board of Directors. No
Options may be granted under this Plan after its termination, but no termination
or amendment of the Plan shall affect any previously granted Option.
SECTION 15. GENERAL LIMITATIONS
Neither the Participant nor the Participant's Successors shall have rights as a
shareholder of the Company with respect to Common Shares covered by Options
until the Participant or Participant's Successors become the holder of record of
such shares.
SECTION 16. RISK
EACH PARTICIPANT ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE
COMMON SHARES.
SECTION 17. APPLICABLE LAW
All questions concerning the interpretation, validity and construction of this
Plan and the instruments evidencing Options shall be governed by the internal
law, and not the law of conflicts, of the Province of British Columbia.
SECTION 18. COMPLIANCE WITH CERTAIN U.S. LAWS
The Company intends that, with respect to persons subject to Section 16 of the
1934 Act, this Plan will qualify under Rule 16b-3 promulgated thereunder. So
long as the Company is subject to Section 16, any equity security, as defined in
the 1934 Act or the rules and regulations thereunder, offered pursuant to the
Plan may not be sold for at least six months after the date of grant thereof,
and any derivative security, as defined in the rules and regulations promulgated
under Section 16, offered pursuant to the Plan may not be sold for at least six
months after the acquisition thereof, except in the event of the death or
disability of the holder thereof. In addition, (i) the date by which an
Election must be
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made and (ii) the number of Options granted pursuant to Section 5(c) of this
Plan, may be modified to the extent necessary to reflect prospective changes to
Rule 16b-3. Should any provision of this paragraph require modification or be
unnecessary to comply with the requirements of Section 16 and the rules
thereunder, the Board of Directors may waive such provisions and/or amend this
Plan or modify such provision accordingly. To the extent that any provision of
this Plan or action by the Board of Directors fails to comply with the Section
16 rules, it shall be null and void to the extent permitted by law and deemed
advisable by the Board of Directors.
SECTION 19. EFFECTIVE DATE; APPROVAL
This Plan shall become effective upon approval of the Plan by the Board of
Directors. Common Shares shall not be issued under this Plan unless and until
the Plan is approved by the shareholders of the Company.
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EXHIBIT 35
THE LOEWEN GROUP INC.
EMPLOYEE STOCK BONUS PLAN
(AS AMENDED AS AT APRIL 7, 1995)
1. PURPOSE AND EFFECTIVE DATE
1.1 PURPOSE. The purpose of the Plan is to enhance the sense of commitment and
community among the Employees of the Company and to foster the interest of such
Employees in the growth and development of the Company by providing such
Employees, through the grant of Common shares in TLGI, with a proprietary
interest in the Company and a real sense of ownership and by means of the
foregoing to advance the interests of the Company.
1.2 EFFECTIVE DATE. The Plan shall be effective as of September 1, 1993.
2. DEFINITION AND INTERPRETATION
2.1 DEFINITIONS. In the Plan, unless the context otherwise requires, the
following terms shall have the following meanings:
"Board of Directors" means the Board of Directors of TLGI;
"Committee" means the committee appointed by the Board of Directors
pursuant to Section 3.1 of the Plan;
"Company" means TLGI and its Subsidiaries;
"Employee" means, at a relevant date:
(a) a regular full time employee (including officer) of TLGI or a
Subsidiary who has been so employed for at least 90 consecutive days
as at that date;
(b) a regular part time employee (including officer) of TLGI or a
Subsidiary who has been so employed for at least 90 consecutive days
as at that date, is not employed by any company or person other than
TLGI or a Subsidiary, works an average of 20 hours per week and is
entitled to substantially all of the benefits of a regular full time
employee;
(c) a part time or on-call employee of TLGI or a Subsidiary who as at
that date has been so employed for at least 5 years, works an average
of 5 hours per week or 260 hours per year and who the Committee
determines has made a contribution to the Company; and
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(d) an employee of TLGI or a Subsidiary who as at that date is paid
on a commission basis, is meeting his or her sales and income
requirements and is entitled to substantially all of the benefits of a
regular full time employee;
and for the purpose of the Plan:
(e) the average of 5 hours per week or 20 hours per week shall be
determined as follows:
(i) if the employee has been employed for 12 months or more,
then averaged over a period of 12 months preceding the relevant date;
(ii) if the employee has been employed less than 12 months
preceding the relevant date, then averaged over such period of
employment; or
(iii) on such other basis as the Committee may determine;
(f) employed for consecutive days shall mean employment without any
termination or leave of absence, except for a leave of absence
approved by the employer which is less than 6 consecutive months in
duration;
(g) there shall be taken into account employment with a company or
person before that company became a Subsidiary or before that
company's or person's funeral service or related assets were acquired
by TLGI or a Subsidiary; and
(h) "Employee" shall not include an employee of another company or
person who is on temporary loan to TLGI or a Subsidiary, a short term
temporary employee, a probationary employee, a director of TLGI or a
Subsidiary unless such director is otherwise eligible as an Employee
and such other persons or class of persons as may be excluded from
participation from time to time by the Committee;
"Participant" means an Employee who has delivered an acknowledgment in
accordance with Section 4.3 of the Plan;
"Plan" means the employee stock bonus plan described herein;
"Plan Administrator" means the person or persons designated from time to
time by the Committee pursuant to Section 3.2 of the Plan as being
responsible for maintaining records in connection with the Plan;
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"Plan Agent" means the person or persons from time to time appointed by the
Board of Directors to act as plan agent for the Plan;
"Shares" means Common shares of TLGI;
"Subsidiaries" means any corporations which are direct or indirect
subsidiaries of TLGI; and
"TLGI" means The Loewen Group Inc., a company incorporated under the laws
of the Province of British Columbia and any successor company.
2.2 ARTICLES, SECTIONS AND HEADINGS. The division of the Plan into Articles
and Sections and the insertion of headings are for convenience of reference only
and shall not affect the construction or interpretation of the Plan.
2.3 EXTENDED MEANINGS. Where the context so requires, words importing the
singular include the plural and vice versa, and words importing the masculine
gender include the feminine and neuter genders.
2.4 APPLICABLE LAW. The Plan shall be governed by and construed in accordance
with the laws of the Province of British Columbia.
3. ADMINISTRATION OF THE PLAN
3.1 COMMITTEE. The Plan will be administered by a specifically designated
Committee of the Board of Directors. The Committee shall consist of such two or
more directors of TLGI as the Board of Directors may designate from time to
time. The Committee is authorized to interpret and construe the Plan, including
but not limited to adjudicating as to and rectifying inconsistencies and
omissions, and may from time to time make, amend and rescind rules and
regulations for carrying out the Plan. The Committee may in its absolute
discretion, if it determines that there is hardship or other good cause, grant
relief from the literal provisions of the Plan, but no such grant of relief
shall constitute a precedent in any other circumstance. Any such interpretation
or construction of any provision of the Plan or grant of relief shall be final
and conclusive. All administrative costs of the Plan shall be paid by TLGI. No
member of the Committee shall be liable for any action or inaction or
determination made in good faith with respect to the Plan or any Shares granted
under it.
3.2 PLAN ADMINISTRATOR. The Committee may appoint a person or persons from
time to time, called a Plan Administrator, to maintain records in connection
with the Plan.
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4. PARTICIPATION
4.1 INITIAL ISSUANCE. TLGI will, subject to Section 4.3, issue on the date
determined by the Committee (the "Initial Issuance Date"), 5 Shares for each
person who is an Employee as of June 30, 1993 and has not ceased to be an
Employee as of the Initial Issuance Date, for services performed by that person.
The 5 Shares may be issued either (a) directly to and in the name of each
Employee or (b) in the name of the Plan Agent and held by the Plan Agent as
nominee for each such person, as the Committee may determine in its sole
discretion.
4.2 FUTURE ISSUANCES. TLGI will, subject to Section 4.3, issue, on dates from
time to time determined by the Committee (each such date being at approximately
three month intervals or such other intervals as the Committee may select) 5
Shares for each person (other than a person who has, in the past, received 5
Shares pursuant to Section 4.1 or this Section 4.2), who qualifies as an
Employee after June 30, 1993 and has not ceased to be an Employee as of the
relevant issuance date, for services performed by that person. The 5 Shares may
be issued either (a) directly to and in the name of each Employee or (b) in the
name of the Plan Agent and held by the Plan Agent as nominee for each such
person as the Committee may determine in its sole discretion.
4.3 ACKNOWLEDGMENT. An Employee who has qualified pursuant to Section 4.1 or
4.2 must, as a condition to the issuance of the 5 Shares relating to such
person, deliver to the Plan Administrator prior to the date of issue of that
Employee's 5 Shares a completed form of acknowledgment substantially in the form
attached hereto as Schedule A or in such other form as the Committee may
approve, expressing the agreement of such Employee to the terms and conditions
of the Plan as it may be amended from time to time. An Employee delivering such
acknowledgment shall be a Participant in the Plan.
4.4 ONE TIME ENTITLEMENT. Unless the Committee otherwise determines, any one
person's entitlement under the Plan is limited to one grant of 5 Shares.
5. SPECIFIC PROVISIONS AFFECTING SHARES
5.1 HOLD PERIOD. A Participant may not sell, assign, mortgage, pledge or
otherwise dispose of that Participant's 5 Shares while that Participant is an
Employee. If that Participant ceases to be an Employee for any reason
(including death) then that Participant or that Participant's personal
representative may not sell, assign, mortgage, pledge or otherwise dispose of
that Participant's 5 Shares unless and until 3 years have elapsed since the date
of issuance of such 5 Shares.
5.2 PLAN AGENT AS HOLDER. At the sole discretion of the Committee, a
certificate representing the 5 Shares awarded to a Participant may be issued
directly to and in the name of such Participant or may be issued in the name of
the Plan Agent and held by the Plan Agent as nominee for such Employee. If the
Plan Agent so acts, the Plan Agent will continue to be the
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<PAGE>
registered holder of 5 Shares on behalf of a Participant during the relevant
hold period described in Section 5.1 and thereafter until that Participant makes
a written request to the Plan Administrator that a share certificate for that
Participant's 5 Shares be issued to that Participant or that Participant's
order, and TLGI has issued such share certificate. A Participant shall be
solely responsible for the sale or other disposition of that Participant's 5
Shares including compliance with all relevant securities laws and conditions
imposed by relevant stock exchanges and quotation systems, provided that nothing
herein contained shall preclude a Participant from participating, if eligible,
in any plan that TLGI may establish for the purchase of Shares from
shareholders.
5.3 DIVIDENDS AND DISTRIBUTIONS. Any dividends (cash, stock or in specie)
declared on each Participant's 5 Shares and any other distributions (including
any warrants, options or rights) with respect to such Shares shall be paid or
delivered by TLGI to either (a) the respective Participants entitled thereto or
(b) the Plan Agent, as the Committee may determine in its sole discretion. If
such dividends or other distributions are paid or delivered to the Plan Agent,
then the Plan Agent shall hold such dividends or other distributions for the
benefit of the Participants entitled thereto, without interest or other return
to such Participants on such dividends or other distributions held, during the
relevant hold period described in Section 5.1 and thereafter, subject to the
following sentence. If a Participant requests a certificate for that
Participant's 5 Shares pursuant to Section 5.2, the Plan Agent shall pay or
deliver the aggregate dividends or other distributions held for that Participant
to that Participant or that Participant's order, less any withholding taxes.
TLGI shall be entitled to earn interest, commissions, fees or other returns on
all dividends or other distributions held by the Plan Agent. Nothing herein
contained shall preclude a Participant from participating, if eligible, in a
plan that TLGI may establish for dividend reinvestment and/or share purchases.
Any warrants, options or rights with respect to the Shares may in the sole
discretion of the Committee be delivered to the Participants for exercise or be
allowed to lapse (if the Committee determines that there is negligible value to
the warrants, options or rights) or be sold by the Plan Agent on behalf of the
Participants, and the proceeds of any such sale shall be proportionately
credited to each Participant.
5.4 VOTING. Shares held directly by a Participant will be voted by such
Participant. Shares held by the Plan Agent under the Plan will be voted by the
Plan Agent in accordance with the directions, if any, of the respective
Participants and in the absence of a direction will be voted for any proposals
or resolutions proposed by management of TLGI.
5.5 REPRESENTATIVE CERTIFICATE. In the event that the Plan Agent holds Shares
on behalf of a Participant, the Plan Administrator may, but shall not be
obligated to, issue or cause to be issued to a Participant a representative
certificate confirming the entitlement of that Participant to the beneficial
interest in that Participant's 5 Shares held in the name of the Plan Agent.
5.6 PROTECTION AGAINST DILUTION. The Committee will adjust the number of
Shares covered by the Plan in a manner which it considers equitable to reflect
any change in the capitalization of TLGI including, but not limited to, such
changes as stock dividends, consolidations and subdivisions of shares or changes
resulting from an amalgamation of
5
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TLGI with one or more corporations. No fractional shares or rights to acquire a
fractional share will be created as a result of an adjustment made pursuant to
this section.
6. MAXIMUM NUMBER OF SHARES
6.1 LIMITATIONS. The number of Shares that may be issued under the Plan is
limited as follows:
(a) the aggregate number of Shares to be issued pursuant to the Plan
shall not exceed 50,000 Shares;
(b) the aggregate number of Shares issued shall not exceed 1% of the
total issued and outstanding Shares on an annual basis; and
(c) Shares issued to insiders of TLGI (as defined in the Securities
Act (British Columbia)) shall not exceed 0.5% of the total issued and
outstanding Shares on an annual basis;
subject to any change to such limitations as determined by the Committee and as
required and approved by relevant regulatory authorities, stock exchanges,
quotation systems and, where required, the shareholders of TLGI.
7. EMPLOYMENT
7.1 NO ENTITLEMENT. The Plan is a voluntary plan on the part of the Company
and shall not constitute consideration for or an inducement to or condition of
the employment of any Employee. Nothing contained in the Plan shall confer upon
any Employee any right with respect to employment or continuance of employment
with TLGI or any Subsidiary or interfere in any way with the right of TLGI or
any Subsidiary to terminate an Employee's employment at any time. The Plan does
not give any Employee or any beneficiary of an Employee any right or claim to
any benefit except to the extent provided for in the Plan.
8. SECURITIES REGULATION AND TAX COMPLIANCE
8.1 SECURITIES COMPLIANCE. Where necessary to effect exemption from
registration or distribution or to effect qualification of the Shares under
securities laws or policies applicable to the Shares, the Board of Directors or
the Committee may take such action or require such action or agreement by any
Employee as may from time to time be necessary to comply with such applicable
securities laws and policies. Such action may include but is not limited to (a)
requiring a Participant to acquire Shares with investment intent and not with a
view to their distribution, and to present to the Board of Directors or the
Committee an undertaking to that effect in a form acceptable to the Board of
Directors or the Committee, as the case may be, (b) the legending of
certificates issued pursuant to the Plan, (c) requiring of an opinion of counsel
for a transferor or transferee with respect to the
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legality of the transfer of Shares issued pursuant to the Plan and (d) the
establishment of other or different custody arrangements whereby Shares issued
pursuant to the Plan will be held by a custodian designated by the Board of
Directors or the Committee pursuant to a custodian arrangement for the benefit
of Participants. This Section 8.1 shall in no way obligate the Company to
undertake the registration or qualification of any Shares under any securities
laws applicable to the securities of the Company. The Committee may decline to
issue some or all of the Shares pursuant to the Plan unless the Shares to be
issued hereunder are qualified under appropriate securities laws, or the
issuance of the Shares hereunder is exempt therefrom in the opinion of the
Committee, upon advice of counsel to the Company.
8.2 SECTION 16 COMPLIANCE. With respect to persons subject to Section 16 of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the 1934 Act. If any provision of the Plan or
action by the Plan Administrator fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Plan
Administrator.
8.3 TAX AND OTHER COMPLIANCE. The Participant shall be solely responsible for
reporting and paying all taxes, duties and imposts relating to the Shares
including but not limited to reporting on such Participant's income tax return
and paying tax on the value of the Shares on issuance, tax on dividends and
other distributions and tax on the sale or other disposition of the Shares. The
Company may make withholdings from salary or other sums payable to Participants
on account of taxes, duties and imposts relating to the Shares, dividends or
other distributions.
8.4 DELAYING CERTIFICATES. Issuance, transfer or delivery of certificates for
Shares issued or to be issued pursuant to the Plan may be delayed, at the
discretion of the Committee, until the Committee is satisfied that the
applicable requirements of securities, income tax and other laws and the rules,
regulations and policies of stock exchanges and quotation systems have been met.
9. AMENDMENT, SUSPENSION AND TERMINATION OF THE PLAN
9.1 BOARD OR COMMITTEE MAY AMEND, SUSPEND OR TERMINATE. The Board of Directors
or the Committee may amend, suspend or terminate the Plan, in whole or in part,
if and when it is advisable in the absolute discretion of the Board of Directors
or the Committee (including but not limited to amendment, suspension or
termination of the Plan due to regulatory requirements) and to provide for the
consequences thereof (including but not limited to the consequences that
Employees will have no entitlement or further entitlement under this Plan upon
amendment, suspension or termination); provided, however, that the Plan may not
be amended more than once every six months, except to comply with changes to the
U.S. Internal Revenue Code or the U.S. Employee Retirement Income Security Act
of 1974. In particular and without limitation, the Board of Directors or the
Committee may determine that share certificates for the Shares shall be issued
to Participants or that
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dividends or other distributions will be paid or delivered to Participants
before the expiration of the relevant hold period in Section 5.1 or without a
written request pursuant to Section 8.1. The provisions of the Plan are subject
to and shall be read as incorporating all laws, rules, regulations and policies
as may from time to time be applicable thereto, including but not limited to
rules, regulations and policies of any stock exchange or quotation system. Any
amendment of the Plan is subject to regulatory approval in accordance with such
laws, rules, regulations and policies and, where required thereunder, the
approval of the shareholders of TLGI.
10. FUTURE VALUE
10.1 NO REPRESENTATION. The Participants by participating in the Plan shall be
deemed to have accepted all risks associated with acquiring Shares pursuant to
the Plan. The Company, the Board of Directors, the Committee, the Plan
Administrator(s) and the Plan Agent make no representation, warranty or
guarantee as to the future value of the Shares and shall not be liable to any
Employee for any loss resulting from a decline, or failure to increase, in the
market value of the Shares issued with respect to that Employee under the Plan
or as a result of the amendment, suspension or termination of the Plan.
11. NON-ASSIGNABILITY OF RIGHTS
11.1 NO ASSIGNMENT. No right of an Employee under the Plan is capable of being
sold, assigned, mortgaged, pledged or otherwise disposed of, in whole or in
part.
12. NECESSARY APPROVALS
12.1 CESSATION OF PLAN. The obligation of TLGI to issue and deliver any Shares
in accordance with the Plan is subject to any necessary approval of any
regulatory authority having jurisdiction over the securities of TLGI. If any
Shares cannot be issued to or for the benefit of a Participant for any reason
whatsoever, the obligation of TLGI, if any, to issue such Shares shall terminate
without further liability.
13. SEVERABILITY
13.1 SEVERABILITY. Each provision of the Plan shall be severable, and the
invalidity, illegality or unenforceability of any provision will not affect or
impair the validity, legality and enforceability of any other provisions of the
Plan.
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14. NOTICE AND DELIVERY
14.1 ADDRESS OF PARTICIPANT. Any notice, document, certificate or other form of
communication may be delivered to a Participant to the address for such
Participant shown from time to time in the Plan Administrator's records.
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SCHEDULE A
to the Employee Stock Bonus Plan of The Loewen Group Inc.
TO: The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia
V5G 3S8
Attention: Plan Administrator
Employee Stock Bonus Plan
The undersigned hereby elects to participate in The Loewen Group Inc. Employee
Stock Bonus Plan (the "Plan") and agrees to all of the terms and conditions of
the Plan as it may be amended from time to time. The undersigned accordingly
hereby subscribes for 5 Common shares (the "Shares") of The Loewen Group Inc.
(" TLGI").
The undersigned will be the owner of the Shares. The undersigned acknowledges
that for administrative purposes, his or her Shares may be held by the Plan
Agent under the Plan and issued in the name of the Plan Agent as the
representative of the undersigned.
THE FOLLOWING IS A SUMMARY OF SOME OF THE TERMS AND CONDITIONS OF THE PLAN BUT
THE UNDERSIGNED AGREES THAT THE FULL TEXT OF ALL OF THE TERMS AND CONDITIONS OF
THE PLAN, AS IT MAY BE AMENDED FROM TIME TO TIME, SHALL GOVERN.
1. The undersigned will not sell, pledge or otherwise dispose of the Shares
during the undersigned's employment with TLGI or a Subsidiary of TLGI (as
defined in the Plan). If such employment ceases for any reason, the
undersigned will not sell, pledge or otherwise dispose of the Shares unless
and until 3 years have elapsed from the date the Shares were issued to the
undersigned. When the undersigned is permitted to sell the Shares, the
sale or other disposition of the Shares will be the sole responsibility of
the undersigned.
2. The undersigned agrees that all dividends and distributions on the Shares
may, if the Committee appointed under the Plan so decides, be held by the
Plan Agent without interest or other income payable to the undersigned and
that TLGI may earn interest, commission, fees or other income on such
dividends and distributions.
3. The undersigned acknowledges and agrees that the value of the Shares on
issuance, the dividends and other distributions and the proceeds of the
sale of the Shares are taxable to the undersigned, that the undersigned
will be responsible for all reporting and payment of taxes and that TLGI or
the undersigned's employer may make withholdings from salary or other
amounts payable to the undersigned on account of taxes.
4. The undersigned accepts all risks associated with acquiring the Shares and
agrees that there is no guarantee as to the future value of the Shares and
that TLGI and its directors, the undersigned's employer, and the Committee,
the Plan Administrator(s) and the Plan Agent under the Plan are not liable
for any loss.
The undersigned's full name and address are as follows:
Name
Number and Street
City etc.
-------------------------------------------
Signature
-------------------------------------------
Date
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EXHIBIT 36
SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT
dated as of
April 20, 1990
between
THE LOEWEN GROUP INC.
and
THE ROYAL TRUST COMPANY
as Rights Agent
Borden & Elliot
<PAGE>
TABLE OF CONTENTS
Section Description Page
- - ------- ----------- ----
ARTICLE 1. -- INTERPRETATION........................ 1
1.1 Certain Definitions..................................................... 1
"Acquiring Person"................................................. 2
"Affiliate"........................................................ 3
"Associate"........................................................ 3
"Beneficial Owner"................................................. 3
"Beneficial Ownership"............................................. 3
"Beneficially Own"................................................. 3
"British Columbia Company Act"..................................... 4
"Business Day"..................................................... 4
"Canadian-U.S. Exchange Rate"...................................... 4
"Canadian Dollar Equivalent"....................................... 4
"close of business"................................................ 4
"Common Shares".................................................... 4
"Exempt Acquisitions".............................................. 4
"Exercise Price"................................................... 5
"Expiration Time".................................................. 5
"Flip-in Event".................................................... 5
"Flip-over Transaction or Event"................................... 5
"Grandfathered Person"............................................. 5
"Grandfathered Person Transferee".................................. 5
"Grandfathered Bidder"............................................. 5
"Independent Shareholders"......................................... 5
"Market Price"..................................................... 6
"Offer to Acquire"................................................. 7
"Offeror's Securities"............................................. 7
"Permitted Bid".................................................... 7
"Permitted Bid Acquisition"........................................ 8
"Person"........................................................... 8
"Pro Rata Acquisition"............................................. 8
"Record Time"...................................................... 8
"regular periodic cash dividend"................................... 8
"Securities Act (Ontario)"......................................... 9
"Separation Time".................................................. 9
"Stock Acquisition Date"........................................... 9
"Subsidiary"....................................................... 9
"Take-over-Bid".................................................... 9
"Termination Time"................................................. 9
"Trading Day"...................................................... 9
"U.S.-Canadian Exchange Rate"...................................... 9
"U.S. Dollar Equivalent"........................................... 10
"Voting Shares".................................................... 10
"1933 Securities Act".............................................. 10
"1934 Exchange Act"................................................ 10
1.2 Currency................................................................ 10
1.3 Grandfather Provisions.................................................. 10
i
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Section Description Page
- - ------- ----------- ----
ARTICLE 2. -- THE RIGHTS
2.1 Legend on Common Share Certificates..................................... 12
2.2 Initial Exercise Price; Exercise of Rights; Detachment of Rights........ 12
2.3 Adjustments to Exercise Price, Number of Rights......................... 14
2.4 Date on Which Exercise is Effective..................................... 17
2.5 Execution, Authentication, Delivery and Dating of Rights Certificates... 17
2.6 Registration, Registration of Transfer and Exchange..................... 17
2.7 Mutilated, Destroyed, Lost and Stolen Rights Certificates............... 18
2.8 Persons Deemed Owners................................................... 18
2.9 Delivery and Cancellation of Certificates............................... 18
2.10 Agreement of Rights Holders............................................. 19
ARTICLE 3. -- ADJUSTMENTS TO THE RIGHTS IN THE EVENT
OF CERTAIN TRANSACTIONS
3.1 Flip-over Transaction or Event.......................................... 19
3.2 Flip-in Event........................................................... 20
3.3 Obligations of the Company.............................................. 21
3.4 Exchange Option......................................................... 21
3.5 Special Meeting of Shareholders to Consider Permitted Bids.............. 22
ARTICLE 4. -- THE RIGHTS AGENT
4.1 General................................................................. 23
4.2 Merger, Amalgamation or Consolidation or Change of Name of Rights Agent. 24
4.3 Duties of Rights Agent.................................................. 24
4.4 Change of Rights Agent.................................................. 26
ARTICLE 5. - MISCELLANEOUS
5.1 Redemption, Waiver and Termination...................................... 26
5.2 Expiration.............................................................. 27
5.3 Issuance of New Rights Certificates..................................... 27
5.4 Supplements and Amendments.............................................. 27
5.5 Fractional Rights and Fractional Shares................................. 29
5.6 Rights of Action........................................................ 29
5.7 Holder of Rights Not Deemed a Shareholder............................... 29
5.8 Notice of Proposed Actions.............................................. 30
5.9 Notices................................................................. 30
5.10 Costs of Enforcement.................................................... 30
5.11 Successors.............................................................. 31
5.12 Benefits of this Agreement.............................................. 31
5.13 Descriptive Headings.................................................... 31
5.14 Governing Law........................................................... 31
5.15 Language................................................................ 31
5.16 Counterparts............................................................ 31
5.17 Severability............................................................ 31
5.18 Effective Date.......................................................... 31
5.19 Determinations and Actions by the Board of Directors.................... 32
ii
<PAGE>
SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT
AGREEMENT made as of April 20, 1990
B E T W E E N:
THE LOEWEN GROUP INC., a corporation incorporated under the laws of
British Columbia (hereinafter referred to as the "Company"),
OF THE FIRST PART,
-- and --
THE ROYAL TRUST COMPANY, a trust company incorporated under the laws
of Quebec (hereinafter referred to as the "Rights Agent"),
OF THE SECOND PART.
WHEREAS the Board of Directors of the Company has determined that it is
advisable to adopt a shareholder protection rights plan (the "Rights Plan");
AND WHEREAS, in order to implement the Rights Plan, the Board of Directors
of the Company has
(a) authorized and declared a distribution of one right (a "Right")
effective at the close of business on May 9, 1990 in respect of each
Common Shares (as hereinafter defined) outstanding at the close of
business on May 9, 1990 (the "Record Time"),
(b) authorized the issuance of one Right in respect of each Common Share
issued after the Record Time and prior to the earlier of the
Separation Time (as hereinafter defined) and the Expiration Time (as
hereinafter defined),
(c) authorized the issuance of Rights Certificates (as hereinafter
defined) to holders of Rights pursuant to the terms and subject to the
conditions set forth herein;
WHEREAS each Right entitles the holder thereof, after the Separation Time,
to purchase securities of the Company (or, in certain cases, of certain other
entities) pursuant to the terms and subject to the conditions set forth herein;
and
WHEREAS the Company desires to appoint the Rights Agent to act on behalf of
the Company and the holders of Rights, and the Rights Agent is willing to so
act, in connection with the issuance, transfer, exchange, cancellation and
replacement of Rights Certificates, the exercise of Rights and other matters
referred to herein;
NOW THEREFORE in consideration of the premises and respective agreements
set forth herein, the parties hereby agree as follows:
ARTICLE 1. -- INTERPRETATION
1.1 CERTAIN DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
indicated:
<PAGE>
(a) "ACQUIRING PERSON" shall mean, subject to subsections 1.3(a) and (b),
any Person who is the Beneficial Owner of 20% or more of the
outstanding Common Shares or Voting Shares of the Company; provided,
however, that the term "Acquiring Person" shall not include
(i) the Company or any Subsidiary of the Company, any employee
benefit plan, or trust for the benefit of employees, of the
Company or any Subsidiary of the Company, or any Person
organized, appointed or established by the Company for or
pursuant to the terms of any such plan or trust;
(ii) any Person who becomes the Beneficial Owner of 20% or more of
the outstanding Common Shares or Voting Shares of the Company
as a result of
(A) an acquisition or redemption by the Company of Voting
Shares of the Company which, by reducing the number of
Voting Shares outstanding, increases the proportionate
number of Voting Shares Beneficially Owned by such
Person to 20% or more of the Common Shares or Voting
Shares of the Company then outstanding, or
(B) share acquisitions made pursuant to a Permitted Bid and
approved in accordance with the provision of Section
3.5 and made after the date of such approval
("PERMITTED BID ACQUISITIONS") or
(C) share acquisitions in respect of which the Board of
Directors of the Company has waived the application of
Section 3.2 pursuant to subsection 5.1(b) or which were
made on or prior to the date of this Agreement ("EXEMPT
ACQUISITIONS");
provided, however, that if a Person shall become the Beneficial
Owner of 20% or more of the Common Shares or Voting Shares of
the Company then outstanding by reason of (i) share
acquisitions or redemptions by the Company or (ii) Permitted
Bid Acquisitions or (iii) Exempt Acquisitions and, after such
share acquisitions or redemptions by the Company or Permitted
Bid Acquisitions or Exempt Acquisitions, becomes the Beneficial
Owner of any additional Voting Shares of the Company other than
pursuant to Permitted Bid Acquisitions, Exempt Acquisitions,
acquisitions as a result of a stock dividend, a stock split or
other event pursuant to which such Person receives or acquires
Voting Shares on the same pro rata basis as all other holders
of Voting Shares of the same class ("PRO RATA ACQUISITIONS") or
acquisitions pursuant to a dividend reinvestment plan of the
Company, then as of the date of becoming the Beneficial Owner
of any additional Voting Shares, such Person shall become an
"Acquiring Person"; and
(iii) for the period of 10 days after the Disqualification Date (as
hereinafter defined), any Person who becomes the Beneficial
Owner of 10% or more of the outstanding Common Shares or Voting
Shares of the Company as a result of such Person becoming
disqualified from relying on clause 1.1(d)(vii) hereof where
such disqualification results solely because such Person has
made or proposed to make a tender or exchange offer or a Take-
over Bid in respect of securities of the Company alone or by
acting jointly or in concert with any other Person (the first
date of public announcement (which, for purposes of this
definition, shall include, without limitation, a report
filed pursuant to Section 100 of the Securities Act (Ontario)
or Section 13(d) of the 1934 Exchange Act) by such Person or
the Company of the intent to commence such a tender or
exchange offer or Take-over Bid being herein referred
to as the "DISQUALIFICATION DATE").
2
<PAGE>
(b) "AFFILIATE" has the meaning ascribed to such term in the Securities
Act (Ontario).
(c) "ASSOCIATE" has the meaning ascribed to such term in the Securities
Act (Ontario).
(d) A Person shall be deemed the "BENEFICIAL OWNER", and to have
"BENEFICIAL OWNERSHIP" of, and to "BENEFICIALLY OWN"
(i) any securities as to which such Person or any of such Person's
Affiliates or Associates is or may be deemed to be the direct
or indirect beneficial owner pursuant to the Securities Act
(Ontario) for the purposes of insider trading or take-over bids
or pursuant to Rule 13d-3 or 13d-5 under the 1934 Exchange Act
(or pursuant to any comparable or successor laws, Rules or
regulations or, if such laws, Rules or regulations shall be
rescinded and there shall be no comparable or successor laws,
Rules or regulations, pursuant to Rule 13d-3 or 13d-5 as in
effect on the date of this Agreement) whether or not such laws
or regulations apply to such Person;
(ii) any securities as to which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether
such right is exercisable immediately or after the lapse or
passage of time or otherwise) pursuant to any agreement,
arrangement, pledge or understanding (other than customary
agreements with and between underwriters and banking group or
selling group members with respect to a bona fide public
offering of securities and other than pledges of securities in
the ordinary course of business that meet all of the conditions
specified in Rule 13d-3(d)(3) under the 1934 Exchange Act), or
upon the exercise of any conversion right, exchange right,
right (other than the Rights), warrant or option, or otherwise,
or (B) the right to vote such security (whether such right is
exercisable immediately or after the lapse or passage of time
or otherwise), pursuant to any agreement, arrangement,
understanding or otherwise;
(iii) any securities that are Beneficially Owned within the meaning
of paragraph (i) or (ii) by any other Person with which such
Person or any such Person's Affiliates or Associates has any
agreement, arrangement or understanding (whether or not in
writing) with respect to or for the purpose of acquiring,
holding, voting or disposing of any Voting Shares of the
Company (other than customary agreements with and between
underwriters and banking group or selling group members with
respect to a bona fide public offering of securities) or
acquiring, holding or disposing of a significant portion of the
property or assets of the Company or any Subsidiary of the
Company;
A person shall be deemed not to be the "Beneficial Owner", or to have
"Beneficial Ownership", of or to "Beneficially Own", any security
(iv) solely because such security has been deposited or tendered
pursuant to a tender or exchange offer or Take-over Bid made by
such Person or any of such Person's Affiliates or Associates
until the earliest of such tendered security being accepted
unconditionally for payment or exchange or being taken up and
paid for;
(v) solely because such Person or any of such Person's Affiliates
or Associates has or shares the power to vote or direct the
voting of such security pursuant to a revocable proxy given in
response to a public proxy solicitation made pursuant to, and
in accordance with, the applicable rules and regulations under
(A) the Securities Act (Ontario) or (B) the 1934 Exchange Act,
except if such power (or the arrangements relating thereto) is
then reportable under Item 6 of Schedule 13D under the 1934
Exchange Act (or any similar provision of a comparable or
successor report);
3
<PAGE>
(vi) solely because such Person or any of such Person's Affiliates
or Associates has or shares the power to vote or direct the
voting of such security in connection with or in order to
participate in a public proxy solicitation made or to be made
pursuant to and in accordance with the applicable rules and
regulations referred to in (v) above;
(vii) solely because such Person is principally engaged in the
business of managing investment funds for unaffiliated
securities investors and as part of such Person's duties as
agent for fully managed accounts, holds or exercises voting or
dispositive power over such security provided, however, that
(A) such Person does not individually Beneficially Own in
excess of 10% of the outstanding Common Shares or Voting Shares
of the Company; and (B) such Person has not made or proposed to
make a tender or exchange offer or a Take-over Bid in respect
of securities of the Company alone or by acting jointly or in
concert with any other Person; or
(viii) solely because such Person is a party to an agreement made May
28, 1986 between the Company, The Canada Trust Company, the
initial holders of the Company's subordinated debentures,
Raymond L. Loewen and Anne Loewen, as amended, or an agreement
dated as of May 28, 1986 between the Company, Raymond L.
Loewen, Anne Loewen and the initial holders of the Company's
subordinated debentures.
For purposes of this Agreement, in determining the percentage of the
outstanding Common Shares or Voting Shares with respect to which a
Person is or is deemed to be the Beneficial Owner, all Voting Shares
as to which such Person is deemed to be the Beneficial Owner shall be
deemed outstanding.
(e) "BRITISH COLUMBIA COMPANY ACT" shall mean the Company Act, R.S.B.C.
1979, c.59, as amended and the regulations thereunder, and any
comparable or successor laws or regulations thereto.
(f) "BUSINESS DAY" shall mean any day, other than a Saturday or Sunday or
a day on which banking institutions in the City of Toronto are
authorized or obligated by law to close.
(g) "CANADIAN-U.S. EXCHANGE RATE" shall mean on any date the inverse of
the U.S.-Canadian Exchange Rate.
(h) "CANADIAN DOLLAR EQUIVALENT" of any amount which is expressed in
United States dollars shall mean on any day the Canadian dollar
equivalent of such amount determined by reference to the Canadian-U.S.
Exchange Rate on such date.
(i) "CLOSE OF BUSINESS" on any given date shall mean the time on such date
(or, if such date is not a Business Day, the time on the next
succeeding Business Day) at which the office of the transfer agent for
the Common Shares (or, after the Separation Time, the offices of the
Rights Agent) in the City of Toronto becomes closed to the public.
(j) "COMMON SHARES" shall mean the Common shares of the Company; provided,
however, that "Common Shares", when used with reference to any Person
other than the Company, shall mean the class or classes of shares (or
similar equity interest) with the greatest per share voting power
entitled to vote generally in the election of all directors of such
other Person or the equity securities or other equity interest having
power (whether or not exercised) to control or direct the management
of such other Person; if such other Person is a Subsidiary of another
Person, "SUCH OTHER PERSON" as used herein shall mean the Person or
Persons which ultimately control such first-mentioned Person.
(k) "EXEMPT ACQUISITIONS" shall have the meaning ascribed thereto by
subclause 1.1(a)(ii)(C).
4
<PAGE>
(l) "EXERCISE PRICE" shall mean, as of any date, the price at which a
holder may purchase the securities issuable upon exercise of one whole
Right and, until adjustment thereof in accordance with the terms
hereof, the Exercise Price shall equal $90.
(m) "EXPIRATION TIME" shall mean the earlier of the Termination Time or
the close of business on the tenth-year anniversary of the date
hereof.
(n) "FLIP-IN EVENT" shall mean the close of business on the tenth day (or
such earlier or later day as the Board of Directors of the Company may
determine) after the first date of public announcement (which, for
purposes of this definition, shall include, without limitation, a
report filed pursuant to Section 100 of the Securities Act (Ontario)
or Section 13(d) under the 1934 Exchange Act) by the Company or an
Acquiring Person of facts indicating that a Person has become an
Acquiring Person in a transaction occurring subsequent to the date of
this Agreement (disregarding, for such purpose only, that such Person
may previously have been an Acquiring Person apart from such
transaction) provided, however, that the term "Flip-in Event" shall
not include any transaction or event that constitutes a Flip-over
Transaction or Event.
(o) "FLIP-OVER TRANSACTION OR EVENT" shall mean
(i) a transaction or series of transactions in which, directly or
indirectly, the Company shall consolidate or merge with or
into, amalgamate with or into or enter into a statutory
arrangement with any other Person (other than one or more
wholly-owned Subsidiaries of the Company), or any other Person
(other than one or more wholly-owned Subsidiaries of the
Company) shall consolidate or merge with or into, amalgamate
with or into or enter into a statutory arrangement with, the
Company, and in connection therewith, all or part of the
outstanding Common Shares shall be changed in any way,
reclassified or converted into or exchanged, redeemed or
otherwise acquired for shares or other securities of the
Company or any other Person or cash or any other property, or
(ii) a transaction or series of transactions in which, directly or
indirectly, the Company shall sell or otherwise assign or
transfer, including by way of leasehold interest, (or one or
more of its Subsidiaries shall sell or otherwise assign or
transfer) assets
(A) aggregating more than 50% of the assets (measured by
either book value or fair market value); or
(B) that generated during the Company's last completed
fiscal year or are expected to generate in the
Company's then current fiscal year more than 50% of the
operating income or cash flow,
of the Company and its Subsidiaries (taken as a whole) to any other
Person or Persons (other than the Company or one or more of its
wholly-owned Subsidiaries).
(p) "GRANDFATHERED PERSON", "GRANDFATHERED PERSON TRANSFEREE" AND
"GRANDFATHERED BIDDER" shall have the respective meanings ascribed
thereto in subsections 1.3(a), (b) and (c).
(q) "INDEPENDENT SHAREHOLDERS" shall mean holders of Voting Shares of the
Company, but shall not include
(i) any Acquiring Person or
5
<PAGE>
(ii) any Person that has made a tender or exchange offer or a Take-
over Bid for Voting Shares of the Company (including a
Permitted Bid) or
(iii) any Person acting jointly or in concert with such Acquiring
Person or Person or
(iv) any Associate or Affiliate of such Acquiring Person or Persons.
(r) "MARKET PRICE" per share of any securities on any date of
determination shall mean the average of the daily Closing Prices Per
Share of such securities (determined as described below) on each of
the 20 consecutive Trading Days through and including the Trading Day
immediately preceding such date; provided, however, that if an event
of a type analogous to any of the events described in Section 2.3
hereof shall have caused the closing prices used to determine the
Market Price on any Trading Days not to be fully comparable with the
closing price on such date of determination or, if the date of
determination is not a Trading Day, on the immediately preceding
Trading Day, each such closing price so used shall be appropriately
adjusted in a manner analogous to the applicable adjustment provided
for in Section 2.3 hereof in order to make it fully comparable with
the closing price on such date of determination or, if the date of
determination is not a Trading Day, on the immediately preceding
Trading Day. The "CLOSING PRICE PER SHARE" of any securities on any
date shall be
(i) the closing board lot sale price or, if such price is not
available, the average of the closing bid and asked prices, for
each share as reported in the principal consolidated
transaction reporting system with respect to securities listed
or admitted to trading on the Toronto Stock Exchange, or if not
so listed or admitted to trading, the principal stock exchange
in Canada on which such securities are listed or admitted to
trading;
(ii) if the securities are not listed or admitted to trading on a
stock exchange in Canada, the last sale price, regular way, or,
in case no such sale takes place on such date, the average of
the closing bid and asked prices, regular way, for each share
of such securities as reported in the principal consolidated
transaction reporting system with respect to securities listed
or admitted to trading on the principal stock exchange in the
United States on which such securities are listed or admitted
to trading;
(iii) if for any reason none of such prices is available on such day
or the securities are not listed or admitted to trading on any
stock exchange in Canada or the United States, the last quoted
price, or if not so quoted, the average of the high bid and low
asked prices for each share of such securities as reported by
the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or, if the securities are not
quoted on NASDAQ as reported by the Canadian Over-The-Counter
Automated Trading System or another such system then in use;
(iv) if on any such date the securities are not quoted by any such
organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in
the securities selected in good faith by the Board of Directors
of the Company; or
(v) if on any such date the securities are not traded in the over-
the-counter market, the fair value per share of securities on
such date as determined in good faith by the Board of Directors
of the Company, after consultation with an internationally
recognized Canadian investment dealer or investment banker with
respect to the fair value per share of such securities.
The Market Price shall be expressed in Canadian dollars and if
initially determined in respect of any day forming part of the 20
consecutive trading day period in question in United States
6
<PAGE>
dollars, such amount shall be translated into Canadian dollars at the
Canadian Dollar Equivalent thereof on the relevant Trading Day.
(s) "OFFER TO ACQUIRE" shall include:
(i) an offer to purchase, or a solicitation of an offer to sell,
Voting Shares; and
(ii) an acceptance of an offer to sell Voting Shares, whether or not
such offer to sell has been solicited;
or any combination thereof, and the Person accepting an offer to sell
shall be deemed to be making an offer to acquire to the Person that
made the offer to sell.
(t) "OFFEROR'S SECURITIES" means Voting Shares Beneficially Owned on the
date of an Offer to Acquire by any Person who makes a Take-over Bid or
by any Person acting jointly or in concert with such Person.
(u) "PERMITTED BID" means a Take-over Bid made in compliance with, and not
on a basis which is exempt from or otherwise not subject to, the
provisions of Part XIX of the Securities Act (Ontario) and, if
applicable, Sections 10, 13(d) and 14 of the 1934 Exchange Act and the
regulations thereunder (or such comparable or successor laws or
regulations, or if such provisions shall be repealed and there shall
be no comparable or successor laws or regulations, pursuant to Part
XIX and, if applicable, Sections 10, 13(d) and 14 both as in effect on
the date of this Agreement) and in compliance with all other
applicable laws (including the securities laws and regulations of all
other relevant jurisdictions) and which also complies with the
following additional provisions:
(i) the Take-over Bid is made for all Common Shares to all holders
of record of Common Shares wherever resident as registered on
the books of the Company;
(ii) subject to subsection 1.3(c), the Person making the Take-over
Bid together with any other Person acting jointly or in concert
with such Person does not, and during the pendency of such
Person's Take-over Bid does not, Beneficially Own more than 5%
of the outstanding Common Shares and agrees that none of him,
any Person acting jointly or in concert with him and any
Affiliate or Associate of any of them will acquire any Common
Shares during the pendency of such Take-over Bid;
(iii) the Person making the Take-over Bid shall provide the Rights
Agent, within two Business Days of the announcement of the
Take-over Bid, with a list certified true and correct of all
securities of the Company Beneficially Owned by each of such
Person, such Person's Associates and Affiliates and any Person
acting jointly or in concert with such Person or any Associate
or Affiliate of such Person together with the particulars of
the registration and holding of all such securities and an
undertaking to update such list on a daily basis prior to the
termination or expiration of the Take-over Bid to reflect any
changes occurring or to occur in such Beneficial Ownership;
(iv) the Take-over Bid shall contain and the take up and payment for
securities tendered or deposited thereunder shall be subject to
an irrevocable and unqualified condition that no Common Shares
shall be taken up or paid for pursuant to the Take-over Bid
unless a resolution is passed to approve the Take-over Bid at a
special meeting of holders of Common Shares by a majority of
the votes cast by Independent Shareholders represented at the
meeting in person or by proxy, which special meeting shall be
called and held for that purpose in accordance with the
provisions of Section 3.5;
7
<PAGE>
(v) the Take-over Bid is made on terms and conditions that comply
with, and which do not and will not, upon consummation of the
bid, result in a default under, or a contravention of, any
other applicable laws, including laws, regulations, rules,
policy statements, cabinet directions or conditions of license
or franchise, relating to an acquisition of an interest or an
increased interest in, or a change of ownership or effective
control of, the Company or any Subsidiary of the Company or any
undertaking carried on by the Company or any Subsidiary of the
Company;
(vi) the Take-over Bid shall not expire earlier than five clear
Business Days following the conclusion of the special meeting
of Independent Shareholders referred to in clause 1.1(u)(iv);
(vii) if the Take-over Bid is made by a Grandfathered Person
Transferee or any Person acting jointly or in concert with a
Grandfathered Person Transferee or any Person who, as regards
the Grandfathered Person Transferee, is a person or company or
a member of a combination of persons or companies referred to
in subparagraph (iii) of paragraph 11 of subsection 1(1) of the
Securities Act (Ontario) or any Affiliate or Associate of any
of the foregoing within 12 months from the date upon which the
Grandfathered Person Transferee became such, the Offeror shall
offer consideration for Common Shares deposited under the Take-
over Bid at least equal to the consideration that was paid on a
per Common Share basis to the Transferor (as defined in
subsection 1.3(b)) from whom such Grandfathered Person
Transferee acquired Voting Shares or the Offeror shall offer at
least the cash equivalent of such consideration;
and the Board of Directors of the Company acting in good faith within the
period contemplated by subsection 3.5(a) determines that the Take-over Bid
complies with the provisions of this subsection 1.1(u).
(v) "PERMITTED BID ACQUISITION" shall have the meaning ascribed thereto by
subclause 1.1(a)(ii)(B).
(w) "PERSON" shall mean any individual, firm, partnership, association,
trust, trustee, executor, administrator, legal personal
representative, group (as such term is used in Rule 13d-5 under the
1934 Exchange Act, as in effect on the date of this Agreement), body
corporate, corporation, unincorporated organization, syndicate or
other entity.
(x) "PRO RATA ACQUISITION" shall have the meaning ascribed thereto by
clause 1.1(a)(ii).
(y) "RECORD TIME" shall have the meaning ascribed to it in paragraph (a)
of the second recital hereto.
(z) "REGULAR PERIODIC CASH DIVIDEND" shall mean cash dividends paid at
regular intervals in any fiscal year of the Company to the extent that
such cash dividends do not exceed, in the aggregate, the greatest of:
(i) 200% of the aggregate amount of cash dividends declared payable
by the Company on its Common Shares in its immediately
preceding fiscal year;
(ii) 300% of the arithmetic mean of the aggregate amounts of cash
dividends declared payable by the Company on its Common Shares
in its three immediately preceding fiscal years; and
(iii) 100% of the aggregate consolidated net income of the Company,
before extraordinary items, for its immediately preceding
fiscal year.
8
<PAGE>
(aa) "SECURITIES ACT (ONTARIO)" shall mean the Securities Act, R.S.O. 1980,
c.466, as amended and the regulations thereunder, and any comparable
or successor laws or regulations thereto.
(bb) "SEPARATION TIME" shall mean, subject to subsection 5.1(b) and (c),
the earliest of
(i) the close of business on the tenth day after the Stock
Acquisition Date;
(ii) the close of business on the tenth day after the date of the
commencement of, or first public announcement of the intent of
any Person (other than the Company or any Subsidiary of the
Company) to commence, a Take-over Bid (other than a Permitted
Bid so long as such Take-over Bid continues to satisfy the
requirements of a Permitted Bid, but not subsequent to an
unfavorable vote of Independent Shareholders in respect of such
Take-over Bid pursuant to Section 3.5), provided that, if any
Take-over Bid referred to in clause (ii) of this subsection
1.1(bb) expires, is cancelled, terminated or otherwise
withdrawn prior to the Separation Time, such offer shall be
deemed, for purposes of this subsection 1.1(bb), never to have
been made; and
(iii) the occurrence or consummation of a Flip-over Transaction or
Event
or such earlier or later date as may be determined by the Board of
Directors of the Company acting in good faith provided that, if the
foregoing results in the Separation Time being prior to the Record
Time, the Separation Time shall be the Record Time.
(cc) "STOCK ACQUISITION DATE" shall mean the first date of public
announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 100 of the
Securities Act (Ontario) or Section 13(d) under the 1934 Exchange Act)
by the Company or an Acquiring Person of facts indicating that a
Person has become an Acquiring Person.
(dd) "SUBSIDIARY" of any specified Person has the meaning ascribed to such
term in the Securities Act (Ontario).
(ee) "TAKE-OVER-BID" means an Offer to Acquire Voting Shares or securities
convertible into Voting Shares, where the Voting Shares subject to the
Offer to Acquire, together with the Voting Shares into which the
securities subject to the Offer to Acquire are convertible, and the
Offeror's Securities, constitute in the aggregate 20% or more of the
outstanding Common Shares or Voting Shares at the date of the Offer to
Acquire.
(ff) "TERMINATION TIME" shall mean the time at which the right to exercise
Rights shall terminate pursuant to Sections 3.4, 5.1 or 5.18 hereof.
(gg) "TRADING DAY" when used with respect to any securities, shall mean a
day on which the principal Canadian or United States securities
exchange on which such securities are listed or admitted to trading is
open for the transaction of business or, if the securities are not
listed or admitted to trading on any Canadian or United States
securities exchange, a Business Day.
(hh) "U.S.-CANADIAN EXCHANGE RATE" shall mean on any date:
(iv) if on such date the Bank of Canada sets an average noon spot
rate of exchange for the conversion of the United States dollar
into Canadian dollars, such rate; and
(v) in any other case, the rate for such date for the conversion of
one United Sates dollar into Canadian dollars which is
calculated in the manner which shall be determined by the Board
of Directors of the Company from time to time acting in good
faith.
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(ii) "U.S. DOLLAR EQUIVALENT" of any amount which is expressed in Canadian
dollars shall mean on any day the United States dollar equivalent of
such amount determined by reference to the Canadian-U.S. Exchange Rate
on such date.
(jj) "VOTING SHARES" shall mean the Common Shares of the Company and any
other shares of capital stock of the Company entitled to vote
generally in the election of directors; and the percentage of Voting
Shares Beneficially Owned by any Person, shall for the purposes of
this Agreement, be and be deemed to be the product determined by the
formula:
A
100 X ---
B
where
A = the number of votes for the election of all directors
generally attaching to the Voting Shares Beneficially Owned
by such Person.
B = the number of votes for the election of all directors
generally attaching to all outstanding Voting Shares.
Where any person is deemed to Beneficially Own unissued Voting Shares,
such Voting Shares shall be deemed to be outstanding for the purpose
of calculating the percentage of Voting Shares Beneficially Owned by
such Person.
(kk) "1933 SECURITIES ACT" shall mean the Securities Act of 1933 of the
United States, as amended and the rules and regulations thereunder,
and any comparable or successor laws or regulations thereto.
(ll) "1934 EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 of
the United States, as amended and the rules and regulations
thereunder, and any comparable or successor laws or regulations
thereto.
1.2 CURRENCY
All sums of money which are referred to in this Agreement are expressed in
lawful money of Canada unless otherwise specified.
1.3 GRANDFATHER PROVISIONS
(a) A Person shall not be and shall not be deemed to be an Acquiring
Person if such Person (a "GRANDFATHERED PERSON"):
(i) is the Beneficial Owner of 20% or more of the outstanding Voting
Shares of the Company as at the date of this Agreement; or
(ii) becomes the Beneficial Owner of 20% or more of the outstanding Common
Shares or Voting Shares of the Company after the date of this
Agreement and such Person's Beneficial Ownership of Common Shares or
Voting Shares of the Company at such time does not exceed the number
of Common Shares or Voting Shares of the Company Beneficially Owned by
such Person immediately prior to the date of this Agreement by more
than 2% of the then issued and outstanding Common Shares or Voting
Shares of the Company;
provided, however, that the exceptions in clauses 13(a)(i) and (ii) shall
cease to be applicable to a Grandfathered Person who shall after the date
of this Agreement become, pursuant to one or more
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transactions or events, the Beneficial Owner of additional Common Shares or
Voting Shares of the Company such that the number of Common Shares or
Voting Shares of the Company Beneficially Owned at such time exceeds the
number of Common Shares or Voting Shares of the Company Beneficially Owned
by such Person immediately prior to the date of this Agreement by more than
2% of the Common Shares or Voting Shares of the Company then outstanding,
other than those acquired pursuant to Permitted Bid Acquisitions, Exempt
Acquisitions or Pro Rata Acquisitions.
(b) A Person shall not be and shall not be deemed to be an Acquiring
Person if such Person (a "GRANDFATHERED PERSON TRANSFEREE") becomes the
Beneficial Owner of 20% or more of the outstanding Common Shares or Voting
Shares of the Company solely as a result of the acquisition of all but not less
than all of the Common Shares or Voting Shares of the Company Beneficially Owned
immediately prior thereto by a Grandfathered Person or a Grandfathered Person
Transferee (the "TRANSFEROR") and such Person's Beneficial Ownership of Common
Shares or Voting Shares of the Company after giving effect to such acquisitions
does not exceed the number of Common Shares or Voting Shares of the Company
Beneficially Owned by the Transferor immediately prior to such acquisition by
more than 2% of the then issued and outstanding Common Shares or Voting Shares
of the Company; provided, however, that the exception in this subsection 13(b)
shall cease to be applicable to a Grandfathered Person Transferee who shall
after the time at which he becomes a Grandfathered Person Transferee (the
"Transfer Time") become, pursuant to one or more transactions or events, the
Beneficial Owner of additional Common Shares or Voting Shares of the Company
constituting, together with the number of Common Shares to Voting Shares
Beneficially Owned by such Grandfathered Person Transferee immediately prior to
the Transfer Time, in the aggregate more than 2% of the Common Shares or Voting
Shares of the Company then outstanding, other than pursuant to Permitted Bid
Acquisitions, Exempt Actions or Pro Rata Acquisitions.
(c) For the purpose of determining whether a Person is entitled to make a
Permitted Bid, the provisions of clause 1.1(u)(ii) shall not apply to a Person
(a "Grandfathered Bidder") who is either:
(i) a Grandfathered Person or a Grandfathered Person Transferee at the
time of commencement of and at all times while such Person's Take-over
Bid remains outstanding; or
(ii) the Beneficial Owner of more than 5% but less than 20% of the
outstanding Common Shares or Voting Shares of the Company as at the
date of this Agreement; provided that the exception in this clause
1.3(c)(ii) shall cease to be applicable to a Grandfathered Bidder if
such Grandfathered Bidder shall after the date of this Agreement
become, pursuant to one or more transactions or events, the Beneficial
Owner of additional Common Shares or Voting Shares of the Company such
that the number of Common Shares or Voting Shares of the Company
Beneficially Owned at such time exceeds the number of Common Shares or
Voting Shares of the Company Beneficially Owned by such Person
immediately prior to the date of this Agreement by more than 2% of the
Common Shares or Voting Shares of the Company then outstanding, other
than those acquired pursuant to Permitted Bid Acquisitions, Exempt
Acquisitions or Pro Rata Acquisitions.
(d) For greater certainty, for the purposes of this Section 1.3, a Person
shall be deemed to have become the Beneficial Owner of additional Common Shares
or Voting Shares of the Company if the Person becomes the Beneficial Owner of
such Common Shares or Voting Shares pursuant to a transaction or event and, as a
result, such Person is the Beneficial Owner of a greater number of Common Shares
or Voting Shares than the number of Common Shares or Voting Shares that he
Beneficially Owned immediately prior to such transaction or event.
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ARTICLE 2. -- THE RIGHTS
2.1 LEGEND ON COMMON SHARE CERTIFICATES
Certificates for the Common Shares issued after the Record Time but prior
to the close of business on the earlier of the Separation Time and the
Expiration Time shall evidence one Right for each Common Share represented
thereby and shall have impressed on, printed on, written on or otherwise affixed
to them the following legend:
Until the Separation Time (as defined in the Rights Agreement referred to
below), this certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement, dated as of April 20,
1990 (the "Rights Agreement"), between The Loewen Group Inc. (the
"Company") and The Royal Trust Company, as Rights Agent, the terms of which
are hereby incorporated herein by reference and a copy of which is on file
at the principal executive offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights may be
amended or redeemed, may expire, may become void (if, in certain cases,
they are "Beneficially Owned" by an "Acquiring Person", as such terms are
defined in the Rights Agreement, or a transferee thereof) or may be
evidenced by separate certificates and may no longer be evidenced by this
Certificate. The Company will mail or arrange for the mailing of a copy of
the Rights Agreement to the holder of this certificate without charge
within five days after the receipt of a written request therefor.
Certificates representing Common Shares that are issued and outstanding at
the Record Time shall evidence one Right for each Common Share evidenced thereby
notwithstanding the absence of the foregoing legend until the earlier of the
Separation Time and the Expiration Time.
2.2 INITIAL EXERCISE PRICE; EXERCISE OF RIGHTS; DETACHMENT OF RIGHTS
(a) Subject to adjustment as herein set forth, each Right will entitle the
holder thereof, after the Separation Time and prior to the Expiration
Time, to purchase, for the Exercise Price, or its U.S. Dollar
Equivalent as at the Business Day immediately preceding the date of
exercise of the Right, one Common Share.
(b) Until the Separation Time,
(i) no Right may be exercised; and
(ii) each Right will be evidenced by the certificate for the
associated Common Share and will be transferable only together
with, and will be transferred by a transfer of, such associated
share.
(c) After the Separation Time and prior to the Expiration Time, the Rights
(i) may be exercised; and (ii) will be transferable independently of
Common Shares. Promptly following the Separation Time the Rights
Agent will mail to each holder of record Voting Shares as of the
Separation Time (other than an Acquiring Person and, in respect of any
Rights Beneficially Owned by such Acquiring Person which are not held
of record by such Acquiring Person, the holder of record of such
rights (a "Nominee")) at such holder's address as shown by the records
of the Company (the Company hereby agreeing to furnish copies of such
records to the Rights Agent for this purpose), (x) a certificate (a
"Rights Certificate") in substantially the form of Exhibit A hereto
appropriately completed, representing the number of Rights held by
such holder at the Separation Time and having such marks of
identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and
as are not inconsistent with the provisions of this Agreement, or as
may be required to comply with any law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any stock
exchange or quotation system on which the Rights may from time to
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time be listed or traded, or to conform usage, and (y) a disclosure
statement describing the Rights provided that a Nominee shall be sent
the materials provided for in (x) and (y) only in respect of all
Common Shares held of record by him which are not Beneficially Owned
by an Acquiring Person.
(d) Rights may be exercised in whole or in part on any Business Day after
the Separation Time and prior to the Expiration Time by submitting to
the Rights Agent the Rights Certificate evidencing such Rights with an
Election to Exercise (an "Election to Exercise") substantially in the
form attached to the Rights Certificate duly completed, accompanied by
payment in cash, or by certified cheque, banker's draft or money order
payable to the order of the Company, of a sum equal to the Exercise
Price multiplied by the number of Rights being exercised and a sum
sufficient to cover any transfer tax or charge which may be payable in
respect of any transfer involved in the transfer or delivery of Rights
Certificates or the issuance or delivery of certificates for Common
Shares in a name other than that of the holder of the Rights being
exercised.
(e) Upon receipt of a Rights Certificate, which is accompanied by (x) a
completed Election to Exercise that does not indicate that such Right
is null and void as provided by subsection 3.2(b) and (y) payment as
set forth in subsection 2.2(d) above, the Rights Agent will thereupon
promptly
(i) requisition from a transfer agent of the Common Shares
certificates for the number of Common Shares to be purchased
(the Company hereby irrevocably authorizing its transfer agents
to comply with all such requisitions),
(ii) when appropriate, requisition from the Company the amount of
cash to be paid in lieu of issuing fractional Common Shares,
(iii) after receipt of such certificates, deliver the same to or upon
the order of the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such
holder, and
(iv) when appropriate, after receipt, deliver such cash to or to the
order of the registered holder of the Rights Certificate.
(f) In case the holder of any Rights shall exercise less than all the
Rights evidenced by such holder's Rights Certificate, a new Rights
Certificate evidencing the Rights remaining unexercised will be issued
by the Rights Agent to such holder or to such holder's duly authorized
assigns.
(g) The Company covenants and agrees that it will
(i) take all such action as may be necessary and within its power
to ensure that all shares delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such
shares (subject to payment of the Exercise Price), be duly and
validly authorized, executed, issued and delivered and fully
paid and nonassessable;
(ii) take all such action as may be necessary and within its power
to comply with any applicable requirements of the British
Columbia Company Act and the Securities Acts or comparable
legislation of each of the provinces of Canada and the 1933
Securities Act or the 1934 Exchange Act, or the rules and
regulations thereunder or any other applicable law, rule or
regulation, in connection with the issuance and delivery of the
Rights Certificates and the issuance of any shares upon
exercise of Rights;
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(iii) use reasonable efforts to cause all shares
issued upon exercise of Rights to be listed on the principal
exchanges on which the shares were traded prior to the Stock
Acquisition Date; and
(iv) pay when due and payable any and all Canadian and United States
federal, provincial and state transfer taxes (for greater
certainty not including any income taxes of the holder or
exercising holder or any liability of the Company to withhold
tax) and charges which may be payable in respect of the
original issuance or delivery of the Rights Certificates or
certificates for shares, provided that the Company shall not be
required to pay any transfer tax or charge which may be payable
in respect of any transfer involved in the transfer or delivery
of Rights Certificates or the issuance or delivery of
certificates for shares in a name other than that of the holder
of the Rights being transferred or exercised.
2.3 ADJUSTMENTS TO EXERCISE PRICE, NUMBER OF RIGHTS
The Exercise Price, the number and kind of shares subject to purchase upon
exercise of each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 2.3.
(a) If the Company shall at any time after the Record Time and prior to
the Expiration Time
(i) declare or pay a dividend on the Common Shares payable in
Common Shares (or other capital stock or securities
exchangeable for or convertible into or giving a right to
acquire Common Shares or other capital stock) other than
pursuant to any optional stock dividend program,
(ii) subdivide or change the then outstanding Common Shares into a
greater number of Common Shares,
(iii) combine or change the then outstanding Common Shares into a
smaller number of Common Shares, or
(iv) issue any Common Shares (or other capital stock or securities
exchangeable for or convertible into or giving a right to
acquire Common Shares or other capital stock) in respect of, in
lieu of or in exchange for existing Common Shares in a
reclassification, amalgamation, statutory arrangement or
consolidation,
the Exercise Price and the number of Rights outstanding, or, if the
payment or effective date therefor shall occur after the Separation
Time, the securities purchasable upon exercise of Rights shall be
adjusted in the manner set forth below. If the Exercise Price and
number of Rights outstanding are to be adjusted, (x) the Exercise
Price in effect after such adjustment will be equal to the Exercise
Price in effect immediately prior to such adjustment divided by the
number of Common Shares (or other capital stock) (the "Expansion
Factor") that a holder of one Common Share immediately prior to such
dividend, subdivision, change, combination or issuance would hold
thereafter as a result thereof and (y) each Right held prior to such
adjustment will become that number of rights equal to the Expansion
Factor, and the adjusted number of Rights will be deemed to be
allocated among the Common Shares with respect to which the original
Rights were associated (if they remain outstanding) and the shares
issued in respect of such dividend, subdivision, change, combination
or issuance, so that each such Common Share (or other capital stock)
will have exactly one Right associated with it. If the securities
purchasable upon exercise of Rights are to be adjusted, the securities
purchasable upon exercise of each Right after such adjustment will be
the securities that a holder of the securities purchasable upon
exercise of one Right immediately prior to such dividend, subdivision,
change, combination or issuance would hold thereafter as a result
thereof. If after
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the Record Time and prior to the Expiration Time the Company shall
issue any shares of capital stock other than Common Shares in a
transaction of a type described in this subsection 2.3(a), shares of
such capital stock shall be treated herein as nearly equivalent to
Common Shares as may be practicable and appropriate under the
circumstances and the Company and the Rights Agent agree to amend this
Agreement in order to effect such treatment, and the Company will not
consolidate with, amalgamate with or into or enter into a statutory
arrangement with, any other Person unless such Person agrees to be
bound by the terms of an amendment effecting such treatment. If an
event occurs which would require an adjustment under both this Section
2.3 and Section 3.2 hereof, the adjustment provided for in this
Section 2.3 shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 3.2 hereof.
If the Company shall at any time after the Record Time and prior to
the Separation Time issue any Common Shares otherwise than in a
transaction referred to in the preceding paragraph, each such Common
Share so issued shall automatically have one new Right associated with
it, which Right shall be evidenced by the certificate representing
such share.
(b) If the Company shall at any time after the Record Time and prior to
the Expiration Time fix a record date for the making of a distribution
to all holders of Common Shares of rights or warrants entitling them
(for a period expiring within 45 calendar days after such record date)
to subscribe for or purchase Common Shares (or securities convertible
into or exchangeable for or carrying a right to purchase or subscribe
for Common Shares) at a price per Common Share (or, if a security
convertible into or exchangeable for or carrying a right to purchase
or subscribe for Common Shares, having a conversion, exchange or
exercise price (including the price required to be paid to purchase
such convertible or exchangeable security or right per share)) less
than the Market Price per Common Share on such record date, the
Exercise Price shall be adjusted in the manner provided in this
subsection 2.3(b). The Exercise Price in effect after such record
date will equal the Exercise Price in effect immediately prior to such
record date multiplied by a fraction, of which the numerator shall be
the number of Common Shares outstanding on such record date plus the
number of Common Shares which the aggregate offering price of the
total number of Common Shares so to be offered (and/or the aggregate
initial conversion, exchange or exercise price of the convertible or
exchangeable securities or rights so to be offered (including the
price required to be paid to the purchase such convertible or
exchangeable securities or rights)) would purchase at such Market
Price and of which the denominator shall be the number of Common
Shares outstanding on such record date plus the number of additional
Common Shares to be offered for subscription or purchase (or into
which the convertible or exchangeable securities or rights so to be
offered are initially convertible, exchangeable or exercisable). In
case such subscription price may be paid in a consideration part or
all of which shall be in a form other than cash, the value of such
consideration shall be as determined in good faith by the Board of
Directors of the Company whose determination shall be described in a
statement filed with the Rights Agent and shall be bidding on the
Rights Agent and the holders of the Rights. Such adjustment shall be
made successively whenever such a record date is fixed.
For purposes of this subsection (b) the granting of the right to
purchase Common Shares (whether from treasury shares or otherwise)
pursuant to any dividend or interest reinvestment plan and/or any
Common Share purchase plan providing for the reinvestment of dividends
or interest payable on securities of the Company and/or the investment
of periodic optional payments and/or employee share purchase or
employee share option or similar plans (so long as such right to
purchase is in no case evidenced by the delivery of rights or
warrants) shall not be deemed to constitute an issue of rights or
warrants by the Company, provided that in the case of any dividend or
interest reinvestment plan, the right to purchase Common Shares is at
a price per share of not less than 90 percent of the current market
price per share (determined as provided in such plans) of the Common
Shares.
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(c) If the Company shall at any time after the Record Time and prior to
the Expiration Time fix a record date for the making of a distribution
to all holders of Common Shares of evidences of indebtedness or assets
(other than a regular periodic cash dividend or a dividend paid in
Common Shares) or rights or warrants (excluding those referred to in
subsection 2.3(b)), the Exercise Price shall be adjusted in the manner
provided for in this subsection 2.3(c). The Exercise Price in effect
after such record date will equal the Exercise Price in effect
immediately prior to such record date less the fair market value (as
determined in good faith by the Board of Directors of the Company) of
the portion of the assets, evidences of indebtedness, rights or
warrants so to be distributed applicable to each of the securities
purchasable upon exercise of one Right (such determination to be
described in a statement filed with the Rights Agent and to be binding
on the Rights Agent and the holders of the Rights). Such adjustment
shall be made successively whenever such a record date is fixed.
(d) Each adjustment made pursuant to this Section 2.3 shall be made as of
(i) the payment or effective date for the applicable dividend,
subdivision, change, combination or issuance, in the case of an
adjustment made pursuant to subsection (a) above; and
(ii) the record date for the applicable distribution, in the case of
an adjustment made pursuant to subsection (b) or (c) above,
subject to readjustment to reverse the same if such
distribution shall not be made.
(e) If the Company shall at any time after the Record Time and prior to
the Separation Time issue any shares (other than Common Shares), or
rights or warrants to subscribe for or purchase any such capital
stock, or securities convertible into or exchangeable for any such
capital stock, in a transaction referred to in clause (a)(i) or
(a)(iv) of this Section 2.3, or if the Company shall take any other
action (other than the issue of Common Shares) which might have a
negative effect on the holders of Rights, and, in either case, if the
Board of Directors acting in good faith determines that the
adjustments contemplated by subsections (a), (b) and (c) of this
Section 2.3 in connection with such transaction will not appropriately
protect the interests of the holders of Rights, the Company may
determine what other adjustments, rather than the adjustments
contemplated by subsections (a), (b) and (c) of this Section 2.3,
shall be made. The Company and the Rights Agent shall amend this
Agreement as appropriate to provide for such adjustments.
(f) Each adjustment to the Exercise Price made pursuant to this Section
2.3 shall be calculated to the nearest cent. Whenever an adjustment
to the Exercise Price is made pursuant to this Section 2.3, the
Company shall
(i) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such
adjustment, and
(ii) promptly file with the Rights Agent and with each transfer
agent for the Common Shares a copy of such certificate and mail
a brief summary thereof to each bolder of Rights.
(g) Irrespective of any adjustment or change in the securities purchasable
upon exercise of the Rights, the Rights Certificates theretofore and
thereafter issued may continue to represent the securities so
purchasable which were represented in the initial Rights Certificates
issued hereunder.
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2.4 DATE ON WHICH EXERCISE IS EFFECTIVE
Each Person in whose name any certificate for Common Shares is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Common Shares represented thereby on, and such
certificate shall be dated the date upon which the Rights Certificate evidencing
such Rights was duly surrendered (together with a duly completed Election to
Exercise) and payment of the Exercise Price for such Rights (and any applicable
transfer taxes and other governmental charges payable by the exercising holder
hereunder) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Common Share transfer books of the Company are
closed, such Person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business Day
on which the Common Share transfer books of the Company are open.
2.5 EXECUTION, AUTHENTICATION, DELIVERY AND DATING OF RIGHTS CERTIFICATES
(a) The Rights Certificates shall be executed on behalf of the Company by
its Chairman, President or one of its Senior Vice-Presidents, under
its corporate seal reproduced thereon attested by its Secretary or one
of its Assistant Secretaries or any other one of the foregoing. The
signature of any of these officers on the Rights Certificates may be
manual or facsimile.
(b) Rights Certificates bearing the manual or facsimile signatures of
Individuals who were at any time the proper officers of the Company
shall bind the Company, notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the countersignature
and delivery of such Rights Certificates.
(c) Promptly after the Company learns of the Separation Time, the Company
will notify the Rights Agent of such Separation Time and will deliver
Rights Certificates executed by the Company to the Rights Agent for
countersignature, and the Rights Agent shall countersign and deliver
such Right Certificates to the holders of the Rights pursuant to
subsection 2.2(c) hereof. No Rights Certificate shall be valid for
any purpose until countersigned by the Rights Agent as aforesaid.
(d) Each Rights Certificate shall be dated the date of countersignature
thereof.
2.6 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
(a) The Company will cause to be kept a register (the "Rights Register")
in which, subject to such reasonable regulations as it may prescribe,
the Company will provide for the registration and transfer of Rights.
The Rights Agent is hereby appointed "Rights Registrar" for the
purpose of maintaining the Rights Register for the Company and
registering Rights and transfers of Rights as herein provided. In the
event that the Rights Agent shall cease to be the Rights Registrar,
the Rights Agent win have the right to examine the Rights Register at
all reasonable times.
After the Separation Time and prior to the Expiration Time, upon
surrender for registration of transfer or exchange of any Rights
Certificate, and subject to the provisions of subsection 2.6(c), the
Company will execute, and the Rights Agent will countersign and
deliver, in the name of the holder or the designated transferee or
transferees, as required pursuant to the holder's instructions, one or
more new Rights Certificates evidencing the same aggregate number of
Rights as did the Rights Certificates so surrendered.
(b) All Rights issued upon any registration of transfer or exchange of
Rights Certificates shall be valid obligations of the Company, and
such Rights shall be entitled to the same benefits under this
Agreement as the Rights surrendered upon such registration or transfer
or exchange.
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(c) Every Rights Certificate surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company or the
Rights Agent, as the case may be, duly executed by the holder thereof
or such holder's attorney duly authorized in writing. As a condition
to the issuance of any new Rights Certificate under this Section 2.6,
the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation
thereto.
2.7 MUTILATED, DESTROYED, LOST AND STOLEN RIGHTS CERTIFICATES
(a) If any mutilated Rights Certificate is surrendered to the Rights Agent
prior to the Expiration Time, the Company shall execute and the Rights
Agent shall countersign and deliver in exchange therefor a new Rights
Certificate evidencing the same number of Rights as did the Rights
Certificate so surrendered.
(b) If there shall be delivered to the Company and the Rights Agent prior
to the Expiration Time (i) evidence to their satisfaction of the
destruction, loss or theft of any Rights Certificate and (ii) such
security or indemnity as may be required by them to save each of them
and any of their agents harmless, then, in the absence of notice to
the Company or the Rights Agent that such Rights Certificate has been
acquired by a bona fide purchaser, the Company shall execute and upon
its request the Rights Agent shall countersign and deliver, in lieu of
any such destroyed, lost or stolen Rights Certificate, a new Rights
Certificate evidencing the same number of Rights as did the Rights
Certificate so destroyed, lost or stolen.
(c) As a condition to the issuance of any new Rights Certificate under
this Section 2.7, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees
and expenses of the Rights Agent) connected therewith.
(d) Every new Rights Certificate issued pursuant to this Section 2.7 in
lieu of any destroyed, lost or stolen Rights Certificate shall
evidence the contractual obligation of the Company, whether or not the
destroyed, lost or stolen Rights Certificate shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of
this Agreement equally and proportionately with any and all other
Rights duly issued hereunder.
2.8 PERSONS DEEMED OWNERS
The Company, the Rights Agent and any agent of the Company or the Rights
Agent may deem and treat the person in whose name a Rights Certificate (or,
prior to the Separation Time, a Common Share certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby for all purposes
whatsoever. As used in this Agreement, unless the context otherwise requires,
the term "holder" of any Rights shall mean the registered holder of such Rights
(or prior to the Separation Time, the associated Common Shares).
2.9 DELIVERY AND CANCELLATION OF CERTIFICATES
All Rights Certificates surrendered upon exercise or for redemption or
registration of transfer or exchange shall, if surrendered to any person other
than the Rights Agent, be delivered to the Rights Agent and, in any case, shall
be promptly cancelled by the Rights Agent. The Company may at any time deliver
to the Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Rights Certificates so delivered shall be promptly
cancelled by the Rights Agent. No Rights Certificate shall be countersigned in
lieu of or in exchange for any Rights Certificates cancelled as provided in this
Section 2.9 except as expressly permitted by this Agreement. The Rights Agent
shall destroy all cancelled Rights Certificates and deliver a certificate of
destruction to the Company.
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2.10 AGREEMENT OF RIGHTS HOLDERS
Every holder of Rights by accepting the same consents and agrees with the
Company and the Rights Agent and every other holder of Rights that
(a) he will be bound by and subject to the provisions of this Agreement,
as amended from time to time in accordance with the terms hereof, in
respect of all Rights held;
(b) prior to the Separation Time, each Right will be transferable only
together with, and will be transferred by a transfer of, the
associated Common Share;
(c) after the Separation Time, the Rights Certificates will be
transferable only on the Rights Register as provided herein;
(d) prior to due presentment of a Rights Certificate (or, prior to the
Separation Time, the associated Common Share certificate) for
registration of transfer, the Company, the Rights Agent and any agent
of the Company or the Rights Agent may deem and treat the person in
whose name the Rights Certificate (or, prior to the Separation Time,
the associated Common Share certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on such Rights Certificate or the
associated Common Share certificate made by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent shall be affected by any notice to
the contrary;
(e) such holder of Rights has waived his right to receive any fractional
Rights or any fractional shares upon exercise of a Right (except as
provided herein); and
(f) without the approval of any holder of Rights and upon the sole
authority of the Board of Directors of the Company acting in good
faith this Agreement may be supplemented or amended from time to time
as provided herein.
ARTICLE 3. -- ADJUSTMENTS TO THE RIGHTS IN THE EVENT
OF CERTAIN TRANSACTIONS
3.1 FLIP-OVER TRANSACTION OR EVENT
(a) Subject to Sections 3.3 and 3.4 and subsection 5.1(b), if prior to the
Expiration Time the Company enters into, consummates or permits to
occur any Flip-over Transaction or Event, the Company must take such
action as is necessary to ensure, and shall not enter into, consummate
or permit to occur such Flip-over Transaction or Event until it shall
have entered into a supplement agreement with the Person engaging in
such Flip-over Transaction or Event, for the benefit of the holders of
the Rights, providing, that upon consummation of the Flip-over
Transaction or Event:
(i) each Right, from and after the date upon which any Flip-over
Transaction or Event becomes effective, constitutes the right
to purchase from the Person into which or with which the
Company will be consolidated, merged or amalgamated or with
which the Company shall enter into a statutory arrangement or
to which the Company will sell assets (the "Flip-over Entity"),
upon exercise thereof in accordance with the terms hereof, that
number of Common Shares of such Flip-over Entity having an
aggregate Market Price on the date of consummation or
occurrence of such Flip-over Transaction or Event equal to
twice the Exercise Price for an amount in cash equal to the
Exercise Price (such right to be appropriately adjusted in a
manner analogous to
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the applicable adjustment to the Rights provided for in Section
2.3 if after such date of consummation or occurrence an event
of a type analogous to any of the events described in Section
2.3 shall have occurred with respect to such Common Shares);
and
(ii) the Flip-over Entity is to be liable for, and shall assume, by
virtue of such Flip-over Transaction or Event and such
supplemental agreement, all the obligations and duties of the
Company pursuant to this Agreement.
(b) The Company shall do all such acts and things and shall take all steps
within its control to ensure that the Flip-Over Entity does all such
acts and things as shall be necessary to ensure compliance with the
provisions of subsection 3.1(a) of this Agreement.
3.2 FLIP-IN EVENT
(a) Subject to Sections 3.3 and 3.4 and subsections 5.1(b) and (c), if
prior to the Expiration Time a Flip-in Event occurs, the Company shall
take such action as shall be necessary to ensure and provide, within
five Business Days of such occurrence or such longer period as may be
required to satisfy the requirements of the Securities Act (Ontario)
or comparable legislation of each of the provinces of Canada or the
1933 Securities Act, so that, except as provided below, each Right
shall thereafter constitute the right to purchase from the Company,
upon exercise thereof in accordance with the terms hereof, that number
of Common Shares of the Company having an aggregate Market Price on
the date of occurrence of such Flip-in Event equal to twice the
Exercise Price for an amount in cash equal to the Exercise Price (such
right to be appropriately adjusted in a manner analogous to the
applicable adjustment provided for in Section 2.3 if after such date
of occurrence an event of a type analogous to any of the events
described in Section 2.3 shall have occurred with respect to such
Common Shares).
(b) Notwithstanding the foregoing, upon the occurrence of any Flip-in
Event any Rights that are or were Beneficially Owned on or after the
earlier of the Separation Time or the Stock Acquisition Date by
(i) an Acquiring Person (or any Affiliate or Associate of an
Acquiring Person or any Person Acting jointly or in concert
with an Acquiring Person or any Associate or Affiliate of an
Acquiring Person); or
(ii) a transferee, direct or indirect, of an Acquiring Person (or
any Affiliate or Associate of an Acquiring Person or any Person
acting jointly or in concert with an Acquiring Person or any
Associate or Affiliate of an Acquiring Person) in a transfer,
whether or not for consideration, that the Board of Directors
of the Company acting in good faith has determined is part of a
plan, arrangement or scheme of an Acquiring Person (or any
Affiliate or Associate of an Acquiring Person) that has the
purpose or affect of avoiding clause (i) of this subsection
3.2(b),
become null and void and any holder of such Rights (including
transferees) shall thereafter have no right to exercise such Rights
under any provision of this Agreement.
(c) Any Rights Certificate that represents Rights Beneficially Owned by a
Person described in either clauses (i) or (ii) of subsection 3.2(b) or
transferred to any nominee of any such Person, and any Rights
Certificate issued upon transfer, exchange, replacement or adjustment
of any other Rights Certificate referred to in this sentence, shall
contain or will be deemed to contain the following legend:
The Rights represented by this Rights Certificate were issued
to a Person who was an Acquiring Person or an Affiliate or an
Associate of an Acquiring Person (as such
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terms are defined in the Rights Agreement) or acting jointly or
in concert with any of them. This Rights Certificate and the
Rights represented hereby shall be void in the circumstances
specified in subsection 3.2(b) of the Rights Agreement.
provided that the Rights Agent is not to be under any responsibility
to ascertain the existence of facts that would require the imposition
of such legend but is required to impose such legend only if
instructed to do so by the Company or if a holder fails to certify
upon transfer or exchange in the space provided on the Rights
Certificate that such holder is not an Acquiring Person or an
Affiliate or Associate thereof.
3.3 OBLIGATIONS OF THE COMPANY
The Company shall not enter into or engage in any transaction of the kind
referred to in this Article 3 if at the time of such transaction there are any
rights, warrants or securities outstanding or any other arrangements, agreements
or instruments which would eliminate or otherwise diminish in any respect the
benefits intended to be afforded by this Rights Agreement to the holders of
Rights upon consummation of such transaction. The provisions of this Article 3
shall apply to successive amalgamation, arrangements or consolidations or sales
or other transfers.
3.4 EXCHANGE OPTION
(a) If the Board of Directors acting in good faith shall determine that
conditions exist which would eliminate or otherwise materially
diminish in any respect the benefits intended to be afforded to the
holders of Rights pursuant to this Agreement, the Board of Directors
may, at its option, at any time after a Flip-in Event, issue or
deliver in respect of each Right which is not void pursuant to
subsection 3.2(b), either
(i) in return for the Exercise Price and the Right, debt or equity
securities or other assets (or a combination thereof) having a
value equal to twice the Exercise Price; or
(ii) in return for the Right and without further charge, subject to
any amounts that may be required to be paid under applicable
law, debt or equity securities or other assets (or a
combination thereof) having a value equal to the Exercise
Price,
where in either case the value of such debt or equity securities shall
be determined by an internationally recognized Canadian investment
dealer or investment banker selected by the Board of Directors of the
Company. To the extent that the Board of Directors determines in good
faith that some action need be taken pursuant to this Section 3.4, the
Board of Directors may suspend the exercisability of the Rights for a
period of up to 90 days following the date of the occurrence of the
relevant Flip-in Event in order to decide the appropriate form of
distribution to be made and to determine the value thereof. In the
event of any such suspension, the Company shall notify the Rights
Agent and issue as promptly as practicable a public announcement
stating that the exercisability of the Rights has been temporarily
suspended.
(b) If the Board of Directors of the Company authorizes the exchange of
debt or equity securities or other assets (or a combination thereof)
for Rights pursuant to subsection 3.4(a), without any further action
or notice the right to exercise the Rights will terminate and the only
right thereafter of a holder of Rights shall be to receive such debt
or equity securities or other assets (or combination thereof) in
accordance with the exchange formula authorized by the Board of
Directors. Within 10 Business Days after the Board of Directors has
authorized the exchange of such debt or equity securities or other
assets (or combination thereof) for rights pursuant to subsection
3.4(a), the Company shall give notice of such exchange to the holders
of such Rights by mailing such notice to all such holders at their
last addresses as they appear upon the
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register of Rights holders maintained by the Rights Agent. Each such
notice of exchange will state the method by which the exchange of such
debt or equity securities or other assets (or a combination thereof)
for Rights will be effected.
3.5 SPECIAL MEETING OF SHAREHOLDERS TO CONSIDER PERMITTED BIDS
(a) If a Person (the "Offeror") makes a Take-over Bid which would be a
Permitted Bid within the meaning of subsection 1.1(u) but for
obtaining the shareholder approval mentioned in clause 1.1(u)(iv) and
the Board of Directors of the Company acting in good faith concludes
that upon receipt of the approval of the Independent Shareholders
referred to in subsection 1.1(u) acquisitions of shares pursuant to
such Take-over Bid shall be Permitted Bid Acquisitions, the Board of
Directors of the Company shall, as soon as practicable after the date
(the "Offer Date") on which all of the documents referred to in
subsection 1.1(u) and which have otherwise been sent to the holders of
Common Shares by the Offeror in connection with such Take-over Bid
have been delivered to the Company, call a special meeting (the
"Special Meeting") of holders of Common Shares who are Independent
Shareholders in order for them to consider and if thought fit to
approve a resolution (the "Referendum") on the question of whether
such Take-over Bid (as such Take-over Bid may be amended or revised by
the Offeror from time to time either (a) to waive a condition thereof
of (b) to increase the price per share to be paid to holders of Common
Shares, without reduction in amount or change in terms of any security
or reduction in amount of cash that are components thereof) should be
approved. The Special Meeting shall be held on a date fixed by the
Board of Directors, which date shall be as soon as practicable after
the mailing of the Take-over Bid, taking into account
(i) the time required to prepare a management proxy statement or
information circular and to comply with applicable securities
laws and other regulatory requirements relating to the holding
of meetings of shareholders, record dates and the distribution
of proxy related materials to shareholders and intermediaries;
(ii) other actual or pending Take-over Bids including Permitted
Bids, if any; and
(iii) other factors considered relevant by the Board of Directors of
the Company,
but not less than 90 nor more than 120 days after the Offer Date;
provided further that if the Board of Directors receives a competing
Take-over Bid which is a Permitted Bid after a special meeting has
been called for another Take-over Bid, the Board in its discretion may
delay the date on which the meeting is to be held, or adjourn the
meeting, to a date not more than 45 days after the originally
scheduled meeting date, so that shareholders may consider the merits
of the competing Take-over Bid and the other Take-over Bid at such
other special meeting. The Board of Directors of the Company shall
fix a record date for determining the Independent Shareholders
entitled to receive notice of the Special Meeting in accordance with
the procedures set forth in National Policy No. 41 of the Canadian
Securities Administrators and the rules of any stock exchange on which
the Common Shares are then listed, and the Articles and By-laws of the
Company. The Special Meeting shall be conducted in accordance with
the rules for holding meetings of shareholders set forth in this
Articles and By-Laws of the Company. At the Offeror's request, the
Company shall include with its proxy statement or information circular
prepared in connection with the Special Meeting, proxy solicitation
materials submitted by the Offeror provided that the Offeror by
written agreement with the Company in form and substance satisfactory
to the Company shall indemnify and hold the Company harmless from and
against all costs, damages, expenses, fees and liabilities whatsoever,
directly or indirectly, resulting from or arising out of any
misstatements, misrepresentations, misleading statements or untrue
statements contained in or omissions to state any fact in the
Offeror's proxy solicitation materials necessary to make any statement
contained therein not misleading in light of the circumstances in
which it was made and shall
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have agreed to pay the Company's incremental costs incurred as a
result of including such materials with the Company's proxy statement
or information circular. Notwithstanding the foregoing, no Special
Meeting shall be held from and after such time as any Person becomes
an Acquiring Person, and any Special Meeting scheduled prior to such
time and not theretofore held shall be cancelled.
(b) If at the Special Meeting the Referendum receives the affirmative vote
of a majority of the votes cast by Independent Shareholders
represented at the meeting in person or by proxy and such vote has
been confirmed by independent election inspectors retained by the
Company then acquisitions of Common Shares made under the Permitted
Bid referred to in the Referendum shall be deemed to be Permitted Bid
Acquisitions.
(c) For clarification it is understood that nothing contained in this
Section 3.5 shall be considered to affect the obligations of the Board
of Directors to exercise its fiduciary duties. Without limiting the
generality of the foregoing, nothing contained herein shall be
construed to suggest or imply that the Board of Directors shall not be
entitled to recommend that holders of Common Shares reject or accept
any Take-over Bid or take any other action (including, without
limitation, the commencement, prosecution, defence or settlement of
any litigation and the submission of additional or alternative Take-
over Bids or other proposals to the Special Meeting) with respect to
any Take-over Bid or otherwise that the Board of Directors believes is
necessary or appropriate in the exercise of its fiduciary duties.
(d) Nothing contained in this Section 3.5 shall be construed as limiting
or prohibiting the Company or any Offeror from proposing or engaging
in any acquisition, disposition or other transfer of any securities of
the Company, any merger, amalgamation, arrangement, recapitalization
or business combination or transaction involving the Company, any sale
or other transfer of assets of the Company, any liquidation,
dissolution or winding-up of the Company or any other business
combination or other transaction, or any other action by the Company
or such Offeror, provided that the holders of Rights shall have the
rights set forth in this Agreement with respect to any such
acquisition, disposition, transfer, merger, amalgamation, arrangement,
recapitalization, sale, liquidation, dissolution, winding-up, business
combination or transaction or action.
ARTICLE 4. -- THE RIGHTS AGENT
4.1 GENERAL
(a) The Company hereby appoints the Rights Agent to act as agent for the
Company and the holders of Rights in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such Co-Rights
Agents as it may deem necessary or desirable. In the event the
Company appoints one or more Co-Rights Agents, the respective duties
of the Rights Agent and Co-Rights Agents shall be as the Company may
determine. The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of
its duties hereunder. The Company also agrees to indemnify the Rights
Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or wilful misconduct
on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of
this Agreement, including the costs and expenses of defending against
any claim of liability, which right to indemnification will survive
the termination of this Agreement.
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(b) The Rights Agent will be protected and will incur no liability for or
in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon
any certificate for Common Shares, Rights Certificate, certificate for
other securities of the Company, instrument of assignment or transfer,
power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed
by it to the genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper person or persons.
4.2 MERGER, AMALGAMATION OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or amalgamated or with which it may be
consolidated, or any corporation resulting form any merger,
amalgamation or consolidation to which the Rights Agent or any
successor Rights Agent is a party, or any corporation succeeding to
the shareholder or stockholder services business of the Rights Agent
or any successor Rights Agent, will be the successor to the Rights
Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 4.4 hereof. In
case at the time such successor Rights Agent succeeds to the agency
created by this Agreement any of the Rights Certificates have been
countersigned by not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver
such Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates have not been countersigned, any
successor Rights Agent may countersign such Rights Certificates either
in the name of the predecessor Rights Agent or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates
will have the full force provided in the Rights Certificates and in
this Agreement.
(b) In case at any time the name of the Rights Agent is changed and at
such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver rights Certificates so countersigned;
and in case at that time any of the Rights Certificates shall not have
been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in
all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
4.3 DUTIES OF RIGHTS AGENT
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by which the Company, the
holders of Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel will be full
and complete authorization and protection to the Rights Agent as to
any action taken or omitted by it in good faith and in accordance with
such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent deems it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by a
person believed by the Rights Agent to be the Chairman, the President
or any Senior Vice-President and by any other of the foregoing or the
Treasurer or any Assistant Treasurer or the Secretary or any Assistant
Secretary of the Company and delivered to the Rights Agent; and such
certificate will be full authorization to the Rights Agent
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for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent will be liable hereunder only for its own negligence,
bad faith or wilful misconduct.
(d) The Rights Agent will not be liable for or by reason of any of the
statements of fact or recitals contained in this agreement or in the
certificate for Common Shares or the Rights Certificates (except its
countersignature thereof) or be required to verify the same, but all
such statements and recitals are and will be deemed to have been made
by the Company only.
(e) The Rights Agent will not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof
(except the due authorization, execution and delivery hereof by the
Rights Agent) or in respect of the validity or execution of any Common
Share certificate or Rights Certificates (except it countersignature
thereof); nor will it be responsible for any breach by the Company of
any covenant or condition contained in this Agreement or in any Rights
Certificate; nor will it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void
pursuant to subsection 3.2(b) hereof) or any adjustment required under
the provisions of Section 2.3 hereof or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with
respect to the exercise of Rights after receipt of the certificate
contemplated by Section 2.3 describing any such adjustment); nor will
it by any act hereunder be deemed to make any representation or
warranty as to the authorization of any Common Shares to be issued
pursuant to this Agreement or any Rights or as to whether any Common
Shares will, when issued, be duly and validly authorized, executed,
issued and delivered and fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered
all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or
performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder
from any person believed by the Rights Agent to be the Chairman, the
President, any Senior Vice-President or the Secretary or any Assistant
Secretary or the Treasurer or any Assistant Treasurer of the Company,
and to apply to such persons for advice or instructions in connection
with its duties, and it shall not be liable for any action taken or
suffered by it in good faith in accordance with instructions of any
such person.
(h) The Rights Agent and any shareholder or stockholder, director, officer
or employee of the Rights Agent may buy, sell or deal in Common
Shares, Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise
act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent will not be
answerable or accountable for any act, default, neglect or misconduct
of any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct, provided
reasonable care was exercised in the selection and continued
employment thereof.
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4.4 CHANGE OF RIGHTS AGENT
The Rights Agent may resign and be discharged from its duties under this
Agreement upon 90 days notice (or such lesser notice as is acceptable to the
Company) in writing mailed to the Company and to each transfer agent of Common
Shares by registered or certified mail, and to the holders of the Rights in
accordance with Section 5.9. The Company may remove the Rights Agent upon 30
days notice in writing, mailed to the Rights Agent and to each transfer agent of
the Common Shares by registered or certified mail, and to the holders of the
Rights in accordance with Section 5.9. If the Rights Agent should resign or be
removed or otherwise become incapable of acting, the Company will appoint a
successor to the Rights Agent. If the Company fails to make such appointment
within a period 30 days after such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of any Rights (which holder shall, with such
notice, submit such holder's Rights Certificate for inspection by the Company),
then the holder of any Rights may apply to any court of competent jurisdiction
for the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, must be a corporation incorporated
under the laws of Canada or a province thereof and authorized to carry on the
business of a trust company in the Province of British Columbia. After
appointment, the successor Rights Agent will be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any
such appointment, the Company will file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of any class of Voting Shares
and mail a notice thereof in writing to the holders of the Rights. Failure to
give any notice provided for in this Section 4.4, however, or any defect
therein, shall not affect the legality or validity of the resignation or removal
of the Rights Agent or the appointment of the successor Rights Agent, as the
case may be.
ARTICLE 5. - MISCELLANEOUS
5.1 REDEMPTION, WAIVER AND TERMINATION
(a) The Board of Directors of the Company acting in good faith may, at its
option, at any time prior to the provisions of Section 3.1 or 3.2
becoming applicable as a result of the occurrence of a Flip-in Event
or a Flip-over Transaction or Event, elect to redeem all but not less
than all of the then outstanding Rights at a redemption price of $0.01
per Right appropriately adjusted in a manner analogous to the
applicable adjustment provided for in Section 2.3 if an event of the
type analogous to any of the events described in Section 2.3 shall
have occurred (such redemption price being herein referred to as the
"Redemption Price"). The redemption of the Rights by the Board of
Directors may be made effective at such time, on such basis and with
such conditions as the Board of Directors in its sole discretion may
establish.
(b) The Board of Directors of the Company may, until the first to occur of
a Flip-in Event or a Flip-over Transaction or Event, upon prior
written notice delivered to the Rights Agent, determine to waive the
application of subsection 1.1(bb) and Section 3.1 or 3.2 to any
particular Flip-over Transaction or Event or Flip-in Event.
(c) The Board of Directors of the Company may waive the application of
subsection 1.1(bb) and Section 3.2 to any Flip-in Event, provided that
both of the following conditions are satisfied:
(i) the Board of Directors has determined that the Acquiring Person
became an Acquiring Person by inadvertence and without any
intent or knowledge that he would become an Acquiring Person;
and
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(ii) such Acquiring Person has reduced his Beneficial Ownership of
Voting Shares such that at the time of waiver pursuant to this
subsection 5.1(c) he is no longer an Acquiring Person.
(d) If the Board of Directors of the Company elects to redeem the Rights,
the right to exercise the Rights will thereupon, without further
action and without notice, terminate and each Right will after
redemption be null and void.
(e) If a Person makes a Permitted Bid and, within 120 days after the
making of the Permitted Bid, has taken up and paid for not less than
90 per cent of the Common Shares pursuant to a Permitted Bid
Acquisition, other than Common Shares already held at the date of the
Permitted Bid by, or by a nominee for, such Person or any of its
Affiliates, then the Board of Directors of the Company shall without
further formality be deemed to have elected to redeem the rights at
the Redemption Price.
(f) If the Board of Directors of the Company elects or is deemed to have
elected to redeem the Rights, the right to exercise the Rights will
thereupon, without further action and without notice, terminate and
the only right thereafter of the holders of Rights will be to receive
the Redemption Price.
(g) Within 10 days after the Board of Directors electing or having been
deemed to have elected to redeem the Rights, the Company must give
notice of redemption to the holders of the then outstanding Rights by
mailing such notice to each such holder at its last address as it
appears upon the registry books of the Rights Agent or, prior to the
Separation Time, on the registry books of the Transfer Agent for the
Common Shares. Any notice which is mailed in the manner herein
provided will be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which
the payment of the Redemption Price will be made. The Company may not
redeem, acquire or purchase for value any Rights at any time in any
manner other than that specifically set forth in this Section 5.1 and
other than in connection with the purchase of Common Shares prior to
the Separation Time.
5.2 EXPIRATION
No person will have any rights pursuant to this Agreement or in respect of
any Right after the Expiration Time, except the Rights Agent as specified in
subsection 4.1(a) of this Agreement.
5.3 ISSUANCE OF NEW RIGHTS CERTIFICATES
Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, the Company may, at its option, issue new Rights Certificates
evidencing rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the number or kind or class of shares
purchasable upon exercise of rights made in accordance with the provisions of
this Agreement.
5.4 SUPPLEMENTS AND AMENDMENTS
(a) The Company may from time to time supplement or amend this Agreement:
(i) to make any changes which the Board of Directors acting in good
faith may deem necessary or desirable, provided that no such
supplement or amendment which would change the Expiration Time
or increase the Exercise Price or change the percentage
referred to in subsection 1.1(a) hereof shall be effective
until confirmed by the holders of the Rights as hereinafter set
forth and no such supplement or amendment made on or after the
Stock Acquisition Date shall materially adversely affect the
interests of the holders of Rights generally and provided
further that no such supplement or
27
<PAGE>
amendment shall be made to the provisions of Article 4 except
with the written concurrence of the Rights Agent to such
supplement or amendment, or
(ii) in order to cure any ambiguity or to correct or supplement any
provision contained herein which may be inconsistent with any
other provisions herein or otherwise defective.
(b) The confirmation of a supplement or amendment to this Agreement
required by clause 5.4(a)(i) hereof may be given by a resolution
proposed at a meeting of Rights holders duly convened for that purpose
and held in accordance with the provisions of this Section or, prior
to the Separation Time, at a meeting of shareholders of the Company
duly convened for any purpose, and passed by a majority of the votes
cast by the Rights holders or shareholders, as the case may be, who
voted in respect of that resolution.
(c) The Right Agent shall on receipt of a written request of the Company
and upon being indemnified to its reasonable satisfaction by the
Company against the cost which may be incurred in connection with the
calling and holding of such meeting, convene a meeting of the Rights
holders. In the event of the Rights Agent failing so to convene a
meeting within 15 days after receipt of such request and indemnity,
the Company may convene such meeting.
(d) At least 21 days' prior notice of any meeting of Rights holders shall
be given to the Rights holders and a copy of such notice shall be sent
by mail to the Company (unless the meeting has been called by the
Company, in which case the copy shall be sent to the Rights Agent).
Such notice shall state the time and place of the meeting and the
general nature of the business to be transacted thereat and shall
contain such information as is reasonably necessary to enable the
Rights holders to make a reasoned decision on the matter, but it shall
not be necessary for any such notice to set out the terms of any
resolution to be proposed or any of the provisions of this Section.
(e) An individual (who need not be a Rights holder) designated in writing
by the Rights Agent shall be chairman of the meeting and if no
individual is so designated, or if the individual so designated is not
present within 15 minutes from the time fixed for the holding of the
meeting, the Rights holders present in present or by proxy shall
choose some individual present to be chairman.
(f) At any meeting of the Rights holders a quorum shall consist of holders
present in person or by proxy of at least 20% of the Rights, provided
that at least two Persons entitled to vote thereat are personally
present. If a quorum of the Rights holders shall not be present
within 30 minutes from the time fixed for holding any meeting, the
meeting shall be adjourned to the same day in the next week (unless
such day is not a Business Day, in which case it shall be adjourned to
the next Business Day) at the same time and place and no notice of the
adjournment need be given. Any business may be brought before or
dealt with at an adjourned meeting which might have been dealt with at
the original meeting in accordance with the notice calling the same.
No business shall be transacted at any meeting unless a quorum is
present at the commencement of business. At the adjourned meeting the
Rights holders present in person or by proxy shall form a quorum and
may transact the business for which the meeting was originally
convened, notwithstanding that they may not hold 20% of the Rights.
The chairman of any meeting at which a quorum of the Rights holders is
present may, with the consent of the meeting, adjourn any such
meeting, and no notice of such adjournment need be given except such
notice, if any, as the meeting may prescribe.
(g) Votes of Rights holders on any matter may be given on a show of hands,
unless a poll is duly demanded. On a show of hands, every person who
is present and entitled to vote, whether as a Rights holder or as
proxy for one or more absent Rights holders, or both, shall have one
vote.
28
<PAGE>
On a poll, each Rights holder present in person or represented by a
proxy duly appointed by instrument in writing shall be entitled to one
vote in respect of each whole Right then held or represented by him.
A proxy need not be Rights holder. The chairman of any meeting shall
be entitled, both on a show of bands and on a poll, to vote in respect
of the Rights, if any, held or represented by him, but shall not have
a second or deciding vote. The Rights Agent or the Company with the
approval of the Rights holders may from time to time make and vary
such regulations as it shall think fit for the form of the required
instrument of proxy and generally for the calling of meetings of
Rights holders and the conduct of business thereat. The Company and
the Rights Agent, by their respective directors and officers, and the
counsel for the Company and for the Rights Agent and for any Rights
holder may attend any meeting of the Rights holders, but shall have no
vote as such.
5.5 FRACTIONAL RIGHTS AND FRACTIONAL SHARES
(a) The Company will not be required to issue fractions of Rights or to
distribute Rights Certificates which evidence fractional Rights.
Subject to Section 5.2, after the Separation Time there shall be paid
in lieu of such fractional Rights to the registered holders of the
Rights Certificates with regard to which fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of
the Market Price of a whole Right.
(b) The Company will not be required to issue fractional Common Shares
upon exercise of the Rights or to distribute certificates that
evidence fractional Common Shares. In lieu of issuing fractional
Common Shares, the Company shall pay to the registered holder of
Rights Certificates at the time such Rights are exercised as herein
provided, an amount in cash equal to the same fraction of the Market
Price of one Common Share at the date of such exercise.
5.6 RIGHTS OF ACTION
Subject to the terms of this Agreement, rights of action in respect of this
Agreement, other than rights of action vested solely in the Rights Agent, are
vested in the respective holders of the Rights and any holder of any Rights,
without the consent of the Rights Agent or of the holder of any other Rights,
may, on such holder's own behalf and for such holder's own benefit and the
benefit of other holders of Rights, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, such holder's right to exercise such holder's Rights, or Rights to
which he is entitled, in the manner provided in this Agreement and in such
holder's Rights Certificate. Without limiting the foregoing or any remedies
available to the holders of Rights, it is specifically acknowledged that the
holders of Rights would not have an adequate remedy at law for any breach of
this Agreement and will be entitled to specific performance of the obligations
under, and injunctive relief against actual or threatened violations of the
obligations of any Person subject to, this Agreement.
5.7 HOLDER OF RIGHTS NOT DEEMED A SHAREHOLDER
No holder, as such, of any Rights shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of Common Shares or any other
securities which may at any time be issuable on the exercise of Rights, nor
shall anything contained herein or in any Rights Certificate be construed to
confer upon the holder of any Rights, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders (except as provided in Section 5.8 hereof)
or to receive dividends or subscription rights or otherwise, until such Rights,
or Rights to which such holder is entitled, shall have been exercised in
accordance with the provisions hereof.
29
<PAGE>
5.8 NOTICE OF PROPOSED ACTIONS
If the Company proposes after the Separation Time and prior to the
Expiration Time
(i) to effect or permit (in cases where the Company's permission is
required) any Flip-in Event or Flip-over Transaction or Event; or
(ii) to effect the liquidation, dissolution or winding up of the Company or
the sale of all or substantially all of the Company's assets,
then, in each such case, the Company shall give to each holder of a Right, in
accordance with Section 5.9 hereof, a notice of such proposed action, which
shall specify the date on which such Flip-in Event or Flip-over Transaction or
Event, liquidation, dissolution, or winding up is to take place, and such notice
shall be so given at least 20 Business Days prior to the date of taking of such
proposed action by the Company.
5.9 NOTICES
Notices or demands authorized or required by this Agreement to be given or
made by the Rights Agent or by the holder of any Rights to or on the Company
will be sufficiently given or made if delivered or sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
The Loewen Group Inc.
Suite 506
4940 Canada Way
Burnaby, British Columbia
V5G 4K6
Attention: Senior Vice President, Law and General Counsel
Facsimile No.: (604) 299-1237
Any notice or demand authorized or required by this Agreement to be given
or made by the Company or by the holder of any Rights to or on the Rights Agent
shall be sufficiently given or made if delivered or sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Company) as follows:
The Royal Trust Company
Concourse Level
1177 West Hastings Street
Vancouver, British Columbia
V6E 2K3
Attention: Manager, Corporate Trust Services
Facsimile No.: (604) 662-2019
Notices or demands authorized or required by this Agreement to be given or
made by the Company or the Rights Agent to or on the holder of any Rights shall
be sufficiently given or made if delivered or sent by first-class mail, postage
prepaid addressed to such holder at the address of such holder as it appears
upon the registry books of the Rights Agent or, prior to the Separation Time, on
the registry books of the Company for the Common Shares. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice.
5.10 COSTS OF ENFORCEMENT
If the Company or any other Person the securities of which are purchasable
upon exercise of Rights fails to fulfill any of its obligations pursuant to this
Agreement, then the Company or such Person will reimburse the
30
<PAGE>
holder of any Rights for the costs and expenses (including legal fees) incurred
by such holder in actions to enforce his rights pursuant to any Rights of this
agreement.
5.11 SUCCESSORS
All the covenants and provisions of this Agreement by or for the benefit of
the Company or the Rights Agent shall bind and ensure to the benefit of their
respective successors and assigns hereunder.
5.12 BENEFITS OF THIS AGREEMENT
Nothing in this Agreement shall be construed to give to any Person other
than the Company, the Rights Agent and the holders of the Rights any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
holders of the Rights.
5.13 DESCRIPTIVE HEADINGS
Descriptive headings appear herein for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
5.14 GOVERNING LAW
This Agreement and the Rights issued hereunder shall be deemed to be a
contract made under the laws of the Province of Ontario and for all purposes
will be governed by and construed in accordance with the laws of such province
applicable to contracts to be made and performed entirely within such province.
5.15 LANGUAGE
Les parties aux presentes ont exige que la presente convention ainsi que
tous les documents et avis qui s'y rattachent et/ou qui en decoulent soient
rediges en langue anglaise. The parties hereto have required that this
Agreement and all documents and notices related thereto and/or resulting
therefrom be drawn up in English.
5.16 COUNTERPARTS
This Agreement may be executed in any number of counterparts and each of
such counterparts will for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
5.17 SEVERABILITY
If any term or provision hereof or the application thereof to any
circumstance is, in any jurisdiction and to any extent, invalid or
unenforceable, such term or provision will be ineffective only to the extent of
such invalidity or application of such term or provision to circumstances other
than those as to which it is held invalid or unenforceable.
5.18 EFFECTIVE DATE
This Agreement is effective from the date hereof. If this Agreement is not
confirmed by resolution passed by a majority of the votes cast by Independent
Shareholders, and by a majority of the votes cast by Independent Shareholders
other than Raymond Loewen and Anne Loewen and their respective Associates, in
each case who vote in respect of confirmation of this Agreement at a meeting of
shareholders to be held not later than the date of the 1990 Annual Meeting of
Shareholders of the Company, then this Agreement and any then outstanding Rights
shall be of no further force and effect, and such Rights shall terminate, from
the date
31
<PAGE>
which is the earlier of (a) the date of such meeting and (b) the date of the
1990 Annul Meeting of Shareholders of the Company.
If neither a Flip-in Event nor a Flip-over Transaction or Event to which
Section 3.1 or 3.2 is applicable has occurred prior to the 1995 Annual Meeting
of Shareholders of the Company and this Agreement is not re-confirmed by
resolution passed by a majority of the votes cast by Independent Shareholders
who vote in respect of confirmation of this Agreement at the 1995 Annual Meeting
of Shareholders of the Company, then this Agreement and any then outstanding
Rights shall be of no further force and effect, and such Rights shall terminate
from the date of the 1995 Annual Meeting of Shareholders of the Company.
5.19 DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS
The Board of Directors of the Company will have the exclusive power and
authority to administer and amend this Agreement and to exercise all rights and
powers specifically grant to the Board or the Company, or as may be necessary or
advisable in the administration of this Agreement, including without limitation,
the rights and power to
(i) interpret the provisions of this Agreement; and
(ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem
or not to redeem the Rights or to amend the Agreement).
All such actions, calculations, interpretations and determinations
(including, for purposes of clause (b) below, all omissions with respect to the
foregoing) which are done or made by the Board, in good faith, shall (a) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties, and (b) not subject the Board to any liability
to the holders of the Rights.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
THE LOEWEN GROUP INC.
By:
-----------------------------------------------
Peter Hyndman, Senior Vice President, Law and
General Counsel
THE ROYAL TRUST COMPANY
By:
-----------------------------------------------
Brent Cheal, Senior Corporate Trust Officer
and:
----------------------------------------------
Frances Ipsen, Senior Corporate Trust Officer
32
<PAGE>
EXHIBIT A
[Form of Rights Certificate]
Certificate No. Rights
------------------------ ------------------------
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES (SPECIFIED IN SUBSECTION 3.2(b) OF THE RIGHTS
AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR
TRANSFEREES OF AN ACQUIRING PERSON OR ITS AFFILIATES OR ASSOCIATES (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR ANY PERSON ACTING
JOINTLY OR IN CONCERT WITH ANY OF THEM MAY BECOME VOID.
RIGHTS CERTIFICATE
This certifies that ________________________________________________,
or registered assigns, is the registered holder of the number of Rights set
forth above, each of which entitles the registered holder thereof, subject to
the terms, provisions and conditions of the Rights Agreement dated as of April
20, 1990 (the "Rights Agreement") between The Loewen Group Inc., a corporation
incorporated under the British Columbia Company Act (the "Company") and The
Royal Trust Company, a trust company incorporated under the laws of Quebec, as
Rights Agent (the "Rights Agent", which term shall include any successor Rights
Agent under the Rights Agreement), to purchase from the Company at any time
after the Separation Time (as such term is defined in the Rights Agreement) and
prior to the close of business on April 20, 2000, one fully paid Common Share of
the Company (a "Common Share") at the Exercise Price referred to below, upon
presentation and surrender of this Rights Certificate with the Form of Election
to Exercise duly executed and submitted to the Rights Agent at its principal
office in any of the Cities of Vancouver, Toronto or Montreal. The Exercise
Price will initially be $90 (Canadian) per Right and shall be subject to
adjustment in certain events as provided in the Rights Agreement.
In certain circumstances described in the Rights Agreement, each Right
evidenced hereby may entitle the registered holder thereof to receive Common
Shares in exchange for the Right or to purchase or receive securities of an
entity other than the Company or other securities or assets of the Company other
than Common Shares all as provided in the Right Agreement.
This Rights Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Rights Agent, the Company and the holders or the Rights Certificates. Copies of
the Rights Agreement are on file at the registered office of the Company and are
available upon written request.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at any of the offices of the Rights Agent designated for such
purpose, may be exchanged for another Rights Certificate or Rights Certificates
of like tenor and date evidencing an aggregate number of Rights equal to the
aggregate number of Rights evidenced by the Rights Certificate or Rights
Certificates surrendered. If this Rights Certificate shall be exercised in
part, the registered holder shall be entitled to receive, upon surrender hereof,
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
<PAGE>
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be, and under certain circumstances are
required to be, redeemed by the Company at a redemption price of $0.01 per
Right, subject to adjustment in certain events, under certain circumstances.
No fractional Common Shares will be issued upon the exercise of any
Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Common
Shares or of any other securities that may at any time be issuable upon the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders of the Company at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Rights evidenced by the Rights Certificate shall have been exercised
as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Date:
-------------------------
THE LOEWEN GROUP INC.
Per: By:
-------------------------- ------------------------------------
Countersigned:
THE ROYAL TRUST COMPANY
By:
---------------------------
Authorized Signature
2
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to assign or
transfer the Rights Certificates.)
FOR VALUE RECEIVED
---------------------------------------------------------
hereby sells, assigns and transfers to
------------------------------------------
(Please print name and address of transferee)
the Rights represented by the Rights Certificate, together with all right, title
and interest therein, and hereby irrevocably constitutes and
appoints
------------------------------------------------------------------------
an attorney, to transfer the within Rights on the books of the Company, with
full power of substitution.
Dated:
--------------------------
Signature Guaranteed: ----------------------------------------
Signature
(Signature must correspond to name as
written upon the face of this Rights
Certificate in every particular, without
alteration or enlargement or any change
whatsoever)
Signature must be guaranteed by a member firm of a recognized stock
exchange in Canada, a registered national securities exchange in the United
States, a member of the Investment Dealers Association of Canada or National
Association of Securities Dealers, Inc., or a commercial bank or trust company
having an office or correspondent in Canada or the United States.
- - --------------------------------------------------------------------------------
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights
and Common Shares, that the Rights evidenced by this Rights Certificate are not,
and, to the knowledge of the undersigned, have never been, Beneficially Owned by
an Acquiring Person or an Affiliate or Associate thereof or by any Person acting
jointly or in concert with any of the foregoing (all as defined in the Rights
Agreement).
----------------------------------------
Signature
NOTICE
If the certification set forth above in the Form of Assignment is not
completed upon the assignment of the Right(s) evidenced by this Rights
Certificate, the Company will deem the Beneficial Owner of such Rights to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) and will affix a legend to that effect on any Right Certificates
issued in exchange for this Rights Certificate.
3
<PAGE>
[To be attached to each Rights Certificate]
FORM OF ELECTION TO EXERCISE
TO: THE LOEWEN GROUP INC.
The undersigned hereby irrevocably elects to exercise
__________________________________ whole Rights represented by the attached
Rights Certificate to purchase the Common Shares issuable upon the exercise of
such Rights and requests that certificates for such shares by issued in the name
of:
---------------------------------------------------------------------------
(Name)
---------------------------------------------------------------------------
(Street)
---------------------------------------------------------------------------
(City and State or Province) (Postal Code)
---------------------------------------------------------------------------
SOCIAL INSURANCE, SOCIAL SECURITY OR OTHER TAXPAYER IDENTIFICATION NUMBER
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate a new Rights Certificate for the balance of such Rights shall
be registered in the name of and delivered to:
---------------------------------------------------------------------------
(Name)
---------------------------------------------------------------------------
(Street)
---------------------------------------------------------------------------
(City and State or Province) (Postal Code)
---------------------------------------------------------------------------
SOCIAL INSURANCE, SOCIAL SECURITY OR OTHER TAXPAYER IDENTIFICATION NUMBER
Dated:
------------------------
Signature Guaranteed: ----------------------------------------
Signature
(Signature must correspond to name as
written upon the face of this Rights
Certificate in every particular, without
alteration or enlargement or any change
whatsoever)
Signature must be guaranteed by a member firm of a recognized stock
exchange in Canada, a registered national securities exchange in the United
States, a member of the Investment Dealers Association of Canada or National
Association of Securities Dealers, Inc., or a commercial bank or trust company
having an office or correspondent in Canada or the United States.
- - --------------------------------------------------------------------------------
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights
and Common Shares, that the Rights evidenced by this Rights Certificate are not,
and, to the knowledge of the undersigned, have never been, Beneficially Owned by
an Acquiring Person or an Affiliate or Associate thereof or by any Person acting
jointly or in concert with any of the foregoing (all as defined in the Rights
Agreement).
----------------------------------------
Signature
NOTICE
If the certification set forth above in the Form of Election to Exercise is
not completed upon the exercise of the Right(s) evidenced by this Rights
Certificate, the Company will deem the Beneficial Owner of such Right(s) to be
an Acquiring Person or an Affiliate or Associate thereof (as defined in the
Rights Agreement).
4
<PAGE>
SHAREHOLDER PROTECTION RIGHTS AGREEMENT
AMENDMENTS made as of the 24th day May, 1990 to Agreement made as of April 20,
1990.
BETWEEN:
THE LOEWEN GROUP INC., a corporation incorporated under the
laws of British Columbia
(hereinafter referred to as the "Company")
OF THE FIRST PART,
- and -
THE ROYAL TRUST COMPANY, a trust company incorporated under
the laws of Quebec
(hereinafter referred to as the "Rights Agent")
OF THE SECOND PART.
WHEREAS at the meeting of shareholders of the Company, held on the 24th day
of May, 1990, called to consider, among other things, the resolution to confirm
the Shareholder Protection Rights Plan Agreement made as of April 20, 1990 (the
"Rights Plan") (the "Main Resolution") a resolution (the "Amending Resolution")
was made to amend the Main Resolution so as to authorize and direct the Company
to amend the definition of "Acquiring Person" in the Rights Plan in the manner
herein set out;
AND WHEREAS the Amending Resolution and the Main Resolution were passed by
a majority of the votes cast by Independent Shareholders (as defined in the
Rights Plan) and by a majority of the votes cast by Independent Shareholders,
other than Raymond
<PAGE>
Loewen and Anne Loewen and their respective Associates (as defined in the Rights
Plan), at such meeting;
NOW THEREFORE in consideration of the premises the parties hereby agree
that:
1. The definition of "Acquiring Person" in subsection 1.1(a) of the Rights
Plan shall be amended:
(a) by deleting the word "and" at the end of clause (ii) thereof;
(b) by replacing the period at the end of clause (iii) thereof with a
semi-colon and by adding the word "and" at the end thereof; and
(c) by adding the following after clause (iii) thereof:
"(iv) any pension plan or fund registered under the Pension
Benefits Standards Act, 1985 (Canada), the Employment Pension
Plans Act (Alberta), an Act respecting supplemental pension plans
(Quebec) or the Pension Benefits Act, 1987 (Ontario) or any
comparable or successor laws thereto so long as (A) such
legislation prohibits such pension plan or fund from owning more
than 30% of the Common Shares or Voting Shares and (B) such
pension plan or fund
- 2 -
<PAGE>
holds its Common Shares or Voting Shares for investment purposes only
and is not acting jointly or in concert with any other Person."
IN WITNESS WHEREOF, these amendments have been duly executed as of the date
first above written.
THE LOEWEN GROUP INC.
By: /s/ Peter Hyndman
----------------------------------------------
Peter Hyndman, Senior Vice-President, Law and
General Counsel
THE ROYAL TRUST COMPANY
By: /s/ Brent Cheal
----------------------------------------------
Brent Cheal, Senior Corporate Trust Officer
By: /s/ Francis Ipsen
----------------------------------------------
Francis Ipsen, Senior Corporate Trust Officer
- 3 -
<PAGE>
CERTIFICATE
RE: SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT
made as of April 20, 1990 between THE LOEWEN
GROUP INC. and THE ROYAL TRUST COMPANY, as
amended ("Rights Plan Agreement")
--------------------------------------------
The undersigned, Robert B. Lundgren, Senior Vice-President, Finance and
Corporate Development of The Loewen Group Inc. (the "Company") hereby certifies
on behalf of the Company that there has been an adjustment to the Exercise Price
(as defined in the Rights Plan Agreement). Effective as at the close of
business on June 18, 1991 at each of the respective locations of The Royal Trust
Company, registrar and transfer agent for the Common shares of the Company the
Exercise Price shall equal $45.
The adjustment has been made because of the subdivision of the issued and
unissued Common shares of the Company on a 2 for 1 basis. The record date for
such subdivision is the close of business on June 18, 1991, as described in the
preceding paragraph. The effect of the subdivision is to double the number of
Common shares and therefore to halve the Exercise Price, which was equal to $90
prior to such subdivision.
Dated this ______ day of June, 1991 at Burnaby, British Columbia, Canada.
/s/ Robert B. Lundgren
--------------------------------------------------
Robert B. Lundgren
Senior Vice-President, Finance
and Corporate Development
<PAGE>
CERTIFIED COPY OF RESOLUTION
I, PETER STEWART HYNDMAN, Senior Vice-President, Law and General Counsel of
The Loewen Group Inc., hereby certify that the attached Schedule "A" is a true
and correct copy of a duly passed resolution of the Directors of The Loewen
Group Inc. on April 7, 1994 and that the said resolution has not been rescinded,
amended or modified and is in full force and effect as at May 27, 1994.
"Peter S. Hyndman"
----------------------------------------------
PETER S. HYNDMAN, Senior Vice-President, Law
and General Counsel
<PAGE>
SCHEDULE "A"
4. SHAREHOLDER PROTECTION RIGHTS PLAN
The Directors then considered three suggested amendments to the Shareholder
Protection Rights Plan, outlined in the memo to Directors of April 5, 1994
from Borden & Elliot and previously circulated to Directors.
UPON MOTION duly proposed and unanimously carried (Hyndman, Garnett), it
was resolved that:
(a) SUCCESSION PLANNING
WHEREAS The Loewen Group Inc. (the "Company") and The Royal Trust
Company (the "Rights Agent") entered into a Shareholder Protection
Rights Plan Agreement made as of April 20, 1990 (the "Rights Plan");
AND WHEREAS the Rights Plan was amended as evidenced by an amendment
thereto made as of the 24th day of May, 1990;
AND WHEREAS the Rights Plan provides, pursuant to section 5.4 thereof,
that the Company may from time to time supplement or amend the Rights
Plan to make any changes which the Board of Directors acting in good
faith may deem necessary or desirable;
AND WHEREAS the Board of Directors acting in good faith has determined
that the amendments set out in the following resolution are necessary
or desirable;
(i) the Rights Plan be amended as follows:
(A) Clause (ii) of subsection 1.1(a) is hereby amended to read
as follows:
"(ii) any Person who becomes the Beneficial Owner of 20%
or more of the outstanding Common Shares or Voting
Shares of the Company as a result of
(A) an acquisition or redemption by the Company of
Voting Shares of the Company which, by reducing
the number of Voting Shares outstanding, increases
the proportionate number of Voting Shares
Beneficially Owned by such Person to 20% or more
of the
<PAGE>
Common Shares or Voting Shares of the Company then
outstanding, or
(B) share acquisitions made pursuant to a Permitted
Bid and approved in accordance with the provision
of Section 3.5 and made after the date of such
approval ("PERMITTED BID ACQUISITIONS") or
(C) share acquisitions in respect of which the Board
of Directors of the Company has waived the
application of Section 3.2 pursuant to subsection
5.1(b) or which were made on or prior to the date
of this Agreement ("EXEMPT ACQUISITIONS"); or
(D) acquisitions of Common Shares or Voting Shares
made as a result of the death of the Beneficial
Owner of such Common Shares or Voting Shares of
the Company ("INHERITED ACQUISITIONS").
provided, however, that if a Person shall become the
Beneficial Owner of 20% or more of the Common Shares or
Voting Shares of the Company then outstanding by reason
of (i) share acquisitions or redemptions by the Company
or (ii) Permitted Bid Acquisitions or (iii) Exempt
Acquisitions or (iv) Inherited Acquisitions and, after
such share acquisitions or redemptions by the Company
or Permitted Bid Acquisitions or Exempt Acquisitions or
Inherited Acquisitions, becomes the Beneficial Owner of
any additional Voting Shares of the Company other than
pursuant to Permitted Bid Acquisitions, Exempt
Acquisitions, Inherited Acquisitions, acquisitions as a
result of a stock dividend, a stock split or other
event pursuant to which such Person receives or
acquires Voting Shares in the same pro rata basis as
all other holders of Voting Shares of the same class
("PRO RATA ACQUISITIONS") or acquisitions pursuant to a
dividend reinvestment plan of the Company, then as of
the date of becoming the Beneficial Owner of any
additional
- 2 -
<PAGE>
Voting Shares, such Person shall become an "Acquiring
Person"; and"
(ii) Subsection 1.1(q.l) shall be added immediately after
subsection 1.1(q) to read as follows:
"(q.l) "INHERITED ACQUISITION" shall have the
meaning ascribed thereto by subclause 1.1(a)(ii)(D)."
(iii) Section 1.3(a) is amended by replacing the words "or Pro
Rata Acquisitions" at the end thereof with the following: ",
Pro Rata Acquisitions or Inherited Acquisitions".
(iv) Subsection 1.3(b) is amended to read as follows:
" (b) A Person shall not be and shall not be deemed
to be an Acquiring Person if such Person (a
"GRANDFATHERED PERSON TRANSFEREE") becomes the
Beneficial Owner of 20% or more of the outstanding
Common Shares or Voting Shares of the Company solely as
a result of
(i) the acquisition of all but not less than all of
the Common Shares or Voting Shares of the Company
Beneficially Owned immediately prior thereto by a
Grandfathered Person or a Grandfathered Person
Transferee (the "TRANSFEROR") and such Person's
Beneficial Ownership of Common Shares or Voting
Shares of the Company after giving effect to such
acquisition does not exceed the number of Common
Shares or Voting Shares of the Company
Beneficially Owned by the Transferor immediately
prior to such acquisition by more than 2% of the
then issued and outstanding Common Shares or
Voting Shares of the Company or
(ii) as a result of the death of a Grandfathered Person
or a Grandfathered Person Transferee;
provided, however, that the exception in this
subsection 1.3(b) shall cease to be applicable to a
Grandfathered Person Transferee who shall after the
time at which he becomes a Grandfathered Person
- 3 -
<PAGE>
Transferee (the "Transfer Time") become, pursuant to
one or more transactions or events, the Beneficial
Owner of additional Common Shares or Voting Shares of
the Company constituting, together with the number of
Common Shares or Voting Shares Beneficially Owned by
such Grandfathered Person Transferee immediately prior
to the Transfer Time, in the aggregate more than 2% of
the Common Shares or Voting Shares of the Company then
outstanding, other than pursuant to Permitted Bid
Acquisitions, Exempt Acquisitions, Pro Rata
Acquisitions or Inherited Acquisitions."
(v) Section 1.3(c) is amended by replacing the words "or Pro
Rata Acquisitions" at the end thereof with the following: ",
Pro Rata Acquisitions or Inherited Acquisitions'.
(b) EXERCISE PRICE
WHEREAS The Loewen Group Inc. (the "Company") and The Royal Trust
Company (the "Rights Agent") entered into a Shareholder Protection
Rights Plan Agreement made as of April 20, 1990 (the "Rights Plan");
AND WHEREAS the Rights Plan was amended as evidenced by an amendment
thereto made as of the 24th day of May, 1990;
AND WHEREAS the Rights Plan provides, pursuant to section 5.4 thereof,
that the Company may from time to time supplement or amend the Rights
Plan to make any changes which the Board of Directors acting in good
faith may deem necessary or desirable, provided that no such
supplement or amendments which would increase the Exercise Price (as
defined therein) shall be effective until confirmed by the holders of
the Rights;
AND WHEREAS the Board of Directors acting in good faith has determined
that the amendments set out in the following resolution are necessary
or desirable;
(i) the Rights Plan be amended so that subsection 1.1(l) shall read
as follows:
"EXERCISE PRICE" shall mean, as of any date, the price at which a
holder may purchase the securities issuable upon exercise of one
whole Right and, until adjustment thereof in accordance with the
terms hereof, the Exercise Price shall equal $125.";
- 4 -
<PAGE>
(ii) such amendment be placed before the shareholders of the Company
at the annual general meeting to be held on May 16, 1994.
(c) WAIVER
WHEREAS The Loewen Group Inc. (the "Company") and The Royal Trust
Company (the "Rights Agent") entered into a Shareholder Protection
Rights Plan Agreement made as of April 20, 1990 (the "Rights Plan");
AND WHEREAS pursuant to the terms of the Rights Plan, Raymond L.
Loewen is a Grandfathered Person, as defined therein;
AND WHEREAS it is proposed that Mr. Loewen participate in the
Company's Management Equity Investment Plan (the "MEIP");
AND WHEREAS if Mr. Loewen participates in the MEIP, pursuant to the
terms of the Rights Plan, he would be deemed to Beneficially Own an
additional 2,000,000 Common Shares of the Company and would,
therefore, become an Acquiring Person under the terms of the Rights
Plan such that, at the close of business on the tenth day after his
agreeing to participate in the MEIP a Separation Time (as defined in
subsection 1.1(bb) of the Rights Plan) would occur and the terms of
the Rights would change pursuant to section 3.2 of the Rights Plan;
AND WHEREAS pursuant to subsection 5.1(b) of the Rights Plan, the
Board of Directors may, until the first to occur of a Flip-in Event
(as defined in the Rights Plan) or a Flip-over Transaction or Event
(as defined in the Rights Plan) upon prior written notice delivered to
the Rights Agent (as defined in the Rights Plan) determine to waive
the application of subsection 1.1(bb) and Section 3.1 or 3.2 to any
particular Flip-over Transaction or Event or Flip-in Event.
(i) the Board of Directors of the Company hereby determine to waive
the application of subsection 1.1(bb) and section 3.2 of the
Rights Plan to the Flip-in Event that would arise as a result of
Mr. Loewen's acquisition of Beneficial Ownership of 2,000,000
Common Shares pursuant to the MEIP;
(ii) the proper officers of the Company be hereby directed to give
notice of this waiver to the Rights Agent under the Rights Plan.
- 5 -
<PAGE>
EXHIBIT 37
[Loewen Letterhead]
August 19, 1988
VIA FEDERAL EXPRESS
Mr. Tim Hogenkamp
5161 Scarsdale Cove
Cincinnati, Ohio 45248
U.S.A.
Dear Tim:
We thoroughly enjoyed our dinner meeting and discussions in Toronto. Please be
advised that The Loewen Group Inc. (the "Company") hereby makes an offer of
employment in accordance with the following terms and conditions:
(a) You will be employed as Vice President, Operations of the Company with
employment to commence on September 19, 1988.
(b) Your responsibilities will be those described in the attached job
description (Schedule "A").
(c) Your compensation will be made up of the following:
(i) a base management salary of $130,000 per annum payable on a twice
monthly basis.
(ii) reimbursement of your $18,500 (U.S. funds) bonus from your
current employer which will be lost as a result of your
acceptance of employment with us (payable on November 30, 1988).
(iii) $400 per month automobile expense allowance.
(iv) the provision of an executive stock option plan whereby you will
be able to purchase 7500 common shares of the company per year
for 4 years at a per share price which is 10% below the market
value price of the stock on the day we enter into the stock
option agreement. This will provide options on 30,000 common
shares in total over the 4 year period. Your rights to purchase
will take place at 12 month intervals commencing September 30,
1989.
<PAGE>
2
(v) Reimbursement of mutually agreeable relocation expenses including
temporary housing for 90 days following commencement of
employment.
(d) The employment engagement can be terminated on 6 months notice by either
party.
We look forward to your acceptance and will do whatever possible to work with
you in expediting your acceptance for employment by Canadian Immigration
authorities on both a temporary and permanent basis. Please sign both copies of
the enclosed offer by Wednesday, August 24, 1988 and return one copy to our
office.
Yours very truly,
/s/ Raymond L. Loewen
- - -------------------------
Raymond L. Loewen
President
RLL/lbh
Accepted this ___ day of
August, 1988.
/s/ Tim Hogenkamp
--------------------------
Tim Hogenkamp
<PAGE>
EXHIBIT 38
[INTENTIONALLY OMITTED].
<PAGE>
EXHIBIT 39
An Indemnification Letter in the following form has been executed
between the Company and the following individuals:
Kenneth S. Bagnell
J. Carter Beese, Jr.
Earl A. Grollman
Harold E. Hughes
Albert S. Lineberry, Sr.
Charles B. Loewen
Robert B. Lundgren
James D. McLennan
Ernest G. Penner
John N. Turner
Raymond L. Loewen
Paul Wagler
Lawrence Miller
Peter Hyndman
Timothy R. Hogenkamp
INDEMNIFICATION LETTER FOR DIRECTORS
October 10, 1996
Dear ___________________:
Pursuant to Section 152 of the COMPANY ACT, R.S.B.C. 1979, c. 59, as amended,
The Loewen Group Inc. (the "Company") may provide certain indemnities in
favour of directors and former directors of the Company and in favour of
directors or former directors of corporations of which the Company is or was
a shareholder. Article 19.1 of the Articles of the Company provides for
directors and former directors to be indemnified accordingly.
In consideration of one dollar ($1.00) and other valuable consideration, the
receipt and sufficiency whereof is hereby acknowledged, the Company hereby
undertakes to indemnify you and your heirs and personal representatives
against all costs, charges and expenses, including an amount paid to settle
an action or satisfy a judgment, actually and reasonably incurred by you or
any of such persons by reason of, arising from or in connection with your
being a director of the Company or corporation of which the Company is or was
a shareholder, including a judgment in any civil, criminal or administrative
action or proceeding to which you or any of such persons is made a party by
reason of your being or having been an director of the Company or corporation
of which the Company is or was a shareholder, including an action brought by
the Company or any corporation of which the Company is or was a shareholder.
The Company (i) will, so long as you shall be an director of the Company or
corporation of which the Company is or was a shareholder, as the case may be,
use its best efforts to ensure that none of the provisions in the articles of
the Company relating to the indemnity of the directors is altered, (ii) will
not prevent or seek to prevent you from obtaining the protection of any such
provisions and (iii) will do all acts which may be required to secure such
protection including without limitation make application to court for
approval of the indemnity herein.
The foregoing indemnities are subject to the approval of the court, as
provided in the COMPANY ACT and to the conditions that you have acted
honestly and in good faith with a view to the best interests of the Company
or corporation of which the Company is or was a shareholder, as the case may
be, and, in case of a criminal or administrative action or proceeding, you
had reasonable grounds for believing your conduct was lawful. You will be
presumed to have acted honestly and
<PAGE>
-2-
in good faith with a view to the best interests of the Company or corporation
of which the Company is or was a shareholder, as the case may be, in the
absence of a determination by the court that you acted in bad faith or with
criminal intent.
This letter also confirms the terms on which the Company will assume conduct
of the defence of any action to which the indemnity relates. Promptly upon
your receiving notice of any claim for which you are entitled to indemnity
under this letter, you will give notice thereof to the Company, together with
all information in your possession related to the subject matter of the
claim, and together with copies of any writs, petitions or other legal
process served upon you. The Company will at its expense assume the defence
of the claim, through counsel of its choice to whom you do not, on reasonable
grounds, object. In addition, if you wish, you may retain legal counsel of
your choice at the cost of the Company. Failure to give notice of a claim in
a timely fashion will not disentitle you or your heirs or personal
representatives to your rights hereunder unless the Company suffers material
prejudice because of the delay.
Thereafter the Company will have carriage of the defence of the claim, but
you will make yourself available at the times and (at the expense of the
Company) places from time to time requested by the Company or its counsel for
the purpose of examinations for discovery, preparation of answer to any
claim, and for any other purposes related to the claim. The Company may at
its expense, settle or compromise any claim made against you, but not without
the consent of you or your heirs or personal representatives, which will not
be unreasonably withheld. The Company will pay all costs of investigating any
claim and all costs associated with conducting the defence.
All amounts advanced by the Company in respect of costs, charges and expenses
of defending the claim will be treated as a non-interest bearing loan and
will be repayable forthwith on demand in the event that the court fails to
approve your entitlement to indemnity hereunder.
The provisions of this letter shall survive your resignation or other
cessation of holding office as director and shall be in addition to and not
in derogation of any rights at law or in equity that you or your heirs and
personal representatives may have.
The Company will be subrogated to all rights which you or your heirs and
personal representatives may have under policies of insurance.
The Company and you and your heirs and personal representatives will execute
all further documents and take all further actions as shall be necessary or
desirable to give effect to the provisions hereof.
If any provision of this agreement is illegal, void, unenforceable or
otherwise ineffective, such provision shall be severed and the remaining
provisions shall remain in full force and effect.
<PAGE>
-3-
The provisions hereof shall be binding upon the Company and its successors
and shall survive any amalgamation, merger, combination or other
reorganization of the Company.
Yours very truly
THE LOEWEN GROUP INC.
Per:
Agreed upon this _________ day of October, 1996.
<PAGE>
EXHIBIT 40
An Indemnification Letter in the following form has been executed
between the Company and the following individuals:
Grant Ballantyne
Timothy A. Birch
Dwight K. Hawes
David Laundy
J.C. Ogier Mathewes
Douglas J. McKinnon
Peter W. Roberts
Andrew Scott
William R. Shane
Thomas E. Stilgenbauer
Randall M. Walters
Timothy R. Hogankamp
Peter Hyndman
Raymond L. Loewen
Lawrence Miller
Paul Wagler
INDEMNIFICATION LETTER FOR OFFICERS
October 10, 1996
Dear ___________________:
Pursuant to Section 152 of the COMPANY ACT, R.S.B.C. 1979, c. 59, as amended,
The Loewen Group Inc. (the "Company") may provide certain indemnities in
favour of officers and former officers of the Company and in favour of
officers or former officers of corporations of which the Company is or was a
shareholder. Article 19.2 of the Articles of the Company provides for
officers and former officers to be indemnified accordingly.
In consideration of one dollar ($1.00) and other valuable consideration, the
receipt and sufficiency whereof is hereby acknowledged, the Company hereby
undertakes to indemnify you and your heirs and personal representatives
against all costs, charges and expenses, including an amount paid to settle
an action or satisfy a judgment, actually and reasonably incurred by you or
any of such persons by reason of, arising from or in connection with your
being an officer of the Company or corporation of which the Company is or was
a shareholder, including a judgment in any civil, criminal or administrative
action or proceeding to which you or any of such persons is made a party by
reason of your being or having been an officer of the Company or corporation
of which the Company is or was a shareholder, including an action brought by
the Company or any corporation of which the Company is or was a shareholder.
The Company (i) will, so long as you shall be an officer of the Company or
corporation of which the Company is or was a shareholder, as the case may be,
use its best efforts to ensure that none of the provisions in the articles of
the Company relating to the indemnity of the officers is altered, (ii) will
not prevent or seek to prevent you from obtaining the protection of any such
provisions and (iii) will do all acts which may be required to secure such
protection including without limitation make application to court for
approval of the indemnity herein.
The foregoing indemnities are subject to the approval of the court, as
provided in the COMPANY ACT and to the conditions that you have acted
honestly and in good faith with a view to the best interests of the Company
or corporation of which the Company is or was a shareholder, as the case may
be, and, in case of a criminal or administrative action or proceeding, you
had reasonable grounds for believing your conduct was lawful. You will be
presumed to have acted honestly and
<PAGE>
-2-
in good faith with a view to the best interests of the Company or corporation
of which the Company is or was a shareholder, as the case may be, in the
absence of a determination by the court that you acted in bad faith or with
criminal intent.
This letter also confirms the terms on which the Company will assume conduct
of the defence of any action to which the indemnity relates. Promptly upon
your receiving notice of any claim for which you are entitled to indemnity
under this letter, you will give notice thereof to the Company, together with
all information in your possession related to the subject matter of the
claim, and together with copies of any writs, petitions or other legal
process served upon you. The Company will at its expense assume the defence
of the claim, through counsel of its choice to whom you do not, on reasonable
grounds, object. In addition, if you wish, you may retain legal counsel of
your choice at the cost of the Company. Failure to give notice of a claim in
a timely fashion will not disentitle you or your heirs or personal
representatives to your rights hereunder unless the Company suffers material
prejudice because of the delay.
Thereafter the Company will have carriage of the defence of the claim, but
you will make yourself available at the times and (at the expense of the
Company) places from time to time requested by the Company or its counsel for
the purpose of examinations for discovery, preparation of answer to any
claim, and for any other purposes related to the claim. The Company may at
its expense, settle or compromise any claim made against you, but not without
the consent of you or your heirs or personal representatives, which will not
be unreasonably withheld. The Company will pay all costs of investigating any
claim and all costs associated with conducting the defence.
All amounts advanced by the Company in respect of costs, charges and expenses
of defending the claim will be treated as a non-interest bearing loan and
will be repayable forthwith on demand in the event that the court fails to
approve your entitlement to indemnity hereunder.
The provisions of this letter shall survive your resignation or other
cessation of holding office as officer and shall be in addition to and not
in derogation of any rights at law or in equity that you or your heirs and
personal representatives may have.
The Company will be subrogated to all rights which you or your heirs and
personal representatives may have under policies of insurance.
The Company and you and your heirs and personal representatives will execute
all further documents and take all further actions as shall be necessary or
desirable to give effect to the provisions hereof.
If any provision of this agreement is illegal, void, unenforceable or
otherwise ineffective, such provision shall be severed and the remaining
provisions shall remain in full force and effect.
<PAGE>
-3-
The provisions hereof shall be binding upon the Company and its successors
and shall survive any amalgamation, merger, combination or other
reorganization of the Company.
Yours very truly
THE LOEWEN GROUP INC.
Per:
Agreed upon this _________ day of October, 1996.
<PAGE>
EXHIBIT 41
The attached form of Severance Agreement has been authorized for each of the
following five key executives of the Company, among others:
1. Timothy R. Hogenkamp
2. Lawrence Miller
3. Douglas McKinnon
4. Paul Wagler
5. Peter S. Hyndman
Section 3(c) will be included in the Severance Agreement for each of the
foregoing individuals. The multiples to be reflected in Items I and II of Annex
A to the Severance Agreement for each of the foregoing individuals are One and
Three, respectively, and the number of months to be reflected in Item III of
Annex A to the Severance Agreement for each of the foregoing individuals is 36.
<PAGE>
SEVERANCE AGREEMENT
This Severance Agreement (this "Agreement"), is made and entered into
as of October ___, 1996, by and between [THE LOEWEN GROUP INC., A BRITISH
COLUMBIA CORPORATION] [LOEWEN GROUP INTERNATIONAL, INC., A DELAWARE CORPORATION]
(the "Company"), and ______________________ (the "Executive").
WITNESSETH:
[WHEREAS, THE COMPANY IS A WHOLLY OWNED SUBSIDIARY OF THE LOEWEN GROUP
INC., A BRITISH COLUMBIA CORPORATION ("PARENT"), AND PARENT, BY EXECUTING THE
SIGNATURE PAGE HERETO, HEREBY REQUESTS THAT THE COMPANY ENTER INTO THIS
AGREEMENT;]
WHEREAS, the Executive is a senior executive of the Company and has
made and is expected to continue to make major contributions to the short- and
long-term profitability, growth and financial strength of the Company;
WHEREAS, [THE COMPANY DESIRES] [PARENT DESIRES THAT THE COMPANY TAKE
ACTION] to assure itself of both present and future continuity of management and
to establish certain retention bonus and severance benefits for certain of its
senior executives, including the Executive, applicable in the event of a Change
in Control;
WHEREAS, [THE COMPANY DESIRES] [PARENT DESIRES THAT THE COMPANY TAKE
ACTION] to ensure that its senior executives are not practically disabled from
discharging their duties in respect of a proposed or actual transaction
involving a Change in Control; and
WHEREAS, [THE COMPANY DESIRES] [PARENT DESIRES THAT THE COMPANY TAKE
ACTION] to provide additional inducement for the Executive to continue to remain
in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as follows:
____________
NOTE: In the actual agreements for Executives employed by The Loewen Group
Inc., the bracketed references regarding "Parent" will be deleted. In the
actual agreements for Executives employed by Loewen Group International, Inc.,
the bracketed references to "the Company" will be deleted. In the actual
agreements for certain Executives, Section 3(c) and all references thereto will
be deleted.
<PAGE>
1. CERTAIN DEFINED TERMS: In addition to terms defined elsewhere
herein, the following terms have the following
meanings when used in this Agreement with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary at a rate not
less than the Executive's annual fixed or base compensation as in effect
for Executive immediately prior to the occurrence of a Change in Control or
such higher rate as may be determined from time to time by the Board of
Directors of the Company (the "Board") or a committee thereof.
(b) "Cause" means that, prior to any termination pursuant to
Section 3(b) or Section 3(c), the Executive shall have committed:
(i) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment with the
Company or any Subsidiary;
(ii) intentional wrongful damage to property of the Company or
any Subsidiary;
(iii) intentional wrongful disclosure of secret processes or
confidential information of the Company or any Subsidiary; or
(iv) intentional wrongful engagement in any Competitive Activity;
and any such act shall have been materially harmful to the Company. For
purposes of this Agreement, no act or failure to act on the part of the
Executive shall be deemed "intentional" if it was due primarily to an error
in judgment or negligence, but shall be deemed "intentional" only if done
or omitted to be done by the Executive not in good faith and without
reasonable belief that his action or omission was in the best interest of
the Company. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for "Cause" hereunder unless and until there
shall have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the Board
then in office at a meeting of the Board called and held for such purpose,
after reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel (if the Executive chooses to have
counsel present at such meeting), to be heard before the Board, finding
that, in the good faith opinion of the Board, the Executive had committed
an act constituting "Cause" as herein defined and specifying the
particulars thereof in detail. Nothing herein will limit the right of the
Executive or his beneficiaries to contest the validity or propriety of any
such determination.
-3-
<PAGE>
(c) "Change in Control" means the occurrence during the Term of any
of the following events:
(i) [THE COMPANY] [PARENT] is merged, consolidated or
reorganized into or with another corporation or other legal person,
and as a result of such merger, consolidation or reorganization less
than two-thirds of the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors
("Voting Stock") of such corporation or person immediately after such
transaction are held in the aggregate by the holders of Voting Stock
of [THE COMPANY] [PARENT] immediately prior to such transaction;
(ii) [THE COMPANY] [PARENT] sells or otherwise transfers all or
substantially all of its assets to another corporation or other legal
person, and as a result of such sale or transfer less than two-thirds
of the combined voting power of the then-outstanding Voting Stock of
such corporation or person immediately after such sale or transfer is
held in the aggregate by the holders of Voting Stock of [THE COMPANY]
[PARENT] immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), disclosing that any person (as the term "person" is
used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act),
other than Raymond L. Loewen, a person including Raymond L. Loewen, or
a person whose beneficial ownership of Voting Stock of [THE COMPANY]
[PARENT] is shared with Raymond L. Loewen, has become the beneficial
owner (as the term "beneficial owner" is defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act)
of securities representing 25% or more of the combined voting power of
the then-outstanding Voting Stock of [THE COMPANY] [PARENT];
(iv) [THE COMPANY] [PARENT] files a report or proxy statement
with the Securities and Exchange Commission pursuant to the Exchange
Act disclosing in response to Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) that a change in
control of [THE COMPANY] [PARENT] has occurred or will occur in the
future pursuant to any then-existing contract or transaction; or
(v) If, during any period of two consecutive years, individuals
who at the beginning of any such period constitute the directors of
[THE COMPANY] [PARENT] cease for any reason to constitute at least a
-4-
<PAGE>
majority thereof; PROVIDED, HOWEVER, that for purposes of this clause
(v) each director who is first elected, or first nominated for
election by [THE COMPANY'S] [PARENT'S] stockholders, by a vote of at
least two-thirds of the directors of [THE COMPANY] [PARENT] (or a
committee thereof) then still in office who were directors of [THE
COMPANY] [PARENT] at the beginning of any such period will be deemed
to have been a director of [THE COMPANY] [PARENT] at the beginning of
such period.
Notwithstanding the foregoing provisions of Sections 1(c)(iii) or 1(c)(iv),
unless otherwise determined in a specific case by majority vote of the
Board, a "Change in Control" shall not be deemed to have occurred for
purposes of Section 1(c)(iii) or 1(c)(iv) solely because (A) [THE COMPANY]
[PARENT], (B) an entity in which [THE COMPANY] [PARENT] directly or
indirectly beneficially owns 50% or more of the outstanding Voting Stock (a
"Subsidiary"), or (C) any [COMPANY] [PARENT]-sponsored employee stock
ownership plan or any other employee benefit plan of [THE COMPANY] [PARENT]
or any Subsidiary either files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form
8-K or Schedule 14A (or any successor schedule, form or report or item
therein) under the Exchange Act disclosing beneficial ownership by it of
shares of Voting Stock, whether in excess of 25% or otherwise, or because
[THE COMPANY] [PARENT] reports that a change in control of [THE COMPANY]
[PARENT] has occurred or will occur in the future by reason of such
beneficial ownership.
(d) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee retirement
income and welfare benefit policies, plans, programs or arrangements in
which Executive is entitled to participate, including without limitation
any stock option, stock purchase, stock appreciation, savings, pension,
supplemental executive retirement, or other retirement income or welfare
benefit, deferred compensation, incentive compensation, group or other
life, health, medical/hospital or other insurance (whether funded by actual
insurance or self-insured by the Company), disability, salary continuation,
expense reimbursement and other employee benefit policies, plans, programs
or arrangements that may now exist or any equivalent successor policies,
plans, programs or arrangements that may be adopted hereafter by the
Company, providing perquisites, benefits and service credit for benefits at
least as great in the aggregate as are payable thereunder prior to a Change
in Control.
(e) "Incentive Pay" means an annual amount equal to not less than the
greatest aggregate annual bonus, incentive or other payments of cash
compensation, in addition to Base
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Pay, made or to be made in regard to services rendered in any calendar year
during the three calendar years immediately preceding the year in which the
Change in Control occurred pursuant to any bonus, incentive,
profit-sharing, performance, discretionary pay or similar agreement,
policy, plan, program or arrangement (whether or not funded) of the
Company, or any successor thereto providing benefits at least as great as
the benefits payable thereunder prior to a Change in Control.
(f) "Severance Period" means the period of time commencing on the
date of the first occurrence of a Change in Control and continuing until
the earliest of (i) the second anniversary of the occurrence of the Change
in Control or (ii) the Executive's death; PROVIDED, HOWEVER, that
commencing on each anniversary of the occurrence of the Change in Control,
the Severance Period will automatically be extended for an additional year
unless, not later than 90 calendar days prior to such anniversary date,
either the Company or the Executive shall have given written notice to the
other that the Severance Period is not to be so extended.
(g) "Target Annual Bonus" means the aggregate amount of all payments
in the nature of annual cash bonus to which the Executive would be entitled
in respect of any particular year if (i) the Executive were employed
throughout the entirety of such year and (ii) with respect to any such
payment that is contingent in whole or in part upon the achievement of one
or more specified performance targets, a performance level equal to the
minimum performance target established to determine whether any bonus would
be payable (in the event that only one performance target applicable
thereto shall have been established) or a performance level equal to the
midpoint of the minimum and maximum performance targets established to
determine the amount of any bonus that would be payable (in the event that
two or more performance targets applicable thereto shall have been
established) were achieved in respect of that year.
(h) "Term" means the period commencing as of the date hereof and
expiring as of the later of (i) the close of business on December 31, 1998,
or (ii) the expiration of the Severance Period; PROVIDED, HOWEVER, that
(A) commencing on January 1, 1998 and each January 1 thereafter, the term
of this Agreement will automatically be extended for an additional year
unless, not later than September 30 of the immediately preceding year, the
Company or the Executive shall have given notice that it or the Executive,
as the case may be, does not wish to have the Term extended and (B) subject
to the last sentence of Section 9, if, prior to a Change in Control, the
Executive ceases for any reason to be an employee of the Company and any
Subsidiary, thereupon without further action the Term shall be deemed to
have expired and this Agreement will immediately terminate and be
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of no further effect. For purposes of this Section 1(h), the Executive
shall not be deemed to have ceased to be an employee of the Company and any
Subsidiary by reason of the transfer of Executive's employment between the
Company and any Subsidiary, or among any Subsidiaries.
2. OPERATION OF AGREEMENT: This Agreement will be effective and
binding immediately upon its execution, but, anything in this Agreement to the
contrary notwithstanding, this Agreement will not be operative unless and until
a Change in Control occurs. Upon the occurrence of a Change in Control at any
time during the Term, without further action, this Agreement shall become
immediately operative.
3. TERMINATION FOLLOWING A CHANGE IN CONTROL: (a) In
the event of the occurrence of a Change in Control, the Executive's employment
may be terminated by the Company during the Severance Period and the Executive
shall be entitled to the benefits provided by Section 4(b) unless such
termination is the result of the occurrence of one or more of the following
events:
(i) The Executive's death;
(ii) If the Executive becomes permanently disabled within the
meaning of, and begins actually to receive disability benefits
pursuant to, the long-term disability plan in effect for, or
applicable to, Executive immediately prior to the Change in Control;
or
(iii) Cause.
If, during the Severance Period, the Executive's employment is terminated by the
Company or any Subsidiary otherwise than pursuant to Section 3(a)(i), 3(a)(ii)
or 3(a)(iii), the Executive will be entitled to the benefits provided by Section
4(b) hereof.
(b) In the event of the occurrence of a Change in Control, the
Executive may terminate employment with the Company and any Subsidiary
during the Severance Period with the right to severance compensation as
provided in Section 4(b) upon the occurrence of one or more of the
following events (regardless of whether any other reason, other than Cause
as hereinabove provided, for such termination exists or has occurred,
including without limitation other employment):
(i) Failure to elect or reelect or otherwise to maintain the
Executive in the office or the position, or a substantially equivalent
office or position, of or with the Company and/or a Subsidiary, as the
case may be, which the Executive held immediately prior to a Change in
Control, or the removal of the Executive as a director of the Company
(or any successor thereto) if
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the Executive shall have been a director of the Company immediately
prior to the Change in Control;
(ii) (A) A significant adverse change in the nature or scope of
the authorities, powers, functions, responsibilities or duties
attached to the position with the Company and any Subsidiary which the
Executive held immediately prior to the Change in Control, (B) a
reduction in the aggregate of the Executive's Base Pay and Incentive
Pay received from the Company and any Subsidiary, or (C) the
termination or denial of the Executive's rights to Employee Benefits
or a reduction in the scope or value thereof, any of which is not
remedied by the Company within 10 calendar days after receipt by the
Company of written notice from the Executive of such change, reduction
or termination, as the case may be;
(iii) A determination by the Executive (which determination
will be conclusive and binding upon the parties hereto provided it has
been made in good faith and in all events will be presumed to have
been made in good faith unless otherwise shown by the Company by clear
and convincing evidence) that a change in circumstances has occurred
following a Change in Control, including, without limitation, a change
in the scope of the business or other activities for which the
Executive was responsible immediately prior to the Change in Control,
which has caused Executive to suffer a substantial reduction in any of
the authorities, powers, functions, responsibilities or duties
attached to the position held by the Executive immediately prior to
the Change in Control, which situation is not remedied within 10
calendar days after written notice to the Company from the Executive
of such determination;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all
of its business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer or
otherwise) to which all or substantially all of its business and/or
assets have been transferred (directly or by operation of law) assumed
all duties and obligations of the Company under this Agreement
pursuant to Section 11(a);
(v) The Company relocates its principal executive offices, or
requires the Executive to have his principal location of work changed,
to any location which is in excess of 25 miles from the location
thereof immediately prior to the Change of Control, or requires the
Executive to travel away from his office in the course of discharging
his responsibilities or
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duties hereunder at least 20% more (in terms of aggregate days in any
calendar year or in any calendar quarter when annualized for purposes
of comparison to any prior year) than was required of Executive in any
of the three full years immediately prior to the Change of Control
without, in either case, his prior written consent; or
(vi) Without limiting the generality or effect of the foregoing,
any material breach of this Agreement by the Company or any successor
thereto.
(c) Notwithstanding anything contained in this Agreement to the
contrary, in the event of a Change in Control, the Executive may terminate
employment with the Company and any Subsidiary for any reason, or without
reason, during the 30-day period immediately following the first
anniversary of the first occurrence of a Change in Control with the right
to severance compensation as provided in Section 4(b).
(d) A termination by the Company pursuant to Section 3(a) or by the
Executive pursuant to Section 3(b) or Section 3(c) will not affect any
rights which the Executive may have pursuant to any agreement, policy,
plan, program or arrangement of the Company providing Employee Benefits,
which rights shall be governed by the terms thereof (subject in all events
to the provisions of Section 6).
4. RETENTION BONUS AND SEVERANCE COMPENSATION: (a) If (i) the
Executive remains employed by the Company or any Subsidiary for 30 days
after the first occurrence of a Change in Control (the "Bonus Date") or
(ii) the Executive's employment with the Company or any Subsidiary is
terminated pursuant to Section 3(a)(i) or 3(a)(ii) following the first
occurrence of a Change in Control but prior to the 31st day after the first
occurrence of a Change in Control, the Company will pay to the Executive,
within 10 business days after the Bonus Date, a lump sum payment (the
"Retention Bonus Payment") in an amount equal to the multiple set forth
under Item I on Annex A hereto times the sum of Base Pay and Target Annual
Bonus (at the highest combined rate in effect for any period prior to the
Bonus Date).
(b) If, following the occurrence of a Change in Control, the Company
terminates the Executive's employment during the Severance Period other
than pursuant to Section 3(a), or if the Executive terminates his
employment pursuant to Section 3(b) or Section 3(c), the Company will pay
to the Executive the following amounts within 10 business days after the
date (the "Termination Date") that the Executive's employment is terminated
(the effective date of which shall be the date of termination, or such
other date that may be specified by the Executive if the
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termination is pursuant to Section 3(b) or Section 3(c)) and continue to
provide to the Executive the following benefits:
(i) A lump sum payment (the "Severance Payment") in an amount
equal to (A) the multiple set forth under Item II on Annex A hereto
times the sum of Base Pay and Target Annual Bonus (at the highest
combined rate in effect for any period prior to the Termination Date)
minus (B) the amount of any Retention Bonus Payment actually paid to
the Executive pursuant to Section 4(a).
(ii) (A) for the number of months set forth under Item III on
Annex A hereto (the "Continuation Period") following the Termination
Date, the Company will arrange to provide the Executive with Employee
Benefits that are health or welfare benefits (but not stock option,
stock purchase, stock appreciation or similar compensatory benefits)
substantially similar to those which the Executive was receiving or
entitled to receive immediately prior to the Termination Date, and
(B) such Continuation Period will be considered service with the
Company for the purpose of determining service credits and benefits
due and payable to the Executive under any retirement income,
supplemental executive retirement and other benefit plans of the
Company applicable to the Executive, his dependents or his
beneficiaries immediately prior to the Termination Date. If and to
the extent that any benefit described in subsection (A) or (B) of this
Section 4(b)(ii) is not or cannot be paid or provided under any
policy, plan, program or arrangement of the Company or any Subsidiary,
as the case may be, then the Company will itself pay or provide for
the payment to the Executive, his dependents and beneficiaries, of
such Employee Benefits. Notwithstanding the foregoing, Employee
Benefits otherwise receivable by the Executive pursuant to subsection
(A) of this Section 4(b)(ii) will be reduced to the extent comparable
health or welfare benefits are actually received by the Executive from
another employer during the Continuation Period following the
Executive's Termination Date, and any such benefits actually received
by the Executive shall be reported by the Executive to the Company.
(c) Without limiting the rights of the Executive at law or in equity,
if the Company fails to make any payment or provide any benefit required to
be made or provided hereunder on a timely basis, the Company will pay
interest on the amount or value thereof at an annualized rate of interest
equal to the so-called composite "prime rate" as quoted from time to time
during the relevant period in the Northeast Edition of THE WALL STREET
JOURNAL. Such interest will be payable as it accrues on demand. Any
change in such
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prime rate will be effective on and as of the date of such change.
(d) Promptly following the date hereof, [THE COMPANY] [PARENT] will
(if it has not already done so) establish a trust (the "Trust") for the
purpose of assuring the payment of amounts that may become payable to the
Executive under Sections 4(a) and (b) together, at [THE COMPANY'S]
[PARENT'S] election, with amounts that may become payable under other
retention bonus or change-in-control severance agreements or plans to which
[THE COMPANY] [PARENT] is a party or under which [THE COMPANY] [PARENT] is
an obligor. A reputable commercial bank or trust company selected by [THE
COMPANY] [PARENT] shall serve as trustee of the Trust (the "Trustee")
pursuant to a written trust agreement between [THE COMPANY] [PARENT] and
the Trustee. Prior to the occurrence of a Change in Control, [THE COMPANY]
[PARENT] shall deposit with the Trustee cash and/or a letter of credit in
an amount sufficient to fund all amounts which may become payable to the
Executive under Sections 4(a) and (b), together with all amounts that may
become payable under all other retention bonus or change-in-control
severance agreements or plans that are intended to be secured by the Trust,
and shall thereafter make such additional deposits, if any, as may be
necessary to result in the Trust holding at all times a combination of cash
and/or letters of credit sufficient for the payment of all such amounts.
Any letter of credit deposited with the Trustee pursuant to this Section
4(d) shall be issued by a reputable commercial bank having combined capital
and surplus of at least $500 million, shall be irrevocable and shall
entitle the Trustee to draw all amounts payable thereunder immediately upon
the occurrence of a Change in Control. Without limiting [THE COMPANY'S]
[PARENT'S] obligations under the preceding provisions of this Section 4(d),
in the event that [THE COMPANY] [PARENT] shall have failed to fully fund
the Trust as provided herein prior to the occurrence of a Change in
Control, [THE COMPANY] [PARENT] shall do so as promptly as practicable
thereafter. All amounts required to be deposited with the Trustee pursuant
to this Section 4(d) that are so deposited after the occurrence of a Change
in Control shall be deposited solely in the form of cash. No failure by
[THE COMPANY] [PARENT] to satisfy any of its obligations under this Section
4(d) shall limit the rights of the Executive hereunder. Notwithstanding
the foregoing provisions of this Section 4(d), with respect to any and all
amounts which may become payable to the Executive under this Agreement, the
Executive shall have the status of a general unsecured creditor of the
Company and shall have no right to, or security interest in, any assets of
the Company.
(e) Notwithstanding any other provision of this Agreement to the
contrary, the parties' respective rights and obligations under this
Section 4 and under Sections 5 and 8 will survive any termination or
expiration of this
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Agreement or the termination of the Executive's employment following a
Change in Control for any reason whatsoever.
5. LIMITATION ON PAYMENTS AND BENEFITS. Notwithstanding any
provision of this Agreement to the contrary, if any amount or benefit to be paid
or provided under this Agreement (taking into account all other amounts and
benefits to be paid or provided to or for the benefit of the Executive by the
Company or any affiliate thereof under this Agreement or otherwise as though all
such other amounts and benefits had already been so paid or provided) would be
an "Excess Parachute Payment," within the meaning of Section 280G of the United
States Internal Revenue Code of 1986, as amended (the "Code"), or any successor
provision thereto, but for the application of this sentence, then the payments
and benefits to be paid or provided under this Agreement shall be reduced to the
minimum extent necessary (but in no event to less than zero) so that no portion
of any such payment or benefit, as so reduced, constitutes an Excess Parachute
Payment; provided, however, that the foregoing reduction shall be made only if
and to the extent that such reduction would result in an increase in the
aggregate payment and benefits to be provided, determined on an after-tax basis
(taking into account the excise tax imposed pursuant to Section 4999 of the
Code, or any successor provision thereto, any tax imposed by any comparable
provision of United States state law, and any applicable United States federal,
state and local income taxes). The determination of whether any reduction in
such payments or benefits to be provided under this Agreement is required
pursuant to the preceding sentence shall be made at the expense of the Company,
if requested by the Executive or the Company, by the Company's independent
accountants. The fact that the Executive's right to payments or benefits may be
reduced by reason of the limitations contained in this Section 5 shall not of
itself limit or otherwise affect any other rights of the Executive other than
pursuant to this Agreement. In the event that any payment or benefit intended
to be provided under this Agreement is required to be reduced pursuant to this
Section 5, the Executive shall be entitled to designate the payments and/or
benefits to be so reduced in order to give effect to this Section 5. The
Company shall provide the Executive with all information reasonably requested by
the Executive to permit the Executive to make such designation. In the event
that the Executive fails to make such designation within 5 business days of the
Bonus Date or the Termination Date, as applicable, the Company may effect such
reduction in any manner it deems appropriate.
6. WAIVER BY EXECUTIVE OF CERTAIN RIGHTS: The Executive hereby
irrevocably waives any and all rights that the Executive may have pursuant to
any agreement (other than this Agreement), policy, plan, program or arrangement
of the Company or any affiliate (as the term "affiliate" is defined under Rule
12b-2 promulgated under the Exchange Act) of the Company in effect as of the
date hereof to receive payments and/or benefits in the nature of severance
payments or benefits.
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7. NO MITIGATION OBLIGATION: The Company hereby acknowledges that
it will be difficult and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date. Accordingly, the payment
of the severance compensation by the Company to the Executive in accordance with
the terms of this Agreement is hereby acknowledged by the Company to be
reasonable, and the Executive will not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor will any profits, income, earnings or other benefits from any source
whatsoever create any mitigation, offset, reduction or any other obligation on
the part of the Executive hereunder or otherwise, except as expressly provided
in the last sentence of Section 4(a)(ii).
8. LEGAL FEES AND EXPENSES: It is the intent of the Company that
the Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's rights
under this Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to
recover from, the Executive the benefits provided or intended to be provided to
the Executive hereunder, the Company irrevocably authorizes the Executive from
time to time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any Director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential relationship
shall exist between the Executive and such counsel. Without respect to whether
the Executive prevails, in whole or in part, in connection with any of the
foregoing, the Company will pay and be solely financially responsible for any
and all attorneys' and related fees and expenses incurred by the Executive in
connection with any of the foregoing.
9. EMPLOYMENT RIGHTS: Nothing expressed or implied in this
Agreement will create any right or duty on the part of the Company or the
Executive to have the Executive remain in the employment of the Company or any
Subsidiary prior to or following any Change in Control. Any termination of
employment of the Executive or the removal of the Executive from the office or
position in the Company or any Subsidiary following the
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commencement of any discussion with a third person that ultimately results in a
Change in Control shall be deemed to be a termination or removal of the
Executive after a Change in Control for purposes of this Agreement.
10. WITHHOLDING OF TAXES: The Company may withhold from any amounts
payable under this Agreement all federal, provincial, state, city or other taxes
as the Company is required to withhold pursuant to any law or government
regulation or ruling.
11. SUCCESSORS AND BINDING AGREEMENT: (a) The Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place. This Agreement will be binding upon and inure
to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise (and such successor shall
thereafter be deemed the "Company" for the purposes of this Agreement), but will
not otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in Sections 11(a) and 11(b). Without limiting the
generality or effect of the foregoing, the Executive's right to receive
payments hereunder will not be assignable, transferable or delegable,
whether by pledge, creation of a security interest, or otherwise, other
than by a transfer by Executive's will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer
contrary to this Section 11(c), the Company shall have no liability to pay
any amount so attempted to be assigned, transferred or delegated.
12. NOTICES: For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five
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business days after having been mailed by registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as Federal
Express, UPS, or Purolator, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office and to the Executive
at his principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except that
notices of changes of address shall be effective only upon receipt.
13. GOVERNING LAW: The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of [BRITISH COLUMBIA] [THE STATE OF DELAWARE], without
giving effect to the principles of conflict of laws thereof.
14. VALIDITY: If any provision of this Agreement or the application
of any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
15. MISCELLANEOUS: No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement.
16. COUNTERPARTS: This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
[THE LOEWEN GROUP INC.]
[LOEWEN GROUP INTERNATIONAL, INC.]
By
------------------------------------
[Name and Title]
____________________________________
[Executive]
[BY SIGNING THIS AGREEMENT BELOW, PARENT (I) IN ITS CAPACITY AS THE
SOLE STOCKHOLDER OF THE COMPANY, HEREBY REQUESTS THAT THE COMPANY ENTER INTO
THIS AGREEMENT AND HEREBY AUTHORIZES THE COMPANY TO EXECUTE AND DELIVER THIS
AGREEMENT AND TO PERFORM ITS OBLIGATIONS HEREUNDER AND (II) AGREES WITH EACH OF
THE COMPANY AND THE EXECUTIVE THAT IT WILL TIMELY PERFORM ALL OBLIGATIONS TO BE
PERFORMED BY PARENT UNDER SECTION 4(D).
THE LOEWEN GROUP INC.
BY
------------------------------------
[NAME AND TITLE]]
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ANNEX A
I. MULTIPLE OF BASE PAY AND TARGET ANNUAL BONUS.
[ONE-THIRD] [ONE-HALF] [TWO-THIRDS] [ONE] times.
II. MULTIPLE OF BASE PAY AND TARGET ANNUAL BONUS.
[ONE] [ONE AND ONE-HALF] [TWO] [THREE] times.
III. MONTHS OF HEALTH AND WELFARE BENEFIT CONTINUATION
AND ADDITIONAL RETIREMENT INCOME SERVICE CREDIT.
[12] [18] [24] [36] months.
<PAGE>
EXHIBIT 42
CHANGE-IN-CONTROL SEVERANCE COMPENSATION PLAN
INTRODUCTION
The Board of Directors (the "Board") of The Loewen Group Inc. (the
"Company") has considered the effect a Change in Control of the Company may
have on certain employees of the Company and its subsidiaries. Given the
level of hostile takeover activity over the past several years, the Board
recognizes and understands the concern such employees have for their careers
and their personal financial security. As a result, absent appropriate
assurances, such employees are likely to seek more secure career
opportunities elsewhere if a Change in Control of the Company is perceived to
be a real possibility, or if a Change-in-Control transaction is proposed or
threatened.
This Plan is designed to enable such employees to make career decisions
without the time pressure and financial uncertainty which may result from a
proposed or threatened Change-in-Control transaction, to encourage such
employees to remain employees of the Company and its subsidiaries
notwithstanding the outcome of any such proposed transaction and to assure
fair treatment of such employees in the event of a Change in Control of the
Company.
As a result, the Board believes that this Plan will assist the Company
in attracting and retaining qualified employees. Accordingly, the following
Plan is hereby adopted.
I. ESTABLISHMENT OF THE PLAN
1.1 ESTABLISHMENT OF PLAN: As of the Effective Date, the Company
establishes a severance compensation plan known as the "Change-in-Control
Severance Compensation Plan" as set forth herein and as amended as hereafter
provided (this "Plan"). The purposes of this Plan are as set forth in the
Introduction.
1.2. APPLICABILITY OF PLAN: The benefits provided by this Plan shall
be available to all Employees who, at or after the Effective Date, meet the
eligibility requirements of Article III hereof.
1.3. CONTRACTUAL RIGHT TO BENEFITS: This Plan establishes and vests in
each Participant a contractual right to the benefits to which he or she is
entitled hereunder, enforceable by the Participant against the Company or his
Employer, or both, on the terms and subject to the conditions hereof.
<PAGE>
II. DEFINITIONS AND CONSTRUCTION
2.1. DEFINITIONS: The following terms shall have the following
meanings when used in this Plan with initial capital letters:
(a) "CHANGE IN CONTROL" of the Company means and includes the
following:
(i) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each as
promulgated pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), disclosing that any person
(as the term "person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act), other than Raymond L. Loewen,
a person including Raymond L. Loewen, or a person whose
beneficial ownership of voting securities of the Company is
shared with Raymond L. Loewen, has become the beneficial
owner (as the term "beneficial owner" is defined under Rule
13d-3 or any successor rule or regulation promulgated under
the Exchange Act) of securities representing 25% or more of
the combined voting power of the then-outstanding securities
of the Company entitled to vote generally in the election of
directors of the Company and such acquisition has not been
authorized, approved or recommended by a majority vote of the
Board, in its sole discretion, prior to the date of the
filing of such report; or
(ii) Such other event relating to the control of the
Company (rather than a subsidiary as such) as the Board may,
in its sole discretion, by a majority vote determine to
constitute a change in control of the Company as to which
this Plan should apply.
(b) "COMPANY" means The Loewen Group Inc., a British
Columbia corporation, and any successor thereto as provided in
Section 6.2 hereof.
(c) "EFFECTIVE DATE" as to Employees of the Company means
October 10, 1996, and, as to Employees of an Employer other than
the Company, means the date this Plan is approved by the board of
directors of that Employer, or such other date as the Board shall
designate.
(d) "EMPLOYEE" means a salaried employee of an Employer who
is employed by an Employer on a full-time basis.
(e) "EMPLOYER" means the Company or a Subsidiary which has
adopted this Plan pursuant to Section 6.1 hereof.
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(f) "JUST CAUSE" means the termination of employment of an
Employee shall have taken place as a result of (i) criminal
activity, willful violation of an Employer policy or willful
misconduct or gross negligence in the performance of duties, as
determined by the Company or an Employer in good faith
consistently, if applicable, with its existing personnel practices
or (ii) the sale of the stock of the Subsidiary of which the
Participant was an Employee or substantially all of the assets
comprising the business unit which constituted the Employee's
primary business unit in a transaction in which the purchaser of
such stock or assets, as the case may be, is (A) unaffiliated with
the Company, has a net worth computed in accordance with generally
accepted accounting principles (as of its most recent balance
sheet date) of at least $25,000,000 and (B) has agreed in
connection with such transaction to adopt or continue this Plan
substantially in accordance with its terms or a substantially
equivalent plan, in either case as applicable to such Employee, or
agrees to or does continue the employment of the Employee
following such transaction directly or through one or more
affiliates (including without limitation one or more Employers
acquired in such transactions), subject to termination after such
transaction by such purchaser or its affiliates in accordance with
the terms of such agreement or, if none, applicable law.
(g) "PARTICIPANT" means an Employee whose principal duties
consist of corporate or regional management functions and who
meets the eligibility requirements of Article III hereof, other
than an elected officer of the Company or any other Employee who
has entered into an employment, severance or other similar
agreement with the Company which becomes operative upon the
occurrence of a change in control of the Company (as defined in
such agreement) and actually receives the payments to which such
officer or other Employee is entitled under such agreement.
(h) "PLAN" means this Change-in-Control Severance
Compensation Plan.
(i) "SEVERANCE PAYMENT" means the payment of severance
compensation as provided in Article IV hereof.
(j) "SUBSIDIARY" means any corporation or other legal entity
a majority of the securities entitled to vote generally in the
election of directors of which are owned by the Company or another
Subsidiary of the Company.
(k) "WEEKLY BASE PAY" of a Participant means the quotient
that results from dividing (i) the aggregate amount of cash
compensation consisting of wages or salary paid by an Employer
as consideration for the Participant's service during
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the 12-month period ended on the last day of the calendar month
immediately prior to the date as of which Weekly Base Pay is to
be determined (annualized if the Participant has not been
employed by an Employer continuously during such 12-month
period) by (ii) 52.
2.2. APPLICABLE LAW: The laws of British Columbia shall be
the controlling law in all matters relating to this Plan as applicable to
Employees of the Company, and the laws of the jurisdiction of incorporation
or organization of any other Employer shall be the controlling law in all
matters relating to this Plan as applicable to Employees of such other
Employer.
2.3. SEVERABILITY: If a provision of this Plan shall be held
illegal or invalid, the illegality or invalidity shall not affect the
remaining parts of this Plan and this Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
2.4. GENDER: As used herein, words of the masculine gender
shall include the feminine and neuter, and the singular shall include the
plural, and vice versa.
III. ELIGIBILITY
3.1. PARTICIPATION: Each Employee who, as of the Effective
Date, shall have first become an Employee prior to a Change in Control shall
be a Participant, provided that this Plan has become or thereafter becomes
effective for his Employer. Thereafter, each Employee who shall first become
an Employee prior to a Change in Control shall become a Participant on the
day on which such Employee's employment with an Employer commences.
3.2. DURATION OF PARTICIPATION: A Participant shall cease to
be a Participant and shall have no rights hereunder, without further action,
when he ceases to be an Employee, unless such Participant is then entitled to
payment of a Severance Payment as provided in Section 4.1 hereof. A
Participant entitled to a Severance Payment shall remain a Participant in
this Plan until the full amount of the Severance Payment has been paid to the
Participant.
IV. SEVERANCE PAYMENTS
4.1. RIGHT TO SEVERANCE PAYMENT: (a) A Participant shall be
entitled to receive from the Company or, if applicable, the other Employer of
which he is an Employee, a Severance Payment in the amount provided in
Section 4.2 hereof if there has been a Change in Control of the Company and
if, within 24 months thereafter,
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the Participant's employment by an Employer shall be terminated by the
Employer and Just Cause shall not exist; provided, however, that the
Participant shall not be entitled to a Severance Payment if termination
occurs by reason of his death, voluntary retirement or total and permanent
disability, provided that the Participant actually begins to receive
retirement or disability benefits, as the case may be, under the retirement
or disability plan, if any, applicable to the Participant immediately prior
to a Change in Control, as amended (other than an amendment which materially
decreases aggregate benefits payable to the Employee thereunder).
(b) Promptly following the date hereof, the Company will
establish a trust (the "Trust") for the purpose of assuring the payment of
amounts that may become payable to Participants under Section 4.1(a)
together, at the Company's election, with amounts that may become payable
under other change-in-control severance agreements or plans to which the
Company or another Employer is a party or under which the Company or another
Employer is an obligor. A reputable commercial bank or trust company
selected by the Company shall serve as trustee of the Trust (the "Trustee")
pursuant to a written trust agreement between the Company and the Trustee.
Prior to the occurrence of a Change in Control, the Company shall deposit
with the Trustee cash and/or a letter of credit in an amount sufficient to
fund all amounts which may become payable to Participants under Section
4.1(a), together with all amounts that may become payable under all other
change-in-control severance agreements or plans that are intended to be
secured by the Trust, and shall thereafter make such additional deposits, if
any, as may be necessary to result in the Trust holding at all times a
combination of cash and/or letters of credit sufficient for the payment of
all such amounts. Any letter of credit deposited with the Trustee pursuant
to this Section 4.1(b) shall be issued by a reputable commercial bank having
combined capital and surplus of at least $500 million, shall be irrevocable
and shall entitle the Trustee to draw all amounts payable thereunder
immediately upon the occurrence of a Change in Control. Without limiting the
Company's obligations under the preceding provisions of this Section 4.1(b),
in the event that the Company shall have failed to fully fund the Trust as
provided herein prior to the occurrence of a Change in Control, the Company
shall do so as promptly as practicable thereafter. All amounts required to
be deposited with the Trustee pursuant to this Section 4.1(b) that are so
deposited after the occurrence of a Change in Control shall be deposited
solely in the form of cash. No failure by the Company to satisfy any of its
obligations under this Section 4.1(c) shall limit the rights of any
Participant hereunder. Notwithstanding the foregoing provisions of this
Section 4.1(b), with respect to any and all amounts which may become payable
to Participants under this Plan, Participants shall have the status
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of general unsecured creditors of the Company and shall have no right to, or
security interest in, any assets of the Company.
4.2 AMOUNT OF SEVERANCE PAYMENT: (a) Each Participant
entitled to a Severance Payment under this Plan shall receive from the
Company or the Employer, as the case may be, a lump sum cash payment in an
amount, based upon his length of continuous employment by the Company or one
or more Employers, equal to the product of (i) two, (ii) Participant's Weekly
Base Pay, and (iii) the number of full years of the Participant's continuous
service with one or more Employers; provided, however, that in no event shall
the amount of such cash payment be less than the product of 12 and the
Participant's Weekly Base Pay or more than the product of 52 and the
Participant's Weekly Base Pay; and provided further that the amount of such
cash payment determined pursuant to the preceding provisions of this Section
4.2(a) shall be reduced by an amount equal to the aggregate amount of any
other cash payments in the nature of severance payments paid or payable by
the Company or the Employer or any affiliate (as the term "affiliate" is
defined under Rule 12b-2 promulgated under the Exchange Act) of the Company
or the Employer pursuant to any agreement, policy, plan (other than this
Plan), program, arrangement or requirement of statutory or common law.
(b) Notwithstanding the foregoing provisions of this
Section 4.2, if any portion of a Severance Payment to a Participant would be
an Excess Parachute Payment but for the application of this Section 4.2(b),
then such Severance Payment shall be reduced to the minimum extent necessary
(but in no event to less than zero) so that no portion of the Severance
Payment, as so reduced, constitutes an Excess Parachute Payment. As used
herein, the terms "Disqualified Individual" and "Excess Parachute Payment"
shall have the same meanings given such terms in Section 280G of the Internal
Revenue Code of 1986, as amended, or any successor provision thereto.
(c) The Participant shall not be required to mitigate
damages or the amount of his Severance Payment by seeking other employment or
otherwise, nor shall the amount of such payment be reduced by any
compensation earned by the Participant as a result of employment after the
termination of his employment by an Employer.
4.3. TIME OF SEVERANCE PAYMENT: The Severance Payment to
which a Participant is entitled shall be paid to the Participant by the
Company or, if applicable, by the other Employer of which he was an Employee,
in cash and in full, not later than five business days after the termination
of the Participant's employment. If such a Participant should die before all
amounts payable to him have been paid, such unpaid amounts shall be paid to
the Participant's spouse, if living, otherwise to the personal representative
of the Participant's estate.
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V. OTHER RIGHTS AND BENEFITS NOT AFFECTED
5.1. OTHER BENEFITS: Neither the provisions of this Plan nor
the Severance Payment provided for hereunder shall reduce or increase any
amounts otherwise payable, or in any other way affect a Participant's rights
as an Employee of an Employer, whether existing now or hereafter, under any
benefit, incentive, retirement, stock option, stock bonus, stock purchase or
employment agreement, plan (other than this Plan), program or arrangement.
5.2. CERTAIN LIMITATIONS: This Plan does not constitute a
contract of employment or impose on any Participant, the Company or any other
Employer any obligation to retain any Participant as an employee or in any
other capacity, to change or not change the status, terms or conditions of
any Participant's employment, or to change or not change the Company's
policies regarding termination of employment. Notwithstanding any other
provisions of this Plan or applicable law, neither the Company nor any
Director, officer, employee or agent of the Company or any of its affiliates
shall have any liability to any other person, including without limitation
any Employee or his estate, heirs, successors, assigns or spouse or
relatives, in the event of the failure or refusal of the Board to determine
that any event constitutes or should constitute a "Change in Control" under
this Plan, and in no event shall any Participant have any rights hereunder
unless and until a Change in Control (as herein expressly defined) shall have
occurred.
VI. PARTICIPATING EMPLOYERS AND SUCCESSORS
6.1. PARTICIPATING EMPLOYERS: Upon approval by the Board,
this Plan may be adopted by any Subsidiary by action of the board of
directors of such Subsidiary, it being acknowledged that the Board has
approved the adoption of this Plan by Loewen Group International, Inc. Upon
such adoption, the Subsidiary shall become an Employer hereunder and the
provisions of this Plan shall be fully applicable to the Employees of that
Subsidiary.
6.2. SUCCESSORS TO THE COMPANY: Without limiting the
obligations of any person or entity under applicable law, the Company shall
require any successor or assignee, whether direct or indirect, by purchase,
merger, consolidation or otherwise, to all or substantially all the business
or assets of the Company, expressly and unconditionally to assume and agree
to perform the Company's obligations under this Plan, in the same manner and
to the same extent that the Company would be required to perform if no such
succession or assignment had taken place. In such event, the term "Company,"
as used in this Plan, shall mean the Company as hereinbefore defined and any
successor assignee to the
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business or assets which by reason hereof becomes bound by the terms and
provisions of this Plan.
VII. DURATION, AMENDMENT AND TERMINATION
7.1. DURATION: (a) If a Change in Control has not occurred,
this Plan shall expire on October 10, 2001, unless sooner terminated as
provided in Section 7.2 hereof, or unless extended for an additional period
or periods by resolution adopted by the Board at any time.
(b) If a Change in Control occurs, this Plan shall
continue in full force and effect, and shall not terminate or expire until
after all Participants who were Participants on the date of the Change in
Control and become entitled to a Severance Payment hereunder shall have
received such payment in full.
7.2. AMENDMENT AND TERMINATION: This Plan may be terminated
or amended in any respect by resolution adopted by a majority of the members
of the Board, unless a Change in Control has previously occurred. If a
Change in Control occurs, this Plan no longer shall be subject to amendment,
change, substitution, deletion, revocation or termination in any respect.
7.3. FORM OF AMENDMENT: The form of any proper amendment or
termination of this Plan shall be a written instrument signed by a duly
authorized officer or officers of the Company, certifying that the amendment
or termination has been approved by the Board as provided in Section 7.2
hereof. A proper amendment of this Plan automatically shall effect a
corresponding amendment to all Participants' rights hereunder. A proper
termination of this Plan automatically shall effect a termination of all
Participants' rights and benefits hereunder without further action.
VIII. MISCELLANEOUS
8.1. LEGAL FEES AND EXPENSES: (a) It is the intent of the
Company that Participants not be required to incur all of the expenses
associated with the enforcement of rights under this Plan by litigation or
other legal action because the cost and expense thereof would substantially
detract from the benefits intended to be extended to Participants hereunder.
Accordingly, if the Company or any Employer, as the case may be, has failed
to comply with any of its obligations under this Plan or in the event that
the Company or any Employer, as the case may be, or any other person takes
any action to declare this Plan void or unenforceable, or institutes any
litigation designed to deny, or to recover from, a Participant the benefits
intended to be provided to the Participant hereunder, the Company and each
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Employer irrevocably authorizes the Participant from time to time to retain
counsel of his or her choice, at the expense of the Company or any Employer,
as the case may be, as hereafter provided, to represent the Participant in
connection with the initiation or defense of any litigation or other legal
action, whether by or against the Company or any Employer, as the case may
be, in any jurisdiction. The Company or any Employer, as the case may be,
shall pay or cause to be paid and shall be solely responsible for any and all
reasonable attorneys' fees and expenses incurred by the Participant in
enforcing his rights hereunder individually (but not as a representative of
any class) as a result of the Company's or any Employer's, as the case may
be, failure to perform this Plan or any provision hereof or as a result of
the Company or any Employer, as the case may be, or any person contesting the
validity or enforceability of this Plan or any provision hereof as aforesaid;
provided, however, that in no event will the Company or any Employer be
obligated hereunder or otherwise to pay or reimburse more than $50,000.00 of
such fees or expenses to any Participant.
(b) Each Participant shall have the right and option to
elect (in lieu of litigation) to have any dispute or controversy arising
under or in connection with this Plan settled by arbitration, conducted
before a panel of three arbitrators sitting in a location selected by the
Participant within 50 miles from the location of his job with his Employer,
in accordance with rules of the American Arbitration Association then in
effect. Judgment may be entered on the award of the arbitrator in any court
having jurisdiction. All expenses of such arbitration, including the fees
and expenses of the counsel for the Participant, shall be borne by the
Employer, subject to the limitations contained in Section 8.1(a) hereof.
8.2. WITHHOLDING OF TAXES: The Employer may withhold from any
amounts payable under this Plan all federal, provincial, state, city or other
taxes as shall be required pursuant to any law or government regulation or
ruling.
8.3. SUCCESSORS: (a) This Plan shall inure to the benefit of
and be enforceable by the Participant's personal or legal representatives,
executors, administrators, successors, heirs, distributees and/or legatees.
(b) The rights under this Plan are personal in nature and
neither of the Company or any other Employer, as the case may be, nor any
Participant shall, without the consent of the other, assign, transfer or
delegate any rights or obligations hereunder except as expressly provided in
Section 6.2 hereof. Without limiting the generality of the foregoing, the
Participant's right to receive a Severance Payment hereunder shall not be
assignable, transferable or delegable, whether by pledge, creation of a
security interest or otherwise, other than by a transfer by his
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will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 8.3(b), the Company
or any other Employer, as the case may be, shall have no liability to pay any
amount so attempted to be assigned, transferred or delegated.
(c) The Company or any other Employer, as the case may
be, and each Participant recognizes that each party will have no adequate
remedy at law for breach by the other of any of the agreements contained
herein and, in the event of any such breach, the Company or any other
Employer, as the case may be, and each Participant hereby agree and consent
that the other shall be entitled to a decree of specific performance,
mandamus or other appropriate remedy to enforce performance of this Plan.
8.4. NOTICES: For all purposes of this Plan, all
communications, including without limitation notices, consents, requests or
approvals provided for herein shall be in writing and shall be deemed to have
been duly given when delivered or five business days after having been mailed
by registered or certified mail, return receipt requested, postage prepaid,
addressed to the Company or any other Employer, as the case may be (to the
attention of the Secretary of the Company or any other Employer, as the case
may be), at its principal executive office and to any Participant at his or
her principal residence as shown in the relevant records of the Company or
other Employer, as the case may be, or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except
that notices of change of address shall be effective only upon receipt.
Having been adopted by the Board on October 10, 1996, this Plan
has been duly executed as of such date.
THE LOEWEN GROUP INC.
By ____________________________
Raymond L. Loewen,
Chairman
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