<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
<PAGE>
FILED PURSUANT TO RULE 424(a)
FILE NOS. 333-29443 AND 333-29443-01
PROSPECTUS
SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 1997
$500,000,000
LOEWEN GROUP INTERNATIONAL, INC.
DEBT SECURITIES
[LOGO]
---------------------
FULLY AND UNCONDITIONALLY GUARANTEED BY
THE LOEWEN GROUP INC.
------------------------
Loewen Group International, Inc., a Delaware corporation ("LGII"), may offer
and sell from time to time, in one or more series, debt securities consisting of
notes, debentures and/or other evidences of indebtedness representing secured or
unsecured obligations of LGII ("Debt Securities"). Debt Securities will be fully
and unconditionally guaranteed ("Guarantees") by The Loewen Group Inc., a
corporation organized under the laws of British Columbia, Canada ("Loewen" and,
together with its subsidiaries and associated entities, the "Company"). LGII is
a wholly owned subsidiary of Loewen.
Certain specific terms of the particular Debt Securities in respect of which
this Prospectus is being delivered will be set forth in an accompanying
supplement to this Prospectus (a "Prospectus Supplement"), which will describe,
without limitation and where applicable, the specific designation and
denomination, the aggregate principal amount being offered, whether such Debt
Securities are secured, maturity, interest rate (which may be fixed or
variable), place or places where interest on such Debt Securities will be
payable, terms of conversion, sinking fund provisions, redemption provisions,
voting rights, restrictions on transferability, listing or application for
listing on a securities exchange or interdealer quotation system, any right of
LGII to defer payment of interest on the Debt Securities and the maximum length
of such deferral period, and any other rights, privileges, limitations or
restrictions relating to the Debt Securities.
The aggregate offering price to the public of the Debt Securities will be
limited to $500,000,000 (or its equivalent, based on the applicable exchange
rate at the time of issue, if Debt Securities are offered for consideration
denominated in one or more foreign currencies as shall be designated by LGII).
The Debt Securities may be denominated in United States dollars or, at the
option of LGII if so specified in the applicable Prospectus Supplement, in one
or more foreign currencies. The Debt Securities may be issued in registered form
or bearer form, or both. If so specified in the applicable Prospectus
Supplement, Debt Securities of a series may be issued in whole or in part in the
form of one or more temporary or permanent global securities.
The Debt Securities may be sold to or through underwriters, through dealers
or agents or directly to purchasers. See "Plan of Distribution." The names of
any underwriters, dealers or agents involved in the sale of the Debt Securities
in respect of which this Prospectus is being delivered and any applicable fee,
commission or discount arrangements with them will be set forth in a Prospectus
Supplement. See "Plan of Distribution" for possible indemnification arrangements
for dealers, underwriters and agents.
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
AVAILABLE INFORMATION
Loewen and LGII have filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with any
amendments, exhibits, annexes and schedules thereto, the "Registration
Statement") pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations thereunder, with respect to the Debt
Securities and the Guarantees. This Prospectus does not include all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Statements made in the Prospectus as to the contents of any contract, agreement
or other document referred to in the Registration Statement are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.
Loewen is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by Loewen
may be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at Seven World
Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can be obtained by mail from the Public Reference section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, reports, proxy statements and other
information that Loewen files with the Commission electronically are contained
in the Internet Web site maintained by the Commission. The Commission's Web site
address is http://www.sec.gov. The Common Shares are traded on the New York
Stock Exchange, The Toronto Stock Exchange and The Montreal Exchange. Reports,
proxy statements and other information filed by Loewen may be inspected at the
offices of the New York Stock Exchange at 20 Broad Street, New York, New York
10005, at the offices of The Toronto Stock Exchange at The Exchange Tower, 2
First Canadian Place, Toronto, Ontario, Canada M5X IJ2 and at the offices of The
Montreal Exchange at 800 Victoria Square, Montreal, Quebec, Canada H4Z 1A9.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents heretofore filed by Loewen with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act (File No. 1-12163) are
hereby incorporated herein by reference: Loewen's (i) Annual Report on Form 10-K
for the year ended December 31, 1996, filed March 31, 1997 (the "1996 Form
10-K"); (ii) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997 (filed May 13, 1997), and June 30, 1997 (filed August 13, 1997) and (iii)
Current Reports on Form 8-K dated January 7, 1997, January 8, 1997, March 5,
1997, March 24, 1997, May 2, 1997, May 5, 1997, May 21, 1997, June 5, 1997, July
17, 1997 and August 11, 1997. All documents filed by Loewen pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of the Debt Securities shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Loewen will provide without charge to each person to whom this Prospectus is
delivered, upon the written or oral request of such person, a copy of any or all
of the foregoing documents incorporated by reference herein (other than exhibits
to any such document unless such exhibits are specifically incorporated by
reference into such document). Requests for such copies should be directed to
the Corporate
2
<PAGE>
Secretary of Loewen, 4126 Norland Avenue, Burnaby, British Columbia, Canada V5G
3S8; telephone number (604) 299-9321.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, as amended and supplemented, and certain documents
incorporated by reference herein contain or may contain both statements of
historical fact and "forward-looking statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. Examples of
forward-looking statements include: (i) projections of revenue, earnings,
capital structure and other financial items, (ii) statements of the plans and
objectives of the Company or its management, (iii) statements of future economic
performance and (iv) assumptions underlying statements regarding the Company or
its business. Important factors, risks and uncertainties that could cause actual
results to differ materially from any forward-looking statements ("Cautionary
Statements") are disclosed herein and in certain documents incorporated by
reference herein. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
FINANCIAL INFORMATION
All dollar amounts in financial statements incorporated by reference into
this Prospectus are in United States dollars ("U.S.$" or "$") unless otherwise
indicated. References to "Cdn.$" are to Canadian dollars.
The consolidated financial statements of Loewen, its subsidiaries and
associated entities (the "Company") included in Loewen's reports filed pursuant
to the Exchange Act are prepared in accordance with accounting principles
generally accepted in Canada ("Canadian GAAP"). Differences between Canadian
GAAP and accounting principles generally accepted in the United States ("U.S.
GAAP"), as applicable to the Company, are explained in Note 21 to the
consolidated financial statements included in Loewen's Annual Report on Form
10-K for the year ended December 31, 1996 (the "1996 Consolidated Financial
Statements") and Note 11 to the consolidated financial statements included in
Loewen's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
The consolidated financial statements of the Company for the year ended
December 31, 1993, and for prior years, were published in Canadian dollars.
Effective January 1, 1994, the Company adopted the United States dollar as its
reporting currency and, accordingly, has published its consolidated financial
statements for the year ended December 31, 1994 and subsequent periods in United
States dollars. Financial information relating to periods prior to January 1,
1994 has been translated from Canadian dollars into United States dollars as
required by Canadian GAAP at the December 31, 1993 rate of U.S.$1.00=Cdn$1.3217.
THE COMPANY
The Company operates the second-largest number of funeral homes and
cemeteries in North America and the largest number of funeral homes in Canada.
The Company also engages in the pre-need selling of funeral, cemetery and
cremation merchandise and services. As at July 31, 1997, the Company operated
1,003 funeral homes, 422 cemeteries and four insurance companies throughout
North America. This included 880 funeral homes, 416 cemeteries and four
insurance companies in the United States (including locations in Puerto Rico).
Loewen is a holding company that, as at July 31, 1997, had approximately 900
direct and indirect subsidiaries, including LGII. LGII is a holding company for
all of the Company's United States operations (excluding the Company's
operations in Puerto Rico). All of Loewen's subsidiaries are operating
subsidiaries except for fourteen subsidiaries that principally are financing
vehicles. In addition, LGII is the general partner of Loewen Group Capital, L.P.
("LGC"). The Monthly Income Preferred Securities ("MIPS") issued by LGC are
publicly held and are traded on the New York Stock Exchange.
3
<PAGE>
LGII was incorporated in 1987 under the laws of the State of Delaware.
LGII's principal executive offices are located at 3190 Tremont Avenue, Trevose,
Pennsylvania 19053; telephone (215) 364-7770. Loewen was incorporated in 1985
under the laws of British Columbia, Canada. Loewen's principal executive offices
are located at 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8;
telephone (604) 299-9321.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the net
proceeds received by LGII from the sale of any Debt Securities offered hereby
will be used for working capital and general corporate purposes, including
acquisitions. Any specific allocation of the proceeds to a particular purpose
that has been made at the date of any Prospectus Supplement will be described
therein.
4
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
THE LOEWEN GROUP INC.
Set forth below is certain selected consolidated financial and operating
information of the Company for each year in the five year period ended December
31, 1996. The selected consolidated financial information is derived from the
Company's audited consolidated financial statements for such periods. The
Company's consolidated financial statements are prepared in accordance with
Canadian GAAP. The information set forth below should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the 1996 Consolidated Financial Statements and Notes thereto, all
of which are included in the 1996 Form 10-K.
The financial results for the year ended December 31, 1996 include $18.7
million of finance and other costs related to the hostile takeover proposed by
Service Corporation International ("SCI"), which proposal was withdrawn in
January 1997. The financial results for the year ended December 31, 1995 include
an aggregate of $195.7 million for legal settlements and litigation related
finance costs and certain general and administrative costs related to the legal
settlements. See Management's Discussion and Analysis of Financial Condition and
Results of Operations for additional information regarding SCI's hostile
takeover proposal and the legal settlements, and costs related thereto.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995(1) 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Revenue........................................ $ 908,385 $ 598,493 $ 417,328 $ 303,011 $ 218,907
Gross margin................................... 337,571 225,362 158,854 115,118 83,708
Earnings from operations....................... 204,105 117,607 95,113 65,697 50,563
Net earnings (loss)............................ 63,906 (76,684) 38,494 28,182 19,766
Basic earnings (loss) per share................ 0.97 (1.69) 0.97 0.77 0.59
Fully diluted earnings (loss) per share(2)..... 0.97 (1.69) 0.97 0.76 0.58
Ratio of earnings to fixed charges(3).......... 1.9x -- 2.5x 2.9x 2.6x
Aggregate dividends declared per Common
Share........................................ 0.200 0.050 0.070 0.045 0.030
</TABLE>
<TABLE>
<CAPTION>
AS AT DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT OPERATING INFORMATION)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Total assets................................... $ 3,496,939 $ 2,262,980 $ 1,326,275 $ 913,661 $ 675,111
Total long-term debt(4)........................ 1,508,221 934,509 516,654 341,977 246,715
Preferred securities of subsidiary............. 75,000 75,000 75,000 -- --
Shareholders' equity........................... 1,048,200 614,682 411,139 325,890 236,317
OPERATING INFORMATION:
Number of funeral home locations(5)............ 956 815 641 533 451
Number of funeral services..................... 142,265 114,319 93,760 78,847 63,516
Number of cemeteries(5)........................ 313 179 116 70 38
</TABLE>
- ------------------------------
(1) Certain of the comparative figures have been reclassified to conform to the
presentation adopted in 1996.
(2) Fully diluted earnings (loss) per share figures are calculated in accordance
with Canadian GAAP and assume, if dilutive (a) exercise of employee and
other stock options effective on their dates of issue and that the funds
derived therefrom were invested at annual after-tax rates of return ranging
from 5.8% to 7.3%, (b) exercise of options and purchase rights under the
1994 Management Equity Investment Plan ("MEIP") effective on their dates of
issue and the add-back of the interest under the related MEIP loan and (c)
conversion of the Series C Preferred Shares effective on the date of the
issue of the Series C Receipts and the add-back of the dividends during the
period. See Note 9 to the 1996 Consolidated Financial Statements.
(3) The 1995 loss is not sufficient to cover fixed charges by a total of
approximately $126.6 million and as such the ratio of earnings to fixed
charges has not been computed.
(4) Total long-term debt comprises long-term debt, including current portion.
(5) The numbers of locations for 1994 and 1993 include adjustments and
consolidations related to prior periods.
5
<PAGE>
Under Canadian GAAP, the ratios of earnings to fixed charges for the six
months ended June 30, 1997 and 1996 were 1.9x and 2.1x, respectively.
Had the Company's consolidated financial statements been prepared in
accordance with U.S. GAAP (see Note 21 to the 1996 Consolidated Financial
Statements), selected consolidated financial information would have been as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995(1) 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Revenue........................................ $ 909,137 $ 598,493 $ 417,479 $ 308,402 $ 239,452
Earnings from operations....................... 198,869 117,376 94,758 66,711 54,838
Earnings (loss) before cumulative effect of
change in accounting principles.............. 64,559 (75,800) 39,652 28,912 21,330
Fully diluted earnings (loss) per share before
cumulative effect of change in accounting
principles................................... 0.96 (1.67) 0.98 0.77 0.62
Ratio of earnings to fixed charges(2).......... 1.8x -- 2.4x 2.9x 2.6x
Aggregate dividends declared per Common
Share........................................ 0.200 0.050 0.070 0.047 0.033
</TABLE>
<TABLE>
<CAPTION>
AS AT DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Total assets................................... $ 3,768,021 $ 2,345,874 $ 1,329,928 $ 921,342 $ 702,096
Total long-term debt(3)........................ 1,508,221 894,509 516,654 341,977 256,577
Preferred securities of subsidiary............. 75,000 75,000 75,000 -- --
Shareholders' equity........................... 1,026,110 519,006 385,950 299,059 245,472
</TABLE>
- ------------------------------
(1) Certain of the comparative figures have been reclassified to conform to the
presentation adopted in 1996.
(2) The 1995 loss is not sufficient to cover fixed charges by a total of
approximately $128.3 million and as such the ratio of earnings to fixed
charges has not been computed.
(3) Total long-term debt comprises long-term debt, including current portion.
Under U.S. GAAP, the ratios of earnings to fixed charges for the six months
ended June 30, 1997 and 1996 were 1.9x and 2.1x, respectively.
6
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
Set forth below is certain selected consolidated financial information
relating to LGII. The selected consolidated financial information for each of
the years in the five year period ended December 31, 1996 is derived from
audited consolidated financial statements of LGII, which have been prepared in
accordance with Canadian GAAP.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Revenue........................................ $ 839,352 $ 540,825 $ 365,458 $ 263,493 $ 190,047
Gross margin................................... 302,078 198,867 136,639 97,328 69,675
Earnings from operations....................... 179,185 75,715 84,390 59,462 44,910
Net earnings (loss)(1)......................... (4,868) (127,353) 7,491 10,671 9,766
Ratio of earnings to fixed charges(2).......... 1.1x -- 1.6x 2.1x 1.9x
<CAPTION>
AS AT DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Current assets................................. $ 223,388 $ 184,289 $ 96,943 $ 81,028 $ 57,145
Non-current assets............................. 2,865,005 1,776,425 998,753 686,260 507,545
------------ ------------ ------------ ------------ ------------
Total assets................................... 3,088,393 1,960,714 1,095,696 767,288 564,690
Current liabilities............................ 156,290 221,555 81,472 36,722 27,242
Long-term debt, excluding current portion...... 1,308,838 730,355 372,887 243,290 176,073
Other non-current liabilities.................. 1,335,615 891,354 396,534 324,964 251,734
Preferred securities of subsidiary............. 75,000 75,000 75,000 -- --
Shareholders' equity........................... 212,650 42,450 169,803 162,312 109,641
</TABLE>
- ------------------------------
(1) Losses incurred during the year ended December 31, 1995 are as a result of
LGII recording the litigation settlements and additional intercompany
charges payable to Loewen. These intercompany charges are eliminated in the
consolidated financial statements of the Company.
(2) LGII's ratios of earnings to fixed charges reflect intercompany charges
which are eliminated in Loewen's consolidated financial statements. Such
intercompany charges aggregated $71.3 million, $36.5 million, $19.4 million
and $10.2 million in 1996, 1994, 1993 and 1992, respectively. The 1995 loss
is not sufficient to cover fixed charges by a total of approximately $195.9
million and as such the 1995 ratio of earnings to fixed charges has not been
computed.
Under Canadian GAAP, the ratios of LGII's earnings to fixed charges for the
six months ended June 30, 1997 and 1996 were 1.2x and 1.6x, respectively.
7
<PAGE>
Had LGII's consolidated financial statements been prepared in accordance
with U.S. GAAP (see Note 22 to LGII's consolidated financial statements included
in Loewen's Annual Report on Form 10-K for the year ended December 31, 1996),
selected consolidated financial information for LGII would have been as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Revenue........................................ $ 840,103 $ 540,825 $ 365,458 $ 261,438 $ 190,047
Earnings from operations....................... 175,764 74,172 83,500 58,604 44,440
Earnings (loss) before cumulative effect of
change in accounting principles(1)........... (4,547) (126,325) 8,787 10,951 9,766
Ratio of earnings to fixed charges(2).......... 1.1x -- 1.6x 2.1x 1.8x
<CAPTION>
AS AT DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Current assets................................. $ 223,388 $ 184,289 $ 96,943 $ 81,028 $ 57,145
Non-current assets............................. 3,107,289 1,915,670 998,161 709,270 507,545
------------ ------------ ------------ ------------ ------------
Total assets................................... 3,330,677 2,099,959 1,095,104 790,298 564,690
Current liabilities............................ 156,290 221,555 81,472 36,722 27,242
Long-term debt, excluding current portion...... 1,308,838 690,355 372,887 243,290 176,073
Other non-current liabilities.................. 1,597,304 1,091,256 417,627 358,875 251,734
Preferred securities of subsidiary............. 75,000 75,000 75,000 -- --
Shareholders' equity........................... 193,245 21,793 148,118 151,411 109,641
</TABLE>
- ------------------------------
(1) Losses incurred during the year ended December 31, 1995 are as a result of
LGII recording the litigation settlements and additional intercompany
charges payable to Loewen. These intercompany charges are eliminated in the
consolidated financial statements of the Company.
(2) LGII's ratios of earnings to fixed charges reflect intercompany charges
which are eliminated in Loewen's consolidated financial statements. Such
intercompany charges aggregated $71.3 million, $36.5 million, $19.4 million
and $10.2 million in 1996, 1994, 1993 and 1992, respectively. The 1995 loss
is not sufficient to cover fixed charges by a total of approximately $197.1
million and as such the 1995 ratio of earnings to fixed charges has not been
computed.
Under U.S. GAAP, the ratios of LGII's earnings to fixed charges for the six
months ended June 30, 1997 and 1996 were 1.2x and 1.5x, respectively.
8
<PAGE>
DESCRIPTION OF DEBT SECURITIES
Debt Securities offered hereby, which may consist of notes, debentures and
other evidences of indebtedness, may be issued in one or more series and will be
fully and unconditionally guaranteed by Loewen. Each series of debt securities
will be issued under an indenture by and among LGII, Loewen, as guarantor and
the trustee identified therein (the "Trustee"). A form of the indenture to be
entered into with respect to a series of Debt Securities (each, an "Indenture")
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
The statements herein relating to the Debt Securities, the Guarantees and
the Indenture are summaries and do not purport to be complete. Such summaries
are subject to the detailed provisions of the applicable Indenture, to which
reference is hereby made for a full description of such provisions, including
the definitions therein of certain terms capitalized in this Prospectus.
Whenever defined terms of the Indenture are referred to herein or in a
Prospectus Supplement, such defined terms are incorporated herein or therein by
reference as part of the statement made and such statement shall be qualified in
its entirety by such reference.
GENERAL
Reference is made to the Prospectus Supplement which accompanies this
Prospectus for a description of the specific series of Debt Securities being
offered thereby, including as applicable: (1) the specific designation of such
Debt Securities; (2) any limit upon the aggregate principal amount of such Debt
Securities; (3) the date or dates on which the principal of such Debt Securities
will mature or the method of determining such date or dates; (4) the interest
rate or rates (which may be fixed or variable) or the method of calculating such
rate or rates; (5) the date or dates from which interest will accrue or the
method by which such date or dates will be determined; (6) the date or dates on
which interest will be payable and the record date or dates therefor; (7)
whether such Debt Securities are secured or unsecured, (8) the place or places
where principal of, premium, if any, and interest, if any, on such Debt
Securities will be payable; (9) the period or periods within which, the price or
prices at which, the currency or currencies (including currency units) in which,
and the terms and conditions upon which, such Debt Securities may be redeemed,
in whole or in part, at the option of LGII; (10) any obligation of LGII to
redeem or purchase such Debt Securities pursuant to any sinking fund or
analogous provisions, upon the happening of specified events, or at the option
of a holder thereof and the period or periods within which, the price or prices
at which and the terms and conditions upon which, such Debt Securities shall be
redeemed or purchased, in whole or in part, pursuant to such obligations; (11)
the denominations in which such Debt Securities are authorized to be issued;
(12) the currency or currency units for which Debt Securities may be purchased
or in which Debt Securities may be denominated and/or the currency or currency
units in which principal of, premium, if any, and/or interest, if any, on such
Debt Securities will be payable or redeemable and whether LGII or the holders of
any such Debt Securities may elect to receive payments in respect of such Debt
Securities in a currency or currency units other than that in which such Debt
Securities are stated to be payable or redeemable; (13) if other than the
principal amount thereof, the portion of the principal amount of such Debt
Securities which will be payable upon declaration of the acceleration of the
maturity thereof or the method by which such portion shall be determined; (14)
the person to whom any interest on any such Debt Security shall be payable if
other than the person in whose name such Debt Security is registered on the
applicable record date; (15) any addition to, or modification or deletion of,
any Event of Default or any covenant of Loewen specified in the Indenture with
respect to such Debt Securities; (16) the application of any means of defeasance
or covenant defeasance that may be specified for such Debt Securities; (17) any
provisions relating to the exchange or conversion of such Debt Securities; and
(18) any other material terms pertaining to such Debt Securities or the related
Guarantees. Unless otherwise specified in the applicable Prospectus Supplement,
the Debt Securities will not be listed on any securities exchange or interdealer
quotation system.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities will be issued in fully registered form without coupons. If Debt
Securities of any series are issued in bearer form, any special restrictions and
considerations, including any offering restrictions and United States federal
income
9
<PAGE>
tax considerations, applicable to such Debt Securities and to payment on and
transfer and exchange of such Debt Securities will be described in the
applicable Prospectus Supplement.
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time of
issuance is below market rates. Certain United States federal income tax
consequences and special considerations applicable to any such Debt Securities
will be described in the applicable Prospectus Supplement.
If the purchase price of any Debt Securities is payable in one or more
foreign currencies or currency units of if any Debt Securities are denominated
in one or more foreign currencies or currency units or if the principal of,
premium, if any, or interest, if any, on any Debt Securities is payable in one
or more foreign currencies or currency units, the restrictions, elections,
certain United States federal income tax considerations, specific terms and
other information with respect to such issue of Debt Securities and such foreign
currency or currency units will be set forth in the applicable Prospectus
Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities will not be convertible or exchangeable into any other securities. If
any series of Debt Securities is convertible or exchangeable into other
securities, the applicable Prospectus Supplement will include a description of
such securities, including as applicable (a) the title, designation, maturity
and denomination, (b) any dividend, conversion, sinking fund, redemption,
voting, liquidation and preemption rights, (c) any restrictions on
transferability by the holders or on repurchase or redemption by LGII, and (d)
any other special terms pertaining to such securities.
DENOMINATIONS, PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
Debt Securities generally will be issued in registered form and in
denominations of $1,000 and integral multiples of $1,000. Unless otherwise
provided in the applicable Prospectus Supplement, payments in respect of Debt
Securities will be made, subject to any applicable laws and regulations, in the
designated currency at the office or agency of LGII maintained for that purpose
as Loewen may designate from time to time, except that, at the option of LGII,
interest payments, if any, on Debt Securities in registered form may be made (i)
by checks mailed by the Trustee to the holders of Debt Securities entitled
thereto at their registered addresses or (ii) by wire transfer to an account
maintained by the person entitled thereto, as specified in the Register. Unless
otherwise indicated in an applicable Prospectus Supplement, payment of any
installment of interest on Debt Securities in registered form will be made to
the person in whose name such Debt Security is registered at the close of
business on the regular record date for such interest.
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities in registered form will be transferable or exchangeable at the office
or agency of Loewen maintained for such purpose as Loewen may designate from
time to time. Debt Securities may be transferred or exchanged without service
charge, other than any tax or other governmental charge imposed in connection
therewith.
REDEMPTION
A series of Debt Securities may be subject to redemption at the option of
LGII, in whole or in part, or may not be redeemable prior to maturity. In
addition, LGII may be obligated upon the occurrence of specified events or at
the option of a holder of Debt Securities, to redeem or repurchase all or part
of a series of Debt Securities. Any such provisions will be set forth in the
applicable Prospectus Supplement.
RANKING
Each series of Debt Securities and the related Guarantees will rank equally
and PARI PASSU as to the right of payment of principal and interest, if any,
with each other series of the Debt Securities and Guarantees and with all other
Senior Debt (defined herein) of LGII and Loewen, respectively. LGII and Loewen
are parties to a collateral trust arrangement, described below (the "Collateral
Agreement"), pursuant to which, so long as the Indebtedness (defined herein)
subject to the Collateral Agreement is secured, the Debt Securities of a series
will be secured as described herein. However, unless the applicable Prospectus
Supplement provides otherwise, the holders of Debt Securities will not have an
independent right to require the Lien secured by the Collateral (defined herein)
to remain in place or to require any
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other security for the Debt Securities. As at December 31, 1996, the aggregate
amount of outstanding Pari Passu Indebtedness (defined herein) was approximately
$1.3 billion. See "--Collateral Trust Arrangement."
Debt Securities will be effectively subordinated in right of payment to all
existing and future liabilities, including trade payables, of the subsidiaries
of LGII.
"Indebtedness" means, with respect to any person, without duplication (a)
all liabilities of such person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business and which are
not overdue by more than 90 days, but excluding, without limitation, all
obligations, contingent or otherwise, of such person in connection with any
undrawn letters of credit, banker's acceptance or other similar credit
transaction, (b) all obligations of such person evidenced by bonds, notes,
debentures or other similar instruments, (c) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such person (even if the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (d) all Capitalized Lease
Obligations of such person, (e) all Indebtedness referred to in the preceding
clauses of other persons and all dividends of other persons, the payment of
which is secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such person, even though such person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligation being deemed to be
the lesser of the value of such property or asset or the amount of the
obligation so secured), (f) all guarantees of Indebtedness referred to in this
definition by such person, (g) all Redeemable Capital Stock of such person
valued at the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued dividends, (h) all obligations under or in respect of
Currency Agreements and Interest Rate Protection Obligations of such person, (i)
any Preferred Stock of any Restricted Subsidiary of such person valued at the
sum of (without duplication) (A) the liquidation preference thereof, (B) any
mandatory redemption payment obligations in respect thereof and (C) accrued
dividends thereon, and (j) any amendment, supplement, modification, deferral,
renewal, extension or refunding of any liability of the types referred to in
clauses (a) through (i) above. For purposes hereof, the "maximum fixed
repurchase price" of any Redeemable Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on
any date on which Indebtedness shall be required to be determined pursuant to
the provisions hereof, and if such price is based upon, or measured by, the fair
market value of such Redeemable Capital Stock, such fair market value shall be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock. For purposes of this definition, the term
"Indebtedness" shall not include (i) Indebtedness of a Wholly-Owned Subsidiary
owed to and held by Loewen, LGII or another Wholly-Owned Subsidiary, in each
case which is not subordinate in right of payment to any Indebtedness of such
Subsidiary, except that (a) any transfer of such Indebtedness by Loewen, LGII or
a Wholly-Owned Subsidiary (other than to Loewen, LGII or to a Wholly-Owned
Subsidiary) and (b) the sale, transfer or other disposition by Loewen, LGII or
any Restricted Subsidiary of Loewen or LGII of Capital Stock of a Wholly-Owned
Subsidiary which is owed Indebtedness of another Wholly-Owned Subsidiary such
that it ceases to be a Wholly-Owned Subsidiary of Loewen or LGII shall, in each
case, be an incurrence of Indebtedness by such Restricted Subsidiary subject to
the other provisions hereof; and (ii) Indebtedness of Loewen or LGII owed to and
held by a Wholly-Owned Subsidiary of Loewen or LGII which is unsecured and
subordinate in right of payment to the payment and performance of Loewen's or
LGII's obligations under the provisions of the applicable Indenture and the Debt
Securities except that (a) any transfer of such Indebtedness by a Wholly-Owned
Subsidiary of Loewen or LGII (other than to another Wholly-Owned Subsidiary of
Loewen or LGII) and (b) the sale, transfer or other disposition by Loewen or
LGII or any Restricted Subsidiary of Loewen or LGII of Capital Stock of a
Wholly-Owned Subsidiary which holds Indebtedness of Loewen or LGII such that it
ceases to be a Wholly-Owned Subsidiary shall, in each case, be an incurrence of
Indebtedness by Loewen or LGII, as the case may be, subject to the other
provisions hereof.
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"Pari Passu Indebtedness" means Indebtedness of Loewen or LGII which ranks
PARI PASSU in right of payment with the Debt Securities.
"Senior Debt" means Indebtedness which is not (i) Indebtedness of Loewen to
any Subsidiary or (ii) Indebtedness of Loewen which by its terms is subordinate
or junior in any respect to any other Indebtedness or other obligation of
Loewen.
COLLATERAL TRUST ARRANGEMENT
On May 31, 1996, Loewen, LGII and their senior lenders (the "Senior
Lenders") entered into the Collateral Agreement, pursuant to which the Senior
Lenders share, on a PARI PASSU basis, a pledge by Loewen and LGII of (i) the
shares of capital stock held by Loewen of substantially all of the subsidiaries
in which Loewen directly or indirectly holds more than a 50% voting or economic
interest, and (ii) all of the financial assets of LGII (including shares of
capital stock held by LGII of various subsidiaries) (collectively, the
"Collateral"). The Collateral is held by a trustee for the equal and ratable
benefit of the various holders of such Indebtedness.
MERGER, SALE OF ASSETS, ETC.
Each Indenture will provide that Loewen shall not, in any transaction or
series of transactions, merge or consolidate with or into, or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to, any person or persons, and Loewen shall
not permit any of its Restricted Subsidiaries (defined herein) to enter into any
such transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in a sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially all of the
properties and assets of Loewen or of Loewen and its Restricted Subsidiaries
taken as a whole, to any other person or persons, unless at the time of and
after giving effect thereto (a) either (i) if the transaction or series of
transactions is a merger or consolidation, Loewen or LGII or the Restricted
Subsidiary, as the case may be, shall be the surviving person of such merger or
consolidation, or (ii) the person formed by such consolidation or into which
Loewen or such Restricted Subsidiary, as the case may be, is merged or to which
the properties and assets of Loewen or such Restricted Subsidiary, as the case
may be, are transferred (any such surviving person or transferee being the
"Surviving Entity") shall be a corporation organized and existing under the laws
of the United States, any state thereof, the District of Columbia, Canada or any
province thereof and shall expressly assume by a supplemental indenture executed
and delivered to the Trustee, in form reasonably satisfactory to the Trustee,
all of the obligations of Loewen under the Debt Securities and, in each case the
Indenture shall remain in full force and effect; (b) immediately before and
immediately after giving effect to such transaction or series of transaction on
a pro forma basis (including without limitation any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such transaction
or series of transactions), no Default (defined herein) or Event of Default
(defined herein) shall have occurred and be continuing and Loewen, the
Restricted Subsidiary or the Surviving Entity, as the case may be, after giving
effect to such transaction or series of transaction on a pro forma basis
(including without limitation any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transaction), could incur $1.00 of additional Indebtedness pursuant to the
covenants regarding limitations on Indebtedness contained in the Indentures; and
(c) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including without limitation any Indebtedness
incurred or anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), the Consolidated Net Worth (defined
herein) of Loewen or the Surviving Entity, as the case maybe, is at least equal
to the Consolidated Net Worth of Loewen immediately before such transaction or
series of transactions.
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In connection with any consolidation, merger, transfer, lease, assignment or
other disposition contemplated hereby, Loewen shall deliver or cause to be
delivered to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an officers' certificate and an opinion of counsel, each stating that
such consolidation, merger, transfer, lease, assignment or other disposition and
the supplemental indenture in respect thereof comply with the requirements under
the Indentures.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of Loewen in accordance with the foregoing, in which Loewen is not
the continuing corporation, the successor corporation formed by such
consolidation or into which Loewen is merged or to which such transfer is made
shall succeed to, and be substituted for, and may exercise every right and power
of, Loewen under the Indentures with the same effect as if such successor
corporation had been named therein.
"Consolidated Net Worth" means, with respect to any person at any date, the
consolidated stockholders' equity of such person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock of such person and
its Restricted Subsidiaries, as determined in accordance with Canadian GAAP. As
used above, "Redeemable Capital Stock" means any shares of any class or series
of Capital Stock that, either by the terms thereof, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise, is or
upon the happening of an event or passage of time would be, required to be
redeemed prior to the Stated Maturity with respect to the principal of any
Security or is redeemable at the option of the holder thereof at any time prior
to any such Stated Maturity, or is convertible into or exchangeable for debt
securities at any time prior to any such Stated Maturity.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default. See "--Events of Default."
"Restricted Subsidiary" means any Subsidiary of Loewen other than (i) First
Capital Life Insurance Company of Louisiana, National Capital Life Insurance
Company, Security Industrial Insurance Company, Security Industrial Fire
Insurance Company or any successors to such Subsidiaries or (ii) a Subsidiary of
Loewen declared by the Board of Directors of Loewen to be an Unrestricted
Subsidiary; PROVIDED, that no such Subsidiary shall be declared to be an
Unrestricted Subsidiary unless (x) none of its properties or assets were owned
by Loewen or any of its Subsidiaries prior to the Issue Date, other than any
such assets as are transferred to such Unrestricted Subsidiary in accordance
with the covenant described under "--Limitation on Restricted Payments," (y) its
properties and assets, to the extent that they secure Indebtedness, secure only
Non-Recourse Indebtedness and (z) it has no Indebtedness other than Non-Recourse
Indebtedness. As used above, "Non-Recourse Indebtedness" means Indebtedness as
to which (i) neither Loewen nor any of its Subsidiaries (other than the relevant
Unrestricted Subsidiary or another Unrestricted Subsidiary) (1) provides credit
support (including any undertaking, agreement or instrument which would
constitute Indebtedness), (2) guarantees or is otherwise directly or indirectly
liable or (3) constitutes the lender (in each case, other than pursuant to and
in compliance with the covenant described under "--Limitation on Restricted
Payments") and (ii) no default with respect to such Indebtedness (including any
rights which the holders thereof may have to take enforcement action against the
relevant Unrestricted Subsidiary or its assets) would permit (upon notice, lapse
of time or both) any holder of any other Indebtedness of Loewen or its
Subsidiaries (other than Unrestricted Subsidiaries) to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity.
CERTAIN COVENANTS
LGII and Loewen make the following covenants, among others, in the
Indentures:
LIMITATION ON INDEBTEDNESS. Loewen will not, and will not permit any of its
Restricted Subsidiaries (including, without limitation, LGII) to, directly or
indirectly, create, incur, issue, assume, guarantee or in any manner become
directly or indirectly liable, contingently or otherwise, for the payment of
(collectively, to "incur") any Indebtedness (including, without limitation, any
Acquired Indebtedness, defined herein) other than Permitted Indebtedness.
Notwithstanding the foregoing limitations, Loewen and LGII (and any Wholly-Owned
Subsidiary with respect to Seller Financing Indebtedness, defined herein) will
be permitted to incur Indebtedness (including, without limitation, Acquired
Indebtedness) if at the time of such
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incurrence, and after giving PRO FORMA effect thereto, the Consolidated Fixed
Charge Coverage Ratio (defined herein) of Loewen is at least equal to 2.25 : 1.
"Acquired Indebtedness" means Indebtedness of a person (a) assumed or
created in connection with an Asset Acquisition from such person or (b) existing
at the time such person becomes a Restricted Subsidiary of any other person.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
person, the ratio of the aggregate amount of Consolidated Cash Flow Available
for Fixed Charges of such person for the full fiscal quarter immediately
preceding the date of the transaction (the "Transaction Date") giving rise to
the need to calculate the Consolidated Fixed Charge Coverage Ratio (such full
fiscal quarter period being referred to herein as the "Prior Quarter") to the
aggregate amount of Consolidated Fixed Charges of such person for the Prior
Quarter. In addition to and without limitation of the foregoing, for purposes of
this definition, "Consolidated Cash Flow Available for Fixed Charges" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a PRO
FORMA basis for the period of such calculation to, without duplication, (a) the
incurrence of any Indebtedness of such person or any of its Restricted
Subsidiaries (and the application of the net proceeds thereof) during the period
commencing on the first day of the Prior Quarter to and including the
Transaction Date (the "Reference Period"), including, without limitation, the
incurrence of the Indebtedness giving rise to the need to make such calculation
(and the application of the net proceeds thereof), as if such incurrence (and
application) occurred on the first day of the Reference Period, and (b) any
Material Asset Sales or Material Asset Acquisitions (including, without
limitation, any Material Asset Acquisition giving rise to the need to make such
calculation as a result of such person or one of its Restricted Subsidiaries
(including any person who becomes a Restricted Subsidiary as a result of the
Material Asset Acquisition) incurring, assuming or otherwise being liable for
Acquired Indebtedness) occurring during the Reference Period, as if such
Material Asset Sale or Material Asset Acquisition occurred on the first day of
the Reference Period. Furthermore, in calculating "Consolidated Fixed Charges"
for purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (i) interest on outstanding
Indebtedness determined on a fluctuating basis as at the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate PER ANNUM equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (ii) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Reference Period. If such person or any of its Restricted Subsidiaries directly
or indirectly guarantees Indebtedness of a third person, the above clause shall
give effect to the incurrence of such guaranteed Indebtedness as if such person
or such Restricted Subsidiary had directly incurred or otherwise assumed such
guaranteed Indebtedness. For purposes of this calculation, a "Material Asset
Acquisition" is an Asset Acquisition which is deemed by such person to be
material for such purposes or which has a purchase price of $30,000,000 or more
and a "Material Asset Sale" is one or more Asset Sales which relate to assets
with an aggregate value of more than $30,000,000. For purposes of this
definition, "Consolidated Cash Flow Available for Fixed Charges" means, with
respect to any person for any period, (A) the sum of, without duplication, the
amounts for such period, taken as a single accounting period, of (a)
Consolidated Net Income, (b) Consolidated Non-cash Charges, (c) Consolidated
Interest Expense and (d) Consolidated Income Tax Expense LESS (B) any non-cash
items increasing Consolidated Net Income for such period.
"Permitted Indebtedness" means, without duplication, each of the following:
(a) the Debt Securities and Indebtedness of Loewen evidenced by the Guarantees;
(b) Indebtedness of Loewen and its Restricted Subsidiaries (including, without
limitation, LGII) outstanding on the Issue Date (other than Indebtedness under
the Credit Agreements); (c) Indebtedness of Loewen or LGII, as the case may be,
under the Credit Agreements in an aggregate principal amount at any one time
outstanding not to exceed $750,000,000 less the Net Proceeds of any Asset Sale
that are applied to repay, and permanently reduce the commitments under, the
Credit Agreements (as required by the terms thereof); (d) (i) Interest Rate
Protection Obligations of Loewen covering Indebtedness of Loewen and its
Restricted Subsidiaries (including, without limitation, LGII); (ii) Interest
Rate Protection Obligations of any Restricted Subsidiary of Loewen
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covering Indebtedness of such Restricted Subsidiary; PROVIDED, HOWEVER, that, in
the case of either clause (i) or (ii), (x) any Indebtedness to which any such
Interest Rate Protection Obligations relate bears interest at fluctuating
interest rates and is otherwise permitted to be incurred under this covenant and
(y) the notional principal amount of any such Interest Rate Protection
Obligations does not exceed the principal amount of the Indebtedness to which
such Interest Rate Protection Obligations relate; (e) Indebtedness under
Currency Agreements; PROVIDED, HOWEVER, that in the case of Currency Agreements
which relate to Indebtedness, such Currency Agreements do not increase the
Indebtedness of Loewen and its Restricted Subsidiaries (including, without
limitation, LGII) outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder; (f) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; PROVIDED, HOWEVER, that
such Indebtedness is extinguished within two business days of incurrence; (g)
Indebtedness incurred in respect of performance bonds or letters of credit in
lieu thereof provided in the ordinary course of business; (h) Indebtedness of
Loewen and its Restricted Subsidiaries (including, without limitation, LGII)
represented by letters of credit for the account of Loewen and its Restricted
Subsidiaries in order to provide security for workers' compensation claims,
payment obligations in connection with self-insurance or similar requirements in
the ordinary course of business; (i) Indebtedness of Loewen and its Restricted
Subsidiaries (including, without limitation, LGII) in addition to that described
in clauses (a) through (h) above, in an aggregate principal amount outstanding
at any time not exceeding $5,000,000; and (j) (i) Indebtedness of Loewen the
proceeds of which are used solely to refinance (whether by amendment, renewal,
extension or refunding) Indebtedness of Loewen and its Restricted Subsidiaries
(including, without limitation, LGII) and (ii) Indebtedness of any Restricted
Subsidiary of Loewen the proceeds of which are used solely to refinance (whether
by amendment, renewal, extension or refunding) Indebtedness of such Restricted
Subsidiary, in each case other than the Indebtedness refinanced, redeemed or
retired on the Issue Date or Indebtedness incurred under clause (c), (d), (e),
(f), (g), (h), or (i) of this covenant; PROVIDED, HOWEVER, that (x) the
principal amount of Indebtedness incurred pursuant to this clause (j) (or, if
such Indebtedness provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration of the maturity
thereof, the original issue price of such Indebtedness) shall not exceed the sum
of the principal amount of Indebtedness so refinanced, plus the amount of any
premium required to be paid in connection with such refinancing pursuant to the
terms of such Indebtedness or the amount of any premium reasonably determined by
the Board of Directors of Loewen as necessary to accomplish such refinancing by
means of a tender offer or privately negotiated purchase, plus the amount of
expenses in connection therewith, (y) in the case of Indebtedness incurred by
Loewen pursuant to this clause (j) to refinance Pari Passu Indebtedness, such
Indebtedness constitutes Pari Passu Indebtedness.
"Seller Financing Indebtedness" means a purchase money Indebtedness issued
to the seller of a business or other assets for, and not in excess of, the
purchase price thereof.
LIMITATION ON RESTRICTED PAYMENTS. Loewen will not, and will not permit any
of its Restricted Subsidiaries (including, without limitation, LGII) to,
directly or indirectly:
(a) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of Loewen or any of its Restricted
Subsidiaries or any payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of Loewen or any of its Restricted
Subsidiaries (other than (x) dividends or distributions payable solely in
Capital Stock of Loewen (other than Redeemable Capital Stock) or in options,
warrants or other rights to purchase Capital Stock of Loewen (other than
Redeemable Capital Stock) and (y) dividends or other distributions to the
extent declared or paid to Loewen or any Wholly-Owned Subsidiary of Loewen),
(b) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of Loewen or any of its Restricted Subsidiaries (other
than any such Capital Stock of a Wholly-Owned Subsidiary of Loewen),
(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking
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fund payment or other Stated Maturity, any Indebtedness that is subordinate
or junior in right of payment to the Debt Securities or Pari Passu
Indebtedness (other than any such subordinated or Pari Passu Indebtedness
owned by Loewen or a Wholly-Owned Subsidiary of Loewen), or
(d) make any Investment (other than any Permitted Investment, defined
herein) in any person (such payments or Investments described in the
preceding clauses (a), (b), (c) and (d) are collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to
the proposed Restricted Payment (the amount of any such Restricted Payment,
if other than cash, shall be the Fair Market Value on the date of such
Restricted Payment of the asset(s) proposed to be transferred by Loewen or
such Restricted Subsidiary, as the case may be, pursuant to such Restricted
Payment), (A) no Default or Event of Default shall have occurred and be
continuing, (B) immediately prior to and after giving effect to such
Restricted Payment, Loewen would be able to incur $1.00 of additional
Indebtedness pursuant to the covenant described under "--Limitation on
Indebtedness" (assuming a market rate of interest with respect to such
additional Indebtedness) and (C) the aggregate amount of all Restricted
Payments declared or made from and after the Measurement Date would not
exceed the sum of (1) 50% of the aggregate Consolidated Net Income (defined
herein) of Loewen accrued on a cumulative basis during the period beginning
on the first day of the fiscal quarter of Loewen during which the
Measurement Date occurs and ending on the last day of the fiscal quarter of
Loewen immediately preceding the date of such proposed Restricted Payment,
which period shall be treated as a single accounting period (or, if such
aggregate cumulative Consolidated Net Income of Loewen for such period shall
be a deficit, minus 100% of such deficit) PLUS (2) the aggregate net cash
proceeds received by Loewen or LGII (without duplication) either (x) as
capital contributions to Loewen or LGII (without duplication) after the
Measurement Date from any person (other than Loewen, LGII or a Restricted
Subsidiary of Loewen or LGII, as the case may be) or (y) from the issuance
or sale of Capital Stock (excluding Redeemable Capital Stock, but including
Capital Stock issued upon the conversion of convertible Indebtedness or from
the exercise of options, warrants or rights to purchase Capital Stock (other
than Redeemable Capital Stock)) of Loewen or LGII (without duplication) to
any person (other than to Loewen, LGII or a Restricted Subsidiary of Loewen
or LGII, as the case may be) after the Measurement Date PLUS (3) in the case
of the disposition or repayment of any Investment constituting a Restricted
Payment made after the Measurement Date (excluding any Investment described
in clause (v) of the following paragraph), an amount equal to the lesser of
the return of capital with respect to such Investment and the cost of such
Investment less, in either case, the cost of the disposition of such
Investment PLUS (4) the sum of $15,000,000. For purposes of the preceding
clause (C)(2), the value of the aggregate net proceeds received by Loewen or
LGII (without duplication) upon the issuance of Capital Stock upon the
conversion of convertible Indebtedness or upon the exercise of options,
warrants or rights will be the net cash proceeds received upon the issuance
of such Indebtedness, options, warrants or rights plus the incremental cash
amount received by Loewen or LGII (without duplication) upon the conversion
or exercise thereof.
None of the foregoing provisions will prohibit (i) the payment of any
dividend within 60 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph; (ii) so
long as no Default or Event of Default shall have occurred and be continuing,
the redemption, repurchase or other acquisition or retirement of any shares of
any class of Capital Stock of Loewen, LGII or any Restricted Subsidiary of
Loewen or LGII in exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to Loewen or LGII from any
person (other than a Related Obligor, as defined below) or (y) issue and sale of
other shares of Capital Stock (other than Redeemable Capital Stock) of Loewen or
LGII to any person (other than to a Related Obligor); (iii) so long as no
Default or Event of Default shall have occurred and be continuing, any
redemption, repurchase or other acquisition or retirement of Indebtedness that
is subordinate or junior in right of payment to the Debt Securities and the
Guarantees, if applicable, by exchange for, or out of the net cash proceeds of,
a substantially concurrent (x) capital contribution to Loewen or LGII from any
person (other than a Related Obligor) or (y) issue and sale of (1) Capital Stock
(other than Redeemable Capital Stock) of Loewen or LGII to any person (other
than a Related Obligor); PROVIDED, HOWEVER, that the amount of any such net
proceeds that are utilized for any such redemption, repurchase or other
acquisition or retirement shall be
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excluded from clause (C)(2) of the preceding paragraph; or (2) Indebtedness of
Loewen or LGII issued to any person (other than a Related Obligor), so long as
such Indebtedness is Pari Passu Indebtedness or Indebtedness that is subordinate
or junior in right of payment to the Debt Securities and the Guarantees, if
applicable, in the same manner and at least to the same extent as the
Indebtedness so purchased, exchanged, redeemed, acquired or retired; (iv) so
long as no Default or Event of Default shall have occurred and be continuing,
any redemption, repurchase or other acquisition or retirement of Pari Passu
Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to Loewen or LGII from any
person (other than a Related Obligor) or (y) issue and sale of (1) Capital Stock
(other than Redeemable Capital Stock) of Loewen or LGII to any person (other
than a Related Obligor); PROVIDED, HOWEVER, that the amount of any such net
proceeds that are utilized for any such redemption, repurchase or other
acquisition or retirement shall be excluded from clause (C)(2) of the preceding
paragraph; or (2) Indebtedness of Loewen or LGII issued to any person (other
than a Related Obligor), so long as such Indebtedness is Pari Passu Indebtedness
or Indebtedness that is subordinate or junior in right of payment to the Debt
Securities and the Guarantees in the same manner and at least to the same extent
as the Indebtedness so purchased, exchanged, redeemed, acquired or retired; (v)
Investments constituting Restricted Payments made as a result of the receipt of
consideration that consists of cash or Cash Equivalents from any Asset Sale made
pursuant to and in compliance with the covenant described under "--Disposition
of Proceeds of Asset Sales"; (vi) so long as no Default or Event of Default has
occurred and is continuing, repurchases by Loewen of Common Stock of Loewen from
employees of Loewen or their authorized representatives upon the death,
disability or termination of employment of such employees, in an aggregate
amount not exceeding $10,000,000 in any calendar year; (vii) Investments
constituting Restricted Payments that are permitted by subparagraphs (iv) and
(v) of the proviso to the covenant described under "--Limitation on Transactions
with Interested Persons"; and (viii) the declaration or the payment of dividends
on, or the scheduled purchase or redemption of, the Preferred Securities of a
Special Finance Subsidiary or the Series C Preferred Shares, of Loewen. In
computing the amount of Restricted Payments previously made for purposes of
clause (C) of the preceding paragraph, Restricted Payments made under the
preceding clauses (v), (vi) and (vii) shall be included and those under clauses
(i), (ii), (iii), (iv) and (viii) shall not be so included.
"Consolidated Net Income" means, with respect to any person, for any period,
the consolidated net income (or loss) of such person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses, (ii) the portion of net
income (but not losses) of such person and its Restricted Subsidiaries allocable
to minority interests in unconsolidated persons to the extent that cash
dividends or distributions have not actually been received by such person or one
of its Restricted Subsidiaries, (iii) net income (or loss) of any person
combined with such person or one of its Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(iv) any gain or loss realized upon the termination of any employee pension
benefit plan, on an after-tax basis, (v) gains or losses in respect of any Asset
Sales by such person or one of its Restricted Subsidiaries, and (vi) the net
income of any Restricted Subsidiary of such person to the extent that the
declaration of dividends or similar distributions by that Restricted Subsidiary
of that income is not at the time permitted, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders.
"Permitted Investments" means any of the following: (i) Investments in any
Wholly-Owned Subsidiary of Loewen (including (a) LGII and (b) any person that
pursuant to such Investment becomes a Wholly-Owned Subsidiary of Loewen) and any
person that is merged or consolidated with or into, or transfers or conveys all
or substantially all of its assets to, Loewen or any Wholly-Owned Subsidiary of
Loewen at the time such Investment is made; (ii) Investments in Cash
Equivalents; (iii) Investments in Currency Agreements on commercially reasonable
terms entered into by Loewen or any of its Restricted Subsidiaries in the
ordinary course of business in connection with the operations of the business of
Loewen or its Restricted Subsidiaries to hedge against fluctuations in foreign
exchange rates; (iv) loans or advances to officers, employees or consultants of
Loewen and its Restricted Subsidiaries for travel and moving
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expenses in the ordinary course of business for bona fide business purposes of
Loewen and its Restricted Subsidiaries; (v) other loans or advances to officers,
employees or consultants of Loewen and its Restricted Subsidiaries in the
ordinary course of business for bona fide business purposes of Loewen and its
Restricted Subsidiaries not in excess of $10,000,000 in the aggregate at any one
time outstanding; (vi) Investments in evidences of Indebtedness, securities or
other property received from another person by Loewen or any of its Restricted
Subsidiaries in connection with any bankruptcy proceeding or by reason of a
composition or readjustment of debt or a reorganization of such person or as a
result of foreclosure, perfection or enforcement of any Lien in exchange for
evidences of Indebtedness, securities or other property of such person held by
Loewen or any of its Restricted Subsidiaries, or for other liabilities or
obligations of such other person to Loewen or any of its Restricted Subsidiaries
that were created, in accordance with the terms of the Indenture; (vii)
Investments in Interest Rate Protection Agreements on commercially reasonable
terms entered into by Loewen or any of its Restricted Subsidiaries in the
ordinary course of business in connection with the operations of Loewen and its
Restricted Subsidiaries to hedge against fluctuations in interest rates; and
(viii) Investments of funds received by Loewen or its Restricted Subsidiaries
(including, without limitation, LGII) in the ordinary course of business, which
funds are required to be held in trust for the benefit of others by Loewen or
such Restricted Subsidiary, as the case may be, and which funds do not
constitute assets or liabilities of Loewen or such Restricted Subsidiary; (ix)
Investments not in excess of $50,000,000 in the aggregate in other Unrestricted
Subsidiaries which are engaged in the insurance business; and (x) Investments
not in excess of $50,000,000 in persons (other than Wholly-Owned Subsidiaries)
engaged in businesses incidental to the funeral home, cemetery and cremation
businesses of Loewen and its Restricted Subsidiaries.
"Related Obligor" means Loewen or a Restricted Subsidiary of Loewen.
LIMITATION ON ISSUANCES AND SALE OF PREFERRED STOCK BY RESTRICTED
SUBSIDIARIES. Loewen (a) will not permit any of its Restricted Subsidiaries
(including, without limitation, LGII) to issue any Preferred Stock (other than
(i) Preferred Stock issued to Loewen or a Wholly-Owned Subsidiary of Loewen and
(ii) Preferred Securities of a Special Finance Subsidiary, defined herein); and
(b) will not permit any person to own any Preferred Stock of any Restricted
Subsidiary of Loewen (other than (i) Preferred Stock owned by Loewen or a
Wholly-Owned Subsidiary of Loewen and (ii) Preferred Securities of a Special
Finance Subsidiary); PROVIDED, HOWEVER, that this covenant shall not prohibit
the issuance and sale of (x) all, but not less than all, of the issued and
outstanding Capital Stock of any Restricted Subsidiary of Loewen owned by Loewen
or any of its Restricted Subsidiaries in compliance with the other provisions of
the Indenture or (y) directors' qualifying shares or investments by foreign
nationals mandated by applicable law.
"Special Finance Subsidiary" means a Restricted Subsidiary whose sole assets
are debt obligations of LGII or Loewen and whose sole liabilities are Preferred
Securities, the proceeds from the sale of which are or have been advanced to
LGII or Loewen.
LIMITATION ON LIENS. Loewen will not, and will not permit any of its
Restricted Subsidiaries (including, without limitation, LGII) to, create, incur,
assume or suffer to exist any Liens of any kind against or upon any of its
property or assets, or any proceeds therefrom where the aggregate amount of
Indebtedness secured by any such Liens, together with the aggregate amount of
property subject to any Sale-Leaseback Transactions of Loewen and its Restricted
Subsidiaries (other than Permitted Sale-Leaseback Transactions, defined herein),
exceeds 10% of Loewen's Consolidated Net Worth, unless (x) in the case of Liens
securing Indebtedness that is subordinate or junior in right of payment to the
Debt Securities, the Debt Securities are secured by a Lien on such property,
assets or proceeds that is senior in priority to such Liens and (y) in all other
cases, the Debt Securities are equally and ratably secured except for (a) Liens
existing as at the Measurement Date; (b) Liens securing the Debt Securities or
the Guarantees, if applicable; (c) Liens in favor of Loewen, LGII or any
Wholly-Owned Subsidiary; (d) Liens securing Indebtedness which is incurred to
refinance Indebtedness which has been secured by a Lien permitted under the
provisions of the Indenture and which has been incurred in accordance with the
provisions of the Indenture; PROVIDED, HOWEVER, that such Liens do not extend to
or cover any property or assets of Loewen or any of its Restricted Subsidiaries
not securing the Indebtedness so refinanced; and (e) Permitted Liens.
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"Permitted Liens" means the following types of Liens: (a) Liens for taxes,
assessments or governmental charges or claims either (i) not delinquent or (ii)
contested in good faith by appropriate proceedings and as to which Loewen or any
of its Restricted Subsidiaries (including, without limitation, LGII) shall have
set aside on its books such reserves as may be required pursuant to Canadian
GAAP; (b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or being
contested in good faith, if such reserve or other appropriate provision, if any,
as shall be required by Canadian GAAP shall have been made in respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, governmental contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (d) judgment Liens not giving rise to an
Event of Default so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired; (e) easements,
rights-of-way, zoning restrictions and other similar charges or encumbrances in
respect of real property not interfering in any material respect with the
ordinary conduct of the business of Loewen or any of its Restricted Subsidiaries
(including, without limitation, LGII); (f) any interest or title of a lessor
under any Capitalized Lease Obligation or operating lease; (g) any Lien existing
on any asset of any corporation at the time such corporation becomes a
Restricted Subsidiary and not created in contemplation of such event; (h) any
Lien on any asset securing Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring or constructing such asset;
PROVIDED, that such Lien attaches to such asset concurrently with or within 18
months after the acquisition or completion thereof; (i) any Lien on any asset of
any corporation existing at the time such corporation is merged or consolidated
with or into Loewen or a Restricted Subsidiary and not created in contemplation
of such event; (j) any Lien existing on any asset prior to the acquisition
thereof by Loewen or a Restricted Subsidiary and not created in contemplation of
such acquisition; (k) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods; and (l) any extension, renewal or replacement of any Lien
permitted by the preceding clauses (g), (h), (i) or (j) hereof in respect of the
same property or assets theretofore subject to such Lien in connection with the
extension, renewal or refunding of the Indebtedness secured thereby; PROVIDED
that (i) such Lien shall attach solely to the same property or assets and (ii)
such extension, renewal or refunding of such Indebtedness shall be without
increase in the principal remaining unpaid as at the date of such extension,
renewal or refunding.
"Permitted Sale-Leaseback Transactions" means any Sale-Leaseback Transaction
with respect to property acquired or constructed after the Issue Date; PROVIDED
that (a) the Attributable Value of such Sale-Leaseback Transaction shall be
deemed to be Indebtedness of Loewen or such Restricted Subsidiary, as the case
may be, and (b) after giving PRO FORMA effect to any such Sale-Leaseback
Transaction and the foregoing clause (a), Loewen would be able to incur $1.00 of
additional Indebtedness pursuant to the covenant described under "--Limitation
on Indebtedness" (assuming a market rate of interest with respect to such
additional Indebtedness). For purposes of the foregoing, "Attributable Value"
means, as to any lease other than a Capitalized Lease Obligation and at any date
as of which the amount thereof is to be determined, the total net amount of rent
required to be paid by such person under a lease during the initial term thereof
as determined in accordance with Canadian GAAP, discounted from the last date of
such initial term to the date of determination at a rate per annum equal to the
discount rate which would be applicable to a Capitalized Lease Obligation with a
like term in accordance with Canadian GAAP. The net amount of rent required to
be paid under any such lease for any such period shall be the aggregate amount
of rent payable by the lessee with respect to such period after excluding
amounts required to be paid on account of insurance, taxes, assessments,
utility, operating and labor costs and similar charges. In the case of any lease
which is terminable by the lessee upon the payment of a penalty, such net amount
shall also include the amount of such penalty, but no rent shall be considered
as required to be paid under such lease subsequent to the first date upon which
it may be so terminated. "Attributable Value" means, as to a
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Capitalized Lease Obligation under which any person is at the time liable and at
any date as of which the amount thereof is to be determined, the capitalized
amount thereof that would appear on the face of a balance sheet of such person
in accordance with Canadian GAAP.
CHANGE OF CONTROL. Upon the occurrence of a Change of Control (defined
herein), LGII or Loewen (if applicable) will be obligated to make an offer to
purchase (a "Change of Control Offer"), and shall purchase, on a Business Day
(the "Change of Control Purchase Date") not more than 60 nor less than 30 days
following the occurrence of the Change of Control, all of the then outstanding
Debt Securities of each series properly tendered and not withdrawn at a purchase
price (the "Change of Control Purchase Price") equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the Change of
Control Purchase Date. The Change of Control Offer is required to remain open
for at least 20 Business Days and until the close of business on the Change of
Control Purchase Date.
If a Change of Control occurs and LGII fails to pay the Purchase Price for
all Debt Securities properly tendered and not withdrawn, Loewen will be obliged
to purchase all such Debt Securities at the Change of Control Purchase Price on
the Change of Control Purchase Date in compliance with the requirements
applicable to a Change of Control Offer made by LGII.
In order to effect such Change of Control Offer, LGII or Loewen, as the case
may be, shall not later than the 30th day after the occurrence of a Change of
Control, mail to each holder of Debt Securities notice of the Change of Control
Offer, which notice shall govern the terms of the Change of Control Offer and
shall state, among other things, the procedures that holders of Debt Securities
must follow to accept the Change of Control Offer.
If a Change of Control were to occur, there can be no assurance that LGII or
Loewen would have sufficient funds to pay the purchase price for all Debt
Securities that Loewen or LGII might to required to purchase. In the event that
LGII or Loewen is required to purchase Debt Securities pursuant to a Change of
Control Offer, each of LGII and Loewen expect that they would need to seek
third-party financing to the extent they may not have available funds to meet
their purchase obligations. However, there can be no assurance that Loewen or
LGII will be able to obtain such financing on favorable terms, if at all.
Neither LGII nor Loewen shall be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in a
manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by Loewen and purchases all Debt
Securities validly tendered and not withdrawn under such Change of Control
Offer.
LGII and Loewen will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act, and any other securities laws or
regulations in connection with the repurchase of Debt Securities pursuant to a
Change of Control Offer.
"Change of Control" means the occurrence on or after the Measurement Date of
any of the following events: (a) any "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted Holders,
is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time, upon
the happening of an event or otherwise), directly or indirectly, of more than
35% of the total Voting Stock of Loewen or LGII, under circumstances where the
Permitted Holders (i) "beneficially own" (as so defined) a lower percentage of
the Voting Stock than such other "person" or "group" and (ii) do not have the
right or ability by voting power, contract or otherwise to elect or designate
for election a majority of the Board of Directors of Loewen or LGII; (b) Loewen
or LGII consolidates with, or merges with or into, another person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to another person, or another person
consolidates with, or merges with or into, Loewen or LGII, in any such event
pursuant to a transaction in which the outstanding Voting Stock of Loewen or
LGII is converted into or exchanged for cash, securities or other property,
other than any such transaction where (i) the outstanding Voting Stock of Loewen
or LGII is converted into or exchanged for (1) Voting Stock (other than
Redeemable Capital Stock) of the surviving or
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transferee corporation or (2) cash, securities and other property in an amount
which could then be paid by Loewen or LGII as a Restricted Payment under the
provisions hereof, and (ii) immediately after such transaction no "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act), excluding Permitted Holders, is the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time, upon the happening of an event or otherwise), directly or
indirectly, of more than 50% of the total Voting Stock of the surviving or
transferee corporation; (c) at any time during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of Loewen or LGII (together with any new directors whose election by
such Board of Directors or whose nomination for election by the shareholders or
stockholders of Loewen or LGII was approved by a vote of 66 2/3% of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason (including the failure of such individuals to be
elected in a proxy contest involving a solicitation of proxies) to constitute a
majority of the Board of Directors of Loewen or LGII then in office; or (d)
Loewen or LGII is liquidated or dissolved or adopts a plan of liquidation other
than a liquidation of LGII into Loewen. With respect to the sale of assets
referred to above, the meaning of the phrase "all or substantially all" shall
vary according to the facts and circumstances of the subject transaction.
DISPOSITION OF PROCEEDS OF ASSET SALES. Loewen will not, and will not
permit any of its Restricted Subsidiaries (including, without limitation, LGII)
or First Capital Life Insurance Company of Louisiana, National Capital Life
Insurance Company, Security Industrial Insurance Company, Security Industrial
Fire Insurance Company or any successors to such Subsidiaries to, make any Asset
Sale (defined herein) unless (a) Loewen or such Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the shares or assets sold or otherwise
disposed of and (b) at least 75% of such consideration consists of cash or Cash
Equivalents. To the extent the Net Cash Proceeds (defined herein) of any Asset
Sale are not required to be applied to repay, and permanently reduce the
commitments under, the Credit Agreements (as required by the terms thereof) or
any other Pari Passu Indebtedness, or are not so applied, Loewen or such
Restricted Subsidiary, as the case may be, may, within 180 days of such Asset
Sale, apply such Net Cash Proceeds to an investment in properties and assets
that replace the properties and assets that were the subject of such Asset Sale
or in properties and assets that will be used in the business of Loewen and its
Restricted Subsidiaries existing on the Issue Date or in businesses reasonably
related thereto ("Replacement Assets"). Any Net Cash Proceeds from any Asset
Sale that are neither used to repay, and permanently reduce the commitments
under, the Credit Agreements nor invested in Replacement Assets within the
180-day period described above constitute "Excess Proceeds" subject to
disposition as provided below.
When the aggregate amount of Excess Proceeds equals or exceeds $10,000,000,
Loewen shall make an offer to purchase (an "Asset Sale Offer"), from all holders
of each series of Debt Securities, not more than 40 Business Days thereafter, an
aggregate principal amount of Debt Securities equal to such Excess Proceeds, at
a price in cash equal to 100% of the outstanding principal amount thereof plus
accrued and unpaid interest, if any, to the purchase date (the "Asset Sale Offer
Price"). To the extent that the aggregate principal amount of Debt Securities
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds,
Loewen may use such deficiency for general corporate purposes. If the aggregate
principal amount of Debt Securities validly tendered and not withdrawn by
holders thereof exceeds the Excess Proceeds, Debt Securities to be purchased
will be selected on a PRO RATA basis. Upon completion of an Asset Sale Offer,
the amount of Excess Proceeds shall be reset to zero.
Loewen and LGII will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act, and any other securities laws or
regulations in connection with the repurchase of Debt Securities pursuant to any
Asset Sale Offer.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any person other than Loewen or a
Restricted Subsidiary of Loewen (including, without limitation, LGII), in one or
a series of related transactions, of (a) any Capital Stock of any Restricted
Subsidiary of
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Loewen (other than in respect of directors' qualifying shares or investments by
foreign nationals mandated by applicable law) or of First Capital Life Insurance
Company of Louisiana, National Capitol Life Insurance Company, Security
Industrial Insurance Company, Security Industrial Fire Insurance Company or any
successors to such Subsidiaries; (b) all or substantially all of the properties
and assets of any division or line of business of Loewen or any Restricted
Subsidiary of Loewen; or (c) any other properties or assets of Loewen or any
Restricted Subsidiary of Loewen other than properties and assets sold in the
ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include (i) any sale, transfer or other disposition of
equipment, tools or other assets (including Capital Stock of any Restricted
Subsidiary of Loewen) by Loewen or any of its Restricted Subsidiaries in one or
a series of related transactions in respect of which Loewen or such Restricted
Subsidiary receives cash or property with an aggregate Fair Market Value of
$2,000,000 or less; and (ii) any sale, issuance, conveyance, transfer, lease or
other disposition of properties or assets that is governed by the provisions of
the applicable Indenture.
"Net Cash Proceeds" means with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to Loewen or any Restricted Subsidiary of Loewen (including,
without limitation, LGII) net of (i) brokerage commissions and other fees and
expenses (including, without limitation, fees and expenses of legal counsel and
investment bankers) related to such Asset Sale, (ii) provisions for all taxes
payable as a result of such Asset Sale, (iii) amounts required to be paid to any
person (other than Loewen or any Restricted Subsidiary of Loewen) owning a
beneficial interest in the assets subject to the Asset Sale and (iv) appropriate
amounts to be provided by Loewen or any Restricted Subsidiary of Loewen, as the
case may be, as a reserve required in accordance with Canadian GAAP against any
liabilities associated with such Asset Sale and retained by Loewen or any
Restricted Subsidiary of Loewen, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an officers' certificate delivered to the Trustee.
LIMITATION ON TRANSACTIONS WITH INTERESTED PERSONS. Loewen will not, and
will not permit any of its Restricted Subsidiaries (including, without
limitation, LGII) to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, transfer, disposition, purchase, exchange or lease of assets, property
or services) with, or for the benefit of, any Affiliate of Loewen or any
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately, after the passage of time or upon the happening of an
event) of 5% or more of the Common Shares at any time outstanding ("Interested
Persons"), unless (a) such transaction or series of related transactions are on
terms that are no less favorable to Loewen or such Restricted Subsidiary, as the
case may be, than those which could have been obtained in a comparable
transaction at such time from persons who are not Affiliates of Loewen or
Interested Persons, (b) with respect to a transaction or series of transactions
involving aggregate payments or value equal to or greater than $10,000,000,
Loewen has obtained a written opinion from an Independent Financial Advisor
stating that the terms of such transaction or series of transactions are fair to
Loewen or its Restricted Subsidiary, as the case may be, from a financial point
of view and (c) with respect to a transaction or series of transactions
involving aggregate payments or value equal to or greater than $2,500,000,
Loewen shall have delivered an Officer's Certificate to the Trustee certifying
that such transaction or series of transactions comply with the preceding clause
(a) and, if applicable, certifying that the opinion referred to in the preceding
clause (b) has been delivered and that such transaction or series of
transactions has been approved by a majority of the Board of Directors of Loewen
(including a majority of the disinterested directors); PROVIDED, HOWEVER, that
this covenant will not restrict Loewen from (i) paying dividends in respect of
its Capital Stock permitted under the covenant described under "--Limitation on
Restricted Payments," (ii) paying reasonable and customary fees to directors of
Loewen or any Restricted Subsidiary who are not employees of Loewen or any
Restricted Subsidiary, (iii) entering into transactions with its Wholly-Owned
Subsidiaries or permitting its Wholly-Owned Subsidiaries from entering into
transactions with other Wholly-Owned Subsidiaries of Loewen, (iv) making loans
or advances to senior
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officers and directors of Loewen or any Restricted Subsidiary not in excess of
$6,000,000 in the aggregate at any one time outstanding, (v) guaranteeing loans
made to officers and other employees of Loewen or any Restricted Subsidiaries in
connection with Loewen's 1994 Management Equity Investment Plan not in excess of
$6,000,000 in the aggregate at any one time outstanding, (vi) making loans or
advances to officers, employees or consultants of Loewen and its Restricted
Subsidiaries for travel and moving expenses in the ordinary course of business
for bona fide business purposes of Loewen and its Restricted Subsidiaries, (vii)
making other loans or advances to officers, employees or consultants of Loewen
and its Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes of Loewen and its Restricted Subsidiaries not in excess of
$10,000,000 in the aggregate at any one time outstanding, (viii) making payments
to officers or employees of Loewen or its Restricted Subsidiaries pursuant to
obligations undertaken, at a time when such persons were not officers or
employees of Loewen or its Restricted Subsidiaries, in connection with arms'
length Asset Acquisitions or (ix) declaring or paying dividends on, or
purchasing or redeeming, the Preferred Securities of a Special Finance
Subsidiary.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. Loewen will not, and will not permit any of its Restricted
Subsidiaries (including, without limitation, LGII) to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any Restricted Subsidiary of Loewen to (a) pay
dividends, in cash or otherwise, or make any other distributions on or in
respect of its Capital Stock or any other interest or participation in, or
measured by, its profits, (b) pay any Indebtedness owed to Loewen or any other
Restricted Subsidiary of Loewen, (c) make loans or advances to, or any
Investment in, Loewen or any other Restricted Subsidiary of Loewen, (d) transfer
any of its properties or assets to Loewen or any other Restricted Subsidiary of
Loewen or (e) guarantee any Indebtedness of Loewen or any other Restricted
Subsidiary of Loewen, except for such encumbrances or restrictions existing
under or by reason of (i) applicable law, (ii) customary non-assignment
provisions of any contract or any lease governing a leasehold interest of Loewen
or any Restricted Subsidiary of Loewen, (iii) customary restrictions on
transfers of property subject to a Lien permitted under the provisions of the
Indenture which could not materially adversely affect Loewen's ability to
satisfy its obligations under the provisions of the Indenture and the Debt
Securities, (iv) any agreement or other instrument of a person acquired by
Loewen or any Restricted Subsidiary of Loewen (or a Restricted Subsidiary of
such person) in existence at the time of such acquisition (but not created in
contemplation thereof), which encumbrance or restriction is not applicable to
any person, or the properties or assets of any person, other than the person, or
the properties or assets of the person, so acquired, (v) provisions contained in
any agreement or instrument relating to Indebtedness which prohibit the transfer
of all or substantially all of the assets of the obligor thereunder unless the
transferee shall assume the obligations of the obligor under such agreement or
instrument and (vi) encumbrances and restrictions under Indebtedness in effect
on the Issue Date (including under the Debt Securities) and encumbrances and
restrictions in permitted refinancings or replacements thereof which are no less
favorable to the holders of the Debt Securities than those contained in the
Indebtedness so refinanced or replaced.
LIMITATIONS ON SALE-LEASEBACK TRANSACTIONS. Loewen will not, and will not
permit any of its Restricted Subsidiaries (including, without limitation, LGII)
to, enter into any Sale-Leaseback Transaction, other than Permitted
Sale-Leaseback Transactions, with respect to any property of Loewen or any of
its Restricted Subsidiaries where the aggregate amount of property subject to
such Sale-Leaseback Transactions, together with the aggregate amount of Liens
securing Indebtedness of Loewen and its Restricted Subsidiaries (other than
Permitted Liens), exceeds 10% of Loewen's Consolidated Net Worth.
LIMITATION ON APPLICABILITY OF CERTAIN COVENANTS. During any period of time
that (i) the ratings assigned to any series of Debt Securities by each of S&P
and Moody's (collectively, the "Rating Agencies") are no less than BBB- and
Baa3, respectively (the "Investment Grade Ratings"), and (ii) no Default or
Event of Default has occurred and is continuing with respect to such series of
Debt Securities, Loewen and its Restricted Subsidiaries (including, without
limitation, LGII) will not be subject to the covenants entitled "Limitation on
Indebtedness," "Limitation on Restricted Payments," "Disposition of Proceeds of
Asset Sales," "Limitation on Issuances and Sale of Preferred Stock by Restricted
Subsidiaries," "Limitations on
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Transactions with Interested Persons" and "Limitation on Dividends and Other
Payment Restrictions Affecting Restricted Subsidiaries" (collectively, the
"Suspended Covenants") with respect to such series of Debt Securities. If one or
both Rating Agencies withdraws its rating or downgrades its Investment Grade
Rating, then thereafter Loewen and its Restricted Subsidiaries will be subject,
on a prospective basis, to the Suspended Covenants (until the Rating Agencies
have again assigned Investment Grade Ratings to the Debt Securities) and
compliance with the Suspended Covenants with respect to Restricted Payments made
after the time of such withdrawal or downgrade will be calculated in accordance
with the covenant described under "Limitations on Indebtedness," as if such
covenant had been in effect at all times after the Measurement Date.
LOEWEN GUARANTEE
The Debt Securities will be guaranteed by Loewen. The Guarantee, which is
included in the Indenture, provides that Loewen will unconditionally guarantee
to each Holder of a Debt Security, (a) that principal of, premium, if any, and
interest (including interest on the overdue principal and (to the extent
permitted by law) interest), if any, on the Debt Securities will be duly and
punctually paid in full when due, and all obligation of LGII to the Holders or
the Trustee will be promptly paid in full or performed, and (b) in case of any
extension of time of payment or renewal of any Debt Securities, the same will be
promptly paid in full when due or performance in accordance with the terms of
the extension or renewal. Failing payment when due of any amount so guaranteed,
or failing performance of any other obligation of LGII to the Holders for
whatever reason, Loewen will be obligated to pay, or to perform or cause the
performance of, the same immediately. An Event of Default under the Guarantee or
the Debt Securities will constitute an event of default under the Guarantee, and
will entitle the Holders of Debt Securities to accelerate the obligations of
Loewen under the Indenture in the same manner and to the same extent as the
obligations of LGII.
The Guarantee will constitute a guarantee of payment and will rank PARI
PASSU in right of payment to all senior indebtedness of Loewen.
REPORTING REQUIREMENTS
Loewen shall file with the Commission, or if not permitted or required to so
file will deliver to the Trustee, the annual reports, quarterly reports and the
information, documents and other reports required to be filed with the
Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or not
Loewen has a class of securities registered under the Exchange Act. Loewen shall
file with the Trustee and provide to each holder of Debt Securities, within 15
days after it files them with the Commission (or if such filing is not permitted
under the Exchange Act, 15 days after Loewen would have been required to make
such filing), copies of such reports.
EVENTS OF DEFAULT
The following will be "Events of Default" with respect to each series of
Debt Securities:
(a) default in the payment of the principal of or premium, if any, on
the Debt Securities of such series as and when the same shall become due and
payable (upon maturity, acceleration, optional redemption, required
purchase, scheduled principal payment, by declaration or otherwise); or
(b) default in the payment of any installment of interest upon any of
the Debt Securities of such series, as and when the same shall become due
and payable, and continuance of such default for a period of 30 days; or
(c) failure on the part of LGII or Loewen duly to observe or perform any
other term, covenant or agreement contained in the Debt Securities of such
series or pursuant to the provisions of the Indenture (other than Defaults
specified in clause (a) or (b) above) and such Default continues for a
period of 60 days after the date on which written notice of such Default
requiring LGII to remedy the same shall have been given (i) to the Issuer by
the Trustee by registered mail, or (ii) to LGII and the
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Trustee by holders of at least 25% in aggregate principal amount of the Debt
Securities of such series then outstanding; or
(d) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
Loewen or any Restricted Subsidiary (including, without limitation, LGII)
then has outstanding Indebtedness in excess of $20,000,000 (including
Securities of another series), individually or in the aggregate, and either
(i) such Indebtedness is already due and payable in full or (ii) such
default or defaults have resulted in the acceleration of the maturity of
such Indebtedness; or
(e) one or more judgments, orders or decrees of any court or regulatory
or administrative agency of competent jurisdiction for the payment of money
in excess of $20,000,000, either individually or in the aggregate, shall be
entered against Loewen or any Restricted Subsidiary (including without
limitation LGII) or any of their respective properties and shall not be
discharged or bonded against or stayed and there shall have been a period of
60 days after the date on which any period for appeal has expired and during
which a stay of enforcement of such judgment, order or decree, shall not be
in effect; or
(f) either (i) the collateral agent under the Collateral Agreement or
(ii) any holder of at least $20,000,000 in aggregate principal amount of
Indebtedness of Loewen or any of its Restricted Subsidiaries (including,
without limitation, LGII) shall commence judicial proceedings to foreclose
upon assets of Loewen or any of its Restricted Subsidiaries having an
aggregate Fair Market Value, individually or in the aggregate, in excess of
$20,000,000 or shall have exercised any right under applicable law or
applicable security documents to take ownership of any such assets in lieu
of foreclosure; or
(g) certain events of bankruptcy, insolvency or reorganization with
respect to Loewen or any Significant Subsidiary of Loewen (including without
limitation LGII) shall have occurred; or
(h) the Guarantees with respect to such series of Debt Securities cease
to be in full force and effect or are declared null and void, or Loewen
denies that it has any further liability under the Guarantees with respect
to such series, or gives notice to such effect and such condition shall have
continued for a period of 60 days after written notice of such failure
(which notice shall specify the Default, demand that it be remedied and
state that it is a "Notice of Default") requiring Loewen and LGII to remedy
the same shall have been given (i) to Loewen and LGII by the Trustee, or
(ii) to Loewen, LGII and the Trustee by holders of at least 25% in aggregate
principal amount of the Debt Securities of such series then outstanding.
NOTICE OF DEFAULT
Within 90 days after the occurrence of a Default or an Event of Default with
respect to Debt Securities of any series, the Trustee shall mail to all holders
of Debt Securities of such series notice of the Default or Event of Default
known to the Trustee with respect to such series, unless such default shall have
been cured before the giving of such notice. Except in the case of a Default in
the payment of the principal of, premium, if any, or interest on any Debt
Securities, or in the payment or satisfaction of any sinking fund or other
purchase obligation, the Trustee may withhold such notice if and so long as the
board of directors, the executive committee of the board of directors or a
committee of the directors of the Trustee and/or Trust Officers in good faith
determine that the withholding of such notice is in the interest of the holders
of the Debt Securities of such series.
ACCELERATION
If an Event of Default (other than as specified in clause (g) above) occurs
and is continuing with respect to the Debt Securities of any series then
outstanding, (a) the Trustee, by written notice to Loewen, or (b) the holders of
at least 25% in aggregate principal amount of the Debt Securities of such series
then outstanding, by written notice to the Trustee and Loewen, may declare the
principal amount (or, if the
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Debt Securities of such series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of such series)
of all the Debt Securities of such series, premium, if any, and accrued and
unpaid interest, if any, on all of the Debt Securities of such series to be due
and payable immediately, upon which declaration, all amounts payable in respect
of the Debt Securities of such series shall be immediately due and payable. If
an Event of Default specified in clause (g) above occurs and is continuing, then
the unpaid principal amount (or, if the Debt Securities of any series then
outstanding are Original Issue Discount Securities, such portion of the
principal amounts as may be specified in the terms of each such series),
premium, if any, and accrued and unpaid interest on all Debt Securities of each
series then outstanding shall IPSO FACTO become and be immediately due and
payable without any declaration or other act by the Trustee or any holder of
Debt Securities of such series.
After a declaration of acceleration hereunder with respect to Debt
Securities of any series, but before a judgment or decree for payment of the
money due has been obtained by the Trustee, the holders of a majority in
aggregate principal amount of the outstanding Debt Securities of such series, by
written notice to LGII and the Trustee, may rescind and annul such declaration
and its consequences if (a) LGII has paid or deposited with the Trustee a sum
sufficient to pay (i) all amounts due the Trustee under the respective Indenture
and the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, (ii) all overdue interest on all Debt
Securities of such series, (iii) the principal of and premium, if any, on any
Debt Securities of such series which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne by the Debt
Securities of such series, and (iv) to the extent that payment of such interest
is lawful, interest upon overdue interest and overdue principal which has become
due otherwise than by such declaration of acceleration at the rate borne by the
Debt Securities of such series; (b) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction; and (c) all Events of
Default, other than the non-payment of principal of, premium, if any, and
interest on the Debt Securities of such series that has become due solely by
such declaration of acceleration, have been cured or waived; but no such
rescission and annulment shall extend to or shall affect any subsequent default,
or shall impair any right consequent thereon. No such rescission shall affect
any subsequent Default or Event of Default or impair any right subsequent
thereon.
WAIVER
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of a series by notice to the Trustee may, on behalf of the
holders of all the Debt Securities of such series, waive any existing Default or
Event of Default and its consequences, except a Default or Event of Default
specified in clause (a) or (b) above, or in respect of any provision of the
applicable Indenture which cannot be modified or amended without the consent of
the holder so affected. When a Default or Event of Default is so waived, it
shall be deemed cured and shall cease to exist.
LIMITATION ON SUITS
No holder of any Debt Securities of any series shall have any right to
institute any suit, action or proceeding with respect to an Indenture or the
Debt Securities of such series, or for the appointment of a receiver or trustee
or similar official, or for any other remedy hereunder or thereunder, unless:
(1) the holder gives written notice to the Trustee of a continuing Event of
Default; (2) the holders of at least 25% in aggregate principal amount of the
Debt Securities of such series then outstanding shall have made written request
to the Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder; (3) such holder or holders offer and, if requested, provide
to the Trustee reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby; (4) the Trustee for
60 days after its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or proceeding; and
(5) during such 60-day period the holders of a majority in aggregate principal
amount of the Debt Securities of such series then outstanding do not give the
Trustee a direction which is inconsistent with the request; it being understood
and intended, and being expressly covenanted by the holder of every Debt
Security of such series with every other taker and holder and the Trustee, that
no one or more holders of Debt Securities of such series shall have any right in
any
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manner whatever by virtue of or by availing of any provision of an Indenture or
of the Debt Securities to affect, disturb or prejudice the rights of any other
holder of Debt Securities of such series, or to obtain or seek to obtain
priority over or preference as to any other such holder, or to enforce any right
under an Indenture or the Debt Securities of any series, except in the manner
herein provided and for the equal, ratable and common benefit of all holders of
Debt Securities of such series.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, premium, if any, or interest on the Debt Securities of any series
or to enforce the performance of any provision of the applicable Debt Securities
or Indenture.
CERTIFICATES OF COMPLIANCE
LGII shall furnish to the Trustee annual and quarterly statements as to the
performance by LGII of its obligations under the Indenture and as to any default
in such performance. LGII is also required to notify the Trustee within 10 days
of any event which is, or after notice or lapse of time or both would become, an
Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE
Each of LGII and Loewen may, at its option and at any time, terminate its
respective obligations with respect to an outstanding series of Debt Securities
("defeasance"). Such defeasance means that Loewen and LGII shall be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Debt Securities of such series, except for (i) the rights of holders of
outstanding Debt Securities of such series to receive payment in respect of the
principal of, premium, if any, and interest on such Debt Securities when such
payments are due, (ii) LGII's obligations to issue temporary Debt Securities of
such series, register the transfer or exchange of any Debt Securities of such
series, replace mutilated, destroyed, lost or stolen Debt Securities of such
series and maintain an office or agency for payments in respect of the Debt
Securities of such series, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and (iv) the defeasance provisions of the Indenture.
In addition, each of Loewen and LGII may, at its option and at any time, elect
to terminate its obligations with respect to certain covenants that are set
forth in the Indenture, some of which are described above, and any subsequent
failure to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Debt Securities of such series ("covenant
defeasance").
In order to exercise either defeasance or covenant defeasance, (i) LGII must
irrevocably deposit with the Trustee, in trust, for the benefit of the holders
of the Debt Securities of such series, cash in United States dollars, U.S.
Government Obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
outstanding Debt Securities of such series to maturity (except lost, stolen or
destroyed Debt Securities of such series which have been replaced or paid); (ii)
Loewen or LGII shall have delivered to the Trustee an opinion of counsel to the
effect that the holders of the outstanding Debt Securities of such series will
not recognize income, gain or loss for federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance or covenant defeasance had not occurred (in the
case of defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax laws);
(iii) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit; (iv) such defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest with respect to any securities
of Loewen or LGII; (v) such defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a default under, any material
agreement or instrument to which Loewen or LGII is a party or by which it is
bound; (vi) Loewen or LGII shall have delivered to the Trustee an opinion of
counsel to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar law affecting creditors' rights generally;
and (vii) Loewen or LGII shall have delivered to the Trustee an
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officers' certificate and an opinion of counsel, each stating that all
conditions precedent under the Indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture with respect to a series of Debt Securities will be discharged
and will cease to be of further effect (except as to surviving rights or
registration of transfer or exchange of the Debt Securities, as expressly
provided for in the Indenture) as to all outstanding Debt Securities of such
series when (i) either (a) all of the Debt Securities of such series theretofore
authenticated and delivered (except lost, stolen or destroyed Debt Securities of
such series which have been replaced or repaid and Debt Securities of such
series for whose payment money has theretofore been deposited in trust or
segregated and held in trust by LGII and thereafter repaid to LGII or discharged
from such trust) have been delivered to the Trustee for cancellation or (b) all
Debt Securities of such series have been called for redemption or otherwise
become due and payable and Loewen or LGII has irrevocably deposited or caused to
be deposited with the Trustee funds in an amount sufficient to pay and discharge
the entire Indebtedness on the Debt Securities of such series not theretofore
delivered to the Trustee for cancellation, for principal of, premium, if any,
and interest on the Debt Securities of such series to the date of deposit
together with irrevocable instructions from Loewen or LGII directing the Trustee
to apply such funds to the payment thereof at maturity; (ii) Loewen and LGII
have paid all other sums payable by LGII under the Indenture; (iii) there exists
no Default or Event of Default under the Indenture; and (iv) Loewen or LGII has
delivered to the Trustee an officers' certificate and an opinion of counsel
stating that all conditions precedent under the Indenture relating to the
satisfaction and discharge of the Indenture have been complied with.
AMENDMENTS AND WAIVERS
LGII and the Trustee may from time to time and at any time amend or
supplement an Indenture (a) to cure any ambiguity, defect or inconsistency or to
correct or supplement any provision contained herein or in any supplemental
indenture which may be defective or inconsistent with any other provision
contained herein or in any supplemental indenture, or to make any other
provisions as to LGII may deem necessary or desirable, provided that no such
action shall adversely affect the interests of the holders of any series of Debt
Securities; (b) to evidence the succession of another corporation to LGII, or
successive successions, and the assumption by the successor corporation of the
covenants, agreements and obligations of LGII; (c) to establish the form or
terms of Debt Securities of any series and to provide for adjustment of
conversion rights; (d) to comply with any requirements of the Commission in
order to effect or maintain the qualification of any Indenture under the Trust
Indenture Act of 1939, as amended (the "TIA"); (e) to evidence and provide for
the acceptance of appointment by a successor trustee with respect to the Debt
Securities of one or more series and to add to or change any of the provisions
of an Indenture as shall be necessary to provide for or facilitate the
administration of trusts by more than one trustee; and (f) to add to the
covenants of LGII such further covenants, restrictions, conditions or provisions
as the Issuer and the Trustee shall consider to be for the protection of the
holders of all or any series of Debt Securities (and if such covenants,
restrictions, conditions or provisions are to be for the protection of less than
all series of Debt Securities, stating that the same are expressly being
included solely for the protection of such series), and to make the occurrence,
or the occurrence and continuance, of a default in any such additional
covenants, restrictions, conditions or provisions an Event of Default; provided,
that in respect of any such additional covenant, restriction, condition or
provision a supplemental indenture may provide for a particular period of grace
after default (which period may be shorter or longer than that allowed in the
case of other defaults) or may provide for an immediate enforcement upon such an
Event of Default or may limit the remedies available to the Trustee upon such an
Event of Default or may limit the right of the holders of a majority in
aggregate principal amount of the Debt Securities of such series to waive such
Event of Default.
Any supplemental indenture authorized by an Indenture may be executed
without the consent of the holders of any of the Debt Securities then
outstanding. Notwithstanding the foregoing, the Trustee and LGII may not make
any change to an Indenture that adversely affects the rights of any holders of
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outstanding Debt Securities. LGII shall be required to deliver to the Trustee an
Opinion of Counsel stating that any such change does not adversely affect the
rights of any holder.
GLOBAL DEBT SECURITIES
Debt Securities of a series may be issued in whole or in part in the form of
one or more fully registered global securities (a "Registered Global Security")
that may be deposited with a depositary ("Depositary") or with a nominee for the
Depositary identified in the applicable Prospectus Supplement. In such case, one
or more Registered Global Securities will be issued in a denomination or
aggregate denominations equal to the portion of the aggregate principal amount
of Debt Securities of the series to be represented by such Registered Global
Security or Securities. Unless and until it is exchanged in whole or in part for
Debt Securities in definitive certificated form, a Registered Global Security
may not be registered for transfer or exchange except as a whole by the
Depositary for such Registered Global Security to a nominee of such Depositary
or by a nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary to any such nominee to a successor Depositary
for such series or a nominee of such successor Depositary and except in the
circumstances described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to a portion
of a series of Debt Securities to be represented by a Registered Global Security
will be described in the applicable Prospectus Supplement. Loewen expects that
the following provisions will apply to any such depositary arrangements.
Upon the issuance of any Global Registered Securities, the Depositary will
credit, on its internal book-entry system, the principal amount of Debt
Securities of the individual beneficial interest represented by such Global
Registered Securities to the respective accounts of institutions
("participants") that have accounts with the Depositary or its nominee. The
accounts to be credited will be designated by the underwriters or agents
engaging in the distribution of such Debt Securities or by LGII if such Debt
Securities are offered and sold directly by LGII. Ownership of beneficial
interests by participants in such Registered Global Security will be shown on,
and the transfer of that ownership interest will be effected only through,
records maintained by the Depositary for such Registered Global Security or by
its nominee. Ownership of beneficial interests in such Registered Global
Security by persons that hold such interests through a participant will be shown
on, and the transfer of such ownership interests will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interest in such Registered Global Securities.
So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented thereby for all purposes under the Indentures.
Unless otherwise specified in the applicable Prospectus Supplement and except as
specified below, owners of beneficial interests in such Registered Global
Security will not be entitled to have Debt Securities of the series represented
by such Registered Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities of such series in
certificated form and will not be considered the holders thereof for any
purposes under the Indentures. Accordingly, each person owning a beneficial
interest in such Registered Global Security will be required to rely on the
procedures of the Depositary and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest., to
exercise the rights of a holder under the Indentures. The Depositary may grant
proxies and otherwise authorize participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action which
a holder is entitled to give or take under the applicable Indenture. Loewen
understands that, under existing industry practices, if Loewen requests any
action of holders or an owner of a beneficial interest in a Registered Global
Security desires to give any notice or take any action a holder is entitled to
give or take under the applicable Indenture, the Depositary would authorize the
participants to give such notice or take such action, and participants would
authorize
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beneficial owners owning through such participants to give such notice or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
Unless otherwise specified in the applicable Prospectus Supplement, payments
with respect to principal of, premium, if any and interest, if any, on Debt
Securities represented by a Registered Global Security registered in the name of
a Depositary or its nominee will be made to such Depositary or its nominee, as
the case may be, as the registered owners of such Registered Global Security.
LGII expects that the Depositary for any Debt Securities represented by a
Registered Global Security, upon receipt of any payment of principal, premium or
interest will immediately credit participants' accounts with payment in amounts
proportionate to their respective beneficial interest in the principal amount of
such Registered Global Security as shown on the records of such Depositary. LGII
also expects that payments by participants to owners of beneficial interests in
such Registered Global Security held through such participants will be governed
by standing instructions and customary practices, as is now the case with the
securities held for the accounts of customers registered in "street names" and
will be the responsibility of such participants. None of LGII, the Trustee or
any agent of LGII shall have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in a Registered Global Security, or for maintaining, supervising, or
reviewing any records relating to such beneficial ownership interests.
Unless otherwise specified in the applicable Prospectus Supplement, if the
Depositary for any Debt Securities represented by a Registered Global Security
is at any time unwilling or unable to continue as Depositary and a successor
Depositary is not appointed by LGII within 90 days, LGII will issue such Debt
Securities in definitive certificated form in exchange for such Registered
Global Security. In addition, LGII may at any time and in its sole discretion
determine not to have any of the Debt Securities of a series represented by one
or more Registered Global Securities and, in such event, will issue Debt
Securities of such series in definitive certificated form in exchange for all of
the Registered Global Securities representing such Debt Securities. Further, if
LGII so specifies with respect to Debt Securities of any series an owner of a
beneficial interest in a Registered Global Security representing Debt Securities
of such series may, on terms acceptable to LGII and the Depositary, receive Debt
Securities of such series in definitive form registered in the name of such
beneficial owner or its designee.
THE TRUSTEE
Unless otherwise specified in the applicable Prospectus Supplement, Fleet
National Bank, or its successor, shall be the Trustee under each Indenture. The
Indentures provide that, except during the continuance of an Event of Default,
the Trustee will perform only such duties as are specifically set forth in the
Indenture. If any Event of Default has occurred and is continuing the Trustee
will exercise such rights and powers vested in it under the Indenture and use
the same degree of care and skill in its exercise as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
The Indentures, including provisions of the TIA incorporated by reference
therein, will contain limitations on the rights of the Trustee should it become
a creditor of LGII, to obtain payment of claims in certain cases or to realize
on certain property received by it in respect of any such claims, as security or
otherwise.
In addition to serving as Trustee under the Indentures, Fleet National Bank
also serves as trustee under (a) the Indenture dated as of March 20, 1996, as
amended (the "March 1996 Indenture"), among LGII, Loewen, as Guarantor, and
Fleet National Bank, as trustee, and (b) the Indenture dated as of October 1,
1996, as amended (the "October 1996 Indenture") among LGII, Loewen, as
Guarantor, and Fleet National Bank, as trustee. In March 1996, LGII issued
$225,000,000 7 1/2% Series 1 Senior Guaranteed Notes due 2001 and $125,000,000
8 1/4% Series 2 Senior Guaranteed Notes due 2003 under the March 1996 Indenture,
and in October 1996, LGII issued $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
under the October 1996 Indenture. Pursuant to the TIA, in certain circumstances,
if an event of default were to occur under the March 1996 Indenture, the October
1996 Indenture and/or any Indenture relating to Debt Securities, Fleet
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National Bank could be required to resign as trustee under one or more of such
indentures. If Fleet National Bank were to resign as trustee, Loewen or LGII
would be required to take prompt steps to have a successor trustee or trustees
appointed in the manner provided in the indenture or indentures from which Fleet
National Bank has resigned.
PLAN OF DISTRIBUTION
LGII may offer and sell the Debt Securities from time to time through
agents, to or through underwriters, through dealers or directly to purchasers.
The Prospectus Supplement with respect to the Debt Securities to be offered will
set forth the terms of the offering of the Debt Securities, including (i) the
name or names of any underwriters, dealers or agents, (ii) the offering price of
the Debt Securities, (iii) the proceeds to the Company from such sale, (iv) any
underwriting discounts and commissions or other amounts constituting
underwriters' or agents' compensation, and (v) any securities exchange or
automated quotation system on which the Debt Securities may be listed. Any
initial public offering price, discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
The distribution of the Debt Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
Offers to purchase Debt Securities may be solicited by agents designated by
LGII from time to time. Any such agent involved in the offer or sale of the Debt
Securities will be named, and any commissions payable by LGII to such agent will
be set forth, in the applicable Prospectus Supplement. Any such agent may be
deemed to be an underwriter (as that term is defined in the Securities Act) of
the Debt Securities so offered and sold.
If Debt Securities are sold by means of an underwritten offering, LGII will
execute an underwriting agreement with one or more underwriters at the time an
agreement for such sale is reached. The names of the specific managing
underwriter or underwriters, as well as any other underwriters, and the terms of
the transaction, including commissions, discounts and any other compensation of
the underwriters and dealers, if any, will be set forth in the Prospectus
Supplement which will be used by the underwriters to make resales of the Debt
Securities. If underwriters are utilized in the sale of Debt Securities, the
Debt Securities will be acquired by the underwriters for their own account and
may be resold from time to time in one or more transactions, including
negotiated transactions, at fixed public offering prices or at varying prices
determined by the underwriter at the time of sale. Debt Securities may be
offered to the public either through underwriting syndicates represented by
managing underwriters or directly by the managing underwriters. If any
underwriter or underwriters are utilized in the sale of the Debt Securities,
unless otherwise indicated in the Prospectus Supplement, the underwriting
agreement will provide that the obligations of the underwriters are subject to
certain conditions precedent and that the underwriters with respect to a sale of
Debt Securities will be obligated to purchase all of such series of Debt
Securities if any are purchased.
If a dealer is utilized in the sale of Debt Securities, LGII will sell such
Debt Securities to the dealer as principal. The dealer may then resell such Debt
Securities to the public at varying prices to be determined by such dealer at
the time of resale. Any such dealer may be deemed to be an underwriter (as that
term is defined in the Securities Act) of the Debt Securities so offered and
sold. The name of the dealer and the terms of the transaction will be set forth
in the Prospectus Supplement relating thereto.
Offers to purchase Debt Securities may be solicited by LGII directly to
institutional investors and others who may be deemed to be underwriters (as that
term is defined in the Securities Act) with respect to any resale thereof. The
terms of any such sales will be described in the Prospectus Supplement relating
thereto.
Agents, underwriters and dealers may be entitled under relevant agreements
to indemnification or contribution by LGII against certain liabilities,
including liabilities under the Securities Act.
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Agents, underwriters and dealers may be customers of, engage in transactions
with or perform services for the Company in the ordinary course of business.
Debt Securities may also be offered and sold, if so indicated in the
applicable Prospectus Supplement, in connection with a remarketing upon their
purchase, in accordance with a redemption or repayment pursuant to their terms,
or otherwise, by one or ore firms ("remarketing firms"), acting as principals
for their own accounts or as agents of LGII. Any remarketing firm will be
identified and the terms of its agreement, if any, with its compensation will be
described in the applicable Prospectus Supplement. Remarketing firms may be
deemed to be underwriters (as such term is defined in the Securities Act) in
connection with the Debt Securities remarketed thereby. Remarketing firms may be
entitled under agreements which may be entered into with LGII to indemnification
or contribution by the Company against certain liabilities, including
liabilities under the Securities Act, and may be customers of, engage in
transactions with or perform services for the Company in the ordinary course of
business.
If so indicated in the applicable Prospectus Supplement, LGII may authorize
agents, underwriters or dealers to solicit offers by certain types of
institutions to purchase Debt Securities from LGII at the public offering prices
set forth in the applicable Prospectus Supplement pursuant to delayed delivery
contracts ("Contracts") providing for payment and delivery on a specified date
or dates in the future. A commission indicated in the applicable Prospectus
Supplement will be paid to underwriters, dealers and agents soliciting purchases
of Securities pursuant to Contracts accepted by LGII.
LEGAL MATTERS
The validity of the Debt Securities and certain matters of New York law
relating to the Guarantees will be passed upon for LGII and Loewen by Thelen,
Marrin, Johnson & Bridges LLP, San Francisco, California. The validity of the
Guarantees will be passed upon for Loewen by Russell & DuMoulin, Vancouver,
British Columbia, Canada.
EXPERTS
The consolidated financial statements of Loewen incorporated by reference in
this Prospectus have been audited by KPMG, Chartered Accountants, for the
periods indicated in its report thereon, which is incorporated herein by
reference. Such consolidated financial statements have been so incorporated in
reliance on such report given on the authority of KPMG as experts in accounting
and auditing.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER AND SALE OF SECURITIES MADE HEREBY, AND
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER OR A
SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS, NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Information by Reference......................... 2
Disclosure Regarding Forward-Looking Statements........................... 3
Financial Information..................................................... 3
The Company............................................................... 3
Use of Proceeds........................................................... 4
Selected Consolidated Financial and Operating Information................. 5
Description of Debt Securities............................................ 9
Plan of Distribution...................................................... 31
Legal Matters............................................................. 32
Experts................................................................... 32
</TABLE>
$500,000,000
LOEWEN GROUP
INTERNATIONAL, INC.
DEBT SECURITIES
[LOGO]
GUARANTEED BY
THE LOEWEN GROUP INC.
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PROSPECTUS
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, 1997
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