<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-12163
----------------
THE LOEWEN GROUP INC.
(Exact name of registrant as specified in its charter)
----------------
<TABLE>
<S> <C>
BRITISH COLUMBIA 98-0121376
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
4126 NORLAND AVENUE,
BURNABY, BRITISH COLUMBIA, CANADA V5G 3S8
(Address of principal executive offices)(Zip Code)
604-299-9321
Registrant's telephone number, including area code
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check /X/ whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
----------------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check /X/ whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes / / No / /
----------------
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of outstanding Common shares as of May 9, 1997, was 59,199,039.
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<PAGE>
THE LOEWEN GROUP INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS
as of March 31, 1997 and December 31, 1996............... 1
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
for the Three Months Ended March 31, 1997 and 1996....... 2
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
for the Three Months Ended March 31, 1997 and 1996....... 3
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS............. 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.... 19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS................................... 25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................... 29
SIGNATURES............................................................... 35
</TABLE>
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
THE LOEWEN GROUP INC.
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and term deposits......................... $ 20,198 $ 18,059
Receivables, net of allowances................. 210,832 187,617
Inventories.................................... 32,877 32,008
Prepaid expenses............................... 11,167 11,545
------------- ------------
275,074 249,229
Prearranged funeral services..................... 341,211 334,420
Long-term receivables, net of allowances......... 336,547 288,579
Investments...................................... 276,308 266,228
Insurance invested assets........................ 303,071 296,249
Cemetery property, at cost....................... 706,698 615,192
Property and equipment........................... 699,568 686,285
Names and reputations............................ 570,399 558,710
Deferred income taxes............................ 70,858 67,904
Other assets..................................... 139,534 134,143
------------- ------------
$3,719,268 $3,496,939
------------- ------------
------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 115,364 $ 114,072
Long-term debt, current portion 78,192 79,580
------------- ------------
193,556 193,652
Long-term debt................................... 1,608,610 1,428,641
Other liabilities................................ 212,101 204,546
Insurance policy liabilities..................... 218,076 212,480
Deferred prearranged funeral services revenue.... 341,211 334,420
Preferred securities of subsidiary............... 75,000 75,000
Shareholders' equity
Common shares.................................. 798,329 796,431
Preferred shares............................... 157,146 157,146
Retained earnings.............................. 101,388 80,117
Foreign exchange adjustment.................... 13,851 14,506
------------- ------------
1,070,714 1,048,200
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$3,719,268 $3,496,939
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------------- ------------
</TABLE>
Commitments and contingencies (Notes 3, 4, 7 and 9)
See accompanying notes to interim consolidated financial statements
-1-
<PAGE>
THE LOEWEN GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
---------- ----------
(UNAUDITED)
<S> <C> <C>
Revenue
Funeral................................................................................. $ 155,543 $ 133,259
Cemetery................................................................................ 97,435 53,324
Insurance............................................................................... 21,719 6,501
---------- ----------
274,697 193,084
Costs and expenses
Funeral................................................................................. 92,084 77,224
Cemetery................................................................................ 64,106 37,650
Insurance............................................................................... 17,193 5,375
---------- ----------
173,383 120,249
---------- ----------
101,314 72,835
Expenses
General and administrative.............................................................. 23,479 16,355
Depreciation and amortization........................................................... 16,826 11,642
---------- ----------
40,305 27,997
---------- ----------
Earnings from operations.................................................................. 61,009 44,838
Interest on long-term debt................................................................ 30,698 18,488
---------- ----------
Earnings before undernoted items.......................................................... 30,311 26,350
Dividends on preferred securities of subsidiary........................................... 1,772 1,772
---------- ----------
Earnings before income taxes and undernoted items......................................... 28,539 24,578
Income taxes
Current................................................................................. 11,674 2,168
Deferred................................................................................ (3,678) 5,570
---------- ----------
7,996 7,738
---------- ----------
20,543 16,840
Equity and other earnings of associated companies......................................... 3,157 383
---------- ----------
Net earnings for the period............................................................... $ 23,700 $ 17,223
Retained earnings, beginning of period.................................................... 80,117 36,439
Common share dividends.................................................................... -- (2,499)
Preferred share dividends................................................................. (2,429) --
---------- ----------
Retained earnings, end of period.......................................................... $ 101,388 $ 51,163
---------- ----------
---------- ----------
Basic earnings per Common share........................................................... $ 0.36 $ 0.30
Fully diluted earnings per Common share................................................... $ 0.36 $ 0.30
Dividend per Common share................................................................. $ -- $ 0.05
</TABLE>
See accompanying notes to interim consolidated financial statements.
-2-
<PAGE>
THE LOEWEN GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
---------- ----------
(UNAUDITED)
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings............................................................................ $ 23,700 $ 17,223
Items not affecting cash
Depreciation and amortization......................................................... 16,826 11,642
Deferred income taxes................................................................. (3,678) 5,570
Equity and other earnings of associated companies..................................... (3,157) (383)
Other................................................................................. 3,056 5,092
Common shares and debt issued for legal settlements..................................... -- (112,000)
Net changes in other non-cash balances.................................................. (59,220) (84,922)
---------- ----------
(22,473) (157,778)
---------- ----------
Investing
Business acquisitions................................................................... (127,501) (264,769)
Construction of new facilities.......................................................... (3,089) (2,142)
Investments, net........................................................................ (11,091) 3,965
Purchase of insurance invested assets................................................... (42,396) --
Proceeds on disposition of insurance invested assets.................................... 21,746 --
Purchase of property and equipment...................................................... (5,411) (4,080)
Proceeds on disposition of assets....................................................... 170 331
Other................................................................................... 12,303 (2,311)
---------- ----------
(155,269) (269,006)
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Financing
Issue of Common shares, before income tax recovery...................................... 1,880 275,085
Issue of Preferred shares, before income tax recovery................................... -- 84,842
Increase in long-term debt.............................................................. 200,330 131,553
Reduction in long-term debt............................................................. (21,579) (21,551)
Common share dividends.................................................................. -- (2,499)
Preferred share dividends............................................................... (2,429) --
Current note payable.................................................................... -- (38,546)
Other................................................................................... 797 (8,209)
---------- ----------
178,999 420,675
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Increase (decrease) in cash and cash equivalents during the period........................ 1,257 (6,109)
Effect of foreign exchange adjustment..................................................... 882 (737)
Cash and cash equivalents, beginning of period............................................ 18,059 39,454
---------- ----------
Cash and cash equivalents, end of period.................................................. $ 20,198 $ 32,608
---------- ----------
---------- ----------
Cash and cash equivalents include
Cash and term deposits.................................................................. $ 20,198 $ 32,608
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to interim consolidated financial statements.
-3-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 1. BASIS OF PRESENTATION
The United States dollar is the principal currency of the Company's business
and accordingly the interim consolidated financial statements are expressed in
United States dollars. The interim consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in Canada.
The interim consolidated financial statements include the accounts of all
subsidiary companies and include all adjustments, consisting of normal recurring
adjustments, which in management's opinion are necessary for a fair presentation
of the financial results for the interim periods. The financial statements have
been prepared consistent with the accounting policies described in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission for
the year ended December 31, 1996 and should be read in conjunction therewith.
Certain of the comparative figures have been reclassified to conform to the
presentation adopted in the current period.
USE OF ESTIMATES
The preparation of interim consolidated financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period. As a result, actual results could differ
from those estimates.
NOTE 2. ACQUISITIONS
During the three months ended March 31, 1997, the Company acquired 30
funeral homes and 52 cemeteries in the United States, and three funeral homes in
Canada.
During the three months ended March 31, 1996, the Company acquired 52
funeral homes, 29 cemeteries and two insurance companies in the United States
and one funeral home and one cemetery in Canada. Included in these acquisitions
was the purchase of certain net assets of S.I. Acquisition Associates L.P.
("S.I.") of Donaldsonville, Louisiana, for approximately $155,800,000, including
costs of acquisition. S.I. concurrently acquired all the outstanding shares of
Ourso Investment Corporation. The S.I. assets included 15 funeral homes, two
cemeteries and two insurance companies.
All of the Company's acquisitions have been accounted for by the purchase
method. The preliminary purchase price allocation for certain of these
acquisitions has been estimated based on available
-4-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 2. ACQUISITIONS (CONTINUED)
information at the time and is subject to revision. The effect of acquisitions
at dates of purchase on the Consolidated Balance Sheet is shown below.
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
---------- ----------
<S> <C> <C>
Current assets.................................................................. $ 3,115 $ 12,934
Prearranged funeral services.................................................... 4,058 11,432
Long-term receivables, net of allowances........................................ 5,568 6,620
Insurance invested assets....................................................... -- 185,971
Cemetery property, at cost...................................................... 89,940 60,859
Property and equipment.......................................................... 16,617 54,014
Names and reputations........................................................... 17,132 88,117
Other assets.................................................................... 87 276
---------- ----------
136,517 420,223
Current liabilities............................................................. (675) (4,329)
Long-term debt.................................................................. (380) (4,367)
Other liabilities............................................................... (3,903) (9,612)
Insurance policy liabilities.................................................... -- (125,207)
Deferred income taxes........................................................... -- (507)
Deferred prearranged funeral services revenue................................... (4,058) (11,432)
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$ 127,501 $ 264,769
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---------- ----------
Consideration
Cash, including assumed debt repaid at closing................................ $ 122,798 $ 246,285
Debt.......................................................................... 4,703 9,718
Common shares................................................................. -- 8,766
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Purchase Price.................................................................. $ 127,501 $ 264,769
---------- ----------
---------- ----------
</TABLE>
The following table reflects, on a pro-forma basis, the combined results of
the Company's operations acquired during the period ended March 31, 1997 as if
all such acquisitions had taken place at the beginning of the respective years
presented. Appropriate adjustments have been made to reflect the accounting
basis used in recording these acquisitions. This pro-forma information does not
purport to be indicative of the results of operations that would have resulted
had the acquisitions been in effect for the entire periods presented, and is not
intended to be a projection of future results or trends.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Revenues........................................................................ $ 281,028 $ 202,969
Net earnings.................................................................... $ 23,899 $ 17,071
Basic earnings per share........................................................ $ 0.36 $ 0.30
Fully diluted earnings per share................................................ $ 0.36 $ 0.30
</TABLE>
-5-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 3. INVESTMENT IN PRIME SUCCESSION HOLDINGS, INC. ("PRIME")
On August 26, 1996, the Company acquired 235.2941 Common shares of Prime for
$16,000,000, representing 23.5% of Prime's voting common shares, and 100% of
Prime's non-voting preferred stock for $62,000,000. Blackstone Capital Partners
II Merchant Banking Fund L.P. and certain affiliates (together, "Blackstone")
acquired 764.7059 Common shares, representing 76.5% of Prime's voting common
stock for $52,000,000. On February 14, 1997, the Company and Blackstone agreed
to adjust their respective ownership of Prime's voting common stock
retroactively to August 26, 1996. No adjustment to the aggregate purchase price
was made. After giving effect to the readjustment, the Company has paid
$14,500,000 for 213.2353 Common shares and Blackstone has paid $52,000,000 for
764.7059 Common shares representing 21.8% and 78.2% respectively of Prime's
voting common shares. The Company has acquired 100% of Prime's non-voting
preferred stock. A 10% cumulative annual payment-in-kind dividend is payable on
the preferred stock.
Prime holds all of the outstanding common shares of Prime Succession, Inc.,
an operator of funeral homes and cemeteries in the United States. Prime
Succession, Inc. was purchased on August 26, 1996 for approximately $320,000,000
of which $130,000,000 was funded by Blackstone and the Company, and $190,000,000
was financed through bank borrowings and the issuance of senior subordinated
notes. The excess of the purchase price over the fair value of net assets of
approximately $230,000,000, was established as goodwill in Prime Succession,
Inc. and is being amortized over 40 years.
The Company accounts for its investment in preferred shares of Prime by the
cost method. For the three months ended March 31, 1997, income of $1,588,000 was
recorded representing the cumulative annual payment-in-kind dividend.
The Company accounts for its investment in common shares of Prime by the
equity method. Under this method, the Company records its proportionate share of
the net earnings (loss) of Prime after deducting the payment-in-kind dividend.
For the three months ended March 31, 1997, a loss of $553,000 was recorded
representing the Company's proportionate share of the loss attributable to the
common shares of Prime.
Under a Put/Call Agreement entered into with Blackstone, the Company has the
option to acquire ("Call") Blackstone's common share interest in Prime
commencing on the fourth anniversary of the acquisition, and for a period of two
years thereafter, at a price determined pursuant to the Put/Call Agreement.
Blackstone has the option to sell ("Put") its common share interest to the
Company commencing on the sixth anniversary of the acquisition, and for a period
of two years thereafter, at a price determined pursuant to the Put/Call
Agreement.
-6-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 3. INVESTMENT IN PRIME SUCCESSION HOLDINGS, INC. ("PRIME") (CONTINUED)
Summarized financial data for Prime are presented as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
31, 1997
-------------
<S> <C>
Income statement information:
Revenue................................................................................ $ 24,195
Gross margin........................................................................... 15,514
Earnings from operations............................................................... 5,071
Payment-in-kind dividend............................................................... 1,588
Net loss attributable to common shareholders........................................... 2,538
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
---------- ------------
<S> <C> <C>
Balance sheet information:
Current assets............................................................. $ 19,608 $ 24,614
Non-current assets......................................................... 373,861 374,174
---------- ------------
Total assets............................................................... 393,469 398,788
Current liabilities........................................................ 19,755 22,531
Non-current liabilities.................................................... 248,059 249,652
---------- ------------
Total liabilities.......................................................... 267,814 272,183
Shareholders' equity....................................................... 125,655 126,605
</TABLE>
NOTE 4. INVESTMENT IN ROSE HILLS HOLDING CORP. ("RH HOLDINGS")
On November 19, 1996, the Company acquired 204.5454 Common shares of RH
Holdings for $9,000,000, representing 20.45% of RH Holdings' voting common
shares, and 100% of RH Holdings' non-voting preferred shares with a cumulative
annual payment-in-kind dividend of 10%, for $86,000,000. The Company's total
investment of $95,000,000 consisted of $72,000,000 in cash and a contribution by
the Company of 14 funeral homes and two combination funeral home and cemetery
properties located in California valued at $23,000,000. Blackstone acquired
795.4546 Common shares, representing 79.55% of RH Holdings' voting common stock
for $35,000,000.
RH Holdings holds all of the outstanding common shares of Rose Hills Company
("RHC") and the cemetery related assets of Rose Hills Memorial Park Association,
representing the largest single location cemetery in the United States. These
companies were purchased on November 19, 1996 for approximately $285,000,000 of
which $130,000,000 was funded by Blackstone and the Company, and $155,000,000
was financed through bank borrowings and the issuance of senior subordinated
notes. The excess of the purchase price over the fair value of net assets of
approximately $130,000,000 was established as goodwill in RH Holdings and is
being amortized over 40 years.
The Company accounts for its investment in preferred shares of RH Holdings
by the cost method. For the three months ended March 31, 1997, income of
$2,150,000 was recorded representing the cumulative annual payment-in-kind
dividend.
The Company accounts for its investment in common shares of RH Holdings by
the equity method. Under the equity method, the Company records its
proportionate share of the net earnings (loss) of
-7-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 4. INVESTMENT IN ROSE HILLS HOLDING CORP. ("RH HOLDINGS") (CONTINUED)
RH Holdings after deducting the payment-in-kind dividend. For the three months
ended March 31, 1997, a loss of $440,000 was recorded representing the Company's
proportionate share of the loss attributable to the common shares of RH
Holdings. The properties contributed by the Company had a net carrying value of
$20,382,000. The Company has deferred a gain of $2,618,000 on the disposition of
these properties and will recognize the gain if and when the properties are
sold. The deferred gain is recorded in other liabilities on the interim
consolidated balance sheet.
Under a Put/Call Agreement entered into with Blackstone, the Company has the
option to acquire ("Call") Blackstone's common share interest in RH Holdings
commencing on the fourth anniversary of the acquisition, and for a period of two
years thereafter, at a price determined pursuant to the Put/Call Agreement.
Blackstone has the option to sell ("Put") its common share interest to the
Company commencing on the sixth anniversary of the acquisition, and for a period
of two years thereafter, at a price determined pursuant to the Put/Call
Agreement.
NOTE 5. LONG-TERM DEBT
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Bank revolving credit agreements..................................................... $ 459,543 $ 270,489
Management Equity Investment Plan bank term loan agreement
due in 2000........................................................................ 107,583 107,583
Canadian bank term loan agreement due 2000 (Cdn. $35,000,000)........................ 25,282 25,536
9.70% Series A and C senior amortizing notes due in 1998............................. 62,500 62,500
9.93% Series B senior amortizing notes due in 2001................................... 35,700 35,700
9.62% Series D senior amortizing notes due in 2003................................... 60,000 60,000
6.49% Series E senior amortizing notes due in 2004................................... 50,000 50,000
7.50% Series 1 senior notes due in 2001.............................................. 225,000 225,000
7.75% Series 3 senior notes due in 2001.............................................. 125,000 125,000
8.25% Series 2 and 4 senior notes due in 2003........................................ 350,000 350,000
Present value of notes issued under legal settlements discounted at
an effective interest rate of 7.75%................................................ 39,115 40,000
Present value of contingent consideration payable on acquisitions
discounted at an effective interest rate of 8.0%................................... 26,515 34,681
Other, principally arising from vendor financing of acquired operations
or long-term debt assumed on acquisitions, bearing interest at fixed
and floating rates varying from 4.8% to 14.0%, certain of which are
secured by assets of certain subsidiaries.......................................... 120,564 121,732
------------ ------------
1,686,802 1,508,221
Less current portion................................................................. 78,192 79,580
------------ ------------
$ 1,608,610 $1,428,641
------------ ------------
------------ ------------
</TABLE>
(a) Certain of the Company's loan agreements contain various restrictive
provisions, including change of control provisions and provisions restricting
payment of dividends on Common and Preferred shares, restricting encumbrance of
assets, limiting redemption or repurchase of shares, limiting disposition of
assets, limiting the amount of additional debt, limiting the amount of capital
expenditures and requiring the Company to maintain specified financial ratios.
At March 31, 1997, approximately $19,500,000 of the
-8-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 5. LONG-TERM DEBT (CONTINUED)
Company's retained earnings were not restricted and available for payment of
dividends under the most restrictive agreement.
(b) In October 1996, Loewen Group International, Inc. ("LGII") consummated a
private placement of two series of senior notes guaranteed by the Company
(Series 3 and 4) for gross proceeds of $350,000,000. In March 1997, these notes
were exchanged for notes registered under the Securities Act of 1933.
NOTE 6. PREFERRED SECURITIES OF SUBSIDIARY
On August 15, 1994, 3,000,000 9.45% Cumulative Monthly Income Preferred
Securities, Series A ("MIPS") were issued by Loewen Group Capital, L.P. ("LGC")
in a public offering for an aggregate amount of $75,000,000. LGC is a limited
partnership and LGII as its general partner manages its business and affairs.
LGII serves as the holding company for all United States assets and operations
of the Company. The consolidated financial statements of LGII are prepared in
accordance with Canadian generally accepted accounting principles and are
presented in United States dollars.
Summarized financial data for LGII are presented as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Income statement information:
Revenue................................................................................. $ 254,931 $ 176,057
Gross margin............................................................................ 88,070 65,877
Earnings from operations................................................................ 51,461 41,355
Net earnings............................................................................ 1,003 5,465
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Balance sheet information:
Current assets..................................................................... $ 248,902 $ 223,388
Non-current assets................................................................. 3,034,057 2,865,005
------------ ------------
Total assets....................................................................... 3,282,959 3,088,393
Current liabilities................................................................ 163,510 156,290
Non-current liabilities............................................................ 2,905,791 2,719,453
------------ ------------
Total liabilities.................................................................. 3,069,301 2,875,743
Shareholders' equity............................................................... 213,658 212,650
</TABLE>
-9-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 7. LEGAL PROCEEDINGS AND CONTINGENCIES
CLASS ACTIONS ALLEGING SECURITIES LAWS VIOLATIONS
On November 4, 1995, a class action lawsuit claiming violations of federal
securities laws was filed on behalf of a class of purchasers of Company
securities against the Company and five individuals who were officers of the
Company (four of whom were also directors) in the United States District Court
for the Eastern District of Pennsylvania. LGII, LGC, and the lead underwriters
(the "Underwriters") of LGC's 1994 offering of Monthly Income Preferred
Securities ("MIPS"), were subsequently added as defendants. On November 7, 1995,
a class action lawsuit was filed on behalf of a class of purchasers of Common
shares against the Company and the same individual defendants in the United
States District Court for the Southern District of Mississippi alleging Federal
securities law violations and related common law claims. On December 1, 1995, a
class action lawsuit was filed on behalf of a class of purchasers of the
Company's securities against the Company, LGII, LGC and the same individual
defendants in the United States District Court for the Eastern District of
Pennsylvania.
The complaints with respect to the class actions alleged that the defendants
failed to disclose the Company's anticipated liability in connection with
certain litigation with Gulf National. The Pennsylvania class actions also
alleged failure to disclose the Company's potential liability in connection with
certain litigation with Provident. The Company settled the lawsuits with Gulf
National and Provident during the first quarter of 1996.
Pursuant to a Transfer Order filed April 15, 1996 by the Judicial Panel on
Multidistrict Litigation, the Mississippi class action was transferred to the
Eastern District of Pennsylvania for consolidation of pretrial proceedings with
the two Pennsylvania class actions. On September 16, 1996, the plaintiffs filed
a Consolidated and Amended Class Action Complaint (the "Consolidated Class
Action Complaint"). Procedurally, the Consolidated Class Action Complaint
supersedes the complaints filed in the class actions. Plaintiffs allege three
causes of action in the Consolidated Class Action Complaint: (i) the Company,
LGII, LGC and the five individual defendants violated Sections 10(b) and 20(a)
and the implementing antifraud rules under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), (ii) LGII, LGC and three of the five individual
defendants violated Sections 11 and 15 of the Securities Act of 1933, as amended
(the "Securities Act"), in connection with the MIPS offering and (iii) the
Company, LGII and LGC made material misstatements in connection with the MIPS
offering in violation of Sections 12(2) and 15 of the Securities Act. Plaintiffs
seek compensatory money damages in an unspecified amount, together with
attorneys fees, expert fees and other costs and disbursements. Punitive damages
are not sought.
The defendants filed their Answer to the Consolidated Class Action Complaint
on November 1, 1996, in which they have denied the material allegations and
raised certain affirmative defenses. The parties have commenced discovery and
document production. No depositions have been taken.
The parties have stipulated to the provisional certification of plaintiff
classes consisting of: (i) all purchasers of Common shares or MIPS on an
American stock exchange or in public offerings during the period from April 16,
1993 through November 1, 1995, with respect to the Exchange Act claims; and (ii)
all persons who purchased MIPS pursuant to the public offering in August 1994,
with respect to the Securities Act claims. Defendants have retained all rights
to conduct discovery on class issues and to move to modify the class definitions
or to decertify the classes. Plaintiffs have agreed to stay all proceedings,
including all discovery, relating to disclosures about the Provident litigation.
Plaintiffs have the right to lift the stay upon written notice, which must be
provided 90 days before the end of discovery or the beginning of trial.
-10-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 7. LEGAL PROCEEDINGS AND CONTINGENCIES (CONTINUED)
On June 11, 1996, all claims against the Underwriters were dismissed without
prejudice, by agreement of the parties. Prior to the dismissal, the Underwriters
had indicated to the Company that they would seek indemnity from the Company for
costs incurred. The Company paid the Underwriters' costs through the date of
dismissal. The Company expects that the Underwriters will seek further indemnity
from the Company if any of the claims against the Underwriters are reinstated.
On April 29, 1997, the Court issued Pretrial Order No. 2, which provides,
among other things, that: (i) trial will be set on or after February 1, 1999;
(ii) the Court will convene a settlement conference on August 19, 1997; (iii)
depositions are to commence on or after September 10, 1997 and be completed by
June 30, 1998; (iv) expert discovery is to be completed by September 30, 1998;
and (v) dispositive motions are to be filed by October 30, 1998.
The Company referred the claims to its insurance carrier under its directors
and officers liability insurance policy. On February 9, 1996, the carrier denied
coverage of the claim. The Company believes that such denial was improper. On
March 21, 1996, the Company commenced an action in British Columbia Supreme
Court seeking a declaration that the policy covers indemnification with respect
to the Class Action. As of the date hereof, the Supreme Court has not ruled on
the action. The Company cannot predict at this time the extent to which any
settlement or litigation that may result from these claims will ultimately be
covered by insurance, if at all.
The Company has determined that it is not possible at this time to predict
the final outcome of these legal proceedings and that it is not possible to
establish a reasonable estimate of possible damages, if any, or reasonably to
estimate the range of possible damages that may be awarded to the plaintiffs.
Accordingly, no provision with respect to the class actions has been made in the
Company's interim consolidated financial statements.
ROE ET AL., PALLADINO ET AL., O'SULLIVAN AND SCHNEIDER
In October 1995, Roe and 22 other families filed a lawsuit against LGII and
Osiris Holding Corporation ("Osiris") in Florida Circuit Court in St.
Petersburg. In early April 1996, a related lawsuit, PALLADINO ET AL., was filed
by eight families against LGII and Osiris in Florida Circuit Court in St.
Petersburg, and was assigned to the same judge handling the Roe matter. In June
1996, the Roe and Palladino lawsuits were consolidated and amended to include a
total of 90 families, and in July 1996, the Palladino lawsuit was dismissed. In
October 1996, a Fifth Amended Complaint ("Complaint") was filed bringing the
number of plaintiff families to 150. The gravamen of the Complaint is that, in
July 1992, employees of the Royal Palm Cemetery facility who were installing a
sprinkler line disturbed the remains of infants in one section of the cemetery.
The specific claims include tortious interference with a dead body (intentional
and grossly negligent conduct so extreme and outrageous as to imply malice) and
negligent infliction of emotional distress. The Complaint also names the Company
and LGII as defendants (on an alter ego theory) and includes claims for
negligent retention of certain cemetery employees. Each plaintiff identified in
the Complaint is seeking damages in excess of $15,000, but the Complaint alleges
aggregate damage in excess of $40,000,000. In addition, in May 1996, Sean M.
O'Sullivan filed a lawsuit against Osiris and LGII and in July 1996, Karen
Schneider filed a lawsuit against Osiris and LGII. The factual allegations
underlying the O'Sullivan and Schneider complaints are identical to those
alleged in the Complaint. Schneider has been named in the Complaint and the
Schneider lawsuit has been dismissed. A mediation was held on November 14, 1996,
but the parties did not reach an agreement. However, over the past several
months, nearly 100 families have settled their claims for de minimis sums,
leaving the number of plaintiff families at 51. O'Sullivan likewise settled for
a de minimis sum and dismissed his complaint. The
-11-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 7. LEGAL PROCEEDINGS AND CONTINGENCIES (CONTINUED)
Complaint was dismissed for pleading deficiencies. A Sixth Amended Complaint has
been filed, essentially recasting all of the previous claims in new terms.
Moreover, the Sixth Amended Complaint improperly names plaintiffs who have
already settled their claims. A motion to dismiss and for sanctions directed
toward the Sixth Amended Complaint has been filed.
At the time the remains allegedly were disturbed, the Royal Palm Cemetery
was owned by Osiris. Osiris was acquired by the Company in March 1995. The
insurance carriers for Osiris and the Company have assumed the defense of these
claims, subject to a reservation of rights. The insurance carrier for the
Company has stated that it may take the position that each gravesite claim is
separately subject to the per claim policy deductible of $250,000. Accordingly,
no assurance can be made that insurance coverage will be available. The annual
Osiris policy limit is $11,000,000 and the annual Company policy limit is
$80,000,000.
The Company has determined that it is not possible at this time to predict
the final outcome of these legal proceedings and that it is not possible to
establish a reasonable estimate of possible damages, if any, or reasonably to
estimate the range of possible damages that may be awarded to the plaintiffs.
Accordingly, no provision with respect to this lawsuit has been made in the
Company's interim consolidated financial statements.
ESNER ESTATE
On February 1, 1995, Stuart B. Esner and Sandra Esner (the "Executors") as
co-executor for the Estate of Gerald F. Esner (the "Esner Estate") filed an
action in the Court of Common Pleas in Bucks County, Pennsylvania against Osiris
and a law firm (the "Law Firm") that previously represented Osiris and its
principal shareholders, Gerald F. Esner, Lawrence Miller and William R. Shane.
Messrs. Miller and Shane currently are executive officers of the Company and
LGII.
The complaint alleged that Osiris breached the terms of a Second Amended and
Restated Shareholders' Agreement among Messrs. Esner, Miller and Shane (the
"Shareholders' Agreement") by attempting to repurchase shares of Osiris held by
the Esner Estate (the "Esner Shares") without complying with the terms of the
Shareholders' Agreement, and that the Law Firm breached its fiduciary duty and
committed malpractice in connection with the drafting of the Shareholders'
Agreement and its representation of Esner and Osiris. The Executors asked the
Court (i) to have the value of Osiris reappraised pursuant to the terms of the
Shareholders' Agreement and (ii) to require Osiris to repurchase the Esner
Shares pursuant to a new appraisal and the alleged terms of the Shareholders'
Agreement or, alternatively, to pay the Esner Estate the fair value of the Esner
Shares as determined by the new appraisal.
In March 1995, LGII purchased all of the issued and outstanding shares of
Osiris, including the Esner Shares. In connection with the purchase, LGII
entered into an indemnification agreement whereby Messrs. Miller and Shane
agreed to indemnify and hold LGII harmless with respect to any claims,
liabilities, losses and expenses, including reasonable attorney's fees, in
connection with or arising from the Esner Estate litigation.
On April 9, 1996, the Executors filed a second complaint, which names
Messrs. Miller and Shane and LGII as defendants. The second complaint alleges
breach of contract, fraud and related claims against Messrs. Miller and Shane,
and that LGII joined a civil conspiracy by acquiring Osiris. The Executors
request compensatory damages of $24,300,000 against the various defendants, and
seek punitive damages from Messrs. Miller and Shane. The two cases were
consolidated by the Court.
-12-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 7. LEGAL PROCEEDINGS AND CONTINGENCIES (CONTINUED)
On October 9, 1996, the Executors instituted a new civil action against the
Law Firm. On November 18, 1996, the Executors instituted a new civil action
against the individual partners of the Law Firm. In both complaints, the
Executors expanded upon the allegations against the Law Firm contained in the
previous complaints. By stipulation approved by the Court on February 24, 1997,
the parties agreed to consolidate all suits and to permit the Executors to file
a Third Amended Complaint, which was filed on February 10, 1997. The prayers for
relief remain unchanged. Osiris and Messrs. Miller and Shane have filed
preliminary challenges to the Third Amended Complaint. Likewise, LGII has moved
for a dismissal of the claims against it for failure to state a claim upon which
relief can be granted. That motion and the preliminary challenges are all
pending.
The Company has determined that it is not possible at this time to predict
the final outcome of these legal proceedings and that it is not possible to
establish a reasonable estimate of possible damages, if any, or reasonably to
estimate the range of possible damages that may be awarded to the plaintiffs.
Accordingly, no provision with respect to this lawsuit has been made in the
Company's interim consolidated financial statements.
FELDHEIM ET AL. V. SI-SIFH CORP. ET AL.
In January 1997, Elmer C. Feldheim and four other individuals filed a
lawsuit on behalf of themselves and a class of similarly situated individuals
and/or entities against SI-SIFH Corp., SI-SI Insurance Company, Inc., Loewen
Louisiana Holdings, Inc., and LGII in the Parish of Jefferson, State of
Louisiana. Plaintiffs seek a class action. SI-SIFH Corp. and SI-SI Insurance
Company, Inc. were acquired by LGII in March 1996 when LGII acquired the assets
of S.I. Acquisition Associates, L.P.
Plaintiffs hold or held funeral insurance policies issued by insurance
companies owned, directly or indirectly, by the defendants. Plaintiffs allege
that (i) the defendants failed to provide the funeral services purchased with
the policies by, among other things, offering a casket of inferior quality upon
presentation of a policy, and (ii) in connection with the sale of the insurance
policy, the insurance companies negligently or fraudulently represented and
interpreted the scope and terms of the policies and omitted to provide material
information regarding the policy benefits and limitations. Plaintiffs also
allege unfair trade practices in violation of Louisiana's insurance code and
trade practices laws.
Plaintiffs seek damages, penalties and attorneys fees. Louisiana law
prohibits plaintiffs from alleging specific amounts of damages. Plaintiffs also
seek a declaratory judgment compelling defendants to honour the policies and
allowing a plaintiff to select a more expensive casket than provided for in the
policy, upon payment of the difference in retail value, without forfeiting the
other benefits provided for in the policy.
As of the date hereof, no discovery has taken place. The Company has
determined that it is not possible at this time to predict the final outcome of
this legal proceeding, including whether a class will be certified, and that it
is not possible to establish a reasonable estimate of possible damages, if any,
or reasonably to estimate the range of possible damages that may be awarded to
plaintiffs. Accordingly, no provision with respect to this lawsuit has been made
in the Company's interim consolidated financial statements.
ENVIRONMENTAL CONTINGENCIES AND LIABILITIES
The Company's operations are subject to numerous environmental laws,
regulations and guidelines adopted by various governmental authorities in the
jurisdictions in which the Company operates. Liabilities
-13-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 7. LEGAL PROCEEDINGS AND CONTINGENCIES (CONTINUED)
are recorded when environmental liabilities are either known or considered
probable and can be reasonably estimated. The Company policies are designated to
control environmental risk upon acquisition through extensive due diligence and
corrective measures taken prior to acquisition. The Company believes
environmental contingencies and liabilities to be immaterial individually and in
the aggregate.
OTHER
No material developments occurred in connection with any other previously
reported legal proceedings against the Company during the last fiscal quarter.
The Company is a party to other legal proceedings in the ordinary course of
its business but does not expect the outcome of any other proceedings,
individually or in the aggregate, to have a material adverse effect on the
Company's financial position, results of operation or liquidity.
NOTE 8. HOSTILE TAKEOVER PROPOSAL
On January 7, 1997, Service Corporation International ("SCI") publicly
withdrew its unsolicited proposed offer to acquire the Company through an
exchange offer announced in October 1996. SCI had proposed to exchange $45 worth
of Common stock for each Common share of the Company tendered and $29.51 worth
of Common stock for each Series C Preferred share of the Company tendered. In
October 1996, the Board of Directors of the Company unanimously determined that
the offer was inadequate and not in the best interests of the Company or its
shareholders and recommended that, if the offer were commenced, the Company's
shareholders should not tender their shares.
NOTE 9. SUBSEQUENT EVENTS
(a) ACQUISITIONS
During the period from April 1, 1997 to April 30, 1997, the Company acquired
nine funeral homes and eight cemeteries. The aggregate cost of these
transactions was approximately $24,835,000.
As at April 30, 1997, the Company has committed to acquire certain funeral
homes, cemeteries and related operations, subject in most instances to certain
conditions including approval by the Company's Board of Directors. The aggregate
cost of these transactions, if completed, will be approximately $285,965,000.
(b) EQUITY FINANCINGS
The Company filed a preliminary prospectus supplement for a takedown of
10,000,000 Common shares plus an over-allotment option of 1,500,000 Common
shares for a proposed public offering in the United States and Canada. The
proceeds from the offering will be used for working capital and general
corporate purposes, including acquisitions. Pending use for such purposes, the
net proceeds will be used to repay outstanding indebtedness.
(c) OTHER
The Company received a commitment from the lead bank in its banking
syndicate to increase the Company's principal revolving credit facility to
$1,000,000,000 from its current level of $750,000,000.
-14-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 9. SUBSEQUENT EVENTS (CONTINUED)
The commitment is subject to completion of the proposed equity offering (with
proceeds of at least $250,000,000) and approval of certain senior lenders.
NOTE 10. UNITED STATES ACCOUNTING PRINCIPLES
The interim consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") in Canada.
These principles differ in the following material respects from those in the
United States as summarized below:
(a) EARNINGS AND EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
EARNINGS
Net earnings in accordance with Canadian GAAP............................................... $ 23,700 $ 17,223
Effects of differences in accounting for:
Insurance operations (e).................................................................. 523 --
Income taxes (c).......................................................................... 467 424
--------- ---------
Net earnings in accordance with United States GAAP.......................................... $ 24,690 $ 17,647
--------- ---------
--------- ---------
EARNINGS PER COMMON SHARE
Earnings per Common share in accordance with United States GAAP, are as follows:
Primary earnings per Common share......................................................... $ 0.37 $ 0.31
Fully diluted earnings per Common share................................................... $ 0.37 $ 0.31
</TABLE>
The following average number of shares were used for the computation of
primary and fully diluted earnings per Common share:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(THOUSANDS OF
SHARES)
<S> <C> <C>
Primary........................................................................................ 60,709 50,726
Fully diluted.................................................................................. 64,479 51,009
</TABLE>
-15-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 10. UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED)
(b) BALANCE SHEET
The amounts in the interim consolidated balance sheet that differ from those
reported under Canadian GAAP are as follows:
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
------------------------ ------------------------
UNITED UNITED
CANADIAN STATES CANADIAN STATES
GAAP GAAP GAAP GAAP
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Assets
Investments............................................... $ 276,308 $ 239,319 $ 266,228 $ 230,911
Insurance invested assets................................. 303,071 298,872 296,249 297,340
Cemetery property......................................... 706,698 994,029 615,192 872,782
Present value of insurance policies acquired.............. -- 14,501 -- 14,933
Deferred policy acquisition costs......................... -- 6,354 5,047
---
Names and reputations..................................... 570,399 599,809 558,710 586,847
Liabilities and Shareholders' Equity
Insurance policy liabilities.............................. 218,076 239,437 212,480 234,909
Other liabilities......................................... 212,101 174,718 204,546 167,648
Deferred income taxes..................................... (70,858) 266,987 (67,904) 239,617
Common shares............................................. 798,329 824,276 796,431 822,378
Retained earnings......................................... 101,388 84,085 80,117 61,824
Foreign exchange adjustment............................... 13,851 (16,826) 14,506 (16,171)
</TABLE>
(c) INCOME TAXES
Under United States GAAP, deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
Temporary differences are tax-effected at current rates whereas under Canadian
GAAP, temporary differences are tax-effected at historic rates.
The Company's deferred tax liabilities under FAS 109 are as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
---------- ------------
<S> <C> <C>
Deferred tax liabilities
Cemetery property.................................................................... $ 284,725 $ 254,995
Property and equipment............................................................... 63,920 62,609
Deferred costs related to prearranged funeral services............................... 3,885 5,068
Other tax liabilities................................................................ 26,867 24,515
---------- ------------
Total deferred tax liabilities......................................................... 379,397 347,187
---------- ------------
Deferred tax assets
Legal settlements.................................................................... 14,569 16,049
Interest and intercompany management fees............................................ 59,588 55,119
Other tax assets, net of valuation allowance......................................... 38,253 36,402
---------- ------------
Total deferred tax assets.............................................................. 112,410 107,570
---------- ------------
Net deferred tax liabilities........................................................... $ 266,987 $ 239,617
---------- ------------
---------- ------------
</TABLE>
-16-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 10. UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED)
The Company believes realization of its net deferred tax assets is more
likely than not. The Company's ability to realize its deferred tax assets is
based on several factors, including a presumption of future profitability in
certain jurisdictions and is subject to some degree of uncertainty. At March 31,
1997, the Company had a valuation allowance of $3,499,000 (December 31,
1996--$3,499,000).
(d) STATEMENT OF CASH FLOWS
Under United States GAAP, cash provided by financing and applied to
investing would decrease by approximately $4,700,000 (1996--$18,500,000) for
non-cash debt and common share consideration on acquisitions.
(e) INSURANCE OPERATIONS
PRESENT VALUE OF INSURANCE POLICIES
Under United States GAAP, the Company recognizes an asset that represents
the actuarially-determined present value of the projected future profits of the
insurance in-force at dates of acquisition. Canadian GAAP does not recognize
such an asset. The asset is being amortized to insurance expense over the
estimated life of the insurance in-force at the date of acquisition.
DEFERRED POLICY ACQUISITION COSTS
Under United States GAAP, the Company defers costs related to the production
of new business, which consist principally of commissions, certain underwriting
expenses, and the costs of issuing policies. Deferred acquisition costs are
amortized over the expected premium-paying periods of the related policies.
Canadian GAAP does not permit deferral of such costs.
INSURANCE POLICY LIABILITIES
Insurance policy liabilities, which represent liabilities for future policy
benefits, are accounted for under United States GAAP using the net level premium
method which involves different actuarial assumptions and methodologies than the
policy premium method used for Canadian GAAP. In addition, under Canadian GAAP,
all actuarial assumptions are re-evaluated on a periodic basis, resulting in
adjustments to insurance policy liabilities and insurance costs and expenses.
Under United States GAAP, assumptions established at the time a policy is
written are locked in and only revised if it is determined that future
experience will worsen from that previously assumed.
(f) UNREALIZED GAINS AND LOSSES
Under United States GAAP, fixed maturity securities which the Company has
the positive intent and ability to hold to maturity are classified as
held-to-maturity and are carried at amortized cost. Fixed maturity securities
classified as held-to-maturity were approximately $74,867,000 at March 31, 1997
(December 31, 1996--$83,719,000). Debt and equity securities that are held with
the objective of trading to generate profits on short-term differences in price
are carried at fair value, with changes in fair value reflected in the results
of operations. At March 31, 1997, securities classified as trading were
approximately $1,000,000 (December 31, 1996--$5,600,000). All other fixed
maturity and equity securities not classified as either held-to-maturity or
trading are classified as available-for-sale and carried at fair value which was
approximately $354,486,000 at March 31, 1997 (December 31, 1996--$316,028,000).
Available-for-sale securities may be sold in response to changes in interest
rates and liquidity needs. Unrealized holding gains
-17-
<PAGE>
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 10. UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED)
and losses related to available-for-sale investments, after deducting amounts
allocable to income taxes, are reflected as a separate component of
stockholders' equity. There were unrealized gains of approximately $1,962,000
and unrealized losses of approximately $5,750,000 on securities
available-for-sale as of March 31, 1997. There were no significant unrealized
gains or losses on securities available-for-sale as of December 31, 1996.
Unrealized holding gains and losses related to trading investments, after
deducting amounts allocable to income taxes, are reflected in earnings.
-18-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Unless the context otherwise requires (i) "Loewen" refers to The Loewen
Group Inc., a company organized under the laws of British Columbia, Canada, (ii)
"LGII" refers to Loewen Group International, Inc., a Delaware corporation and a
wholly-owned subsidiary of Loewen, and (iii) the "Company" refers to Loewen
together with its subsidiaries and associated companies.
OVERVIEW
The Company operates the second largest number of funeral homes and
cemeteries in North America and the largest number of funeral homes in Canada.
In addition to providing services at the time of need, the Company also makes
funeral, cemetery and cremation arrangements on a preneed basis. As at April 30,
1997, the Company operated 997 funeral homes throughout the United States and
Canada. This included 875 funeral homes in the United States (including
locations in Puerto Rico) and 122 funeral homes in Canada. In addition, as at
such date, the Company operated 367 cemeteries in the United States (including
locations in Puerto Rico) and six cemeteries in Canada. As at April 30, 1997,
the Company also operated four insurance subsidiaries which sell a variety of
life insurance products, primarily to fund funerals purchased through a preneed
arrangement.
The funeral service industry has a number of attractive characteristics.
Historically the funeral service industry has had a low business failure risk
compared with most other businesses and has not been significantly affected by
economic or market cycles. According to the 1994 Business Failure Record
published by The Dun & Bradstreet Corporation, the average business failure rate
in the United States in 1994 was 86 per 10,000. The 1994 failure rate of the
funeral service and crematoria industry was 8 per 10,000, among the lowest of
all industries. In addition, future demographic trends are expected to
contribute to the continued stability of the funeral service industry. The U.S.
Department of Commerce, Bureau of the Census, projects that the number of deaths
in the United States will grow at approximately 1.0% annually from 1990 through
2010. Finally, the funeral service industry in North America is highly
fragmented, consisting primarily of small, stable, family-owned businesses.
Management estimates that notwithstanding the increasing trend toward
consolidation over the last few years, only approximately 11% of the 23,500
funeral homes and approximately 9% of the 10,500 cemeteries in North America are
currently owned or operated by the five largest publicly-traded North American
funeral service companies.
The Company capitalizes on these attractive industry fundamentals through a
growth strategy that emphasizes three principal components: (i) acquiring a
significant number of small, family-owned funeral homes and cemeteries; (ii)
acquiring "strategic" operations consisting predominantly of large, multi-
location urban properties that generally serve as platforms for acquiring small,
family-owned businesses in surrounding regions; and (iii) improving the revenue
and profitability of newly acquired and established operations. As a result of
the successful implementation of this strategy, the Company has grown
significantly. Managing the Company's growth is critical to profitability, and
will continue to be one of the most important responsibilities and challenges
facing the Company.
On January 7, 1997, Service Corporation International ("SCI") publicly
withdrew its unsolicited proposal to acquire Loewen through an exchange offer
announced in October 1996.
RESULTS OF OPERATION
Detailed below are the Company's operating results for the three months
ended March 31, 1997 and 1996, expressed in dollar amounts as well as relevant
percentages. Revenue, gross margin data and
-19-
<PAGE>
expenses other than income taxes are presented as a percentage of revenue.
Income taxes are presented as a percentage of earnings before income taxes and
equity and other earnings of associated companies.
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(IN MILLIONS) (PERCENTAGES)
<S> <C> <C> <C> <C>
Revenue
Funeral.................................................................... $ 155.6 $ 133.3 56.6 69.0
Cemetery................................................................... 97.4 53.3 35.5 27.6
Insurance.................................................................. 21.7 6.5 7.9 3.4
--------- ---------
Total.................................................................... $ 274.7 $ 193.1 100.0 100.0
--------- ---------
--------- ---------
Gross margin
Funeral.................................................................... $ 63.5 $ 56.0 40.8 42.0
Cemetery................................................................... 33.3 15.7 34.2 29.4
Insurance.................................................................. 4.5 1.1 20.8 17.3
--------- ---------
Total.................................................................... $ 101.3 $ 72.8 36.9 37.7
Expenses
General and administrative................................................. 23.5 16.4 8.5 8.5
Depreciation and amortization.............................................. 16.8 11.6 6.1 6.0
--------- ---------
Earnings from operations..................................................... 61.0 44.8 22.2 23.2
Interest on long-term debt................................................... 30.7 18.5 11.2 9.6
Dividends on preferred securities of subsidiary.............................. 1.8 1.8 0.7 0.9
Income taxes................................................................. 8.0 7.7 28.0 31.5
--------- ---------
20.5 16.8 7.5 8.7
Equity and other earnings of associated companies............................ 3.2 0.4 1.1 0.2
--------- ---------
Net earnings................................................................. $ 23.7 $ 17.2 8.6 8.9
--------- ---------
--------- ---------
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
Consolidated revenue increased 42% to $274.7 million in the three months
ended March 31, 1997 from $193.1 million during the same period in 1996.
Consolidated gross margin increased 39% to $101.3 million in the three months
ended March 31,1997 from $72.8 million during the same period in 1996. As a
percentage of revenue, consolidated gross margin decreased to 36.9% in 1997 from
37.7% in 1996, principally due to the increased proportion of cemetery and
insurance revenue with associated lower margins and the decrease in funeral
gross margin as a percentage of funeral revenue. The Company anticipates that
the consolidated gross margin as a percentage of revenue will continue to
decline slightly, primarily as a result of continued acquisition and internally
generated growth in the cemetery and insurance divisions.
Funeral revenue increased 17% to $155.6 million for the three months ended
March 31, 1997 compared to $133.3 million for the same period in 1996, due to
acquisitions. The number of funeral services performed at locations in operation
for the three months ended March 31, 1996 and 1997 ("Established Locations")
declined by 2.4% from 1996 to 1997; however, this was offset by a higher average
revenue per funeral service. Funeral gross margin as a percentage of funeral
revenue for Established Locations decreased slightly to 41.5% in 1997 from 42.2%
in 1996, as the $2.0 million increase in revenue was offset by a $2.0 million
increase in costs. As a result of such decrease, together with the lower margins
of acquired funeral locations, overall funeral gross margin as a percentage of
funeral revenue decreased to 40.8% in 1997 from 42.0% in 1996.
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Cemetery revenue increased 83% to $97.4 million for the three months ended
March 31, 1997 compared to $53.3 million during the same period in 1996,
primarily due to acquisitions. Cemetery gross margin increased to 34.2% in 1997
from 29.4% in 1996, principally as a result of a shift to increased sales of
pre-need interment services for newly acquired as well as existing locations.
For Established Locations, cemetery gross margin increased to 34.2% in 1997 from
32.9% in 1996, primarily as a result of an increase in revenue of $9.5 million,
offset by a $5.6 million increase in costs.
Insurance revenue increased to $21.7 million for the three months ended
March 31, 1997 from $6.5 million during the same period in 1996. The increase
was due primarily to the integration of the March 1996 acquisition of certain
net assets of S.I. Acquisition Associates, L.P. ("S.I.") for $155.8 million
(including related costs), which assets included two insurance companies. The
full benefit of this acquired operation was not reflected in the results for the
period ended March 31, 1996 because the acquisition was consummated late in the
quarter.
United States based operations contributed 94.0% of 1997 consolidated
revenue compared with 92.5% in 1996.
General and administrative expenses, as a percentage of revenue, remained
constant at 8.5% for the three months ended March 31, 1997 and for the same
period in 1996. For the three months ended March 31, 1997, general and
administrative expenses increased 44% to $23.5 million from $16.4 million in
1996. The increase in general and administrative expenses in 1997 is primarily a
result of the expansion of the Company's infrastructure necessary to purchase,
integrate and operate newly acquired locations, particularly in the cemetery
division.
Interest expense on long-term debt increased by $12.2 million for the three
months ended March 31, 1997 primarily as a result of additional borrowings by
the Company to finance its acquisitions.
Income taxes were $8.0 million, resulting in an effective tax rate of 28.0%
on earnings before income taxes and equity and other earnings of associated
companies for the three months ended March 31, 1997 compared to an effective tax
rate of 31.5% during the same period in 1996. The decrease in the effective tax
rate is due to the expansion of the Company's international and intercompany
financing arrangements.
Equity and other earnings of associated companies increased to $3.2 million
for the three months ended March 31, 1997 from $0.4 million in 1996 due to the
inclusion of payment-in-kind dividends and the company's proportionate share of
the loss attributable to the Common shares of Prime Succession Holdings, Inc.
and Rose Hills Holding Corp., as described further in Notes 3 and 4 to the
Company's financial statements.
Net earnings increased to $23.7 million for the three months ended March 31,
1997 from $17.2 million during the same period in 1996. Fully diluted earnings
per share increased to $0.36 per share in 1997 from $0.30 per share during the
same period in 1996.
ACQUISITIONS, INVESTMENTS AND CAPITAL EXPENDITURES
The Company acquired 33 funeral homes and 52 cemeteries during the three
months ended March 31, 1997 for consideration of approximately $128 million
through 40 separate acquisition transactions. Of these acquisitions, 30 funeral
homes, and 52 cemeteries were located in the United States and the balance were
located in Canada. During the same period in 1996, the Company acquired 53
funeral homes, 30 cemeteries and two insurance companies for consideration of
approximately $265 million. Included in these acquisitions was the purchase of
certain net assets of S.I., for $155.8 million, including costs of acquisition.
From time to time, the Company may dispose of non-core assets or businesses
acquired in conjunction with the acquisition of funeral homes and cemeteries. In
addition, the Company expects to continue to combine or sell a small number of
locations in order to utilize its resources to produce a better return from its
assets.
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As of April 30, 1997, the Company had signed agreements, some of which are
non-binding, for the acquisition of 59 additional funeral homes and 76
additional cemeteries aggregating approximately $286 million. In addition, in
the ordinary course of its business, the Company continually is in the process
of evaluating or negotiating prospective acquisitions in competition with other
potential purchasers. From time to time, the Company may evaluate or negotiate
potential acquisitions, which, if consummated, may be considered significant
based on acquisition price.
LIQUIDITY AND CAPITAL RESOURCES
The Company plans to fund future acquisitions through a combination of debt
and equity offerings and borrowings under its credit facilities (described
below). The Company believes that cash flow from operations generally will be
sufficient to meet working capital and short-term liquidity requirements for
current operations and to fund interest payments and dividends on outstanding
Common and preferred shares. The Company plans to finance principal repayments
on debt primarily through the issue of additional debt or equity or borrowings
under revolving credit facilities and plans to ensure financing is available
well in advance of scheduled principal repayment dates, thereby protecting the
Company's liquidity and maintaining its financial flexibility.
The Company's balance sheet at March 31, 1997, as compared to December 31,
1996, reflects changes principally from acquisitions during 1997, as described
further in Note 2 to the Company's financial statements.
During the last two years the Company has significantly expanded its
cemetery preneed sales programs. Cemetery preneed sales typically are structured
with low initial cash payments by the customer. The balance due is recorded as
an installment contract receivable and the future liability for merchandise as
an other liability. The increase in the level of preneed sales has resulted in
an increase in both current and long-term receivables and other liabilities.
The Company's objective is to maintain its long-term debt/equity ratio, on
average, in a range of 1.0:1 to 1.5:1. Due to the timing of its ongoing
acquisition program, the Company's long-term debt/equity ratio typically will
rise to the high end of the range, and then will be reduced substantially by an
equity issue. At March 31, 1997 the Company's long-term debt/equity ratio was
1.6:1.
In March 1997, Loewen filed a registration statement with the Securities and
Exchange Commission (the "SEC") for the future offering on a periodic basis of
up to $1 billion of debt securities and Common and preferred stock and warrants.
On May 5, 1997 the Company announced that it had filed a preliminary prospectus
supplement for the takedown of 10,000,000 Common shares plus an over-allotment
of 1,500,000 Common shares for a proposed public offering in the United States,
Canada and internationally. The proceeds from the offering would be used for
general corporate purposes, including future acquisitions. Pending use for such
purposes, the net proceeds will be used to repay outstanding indebtedness.
In addition, Loewen currently has registered with the SEC 5,000,000 Common
shares for issuance in connection with certain prospective acquisitions for
which the Company may issue Common shares as full or partial payment of the
purchase price ("share-for-share acquisitions"). The Company issued 59,388 of
such Common shares in connection with share-for-share acquisitions during 1997.
INDEBTEDNESS
At March 31, 1997 LGII has outstanding four series of senior guaranteed
notes (the "Series 1-4 Senior Notes") issued in March and October of 1996. The
Series 1-4 Notes are guaranteed by Loewen and bear interest rates ranging from
7.5% to 8.25% and have terms of five to seven years.
LGII also has a five-year $750 million secured revolving credit facility
(the "Revolving Credit Facility") with a syndicate of banks. The Revolving
Credit Facility matures in May 2002 and bears interest at alternative rates
selected by LGII. At March 31, 1997, the amount outstanding under the Revolving
Credit Facility was $430 million, and such amount bore interest at 6.7% per
annum. On May 5, 1997 Loewen announced it had received a commitment from the
lead bank in its banking syndicate to increase
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the Revolving Credit Facility to $1 billion. The commitment is subject to the
completion of the proposed equity offering (with proceeds of at least $250
million) and approval of certain senior lenders.
In addition LGII and Loewen have outstanding at March 31, 1997 an aggregate
of $208 million of senior amortizing notes, issued in five series (Series A
through Series E) in 1991, 1993, and 1994 (the "Series A-E Amortizing Notes").
The Series A-E Amortizing Notes bear interest at rates ranging from 6.49% to
9.93% and have initial terms of seven to ten years.
Loewen also has a Cdn.$50 million revolving credit facility that matures in
July 1999 (the "Canadian Revolving Credit Facility") and a Cdn.$35 million
five-year term loan that will terminate in January 2000 (the "Canadian Term
Loan"). A subsidiary of Loewen has a $108 million secured term loan implemented
in connection with the 1994 Management Equity Investment Plan that will
terminate in July 2000 (the "MEIP Loan").
In 1996 Loewen, LGII and their senior lenders entered into a collateral
trust arrangement pursuant to which the senior lenders share certain collateral
on a pari passu basis. The collateral includes (i) a pledge for the benefit of
the senior lenders of the shares of capital stock held by Loewen of
substantially all of the Loewen subsidiaries and (ii) all of the financial
assets of LGII (including the shares of capital stock held by LGII of various
subsidiaries). The collateral is held by a trustee for the equal and ratable
benefit of the various holders of senior indebtedness. This senior lending group
consists principally of the lenders under the Series 1-4 Senior Notes, the
Series A-E Amortizing Notes, the Revolving Credit Facility, the Canadian
Revolving Credit Facility, the Canadian Term Loan and the MEIP Loan as well as
the holders of certain letters of credit.
RESTRICTIONS ON PAYMENT OF DIVIDENDS
Certain of the Company's debt instruments and credit facilities contain
restrictions, including change of control provisions and provisions restricting
payment of dividends on Common and preferred shares, restricting encumbrance of
assets, limiting redemption or repurchase of shares, limiting disposition of
assets, limiting the amount of additional debt, limiting the amount of capital
expenditures and requiring the Company to maintain specified financial ratios.
At March 31, 1997, approximately $19 million of the Company's retained earnings
were not restricted and available for payment of dividends under the most
restrictive agreement. See Note 5 to the Company's financial statements.
In connection with the issuance of the MIPS by LGC in August 1994, Loewen is
guarantor of a Series A Junior Subordinated Debenture due August 31, 2024 issued
by LGII (the "Series A Debenture"). Under the terms of the Series A Debenture,
Loewen may not pay dividends on its Common shares if (i) there shall have
occurred any event that, with the giving of notice or the lapse of time or both,
would constitute an Event of Default (as defined in the Series A Debenture),
(ii) Loewen is in default with respect to payment of any obligations under
certain related guarantees or (iii) LGII shall have given notice of its election
to select an Extension Period (as defined in the Series A Debenture), and such
period, or any extension thereof, shall be continuing. For further information
regarding the MIPS, see Note 6 to the Company's financial statements.
Payments of dividends and loans and advances by subsidiaries to Loewen or
LGII are not restricted except that the Company's insurance subsidiaries are
subject to certain state regulations which restrict distributions, loans and
advances from such subsidiaries to the Company.
INTEREST RATE RISK MANAGEMENT
The Company enters into derivative transactions with financial institutions
only as hedges of other financial transactions and not for speculative purposes.
The Company's policies do not allow leveraged transactions and are designed to
minimize credit and concentration risk with counterparties. The Company's
practice is to use swaps and options to manage its exposure to interest rate
movements. The Company's strategy is to maintain an average of between 60% and
80% of its debt subject to fixed interest rates, although at any point in time
during a period the percentage of debt subject to fixed interest rates
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may be higher or lower. The Company also uses futures and options to fix the
interest rate of anticipated financing transactions in advance. All derivatives
are entered into as hedges based on several criteria, including the timing, size
and term of the anticipated transaction. Any gain or loss from an effective
hedging transaction is deferred and amortized over the life of the financing
transaction as an adjustment to interest expense.
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PART II
ITEM 1. LEGAL PROCEEDINGS.
CLASS ACTIONS ALLEGING SECURITIES LAWS VIOLATIONS
On November 4, 1995, a class action lawsuit claiming violations of federal
securities laws was filed on behalf of a class of purchasers of Company
securities against Loewen and five individuals who were officers of Loewen (four
of whom were also directors) in the United States District Court for the Eastern
District of Pennsylvania. LGII, LGC, and the lead underwriters (the
"Underwriters") of LGC's 1994 offering of Monthly Income Preferred Securities
("MIPS"), were subsequently added as defendants. On November 7, 1995, a class
action lawsuit was filed on behalf of a class of purchasers of Common shares
against Loewen and the same individual defendants in the United States District
Court for the Southern District of Mississippi alleging Federal securities law
violations and related common law claims. On December 1, 1995, a class action
lawsuit was filed on behalf of a class of purchasers of the Company's securities
against Loewen, LGII, LGC and the same individual defendants in the United
States District Court for the Eastern District of Pennsylvania.
The complaints with respect to the class actions alleged that the defendants
failed to disclose the Company's anticipated liability in connection with
certain litigation with Gulf National Insurance Company and certain of its
affiliates ("Gulf National"). The Pennsylvania class actions also alleged
failure to disclose the Company's potential liability in connection with certain
litigation with Provident American Corporation and one of its subsidiaries
("Provident"). The Company settled the lawsuits with Gulf National and Provident
during the first quarter of 1996.
Pursuant to a Transfer Order filed April 15, 1996 by the Judicial Panel on
Multidistrict Litigation, the Mississippi class action was transferred to the
Eastern District of Pennsylvania for consolidation of pretrial proceedings with
the two Pennsylvania class actions. On September 16, 1996, the plaintiffs filed
a Consolidated and Amended Class Action Complaint (the "Consolidated Class
Action Complaint"). Procedurally, the Consolidated Class Action Complaint
supersedes the complaints filed in the class actions. Plaintiffs allege three
causes of action in the Consolidated Class Action Complaint: (i) Loewen, LGII,
LGC and the five individual defendants violated Sections 10(b) and 20(a) and the
implementing antifraud rules under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (ii) LGII, LGC and three of the five individual
defendants violated Sections 11 and 15 of the Securities Act of 1933, as amended
(the "Securities Act"), in connection with the MIPS offering and (iii) Loewen,
LGII and LGC made material misstatements in connection with the MIPS offering in
violation of Sections 12(2) and 15 of the Securities Act. Plaintiffs seek
compensatory money damages in an unspecified amount, together with attorneys
fees, expert fees and other costs and disbursements. Punitive damages are not
sought.
The defendants filed their Answer to the Consolidated Class Action Complaint
on November 1, 1996, in which they have denied the material allegations and
raised certain affirmative defenses. The parties have commenced discovery and
document production. No depositions have been taken.
The parties have stipulated to the provisional certification of plaintiff
classes consisting of: (i) all purchasers of Common shares or MIPS on an
American stock exchange or in public offerings during the period from April 16,
1993 through November 1, 1995, with respect to the Exchange Act claims; and (ii)
all persons who purchased MIPS pursuant to the public offering in August 1994,
with respect to the Securities Act claims. Defendants have retained all rights
to conduct discovery on class issues and to move to modify the class definitions
or to decertify the classes. Plaintiffs have agreed to stay all proceedings,
including all discovery, relating to disclosures about the Provident litigation.
Plaintiffs have the right to lift the stay upon written notice, which must be
provided 90 days before the end of discovery or the beginning of trial.
On June 11, 1996, all claims against the Underwriters were dismissed without
prejudice, by agreement of the parties. Prior to the dismissal, the Underwriters
had indicated to the Company that they would seek indemnity from the Company for
costs incurred. The Company paid the Underwriters' costs through the
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date of dismissal. The Company expects that the Underwriters will seek further
indemnity from the Company if any of the claims against the Underwriters are
reinstated.
On April 29, 1997, the Court issued Pretrial Order No. 2, which provides,
among other things, that: (i) trial will be set on or after February 1, 1999;
(ii) the Court will convene a settlement conference on August 19, 1997; (iii)
depositions are to commence on or after September 10, 1997 and be completed by
June 30, 1998; (iv) expert discovery is to be completed by September 30, 1998;
and (v) dispositive motions are to be filed by October 30, 1998.
The Company referred the claims to its insurance carrier under its directors
and officers liability insurance policy. On February 9, 1996, the carrier denied
coverage of the claim. The Company believes that such denial was improper. On
March 21, 1996, the Company commenced an action in British Columbia Supreme
Court seeking a declaration that the policy covers indemnification with respect
to the class action. As of the date hereof, the Supreme Court had not ruled on
the action. The Company cannot predict at this time the extent to which any
settlement or litigation that may result from these claims will ultimately be
covered by insurance, if at all.
The Company has determined that it is not possible at this time to predict
the final outcome of these legal proceedings and that it is not possible to
establish a reasonable estimate of possible damages, if any, or reasonably to
estimate the range of possible damages that may be awarded to the plaintiffs.
Accordingly, no provision with respect to the class actions has been made in the
Company's financial statements.
ROE ET AL., PALLADINO ET AL., O'SULLIVAN AND SCHNEIDER
In October 1995, Roe and 22 other families filed a lawsuit against LGII and
Osiris Holding Corporation ("Osiris") in Florida Circuit Court in St.
Petersburg. In early April 1996, a related lawsuit, PALLADINO ET AL., was filed
by eight families against LGII and Osiris in Florida Circuit Court in St.
Petersburg, and was assigned to the same judge handling the Roe matter. In June
1996, the Roe and Palladino lawsuits were consolidated and amended to include a
total of 90 families, and in July 1996, the Palladino lawsuit was dismissed. In
October 1996, a Fifth Amended Complaint ("Complaint") was filed bringing the
number of plaintiff families to 150. The gravamen of the Complaint is that, in
July 1992, employees of the Royal Palm Cemetery facility who were installing a
sprinkler line disturbed the remains of infants in one section of the cemetery.
The specific claims include tortious interference with a dead body (intentional
and grossly negligent conduct so extreme and outrageous as to imply malice) and
negligent infliction of emotional distress. The Complaint also names Loewen and
LGII as defendants (on an alter ego theory) and includes claims for negligent
retention of certain cemetery employees. Each plaintiff identified in the
Complaint is seeking damages in excess of $15,000, but the Complaint alleges
aggregate damage in excess of $40,000,000. In addition, in May 1996, Sean M.
O'Sullivan filed a lawsuit against Osiris and LGII and in July 1996, Karen
Schneider filed a lawsuit against Osiris and LGII. The factual allegations
underlying the O'Sullivan and Schneider complaints are identical to those
alleged in the Complaint. Schneider has been named in the Complaint and the
Schneider lawsuit has been dismissed. A mediation was held on November 14, 1996,
but the parties did not reach an agreement. However, over the past several
months, nearly 100 families have settled their claims for de minimis sums,
leaving the number of plaintiff families at 51. O'Sullivan likewise settled for
a de minimis sum and dismissed his complaint. The Complaint was dismissed for
pleading deficiencies. A Sixth Amended Complaint has been filed, essentially
recasting all of the previous claims in new terms. Moreover, the Sixth Amended
Complaint improperly names plaintiffs who have already settled their claims. A
motion to dismiss and for sanctions directed toward the Sixth Amended Complaint
has been filed.
At the time the remains allegedly were disturbed, the Royal Palm Cemetery
was owned by Osiris. Osiris was acquired by the Company in March 1995. The
insurance carriers for Osiris and Loewen have assumed the defense of these
claims, subject to a reservation of rights. The insurance carrier for Loewen has
stated that it may take the position that each gravesite claim is separately
subject to the per claim policy deductible of $250,000. Accordingly, no
assurance can be made that insurance coverage will be available. The annual
Osiris policy limit is $11,000,000 and the annual Loewen policy limit is
$80,000,000.
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The Company has determined that it is not possible at this time to predict
the final outcome of these legal proceedings and that it is not possible to
establish a reasonable estimate of possible damages, if any, or reasonably to
estimate the range of possible damages that may be awarded to the plaintiffs.
Accordingly, no provision with respect to this lawsuit has been made in the
Company's financial statements.
ESNER ESTATE
On February 1, 1995, Stuart B. Esner and Sandra Esner (the "Executors") as
co-executor for the Estate of Gerald F. Esner (the "Esner Estate") filed an
action in the Court of Common Pleas in Bucks County, Pennsylvania against Osiris
and a law firm (the "Law Firm") that previously represented Osiris and its
principal shareholders, Gerald F. Esner, Lawrence Miller and William R. Shane.
Messrs. Miller and Shane currently are executive officers of Loewen and LGII.
The complaint alleged that Osiris breached the terms of a Second Amended and
Restated Shareholders' Agreement among Messrs. Esner, Miller and Shane (the
"Shareholders' Agreement") by attempting to repurchase shares of Osiris held by
the Esner Estate (the "Esner Shares") without complying with the terms of the
Shareholders' Agreement, and that the Law Firm breached its fiduciary duty and
committed malpractice in connection with the drafting of the Shareholders'
Agreement and its representation of Esner and Osiris. The Executors asked the
Court (i) to have the value of Osiris reappraised pursuant to the terms of the
Shareholders' Agreement and (ii) to require Osiris to repurchase the Esner
Shares pursuant to a new appraisal and the alleged terms of the Shareholders'
Agreement or, alternatively, to pay the Esner Estate the fair value of the Esner
Shares as determined by the new appraisal.
In March 1995, LGII purchased all of the issued and outstanding shares of
Osiris, including the Esner Shares. In connection with the purchase, LGII
entered into an indemnification agreement whereby Messrs. Miller and Shane
agreed to indemnify and hold LGII harmless with respect to any claims,
liabilities, losses and expenses, including reasonable attorney's fees, in
connection with or arising from the Esner Estate litigation.
On April 9, 1996, the Executors filed a second complaint, which names
Messrs. Miller and Shane and LGII as defendants. The second complaint alleges
breach of contract, fraud and related claims against Messrs. Miller and Shane,
and that LGII joined a civil conspiracy by acquiring Osiris. The Executors
request compensatory damages of $24,300,000 against the various defendants, and
seek punitive damages from Messrs. Miller and Shane. The two cases were
consolidated by the Court.
On October 9, 1996, the Executors instituted a new civil action against the
Law Firm. On November 18, 1996 the Executors instituted a new civil action
against the individual partners of the Law Firm. In both complaints, the
Executors expanded upon the allegations against the Law Firm contained in the
previous complaints. By stipulation approved by the Court on February 24, 1997,
the parties agreed to consolidate all suits and to permit the Executors to file
a Third Amended Complaint, which was filed on February 10, 1997. The prayers for
relief remain unchanged. Osiris and Messrs. Miller and Shane have filed
preliminary challenges to the Third Amended Complaint. Likewise, LGII has moved
for a dismissal of the claims against it for failure to state a claim upon which
relief can be granted. That motion and the preliminary challenges are all
pending.
The Company has determined that it is not possible at this time to predict
the final outcome of these legal proceedings and that it is not possible to
establish a reasonable estimate of possible damages, if any, or reasonably to
estimate the range of possible damages that may be awarded to the plaintiffs.
Accordingly, no provision with respect to this lawsuit has been made in the
Company's financial statements.
FELDHEIM ET AL. V. SI-SIFH CORP. ET AL.
In January 1997, Elmer C. Feldheim and four other individuals filed a
lawsuit on behalf of themselves and a class of similarly situated individuals
and/or entities against SI-SIFH Corp., SI-SI Insurance Company, Inc., Loewen
Louisiana Holdings, Inc., and LGII in the Parish of Jefferson, State of
Louisiana.
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Plaintiffs seek a class action. SI-SIFH Corp. and SI-SI Insurance Company, Inc.
were acquired by the Company in March 1996 when the Company acquired the assets
of S.I. Acquisition Associates, L.P.
Plaintiffs hold or held funeral insurance policies issued by insurance
companies owned, directly or indirectly, by the defendants. The plaintiffs
allege that (i) the defendants failed to provide the funeral services purchased
with the policies by, among other things, offering a casket of inferior quality
upon presentation of a policy, and (ii) in connection with the sale of the
insurance policy, the insurance companies negligently or fraudulently
represented and interpreted the scope and terms of the policies and omitted to
provide material information regarding the policy benefits and limitations.
Plaintiffs also allege unfair trade practices in violation of Louisiana's
insurance code and trade practices laws.
Plaintiffs seek damages, penalties and attorneys fees. Louisiana law
prohibits plaintiffs from alleging specific amounts of damages. Plaintiffs also
seek a declaratory judgment compelling defendants to honor the policies and
allowing a plaintiff to select a more expensive casket than provided for in the
policy, upon payment of the difference in retail value, without forfeiting the
other benefits provided for in the policy.
As of the date hereof, no discovery has taken place. The Company has
determined that it is not possible at this time to predict the final outcome of
this legal proceeding, including whether a class will be certified, and that it
is not possible to establish a reasonable estimate of possible damages, if any,
or reasonably to estimate the range of possible damages that may be awarded to
plaintiffs. Accordingly, no provision with respect to this lawsuit has been made
in the Company's financial statements.
OTHER
No material developments occurred in connection with any other previously
reported legal proceedings against the Company during the last fiscal quarter.
The Company is a party to other legal proceedings previously disclosed in
the ordinary course of its business but does not expect the outcome of any other
proceedings, individually or in the aggregate, to have a material adverse effect
on the Company's financial position, results of operation or liquidity.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<C> <S>
3 CHARTER DOCUMENTS
3.1 Certificate of Incorporation of The Loewen Group Inc. ("Loewen"), issued by the British Columbia
Registrar of Companies (the "Registrar") on October 30, 1985(1)
3.2 Altered Memorandum of Loewen, filed with the Registrar on June 21, 1996(2)
3.3 Articles of Loewen, restated, filed with the Registrar on March 1, 1988, as amended on March 30,
1988, April 21, 1988, May 19, 1989, May 28, 1992, May 20, 1993, June 29, 1994, December 21, 1995
and February 7, 1996(3)
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY-HOLDERS, INCLUDING INDENTURES
4.1 Note Agreement by Loewen and Loewen Group International, Inc. ("LGII") re 9.70% Senior Guaranteed
Notes, Series A, due November 1, 1998, issued by LGII ("Series A Notes"), 9.93% Senior
Guaranteed Notes, Series B, due November 1, 2001, issued by LGII ("Series B Notes"), and 9.70%
Senior Guaranteed Notes, Series C, due November 1, 1998, issued Loewen ("Series C Notes"), dated
for reference October 1, 1991(1)
4.1.1 Second Amendment, dated for reference May 15, 1996, to Note Agreements, dated for reference
October 1, 1991, among Loewen, LGII and institutions named therein, re Series A Notes, Series B
Notes and Series C Notes(4)
4.2 Guaranty Agreement by Loewen re Series A Notes and Series B Notes, dated for reference October 1,
1991(1)
4.3 Guaranty Agreement by LGII re Series C Notes, dated for reference October 1, 1991(1)
4.4 Note Agreement, dated for reference September 1, 1993, by and between Loewen and LGII re 9.62%
Senior Guaranteed Notes, Series D, due September 11, 2003, issued by Loewen ("Series D Notes"),
as amended on June 10, 1994(1)
4.4.1 Second Amendment, dated for reference May 15, 1996, to Note Agreements, dated for reference
September 1, 1993, among Loewen, LGII and institutions named therein, re Series D Notes(4)
4.5 Guaranty Agreement by LGII re Series D Notes, dated for reference April 1, 1993(1)
4.6 Note Agreement by LGII and Loewen re 6.49% Senior Guaranteed Notes, Series E, due February 25,
2004, issued by LGII ("Series E Notes"), dated for reference February 1, 1994(1)
4.6.1 Second Amendment, dated for reference May 15, 1996, to Note Agreements, dated for reference
February 1, 1994, among Loewen, LGII and Teachers Insurance and Annuity Association of America,
re Series E Notes(4)
4.7 Guaranty Agreement by Loewen re Series E Notes, dated for reference February 1, 1994(1)
4.8 Amended and Restated 1994 MEIP Credit Agreement, dated as of June 14, 1994, amended and restated
as of May 15, 1996 ("MEIP Credit Agreement"), by and between Loewen Management Investment
Corporation, in its capacity as agent for LGII ("LMIC"), Loewen and the banks listed therein
(the "MEIP Banks") and Wachovia Bank of Georgia, N.A., as agent for the MEIP Banks ("MEIP
Agent")(1)
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
<C> <S>
4.8.1 First Amendment to the MEIP Credit Agreement, dated as of December 2, 1996
4.8.2 Second Amendment to the MEIP Credit Agreement, dated as of April 30, 1997
4.9 Security Agreement, dated as of June 14, 1994, by and between LMIC and the MEIP Agent(1)
4.10 Guaranty dated as of June 14, 1994, by LGII in favor of the MEIP Agent for the ratable benefit of
the MEIP Banks(1)
4.11 Guaranty dated as of June 14, 1994, by Loewen in favor of the MEIP Agent for the ratable benefit
of the MEIP Banks(1)
4.12 Exchange Acknowledgment by Loewen, with respect to the 1994 Exchangeable Floating Rate Debentures
due July 1, 2001 issued by LGII, dated June 15, 1994(1)
4.13 Indenture, dated as of August 15, 1994, by and between LGII, as issuer, Loewen, as guarantor, and
State Street Bank and Trust Company, as trustee with respect to 9.45% Junior Subordinated
Debentures, Series A, due 2024, issued by LGII and guaranteed by Loewen(5)
4.14 MIPS Guarantee Agreement, dated August 15, 1994(5)
4.15 Zero Coupon Loan Agreement, dated as of November 1, 1994, by and between WLSP Investment Partners
I Neweol Finance B.V., Electrolux Holdings B.V., Man Production Rotterdam B.V., Adinvest A.G.,
and Wachovia Bank of Georgia, N.A.(1)
4.16 Indenture, dated as of March 20, 1996, by and between LGII, Loewen, as guarantor of the
obligations of LGII under the Indenture, and Fleet National Bank as Trustee, with respect to
Senior Guaranteed Notes of LGII(3)
4.17 Form of Global Series 1 and 2 Outstanding Notes of LGII(3)
4.18 Form of Physical Series 1 and 2 Outstanding Notes of LGII(3)
4.19 Form of Global Series 1 and 2 Exchange Notes of LGII(4)
4.20 Form of Physical Series 1 and 2 Exchange Notes of LGII(4)
4.21 Form of Senior Guarantee of LGII's Series 1 and 2 Notes(4)
4.22 Credit Agreement, dated as of May 15, 1996 ("BMO Credit Agreement"), among LGII, as borrower,
Loewen, as a guarantor, the lenders named therein, as the lenders, Goldman, Sachs & Co., as the
documentation agent and Bank of Montreal, as issuer, swingline lender and agent(4)
4.22.1 Commitment Letter regarding the BMO Credit Agreement, dated as of April 14, 1997
4.22.2 Second Amendment to the BMO Credit Agreement, dated as of April 30, 1997
4.23 Collateral Trust Agreement, dated as of May 15, 1996, among Bankers Trust Company, as trustee,
Loewen, LGII and various other pledgers(4)
4.24 Amended and Restated Operating Credit Agreement, dated for reference July 15, 1996, between Loewen
and Royal Bank of Canada(6)
4.24.1 Third Amendment to Operating Credit Agreement, dated for reference July 15, 1996, among Loewen,
LGII and Royal Bank of Canada(6)
4.25 Indenture, dated as of October 1, 1996, by and between LGII, Loewen, as guarantor of the
obligations of LGII under the Indenture, and Fleet National Bank, as Trustee, with respect to
the Series 3 and 4 Notes(6)
</TABLE>
-30-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
<C> <S>
4.26 Form of Global Series 3 and 4 Outstanding Notes of LGII(6)
4.27 Form of Physical Series 3 and 4 Outstanding Notes of LGII(6)
4.28 Form of Global Series 3 and 4 Exchange Notes of LGII(7)
4.29 Form of Physical Series 3 and 4 Exchange Notes of LGII(7)
4.30 Form of Senior Guarantee of LGII's Series 3 and 4 Notes(6)
4.31 Shareholder Protection Rights Plan, dated as of April 20, 1990, as amended on May 24, 1990 and
April 7, 1994 and reconfirmed on May 17, 1995(1)
4.32 Form of Indenture by and between Loewen, as issuer, and Fleet National Bank, as trustee (8)
4.33 Form of Indenture by and among LGII, as issuer, Loewen, as guarantor, and Fleet National Bank, as
trustee (8)
4.34 Loewen hereby agrees to furnish to the Commission, upon request, a copy of the instruments which
define the rights of holders of long-term debt of Loewen. None of such instruments not included
as exhibits herein collectively represents long-term debt in excess of 10% of the consolidated
total assets of Loewen.
10 MATERIAL CONTRACTS
10.1 Stock Purchase Agreement, dated as of March 16, 1995, by and between Osiris Holding Corporation
and LGII(9)
10.2 Receipt Agreement, dated as of January 3, 1996, for the Cumulative Redeemable Convertible First
Preferred Shares Series C of Loewen ("Series C Shares")(3)
10.3 Undertaking by Raymond L. Loewen and Anne Loewen, dated as of January 3, 1996, to vote in favor of
the motion to subdivide the Series C Shares(3)
10.4 Settlement Agreement, dated as of February 1, 1996, by and between Loewen, LGII and affiliated
entities and J.J. O'Keefe, Sr., Gulf National Life Insurance Company and affiliated entities(3)
10.5 Shareholders' Agreement, dated as of February 9, 1996, by and between Loewen, LGII, J.J. O'Keefe,
Sr., Gulf National Life Insurance Company and affiliated entities, and certain individuals and
law firms named therein(3)
10.6 Settlement Agreement and Mutual General Release effective as of February 12, 1996, entered into on
March 19, 1996, by and between Provident American Corporation, Provident Indemnity Life
Insurance Company, Loewen and LGII(3)
10.7 Registration Rights Agreement, dated as of March 20, 1996, by and between LGII, Loewen and the
Initial Purchasers named therein(3)
10.8 Asset Purchase Agreement, dated as of March 26, 1996, by and between LLI, Inc., and LLPC, Inc. and
S.I. Acquisition Associates, L.P.(3)
10.9 Asset Purchase Agreement, dated as of March 26, 1996, by and between Loewen Louisiana Holdings,
Inc. and S.I. Acquisition Associates, L.P.(3)
*10.10 Form of Indemnification Agreement with Outside Directors(10)
*10.11 Form of Indemnification Agreement with Officers(10)
*10.12 Form of The Loewen Group Inc. Severance Agreement(10)
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
<C> <S>
*10.13 The Loewen Group Inc. Severance Pay Plan(10)
*10.14 Employment Agreement, dated August 19, 1988, by and between Loewen and Tim Hogenkamp(1)
*10.15 Employment Agreement, dated March 6, 1990, by and between Loewen and Peter S. Hyndman(1)
*10.16 Employment Agreement, dated March 21, 1990, by and between Loewen and David FitzSimmons(1)
*10.17 Employment Agreement, and Covenant Not to Compete, dated November 14, 1990, by and between LGII
and Albert S. Lineberry, Sr.(1)
*10.18 Employment Agreement, dated December 18, 1990, by and between Loewen and Peter W. Roberts(1)
*10.19 Employment Agreement, dated April 12, 1991, by and between Loewen and Dwight Hawes(1)
*10.20 Employment Agreement, dated October 9, 1991, by and between Loewen and Timothy A. Birch(1)
*10.21 Consulting Agreement, dated July 18, 1994, by and between Loewen and Charles B. Loewen, LGII, and
Corporate Services International Inc.(1)
*10.22 Employment Letter, dated March 10, 1995, by Raymond L. Loewen to Paul Wagler(5)
*10.23 Employment Agreement, dated March 17, 1995, by and between Loewen, LGII and Lawrence Miller(1)
*10.24 Employment Agreement, dated March 17, 1995, by and between Loewen and William R. Shane(1)
*10.25 1994 Management Equity Investment Plan (the "MEIP")(1)
*10.26 Form of Executive Agreement executed by participants in the MEIP(5)
*10.27 1994 Outside Director Compensation Plan as restated and amended as at January 9, 1997(11)
*10.28 Severance Agreement, dated June 15, 1995, by and between Loewen and Robert Garnett(3)
*10.29 Employee Stock Option Plan (United States), as restated and amended as at April 2, 1996(11)
*10.30 Employee Stock Option Plan (Canada), as restated and amended as at April 2, 1996(11)
*10.31 Employment Agreement, dated April 30, 1996, by and between Loewen and Grant Ballantyne(5)
*10.32 Employment Agreement, dated May 1, 1996, amended July 18, 1996 by and between Loewen and Douglas
J. McKinnon(5)
*10.33 Resignation and Release Agreement, effective June 10, 1996, by and between Loewen, LGII and Robert
O. Wienke(5)
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
27 FINANCIAL DATA SCHEDULE
99 ADDITIONAL EXHIBITS
</TABLE>
-32-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
<C> <S>
99.1 Stock Purchase Agreement, dated as of June 14, 1996, by and among Prime Succession, Inc., the
other individuals or entities listed on the signature pages thereof, Loewen and Blackhawk
Acquisition Corp.(12)
99.2 Put/Call Agreement, dated as of August 26, 1996, by and among Blackstone, Blackstone Offshore
Capital Partners II L.P. ("Blackstone Offshore"), Blackstone Family Investment Partnership II
L.P. ("Blackstone Family"), PSI Management Direct L.P. ("PSI"), LGII and Loewen(12)
99.3 Stockholders' Agreement, dated as of August 26, 1996, by and among Prime Succession, Inc. (to be
renamed Prime Succession Holdings, Inc.), Blackstone, Blackstone Offshore, Blackstone Family,
PSI and LGII(12)
99.4 Subscription Agreement, dated as of November 19, 1996, by and among Rose Hills Holdings Corp.,
Blackstone, Blackstone Rose Hills Offshore Capital Partners L.P. ("Blackstone Rose Hills"),
Blackstone Family, Roses Delaware, Inc. ("RDI"), Loewen, LGII and RHI Management Direct, L.P.
("RHI")(13)
99.5 Put/Call Agreement, dated as of November 19, 1996, by and among Blackstone, Blackstone Offshore,
Blackstone Family, Blackstone Rose Hills, LGII, RDI, Loewen and RHI(13)
99.6 Stockholders' Agreement, dated as of November 19, 1996, by and among Rose Hills, Blackstone,
Blackstone Rose Hills, Blackstone Family, RDI, LGII and RHI(13)
</TABLE>
- ------------------------
* Compensatory plan or management contract
(1) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1994, filed on March 31, 1995 (File No. 0-18429)
(2) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed on August 15, 1996 (File No. 0-18429)
(3) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1995, filed on March 28, 1996, as amended (File No.
0-18429)
(4) Incorporated by reference from the S-4 Registration Statement filed with
the Commission by LGII and Loewen (File Nos. 333-03135 and 333-03135-01) on
May 3, 1996, as amended
(5) Incorporated by reference from the combined Form F-9/F-3 Registration
Statements filed with the Commission by Loewen and LGII, respectively (Nos.
33-81032 and 33-81034), on July 1, 1994, as amended
(6) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, filed on November 14, 1996 (File No.
1-12163)
(7) Incorporated by reference from the S-4 Registration Statement filed with
the Commission by LGII and Loewen (File Nos. 333-16319 and 333-16319-01),
filed on November 18, 1996, as amended
(8) Incorporated by reference from the S-3 Registration Statement filed with
the Commission by Loewen and LGII (File Nos. 333-23747 and 333-23747-01), on
March 21, 1997, as amended
(9) Incorporated by reference from Loewen's Periodic Report on Form 8-K/A No. 1
dated April 18, 1995, filed May 5, 1995 (File No. 0-18429)
(10) Incorporated by reference from Loewen's Solicitation/Recommendation
Statement on Schedule 14D-9 filed on October 10, 1996, as amended
-33-
<PAGE>
(11) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1996, filed on March 31, 1997 (File No. 1-12163)
(12) Incorporated by reference from Loewen's Periodic Report on Form 8-K, dated
August 26, 1996, filed October 12, 1996, amended October 30, 1996 (File No.
1-12163)
(13) Incorporated by reference from Loewen's Periodic Report on Form 8-K, dated
November 19, 1996, filed December 27, 1996 (File No. 1-12163)
(b) The following reports on Form 8-K were filed by the Company during the first
quarter of fiscal 1997:
<TABLE>
<CAPTION>
FILING DATE ITEM NUMBER DESCRIPTION
- ---------------------------- ------------------------ ----------------------------------------------------------
<S> <C> <C>
January 10, 1997 Item 5. Other Events Press release announcing Service Corporation
(dated January 7, 1997) International's decision to withdraw its hostile takeover
bid
January 10, 1997 Item 5. Other Events Press release announcing the Company's 1996 acquisition
(dated January 8, 1997) level and 1997 acquisition pace
March 7, 1997 Item 5. Other Events Press release announcing a cash dividend on preferred
(dated March 5, 1997) shares
March 7, 1997 Item 5. Other Events Press release announcing revenue and earnings; acquisition
(dated March 5, 1997) pace
</TABLE>
-34-
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- --------- -------------------------------------------------------------------------------------------------- ----
<C> <S> <C>
3 CHARTER DOCUMENTS
3.1 Certificate of Incorporation of The Loewen Group Inc. ("Loewen"), issued by the British Columbia
Registrar of Companies (the "Registrar") on October 30, 1985(1)
3.2 Altered Memorandum of Loewen, filed with the Registrar on June 21, 1996(2)
3.3 Articles of Loewen, restated, filed with the Registrar on March 1, 1988, as amended on March 30,
1988, April 21, 1988, May 19, 1989, May 28, 1992, May 20, 1993, June 29, 1994, December 21, 1995
and February 7, 1996(3)
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY-HOLDERS, INCLUDING INDENTURES
4.1 Note Agreement by Loewen and Loewen Group International, Inc. ("LGII") re 9.70% Senior Guaranteed
Notes, Series A, due November 1, 1998, issued by LGII ("Series A Notes"), 9.93% Senior
Guaranteed Notes, Series B, due November 1, 2001, issued by LGII ("Series B Notes"), and 9.70%
Senior Guaranteed Notes, Series C, due November 1, 1998, issued Loewen ("Series C Notes"), dated
for reference October 1, 1991(1)
4.1.1 Second Amendment, dated for reference May 15, 1996, to Note Agreements, dated for reference
October 1, 1991, among Loewen, LGII and institutions named therein, re Series A Notes, Series B
Notes and Series C Notes(4)
4.2 Guaranty Agreement by Loewen re Series A Notes and Series B Notes, dated for reference October 1,
1991(1)
4.3 Guaranty Agreement by LGII re Series C Notes, dated for reference October 1, 1991(1)
4.4 Note Agreement, dated for reference September 1, 1993, by and between Loewen and LGII re 9.62%
Senior Guaranteed Notes, Series D, due September 11, 2003, issued by Loewen ("Series D Notes"),
as amended on June 10, 1994(1)
4.4.1 Second Amendment, dated for reference May 15, 1996, to Note Agreements, dated for reference
September 1, 1993, among Loewen, LGII and institutions named therein, re Series D Notes(4)
4.5 Guaranty Agreement by LGII re Series D Notes, dated for reference April 1, 1993(1)
4.6 Note Agreement by LGII and Loewen re 6.49% Senior Guaranteed Notes, Series E, due February 25,
2004, issued by LGII ("Series E Notes"), dated for reference February 1, 1994(1)
4.6.1 Second Amendment, dated for reference May 15, 1996, to Note Agreements, dated for reference
February 1, 1994, among Loewen, LGII and Teachers Insurance and Annuity Association of America,
re Series E Notes(4)
4.7 Guaranty Agreement by Loewen re Series E Notes, dated for reference February 1, 1994(1)
4.8 Amended and Restated 1994 MEIP Credit Agreement, dated as of June 14, 1994, amended and restated
as of May 15, 1996 ("MEIP Credit Agreement"), by and between Loewen Management Investment
Corporation, in its capacity as agent for LGII ("LMIC"), Loewen and the banks listed therein
(the "MEIP Banks") and Wachovia Bank of Georgia, N.A., as agent for the MEIP Banks ("MEIP
Agent")(1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- --------- -------------------------------------------------------------------------------------------------- ----
<C> <S> <C>
4.8.1 First Amendment to the MEIP Credit Agreement, dated as of December 2, 1996
4.8.2 Second Amendment to the MEIP Credit Agreement, dated as of April 30, 1997
4.9 Security Agreement, dated as of June 14, 1994, by and between LMIC and the MEIP Agent(1)
4.10 Guaranty dated as of June 14, 1994, by LGII in favor of the MEIP Agent for the ratable benefit of
the MEIP Banks(1)
4.11 Guaranty dated as of June 14, 1994, by Loewen in favor of the MEIP Agent for the ratable benefit
of the MEIP Banks(1)
4.12 Exchange Acknowledgment by Loewen, with respect to the 1994 Exchangeable Floating Rate Debentures
due July 1, 2001 issued by LGII, dated June 15, 1994(1)
4.13 Indenture, dated as of August 15, 1994, by and between LGII, as issuer, Loewen, as guarantor, and
State Street Bank and Trust Company, as trustee with respect to 9.45% Junior Subordinated
Debentures, Series A, due 2024, issued by LGII and guaranteed by Loewen(5)
4.14 MIPS Guarantee Agreement, dated August 15, 1994(5)
4.15 Zero Coupon Loan Agreement, dated as of November 1, 1994, by and between WLSP Investment Partners
I Neweol Finance B.V., Electrolux Holdings B.V., Man Production Rotterdam B.V., Adinvest A.G.,
and Wachovia Bank of Georgia, N.A.(1)
4.16 Indenture, dated as of March 20, 1996, by and between LGII, Loewen, as guarantor of the
obligations of LGII under the Indenture, and Fleet National Bank as Trustee, with respect to
Senior Guaranteed Notes of LGII(3)
4.17 Form of Global Series 1 and 2 Outstanding Notes of LGII(3)
4.18 Form of Physical Series 1 and 2 Outstanding Notes of LGII(3)
4.19 Form of Global Series 1 and 2 Exchange Notes of LGII(4)
4.20 Form of Physical Series 1 and 2 Exchange Notes of LGII(4)
4.21 Form of Senior Guarantee of LGII's Series 1 and 2 Notes(4)
4.22 Credit Agreement, dated as of May 15, 1996 ("BMO Credit Agreement"), among LGII, as borrower,
Loewen, as a guarantor, the lenders named therein, as the lenders, Goldman, Sachs & Co., as the
documentation agent and Bank of Montreal, as issuer, swingline lender and agent(4)
4.22.1 Commitment Letter regarding the BMO Credit Agreement, dated as of April 14, 1997
4.22.2 Second Amendment to the BMO Credit Agreement, dated as of April 30, 1997
4.23 Collateral Trust Agreement, dated as of May 15, 1996, among Bankers Trust Company, as trustee,
Loewen, LGII and various other pledgers(4)
4.24 Amended and Restated Operating Credit Agreement, dated for reference July 15, 1996, between Loewen
and Royal Bank of Canada(6)
4.24.1 Third Amendment to Operating Credit Agreement, dated for reference July 15, 1996, among Loewen,
LGII and Royal Bank of Canada(6)
4.25 Indenture, dated as of October 1, 1996, by and between LGII, Loewen, as guarantor of the
obligations of LGII under the Indenture, and Fleet National Bank, as Trustee, with respect to
the Series 3 and 4 Notes(6)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- --------- -------------------------------------------------------------------------------------------------- ----
<C> <S> <C>
4.26 Form of Global Series 3 and 4 Outstanding Notes of LGII(6)
4.27 Form of Physical Series 3 and 4 Outstanding Notes of LGII(6)
4.28 Form of Global Series 3 and 4 Exchange Notes of LGII(7)
4.29 Form of Physical Series 3 and 4 Exchange Notes of LGII(7)
4.30 Form of Senior Guarantee of LGII's Series 3 and 4 Notes(6)
4.31 Shareholder Protection Rights Plan, dated as of April 20, 1990, as amended on May 24, 1990 and
April 7, 1994 and reconfirmed on May 17, 1995(1)
4.32 Form of Indenture by and between Loewen, as issuer, and Fleet National Bank, as trustee (8)
4.33 Form of Indenture by and among LGII, as issuer, Loewen, as guarantor, and Fleet National Bank, as
trustee (8)
4.34 Loewen hereby agrees to furnish to the Commission, upon request, a copy of the instruments which
define the rights of holders of long-term debt of Loewen. None of such instruments not included
as exhibits herein collectively represents long-term debt in excess of 10% of the consolidated
total assets of Loewen.
10 MATERIAL CONTRACTS
10.1 Stock Purchase Agreement, dated as of March 16, 1995, by and between Osiris Holding Corporation
and LGII(9)
10.2 Receipt Agreement, dated as of January 3, 1996, for the Cumulative Redeemable Convertible First
Preferred Shares Series C of Loewen ("Series C Shares")(3)
10.3 Undertaking by Raymond L. Loewen and Anne Loewen, dated as of January 3, 1996, to vote in favor of
the motion to subdivide the Series C Shares(3)
10.4 Settlement Agreement, dated as of February 1, 1996, by and between Loewen, LGII and affiliated
entities and J.J. O'Keefe, Sr., Gulf National Life Insurance Company and affiliated entities(3)
10.5 Shareholders' Agreement, dated as of February 9, 1996, by and between Loewen, LGII, J.J. O'Keefe,
Sr., Gulf National Life Insurance Company and affiliated entities, and certain individuals and
law firms named therein(3)
10.6 Settlement Agreement and Mutual General Release effective as of February 12, 1996, entered into on
March 19, 1996, by and between Provident American Corporation, Provident Indemnity Life
Insurance Company, Loewen and LGII(3)
10.7 Registration Rights Agreement, dated as of March 20, 1996, by and between LGII, Loewen and the
Initial Purchasers named therein(3)
10.8 Asset Purchase Agreement, dated as of March 26, 1996, by and between LLI, Inc., and LLPC, Inc. and
S.I. Acquisition Associates, L.P.(3)
10.9 Asset Purchase Agreement, dated as of March 26, 1996, by and between Loewen Louisiana Holdings,
Inc. and S.I. Acquisition Associates, L.P.(3)
*10.10 Form of Indemnification Agreement with Outside Directors(10)
*10.11 Form of Indemnification Agreement with Officers(10)
*10.12 Form of The Loewen Group Inc. Severance Agreement(10)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- --------- -------------------------------------------------------------------------------------------------- ----
<C> <S> <C>
*10.13 The Loewen Group Inc. Severance Pay Plan(10)
*10.14 Employment Agreement, dated August 19, 1988, by and between Loewen and Tim Hogenkamp(1)
*10.15 Employment Agreement, dated March 6, 1990, by and between Loewen and Peter S. Hyndman(1)
*10.16 Employment Agreement, dated March 21, 1990, by and between Loewen and David FitzSimmons(1)
*10.17 Employment Agreement, and Covenant Not to Compete, dated November 14, 1990, by and between LGII
and Albert S. Lineberry, Sr.(1)
*10.18 Employment Agreement, dated December 18, 1990, by and between Loewen and Peter W. Roberts(1)
*10.19 Employment Agreement, dated April 12, 1991, by and between Loewen and Dwight Hawes(1)
*10.20 Employment Agreement, dated October 9, 1991, by and between Loewen and Timothy A. Birch(1)
*10.21 Consulting Agreement, dated July 18, 1994, by and between Loewen and Charles B. Loewen, LGII, and
Corporate Services International Inc.(1)
*10.22 Employment Letter, dated March 10, 1995, by Raymond L. Loewen to Paul Wagler(5)
*10.23 Employment Agreement, dated March 17, 1995, by and between Loewen, LGII and Lawrence Miller(1)
*10.24 Employment Agreement, dated March 17, 1995, by and between Loewen and William R. Shane(1)
*10.25 1994 Management Equity Investment Plan (the "MEIP")(1)
*10.26 Form of Executive Agreement executed by participants in the MEIP(5)
*10.27 1994 Outside Director Compensation Plan as restated and amended as at January 9, 1997(11)
*10.28 Severance Agreement, dated June 15, 1995, by and between Loewen and Robert Garnett(3)
*10.29 Employee Stock Option Plan (United States), as restated and amended as at April 2, 1996(11)
*10.30 Employee Stock Option Plan (Canada), as restated and amended as at April 2, 1996(11)
*10.31 Employment Agreement, dated April 30, 1996, by and between Loewen and Grant Ballantyne(5)
*10.32 Employment Agreement, dated May 1, 1996, amended July 18, 1996 by and between Loewen and Douglas
J. McKinnon(5)
*10.33 Resignation and Release Agreement, effective June 10, 1996, by and between Loewen, LGII and Robert
O. Wienke(5)
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
27 FINANCIAL DATA SCHEDULE
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- --------- -------------------------------------------------------------------------------------------------- ----
<C> <S> <C>
99 ADDITIONAL EXHIBITS
99.1 Stock Purchase Agreement, dated as of June 14, 1996, by and among Prime Succession, Inc., the
other individuals or entities listed on the signature pages thereof, Loewen and Blackhawk
Acquisition Corp.(12)
99.2 Put/Call Agreement, dated as of August 26, 1996, by and among Blackstone, Blackstone Offshore
Capital Partners II L.P. ("Blackstone Offshore"), Blackstone Family Investment Partnership II
L.P. ("Blackstone Family"), PSI Management Direct L.P. ("PSI"), LGII and Loewen(12)
99.3 Stockholders' Agreement, dated as of August 26, 1996, by and among Prime Succession, Inc. (to be
renamed Prime Succession Holdings, Inc.), Blackstone, Blackstone Offshore, Blackstone Family,
PSI and LGII(12)
99.4 Subscription Agreement, dated as of November 19, 1996, by and among Rose Hills Holdings Corp.,
Blackstone, Blackstone Rose Hills Offshore Capital Partners L.P. ("Blackstone Rose Hills"),
Blackstone Family, Roses Delaware, Inc. ("RDI"), Loewen, LGII and RHI Management Direct, L.P.
("RHI")(13)
99.5 Put/Call Agreement, dated as of November 19, 1996, by and among Blackstone, Blackstone Offshore,
Blackstone Family, Blackstone Rose Hills, LGII, RDI, Loewen and RHI(13)
99.6 Stockholders' Agreement, dated as of November 19, 1996, by and among Rose Hills, Blackstone,
Blackstone Rose Hills, Blackstone Family, RDI, LGII and RHI(13)
</TABLE>
- ------------------------
* Compensatory plan or management contract
(1) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1994, filed on March 31, 1995 (File No. 0-18429)
(2) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed on August 15, 1996 (File No. 0-18429)
(3) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1995, filed on March 28, 1996, as amended (File No.
0-18429)
(4) Incorporated by reference from the S-4 Registration Statement filed with
the Commission by LGII and Loewen (File Nos. 333-03135 and 333-03135-01) on
May 3, 1996, as amended
(5) Incorporated by reference from the combined Form F-9/F-3 Registration
Statements filed with the Commission by Loewen and LGII, respectively (Nos.
33-81032 and 33-81034), on July 1, 1994, as amended
(6) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, filed on November 14, 1996 (File No.
1-12163)
(7) Incorporated by reference from the S-4 Registration Statement filed with
the Commission by LGII and Loewen (File Nos. 333-16319 and 333-16319-01),
filed on November 18, 1996, as amended
(8) Incorporated by reference from the S-3 Registration Statement filed with
the Commission by Loewen and LGII (File Nos. 333-23747 and 333-23747-01), on
March 21, 1997, as amended
(9) Incorporated by reference from Loewen's Periodic Report on Form 8-K/A No. 1
dated April 18, 1995, filed May 5, 1995 (File No. 0-18429)
(10) Incorporated by reference from Loewen's Solicitation/Recommendation
Statement on Schedule 14D-9 filed on October 10, 1996, as amended
<PAGE>
(11) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1996, filed on March 31, 1997 (File No. 1-12163)
(12) Incorporated by reference from Loewen's Periodic Report on Form 8-K, dated
August 26, 1996, filed October 12, 1996, amended October 30, 1996 (File No.
1-12163)
(13) Incorporated by reference from Loewen's Periodic Report on Form 8-K, dated
November 19, 1996, filed December 27, 1996 (File No. 1-12163)
<PAGE>
AMENDMENT NUMBER ONE
DATED AS OF DECEMBER 2, 1996
TO
$121,300,000 AMENDED AND RESTATED 1994 MEIP CREDIT AGREEMENT
DATED AS OF JUNE 14, 1994
AND
AMENDED AND RESTATED AS OF MAY 15, 1996
THIS AMENDMENT NUMBER ONE (this "AMENDMENT") is executed as of the 2nd
day of December, 1996, among LOEWEN MANAGEMENT INVESTMENT CORPORATION ("LMIC"),
in its capacity as Agent for LOEWEN GROUP INTERNATIONAL, INC. (the "BORROWER" or
"LGII"), THE LOEWEN GROUP INC. ("TLGI"), the BANKS party to the Credit Agreement
(collectively, the "BANKS"), and WACHOVIA BANK OF GEORGIA, N.A., as agent (the
"AGENT").
W I T N E S S E T H:
WHEREAS, LMIC, acting in its capacity as agent for the Borrower, TLGI,
the Banks and the Agent entered into a $121,300,000 Amended and Restated 1994
MEIP Credit Agreements dated as of June 14, 1994, as amended and restated as of
May 15, 1996 (the "CREDIT AGREEMENT;" terms defined in the Credit Agreement
being used herein as therein defined unless otherwise defined herein);
WHEREAS, TLGI and LGII have each guaranteed the Obligations of the
Borrower under the Credit Agreement;
WHEREAS, the Borrower, TLGI, LMIC, and LGII (collectively, the "CREDIT
PARTIES") have requested that the Banks make additional amendments to the Credit
Agreement and the Banks have agreed to do so, but only to the extent and subject
to the limitations set forth herein;
NOW, THEREFORE, for good and valuable consideration, the sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. AMENDMENTS. The Credit Agreement shall be amended as
follows:
(a) The definition of the term "APPLICABLE MARGIN" contained in
Section 1.01 of the Credit Agreement is hereby amended to read as
follows:
<PAGE>
"APPLICABLE MARGIN" means a per annum rate determined
from time to time by reference to (A) during the period
from January 1, 1997 through and including September
30, 1997, SCHEDULE 2 or SCHEDULE 2A attached hereto,
whichever rate is higher, and (B) at all other times,
SCHEDULE 2. Any change in the Applicable Margin
resulting from a change in TLGI's debt ratings will
take effect as of the date of the debt ratings change.
Any change in the Applicable Margin resulting from a
change in the ratio of Consolidated Indebtedness to
Adjusted EBITDA will take effect as provided in SECTION
2.13.
(b) The following new Sections 2.12 and 2.13 are hereby incorporated
into the Credit Agreement, immediately following Section 2.11:
SECTION 2.12 QUARTERLY EXCESS LEVERAGE FEE. The
"CERTIFICATE REQUIREMENT DATE" applicable to any of the
first three calendar quarters of 1997 shall be (1) in
the case of the first calendar quarter of 1997, the
120th day after the last day of the immediately
preceding calendar quarter, and (2) in the case of each
of the second and third calendar quarters of 1997, the
60th day after the last day of the immediately
preceding calendar quarter. On the Certificate
Requirement Date which is applicable to each of the
first three calendar quarters of 1997, the Borrower
shall pay to the Agent for the account of the Banks,
PRO-RATA according to their respective Commitments on
such Certificate Requirement Date, a quarterly excess
leverage fee (the "QUARTERLY EXCESS LEVERAGE FEE").
The Quarterly Excess Leverage Fee payable on any
Certificate Requirement Date shall be the amount
specified in SCHEDULE 2A for Level I, Level II, Level
III or Level IV (as applicable pursuant to SCHEDULE 2A)
which is shown in the chief financial officer's
certificate delivered pursuant to Section 2.13(b) in
respect of the calendar quarter to which such
Certificate Requirement Date applies (or, if no such
certificate is delivered, the amount specified for
Level IV). The Agent shall promptly distribute such
Quarterly Excess Leverage Fee to the Banks ratably
according to their respective Commitments on such
Certificate Requirement Date. The Borrower's
obligations under this Section 2.12 shall survive any
termination of this Agreement. Payment of such
Quarterly Excess Leverage Fee shall not relieve the
Borrower or TLGI from any Default under Section 5.25.
-2-
<PAGE>
SECTION 2.13 RECONCILIATION OF INTEREST AND FEES.
(a) During each of the first, second and third
calendar quarters of 1997, the Borrower will
provisionally accrue interest hereunder (and will pay
such accrued interest) based on the Applicable Margin
specified on SCHEDULE 2A for Level II described
therein, in the case of the first and second calendar
quarters of 1997, and Level I described therein, in the
case of the third calendar quarter of 1997.
(b) No later than the Certificate Requirement
Date which is applicable to each of the first, second
and third calendar quarters of 1997, the Borrower will
deliver to the Agent (i) a calculation, certified as
true and correct by the chief financial officer of
TLGI, of the ratio of Consolidated Indebtedness for the
period of four consecutive fiscal quarters of TLGI
which ended on the last day of the most recently ended
fiscal quarter of TLGI to Adjusted EBITDA for such
period of four consecutive fiscal quarters, and (ii) a
certificate of the chief financial officer of TLGI as
to which of Level I, Level II, Level III or Level IV
(as set forth in SCHEDULE 2A) is applicable for the
purpose of computing the Applicable Margin for the
calendar quarter to which such Certificate Requirement
Date is applicable. If the Borrower fails to timely
deliver either such certified calculation or such
certificate, Level IV shall apply for such fiscal
quarter.
(c) Within 5 Business Days after the later of (A)
the end of each of the first, second and third calendar
quarters of 1997, and (B) the receipt by the Agent of
the calculation and chief financial officer's
certificate required by paragraph (b) for such calendar
quarter (or if such calculation or certificate are not
timely delivered, the Certificate Requirement Date
applicable to such calendar quarter), the Agent will
calculate the difference between (i) the amount of
interest which would have accrued hereunder during such
quarter if the Applicable Margin had been based on the
Level under SCHEDULE 2A set forth in such chief
financial officer's certificate (or otherwise deemed to
apply) and (ii) the amount of such interest which
provisionally accrued during such quarter pursuant to
paragraph (a). If any amount of such interest
calculated pursuant to clause (i) is greater than the
corresponding amount calculated pursuant to clause
(ii), the Borrower will pay such excess to the Agent on
demand, for the ratable account of the Banks according
to the daily amounts during such quarter of their
respective Loans. If any amount of interest calculated
pursuant to clause (i) is less than the corresponding
amount calculated pursuant to clause
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<PAGE>
(ii), the Agent will notify the Borrower thereof and the
Borrower may reduce succeeding payments of corresponding
types of interest by amounts equal to the absolute value
of the deficiency in such interest. Any such reductions
shall be allocated ratably to the Banks as set forth in the
previous sentence.
(d) Notwithstanding anything above in this
Section 2.13, during such times as the Applicable
Margin shall be determined in accordance with SCHEDULE
2, as provided in the definitions of such terms,
interest shall accrue and be payable in accordance with
SCHEDULE 2 and the provisions of this Agreement other
than this Section 2.13, but the Borrower will remain
obligated to make the payments (and may make the
reductions) required by paragraph (c) above with
respect to all periods when the Applicable Margin is
determined pursuant to SCHEDULE 2A.
(e) The Borrower's obligations under this Section
2.13 shall survive termination of this Agreement, but
neither the Agent nor any Bank will be required to make
any refund to the Borrower if this Agreement terminates
before the Borrower has fully recaptured any excess
interest through reductions of interest as provided in
paragraph (c).
(c) Section 5.24 of the Credit Agreement is hereby amended to read as
follows:
SECTION 5.24 MAXIMUM CONSOLIDATED INDEBTEDNESS
TO CONSOLIDATED CAPITALIZATION. TLGI will not permit
the ratio of Consolidated Indebtedness to Consolidated
Capitalization (x) at any time through and including
June 30, 1997 to exceed 0.62 to 1.00 and (y) at any
time after June 30, 1997 to exceed 0.60 to 1.00.
(d) Section 5.25 of the Credit Agreement is hereby amended
to read as follows:
SECTION 5.25 MAXIMUM CONSOLIDATED INDEBTEDNESS
TO ADJUSTED EBITDA. TLGI will not permit the ratio of
Consolidated Indebtedness for the most recently ended
period of four consecutive fiscal quarters of TLGI to
Adjusted EBITDA for such period of four consecutive
fiscal quarters (x) to be greater than 6.00 to 1.00 at
any time through and including June 30, 1997 or (y) to
be greater than 5.00 to 1.00 at any time after June 30,
1997.
-4-
<PAGE>
(e) Clause (h) and the final paragraph of Section 5.26 of the Credit
Agreement are hereby amended to read as follows:
(h) subject to the final paragraph of this
Section 5.26, additional Indebtedness issued or
incurred by TLGI or LGII, provided that after
giving effect thereto and to the application of
the proceeds thereof, Consolidated Indebtedness
would not exceed (1) 62% of Consolidated
Capitalization at any time through and including
June 30, 1997, and (2) 60% of Consolidated
Capitalization at any time after June 30, 1997.
Notwithstanding the foregoing, but subject to the last
two sentences of this paragraph, any Indebtedness
otherwise permitted under any of the foregoing Sections
5.26(f), (g) and (h) shall not be permitted unless at
the time of the incurrence of such Indebtedness, and
after giving PRO FORMA effect thereto, LGII and TLGI
will be in compliance with Section 4.07 of the
Indenture dated as of March 20, 1996, among LGII, TLGI
and Fleet National Bank of Connecticut, as Trustee,
relating to LGII's $500,000,000 Senior Guaranteed
Notes, as such Indenture may be amended, modified,
supplemented or waived from time to time. (The
acquisition by TLGI or any of its Subsidiaries of a new
Subsidiary which is obligated in respect of any
Indebtedness shall be deemed for purposes of this
Section to be the incurrence of such Indebtedness by
such new Subsidiary on the date it becomes a Subsidiary
of TLGI.) During any period of time that (i) the
ratings assigned to the senior unsecured and unenhanced
(other than, if applicable, pursuant to the Collateral
Trust Agreement) long-term Indebtedness of TLGI by each
of Standard & Poor's and Moody's (collectively, the
"RATING AGENCIES") are no less than BBB- and Baa3,
respectively (the "INVESTMENT GRADE RATINGS"), and (ii)
no Default or Event of Default has occurred and is
continuing, the restriction contained in the first
sentence of this paragraph shall not be applicable. If
one or both of the Rating Agencies withdraws its rating
or downgrades its Investment Grade Rating, then
thereafter the restriction contained in the first
sentence of this paragraph shall be applicable on a
prospective basis until both of the Rating Agencies
thereafter assign Investment Grade Ratings to the
senior unsecured and unenhanced (other than, if
applicable, pursuant to the Collateral Trust Agreement)
long-term Indebtedness of TLGI.
The foregoing amendment to Section 5.26 of the Credit Agreement
shall be retroactive to the date of the Credit Agreement, and any
Default or Event of Default
-5-
<PAGE>
under Section 5.26 which would not have occurred if such amendment
had been in effect on such date is hereby waived.
(f) SCHEDULE 2 of the Credit Agreement is hereby amended by
incorporating the following additional Note at the end thereof:
References to TLGI's long term senior unsecured and
unenhanced debt shall mean such long term senior debt of TLGI
which is unsecured and unenhanced other than, if applicable,
pursuant to the Collateral Trust Agreement.
(g) SCHEDULE 2A of this Amendment is hereby added to the Credit
Agreement as SCHEDULE 2A thereto.
Section 2. REAFFIRMATION OF GUARANTIES. The Credit Parties (a) consent
to the terms and provisions of this Amendment provided for herein, (b) reaffirm
their obligations under their respective Guaranties, and (c) confirm that their
respective Guaranties remain in full force and effect with respect to the Credit
Agreement notwithstanding the waiver and amendment provided for herein.
Section 3. EFFECTIVENESS. This Amendment shall become effective only
after the Agent shall have received one or more counterparts of this Amendment,
in form and substance satisfactory to the Agent and its counsel, duly executed
by the Credit Parties, the Agent and the Required Banks together with the
following additional items:
(i) copies, certified by the Secretary, Assistant Secretary or other
appropriate officer or director of each of TLGI and the Borrower of
its board of director's resolutions authorizing the execution and
performance of this Amendment; and
(ii) supplementary incumbency certificates, if applicable executed by
the Secretary or Assistant Secretary or other appropriate officer or
director of each of TLGI and the Borrower, which shall identify by
name and title and bear the signature of any officer of TLGI or the
Borrower who was not shown on the incumbency certificates which were
delivered in connection with the closing of the Credit Agreement and
who executes this Amendment, upon which certificate the Agent, the
Lenders and the L/C Issuer shall be entitled to rely until informed of
any change in writing by TLGI or the Borrower, as applicable.
(iii) Receipt by the Agent for the account of each Bank executing
and delivering (including by facsimile) this Amendment to the Agent
prior to 5:00 p.m. New York City time on November 26, 1996 or such
later date as the Agent and the Borrower shall agree, of an amount
equal to such Bank's Commitment, multiplied by 0.15% (a flat
percentage, not a percentage per annum); and
(iv) Receipt by the Agent of the amounts payable to the Agent pursuant
to that certain letter agreement from the Agent to TLGI, dated as of
the date hereof.
-6-
<PAGE>
Section 4. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. Each of
the Credit Parties hereby represents and warrants that as of the date of its
execution of this Amendment and the date of its effectiveness, in each case
after giving effect to the waiver and amendment provided for herein:
(a) There exists no Default or Event of Default under the Credit
Agreement;
(b) The representations and warranties contained Article IV of the Credit
Agreement are true and correct as of such dates, except to the extent any such
representation or warranty is stated to relate solely to an earlier date, in
which case such representation or warranty shall be true and correct on and as
of such earlier date; and
(c) No default, unmatured default or similar event exists under any
agreement, instrument or other document evidencing or related to Debt of any
Credit Party or any Subsidiary thereof.
Section 5. EFFECT. Except as otherwise expressly provided herein, the
Credit Agreement shall continue in full force and effect and is hereby ratified
and confirmed.
Section 6. GOVERNING LAW. THIS AMENDMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF
THE STATE OF GEORGIA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.
Section 7. SEVERABILITY. Each provision of this Amendment shall be
severable from every other provision of this Amendment for the purpose of
determining the legal enforceability of any provision hereof, and the
unenforceability of one or more provisions of this Amendment in one jurisdiction
shall not have the effect of rendering such provision or provisions
unenforceable in any other jurisdiction.
Section 8. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
LOEWEN MANAGEMENT INVESTMENT
CORPORATION, IN ITS CAPACITY AS AGENT FOR
LOEWEN GROUP INTERNATIONAL, INC., AS
BORROWER
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
LOEWEN GROUP INTERNATIONAL, INC.,
AS GUARANTOR
-7-
<PAGE>
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
THE LOEWEN GROUP INC.
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
WACHOVIA BANK OF GEORGIA, N.A.,
INDIVIDUALLY AND AS AGENT
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
ROYAL BANK OF CANADA
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
-8-
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
BANK OF MONTREAL,
NEW YORK BRANCH
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
STAR BANK, N.A.
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
-9-
<PAGE>
AMENDMENT NUMBER TWO
DATED AS OF APRIL 30, 1997
TO
$121,300,000 AMENDED AND RESTATED 1994 MEIP CREDIT AGREEMENT
DATED AS OF JUNE 14, 1994
AND
AMENDED AND RESTATED AS OF MAY 15, 1996
THIS AMENDMENT NUMBER TWO (this "AMENDMENT") is executed as of the
30th day of April, 1997, among LOEWEN MANAGEMENT INVESTMENT CORPORATION
("LMIC"), in its capacity as Agent for LOEWEN GROUP INTERNATIONAL, INC. (the
"BORROWER" or "LGII"), THE LOEWEN GROUP INC. ("TLGI"), the BANKS party to the
Credit Agreement (collectively, the "BANKS"), and WACHOVIA BANK OF GEORGIA,
N.A., as agent (the "AGENT").
W I T N E S S E T H:
WHEREAS, LMIC, acting in its capacity as agent for the Borrower, TLGI,
the Banks and the Agent entered into a $121,300,000 Amended and Restated 1994
MEIP Credit Agreement dated as of June 14, 1994, as amended and restated as of
May 15, 1996, and as further amended by Amendment Number One dated as of
December 2, 1996 (the "CREDIT AGREEMENT;" terms defined in the Credit Agreement
being used herein as therein defined unless otherwise defined herein);
WHEREAS, TLGI and LGII have each guaranteed the Obligations of the
Borrower under the Credit Agreement; and
WHEREAS, the Borrower, TLGI, LMIC, and LGII (collectively, the "CREDIT
PARTIES") have requested that the Banks make additional amendments to the Credit
Agreement and the Banks have agreed to do so, but only to the extent and subject
to the limitations set forth herein;
NOW, THEREFORE, for good and valuable consideration, the sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. AMENDMENTS. The Credit Agreement shall be amended as
follows:
(a) The definition of the term "FINANCE SUBSIDIARY" contained in
Section 1.01 of the Credit Agreement is hereby amended to read as
follows:
<PAGE>
""FINANCE SUBSIDIARY" means any captive finance
Subsidiary of TLGI that engages in no material activity
other than (i) buying accounts receivable or other financial
assets of any Affiliate of TLGI, (ii) making loans or
otherwise extending credit to any such Affiliates, (iii)
succeeding to any or all of the business of LFW or Eagle or
otherwise engaging in finance activities similar to the
finance activities engaged in by LFW or Eagle from time to
time, or (iv) making Investments in other Finance
Subsidiaries."
(b) Section 5.03 of the Credit Agreement is hereby amended to read as
follows:
"SECTION 5.03 INTEREST CHARGES COVERAGE. TLGI will at
all times maintain (a) a ratio of EBITDA for the most
recently ended period of four consecutive fiscal quarters of
TLGI to Consolidated Interest Charges for such period of
four consecutive fiscal quarters of not less than 2.75 to
1.00 and (b) a ratio of EBITDA for the most recently ended
fiscal quarter to Consolidated Interest Charges for such
fiscal quarter of not less than 1.50 to 1.00. For purposes
of this Section 5.03, any costs and expenses incurred by
TLGI in contesting the 1996 tender offer for TLGI by Service
Corporation International, Inc., which are reflected in the
audited financial statements of TLGI as at December 31, 1996
which have been delivered to the Agent and the Banks, up to
an aggregate amount not to exceed $18,678,000 for all such
costs and expenses, shall be excluded from the calculation
of Consolidated Net Income in determining EBITDA for the
respective periods in which such costs were incurred."
(c) The proviso contained at the end of Section 5.08 of the Credit
Agreement is hereby amended to read as follows:
"; PROVIDED, HOWEVER, that notwithstanding any provision to
the contrary herein, none of TLGI, LGII or any Subsidiary of
either shall make any Investment in any Person effectively
located outside of the United States or Canada if after
giving effect to such Investment, the aggregate amount of
Investments of TLGI, LGII or any Subsidiary of either in any
Persons effectively located outside of the United States or
Canada, excluding Investments in Finance Subsidiaries which
are Wholly-Owned Subsidiaries, would exceed an amount equal
to 5% of Consolidated Net Worth. For the purpose of any
computation required to be made pursuant to this Agreement,
Investments shall be valued at lower of the cost or Fair
Value thereof as of the date of computation."
(d) Section 5.10 of the Credit Agreement is hereby amended to add the
following sentence at the end thereof:
"Nothing in this Section 5.10 shall prohibit any merger,
amalgamation, or consolidation which is permitted by Section
5.12."
-2-
<PAGE>
(e) Section 5.29(b) of the Credit Agreement is hereby amended to read
as follows:
"(b) Except as set out in clauses (i) and (ii) below or
as otherwise consented to by the Agent in its sole
discretion, TLGI and LGII will, and will cause each
Subsidiary (other than a Canadian Subsidiary), the shares or
other equity interests of which are Pledged Shares under the
Collateral Trust Agreement, to take any and all actions
necessary to ensure that there are no restrictions on a
transfer of such Pledged Shares pursuant to the due exercise
of the Trustee's powers under the Collateral Trust
Agreement, except with respect to any and all restrictions
under applicable law. The foregoing sentence does not apply
to:
(i) the interests of TLGI, LGII or any Pledgor Subsidiary
in any limited partnership or limited liability company
where the restriction is required to preserve the tax
status of the entity; and
(ii) the shares listed in Part I of SCHEDULE 4 hereto."
(f) Section 5.30(e) of the Credit Agreement is hereby amended to read
as follows:
"(e) such Subsidiary has no material assets other than
(i) Indebtedness owed to it by TLGI or LGII or an Affiliate
of TLGI, (ii) Investments in other Finance Subsidiaries
which are Wholly-Owned Subsidiaries and (iii) the accounts
receivable and other financial assets described in the
foregoing clause (d), and"
Section 2. REAFFIRMATION OF GUARANTIES. The Credit Parties (a) consent
to the terms and provisions of this Amendment provided for herein, (b) reaffirm
their obligations under their respective Guaranties, and (c) confirm that their
respective Guaranties remain in full force and effect with respect to the Credit
Agreement notwithstanding the waiver and amendment provided for herein.
Section 3. EFFECTIVENESS. This Amendment shall become effective only
after the Agent shall have received one or more counterparts of this Amendment,
in form and substance satisfactory to the Agent and its counsel, duly executed
by the Credit Parties, the Agent and the Required Banks.
Section 4. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. Each of
the Credit Parties hereby represents and warrants that as of the date of its
execution of this Amendment and the date of its effectiveness, in each case
after giving effect to the waiver and amendment provided for herein:
(a) There exists no Default or Event of Default under the Credit
Agreement;
(b) The representations and warranties contained Article IV of the Credit
Agreement are true and correct as of such dates, except to the extent any such
representation or warranty is stated to
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<PAGE>
relate solely to an earlier date, in which case such representation or
warranty shall be true and correct on and as of such earlier date; and
(c) No default, unmatured default or similar event exists under any
agreement, instrument or other document evidencing or related to Debt of any
Credit Party or any Subsidiary thereof.
Section 5. EFFECT. Except as otherwise expressly provided herein, the
Credit Agreement is and shall continue in full force and effect and is hereby
ratified and confirmed.
Section 6. GOVERNING LAW. THIS AMENDMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF
THE STATE OF GEORGIA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.
Section 7. SEVERABILITY. Each provision of this Amendment shall be
severable from every other provision of this Amendment for the purpose of
determining the legal enforceability of any provision hereof, and the
unenforceability of one or more provisions of this Amendment in one jurisdiction
shall not have the effect of rendering such provision or provisions
unenforceable in any other jurisdiction.
Section 8. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
LOEWEN MANAGEMENT INVESTMENT
CORPORATION, IN ITS CAPACITY AS AGENT FOR
LOEWEN GROUP INTERNATIONAL, INC., AS
BORROWER
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
LOEWEN GROUP INTERNATIONAL, INC.,
AS GUARANTOR
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
THE LOEWEN GROUP INC.
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
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<PAGE>
WACHOVIA BANK OF GEORGIA, N.A.,
INDIVIDUALLY AND AS AGENT
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
ROYAL BANK OF CANADA
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
THE FIRST NATIONAL BANK OF CHICAGO
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
BANK OF MONTREAL
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
STAR BANK, N.A.
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
-6-
<PAGE>
[LOGO]
BANK OF MONTREAL
Chicago Branch
115 South LaSalle Street, 12th Floor
Chicago, Illinois 60603
(312) 750-4300
CONFIDENTIAL
April 14, 1997
Loewen Group International, Inc.
4126 Norland Avenue
Burnaby, B.C.
Canada V5G 3S8
Attention: Paul Wagler
Chief Financial Officer
Ladies and Gentlemen:
Bank of Montreal is pleased to advise you that it is willing, subject
to the terms and conditions contained in this letter and in either (but not
both) the Summary of Terms and Conditions attached hereto as APPENDIX A (the
"FACILITY TERM SHEET") or the Summary of Terms and Conditions attached hereto
as APPENDIX B (the "BMO TERM SHEET"), as applicable, to (i)(x) grant to the
Borrower an option (the "CREDIT FACILITY OPTION") to increase by $250,000,000
the credit available under the Credit Agreement (hereinafter defined) and (y)
if the Credit Facility Option is exercised by you, commit $250,000,000 (the
"CREDIT FACILITY COMMITMENT") toward the $250,000,000 increase (the
"FACILITY INCREASE") to the $750,000,000 Credit Agreement, dated as of May 15,
1996 (the "CREDIT AGREEMENT"; the credit facility evidenced by the Credit
Agreement, after giving effect to the Facility Increase, is referred to as
the "FACILITY") between Loewen Group International, Inc. (the "BORROWER"),
The Loewen Group Inc. ("TLGI"), Goldman Sachs & Co., the Lenders party
thereto and Bank of Montreal, as Agent, L/C Issuer and Swing Line Lender,
such Facility Increase to include the terms and conditions set forth in
APPENDIX A, and (ii)(x) grant to the Borrower an option (the "BMO OPTION")
for a $250,000,000 credit facility to be provided by Bank of Montreal to the
Borrower and (y) if the BMO Option is exercised by you, underwrite all
$250,000,000 (the "BMO COMMITMENT") of such $250,000,000 credit facility
(the "NEW FACILITY"), such New Facility to include the terms and conditions
set forth in APPENDIX B; PROVIDED, HOWEVER, that, as is described herein, you
may exercise only the Credit Facility Option or the BMO Option, but not both.
Upon your acceptance of this letter (which acceptance in order to be
valid shall include your designation below your signature hereto of either
(but not both) the Sixty Day Option or the Ninety Day Option as the applicable
Option period for purposes of both the Facility Term Sheet and the BMOT Term
Sheet), and upon your subsequent exercise of either (but not both) the Credit
Facility Option or the BMO Option, which exercise shall be deemed to be your
selection of
<PAGE>
April 14, 1997
Page 2
APPENDIX A hereto or APPENDIX B hereto, as applicable, as the term sheet to
be applicable to this commitment letter (such option, as so exercised by you,
the "OPTION", and APPENDIX A or APPENDIX B as so deemed to be selected by you
pursuant to such exercise, the "TERM SHEET"), Bank of Montreal will, in
consultation with the Borrower, endeavor as arranger to form a group of
financial institutions (together with Bank of Montreal, the "BANKS")
acceptable to Bank of Montreal and TLGI, to either (x) if you are deemed to
have selected APPENDIX A as the applicable Term Sheet, become lenders under
the Credit Agreement for all of the Facility Increase, or (y) if you are
deemed to have selected APPENDIX B as the applicable Term Sheet, become
lenders under the New Facility for all of the BMO Commitment. Such lenders in
either case may include the existing Lenders under the Credit Agreement.
However, subject to the final two paragraphs of the Term Sheet and the
conditions precedent set forth in the Term Sheet, the grant by Bank of
Montreal of the Credit Facility Option and the BMO Option and either the
Credit Facility Commitment or the BMO Commitment, as applicable, under this
letter is not contingent upon successful syndication of the Facility Increase
or the New Facility, as applicable.
Certain fees payable to Bank of Montreal in connection with the Option
and Facility Increase or the New Facility, as applicable, are set forth in the
Term Sheet. The Upfront Option Granting Fee payable to Bank of Montreal is
(x) 0.125% of the greater of the Credit Facility Commitment or the BMO
Commitment, if the Sixty Day Option is elected, and (y) 0.250% of the greater
of the Credit Facility Commitment or the BMO Commitment, if the Ninety Day
Option is elected. Only one Upfront Option Granting Fee shall be payable in
respect of Bank of Montreal's grant of both the Credit Facility Option and
the BMO Option. The Upfront Granting Fee shall be payable on your acceptance
of this letter. The Option Exercise Fee payable to Bank of Montreal in
connection with the exercise of the Option and the syndication of the
Facility Increase or the New Facility, as applicable, is 0.25% of the Credit
Facility Commitment or the BMO Commitment, as applicable. The Option
Exercise fee shall be payable immediately upon the Borrower's exercise of the
Option.
To assist Bank of Montreal in its syndication efforts, you agree to
provide upon its request all information and assistance reasonably deemed
necessary by it to complete successfully the syndication of the Facility
Increase or the New Facility, as applicable, including but not limited to
information and projections prepared by you on your behalf relating to the
transactions contemplated hereby. Without limiting the foregoing, you agree
to make available your senior executive officers and other employees, and
those of TLGI, to meet with and make presentations to potential Banks, to
assist in the preparation of syndication materials and otherwise to assist
Bank of Montreal in syndicating the Facility Increase or the New Facility, as
applicable. Bank of Montreal reserves the right (in consultation with you) to
allocate the Facility Increase or the New Facility, as applicable, among the
Banks.
In addition to the conditions to funding or closing set forth in the
Term Sheet, Bank of Montreal's commitment to grant the Credit Facility Option
and the BMO Option and provide financing hereunder is subject to, among other
conditions, (i) the negotiations and execution of definitive documentation
satisfactory to Bank of Montreal and the Banks (the "DEFINITIVE
DOCUMENTATION"), (ii) there being no material adverse change in the
reasonable opinion of Bank of Montreal in the financial condition, business,
operations or, properties of the Borrower, TLGI
<PAGE>
April 14, 1997
Page 3
and TLGI's consolidated group taken as a whole, from the date of acceptance
of this letter and (iii) there being no material disruption of the financial
markets in Bank of Montreal's reasonable opinion which affects pricing or
availability of credit in a material way (such as, without limitation,
imposition of a banking moratorium by federal or state banking authorities or
impairment of primary syndication or secondary trading of facilities similar
to that contemplated hereunder). In addition, all tax, accounting and legal
matters incident to the transaction, including, without limitation, the
definitive documentation, must be satisfactory in form and substance to all
parties.
Until the date on which both the Credit Facility Option and the BMO
Option are granted, Bank of Montreal's willingness to participate in the
transaction contemplated herein is subject to Bank of Montreal's continuing
satisfaction with the financial condition, business, operations and
properties of the Borrower, TLGI, and TLGI's consolidated group taken as a
whole. If, on or before the date on which both the Credit Facility Option and
the BMO Option are granted, Bank of Montreal's continuing review of the
Borrower and its consolidated group discloses information, or Bank of
Montreal otherwise discovers information not previously disclosed to it,
which Bank of Montreal reasonably believes has a material adverse impact on
the Borrower's financial condition, business, operations or properties taken
as a whole, Bank of Montreal may, in its sole discretion, refuse to grant
either or both of the Credit Facility Option and the BMO Option and withdraw
either or both of the Credit Facility Commitment and the BMO Commitment.
The Borrower hereby represents and covenants that all information and
data concerning the Borrower, TLGI and their respective subsidiaries and
affiliates (the "INFORMATION") which is made available to Bank of Montreal by
or on behalf of the Borrower, TLGI or any subsidiary or affiliate thereof
will be complete and correct in all material respects and will not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements are
made. In arranging for the syndication of the Facility Increase or the New
Facility, as applicable, the Borrower acknowledges that Bank of Montreal will
be using and relying primarily on the Information without independent
verification thereof.
The terms and conditions of the Credit Facility Option, the BMO Option,
the Facility Increase, the Facility, and the New Facility, while
substantially defined in the Facility Term Sheet or the BMO Term Sheet, as
applicable, are not necessarily limited to those set forth therein.
Whether or not the transaction contemplated herein is consummated, the
Borrower hereby agrees to indemnify and hold harmless Bank of Montreal, and
its directors, officers, employees and affiliates (each, an "INDEMNIFIED
PERSON") from and against any and all losses, claims, damages, liabilities or
actions or other proceedings commenced or threatened in respect thereof, and
expenses that arise out of, result from or in any way relate to this
commitment letter, the Credit Facility Option, the BMO Option, the Credit
Facility Commitment, the BMO Commitment or the providing or syndication of
the Facility Increase or the New Facility, as applicable, and to reimburse
each indemnified person, upon its demand, for any legal or other expenses
incurred in connection with investigating, defending or participating in any
such loss, claim, damage, liability or action or other proceeding (whether or
not such indemnified person is a party to any action or
<PAGE>
April 14, 1997
Page 4
proceeding out of which any such expenses arise), other than any of the
foregoing claimed by an indemnified person to the extent they have been
incurred by reason of the gross negligence or willful misconduct of such
person. Neither Bank of Montreal nor any of its subsidiaries or affiliates
shall be responsible or liable to the Borrower or any other person for any
consequential damages which may be alleged. The obligation contained in this
paragraph will survive the exercise or expiration of the Credit Facility
Option, the BMO Option and the closing of the syndication of the Facility
Increase or the New Facility, as applicable.
In addition, the Borrower hereby agrees to reimburse Bank of Montreal
from time to time upon demand for its reasonable out-of-pocket costs and
expenses incurred by Bank of Montreal in connection with the Credit Facility
Option, the BMO Option, the Credit Facility Commitment, the BMO Commitment,
the syndication of the Facility Increase or the New Facility, as applicable,
and any related matters, regardless of whether Definitive Documentation is
executed, the Credit Facility Option or the BMO Option is granted or
exercised, or the Facility Increase or the New Facility, as applicable, is
successfully syndicated.
The terms contained in this letter and both the Facility Term Sheet and
the BMO Term Sheet are confidential and, except for disclosure to your board
of directors, officers and employees, to professional advisors retained by
you in connection with this transaction, or as may be required by law, may
not be disclosed in whole or in part to any other person or entity without
Bank of Montreal's prior written consent. We hereby consent to your
disclosure of the fact that you have entered into this letter and accepted
the Term Sheet, the aggregate amount of the Credit Facility Commitment and
the BMO Commitment, the aggregate amount of the Facility after giving effect
to the Facility Increase, the aggregate amount of the New Facility,
collateral therefor, and the conditions precedent to closing the Facility
Increase or the New Facility, as applicable, in connection with offerings by
you of your debt or equity securities, provided that you may not disclose
information relating to pricing, fees and expenses. No such consent or
disclosure shall create any third-party beneficiary as to the Credit Facility
Commitment and the BMO Commitment, or any liability of Bank of Montreal or
any of its directors, officers, employees or affiliates to you, any investor
in any of such securities or any other person or entity.
This offer will terminate at noon (12:00 p.m.), Vancouver time on April
22, 1997 unless on or before that time you sign and return by facsimile a
copy of this letter and pay the Upfront Option Granting Fee described above,
and the Credit Facility Commitment and the BMO Commitment will expire on June
16, 1997, if you elect the Sixty Day Option, or July 16, 1997, if you elect
the Ninety Day Option, if the Option has not been exercised by you on or
before such applicable date.
If the foregoing is satisfactory to you, please indicate your agreement
and acceptance below, designate below which Option period you have elected as
being applicable to both the Facility Term Sheet and the BMO Term Sheet, and
return a copy of this letter to us. Upon your delivery to us of a signed copy
of this letter (completed as appropriate by you) and payment of the Upfront
Option Granting Fee as set forth above, this letter agreement shall become a
binding agreement under New York law as of the date so accepted.
Concurrently with our receipt thereof, each of the Credit Facility Option and
the BMO Option will be deemed to have been granted by
<PAGE>
April 14, 1997
Page 5
us on the terms set forth herein and in the Facility Term Sheet and the BMO
Term Sheet, as applicable, unless we shall have notified you prior thereto
that we refuse to grant either or both of the Credit Facility Option and the
BMO Option in accordance with the terms of this letter.
We are pleased to have this opportunity and look forward to working
with you.
Very truly yours,
BANK OF MONTREAL
By: /s/ Mary V. Roney
-------------------------------
Mary V. Roney
Title: Director
ACCEPTED AND AGREED TO
this _____ day of April, 1997. The
undersigned elects:
The Sixty Day Option
- ---
The Ninety Day Option
- ---
LOEWEN GROUP INTERNATIONAL, INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
<PAGE>
APPENDIX A
----------
LOEWEN GROUP INTERNATIONAL, INC.
SUMMARY OF TERMS AND CONDITIONS
FACILITY: Option (as defined below) for U.S. $250,000,000
increase (the "FACILITY INCREASE") to existing
U.S. $750,000,000 Credit Agreement dated as of
May 15, 1996 for the Borrower agented by Bank of
Montreal (the "CREDIT AGREEMENT"). Except as
otherwise set forth herein, the terms of the
Credit Agreement (as it may from time to time be
amended) shall apply to the Facility Increase and
the Facility Increase shall be documented
pursuant to an amendment to the Credit Agreement.
OPTION TERMS: The Option shall be exercisable by the Borrower
at any time from and after acceptance by Bank of
Montreal and the Borrower of this Summary of
Terms and Conditions and the commitment letter
(the "COMMITMENT LETTER") to which this Summary
is attached through and including, at the
Borrower's election made at the time the
Commitment Letter is accepted by the Borrower,
either (x) June 16, 1997 (the "SIXTY DAY
OPTION"), or (y) July 16, 1997 (the "NINETY DAY
OPTION"; whichever of the Sixty Day Option and
the Ninety Day Option is elected by the Borrower
at the time it accepts the Commitment Letter, the
"OPTION"). The Option shall be exercisable only
in full and not in part. In order to exercise the
Option, the Borrower shall give written notice to
Bank of Montreal of such exercise (any such
exercise, the "EXERCISE"). If the Option shall
not have been exercised before 5:00 p.m. (Chicago
time) on June 16, 1997 (if the Sixty Day Option
is elected), or July 16, 1997 (if the Ninety Day
Option is elected), the Option shall expire,
provided that all amounts previously paid by the
Borrower in respect thereof shall be
non-refundable.
BORROWER: Loewen Group International, Inc. ("LGII").
GUARANTOR: The Loewen Group Inc., a corporation incorporated
under the laws of the Province of British
Columbia ("TLGI").
AGENT: Bank of Montreal.
LENDERS: A group of lenders selected by the Agent in
consultation with the Borrower, which lenders may
include some or all of the existing lenders under
the Credit Agreement (such lenders so selected,
together with all continuing lenders under the
Credit Agreement after, giving effect to the
Facility Increase, and together with the Agent in
its capacity.
<PAGE>
as a lender, the "LENDERS"). The Lenders will not
be selected until after the Exercise of the
Option.
PURPOSE: General Corporate Purposes to include the
refinancing of certain indebtedness, friendly
acquisitions, and L/C issuances.
SECURITY: Pledge of shares of Canadian and US subsidiaries
shared ratably by all senior lenders under the
Collateral Trust Agreement dated as of May 15,
1996. The obligations of the Borrower in respect
of the Facility Increase shall be Class A Secured
Indebtedness under such Collateral Trust
Agreement.
FINAL MATURITY: May 29, 2001 (subject to extension of the
Facility Termination Date pursuant to Section
2.18 of the Credit Agreement).
EXTENSION OPTIONS: Two one-year extensions of the Facility Increase
(any such extension to include the existing
commitments under the Credit Agreement) at the
Borrower's request and at the Lenders' option on
the terms set forth in the Credit Agreement.
AGENCY FEE: US $100,000 per annum payable at each anniversary
date (May 29) of the Credit Agreement as provided
in the Credit Agreement.
UPFRONT OPTION GRANTING FEE: 0.125% on $250,000,000, if the Sixty Day Option
is elected, or 0.25% on $250,000,000, if the
Ninety Day Option is elected, payable by the
Borrower upon acceptance by the Borrower and
Bank of Montreal of this Summary of Terms and
Conditions and the Commitment Letter as
consideration for Bank of Montreal to grant the
Option and keep the Option exercisable by the
Borrower until June 16, 1997 or July 16, 1997,
as applicable.
OPTION EXERCISE FEE: 0.25% on $250,000,000 payable by the Borrower
immediately upon the Exercise of the Option.
COMMITMENT FEE: A per annum fee (per the applicable pricing
grid below), calculated on a 360-day basis
payable on the average daily unused portion of
the Aggregate Commitment under the Credit
Agreement after giving effect to the Facility
Increase payable quarterly in arrears to the
Lenders ratably in proportion to their
commitments from the Closing Date for the
Facility Increase until termination of the
Credit Agreement.
2
<PAGE>
INTEREST RATES: The Borrower will have the option of either:
- The ABR + Applicable Margin in the
applicable pricing grid
- LIBOR + Applicable Margin in the applicable
pricing grid
- Fixed CD + Applicable Margin in the
applicable pricing grid
- Letters of Credit at the Applicable Margin
for LIBOR plus a 12.5 bps fee to the
fronting bank.
PRICING GRID:
After giving effect to an amendment (the "AMENDMENT") to the Credit Agreement
which may become effective with the approval of all of the Lenders following
the acceptance by the Borrower and Bank of Montreal of this Summary of Terms
and Conditions and the Commitment Letter, pricing in the period from January
1, 1997 through the Borrower's receipt of Equity Proceeds (as hereinafter
defined) is to be based on previous quarter Debt/Adjusted EBITDA ratios as
follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
LEVEL A LEVEL B LEVEL C LEVEL D
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consolidated greater than 5.00 and greater than 5.50 and greater than 5.75 and
Indebtedness/ less than=5.00 less than = 5.50 less than = 5.75 less than = 6.00
Adjusted EBITDA
- ---------------------------------------------------------------------------------------------------------------------
Commitment Fee 25.0bps 25.0bps 25.0bps 25.0bps
- ---------------------------------------------------------------------------------------------------------------------
LIBOR Margin/ 87.5bps 100.0bps 125.0bps 125.0bps
L/C Fee
- ---------------------------------------------------------------------------------------------------------------------
CD Margin 100.0bps 112.5bps 137.5bps 137.5bps
- ---------------------------------------------------------------------------------------------------------------------
ABR Margin 0 0 25.0bps 37.5bps
- ---------------------------------------------------------------------------------------------------------------------
Quarterly Excess 0 $250,000 $250,000 $500,000
Leverage Fee
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Usage Fee: spreads will increase by 7.5 bps when usage is over 65% of the
Facility
For all periods thereafter, pricing is to be based on TLGI's public debt
ratings as follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
- --------------------------------------------------------------------------------
Credit Quality of A- or better BBB/BBB+ BBB- BB+ BB or
TLGI Lower
- --------------------------------------------------------------------------------
Commitment Fee 17.5 bps 15.0 bps 17.5 bps 20.0 bps 37.5 bps
- --------------------------------------------------------------------------------
LIBOR Margin/ 25.0 bps 35.0 bps 45.0 bps 70.0 bps 100.0 bps
L/C Fee
- --------------------------------------------------------------------------------
CD Margin 37.5 bps 47.5 bps 57.5 bps 82.5 bps 112.5 bps
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
- --------------------------------------------------------------------------------
ABR Margin 0 0 0 0 12.5 bps
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Usage Fee: Spreads will increase by 7.5 bps when usage is over 65% of the
Facility except under Level I and except under the ABR Margin.
Notwithstanding the foregoing, if the Amendment does not become effective,
then pricing for all periods will be determined as set forth in the Credit
Agreement.
GENERAL PROVISIONS
RELATING TO INTEREST RATES: The provisions of the Credit Agreement
regarding interest rates shall be
applicable to the Facility Increase.
LIBOR Rate interest periods shall be one,
two, three, or six months. Fixed CD Rate
interest periods shall be 30, 60, 90 or
180 days. Interest on ABR loans shall be
payable quarterly in arrears, upon any
prepayments and final maturity. Interest
on LIBOR Rate loans or Fixed CD Rate loans
shall be payable in arrears on the last
day of each interest period and, in the
case of an interest period longer than
three months, quarterly, upon any
prepayment and at final maturity.
Interest on ABR loans shall be calculated
for actual days elapsed on the basis of a
365, or when appropriate 366, day year.
Interest on LIBOR Rate loans and Fixed CD
Rate loans and fees shall be calculated
for actual days elapsed on the basis of a
360-day year.
The Credit Agreement provisions relating
to yield protection, availability and
capital adequacy shall also be applicable
to the Facility Increase. After default,
the interest rate will be equal to the
applicable rate of interest plus 2% per
annum.
DRAWDOWNS: Drawdowns will be permitted on the terms
set forth in the Credit Agreement, which
terms include that such drawdowns shall be
in minimum amounts of $10MM with
additional increments of $1MM for all
loans. Drawdowns are at the Borrower's
option upon notice by 10:30 a.m. (Chicago
time):
(1) on the Borrowing date for ABR Loans;
(2) two business days prior for fixed CD
Rate Loans; and
(3) three business days prior for LIBOR
Rate Loans.
PREPAYMENTS: Prepayments will be permitted on the terms
set forth in the Credit Agreement, which
terms include that ABR Loans may be
prepaid in a minimum amount of $10MM at
any time with the same day's notice by
11:00 a.m. (Chicago time), and that LIBOR
Rate and Fixed CD Rate Loans may be
prepaid in whole before the end of the
applicable interest
4
<PAGE>
period, subject to payment of applicable breakage
costs by the Borrower, upon notice by 11:00 a.m.
(Chicago time) on the same day, two business days
prior for Fixed CD Rate Loans, or three business
days prior for LIBOR Rate Loans.
TERMINATION OR
REDUCTION OF
COMMITMENTS: Unused Commitments in amounts of $10,000,000 may be
terminated at any time upon three business day's
notice,
CONDITIONS PRECEDENT
TO FACILITY INCREASE: Usual and customary conditions precedent, including,
but not limited to, the following:
a) approval by Required Lenders shall have been
obtained which approval will be solicited
concurrently with general syndication of the
Facility Increase after the Exercise of the
Option;
b) not less than US$250,000,000 of equity ("EQUITY
PROCEEDS") shall have been raised in connection
with the anticipated equity issue by TLGI (such
equity issue to be on substantially the terms
previously described by the Borrower to Bank of
Montreal);
c) confirmation that the Borrower's obligations in
respect of the Facility Increase can be registered
as Additional Secured Indebtedness under the
Collateral Trust Agreement and qualify thereunder
as Class A Secured Indebtedness;
d) no Default or Unmatured Default shall have
occurred and be continuing;
e) all representations and warranties of
the Borrower and the Guarantor set forth in the
Credit Agreement and all related documents shall
be true and correct; and
f) completion of documentation satisfactory to the
Agent and Lenders' counsel.
CONDITIONS PRECEDENT
TO SUBSEQUENT LOANS: As set forth in the Credit Agreement, including,
but not limited to, the following:
a) continued accuracy of representations and
warranties; and
b) absence of Default or Unmatured Default.
REPRESENTATIONS AND
WARRANTIES: As set forth in the Credit Agreement.
REPORTING REQUIREMENTS: As set forth in the Credit Agreement.
5
<PAGE>
COVENANTS: As set forth in the Credit Agreement.
FINANCIAL COVENANTS: As set forth in the Credit Agreement.
EVENTS OF DEFAULT: As set forth in the Credit Agreement.
ASSIGNMENT: Each Lender may, in its sole discretion, sell
participations and assignments of the terms set
forth in the Credit Agreement, which terms include
that any such participations and assignments must
be in minimum amounts of $5MM, and with the consent
of the Borrower and the Agent to prospective
assignees (and the Borrower shall release the
assignor Lender for the amount so assigned).
REQUIRED LENDERS: Lenders holding at least 66 2/3% of the commitments
and/or outstanding loans under the Credit Agreement,
after giving effect to the Facility Increase.
TAXES: All payments will be made free and clear of any
present or future domestic or foreign taxes,
withholdings or deductions, whatsoever, in
accordance with the terms set forth in the Credit
Agreement.
GOVERNING LAW: State of New York.
LENDERS COUNSEL: Mayer, Brown and Platt.
MARKET CONDITION: This Summary of Terms and Conditions is prepared as
of April 14, 1997 and may not prevail depending on
market conditions and a clear market in which to
syndicate the Facility Increase.
ANY UNDERWRITING OF THIS TRANSACTION IS SUBJECT TO THERE BEING NO MATERIAL
DISRUPTION OF THE FINANCIAL MARKETS IN BANK OF MONTREAL'S REASONABLE OPINION
WHICH IMPACTS PRICING OR AVAILABILITY OF CREDIT IN A MATERIAL WAY (SUCH AS,
WITHOUT LIMITATION, IMPOSITION OF A BANKING MORATORIUM BY FEDERAL OR STATE
BANKING AUTHORITIES OR IMPAIRMENT OF PRIMARY SYNDICATION OR SECONDARY TRADING
OF FACILITIES SIMILAR TO THAT CONTEMPLATED HEREUNDER). IN ADDITION, ALL TAX,
ACCOUNTING AND LEGAL MATTERS INCIDENT TO THE TRANSACTION INCLUDING, WITHOUT
LIMITATION, THE DEFINITIVE DOCUMENTATION MUST BE SATISFACTORY IN FORM AND
SUBSTANCE TO BANK OF MONTREAL AND ITS LEGAL COUNSEL.
6
<PAGE>
APPENDIX B
LOEWEN GROUP INTERNATIONAL, INC.
SUMMARY OF TERMS AND CONDITIONS
FACILITY: Option (as defined below) for a U.S. $250,000,000
credit facility (the "NEW FACILITY") for the
Borrower to be agented by Bank of Montreal.
Except as otherwise set forth herein, the terms
and conditions of the New Facility shall be
documented in a credit agreement (the "NEW CREDIT
AGREEMENT") with terms and conditions
substantially identical to the terms and
conditions of the existing U.S. $750,000,000
Credit Agreement dated as of May 15, 1996 for the
Borrower agented by Bank of Montreal (the "CREDIT
AGREEMENT").
OPTION TERMS: The Option shall be exercisable by the Borrower at
any time from and after acceptance by Bank of
Montreal and the Borrower of this Summary of Terms
and Conditions and the commitment letter (the
"COMMITMENT LETTER") to which this Summary is
attached through and including, at the Borrower's
election made at the time the Commitment Letter
is accepted by the Borrower, either (x) June 16,
1997 (the "SIXTY DAY OPTION"), or (y) July 16,
1997 (the "NINETY DAY OPTION"); whichever of the
Sixty Day Option and the Ninety Day Option is
elected by the Borrower at the time it accepts
the Commitment Letter, the "OPTION"). The Option
shall be exercisable only in full and not in
part. In order to exercise the Option, the
Borrower shall give written notice to Bank of
Montreal of such exercise (any such exercise, the
"EXERCISE"). If the Option shall not have been
exercised before 5:00 p.m. (Chicago time) on June
16, 1997 (if the Sixty Day Option is elected), or
July 16, 1997 (if the Ninety Day Option is
elected), the Option shall expire, provided that
all amounts previously paid by the Borrower in
respect thereof shall be non-refundable.
BORROWER: Loewen Group International, Inc. ("LGII").
GUARANTOR: The Loewen Group Inc., a corporation incorporated
under the laws of the Province of British
Columbia ("TLGI").
AGENT: Bank of Montreal.
LENDERS: A group of lenders selected by the Agent in
consultation with the Borrower, which lenders may
include some or all of the existing lenders under
the Credit Agreement (such lenders to selected,
together with the Agent in its capacity
<PAGE>
as a lender, the "LENDERS"). The lenders will not
be selected until after the Exercise of the
Option.
PURPOSE: General Corporate Purposes to include the
refinancing of certain indebtedness, friendly
acquisitions, and L/C issuances.
SECURITY: Pledge of shares of Canadian and US subsidiaries
shared ratably by all senior lenders under the
Collateral Trust Agreement dated as of May 15,
1996. The obligations of the Borrower in respect
of the New Facility shall be Class A Secured
Indebtedness under such Collateral Trust
Agreement.
FINAL MATURITY: May 29, 2001 (or May 29, 2002 if the Facility
Termination Date shall have been extended
pursuant to the terms of Section 2.18 of the
Credit Agreement prior to the date on which the
Borrower Exercises the Option).
EXTENSION OPTIONS: Two one-year extensions of the New Facility at
the Borrower's request and at the Lenders' option
on terms substantially similar to those set forth
in the Credit Agreement.
AGENCY FEE: US $100,000 per annum payable at each anniversary
date of the New Credit Agreement on the terms
(but not the dates) provided in the Credit
Agreement.
UPFRONT OPTION GRANTING FEE: 0.125% on $250,000,000, if the Sixty Day Option
is elected, or 0.25% on $250,000,000, if the
Ninety Day Option is elected, payable by the
Borrower upon acceptance by the Borrower and
Bank of Montreal of this Summary of Terms and
Conditions and the Commitment Letter as
consideration for Bank of Montreal to grant the
Option and keep the Option exercisable by
the Borrower until June 16, 1997 or July 16,
1997, as applicable.
OPTION EXERCISE FEE: 0.25% on $250,000,000 payable by the Borrower
immediately upon the Exercise of the Option.
COMMITMENT FEE: A per annum fee (per the applicable pricing grid
below), calculated on a 360-day basis payable on
the average daily unused portion of the
Aggregated Commitment under the New Credit
Agreement payable quarterly in arrears to the
Lenders ratably in proportion to their
commitments from the Closing Date for the New
Facility until termination of the New Credit
Agreement.
INTEREST RATES: The Borrower will have the option of either:
2
<PAGE>
- The ABR + Applicable Margin in the applicable pricing
grid
- LIBOR + Applicable Margin in the applicable
pricing grid
- Fixed CD + Applicable Margin in the applicable
pricing grid
- Letters of Credit at the Applicable Margin for
LIBOR plus a 12.5 bps fee to the fronting bank.
PRICING GRID:
Pricing in the period from January 1, 1997 through the Borrower's receipt of
Equity Proceeds (as hereinafter defined) is to be based on previous quarter
Debt/Adjusted EBITDA ratios as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Level A Level B Level C Level D
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consolidated greater than 5.00 and greater than 5.50 and greater than 5.75 and
Indebtedness/ less than = 5.00 less than = 5.50 less than = 5.75 less than = 6.00
Adjusted EBITDA
- -----------------------------------------------------------------------------------------------------------
Commitment Fee 25.0bps 25.0bps 25.0bps 25.0bps
- -----------------------------------------------------------------------------------------------------------
LIBOR Margin/ 87.5bps 100.0bps 125.0bps 125.0bps
L/C Fee
- -----------------------------------------------------------------------------------------------------------
CD Margin 100.0bps 112.5bps 137.5bps 137.5bps
- -----------------------------------------------------------------------------------------------------------
ABR Margin 0 0 25.0bps 37.5bps
- -----------------------------------------------------------------------------------------------------------
Quarterly Excess 0 $250,000 $250,000 $500,000
Leverage Fee
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Usage Fee: spreads will increase by 7.5bps when usage is over 65% of the New
Facility
For all periods thereafter, pricing is to be based on TLGI's public debt
ratings as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Credit Quality of A- or Better BBB/BBB+ BBB- BB+ BB or
TLGI Lower
- -----------------------------------------------------------------------------------------------------------------
Commitment Fee 17.5 bps 15.0 bps 17.5 bps 20.0 bps 37.5 bps
- -----------------------------------------------------------------------------------------------------------------
LIBOR Margin/ 25.0 bps 35.0 bps 45.0 bps 70.0 bps 100.0 bps
L/C Fee
- -----------------------------------------------------------------------------------------------------------------
CD Margin 37.5 bps 47.5 bps 57.5 bps 82.5 bps 112.5 bps
- -----------------------------------------------------------------------------------------------------------------
ABR Margin 0 0 0 0 12.5 bps
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Usage Fee: Spreads will increase by 7.5 bps when usage is over 65% of the New
Facility except under Level I and except under the ABR margin.
3
<PAGE>
<TABLE>
<S> <C>
GENERAL PROVISIONS
RELATING TO INTEREST RATES: The provisions of the Credit Agreement regarding interest
rates shall be applicable to the New Facility. LIBOR Rate
interest periods shall be one, two, three, or six months.
Fixed CD Rate interest periods shall be 30, 60, 90 or 180
days. Interest on ABR loans shall be payable quarterly in
arrears, upon any prepayments and final maturity. Interest
on LIBOR Rate loans or Fixed CD Rate loans shall be
payable in arrears on the last day of each interest period
and, in the case of an interest period longer than three
months, quarterly, upon any prepayment and at final
maturity. Interest on ABR loans shall be calculated for
actual days elapsed on the basis of a 365, or when
appropriate 366, day year. Interest on LIBOR Rate loans
and Fixed CD Rate loans and fees shall be calculated for
actual days elapsed on the basis of a 360-day year.
The Credit Agreement provisions relating to yield
protection, availability and capital adequacy shall also be
applicable to the New Facility. After default, the interest
rate will be equal to the applicable rate of interest plus 2%
per annum.
DRAWDOWNS: Drawdowns will be permitted on the terms set forth in the
Credit Agreement, which terms include that such
drawdowns shall be in minimum amounts of $10MM with
additional increments of $1MM for all loans. Drawdowns
are at the Borrower's option upon notice by 10:30 a.m.
(Chicago time):
(1) on the Borrowing date for ABR Loans;
(2) two business days prior for fixed CD Rate Loans; and
(3) three business days prior for LIBOR Rate Loans.
PREPAYMENTS: Prepayments will be permitted on the terms set forth in the
Credit Agreement, which terms include that ABR Loans
may be prepaid in a minimum amount of $10MM at any
time with the same day's notice by 11:00 a.m. (Chicago
time), and that LIBOR Rate and Fixed CD Rate Loans may
be prepaid in whole before the end of the applicable interest
period, subject to payment of applicable breakage costs by
the Borrower, upon notice by 11:00 a.m. (Chicago time) on
the same day, two business days prior for Fixed CD Rate
Loans, or three business days prior for LIBOR Rate Loans.
TERMINATION OR
REDUCTION OF COMMITMENTS: Unused Commitments in amounts of $10,000,000 may be
terminated at any time upon three business day's notice.
</TABLE>
4
<PAGE>
CONDITIONS PRECEDENT
TO NEW FACILITY: Usual and customary conditions precedent,
including, but not limited to, the
following:
a) not less than US$250,000 of equity
("EQUITY PROCEEDS") shall have been
raised in connection with the anticipated
equity issue by TLGI (such equity issue
to be on substantially the terms
previously described by the Borrower to
Bank of Montreal);
b) confirmation that the Borrower's
obligations in respect of the New
Facility can be registered as
Additional Secured Indebtedness under
the Collateral Trust Agreement and
qualify thereunder as Class A Secured
Indebtedness;
c) no Default or Unmatured Default shall
have occurred and be continuing under
the Credit Agreement;
d) all representations and warranties of
the Borrower and the Guarantor set
forth in the Credit Agreement and all
related documents shall be true and
correct; and
e) completion of documentation
satisfactory to the Agent and Lenders'
counsel.
CONDITIONS PRECEDENT
TO SUBSEQUENT LOANS: As set forth in the Credit Agreement,
including, but not limited to, the
following:
a) continued accuracy of representations
and warranties; and
b) absence of Default or Unmatured Default.
REPRESENTATIONS AND WARRANTIES: As set forth in the Credit Agreement.
REPORTING REQUIREMENTS: As set forth in the Credit Agreement.
COVENANTS: As set forth in the Credit Agreement.
FINANCIAL COVENANTS: As set forth in the Credit Agreement.
EVENTS OF DEFAULT: As set forth in the Credit Agreement.
ASSIGNMENT: Each Lender may, in its sole discretion,
sell participations and assignments on the
terms set forth in the Credit Agreement,
which terms include that any such
participations and assignments must be in
minimum amounts of $5MM, and with the
consent of the Borrower and the Agent to
prospective assignees (and the Borrower
shall release the assignor Lender for the
amount so assigned).
5
<PAGE>
REQUIRED LENDERS: Lenders holding at least 66 2/3% of the
commitments and/or outstanding loans under
the New Credit Agreement.
TAXES: All payments will be made free and clear
of any present or future domestic or
foreign taxes, withholdings or
deductions, whatsoever, in accordance with
the terms set forth in the Credit
Agreement.
GOVERNING LAW: State of New York.
LENDERS COUNSEL: Mayer, Brown and Platt.
MARKET CONDITION: This Summary of Terms and Conditions is
prepared as of April 14, 1997 and may not
prevail depending on market conditions and
a clear market in which to syndicate the
New Facility.
ANY UNDERWRITING OF THIS TRANSACTION IS SUBJECT TO THERE BEING NO MATERIAL
DISRUPTION OF THE FINANCIAL MARKETS IN BANK OF MONTREAL'S REASONABLE OPINION
WHICH IMPACTS PRICING OR AVAILABILITY OF CREDIT IN A MATERIAL WAY (SUCH AS,
WITHOUT LIMITATION, IMPOSITION OF A BANKING MORATORIUM BY FEDERAL OR STATE
BANKING AUTHORITIES OR IMPAIRMENT OF PRIMARY SYNDICATION OR SECONDARY TRADING
OF FACILITIES SIMILAR TO THAT CONTEMPLATED HEREUNDER). IN ADDITION, ALL TAX,
ACCOUNTING AND LEGAL MATTERS INCIDENT TO THE TRANSACTION INCLUDING, WITHOUT
LIMITATION, THE DEFINITIVE DOCUMENTATION MUST BE SATISFACTORY IN FORM AND
SUBSTANCE TO BANK OF MONTREAL AND ITS LEGAL COUNSEL.
6
<PAGE>
EXECUTION COPY
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT"), dated as of
April 30, 1997 is among LOEWEN GROUP INTERNATIONAL, INC., a Delaware
corporation, as the Borrower, THE LOEWEN GROUP INC., a corporation organized
under the laws of the Province of British Columbia, Canada, as a Guarantor,
THE LENDERS NAMED HEREIN, as the initial Lenders, GOLDMAN, SACHS & CO., as
the Documentation Agent, and BANK OF MONTREAL, as the L/C Issuer and the
Swing Line Lender and as the Agent for the Lenders.
The parties hereto are parties to a Credit Agreement dated as of May 15,
1996, ( as heretofore amended, the "CREDIT AGREEMENT"), and now wish to
further amend the Credit Agreement as set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined herein, terms defined in the Credit Agreement are
used herein as defined in the Credit Agreement.
ARTICLE II
AMENDMENTS TO CREDIT AGREEMENT
Section 2.1 CERTAIN DEFINITIONS. The definition of "Finance Subsidiary" in
Section 1.1 of the Credit Agreement is amended to read in full as follows:
"FINANCE SUBSIDIARY" means any captive finance Subsidiary of TLGI
that engages in no material activity other than (i) buying accounts receivable
or other financial assets of any Affiliate of TLGI, (ii) making loans or
otherwise extending credit to any such Affiliates, (iii) succeeding to any or
all of the business of LFW or Eagle or otherwise engaging in finance activities
similar to the finance activities engaged in by LFW or Eagle from time to time,
or (iv) making Investments in other Finance Subsidiaries."
Section 2.2 AMENDMENT TO SECTION 7.4. Section 7.4 of the Credit Agreement
is amended to add the following sentence at the end thereof:
<PAGE>
"Nothing in this SECTION 7.4 shall prohibit any merger, amalgamation, or
consolidation which is permitted by SECTION 7.12."
Section 2.3 AMENDMENT TO SECTION 7.16. The language of Section 7.16 of the
Credit Agreement, commencing with the PROVISO thereto, is amended to read in
full as follows:
"PROVIDED, HOWEVER, that notwithstanding any provision to the contrary
herein, none of TLGI, the Borrower or any Subsidiary of either shall make
any Investment in any Person effectively located outside of the United
States or Canada if after giving effect to such Investment, the aggregate
amount of Investments of TLGI, the Borrower or any Subsidiary of either in
any Persons effectively located outside of the United States or Canada,
excluding Investments in Finance Subsidiaries which are Wholly-Owned
Subsidiaries, would exceed an amount equal to 5% of Consolidated Net Worth.
For the purpose of any computation required to be made pursuant to this
Agreement, Investments shall be valued at lower of the cost or Fair Value
thereof as of the date of computation."
Section 2.4 AMENDMENT TO SECTION 7.22. Section 7.22 of the Credit
Agreement is amended to read in full as follows:
"7.22. INTEREST CHARGES COVERAGE. TLGI will at all times maintain
(a) a ratio of EBITDA for the most recently ended period of four
consecutive fiscal quarters of TLGI to Consolidated Interest Charges for
such period of four consecutive fiscal quarters of not less than 2.750 to
1.00 and (b) a ratio of EBITDA for the most recently ended fiscal quarter
to Consolidated Interest Charges for such fiscal quarter of not less than
1.50 to 1.00. For purposes of this Section 7.22, any costs and expenses
incurred by TLGI in contesting the 1996 tender offer for TLGI by Service
Corporation International, Inc., which are reflected in the audited
financial statements of TLGI as at December 31, 1996 which have been
delivered to the Agent and the Lenders, up to an aggregate amount not to
exceed $18,678,000 for all such costs and expenses, shall be excluded from
the calculation of Consolidated Net Income in determining EBITDA for the
respective periods in which such costs were incurred."
Section 2.5 AMENDMENT TO SECTION 7.28. Section 7.28(e) of the Credit
Agreement is amended to read in full as follows:
"(e) such Subsidiary has no material assets other than (i) Indebtedness
owed to it by TLGI or the Borrower or an Affiliate of TLGI, (ii)
Investments in other Finance Subsidiaries which are Wholly-Owned
Subsidiaries and (iii) the accounts receivable and other financial assets
described in the foregoing CLAUSE (D), and"
Section 2.6 AMENDMENT TO SECTION 7.29. The second sentence of
Section 7.29 of the Credit Agreement is amended to read in full as follows:
-2-
<PAGE>
"Except as set out in clauses (d) and (e) or as otherwise consented to by
the Agent in its sole discretion, TLGI and the Borrower will, and will
cause each Subsidiary (other than a Canadian Subsidiary), the shares or
other equity interests of which are Pledged Shares under the Collateral
Trust Agreement, to take any and all actions necessary to ensure that there
are no restrictions on a transfer of such Pledged Shares pursuant to the
due exercise of the Trustee's powers under the Collateral Trust Agreement,
except with respect to any and all restrictions under applicable law."
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 REPRESENTATIONS AND WARRANTIES. The Borrower hereby certifies
that the following statements, after giving effect to the amendments and waivers
contemplated herein, are true and correct as of the date hereof: (a) each of the
representations and warranties contained in the Credit Agreement is true and
correct in all material respects; and (b) no Unmatured Default or Default has
occurred and is continuing,
ARTICLE IV
EFFECTIVENESS
Section 4.1 EFFECTIVENESS. The amendments set forth in ARTICLE II above
shall become effective on the date (the "AMENDMENT EFFECTIVE DATE") that the
Agent notifies the Borrower, TLGI and the Lenders that the Agent has received,
in form and substance satisfactory to the Agent, counterparts of this Amendment
executed by the Borrower, TLGI, the Required Lenders and the Agent.
ARTICLE V
GENERAL PROVISIONS
Section 5.1 CONTINUING EFFECTIVENESS, ETC. As herein amended, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. After the Amendment Effective Date, all references
in the Credit Agreement or any other Loan Document to the "Credit Agreement"
shall refer to the Credit Agreement as amended hereby. This Amendment shall for
all purposes be deemed to be a Loan Document under the Credit Agreement.
Section 5.2 COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed
in any number of counterparts, all of which taken together shall constitute one
agreement, and any of
-3-
<PAGE>
the parties hereto may execute this Agreement by signing any such
counterpart. This Amendment shall become effective on the Amendment
Effective Date.
Section 5.3 EXPENSES. Without limiting its obligations under Section 10.7
of the Credit Agreement, the Borrower agrees to pay the reasonable costs and
expenses of the Agent (including, without limitation, reasonable fees and
disbursements of counsel to the Agent) in connection with the preparation,
execution and delivery of this Amendment.
Section 5.4 SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon
the parties to the Credit Agreement and their respective successors and assigns.
Section 5.5 HEADINGS. Section headings in this Amendment are for
convenience of reference only and shall not govern the interpretation of any of
the provisions of this Amendment.
Section 5.6 SEVERABILITY OF PROVISIONS. Any provision in this Amendment
that is held to be inoperative, unenforceable or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability or validity of that provision in any other jurisdiction, and to
this end the provisions of this Amendment are declared to be severable.
Section 5.7 CHOICE OF LAW. THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
-4-
<PAGE>
IN WITNESS WHEREOF, the Borrower, TLGI, the Lenders, the L/C Issuer and the
Agent have executed this Agreement as of the date first above written.
LOEWEN GROUP INTERNATIONAL, INC.
By:________________________________
Print Name: Dwight K. Hawes
Title: Vice President, Finance
THE LOEWEN GROUP INC.
By:________________________________
Print Name: Dwight K. Hawes
Title: Vice President, Finance
BANK OF MONTREAL, as Agent, L/C Issuer,
Lender and Swing Line Lender
By:________________________________
Print Name: Mary V. Roney
Title: Director
S-1
<PAGE>
LENDERS
ALLIED IRISH BANKS, p.l.c.
CAYMAN ISLANDS BRANCH
By:________________________________
Print Name:________________________
Title:_____________________________
By:________________________________
Print Name:________________________
Title:_____________________________
BANK BRUSSELS LAMBERT,
NEW YORK BRANCH
By:________________________________
Print Name:________________________
Title:_____________________________
By:________________________________
Print Name:________________________
Title:_____________________________
BANK OF IRELAND - GRAND CAYMAN
BRANCH
By:________________________________
Print Name:________________________
Title:_____________________________
S-2
<PAGE>
THE BANK OF NEW YORK
By:________________________________
Print Name:________________________
Title:_____________________________
THE BANK OF TOKYO - MITSUBISHI, LTD.
By:________________________________
Print Name:________________________
Title:_____________________________
BANK POLSKA KASA OPIEKI, S.A.,
NEW YORK BRANCH
By:________________________________
Print Name:________________________
Title:_____________________________
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By:________________________________
Print Name:________________________
Title:_____________________________
BAYERISCHE VEREINSBANK AG
By:________________________________
Print Name:________________________
Title:_____________________________
S-3
<PAGE>
CAISSE NATIONALE DE CREDIT AGRICOLE
By:________________________________
Print Name:________________________
Title:_____________________________
THE CHUO TRUST & BANKING CO., LTD,
NEW YORK AGENCY
By:________________________________
Print Name:________________________
Title:_____________________________
CITIBANK N.A.
By:________________________________
Print Name:________________________
Title:_____________________________
CIBC INC.
By:________________________________
Print Name:________________________
Title:_____________________________
S-4
<PAGE>
COMERICA BANK
By:________________________________
Print Name:________________________
Title:_____________________________
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A. "RABOBANK NEDERLAND",
NEW YORK BRANCH
By:________________________________
Print Name:________________________
Title:_____________________________
CORESTATES BANK, N.A.
By:________________________________
Print Name:________________________
Title:_____________________________
THE DAI-ICHI KANGYO BANK, LTD.
By:________________________________
Print Name:________________________
Title:_____________________________
DEUTSCHE BANK AG, NEW YORK BRANCH
By:________________________________
Print Name:________________________
Title:_____________________________
S-5
<PAGE>
By:________________________________
Print Name:________________________
Title:_____________________________
THE FUJI BANK, LIMITED
By:________________________________
Print Name:________________________
Title:_____________________________
GIROCREDIT BANK A.G. DER SPARKASSEN
By:________________________________
Print Name:________________________
Title:_____________________________
HIBERNIA NATIONAL BANK
By:________________________________
Print Name:________________________
Title:_____________________________
KREDIETBANK N.V.
GRAND CAYMAN BRANCH
By:________________________________
Print Name:________________________
Title:_____________________________
MELLON BANK, N.A.
S-6
<PAGE>
By:________________________________
Print Name:________________________
Title:_____________________________
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By:________________________________
Print Name:________________________
Title:_____________________________
THE MITSUBISHI TRUST AND BANKING
CORPORATION, CHICAGO BRANCH
By:________________________________
Print Name:________________________
Title:_____________________________
PT BANK NEGARA INDONESIA (PERSERO)
By:________________________________
Print Name:________________________
Title:_____________________________
ROYAL BANK OF CANADA
By:________________________________
Print Name:________________________
Title:_____________________________
THE SAKURA BANK, LIMITED
S-7
<PAGE>
NEW YORK BRANCH
By:________________________________
Print Name:________________________
Title:_____________________________
THE SANWA BANK, LIMITED,
ATLANTA AGENCY
By:________________________________
Print Name:________________________
Title:_____________________________
THE SUMITOMO BANK, LIMITED
By:________________________________
Print Name:________________________
Title:_____________________________
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By:________________________________
Print Name:________________________
Title:_____________________________
U.S. BANK OF WASHINGTON, N.A.
By:________________________________
Print Name:________________________
Title:_____________________________
S-8
<PAGE>
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By:________________________________
Print Name:________________________
Title:_____________________________
WACHOVIA BANK OF GEORGIA, N.A.
By:________________________________
Print Name:________________________
Title:_____________________________
WELLS FARGO BANK, N.A.
By:________________________________
Print Name:________________________
Title:_____________________________
THE YASUDA TRUST AND BANKING
COMPANY LIMITED
NEW YORK BRANCH
By:________________________________
Print Name:________________________
Title:_____________________________
S-9
<PAGE>
THE LOEWEN GROUP INC. Exhibit 11
COMPUTATION OF PER SHARE EARNINGS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS PER SHARE AMOUNTS
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
BASIC
Net earnings $ 21,271 $ 17,223
Undeclared cumulative preferred share dividends - 1,974
-------- --------
Net earnings available to Common shareholders $ 21,271 $ 15,249
Weighted average share; outstanding 59,102 50,203
Basic earnings per share $ 0.36 $ 0.30
FULLY DILUTED
Net earnings available to Common Shareholders $ 21,271 $ 15,249
Add: imputed earnings from dilutive options, net of tax effect 1,576 207
-------- --------
Fully diluted net earnings $ 22,847 $ 15,456
-------- --------
-------- --------
Weighted average shares outstanding 59,102 50,203
Shares issuable upon assumed conversion of dilutive options 4,887 1,044
-------- --------
Fully diluted shares 63,989 51,247
-------- --------
-------- --------
Fully diluted earnings per share $ 0.36 $ 0.30
-------- --------
-------- --------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 20,198
<SECURITIES> 0
<RECEIVABLES> 247,699
<ALLOWANCES> 36,867
<INVENTORY> 32,877
<CURRENT-ASSETS> 275,074
<PP&E> 815,799
<DEPRECIATION> 116,231
<TOTAL-ASSETS> 3,719,268
<CURRENT-LIABILITIES> 193,556
<BONDS> 1,608,610
75,000
157,146
<COMMON> 798,329
<OTHER-SE> 115,239
<TOTAL-LIABILITY-AND-EQUITY> 3,719,268
<SALES> 274,697
<TOTAL-REVENUES> 274,697
<CGS> 173,383
<TOTAL-COSTS> 173,383
<OTHER-EXPENSES> 40,305
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,698
<INCOME-PRETAX> 28,539
<INCOME-TAX> 7,996
<INCOME-CONTINUING> 23,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,700
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
</TABLE>
