LOEWEN GROUP INC, S-3/A, 1997-05-05

LOEWEN GROUP INC
S-3/A, 1997-05-05
PERSONAL SERVICES

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 5, 1997

REGISTRATION NOS. 333-23747 AND 333-23747-01

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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

--------------------------

THE LOEWEN GROUP INC. LOEWEN GROUP INTERNATIONAL, INC.
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)

BRITISH COLUMBIA DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)

98-0121376 61-1264590
(I.R.S. Employer Identification Number)
4126 NORLAND AVENUE 50 EAST RIVERCENTER BOULEVARD
BURNABY, BRITISH COLUMBIA SUITE 800
CANADA V5G 3S8 COVINGTON, KENTUCKY 41011
(604) 299-9321 (606) 431-6663
(Address, including postal or zip code, and telephone number,
including area code, of registrants' principal executive offices)

--------------------------

TIMOTHY R. HOGENKAMP CT CORPORATION SYSTEM
LOEWEN GROUP INTERNATIONAL, INC. 1209 ORANGE STREET
50 EAST RIVERCENTER, SUITE 800 WILMINGTON, DELAWARE 16601
COVINGTON, KENTUCKY 41011 (302) 658-7581
(606) 431-6663
(Name, address, including zip code, and telephone number, including
area code, of Agent for Service)

--------------------------

with copies to:

DWIGHT K. HAWES MICHELLE L. JOHNSON
VICE-PRESIDENT, FINANCE CARISSA C. W. COZE
THE LOEWEN GROUP INC. THELEN, MARRIN, JOHNSON & BRIDGES
4126 NORLAND AVENUE LLP
BURNABY, BRITISH COLUMBIA TWO EMBARCADERO CENTER, SUITE 2100
CANADA V5G 3S8 SAN FRANCISCO, CALIFORNIA 94111-3995

Approximate date of commencement of proposed sale to the public:

FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered solely in connection with dividend or
interest reinvestment plans, check the following box. /X/

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________

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<PAGE>
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
AMOUNT TO MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2)(3) PRICE(2)(3) FEE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common shares without par value of The
Loewen Group Inc. (4)(5)..............
Preferred shares without par value of
The Loewen Group Inc. (6).............
Debt securities of The Loewen Group Inc.
(7)...................................
Warrants to purchase Common shares,
preferred shares or debt securities
(8)...................................
Guarantees of debt securities of Loewen
Group International, Inc. (9)......... $500,000,000 $151,515.15(10)
- ------------------------------------------------------------------------------------------------------------
Debt securities of Loewen Group
International, Inc. (7)............... $500,000,000 $500,000,000 $151,515.15(10)
- ------------------------------------------------------------------------------------------------------------
Total................................. $1,000,000,000 100% $1,000,000,000 $303,030.30(10)
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</TABLE>

(1) Such indeterminate number or amount of Common shares, preferred shares,
debt securities, warrants and guarantees (collectively, "Securities") as may
from time to time be issued at indeterminate prices. The amount registered
is in United States dollars or the equivalent thereof in any other currency,
currency unit or units or composite currency or currencies.

(2) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended. The
aggregate offering price of the Securities registered hereby will not exceed
$1,000,000,000.

(3) Exclusive of accrued interest and distributions, if any.

(4) Each Common share includes one Right to be issued under The Loewen Group
Inc.'s Shareholder Protection Rights Plan Agreement.

(5) Also includes such indeterminate number of Common shares as may be issued
upon conversion of and/or exchange for any debt securities or preferred
shares of The Loewen Group Inc. No separate consideration will be received
for the Common shares issuable upon conversion of and/or in exchange for
debt securities or preferred shares.

(6) Also includes such indeterminate number of preferred shares as may be
issued upon conversion of or exchange for any debt securities of The Loewen
Group Inc. No separate consideration will be received for the preferred
shares issuable upon conversion of or in exchange for debt securities.

(7) If any debt securities of The Loewen Group Inc. or Loewen Group
International, Inc. are issued at an original issue discount, the principal
amount thereof will be increased so that the aggregate proceeds, together
with proceeds from the sale of other Securities, will not exceed
$1,000,000,000.

(8) Warrants may be offered and sold separately or together with other
Securities.

(9) In connection with the sale of debt securities of Loewen Group
International, Inc., The Loewen Group Inc. will fully and unconditionally
guarantee the payment obligations of such debt securities through the issue
of guarantees and back-up undertakings, and may issue additional guarantees
and back-up undertakings to pay and be responsible for, and provide certain
indemnities in respect of, certain expenses, costs, liabilities and debts of
Loewen Group International, Inc., as set forth in an indenture and any
applicable supplemental indentures thereto, as further described in the
Registration Statement. No separate consideration will be received for the
guarantees or back-up undertakings.

(10) The Registration Fee was paid on March 20, 1997.

------------------------

THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
EXPLANATORY NOTE

This Registration Statement includes (1) two separate Prospectuses, (a) a
Prospectus relating to Common shares without par value ("Common Shares"),
preferred shares without par value, debt securities and warrants to purchase
Common Shares, preferred shares or debt securities of The Loewen Group Inc. and
(b) a Prospectus relating to debt securities of Loewen Group International, Inc.
and guarantees of such debt securities by The Loewen Group Inc.; and (2) a
Prospectus Supplement relating to an offering of Common Shares to be made
following the effectiveness of this Registration Statement.

<PAGE>

SUBJECT TO COMPLETION, DATED MAY 5, 1997

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
$500,000,000

THE LOEWEN GROUP INC.
COMMON SHARES, PREFERRED SHARES,
DEBT SECURITIES AND WARRANTS

[LOGO]
---------------------

The Loewen Group Inc., a corporation organized under the laws of British
Columbia, Canada ("Loewen" and, together with its subsidiaries and associated
entities, the "Company"), may offer and sell from time to time, in one or more
series, (a) Common shares without par value ("Common Shares"), (b) preferred
shares without par value ("Preferred Shares"), which may be convertible into
Common Shares, (c) debt securities consisting of notes, debentures and/or other
evidences of indebtedness representing secured or unsecured obligations of
Loewen ("Debt Securities"), which may be convertible into or exchangeable for
Common Shares or Preferred Shares, and (d) warrants to purchase Common Shares,
Preferred Shares or Debt Securities ("Warrants"). Common Shares, Preferred
Shares, Debt Securities and Warrants are herein collectively referred to as
"Securities."

The specific terms of the particular Securities in respect of which this
Prospectus is being delivered will be set forth in an accompanying supplement to
this Prospectus ("Prospectus Supplement"), which will describe, without
limitation and where applicable, the following: (a) in the case of Common
Shares, the number of shares offered, the initial offering price and market
price and dividend information; (b) in the case of Preferred Shares, the
specific designation, number of shares offered, the initial offering price,
liquidation preference, stated value per share, dividend rate (which may be
fixed or variable), place or places where dividends on such Preferred Shares
will be payable, terms of conversion, sinking fund provisions, redemption
provisions, voting rights, preemption rights, restrictions on transferability,
listing or application for listing on a securities exchange or interdealer
quotation system, and any other rights, preferences, privileges, limitations or
restrictions relating to the Preferred Shares; (c) in the case of Debt
Securities, the specific designation and denomination, the aggregate principal
amount being offered, whether such Debt Securities are secured, maturity,
interest rate (which may be fixed or variable), place or places where interest
on such Debt Securities will be payable, terms of conversion, sinking fund
provisions, redemption provisions, voting rights, restrictions on
transferability, listing or application for listing on a securities exchange or
interdealer quotation system, any right of Loewen to defer payment of interest
on the Debt Securities and the maximum length of such deferral period, and any
other rights, privileges, limitations or restrictions relating to the Debt
Securities and (d) in the case of Warrants, the title, series or designation,
the type and aggregate amount of Securities that may be acquired on exercise of
the Warrants, initial offering price of the Warrants, whether the Warrants are
offered attached to or separate from other Securities, period during which the
Warrants are exercisable, exercise terms and price, listing or application for
listing on a securities exchange or interdealer quotation system, and any other
rights, privileges, limitations or restrictions relating to the Warrants.

The aggregate offering price to the public of the Securities will be limited
to $500,000,000 (or its equivalent, based on the applicable exchange rate at the
time of issue, if Securities are offered for consideration denominated in one or
more foreign currencies as shall be designated by Loewen). Debt Securities may
be denominated in United States dollars or, at the option of Loewen, if so
specified in the applicable Prospectus Supplement, in one or more foreign
currencies. Debt Securities may be issued in registered form or bearer form, or
both. If so specified in the applicable Prospectus Supplement, Debt Securities
of a series may be issued, in whole or in part, in the form of one or more
temporary or permanent global securities.

The Securities may be sold to or through underwriters, through dealers or
agents or directly to purchasers. See "Plan of Distribution." The names of any
underwriters, dealers or agents involved in the sale of the Securities in
respect of which this Prospectus is being delivered and any applicable fee,
commission or discount arrangements with them will be set forth in a Prospectus
Supplement. See "Plan of Distribution" for possible indemnification arrangements
for dealers, underwriters and agents.
<PAGE>

This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.

--------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
AVAILABLE INFORMATION

Loewen and Loewen Group International, Inc., a Delaware corporation and a
wholly owned subsidiary of Loewen ("LGII"), have filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form S-3
(together with any amendments, exhibits, annexes and schedules thereto, the
"Registration Statement") pursuant to the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations thereunder, with respect
to the Securities. This Prospectus does not include all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements made in
the Prospectus as to the contents of any contract, agreement or other document
referred to in the Registration Statement are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.

Loewen is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by Loewen
may be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at Seven World
Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can be obtained by mail from the Public Reference section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, reports, proxy statements and other
information that Loewen files with the Commission electronically are contained
in the Internet Web site maintained by the Commission. The Commission's Web site
address is http://www.sec.gov. The Common Shares are traded on the New York
Stock Exchange, The Toronto Stock Exchange and The Montreal Exchange. Reports,
proxy statements and other information filed by Loewen may be inspected at the
offices of the New York Stock Exchange at 20 Broad Street, New York, New York
10005, at the offices of The Toronto Stock Exchange at The Exchange Tower, 2
First Canadian Place, Toronto, Ontario, Canada M5X IJ2 and at the offices of The
Montreal Exchange at 800 Victoria Square, Montreal, Quebec, Canada H4Z 1A9.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents heretofore filed by Loewen with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act (File No. 1-12163) are
hereby incorporated herein by reference: (a) Loewen's (i) Annual Report on Form
10-K for the year ended December 31, 1996, filed March 31, 1997 and (ii) Current
Reports on Form 8-K dated January 7, 1997, January 8, 1997, March 5, 1997, March
24, 1997 and May 2, 1997; and (b) the description of the Common Shares contained
in Loewen's Current Report on Form 8-K dated May 2, 1997. All documents filed by
Loewen pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Prospectus and prior to the termination of the offering of the
Securities shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the date of filing of such documents.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.

LOEWEN WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS
DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL
OF THE FOREGOING DOCUMENTS INCORPORATED BY REFERENCE HEREIN (OTHER THAN EXHIBITS
TO ANY SUCH DOCUMENT UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE INTO SUCH DOCUMENT). REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO
THE CORPORATE SECRETARY OF LOEWEN, 4126 NORLAND AVENUE, BURNABY, BRITISH
COLUMBIA, CANADA V5G 3S8; TELEPHONE NUMBER (604) 299-9321.

2
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

The Prospectus, as amended and supplemented, and certain documents
incorporated by reference herein contain or may contain both statements of
historical fact and "forward-looking statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. Examples of
forward-looking statements include: (i) projections of revenue, earnings,
capital structure and other financial items, (ii) statements of the plans and
objectives of the Company or its management, (iii) statements of future economic
performance and (iv) assumptions underlying statements regarding the Company or
its business. Important factors, risks and uncertainties that could cause actual
results to differ materially from any forward-looking statements ("Cautionary
Statements") are disclosed in the Prospectus, as amended and supplemented, and
in certain documents incorporated by reference herein. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by the Cautionary
Statements.

FINANCIAL INFORMATION

All dollar amounts in financial statements incorporated by reference into
this Prospectus are in United States dollars ("U.S.$" or "$") unless otherwise
indicated. References to "Cdn.$" are to Canadian dollars.

The consolidated financial statements of the Company included in Loewen's
reports filed pursuant to the Exchange Act are prepared in accordance with
accounting principles generally accepted in Canada ("Canadian GAAP").
Differences between Canadian GAAP and accounting principles generally accepted
in the United States ("U.S. GAAP"), as applicable to the Company, are explained
in Note 21 to the consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 (the "1996
Consolidated Financial Statements").

The consolidated financial statements of the Company for the year ended
December 31, 1993, and for prior years, were published in Canadian dollars.
Effective January 1, 1994, the Company adopted the United States dollar as its
reporting currency and, accordingly, has published its consolidated financial
statements for the year ended December 31, 1994 and subsequent periods in United
States dollars. Financial information relating to periods prior to January 1,
1994 has been translated from Canadian dollars into United States dollars as
required by Canadian GAAP at the December 31, 1993 rate of
U.S.$1.00=Cdn.$1.3217.

3
<PAGE>
THE COMPANY

The Company operates the second-largest number of funeral homes and
cemeteries in North America and the largest number of funeral homes in Canada.
The Company also engages in the pre-need selling of funeral, cemetery and
cremation merchandise and services. As at December 31, 1996, the Company
operated 956 funeral homes and 313 cemeteries throughout North America. This
included 837 funeral homes and 307 cemeteries in the United States (including
locations in Puerto Rico).

Loewen is a holding company that, as at April 30, 1997, had approximately
900 direct and indirect subsidiaries, including LGII. LGII, which is a wholly
owned subsidiary of Loewen, is a holding company for all of the Company's United
States operations (excluding the Company's operations in Puerto Rico). Loewen is
a holding company for all of the Company's operations outside of the United
States (including Puerto Rico). All of Loewen's subsidiaries are operating
subsidiaries except for fourteen subsidiaries that principally are financing
vehicles. In addition, LGII is the general partner of Loewen Group Capital, L.P.
("LGC"). The Monthly Income Preferred Securities ("MIPS") issued by LGC are
publicly held and are traded on the New York Stock Exchange.

Loewen was incorporated in 1985 under the laws of British Columbia, Canada.
Loewen's principal executive offices are located at 4126 Norland Avenue,
Burnaby, British Columbia, Canada, V5G 3S8; telephone (604) 299-9321.

USE OF PROCEEDS

Unless otherwise indicated in the applicable Prospectus Supplement, the net
proceeds received by the Company from the sale of any Securities offered hereby
will be used for working capital and general corporate purposes, including
acquisitions. Any specific allocation of the proceeds to a particular purpose
that has been made at the date of any Prospectus Supplement will be described
therein.

4
<PAGE>

SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION

Set forth below is certain selected consolidated financial and operating
information of the Company for each year in the five year period ended December
31, 1996. The selected consolidated financial information is derived from the
Company's audited consolidated financial statements for such periods. The
Company's consolidated financial statements are prepared in accordance with
Canadian GAAP. The information set forth below should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the 1996 Consolidated Financial Statements and Notes thereto.

The financial results for the year ended December 31, 1996 include $18.7
million of finance and other costs related to the hostile takeover proposed by
Service Corporation International ("SCI"), which proposal was withdrawn in
January 1997. The financial results for the year ended December 31, 1995 include
an aggregate of $195.7 million for legal settlements and litigation related
finance costs and certain general and administrative costs related to the legal
settlements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for additional information regarding SCI's hostile
takeover proposal and the legal settlements, and costs related thereto.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1996 1995(1) 1994 1993 1992
------------ ------------ ------------ ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Revenue........................................ $ 908,385 $ 598,493 $ 417,328 $ 303,011 $ 218,907
Gross margin................................... 337,571 225,362 158,854 115,118 83,708
Earnings from operations....................... 204,105 117,607 95,113 65,697 50,563
Net earnings (loss)............................ 63,906 (76,684) 38,494 28,182 19,766
Basic earnings (loss) per share................ 0.97 (1.69) 0.97 0.77 0.59
Fully diluted earnings (loss) per share(2)..... 0.97 (1.69) 0.97 0.76 0.58
Ratio of earnings to fixed charges(3).......... 1.9x -- 2.5x 2.9x 2.6x
Ratio of earnings to fixed charges and
preferred share dividends(4)................. 1.7x -- -- -- --
Aggregate dividends declared per Common
Share........................................ 0.200 0.050 0.070 0.045 0.030

AS AT DECEMBER 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ---------- ----------
(IN THOUSANDS, EXCEPT OPERATING INFORMATION)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Total assets................................... $ 3,496,939 $ 2,262,980 $ 1,326,275 $ 913,661 $ 675,111
Total long-term debt(5)........................ 1,508,221 934,509 516,654 341,977 246,715
Preferred securities of subsidiary............. 75,000 75,000 75,000 -- --
Shareholders' equity........................... 1,048,200 614,682 411,139 325,890 236,317

OPERATING INFORMATION:
Number of funeral home locations(6)............ 956 815 641 533 451
Number of funeral services..................... 142,265 114,319 93,760 78,847 63,516
Number of cemeteries(6)........................ 313 179 116 70 38
</TABLE>

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(1) Certain of the comparative figures have been reclassified to conform to the
presentation adopted in 1996.

(2) Fully diluted earnings (loss) per share figures are calculated in accordance
with Canadian GAAP and assume, if dilutive (a) exercise of employee and
other stock options effective on their dates of issue and that the funds
derived therefrom were invested at annual after-tax rates of return ranging
from 5.8% to 7.3%, (b) exercise of options and purchase rights under the
1994 Management Equity Investment Plan ("MEIP") effective on their dates of
issue and the add-back of the interest under the related MEIP loan and (c)
conversion of the Series C Preferred Shares effective on the date of the
issue of the Series C Receipts and the add-back of the dividends during the
period. See Note 9 to the 1996 Consolidated Financial Statements.

5
<PAGE>

(3) The 1995 loss is not sufficient to cover fixed charges by a total of
approximately $126.6 million and as such the ratio of earnings to fixed
charges has not been computed.

(4) The Company did not pay any preferred share dividends from 1992-1995.

(5) Total long-term debt comprises long-term debt, including current portion.

(6) The numbers of locations for 1994 and 1993 include adjustments and
consolidations related to prior periods.

Had the Company's consolidated financial statements been prepared in
accordance with U.S. GAAP (see Note 21 to the 1996 Consolidated Financial
Statements), selected consolidated financial information would have been as
follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995(1) 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Revenue.................................... $ 909,137 $ 598,493 $ 417,479 $ 308,402 $ 239,452
Earnings from operations................... 198,869 117,376 94,758 66,711 54,838
Earnings (loss) before cumulative effect of
change in accounting principles.......... 64,559 (75,800) 39,652 28,912 21,330
Fully diluted earnings (loss) per share
before cumulative effect of change in
accounting principles.................... 0.96 (1.67) 0.98 0.77 0.62
Ratio of earnings to fixed charges(2)...... 1.8x -- 2.4x 2.9x 2.6x
Ratio of earnings to fixed charges and
preferred share dividends(3)............. 1.7x -- -- -- --
Aggregate dividends declared per Common
Share.................................... 0.200 0.050 0.070 0.047 0.033

- ------------------------

(1) Certain of the comparative figures have been reclassified to conform to the
presentation adopted in 1996.

(2) The 1995 loss is not sufficient to cover fixed charges by a total of
approximately $128.3 million and as such the ratio of earnings to fixed
charges has not been computed.

(3) The Company did not pay any preferred share dividends from 1992-1995.

(4) Total long-term debt comprises long-term debt, including current portion.

6
<PAGE>
DESCRIPTION OF DEBT SECURITIES

Debt Securities offered hereby, which may consist of notes, debentures and
other evidences of indebtedness, may be issued in one or more series. Each
series of debt securities will be issued under an indenture by and between
Loewen and the trustee identified therein (the "Trustee"). A form of the
indenture to be entered into with respect to each series of Debt Securities
(each, an "Indenture") has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.

The statements herein relating to the Debt Securities and the Indentures are
summaries and do not purport to be complete. Such summaries are subject to the
detailed provisions of the applicable Indenture, to which reference is hereby
made for a full description of such provisions, including the definitions
therein of certain terms capitalized in this Prospectus. Whenever defined terms
of the Indentures are referred to herein or in a Prospectus Supplement, such
defined terms are incorporated herein or therein by reference as part of the
statement made and such statement shall be qualified in its entirety by such
reference.

GENERAL

A series of Debt Securities may be offered contemporaneously with an
offering of Warrants to purchase an additional portion of such or another series
of Debt Securities. Warrants to purchase a series of Debt Securities may also be
offered independently of any offering of Debt Securities. See "Description of
Warrants."

Reference is made to the Prospectus Supplement which accompanies this
Prospectus for a description of the specific series of Debt Securities being
offered thereby or, if Warrants are being offered thereby, the Debt Securities
to be issued upon exercise of such Warrants, including as applicable: (1) the
specific designation of such Debt Securities; (2) any limit upon the aggregate
principal amount of such Debt Securities; (3) the date or dates on which the
principal of such Debt Securities will mature or the method of determining such
date or dates; (4) the interest rate or rates (which may be fixed or variable)
or the method of calculating such rate or rates; (5) the date or dates from
which interest will accrue or the method by which such date or dates will be
determined; (6) the date or dates on which interest will be payable and the
record date or dates therefor; (7) whether such Debt Securities are secured or
unsecured, (8) the place or places where principal of, premium, if any, and
interest, if any, on such Debt Securities will be payable; (9) the period or
periods within which, the price or prices at which, the currency or currencies
(including currency units) in which, and the terms and conditions upon which,
such Debt Securities may be redeemed, in whole or in part, at the option of
Loewen; (10) any obligation of Loewen to redeem or purchase such Debt Securities
pursuant to any sinking fund or analogous provisions, upon the happening of
specified events, or at the option of a holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions upon
which, such Debt Securities shall be redeemed or purchased, in whole or in part,
pursuant to such obligations; (11) the denominations in which such Debt
Securities are authorized to be issued; (12) the currency or currency units for
which Debt Securities may be purchased or in which Debt Securities may be
denominated and/or the currency or currency units in which principal of,
premium, if any, and/or interest, if any, on such Debt Securities will be
payable or redeemable and whether Loewen or the holders of any such Debt
Securities may elect to receive payments in respect of such Debt Securities in a
currency or currency units other than that in which such Debt Securities are
stated to be payable or redeemable; (13) if other than the principal amount
thereof, the portion of the principal amount of such Debt Securities which will
be payable upon declaration of the acceleration of the maturity thereof or the
method by which such portion shall be determined; (14) the person to whom any
interest on any such Debt Security shall be payable if other than the person in
whose name such Debt Security is registered on the applicable record date; (15)
any addition to, or modification or deletion of, any Event of Default or any
covenant of Loewen specified in the Indenture with respect to such Debt
Securities; (16) the application of any means of defeasance or covenant
defeasance that may be specified for such Debt Securities; (17) the terms and
conditions relating to Warrants issued by Loewen in connection with or for the
purchase of such Debt Securities; (18) any provisions relating to the exchange
or conversion of such Debt Securities; and (19) any other material terms
pertaining to such Debt Securities.

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Unless otherwise specified in the applicable Prospectus Supplement, the Debt
Securities will not be listed on any securities exchange or interdealer
quotation system.

Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities will be issued in fully registered form without coupons. If Debt
Securities of any series are issued in bearer form, any special restrictions and
considerations, including any offering restrictions and United States federal
income tax considerations, applicable to such Debt Securities and to payment on
and transfer and exchange of such Debt Securities will be described in the
applicable Prospectus Supplement.

Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time of
issuance is below market rates. Certain United States federal income tax
consequences and special considerations applicable to any such Debt Securities
will be described in the applicable Prospectus Supplement.

If the purchase price of any Debt Securities is payable in one or more
foreign currencies or currency units of if any Debt Securities are denominated
in one or more foreign currencies or currency units or if the principal of,
premium, if any, or interest, if any, on any Debt Securities is payable in one
or more foreign currencies or currency units, the restrictions, elections,
certain United States federal income tax considerations, specific terms and
other information with respect to such series of Debt Securities and such
foreign currency or currency units will be set forth in the applicable
Prospectus Supplement.

DENOMINATIONS, PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE

Debt Securities generally will be issued in registered form and in
denominations of $1,000 and integral multiples of $1,000. Unless otherwise
provided in the applicable Prospectus Supplement, payments in respect of Debt
Securities will be made, subject to any applicable laws and regulations, in the
designated currency at the office or agency of Loewen maintained for that
purpose as Loewen may designate from time to time, except that, at the option of
Loewen, interest payments, if any, on Debt Securities in registered form may be
made (i) by checks mailed by the Trustee to the holders of Debt Securities
entitled thereto at their registered addresses or (ii) by wire transfer to an
account maintained by the person entitled thereto, as specified in the Register.
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
any installment of interest on Debt Securities in registered form will be made
to the person in whose name such Debt Security is registered at the close of
business on the regular record date for such interest.

Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities in registered form will be transferable or exchangeable at the office
or agency of Loewen maintained for such purpose as Loewen may designate from
time to time. Debt Securities may be transferred or exchanged without service
charge, other than any tax or other governmental charge imposed in connection
therewith.

REDEMPTION

A series of Debt Securities may be subject to redemption at the option of
Loewen, in whole or in part, or may not be redeemable prior to maturity. In
addition, Loewen may be obligated upon the occurrence of specified events or at
the option of a holder of Debt Securities, to redeem or repurchase all or part
of a series of Debt Securities. Any such provisions will be set forth in the
applicable Prospectus Supplement.

CONVERSION AND EXCHANGE

The terms on which a series of Debt Securities may be convertible into or
exchangeable for Preferred Shares or Common Shares, if at all, will be set forth
in the applicable Prospectus Supplement. Such terms shall include as applicable
(i) the type and amount of Preferred Shares or Common Shares into or for which
the Debt Securities are convertible or exchangeable, and (ii) the period or
periods during which, or the circumstances under which, Debt Securities may be
converted or exchanged. The applicable Prospectus Supplement may also include
market price and dividend information with respect to the Preferred Shares or
Common Shares that may be acquired on conversion or exchange of the Debt
Securities and other

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information with respect to such Securities, including in the case of Preferred
Shares, the designation and denomination, any dividend, conversion, sinking
fund, redemption, voting, liquidation and preemption rights, any restrictions on
transferability by the holders or on repurchase or redemption by Loewen, and any
other special terms pertaining to such Preferred Shares.

RANKING

Each series of Debt Securities will rank equally and PARI PASSU as to the
right of payment of principal and interest, if any, with each other series of
Debt Securities and with all other Senior Debt (defined herein) of Loewen.
Loewen and LGII are parties to a collateral trust arrangement, described below
(the "Collateral Agreement"), pursuant to which, so long as the Indebtedness
(defined herein) subject to the Collateral Agreement is secured, the Debt
Securities will be secured as described herein. However, unless the applicable
Prospectus Supplement provides otherwise, the holders of Debt Securities of a
series will not have an independent right to require the Lien secured by the
Collateral (defined herein) to remain in place or to require any other security
for the Debt Securities of such series. As at December 31, 1996, the aggregate
amount of outstanding Pari Passu Indebtedness (defined herein) was approximately
$1.3 billion. See "--Collateral Trust Arrangement."

Debt Securities will be effectively subordinated in right of payment to all
existing and future liabilities, including trade payables, of the subsidiaries
of Loewen.

"Indebtedness" means, with respect to any person, without duplication (a)
all liabilities of such person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business and which are
not overdue by more than 90 days, but excluding, without limitation, all
obligations, contingent or otherwise, of such person in connection with any
undrawn letters of credit, banker's acceptance or other similar credit
transaction, (b) all obligations of such person evidenced by bonds, notes,
debentures or other similar instruments, (c) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such person (even if the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (d) all Capitalized Lease
Obligations of such person, (e) all Indebtedness referred to in the preceding
clauses of other persons and all dividends of other persons, the payment of
which is secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such person, even though such person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligation being deemed to be
the lesser of the value of such property or asset or the amount of the
obligation so secured), (f) all guarantees of Indebtedness referred to in this
definition by such person, (g) all Redeemable Capital Stock of such person
valued at the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued dividends, (h) all obligations under or in respect of
Currency Agreements and Interest Rate Protection Obligations of such person, (i)
any Preferred Stock of any Restricted Subsidiary of such person valued at the
sum of (without duplication) (A) the liquidation preference thereof, (B) any
mandatory redemption payment obligations in respect thereof and (C) accrued
dividends thereon, and (j) any amendment, supplement, modification, deferral,
renewal, extension or refunding of any liability of the types referred to in
clauses (a) through (i) above. For purposes hereof, the "maximum fixed
repurchase price" of any Redeemable Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on
any date on which Indebtedness shall be required to be determined pursuant to
the provisions hereof, and if such price is based upon, or measured by, the fair
market value of such Redeemable Capital Stock, such fair market value shall be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock. For purposes of this definition, the term
"Indebtedness" shall not include (i) Indebtedness of a Wholly-Owned Subsidiary
owed to and held by Loewen, LGII or another Wholly-Owned Subsidiary, in each
case which is not subordinate in right of payment to any Indebtedness of such
Subsidiary, except that (a) any transfer of such Indebtedness by

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Loewen, LGII or a Wholly-Owned Subsidiary (other than to Loewen, LGII or to a
Wholly-Owned Subsidiary) and (b) the sale, transfer or other disposition by
Loewen, LGII or any Restricted Subsidiary of Loewen or LGII of Capital Stock of
a Wholly-Owned Subsidiary which is owed Indebtedness of another Wholly-Owned
Subsidiary such that it ceases to be a Wholly-Owned Subsidiary of Loewen or LGII
shall, in each case, be an incurrence of Indebtedness by such Restricted
Subsidiary subject to the other provisions hereof; and (ii) Indebtedness of
Loewen or LGII owed to and held by a Wholly-Owned Subsidiary of Loewen or LGII
which is unsecured and subordinate in right of payment to the payment and
performance of Loewen's or LGII's obligations under the provisions of the
applicable Indenture and the Debt Securities except that (a) any transfer of
such Indebtedness by a Wholly-Owned Subsidiary of Loewen or LGII (other than to
another Wholly-Owned Subsidiary of Loewen or LGII) and (b) the sale, transfer or
other disposition by Loewen or LGII or any Restricted Subsidiary of Loewen or
LGII of Capital Stock of a Wholly-Owned Subsidiary which holds Indebtedness of
Loewen or LGII such that it ceases to be a Wholly-Owned Subsidiary shall, in
each case, be an incurrence of Indebtedness by Loewen or LGII, as the case may
be, subject to the other provisions hereof.

"Pari Passu Indebtedness" means Indebtedness of Loewen or LGII which ranks
PARI PASSU in right of payment with the Debt Securities.

"Senior Debt" means Indebtedness which is not (i) Indebtedness of Loewen to
any Subsidiary, or (ii) Indebtedness of Loewen which by its terms is subordinate
or junior in any respect to any other Indebtedness or other obligation of
Loewen.

COLLATERAL TRUST ARRANGEMENT

On May 31, 1996, Loewen, LGII and their senior lenders (the "Senior
Lenders") entered into the Collateral Agreement, pursuant to which the Senior
Lenders share, on a PARI PASSU basis, a pledge by Loewen and LGII of (i) the
shares of capital stock held by Loewen of substantially all of the subsidiaries
in which Loewen directly or indirectly holds more than a 50% voting or economic
interest, and (ii) all of the financial assets of LGII (including shares of
capital stock held by LGII of various subsidiaries) (collectively, the
"Collateral"). The Collateral is held by a trustee for the equal and ratable
benefit of the various holders of such Indebtedness.

MERGER, SALE OF ASSETS, ETC.

Each Indenture will provide that Loewen shall not, in any transaction or
series of transactions, merge or consolidate with or into, or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to, any person or persons, and Loewen shall
not permit any of its Restricted Subsidiaries (defined herein) to enter into any
such transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in a sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially all of the
properties and assets of Loewen or of Loewen and its Restricted Subsidiaries
taken as a whole, to any other person or persons, unless at the time of and
after giving effect thereto (a) either (i) if the transaction or series of
transactions is a merger or consolidation, Loewen or LGII or the Restricted
Subsidiary, as the case may be, shall be the surviving person of such merger or
consolidation, or (ii) the person formed by such consolidation or into which
Loewen or such Restricted Subsidiary, as the case may be, is merged or to which
the properties and assets of Loewen or such Restricted Subsidiary, as the case
may be, are transferred (any such surviving person or transferee being the
"Surviving Entity") shall be a corporation organized and existing under the laws
of the United States, any state thereof, the District of Columbia, Canada or any
province thereof and shall expressly assume by a supplemental indenture executed
and delivered to the Trustee, in form reasonably satisfactory to the Trustee,
all of the obligations of Loewen under the Debt Securities and, in each case the
Indenture shall remain in full force and effect; (b) immediately before and
immediately after giving effect to such transaction or series of transaction on
a pro forma basis (including without limitation any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such transaction
or series of transactions), no Default (defined herein) or Event of Default
(defined herein) shall have occurred and be continuing and Loewen, the
Restricted Subsidiary or the Surviving Entity, as the case may

10
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be, after giving effect to such transaction or series of transaction on a pro
forma basis (including without limitation any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such transaction
or series of transaction), could incur $1.00 of additional Indebtedness pursuant
to the covenants regarding limitations on Indebtedness contained in the
Indentures; and (c) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including without limitation any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), the Consolidated Net
Worth (defined herein) of Loewen or the Surviving Entity, as the case maybe, is
at least equal to the Consolidated Net Worth of Loewen immediately before such
transaction or series of transactions.

In connection with any consolidation, merger, transfer, lease, assignment or
other disposition contemplated hereby, Loewen shall deliver or cause to be
delivered to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an officers' certificate and an opinion of counsel, each stating that
such consolidation, merger, transfer, lease, assignment or other disposition and
the supplemental indenture in respect thereof comply with the requirements under
the Indentures.

Upon any consolidation or merger or any transfer of all or substantially all
of the assets of Loewen in accordance with the foregoing, in which Loewen is not
the continuing corporation, the successor corporation formed by such
consolidation or into which Loewen is merged or to which such transfer is made
shall succeed to, and be substituted for, and may exercise every right and power
of, Loewen under the Indentures with the same effect as if such successor
corporation had been named therein.

"Consolidated Net Worth" means, with respect to any person at any date, the
consolidated stockholders' equity of such person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock of such person and
its Restricted Subsidiaries, as determined in accordance with Canadian GAAP. As
used above, "Redeemable Capital Stock" means any shares of any class or series
of Capital Stock that, either by the terms thereof, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise, is or
upon the happening of an event or passage of time would be, required to be
redeemed prior to the Stated Maturity with respect to the principal of any
Security or is redeemable at the option of the holder thereof at any time prior
to any such Stated Maturity, or is convertible into or exchangeable for debt
securities at any time prior to any such Stated Maturity.

"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default. See "--Events of Default."

"Restricted Subsidiary" means any Subsidiary of Loewen other than (i) First
Capital Life Insurance Company of Louisiana, National Capital Life Insurance
Company, Security Industrial Insurance Company, Security Industrial Fire
Insurance Company or any successors to such Subsidiaries or (ii) a Subsidiary of
Loewen declared by the Board of Directors of Loewen to be an Unrestricted
Subsidiary; PROVIDED, that no such Subsidiary shall be declared to be an
Unrestricted Subsidiary unless (x) none of its properties or assets were owned
by Loewen or any of its Subsidiaries prior to the Issue Date, other than any
such assets as are transferred to such Unrestricted Subsidiary in accordance
with the covenant described under "--Limitation on Restricted Payments," (y) its
properties and assets, to the extent that they secure Indebtedness, secure only
Non-Recourse Indebtedness and (z) it has no Indebtedness other than Non-Recourse
Indebtedness. As used above, "Non-Recourse Indebtedness" means Indebtedness as
to which (i) neither Loewen nor any of its Subsidiaries (other than the relevant
Unrestricted Subsidiary or another Unrestricted Subsidiary) (1) provides credit
support (including any undertaking, agreement or instrument which would
constitute Indebtedness), (2) guarantees or is otherwise directly or indirectly
liable or (3) constitutes the lender (in each case, other than pursuant to and
in compliance with the covenant described under "--Limitation on Restricted
Payments") and (ii) no default with respect to such Indebtedness (including any
rights which the holders thereof may have to take enforcement action against the
relevant Unrestricted Subsidiary or its assets) would permit (upon notice, lapse
of time or both) any holder of any other Indebtedness of Loewen or its
Subsidiaries (other than Unrestricted Subsidiaries) to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity.

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CERTAIN COVENANTS

Loewen makes the following covenants, among others, in the Indentures:

LIMITATION ON INDEBTEDNESS. Loewen will not, and will not permit any of its
Restricted Subsidiaries (including, without limitation, LGII) to, directly or
indirectly, create, incur, issue, assume, guarantee or in any manner become
directly or indirectly liable, contingently or otherwise, for the payment of
(collectively, to "incur") any Indebtedness (including, without limitation, any
Acquired Indebtedness, defined herein), other than Permitted Indebtedness
(defined herein). Notwithstanding the foregoing limitations, Loewen and LGII
(and any Wholly-Owned Subsidiary with respect to Seller Financing Indebtedness,
defined herein) will be permitted to incur Indebtedness (including, without
limitation, Acquired Indebtedness) if at the time of such incurrence, and after
giving PRO FORMA effect thereto, the Consolidated Fixed Charge Coverage Ratio
(defined herein) of Loewen is at least equal to 2.25 : 1.

"Acquired Indebtedness" means Indebtedness of a person (a) assumed or
created in connection with an Asset Acquisition from such person or (b) existing
at the time such person becomes a Restricted Subsidiary of any other person.

"Consolidated Fixed Charge Coverage Ratio" means with respect to any person,
the ratio of the aggregate amount of Consolidated Cash Flow Available for Fixed
Charges of such person for the full fiscal quarter immediately preceding the
date of the transaction (the "Transaction Date") giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio (such full fiscal quarter
period being referred to herein as the "Prior Quarter") to the aggregate amount
of Consolidated Fixed Charges of such person for the Prior Quarter. In addition
to and without limitation of the foregoing, for purposes of this definition,
"Consolidated Cash Flow Available for Fixed Charges" and "Consolidated Fixed
Charges" shall be calculated after giving effect on a PRO FORMA basis for the
period of such calculation to, without duplication, (a) the incurrence of any
Indebtedness of such person or any of its Restricted Subsidiaries (and the
application of the net proceeds thereof) during the period commencing on the
first day of the Prior Quarter to and including the Transaction Date (the
"Reference Period"), including, without limitation, the incurrence of the
Indebtedness giving rise to the need to make such calculation (and the
application of the net proceeds thereof), as if such incurrence (and
application) occurred on the first day of the Reference Period, and (b) any
Material Asset Sales or Material Asset Acquisitions (including, without
limitation, any Material Asset Acquisition giving rise to the need to make such
calculation as a result of such person or one of its Restricted Subsidiaries
(including any person who becomes a Restricted Subsidiary as a result of the
Material Asset Acquisition) incurring, assuming or otherwise being liable for
Acquired Indebtedness) occurring during the Reference Period, as if such
Material Asset Sale or Material Asset Acquisition occurred on the first day of
the Reference Period. Furthermore, in calculating "Consolidated Fixed Charges"
for purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (i) interest on outstanding
Indebtedness determined on a fluctuating basis as at the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate PER ANNUM equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (ii) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Reference Period. If such person or any of its Restricted Subsidiaries directly
or indirectly guarantees Indebtedness of a third person, the above clause shall
give effect to the incurrence of such guaranteed Indebtedness as if such person
or such Restricted Subsidiary had directly incurred or otherwise assumed such
guaranteed Indebtedness. For purposes of this calculation, a "Material Asset
Acquisition" is an Asset Acquisition which is deemed by such person to be
material for such purposes or which has a purchase price of $30,000,000 or more
and a "Material Asset Sale" is one or more Asset Sales which relate to assets
with an aggregate value of more than $30,000,000. For purposes of this
definition, "Consolidated Cash Flow Available for Fixed Charges" means, with
respect to any person for any period, (A) the sum of, without duplication, the
amounts for such period, taken as a single accounting period, of (a)
Consolidated Net Income, (b) Consolidated Non-cash Charges, (c) Consolidated

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Interest Expense and (d) Consolidated Income Tax Expense LESS (B) any non-cash
items increasing Consolidated Net Income for such period.

"Permitted Indebtedness" means, without duplication, each of the following:
(a) the Debt Securities; (b) Indebtedness of Loewen and its Restricted
Subsidiaries (including, without limitation, LGII) outstanding on the Issue Date
(other than Indebtedness under the Credit Agreements); (c) Indebtedness of
Loewen or LGII, as the case may be, under the Credit Agreements in an aggregate
principal amount at any one time outstanding not to exceed $750,000,000 less the
Net Proceeds of any Asset Sale that are applied to repay, and permanently reduce
the commitments under, the Credit Agreements (as required by the terms thereof);
(d) (i) Interest Rate Protection Obligations of Loewen covering Indebtedness of
Loewen and its Restricted Subsidiaries (including, without limitation, LGII);
(ii) Interest Rate Protection Obligations of any Restricted Subsidiary of Loewen
covering Indebtedness of such Restricted Subsidiary; PROVIDED, HOWEVER, that, in
the case of either clause (i) or (ii), (x) any Indebtedness to which any such
Interest Rate Protection Obligations relate bears interest at fluctuating
interest rates and is otherwise permitted to be incurred under this covenant and
(y) the notional principal amount of any such Interest Rate Protection
Obligations does not exceed the principal amount of the Indebtedness to which
such Interest Rate Protection Obligations relate; (e) Indebtedness under
Currency Agreements; PROVIDED, HOWEVER, that in the case of Currency Agreements
which relate to Indebtedness, such Currency Agreements do not increase the
Indebtedness of Loewen and its Restricted Subsidiaries (including, without
limitation, LGII) outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder; (f) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; PROVIDED, HOWEVER, that
such Indebtedness is extinguished within two business days of incurrence; (g)
Indebtedness incurred in respect of performance bonds or letters of credit in
lieu thereof provided in the ordinary course of business; (h) Indebtedness of
Loewen and its Restricted Subsidiaries (including, without limitation, LGII)
represented by letters of credit for the account of Loewen and its Restricted
Subsidiaries in order to provide security for workers' compensation claims,
payment obligations in connection with self-insurance or similar requirements in
the ordinary course of business; (i) Indebtedness of Loewen and its Restricted
Subsidiaries (including, without limitation, LGII) in addition to that described
in clauses (a) through (h) above, in an aggregate principal amount outstanding
at any time not exceeding $5,000,000; and (j) (i) Indebtedness of Loewen the
proceeds of which are used solely to refinance (whether by amendment, renewal,
extension or refunding) Indebtedness of Loewen and its Restricted Subsidiaries
(including, without limitation, LGII) and (ii) Indebtedness of any Restricted
Subsidiary of Loewen the proceeds of which are used solely to refinance (whether
by amendment, renewal, extension or refunding) Indebtedness of such Restricted
Subsidiary, in each case other than the Indebtedness refinanced, redeemed or
retired on the Issue Date or Indebtedness incurred under clause (c), (d), (e),
(f), (g), (h), or (i) of this covenant; PROVIDED, HOWEVER, that (x) the
principal amount of Indebtedness incurred pursuant to this clause (j) (or, if
such Indebtedness provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration of the maturity
thereof, the original issue price of such Indebtedness) shall not exceed the sum
of the principal amount of Indebtedness so refinanced, plus the amount of any
premium required to be paid in connection with such refinancing pursuant to the
terms of such Indebtedness or the amount of any premium reasonably determined by
the Board of Directors of Loewen as necessary to accomplish such refinancing by
means of a tender offer or privately negotiated purchase, plus the amount of
expenses in connection therewith, (y) in the case of Indebtedness incurred by
Loewen pursuant to this clause (j) to refinance Pari Passu Indebtedness, such
Indebtedness constitutes Pari Passu Indebtedness.

"Seller Financing Indebtedness" means a purchase money Indebtedness issued
to the seller of a business or other assets for, and not in excess of, the
purchase price thereof.

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LIMITATION ON RESTRICTED PAYMENTS. Loewen will not, and will not permit any
of its Restricted Subsidiaries (including, without limitation, LGII) to,
directly or indirectly:

(a) declare or pay any dividend or make any other distribution or payment on
or in respect of Capital Stock of Loewen or any of its Restricted Subsidiaries
or any payment made to the direct or indirect holders (in their capacities as
such) of Capital Stock of Loewen or any of its Restricted Subsidiaries (other
than (x) dividends or distributions payable solely in Capital Stock of Loewen
(other than Redeemable Capital Stock) or in options, warrants or other rights to
purchase Capital Stock of Loewen (other than Redeemable Capital Stock) and (y)
dividends or other distributions to the extent declared or paid to Loewen or any
Wholly-Owned Subsidiary of Loewen),

(b) purchase, redeem, defease or otherwise acquire or retire for value any
Capital Stock of Loewen or any of its Restricted Subsidiaries (other than any
such Capital Stock of a Wholly-Owned Subsidiary of Loewen),

(c) make any principal payment on, or purchase, defease, repurchase, redeem
or otherwise acquire or retire for value, prior to any scheduled maturity,
scheduled repayment, scheduled sinking fund payment or other Stated Maturity,
any Indebtedness that is subordinate or junior in right of payment to the Debt
Securities or Pari Passu Indebtedness (other than any such subordinated or Pari
Passu Indebtedness owned by Loewen or a Wholly-Owned Subsidiary of Loewen), or

(d) make any Investment (other than any Permitted Investment, defined
herein) in any person (such payments or Investments described in the preceding
clauses (a), (b), (c) and (d) are collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to the proposed
Restricted Payment (the amount of any such Restricted Payment, if other than
cash, shall be the Fair Market Value on the date of such Restricted Payment of
the asset(s) proposed to be transferred by Loewen or such Restricted Subsidiary,
as the case may be, pursuant to such Restricted Payment), (A) no Default or
Event of Default shall have occurred and be continuing, (B) immediately prior to
and after giving effect to such Restricted Payment, Loewen would be able to
incur $1.00 of additional Indebtedness pursuant to the covenant described under
"--Limitation on Indebtedness" (assuming a market rate of interest with respect
to such additional Indebtedness) and (C) the aggregate amount of all Restricted
Payments declared or made from and after the Measurement Date would not exceed
the sum of (1) 50% of the aggregate Consolidated Net Income (defined herein) of
Loewen accrued on a cumulative basis during the period beginning on the first
day of the fiscal quarter of Loewen during which the Measurement Date occurs and
ending on the last day of the fiscal quarter of Loewen immediately preceding the
date of such proposed Restricted Payment, which period shall be treated as a
single accounting period (or, if such aggregate cumulative Consolidated Net
Income of Loewen for such period shall be a deficit, minus 100% of such deficit)
PLUS (2) the aggregate net cash proceeds received by Loewen or LGII (without
duplication) either (x) as capital contributions to Loewen or LGII (without
duplication) after the Measurement Date from any person (other than Loewen, LGII
or a Restricted Subsidiary of Loewen or LGII, as the case may be) or (y) from
the issuance or sale of Capital Stock (excluding Redeemable Capital Stock, but
including Capital Stock issued upon the conversion of convertible Indebtedness
or from the exercise of options, warrants or rights to purchase Capital Stock
(other than Redeemable Capital Stock)) of Loewen or LGII (without duplication)
to any person (other than to Loewen, LGII or a Restricted Subsidiary of Loewen
or LGII, as the case may be) after the Measurement Date PLUS (3) in the case of
the disposition or repayment of any Investment constituting a Restricted Payment
made after the Measurement Date (excluding any Investment described in clause
(v) of the following paragraph), an amount equal to the lesser of the return of
capital with respect to such Investment and the cost of such Investment less, in
either case, the cost of the disposition of such Investment PLUS (4) the sum of
$15,000,000. For purposes of the preceding clause (C)(2), the value of the
aggregate net proceeds received by Loewen or LGII (without duplication) upon the
issuance of Capital Stock upon the conversion of convertible Indebtedness or
upon the exercise of options, warrants or rights will be the net cash proceeds
received upon the issuance of such Indebtedness, options, warrants or rights
plus the incremental cash amount received by Loewen or LGII (without
duplication) upon the conversion or exercise thereof.

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None of the foregoing provisions will prohibit (i) the payment of any
dividend within 60 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph; (ii) so
long as no Default or Event of Default shall have occurred and be continuing,
the redemption, repurchase or other acquisition or retirement of any shares of
any class of Capital Stock of Loewen, LGII or any Restricted Subsidiary of
Loewen or LGII in exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to Loewen or LGII from any
person (other than a Related Obligor, as defined below) or (y) issue and sale of
other shares of Capital Stock (other than Redeemable Capital Stock) of Loewen or
LGII to any person (other than to a Related Obligor); (iii) so long as no
Default or Event of Default shall have occurred and be continuing, any
redemption, repurchase or other acquisition or retirement of Indebtedness that
is subordinate or junior in right of payment to the Debt Securities and the
Guarantees, if applicable, by exchange for, or out of the net cash proceeds of,
a substantially concurrent (x) capital contribution to Loewen or LGII from any
person (other than a Related Obligor) or (y) issue and sale of (1) Capital Stock
(other than Redeemable Capital Stock) of Loewen or LGII to any person (other
than a Related Obligor); PROVIDED, HOWEVER, that the amount of any such net
proceeds that are utilized for any such redemption, repurchase or other
acquisition or retirement shall be excluded from clause (C)(2) of the preceding
paragraph; or (2) Indebtedness of Loewen or LGII issued to any person (other
than a Related Obligor), so long as such Indebtedness is Pari Passu Indebtedness
or Indebtedness that is subordinate or junior in right of payment to the Debt
Securities and the Guarantees, if applicable, in the same manner and at least to
the same extent as the Indebtedness so purchased, exchanged, redeemed, acquired
or retired; (iv) so long as no Default or Event of Default shall have occurred
and be continuing, any redemption, repurchase or other acquisition or retirement
of Pari Passu Indebtedness by exchange for, or out of the net cash proceeds of,
a substantially concurrent (x) capital contribution to Loewen or LGII from any
person (other than a Related Obligor) or (y) issue and sale of (1) Capital Stock
(other than Redeemable Capital Stock) of Loewen or LGII to any person (other
than a Related Obligor); PROVIDED, HOWEVER, that the amount of any such net
proceeds that are utilized for any such redemption, repurchase or other
acquisition or retirement shall be excluded from clause (C)(2) of the preceding
paragraph; or (2) Indebtedness of Loewen or LGII issued to any person (other
than a Related Obligor), so long as such Indebtedness is Pari Passu Indebtedness
or Indebtedness that is subordinate or junior in right of payment to the Debt
Securities and the Guarantees in the same manner and at least to the same extent
as the Indebtedness so purchased, exchanged, redeemed, acquired or retired; (v)
Investments constituting Restricted Payments made as a result of the receipt of
consideration that consists of cash or Cash Equivalents from any Asset Sale made
pursuant to and in compliance with the covenant described under "--Disposition
of Proceeds of Asset Sales"; (vi) so long as no Default or Event of Default has
occurred and is continuing, repurchases by Loewen of Common Stock of Loewen from
employees of Loewen or their authorized representatives upon the death,
disability or termination of employment of such employees, in an aggregate
amount not exceeding $10,000,000 in any calendar year; (vii) Investments
constituting Restricted Payments that are permitted by subparagraphs (iv) and
(v) of the proviso to the covenant described under "--Limitation on Transactions
with Interested Persons"; and (viii) the declaration or the payment of dividends
on, or the scheduled purchase or redemption of, the Preferred Securities of a
Special Finance Subsidiary or the Series C Preferred Shares, of Loewen. In
computing the amount of Restricted Payments previously made for purposes of
clause (C) of the preceding paragraph, Restricted Payments made under the
preceding clauses (v), (vi) and (vii) shall be included and those under clauses
(i), (ii), (iii), (iv) and (viii) shall not be so included.

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an after-tax basis, (v) gains or losses in respect of any Asset Sales by such
person or one of its Restricted Subsidiaries, and (vi) the net income of any
Restricted Subsidiary of such person to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is not at the time permitted, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary or its
stockholders.

"Permitted Investments" means any of the following: (i) Investments in any
Wholly-Owned Subsidiary of Loewen (including (a) LGII and (b) any person that
pursuant to such Investment becomes a Wholly-Owned Subsidiary of Loewen) and any
person that is merged or consolidated with or into, or transfers or conveys all
or substantially all of its assets to, Loewen or any Wholly-Owned Subsidiary of
Loewen at the time such Investment is made; (ii) Investments in Cash
Equivalents; (iii) Investments in Currency Agreements on commercially reasonable
terms entered into by Loewen or any of its Restricted Subsidiaries in the
ordinary course of business in connection with the operations of the business of
Loewen or its Restricted Subsidiaries to hedge against fluctuations in foreign
exchange rates; (iv) loans or advances to officers, employees or consultants of
Loewen and its Restricted Subsidiaries for travel and moving expenses in the
ordinary course of business for bona fide business purposes of Loewen and its
Restricted Subsidiaries; (v) other loans or advances to officers, employees or
consultants of Loewen and its Restricted Subsidiaries in the ordinary course of
business for bona fide business purposes of Loewen and its Restricted
Subsidiaries not in excess of $10,000,000 in the aggregate at any one time
outstanding; (vi) Investments in evidences of Indebtedness, securities or other
property received from another person by Loewen or any of its Restricted
Subsidiaries in connection with any bankruptcy proceeding or by reason of a
composition or readjustment of debt or a reorganization of such person or as a
result of foreclosure, perfection or enforcement of any Lien in exchange for
evidences of Indebtedness, securities or other property of such person held by
Loewen or any of its Restricted Subsidiaries, or for other liabilities or
obligations of such other person to Loewen or any of its Restricted Subsidiaries
that were created, in accordance with the terms of the Indenture; (vii)
Investments in Interest Rate Protection Agreements on commercially reasonable
terms entered into by Loewen or any of its Restricted Subsidiaries in the
ordinary course of business in connection with the operations of Loewen and its
Restricted Subsidiaries to hedge against fluctuations in interest rates; and
(viii) Investments of funds received by Loewen or its Restricted Subsidiaries
(including, without limitation, LGII) in the ordinary course of business, which
funds are required to be held in trust for the benefit of others by Loewen or
such Restricted Subsidiary, as the case may be, and which funds do not
constitute assets or liabilities of Loewen or such Restricted Subsidiary; (ix)
Investments not in excess of $50,000,000 in the aggregate in other Unrestricted
Subsidiaries which are engaged in the insurance business; and (x) Investments
not in excess of $50,000,000 in persons (other than Wholly-Owned Subsidiaries)
engaged in businesses incidental to the funeral home, cemetery and cremation
businesses of Loewen and its Restricted Subsidiaries.

"Related Obligor" means Loewen or a Restricted Subsidiary of Loewen.

LIMITATION ON ISSUANCES AND SALE OF PREFERRED STOCK BY RESTRICTED
SUBSIDIARIES. Loewen (a) will not permit any of its Restricted Subsidiaries
(including, without limitation, LGII) to issue any Preferred Stock (other than
(i) Preferred Stock issued to Loewen or a Wholly-Owned Subsidiary of Loewen and
(ii) Preferred Securities of a Special Finance Subsidiary, defined herein); and
(b) will not permit any person to own any Preferred Stock of any Restricted
Subsidiary of Loewen (other than (i) Preferred Stock owned by Loewen or a
Wholly-Owned Subsidiary of Loewen and (ii) Preferred Securities of a Special
Finance Subsidiary); PROVIDED, HOWEVER, that this covenant shall not prohibit
the issuance and sale of (x) all, but not less than all, of the issued and
outstanding Capital Stock of any Restricted Subsidiary of Loewen owned by Loewen
or any of its Restricted Subsidiaries in compliance with the other provisions of
the Indenture or (y) directors' qualifying shares or investments by foreign
nationals mandated by applicable law.

"Special Finance Subsidiary" means a Restricted Subsidiary whose sole assets
are debt obligations of LGII or Loewen and whose sole liabilities are Preferred
Securities, the proceeds from the sale of which are or have been advanced to
LGII or Loewen.

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LIMITATION ON LIENS. Loewen will not, and will not permit any of its
Restricted Subsidiaries (including, without limitation, LGII) to, create, incur,
assume or suffer to exist any Liens of any kind against or upon any of its
property or assets, or any proceeds therefrom where the aggregate amount of
Indebtedness secured by any such Liens, together with the aggregate amount of
property subject to any Sale-Leaseback Transactions of Loewen and its Restricted
Subsidiaries (other than Permitted Sale-Leaseback Transactions, defined herein),
exceeds 10% of Loewen's Consolidated Net Worth, unless (x) in the case of Liens
securing Indebtedness that is subordinate or junior in right of payment to the
Debt Securities, the Debt Securities are secured by a Lien on such property,
assets or proceeds that is senior in priority to such Liens and (y) in all other
cases, the Debt Securities are equally and ratably secured except for (a) Liens
existing as at the Measurement Date; (b) Liens securing the Debt Securities or
the Guarantees, if applicable; (c) Liens in favor of Loewen, LGII or any
Wholly-Owned Subsidiary; (d) Liens securing Indebtedness which is incurred to
refinance Indebtedness which has been secured by a Lien permitted under the
provisions of the Indenture and which has been incurred in accordance with the
provisions of the Indenture; PROVIDED, HOWEVER, that such Liens do not extend to
or cover any property or assets of Loewen or any of its Restricted Subsidiaries
not securing the Indebtedness so refinanced; and (e) Permitted Liens.

"Permitted Liens" means the following types of Liens: (a) Liens for taxes,
assessments or governmental charges or claims either (i) not delinquent or (ii)
contested in good faith by appropriate proceedings and as to which Loewen or any
of its Restricted Subsidiaries (including, without limitation, LGII) shall have
set aside on its books such reserves as may be required pursuant to Canadian
GAAP; (b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or being
contested in good faith, if such reserve or other appropriate provision, if any,
as shall be required by Canadian GAAP shall have been made in respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, governmental contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (d) judgment Liens not giving rise to an
Event of Default so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired; (e) easements,
rights-of-way, zoning restrictions and other similar charges or encumbrances in
respect of real property not interfering in any material respect with the
ordinary conduct of the business of Loewen or any of its Restricted Subsidiaries
(including, without limitation, LGII); (f) any interest or title of a lessor
under any Capitalized Lease Obligation or operating lease; (g) any Lien existing
on any asset of any corporation at the time such corporation becomes a
Restricted Subsidiary and not created in contemplation of such event; (h) any
Lien on any asset securing Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring or constructing such asset;
PROVIDED, that such Lien attaches to such asset concurrently with or within 18
months after the acquisition or completion thereof; (i) any Lien on any asset of
any corporation existing at the time such corporation is merged or consolidated
with or into Loewen or a Restricted Subsidiary and not created in contemplation
of such event; (j) any Lien existing on any asset prior to the acquisition
thereof by Loewen or a Restricted Subsidiary and not created in contemplation of
such acquisition; (k) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods; and (l) any extension, renewal or replacement of any Lien
permitted by the preceding clauses (g), (h), (i) or (j) hereof in respect of the
same property or assets theretofore subject to such Lien in connection with the
extension, renewal or refunding of the Indebtedness secured thereby; PROVIDED
that (i) such Lien shall attach solely to the same property or assets and (ii)
such extension, renewal or refunding of such Indebtedness shall be without
increase in the principal remaining unpaid as at the date of such extension,
renewal or refunding.

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as the case may be, and (b) after giving PRO FORMA effect to any such
Sale-Leaseback Transaction and the foregoing clause (a), Loewen would be able to
incur $1.00 of additional Indebtedness pursuant to the covenant described under
"--Limitation on Indebtedness" (assuming a market rate of interest with respect
to such additional Indebtedness). For purposes of the foregoing, "Attributable
Value" means, as to any lease other than a Capitalized Lease Obligation and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such person under a lease during the
initial term thereof as determined in accordance with Canadian GAAP, discounted
from the last date of such initial term to the date of determination at a rate
per annum equal to the discount rate which would be applicable to a Capitalized
Lease Obligation with a like term in accordance with Canadian GAAP. The net
amount of rent required to be paid under any such lease for any such period
shall be the aggregate amount of rent payable by the lessee with respect to such
period after excluding amounts required to be paid on account of insurance,
taxes, assessments, utility, operating and labor costs and similar charges. In
the case of any lease which is terminable by the lessee upon the payment of a
penalty, such net amount shall also include the amount of such penalty, but no
rent shall be considered as required to be paid under such lease subsequent to
the first date upon which it may be so terminated. "Attributable Value" means,
as to a Capitalized Lease Obligation under which any person is at the time
liable and at any date as of which the amount thereof is to be determined, the
capitalized amount thereof that would appear on the face of a balance sheet of
such person in accordance with Canadian GAAP.

CHANGE OF CONTROL. Upon the occurrence of a Change of Control (defined
herein), Loewen will be obligated to make an offer to purchase (a "Change of
Control Offer"), and shall purchase, on a Business Day (the "Change of Control
Purchase Date") not more than 60 nor less than 30 days following the occurrence
of the Change of Control, all of the then outstanding Debt Securities of each
series properly tendered and not withdrawn at a purchase price (the "Change of
Control Purchase Price") equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the Change of Control Purchase Date. The
Change of Control Offer is required to remain open for at least 20 Business Days
and until the close of business on the Change of Control Purchase Date.

In order to effect such Change of Control Offer, Loewen shall not later than
the 30th day after the occurrence of a Change of Control, mail to each holder of
Debt Securities notice of the Change of Control Offer, which notice shall govern
the terms of the Change of Control Offer and shall state, among other things,
the procedures that holders of Debt Securities must follow to accept the Change
of Control Offer.

If a Change of Control were to occur, there can be no assurance that Loewen
would have sufficient funds to pay the purchase price for all Debt Securities
that Loewen might to required to purchase. In the event that Loewen is required
to purchase Debt Securities pursuant to a Change of Control Offer, Loewen
expects that it would need to seek third-party financing to the extent it may
not have available funds to meet its purchase obligations. However, there can be
no assurance that Loewen will be able to obtain such financing on favorable
terms, if at all.

Loewen shall be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in a manner, at the
times and otherwise in compliance with the requirements applicable to a Change
of Control Offer made by Loewen and purchases all Debt Securities validly
tendered and not withdrawn under such Change of Control Offer.

Loewen will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act, and any other securities laws or regulations
in connection with the repurchase of Debt Securities pursuant to a Change of
Control Offer.

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"Change of Control" means the occurrence on or after the Measurement Date of
any of the following events: (a) any "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted Holders,
is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time, upon
the happening of an event or otherwise), directly or indirectly, of more than
35% of the total Voting Stock of Loewen or LGII, under circumstances where the
Permitted Holders (i) "beneficially own" (as so defined) a lower percentage of
the Voting Stock than such other "person" or "group" and (ii) do not have the
right or ability by voting power, contract or otherwise to elect or designate
for election a majority of the Board of Directors of Loewen or LGII; (b) Loewen
or LGII consolidates with, or merges with or into, another person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to another person, or another person
consolidates with, or merges with or into, Loewen or LGII, in any such event
pursuant to a transaction in which the outstanding Voting Stock of Loewen or
LGII is converted into or exchanged for cash, securities or other property,
other than any such transaction where (i) the outstanding Voting Stock of Loewen
or LGII is converted into or exchanged for (1) Voting Stock (other than
Redeemable Capital Stock) of the surviving or transferee corporation or (2)
cash, securities and other property in an amount which could then be paid by
Loewen or LGII as a Restricted Payment under the provisions hereof, and (ii)
immediately after such transaction no "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted
Holders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time, upon
the happening of an event or otherwise), directly or indirectly, of more than
50% of the total Voting Stock of the surviving or transferee corporation; (c) at
any time during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of Loewen or LGII
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders or stockholders of Loewen or
LGII was approved by a vote of 66 2/3% of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
(including the failure of such individuals to be elected in a proxy contest
involving a solicitation of proxies) to constitute a majority of the Board of
Directors of Loewen or LGII then in office; or (d) Loewen or LGII is liquidated
or dissolved or adopts a plan of liquidation other than a liquidation of LGII
into Loewen. With respect to the sale of assets referred to above, the meaning
of the phrase "all or substantially all" shall vary according to the facts and
circumstances of the subject transaction.

DISPOSITION OF PROCEEDS OF ASSET SALES. Loewen will not, and will not
permit any of its Restricted Subsidiaries (including, without limitation, LGII)
or First Capital Life Insurance Company of Louisiana, National Capital Life
Insurance Company, Security Industrial Insurance Company, Security Industrial
Fire Insurance Company or any successors to such Subsidiaries to, make any Asset
Sale (defined herein) unless (a) Loewen or such Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the shares or assets sold or otherwise
disposed of and (b) at least 75% of such consideration consists of cash or Cash
Equivalents. To the extent the Net Cash Proceeds (defined herein) of any Asset
Sale are not required to be applied to repay, and permanently reduce the
commitments under, the Credit Agreements (as required by the terms thereof) or
any other Pari Passu Indebtedness, or are not so applied, Loewen or such
Restricted Subsidiary, as the case may be, may, within 180 days of such Asset
Sale, apply such Net Cash Proceeds to an investment in properties and assets
that replace the properties and assets that were the subject of such Asset Sale
or in properties and assets that will be used in the business of Loewen and its
Restricted Subsidiaries existing on the Issue Date or in businesses reasonably
related thereto ("Replacement Assets"). Any Net Cash Proceeds from any Asset
Sale that are neither used to repay, and permanently reduce the commitments
under, the Credit Agreements nor invested in Replacement Assets within the
180-day period described above constitute "Excess Proceeds" subject to
disposition as provided below.

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When the aggregate amount of Excess Proceeds equals or exceeds $10,000,000,
Loewen shall make an offer to purchase (an "Asset Sale Offer"), from all holders
of each series of Debt Securities, not more than 40 Business Days thereafter, an
aggregate principal amount of Debt Securities equal to such Excess Proceeds, at
a price in cash equal to 100% of the outstanding principal amount thereof plus
accrued and unpaid interest, if any, to the purchase date (the "Asset Sale Offer
Price"). To the extent that the aggregate principal amount of Debt Securities
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds,
Loewen may use such deficiency for general corporate purposes. If the aggregate
principal amount of Debt Securities validly tendered and not withdrawn by
holders thereof exceeds the Excess Proceeds, Debt Securities to be purchased
will be selected on a PRO RATA basis. Upon completion of an Asset Sale Offer,
the amount of Excess Proceeds shall be reset to zero.

"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any person other than Loewen or a
Restricted Subsidiary of Loewen (including, without limitation, LGII), in one or
a series of related transactions, of (a) any Capital Stock of any Restricted
Subsidiary of Loewen (other than in respect of directors' qualifying shares or
investments by foreign nationals mandated by applicable law) or of First Capital
Life Insurance Company of Louisiana, National Capitol Life Insurance Company,
Security Industrial Insurance Company, Security Industrial Fire Insurance
Company or any successors to such Subsidiaries; (b) all or substantially all of
the properties and assets of any division or line of business of Loewen or any
Restricted Subsidiary of Loewen; or (c) any other properties or assets of Loewen
or any Restricted Subsidiary of Loewen other than properties and assets sold in
the ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include (i) any sale, transfer or other disposition of
equipment, tools or other assets (including Capital Stock of any Restricted
Subsidiary of Loewen) by Loewen or any of its Restricted Subsidiaries in one or
a series of related transactions in respect of which Loewen or such Restricted
Subsidiary receives cash or property with an aggregate Fair Market Value of
$2,000,000 or less; and (ii) any sale, issuance, conveyance, transfer, lease or
other disposition of properties or assets that is governed by the provisions of
the applicable Indenture.

"Net Cash Proceeds" means with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to Loewen or any Restricted Subsidiary of Loewen (including,
without limitation, LGII) net of (i) brokerage commissions and other fees and
expenses (including, without limitation, fees and expenses of legal counsel and
investment bankers) related to such Asset Sale, (ii) provisions for all taxes
payable as a result of such Asset Sale, (iii) amounts required to be paid to any
person (other than Loewen or any Restricted Subsidiary of Loewen) owning a
beneficial interest in the assets subject to the Asset Sale and (iv) appropriate
amounts to be provided by Loewen or any Restricted Subsidiary of Loewen, as the
case may be, as a reserve required in accordance with Canadian GAAP against any
liabilities associated with such Asset Sale and retained by Loewen or any
Restricted Subsidiary of Loewen, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an officers' certificate delivered to the Trustee.

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favorable to Loewen or such Restricted Subsidiary, as the case may be, than
those which could have been obtained in a comparable transaction at such time
from persons who are not Affiliates of Loewen or Interested Persons, (b) with
respect to a transaction or series of transactions involving aggregate payments
or value equal to or greater than $10,000,000, Loewen has obtained a written
opinion from an Independent Financial Advisor stating that the terms of such
transaction or series of transactions are fair to Loewen or its Restricted
Subsidiary, as the case may be, from a financial point of view and (c) with
respect to a transaction or series of transactions involving aggregate payments
or value equal to or greater than $2,500,000, Loewen shall have delivered an
Officer's Certificate to the Trustee certifying that such transaction or series
of transactions comply with the preceding clause (a) and, if applicable,
certifying that the opinion referred to in the preceding clause (b) has been
delivered and that such transaction or series of transactions has been approved
by a majority of the Board of Directors of Loewen (including a majority of the
disinterested directors); PROVIDED, HOWEVER, that this covenant will not
restrict Loewen from (i) paying dividends in respect of its Capital Stock
permitted under the covenant described under "--Limitation on Restricted
Payments," (ii) paying reasonable and customary fees to directors of Loewen or
any Restricted Subsidiary who are not employees of Loewen or any Restricted
Subsidiary, (iii) entering into transactions with its Wholly-Owned Subsidiaries
or permitting its Wholly-Owned Subsidiaries from entering into transactions with
other Wholly-Owned Subsidiaries of Loewen, (iv) making loans or advances to
senior officers and directors of Loewen or any Restricted Subsidiary not in
excess of $6,000,000 in the aggregate at any one time outstanding, (v)
guaranteeing loans made to officers and other employees of Loewen or any
Restricted Subsidiaries in connection with Loewen's 1994 Management Equity
Investment Plan not in excess of $6,000,000 in the aggregate at any one time
outstanding, (vi) making loans or advances to officers, employees or consultants
of Loewen and its Restricted Subsidiaries for travel and moving expenses in the
ordinary course of business for bona fide business purposes of Loewen and its
Restricted Subsidiaries, (vii) making other loans or advances to officers,
employees or consultants of Loewen and its Restricted Subsidiaries in the
ordinary course of business for bona fide business purposes of Loewen and its
Restricted Subsidiaries not in excess of $10,000,000 in the aggregate at any one
time outstanding, (viii) making payments to officers or employees of Loewen or
its Restricted Subsidiaries pursuant to obligations undertaken, at a time when
such persons were not officers or employees of Loewen or its Restricted
Subsidiaries, in connection with arms' length Asset Acquisitions or (ix)
declaring or paying dividends on, or purchasing or redeeming, the Preferred
Securities of a Special Finance Subsidiary.

LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. Loewen will not, and will not permit any of its Restricted
Subsidiaries (including, without limitation, LGII) to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any Restricted Subsidiary of Loewen to (a) pay
dividends, in cash or otherwise, or make any other distributions on or in
respect of its Capital Stock or any other interest or participation in, or
measured by, its profits, (b) pay any Indebtedness owed to Loewen or any other
Restricted Subsidiary of Loewen, (c) make loans or advances to, or any
Investment in, Loewen or any other Restricted Subsidiary of Loewen, (d) transfer
any of its properties or assets to Loewen or any other Restricted Subsidiary of
Loewen or (e) guarantee any Indebtedness of Loewen or any other Restricted
Subsidiary of Loewen, except for such encumbrances or restrictions existing
under or by reason of (i) applicable law, (ii) customary non-assignment
provisions of any contract or any lease governing a leasehold interest of Loewen
or any Restricted Subsidiary of Loewen, (iii) customary restrictions on
transfers of property subject to a Lien permitted under the provisions of the
Indenture which could not materially adversely affect Loewen's ability to
satisfy its obligations under the provisions of the applicable Indenture and the
Debt Securities, (iv) any agreement or other instrument of a person acquired by
Loewen or any Restricted Subsidiary of Loewen (or a Restricted Subsidiary of
such person) in existence at the time of such acquisition (but not created in
contemplation thereof), which encumbrance or restriction is not applicable to
any person, or the properties or assets of any person, other than the person, or
the properties or assets of the person, so acquired, (v) provisions contained in
any agreement or instrument relating to Indebtedness which prohibit the transfer
of all or substantially all of the assets of the obligor thereunder unless the
transferee shall assume the obligations of the obligor under such agreement or
instrument and (vi) encumbrances and restrictions under Indebtedness in effect
on the Issue Date (including under the

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Debt Securities) and encumbrances and restrictions in permitted refinancings or
replacements thereof which are no less favorable to the holders of the Debt
Securities than those contained in the Indebtedness so refinanced or replaced.

LIMITATIONS ON SALE-LEASEBACK TRANSACTIONS. Loewen will not, and will not
permit any of its Restricted Subsidiaries (including, without limitation, LGII)
to, enter into any Sale-Leaseback Transaction, other than Permitted
Sale-Leaseback Transactions, with respect to any property of Loewen or any of
its Restricted Subsidiaries where the aggregate amount of property subject to
such Sale-Leaseback Transactions, together with the aggregate amount of Liens
securing Indebtedness of Loewen and its Restricted Subsidiaries (other than
Permitted Liens), exceeds 10% of Loewen's Consolidated Net Worth.

LIMITATION ON APPLICABILITY OF CERTAIN COVENANTS. During any period of time
that (i) the ratings assigned to any series of Debt Securities by each of S&P
and Moody's (collectively, the "Rating Agencies") are no less than BBB- and
Baa3, respectively (the "Investment Grade Ratings"), and (ii) no Default or
Event of Default has occurred and is continuing with respect to such series of
Debt Securities, Loewen and its Restricted Subsidiaries (including, without
limitation, LGII) will not be subject to the covenants entitled "Limitation on
Indebtedness," "Limitation on Restricted Payments," "Disposition of Proceeds of
Asset Sales," "Limitation on Issuances and Sale of Preferred Stock by Restricted
Subsidiaries," "Limitations on Transactions with Interested Persons" and
"Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries" (collectively, the "Suspended Covenants") with respect to such
series of Debt Securities. If one or both Rating Agencies withdraws its rating
or downgrades its Investment Grade Rating, then thereafter Loewen and its
Restricted Subsidiaries will be subject, on a prospective basis, to the
Suspended Covenants (until the Rating Agencies have again assigned Investment
Grade Ratings to the Debt Securities) and compliance with the Suspended
Covenants with respect to Restricted Payments made after the time of such
withdrawal or downgrade will be calculated in accordance with the covenant
described under "Limitations on Indebtedness," as if such covenant had been in
effect at all times after the Measurement Date.

REPORTING REQUIREMENTS

Loewen shall file with the Commission, or if not permitted or required to so
file will deliver to the Trustee, the annual reports, quarterly reports and the
information, documents and other reports required to be filed with the
Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or not
Loewen has a class of securities registered under the Exchange Act. Loewen shall
file with the Trustee and provide to each holder of Debt Securities, within 15
days after it files them with the Commission (or if such filing is not permitted
under the Exchange Act, 15 days after Loewen would have been required to make
such filing), copies of such reports.

EVENTS OF DEFAULT

The following will be "Events of Default" with respect to each series of
Debt Securities:

(a) default in the payment of the principal of or premium, if any, on
the Debt Securities of such series as and when the same shall become due and
payable (upon maturity, acceleration, optional redemption, required
purchase, scheduled principal payment, by declaration or otherwise); or

(b) default in the payment of any installment of interest upon any of
the Debt Securities of such series, as and when the same shall become due
and payable, and continuance of such default for a period of 30 days; or

(c) failure on the part of Loewen duly to observe or perform any other
term, covenant or agreement contained in the Debt Securities of such series
or pursuant to the provisions of the Indenture (other than Defaults
specified in clause (a) or (b) above) and such Default continues for a
period of 60 days after the date on which written notice of such Default
requiring Loewen to remedy the same shall have been given (i) to the Issuer
by the Trustee by registered mail, or (ii) to Loewen and the Trustee by
holders of at least 25% in aggregate principal amount of the Debt Securities
of such series then outstanding; or

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(d) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
Loewen or any Restricted Subsidiary (including, without limitation, LGII)
then has outstanding Indebtedness in excess of $20,000,000 (including
Securities of another series), individually or in the aggregate, and either
(i) such Indebtedness is already due and payable in full or (ii) such
default or defaults have resulted in the acceleration of the maturity of
such Indebtedness; or

(e) one or more judgments, orders or decrees of any court or regulatory
or administrative agency of competent jurisdiction for the payment of money
in excess of $20,000,000, either individually or in the aggregate, shall be
entered against Loewen or any Restricted Subsidiary (including without
limitation LGII) or any of their respective properties and shall not be
discharged or bonded against or stayed and there shall have been a period of
60 days after the date on which any period for appeal has expired and during
which a stay of enforcement of such judgment, order or decree, shall not be
in effect; or

(f) either (i) the collateral agent under the Collateral Agreement or
(ii) any holder of at least $20,000,000 in aggregate principal amount of
Indebtedness of Loewen or any of its Restricted Subsidiaries (including,
without limitation, LGII) shall commence judicial proceedings to foreclose
upon assets of Loewen or any of its Restricted Subsidiaries having an
aggregate Fair Market Value, individually or in the aggregate, in excess of
$20,000,000 or shall have exercised any right under applicable law or
applicable security documents to take ownership of any such assets in lieu
of foreclosure; or

(g) certain events of bankruptcy, insolvency or reorganization with
respect to Loewen or any Significant Subsidiary of Loewen (including without
limitation LGII) shall have occurred.

NOTICE OF DEFAULT

Within 90 days after the occurrence of a Default or an Event of Default with
respect to Debt Securities of any series, the Trustee shall mail to all holders
of Debt Securities of such series notice of the Default or Event of Default
known to the Trustee with respect to such series, unless such default shall have
been cured before the giving of such notice. Except in the case of a Default in
the payment of the principal of, premium, if any, or interest on any Debt
Securities, or in the payment or satisfaction of any sinking fund or other
purchase obligation, the Trustee may withhold such notice if and so long as the
board of directors, the executive committee of the board of directors or a
committee of the directors of the Trustee and/or Trust Officers in good faith
determine that the withholding of such notice is in the interest of the holders
of the Debt Securities of such series.

ACCELERATION

If an Event of Default (other than as specified in clause (g) above) occurs
and is continuing with respect to the Debt Securities of any series then
outstanding, (a) the Trustee, by written notice to Loewen, or (b) the holders of
at least 25% in aggregate principal amount of the Debt Securities of such series
then outstanding, by written notice to the Trustee and Loewen, may declare the
principal amount (or, if the Debt Securities of such series are Original Issue
Discount Securities, such portion of the principal amount as may be specified in
the terms of such series) of all the Debt Securities of such series, premium, if
any, and accrued and unpaid interest, if any, on all of the Debt Securities of
such series to be due and payable immediately, upon which declaration, all
amounts payable in respect of the Debt Securities of such series shall be
immediately due and payable. If an Event of Default specified in clause (g)
above occurs and is continuing, then the unpaid principal amount (or, if the
Debt Securities of any series then outstanding are Original Issue Discount
Securities, such portion of the principal amounts as may be specified in the
terms of each such series), premium, if any, and accrued and unpaid interest on
all Debt Securities of each series then outstanding shall IPSO FACTO become and
be immediately due and payable without any declaration or other act by the
Trustee or any holder of Debt Securities of such series.

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majority in aggregate principal amount of the outstanding Debt Securities of
such series, by written notice to Loewen and the Trustee, may rescind and annul
such declaration and its consequences if (a) Loewen has paid or deposited with
the Trustee a sum sufficient to pay (i) all amounts due the Trustee under the
respective Indenture and the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, (ii) all overdue interest
on all Debt Securities of such series, (iii) the principal of and premium, if
any, on any Debt Securities of such series which have become due otherwise than
by such declaration of acceleration and interest thereon at the rate borne by
the Debt Securities of such series, and (iv) to the extent that payment of such
interest is lawful, interest upon overdue interest and overdue principal which
has become due otherwise than by such declaration of acceleration at the rate
borne by the Debt Securities of such series; (b) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction; and
(c) all Events of Default, other than the non-payment of principal of, premium,
if any, and interest on the Debt Securities of such series that has become due
solely by such declaration of acceleration, have been cured or waived; but no
such rescission and annulment shall extend to or shall affect any subsequent
default, or shall impair any right consequent thereon. No such rescission shall
affect any subsequent Default or Event of Default or impair any right subsequent
thereon.

WAIVER

The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of a series by notice to the Trustee may, on behalf of the
holders of all the Debt Securities of such series, waive any existing Default or
Event of Default and its consequences, except a Default or Event of Default
specified in clause (a) or (b) above, or in respect of any provision of the
Indenture which cannot be modified or amended without the consent of the holder
so affected. When a Default or Event of Default is so waived, it shall be deemed
cured and shall cease to exist.

LIMITATION ON SUITS

No holder of any Debt Securities of any series shall have any right to
institute any suit, action or proceeding with respect to an Indenture or the
Debt Securities of such series, or for the appointment of a receiver or trustee
or similar official, or for any other remedy hereunder or thereunder, unless:
(1) the holder gives written notice to the Trustee of a continuing Event of
Default; (2) the holders of at least 25% in aggregate principal amount of the
Debt Securities of such series then outstanding shall have made written request
to the Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder; (3) such holder or holders offer and, if requested, provide
to the Trustee reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby; (4) the Trustee for
60 days after its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or proceeding; and
(5) during such 60-day period the holders of a majority in aggregate principal
amount of the Debt Securities of such series then outstanding do not give the
Trustee a direction which is inconsistent with the request; it being understood
and intended, and being expressly covenanted by the holder of every Debt
Security of such series with every other taker and holder and the Trustee, that
no one or more holders of Debt Securities of such series shall have any right in
any manner whatever by virtue of or by availing of any provision of an Indenture
or of the Debt Securities to affect, disturb or prejudice the rights of any
other holder of Debt Securities of such series, or to obtain or seek to obtain
priority over or preference as to any other such holder, or to enforce any right
under an Indenture or the Debt Securities of any series, except in the manner
herein provided and for the equal, ratable and common benefit of all holders of
Debt Securities of such series.

If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, premium, if any, or interest on the Debt Securities of any series
or to enforce the performance of any provision of the applicable Debt Securities
or Indenture.

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CERTIFICATES OF COMPLIANCE

Loewen shall furnish to the Trustee annual and quarterly statements as to
the performance by Loewen of its obligations under the Indenture and as to any
default in such performance. Loewen is also required to notify the Trustee
within 10 days of any event which is, or after notice or lapse of time or both
would become, an Event of Default.

DEFEASANCE OR COVENANT DEFEASANCE

Loewen may, at its option and at any time, terminate its obligations with
respect to an outstanding series of Debt Securities ("defeasance"). Such
defeasance means that Loewen shall be deemed to have paid and discharged the
entire Indebtedness represented by the outstanding Debt Securities of such
series, except for (i) the rights of holders of outstanding Debt Securities of
such series to receive payment in respect of the principal of, premium, if any,
and interest on such Debt Securities when such payments are due, (ii) Loewen's
obligations to issue temporary Debt Securities of such series, register the
transfer or exchange of any Debt Securities of such series, replace mutilated,
destroyed, lost or stolen Debt Securities of such series and maintain an office
or agency for payments in respect of the Debt Securities of such series, (iii)
the rights, powers, trusts, duties and immunities of the Trustee, and (iv) the
defeasance provisions of the Indenture. In addition, Loewen may, at its option
and at any time, elect to terminate its obligations with respect to certain
covenants that are set forth in the Indenture, some of which are described
above, and any subsequent failure to comply with such obligations shall not
constitute a Default or Event of Default with respect to the Debt Securities of
such series ("covenant defeasance").

In order to exercise either defeasance or covenant defeasance, (i) Loewen
must irrevocably deposit with the Trustee, in trust, for the benefit of the
holders of the Debt Securities of such series, cash in United States dollars,
U.S. Government Obligations, or a combination thereof, in such amounts as will
be sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
the outstanding Debt Securities of such series to maturity (except lost, stolen
or destroyed Debt Securities of such series which have been replaced or paid);
(ii) Loewen shall have delivered to the Trustee an opinion of counsel to the
effect that the holders of the outstanding Debt Securities of such series will
not recognize income, gain or loss for federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance or covenant defeasance had not occurred (in the
case of defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax laws);
(iii) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit; (iv) such defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest with respect to any securities
of Loewen; (v) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument to which Loewen is a party or by which it is bound; (vi) Loewen shall
have delivered to the Trustee an opinion of counsel to the effect that after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar law
affecting creditors' rights generally; and (vii) Loewen shall have delivered to
the Trustee an officers' certificate and an opinion of counsel, each stating
that all conditions precedent under the Indenture to either defeasance or
covenant defeasance, as the case may be, have been complied with.

SATISFACTION AND DISCHARGE

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for cancellation or (b) all Debt Securities of such series have been called for
redemption or otherwise become due and payable and Loewen has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Debt Securities
of such series not theretofore delivered to the Trustee for cancellation, for
principal of, premium, if any, and interest on the Debt Securities of such
series to the date of deposit together with irrevocable instructions from Loewen
directing the Trustee to apply such funds to the payment thereof at maturity;
(ii) Loewen have paid all other sums payable by Loewen under the Indenture;
(iii) there exists no Default or Event of Default under the Indenture; and (iv)
Loewen has delivered to the Trustee an officers' certificate and an opinion of
counsel stating that all conditions precedent under the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with.

AMENDMENTS AND WAIVERS

Loewen and the Trustee may from time to time and at any time amend or
supplement an Indenture (a) to cure any ambiguity, defect or inconsistency or to
correct or supplement any provision contained herein or in any supplemental
indenture which may be defective or inconsistent with any other provision
contained herein or in any supplemental indenture, or to make any other
provisions as to Loewen may deem necessary or desirable, provided that no such
action shall adversely affect the interests of the holders of any series of Debt
Securities; (b) to evidence the succession of another corporation to Loewen, or
successive successions, and the assumption by the successor corporation of the
covenants, agreements and obligations of Loewen; (c) to establish the form or
terms of Debt Securities of any series and to provide for adjustment of
conversion rights; (d) to comply with any requirements of the Commission in
order to effect or maintain the qualification of any Indenture under the Trust
Indenture Act of 1939, as amended (the "TIA"); (e) to evidence and provide for
the acceptance of appointment by a successor trustee with respect to the Debt
Securities of one or more series and to add to or change any of the provisions
of an Indenture as shall be necessary to provide for or facilitate the
administration of trusts by more than one trustee; and (f) to add to the
covenants of Loewen such further covenants, restrictions, conditions or
provisions as Loewen and the Trustee shall consider to be for the protection of
the holders of all or any series of Debt Securities (and if such covenants,
restrictions, conditions or provisions are to be for the protection of less than
all series of Debt Securities, stating that the same are expressly being
included solely for the protection of such series), and to make the occurrence,
or the occurrence and continuance, of a default in any such additional
covenants, restrictions, conditions or provisions an Event of Default; provided,
that in respect of any such additional covenant, restriction, condition or
provision a supplemental indenture may provide for a particular period of grace
after default (which period may be shorter or longer than that allowed in the
case of other defaults) or may provide for an immediate enforcement upon such an
Event of Default or may limit the remedies available to the Trustee upon such an
Event of Default or may limit the right of the holders of a majority in
aggregate principal amount of the Debt Securities of such series to waive such
Event of Default.

Any supplemental indenture authorized by an Indenture may be executed
without the consent of the holders of any of the Debt Securities then
outstanding. Notwithstanding the foregoing, the Trustee and Loewen may not make
any change to an Indenture that adversely affects the rights of any holders of
outstanding Debt Securities. Loewen shall be required to deliver to the Trustee
an Opinion of Counsel stating that any such change does not adversely affect the
rights of any holder.

GLOBAL DEBT SECURITIES

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registered for transfer or exchange except as a whole by the Depositary for such
Registered Global Security to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary to any such nominee to a successor Depositary for such series or
a nominee of such successor Depositary and except in the circumstances described
in the applicable Prospectus Supplement.

The specific terms of the depositary arrangement with respect to a portion
of a series of Debt Securities to be represented by a Registered Global Security
will be described in the applicable Prospectus Supplement. Loewen expects that
the following provisions will apply to any such depositary arrangements.

Upon the issuance of any Global Registered Securities, the Depositary will
credit, on its internal book-entry system, the principal amount of Debt
Securities of the individual beneficial interest represented by such Global
Registered Securities to the respective accounts of institutions
("participants") that have accounts with the Depositary or its nominee. The
accounts to be credited will be designated by the underwriters or agents
engaging in the distribution of such Debt Securities or by Loewen if such Debt
Securities are offered and sold directly by Loewen. Ownership of beneficial
interests by participants in such Registered Global Security will be shown on,
and the transfer of that ownership interest will be effected only through,
records maintained by the Depositary for such Registered Global Security or by
its nominee. Ownership of beneficial interests in such Registered Global
Security by persons that hold such interests through a participant will be shown
on, and the transfer of such ownership interests will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interest in such Registered Global Securities.

So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented thereby for all purposes under the Indentures.
Unless otherwise specified in the applicable Prospectus Supplement and except as
specified below, owners of beneficial interests in such Registered Global
Security will not be entitled to have Debt Securities of the series represented
by such Registered Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities of such series in
certificated form and will not be considered the holders thereof for any
purposes under the Indentures. Accordingly, each person owning a beneficial
interest in such Registered Global Security will be required to rely on the
procedures of the Depositary and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise the rights of a holder under the Indentures. The Depositary may grant
proxies and otherwise authorize participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action which
a holder is entitled to give or take under the applicable Indenture. Loewen
understands that, under existing industry practices, if Loewen requests any
action of holders or an owner of a beneficial interest in a Registered Global
Security desires to give any notice or take any action a holder is entitled to
give or take under the applicable Indenture, the Depositary would authorize the
participants to give such notice or take such action, and participants would
authorize beneficial owners owning through such participants to give such notice
or take such action or would otherwise act upon the instructions of beneficial
owners owning through them.

Unless otherwise specified in the applicable Prospectus Supplement, payments
with respect to principal of, premium, if any and interest, if any, on Debt
Securities represented by a Registered Global Security registered in the name of
a Depositary or its nominee will be made to such Depositary or its nominee, as
the case may be, as the registered owners of such Registered Global Security.

Loewen expects that the Depositary for any Debt Securities represented by a
Registered Global Security, upon receipt of any payment of principal, premium or
interest will immediately credit participants' accounts with payment in amounts
proportionate to their respective beneficial interest in the principal amount of
such Registered Global Security as shown on the records of such Depositary.
Loewen also expects that payments by participants to owners of beneficial
interests in such Registered Global

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Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with the securities
held for the accounts of customers registered in "street names" and will be the
responsibility of such participants. None of Loewen, the Trustee or any agent of
Loewen shall have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
Registered Global Security, or for maintaining, supervising, or reviewing any
records relating to such beneficial ownership interests.

Unless otherwise specified in the applicable Prospectus Supplement, if the
Depositary for any Debt Securities represented by a Registered Global Security
is at any time unwilling or unable to continue as Depositary and a successor
Depositary is not appointed by Loewen within 90 days, Loewen will issue such
Debt Securities in definitive certificated form in exchange for such Registered
Global Security. In addition, Loewen may at any time and in its sole discretion
determine not to have any of the Debt Securities of a series represented by one
or more Registered Global Securities and, in such event, will issue Debt
Securities of such series in definitive certificated form in exchange for all of
the Registered Global Securities representing such Debt Securities. Further, if
Loewen so specifies with respect to Debt Securities of any series an owner of a
beneficial interest in a Registered Global Security representing Debt Securities
of such series may, on terms acceptable to Loewen and the Depositary, receive
Debt Securities of such series in definitive form registered in the name of such
beneficial owner or its designee.

THE TRUSTEE

Unless otherwise specified in the applicable Prospectus Supplement, Fleet
National Bank, or its successor, shall be the Trustee under each Indenture. The
Indentures provide that, except during the continuance of an Event of Default,
the Trustee will perform only such duties as are specifically set forth in the
Indenture. If any Event of Default has occurred and is continuing the Trustee
will exercise such rights and powers vested in it under the applicable Indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs.

The Indentures, including provisions of the TIA incorporated by reference
therein, will contain limitations on the rights of the Trustee should it become
a creditor of Loewen, to obtain payment of claims in certain cases or to realize
on certain property received by it in respect of any such claims, as security or
otherwise.

In addition to serving as Trustee under the Indentures, Fleet National Bank
also serves as trustee under (a) the Indenture dated as of March 20, 1996, as
amended (the "March 1996 Indenture"), among LGII, Loewen, as Guarantor, and
Fleet National Bank, as trustee, and (b) the Indenture dated as of October 1,
1996, as amended (the "October 1996 Indenture") among LGII, Loewen, as
Guarantor, and Fleet National Bank, as trustee. In March 1996, LGII issued
$225,000,000 7 1/2% Series 1 Senior Guaranteed Notes due 2001 and $125,000,000
8 1/4% Series 2 Senior Guaranteed Notes due 2003 under the March 1996 Indenture,
and in October 1996, LGII issued $125,000,000 7 3/4% Series 3 Senior Guaranteed
Notes due 2001 and $225,000,000 8 1/4% Series 4 Senior Guaranteed Notes due 2003
under the October 1996 Indenture. Pursuant to the TIA, in certain circumstances,
if an event of default were to occur under the March 1996 Indenture, the October
1996 Indenture and/or any Indenture relating to Debt Securities, Fleet National
Bank could be required to resign as trustee under one or more of such
indentures. If Fleet National Bank were to resign as trustee, Loewen or LGII
would be required to take prompt steps to have a successor trustee or trustees
appointed in the manner provided in the indenture or indentures from which Fleet
National Bank has resigned.

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<PAGE>
DESCRIPTION OF SHARE CAPITAL

The authorized capital of Loewen consists of 990,000,000 shares without par
value divided into 750,000,000 Common Shares, 40,000,000 Class A shares without
par value ("Class A Shares"), and 200,000,000 First Preferred Shares without par
value ("First Preferred Shares").

The following description of the capital stock of Loewen does not purport to
be complete and is qualified in its entirety by reference to Loewen's Altered
Memorandum and Articles, as amended, and the Shareholder Protection Rights Plan
Agreement, as amended (the "Rights Plan"), each of which is filed as an Exhibit
to the Registration Statement of which this Prospectus forms a part.

GENERAL

If Common Shares or Preferred Shares are offered hereby, reference is made
to the Prospectus Supplement which accompanies this Prospectus for a description
of such Securities, including (a) with respect to Common Shares, the number of
shares or the aggregate market value of the shares being offered, the initial
offering price, and market price and dividend information, and (b) with respect
to Preferred Shares, as applicable, the specific designation, number of shares
offered, the initial offering price, liquidation preference, stated value per
share, dividend rate (which may be fixed or variable), place or places where
dividends on such Preferred Shares will be payable, terms of conversion, sinking
fund provisions, redemption provisions, voting rights, preemption rights,
restrictions on transferability, listing or application for listing on a
securities exchange or interdealer quotation system, restrictions on the
repurchase or redemption of such Preferred Shares by Loewen if there is any
arrearage in the payment of dividends or sinking fund installments, and any
other rights, preferences, privileges, limitations or restrictions relating to
such Preferred Shares.

COMMON SHARES

Each Common Share carries one vote on a poll (ballot) at all meetings of
shareholders, participates equally in any dividend declared by the Board of
Directors on such shares (subject to the dividend priority of any First
Preferred Shares) and carries the right to receive (after the return of capital
and accrued but unpaid dividends on the outstanding First Preferred Shares, if
any) a proportionate share of the assets of Loewen available for distribution in
the event of the liquidation, dissolution or winding up of Loewen, whether
voluntary or involuntary, or in the event of any other distribution of assets of
Loewen among its shareholders for the purpose of winding up its affairs (a
"Liquidation"). The Common Shares and the Class A Shares rank equally as to
dividends and distribution on winding up. See "--Class A Shares."

CLASS A SHARES

The Class A Shares, which rank PARI PASSU with the Common Shares, were
created in connection with the issuance of warrants to the purchasers of certain
subordinated debentures issued by Loewen. All of the warrants to acquire Class A
Shares were exercised by the debenture holders when Loewen made its initial
public offering, and all of the issued Class A Shares have been converted into
Common Shares.

FIRST PREFERRED SHARES

First Preferred Shares may be issued from time to time in one or more series
and in such numbers and with such special rights and restrictions attached to
each series as the Board of Directors of Loewen determines. The First Preferred
Shares, as a class, are entitled to preference over the Common Shares and shares
of any other class ranking junior to the First Preferred Shares with respect to
the payment of dividends or the distribution of assets in the event of a
Liquidation. In the event of non-payment of the full amount of dividends payable
or any other amount payable on winding up or other return of capital, the First
Preferred Shares of each series will participate ratably with the First
Preferred Shares of every other series in accordance with the respective amounts
payable.

29
<PAGE>
SERIES A PREFERRED SHARES

In March 1988, the Board of Directors designated 1,000,000 First Preferred
Shares as 7.75% Cumulative Redeemable Convertible First Preferred Shares, Series
A ("Series A Preferred Shares"), all of which shares were issued on March 30,
1988. All of the Series A Preferred Shares were converted to Common Shares on or
prior to May 29, 1990.

SERIES B PREFERRED SHARES

In June 1994, in connection with the 1994 Management Equity Investment Plan
("MEIP"), the Board of Directors of Loewen designated 425,000 First Preferred
Shares as Series B Preferred Shares. As of the date hereof, no Series B
Preferred Shares have been issued. Each Series B Preferred Share will be
convertible into ten Common Shares at any time before July 15, 2011. As and when
cash dividends are declared on the Common Shares, the holders of Series B
Preferred Shares are entitled to equivalent cash dividends in proportion to the
conversion basis. The Series B Preferred Shares are non-voting.

Participants in the MEIP were issued investment options ("Investment
Options") to acquire debentures of LGII ("MEIP Debentures"). In connection
therewith, Loewen entered into an exchange acknowledgment dated as of June 14,
1994, pursuant to which Loewen will issue Series B Preferred Shares to
participants in the MEIP in exchange for their MEIP Debentures. Participants in
the MEIP have undertaken that, immediately upon exercising their Investment
Options, they will exchange the MEIP Debentures acquired thereby for Series B
Preferred Shares. Canadian participants have further undertaken that,
immediately upon such exchange, they will convert their Series B Preferred
Shares into Common Shares. Pursuant to the MEIP, Raymond L. Loewen, Chairman of
the Board and Chief Executive Officer of Loewen, has entered into a binding
commitment to purchase MEIP Debentures. At his option, Mr. Loewen may hold the
Series B Preferred Shares that he acquires on exchange of such MEIP Debentures.
It is unlikely that any participants in the MEIP will be entitled to purchase
MEIP Debentures, and exchange them for Series B Preferred Shares, before June
15, 1999.

SERIES C PREFERRED SHARES

In December 1995, the Board of Directors designated 880,000 First Preferred
Shares as Series C Preferred Shares. In May 1996, each Series C Preferred Share
was subdivided into ten Series C Preferred Shares; accordingly, currently
8,800,000 First Preferred Shares are designated as Series C Preferred Shares.

In January 1996, Loewen completed a public offering in Canada and a
simultaneous private placement in the United States of an aggregate of 8,800,000
Convertible First Preferred Shares Series C Receipts ("Series C Receipts"), each
representing entitlement to 1/10 of a Series C Preferred Share. Following the
subdivision of the Series C Preferred Shares in May 1996, the Series C Receipts
were replaced with Series C Preferred Shares.

For purposes of certain determinations in connection with redemption or
conversion of Series C Preferred Shares described below, "Current Market Price"
at a particular date means the weighted average price at which the Common Shares
have traded during the 20 consecutive trading days ending on the third day
before such date on The Toronto Stock Exchange or, if the Common Shares are not
then listed on The Toronto Stock Exchange, on such stock exchange or interdealer
quotation system on which the Common Shares are listed, as may be selected for
such purpose by the Board of Directors.

Holders of Series C Preferred Shares are entitled to cumulative dividends at
an annual rate of 6.00%, payable quarterly in arrears on the first business day
in January, April, July and October in each year.

Holders of Series C Preferred Shares have the right at any time before
January 1, 2003, to convert each Series C Preferred Share into the number of
Common Shares as is determined by dividing Cdn.$25.00 by Cdn.$38.125, as it may
be adjusted from time to time. Thereafter, holders of Series C Preferred Shares
will have the right on January 1, 2003 and on the first business day of each
quarter thereafter, to convert each Series C Preferred Share into the number of
Common shares as is determined by dividing Cdn.$25.00

30
<PAGE>
plus accrued and unpaid dividends thereon by the greater of Cdn.$3.00 and 95% of
the Current Market Price on the date of conversion.

Series C Preferred Shares are not redeemable prior to July 1, 1999.
Beginning on July 1, 1999, the Series C Preferred Shares will be redeemable by
Loewen, upon giving not less than 30 days' notice, at a redemption price equal
to Cdn.$25.00 per share plus accrued and unpaid dividends thereon (the
"Redemption Price"). Prior to July 1, 2001, a redemption may only be effected by
the issuance of Common Shares, determined by dividing the Redemption Price by
the greater of Cdn.$3.00 and 95% of the Current Market Price at the date of
redemption. On and after July 1, 2001, the Redemption Price may be paid in cash
or Common Shares. Loewen may not redeem the Series C Preferred Shares unless the
arrearage, if any, of dividends, is paid in full.

In the event of a Liquidation, holders of the Series C Preferred Shares will
be entitled to receive an amount equal to the Redemption Price before any
amounts are paid to the holders of Common Shares or any other class of shares
ranking junior to the Series C Preferred Shares.

Holders of Series C Preferred Shares generally are not entitled to attend or
vote at any meeting of the holders of Common Shares, except as otherwise
required by law. In the event that Loewen shall have failed to pay six quarterly
dividends (or the initial dividend payable on July 1, 1996 and any four other
quarterly dividends) and so long as such dividends remain in arrears, holders of
Series C Preferred Shares shall be entitled to receive notice of, and to attend
all meetings of the holders of Common Shares and, at such meetings, shall be
entitled to one vote per Series C Preferred Share then held.

SHAREHOLDER PROTECTION RIGHTS PLAN

On April 20, 1990, the Board of Directors approved the Rights Plan, which
was confirmed by Loewen's shareholders in accordance with the provisions thereof
at the annual general meeting of shareholders on May 24, 1990 and re-confirmed
for an additional five year period at the annual general meeting of shareholders
on May 17, 1995. The Rights Plan is currently set to expire on April 20, 2000.
This summary of the Rights Plan does not purport to be complete and is qualified
in its entirety by reference to the text of the Rights Plan. Certain capitalized
terms used below without definition are used as defined in the Rights Plan.

The Rights Plan is intended to discourage unfair takeover bid tactics and to
give the Board of Directors time, if there is an unsolicited bid, to pursue
alternatives to maximize shareholder value. To preserve the shareholders' right
to consider take-over bids on a fully-informed basis, the Rights Plan provides
that a bidder's position may be substantially diluted if it does not either make
a "Permitted Bid" directly to all shareholders or negotiate with the Board of
Directors for a waiver of the Rights Plan's provisions.

Unless and until the Rights "separate", each Common Share carries one Right,
which is evidenced by the share certificate and is transferable only along with
the Common Share.

The Rights would separate upon:

(1) the tenth day after the date of first public announcement of a Take-over
Bid or the intention of any one (other than Loewen or a subsidiary of Loewen) to
make a Take-over Bid, other than a Permitted Bid;

(2) the tenth day after the date of first public announcement of facts
indicating that any person has become the Beneficial Owner of 20% or more of the
outstanding Common Shares (unless otherwise exempt under the Rights Plan);

(3) a Flip-over Transaction or Event, which is generally either

a. a business combination whereby the Common Shares would be changed;
or

b. a sale of more than 50% of the consolidated assets of the Company;
or

31
<PAGE>
(4) such earlier or later date as may be determined by the Board of
Directors, acting in good faith; provided that, if the foregoing results in the
Separation Time being prior to the Record Time, the Separation Time shall be the
Record Time.

In the case of a Take-over Bid (so long as a Flip-in Event has not
occurred), each Right would entitle the holder (other than the bidder) to
acquire one Common Share for the Exercise Price; in the other cases described
above, each Right would entitle the holder (other than the bidder) to acquire
for the Exercise Price, Common Shares (in the case of a Flip-in Event) or common
shares of the combined entity or purchaser (in the case of a Flip-over
Transaction or Event) having an aggregate Market Price of two times the Exercise
Price. The Exercise Price is currently Cdn.$125 and is subject to anti-dilution
provisions.

Under the Rights Plan, a Flip-in Event will occur ten days after the
acquisition of Beneficial Ownership of more than 20% of the Common Shares
except:

a. by way of a Permitted Bid (as defined herein);

b. by an acquirer who obtains a waiver from the Board of Directors;

c. as a result of the death of a Beneficial Owner of Common Shares;

d. by a person who held more than 20% of the Common Shares on April 20,
1990, who is "grandfathered" subject to a number of restrictions (a
"Grandfathered Person"); or

e. by registered pension plans whose governing legislation does not permit
them to hold more than 30% of Common Shares and who acquire shares independently
for investment.

A "Permitted Bid" is a take-over bid that complies with all applicable
securities laws and is:

(1) for all Common Shares and to all holders, wherever resident;

(2) made by a bidder who (with related parties) does not own more than 5% of
the Common Shares (unless the bidder owned at least that percentage on April 20,
1990); and

(3) conditioned upon approval by a majority of the votes cast by
"Independent Shareholders" (those other than certain shareholders who have
acquired more than 20% of the Common Shares or who have made a Takeover-Bid,
their Associates, Affiliate or persons acting jointly or in concert with them),
and expire no earlier than five business days after the shareholders' meeting
called to consider it.

To Loewen's knowledge, the only "Grandfathered Persons" are Raymond L.
Loewen and Anne Loewen. The holdings of a Grandfathered Person can be increased
by up to 2% of the Common Shares without causing a Flip-in Event to occur. A
person who acquires Common Shares as a result of the death of a Grandfathered
Person or who buys all of the Common Shares beneficially owned by a
Grandfathered Person would also be a Grandfathered Person, but to make a
Permitted Bid such a buyer would have to offer the other holders of Common
Shares consideration at least equal to that paid to the selling Grandfathered
Person.

32
<PAGE>
DESCRIPTION OF WARRANTS

Loewen may issue Warrants to purchase Common Shares, Preferred Shares or
Debt Securities, or any combination thereof. Warrants may be issued
independently or together with other Securities and may be attached to or
separate from such Securities. Each series of Warrants will be issued under a
separate warrant agreement (a "Warrant Agreement") to be entered into between
Loewen and a warrant agent ("Warrant Agent"). Forms of Warrant Agreements are
filed as exhibits to the Registration Statement of which this Prospectus forms a
part. The Warrant Agent will act solely as an agent of Loewen in connection with
the Warrants for each such series and will not assume any obligation or
relationship of agency for or with holders or beneficial owners or Warrants.

GENERAL

The following sets forth certain general terms and provisions of the
Warrants. Further terms of the Warrants and the respective Warrant Agreement
will be set forth in the applicable Prospectus Supplement, including as
applicable: (i) the title, series or designation of the Warrants, (ii) the type
and amount of Securities that may be acquired on exercise of the Warrants, (iii)
the offering price of the Warrants, including the currency or currencies,
including composite currencies, in which the Warrants may be purchased, (iv)
whether the Warrants are offered attached to or separate from other Securities,
(v) the period during which the Warrants are exercisable, (iv) the exercise
price of the Warrants, including the currency or currencies in which the
exercise price is payable, and any provisions for changes to or adjustments in
the exercise price, (v) any limitations on exercise of the Warrants, (vi) the
amount of other Warrants outstanding, (vi) whether the Warrants will be issued
in registered or bearer form, (vii) information with respect to book entry
procedures, and (viii) any other material terms of the Warrants.

EXERCISE OF WARRANTS

Each Warrant will entitle the holder to purchase such number of Common
Shares or Preferred Shares at such exercise price, for such consideration and
during such period or periods, or under such circumstances, as shall in each
case be set forth in, or calculable from, the applicable Prospectus Supplement.

Warrants shall be exercisable by delivery to the Warrant Agent of payment of
the exercise price along with properly completed and endorsed certificates
representing the Warrants being exercised ("Warrant Certificates"), as provided
in the applicable Prospectus Supplement. Unless otherwise provided in the
Warrant Agreement, as soon as practicable following receipt of the exercise
price and the requisite Warrant Certificates, Loewen shall issue and deliver the
Securities purchased pursuant to exercise of the Warrants as soon as
practicable. If fewer than all of the Warrants represented by a Warrant
Certificate are exercised, a new Warrant Certificate shall be issued for the
amount of unexercised Warrants.

MODIFICATION OF WARRANT AGREEMENTS

The Warrant Agreement will contain a provision permitting Loewen and the
Warrant Agent, without the consent of any Warrant holder, to supplement or amend
the Warrant Agreement in order to cure any ambiguity and to correct or
supplement any provision contained therein which may be defective or
inconsistent with other provisions, or to make other provisions in regard to
matters or questions arising thereunder which Loewen and the Warrant Agent deem
necessary or desirable and which do not adversely affect the interests of the
Warrant holders.

33
<PAGE>
PLAN OF DISTRIBUTION

Loewen may offer and sell any of the Securities from time to time through
agents, to or through underwriters, through dealers or directly to purchasers.
The Prospectus Supplement with respect to the Securities to be offered will set
forth the terms of the offering of the Securities, including (i) the name or
names of any underwriters, dealers or agents, (ii) the offering price of the
Securities, (iii) the proceeds to the Company from such sale, (iv) any
underwriting discounts and commissions or other amounts constituting
underwriters' or agents' compensation, and (v) any securities exchange or
automated quotation system on which the Securities may be listed. Any initial
public offering price, discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.

The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.

Offers to purchase Securities may be solicited by agents designated by
Loewen from time to time. Any such agent involved in the offer or sale of the
Securities will be named, and any commissions payable by Loewen to such agent
will be set forth, in the applicable Prospectus Supplement. Any such agent may
be deemed to be an underwriter (as that term is defined in the Securities Act)
of the Securities so offered and sold.

If Securities are sold by means of an underwritten offering, Loewen will
execute an underwriting agreement with one or more underwriters at the time an
agreement for such sale is reached. The names of the specific managing
underwriter or underwriters, as well as any other underwriters, and the terms of
the transaction, including commissions, discounts and any other compensation of
the underwriters and dealers, if any, will be set forth in the Prospectus
Supplement which will be used by the underwriters to make resales of the
Securities. If underwriters are utilized in the sale of Securities, the
Securities will be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices determined by
the underwriter at the time of sale. Securities may be offered to the public
either through underwriting syndicates represented by managing underwriters or
directly by the managing underwriters. If any underwriter or underwriters are
utilized in the sale of the Securities, unless otherwise indicated in the
Prospectus Supplement, the underwriting agreement will provide that the
obligations of the underwriters are subject to certain conditions precedent and
that the underwriters with respect to a sale of Securities will be obligated to
purchase all of such series of Securities if any are purchased.

If a dealer is utilized in the sale of Securities, Loewen will sell such
Securities to the dealer as principal. The dealer may then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale. Any such dealer may be deemed to be an underwriter (as that
term is defined in the Securities Act) of the Securities so offered and sold.
The name of the dealer and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.

Offers to purchase Securities may be solicited by Loewen directly to
institutional investors and others who may be deemed to be underwriters (as that
term is defined in the Securities Act) with respect to any resale thereof. The
terms of any such sales will be described in the Prospectus Supplement relating
thereto.

Agents, underwriters and dealers may be entitled under relevant agreements
to indemnification or contribution by Loewen against certain liabilities,
including liabilities under the Securities Act.

Agents, underwriters and dealers may be customers of, engage in transactions
with or perform services for the Company in the ordinary course of business.

Securities may also be offered and sold, if so indicated in the applicable
Prospectus Supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more firms ("remarketing firms"), acting as principals for their own
accounts or as agents of Loewen. Any remarketing firm will be identified and the
terms of its agreement, if any, with its compensation will be described in the
applicable Prospectus Supplement.

34
<PAGE>
Remarketing firms may be deemed to be underwriters (as such term is defined in
the Securities Act) in connection with the Securities remarketed thereby.
Remarketing firms may be entitled under agreements which may be entered into
with the Company to indemnification or contribution by Loewen against certain
liabilities, including liabilities under the Securities Act, and may be
customers of, engage in transactions with or perform services for the Company in
the ordinary course of business.

If so indicated in the applicable Prospectus Supplement, Loewen may
authorize agents, underwriters or dealers to solicit offers by certain types of
institutions to purchase Securities from Loewen at the public offering prices
set forth in the applicable Prospectus Supplement pursuant to delayed delivery
contracts ("Contracts") providing for payment and delivery on a specified date
or dates in the future. A commission indicated in the applicable Prospectus
Supplement will be paid to underwriters, dealers and agents soliciting purchases
of Securities pursuant to Contracts accepted by Loewen.

LEGAL MATTERS

The validity of the Securities will be passed upon for Loewen by Russell &
DuMoulin, Vancouver, British Columbia, Canada. Certain matters of New York law
relating to the Debt Securities will be passed upon for Loewen by Thelen,
Marrin, Johnson & Bridges LLP, San Francisco, California.

EXPERTS

The consolidated financial statements of Loewen incorporated by reference in
this Prospectus have been audited by KPMG, Chartered Accountants, for the
periods indicated in its report thereon, which is incorporated herein by
reference. Such consolidated financial statements have been so incorporated in
reliance on such report given on the authority of KPMG as experts in accounting
and auditing.

35
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer and sale of securities made hereby, and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offer of any securities other than those to which it relates or an offer or a
solicitation in any jurisdiction to any person to whom it is not lawful to make
such offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus, nor any distribution of securities made hereunder shall, under any
circumstances, create any implication that there has not been a change in the
facts set forth in this Prospectus or in the affairs of the Company since the
date hereof or that the information contained herein is correct as of any time
subsequent to the date hereof.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Information by Reference......................... 2
Disclosure Regarding Forward-Looking Statements........................... 3
Financial Information..................................................... 3
The Company............................................................... 4
Use of Proceeds........................................................... 4
Selected Consolidated Financial and Operating Information................. 5
Description of Debt Securities............................................ 7
Description of Share Capital.............................................. 29
Description of Warrants................................................... 33
Plan of Distribution...................................................... 34
Legal Matters............................................................. 35
Experts................................................................... 35
</TABLE>

$500,000,000

THE LOEWEN GROUP INC.

COMMON SHARES
PREFERRED SHARES
DEBT SECURITIES
WARRANTS

[LOGO]

---------------------

PROSPECTUS

---------------------

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 5, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS

$500,000,000

LOEWEN GROUP INTERNATIONAL, INC.
DEBT SECURITIES

[LOGO]
---------------------

FULLY AND UNCONDITIONALLY GUARANTEED BY
THE LOEWEN GROUP INC.

------------------------

Loewen Group International, Inc., a Delaware corporation ("LGII") may offer
and sell from time to time, in one or more series, debt securities consisting of
notes, debentures and/or other evidences of indebtedness representing secured or
unsecured obligations of LGII ("Debt Securities"). Debt Securities will be fully
and unconditionally guaranteed ("Guarantees") by The Loewen Group Inc., a
corporation organized under the laws of British Columbia, Canada ("Loewen" and,
together with its subsidiaries and associated entities, the "Company"). LGII is
a wholly owned subsidiary of Loewen.

Certain specific terms of the particular Debt Securities in respect of which
this Prospectus is being delivered will be set forth in an accompanying
supplement to this Prospectus (a "Prospectus Supplement"), which will describe,
without limitation and where applicable, the specific designation and
denomination, the aggregate principal amount being offered, whether such Debt
Securities are secured, maturity, interest rate (which may be fixed or
variable), place or places where interest on such Debt Securities will be
payable, terms of conversion, sinking fund provisions, redemption provisions,
voting rights, restrictions on transferability, listing or application for
listing on a securities exchange or interdealer quotation system, any right of
LGII to defer payment of interest on the Debt Securities and the maximum length
of such deferral period, and any other rights, privileges, limitations or
restrictions relating to the Debt Securities.

The aggregate offering price to the public of the Debt Securities will be
limited to $500,000,000 (or its equivalent, based on the applicable exchange
rate at the time of issue, if Debt Securities are offered for consideration
denominated in one or more foreign currencies as shall be designated by LGII).
The Debt Securities may be denominated in United States dollars or, at the
option of LGII if so specified in the applicable Prospectus Supplement, in one
or more foreign currencies. The Debt Securities may be issued in registered form
or bearer form, or both. If so specified in the applicable Prospectus
Supplement, Debt Securities of a series may be issued in whole or in part in the
form of one or more temporary or permanent global securities.

The Debt Securities may be sold to or through underwriters, through dealers
or agents or directly to purchasers. See "Plan of Distribution." The names of
any underwriters, dealers or agents involved in the sale of the Debt Securities
in respect of which this Prospectus is being delivered and any applicable fee,
commission or discount arrangements with them will be set forth in a Prospectus
Supplement. See "Plan of Distribution" for possible indemnification arrangements
for dealers, underwriters and agents.
<PAGE>
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
AVAILABLE INFORMATION

Loewen and LGII have filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with any
amendments, exhibits, annexes and schedules thereto, the "Registration
Statement") pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations thereunder, with respect to the Debt
Securities and the Guarantees. This Prospectus does not include all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Statements made in the Prospectus as to the contents of any contract, agreement
or other document referred to in the Registration Statement are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents heretofore filed by Loewen with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act (File No. 1-12163) are
hereby incorporated herein by reference: (a) Loewen's (i) Annual Report on Form
10-K for the year ended December 31, 1996, filed March 31, 1997 and (ii) Current
Reports on Form 8-K dated January 7, 1997, January 8, 1997, March 5, 1997, March
24, 1997 and May 2, 1997; and (b) the description of the Common Shares contained
in Loewen's Current Report on Form 8-K dated May 2, 1997. All documents filed by
Loewen pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Prospectus and prior to the termination of the offering of the
Debt Securities shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.

Loewen will provide without charge to each person to whom this Prospectus is
delivered, upon the written or oral request of such person, a copy of any or all
of the foregoing documents incorporated by reference herein (other than exhibits
to any such document unless such exhibits are specifically incorporated by
reference into such document). Requests for such copies should be directed to
the Corporate

2
<PAGE>
Secretary of Loewen, 4126 Norland Avenue, Burnaby, British Columbia, Canada V5G
3S8; telephone number (604) 299-9321.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

The Prospectus, as amended and supplemented, and certain documents
incorporated by reference herein contain or may contain both statements of
historical fact and "forward-looking statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. Examples of
forward-looking statements include: (i) projections of revenue, earnings,
capital structure and other financial items, (ii) statements of the plans and
objectives of the Company or its management, (iii) statements of future economic
performance and (iv) assumptions underlying statements regarding the Company or
its business. Important factors, risks and uncertainties that could cause actual
results to differ materially from any forward-looking statements ("Cautionary
Statements") are disclosed herein and in certain documents incorporated by
reference herein. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.

FINANCIAL INFORMATION

The consolidated financial statements of Loewen, its subsidiaries and
associated entities (the "Company") included in Loewen's reports filed pursuant
to the Exchange Act are prepared in accordance with accounting principles
generally accepted in Canada ("Canadian GAAP"). Differences between Canadian
GAAP and accounting principles generally accepted in the United States ("U.S.
GAAP"), as applicable to the Company, are explained in Note 21 to the
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 (the "1996 Consolidated Financial
Statements").

THE COMPANY

Loewen is a holding company that, as at April 30, 1997, had approximately
900 direct and indirect subsidiaries, including LGII. LGII is a holding company
for all of the Company's United States operations (excluding the Company's
operations in Puerto Rico). Loewen is a holding company for all of the Company's
operations outside of the United States (including Puerto Rico). All of Loewen's
subsidiaries are operating subsidiaries except for fourteen subsidiaries that
are structured as financing vehicles. In addition, LGII is the general partner
of Loewen Group Capital, L.P. ("LGC"). The Monthly Income Preferred Securities
("MIPS") issued by LGC are publicly held and are traded on the New York Stock
Exchange.

3
<PAGE>
LGII was incorporated in 1987 under the laws of the State of Delaware.
LGII's principal executive officers are located at 50 East RiverCenter
Boulevard, Covington, Kentucky 41011; telephone (606) 431-6663. Loewen was
incorporated in 1985 under the laws of British Columbia, Canada. Loewen's
principal executive offices are located at 4126 Norland Avenue, Burnaby, British
Columbia, Canada, V5G 3S8; telephone (604) 299-9321.

USE OF PROCEEDS

Unless otherwise indicated in the applicable Prospectus Supplement, the net
proceeds received by LGII from the sale of any Debt Securities offered hereby
will be used for working capital and general corporate purposes, including
acquisitions. Any specific allocation of the proceeds to a particular purpose
that has been made at the date of any Prospectus Supplement will be described
therein.

4
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION

THE LOEWEN GROUP INC.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995(1) 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Revenue........................................ $ 908,385 $ 598,493 $ 417,328 $ 303,011 $ 218,907
Gross margin................................... 337,571 225,362 158,854 115,118 83,708
Earnings from operations....................... 204,105 117,607 95,113 65,697 50,563
Net earnings (loss)............................ 63,906 (76,684) 38,494 28,182 19,766
Basic earnings (loss) per share................ 0.97 (1.69) 0.97 0.77 0.59
Fully diluted earnings (loss) per share(2)..... 0.97 (1.69) 0.97 0.76 0.58
Ratio of earnings to fixed charges(3).......... 1.9x -- 2.5x 2.9x 2.6x
Ratio of earnings to fixed charges and
preferred share dividends(4)................. 1.7x -- -- -- --
Aggregate dividends declared per Common
Share........................................ 0.200 0.050 0.070 0.045 0.030
</TABLE>

<TABLE>
<CAPTION>
AS AT DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT OPERATING INFORMATION)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Total assets................................... $ 3,496,939 $ 2,262,980 $ 1,326,275 $ 913,661 $ 675,111
Total long-term debt(5)........................ 1,508,221 934,509 516,654 341,977 246,715
Preferred securities of subsidiary............. 75,000 75,000 75,000 -- --
Shareholders' equity........................... 1,048,200 614,682 411,139 325,890 236,317

- ------------------------------
(1) Certain of the comparative figures have been reclassified to conform to the
presentation adopted in 1996.

5
<PAGE>
(3) The 1995 loss is not sufficient to cover fixed charges by a total of
approximately $126.6 million and as such the ratio of earnings to fixed
charges has not been computed.

(4) The Company did not pay any preferred share dividends from 1992-1995.

(5) Total long-term debt comprises long-term debt, including current portion.

(6) The numbers of locations for 1994 and 1993 include adjustments and
consolidations related to prior periods.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995(1) 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Revenue........................................ $ 909,137 $ 598,493 $ 417,479 $ 308,402 $ 239,452
Earnings from operations....................... 198,869 117,376 94,758 66,711 54,838
Earnings (loss) before cumulative effect of
change in accounting principles.............. 64,559 (75,800) 39,652 28,912 21,330
Fully diluted earnings (loss) per share before
cumulative effect of change in accounting
principles................................... 0.96 (1.67) 0.98 0.77 0.62
Ratio of earnings to fixed charges(2).......... 1.8x -- 2.4x 2.9x 2.6x
Ratio of earnings to fixed charges and
preferred share dividends(3)................. 1.7x -- -- -- --
Aggregate dividends declared per Common
Share........................................ 0.200 0.050 0.070 0.047 0.033
</TABLE>

<TABLE>
<CAPTION>
AS AT DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Total assets................................... $ 3,768,021 $ 2,345,874 $ 1,329,928 $ 921,342 $ 702,096
Total long-term debt(4)........................ 1,508,221 894,509 516,654 341,977 256,577
Preferred securities of subsidiary............. 75,000 75,000 75,000 -- --
Shareholders' equity........................... 1,026,110 519,006 385,950 299,059 245,472
</TABLE>

- ------------------------------
(1) Certain of the comparative figures have been reclassified to conform to the
presentation adopted in 1996.

(2) The 1995 loss is not sufficient to cover fixed charges by a total of
approximately $128.3 million and as such the ratio of earnings to fixed
charges has not been computed.

(3) The Company did not pay any preferred share dividends from 1992-1995.

(4) Total long-term debt comprises long-term debt, including current portion.

6
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.

Set forth below is certain selected consolidated financial information
relating to LGII. The selected consolidated financial information for each of
the years in the five year period ended December 31, 1996 is derived from
audited consolidated financial statements of LGII, which have been prepared in
accordance with Canadian GAAP.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Revenue........................................ $ 839,352 $ 540,825 $ 365,458 $ 263,493 $ 190,047
Gross margin................................... 302,078 198,867 136,639 97,328 69,675
Earnings from operations....................... 179,185 75,715 84,390 59,462 44,910
Net earnings (loss)(1)......................... (4,868) (127,353) 7,491 10,671 9,766

AS AT DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Current assets................................. $ 223,388 $ 184,289 $ 96,943 $ 81,028 $ 57,145
Non-current assets............................. 2,865,005 1,776,425 998,753 686,260 507,545
Total assets................................... 3,088,393 1,960,714 1,095,696 767,288 564,690
Current liabilities............................ 156,290 221,555 81,472 36,722 27,242
Long-term debt, excluding current portion...... 1,308,838 730,355 372,887 243,290 176,073
Other non-current liabilities.................. 1,335,615 891,354 396,534 324,964 251,734
Preferred securities of subsidiary............. 75,000 75,000 75,000 -- --
Shareholders' equity........................... 212,650 42,450 169,803 162,312 109,641
</TABLE>

- ------------------------------
(1) Losses incurred during the year ended December 31, 1995 are as a result of
LGII recording the litigation settlements and additional intercompany
charges payable to Loewen. These intercompany charges are eliminated in the
consolidated financial statements of the Company.

7
<PAGE>
DESCRIPTION OF DEBT SECURITIES

Debt Securities offered hereby, which may consist of notes, debentures and
other evidences of indebtedness, may be issued in one or more series and will be
fully and unconditionally guaranteed by Loewen. Each series of debt securities
will be issued under an indenture by and among LGII, Loewen, as guarantor and
the trustee identified therein (the "Trustee"). A form of the indenture to be
entered into with respect to a series of Debt Securities (each, an "Indenture")
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.

The statements herein relating to the Debt Securities, the Guarantees and
the Indenture are summaries and do not purport to be complete. Such summaries
are subject to the detailed provisions of the applicable Indenture, to which
reference is hereby made for a full description of such provisions, including
the definitions therein of certain terms capitalized in this Prospectus.
Whenever defined terms of the Indenture are referred to herein or in a
Prospectus Supplement, such defined terms are incorporated herein or therein by
reference as part of the statement made and such statement shall be qualified in
its entirety by such reference.

GENERAL

Reference is made to the Prospectus Supplement which accompanies this
Prospectus for a description of the specific series of Debt Securities being
offered thereby, including as applicable: (1) the specific designation of such
Debt Securities; (2) any limit upon the aggregate principal amount of such Debt
Securities; (3) the date or dates on which the principal of such Debt Securities
will mature or the method of determining such date or dates; (4) the interest
rate or rates (which may be fixed or variable) or the method of calculating such
rate or rates; (5) the date or dates from which interest will accrue or the
method by which such date or dates will be determined; (6) the date or dates on
which interest will be payable and the record date or dates therefor; (7)
whether such Debt Securities are secured or unsecured, (8) the place or places
where principal of, premium, if any, and interest, if any, on such Debt
Securities will be payable; (9) the period or periods within which, the price or
prices at which, the currency or currencies (including currency units) in which,
and the terms and conditions upon which, such Debt Securities may be redeemed,
in whole or in part, at the option of LGII; (10) any obligation of LGII to
redeem or purchase such Debt Securities pursuant to any sinking fund or
analogous provisions, upon the happening of specified events, or at the option
of a holder thereof and the period or periods within which, the price or prices
at which and the terms and conditions upon which, such Debt Securities shall be
redeemed or purchased, in whole or in part, pursuant to such obligations; (11)
the denominations in which such Debt Securities are authorized to be issued;
(12) the currency or currency units for which Debt Securities may be purchased
or in which Debt Securities may be denominated and/or the currency or currency
units in which principal of, premium, if any, and/or interest, if any, on such
Debt Securities will be payable or redeemable and whether LGII or the holders of
any such Debt Securities may elect to receive payments in respect of such Debt
Securities in a currency or currency units other than that in which such Debt
Securities are stated to be payable or redeemable; (13) if other than the
principal amount thereof, the portion of the principal amount of such Debt
Securities which will be payable upon declaration of the acceleration of the
maturity thereof or the method by which such portion shall be determined; (14)
the person to whom any interest on any such Debt Security shall be payable if
other than the person in whose name such Debt Security is registered on the
applicable record date; (15) any addition to, or modification or deletion of,
any Event of Default or any covenant of Loewen specified in the Indenture with
respect to such Debt Securities; (16) the application of any means of defeasance
or covenant defeasance that may be specified for such Debt Securities; (17) any
provisions relating to the exchange or conversion of such Debt Securities; and
(18) any other material terms pertaining to such Debt Securities or the related
Guarantees. Unless otherwise specified in the applicable Prospectus Supplement,
the Debt Securities will not be listed on any securities exchange or interdealer
quotation system.

8
<PAGE>
tax considerations, applicable to such Debt Securities and to payment on and
transfer and exchange of such Debt Securities will be described in the
applicable Prospectus Supplement.

If the purchase price of any Debt Securities is payable in one or more
foreign currencies or currency units of if any Debt Securities are denominated
in one or more foreign currencies or currency units or if the principal of,
premium, if any, or interest, if any, on any Debt Securities is payable in one
or more foreign currencies or currency units, the restrictions, elections,
certain United States federal income tax considerations, specific terms and
other information with respect to such issue of Debt Securities and such foreign
currency or currency units will be set forth in the applicable Prospectus
Supplement.

Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities will not be convertible or exchangeable into any other securities. If
any series of Debt Securities is convertible or exchangeable into other
securities, the applicable Prospectus Supplement will include a description of
such securities, including as applicable (a) the title, designation, maturity
and denomination, (b) any dividend, conversion, sinking fund, redemption,
voting, liquidation and preemption rights, (c) any restrictions on
transferability by the holders or on repurchase or redemption by the issuer, and
(d) any other special terms pertaining to such securities.

DENOMINATIONS, PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE

Debt Securities generally will be issued in registered form and in
denominations of $1,000 and integral multiples of $1,000. Unless otherwise
provided in the applicable Prospectus Supplement, payments in respect of Debt
Securities will be made, subject to any applicable laws and regulations, in the
designated currency at the office or agency of LGII maintained for that purpose
as Loewen may designate from time to time, except that, at the option of LGII,
interest payments, if any, on Debt Securities in registered form may be made (i)
by checks mailed by the Trustee to the holders of Debt Securities entitled
thereto at their registered addresses or (ii) by wire transfer to an account
maintained by the person entitled thereto, as specified in the Register. Unless
otherwise indicated in an applicable Prospectus Supplement, payment of any
installment of interest on Debt Securities in registered form will be made to
the person in whose name such Debt Security is registered at the close of
business on the regular record date for such interest.

REDEMPTION

A series of Debt Securities may be subject to redemption at the option of
LGII, in whole or in part, or may not be redeemable prior to maturity. In
addition, LGII may be obligated upon the occurrence of specified events or at
the option of a holder of Debt Securities, to redeem or repurchase all or part
of a series of Debt Securities. Any such provisions will be set forth in the
applicable Prospectus Supplement.

RANKING

Each series of Debt Securities and the related Guarantees will rank equally
and PARI PASSU as to the right of payment of principal and interest, if any,
with each other series of the Debt Securities and Guarantees and with all other
Senior Debt (defined herein) of LGII and Loewen, respectively. LGII and Loewen
are parties to a collateral trust arrangement, described below (the "Collateral
Agreement"), pursuant to which, so long as the Indebtedness (defined herein)
subject to the Collateral Agreement is secured, the Debt Securities of a series
will be secured as described herein. However, unless the applicable

9
<PAGE>
Prospectus Supplement provides otherwise, the holders of Debt Securities will
not have an independent right to require the Lien secured by the Collateral
(defined herein) to remain in place or to require any other security for the
Debt Securities. As at December 31, 1996, the aggregate amount of outstanding
Pari Passu Indebtedness (defined herein) was approximately $1.3 billion. See
"--Collateral Trust Arrangement."

Debt Securities will be effectively subordinated in right of payment to all
existing and future liabilities, including trade payables, of the subsidiaries
of LGII.

10
<PAGE>
Owned Subsidiary shall, in each case, be an incurrence of Indebtedness by Loewen
or LGII, as the case may be, subject to the other provisions hereof.

"Pari Passu Indebtedness" means Indebtedness of Loewen or LGII which ranks
PARI PASSU in right of payment with the Debt Securities.

"Senior Debt" means Indebtedness which is not (i) Indebtedness of Loewen to
any Subsidiary or (ii) Indebtedness of Loewen which by its terms is subordinate
or junior in any respect to any other Indebtedness or other obligation of
Loewen.

COLLATERAL TRUST ARRANGEMENT

MERGER, SALE OF ASSETS, ETC.

11
<PAGE>
In connection with any consolidation, merger, transfer, lease, assignment or
other disposition contemplated hereby, Loewen shall deliver or cause to be
delivered to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an officers' certificate and an opinion of counsel, each stating that
such consolidation, merger, transfer, lease, assignment or other disposition and
the supplemental indenture in respect thereof comply with the requirements under
the Indentures.

"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default. See "--Events of Default."

CERTAIN COVENANTS

LGII and Loewen make the following covenants, among others, in the
Indentures:

LIMITATION ON INDEBTEDNESS. Loewen will not, and will not permit any of its
Restricted Subsidiaries (including, without limitation, LGII) to, directly or
indirectly, create, incur, issue, assume, guarantee or in any manner become
directly or indirectly liable, contingently or otherwise, for the payment of
(collectively, to "incur") any Indebtedness (including, without limitation, any
Acquired Indebtedness, defined herein) other than Permitted Indebtedness.
Notwithstanding the foregoing limitations, Loewen and LGII (and any Wholly-Owned
Subsidiary with respect to Seller Financing Indebtedness, defined herein) will
be permitted to incur Indebtedness (including, without limitation, Acquired
Indebtedness) if at the time of such

12
<PAGE>
incurrence, and after giving PRO FORMA effect thereto, the Consolidated Fixed
Charge Coverage Ratio (defined herein) of Loewen is at least equal to 2.25 : 1.

"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
person, the ratio of the aggregate amount of Consolidated Cash Flow Available
for Fixed Charges of such person for the full fiscal quarter immediately
preceding the date of the transaction (the "Transaction Date") giving rise to
the need to calculate the Consolidated Fixed Charge Coverage Ratio (such full
fiscal quarter period being referred to herein as the "Prior Quarter") to the
aggregate amount of Consolidated Fixed Charges of such person for the Prior
Quarter. In addition to and without limitation of the foregoing, for purposes of
this definition, "Consolidated Cash Flow Available for Fixed Charges" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a PRO
FORMA basis for the period of such calculation to, without duplication, (a) the
incurrence of any Indebtedness of such person or any of its Restricted
Subsidiaries (and the application of the net proceeds thereof) during the period
commencing on the first day of the Prior Quarter to and including the
Transaction Date (the "Reference Period"), including, without limitation, the
incurrence of the Indebtedness giving rise to the need to make such calculation
(and the application of the net proceeds thereof), as if such incurrence (and
application) occurred on the first day of the Reference Period, and (b) any
Material Asset Sales or Material Asset Acquisitions (including, without
limitation, any Material Asset Acquisition giving rise to the need to make such
calculation as a result of such person or one of its Restricted Subsidiaries
(including any person who becomes a Restricted Subsidiary as a result of the
Material Asset Acquisition) incurring, assuming or otherwise being liable for
Acquired Indebtedness) occurring during the Reference Period, as if such
Material Asset Sale or Material Asset Acquisition occurred on the first day of
the Reference Period. Furthermore, in calculating "Consolidated Fixed Charges"
for purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (i) interest on outstanding
Indebtedness determined on a fluctuating basis as at the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate PER ANNUM equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (ii) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Reference Period. If such person or any of its Restricted Subsidiaries directly
or indirectly guarantees Indebtedness of a third person, the above clause shall
give effect to the incurrence of such guaranteed Indebtedness as if such person
or such Restricted Subsidiary had directly incurred or otherwise assumed such
guaranteed Indebtedness. For purposes of this calculation, a "Material Asset
Acquisition" is an Asset Acquisition which is deemed by such person to be
material for such purposes or which has a purchase price of $30,000,000 or more
and a "Material Asset Sale" is one or more Asset Sales which relate to assets
with an aggregate value of more than $30,000,000. For purposes of this
definition, "Consolidated Cash Flow Available for Fixed Charges" means, with
respect to any person for any period, (A) the sum of, without duplication, the
amounts for such period, taken as a single accounting period, of (a)
Consolidated Net Income, (b) Consolidated Non-cash Charges, (c) Consolidated
Interest Expense and (d) Consolidated Income Tax Expense LESS (B) any non-cash
items increasing Consolidated Net Income for such period.

"Permitted Indebtedness" means, without duplication, each of the following:
(a) the Debt Securities and Indebtedness of Loewen evidenced by the Guarantees;
(b) Indebtedness of Loewen and its Restricted Subsidiaries (including, without
limitation, LGII) outstanding on the Issue Date (other than Indebtedness under
the Credit Agreements); (c) Indebtedness of Loewen or LGII, as the case may be,
under the Credit Agreements in an aggregate principal amount at any one time
outstanding not to exceed $750,000,000 less the Net Proceeds of any Asset Sale
that are applied to repay, and permanently reduce the commitments under, the
Credit Agreements (as required by the terms thereof); (d) (i) Interest Rate
Protection Obligations of Loewen covering Indebtedness of Loewen and its
Restricted Subsidiaries (including, without limitation, LGII); (ii) Interest
Rate Protection Obligations of any Restricted Subsidiary of Loewen

13
<PAGE>
covering Indebtedness of such Restricted Subsidiary; PROVIDED, HOWEVER, that, in
the case of either clause (i) or (ii), (x) any Indebtedness to which any such
Interest Rate Protection Obligations relate bears interest at fluctuating
interest rates and is otherwise permitted to be incurred under this covenant and
(y) the notional principal amount of any such Interest Rate Protection
Obligations does not exceed the principal amount of the Indebtedness to which
such Interest Rate Protection Obligations relate; (e) Indebtedness under
Currency Agreements; PROVIDED, HOWEVER, that in the case of Currency Agreements
which relate to Indebtedness, such Currency Agreements do not increase the
Indebtedness of Loewen and its Restricted Subsidiaries (including, without
limitation, LGII) outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder; (f) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; PROVIDED, HOWEVER, that
such Indebtedness is extinguished within two business days of incurrence; (g)
Indebtedness incurred in respect of performance bonds or letters of credit in
lieu thereof provided in the ordinary course of business; (h) Indebtedness of
Loewen and its Restricted Subsidiaries (including, without limitation, LGII)
represented by letters of credit for the account of Loewen and its Restricted
Subsidiaries in order to provide security for workers' compensation claims,
payment obligations in connection with self-insurance or similar requirements in
the ordinary course of business; (i) Indebtedness of Loewen and its Restricted
Subsidiaries (including, without limitation, LGII) in addition to that described
in clauses (a) through (h) above, in an aggregate principal amount outstanding
at any time not exceeding $5,000,000; and (j) (i) Indebtedness of Loewen the
proceeds of which are used solely to refinance (whether by amendment, renewal,
extension or refunding) Indebtedness of Loewen and its Restricted Subsidiaries
(including, without limitation, LGII) and (ii) Indebtedness of any Restricted
Subsidiary of Loewen the proceeds of which are used solely to refinance (whether
by amendment, renewal, extension or refunding) Indebtedness of such Restricted
Subsidiary, in each case other than the Indebtedness refinanced, redeemed or
retired on the Issue Date or Indebtedness incurred under clause (c), (d), (e),
(f), (g), (h), or (i) of this covenant; PROVIDED, HOWEVER, that (x) the
principal amount of Indebtedness incurred pursuant to this clause (j) (or, if
such Indebtedness provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration of the maturity
thereof, the original issue price of such Indebtedness) shall not exceed the sum
of the principal amount of Indebtedness so refinanced, plus the amount of any
premium required to be paid in connection with such refinancing pursuant to the
terms of such Indebtedness or the amount of any premium reasonably determined by
the Board of Directors of Loewen as necessary to accomplish such refinancing by
means of a tender offer or privately negotiated purchase, plus the amount of
expenses in connection therewith, (y) in the case of Indebtedness incurred by
Loewen pursuant to this clause (j) to refinance Pari Passu Indebtedness, such
Indebtedness constitutes Pari Passu Indebtedness.

"Seller Financing Indebtedness" means a purchase money Indebtedness issued
to the seller of a business or other assets for, and not in excess of, the
purchase price thereof.

LIMITATION ON RESTRICTED PAYMENTS. Loewen will not, and will not permit any
of its Restricted Subsidiaries (including, without limitation, LGII) to,
directly or indirectly:

(a) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of Loewen or any of its Restricted
Subsidiaries or any payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of Loewen or any of its Restricted
Subsidiaries (other than (x) dividends or distributions payable solely in
Capital Stock of Loewen (other than Redeemable Capital Stock) or in options,
warrants or other rights to purchase Capital Stock of Loewen (other than
Redeemable Capital Stock) and (y) dividends or other distributions to the
extent declared or paid to Loewen or any Wholly-Owned Subsidiary of Loewen),

(b) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of Loewen or any of its Restricted Subsidiaries (other
than any such Capital Stock of a Wholly-Owned Subsidiary of Loewen),

(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking

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fund payment or other Stated Maturity, any Indebtedness that is subordinate
or junior in right of payment to the Debt Securities or Pari Passu
Indebtedness (other than any such subordinated or Pari Passu Indebtedness
owned by Loewen or a Wholly-Owned Subsidiary of Loewen), or

(d) make any Investment (other than any Permitted Investment, defined
herein) in any person (such payments or Investments described in the
preceding clauses (a), (b), (c) and (d) are collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to
the proposed Restricted Payment (the amount of any such Restricted Payment,
if other than cash, shall be the Fair Market Value on the date of such
Restricted Payment of the asset(s) proposed to be transferred by Loewen or
such Restricted Subsidiary, as the case may be, pursuant to such Restricted
Payment), (A) no Default or Event of Default shall have occurred and be
continuing, (B) immediately prior to and after giving effect to such
Restricted Payment, Loewen would be able to incur $1.00 of additional
Indebtedness pursuant to the covenant described under "--Limitation on
Indebtedness" (assuming a market rate of interest with respect to such
additional Indebtedness) and (C) the aggregate amount of all Restricted
Payments declared or made from and after the Measurement Date would not
exceed the sum of (1) 50% of the aggregate Consolidated Net Income (defined
herein) of Loewen accrued on a cumulative basis during the period beginning
on the first day of the fiscal quarter of Loewen during which the
Measurement Date occurs and ending on the last day of the fiscal quarter of
Loewen immediately preceding the date of such proposed Restricted Payment,
which period shall be treated as a single accounting period (or, if such
aggregate cumulative Consolidated Net Income of Loewen for such period shall
be a deficit, minus 100% of such deficit) PLUS (2) the aggregate net cash
proceeds received by Loewen or LGII (without duplication) either (x) as
capital contributions to Loewen or LGII (without duplication) after the
Measurement Date from any person (other than Loewen, LGII or a Restricted
Subsidiary of Loewen or LGII, as the case may be) or (y) from the issuance
or sale of Capital Stock (excluding Redeemable Capital Stock, but including
Capital Stock issued upon the conversion of convertible Indebtedness or from
the exercise of options, warrants or rights to purchase Capital Stock (other
than Redeemable Capital Stock)) of Loewen or LGII (without duplication) to
any person (other than to Loewen, LGII or a Restricted Subsidiary of Loewen
or LGII, as the case may be) after the Measurement Date PLUS (3) in the case
of the disposition or repayment of any Investment constituting a Restricted
Payment made after the Measurement Date (excluding any Investment described
in clause (v) of the following paragraph), an amount equal to the lesser of
the return of capital with respect to such Investment and the cost of such
Investment less, in either case, the cost of the disposition of such
Investment PLUS (4) the sum of $15,000,000. For purposes of the preceding
clause (C)(2), the value of the aggregate net proceeds received by Loewen or
LGII (without duplication) upon the issuance of Capital Stock upon the
conversion of convertible Indebtedness or upon the exercise of options,
warrants or rights will be the net cash proceeds received upon the issuance
of such Indebtedness, options, warrants or rights plus the incremental cash
amount received by Loewen or LGII (without duplication) upon the conversion
or exercise thereof.

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excluded from clause (C)(2) of the preceding paragraph; or (2) Indebtedness of
Loewen or LGII issued to any person (other than a Related Obligor), so long as
such Indebtedness is Pari Passu Indebtedness or Indebtedness that is subordinate
or junior in right of payment to the Debt Securities and the Guarantees, if
applicable, in the same manner and at least to the same extent as the
Indebtedness so purchased, exchanged, redeemed, acquired or retired; (iv) so
long as no Default or Event of Default shall have occurred and be continuing,
any redemption, repurchase or other acquisition or retirement of Pari Passu
Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to Loewen or LGII from any
person (other than a Related Obligor) or (y) issue and sale of (1) Capital Stock
(other than Redeemable Capital Stock) of Loewen or LGII to any person (other
than a Related Obligor); PROVIDED, HOWEVER, that the amount of any such net
proceeds that are utilized for any such redemption, repurchase or other
acquisition or retirement shall be excluded from clause (C)(2) of the preceding
paragraph; or (2) Indebtedness of Loewen or LGII issued to any person (other
than a Related Obligor), so long as such Indebtedness is Pari Passu Indebtedness
or Indebtedness that is subordinate or junior in right of payment to the Debt
Securities and the Guarantees in the same manner and at least to the same extent
as the Indebtedness so purchased, exchanged, redeemed, acquired or retired; (v)
Investments constituting Restricted Payments made as a result of the receipt of
consideration that consists of cash or Cash Equivalents from any Asset Sale made
pursuant to and in compliance with the covenant described under "--Disposition
of Proceeds of Asset Sales"; (vi) so long as no Default or Event of Default has
occurred and is continuing, repurchases by Loewen of Common Stock of Loewen from
employees of Loewen or their authorized representatives upon the death,
disability or termination of employment of such employees, in an aggregate
amount not exceeding $10,000,000 in any calendar year; (vii) Investments
constituting Restricted Payments that are permitted by subparagraphs (iv) and
(v) of the proviso to the covenant described under "--Limitation on Transactions
with Interested Persons"; and (viii) the declaration or the payment of dividends
on, or the scheduled purchase or redemption of, the Preferred Securities of a
Special Finance Subsidiary or the Series C Preferred Shares, of Loewen. In
computing the amount of Restricted Payments previously made for purposes of
clause (C) of the preceding paragraph, Restricted Payments made under the
preceding clauses (v), (vi) and (vii) shall be included and those under clauses
(i), (ii), (iii), (iv) and (viii) shall not be so included.

"Consolidated Net Income" means, with respect to any person, for any period,
the consolidated net income (or loss) of such person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses, (ii) the portion of net
income (but not losses) of such person and its Restricted Subsidiaries allocable
to minority interests in unconsolidated persons to the extent that cash
dividends or distributions have not actually been received by such person or one
of its Restricted Subsidiaries, (iii) net income (or loss) of any person
combined with such person or one of its Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(iv) any gain or loss realized upon the termination of any employee pension
benefit plan, on an after-tax basis, (v) gains or losses in respect of any Asset
Sales by such person or one of its Restricted Subsidiaries, and (vi) the net
income of any Restricted Subsidiary of such person to the extent that the
declaration of dividends or similar distributions by that Restricted Subsidiary
of that income is not at the time permitted, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders.

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expenses in the ordinary course of business for bona fide business purposes of
Loewen and its Restricted Subsidiaries; (v) other loans or advances to officers,
employees or consultants of Loewen and its Restricted Subsidiaries in the
ordinary course of business for bona fide business purposes of Loewen and its
Restricted Subsidiaries not in excess of $10,000,000 in the aggregate at any one
time outstanding; (vi) Investments in evidences of Indebtedness, securities or
other property received from another person by Loewen or any of its Restricted
Subsidiaries in connection with any bankruptcy proceeding or by reason of a
composition or readjustment of debt or a reorganization of such person or as a
result of foreclosure, perfection or enforcement of any Lien in exchange for
evidences of Indebtedness, securities or other property of such person held by
Loewen or any of its Restricted Subsidiaries, or for other liabilities or
obligations of such other person to Loewen or any of its Restricted Subsidiaries
that were created, in accordance with the terms of the Indenture; (vii)
Investments in Interest Rate Protection Agreements on commercially reasonable
terms entered into by Loewen or any of its Restricted Subsidiaries in the
ordinary course of business in connection with the operations of Loewen and its
Restricted Subsidiaries to hedge against fluctuations in interest rates; and
(viii) Investments of funds received by Loewen or its Restricted Subsidiaries
(including, without limitation, LGII) in the ordinary course of business, which
funds are required to be held in trust for the benefit of others by Loewen or
such Restricted Subsidiary, as the case may be, and which funds do not
constitute assets or liabilities of Loewen or such Restricted Subsidiary; (ix)
Investments not in excess of $50,000,000 in the aggregate in other Unrestricted
Subsidiaries which are engaged in the insurance business; and (x) Investments
not in excess of $50,000,000 in persons (other than Wholly-Owned Subsidiaries)
engaged in businesses incidental to the funeral home, cemetery and cremation
businesses of Loewen and its Restricted Subsidiaries.

"Related Obligor" means Loewen or a Restricted Subsidiary of Loewen.

LIMITATION ON LIENS. Loewen will not, and will not permit any of its
Restricted Subsidiaries (including, without limitation, LGII) to, create, incur,
assume or suffer to exist any Liens of any kind against or upon any of its
property or assets, or any proceeds therefrom where the aggregate amount of
Indebtedness secured by any such Liens, together with the aggregate amount of
property subject to any Sale-Leaseback Transactions of Loewen and its Restricted
Subsidiaries (other than Permitted Sale-Leaseback Transactions, defined herein),
exceeds 10% of Loewen's Consolidated Net Worth, unless (x) in the case of Liens
securing Indebtedness that is subordinate or junior in right of payment to the
Debt Securities, the Debt Securities are secured by a Lien on such property,
assets or proceeds that is senior in priority to such Liens and (y) in all other
cases, the Debt Securities are equally and ratably secured except for (a) Liens
existing as at the Measurement Date; (b) Liens securing the Debt Securities or
the Guarantees, if applicable; (c) Liens in favor of Loewen, LGII or any
Wholly-Owned Subsidiary; (d) Liens securing Indebtedness which is incurred to
refinance Indebtedness which has been secured by a Lien permitted under the
provisions of the Indenture and which has been incurred in accordance with the
provisions of the Indenture; PROVIDED, HOWEVER, that such Liens do not extend to
or cover any property or assets of Loewen or any of its Restricted Subsidiaries
not securing the Indebtedness so refinanced; and (e) Permitted Liens.

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"Permitted Liens" means the following types of Liens: (a) Liens for taxes,
assessments or governmental charges or claims either (i) not delinquent or (ii)
contested in good faith by appropriate proceedings and as to which Loewen or any
of its Restricted Subsidiaries (including, without limitation, LGII) shall have
set aside on its books such reserves as may be required pursuant to Canadian
GAAP; (b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or being
contested in good faith, if such reserve or other appropriate provision, if any,
as shall be required by Canadian GAAP shall have been made in respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, governmental contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (d) judgment Liens not giving rise to an
Event of Default so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired; (e) easements,
rights-of-way, zoning restrictions and other similar charges or encumbrances in
respect of real property not interfering in any material respect with the
ordinary conduct of the business of Loewen or any of its Restricted Subsidiaries
(including, without limitation, LGII); (f) any interest or title of a lessor
under any Capitalized Lease Obligation or operating lease; (g) any Lien existing
on any asset of any corporation at the time such corporation becomes a
Restricted Subsidiary and not created in contemplation of such event; (h) any
Lien on any asset securing Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring or constructing such asset;
PROVIDED, that such Lien attaches to such asset concurrently with or within 18
months after the acquisition or completion thereof; (i) any Lien on any asset of
any corporation existing at the time such corporation is merged or consolidated
with or into Loewen or a Restricted Subsidiary and not created in contemplation
of such event; (j) any Lien existing on any asset prior to the acquisition
thereof by Loewen or a Restricted Subsidiary and not created in contemplation of
such acquisition; (k) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods; and (l) any extension, renewal or replacement of any Lien
permitted by the preceding clauses (g), (h), (i) or (j) hereof in respect of the
same property or assets theretofore subject to such Lien in connection with the
extension, renewal or refunding of the Indebtedness secured thereby; PROVIDED
that (i) such Lien shall attach solely to the same property or assets and (ii)
such extension, renewal or refunding of such Indebtedness shall be without
increase in the principal remaining unpaid as at the date of such extension,
renewal or refunding.

"Permitted Sale-Leaseback Transactions" means any Sale-Leaseback Transaction
with respect to property acquired or constructed after the Issue Date; PROVIDED
that (a) the Attributable Value of such Sale-Leaseback Transaction shall be
deemed to be Indebtedness of Loewen or such Restricted Subsidiary, as the case
may be, and (b) after giving PRO FORMA effect to any such Sale-Leaseback
Transaction and the foregoing clause (a), Loewen would be able to incur $1.00 of
additional Indebtedness pursuant to the covenant described under "--Limitation
on Indebtedness" (assuming a market rate of interest with respect to such
additional Indebtedness). For purposes of the foregoing, "Attributable Value"
means, as to any lease other than a Capitalized Lease Obligation and at any date
as of which the amount thereof is to be determined, the total net amount of rent
required to be paid by such person under a lease during the initial term thereof
as determined in accordance with Canadian GAAP, discounted from the last date of
such initial term to the date of determination at a rate per annum equal to the
discount rate which would be applicable to a Capitalized Lease Obligation with a
like term in accordance with Canadian GAAP. The net amount of rent required to
be paid under any such lease for any such period shall be the aggregate amount
of rent payable by the lessee with respect to such period after excluding
amounts required to be paid on account of insurance, taxes, assessments,
utility, operating and labor costs and similar charges. In the case of any lease
which is terminable by the lessee upon the payment of a penalty, such net amount
shall also include the amount of such penalty, but no rent shall be considered
as required to be paid under such lease subsequent to the first date upon which
it may be so terminated. "Attributable Value" means, as to a

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Capitalized Lease Obligation under which any person is at the time liable and at
any date as of which the amount thereof is to be determined, the capitalized
amount thereof that would appear on the face of a balance sheet of such person
in accordance with Canadian GAAP.

CHANGE OF CONTROL. Upon the occurrence of a Change of Control (defined
herein), LGII or Loewen (if applicable) will be obligated to make an offer to
purchase (a "Change of Control Offer"), and shall purchase, on a Business Day
(the "Change of Control Purchase Date") not more than 60 nor less than 30 days
following the occurrence of the Change of Control, all of the then outstanding
Debt Securities of each series properly tendered and not withdrawn at a purchase
price (the "Change of Control Purchase Price") equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the Change of
Control Purchase Date. The Change of Control Offer is required to remain open
for at least 20 Business Days and until the close of business on the Change of
Control Purchase Date.

If a Change of Control occurs and LGII fails to pay the Purchase Price for
all Debt Securities properly tendered and not withdrawn, Loewen will be obliged
to purchase all such Debt Securities at the Change of Control Purchase Price on
the Change of Control Purchase Date in compliance with the requirements
applicable to a Change of Control Offer made by LGII.

In order to effect such Change of Control Offer, LGII or Loewen, as the case
may be, shall not later than the 30th day after the occurrence of a Change of
Control, mail to each holder of Debt Securities notice of the Change of Control
Offer, which notice shall govern the terms of the Change of Control Offer and
shall state, among other things, the procedures that holders of Debt Securities
must follow to accept the Change of Control Offer.

If a Change of Control were to occur, there can be no assurance that LGII or
Loewen would have sufficient funds to pay the purchase price for all Debt
Securities that Loewen or LGII might to required to purchase. In the event that
LGII or Loewen is required to purchase Debt Securities pursuant to a Change of
Control Offer, each of LGII and Loewen expect that they would need to seek
third-party financing to the extent they may not have available funds to meet
their purchase obligations. However, there can be no assurance that Loewen or
LGII will be able to obtain such financing on favorable terms, if at all.

Neither LGII nor Loewen shall be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in a
manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by Loewen and purchases all Debt
Securities validly tendered and not withdrawn under such Change of Control
Offer.

LGII and Loewen will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act, and any other securities laws or
regulations in connection with the repurchase of Debt Securities pursuant to a
Change of Control Offer.

"Change of Control" means the occurrence on or after the Measurement Date of
any of the following events: (a) any "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted Holders,
is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time, upon
the happening of an event or otherwise), directly or indirectly, of more than
35% of the total Voting Stock of Loewen or LGII, under circumstances where the
Permitted Holders (i) "beneficially own" (as so defined) a lower percentage of
the Voting Stock than such other "person" or "group" and (ii) do not have the
right or ability by voting power, contract or otherwise to elect or designate
for election a majority of the Board of Directors of Loewen or LGII; (b) Loewen
or LGII consolidates with, or merges with or into, another person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to another person, or another person
consolidates with, or merges with or into, Loewen or LGII, in any such event
pursuant to a transaction in which the outstanding Voting Stock of Loewen or
LGII is converted into or exchanged for cash, securities or other property,
other than any such transaction where (i) the outstanding Voting Stock of Loewen
or LGII is converted into or exchanged for (1) Voting Stock (other than
Redeemable Capital Stock) of the surviving or

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transferee corporation or (2) cash, securities and other property in an amount
which could then be paid by Loewen or LGII as a Restricted Payment under the
provisions hereof, and (ii) immediately after such transaction no "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act), excluding Permitted Holders, is the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time, upon the happening of an event or otherwise), directly or
indirectly, of more than 50% of the total Voting Stock of the surviving or
transferee corporation; (c) at any time during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of Loewen or LGII (together with any new directors whose election by
such Board of Directors or whose nomination for election by the shareholders or
stockholders of Loewen or LGII was approved by a vote of 66-2/3% of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason (including the failure of such individuals to be
elected in a proxy contest involving a solicitation of proxies) to constitute a
majority of the Board of Directors of Loewen or LGII then in office; or (d)
Loewen or LGII is liquidated or dissolved or adopts a plan of liquidation other
than a liquidation of LGII into Loewen. With respect to the sale of assets
referred to above, the meaning of the phrase "all or substantially all" shall
vary according to the facts and circumstances of the subject transaction.

When the aggregate amount of Excess Proceeds equals or exceeds $10,000,000,
Loewen shall make an offer to purchase (an "Asset Sale Offer"), from all holders
of each series of Debt Securities, not more than 40 Business Days thereafter, an
aggregate principal amount of Debt Securities equal to such Excess Proceeds, at
a price in cash equal to 100% of the outstanding principal amount thereof plus
accrued and unpaid interest, if any, to the purchase date (the "Asset Sale Offer
Price"). To the extent that the aggregate principal amount of Debt Securities
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds,
Loewen may use such deficiency for general corporate purposes. If the aggregate
principal amount of Debt Securities validly tendered and not withdrawn by
holders thereof exceeds the Excess Proceeds, Debt Securities to be purchased
will be selected on a PRO RATA basis. Upon completion of an Asset Sale Offer,
the amount of Excess Proceeds shall be reset to zero.

Loewen and LGII will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act, and any other securities laws or
regulations in connection with the repurchase of Debt Securities pursuant to any
Asset Sale Offer.

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Loewen (other than in respect of directors' qualifying shares or investments by
foreign nationals mandated by applicable law) or of First Capital Life Insurance
Company of Louisiana, National Capitol Life Insurance Company, Security
Industrial Insurance Company, Security Industrial Fire Insurance Company or any
successors to such Subsidiaries; (b) all or substantially all of the properties
and assets of any division or line of business of Loewen or any Restricted
Subsidiary of Loewen; or (c) any other properties or assets of Loewen or any
Restricted Subsidiary of Loewen other than properties and assets sold in the
ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include (i) any sale, transfer or other disposition of
equipment, tools or other assets (including Capital Stock of any Restricted
Subsidiary of Loewen) by Loewen or any of its Restricted Subsidiaries in one or
a series of related transactions in respect of which Loewen or such Restricted
Subsidiary receives cash or property with an aggregate Fair Market Value of
$2,000,000 or less; and (ii) any sale, issuance, conveyance, transfer, lease or
other disposition of properties or assets that is governed by the provisions of
the applicable Indenture.

LIMITATION ON TRANSACTIONS WITH INTERESTED PERSONS. Loewen will not, and
will not permit any of its Restricted Subsidiaries (including, without
limitation, LGII) to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, transfer, disposition, purchase, exchange or lease of assets, property
or services) with, or for the benefit of, any Affiliate of Loewen or any
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately, after the passage of time or upon the happening of an
event) of 5% or more of the Common Shares at any time outstanding ("Interested
Persons"), unless (a) such transaction or series of related transactions are on
terms that are no less favorable to Loewen or such Restricted Subsidiary, as the
case may be, than those which could have been obtained in a comparable
transaction at such time from persons who are not Affiliates of Loewen or
Interested Persons, (b) with respect to a transaction or series of transactions
involving aggregate payments or value equal to or greater than $10,000,000,
Loewen has obtained a written opinion from an Independent Financial Advisor
stating that the terms of such transaction or series of transactions are fair to
Loewen or its Restricted Subsidiary, as the case may be, from a financial point
of view and (c) with respect to a transaction or series of transactions
involving aggregate payments or value equal to or greater than $2,500,000,
Loewen shall have delivered an Officer's Certificate to the Trustee certifying
that such transaction or series of transactions comply with the preceding clause
(a) and, if applicable, certifying that the opinion referred to in the preceding
clause (b) has been delivered and that such transaction or series of
transactions has been approved by a majority of the Board of Directors of Loewen
(including a majority of the disinterested directors); PROVIDED, HOWEVER, that
this covenant will not restrict Loewen from (i) paying dividends in respect of
its Capital Stock permitted under the covenant described under "--Limitation on
Restricted Payments," (ii) paying reasonable and customary fees to directors of
Loewen or any Restricted Subsidiary who are not employees of Loewen or any
Restricted Subsidiary, (iii) entering into transactions with its Wholly-Owned
Subsidiaries or permitting its Wholly-Owned Subsidiaries from entering into
transactions with other Wholly-Owned Subsidiaries of Loewen, (iv) making loans
or advances to senior

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officers and directors of Loewen or any Restricted Subsidiary not in excess of
$6,000,000 in the aggregate at any one time outstanding, (v) guaranteeing loans
made to officers and other employees of Loewen or any Restricted Subsidiaries in
connection with Loewen's 1994 Management Equity Investment Plan not in excess of
$6,000,000 in the aggregate at any one time outstanding, (vi) making loans or
advances to officers, employees or consultants of Loewen and its Restricted
Subsidiaries for travel and moving expenses in the ordinary course of business
for bona fide business purposes of Loewen and its Restricted Subsidiaries, (vii)
making other loans or advances to officers, employees or consultants of Loewen
and its Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes of Loewen and its Restricted Subsidiaries not in excess of
$10,000,000 in the aggregate at any one time outstanding, (viii) making payments
to officers or employees of Loewen or its Restricted Subsidiaries pursuant to
obligations undertaken, at a time when such persons were not officers or
employees of Loewen or its Restricted Subsidiaries, in connection with arms'
length Asset Acquisitions or (ix) declaring or paying dividends on, or
purchasing or redeeming, the Preferred Securities of a Special Finance
Subsidiary.

LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. Loewen will not, and will not permit any of its Restricted
Subsidiaries (including, without limitation, LGII) to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any Restricted Subsidiary of Loewen to (a) pay
dividends, in cash or otherwise, or make any other distributions on or in
respect of its Capital Stock or any other interest or participation in, or
measured by, its profits, (b) pay any Indebtedness owed to Loewen or any other
Restricted Subsidiary of Loewen, (c) make loans or advances to, or any
Investment in, Loewen or any other Restricted Subsidiary of Loewen, (d) transfer
any of its properties or assets to Loewen or any other Restricted Subsidiary of
Loewen or (e) guarantee any Indebtedness of Loewen or any other Restricted
Subsidiary of Loewen, except for such encumbrances or restrictions existing
under or by reason of (i) applicable law, (ii) customary non-assignment
provisions of any contract or any lease governing a leasehold interest of Loewen
or any Restricted Subsidiary of Loewen, (iii) customary restrictions on
transfers of property subject to a Lien permitted under the provisions of the
Indenture which could not materially adversely affect Loewen's ability to
satisfy its obligations under the provisions of the Indenture and the Debt
Securities, (iv) any agreement or other instrument of a person acquired by
Loewen or any Restricted Subsidiary of Loewen (or a Restricted Subsidiary of
such person) in existence at the time of such acquisition (but not created in
contemplation thereof), which encumbrance or restriction is not applicable to
any person, or the properties or assets of any person, other than the person, or
the properties or assets of the person, so acquired, (v) provisions contained in
any agreement or instrument relating to Indebtedness which prohibit the transfer
of all or substantially all of the assets of the obligor thereunder unless the
transferee shall assume the obligations of the obligor under such agreement or
instrument and (vi) encumbrances and restrictions under Indebtedness in effect
on the Issue Date (including under the Debt Securities) and encumbrances and
restrictions in permitted refinancings or replacements thereof which are no less
favorable to the holders of the Debt Securities than those contained in the
Indebtedness so refinanced or replaced.

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Transactions with Interested Persons" and "Limitation on Dividends and Other
Payment Restrictions Affecting Restricted Subsidiaries" (collectively, the
"Suspended Covenants") with respect to such series of Debt Securities. If one or
both Rating Agencies withdraws its rating or downgrades its Investment Grade
Rating, then thereafter Loewen and its Restricted Subsidiaries will be subject,
on a prospective basis, to the Suspended Covenants (until the Rating Agencies
have again assigned Investment Grade Ratings to the Debt Securities) and
compliance with the Suspended Covenants with respect to Restricted Payments made
after the time of such withdrawal or downgrade will be calculated in accordance
with the covenant described under "Limitations on Indebtedness," as if such
covenant had been in effect at all times after the Measurement Date.

LOEWEN GUARANTEE

The Debt Securities will be guaranteed by Loewen. The Guarantee, which is
included in the Indenture, provides that Loewen will unconditionally guarantee
to each Holder of a Debt Security, (a) that principal of, premium, if any, and
interest (including interest on the overdue principal and (to the extent
permitted by law) interest), if any, on the Debt Securities will be duly and
punctually paid in full when due, and all obligation of LGII to the Holders or
the Trustee will be promptly paid in full or performed, and (b) in case of any
extension of time of payment or renewal of any Debt Securities, the same will be
promptly paid in full when due or performance in accordance with the terms of
the extension or renewal. Failing payment when due of any amount so guaranteed,
or failing performance of any other obligation of LGII to the Holders for
whatever reason, Loewen will be obligated to pay, or to perform or cause the
performance of, the same immediately. An Event of Default under the Guarantee or
the Debt Securities will constitute an event of default under the Guarantee, and
will entitle the Holders of Debt Securities to accelerate the obligations of
Loewen under the Indenture in the same manner and to the same extent as the
obligations of LGII.

The Guarantee will constitute a guarantee of payment and will rank PARI
PASSU in right of payment to all senior indebtedness of Loewen.

REPORTING REQUIREMENTS

EVENTS OF DEFAULT

The following will be "Events of Default" with respect to each series of
Debt Securities:

(c) failure on the part of LGII or Loewen duly to observe or perform any
other term, covenant or agreement contained in the Debt Securities of such
series or pursuant to the provisions of the Indenture (other than Defaults
specified in clause (a) or (b) above) and such Default continues for a
period of 60 days after the date on which written notice of such Default
requiring LGII to remedy the same shall have been given (i) to the Issuer by
the Trustee by registered mail, or (ii) to LGII and the

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Trustee by holders of at least 25% in aggregate principal amount of the Debt
Securities of such series then outstanding; or

(d) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
Loewen or any Restricted Subsidiary (including, without limitation, LGII)
then has outstanding Indebtedness in excess of $20,000,000 (including
Securities of another series), individually or in the aggregate, and either
(i) such Indebtedness is already due and payable in full or (ii) such
default or defaults have resulted in the acceleration of the maturity of
such Indebtedness; or

(g) certain events of bankruptcy, insolvency or reorganization with
respect to Loewen or any Significant Subsidiary of Loewen (including without
limitation LGII) shall have occurred; or

(h) the Guarantees with respect to such series of Debt Securities cease
to be in full force and effect or are declared null and void, or Loewen
denies that it has any further liability under the Guarantees with respect
to such series, or gives notice to such effect and such condition shall have
continued for a period of 60 days after written notice of such failure
(which notice shall specify the Default, demand that it be remedied and
state that it is a "Notice of Default") requiring Loewen and LGII to remedy
the same shall have been given (i) to Loewen and LGII by the Trustee, or
(ii) to Loewen, LGII and the Trustee by holders of at least 25% in aggregate
principal amount of the Debt Securities of such series then outstanding.

NOTICE OF DEFAULT

ACCELERATION

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Debt Securities of such series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of such series)
of all the Debt Securities of such series, premium, if any, and accrued and
unpaid interest, if any, on all of the Debt Securities of such series to be due
and payable immediately, upon which declaration, all amounts payable in respect
of the Debt Securities of such series shall be immediately due and payable. If
an Event of Default specified in clause (g) above occurs and is continuing, then
the unpaid principal amount (or, if the Debt Securities of any series then
outstanding are Original Issue Discount Securities, such portion of the
principal amounts as may be specified in the terms of each such series),
premium, if any, and accrued and unpaid interest on all Debt Securities of each
series then outstanding shall IPSO FACTO become and be immediately due and
payable without any declaration or other act by the Trustee or any holder of
Debt Securities of such series.

After a declaration of acceleration hereunder with respect to Debt
Securities of any series, but before a judgment or decree for payment of the
money due has been obtained by the Trustee, the holders of a majority in
aggregate principal amount of the outstanding Debt Securities of such series, by
written notice to LGII and the Trustee, may rescind and annul such declaration
and its consequences if (a) LGII has paid or deposited with the Trustee a sum
sufficient to pay (i) all amounts due the Trustee under the respective Indenture
and the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, (ii) all overdue interest on all Debt
Securities of such series, (iii) the principal of and premium, if any, on any
Debt Securities of such series which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne by the Debt
Securities of such series, and (iv) to the extent that payment of such interest
is lawful, interest upon overdue interest and overdue principal which has become
due otherwise than by such declaration of acceleration at the rate borne by the
Debt Securities of such series; (b) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction; and (c) all Events of
Default, other than the non-payment of principal of, premium, if any, and
interest on the Debt Securities of such series that has become due solely by
such declaration of acceleration, have been cured or waived; but no such
rescission and annulment shall extend to or shall affect any subsequent default,
or shall impair any right consequent thereon. No such rescission shall affect
any subsequent Default or Event of Default or impair any right subsequent
thereon.

WAIVER

The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of a series by notice to the Trustee may, on behalf of the
holders of all the Debt Securities of such series, waive any existing Default or
Event of Default and its consequences, except a Default or Event of Default
specified in clause (a) or (b) above, or in respect of any provision of the
applicable Indenture which cannot be modified or amended without the consent of
the holder so affected. When a Default or Event of Default is so waived, it
shall be deemed cured and shall cease to exist.

LIMITATION ON SUITS

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manner whatever by virtue of or by availing of any provision of an Indenture or
of the Debt Securities to affect, disturb or prejudice the rights of any other
holder of Debt Securities of such series, or to obtain or seek to obtain
priority over or preference as to any other such holder, or to enforce any right
under an Indenture or the Debt Securities of any series, except in the manner
herein provided and for the equal, ratable and common benefit of all holders of
Debt Securities of such series.

CERTIFICATES OF COMPLIANCE

LGII shall furnish to the Trustee annual and quarterly statements as to the
performance by LGII of its obligations under the Indenture and as to any default
in such performance. LGII is also required to notify the Trustee within 10 days
of any event which is, or after notice or lapse of time or both would become, an
Event of Default.

DEFEASANCE OR COVENANT DEFEASANCE

Each of LGII and Loewen may, at its option and at any time, terminate its
respective obligations with respect to an outstanding series of Debt Securities
("defeasance"). Such defeasance means that Loewen and LGII shall be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Debt Securities of such series, except for (i) the rights of holders of
outstanding Debt Securities of such series to receive payment in respect of the
principal of, premium, if any, and interest on such Debt Securities when such
payments are due, (ii) LGII's obligations to issue temporary Debt Securities of
such series, register the transfer or exchange of any Debt Securities of such
series, replace mutilated, destroyed, lost or stolen Debt Securities of such
series and maintain an office or agency for payments in respect of the Debt
Securities of such series, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and (iv) the defeasance provisions of the Indenture.
In addition, each of Loewen and LGII may, at its option and at any time, elect
to terminate its obligations with respect to certain covenants that are set
forth in the Indenture, some of which are described above, and any subsequent
failure to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Debt Securities of such series ("covenant
defeasance").

In order to exercise either defeasance or covenant defeasance, (i) LGII must
irrevocably deposit with the Trustee, in trust, for the benefit of the holders
of the Debt Securities of such series, cash in United States dollars, U.S.
Government Obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
outstanding Debt Securities of such series to maturity (except lost, stolen or
destroyed Debt Securities of such series which have been replaced or paid); (ii)
Loewen or LGII shall have delivered to the Trustee an opinion of counsel to the
effect that the holders of the outstanding Debt Securities of such series will
not recognize income, gain or loss for federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance or covenant defeasance had not occurred (in the
case of defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax laws);
(iii) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit; (iv) such defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest with respect to any securities
of Loewen or LGII; (v) such defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a default under, any material
agreement or instrument to which Loewen or LGII is a party or by which it is
bound; (vi) Loewen or LGII shall have delivered to the Trustee an opinion of
counsel to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar law affecting creditors' rights generally;
and (vii) Loewen or LGII shall have delivered to the Trustee an

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officers' certificate and an opinion of counsel, each stating that all
conditions precedent under the Indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with.

SATISFACTION AND DISCHARGE

The Indenture with respect to a series of Debt Securities will be discharged
and will cease to be of further effect (except as to surviving rights or
registration of transfer or exchange of the Debt Securities, as expressly
provided for in the Indenture) as to all outstanding Debt Securities of such
series when (i) either (a) all of the Debt Securities of such series theretofore
authenticated and delivered (except lost, stolen or destroyed Debt Securities of
such series which have been replaced or repaid and Debt Securities of such
series for whose payment money has theretofore been deposited in trust or
segregated and held in trust by LGII and thereafter repaid to LGII or discharged
from such trust) have been delivered to the Trustee for cancellation or (b) all
Debt Securities of such series have been called for redemption or otherwise
become due and payable and Loewen or LGII has irrevocably deposited or caused to
be deposited with the Trustee funds in an amount sufficient to pay and discharge
the entire Indebtedness on the Debt Securities of such series not theretofore
delivered to the Trustee for cancellation, for principal of, premium, if any,
and interest on the Debt Securities of such series to the date of deposit
together with irrevocable instructions from Loewen or LGII directing the Trustee
to apply such funds to the payment thereof at maturity; (ii) Loewen and LGII
have paid all other sums payable by LGII under the Indenture; (iii) there exists
no Default or Event of Default under the Indenture; and (iv) Loewen or LGII has
delivered to the Trustee an officers' certificate and an opinion of counsel
stating that all conditions precedent under the Indenture relating to the
satisfaction and discharge of the Indenture have been complied with.

AMENDMENTS AND WAIVERS

LGII and the Trustee may from time to time and at any time amend or
supplement an Indenture (a) to cure any ambiguity, defect or inconsistency or to
correct or supplement any provision contained herein or in any supplemental
indenture which may be defective or inconsistent with any other provision
contained herein or in any supplemental indenture, or to make any other
provisions as to LGII may deem necessary or desirable, provided that no such
action shall adversely affect the interests of the holders of any series of Debt
Securities; (b) to evidence the succession of another corporation to LGII, or
successive successions, and the assumption by the successor corporation of the
covenants, agreements and obligations of LGII; (c) to establish the form or
terms of Debt Securities of any series and to provide for adjustment of
conversion rights; (d) to comply with any requirements of the Commission in
order to effect or maintain the qualification of any Indenture under the Trust
Indenture Act of 1939, as amended (the "TIA"); (e) to evidence and provide for
the acceptance of appointment by a successor trustee with respect to the Debt
Securities of one or more series and to add to or change any of the provisions
of an Indenture as shall be necessary to provide for or facilitate the
administration of trusts by more than one trustee; and (f) to add to the
covenants of LGII such further covenants, restrictions, conditions or provisions
as the Issuer and the Trustee shall consider to be for the protection of the
holders of all or any series of Debt Securities (and if such covenants,
restrictions, conditions or provisions are to be for the protection of less than
all series of Debt Securities, stating that the same are expressly being
included solely for the protection of such series), and to make the occurrence,
or the occurrence and continuance, of a default in any such additional
covenants, restrictions, conditions or provisions an Event of Default; provided,
that in respect of any such additional covenant, restriction, condition or
provision a supplemental indenture may provide for a particular period of grace
after default (which period may be shorter or longer than that allowed in the
case of other defaults) or may provide for an immediate enforcement upon such an
Event of Default or may limit the remedies available to the Trustee upon such an
Event of Default or may limit the right of the holders of a majority in
aggregate principal amount of the Debt Securities of such series to waive such
Event of Default.

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outstanding Debt Securities. LGII shall be required to deliver to the Trustee an
Opinion of Counsel stating that any such change does not adversely affect the
rights of any holder.

GLOBAL DEBT SECURITIES

Debt Securities of a series may be issued in whole or in part in the form of
one or more fully registered global securities (a "Registered Global Security")
that may be deposited with a depositary ("Depositary") or with a nominee for the
Depositary identified in the applicable Prospectus Supplement. In such case, one
or more Registered Global Securities will be issued in a denomination or
aggregate denominations equal to the portion of the aggregate principal amount
of Debt Securities of the series to be represented by such Registered Global
Security or Securities. Unless and until it is exchanged in whole or in part for
Debt Securities in definitive certificated form, a Registered Global Security
may not be registered for transfer or exchange except as a whole by the
Depositary for such Registered Global Security to a nominee of such Depositary
or by a nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary to any such nominee to a successor Depositary
for such series or a nominee of such successor Depositary and except in the
circumstances described in the applicable Prospectus Supplement.

Upon the issuance of any Global Registered Securities, the Depositary will
credit, on its internal book-entry system, the principal amount of Debt
Securities of the individual beneficial interest represented by such Global
Registered Securities to the respective accounts of institutions
("participants") that have accounts with the Depositary or its nominee. The
accounts to be credited will be designated by the underwriters or agents
engaging in the distribution of such Debt Securities or by LGII if such Debt
Securities are offered and sold directly by LGII. Ownership of beneficial
interests by participants in such Registered Global Security will be shown on,
and the transfer of that ownership interest will be effected only through,
records maintained by the Depositary for such Registered Global Security or by
its nominee. Ownership of beneficial interests in such Registered Global
Security by persons that hold such interests through a participant will be shown
on, and the transfer of such ownership interests will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interest in such Registered Global Securities.

So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented thereby for all purposes under the Indentures.
Unless otherwise specified in the applicable Prospectus Supplement and except as
specified below, owners of beneficial interests in such Registered Global
Security will not be entitled to have Debt Securities of the series represented
by such Registered Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities of such series in
certificated form and will not be considered the holders thereof for any
purposes under the Indentures. Accordingly, each person owning a beneficial
interest in such Registered Global Security will be required to rely on the
procedures of the Depositary and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest., to
exercise the rights of a holder under the Indentures. The Depositary may grant
proxies and otherwise authorize participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action which
a holder is entitled to give or take under the applicable Indenture. Loewen
understands that, under existing industry practices, if Loewen requests any
action of holders or an owner of a beneficial interest in a Registered Global
Security desires to give any notice or take any action a holder is entitled to
give or take under the applicable Indenture, the Depositary would authorize the
participants to give such notice or take such action, and participants would
authorize

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beneficial owners owning through such participants to give such notice or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.

LGII expects that the Depositary for any Debt Securities represented by a
Registered Global Security, upon receipt of any payment of principal, premium or
interest will immediately credit participants' accounts with payment in amounts
proportionate to their respective beneficial interest in the principal amount of
such Registered Global Security as shown on the records of such Depositary. LGII
also expects that payments by participants to owners of beneficial interests in
such Registered Global Security held through such participants will be governed
by standing instructions and customary practices, as is now the case with the
securities held for the accounts of customers registered in "street names" and
will be the responsibility of such participants. None of LGII, the Trustee or
any agent of LGII shall have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in a Registered Global Security, or for maintaining, supervising, or
reviewing any records relating to such beneficial ownership interests.

Unless otherwise specified in the applicable Prospectus Supplement, if the
Depositary for any Debt Securities represented by a Registered Global Security
is at any time unwilling or unable to continue as Depositary and a successor
Depositary is not appointed by LGII within 90 days, LGII will issue such Debt
Securities in definitive certificated form in exchange for such Registered
Global Security. In addition, LGII may at any time and in its sole discretion
determine not to have any of the Debt Securities of a series represented by one
or more Registered Global Securities and, in such event, will issue Debt
Securities of such series in definitive certificated form in exchange for all of
the Registered Global Securities representing such Debt Securities. Further, if
LGII so specifies with respect to Debt Securities of any series an owner of a
beneficial interest in a Registered Global Security representing Debt Securities
of such series may, on terms acceptable to LGII and the Depositary, receive Debt
Securities of such series in definitive form registered in the name of such
beneficial owner or its designee.

THE TRUSTEE

Unless otherwise specified in the applicable Prospectus Supplement, Fleet
National Bank, or its successor, shall be the Trustee under each Indenture. The
Indentures provide that, except during the continuance of an Event of Default,
the Trustee will perform only such duties as are specifically set forth in the
Indenture. If any Event of Default has occurred and is continuing the Trustee
will exercise such rights and powers vested in it under the Indenture and use
the same degree of care and skill in its exercise as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.

The Indentures, including provisions of the TIA incorporated by reference
therein, will contain limitations on the rights of the Trustee should it become
a creditor of LGII, to obtain payment of claims in certain cases or to realize
on certain property received by it in respect of any such claims, as security or
otherwise.

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National Bank could be required to resign as trustee under one or more of such
indentures. If Fleet National Bank were to resign as trustee, Loewen or LGII
would be required to take prompt steps to have a successor trustee or trustees
appointed in the manner provided in the indenture or indentures from which Fleet
National Bank has resigned.

PLAN OF DISTRIBUTION

LGII may offer and sell the Debt Securities from time to time through
agents, to or through underwriters, through dealers or directly to purchasers.
The Prospectus Supplement with respect to the Debt Securities to be offered will
set forth the terms of the offering of the Debt Securities, including (i) the
name or names of any underwriters, dealers or agents, (ii) the offering price of
the Debt Securities, (iii) the proceeds to the Company from such sale, (iv) any
underwriting discounts and commissions or other amounts constituting
underwriters' or agents' compensation, and (v) any securities exchange or
automated quotation system on which the Debt Securities may be listed. Any
initial public offering price, discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.

The distribution of the Debt Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.

Offers to purchase Debt Securities may be solicited by agents designated by
LGII from time to time. Any such agent involved in the offer or sale of the Debt
Securities will be named, and any commissions payable by LGII to such agent will
be set forth, in the applicable Prospectus Supplement. Any such agent may be
deemed to be an underwriter (as that term is defined in the Securities Act) of
the Debt Securities so offered and sold.

If Debt Securities are sold by means of an underwritten offering, LGII will
execute an underwriting agreement with one or more underwriters at the time an
agreement for such sale is reached. The names of the specific managing
underwriter or underwriters, as well as any other underwriters, and the terms of
the transaction, including commissions, discounts and any other compensation of
the underwriters and dealers, if any, will be set forth in the Prospectus
Supplement which will be used by the underwriters to make resales of the Debt
Securities. If underwriters are utilized in the sale of Debt Securities, the
Debt Securities will be acquired by the underwriters for their own account and
may be resold from time to time in one or more transactions, including
negotiated transactions, at fixed public offering prices or at varying prices
determined by the underwriter at the time of sale. Debt Securities may be
offered to the public either through underwriting syndicates represented by
managing underwriters or directly by the managing underwriters. If any
underwriter or underwriters are utilized in the sale of the Debt Securities,
unless otherwise indicated in the Prospectus Supplement, the underwriting
agreement will provide that the obligations of the underwriters are subject to
certain conditions precedent and that the underwriters with respect to a sale of
Debt Securities will be obligated to purchase all of such series of Debt
Securities if any are purchased.

If a dealer is utilized in the sale of Debt Securities, LGII will sell such
Debt Securities to the dealer as principal. The dealer may then resell such Debt
Securities to the public at varying prices to be determined by such dealer at
the time of resale. Any such dealer may be deemed to be an underwriter (as that
term is defined in the Securities Act) of the Debt Securities so offered and
sold. The name of the dealer and the terms of the transaction will be set forth
in the Prospectus Supplement relating thereto.

Offers to purchase Debt Securities may be solicited by LGII directly to
institutional investors and others who may be deemed to be underwriters (as that
term is defined in the Securities Act) with respect to any resale thereof. The
terms of any such sales will be described in the Prospectus Supplement relating
thereto.

Agents, underwriters and dealers may be entitled under relevant agreements
to indemnification or contribution by LGII against certain liabilities,
including liabilities under the Securities Act.

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Agents, underwriters and dealers may be customers of, engage in transactions
with or perform services for the Company in the ordinary course of business.

Debt Securities may also be offered and sold, if so indicated in the
applicable Prospectus Supplement, in connection with a remarketing upon their
purchase, in accordance with a redemption or repayment pursuant to their terms,
or otherwise, by one or ore firms ("remarketing firms"), acting as principals
for their own accounts or as agents of LGII. Any remarketing firm will be
identified and the terms of its agreement, if any, with its compensation will be
described in the applicable Prospectus Supplement. Remarketing firms may be
deemed to be underwriters (as such term is defined in the Securities Act) in
connection with the Debt Securities remarketed thereby. Remarketing firms may be
entitled under agreements which may be entered into with LGII to indemnification
or contribution by the Company against certain liabilities, including
liabilities under the Securities Act, and may be customers of, engage in
transactions with or perform services for the Company in the ordinary course of
business.

If so indicated in the applicable Prospectus Supplement, LGII may authorize
agents, underwriters or dealers to solicit offers by certain types of
institutions to purchase Debt Securities from LGII at the public offering prices
set forth in the applicable Prospectus Supplement pursuant to delayed delivery
contracts ("Contracts") providing for payment and delivery on a specified date
or dates in the future. A commission indicated in the applicable Prospectus
Supplement will be paid to underwriters, dealers and agents soliciting purchases
of Securities pursuant to Contracts accepted by LGII.

LEGAL MATTERS

The validity of the Debt Securities and certain matters of New York law
relating to the Guarantees will be passed upon for LGII and Loewen by Thelen,
Marrin, Johnson & Bridges LLP, San Francisco, California. The validity of the
Guarantees will be passed upon for Loewen by Russell & DuMoulin, Vancouver,
British Columbia, Canada.

EXPERTS

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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER AND SALE OF SECURITIES MADE HEREBY, AND
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER OR A
SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS, NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Information by Reference......................... 2
Disclosure Regarding Forward-Looking Statements........................... 3
Financial Information..................................................... 3
The Company............................................................... 3
Use of Proceeds........................................................... 4
Selected Consolidated Financial and Operating Information................. 5
Description of Debt Securities............................................ 8
Plan of Distribution...................................................... 30
Legal Matters............................................................. 31
Experts................................................................... 31
</TABLE>

$500,000,000
LOEWEN GROUP
INTERNATIONAL, INC.

DEBT SECURITIES

[LOGO]

GUARANTEED BY
THE LOEWEN GROUP INC.
---------------------

PROSPECTUS

---------------------

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH JURISDICTION.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 5, 1997

PROSPECTUS SUPPLEMENT

TO PROSPECTUS DATED , 1997

10,000,000 SHARES

THE LOEWEN GROUP INC.

COMMON SHARES

[LOGO]
---------

Of the 10,000,000 Common shares without par value ("Common Shares") of The
Loewen Group Inc. ("Loewen" and, together with its subsidiaries and associated
entities, the "Company") being offered, Common Shares are being offered
initially in the United States and elsewhere outside Canada (the "U.S.
Offering") by United States underwriters (the "U.S. Underwriters") and Common
Shares are being offered initially in Canada (the "Canadian Offering") by
Canadian underwriters (the "Canadian Underwriters" and, together with the U.S.
Underwriters, the "Underwriters"). See "Underwriting."

The Common Shares are listed on the New York Stock Exchange and The Toronto
Stock Exchange under the symbol "LWN." The last reported sales price of the
Common Shares on May 2, 1997 on the New York Stock Exchange was U.S.$30.125 per
share and on The Toronto Stock Exchange was Cdn.$41.700 per share.

SEE "RISK FACTORS" BEGINNING ON PAGE S-8 HEREOF FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED CAREFULLY BY PROSPECTIVE INVESTORS.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC FEES (1) COMPANY (2)
<S> <C> <C> <C>
Offered in the United States and outside Canada.......... U.S.$ U.S.$ U.S.$
Offered in Canada (3) Cdn.$ Cdn.$ Cdn.$
Total (4)................................................ U.S.$ U.S.$ U.S.$
</TABLE>

(1) For information regarding indemnification of the Underwriters, see
"Underwriting."

(2) Before deducting expenses estimated at U.S.$1,000,000, payable by Loewen.

(3) The offering price in Canada is payable in Canadian dollars and that price
and related amounts are the approximate equivalent of the offering price in
the United States and related amounts based on the prevailing U.S.-Canadian
dollar exchange rate on the date of this Prospectus Supplement.

(4) Loewen has granted the U.S. Underwriters and the Canadian Underwriters
30-day options to purchase up to and additional Common
Shares, respectively, up to an aggregate of 1,500,000 Common Shares, to
cover over-allotments. See "Underwriting." If all such Common Shares are
purchased, the total Price to Public, Underwriting Fees and Proceeds to
Company will be U.S.$ , U.S.$ and U.S.$ , respectively.
--------------

GLOBAL COORDINATOR
SMITH BARNEY INC.
---------

The Common Shares offered hereby, including any Common Shares acquired by
transfer from the Canadian Underwriters, are being offered by the several U.S.
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that certificates for the
Common Shares offered hereby will be available for delivery on or about
, 1997 at the offices of Smith Barney Inc., 388 Greenwich Street, New
York, New York 10013.
--------------

SMITH BARNEY INC.
<PAGE>
ALEX. BROWN & SONS
INCORPORATED

GOLDMAN, SACHS & CO.

NESBITT BURNS SECURITIES INC.

THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON SHARES,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

------------------------

IT IS EXPECTED THAT CERTIFICATES FOR THE COMMON SHARES OFFERED HEREBY WILL
BE AVAILABLE FOR DELIVERY ON OR ABOUT THE DATE INDICATED ON THE FRONT COVER PAGE
OF THIS PROSPECTUS SUPPLEMENT, WHICH WILL BE SIX BUSINESS DAYS FOLLOWING THE
DATE HEREOF (SUCH SETTLEMENT CYCLE BEING REFERRED TO HEREIN AS "T+6").
PURCHASERS OF SUCH COMMON SHARES SHOULD NOTE THAT TRADING OF THE COMMON SHARES
ON THE DATE HEREOF OR THE SUCCEEDING TWO BUSINESS DAYS MAY BE AFFECTED BY THE
T+6 SETTLEMENT CYCLE. SEE "UNDERWRITING."

------------------------

In this Prospectus Supplement, unless the context otherwise requires (i)
"Loewen" refers to The Loewen Group Inc., a corporation organized under the law
of British Columbia, Canada, (ii) "LGII" refers to Loewen Group International,
Inc., a Delaware corporation and a wholly-owned subsidiary of Loewen, (iii) the
"Company" refers to Loewen, together with its subsidiaries and associated
entities, (iv) "Common Shares" refers to the Common shares without par value of
Loewen, (v) the "Offering" refers collectively to the U.S. Offering and the
Canadian Offering and (vi) references to the Company's "acquisitions" do not
include the two structured investments made by the Company in 1996 with
Blackstone Capital Partners II Merchant Banking Fund L.P. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Acquisitions, Investments and Capital Expenditures."

Unless otherwise indicated, information provided herein with respect to the
Offering assumes that the Underwriters' over-allotment options are not
exercised.

All dollar amounts herein are in United States dollars, unless otherwise
indicated. References to "Cdn.$" are to Canadian dollars.

S-2
<PAGE>
AVAILABLE INFORMATION

Loewen is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission ("Commission"). Such reports, proxy
statements and other information filed by Loewen may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at Seven World Trade Center, Suite 1300,
New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material can be obtained by
mail from the Public Reference section of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
reports, proxy statements and other information that Loewen files with the
Commission electronically are contained in the Internet Web site maintained by
the Commission. The Commission's Web site address is http://www.sec.gov. The
Common Shares are traded on the New York Stock Exchange, The Toronto Stock
Exchange and the Montreal Exchange. Reports, proxy statements and other
information filed by Loewen may be inspected at the offices of the New York
Stock Exchange at 20 Broad Street, New York, New York 10005, at the offices of
The Toronto Stock Exchange at The Exchange Tower, 2 First Canadian Place,
Toronto, Ontario, Canada M5X IJ2 and at the offices of the Montreal Exchange at
800 Victoria Square, Montreal, Quebec, Canada H4Z 1A9.

FINANCIAL INFORMATION

The consolidated financial statements of the Company, included in Loewen's
reports filed pursuant to the Exchange Act, are prepared in accordance with
accounting principles generally accepted in Canada ("Canadian GAAP").
Differences between Canadian GAAP and accounting principles generally accepted
in the United States ("U.S. GAAP"), as applicable to the Company, are explained
in Note 21 to the consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 (the "1996
Consolidated Financial Statements").

S-3
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY

THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING
PROSPECTUS.

THE COMPANY

OVERVIEW

The Loewen Group Inc. is the second-largest operator of funeral homes and
cemeteries in North America. As of April 30, 1997, the Company operated 997
funeral homes and 373 cemeteries located throughout the United States and
Canada, with 93.5% of its 1996 consolidated revenue derived from locations in
the United States. Over the last five fiscal years, the Company's revenues and
earnings from operations have grown at compound annual growth rates of 41.1% and
39.2%, respectively, representing the highest such growth rates among the three
largest public funeral home and cemetery operators. Over the same period, the
Company invested an aggregate of $1.6 billion in acquisitions.

In order to enhance its growth and long-term competitive position, the
Company has increased its focus on (i) the acquisition and integration of
cemeteries and (ii) the growth of "pre-need" funeral service and cemetery sales
(sales to customers before the time of need). In addition, the Company recently
realigned and combined its cemetery and funeral service sales forces to take
advantage of cross-selling and merchandising opportunities, especially in the
area of pre-need sales.

The Company's March 1995 acquisition of Osiris Holding Corporation
("Osiris"), a leading cemetery operator located in the United States, provided
the Company with an experienced, highly regarded cemetery management team. In
1996, the Company completed $325 million of cemetery acquisitions (136
locations), as compared to only $87 million of cemetery acquisitions (46
locations) in 1994, the year before the Osiris acquisition. Further, cemetery
gross margin has increased from 24.3% for 1994 to 33.2% for 1996, primarily as a
result of policies and programs implemented by the new cemetery management team,
including an increased emphasis on both pre-need sales and higher margin
products and services.

Pre-need funeral and cemetery sales are particularly important to the
Company's growth. A recent American Association of Retired Persons study showed
that of surveyed individuals over 50 years of age, only 40% had been contacted
regarding the purchase of pre-need cemetery property and merchandise or pre-need
funeral services, and only 28% had purchased products or services on a pre-need
basis. Over the past several years, the Company has increased its focus on
pre-need sales in order to capitalize on this significant market opportunity. As
a result, pre-need cemetery sales increased from $87 million in 1995 to $190
million in 1996, and gross pre-need funeral service sales increased from
approximately $97 million in 1995 to approximately $190 million in 1996. From an
accounting standpoint, pre-need cemetery sales are recognized at the time of
sale, while pre-need funeral sales are not recognized until the time that the
funeral service is provided, typically 8 to 12 years after the time of sale. As
at December 31, 1996, the backlog from pre-need funeral sales had reached
approximately $840 million.

In 1996, the Company also entered into two structured investments with
Blackstone Capital Partners II Merchant Banking Fund L.P. ("Blackstone"). In
August 1996, the Company and Blackstone together acquired Prime Succession,
Inc., the largest privately-held funeral services company in North America and,
in November 1996, the Company and Blackstone together acquired the Rose Hills
Memorial Park, the largest funeral home/cemetery combination property in North
America. In each case, the Company has an exclusive option to acquire
Blackstone's interest in these strategic assets. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for further
information regarding the investments with Blackstone.

S-4
<PAGE>
service companies together own or operate approximately 11% of the 23,500
funeral homes in North America and 9% of the 10,500 cemeteries in North America.

GROWTH STRATEGY

The three principal components of the Company's growth strategy are (i) to
acquire a significant number of small, family-owned funeral homes and
cemeteries, (ii) to acquire "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) to
improve the revenue and profitability of newly-acquired and established
locations.

The first element of the Company's strategy is the acquisition of small,
family-owned funeral homes and cemeteries, which comprise the majority of the
funeral homes and cemeteries that currently are not owned by the publicly-traded
funeral service companies. Management believes that the Company has developed a
competitive advantage in this market by differentiating itself from its
principal competitors through its (i) emphasis on succession planning for
prospective sellers, (ii) desire to retain existing management and personnel at
acquired firms and (iii) motivational culture, all of which enhance the
Company's ability to identify, consummate and integrate new acquisitions.

The second element of the Company's strategy is the acquisition of large,
multi-location urban properties. These "strategic" acquisitions provide the
Company with a critical mass of funeral homes or cemeteries that makes it
economic to consolidate relatively less expensive, smaller properties in a
region. The Company intends to remain competitive in the strategic acquisition
market and to acquire those properties which are priced appropriately and meet
its geographic growth objectives.

The final element of the Company's strategy is the enhancement of the
revenue and profitability of its newly-acquired and established locations.
Through the Company's integration process, newly-acquired funeral homes and
cemeteries typically show an improvement in gross margin within the first year
after acquisition, primarily as a result of the economies of scale available to
the Company, the introduction of the Company's merchandising and marketing
programs and implementation of the Company's pre-need sales programs. The
Company's strategy is to continue to increase the revenue and profitability of
its established locations through the introduction of additional merchandising,
cost control programs and inflation-based pricing and further expansion of its
pre-need sales programs. In addition, as the Company increases its presence in a
particular market, it can take advantage of greater synergies among its funeral
homes and cemeteries in that region, thereby further enhancing the revenue and
profitability of each location.

RECENT DEVELOPMENTS

FIRST QUARTER 1997 RESULTS

For the three months ended March 31, 1997, the Company's consolidated
revenue increased 42% to $274.7 million from $193.1 million for the three months
ended March 31, 1996. Net earnings were $23.7 million, a 38% increase from the
same period in 1996. Fully diluted earnings per share were $0.36 for the period,
a 20% increase from the $0.30 per share reported for the same period in 1996.

Strong growth in the Company's cemetery division contributed revenues of
$97.4 million in the three months ended March 31, 1997, up 83% from the same
period in 1996. Funeral home revenues increased 17% to $155.5 million in 1997
and insurance revenues increased to $21.7 million in 1997 from $6.5 million in
1996.

S-5
<PAGE>
ACQUISITION PROGRAM

From January 1, 1997 to April 30, 1997, the Company closed approximately
$152 million of acquisitions, comprising 42 funeral homes and 60 cemeteries. As
at April 30, 1997, the Company had signed agreements, some of which are
non-binding, for the acquisition of a further 59 funeral homes and 76
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.

OPTION TO INCREASE REVOLVING CREDIT FACILITY

On May 5, 1997, the Company announced it had received a commitment from the
lead bank in its banking syndicate to increase the Company's principal revolving
credit facility to $1 billion from its current level of $750 million. The
commitment is subject to completion of the Offering (with proceeds of at least
$250 million) and the approval of certain senior lenders.

SCI TAKEOVER PROPOSAL WITHDRAWN

On January 7, 1997, Service Corporation International ("SCI") publicly
withdrew its unsolicited proposal to acquire Loewen through an exchange offer
announced in October 1996 ("hostile takeover proposal").

S-6
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Shares offered:

U.S. Offering(1)................ shares

Canadian Offering(1)............ shares
--------------------------------------------------------

Total(1)...................... 10,000,000 shares
--------------------------------------------------------
--------------------------------------------------------

69,199,039 shares
Common Shares to be outstanding
after the Offering(1)(2)........

The net proceeds from the Offering will be used for
working capital and general corporate purposes,
Use of proceeds................... including acquisitions. Pending use for such purposes,
the net proceeds will be used to reduce borrowings under
the Company's principal revolving credit facility. See
"Use of Proceeds."

"LWN"
Symbol............................
</TABLE>

- ------------------------

(1) Assumes the Underwriters' over-allotment options are not exercised. See
"Underwriting."

(2) Based on Common Shares issued and outstanding at April 30, 1997. Does not
include (i) 4,576,464 Common Shares issuable upon the exercise of options
outstanding at April 30, 1997 granted under employee stock option plans,
(ii) 3,769,800 Common Shares issuable upon the exercise of options and
purchase rights outstanding at April 30, 1997 granted under the 1994
Management Equity Investment Plan (which options and purchase rights first
become exercisable in part in June 1999, absent extraordinary circumstances)
and (iii) approximately 5,770,492 Common Shares issuable upon the conversion
of Loewen's outstanding Series C Preferred Shares, which are presently
convertible.

S-7
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT, THE
ACCOMPANYING PROSPECTUS, AS AMENDED AND SUPPLEMENTED, AND CERTAIN DOCUMENTS
INCORPORATED BY REFERENCE HEREIN AND THEREIN, POTENTIAL INVESTORS SHOULD
CONSIDER THE FOLLOWING FACTORS.

COMPETITION FOR ACQUISITIONS

The North American funeral services industry acquisition market is extremely
competitive. The Company's competition for acquisitions includes SCI, Stewart
Enterprises, Inc. ("Stewart"), Equity Corporation International ("ECI") and
Carriage Services, Inc. ("CSI"), all of which are publicly-traded companies with
significant United States operations, as well as other non-public regional
consolidators. On occasion, the Company also has experienced competition on a
local level from consolidators who have focused on acquiring funeral home and
cemetery properties in a concentrated geographic area. The timing and certainty
of completion of potential acquisitions are based on many factors. There can be
no assurance that the Company will complete any specific number or dollar amount
of acquisitions in a particular year.

RISKS OF ACQUISITIONS AND MANAGING GROWTH

The Company intends to grow primarily through the acquisition of additional
funeral homes and cemeteries. Aggressive pricing by the Company's competitors,
particularly for strategic operations, may result in increased acquisition
costs. There can be no assurance that the Company will be able to identify,
negotiate and consummate acquisitions or that acquired businesses can be
operated profitably or integrated successfully into the Company's operations
without substantial costs, delays or other operational or financial problems.
While the Company believes it has been successful in integrating the
acquisitions it has made in the past, there can be no assurance that the
Company's historic or future acquisitions will not have an adverse impact on the
Company's business, financial condition or results of operations. In addition,
acquisitions involve a number of special risks, including possible adverse
effects due to diversion of management's attention, failure to retain key
acquired personnel and unanticipated events or liabilities, some or all of which
could have a material adverse effect on the Company's business, financial
condition or results of operations. 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.

FLUCTUATIONS IN REVENUE

The most significant component of increases in revenue is the level of
acquisitions, discussed above. In addition, revenue is affected by the volume of
services rendered, and the mix and pricing of services and products sold. The
foregoing may be affected by fluctuations in the number of deaths, competitive
pricing strategies, pre-need sales and other sales programs implemented by the
Company.

LEGAL PROCEEDINGS

The Company's 1995 financial results were materially and adversely affected
by the unanticipated outcome of certain legal proceedings. There currently are
legal proceedings pending against the Company, including class actions, the
outcome of which could be material. The Company is unable to predict the outcome
of any of such proceedings at this time. See "Legal Proceedings."

CERTAIN ANTI-TAKEOVER PROVISIONS AND RISKS

Certain provisions of Loewen's charter documents and Loewen's Shareholder
Protection Rights Plan Agreement may have the effect of discouraging, delaying
or preventing a change of control of Loewen or unsolicited acquisition proposals
that a shareholder might consider favorable.

The Company's financial results for 1996 include $18.7 million of finance
and other costs related to SCI's hostile takeover proposal.

S-8
<PAGE>
FORWARD-LOOKING AND CAUTIONARY STATEMENTS

FORWARD-LOOKING STATEMENTS

Management believes that the aggregate purchase price for acquisitions in
1997 will be at least $600 million. Management has established a goal for
fully-diluted earnings per share ("EPS") for 1997 of $1.55 to $1.60. The
foregoing statements and certain other statements made in this Prospectus
Supplement, the accompanying Prospectus, as amended and supplemented, other
filings made with the Commission, and elsewhere (including oral statements made
on behalf of the Company) are forward-looking statements within the meaning of
Section 27A(i) of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E(i) of the Exchange Act. Shareholders and potential investors are
hereby cautioned that certain events or circumstances could cause actual results
to differ materially from those estimated, projected or predicted. In addition,
forward-looking statements are based on management's knowledge and judgment as
of the date that such statements are made. The Company undertakes no obligation
to publicly release the result of any revisions to these forward-looking
statements that may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.

CAUTIONARY STATEMENTS

In addition to the Risk Factors set forth above, the following important
factors, among others, could cause EPS for 1997, acquisition levels and other
future results to differ materially from estimates, predictions or projections
included in forward-looking statements: (i) margins achieved by newly-acquired
and established operations, (ii) the cost of the Company's financing
arrangements (including interest rates on long-term debt), (iii) the number of
Common Shares outstanding, (iv) competition, (v) the Company's effective tax
rate, (vi) the accounting treatment of acquisitions and the valuation of assets,
(vii) the amount and growth rate of the Company's general and administrative
costs and (viii) changes in applicable accounting principles and governmental
regulations.

S-9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION

Set forth below is certain selected consolidated financial and operating
information of the Company for each year in the five-year period ended December
31, 1996. The selected consolidated financial information is derived from the
Company's audited consolidated financial statements for such periods. The
Company's consolidated financial statements are prepared in accordance with
Canadian GAAP. The information set forth below should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the 1996 Consolidated Financial Statements and Notes thereto.

The financial results for the year ended December 31, 1996 include $18.7
million of finance and other costs related to SCI's October 1996 hostile
takeover proposal for the Company, which proposal was withdrawn in January 1997.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" for additional information regarding SCI's hostile takeover
proposal. The financial results for the year ended December 31, 1995 include an
aggregate of $195.7 million for legal settlements and litigation related finance
costs and certain general and administrative costs related to the legal
settlements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1996 1995(1) 1994 1993 1992
------------ ------------ ------------ ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Revenue........................................ $ 908,385 $ 598,493 $ 417,328 $ 303,011 $ 218,907
Gross margin................................... 337,571 225,362 158,854 115,118 83,708
Earnings from operations....................... 204,105 117,607 95,113 65,697 50,563
Net earnings (loss)............................ 63,906 (76,684) 38,494 28,182 19,766
Basic earnings (loss) per share................ 0.97 (1.69) 0.97 0.77 0.59
Fully diluted earnings (loss) per share(2)..... 0.97 (1.69) 0.97 0.76 0.58
Ratio of earnings to fixed charges(3).......... 1.9x -- 2.5x 2.9x 2.6x
Aggregate dividends declared per Common
Share........................................ 0.200 0.050 0.070 0.045 0.030

AS AT DECEMBER 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ---------- ----------
(IN THOUSANDS, EXCEPT OPERATING INFORMATION)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Total assets................................... $ 3,496,939 $ 2,262,980 $ 1,326,275 $ 913,661 $ 675,111
Total long-term debt(4)........................ 1,508,221 934,509 516,654 341,977 246,715
Preferred securities of subsidiary............. 75,000 75,000 75,000 -- --
Shareholders' equity........................... 1,048,200 614,682 411,139 325,890 236,317

OPERATING INFORMATION:
Number of funeral home locations(5)............ 956 815 640 533 451
Number of funeral services..................... 142,265 114,319 93,760 78,847 63,516
Number of cemeteries(5)........................ 313 179 116 70 38
</TABLE>

- ------------------------
(1) Certain of the comparative figures have been reclassified to conform to the
presentation adopted in 1996.

(3) The 1995 loss was not sufficient to cover fixed charges by a total of
approximately $126.6 million and as such the ratio of earnings to fixed
charges has not been computed.

(4) Total long-term debt comprises long-term debt, including current portion.

(5) The numbers of locations for 1994 and 1993 include adjustments and
consolidations related to prior periods.

S-10
<PAGE>
Had the Company's consolidated financial statements been prepared in
accordance with U.S. GAAP (see Note 21 to the 1996 Consolidated Financial
Statements), selected consolidated financial information would have been as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1996 1995(1) 1994 1993 1992
------------ ------------ ------------ ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Revenue........................................ $ 909,137 $ 598,493 $ 417,479 $ 308,402 $ 239,452
Earnings from operations....................... 198,869 117,376 94,758 66,711 54,838
Earnings (loss) before cumulative effect of
change in accounting principles.............. 64,559 (75,800) 39,652 28,912 21,330
Fully diluted earnings (loss) per share before
cumulative effect of change in accounting
principles................................... 0.96 (1.67) 0.98 0.77 0.62
Ratio of earnings to fixed charges(2).......... 1.8x -- 2.4x 2.9x 2.6x
Aggregate dividends declared per Common
Share........................................ 0.200 0.050 0.070 0.047 0.033

AS AT DECEMBER 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Total assets................................... $ 3,768,021 $ 2,345,874 $ 1,329,928 $ 921,342 $ 702,096
Total long-term debt(3)........................ 1,508,221 894,509 516,654 341,977 256,577
Preferred securities of subsidiary............. 75,000 75,000 75,000 -- --
Shareholders' equity........................... 1,026,110 519,006 385,950 299,059 245,472
</TABLE>

- ------------------------
(1) Certain of the comparative figures have been reclassified to conform to the
presentation adopted in 1996.

(2) The 1995 loss was not sufficient to cover fixed charges by a total of
approximately $128.3 million and as such the ratio of earnings to fixed
charges has not been computed.

(3) Total long-term debt comprises long-term debt, including current portion.

S-11
<PAGE>
PRICE RANGE OF COMMON SHARES AND DIVIDEND POLICY

The Common Shares have been listed on the New York Stock Exchange since
October 2, 1996 under the symbol "LWN." Prior to such listing, the Common Shares
were quoted on the Nasdaq National Market under the symbol "LWNG" ("LWNGF" prior
to June 6, 1996).

The Common Shares have been trading on The Toronto Stock Exchange since May
6, 1987 under the symbol "LWN," and commenced trading on The Montreal Exchange
on April 28, 1993, also under the symbol "LWN."

The following table sets forth, for the periods indicated, the range of high
and low sales prices, as reported by the New York Stock Exchange, the Nasdaq
National Market and The Toronto Stock Exchange.

<TABLE>
<CAPTION>
NEW YORK NASDAQ THE TORONTO
STOCK EXCHANGE NATIONAL MARKET STOCK EXCHANGE
-------------------- -------------------- --------------------
HIGH LOW HIGH LOW HIGH LOW
--------- --------- --------- --------- --------- ---------
(U.S.$) (U.S.$) (CDN.$)
<S> <C> <C> <C> <C> <C> <C>
1995
First quarter........................................ n/a n/a 29.125 24.703 40.875 35.000
Second quarter....................................... n/a n/a 36.500 26.625 50.750 36.750
Third quarter........................................ n/a n/a 41.750 33.875 56.000 46.000
Fourth quarter....................................... n/a n/a 41.625 23.125 55.750 31.250
1996
First quarter........................................ n/a n/a 29.875 16.375 41.125 22.500
Second quarter....................................... n/a n/a 31.125 26.125 42.350 36.000
Third quarter........................................ n/a n/a 42.750 26.625 58.750 36.600
October 1............................................ n/a n/a 42.500 41.750 57.750 56.750
October 2 through December 31........................ 42.625 37.625 n/a n/a 58.000 51.450
1997
First quarter........................................ 41.375 31.875 n/a n/a 56.750 43.156
April 1 through May 2................................ 31.875 27.500 n/a n/a 45.000 38.500
</TABLE>

The last reported sales price of the Common Shares on May 2, 1997 was
$30.125 on the New York Stock Exchange and Cdn.$41.700 on The Toronto Stock
Exchange.

As of April 30, 1997, there were 2,072 record holders of the Common Shares.

In May 1995, Loewen declared a dividend of $0.05 per Common Share. In
December 1995, the Board of Directors deferred the declaration of a second
semi-annual dividend for 1995 pending resolution of the effects of certain
litigation. In February 1996, Loewen declared a dividend of $0.05 per Common
Share as the second semi-annual dividend in respect of 1995. Loewen declared a
dividend of $0.07 per Common Share in June 1996 and a dividend of $0.08 per
Common Share in December 1996.

The general policy of Loewen is to increase the dividend rate on its Common
Shares as earnings grow. The declaration and payment of future dividends will be
determined by the Board of Directors and will depend upon earnings and, among
other things, the Company's operating and financial position, capital
requirements and general business conditions.

The payment of cash, stock and deemed dividends on the Common Shares is
generally subject to Canadian withholding tax. The rate of withholding tax is
25% or such lesser amount as may be provided by treaty between Canada and the
country of residence of the recipient. Under the current income tax treaty
between the United States and Canada, such withholding tax rate generally is
reduced to 15%. See "Certain Canadian Federal Tax Considerations" for additional
information regarding Canadian withholding tax.

S-12
<PAGE>
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations-- Liquidity and Capital Resources--Restrictions on Payment of
Dividends" for a discussion of certain restrictions on Loewen's ability to pay
dividends.

USE OF PROCEEDS

The net proceeds to be received from the Offering (after underwriting fees
and estimated offering expenses) will be approximately $ ($ if the
Underwriters' over-allotment options are exercised in full), which will be used
for working capital and general corporate purposes, including acquisitions. The
Company anticipates that a substantial portion of the net proceeds from the
Offering will be used to fund acquisitions that are expected to be consummated
during 1997. As of April 30, 1997, the Company had committed approximately $286
million for new acquisitions, some of which are subject to the satisfaction of
certain conditions. None of such acquisitions individually is material to the
Company.

Loewen initially will use all of the net proceeds of the Offering to reduce
the balance outstanding under LGII's five-year $750 million secured revolving
credit facility (the "1996 Revolving Credit Facility") . The facility matures in
May 2002 and bears interest at alternatives rates selected by LGII. At April 30,
1997, the amount outstanding under the facility was $500.5 million, and such
amount bore interest at 6.72% per annum.

Certain of the Underwriters are controlled by or affiliated with
Canadian-chartered banks that are lenders under the 1996 Revolving Credit
Facility. See "Underwriting."

CONSOLIDATED CAPITALIZATION

The following table sets forth the cash and term deposits and total
capitalization of the Company as of December 31, 1996, (a) on a pro forma basis
to reflect the outstanding balance of the 1996 Revolving Credit Facility as of
April 30, 1997 and (b) as adjusted to reflect the sale of 10,000,000 Common
Shares offered hereby and the application of the estimated net proceeds thereof
(after underwriting fees and estimated offering expenses) to reduce the
outstanding balance of the 1996 Revolving Credit Facility. The following
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the 1996
Consolidated Financial Statements and Notes thereto.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
--------------------------
PRO FORMA,
PRO FORMA AS ADJUSTED
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Cash and term deposits................................................................ $ 18,059 $ 18,059
------------ ------------
------------ ------------
Short-term debt, including current portion of long-term debt.......................... $ 79,580 $ 79,580
------------ ------------
Long-term debt
Series 1-4 senior notes............................................................. 700,000 700,000
Senior amortizing notes, Series A-E................................................. 208,200 208,200
1996 Revolving Credit Facility...................................................... 500,500
Canadian Revolver................................................................... 33,489 33,489
Term credit facilities.............................................................. 133,119 133,119
Other long-term debt................................................................ 196,413 196,413
Less current portion................................................................ (79,580) (79,580)
------------ ------------
Total long-term debt.............................................................. 1,692,141
------------ ------------
Preferred securities of subsidiary.................................................... 75,000 75,000
------------ ------------
Total shareholders' equity............................................................ 1,048,200
------------ ------------
Total capitalization.............................................................. $ 2,894,921 $ 2,894,921
------------ ------------
------------ ------------
</TABLE>

S-13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

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 pre-need basis.

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 locations. 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.

RESULTS OF OPERATION

Detailed below are the Company's operating results for the years ended
December 31, 1996, 1995 and 1994, expressed in dollar amounts as well as
relevant percentages. Revenue, gross margin data and expenses other than income
taxes are presented as a percentage of revenue. Income taxes are presented as a
percentage of earnings (loss) before income taxes, including equity and other
earnings in associated companies.

The Company's operations are comprised of three business divisions: funeral
homes, cemeteries and insurance. See Note 18 to the 1996 Consolidated Financial
Statements.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------- -------------------------------
1996 1995 1994 1996 1995 1994
--------- --------- --------- --------- --------- ---------
(IN MILLIONS) (PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Funeral.................................................. $ 549.8 $ 441.4 $ 353.9 60.5% 73.8% 84.8%
Cemetery................................................. 286.7 143.6 63.4 31.6 23.9 15.2
Insurance................................................ 71.9 13.5 -- 7.9 2.3 --
--------- --------- ---------
Total.................................................... $ 908.4 $ 598.5 $ 417.3 100.0% 100.0% 100.0%
--------- --------- ---------
--------- --------- ---------
</TABLE>

S-14
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------- -------------------------------
1996 1995 1994 1996 1995 1994
--------- --------- --------- --------- --------- ---------
(PERCENTAGES)
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Gross margin
Funeral.................................................. $ 222.9 $ 182.5 $ 143.4 40.6% 41.3% 40.5%
Cemetery................................................. 95.2 39.9 15.5 33.2 27.8 24.3
Insurance................................................ 19.5 3.0 -- 27.1 22.3 --
--------- --------- ---------
Total.................................................... 337.6 225.4 158.9 37.2 37.7 38.1

Expenses
General and administrative............................... 76.7 67.7 34.8 8.4 11.3 8.3
Depreciation and amortization............................ 56.8 40.1 29.0 6.3 6.7 6.9
--------- --------- ---------
Earnings from operations................................... 204.1 117.6 95.1 22.5 19.7 22.9
Interest on long-term debt................................. 88.9 50.9 34.2 9.8 8.5 8.2
Finance costs related to hostile takeover proposal......... 3.2 -- -- 0.4 -- --
Other costs related to hostile takeover proposal........... 15.5 -- -- 1.7 -- --
Legal settlements and litigation related finance costs..... -- 184.9 -- -- 30.9 --
Dividends on preferred securities of subsidiary............ 7.1 7.1 2.7 0.8 1.2 0.6
Income taxes............................................... 29.1 (47.2) 19.7 31.3 (38.1) 33.9
--------- --------- ---------
60.3 (78.1) 38.5 6.6 (13.1) 9.2
Equity and other earnings in associated companies.......... 3.6 1.4 -- 0.4 0.3 --
--------- --------- ---------
Net earnings (loss)........................................ $ 63.9 $ (76.7) $ 38.5 7.0% (12.8)% 9.2%
--------- --------- ---------
--------- --------- ---------
</TABLE>

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

Consolidated revenue increased 51.8% to $908.4 million in the year ended
December 31, 1996 from $598.5 million in 1995. Consolidated gross margin
increased 49.8% to $337.6 million in 1996 from $225.4 million in 1995. As a
percentage of revenue, consolidated gross margin decreased to 37.2% in 1996 from
37.7% in 1995, 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 24.6% to $549.8 million in 1996 compared to $441.4
million in 1995, primarily due to acquisitions. Funeral revenue for 1996
includes $4.4 million of commission income received by the Company due to
certain non-recurring conversions of trust investments to insurance investments.
The number of funeral services performed at locations in operation for all of
1995 and 1996 ("Established Locations") declined by 3.2% from 1995 to 1996;
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 41.7% in 1996 from 42.1% in 1995, as the $2.5
million increase in revenue was more than offset by a $2.7 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 40.6% in 1996 from 41.3% in 1995.

Cemetery revenue increased 99.7% to $286.7 million in 1996 compared to
$143.6 million in 1995, primarily due to acquisitions. Cemetery gross margin
increased to 33.2% in 1996 from 27.8% in 1995 principally as a result of a shift
to increased sales of interment services for newly acquired as well as existing
locations. Management believes that the cemetery gross margin is sustainable at
30% to 32% in 1997. Historically, many of the Company's cemeteries had focused
their marketing activities on the sale of cemetery interment rights and related
merchandise. During 1996, management implemented sales programs designed to
encourage existing pre-need cemetery customers, who are already committed to
Company owned cemeteries, as well as new customers, to purchase interment
services on a pre-need basis.

S-15
<PAGE>
For Established Locations, cemetery gross margin increased to 31.2% in 1996 from
26.5% in 1995, primarily as a result of an increase in revenue of $15.2 million,
with a $6.1 million increase in costs.

Insurance revenue increased to $71.9 million for 1996 from $13.5 million in
1995. 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 approximately $150 million (including related costs), which assets included
two insurance companies. The increase in gross margin for insurance operations
to 27.1% for 1996 from 22.3% in 1995 reflects primarily the impact of a $4.6
million reduction in insurance policy liabilities following actuarial reviews of
insurance policy liabilities and insurance costs and expenses. Under Canadian
GAAP, all actuarial assumptions are re-evaluated on a periodic basis. See Note
21 to the 1996 Consolidated Financial Statements.

In addition to its focus on quality at-need funeral and cemetery services,
the Company provides advanced funeral and cemetery planning to the communities
it serves. The Company's gross pre-arranged funeral sales increased to
approximately $190 million in 1996 from approximately $97 million in 1995. Pre-
arranged funeral services comprised approximately 15% of the funeral services
performed by the Company in 1996 and approximately 16% of the funeral services
performed by the Company in 1995. Although pre-need funeral sales increased in
1996, the Company does not expect pre-arranged funeral services as a percentage
of funeral services performed by the Company to vary significantly in 1997 and
1998. The Company estimates that it had a backlog of approximately $840 million
in pre-need funeral sales as of December 31, 1996. Approximately 66% of the
Company's cemetery revenue in 1996 was generated from pre-need sales compared
with 61% in 1995. The Company anticipates approximately the same mix between
pre-need and at-need cemetery sales for at least the next two years. Note 1 to
the 1996 Consolidated Financial Statements provides information regarding the
accounting treatment of pre-arranged funeral services and pre-need cemetery
sales.

United States based operations contributed 93.5% of 1996 consolidated
revenue compared with 91.3% in 1995.

General and administrative expenses, as a percentage of revenue, decreased
to 8.4% in 1996 from 11.3% in 1995. For the year ended December 31, 1996,
general and administrative expenses increased 13.4% to $76.7 million from $67.7
million in 1995. Included in the general and administrative expense for 1995
were $10.8 million for professional fees and other costs related to the Gulf
National and Provident litigations and settlements (described below), and a $3.5
million write-off of acquisition costs. The increase in general and
administrative expenses in 1996 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.

The $3.2 million of finance costs related to the hostile takeover proposal
by SCI are comprised of $1.9 million paid to Company lenders for waiver fees and
$1.3 million in additional interest costs relating to the October 1996 senior
guaranteed note issue. See "--Liquidity and Capital Resources" and Note 14 to
the 1996 Consolidated Financial Statements.

The $15.5 million of other costs related to the hostile takeover proposal by
SCI are comprised of $9.9 million of legal fees, $2.0 million of investment
banking advisory fees and $3.6 million of fees to other advisors. No tax benefit
relating to these other costs is reflected in the 1996 Consolidated Financial
Statements. See Note 14 to the 1996 Consolidated Financial Statements.

Interest expense on long-term debt increased by $38.0 million in 1996
primarily as a result of additional borrowings by the Company to finance its
acquisitions and higher borrowing costs due to lower credit ratings. As a
percentage of revenue, depreciation and amortization decreased to 6.3% in 1996
from 6.7% in 1995, principally due to the increased proportion of cemetery
acquisitions.

Income taxes were $29.1 million for 1996, resulting in an effective tax rate
of 31.3% for the year, after giving effect to the other costs related to the
hostile takeover proposal for which no tax benefit has been provided. In 1995,
the Company recorded a deferred tax benefit of $60.3 million relating to the
settlements of the Gulf National and Provident litigations. Prior to the tax
recovery, 1995 income taxes were

S-16
<PAGE>
$13.2 million, resulting in an effective rate of 32.0%. The decrease in the
effective annual tax rate is due to the expansion of the Company's international
and intercompany financing arrangements, offset by the costs related to the
hostile takeover proposal for which no tax benefit has been provided.

Net earnings increased to $63.9 million in 1996 from a net loss of $76.7
million in 1995. EPS increased to $0.97 per share for 1996 from a loss of $1.69
per share for 1995. The net loss and loss in EPS for 1995 were primarily due to
the impact of the Gulf National and Provident litigations and settlements.

The Company's statement of changes in financial position for the year ended
December 31, 1996 reflects cash applied to operations of approximately $135
million, primarily as a result of legal settlements of $165 million recorded in
1995 but funded in the first quarter of 1996.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

The results for the year ended December 31, 1995 were significantly affected
by the November 1995 jury award of $500 million to Gulf National Insurance
Company and certain of its affiliates ("Gulf National") and the subsequent
settlements, during the first quarter of 1996, of the Gulf National litigation
and certain litigation with Provident American Corporation and one of its
affiliates ("Provident"). The related costs are reflected primarily in the
results for the three months ended December 31, 1995. For that period, the
Company recorded a net loss of $113.2 million as compared to net earnings of
$11.4 million in the same period of 1994. For the year ended December 31, 1995,
the Company recorded a net loss of $76.7 million compared to net earnings of
$38.5 million in 1994.

Consolidated revenue increased 43.4% to $598.5 million in the year ended
December 31, 1995 from $417.3 million in 1994, with funeral revenue increasing
24.6% and cemetery revenue increasing 126.4%. Consolidated gross margin
increased 41.9% to $225.4 million in 1995 from $158.9 million in 1994. As a
percentage of revenue, funeral gross margin increased to 41.3% in 1995 from
40.5% in 1994 and cemetery gross margin increased to 27.8% in 1995 from 24.3% in
1994. As a result of the change in mix between funeral and cemetery operations,
the combined gross margin decreased to 37.7% in 1995 from 38.1% for the same
period in 1994.

Funeral revenue increased 24.6% to $441.4 million in 1995 compared with
$353.9 million in 1994, primarily due to acquisitions. The funeral revenue from
Established Locations in operation for all of 1994 and 1995 increased by $7.5
million while corresponding funeral gross margins increased from 40.6% to 42.1%.
With the implementation of merchandising programs and inflation-based price
increases, the Company was able to more than offset a 1.3% decline in the number
of funeral services performed at Established Locations.

Cemetery revenue increased 126.4% to $143.6 million in 1995 compared with
$63.4 million in 1994, primarily due to acquisitions. Cemetery gross margin
increased to 27.8% in 1995 from 24.3% in 1994, primarily as a result of
increased sales activity and the integration of acquisitions with a higher
cemetery gross margin. The cemetery revenue from Established Locations in
operation for all of 1994 and 1995 increased by $12 million, while corresponding
cemetery gross margins increased from 26.6% to 29.0%, both principally due to a
higher level of pre-need sales at higher margins.

In 1995, approximately 16% of the funeral services performed by the Company
were pre-arranged, an increase from 15% in 1994. During 1995, the Company sold
approximately 28,000 funeral services to families planning in advance compared
with approximately 24,000 funeral services in 1994. In 1995, approximately 61%
of the Company's cemetery revenue was generated from pre-need sales compared
with 53% in 1994.

Insurance revenue in 1995 was $13.5 million. The Company determined in 1995
that it would not, as previously planned, sell a life insurance subsidiary which
had been acquired in connection with a larger acquisition in 1994 with the
intent that it be sold. The subsidiary was accounted for at cost from the date
of acquisition to June 30, 1995. Beginning July 1, 1995, the Company reported
the operations of the life insurance subsidiary on a consolidated basis.

S-17
<PAGE>
United States based operations contributed 91.3% of 1995 consolidated
revenue compared with 88.4% in 1994.

For the year ended December 31, 1995, general and administrative expenses
increased 94.7% to $67.7 million from $34.8 million in 1994. As a percentage of
consolidated revenue, general and administrative expenses in 1995 were 11.3% as
compared with 8.3% in 1994. Included in general and administrative expenses in
1995, and principally in the fourth quarter, are litigation, acquisition and
other expenses, including $10.8 million for professional fees and other costs
related to the Gulf National and Provident litigation and settlements, and a
$3.5 million write-off of acquisition costs. The remaining increase in general
and administration expenses can be attributed to an expansion of the Company's
infrastructure as a result of the integration of acquired operations.

Interest expense on long-term debt increased by $16.7 million in 1995
primarily as a result of additional borrowings by the Company to finance its
acquisitions. The Company's credit ratings were reduced as a result of the Gulf
National award.

The dividends on preferred securities increased from $2.7 million to $7.1
million as a result of the 9.45% Cumulative Monthly Income Preferred Securities
(the "MIPS"), issued in 1994 by Loewen Group Capital, L.P., a limited
partnership of which LGII is the sole general partner ("LGC"), being outstanding
for a full year.

The Company recorded an expense of $165.0 million for the year ended
December 31, 1995 for the Gulf National and Provident settlements announced on
January 29, 1996 and February 12, 1996, respectively. The accrual of $135.0
million for the Gulf National settlement consisted of (i) $50.0 million recorded
in current liabilities in respect of a cash payment made in February 1996, (ii)
$45.0 million recorded in shareholders' equity for the issue of 1.5 million
Common Shares in February 1996 with a price guarantee of $30 per share in
certain circumstances, and (iii) $40.0 million recorded as long-term debt
representing the discounted value of a non-interest bearing promissory note
dated January 31, 1996 with payments of $4.0 million per annum over 20 years.

The accrual of $30 million for the Provident settlement consisted of (i)
$3.0 million recorded in current liabilities in respect of a payment made March
19, 1996 and (ii) $27.0 million recorded in shareholders' equity for the issue
in March 1996 of one million Common Shares with a price guarantee of $27 in
certain circumstances.

The deferred income tax benefit of $60.3 million from the Gulf National and
Provident settlements has been recorded as a deferred income tax asset. Prior to
the tax recovery from the Gulf National and Provident settlements, income taxes
were $13.2 million, an effective rate of 32.0%, compared with $19.7 million in
1994, an effective rate of 33.9%. The decrease in the effective tax rate in 1995
was primarily due to the expansion of the Company's international and
intercompany financing arrangements. As a result of the above, the Company shows
a net income tax recovery of $47.2 million versus a net income tax expense of
$19.7 million in 1994.

As a result of litigation during 1995 and the resulting Gulf National and
Provident settlements, litigation-related finance costs, aggregating $19.9
million, were expensed in 1995. These finance costs consisted of (i) $7.4
million of finance costs incurred as a result of posting a $125 million bond in
connection with the appeal of the Gulf National award, (ii) $3.9 million for
amendment of bank facilities due to litigation and write-off of related existing
deferred financing costs, and (iii) $8.6 million including $7.1 million for the
termination of interest rate agreements and a $1.5 million unrealized loss with
respect to interest rate agreements entered into in anticipation of a long-term
debt issue that was aborted as a result of the Gulf National award.

The cash provided from operations for 1995 decreased from $43.3 million to
$10.4 million primarily as a result of increased expenses associated with the
Gulf National litigation and increases in required working capital and other
non-cash balances arising from the additional cemetery operations.

S-18
<PAGE>
ACQUISITIONS, INVESTMENTS AND CAPITAL EXPENDITURES

The Company acquired 159 funeral homes, 136 cemeteries and two insurance
companies during 1996 for consideration of approximately $620 million through
168 separate acquisition transactions. Of these acquisitions, 149 funeral homes,
135 cemeteries and the two insurance companies were located in the United States
and the balance were located in Canada. Included in these acquisitions is the
March 1996 purchase of 15 funeral homes, two cemeteries and two insurance
companies from S.I. Acquisition Associates, L.P. for approximately $150 million
(including related costs). As a result of this acquisition, the Company recorded
approximately $186 million of insurance invested assets and approximately $125
million of insurance policy liabilities. During 1995, the Company acquired 177
funeral homes and 64 cemeteries for consideration of approximately $488 million.

In connection with certain acquisitions the Company may issue Common Shares
as full or partial payment of the purchase price ("share-for-share
acquisitions"). In August 1996, the Company registered with the Commission
5,000,000 Common Shares for issuance in connection with prospective share-for-
share acquisitions. In September 1996, the Company issued 69,533 of such Common
Shares in connection with one share-for-share 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.

In November 1996, Rose Hills Holding Corp. ("RH Holdings"), a company formed
by Blackstone and LGII, acquired the cemetery and mortuary operations and assets
of The Rose Hills Memorial Park Association and Roses, Inc. of Los Angeles
(together, "Rose Hills"). The principal assets of Rose Hills are the Rose Hills
Memorial Park, the largest cemetery in North America, and a mortuary that serves
more families annually than any other single mortuary location in the United
States. To fund the aggregate transaction price of approximately $285 million,
Blackstone and LGII contributed approximately $35 million and $72 million,
respectively, to RH Holdings, and an affiliate of LGII contributed 14 funeral
homes and two combination funeral home/cemetery operations located in Los
Angeles and Orange counties that were valued at $23 million. The remaining $155
million was funded with debt from banks and other institutional investors. For
its contribution, Blackstone received a controlling interest in RH Holdings.
Blackstone also controls the Board of Directors of RH Holdings. For their
contributions, LGII and its affiliate received approximately 20.5% of the
outstanding common stock of RH Holdings and an aggregate of $86 million of
preferred stock of RH Holdings. The preferred stock constitutes all of the
outstanding preferred stock of RH Holdings and has an annual payment-in-kind
dividend of 10%. Pursuant to a put/ call agreement between the Company and
Blackstone, the Company has an option to acquire Blackstone's common share
interest in RH Holdings in certain circumstances (a "call"), and Blackstone has
the option to sell its common share interest in RH Holdings to the Company in
certain circumstances (a "put"). Upon a call, Blackstone will receive, at a
minimum, its original investment and a 22.5% compound return per annum thereon
regardless of the calculated equity value. Any additional equity attributable to
Blackstone's common share interest will be determined on the basis of a formula
set forth in the put/call agreement. Upon a put, there will be no guaranteed
return to Blackstone. Any payment to Blackstone will be limited to Blackstone's
share of the calculated equity value based on a formula (including earnings
before interest, taxes, depreciation and amortization) set forth in the terms of
the put/call agreement.

In August 1996, Prime Succession Holdings, Inc. ("Prime"), a company formed
by Blackstone and LGII, acquired all of the outstanding shares of Prime
Succession, Inc., which at that time was the largest privately-held funeral
services company in North America, with 146 funeral homes and 16 cemeteries in
20 states. To fund the aggregate transaction price of approximately $320
million, Blackstone and LGII contributed approximately $52 million and
approximately $78 million, respectively, to Prime. The remaining $190 million
was funded with debt from banks and other institutional investors. For its
contribution, Blackstone received a controlling interest in Prime. Blackstone
also controls the Board of Directors of Prime. For its contribution, LGII
received approximately 21.8% of the outstanding common stock of Prime

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<PAGE>
and $63.5 million of preferred stock of Prime. The preferred stock constitutes
all of the outstanding preferred stock of Prime and has an annual
payment-in-kind dividend of 10%. Pursuant to a put/call agreement between the
Company and Blackstone, the Company has an option to acquire Blackstone's common
share interest Prime in certain circumstances, and Blackstone has the option to
sell its common share interest in Prime to the Company in certain circumstances.
Upon a call, Blackstone will receive, at a minimum, its original investment plus
a 24.1% compound return per annum thereon regardless of the calculated equity
value. Any additional equity attributable to Blackstone's common share interest
will be determined on the basis of a formula set forth in the put/call
agreement. Upon a put, there is no guaranteed return to Blackstone. Any payment
to Blackstone will be limited to Blackstone's share of the calculated equity
value based on a formula (involving earnings before interest, taxes,
depreciation and amortization) set forth in the terms of the put/call agreement.

With respect to each of RH Holdings and Prime, the call option can be
exercised on the fourth anniversary of the respective closing date and for two
years thereafter, and the put option can be exercised beginning on the sixth
anniversary of the respective closing date and for two years thereafter.

See Note 4 to the 1996 Consolidated Financial Statements for additional
information regarding RH Holdings and Prime, including further discussions of
the put and call options.

LIQUIDITY AND CAPITAL RESOURCES

The Company plans to fund future acquisitions through a combination of debt
and equity offerings and borrowings under its credit facilities (described
below). The Company believes that cash flow from operations generally will be
sufficient to meet working capital and short-term liquidity requirements for
current operations and to fund interest payments and dividends on outstanding
Common and preferred shares. The Company plans to finance principal repayments
on debt primarily through the issue of additional debt or 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 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 December 31, 1996 the Company's long-term debt/equity ratio was
1.4:1.

The Company's balance sheet at December 31, 1996, as compared to December
31, 1995, reflects changes principally from acquisitions during 1996, as
described further in Note 2 to the 1996 Consolidated Financial Statements. In
addition, the Company's investments in Prime and Rose Hills together increased
investments on the balance sheet by $169 million, as further described in Note 4
to the 1996 Consolidated Financial Statements. As at December 31, 1995, there
was a working capital deficiency arising from the $53 million accrual for the
cash payments required to be made in 1996 under the Gulf National and Provident
settlements. The $50 million payment for the Gulf National settlement was funded
in 1996 by borrowings under the Company's credit facilities.

During 1995 and 1996 the Company significantly expanded its cemetery
pre-need sales programs. Cemetery pre-need sales typically are structured with
low initial cash payments by the customer. The balance due is recorded as an
installment contract receivable and the future liability for merchandise as an
other liability. The increase in the level of pre-need sales has resulted in an
increase in both current and long-term receivables and other liabilities.

EQUITY OFFERINGS

In January 1996, Loewen completed a public offering (the "1996 Preferred
Share Offering") in Canada and a simultaneous private placement in the United
States of Series C Receipts representing 8,800,000 Series C Preferred Shares for
gross proceeds of Cdn.$220 million (U.S.$161 million), which were deposited with
an escrow agent. The net proceeds were released to the Company periodically to
fund

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<PAGE>
acquisitions by depositing with the escrow agent an equal dollar amount of
Series C Preferred Shares. By June 1996, all of the Series C Preferred Shares
had been deposited with the escrow agent, all of the net proceeds had been
released to the Company and the Series C Preferred Shares were released to the
holders of the Series C Receipts. Each Series C Preferred Share is convertible
into 0.6557 of a Common Share at the option of the holder of Series C Preferred
Shares, subject to certain conditions. See Note 9 to the 1996 Consolidated
Financial Statements for additional information regarding the Series C Preferred
Shares.

In March 1996, Loewen completed a public offering in Canada and a
simultaneous private placement in the United States of 7,000,000 Common Shares
and, in April 1996, sold an additional 700,000 Common Shares (pursuant to the
exercise of an over-allotment option) for aggregate gross proceeds of
approximately Cdn.$302 million (U.S.$221 million) (the "1996 Common Share
Offering"). The net proceeds of the 1996 Common Share Offering were used to pay
down the then outstanding balance on the Multi-Currency Revolver (defined below)
and for general corporate purposes, including acquisitions.

INDEBTEDNESS

In March 1996, concurrently with the 1996 Common Share Offering, LGII issued
two series of senior guaranteed notes (the "Series 1 and 2 Notes") in the United
States for aggregate gross proceeds of $350 million (the "Series 1 and 2 Senior
Notes Offering"). The Series 1 and 2 Notes are guaranteed by Loewen. The net
proceeds of the Series 1 and 2 Senior Notes Offering were used to repay the then
outstanding balance on the Multi-Currency Revolver in full and for general
corporate purposes, including acquisitions.

In October 1996, LGII issued two additional series of senior guaranteed
notes (the "Series 3 and 4 Notes") in the United States for aggregate gross
proceeds of $350 million (the "Series 3 and 4 Senior Notes Offering"). The
Series 3 and 4 Notes are guaranteed by Loewen. The net proceeds of the Series 3
and 4 Senior Notes Offering were used primarily to repay indebtedness under the
1996 Revolving Credit Facility (described below), and the balance of the net
proceeds were used for general corporate purposes, including acquisitions and
interest and principal payments on existing senior notes.

In addition to the Series 1 through 4 Notes, LGII and Loewen have
outstanding at December 31, 1996 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 Senior Notes"). The Series A-E Senior Notes bear
interest at rates ranging from 6.49% to 9.93% and have initial terms of seven to
ten years.

Loewen also has a Cdn.$50 million revolving credit facility that matures in
July 1999 (the "Canadian Revolver"), which was amended in July 1996 to modify
certain covenants to parallel the 1996 Revolving Credit Facility. A subsidiary
of 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"), which also was amended in July 1996 to modify certain covenants to
parallel the 1996 Revolving Credit Facility. Loewen has a Cdn.$35 million
five-year term loan that will terminate in January 2000 (the "Canadian Term
Loan").

In May 1996, LGII entered into the 1996 Revolving Credit Facility with a
syndicate of banks. The 1996 Revolving Credit Facility matures in May 2002 and
bears interest at alternative rates selected by LGII. At December 31, 1996, the
amount outstanding under the 1996 Revolving Credit Facility was $237 million,
and such amount bore interest at 6.87% per annum.

Prior to entering into the 1996 Revolving Credit Facility, LGII had a $400
million unsecured multi-currency revolving credit facility with a syndicate of
banks that was scheduled to mature in May 2000 and a $100 million 364-day
unsecured multi-currency revolving credit facility with the same syndicate of
banks that expired on May 10, 1996 (together, the "Multi-Currency Revolver").
The Multi-Currency Revolver was repaid in full and retired on May 31, 1996.

Also on May 31, 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

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<PAGE>
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 1996 Revolving Credit Facility, the Canadian Revolver, the MEIP Loan,
and the Canadian Term Loan as well as the holders of certain letters of credit,
the Series A-E Senior Notes, the Series 1 and 2 Notes and the Series 3 and 4
Notes.

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 December 31, 1996, approximately $26 million of the Company's retained
earnings were not restricted and were available for payment of dividends under
the most restrictive agreement. See Note 6 to the 1996 Consolidated 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 7 to the 1996 Consolidated 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 counter-parties. 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 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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<PAGE>
SOURCES AND USES OF CAPITAL

The following table summarizes the sources and uses of capital for the past
three years based on the Company's Consolidated Statements of Changes in
Financial Position.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995(1) 1994
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Sources of capital:
Cash provided by operations....................................................... $ (134.5) $ 10.4 $ 43.3
Issue of Common Share capital..................................................... 300.6 203.1 53.3
Issue of preferred securities of subsidiary....................................... -- -- 75.0
Issue of preferred shares......................................................... 154.1 -- --
Net change in long-term debt and current note payable............................. 575.4 381.2 172.9
--------- --------- ---------
Total........................................................................... $ 895.6 $ 594.7 $ 344.5
--------- --------- ---------
--------- --------- ---------

Uses of capital:
Business acquisitions (net of debt and liabilities assumed)....................... $ 619.6 $ 487.9 $ 265.6
Construction of new facilities.................................................... 17.7 14.7 14.1
Investments, net.................................................................. 171.4 15.7 30.9
Net capital expenditures.......................................................... 30.8 17.9 13.6
Net purchase of insurance invested assets......................................... 34.4 -- --
Common Share dividends............................................................ 11.4 2.4 2.9
Preferred share dividends......................................................... 8.9 -- --
Increase (decrease) in cash and cash equivalents.................................. (21.3) 27.3 (2.5)
Other............................................................................. 22.7 28.8 19.9
--------- --------- ---------
Total........................................................................... $ 895.6 $ 594.7 $ 344.5
--------- --------- ---------
--------- --------- ---------
</TABLE>

- ------------------------

(1) Certain of the comparative figures have been reclassified to conform to the
presentation adopted in 1996.

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<PAGE>
BUSINESS

OVERVIEW

The Company's March 1995 acquisition of Osiris provided the Company with an
experienced, highly regarded cemetery management team. In 1996, the Company
completed $325 million of cemetery acquisitions (136 locations), as compared to
only $87 million of cemetery acquisitions (46 locations) in 1994, the year
before the Osiris acquisition. Further, cemetery gross margin has increased from
24.3% for 1994 to 33.2% for 1996, primarily as a result of policies and programs
implemented by the new cemetery management team, including an increased emphasis
on both pre-need sales and higher margin products and services.

In 1996, the Company also entered into two structured investments with
Blackstone. In August 1996, the Company and Blackstone together acquired Prime
Succession, Inc., the largest privately-held funeral services company in North
America, and in November 1996, the Company and Blackstone together acquired the
Rose Hills Memorial Park, the largest funeral home/cemetery combination property
in North America. In each case, the Company has an exclusive option to acquire
Blackstone's interest in these strategic assets. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for further
information regarding the investments with Blackstone.

The Company believes that it is well positioned to continue its growth due
in part to the attractive consolidation opportunities available in the highly
fragmented North American funeral home and cemetery industry. Management
currently estimates that the five largest publicly-traded North American funeral
service companies together own or operate approximately 11% of the 23,500
funeral homes in North America and 9% of the 10,500 cemeteries in North America.

Loewen is a holding company that, as of April 30, 1997, has approximately
900 direct and indirect subsidiaries, including LGII. LGII, which is a
wholly-owned subsidiary of Loewen, is a holding company for all United States
operations (excluding the Company's operations in Puerto Rico). Loewen is a
holding company for all of the Company's operations outside of the United States
(including Puerto Rico). All of Loewen's subsidiaries are operating subsidiaries
except for fourteen subsidiaries that principally are

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<PAGE>
financing vehicles. In addition, LGII is the general partner of LGC. The MIPS
issued by LGC are publicly-held and are traded on the New York Stock Exchange.

Loewen was incorporated under the Company Act of British Columbia on October
30, 1985. The principal executive offices of the Company are located at 4126
Norland Avenue, Burnaby, British Columbia V5G 3S8, telephone number (604)
299-9321. The Company also maintains corporate offices at 50 East RiverCenter
Boulevard, Suite 800, Covington, Kentucky 41011 and at 3190 Tremont Avenue,
Trevose, Pennsylvania 19053.

GROWTH STRATEGY

BUSINESS OPERATIONS

The Company's operations are comprised of three business divisions: funeral
homes, cemeteries and insurance. In August 1996, the Company created a regional
management structure to organize its operations into seven geographic regions.
Within each of these regions, five of which are in the United States and two of
which are in Canada, the Company has integrated certain aspects of its funeral
home and cemetery divisions. Management believes that the new organizational
structure will enable the Company to capitalize on regional operating
efficiencies and to better realize synergies.

The Company's management structure and remuneration practices are designed
to support and encourage entrepreneurial drive and individual responsibility.
Each funeral home and cemetery is operated as a distinct profit center, with
monthly and annual financial performance monitored by regional and corporate
management in accordance with budgeted projections. Local managers are given a
high degree

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<PAGE>
of autonomy because the Company believes that, as members of the local
community, they are best able to judge how to conduct day-to-day operations in a
manner consistent with the established character of the particular business and
the needs of the community.

FUNERAL HOMES

The Company's funeral homes offer a full range of funeral services,
encompassing the collection of remains, registration of death, professional
embalming, use of funeral home facilities, sale of caskets and other
merchandise, transportation to a place of worship or funeral chapel for a
religious service and transportation to a cemetery or crematorium. To provide
the public with the opportunity to choose the service that is most appropriate
from both a personal and financial perspective, the Company offers complete
funeral services (including caskets and related merchandise) at prices ranging
from approximately $750 to $7,500 (and averaging approximately $3,500).

Substantially all of the Company's funeral homes provide basic cremation
services, and the Company has proprietary programs designed to provide a full
range of service alternatives to families choosing cremation. In 1996,
cremations accounted for approximately 28% of all funeral services performed by
the Company. As a percentage of all funeral services in the United States,
cremations have been increasing by approximately 1% annually over the past five
years and, in 1996, accounted for approximately 21% of all funeral services
performed in the United States.

Funeral operations accounted for approximately 61% of the Company's
consolidated revenue for 1996. Amounts paid for funeral services are recorded as
revenue at the time the service is performed. Payments made for pre-need funeral
contracts are either placed in trust by the Company or are used on behalf of the
purchaser of the pre-need contract to pay premiums on life insurance polices
under which the Company is designated as the beneficiary. At the date of
performing a pre-arranged funeral service, the Company records as funeral
revenue the amount originally trusted or the insurance contract amount, together
with related accrued earnings retained in trust and increased insurance
benefits. The Company's gross pre-arranged funeral sales were approximately $190
million for 1996, compared with approximately $97 million in 1995.

CEMETERIES

The Company's cemetery division assists families in making burial
arrangements and offers a complete line of cemetery products (including a
selection of burial spaces, burial vaults, lawn crypts, memorials, niches and
mausoleum crypts), the opening and closing of graves and cremation services.

The Company's cemetery operations comprised approximately 32% of the
Company's consolidated revenue for 1996, the majority of which was derived from
pre-need sales of cemetery products and services. The pre-need sale of interment
rights and related products and services is recorded as revenue when customer
contracts are signed. At that time, costs related to the sale are also recorded
and an allowance is established for future cancellations and refunds, based on
management's estimates of expected cancellations. A portion of the proceeds
received by the Company from pre-need merchandise sales is generally set aside
in merchandise trust funds to provide for the future delivery of the cemetery
products. Pre-need sales are usually financed by the Company over three to four
years at interest rates ranging from 10% to 15%.

In addition, the Company provides for the long-term maintenance of its
cemetery properties by placing a portion, typically 10%, of the proceeds from
the sale of interment rights into a perpetual care trust fund. The income from
these funds is used to offset the maintenance costs of operating the cemeteries.
At December 31, 1996, the Company had approximately $160 million in perpetual
care trust funds.

INSURANCE

The Company operates four insurance subsidiaries, all of which were acquired
in conjunction with certain funeral home acquisitions. These insurance
subsidiaries operate in Texas, Louisiana, Mississippi

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<PAGE>
and Arizona and sell a variety of life insurance products to fund funerals.
Revenue from the Company's insurance operations totaled approximately $72
million in 1996.

COMPETITION

Competition generally arises from two sources in the funeral service
industry. The first form is competition among local funeral homes and cemeteries
for at-need and pre-need business. The market share of a single funeral home or
cemetery in any community is often a function of the name, reputation and
location of that funeral home or cemetery. Accordingly, gains in market share
within a community are usually achieved over a long period of time.

The Company also faces competition in its ongoing acquisition program. In
the North American funeral service industry acquisition market, the Company's
competition includes SCI, Stewart, ECI and CSI, all of which are publicly-traded
funeral service companies with significant United States operations, as well as
other non-public regional consolidators. On occasion, the Company also has
experienced competition on a local level from consolidators who have focused on
acquiring funeral home and cemetery properties in a concentrated geographic
area.

REGULATION

The funeral service industry is regulated primarily on a state and
provincial basis with the vast majority of jurisdictions requiring licensing and
supervision of individuals who provide funeral-related services. A number of
jurisdictions also regulate the sale of pre-need services and the administration
of any resulting trust funds or insurance contracts. In addition, concerns
regarding lack of competition have led a few jurisdictions to enact legislation
designed to encourage competition by restricting the common ownership of funeral
homes, cemeteries and related operations within a specific geographic region.

The Company's United States operations must also comply with federal
legislation, including the laws administered by the Occupational Safety and
Health Administration, the Americans with Disabilities Act and the Federal Trade
Commission ("FTC") regulations. The FTC administers the Trade Regulation Rule on
Funeral Industry Practices, the purpose of which is to prevent unfair or
deceptive acts or practices in connection with the provision of funeral goods or
services.

The Company's insurance company subsidiaries are subject to regulation by
the states in which they are domiciled and the states in which their products
are sold.

ENVIRONMENTAL RISK

Management believes that the Company's primary environmental risk arises in
connection with the acquisition of a funeral home or cemetery property. The
Company manages this risk by conducting extensive environmental due diligence of
all potential acquisition candidates. Management endeavors to ensure that
environmental issues are identified and addressed in advance of acquisition or
are covered by an indemnity by the seller or an offset to the purchase price.

EMPLOYEES

At March 31, 1997, the Company employed approximately 17,000 people with
approximately 500 people employed at the Company's corporate offices. Management
believes that its relationship with employees is good. Fewer than 150 of the
Company's employees are members of collective bargaining units. All full-time
and eligible part-time employees who have been employed by the Company for more
than 90 days are entitled to five free Common Shares as part of the Company's
"Share The Vision" program.

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<PAGE>
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 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
"MIPS Underwriters") of LGC's 1994 offering of the MIPS, were subsequently added
as defendants. On November 7, 1995, a class action lawsuit was filed on behalf
of a class of purchasers of Loewen's Common Shares against Loewen and the same
individual defendants in the United States District Court for the Southern
District of Mississippi alleging Federal securities law violations and related
common law claims. On December 1, 1995, a class action lawsuit was filed on
behalf of a class of purchasers of the Company's securities against Loewen,
LGII, LGC and the same individual defendants in the United States District Court
for the Eastern District of Pennsylvania.

The complaints with respect to the class actions alleged that the defendants
failed to disclose the Company's anticipated liability in connection with
certain litigation with Gulf National. The Pennsylvania class actions also
alleged failure to disclose the Company's potential liability in connection with
certain litigation with Provident. The Company settled the lawsuits with Gulf
National and Provident during the first quarter of 1996.

Pursuant to a Transfer Order filed April 15, 1996 by the Judicial Panel on
Multidistrict Litigation, the Mississippi class action was transferred to the
Eastern District of Pennsylvania for consolidation of pretrial proceedings with
the two Pennsylvania class actions. On September 16, 1996, the plaintiffs filed
a Consolidated and Amended Class Action Complaint (the "Consolidated Class
Action Complaint"). Procedurally, the Consolidated Class Action Complaint
supersedes the complaints filed in the class actions. Plaintiffs allege three
causes of action in the Consolidated Class Action Complaint: (i) Loewen, LGII,
LGC and the five individual defendants violated Sections 10(b) and 20(a) and the
implementing anti-fraud rules under the Exchange Act, (ii) LGII, LGC and three
of the five individual defendants violated Sections 11 and 15 of the Securities
Act, in connection with the MIPS offering and (iii) Loewen, LGII and LGC made
material misstatements in connection with the MIPS offering in violation of
Sections 12(2) and 15 of the Securities Act. Plaintiffs seek compensatory money
damages in an unspecified amount, together with attorneys fees, expert fees and
other costs and disbursements. Punitive damages are not sought.

The defendants filed their Answer to the Consolidated Class Action Complaint
on November 1, 1996, in which they have denied the material allegations and
raised certain affirmative defenses. The parties have commenced discovery 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 MIPS Underwriters were dismissed
without prejudice, by agreement of the parties. Prior to the dismissal, the MIPS
Underwriters had indicated to the Company that they would seek indemnity from
the Company for costs incurred. The Company paid the MIPS Underwriters' costs
through the date of dismissal. The Company expects that the MIPS 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

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<PAGE>
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
1996 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 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 will be filed in May 1997.

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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<PAGE>
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 1996 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.

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 1996
Consolidated Financial Statements.

S-30
<PAGE>
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 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 1996 Consolidated Financial Statements.

CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS

The following is the opinion of Thelen, Marrin, Johnson & Bridges LLP,
United States counsel to Loewen, as to the material United States federal income
tax consequences generally applicable to the acquisition, ownership and
disposition of Common Shares by beneficial owners who are either United States
Holders (as defined) or non-United States Holders (as defined) of Common Shares
and who own, directly or constructively, less than 10% of the voting stock of
Loewen. The opinion reflects counsel's interpretation of the Income Tax Treaty
between Canada and the United States (the "Treaty"); the Internal Revenue Code
of 1986, as amended; judicial decisions; administrative pronouncements; and
existing and proposed Treasury Regulations in force as of the date of this
Prospectus Supplement, changes to any of which after the date of this Prospectus
Supplement could apply on a retroactive basis and affect the tax consequences
described herein. There can be no assurance that the Internal Revenue Service
will not take a different position concerning the consequences of the
acquisition, ownership or disposition of Common Shares or that any such position
would not be sustained. Thus, future legislative, judicial or administrative
changes or interpretations, which may or may not be retroactive, could produce
United States tax consequences different from those expressed in counsel's
opinion. This discussion deals only with Common Shares held as capital assets
and does not address all aspects of federal income taxation or all tax
considerations that may be relevant to all categories of potential purchasers
(such as United States Holders who are dealers or United States Holders whose
functional currency is not the United States dollar). This discussion does not
include state, local or non-United States income or other tax considerations.
THIS DISCUSSION IS OF A GENERAL NATURE ONLY. IT IS NOT INTENDED TO CONSTITUTE A
COMPLETE ANALYSIS OF THE INCOME TAX CONSEQUENCES AND SHOULD NOT BE INTERPRETED
AS LEGAL OR TAX ADVICE TO ANY PARTICULAR INVESTOR. EACH PROSPECTIVE INVESTOR
SHOULD OBTAIN INDEPENDENT ADVICE FROM A TAX ADVISOR REGARDING THE TAX
CONSEQUENCES TO THAT INVESTOR OF ACQUIRING, HOLDING AND DISPOSING OF COMMON
SHARES.

As used in this opinion, the term "United States Holder" means for United
States federal income tax purposes, (i) a citizen or resident of the United
States; (ii) a corporation or partnership created or

S-31
<PAGE>
organized in the United States or under the laws of the United States or any
state; and (iii) an estate or trust, the income of which is includible in gross
income for United States federal income tax purposes regardless of its source.
The term "Non-United States Holder" means a person or entity that, for United
States federal income tax purposes, is a non-resident alien individual, a
foreign corporation, a foreign partnership or a foreign estate or trust.

UNITED STATES HOLDERS

United States Holders generally will be required to include dividends
received on the Common Shares, including the amount of any Canadian taxes
withheld therefrom, in their taxable incomes for United States federal income
tax purposes. Distributions made by Loewen to a United States Holder of Common
Shares generally will constitute dividends to the extent that they are paid out
of Loewen's current and accumulated earnings and profits as computed for United
States federal income tax purposes. To the extent that any distribution exceeds
Loewen's current and accumulated earnings and profits as so computed, it will be
treated as a tax-free return of the United States Holder's tax basis in the
Common Shares and thereafter as gain from the sale or exchange of property.
United States Holders will not be entitled to claim a dividends received
deduction with respect to distributions by Loewen.

Subject to certain conditions and limitations, Canadian income taxes
withheld from dividends may be allowed as a credit against the United States
Holder's federal income tax liability. See "Certain Canadian Federal Tax
Considerations" for additional information regarding Canadian withholding tax.
Foreign taxes are creditable only to the extent of the United States federal
income tax otherwise payable with respect to the United States Holder's foreign
source income, and this overall limitation is calculated separately with respect
to specific classes of income. The consequences of the separate limitation
calculations will depend on the nature and sources of each United States
Holder's income and deductions. Except as discussed below, dividends distributed
by Loewen will generally constitute "passive income" or, in the case of certain
United States Holders, "financial services income." If 10% or more of Loewen's
earnings and profits in any year is attributable to sources within the United
States, then the same percentage of any dividend paid by Loewen from such
earnings and profits will be treated as U.S.-source income for foreign tax
credit purposes, unless the United States Holder elects to treat such dividends
as a separate class of income in computing the foreign tax credit limitation.
For 1996, 10% or more of Loewen's earnings and profits was attributable to
sources within the United States, and Loewen expects that for 1997, 10% or more
of its earnings and profits will be attributable to sources within the United
States. Loewen will notify its United States Holders within a reasonable time as
to the extent to which any dividend is subject to this rule.

Any difference between the amount realized by the United States Holder on a
sale or exchange of the Common Shares and the United States Holder's tax basis
in the Common Shares will be treated as capital gain or loss. Capital gain or
loss recognized by a United States Holder on the sale or other disposition of
Common Shares will generally be treated as United States source income. The
deductibility of capital losses is subject to restrictions.

Under current Loewen policy, dividends are paid in United States currency to
record holders having addresses in the United States. Purchases and sales of
Common Shares through The New York Stock Exchange are generally settled in
United States currency. However, if at any time a United States Holder purchases
or sells Common Shares for or receives dividends on Common Shares paid in
Canadian currency, in calculating taxable income the United States Holder
generally will be required to determine the tax basis, the amount realized on
sale or the amount of the dividend, as the case may be, in United States
currency at the exchange rate prevailing at the time of the purchase or sale or
the receipt of the dividend. Gain or loss, if any, recognized on a disposition
of Canadian currency generally will be taxed as ordinary income or loss.

Certain noncorporate United States Holders may be subject to backup
withholding at a rate of 31% on the proceeds of a sale, exchange or other
disposition of Common Shares. United States Holders should consult their tax
advisors regarding the application of information reporting and backup
withholding in

S-32
<PAGE>
their particular situations, the availability of an exemption therefrom, and the
procedure for obtaining such an exemption, if available.

HOLDERS OTHER THAN UNITED STATES HOLDERS

Pursuant to Article X of the Treaty, no United States federal income or
withholding tax will be imposed on dividends paid on the Common Shares to a
Non-United States Holder unless the Non-United States Holder has a permanent
establishment or fixed base in the United States (either directly or through a
partnership) with which the dividends are effectively connected. However, if
proposed Treasury Regulations are finalized in their present form, beginning in
1998, dividends paid to non-corporate Non-United States Holders may be subject
to backup withholding and reportable to the Internal Revenue Service if paid to
a United States account or by mail to a United States address, unless the
Non-United States Holder provides a written certification of Non-United States
Holder status to Loewen or to the broker with whom the account is established.

In general, Non-United States Holders will not be subject to United States
federal income taxation of gains realized on the disposition of Common Shares
unless (i) the Holder carries on a trade or business within the United States
(either directly or through a partnership) and such gains are effectively
connected with such trade or business; or (ii) in the case of an individual
Holder, the Holder is present in the United States for 183 days or more during
the taxable year of the disposition and certain other conditions are met.

Payments on the sale, exchange or other disposition of Common Shares made to
or through a foreign office of a broker generally will not be subject to backup
withholding. However, under certain circumstances information reporting (but not
backup withholding) will be required unless the broker has in its records
documentary evidence that the beneficial owner is not a United States person and
certain other conditions are met. Payments to or through the United States
office of a broker will be subject to backup withholding and information
reporting unless the holder certifies, under penalties of perjury, that it is
not a United States person or otherwise establishes an exemption.

Any amounts withheld from a payment to a Non-United States Holder under the
backup withholding rules will be allowed as a credit against such Holder's
United States federal income tax liability, if any, and may entitle such Holder
to a refund, provided that the required information is furnished to the Internal
Revenue Service.

CERTAIN CANADIAN FEDERAL TAX CONSIDERATIONS

The following is the opinion of Russell & DuMoulin, Canadian counsel to
Loewen, as to the material Canadian federal income tax consequences generally
applicable to the acquisition, ownership and disposition of Common Shares by an
individual who is resident in the United States and not in Canada and who holds
the Common Shares as capital property. This opinion is based upon the current
provisions of the Income Tax Act of Canada (the "Canadian Tax Act"), the
regulations thereunder and on counsel's understanding of the current
administrative practices of Revenue Canada Customs, Excise and Taxation. This
discussion does not apply to a holder who, either alone or together with persons
with whom the holder does not deal at arms length, has in the last five years
owned at least 25% of the issued shares of any class of Loewen stock or to a
corporate holder that owns at least 10% of the issued voting shares of Loewen
stock. The provisions of the Canadian Tax Act are subject to income tax treaties
to which Canada is a party, including the Treaty. THIS DISCUSSION IS OF A
GENERAL NATURE ONLY. IT IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF THE
INCOME TAX CONSEQUENCES AND SHOULD NOT BE INTERPRETED AS LEGAL OR TAX ADVICE TO
ANY PARTICULAR INVESTOR. EACH PROSPECTIVE INVESTOR SHOULD OBTAIN INDEPENDENT
ADVICE FROM A TAX ADVISOR REGARDING THE TAX CONSEQUENCES TO THAT INVESTOR OF
ACQUIRING, HOLDING AND DISPOSING OF COMMON SHARES.

S-33
<PAGE>
UNITED STATES HOLDERS

Where a dividend on Common Shares is received by a holder who is resident in
the United States and not in Canada, within the meaning of the Treaty, Canadian
withholding tax will be payable. Under the Treaty, the withholding tax rate is
15%.

A holder who is resident in the United States and not in Canada within the
meaning of the Treaty will not be subject to Canadian income tax on either the
purchase or sale of Common Shares.

There are no Canadian estate or gift taxes.

HOLDERS OTHER THAN UNITED STATES HOLDERS

Where a dividend is received by a holder who is not resident in either
Canada or the United States, Canadian withholding tax will be payable. Under the
Canadian Tax Act, the withholding tax rate is 25%. This rate may be subject to
reduction under the terms of an applicable tax treaty between Canada and the
country of residence of the holder.

A holder who is not resident in either Canada or the United States will not
be subject to Canadian income tax on either the purchase or sale of Common
Shares.

There are no Canadian estate or gift taxes.

S-34
<PAGE>
UNDERWRITING

Subject to the conditions of the U.S. Underwriting Agreement, the U.S.
Underwriters, for whom Smith Barney Inc., Alex. Brown & Sons Incorporated,
Goldman, Sachs & Co., and Nesbitt Burns Securities Inc. are acting as
representatives, have severally agreed to purchase from Loewen, concurrently
with the sale of Common Shares to the Canadian Underwriters under the Canadian
Offering, the number of Common Shares set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITER SHARES
- ----------------------------------------- ----------
<S> <C>
Smith Barney Inc.........................
Alex. Brown & Sons Incorporated..........
Goldman, Sachs & Co......................
Nesbitt Burns Securities Inc.............

<CAPTION>
NUMBER OF
U.S. UNDERWRITER SHARES
- ----------------------------------------- ----------
<S> <C>
----------
TOTAL..................................
----------
----------
</TABLE>

Subject to the conditions of the Canadian Underwriting Agreement, the
Canadian Underwriters have severally agreed to purchase from Loewen,
concurrently with the sale of Common Shares to the U.S. Underwriters under the
U.S. Offering, the number of Common Shares set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
CANADIAN UNDERWRITER SHARES
- ----------------------------------------- ----------
<S> <C>
Nesbitt Burns Inc........................
RBC Dominion Securities Inc..............
Smith Barney Canada Inc..................

<CAPTION>
NUMBER OF
CANADIAN UNDERWRITER SHARES
- ----------------------------------------- ----------
<S> <C>
Midland Walwyn Capital Inc...............
Goepel Shields & Partners Inc............
CIBC Wood Gundy Securities Inc...........
First Marathon Securities Limited........
----------
TOTAL..................................
----------
----------
</TABLE>

Each of the U.S. Underwriting Agreement and the Canadian Underwriting
Agreement provides that the obligations of the several U.S. Underwriters and the
several Canadian Underwriters thereunder are subject to approval of certain
legal matters by counsel and to certain other conditions and may be terminated
at their discretion upon the occurrence of certain stated events. The nature of
the U.S. Underwriters' and the Canadian Underwriters' obligations is such that
they are committed to purchase and pay for all of the above Common Shares if any
are purchased. The offering price of the Common Shares under the Canadian
Offering is payable in Canadian dollars and that price and related amounts are
the approximate equivalent of the offering price of the Common Shares and
related amounts under the U.S. Offering, based on the prevailing U.S.-Canadian
dollar exchange rate on the date of this Prospectus Supplement. The closing of
the U.S. Offering and of the Canadian Offering is a condition of the closing of
the other.

The Underwriters initially propose to offer the Common Shares directly to
the public at the applicable public offering price set forth on the cover page
hereof and to certain dealers at such price less a concession not in excess of
$ per share below the price to the public. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to certain
other dealers.

Loewen has granted the U.S. Underwriters and the Canadian Underwriters
options, exercisable at any time and from time to time during the 30-day period
from the date of this Prospectus Supplement, to purchase up to an aggregate of
1,500,000 additional Common Shares, Common Shares in the case of the U.S.
Underwriters and Common Shares in the case of the Canadian Underwriters,
at the applicable public offering price set forth on the cover page hereof less
underwriting fees. The U.S. Underwriters or the Canadian Underwriters, as the
case may be, may exercise such option to purchase

S-35
<PAGE>
additional shares solely for the purpose of covering over-allotments, if any,
incurred in connection with the sales of the Common Shares made by such
Underwriters. To the extent such option is exercised, each U.S. Underwriter or
Canadian Underwriter, as the case may be, will be obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number of shares set forth opposite such Underwriter's name in the
preceding tables bears to the total number of Common Shares offered by the U.S.
Underwriters or the Canadian Underwriters, as the case may be.

It is expected that delivery of the Common Shares will be made against
payment therefor on or about the date specified in the last paragraph of the
front cover page of this Prospectus Supplement, which is the sixth business day
following the date hereof. Under Rule 15c6-1 of the Exchange Act, trades in the
secondary market generally are required to settle in three business days, unless
the parties to any such trade expressly agree otherwise. Accordingly, purchasers
who wish to trade Common Shares on the date hereof or the next two succeeding
business days will be required, by virtue of the fact that the Common Shares
initially will settle in T+6, to specify an alternate settlement cycle at the
time of any such trade to prevent a failed settlement. Purchasers of Common
Shares who wish to trade Common Shares on the date hereof or the two succeeding
business days should consult their own advisor.

Loewen and its executive officers and directors have agreed that, subject to
certain exceptions, without the prior written consent of Smith Barney Inc. and
Nesbitt Burns Inc., they will not offer, sell, contract to sell or otherwise
dispose of any Common Shares or securities convertible or exercisable or
exchangeable for Common Shares for a period of 90 days after the date of closing
of the Offering, other than the Common Shares offered hereby.

Pursuant to an Agreement between the U.S. Underwriters and the Canadian
Underwriters (the "Intersyndicate Agreement") relating to the Offering, each of
the U.S. Underwriters named herein has agreed that, as a part of the
distribution of the Common Shares under the U.S. Offering and subject to certain
exceptions, the U.S. Underwriters will not offer to sell or sell Common Shares
in Canada or to Canadian persons or to persons they have reason to believe
intend to resell in Canada or to Canadian persons, and the Canadian Underwriters
have agreed that, as part of the distribution of Common Shares under the
Canadian Offering and subject to certain exceptions, the Canadian Underwriters
will not offer to sell or sell Common Shares outside Canada or to non-Canadian
persons or to persons they have reason to believe intend to resell outside
Canada or to non-Canadian persons.

Pursuant to the Intersyndicate Agreement, sales may be made between the U.S.
Underwriters and the Canadian Underwriters of such number of Common Shares as
may be mutually agreed. The price of any shares to be so sold shall be the
initial United States dollar public offering price set forth on the cover page
of this Prospectus Supplement, less a concession not in excess of $ per share
below the price to the public.

Each of the U.S. Underwriters that may offer Common Shares outside the
United States and Canada has represented and agreed that (i) it has not offered
or sold and prior to the date six months after the date of issue of the Common
Shares will not offer or sell any Common Shares to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995, (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Common Shares in, from or
otherwise involving the United Kingdom and (iii) it has only issued or passed on
and will only issue or pass on in the United Kingdom any document received by it
in connection with the issue of the Common Shares to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such document may
otherwise lawfully be issued or passed on.

No action has been or will be taken in any jurisdiction by the Company or
any of the Underwriters that would permit any offering to the general public of
the Common Shares offered hereby in any jurisdictions other than the United
States and Canada.

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<PAGE>
Loewen has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act and Canadian
provincial securities laws, or to contribute to payments the Underwriters may be
required to make in respect thereof.

In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Shares.
Specifically, the Underwriters may over-allot the Offering, creating a syndicate
short position. The Underwriters may bid for and purchase Common Shares in the
open market to cover syndicate short positions. In addition, the Underwriters
may bid for and purchase Common Shares in the open market to stabilize the price
of the Common Shares. These activities may stabilize or maintain the market
price of the Common Shares above independent market levels. The Underwriters are
not required to engage in these activities, and may end any of these activities
at any time.

Pursuant to policy statements of the Ontario Securities Commission and the
Quebec Securities Commission, the Canadian Underwriters may not, throughout the
period of distribution of the Common Shares, bid for or purchase Common Shares.
The foregoing restriction is subject to exceptions, on the condition that the
bid or purchase not be engaged in for the purpose of creating actual or apparent
active trading in or raising the price of the Common Shares. Those exceptions
include a bid or purchase permitted under the by-laws and rules of The Toronto
Stock Exchange and the Montreal Exchange relating to market stabilization and
passive market making activities and a bid or purchase made for and on behalf of
a customer where the order was not solicited during the period of distribution.
Subject to the foregoing, in connection with the Offering, the Canadian
Underwriters are permitted to engage in certain transactions that stabilize the
price of the Common Shares. Such transactions consist of bids or purchases for
the purpose of pegging, fixing or maintaining the price of the Common Shares.

Nesbitt Burns Inc. and Nesbitt Burns Securities Inc. (collectively, "Nesbitt
Burns"), RBC Dominion Securities Inc. ("RBC-DS") and CIBC Wood Gundy Securities
Inc. ("CIBC Wood Gundy") are controlled by or affiliated with Canadian chartered
banks (collectively "Related Banks" and individually "Nesbitt Burns' Related
Bank," "RBC-DS' Related Bank" and "CIBC Wood Gundy's Related Bank,"
respectively) which are lenders to the Company under the Canadian Revolver, the
1996 Revolving Credit Facility, the MEIP Loan or certain other loans and letters
of credit, all of which (except for certain letters of credit) are secured as
described under "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Indebtedness." A number of waivers and amendments have
been made under the agreements governing certain of such debt principally in
connection with the Gulf National and Provident legal settlements and litigation
and the SCI hostile takeover proposal. At March 31, 1997, the Company was in
compliance with the terms of the agreements governing all of such debt. The
decision to distribute the Common Shares under the Offering and the
determination of the terms of the distribution were made through negotiation
between Loewen and the Underwriters. None of the Related Banks had any
involvement in such decision or determination. None of the Underwriters will
receive any benefit from the Offering other than their respective portion of the
underwriting fees fee payable by Loewen.

As at April 30, 1997, the amount owing to RBC-DS' Related Bank was Cdn.$48.8
million under the Canadian Revolver. As at April 30, 1997, the amount
outstanding under the 1996 Revolving Credit Facility was $500.5 million, of
which $45.7 million was owing to Nesbitt Burns' Related Bank, $16.6 million was
owing to RBC-DS' Related Bank and $23.2 million was owing to CIBC Wood Gundy's
Related Bank. As at April 30, 1997, the amount outstanding under the MEIP Loan
was $107.6 million, of which $8.9 million was owing to Nesbitt Burns' Related
Bank and $22.2 million was owing to RBC-DS' Related Bank. As at April 30, 1997,
the amount owing under certain other letters of credit was $14.0 million, of
which $6.0 million was owing to Nesbitt Burns' Related Bank and $0.3 million was
owing to RBC-DS' Related Bank. The proceeds of the Offering will be used to
repay approximately $ million of the 1996 Revolving Credit Facility which will
result in the repayment of approximately $ million to Nesbitt Burns' Related
Bank, approximately $ million to RBC-DS' Related Bank and approximately $
million to CIBC Wood Gundy's Related Bank.

Certain of the Underwriters have provided from time to time, and are
expected to provide in the future, investment banking and other financial
services to the Company.

S-37
<PAGE>
J. Carter Beese, Jr., a director of Loewen, is chairman of Alex. Brown
International. Alex. Brown International is an affiliate of Alex. Brown & Sons
Incorporated, one of the U.S. Underwriters.

Raymond L. Loewen, Chairman of the Board and Chief Executive Officer of
Loewen, has indicated his intent to purchase for investment purposes, from the
Canadian Underwriters, 500,000 of the Common Shares offered under the Canadian
Offering on the same terms and conditions as are available to the public. Mr.
Loewen may finance a portion of the purchase price through a loan from Smith
Barney Inc., which loan may be secured by Common Shares (other than those
purchased by Mr. Loewen under the Canadian Offering). Smith Barney Inc. is one
of the U.S. Underwriters. Mr. Loewen is deemed to be the beneficial owner of
approximately 9,088,128 Common Shares, or 15.37% of the Common Shares
outstanding at April 30, 1997 (although he disclaims beneficial ownership of
2,254,838 shares owned by his wife, who has sole voting and dispositive power
with respect to such shares).

LEGAL MATTERS

Russell & DuMoulin, Canadian counsel to Loewen, will pass upon (i) the
validity of the Common Shares and (ii) statements as to Canadian taxation in the
Prospectus Supplement under the caption "Certain Canadian Federal Tax
Considerations." Thelen, Marrin, Johnson & Bridges LLP, United States counsel to
Loewen, will pass upon statements as to United States taxation in the Prospectus
Supplement under the caption "Certain United States Federal Tax Considerations."
Davis Polk & Wardwell is acting as United States counsel to the Underwriters.
McCarthy Tetrault is acting as Canadian counsel to the Underwriters.

EXPERTS

The consolidated financial statements of the Company incorporated by
reference in the Prospectus have been audited by KPMG, Chartered Accountants,
for the periods indicated in its report thereon, which is incorporated by
reference in the Prospectus. Such financial statements have been so incorporated
in reliance on the reports given on the authority of KPMG as experts in
accounting and auditing.

S-38
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS
PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN
THOSE TO WHICH IT RELATES OR AN OFFER OR A SOLICITATION IN ANY JURISDICTION
WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE ITS DATE.

--------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Available Information..................................................... S-3

Financial Information..................................................... S-3

Prospectus Supplement Summary............................................. S-4

Risk Factors.............................................................. S-8

Forward-looking and Cautionary Statements................................. S-9

Selected Consolidated Financial and Operating Information................. S-10

Price Range of Common Shares and Dividend Policy.......................... S-12

Use of Proceeds........................................................... S-13

Consolidated Capitalization............................................... S-13

Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. S-14

Business.................................................................. S-24

Legal Proceedings......................................................... S-28

Certain United States Federal Tax Considerations.......................... S-31

Certain Canadian Federal Tax Considerations............................... S-33

Underwriting.............................................................. S-35

Legal Matters............................................................. S-37

Experts................................................................... S-38
</TABLE>

10,000,000 SHARES

THE LOEWEN GROUP INC.

COMMON SHARES

[LOGO]

-------------

PROSPECTUS SUPPLEMENT

, 1997

--------------

SMITH BARNEY INC.

ALEX. BROWN & SONS
INCORPORATED

GOLDMAN, SACHS & CO.
NESBITT BURNS SECURITIES INC.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated fees payable by the registrants in connection with the
issuance and distribution of the securities being registered are as follows:

<TABLE>
<S> <C>
SEC Registration Fee.......................................... $ 303,030.30
Accounting Fees and Expense................................... 500,000.00
Legal Fees and Expenses....................................... 500,000.00
Printing Fees................................................. 300,000.00
Miscellaneous................................................. 396,969.70
------------
TOTAL....................................................... $2,000,000.00
------------
------------
</TABLE>

ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

LOEWEN

Section 152 of the Company Act of British Columbia provides in part that:

A company may, with the approval of the court, indemnify a director or
former director of the company or a director of a corporation of which it is or
was a shareholder, and his heirs and personal representatives, against all
costs, charges and expenses, including any amount paid to settle an action or
satisfy a judgment, actually and reasonably incurred by him, including an amount
paid to settle an action or satisfy a judgment in a civil, criminal or
administrative action or proceeding to which he is made a party by reason of
being or having been a director, including an action brought by the company or
corporation, if

(a) he acted honestly and in good faith with a view to the best interests of
the corporation of which his is or was a director; and

(b) in the case of a criminal or administrative action or proceeding, he had
reasonable grounds for believing that his conduct was lawful.

Part 19 of Loewen's Articles provides that Loewen shall indemnify its
directors generally in accordance with the provisions of Section 152 and that
Loewen shall indemnify its Secretary and any Assistant Secretary against all
costs, charges and expenses incurred that have arisen as a result of serving
Loewen in such capacity. The Articles further provide that Loewen may indemnify
any of its officers, employees or agents against all costs, charges and expenses
incurred as a result of acting as an officer, employee and agent of Loewen.

Pursuant to indemnification agreements, Loewen has agreed to indemnify its
directors and certain officers against all costs, charges and expenses incurred
by reason of being a director or officer of Loewen. Loewen's duty to indemnify
is subject to court approval and conditioned upon the individual acting honestly
and in good faith with a view to the best interests of Loewen.

LGII

Section 145 of the Delaware General Corporation Law ("Delaware Law")
permits, subject to certain conditions, a corporation to indemnify its
directors, officers, employees and agents against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such director, officer, employee or agent in connection with
threatened, pending or completed actions, suits and proceedings (other than
actions by or in the right of the corporation) in or to which any of such
persons is a party or is threatened to be made a party.

Section 5.01 of the By-laws of LGII provides that LGII may indemnify its
directors, officers, employees and agents to the fullest extent permitted by
Delaware Law, including the advancement of funds, provided that such persons
acted in good faith and in a manner such person reasonably believed to

II-1
<PAGE>
be in or not opposed to the best interests of LGII and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful.

The Board of Directors of LGII has determined that the expenses of the
officers named in the class actions currently pending against Loewen, LGII and
certain individual defendants incurred in defending such class actions should be
paid by LGII from time to time in advance of the final disposition of such
proceedings, subject to each such individual entering into an undertaking to
repay all amounts paid by LGII if it is ultimately determined that such
individual is not entitled to be indemnified by LGII under the Delaware Law.

ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
1 UNDERWRITING AGREEMENTS
1.1 Form of Underwriting Agreement relating to Common Shares*
1.2 Form of Underwriting Agreement relating to Preferred Shares*
1.3 Form of Underwriting Agreement relating to Debt Securities of Loewen*
1.4 Form of Underwriting Agreement relating to Debt Securities of LGII*
1.5 Form of Underwriting Agreement relating to Warrants*
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
4.1.1 Note Agreement by Loewen and LGII re 9.70% Senior Guaranteed Notes, Series
A, due November 1, 1998, issued by LGII ("Series A Notes"), 9.93%
Senior Guaranteed Notes, Series B, due November 1, 2001, issued by
LGII ("Series B Notes"), and 9.70% Senior Guaranteed Notes, Series C,
due November 1, 1998, issued Loewen ("Series C Notes"), dated for
reference October 1, 1991(1)
4.1.2 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(2)
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)
4.4.1 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)
4.4.2 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(2)
4.5 Guaranty Agreement by LGII re Series D Notes, dated for reference April 1,
1993(1)
4.6.1 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)
4.6.2 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(2)
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, 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>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
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(3)
4.14 MIPS Guarantee Agreement, dated August 15, 1994(3)
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(4)
4.17 Form of Global Series 1 and 2 Outstanding Note of LGII(4)
4.18 Form of Physical Series 1 and 2 Outstanding Note of LGII(4)
4.19 Form of Global Series 1 and 2 Exchange Note of LGII(2)
4.20 Form of Physical Series 1 and 2 Exchange Note of LGII(2)
4.21 Form of Senior Guarantee of LGII's Series 1 and 2 Notes(2)
4.22 Credit Agreement, dated as of May 15, 1996, among LGII, as borrower,
Loewen, as a guarantor, the lenders named therein, as the lenders,
Goldman, Sachs & Co., as the documentation agent and Bank of Montreal,
as issuer, swingline lender and agent(2)
4.23 Collateral Trust Agreement, dated as of May 15, 1996, among Bankers Trust
Company, as trustee, Loewen, LGII and various other pledgers(2)
4.24.1 Amended and Restated Operating Credit Agreement, dated for reference July
15, 1996, between Loewen and Royal Bank of Canada(5)
4.24.2 Third Amendment to Operating Credit Agreement, dated for reference July
15, 1996, among Loewen, LGII and Royal Bank of Canada(5)
4.25 Indenture, dated as of October 1, 1996, by and between LGII, Loewen and
Fleet National Bank, as Trustee, with respect to the Series 3 and 4
Notes(5)
4.26 Form of Global Series 3 and 4 Outstanding Note of LGII(5)
4.27 Form of Physical Series 3 and 4 Outstanding Note of LGII(5)
4.28 Form of Global Series 3 and 4 Exchange Note of LGII(6)
4.29 Form of Physical Series 3 and 4 Exchange Note of LGII(6)
4.30 Form of Senior Guarantee of LGII's Series 3 and 4 Notes(3)
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
4.33 Form of Indenture by and among LGII, as issuer, Loewen, as guarantor, and
Fleet National Bank, as trustee+
4.34 Form of Warrant to Acquire Common Shares*
4.35 Form of Warrant to Acquire Preferred Shares*
</TABLE>

II-3

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
4.36 Form of Warrant to Acquire Debt Securities of Loewen*
4.37 Altered Memorandum of The Loewen Group Inc., filed with the British
Columbia Registrar of Companies (the "Registrar") on June 21, 1996(7)
4.38 Articles of Loewen, restated, filed with the Registrar on March 1, 1988,
as amended(4)
4.39 The Registrants hereby agree to furnish to the Commission, upon request, a
copy of the instruments which define the rights of holders of
long-term debt of the Registrants. None of such instruments not
included as exhibits herein collectively represents long-term debt in
excess of 10% of the consolidated total assets of the Registrants.
5 OPINIONS RE LEGALITY
5.1 Opinion of Russell & DuMoulin relating to the Common Shares, Preferred
Shares, Debt Securities and Warrants to purchase Securities of Loewen
and the Guarantees of LGII Debt Securities
5.2 Opinion of Thelen, Marrin, Johnson & Bridges LLP relating to certain
aspects of the Securities
5.3 Opinion of Russell & DuMoulin relating to the legality of the Common
Shares
8 OPINIONS RE TAX MATTERS
8.1 Opinion of Russell & DuMoulin
8.2 Opinion of Thelen, Marrin, Johnson & Bridges LLP
12 STATEMENTS RE COMPUTATION OF RATIOS
12.1 Statement re Computation of Earnings to Fixed Charges Ratio (Canadian
GAAP) (8)
12.2 Statement re Computation of Earnings to Fixed Charges Ratio (U.S. GAAP)
(8)
12.3 Statement re Computation of Earnings to Fixed Charges and Preferred Share
Dividend Ratio (Canadian GAAP)
12.4 Statement re Computation of Earnings to Fixed Changes and Preferred Share
Dividend (U.S. GAAP)
23 CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Russell & DuMoulin (included in Exhibits 5.1 and 8.1)
23.2 Consent of Thelen, Marrin, Johnson & Bridges LLP (included in Exhibits 5.2
and 8.2)
23.3 Consent of KPMG
23.4 Consent of Peat Marwick
23.5 Consent of American Association of Retired Persons*
24 POWERS OF ATTORNEY+
25 STATEMENT RE ELIGIBILITY OF TRUSTEE
</TABLE>

- ------------------------

* To be filed by amendment to this Registration Statement or on a Form 8-K
incorporated by reference herein after the effective date of this
Registration Statement

+ Previously filed

(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 the Registration Statement on Form S-4 filed
by LGII and Loewen on May 3, 1996, as amended (File Nos. 333-03135 and
333-03135-01)

(3) Incorporated by reference from the combined Registration Statement on Form
F-9/F-3 filed by LGII and Loewen on July 1, 1994, as amended (File Nos.
33-81032 and 33-81034)

(4) 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)

II-4
<PAGE>

(5) 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)

(6) Incorporated by reference from the Registration Statement on Form S-4 filed
by LGII and Loewen on November 18, 1996, as amended (File Nos. 333-16319 and
333-16319-01)

(7) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed August 15, 1996 (File No. 0-18429)

(8) 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)

ITEM 17. UNDERTAKINGS.

(a) The undersigned registrants hereby undertake:

(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
this registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement;

PROVIDED HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply if
the information required to be included in a post-effective amendment by such
paragraphs is contained in one or more periodic reports filed with or furnished
to the Commission by Loewen pursuant to Section 13 or 15(d) of the Exchange Act
that are incorporated by reference in this registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(b) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act, each filing of Loewen's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions, or

II-5
<PAGE>
otherwise, the registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrants of expenses incurred or paid by a director, officer or
controlling person of the registrants in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrants will, unless
in the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by them is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.

(i) The undersigned registrants hereby undertake that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrants pursuant to Rule 424(b)1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(j) The undersigned registrants hereby undertake to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants has duly caused this Amendment to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Burnaby, Province of British Columbia, Canada on May 2, 1997.

THE LOEWEN GROUP INC.

By: /s/ PAUL WAGLER
------------------------------------------
Paul Wagler
Senior Vice-President, Finance and Chief
Financial Officer

LOEWEN GROUP INTERNATIONAL, INC.

By: /s/ PAUL WAGLER
------------------------------------------
Paul Wagler
Senior Vice-President, Finance and Chief
Financial Officer

II-7
<PAGE>

THE LOEWEN GROUP INC.

Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.

Dated: May 2, 1997 /s/ RAYMOND L. LOEWEN*
-------------------------------------------------------
Raymond L. Loewen
Chairman of the Board, Chief Executive Officer and
Director
(Principal Executive Officer)

Dated: May 2, 1997 /s/ TIMOTHY R. HOGENKAMP*
-------------------------------------------------------
Timothy R. Hogenkamp
President and Chief Operating Officer and Director
(Principal Executive Officer)

Dated: May 2, 1997 /s/ PAUL WAGLER
-------------------------------------------------------
Paul Wagler
Senior Vice-President, Finance and Chief Financial
Officer and Director
(Principal Financial Officer)

Dated: May 2, 1997 /s/ WM. GRANT BALLANTYNE*
-------------------------------------------------------
Wm. Grant Ballantyne
Senior Vice-President, Financial Control and
Administration
(Principal Accounting Officer)

Dated: May 2, 1997 /s/ KENNETH S. BAGNELL*
-------------------------------------------------------
Kenneth S. Bagnell
Director

Dated: May 2, 1997 /s/ THE HONORABLE J. CARTER BEESE, JR.*
-------------------------------------------------------
The Honorable J. Carter Beese, Jr.
Director

Dated: May 2, 1997 /s/ EARL A. GROLLMAN*
-------------------------------------------------------
Earl A. Grollman
Director

Dated: May 2, 1997 /s/ PETER S. HYNDMAN*
-------------------------------------------------------
Peter S. Hyndman
Director

II-8

<PAGE>

<TABLE>
<S> <C> <C>
Dated: May 2, 1997 /s/ ALBERT S. LINEBERRY, SR.*
-------------------------------------------------------
Albert S. Lineberry, Sr.
Director

Dated:
-------------------------------------------------------
Charles B. Loewen
Director

Dated: May 2, 1997 /s/ ROBERT B. LUNDGREN*
-------------------------------------------------------
Robert B. Lundgren
Director

Dated: May 2, 1997 /s/ JAMES D. MCLENNAN*
-------------------------------------------------------
James D. McLennan
Director

Dated: May 2, 1997 /s/ LAWRENCE MILLER*
-------------------------------------------------------
Lawrence Miller
Director

Dated: May 2, 1997 /s/ ERNEST G. PENNER*
-------------------------------------------------------
Ernest G. Penner
Director

Dated: May 2, 1997 /s/ THE RIGHT HONOURABLE JOHN N. TURNER, P.C., C.C.,
Q.C.*
-------------------------------------------------------
The Right Honourable John N. Turner, P.C., C.C., Q.C.
Director
</TABLE>

Authorized Representative in the United States

The undersigned is Loewen's authorized representative in the United States.

Dated: May 2, 1997 /s/ TIMOTHY R. HOGENKAMP*
-------------------------------------------------------
Timothy R. Hogenkamp

* By: /s/ PAUL
WAGLER
---------------
Paul Wagler
Attorney-in-fact

II-9
<PAGE>

LOEWEN GROUP INTERNATIONAL, INC.

Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.

Dated:
-------------------------------------------------------
George M. Amato
Director

Dated: May 2, 1997 /s/ GEORGE S. BIGELOW*
-------------------------------------------------------
George S. Bigelow
Director

Dated: May 2, 1997 /s/ J.C. CAROTHERS, JR.*
-------------------------------------------------------
J.C. Carothers, Jr.
Director

Dated: May 2, 1997 /s/ H. STEVEN CHILDRESS*
-------------------------------------------------------
H. Steven Childress
Director

II-10

<PAGE>

<TABLE>
<S> <C> <C>
Dated:
-------------------------------------------------------
Bruce E. Earthman
Director

Dated: May 2, 1997
-------------------------------------------------------
Edward J. Fitzgerald
Director

Dated: May 2, 1997 /s/ HONORINE T. FLANAGAN*
-------------------------------------------------------
Honorine T. Flanagan
Director

Dated:
-------------------------------------------------------
Thomas F. Glodek
Director

Dated: May 2, 1997 /s/ EARL A. GROLLMAN*
-------------------------------------------------------
Earl A. Grollman
Director

Dated: May 2, 1997 /s/ MARY M. HOWARD*
-------------------------------------------------------
Mary M. Howard
Director

Dated: May 2, 1997 /s/ PETER S. HYNDMAN*
-------------------------------------------------------
Peter S. Hyndman
Director

Dated: May 2, 1997 /s/ ALBERT S. LINEBERRY, JR.*
-------------------------------------------------------
Albert S. Lineberry, Jr.
Director

Dated:
-------------------------------------------------------
Michael L. Louden
Director

Dated: May 2, 1997 /s/ JOHN E. MALLETTA, SR.*
-------------------------------------------------------
John E. Malletta, Sr.
Director
</TABLE>

II-11

<PAGE>

<TABLE>
<S> <C> <C>
Dated: May 2, 1997 /s/ LAWRENCE MILLER*
-------------------------------------------------------
Lawrence Miller
Director

Dated: May 2, 1997 /s/ J. DAVID MULLINS*
-------------------------------------------------------
J. David Mullins
Director

Dated: May 2, 1997 /s/ DAVID F. RIEMANN*
-------------------------------------------------------
David F. Riemann
Director

Dated: May 2, 1997 /s/ ROBERT D. RUSSELL*
-------------------------------------------------------
Robert D. Russell
Director

Dated:
-------------------------------------------------------
Michael L. Schweer
Director

Dated: May 2, 1997 /s/ BILL SEALE*
-------------------------------------------------------
Bill Seale
Director

Dated: May 2, 1997 /s/ WILLIAM R. SHANE*
-------------------------------------------------------
William R. Shane
Director

Dated:
-------------------------------------------------------
David J. Shipper
Director

Dated: May 2, 1997 /s/ SANDRA C. STRONG*
-------------------------------------------------------
Sandra C. Strong
Director

Dated: May 2, 1997 /s/ ROBERT L. STUDLEY*
-------------------------------------------------------
Robert L. Studley
Director
</TABLE>

II-12

<PAGE>

<TABLE>
<S> <C> <C>
Dated:
-------------------------------------------------------
Robert A. Weinstein
Director

Dated: May 2, 1997 /s/ JOHN R. WRIGHT, SR.*
-------------------------------------------------------
John R. Wright, Sr.
Director
</TABLE>

* By: /s/ PAUL
WAGLER
---------------
Paul Wagler
Attorney-in-fact

II-13

<PAGE>

THE LOEWEN GROUP INC., as Issuer

and

FLEET NATIONAL BANK, as Trustee

INDENTURE

Dated as of ____________, 1997

$500,000,000

Debt Securities

<PAGE>

ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION. . . . . 1

Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Incorporation by Reference of Trust Indenture Act . . . . .19
Section 1.03 Rules of Construction . . . . . . . . . . . . . . . . . . .19

ARTICLE TWO THE SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . .19

Section 2.01 Amount of Securities; Issuable In Series. . . . . . . . . .19
Section 2.02 Forms Generally . . . . . . . . . . . . . . . . . . . . . .21
Section 2.03 Form Of Trustee's Certificate Of Authentication . . . . . .22
Section 2.04 Authentication And Delivery Of Securities . . . . . . . . .22
Section 2.05 Execution Of Securities . . . . . . . . . . . . . . . . . .25
Section 2.06 Certificate Of Authentication . . . . . . . . . . . . . . .25
Section 2.07 Denomination And Date Of Securities; Payments Of Interest .25
Section 2.08 Registrar . . . . . . . . . . . . . . . . . . . . . . . . .26
Section 2.09 Provision As To Paying Agent. . . . . . . . . . . . . . . .26
Section 2.10 Transfer and Exchange . . . . . . . . . . . . . . . . . . .27
Section 2.11 Mutilated, Defaced, Destroyed, Lost And Stolen Securities .29
Section 2.12 Cancellation Of Securities; Disposition Thereof . . . . . .30
Section 2.13 Temporary Securities. . . . . . . . . . . . . . . . . . . .30
Section 2.14 Defaulted Interest. . . . . . . . . . . . . . . . . . . . .30
Section 2.15 CUSIP Number. . . . . . . . . . . . . . . . . . . . . . . .31
Section 2.16 Deposit of Moneys . . . . . . . . . . . . . . . . . . . . .31

ARTICLE THREE SECURITYHOLDERS LIST AND REPORTS BY TLGI AND THE TRUSTEE. . .31

Section 3.01 TLGI To Furnish Trustee Information As To Names
And Addresses Of Securityholders. . . . . . . . . . . . . .31
Section 3.02 Preservation And Disclosure Of Securityholders Lists. . . .31
Section 3.03 Reports By TLGI.. . . . . . . . . . . . . . . . . . . . . .32

ARTICLE FOUR COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . .33

Section 4.01 Payment of Securities . . . . . . . . . . . . . . . . . . .33
Section 4.02 Office For Notices And Payments, Etc. . . . . . . . . . . .33
Section 4.03 Corporate Existence . . . . . . . . . . . . . . . . . . . .34
Section 4.04 Payment of Taxes and Other Claims . . . . . . . . . . . . .34
Section 4.05 Maintenance of Properties; Insurance; Books and Records;
Compliance with Law . . . . . . . . . . . . . . . . . . . .34
Section 4.06 Compliance Certificate. . . . . . . . . . . . . . . . . . .35
Section 4.07 Limitation on Indebtedness. . . . . . . . . . . . . . . . .35
Section 4.08 Limitation on Restricted Payments . . . . . . . . . . . . .36
Section 4.09 Limitation on Issuances and Sale of Preferred Stock by
Restricted Subsidiaries . . . . . . . . . . . . . . . . . .38
Section 4.10 Limitation on Liens . . . . . . . . . . . . . . . . . . . .38
Section 4.11 Change of Control . . . . . . . . . . . . . . . . . . . . .38

<PAGE>

Section 4.12 Disposition of Proceeds of Asset Sales. . . . . . . . . . .40
Section 4.13 Limitation on Transactions with Interested Persons. . . . .42
Section 4.14 Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries. . . . . . . . . . . . . . . . . . .43
Section 4.15 Limitations on Sale-Leaseback Transactions. . . . . . . . .43
Section 4.16 Limitation on Applicability of Certain Covenants. . . . . .44
Section 4.17 Commission Reports. . . . . . . . . . . . . . . . . . . . .44
Section 4.18 Rule 144A Information Requirement . . . . . . . . . . . . .44
Section 4.19 Waiver of Stay, Extension or Usury Laws . . . . . . . . . .44

ARTICLE FIVE SUCCESSOR CORPORATION. . . . . . . . . . . . . . . . . . . . .45

Section 5.01 When TLGI or LGII May Merge, etc. . . . . . . . . . . . . .45
Section 5.02 Successor Substituted . . . . . . . . . . . . . . . . . . .46

ARTICLE SIX REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . .46

Section 6.01 Events of Default . . . . . . . . . . . . . . . . . . . . .46
Section 6.02 Acceleration. . . . . . . . . . . . . . . . . . . . . . . .48
Section 6.03 Other Remedies. . . . . . . . . . . . . . . . . . . . . . .48
Section 6.04 Waiver of Past Defaults . . . . . . . . . . . . . . . . . .49
Section 6.05 Direction Of Proceedings; Waiver Of Defaults
By Majority Of Securityholders. . . . . . . . . . . . . . .49
Section 6.06 Limitation on Suits . . . . . . . . . . . . . . . . . . . .50
Section 6.07 Right of Holders To Receive Payment . . . . . . . . . . . .50
Section 6.08 Collection Suit by Trustee. . . . . . . . . . . . . . . . .50
Section 6.09 Trustee May File Proofs of Claims . . . . . . . . . . . . .50
Section 6.10 Application Of Moneys Collected By Trustee. . . . . . . . .51
Section 6.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . .52
Section 6.12 Restoration of Rights and Remedies. . . . . . . . . . . . .52
Section 6.13 Remedies Cumulative And Continuing. . . . . . . . . . . . .52

ARTICLE SEVEN TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . .52

Section 7.01 Duties And Responsibilities Of The Trustee;
During Default; Prior To Default. . . . . . . . . . . . . .52
Section 7.02 Certain Rights Of The Trustee . . . . . . . . . . . . . . .53
Section 7.03 Trustee And Agents May Hold Securities; Collections, Etc. .55
Section 7.04 Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . .55
Section 7.05 Notice of Default . . . . . . . . . . . . . . . . . . . . .55
Section 7.06 Money Held in Trust . . . . . . . . . . . . . . . . . . . .55
Section 7.07 Reports by Trustee to Holders . . . . . . . . . . . . . . .55
Section 7.08 Compensation and Indemnity. . . . . . . . . . . . . . . . .55
Section 7.09 Resignation And Removal; Appointment Of Successor Trustee .56
Section 7.10 Merger, Conversion, Consolidation Or Succession To
Business Of Trustee . . . . . . . . . . . . . . . . . . . .57
Section 7.11 Persons Eligible For Appointment As Trustee . . . . . . . .58
Section 7.12 Preferential Collection of Claims Against TLGI. . . . . . .58
Section 7.13 Qualification Of Trustee; Conflicting Interests . . . . . .58
Section 7.14 Acceptance Of Appointment By Successor Trustee. . . . . . .63
Section 7.15 Appointment Of Authenticating Agent . . . . . . . . . . . .64

<PAGE>

ARTICLE EIGHT SATISFACTION AND DISCHARGE OF INDENTURE . . . . . . . . . . .65

Section 8.01 Satisfaction And Discharge Of Indenture . . . . . . . . . .65
Section 8.02 Indemnity for U.S. Government obligations; Repayment. . . .67
Section 8.03 Application By Trustee Of Funds Deposited For Payment Of
Securities. . . . . . . . . . . . . . . . . . . . . . . . .67
Section 8.04 Repayment to TLGI . . . . . . . . . . . . . . . . . . . . .67
Section 8.05 Reinstatement . . . . . . . . . . . . . . . . . . . . . . .68

ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS. . . . . . . . . . . . . .68

Section 9.01 Supplemental Indentures Without Consent Of Securityholders.68
Section 9.02 Supplemental Indentures With Consent Of Securityholders . .69
Section 9.03 Compliance with Trust Indenture Act . . . . . . . . . . . .70
Section 9.04 Effect Of Supplemental Indenture. . . . . . . . . . . . . .70
Section 9.05 Notation on or Exchange of Securities . . . . . . . . . . .71
Section 9.06 Trustee May Sign Amendments, etc. . . . . . . . . . . . . .71

ARTICLE TEN CONCERNING THE SECURITYHOLDERS. . . . . . . . . . . . . . . . .71

Section 10.01 Evidence Of Action Taken By Securityholders. . . . . . . .71
Section 10.02 Proof Of Execution Of Instruments And Of Holding Of
Securities . . . . . . . . . . . . . . . . . . . . . . . .71
Section 10.03 Holders To Be Treated As Owners. . . . . . . . . . . . . .72
Section 10.04 Securities Owned By TLGI Deemed Not Outstanding. . . . . .72
Section 10.05 Right Of Revocation Of Action Taken. . . . . . . . . . . .72
Section 10.06 Record Date For Consents And Waiver. . . . . . . . . . . .73

ARTICLE ELEVEN MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . .73

Section 11.01 Conflict Of Any Provision Of Indenture With Trust
Indenture Act Of 1939. . . . . . . . . . . . . . . . . . .73
Section 11.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . .73
Section 11.03 Communication by Holders with Other Holders. . . . . . . .74
Section 11.04 Officer's Certificates And Opinions Of Counsel;
Statements To Be Contained Therein. . . . . . . . . . . .74
Section 11.05 Payments Due On Saturdays, Sundays And Holidays. . . . . .75
Section 11.06 Rules by Trustee, Paying Agent, Registrar. . . . . . . . .75
Section 11.07 Governing Law. . . . . . . . . . . . . . . . . . . . . . .75
Section 11.08 Consent to Service of Process. . . . . . . . . . . . . . .75
Section 11.09 No Interpretation of Other Agreements. . . . . . . . . . .76
Section 11.10 Partners, Incorporators, Stockholders, Officers And
Directors Of TLGI Exempt From Individual Liability . . . .76
Section 11.11 Successors . . . . . . . . . . . . . . . . . . . . . . . .76
Section 11.12 Duplicate Originals. . . . . . . . . . . . . . . . . . . .76
Section 11.13 Severability . . . . . . . . . . . . . . . . . . . . . . .76
Section 11.14 Table of Contents, Headings, Etc.. . . . . . . . . . . . .76
Section 11.15 Provisions Of Indenture For The Sole Benefit Of
Parties And Holders Of Senior Indebtedness And
Of Securities. . . . . . . . . . . . . . . . . . . . . . .76

ARTICLE TWELVE REDEMPTION OF SECURITIES AND SINKING FUNDS . . . . . . . . .77

Section 12.01 Applicability Of Article . . . . . . . . . . . . . . . . .77

<PAGE>

Section 12.02 Notice Of Redemption; Partial Redemptions. . . . . . . . .77
Section 12.03 Payments Of Securities Called For Redemption . . . . . . .78
Section 12.04 Exclusion Of Certain Securities From Eligibility
For Selection For Redemption . . . . . . . . . . . . . . .79
Section 12.05 Mandatory And Optional Sinking Funds . . . . . . . . . . .79

ARTICLE THIRTEEN CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . .81

Section 13.01 Applicability Of Article . . . . . . . . . . . . . . . . .81
Section 13.02 Exercise Of Conversion Privilege . . . . . . . . . . . . .81
Section 13.03 Fractional Interests . . . . . . . . . . . . . . . . . . .82
Section 13.04 Adjustment Of Conversion Price . . . . . . . . . . . . . .82
Section 13.05 Continuation Of Conversion Privilege In Case Of Merger,
Consolidation Or Sale Of Assets. . . . . . . . . . . . . .84
Section 13.06 Notice Of Certain Events . . . . . . . . . . . . . . . . .85
Section 13.07 Taxes On Conversion. . . . . . . . . . . . . . . . . . . .86
Section 13.08 TLGI To Provide Stock. . . . . . . . . . . . . . . . . . .86
Section 13.09 Disclaimer Of Responsibility For Certain Matters . . . . .86
Section 13.10 Return Of Funds Deposited For Redemption Of Converted
Securities . . . . . . . . . . . . . . . . . . . . . . . .87

SIGNATURES

<PAGE>

THIS INDENTURE, dated as of ____________, 1997, between The Loewen
Group Inc., a body corporate organized under and governed by the laws of the
Province of British Columbia, Canada (hereinafter referred to as "TLGI"), and
Fleet National Bank, a national banking association as trustee (the "TRUSTEE").

W I T N E S S E T H:

WHEREAS, TLGI has duly authorized the issue from time to time of
debentures, notes or other evidences of indebtedness to be issued in one or more
series (the "SECURITIES") up to such principal amount or amounts as may from
time to time be authorized in accordance with the terms of this Indenture;

WHEREAS, TLGI has duly authorized the execution and delivery of this
Indenture to provide, among other things, for the authentication, delivery and
administration of the Securities; and

WHEREAS, all things necessary to make this Indenture a valid indenture
and agreement according to its terms have been undertaken and completed;

NOW, THEREFORE, In consideration of the premises and the purchase of
the Securities by the Holders thereof, TLGI and the Trustee mutually covenant
and agree for the equal and proportionate benefit of the respective Holders from
time to time of the Securities as follows:

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

Section 1.01. DEFINITIONS.

"1996 REVOLVING CREDIT FACILITY" means the $750,000,000 Credit
Agreement, dated as of May 15, 1996, among Loewen Group International, Inc., a
Delaware corporation and a wholly owned subsidiary of TLGI ("LGII"), as
borrower, TLGI, as guarantor, the lenders named therein, as the lenders,
Goldman, Sachs & Co., as the documentation agent and Bank of Montreal, as
issuer, swingline lender and agent.

"ACQUIRED INDEBTEDNESS" means Indebtedness of a person (a) assumed or
created in connection with an Asset Acquisition from such person or (b) existing
at the time such person becomes a Restricted Subsidiary of any other person.

"AFFILIATE" means, with respect to any specified person, any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person.

"ASSET ACQUISITION" means (a) an Investment by TLGI or any Restricted
Subsidiary of TLGI (including, without limitation, LGII) in any other person
pursuant to which such person shall become a Restricted Subsidiary of TLGI, or
shall be merged with or into TLGI or any Restricted Subsidiary of TLGI, (b) the
acquisition by TLGI or any Restricted Subsidiary of TLGI of the assets of any
person (other than a Restricted Subsidiary of TLGI) which constitute all or
substantially all of the assets of such person or (c) the acquisition by TLGI or
any Restricted Subsidiary of TLGI of any division or line of business of any
person (other than a Restricted Subsidiary of TLGI).

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<PAGE>

"ASSET SALE" means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any person other than TLGI or a
Restricted Subsidiary of TLGI (including, without limitation, LGII), in one or a
series of related transactions, of (a) any Capital Stock of any Restricted
Subsidiary of TLGI (other than in respect of directors' qualifying shares or
investments by foreign nationals mandated by applicable law) or of First Capital
Life Insurance Company of Louisiana, National Capitol Life Insurance Company,
Security Industrial Insurance Company, Security Industrial Fire Insurance
Company or any successors to such Subsidiaries; (b) all or substantially all of
the properties and assets of any division or line of business of TLGI or any
Restricted Subsidiary of TLGI; or (c) any other properties or assets of TLGI or
any Restricted Subsidiary of TLGI other than properties and assets sold in the
ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include (i) any sale, transfer or other disposition of
equipment, tools or other assets (including Capital Stock of any Restricted
Subsidiary of TLGI) by TLGI or any of its Restricted Subsidiaries in one or a
series of related transactions in respect of which TLGI or such Restricted
Subsidiary receives cash or property with an aggregate Fair Market Value of
$2,000,000 or less; and (ii) any sale, issuance, conveyance, transfer, lease or
other disposition of properties or assets that is governed by the provisions of
Article Four.

"ASSET SALE OFFER" shall have the meaning set forth in Section 4.12.

"ASSET SALE OFFER PRICE" shall have the meaning set forth in Section
4.12.

"ASSET SALE PURCHASE DATE" shall have the meaning set forth in Section
4.12.

"ASSOCIATED RIGHTS" means any rights to purchase shares of TLGI's
capital stock or other securities that are associated with any class of stock
constituting Common Stock for purposes hereof if at the time of the issuance
thereof such rights are not separable from any class of stock except upon the
occurrence of a contingency, whether such rights exist at the date of the
execution hereof or are thereafter issued by TLGI as a dividend on any such
class of stock or otherwise.

"ATTRIBUTABLE VALUE" means, as to any particular lease under which any
person is at the time liable other than a Capitalized Lease Obligation, and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such person under such lease during the
initial term thereof as determined in accordance with GAAP, discounted from the
last date of such initial term to the date of determination at a rate per annum
equal to the discount rate which would be applicable to a Capitalized Lease
Obligation with a like term in accordance with GAAP. The net amount of rent
required to be paid under any such lease for any such period shall be the
aggregate amount of rent payable by the lessee with respect to such period after
excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges. In the
case of any lease which is terminable by the lessee upon the payment of a
penalty, such net amount shall also include the amount of such penalty, but no
rent shall be considered as required to be paid under such lease subsequent to
the first date upon which it may be so terminated. "Attributable Value" means,
as to a Capitalized Lease Obligation under which any person is at the time
liable and at any date as of which the amount thereof is to be determined, the
capitalized amount thereof that would appear on the face of a balance sheet of
such person in accordance with GAAP.

"AUTHENTICATING AGENT" shall have the meaning set forth in Section
7.15.

"BANKRUPTCY LAW" means Title 11 of the United States Code or any
similar law for the relief of debtors.

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<PAGE>

"BOARD OF DIRECTORS" means the board of directors of LGII or TLGI, as
the case may be, or any committee of such Board duly authorized to act on its
respective behalf.

"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of TLGI to have been duly adopted or
consented to by the Board of Directors of TLGI and to be in full force and
effect on the date of such certification, and delivered to the Trustee.

"BUSINESS DAY" means, with respect to any Security, a day that (a) in
the Place of Payment (or in any of the Places of Payment, if more than one) in
which amounts are payable, as specified in the form of such Security, and (b) in
the city in which the Corporate Trust Office is located, is not a day on which
banking institutions are authorized or required by law or regulation to close.

"CANADIAN REVOLVER" means CDN $50,000,000 Operating Credit Agreement
dated August 15, 1994, as amended on July 15, 1996, among TLGI, LGII and Royal
Bank of Canada.

"CANADIAN TERM LOAN" means CDN $35,000,000 Credit Agreement dated as
of January 12, 1995 between TLGI, LGII and Dresdner Bank Canada.

"CAPITAL STOCK" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.

"CAPITALIZED LEASE OBLIGATION" means any obligation under a lease of
(or other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and the amount of any such obligation at
any date shall be the capitalized amount thereof at such date, determined in
accordance with GAAP.

"CASH EQUIVALENTS" means, at any time, (i) any evidence of
Indebtedness with a maturity of 180 days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii) certificates
of deposit with a maturity of 180 days or less of any financial institution that
is not organized under the laws of the United States, any state thereof or the
District of Columbia that are rated at least A-1 by S&P or at least P-1 by
Moody's or at least an equivalent rating category of another nationally
recognized securities rating agency; (iv) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the government of the United States of America or
issued by any agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within 180 days from the date of
acquisition; provided that the terms of such agreements comply with the
guidelines set forth in the Federal Financial Agreements of Depository
Institutions With Securities Dealers and Others, as adopted by the Comptroller
of the Currency on October 31, 1985; and (v) notes held by TLGI or any
Restricted Subsidiary (including, without limitation, LGII) which were obtained
by TLGI or such Restricted Subsidiary in connection with Asset Sales (x) in the
ordinary course of its funeral home, cemetery or cremation businesses or (y)
which were required to be made pursuant to applicable federal or state law.

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<PAGE>

"CHANGE OF CONTROL" means the occurrence on or after the Measurement
Date of any of the following events: (a) any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted
Holders, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time, upon the happening of an event or otherwise), directly or indirectly,
of more than 35% of the total Voting Stock of TLGI or LGII, under circumstances
where the Permitted Holders (i) "beneficially own" (as so defined) a lower
percentage of the Voting Stock than such other "person" or "group" and (ii) do
not have the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of TLGI or LGII; (b)
TLGI or LGII consolidates with, or merges with or into, another person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to another person, or another person
consolidates with, or merges with or into, TLGI or LGII, in any such event
pursuant to a transaction in which the outstanding Voting Stock of TLGI or LGII
is converted into or exchanged for cash, securities or other property, other
than any such transaction where (i) the outstanding Voting Stock of TLGI or LGII
is converted into or exchanged for (1) Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation or (2) cash,
securities and other property in an amount which could then be paid by TLGI or
LGII as a Restricted Payment under the provisions hereof, and (ii) immediately
after such transaction no "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted Holders, is
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of
an event or otherwise), directly or indirectly, of more than 50% of the total
Voting Stock of the surviving or transferee corporation; (c) at any time during
any consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of TLGI or LGII (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders or stockholders of TLGI or LGII was approved by a
vote of 66-2/3% of the directors then still in office who were either directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason (including the failure of such
individuals to be elected in a proxy contest involving a solicitation of
proxies) to constitute a majority of the Board of Directors of TLGI or LGII then
in office; or (d) TLGI or LGII is liquidated or dissolved or adopts a plan of
liquidation other than a liquidation of LGII into TLGI.

"CHANGE OF CONTROL OFFER" shall have the meaning set forth in Section
4.11.

"CHANGE OF CONTROL PURCHASE DATE" shall have the meaning set forth in
Section 4.11.

"COLLATERAL AGREEMENT" means the Collateral Trust Agreement, dated as
of May 15, 1996, among Bankers Trust Company, as trustee, TLGI, LGII and various
other Subsidiaries.

"COMMISSION" means the Securities and Exchange Commission, as from
time to time constituted, or if at any time after the execution and delivery of
the Indenture such Commission is not existing and performing the applicable
duties now assigned to it, then the body or bodies performing such duties at
such time.

"COMMON STOCK" means the Common shares without par value of TLGI as
the same exists at the date of execution and delivery of this Indenture or other
capital stock of TLGI into which such common stock is reclassified or changed
from time to time.

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<PAGE>

"COMMON STOCK" means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such person's common stock, whether
outstanding at the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.

"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" means, with
respect to any person for any period, (A) the sum of, without duplication, the
amounts for such period, taken as a single accounting period, of
(a) Consolidated Net Income, (b) Consolidated Non-cash Charges, (c) Consolidated
Interest Expense and (d) Consolidated Income Tax Expense LESS (B) any non-cash
items increasing Consolidated Net Income for such period.

"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
person, the ratio of the aggregate amount of Consolidated Cash Flow Available
for Fixed Charges of such person for the full fiscal quarter immediately
preceding the date of the transaction (the "Transaction Date") giving rise to
the need to calculate the Consolidated Fixed Charge Coverage Ratio (such full
fiscal quarter period being referred to herein as the "Prior Quarter") to the
aggregate amount of Consolidated Fixed Charges of such person for the Prior
Quarter. In addition to and without limitation of the foregoing, for purposes
of this definition, "Consolidated Cash Flow Available for Fixed Charges" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a PRO
FORMA basis for the period of such calculation to, without duplication, (a) the
incurrence of any Indebtedness of such person or any of its Restricted
Subsidiaries (and the application of the net proceeds thereof) during the period
commencing on the first day of the Prior Quarter to and including the
Transaction Date (the "REFERENCE PERIOD"), including, without limitation, the
incurrence of the Indebtedness giving rise to the need to make such calculation
(and the application of the net proceeds thereof), as if such incurrence (and
application) occurred on the first day of the Reference Period, and (b) any
Material Asset Sales or Material Asset Acquisitions (including, without
limitation, any Material Asset Acquisition giving rise to the need to make such
calculation as a result of such person or one of its Restricted Subsidiaries
(including any person who becomes a Restricted Subsidiary as a result of the
Material Asset Acquisition) incurring, assuming or otherwise being liable for
Acquired Indebtedness) occurring during the Reference Period, as if such
Material Asset Sale or Material Asset Acquisition occurred on the first day of
the Reference Period. Furthermore, in calculating "Consolidated Fixed Charges"
for purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (i) interest on outstanding
Indebtedness determined on a fluctuating basis as at the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate PER ANNUM equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (ii) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Reference Period. If such person or any of its Restricted Subsidiaries directly
or indirectly guarantees Indebtedness of a third person, the above clause shall
give effect to the incurrence of such guaranteed Indebtedness as if such person
or such Restricted Subsidiary had directly incurred or otherwise assumed such
guaranteed Indebtedness. For purposes of this calculation, a Material Asset
Acquisition is an Asset Acquisition which is deemed by such person to be
material for such purposes or which has a purchase price of $30,000,000 or more
and a Material Asset Sale is one or more Asset Sales which relate to assets with
an aggregate value of more than $30,000,000.

"CONSOLIDATED FIXED CHARGES" means, with respect to any person for any
period, the sum of, without duplication, the amounts for such period of
(i) Consolidated Interest Expense and (ii) the product of (a) the aggregate
amount of dividends and other distributions paid or accrued during such period
in respect of Preferred Stock and Redeemable Capital Stock of such person and
its Restricted Subsidiaries

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<PAGE>

on a consolidated basis and (b) a multiplier, the numerator of which is one and
the denominator of which is one minus the then current combined federal, state
and local statutory tax rate of such person, expressed as a decimal; PROVIDED,
HOWEVER, that the multiplier in clause (b) shall be one if such dividend or
other distribution is fully tax deductible.

"CONSOLIDATED INCOME TAX EXPENSE" means, with respect to any person
for any period, the provision for federal, state, local and foreign income taxes
of such person and its Restricted Subsidiaries for such period as determined on
a consolidated basis in accordance with GAAP.

"CONSOLIDATED INTEREST EXPENSE" means, with respect to any person for
any period, without duplication, the sum of (i) the interest expense of such
person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation,
(a) any amortization of debt discount, (b) the net cost under Interest Rate
Protection Obligations, (c) the interest portion of any deferred payment
obligation, (d) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financings and (e) all
accrued interest and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.

"CONSOLIDATED NET INCOME" means, with respect to any person, for any
period, the consolidated net income (or loss) of such person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses, (ii) the portion of net
income (but not losses) of such person and its Restricted Subsidiaries allocable
to minority interests in unconsolidated persons to the extent that cash
dividends or distributions have not actually been received by such person or
one of its Restricted Subsidiaries, (iii) net income (or loss) of any person
combined with such person or one of its Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(iv) any gain or loss realized upon the termination of any employee pension
benefit plan, on an after-tax basis, (v) gains or losses in respect of any Asset
Sales by such person or one of its Restricted Subsidiaries, and (vi) the net
income of any Restricted Subsidiary of such person to the extent that the
declaration of dividends or similar distributions by that Restricted Subsidiary
of that income is not at the time permitted, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders.

"CONSOLIDATED NET TANGIBLE ASSETS" of TLGI as at any date means the
total amount of assets of TLGI and its Restricted Subsidiaries, less applicable
reserves, on a consolidated basis as of the end of the fiscal quarter
immediately preceding such date, as determined in accordance with GAAP, less:
(i) Intangible Assets and (ii) appropriate adjustments on account of minority
interests of other persons holding equity investments in Restricted
Subsidiaries, in the case of each of clauses (i) and (ii) above as reflected on
the consolidated balance sheet of TLGI and its Restricted Subsidiaries as at the
end of the fiscal quarter immediately preceding such date.

"CONSOLIDATED NET WORTH" means, with respect to any person at any
date, the consolidated stockholders' equity of such person less the amount of
such stockholders' equity attributable to Redeemable Capital Stock of such
person and its Restricted Subsidiaries, as determined in accordance with GAAP.

"CONSOLIDATION" means, with respect to any person, the consolidation
of the accounts of such person and each of its Subsidiaries if and to the extent
the accounts of such person and each of its

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<PAGE>

Restricted Subsidiaries would normally be consolidated with those of such
person, all in accordance with GAAP. The term "consolidated" shall have a
meaning correlative to the foregoing.

"CONTROL" means, with respect to any specified person, the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.

"CONVERSION AGENT" shall have the meaning set forth in Section 4.02.

"CONVERSION PRICE" shall have the meaning set forth in Section 13.04.

"CORPORATE TRUST OFFICE" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indenture is dated, located in Hartford, Connecticut, except that with respect
to the presentation of Securities for payment, for conversion or for
registration of transfer and exchange, such term shall also mean the office of
the Trustee's agent in the Borough of Manhattan, the City and State of New York,
at which at any particular time its corporate agency business shall be
conducted.

"CREDIT AGREEMENTS" means the 1996 Revolving Credit Facility, the
Canadian Revolver, the MEIP Facility and the Canadian Term Loan; in each case as
any such instrument may be amended, supplemented or otherwise modified from time
to time, and any successor or replacement facility.

"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
TLGI or any of its Restricted Subsidiaries against fluctuations in currency
values.

"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.

"DATE OF CONVERSION" shall have the meaning set forth in Section
13.02.

"DEFAULT" means any event that is, or after notice or passage of time
or both would be, an Event of Default.

"DEPOSITARY" means, with respect to the Securities of any series
issuable or issued in the form of one or more Global Securities, the Person
designated as Depositary by TLGI pursuant to Section 2.01 until a successor
Depositary shall have become such pursuant to the applicable provisions of this
Indenture, and, thereafter "Depositary" shall mean or include each Person who is
then a Depositary hereunder, and, if at any time there is more than one such
Person, "Depositary" as used with respect to the Securities of any such series
shall mean the Depositary with respect to the Global Securities of such series.

"EVENT OF DEFAULT" has the meaning set forth under Section 6.01
herein.

"EXCESS PROCEEDS" shall have the meaning set forth in Section 4.12.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

"FAIR MARKET VALUE" means, with respect to any asset, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of

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<PAGE>

which is under pressure or compulsion to complete the transaction; PROVIDED,
HOWEVER, that with respect to any transaction which involves an asset or assets
in excess of $5,000,000, such determination shall be evidenced by a Board
Resolution of TLGI delivered to the Trustee.

"GAAP" means accounting principles generally accepted in Canada
consistently applied until such time as TLGI shall prepare their respective
books of record in accordance with accounting principles generally accepted in
the United States ("U.S. GAAP") at which time and all times thereafter GAAP
shall mean U.S. GAAP consistently applied.

"GLOBAL SECURITY" means a Security evidencing all or a part of a
series of Securities issued to the Depositary for such series in accordance with
Section 2.01 and bearing the legend prescribed in Section 2.04.

"GUARANTEE" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.

"HOLDER", "NOTEHOLDER", "HOLDER OF SECURITIES", "SECURITYHOLDER" or
other similar terms mean, in the case of any Security, the Person in whose name
such Security is registered in the security register kept by TLGI for that
purpose in accordance with the terms hereof.

"INDEBTEDNESS" means, with respect to any person, without duplication,
(a) all liabilities of such person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities incurred in the ordinary course of business and
which are not overdue by more than 90 days, but excluding, without limitation,
all obligations, contingent or otherwise, of such person in connection with any
undrawn letters of credit, banker's acceptance or other similar credit
transaction, (b) all obligations of such person evidenced by bonds, notes,
debentures or other similar instruments, (c) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (d) all Capitalized Lease
Obligations of such person, (e) all Indebtedness referred to in the preceding
clauses of other persons and all dividends of other persons, the payment of
which is secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such person, even though such person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligation being deemed to be
the lesser of the value of such property or asset or the amount of the
obligation so secured), (f) all guarantees of Indebtedness referred to in this
definition by such person, (g) all Redeemable Capital Stock of such person
valued at the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued dividends, (h) all obligations under or in respect of
Currency Agreements and Interest Rate Protection Obligations of such person,
(i) any Preferred Stock of any Restricted Subsidiary of such person valued at
the sum of (without duplication) (A) the liquidation preference thereof, (B) any
mandatory redemption payment obligations in respect thereof and (C) accrued
dividends thereon, and (j) any amendment, supplement, modification, deferral,
renewal, extension or refunding of any liability of the types referred to in
clauses (a) through (i) above. For purposes hereof, the "maximum fixed
repurchase price" of any Redeemable Capital Stock which does not have a fixed

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<PAGE>

repurchase price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on
any date on which Indebtedness shall be required to be determined pursuant to
the provisions hereof, and if such price is based upon, or measured by, the fair
market value of such Redeemable Capital Stock, such fair market value shall be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock. For purposes of this definition, the term
"Indebtedness" shall not include (i) Indebtedness of a Wholly-Owned Subsidiary
owed to and held by TLGI or another Wholly-Owned Subsidiary, in each case which
is not subordinate in right of payment to any Indebtedness of such Subsidiary,
except that (a) any transfer of such Indebtedness by TLGI or a Wholly-Owned
Subsidiary (other than to TLGI or to a Wholly-Owned Subsidiary) and (b) the
sale, transfer or other disposition by TLGI, or any Restricted Subsidiary of
TLGI of Capital Stock of a Wholly-Owned Subsidiary which is owed Indebtedness of
another Wholly-Owned Subsidiary such that it ceases to be a Wholly-Owned
Subsidiary of TLGI shall, in each case, be an incurrence of Indebtedness by such
Restricted Subsidiary subject to the other provisions hereof; and (ii)
Indebtedness of TLGI or LGII owed to and held by a Wholly-Owned Subsidiary of
TLGI which is unsecured and subordinate in right of payment to the payment and
performance of TLGI's or LGII's obligations under the provisions hereof and the
Securities except that (a) any transfer of such Indebtedness by a Wholly-Owned
Subsidiary of TLGI (other than to another Wholly-Owned Subsidiary of TLGI) and
(b) the sale, transfer or other disposition by TLGI or any Restricted Subsidiary
of TLGI of Capital Stock of a Wholly-Owned Subsidiary which holds Indebtedness
of TLGI such that it ceases to be a Wholly-Owned Subsidiary shall, in each case,
be an incurrence of Indebtedness by TLGI, as the case may be, subject to the
other provisions hereof.

"INDENTURE" means this instrument as originally executed and delivered
or, if amended or supplemented as herein provided, as so amended or supplemented
or both, including, for all purposes of this instrument and any such supplement,
the provisions of the Trust Indenture Act of 1939 that are deemed to be a part
of and govern this instrument and any such supplement, respectively, and shall
include the forms and terms of particular series of Securities established as
contemplated hereunder.

"INDEPENDENT FINANCIAL ADVISOR" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in TLGI or LGII and (ii) which, in the judgment of
the Board of Directors of TLGI, is otherwise independent and qualified to
perform the task for which it is to be engaged.

"INTEREST" means, with respect to any interest bearing Security, the
amount of all interest accruing on such Security, and, when used with respect to
non-interest bearing Securities (including, without limitation, any Original
Issue Discount Security which by its terms bears interest only after maturity or
upon default in any other payment due on such Security), interest payable on or
after maturity (whether at stated maturity, upon acceleration or redemption or
otherwise) or after the date, if any, on which TLGI becomes obligated to acquire
a Security, whether upon conversion, by purchase or otherwise, in each case,
including all interest accruing subsequent to the occurrence of any events
specified in Sections 6.01(f) and (g) or which would have accrued but for any
such event, whether or not such claims are allowable under applicable law.

"INTEREST PAYMENT DATE" means the Stated Maturity of an installment of
interest on the Securities, as set forth therein.

"INTEREST RATE PROTECTION AGREEMENT" means any arrangement with any
other person whereby, directly or indirectly, such person is entitled to receive
from time to time periodic payments calculated by applying either a floating or
a fixed rate of interest on a stated notional amount in exchange for periodic
payments made by such person calculated by applying a fixed or a floating rate
of interest on

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<PAGE>

the same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements.

"INTEREST RATE PROTECTION OBLIGATIONS" means the obligations of any
person under any Interest Rate Protection Agreement.

"INVESTMENT" means, with respect to any person, any direct or indirect
loan or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other person. "Investments" shall
exclude extensions of trade credit by TLGI and its Restricted Subsidiaries
(including, without limitation, LGII) in the ordinary course of business in
accordance with normal trade practices of TLGI or such Restricted Subsidiary, as
the case may be.

"ISSUE DATE" means the issue date specified in the securities of each
series except as otherwise provided in Section 2.01.

"ISSUER ORDER" means a written statement, request or order of TLGI
which is signed in its name by the chairman of the Board of Directors, the
president, any vice president or the treasurer of TLGI.

"LAST SALE PRICE" shall have the meaning set forth in Section 13.03.

"LIEN" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A person shall be deemed to own subject to a Lien any property which such
person has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement.

"MATURITY DATE" means, with respect to any Security, the date on which
any principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.

"MEASUREMENT DATE" means March 20, 1996.

"MEIP FACILITY" means the 1994 Management Equity Investment Plan
("MEIP") Credit Agreement, dated as of June 14, 1994, as amended and restated as
of May 15, 1996, by and between Loewen Management Investment Corporation, in its
capacity as agent for LGII, TLGI, the banks listed therein and Wachovia Bank of
Georgia, N.A., as agent.

"MOODY'S" means Moody's Investors Service, Inc. and its successors.

"NET CASH PROCEEDS" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to TLGI or any Restricted Subsidiary of TLGI (including,
without limitation, LGII) net of (i) brokerage commissions and other fees and
expenses (including, without limitation, fees and expenses of legal counsel and
investment bankers) related to such Asset Sale, (ii) provisions for all taxes
payable as a result of such Asset Sale, (iii) amounts required to be paid to any
person (other than TLGI or any Restricted Subsidiary of TLGI) owning a
beneficial interest in the assets subject to the Asset Sale and (iv) appropriate
amounts to be provided by TLGI or any Restricted Subsidiary of TLGI, as the case
may

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<PAGE>

be, as a reserve required in accordance with GAAP against any liabilities
associated with such Asset Sale and retained by TLGI or any Restricted
Subsidiary of TLGI, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected in
an officers' certificate delivered to the Trustee.

"OFFICER" means the Chairman of the Board, the Chief Executive
Officer, the Chief Operating Officer, the President, any Executive Vice
President, any Senior Vice President, any Vice President, the Chief Financial
Officer, the Treasurer, the Secretary or the Controller of TLGI.

"OFFICER'S CERTIFICATE", when used with respect to TLGI, means a
certificate signed by the chairman of the Board of Directors, the president, or
any vice president and by the treasurer, any assistant treasurer, the
controller, any assistant controller, the secretary or any assistant secretary
of TLGI. Each such certificate shall include the statements provided for in
Section 11.04, if and to the extent required by the provisions of such Section
11.04. One of the officers signing any Officer's Certificate given pursuant to
Section 3.03 shall be the principal executive, financial or accounting officer
of TLGI.

"OPINION OF COUNSEL" means an opinion in writing signed by the general
counsel of TLGI or by such other legal counsel who may be an employee of or
counsel to TLGI and who shall be satisfactory to the Trustee. Each such opinion
shall include the statements provided for in Section 11.04, if and to the extent
required by the provisions of such Section 11.04.

"ORIGINAL ISSUE DATE" of any Security (or portion thereof) means the
earlier of (a) the date of such Security or (b) the date of any Security (or
portion thereof) for which such Security was issued (directly or indirectly) on
registration of transfer, exchange or substitution.

"ORIGINAL ISSUE DISCOUNT" of any debt security, including any Original
Issue Discount Security, means the difference between the principal amount of
such debt security and the initial issue price of such debt security (as set
forth in the case of an Original Issue Discount Security on the face of such
Security).

"ORIGINAL ISSUE DISCOUNT SECURITY" means any Security that provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the maturity thereof pursuant to Section 6.01

"OUTSTANDING" (except as otherwise provided in Section 7.13), when
used with reference to Securities, shall, subject to the provisions of Section
10.04, mean, as of any particular time, all Securities authenticated and
delivered by the Trustee under this Indenture, except: (a) Securities
theretofore cancelled by the Trustee or delivered to the Trustee for
cancellation; (b) Securities (other than Securities of any series as to which
the provisions of Article Eight hereof shall not be applicable), or portions
thereof, for the payment or redemption of which moneys or U.S. Government
Obligations (as provided for in Section 8.01) in the necessary amount shall have
been deposited in trust with the Trustee or with any Paying Agent (other than
TLGI) or shall have been set aside, segregated and held in trust by TLGI for the
Holders of such Securities (if TLGI shall act as its own Paying Agent), provided
that, if such Securities, or portions thereof, are to be redeemed prior to the
maturity thereof, notice of such redemption shall have been given as herein
provided, or provision satisfactory to the Trustee shall have been made for
giving such notice; (c) Securities which shall have been paid or in substitution
for which other Securities shall have been authenticated and delivered pursuant
to the terms of Section 2.11 (except with respect to any such Security as to
which proof satisfactory to the Trustee is presented that such Security is held
by a Person in whose

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<PAGE>

hands such Security is a legal, valid and binding obligation of TLGI); and (d)
Securities converted into Common Stock pursuant hereto prior to the applicable
record date and, for purposes of selection for redemption, Securities not deemed
Outstanding pursuant to Section 12.02; provided, however, that Securities
surrendered for conversion during the period between the close of business on
any record date for such Security and the opening of business on the related
interest payment date (or on the related interest payment date) shall be
considered Outstanding for purposes of payment of interest on such related
interest payment date. In determining whether the Holders of the requisite
aggregate principal amount of Outstanding Securities of any or all series have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, the principal amount of an Original Issue Discount Security that
shall be deemed to be Outstanding for such purposes shall be the portion of the
principal amount thereof that would be due and payable as of the date of such
determination (as certified by TLGI to the Trustee) upon a declaration of
acceleration of the maturity thereof pursuant to Section 6.01.

"PARI PASSU INDEBTEDNESS" means Indebtedness of LGII or TLGI which
ranks PARI PASSU in right of payment with the Securities.

"PAYING AGENT" has the meaning set forth in Section 4.02, except that,
for the purposes of Section 4.11 and Section 4.12 and Articles Eight and Twelve,
the Paying Agent shall not be TLGI or a Subsidiary of TLGI or any of their
respective Affiliates.

"PERIODIC OFFERING" means an offering of Securities of a series from
time to time, the specific terms of which Securities, including, without
limitation, the rate or rates of interest, if any, thereon, the stated maturity
or maturities thereof and the redemption and conversion provisions, if any, with
respect thereto, are to be determined by TLGI or its agents upon the issuance of
such Securities.

"PERMITTED HOLDERS" mean (i) Raymond Loewen and Anne Loewen, taken
together, and (ii) in the case of LGII, TLGI.

"PERMITTED INDEBTEDNESS" means, without duplication, each of the
following:

(a) the Securities;

(b) Indebtedness of TLGI and its Restricted Subsidiaries (including,
without limitation, LGII) outstanding on the Issue Date (other than Indebtedness
under the Credit Agreements;

(c) Indebtedness of TLGI or LGII, as the case may be, under the
Credit Agreements in an aggregate principal amount at any one time outstanding
not to exceed the aggregate of the maximum credit limits of the Credit
Agreements as of the Issue Date, less the Net Proceeds of any Asset Sale that
are applied to repay, and permanently reduce the commitments under, the Credit
Agreements (as required by the terms thereof);

(d) (i) Interest Rate Protection Obligations of TLGI covering
Indebtedness of TLGI and its Restricted Subsidiaries (including, without
limitation, LGII); (ii) Interest Rate Protection Obligations of any Restricted
Subsidiary of TLGI covering Indebtedness of such Restricted Subsidiary;
PROVIDED, HOWEVER, that, in the case of either clause (i) or (ii), (x) any
Indebtedness to which any such Interest Rate Protection Obligations relate bears
interest at fluctuating interest rates and is otherwise permitted to be incurred
under this covenant and (y) the notional principal amount of any such Interest
Rate Protection Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Rate Protection Obligations relate;

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<PAGE>

(e) Indebtedness under Currency Agreements; PROVIDED, HOWEVER, that
in the case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of TLGI and its Restricted
Subsidiaries (including, without limitation, LGII) outstanding other than as a
result of fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;

(f) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds in
the ordinary course of business; PROVIDED, HOWEVER, that such Indebtedness is
extinguished within two business days of incurrence;

(g) Indebtedness incurred in respect of performance bonds or letters
of credit in lieu thereof provided in the ordinary course of business;

(h) Indebtedness of TLGI and its Restricted Subsidiaries (including,
without limitation, LGII) represented by letters of credit for the account of
TLGI and its Restricted Subsidiaries in order to provide security for workers'
compensation claims, payment obligations in connection with self-insurance or
similar requirements in the ordinary course of business;

(i) Indebtedness of TLGI and its Restricted Subsidiaries (including,
without limitation, LGII) in addition to that described in clauses (a) through
(h) above, in an aggregate principal amount outstanding at any time not
exceeding $5,000,000; and

(j) (i) Indebtedness of TLGI the proceeds of which are used solely to
refinance (whether by amendment, renewal, extension or refunding) Indebtedness
of TLGI and its Restricted Subsidiaries (including, without limitation, LGII)
and (ii) Indebtedness of any Restricted Subsidiary of TLGI the proceeds of which
are used solely to refinance (whether by amendment, renewal, extension or
refunding) Indebtedness of such Restricted Subsidiary, in each case other than
the Indebtedness refinanced, redeemed or retired on the Issue Date or
Indebtedness incurred under clause (c), (d), (e), (f), (g), (h), or (i) of this
covenant; PROVIDED, HOWEVER, that (x) the principal amount of Indebtedness
incurred pursuant to this clause (j) (or, if such Indebtedness provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof, the original issue price of
such Indebtedness) shall not exceed the sum of the principal amount of
Indebtedness so refinanced, plus the amount of any premium required to be paid
in connection with such refinancing pursuant to the terms of such Indebtedness
or the amount of any premium reasonably determined by the Board of Directors of
TLGI as necessary to accomplish such refinancing by means of a tender offer or
privately negotiated purchase, plus the amount of expenses in connection
therewith, (y) in the case of Indebtedness incurred by TLGI pursuant to this
clause (j) to refinance Pari Passu Indebtedness, such Indebtedness constitutes
Pari Passu Indebtedness.

"PERMITTED INVESTMENTS" means any of the following: (i) Investments
in any Wholly-Owned Subsidiary of TLGI (including (a) LGII and (b) any person
that pursuant to such Investment becomes a Wholly-Owned Subsidiary of TLGI) and
any person that is merged or consolidated with or into, or transfers or conveys
all or substantially all of its assets to, TLGI or any Wholly-Owned Subsidiary
of TLGI at the time such Investment is made; (ii) Investments in Cash
Equivalents; (iii) Investments in Currency Agreements on commercially reasonable
terms entered into by TLGI or any of its Restricted Subsidiaries in the ordinary
course of business in connection with the operations of the business of TLGI or
its Restricted Subsidiaries to hedge against fluctuations in foreign exchange
rates; (iv) loans or advances to officers, employees or consultants of TLGI and
its Restricted Subsidiaries for travel and moving expenses

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in the ordinary course of business for bona fide business purposes of TLGI and
its Restricted Subsidiaries; (v) other loans or advances to officers, employees
or consultants of TLGI and its Restricted Subsidiaries in the ordinary course of
business for bona fide business purposes of TLGI and its Restricted Subsidiaries
not in excess of $10,000,000 in the aggregate at any one time outstanding;
(vi) Investments in evidences of Indebtedness, securities or other property
received from another person by TLGI or any of its Restricted Subsidiaries in
connection with any bankruptcy proceeding or by reason of a composition or
readjustment of debt or a reorganization of such person or as a result of
foreclosure, perfection or enforcement of any Lien in exchange for evidences of
Indebtedness, securities or other property of such person held by TLGI or any of
its Restricted Subsidiaries, or for other liabilities or obligations of such
other person to TLGI or any of its Restricted Subsidiaries that were created, in
accordance with the terms of this Indenture; (vii) Investments in Interest Rate
Protection Agreements on commercially reasonable terms entered into by TLGI or
any of its Restricted Subsidiaries in the ordinary course of business in
connection with the operations of TLGI and its Restricted Subsidiaries to hedge
against fluctuations in interest rates; and (viii) Investments of funds received
by TLGI or its Restricted Subsidiaries (including, without limitation, LGII) in
the ordinary course of business, which funds are required to be held in trust
for the benefit of others by TLGI or such Restricted Subsidiary, as the case may
be, and which funds do not constitute assets or liabilities of TLGI or such
Restricted Subsidiary; (ix) Investments not in excess of $50,000,000 in the
aggregate in other Unrestricted Subsidiaries which are engaged in the insurance
business; and (x) Investments not in excess of $50,000,000 in persons (other
than Wholly-Owned Subsidiaries) engaged in businesses incidental to the funeral
home, cemetery and cremation businesses of TLGI and its Restricted Subsidiaries.

"PERMITTED LIENS" means the following types of Liens:

(a) Liens for taxes, assessments or governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which TLGI or any of its Restricted Subsidiaries
(including, without limitation, LGII) shall have set aside on its books such
reserves as may be required pursuant to GAAP;

(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or being
contested in good faith, if such reserve or other appropriate provision, if
any, as shall be required by GAAP shall have been made in respect thereof;

(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, governmental
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);

(d) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which may
have been duly initiated for the review of such judgment shall not have been
finally terminated or the period within which such proceedings may be initiated
shall not have expired;

(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of TLGI or any of its
Restricted Subsidiaries (including, without limitation, LGII);

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(f) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;

(g) any Lien existing on any asset of any corporation at the time
such corporation becomes a Restricted Subsidiary and not created in
contemplation of such event;

(h) any Lien on any asset securing Indebtedness incurred or assumed
for the purpose of financing all or any part of the cost of acquiring or
constructing such asset; PROVIDED, that such Lien attaches to such asset
concurrently with or within 18 months after the acquisition or completion
thereof;

(i) any Lien on any asset of any corporation existing at the time
such corporation is merged or consolidated with or into TLGI or a Restricted
Subsidiary and not created in contemplation of such event;

(j) any Lien existing on any asset prior to the acquisition thereof
by TLGI or a Restricted Subsidiary and not created in contemplation of such
acquisition;

(k) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; and

(l) any extension, renewal or replacement of any Lien permitted by
the preceding clauses (g), (h), (i) or (j) hereof in respect of the same
property or assets theretofore subject to such Lien in connection with the
extension, renewal or refunding of the Indebtedness secured thereby; PROVIDED
that (1) such Lien shall attach solely to the same property or assets and (2)
such extension, renewal or refunding of such Indebtedness shall be without
increase in the principal remaining unpaid as at the date of such extension,
renewal or refunding.

"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, estate,
charitable foundation, unincorporated organization, government or any agency or
political subdivision thereof.

"PLACE OF PAYMENT", when used with respect to the Securities of any
series, means the place or places where the principal of and interest, if any,
on the Securities of such series are payable as determined in accordance with
Section 2.01.

"PREDECESSOR NOTES" means, with respect to any particular Security,
every previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this definition,
any Securities authenticated and delivered under Section 2.04 hereof in exchange
for mutilated Notes or in lieu of lost, destroyed or stolen Securities, shall be
deemed to evidence the same debt as the mutilated, lost, destroyed or stolen
Securities.

"PREFERRED SECURITIES" means, with respect to a Special Finance
Subsidiary, any securities of such Subsidiary treated for accounting purposes as
an equity security that has preferential rights to any other security of such
person with respect to dividends or redemptions or upon liquidation.

"PREFERRED STOCK" means, with respect to any person, any Capital Stock
of such person that has preferential rights to any other Capital Stock of such
person with respect to dividends or redemptions or upon liquidation and any
Preferred Securities.

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"PRINCIPAL" or "PRINCIPAL AMOUNT" of a debt security, including any
Security, means the amount (including, without limitation, if and to the extent
applicable, any premium and, in the case of an Original Issue Discount Security,
any accrued original issue discount, but excluding interest) that is payable
with respect to such debt security as of any date and for any purpose
(including, without limitation, in connection with any sinking fund, upon any
redemption at the option of TLGI, upon any purchase or exchange at the option of
TLGI or the holder of such debt security and upon any acceleration of the
maturity of such debt security) plus, when appropriate, the premium, if any, on
the security and any interest on overdue principal.

"RECORD DATE" shall have the meaning set forth in Section 2.07.

"REDEEMABLE CAPITAL STOCK" means any shares of any class or series of
Capital Stock that, either by the terms thereof, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise, is or
upon the happening of an event or passage of time would be, required to be
redeemed prior to the Stated Maturity with respect to the principal of any
Security or is redeemable at the option of the holder thereof at any time prior
to any such Stated Maturity, or is convertible into or exchangeable for debt
securities at any time prior to any such Stated Maturity.

"REGISTRAR" has the meaning set forth in Section 4.02.

"RELATED OBLIGOR" has the meaning set forth in Section 4.08.

"RESPONSIBLE OFFICER", when used with respect to the Trustee, means
any officer assigned by the Trustee to administer its corporate trust matters.

"RESTRICTED PAYMENTS" has the meaning set forth in Section 4.08.

"RESTRICTED SUBSIDIARY" means any Subsidiary of TLGI other than an
Unrestricted Subsidiary.

"RULE 144A" means Rule 144A under the Securities Act.

"SALE-LEASEBACK TRANSACTION" of any person means an arrangement with
any lender or investor or to which such lender or investor is a party providing
for the leasing by such person of any property or asset of such person which has
been or is being sold or transferred by such person after the acquisition
thereof or the completion of construction or commencement of operation thereof
to such lender or investor or to any person to whom funds have been or are to be
advanced by such lender or investor on the security of such property or asset.
The stated maturity of such arrangement shall be the date of the last payment of
rent or any other amount due under such arrangement prior to the first date on
which such arrangement may be terminated by the lessee without payment of a
penalty.

"S&P" means Standard & Poor's Corporation, and its successors.

"SECURITY" or "SECURITIES" (except as otherwise provided in Section
7.13) has the meaning stated in the first recital of this Indenture or, as the
case may be, securities that have been authenticated and delivered pursuant to
this Indenture.

"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.

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<PAGE>

"SELLER FINANCING INDEBTEDNESS" means a purchase money Indebtedness
issued to the seller of a business or other assets for, and not in excess of,
the purchase price thereof.

"SENIOR DEBT" means Indebtedness which is not (i) Indebtedness of TLGI
to any Subsidiary, and (ii) Indebtedness of TLGI which by its terms is
subordinate or junior in any respect to any other Indebtedness or other
obligation of TLGI.

"SIGNIFICANT SUBSIDIARY" shall mean a Restricted Subsidiary which is a
"Significant Subsidiary" as defined in Rule 1.02(v) of Regulation S-X under the
Securities Act.

"SPECIAL FINANCE SUBSIDIARY" means a Restricted Subsidiary whose sole
assets are debt obligations of LGII or TLGI and whose sole liabilities are
Preferred Securities the proceeds from the sale of which are or have been
advanced to LGII or TLGI.

"STATED MATURITY" means, when used with respect to any Security or any
installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable, and when used with respect to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due and payable.

"SUBSIDIARY" means, with respect to any person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such person, by one or more Subsidiaries of such person or by such person and
one or more Subsidiaries thereof and (ii) any other person (other than a
corporation), including, without limitation, a joint venture, in which such
person, one or more Subsidiaries thereof or such person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other person performing
similar functions). For purposes of this definition, any directors' qualifying
shares or investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.

"SURVIVING ENTITY" shall have the meaning set forth in Section 5.01.

"TRADING DAY" shall have the meaning set forth in Section 13.03.

"TRUST INDENTURE ACT OF 1939" or "TIA" (except as otherwise provided
in Sections 9.01, 9.02 and 13.5) means the Trust Indenture Act of 1939, as
amended by the Trust Indenture Reform Act of 1990, as in force at the date as of
which this Indenture is originally executed.

"TLGI" shall mean The Loewen Group Inc., and shall include any
successor replacing such TLGI pursuant to the provisions hereof, and thereafter
means such successor.

"TRUST OFFICER" means any officer in the Corporate Trust
Administration of the Trustee or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above-designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.

"TRUSTEE" means the Person identified as "Trustee" in the first
paragraph hereof and, subject to the provisions of Article Seven, shall also
include any successor trustee. "Trustee" shall also mean or include each Person
who is then a trustee hereunder and, if at any time there is more than one such

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Person, "Trustee" as used with respect to the Securities of any series shall
mean the trustee with respect to the Securities of such series.

"U.S. GOVERNMENT OBLIGATIONS" shall have the meaning set forth in
Section 8.01(B).

"UNRESTRICTED SUBSIDIARY" means (i) First Capital Life Insurance
Company of Louisiana, National Capital Life Insurance Company, Security
Industrial Insurance Company, Security Industrial Fire Insurance Company or any
successors to such Subsidiaries or (ii) a Subsidiary of TLGI declared by the
Board of Directors of TLGI to be an Unrestricted Subsidiary; PROVIDED, that no
such Subsidiary shall be declared to be an Unrestricted Subsidiary unless (x)
none of its properties or assets were owned by TLGI or any of its Subsidiaries
prior to the Issue Date, other than any such assets as are transferred to such
Unrestricted Subsidiary in accordance with the covenant contained in Section
4.08, (y) its properties and assets, to the extent that they secure
Indebtedness, secure only Non-Recourse Indebtedness and (z) it has no
Indebtedness other than Non-Recourse Indebtedness. As used above, "Non-Recourse
Indebtedness" means Indebtedness as to which (i) neither TLGI nor any of its
Subsidiaries (other than the relevant Unrestricted Subsidiary or another
Unrestricted Subsidiary) (1) provides credit support (including any undertaking,
agreement or instrument which would constitute Indebtedness), (2) guarantees or
is otherwise directly or indirectly liable or (3) constitutes the lender (in
each case, other than pursuant to and in compliance with the covenant contained
in Section 4.08 and (ii) no default with respect to such Indebtedness (including
any rights which the holders thereof may have to take enforcement action against
the relevant Unrestricted Subsidiary or its assets) would permit (upon notice,
lapse of time or both) any holder of any other Indebtedness of TLGI or its
Subsidiaries (other than Unrestricted Subsidiaries) to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity.

"VOTING STOCK" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any person (irrespective of whether or not, at the time, Capital
Stock of any other class or classes shall have, or might have, voting power by
reason of the happening of any contingency).

"WHOLLY-OWNED SUBSIDIARY" means (i) any Restricted Subsidiary of TLGI
of which 100% of the outstanding Capital Stock is owned by TLGI or one or more
Wholly-Owned Subsidiaries of TLGI or by TLGI and one or more Wholly-Owned
Subsidiaries of TLGI, including LGII, or (ii) any Subsidiary, at least 66 2/3%
of the outstanding voting securities of which, and all of the outstanding shares
entitled to receive dividends or other distributions of which, shall at the time
be owned or controlled, directly or indirectly, by TLGI or one or more Wholly-
Owned Subsidiaries of TLGI or by TLGI and one or more Wholly-Owned Subsidiaries
of TLGI, including LGII. For purposes of this definition, any directors'
qualifying shares or investments by foreign nationals mandated by applicable law
shall be disregarded in determining the ownership of a Subsidiary.

"YIELD TO MATURITY" means the yield to maturity on a series of
Securities, calculated at the time of issuance of such series, or, if
applicable, at the most recent redetermination of interest on such series, and
calculated in accordance with generally accepted financial practice or as
otherwise provided in the terms of such series of Securities.

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Section 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.

Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:

"INDENTURE SECURITIES" means the Securities;

"INDENTURE SECURITY HOLDER" means a Noteholder or Holder;

"INDENTURE TO BE QUALIFIED" means this Indenture;

"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and

"OBLIGOR" on the indenture securities means TLGI or any other obligor
on the Securities.

All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.

Section 1.03. RULES OF CONSTRUCTION.

For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:

(a) words in the singular include the plural, and words in the plural
include the singular.

(b) "or" is not exclusive;

(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision; and

(e) all references to "$" or "dollars" shall refer to the lawful
currency of the United States of America.

ARTICLE TWO

THE SECURITIES

Section 2.01. AMOUNT OF SECURITIES; ISSUABLE IN SERIES. The
aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture may not exceed $500,000,000 at any time, except
to the extent permitted by Section 2.11. The Securities may be issued in one or
more series and the Securities of each such series shall rank equally and PARI
PASSU as to the right of payment of principal and interest, if any, with the
Securities of each other series, and with all other Senior Debt of TLGI. There
shall be established in or pursuant to one or more Board Resolutions (and, to
the extent

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established pursuant to rather than set forth in a Board Resolution, in an
Officer's Certificate detailing such establishment) or established in one or
more indentures supplemental hereto, prior to the initial issuance of Securities
of any series:

(1) the designation of the Securities of the series, which shall
distinguish the Securities of the series from the Securities of all other
series;

(2) whether the Securities will be convertible into Common Stock or
Preferred Stock (or cash in lieu thereof) and, if so, the terms and
conditions upon which such conversion will be effected including the
initial Conversion Price and any adjustments thereto in addition to or
different from those set forth in Section 13.04, the conversion period and
other provisions in addition to or in lieu of those set forth herein;

(3) any limit upon the aggregate principal amount of the Securities
of the series that may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 2.10, 2.12, 2.13, 9.05, 12.03 or 13.02);

(4) the date or dates on which the principal of the Securities of the
series is payable;

(5) the rate or rates at which the Securities of the series shall
bear interest, if any, the date or dates from which any such interest shall
accrue, on which any such interest shall be payable and on which a record
shall be taken for the determination of Holders to whom any such interest
is payable or the method by which such rate or rates or date or dates shall
be determined or both;

(6) the place or places where and the manner in which the principal
of and any interest on Securities of the series shall be payable and the
office or agency for the Securities of the series maintained by TLGI
pursuant to Section 4.02 (if other than as provided in Section 4.02);

(7) any provisions relating to the issuance of Securities of such
series at an original issue discount (including, without limitation, the
issue price thereof, the rate or rates at which such original issue
discount shall accrue, if any, and the date or dates from or to which or
period or periods during which such original issue discount shall accrue at
such rate or rates);

(8) the right, if any, of TLGI to redeem, purchase or repay
Securities of the series, in whole or in part, at its option and the period
or periods within which, the price or prices (or the method by which such
price or prices shall be determined or both) at which, the form or method
of payment therefor if other than in cash and any terms and conditions upon
which and the manner in which (if different from the provisions of Article
Twelve) Securities of the series may be so redeemed, purchased or repaid,
in whole or in part, pursuant to any sinking fund or otherwise;

(9) the obligation, if any, of TLGI to redeem, purchase or repay
Securities of the series, in whole or in part, pursuant to any mandatory
redemption, sinking fund or analogous provisions or at the option of a
Holder thereof and the period or periods within which, the price or price
(or the method by which such price or prices shall be determined or both)
at which, the form or method of payment therefor if other than in cash and
any terms and conditions upon which and the manner in which (if different
from the provisions of Article Twelve) Securities of the series shall be
redeemed, purchased or repaid, in whole or in part, pursuant to such
obligation;

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(10) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;

(11) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
acceleration of the maturity thereof;

(12) whether the Securities of the series will be issuable as Global
Securities;

(13) if the Securities of such series are to be issuable in definitive
form (whether upon original issue or upon exchange of a temporary Security
of such series) only upon receipt of certain certificates or other
documents or satisfaction of other conditions, the form and terms of such
certificates, documents or conditions;

(14) any trustees, depositaries, authenticating or paying agents,
transfer agents or registrars, conversion agents or any other agents with
respect to the Securities of such series;

(15) any deleted, modified or additional events of default or remedies
or any additional covenants with respect to the Securities of such series;

(16) whether the provisions of Section 8.01(C) will be applicable to
Securities of such series;

(17) if the amounts of payment of principal of and interest on the
Securities of such series are to be determined with reference to an index,
the manner in which such amounts shall be determined;

(18) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture); and

(19) whether the Securities of the series will be secured.

All Securities of any one series shall be substantially identical,
except as to denomination and except as may otherwise be provided by or pursuant
to the Board Resolution or Officer's Certificate referred to above or as set
forth in any such indenture supplemental hereto. All Securities of any one
series need not be issued at the same time and may be issued from time to time,
consistent with the terms of this Indenture, if so provided or pursuant to such
Board Resolution, such Officer's Certificate or in any such indenture
supplemental hereto.

Any such Board Resolution or Officer's Certificate referred to above
with respect to Securities any series filed with the Trustee on or before the
initial issuance of the Securities of such series shall be incorporated herein
by reference with respect to Securities of such series and shall thereafter be
deemed to be a part of this Indenture for all purposes relating to Securities of
such series as fully as if such Board Resolution or Officer's Certificate were
set forth herein in full.

Section 2.02 FORMS GENERALLY. The Securities of each series shall
be substantially in such form (not inconsistent with this Indenture) as shall be
established by or pursuant to one or more Board Resolutions (as set forth in a
Board Resolution or, to the extent established pursuant to rather than set forth
in a Board Resolution, an Officer's Certificate detailing such establishment) or
in one or more indentures supplemental hereto, in each case with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have imprinted or otherwise
reproduced

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thereon such legend or legends or endorsements, not inconsistent with the
provisions of this Indenture, as may be required to comply with any law or with
any rules or regulations pursuant thereto, or with any rules of any securities
exchange or to conform to general usage, all as may be determined by the
officers executing such Securities, as evidenced by their execution of such
Securities.

The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Securities
may be listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.

Section 2.03. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. The
Trustee's certificate of authentication on all Securities shall be substantially
as follows:

This is one of the Securities of the series designated herein referred
to in the within-mentioned Indenture.

[Trustee], as Trustee

By:

----------------------------------

Authorized Signatory

If at any time there shall be an Authenticating Agent appointed with
respect to any series of Securities, then the Securities of such series shall
bear, in addition to the Trustee's certificate of authentication, an alternate
certificate of authentication which shall be substantially as follows:

This is one of the Securities of the series designated herein referred
to in the within-mentioned Indenture.

[Trustee], as Trustee

By:

----------------------------------

as Authenticating Agent

By:

----------------------------------

Authorized Signatory

Section 2.04. AUTHENTICATION AND DELIVERY OF SECURITIES. TLGI may
deliver Securities of any series executed by TLGI to the Trustee for
authentication together with the applicable documents referred to below in this
Section 2.04, and the Trustee shall thereupon authenticate and deliver such
Securities to, or upon the order of, TLGI (contained in TLGI Order referred to
below in this Section 2.04) or pursuant to such procedures acceptable to the
Trustee and to such recipients as may be specified from time to time by an
Issuer Order. The maturity date, original issue date, interest rate, if any,
and any other terms of the Securities of such series shall be determined by or
pursuant to such Issuer Order and procedures. If provided for in such
procedures, such Issuer Order may authorize authentication and delivery pursuant
to oral instructions from TLGI or its duly authorized agent, which instructions
shall be promptly confirmed in writing. In authenticating the Securities of
such series and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive (in

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the case of subparagraphs (2), (3) and (4) below only at or before the time of
the first request of TLGI to the Trustee to authenticate Securities of such
series) and (subject to Section 7.01) shall be fully protected in relying upon,
unless and until such documents have been superseded or revoked:

(1) an Issuer Order requesting such authentication and setting forth
delivery instructions if the Securities of such series are not to be
delivered to TLGI, provided that, with respect to Securities of a series
subject to a Periodic Offering, (a) such Issuer Order may be delivered by
TLGI to the Trustee prior to the delivery to the Trustee of such Securities
for authentication and delivery, (b) the Trustee shall authenticate and
deliver Securities of such series for original issue from time to time, in
an aggregate principal amount not exceeding the aggregate principal amount
established for such series, pursuant to an Issuer Order or pursuant to
procedures acceptable to the Trustee as may be specified from time to time
by an Issuer Order, (c) the maturity date or dates, original issue date or
dates, interest rate or rates, if any, and any other terms of Securities of
such series shall be determined by an Issuer Order or pursuant to such
procedures, (d) if provided for in such procedures, such Issuer Order may
authorize authentication and delivery pursuant to telecommunication or
electronic instructions from TLGI or its duly authorized agent or agents,
and (e) after the original issuance of the first Security of such series to
be issued, any separate request by TLGI that the Trustee authenticate
Securities of such series for original issuance will be deemed to be a
certification by TLGI that it is in compliance with all conditions
precedent provided for in this Indenture relating to the authentication and
delivery of such Securities;

(2) the Board Resolutions, Officer's Certificate or executed
supplemental indenture referred to in Sections 2.01 and 2.02 by or pursuant
to which the form or forms and terms of the Securities of such series were
established;

(3) an Officer's Certificate setting forth the form or forms and
terms of the Securities stating that the form or forms and terms of the
Securities have been established pursuant to Sections 2.01 and 2.02 and
comply with this Indenture and covering such other matters as the Trustee
may reasonably request; and

(4) at the option of TLGI, either an Opinion of Counsel, or a letter
from legal counsel addressed to the Trustee permitting it to rely on an
Opinion of Counsel, substantially to the effect that:

(A) the form or forms of the Securities of such series have been
duly authorized and established in conformity with the provisions of
this Indenture;

(B) in the case of an underwritten offering, the Securities of
such series have been duly authorized and established in conformity
with the provisions of this Indenture, and, in the case of an offering
that is not underwritten, certain terms of the Securities of such
series have been established pursuant to a Board Resolution, an
Officer's Certificate or a supplemental indenture in accordance with
this Indenture, and when such other terms as are to be established
pursuant to procedures set forth in an Issuer Order shall have been
established, all such terms will have been duly authorized by TLGI and
will have been established in conformity with the provisions of this
Indenture;

(C) when the Securities of such series have been executed by
TLGI and authenticated by the Trustee in accordance with the
provisions of this Indenture and

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delivered against payment therefor by the purchasers thereof, they
will be valid and legally binding obligations of TLGI, enforceable in
accordance with their respective terms, and will be entitled to the
benefits of this Indenture; and

(D) the execution and delivery by TLGI of, and the performance
by TLGI of its obligations under, the Securities of such series will
not contravene any provision of applicable law or the articles of
incorporation or by-laws of TLGI or any agreement or other instrument
binding upon TLGI or any of its Subsidiaries that is material to TLGI
and its Subsidiaries, considered as one enterprise, or, to such
counsel's knowledge after the inquiry indicated therein, any judgment,
order or decree of any governmental agency or any court having
jurisdiction over TLGI or any Subsidiary, and no consent, approval or
authorization of any governmental body or agency is required for the
performance by TLGI of its obligations under the Securities, except
such as are specified and have been obtained and such as may be
required by the securities or blue sky laws of the various states in
connection with the offer and sale of the Securities.

In rendering such opinions, such counsel may qualify any opinions as
to enforceability by stating that such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium and other
similar laws affecting the rights and remedies of creditors and is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Such counsel may rely, as to
all matters governed by the laws of jurisdictions other than the State of New
York and the federal law of the United States, upon opinions of other counsel
(copies of which shall be delivered to the Trustee), who shall be counsel
reasonably satisfactory to the Trustee, in which case the opinion shall state
that such counsel believes that both such counsel and the Trustee are entitled
so to rely. Such counsel may also state that, insofar as such opinion involves
factual matters, such counsel has relied, to the extent such counsel deems
proper, upon certificates of officers of TLGI and its Subsidiaries and
certificates of public officials.

The Trustee shall have the right to decline to authenticate and
delivery any Securities of any series under this Section 2.04 if the Trustee,
being advised by counsel, determines that such action may not lawfully be taken
by TLGI or if the Trustee in good faith by its board of directors or board of
trustees, executive committee or a trust committee of directors or trustees or
Responsible Officers shall determine that such action would expose the Trustee
to personal liability to existing Holders or would adversely affect the
Trustee's own rights, duties or immunities under the Securities, this Indenture
or otherwise.

If TLGI shall establish pursuant to Section 2.01 that the Securities
of a series are to be issued in the form of one or more Global Securities, then
TLGI shall execute and the Trustee shall, in accordance with this Section 2.04
and Issuer Order with respect to such series, authenticate and deliver one or
more Global Securities that (i) shall represent and shall be denominated in an
amount equal to the aggregate principal amount of all of the Securities of such
series to be issued in the form of Global Securities and not yet cancelled, (ii)
shall be registered in the name of the Depositary for such Global Security or
Securities or the nominee of such Depositary, (iii) shall be delivered by the
Trustee to such Depositary or pursuant to such Depositary's instructions, and
(iv) shall bear a legend substantially to the following effect:

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"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT
AS A WHOLE BY THE DEPOSITARY TO THE NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY."

Each Depositary designated pursuant to Section 2.01 must, at the time
of its designation and at all times while it serves as Depositary, be a clearing
agency registered under the Securities Exchange Act of 1934 and any other
applicable statute or regulation.

Section 2.05. EXECUTION OF SECURITIES. The Securities shall be
signed on behalf of TLGI by two Officers, under its corporate seal which may,
but need not, be attested by its secretary or one of its assistant secretaries.
Such signatures may be the manual or facsimile signatures of the present or any
future such officers. The seal of TLGI may be in the form of a facsimile
thereof and may be impressed, affixed, imprinted or otherwise reproduced in the
Securities. Typographical and other minor errors or defects in any such
reproduction of the seal or any such signature shall not affect the validity or
enforceability of any Security that has been duly authenticated and delivered by
the Trustee.

In case of any officer of TLGI who shall have signed any of the
Securities shall cease to be such officer before the Security so signed shall be
authenticated and delivered by the Trustee or disposed of by TLGI, such Security
nevertheless may be authenticated and delivered or disposed of as though the
person who signed such Security had not ceased to be such officer of TLGI; and
any Security may be signed on behalf of TLGI by such persons as, at the actual
date of the execution of such Security, shall be the proper officers of TLGI,
although at the date of the execution and delivery of this Indenture any such
person was not such an officer.

Section 2.06. CERTIFICATE OF AUTHENTICATION. Only such Securities
as shall bear thereon a certificate of authentication substantially in the form
hereinbefore recited, executed by the Trustee by the manual signature of one of
its authorized signatories, or its Authenticating Agent, shall be entitled to
the benefits of this Indenture or be valid or obligatory for any purpose. The
execution of such certificates by the Trustee, or its Authenticating Agent, upon
any Security executed by TLGI shall be conclusive evidence that the Security so
authenticated has been duly authenticated and delivered hereunder and that the
Holder is entitled to the benefits of this Indenture. Each reference in this
Indenture to authentication by the Trustee includes authentication by an agent
appointed pursuant to Section 7.15.

Section 2.07 DENOMINATION AND DATE OF SECURITIES; PAYMENTS OF
INTEREST. The Securities of each series shall be issuable in registered form
in denominations established as contemplated by Section 2.01 or, with respect
to the Securities of any series, if not so established, in denominations of
$1,000 and any integral multiple thereof. The Securities of each series
shall be numbered, lettered or other distinguished in such manner or in
accordance with such plan as the officers of TLGI executing the same may
determine with the approval of the Trustee, as evidenced by the execution and
authentication thereof.

Each Security shall be dated the date of its authentication. The
Securities of each series shall bear interest, if any, from the date, and such
interest, if any, shall be payable on the dates, established as contemplated by
Section 2.01.

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The Person in whose name any Security of any series is registered at
the close of business on any record date applicable to a particular series with
respect to any interest payment date for such series shall be entitled to
receive the interest, if any, payable on such interest payment date
notwithstanding any transfer or exchange of such Security subsequent to the
record date and prior to such interest payment date, except if and to the extent
TLGI shall default in the payment of the interest due on such interest payment
date for such series, in which case such defaulted interest shall be paid to the
Persons in whose names Outstanding Securities for such series are registered (a)
at the close of business on a subsequent record date (which shall be not less
than five Business Days prior to the date of payment of such defaulted interest)
established by notice given by mail by or on behalf of TLGI to the Holders of
Securities not less than 15 days preceding such subsequent record date or (b) as
determined by such other procedure as is mutually acceptable to TLGI and the
Trustee. The term "RECORD DATE" as used with respect to any interest payment
date (except a date for payment of defaulted interest) for the Securities of
series shall mean the date specified as such in the terms of the Securities of
such series established as contemplated by Section 2.01, or, if no such date is
so established, if such interest payment date is the first day of a calendar
month, the fifteenth day of the next preceding calendar month or, if such
interest payment date is the fifteenth day of a calendar month, the first day of
such calendar month, whether or not such record date is a Business Day.

Section 2.08. REGISTRAR.

TLGI will keep at the office of each Registrar for each series of
Securities a register or registers in which, subject to such reasonable
regulations as it may prescribe, it will provide for the registration of
Securities of each series and the registration of transfer of Securities of such
series. Each such register shall be in written form in the English language or
in any other form capable of being converted into such form within a reasonable
time. At all reasonable times such register or registers shall be open for
inspection and available for copying by the Trustee. Each Registrar for each
series of Securities shall keep a register of such series of Securities and of
their transfer and exchange. TLGI may have one or more co-Registrars.

TLGI shall enter into an appropriate agency agreement with any
Registrar not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Registrar. TLGI shall notify the Trustee of the name and address
of any such Registrar. If TLGI fails to maintain a Registrar, or fails to give
the foregoing notice, the Trustee shall act as such and shall be entitled to
appropriate compensation in accordance with Section 7.08.

Section 2.09. PROVISION AS TO PAYING AGENT.

TLGI may have one or additional paying agents. The term "Paying
Agent" includes any additional paying agent. Except as otherwise expressly
provided in this Indenture, TLGI or any Affiliate thereof may act as Paying
Agent.

If TLGI shall appoint a Paying Agent other than the Trustee, it will
cause such Paying Agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of this
Section 2.09,

(1) that it will hold all sums held by it as such agent for the
payment of the principal of or interest, if any, on the Securities (whether
such sums have been paid to it by TLGI or by any other obligor on the
Securities) in trust for the benefit of the Holders of the Securities or
the Trustee; and

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(2) that it will give the Trustee notice of any failure by TLGI (or
by the other obligor on the Securities) to make any payment of the
principal of or interest, if any, on the Securities when the same shall be
due and payable; and

(3) that it will, at any time during the continuance of any such
failure, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.

The agreement shall implement the provisions of this Indenture that relate to
such Paying Agent.

TLGI shall notify the Trustee of the name and address of any such
Paying Agent. If TLGI fails to maintain a Paying Agent or agent for service of
notices and demands, or fails to give the foregoing notice, the Trustee shall
act as such and shall be entitled to appropriate compensation in accordance with
Section 7.08.

Each Paying Agent shall hold in trust for the benefit of Holders of
the Securities or the Trustee all money held by the Paying Agent for the payment
of principal of, or interest, if any, on, the Securities (whether such money has
been distributed to it by TLGI or any other obligor on the Securities), and TLGI
(or any other obligor on the Securities) and the Paying Agent shall notify the
Trustee of any default by TLGI (or any other obligor on the Securities) in
making any such payment.

If TLGI or an Affiliate of TLGI acts as Paying Agent, it will, on or
before each due date of the principal of or interests, if any, on the
Securities, set aside, segregate and hold in trust for the benefit of the
Holders of the Securities a sum sufficient to pay such principal or interest, if
any, so becoming due and will notify the Trustee of any failure to take such
action and of any failure by TLGI (or by any other obligor under the Securities)
to make any payment of the principal of or interest, if any, on the Securities
when the same shall become due and payable. TLGI at any time may require a
Paying Agent to distribute all money held by it to the Trustee and account for
any funds disbursed and the Trustee may at any time during the continuance of
any Payment Default with respect to the Securities, upon written request to a
Paying Agent, require such Paying Agent to pay all money held by it to the
Trustee and to account for any funds distributed. Upon doing so, the Paying
Agent (other than an obligor on the Securities) shall have no further liability
for the money so paid over to the Trustee. Anything in this Section 2.09 to the
contrary notwithstanding, any agreement of the Trustee or any Paying Agent to
hold sums in trust as provided in this Section 2.09 is subject to Sections 8.03
and 8.04.

Section 2.10. TRANSFER AND EXCHANGE.

Upon due presentation for registration of transfer of any Security of
any series at the office of any Registrar, TLGI shall execute and the Trustee
shall authenticate and deliver in the name of the transferee or transferees a
new Security or Securities of the same series, maturity date, interest date, if
any, and original issue date in authorized denominations for a like aggregate
principal amount.

All Securities presented for registration of transfer shall (if so
required by TLGI or the Trustee) be duly endorsed by, or be accompanied by a
written instrument or instruments of transfer in form satisfactory to TLGI and
the Trustee duly executed by, the Holder or his attorney duly authorized in
writing.

At the option of the Holder thereof, Securities of any series (other
than a Global Security, except as set forth below) may be exchanged for a
Security or Securities of such series having authorized

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denominations and an equal aggregate principal amount, upon surrender of such
Securities to be exchanged at the office of the Registrar.

TLGI may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer of Securities. No service charge shall be made for any such
transaction or for any exchange of Securities of any series for any such
transaction or for any exchange of Securities of any series as contemplated by
the immediately preceding paragraph.

TLGI shall not be required to exchange or register a transfer of (a)
any Securities of any series for a period of 15 days next preceding the first
mailing or publication of notice of redemption of Securities of such series to
be redeemed, (b) any Securities selected, called or being called for redemption,
in whole or in part, in the case of any Security to be redeemed in part, the
portion thereof not so to be redeemed or (c) any Security if the Holder thereof
has exercised his right, if any, to require TLGI to repurchase such Security in
whole or in part, except the portion of such Security not required to be
repurchased.

Notwithstanding any other provision of this Section 2.10, unless and
until it is exchanged in whole or in part for Securities in definitive
registered form, a Global Security representing all or a part of the Securities
of a series may not be transferred except as a whole by the Depositary for such
series to a nominee of such Depositary or by a nominee of such Depositary to
such Depositary or another nominee of such Depositary or by such Depositary or
any such nominee to a successor Depositary for such series or a nominee of such
successor Depositary.

If at any time the Depositary for any Securities of a series
represented by one or more Global Securities notifies TLGI that it is unwilling
or unable to continue as Depositary for such Securities or if at any time the
Depositary for such Securities shall no longer be eligible under Section 2.04,
TLGI shall appoint a successor Depositary with respect to such Securities. If a
successor Depositary for such Securities is not appointed by TLGI within 90 days
after TLGI receives such notice or becomes aware of such ineligibility, TLGI's
election pursuant to Section 2.01 that such Securities be represented by one or
more Global Securities shall no longer be effective and TLGI shall execute, and
the Trustee, upon receipt of an Issuer Order for the authentication and delivery
of definitive Securities of such series, will authenticate and deliver
Securities of such series in definitive registered form, in any authorized
denominations, in an aggregate principal amount equal to the principal amount of
the Global Security or Securities representing such Securities in exchange for
such Global Security or Securities.

TLGI may at any time and in its sole discretion determine that the
Securities of any series issued in the form of one or more Global Securities
shall no longer be represented by a Global Security or Securities. In such
event TLGI shall execute, and the Trustee, upon receipt of an Officer's
Certificate for the authentication and delivery of definitive Securities of such
series, shall authenticate and deliver, Securities of such series in definitive
registered form, in any authorized denominations, in an aggregate principal
amount equal to the principal amount of the Global Security or Securities
representing such Securities, in exchange for such Global Security or
Securities.

If specified by TLGI pursuant to Section 2.01 with respect to
Securities represented by a Global Security, the Depositary for such Global
Security may surrender such Global Security in exchange in whole or in part for
Securities of the same series in definitive registered form on such terms as are
acceptable to TLGI and such Depositary. Thereupon, TLGI shall execute, and the
Trustee shall authenticate and deliver, without service charge,

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(i) to the Person specified by such Depositary, a new Security
or Securities of the same series, of any authorized denominations as
requested by such Person, in an aggregate principal amount equal to
and in exchange for such Person's beneficial interest in the Global
Security; and

(ii) to such Depositary a new Global Security in a denomination
equal to the difference, if any, between the principal amount of the
surrendered Global Security and the aggregate principal amount of
Securities authenticated and delivered pursuant to clause (i) above.

Upon the exchange of a Global Security for Securities in definitive
registered form in authorized denominations, such Global Security shall be
cancelled by the Trustee or an agent of TLGI or the Trustee. Securities in
definitive registered form issued in exchange for a Global Security pursuant to
this Section 2.10 shall be registered in such names and in such authorized
denominations as the Depositary for such Global Security, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee or an agent of TLGI or the Trustee. The Trustee or such
agent shall deliver at its office such Securities to or as directed by the
Persons in whose names such Securities are so registered.

All Securities issued upon any transfer or exchange of Securities
shall be valid and legally binding obligations of TLGI, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange.

Section 2.11. MUTILATED, DEFACED, DESTROYED, LOST AND STOLEN
SECURITIES. In case any temporary or definitive Security shall become
mutilated, defaced or be destroyed, lost or stolen, TLGI in its discretion may
execute, and upon the written request of any officer of TLGI, the Trustee, in
the absence of notice to the Trustee that such Security has been acquired by a
bona fide purchaser, shall authenticate and deliver a new Security of the same
series, maturity date, interest rate, if any, and original issue date, bearing a
number or other distinguishing symbol not contemporaneously outstanding, in
exchange and substitution for the mutilated or defaced Security, or in lieu of
and in substitution for the Security so destroyed, lost or stolen. In every
case the applicant for a substitute Security shall furnish to TLGI and to the
Trustee and any agent of TLGI or the Trustee such security or indemnity as may
be required by the Trustee to indemnity and defend and to save each of the
Trustee and TLGI harmless and, in every case of destruction, loss or theft,
evidence to their satisfaction of the destruction, loss or theft of such
Security and of the ownership thereof and in the case of mutilation or
defacement, shall surrender the Security to the Trustee or such agent.

Upon the issuance of any substitute Security, TLGI may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee or its agent) connected therewith. In case any
Security which has matured or is about to mature or has been called for
redemption in full or is being surrendered for conversion in full shall become
mutilated or defaced or be destroyed, lost or stolen, TLGI may instead of
issuing a substitute Security, pay or authorize the payment of the same or the
conversion of such Security (without surrender thereof except in the case of a
mutilated or defaced Security), if the applicant for such payment or conversion
shall furnish to TLGI and to the Trustee and any agent of TLGI or the Trustee
such security or indemnity as any of them may require to hold each of them
harmless, and, in every case of destruction, loss or theft, the applicant shall
also furnish to TLGI and the Trustee and any agent of TLGI or the Trustee
evidence to the Trustee's satisfaction of the destruction, loss or theft of such
Security and of the ownership thereof.

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Every substitute Security of any series issued pursuant to the
provisions of this Section 2.11 by virtue of the fact that any such Security is
destroyed, lost or stolen shall constitute an additional contractual obligation
of TLGI, whether or not the destroyed, lost or stolen Security shall be at any
time enforceable by anyone and shall be entitled to all the benefits of (but
shall be subject to all the limitations of rights set forth in) this Indenture
equally and proportionately with any and all other Securities of such series
duly authenticated and delivered hereunder. All Securities shall be held and
owned upon the express condition that, to the extent permitted by law, the
foregoing provisions are exclusive with respect to the replacement, payment or
conversion of mutilated, defaced, destroyed, lost or stolen Securities and shall
preclude any and all other rights or remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the replacement
payment or conversion of negotiable instruments or other securities without
their surrender.

Section 2.12 CANCELLATION OF SECURITIES; DISPOSITION THEREOF. All
Securities surrendered for payment, purchase, redemption, registration of
transfer, exchange or conversion, or for credit against any payment in respect
of a sinking or analogous fund, if surrendered to TLGI or any agent of TLGI or
the Trustee or any agent of the Trustee, shall be delivered to the Trustee or
its agent for cancellation or, if surrendered to the Trustee, shall be cancelled
by it; and no Securities shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Indenture. The Trustee or its agent
shall dispose of cancelled Securities held by it, or hold such Securities in
accordance with its standard retention policy, and deliver a certificate of
disposition or retention to TLGI. If TLGI or its agent shall acquire any of the
Securities, such acquisition shall not operate as a redemption or satisfaction
of the indebtedness represented by such Securities unless and until the same are
delivered to the Trustee or its agent for cancellation.

Section 2.13. TEMPORARY SECURITIES. Pending the preparation of
definitive Securities for any series, TLGI may execute and the Trustee shall
authenticate and deliver temporary Securities for such series (printed,
lithographed, typewritten or otherwise reproduced, in each case in form
satisfactory to the Trustee). Temporary Securities of any series shall be
issuable in any authorized denomination, and substantially in the form of the
definitive Securities of such series but with such omissions, insertions and
variations as may be appropriate for temporary Securities, all as may be
determined by TLGI with the concurrence of the Trustee as evidenced by the
execution and authentication thereof. Temporary Securities may contain such
references to any provisions of this Indenture as may be appropriate. Every
Temporary Security shall be executed by TLGI and be authenticated by the Trustee
upon the same conditions and in substantially the same manner, and with like
effect, as the definitive Securities. Without reasonable delay TLGI shall
execute and shall furnish definitive Securities of such series and thereupon
temporary Securities of such series may be surrendered in exchange therefor
without charge at each office or agency to be maintained by TLGI for that
purpose pursuant to Section 4.02 and the Trustee shall authenticate and deliver
in exchange for such temporary Securities of such series an equal aggregate
principal amount of definitive Securities of the same series having authorized
denominations. Until so exchanged, the temporary Securities of any series shall
be entitled to the same benefits under this Indenture as definitive Securities
of such series, unless otherwise established pursuant to Section 2.01.

Section 2.14. DEFAULTED INTEREST. If TLGI defaults on a payment of
interest on the Securities of any series, it shall pay the defaulted interest,
plus (to the extent permitted by law) any interest payable on the defaulted
interest, in accordance with the terms hereof, to the persons who are Holders on
a subsequent special record date, which date shall be at least five Business
Days prior to the payment date. TLGI shall fix such special record date and
payment date in a manner satisfactory to the Trustee. At least 15 days before
such special record date, TLGI shall mail to each Holder a notice that states
the special

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record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.

Section 2.15. CUSIP NUMBER. TLGI in issuing the Securities of each
series may use a "CUSIP" number with respect to each such series (if then
generally in use), and if so, the Trustee may use the CUSIP numbers in notices
of redemption or exchange as a convenience to Holders; PROVIDED, HOWEVER, that
any such notice may state that no representation is made as to the correctness
or accuracy of the CUSIP number printed in the notice or on the Securities, and
that reliance may be placed only on the other identification numbers printed on
the Securities. TLGI will promptly notify the Trustee of any change in the
CUSIP number.

Section 2.16. DEPOSIT OF MONEYS. Whenever TLGI shall have one or
more Paying Agents, it will, on or before each due date of the principal of or
interest, if any, on any Securities, deposit with a Paying Agent a sum
sufficient to pay the principal or interest, if any, so becoming due, such sum
to be held in trust for the benefit of the Persons entitled to such principal or
interest, if any, and (unless such Paying Agent is the Trustee) TLGI will
promptly notify the Trustee of its action or failure so to act.

ARTICLE THREE

SECURITYHOLDERS LIST AND REPORTS BY TLGI AND THE TRUSTEE

Section 3.01 TLGI TO FURNISH TRUSTEE INFORMATION AS TO NAMES AND
ADDRESSES OF SECURITYHOLDERS. TLGI and any other obligor on the Securities
covenant and agree that they will furnish or cause to be furnished to the
Trustee a list in such form as the Trustee may reasonably require of the names
and addresses of the Holders of the Securities of each series as of a date not
more than 15 days prior to the time such information is furnished;

(a) semiannually and not more than 15 days after each March 1 and
September 1; and

(b) at such other times as the Trustee may request in writing, within
30 days after receipt by TLGI of any such request;

provided that if and so long as Trustee shall be the Registrar for such series,
such list shall not be required to be furnished.

Section 3.02 PRESERVATION AND DISCLOSURE OF SECURITYHOLDERS LISTS.

(a) The Trustee shall preserve, in current a form as is reasonably
practicable, all information as to the names and addresses of the Holders of
each series of Securities (i) contained in the most recent list furnished to it
as provided in Section 3.01, and (ii) received by it in its capacity of
Registrar or Paying Agent for such series, if so acting, and shall otherwise
comply with TIA Section 312(a). The Trustee may destroy any list furnished to
it as provided in Section 3.01 upon receipt of a new list so furnished.

(b) In case three or more Holders of Securities (hereinafter
referred to as "APPLICANTS") apply in writing to the Trustee and furnish to the
Trustee reasonable proof that each such applicant has owned a Security for a
period of at least six months preceding the date of such application, and such
application states that the applicants desire to communicate with other Holders
of Securities of a

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particular series (in which case the applicants must all hold Securities of such
series) or with Holders of all Securities with respect to their rights under
this Indenture or under such Securities, and such application is accompanied by
a copy of the form of proxy or other communication which such applicants propose
to transmit, then the Trustee shall, within five Business Days after the receipt
of such application, at its election, either

(i) afford to such applicants access to the information preserved at
the time by the Trustee in accordance with the provisions of subsection (a)
of this Section 3.02, or

(ii) inform such applicants as to the approximate number of Holders of
Securities of such series of all Securities, as the case may be, whose
names and addresses appear in the information preserved at the time by the
Trustee, in accordance with the provisions of subsection (a) of this
Section 3.02, and as to the approximate cost of mailing to such
Securityholders the form of proxy or other communication, if any, specified
in such application.

If the Trustee shall elect not to afford to such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Securityholder of such series or all Holders of Securities, as the
case may be, whose name and address appears in the information preserved at the
time by the Trustee in accordance with the provisions of subsection (a) of this
Section 3.02, a copy of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of mailing, unless within five days after
such tender, the Trustee shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the Trustee, such mailing would
be contrary to the best interests of the Holders of Securities of such series or
of all Securities, as the case may be, or would be in violation of applicable
law. Such written statement shall specify the basis of such opinion. If the
Commission, after opportunity for a hearing upon the objections specified in the
written statement so filed, shall enter an order refusing to sustain any of such
objections or, if, after entry of an order sustaining one or more of such
objection, the Commission shall find, after notice and opportunity for hearing,
that all the objections so sustained have been met, and shall enter an order to
declaring, the Trustee shall mail copies of such material to all such
Securityholders with reasonable promptness after the entry of such order and the
renewal of such tender; otherwise the Trustee shall be relieved of any
obligation or duty to such applicants respecting their application.

(c) Each and every Holder of Securities, by receiving and holding the
same, agrees with TLGI and the Trustee that neither TLGI nor the Trustee nor
any agent of TLGI or the Trustee shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
of Securities in accordance with the provisions of subsection (b) of this
Section 3.02, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under such subsection (b).

Section 3.03 REPORTS BY TLGI.:

(a) to file with the Trustee, within 15 days after TLGI is required
to file the same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules and regulations
prescribe) which TLGI may be required to file with the Commission pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if TLGI
is not required to file information, documents or reports pursuant to either of
such Sections, then to file with the Trustee and the Commission,

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in accordance with rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the Securities Exchange
Act of 1934 in respect of debt security listed and registered on a national
securities exchange as may be prescribed from time to time in such rules and
regulations;

(b) to file with the Trustee and the Commission, in accordance with
rules and regulations presented from time to time by the Commission, such
additional information, documents and reports with respect to compliance by TLGI
with the conditions and covenants provided for in this Indenture as may be
required from time to time by such rules and regulations;

(c) to transmit by mail to the Holders of Securities within 30 days
after the filing thereof with the Trustee, in the manner and to the extent
provided in Section 7.07, such summaries of any information, documents and
reports required to be filed by TLGI pursuant to subsections (a) and (b) of this
Section 3.03 as may be required to be transmitted to such Holders by rules and
regulations prescribed from time to time by the Commission; and

(d) furnish to the Trustee, not less than annually, a brief
certificate from the principal executive officer, principal financial officer or
principal accounting officer as to his knowledge of TLGI's compliance with all
conditions and covenants under this Indenture. For purposes of this subsection
(d), such compliance shall be determined without regard to any period of grace
or requirement of notice provided under this Indenture.

ARTICLE FOUR

COVENANTS

TLGI hereby covenants as follows, from and after the Closing Date and
continuing so long as any amount remains unpaid on any Securities:

Section 4.01. PAYMENT OF SECURITIES. TLGI covenants and agrees that
it will duly and punctually pay, or cause to be paid, the principal of and
interest on the Securities of each series on the dates and in the manner
provided in the Securities and this Indenture. An installment of principal or
interest shall be considered paid on the date due if the Trustee or Paying Agent
(other than TLGI, a Subsidiary of TLGI or any Affiliate thereof) holds on that
date money designated and set aside for and sufficient to pay the installment in
a timely manner and is not prohibited from paying such money to the Holders of
the Securities pursuant to the terms of this Indenture.

TLGI covenants and agrees that it will pay interest on overdue
principal at the rate and in the manner provided in the Securities; it shall pay
interest on overdue installments of interest at the same rate and in the same
manner, to the extent lawful.

Section 4.02. OFFICE FOR NOTICES AND PAYMENTS, ETC. So long as any
of the Securities are Outstanding, TLGI will maintain in each Place of Payment,
an office or agency where the Securities may be presented for payment ("PAYING
AGENT"), an office or agency where the Securities may be presented for
registration of transfer and for exchange ("REGISTRAR") and, if applicable, an
office or agency where the Securities may be presented for conversion
("CONVERSION AGENT") as in this Indenture provided, and an office or agency
where notices and demands to or upon TLGI in respect of the Securities or of
this Indenture may be served. In case TLGI shall at any time fail to maintain
any such office or agency, or

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shall fail to give notice to the Trustee of any change in the location thereof,
presentation may be made and notice and demand may be served in respect of the
Securities or of this Indenture at the Corporate Trust Office. TLGI hereby
initially designates the Corporate Trust Office for each such purpose and
appoints the Trustee as Registrar, Paying Agent, Conversion Agent and as the
agent upon whom notices and demands may be served with respect to the
Securities.

Section 4.03. CORPORATE EXISTENCE. Subject to, and except as
otherwise provided in, Article Five, TLGI shall do or cause to be done all
things necessary to and will cause each Restricted Subsidiary to, preserve and
keep in full force and effect the corporate or partnership existence and rights
(charter and statutory), licenses and/or franchises of TLGI and the Restricted
Subsidiaries (including, without limitation, LGII); PROVIDED, HOWEVER, that TLGI
and the Restricted Subsidiaries shall not be required to preserve any such
rights, licenses or franchises if the Board of Directors of TLGI shall
reasonably determine that (x) the preservation thereof is no longer desirable in
the conduct of the business of TLGI and its Subsidiaries taken as a whole and
(y) the loss thereof is not materially adverse to either TLGI and its
Subsidiaries taken as a whole or to the ability of TLGI to otherwise satisfy its
obligations hereunder.

Section 4.04. PAYMENT OF TAXES AND OTHER CLAIMS. TLGI will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon TLGI or any of its Restricted Subsidiaries (including, without
limitation, LGII) or upon the income, profits or property of TLGI or any of
its Restricted Subsidiaries, and (b) all lawful claims for labor, materials
and supplies which, if unpaid, might by law become a Lien upon the property
of TLGI or any Restricted Subsidiary of TLGI; PROVIDED, HOWEVER, that TLGI
shall not be required to pay or discharge or cause to be paid or discharged
any such tax, assessment, charge or claim the amount, applicability or
validity of which is being contested in good faith by appropriate proceedings
and for which adequate provision has been made or where the failure to effect
such payment or discharge is not adverse in any material respect to TLGI.

Section 4.05. MAINTENANCE OF PROPERTIES; INSURANCE; BOOKS AND
RECORDS; COMPLIANCE WITH LAW.

(a) TLGI shall, and shall cause each of its Restricted Subsidiaries
(including, without limitation, LGII) to, cause all properties and assets to be
maintained and kept in good condition, repair and working order (reasonable wear
and tear excepted) and supplied with all necessary equipment, and shall cause to
be made all necessary repairs, renewals, replacements, additions, betterments
and improvements thereto, as shall be reasonably necessary for the proper
conduct of its business; PROVIDED, HOWEVER, that nothing in this Section 4.05(a)
shall prevent TLGI or any of its Restricted Subsidiaries from discontinuing the
operation and maintenance of any of its properties or assets if such
discontinuance is, in the judgment of the Board of Directors of TLGI or such
Restricted Subsidiary, desirable in the conduct of its business and if such
discontinuance is not materially adverse to either TLGI and its Subsidiaries
taken as a whole or the ability of LGII or TLGI to otherwise satisfy its
obligations hereunder.

(b) TLGI shall, and shall cause each of its Restricted Subsidiaries
(including, without limitation, LGII) to, maintain with financially sound and
reputable insurers such insurance as may be required by law (other than with
respect to any environmental impairment liability insurance not commercially
available) and such other insurance to such extent and against such hazards and
liabilities, as is customarily maintained by companies similarly situated (which
may include self-insurance in the same form as is customarily maintained by
companies similarly situated).

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(c) TLGI shall, and shall cause each of its Restricted Subsidiaries
(including, without limitation, LGII) to, keep proper books of record and
account, in which full and correct entries shall be made of all business and
financial transactions of TLGI and each Restricted Subsidiary of TLGI and
reflect on its financial statements adequate accruals and appropriations to
reserves, all in accordance with GAAP consistently applied to TLGI and its
Subsidiaries taken as a whole.

(d) TLGI shall and shall cause each of its Restricted Subsidiaries
(including, without limitation, LGII) to comply with all statutes, laws,
ordinances, or government rules and regulations to which it is subject,
non-compliance with which would materially adversely affect the business,
earnings, properties, assets or condition (financial or otherwise) of TLGI and
its Subsidiaries taken as a whole.

Section 4.06. COMPLIANCE CERTIFICATE.

(a) TLGI will deliver to the Trustee within 60 days after the end of
each of TLGI's first three fiscal quarters and within 90 days after the end of
TLGI's fiscal year an Officers' Certificate stating whether or not the signers
know of any Default or Event of Default under this Indenture by TLGI or LGII or
an event which, with notice or lapse of time or both, would constitute a default
by TLGI or LGII under any Pari Passu Indebtedness that occurred during such
fiscal period. If they do know of such a Default, Event of Default or default,
the certificate shall describe any such Default, Event of Default or default and
its status. The first certificate to be delivered pursuant to this Section
4.06(a) shall be for the first fiscal quarter of TLGI beginning after the Issue
Date. TLGI shall also deliver a certificate to the Trustee at least annually
from its principal executive, financial or accounting officer as to his or her
knowledge of LGII's and TLGI's compliance with all conditions and covenants
under this Indenture and LGII's, such compliance to be determined without regard
to any period of grace or requirement of notice provided herein or therein.

(b) TLGI shall deliver to the Trustee within 90 days after the end
of each fiscal year a written statement by TLGI's independent chartered
accountants stating (A) that their audit examination has included a review of
the terms of this Indenture and the Securities as they relate to accounting
matters, and (B) whether, in connection with their audit examination, any
Default or Event of Default under this Indenture or an event which, with
notice or lapse of time or both, would constitute a default under any Pari
Passu Indebtedness has come to their attention and, if such a Default, Event
of Default or a default under any Pari Passu Indebtedness has come to their
attention, specifying the nature and period of existence thereof; PROVIDED,
HOWEVER, that, without any restriction as to the scope of the audit
examination, such independent certified public accountants shall not be
liable by reason of any failure to obtain knowledge of any such Default,
Event of Default or a default under any Pari Passu Indebtedness that would
not be disclosed in the course of an audit examination conducted in
accordance with GAAP.

(c) TLGI will deliver to the Trustee as soon as possible, and in any
event within 10 days after TLGI becomes aware or should reasonably have become
aware of the occurrence of any Default, Event of Default or an event which, with
notice or lapse of time or both, would constitute a default by TLGI, as the case
may be, under any Indebtedness, an Officers' Certificate specifying such
Default, Event of Default or default and what action TLGI is taking or proposes
to take with respect thereto.

Section 4.07. LIMITATION ON INDEBTEDNESS.

TLGI will not, and will not permit any of its Restricted
Subsidiaries (including, without limitation, LGII) to, directly or indirectly,
create, incur, issue, assume, guarantee or in any manner become directly or
indirectly liable, contingently or otherwise, for the payment of (collectively,
to "INCUR") any

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Indebtedness (including, without limitation, any Acquired Indebtedness) other
than Permitted Indebtedness. Notwithstanding the foregoing limitations, TLGI and
LGII (and any Wholly-Owned Subsidiary with respect to Seller Financing
Indebtedness) will be permitted to incur Indebtedness (including, without
limitation, Acquired Indebtedness) if at the time of such incurrence, and after
giving PRO FORMA effect thereto, the Consolidated Fixed Charge Coverage Ratio of
TLGI is at least equal to 2.25 : 1.

Section 4.08. LIMITATION ON RESTRICTED PAYMENTS.

TLGI will not, and will not permit any of its Restricted Subsidiaries
(including, without limitation, LGII) to, directly or indirectly:

(a) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of TLGI or any of its Restricted
Subsidiaries or any payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of TLGI or any of its Restricted
Subsidiaries (other than (x) dividends or distributions payable solely in
Capital Stock of TLGI (other than Redeemable Capital Stock) or in options,
warrants or other rights to purchase Capital Stock of TLGI (other than
Redeemable Capital Stock) and (y) dividends or other distributions to the extent
declared or paid to TLGI or any Wholly-Owned Subsidiary of TLGI),

(b) purchase, redeem, defease or otherwise acquire or retire for
value any Capital Stock of TLGI or any of its Restricted Subsidiaries (other
than any such Capital Stock of a Wholly-Owned Subsidiary of TLGI),

(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other Stated
Maturity, any Indebtedness that is subordinate or junior in right of payment to
the Securities or Pari Passu Indebtedness (other than any such subordinated or
Pari Passu Indebtedness owned by TLGI or a Wholly-Owned Subsidiary of TLGI), or

(d) make any Investment (other than any Permitted Investment) in any
person, (such payments or Investments described in the preceding clauses (a),
(b), (c) and (d) are collectively referred to as "RESTRICTED PAYMENTS"), unless,
at the time of and after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, shall be the Fair
Market Value on the date of such Restricted Payment of the asset(s) proposed to
be transferred by TLGI or such Restricted Subsidiary, as the case may be,
pursuant to such Restricted Payment), (A) no Default or Event of Default shall
have occurred and be continuing, (B) immediately prior to and after giving
effect to such Restricted Payment, TLGI would be able to incur $1.00 of
additional Indebtedness pursuant to Section 4.07 (assuming a market rate of
interest with respect to such additional Indebtedness) and (C) the aggregate
amount of all Restricted Payments declared or made from and after the
Measurement Date would not exceed the sum of (1) 50% of the aggregate
Consolidated Net Income of TLGI accrued on a cumulative basis during the period
beginning on the first day of the fiscal quarter of TLGI during which the
Measurement Date occurs and ending on the last day of the fiscal quarter of TLGI
immediately preceding the date of such proposed Restricted Payment, which period
shall be treated as a single accounting period (or, if such aggregate cumulative
Consolidated Net Income of TLGI for such period shall be a deficit, minus 100%
of such deficit) PLUS (2) the aggregate net cash proceeds received by TLGI or
LGII (without duplication) either (x) as capital contributions to TLGI or LGII
(without duplication) after the Measurement Date from any person (other than
TLGI, LGII or a Restricted Subsidiary of TLGI or LGII, as the case may be) or
(y) from the issuance or sale of Capital Stock (excluding Redeemable Capital
Stock, but including Capital Stock issued upon the conversion of convertible
Indebtedness or from the exercise of

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options, warrants or rights to purchase Capital Stock (other than Redeemable
Capital Stock)) of TLGI or LGII (without duplication) to any person (other than
to TLGI, LGII or a Restricted Subsidiary of TLGI or LGII, as the case may be)
after the Measurement Date PLUS (3) in the case of the disposition or repayment
of any Investment constituting a Restricted Payment made after the Measurement
Date (excluding any Investment described in clause (v) of the following
paragraph), an amount equal to the lesser of the return of capital with respect
to such Investment and the cost of such Investment less, in either case, the
cost of the disposition of such Investment PLUS (4) the sum of $15,000,000. For
purposes of the preceding clause (C)(2), the value of the aggregate net proceeds
received by TLGI or LGII (without duplication) upon the issuance of Capital
Stock upon the conversion of convertible Indebtedness or upon the exercise of
options, warrants or rights will be the net cash proceeds received upon the
issuance of such Indebtedness, options, warrants or rights plus the incremental
cash amount received by TLGI or LGII (without duplication) upon the conversion
or exercise thereof.

None of the foregoing provisions will prohibit (i) the payment of any
dividend within 60 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph; (ii) so
long as no Default or Event of Default shall have occurred and be continuing,
the redemption, repurchase or other acquisition or retirement of any shares of
any class of Capital Stock of TLGI or any Restricted Subsidiary of TLGI in
exchange for, or out of the net cash proceeds of, a substantially concurrent (x)
capital contribution to TLGI or LGII from any person (other than a Related
Obligor) or (y) issue and sale of other shares of Capital Stock (other than
Redeemable Capital Stock) of TLGI or LGII to any person (other than to a Related
Obligor); (iii) so long as no Default or Event of Default shall have occurred
and be continuing, any redemption, repurchase or other acquisition or retirement
of Indebtedness that is subordinate or junior in right of payment to the
Securities by exchange for, or out of the net cash proceeds of, a substantially
concurrent (x) capital contribution to TLGI or LGII from any person (other than
a Related Obligor) or (y) issue and sale of (1) Capital Stock (other than
Redeemable Capital Stock) of TLGI or LGII to any person (other than a Related
Obligor); PROVIDED, HOWEVER, that the amount of any such net proceeds that are
utilized for any such redemption, repurchase or other acquisition or retirement
shall be excluded from clause (C)(2) of the preceding paragraph; or (2)
Indebtedness of TLGI or LGII issued to any person (other than a Related
Obligor), so long as such Indebtedness is Pari Passu Indebtedness or
Indebtedness that is subordinate or junior in right of payment to the Securities
in the same manner and at least to the same extent as the Indebtedness so
purchased, exchanged, redeemed, acquired or retired; (iv) so long as no Default
or Event of Default shall have occurred and be continuing, any redemption,
repurchase or other acquisition or retirement of Pari Passu Indebtedness by
exchange for, or out of the net cash proceeds of, a substantially concurrent
(x) capital contribution to TLGI or LGII from any person (other than a Related
Obligor) or (y) issue and sale of (1) Capital Stock (other than Redeemable
Capital Stock) of TLGI or LGII to any person (other than a Related Obligor);
PROVIDED, HOWEVER, that the amount of any such net proceeds that are utilized
for any such redemption, repurchase or other acquisition or retirement shall be
excluded from clause (C)(2) of the preceding paragraph; or (2) Indebtedness of
TLGI or LGII issued to any person (other than a Related Obligor), so long as
such Indebtedness is Pari Passu Indebtedness or Indebtedness that is subordinate
or junior in right of payment to the Securities in the same manner and at least
to the same extent as the Indebtedness so purchased, exchanged, redeemed,
acquired or retired; (v) Investments constituting Restricted Payments made as a
result of the receipt of consideration that consists of cash or Cash Equivalents
from any Asset Sale made pursuant to and in compliance with Section 4.12;
(vi) so long as no Default or Event of Default has occurred and is continuing,
repurchases by TLGI of common stock of TLGI from employees of TLGI or their
authorized representatives upon the death, disability or termination of
employment of such employees, in an aggregate amount not exceeding $10,000,000
in any calendar year; (vii) Investments constituting Restricted Payments that
are permitted by subparagraphs (iv) and (v) of the proviso to Section 4.13; and
(viii) the declaration or the payment of dividends on, or the scheduled

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purchase or redemption of, the Preferred Securities of a Special Finance
Subsidiary or the Series C Preferred Shares, of TLGI. In computing the amount of
Restricted Payments previously made for purposes of clause (C) of the preceding
paragraph, Restricted Payments made under the preceding clauses (v), (vi) and
(vii) shall be included and those under clauses (i), (ii), (iii), (iv) and
(viii) shall not be so included. For purposes of this Section 4.08 only, the
term "RELATED OBLIGOR" shall mean TLGI or a Restricted Subsidiary of TLGI.

Section 4.09. LIMITATION ON ISSUANCES AND SALE OF PREFERRED STOCK BY
RESTRICTED SUBSIDIARIES.

TLGI (a) will not permit any of its Restricted Subsidiaries
(including, without limitation, LGII) to issue any Preferred Stock (other than
(i) Preferred Stock issued to TLGI or a Wholly-Owned Subsidiary of TLGI and (ii)
Preferred Securities of a Special Finance Subsidiary); and (b) will not permit
any person to own any Preferred Stock of any Restricted Subsidiary of TLGI
(other than (i) Preferred Stock owned by TLGI or a Wholly-Owned Subsidiary of
TLGI and (ii) Preferred Securities of a Special Finance Subsidiary); PROVIDED,
HOWEVER, that this covenant shall not prohibit the issuance and sale of (x) all,
but not less than all, of the issued and outstanding Capital Stock of any
Restricted Subsidiary of TLGI owned by TLGI or any of its Restricted
Subsidiaries in compliance with the other provisions of this Indenture or
(y) directors' qualifying shares or investments by foreign nationals mandated by
applicable law.

Section 4.10. LIMITATION ON LIENS.

TLGI will not, and will not permit any of its Restricted Subsidiaries
(including, without limitation, LGII) to, create, incur, assume or suffer to
exist any Liens of any kind against or upon any of its property or assets, or
any proceeds therefrom where the aggregate amount of Indebtedness secured by any
such Liens, together with the aggregate amount of property subject to any
Sale-Leaseback Transactions of TLGI and its Restricted Subsidiaries (other than
Permitted Sale-Leaseback Transactions), exceeds 10% of TLGI's Consolidated Net
Worth, unless (x) in the case of Liens securing Indebtedness that is subordinate
or junior in right of payment to the Securities, the Securities are secured by a
Lien on such property, assets or proceeds that is senior in priority to such
Liens and (y) in all other cases, the Securities are equally and ratably secured
except for (a) Liens existing as at the Measurement Date; (b) Liens securing the
Securities; (c) Liens in favor of TLGI, LGII or any Wholly-Owned Subsidiary;
(d) Liens securing Indebtedness which is incurred to refinance Indebtedness
which has been secured by a Lien permitted under the provisions of this
Indenture and which has been incurred in accordance with the provisions of the
Indenture; PROVIDED, HOWEVER, that such Liens do not extend to or cover any
property or assets of TLGI or any of its Restricted Subsidiaries not securing
the Indebtedness so refinanced; and (e) Permitted Liens.

Section 4.11. CHANGE OF CONTROL.

Upon the occurrence of a Change of Control, TLGI will be obligated to
make an offer to purchase (a "CHANGE OF CONTROL OFFER"), and shall purchase, on
a Business Day (the "CHANGE OF CONTROL PURCHASE DATE") not more than 60 nor less
than 30 days following the occurrence of the Change of Control, all of the then
outstanding Securities of each series properly tendered and not withdrawn at a
purchase price (the "CHANGE OF CONTROL PURCHASE PRICE") equal to 101% of the
principal amount thereof (or, in the case of an Original Issue Discount
Security, the principal thereof (including any amount in respect of original
issue discount) plus accrued and unpaid interest, if any, to the Change of
Control Purchase Date. The Change of Control Offer is required to remain open
for at least 20 Business Days and until the close of business on the Change of
Control Purchase Date.

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Notice of a Change of Control Offer shall be mailed by TLGI not later
than the 30th day after the date of occurrence of the Change of Control to the
Holders of Securities at their last registered addresses with a copy to the
Trustee and the Paying Agent. The Change of Control Offer shall remain open
from the time of mailing for at least 20 Business Days and until 5:00 p.m., New
York City time, on the Change of Control Purchase Date. The notice, which shall
govern the terms of the Change of Control Offer, shall include such disclosures
as are required by law and shall state:

(a) that the Change of Control Offer is being made pursuant to this
Section 4.11 and that all Securities validly tendered into the Change of Control
Offer and not withdrawn will be accepted for payment;

(b) the purchase price (including the amount of accrued interest, if
any) for each Security, the Change of Control Purchase Date and the date on
which the Change of Control Offer expires;

(d) that, unless TLGI shall default in the payment of the purchase
price, any Security accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Purchase Date;

(e) that Holders electing to have Securities purchased pursuant to a
Change of Control Offer will be required to surrender their Securities to the
Paying Agent at the address specified in the notice prior to 5:00 p.m., New York
City time, on the Change of Control Purchase Date and must complete any form of
letter of transmittal proposed by TLGI and reasonably acceptable to the Trustee
and the Paying Agent;

(f) that Holders of Securities will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York City
time, on the Change of Control Purchase Date, a tested telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Securities the Holder delivered for purchase, the Security certificate
number (if any) and a statement that such Holder is withdrawing its election to
have such Securities purchased;

(g) that Holders whose Securities are purchased only in part will be
issued Securities equal in principal amount to the unpurchased portion of the
Securities surrendered;

(h) the instructions that Holders must follow in order to tender
their Securities; and

(i) information concerning the business of TLGI, the most recent
annual and quarterly reports of TLGI filed with the Commission pursuant to the
Exchange Act (or, if TLGI is not then permitted to file any such reports with
the Commission, the comparable reports prepared pursuant to Section 4.17), a
description of material developments in the business of TLGI, information with
respect to PRO FORMA historical financial information after giving effect to
such Change of Control and such other information concerning the circumstances
and relevant facts regarding such Change of Control Offer as would be material
to a Holder of Securities in connection with the decision of such Holder as to
whether or not it should tender Securities pursuant to the Change of Control
Offer.

On the Change of Control Purchase Date, TLGI shall (i) accept for
payment Securities or portions thereof validly tendered pursuant to the Change
of Control Offer, (ii) deposit with the Paying Agent money, in immediately
available funds, sufficient to pay the purchase price of all Securities or

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portions thereof so tendered and accepted and (iii) deliver to the Trustee the
Securities so accepted together with an Officers' Certificate setting forth the
Securities or portions thereof tendered to and accepted for payment by TLGI.
The Paying Agent shall promptly mail or deliver to the Holders of Securities so
accepted payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new Security equal
in principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by TLGI to the
Holder thereof. TLGI will publicly announce the results of the Change of
Control Offer not later than the first Business Day following the Change of
Control Purchase Date.

TLGI shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in a
manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by TLGI and purchases all
Securities validly tendered and not withdrawn under such Change of Control
Offer.

TLGI will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act, and any other securities laws or regulations
in connection with the repurchase of Securities pursuant to a Change of Control
Offer.

Section 4.12. DISPOSITION OF PROCEEDS OF ASSET SALES.

(a) TLGI will not, and will not permit any of its Restricted
Subsidiaries (including, without limitation, LGII) or First Capital Life
Insurance Company of Louisiana, National Capital Life Insurance Company,
Security Industrial Insurance Company, Security Industrial Fire Insurance
Company or any successors to such Subsidiaries to, make any Asset Sale unless
(a) TLGI or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the shares or assets sold or otherwise disposed of and (b) at least 75%
of such consideration consists of cash or Cash Equivalents. To the extent the
Net Cash Proceeds of any Asset Sale are not required to be applied to repay, and
permanently reduce the commitments under, the Credit Agreements (as required by
the terms thereof) or any other Pari Passu Indebtedness, or are not so applied,
TLGI or such Restricted Subsidiary, as the case may be, may, within 180 days of
such Asset Sale, apply such Net Cash Proceeds to an investment in properties and
assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of TLGI
and its Restricted Subsidiaries existing on the Issue Date or in businesses
reasonably related thereto ("REPLACEMENT ASSETS"). Any Net Cash Proceeds from
any Asset Sale that are neither used to repay, and permanently reduce the
commitments under, the Credit Agreements nor invested in Replacement Assets
within the 180-day period described above constitute "EXCESS PROCEEDS" subject
to disposition as provided below.

(b) When the aggregate amount of Excess Proceeds equals or exceeds
$10,000,000, after satisfying any similar purchase obligations of TLGI or LGII
under Senior Debt instruments outstanding as of the Issue Date, TLGI shall make
an offer to purchase (an "ASSET SALE OFFER"), from all holders of each series of
the Securities, not more than 40 Business Days thereafter, an aggregate
principal amount of Securities equal to such Excess Proceeds, at a price in
cash equal to 100% of the outstanding principal amount thereof (or, in the case
of an Original Issue Discount Security, the principal thereof (including any
amount in respect of original issue discount) plus accrued and unpaid interest,
if any, to the purchase date (the "ASSET SALE OFFER PRICE).

(c) Notice of an Asset Sale Offer shall be mailed by TLGI to all
Holders of Securities not less than 20 Business Days nor more than 40 Business
Days before the Asset Sale Purchase Date at

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their last registered address with a copy to the Trustee and the Paying Agent.
The Asset Sale Offer shall remain open from the time of mailing for at least 20
Business Days and until at least 5:00 p.m., New York City time, on the Asset
Sale Purchase Date. The notice, which shall govern the terms of the Asset Sale
Offer, shall include such disclosures as are required by law and shall state:

(1) that the Asset Sale Offer is being made pursuant to this
Section 4.12;

(2) the Asset Sale Offer Price (including the amount of accrued
interest, if any) for each Security, the Asset Sale Purchase Date and the date
on which the Asset Sale Offer expires;

(3) that any Security not tendered or accepted for payment will
continue to accrue interest in accordance with the terms thereof;

(4) that, unless LGII shall default in the payment of the Asset Sale
Offer Price, any Security accepted for payment pursuant to the Asset Sale Offer
shall cease to accrue interest after the Asset Sale Purchase Date;

(5) that Holders electing to have Securities purchased pursuant to an
Asset Sale Offer will be required to surrender their Securities to the Paying
Agent at the address specified in the notice prior to 5:00 p.m., New York City
time, on the Asset Sale Purchase Date and must complete any form of letter of
transmittal proposed by LGII and reasonably acceptable to the Trustee and the
Paying Agent;

(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than 5:00 p.m., New York City time, on the
Asset Sale Purchase Date, a tested telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Securities the
Holder delivered for purchase, the Security certificate number (if any) and a
statement that such Holder is withdrawing its election to have such Securities
purchased;

(7) that if Securities in a principal amount in excess of the
Holder's PRO RATA share of the amount of Excess Proceeds are tendered pursuant
to the Asset Sale Offer, LGII shall purchase Securities on a PRO RATA basis
among the Securities tendered (with such adjustments as may be deemed
appropriate by LGII so that only Securities in denominations of $1,000 or
integral multiples of $1,000 shall be acquired);

(8) that Holders whose Securities are purchased only in part will be
issued new Securities equal in principal amount to the unpurchased portion of
the Securities surrendered;

(9) the instructions that Holders must follow in order to tender
their Securities; and

(10) information concerning the business of TLGI, the most recent
annual and quarterly reports of TLGI filed with the Commission pursuant to the
Exchange Act (or, if TLGI is not permitted to file any such reports with the
Commission, the comparable reports prepared pursuant to Section 4.17), a
description of material developments in the business of LGII and TLGI,
information with respect to PRO FORMA historical financial information after
giving effect to such Asset Sale and Asset Sale Offer and such other information
concerning the circumstances and relevant facts regarding such Asset Sale Offer
as would be material to a Holder of Securities in connection with the decision
of such Holder as to whether or not it should tender Securities pursuant to the
Asset Sale Offer.

(11) On the Asset Sale Purchase Date, TLGI shall (i) accept for
payment, on a PRO RATA basis, Securities or portions thereof tendered pursuant
to the Asset Sale Offer, (ii) deposit with the

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Paying Agent money, in immediately available funds, in an amount sufficient to
pay the Asset Sale Offer Price of all Securities or portions thereof so tendered
and accepted and (iii) deliver to the Trustee the Securities so accepted
together with an Officers' Certificate setting forth the Securities or portions
thereof tendered to and accepted for payment by TLGI. The Paying Agent shall
promptly mail or deliver to Holders of Securities so accepted payment in an
amount equal to the Asset Sale Offer Price, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by TLGI to the
Holder thereof. TLGI will publicly announce the results of the Asset Sale Offer
not later than the first Business Day following the Asset Sale Purchase Date.
To the extent that the aggregate principal amount of Securities tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, TLGI or LGII,
as the case may be, may use such deficiency for general corporate purposes. Upon
completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset to zero. For purposes of this Section 4.12, the Trustee shall act as
Paying Agent.

(12) TLGI will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Securities pursuant to the
Asset Sale Offer.

Section 4.13. LIMITATION ON TRANSACTIONS WITH INTERESTED PERSONS.

TLGI will not, and will not permit any of its Restricted
Subsidiaries (including, without limitation, LGII) to, directly or
indirectly, enter into or suffer to exist any transaction or series of
related transactions (including, without limitation, the sale, transfer,
disposition, purchase, exchange or lease of assets, property or services)
with, or for the benefit of, any Affiliate of TLGI or any beneficial owner
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is exercisable
immediately, after the passage of time or upon the happening of an event) of
5% or more of the Common Shares at any time outstanding ("INTERESTED
PERSONS"), unless (a) such transaction or series of related transactions are
on terms that are no less favorable to TLGI or such Restricted Subsidiary, as
the case may be, than those which could have been obtained in a comparable
transaction at such time from persons who are not Affiliates of TLGI or
Interested Persons, (b) with respect to a transaction or series of
transactions involving aggregate payments or value equal to or greater than
$10,000,000, TLGI has obtained a written opinion from an Independent
Financial Advisor stating that the terms of such transaction or series of
transactions are fair to TLGI or its Restricted Subsidiary, as the case may
be, from a financial point of view and (c) with respect to a transaction or
series of transactions involving aggregate payments or value equal to or
greater than $2,500,000, TLGI shall have delivered an Officer's Certificate
to the Trustee certifying that such transaction or series of transactions
comply with the preceding clause (a) and, if applicable, certifying that the
opinion referred to in the preceding clause (b) has been delivered and that
such transaction or series of transactions has been approved by a majority of
the Board of Directors of TLGI (including a majority of the disinterested
directors); PROVIDED, HOWEVER, that this covenant will not restrict TLGI from
(i) paying dividends in respect of its Capital Stock permitted under Section
4.08, (ii) paying reasonable and customary fees to directors of TLGI or any
Restricted Subsidiary who are not employees of TLGI or any Restricted
Subsidiary, (iii) entering into transactions with its Wholly-Owned
Subsidiaries or permitting its Wholly-Owned Subsidiaries from entering into
transactions with other Wholly-Owned Subsidiaries of TLGI, (iv) making loans
or advances to senior officers and directors of TLGI or any Restricted
Subsidiary not in excess of $6,000,000 in the aggregate at any one time
outstanding, (v) guaranteeing loans made to officers and other employees of
TLGI or any Restricted Subsidiaries in connection with TLGI's 1994 Management
Equity Investment Plan not in excess of $6,000,000 in the aggregate at any
tone time outstanding, (vi) making loans or advances to officers,

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employees or consultants of TLGI and its Restricted Subsidiaries for travel and
moving expenses in the ordinary course of business for bona fide business
purposes of TLGI and its Restricted Subsidiaries, (vii) making other loans or
advances to officers, employees or consultants of TLGI and its Restricted
Subsidiaries in the ordinary course of business for bona fide business purposes
of TLGI and its Restricted Subsidiaries not in excess of $10,000,000 in the
aggregate at any one time outstanding, (viii) making payments to officers or
employees of TLGI or its Restricted Subsidiaries pursuant to obligations
undertaken, at a time when such persons were not officers or employees of TLGI
or its Restricted Subsidiaries, in connection with arms' length Asset
Acquisitions or (ix) declaring or paying dividends on, or purchasing or
redeeming, the Preferred Securities of a Special Finance Subsidiary.

Section 4.14. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.

TLGI will not, and will not permit any of its Restricted Subsidiaries
(including, without limitation, LGII) to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary of TLGI to (a) pay
dividends, in cash or otherwise, or make any other distributions on or in
respect of its Capital Stock or any other interest or participation in, or
measured by, its profits, (b) pay any Indebtedness owed to TLGI or any other
Restricted Subsidiary of TLGI, (c) make loans or advances to, or any Investment
in, TLGI or any other Restricted Subsidiary of TLGI, (d) transfer any of its
properties or assets to TLGI or any other Restricted Subsidiary of TLGI or (e)
guarantee any Indebtedness of TLGI or any other Restricted Subsidiary of TLGI,
except for such encumbrances or restrictions existing under or by reason of (i)
applicable law, (ii) customary non-assignment provisions of any contract or any
lease governing a leasehold interest of TLGI or any Restricted Subsidiary of
TLGI, (iii) customary restrictions on transfers of property subject to a Lien
permitted under the provisions of this Indenture which could not materially
adversely affect TLGI's ability to satisfy its obligations under the provisions
of this Indenture and the Securities, (iv) any agreement or other instrument of
a person acquired by TLGI or any Restricted Subsidiary of TLGI (or a Restricted
Subsidiary of such person) in existence at the time of such acquisition (but
not created in contemplation thereof), which encumbrance or restriction is not
applicable to any person, or the properties or assets of any person, other than
the person, or the properties or assets of the person, so acquired, (v)
provisions contained in any agreement or instrument relating to Indebtedness
which prohibit the transfer of all or substantially all of the assets of the
obligor thereunder unless the transferee shall assume the obligations of the
obligor under such agreement or instrument and (vi) encumbrances and
restrictions under Indebtedness in effect on the Issue Date (including under the
Securities) and encumbrances and restrictions in permitted refinancings or
replacements thereof which are no less favorable to the holders of the
Securities than those contained in the Indebtedness so refinanced or replaced.

Section 4.15. LIMITATIONS ON SALE-LEASEBACK TRANSACTIONS.

TLGI will not, and will not permit any of its Restricted Subsidiaries
(including, without limitation, LGII) to, enter into any Sale-Leaseback
Transaction with respect to any property of TLGI or any of its Restricted
Subsidiaries where the aggregate amount of property subject to such
Sale-Leaseback Transactions, together with the aggregate amount of Liens
securing Indebtedness of TLGI and its Restricted Subsidiaries (other than
Permitted Liens), exceeds 10% of TLGI's Consolidated Net Worth. Notwithstanding
the foregoing, TLGI and its Restricted Subsidiaries may enter into
Sale-Leaseback Transactions ("PERMITTED SALE-LEASEBACK TRANSACTIONS") with
respect to property acquired or constructed after the Issue Date; PROVIDED that
(a) the Attributable Value of such Sale-Leaseback Transaction shall be deemed to
be Indebtedness of TLGI or such Restricted Subsidiary, as the case may be, and
(b) after giving PRO FORMA effect to any such Sale-Leaseback Transaction and the
foregoing clause (a), TLGI would be able

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to incur $1.00 of additional Indebtedness pursuant to 4.07 (assuming a market
rate of interest with respect to such additional Indebtedness).

Section 4.16. LIMITATION ON APPLICABILITY OF CERTAIN COVENANTS.

During any period of time that (i) the ratings assigned to the
Securities by each of S&P and Moody's (collectively, the "RATING AGENCIES") are
no less than BBB-and Baa3, respectively (the "INVESTMENT GRADE RATINGS"), and
(ii) no Default or Event of Default has occurred and is continuing, TLGI and its
Restricted Subsidiaries (including, without limitation, LGII) will not be
subject to the covenants contained in Sections 4.07, 4.08, 4.09, 4.12, 4.13 and
4.14 (collectively, the "SUSPENDED COVENANTS"). If one or both Rating Agencies
withdraws its rating or downgrades its Investment Grade Rating, then thereafter
TLGI and its Restricted Subsidiaries will be subject, on a prospective basis, to
the Suspended Covenants (until the Rating Agencies have again assigned
Investment Grade Ratings to the Securities) and compliance with the Suspended
Covenants with respect to Restricted Payments made after the time of such
withdrawal or downgrade will be calculated in accordance with the covenant
contained in Section 4.07 as if such covenant had been in effect at all times
after the Measurement Date.

Section 4.17 COMMISSION REPORTS.

TLGI shall file with the Commission, or if not permitted or required
to so file will deliver to the Trustee, the annual reports, quarterly reports
and the information, documents and other reports required to be filed with the
Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or not
TLGI has a class of securities registered under the Exchange Act. In accordance
with the provisions of TIA Section 314(a), TLGI shall file with the Trustee and
provide to each Holder, within 15 days after it files them with the Commission
(or if such filing is not permitted under the Exchange Act, 15 days after TLGI
would have been required to make such filing), copies of such reports. TLGI
also shall comply with the other provisions of TIA Section 314(a). In addition,
TLGI shall cause its annual reports to stockholders and any quarterly or other
financial reports furnished by it to stockholders generally to be filed with the
Trustee and mailed no later than the date such materials are mailed or made
available to TLGI's stockholders, to the Holders at their addresses as set forth
in the register of securities maintained by the Registrar.

Section 4.18. RULE 144A INFORMATION REQUIREMENT.

If at any time TLGI is no longer subject to the reporting requirements
of the Exchange Act, it will furnish to the Holders or beneficial holders of the
Securities and prospective purchasers of the Securities designated by the
holders of the Securities, upon their request, any information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.

Section 4.19. WAIVER OF STAY, EXTENSION OR USURY LAWS.

TLGI covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury
law or other law which would prohibit or forgive TLGI from paying all or any
portion of the principal of, premium, if any, or interest on the Securities
as contemplated herein, wherever enacted, now or at any time hereafter in
force, or which may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) TLGI hereby
expressly waives all benefit or advantage of any such law, and covenants that
it will not hinder, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit the execution of every such power
as though no such law had been enacted.

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ARTICLE FIVE

SUCCESSOR CORPORATION

Section 5.01. WHEN TLGI OR LGII MAY MERGE, ETC.

(a) TLGI will not, and will not permit LGII to, in any transaction or
series of transactions, merge or consolidate with or into, or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to, any person or persons, and TLGI will
not permit any of its Restricted Subsidiaries (including, without limitation,
LGII) to enter into any such transaction or series of transactions if such
transaction or series of transactions, in the aggregate, would result in a sale,
assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of TLGI or LGII or TLGI and its
Restricted Subsidiaries, taken as a whole, or LGII and its Restricted
Subsidiaries, taken as a whole, to any other person or persons, unless at the
time of and after giving effect thereto (a) either (i) if the transaction or
series of transactions is a merger or consolidation, TLGI or LGII or the
Restricted Subsidiary, as the case may be, shall be the surviving person of such
merger or consolidation, or (ii) the person formed by such consolidation or into
which TLGI or such Restricted Subsidiary, as the case may be, is merged or to
which the properties and assets of TLGI, LGII or such Restricted Subsidiary, as
the case may be, are transferred (any such surviving person or transferee person
being the "SURVIVING ENTITY") shall be a corporation organized and existing
under the laws of the United States of America, any state thereof, the District
of Columbia, Canada or any province thereof and shall expressly assume by a
supplemental indenture executed and delivered to the Trustee, in form reasonably
satisfactory to the Trustee, the due and punctual payment of the principal of,
premium, if any, and interest on all the Securities and the performance and
observance of every covenant and obligation of this Indenture and the Securities
on the part of TLGI to be performed or observed and, in each case, this
Indenture shall remain in full force and effect; (b) immediately before and
immediately after giving effect to such transaction or series of transactions on
a PRO FORMA basis (including, without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such transaction
or series of transactions), no Default or Event of Default shall have occurred
and be continuing and TLGI, LGII or the Surviving Entity, as the case may be,
after giving effect to such transaction or series of transactions on a PRO FORMA
basis (including, without limitation, any Indebtedness incurred or anticipated
to be incurred in connection with or in respect of such transaction or series of
transactions), could incur $1.00 of additional Indebtedness pursuant to Section
4.07 (assuming a market rate of interest with respect to such additional
Indebtedness); (c) immediately after giving effect to such transaction or series
of transactions on a PRO FORMA basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), the Consolidated Net
Worth of TLGI, LGII or the Surviving Entity, as the case may be, is at least
equal to the Consolidated Net Worth of TLGI or LGII, as the case may be,
immediately before such transaction or series of transactions; and (d) TLGI or
the Surviving Entity, as the case may be, shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each in form and substance
reasonably satisfactory to the Trustee, each stating that such consolidation,
merger, sale, assignment, conveyance, transfer, lease or other disposition and,
if a supplemental indenture is required in connection with such transaction or
series of transactions, such supplemental indenture, complies with this
Indenture and that all conditions precedent herein provided for relating to such
transaction or series of transactions have been complied with; PROVIDED,
HOWEVER, that solely for purposes of computing amounts described in subclause
(C) of Section 4.08, any such successor person shall only be deemed to have
succeeded to and be substituted for TLGI or LGII, as the case may be, with
respect to periods subsequent to the effective time of such merger,
consolidation or transfer of assets.

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Section 5.02. SUCCESSOR SUBSTITUTED.

Upon any consolidation or merger, or any sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of TLGI or LGII in accordance with Section 5.01 hereof,
the successor person or persons formed by such consolidation or into which
TLGI is merged or the successor person to which such sale, assignment,
conveyance, transfer, lease or other disposition is made, shall succeed to,
and be substituted for, and may exercise every right and power of, TLGI under
this Indenture and the Securities with the same effect as if such successor
had been named as TLGI herein; PROVIDED, HOWEVER, that solely for purposes of
computing amounts described in subclause (C) of Section 4.08, any such
successor person shall only be deemed to have succeeded to and be substituted
for TLGI with respect to periods subsequent to the effective time of such
merger, consolidation or transfer of assets.

ARTICLE SIX

REMEDIES

Section 6.01. EVENTS OF DEFAULT. "EVENT OF DEFAULT", wherever used
herein with respect to Securities of any series, means any one or more of the
following events (whatever the reason for such Event of Default), unless it is
earlier inapplicable to a particular series or is specifically deleted or
modified in or pursuant to the Board Resolutions or supplemental indenture
establishing such series of Securities or in the form of Security for such
series:

(a) default in the payment of the principal of or premium, if any, on
the Securities of such series as and when the same shall become due and payable
(upon maturity, acceleration, optional redemption, required purchase, scheduled
principal payment, by declaration or otherwise); or

(b) default in the payment of any installment of interest upon any of
the Securities of such series, as and when the same shall become due and
payable, and continuance of such default for a period of 30 days; or

(c) failure on the part of TLGI duly to observe or perform any other
term, covenant or agreement contained in the Securities of such series or
pursuant to the provisions of this Indenture (other than Defaults specified in
clause (a) or (b) above) and such Default continues for a period of 60 days
after the date on which written notice of such Default requiring TLGI to remedy
the same shall have been given (i) to TLGI by the Trustee by registered mail, or
(ii) to TLGI and the Trustee by Holders of at least 25% in aggregate principal
amount of the Securities of such series then Outstanding; or

(d) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
TLGI or any Restricted Subsidiary of TLGI (including, without limitation,
LGII) then has outstanding Indebtedness in excess of $20,000,000 (including
Securities of another series), individually or in the aggregate, and either
(i) such Indebtedness is already due and payable in full or (ii) such default
or defaults have resulted in the acceleration of the maturity of such
Indebtedness; or

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(including, without limitation, LGII) or any of their respective properties and
shall not be discharged or bonded against or stayed and there shall have been a
period of 60 days after the date on which any period for appeal has expired and
during which a stay of enforcement of such judgment, order or decree, shall not
be in effect; or

(f) either (i) the collateral agent under the Collateral Agreement or
(ii) any holder of at least $20,000,000 in aggregate principal amount of
Indebtedness of TLGI or any of its Restricted Subsidiaries (including, without
limitation, LGII) shall commence judicial proceedings to foreclose upon assets
of TLGI or any of its Restricted Subsidiaries having an aggregate Fair Market
Value, individually or in the aggregate, in excess of $20,000,000 or shall have
exercised any right under applicable law or applicable security documents to
take ownership of any such assets in lieu of foreclosure; or

(g) TLGI or any Significant Subsidiary of TLGI pursuant to or under
or within the meaning of any Bankruptcy Law:

(1) commences a voluntary case or proceeding;

(2) consents to the entry of an order for relief against it in an
involuntary case or proceeding;

(3) consents to the appointment of a Custodian of it or for all
or substantially all of its property;

(4) makes a general assignment for the benefit of its creditors; or

(5) shall generally not pay its debts when such debts become due or
shall admit in writing its inability to pay its debts generally; or

(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:

(1) is for relief against TLGI or any Significant Subsidiary of TLGI
in an involuntary case or proceeding,

(2) appoints a Custodian of TLGI or any Significant Subsidiary of
TLGI for all or substantially all of its properties, or

(3) orders the liquidation of TLGI or any Significant Subsidiary of
TLGI,

and in each case the order or decree remains unstayed and in effect for 60 days;
or

(i) any other Event of Default provided with respect to the
Securities of such series; or

(j) default in the payment or satisfaction of any sinking fund or
other purchase obligation with respect to the Securities of such series, as and
when such obligation shall become due and payable.

Subject to the provisions of Sections 7.01 and 7.02, the Trustee shall
not be charged with knowledge of any Default or Event of Default unless written
notice thereof shall have been given to a Trust

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Officer at the Corporate Trust Office of the Trustee by LGII, TLGI, the Paying
Agent, any Holder, any holder of Indebtedness or any of their respective agents.

Section 6.02. ACCELERATION. If an Event of Default (other than as
specified in Section 6.01(g) or 6.01(h)) occurs and is continuing with
respect to the Securities of any series then Outstanding, the Trustee, by
written notice to TLGI, or the Holders of at least 25% in aggregate principal
amount of the Securities of such series then Outstanding, by written notice
to the Trustee and TLGI, may declare the principal amount (or, if the
Securities of such series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of such
series) of all the Securities of such series, premium, if any, and accrued
and unpaid interest, if any, on all of the Securities of such series to be
due and payable immediately, upon which declaration, all amounts payable in
respect of the Securities of such series shall be immediately due and
payable. If an Event of Default specified in Section 6.01(g) or 6.01(h)
occurs and is continuing, then the unpaid principal amount (or, if the
Securities of any series then Outstanding are Original Issue Discount
Securities, such portion of the principal amounts as may be specified in the
terms of each such series), premium, if any, and accrued and unpaid interest
on all Securities of each series then outstanding shall IPSO FACTO become and
be immediately due and payable without any declaration or other act by the
Trustee or any Securityholder.

After a declaration of acceleration hereunder with respect to
Securities of any series, but before a judgment or decree for payment of the
money due has been obtained by the Trustee, the Holders of a majority in
aggregate principal amount of the Outstanding Securities of such series, by
written notice to TLGI and the Trustee, may rescind and annul such
declaration and its consequences if (a) TLGI has paid or deposited with the
Trustee a sum sufficient to pay (i) all amounts due the Trustee under Section
7.08 and the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, (ii) all overdue interest on all
Securities of such series, (iii) the principal of and premium, if any, on any
Securities of such series which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne by the
Securities of such series, and (iv) to the extent that payment of such
interest is lawful, interest upon overdue interest and overdue principal
which has become due otherwise than by such declaration of acceleration at
the rate borne by the Securities of such series; (b) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction;
and (c) all Events of Default, other than the non-payment of principal of,
premium, if any, and interest on the Securities of such series that has
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 6.04; but no such rescission and annulment
shall extent to or shall affect any subsequent default, or shall impair any
right consequent thereon.

No such rescission shall affect any subsequent Default or Event of
Default or impair any right subsequent therein.

Section 6.03. OTHER REMEDIES.

TLGI covenants that (a) if default shall be made in the payment of
any installment of interest upon any of the Securities of any series then
Outstanding as and when the same shall become due and payable, and such
default shall have continued for a period of 30 days, or (b) if default shall
be made in the payment of the principal of any of the Securities of such
series as and when the same shall have become due and payable, whether at
maturity of the Securities of such series or upon redemption or by
declaration or otherwise, then, upon demand of the Trustee, TLGI will pay to
the Trustee, for the benefit of the Holders of the Securities, the whole
amount that then shall have become due and payable on all such Securities of
such series for principal or interest, if any, or both, as the case may be,
with interest upon the overdue principal and (to the extent that payment of
such interest is enforceable under applicable law) upon

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the overdue installments of interest, if any, at the rate borne by the
Securities of such series; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents, attorneys and counsel, and any expenses or liabilities incurred
by the Trustee hereunder other than through its negligence or bad faith.

If TLGI shall fail forthwith to pay such amounts upon such demand, the
Trustee, in its own name and as trustee of an express trust, shall be entitled
and empowered to institute any actions or proceedings at law or in equity for
the collection of the sums so due and unpaid, and may prosecute any such action
or proceeding to judgment or final decree, and may enforce any such judgment or
final decree against TLGI or any other obligor on the Securities of such series
and collect in the manner provided by law out of the property of TLGI or any
other obligor on the Securities of such series, wherever situated, the moneys
adjudged or decreed to be payable.

If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, premium, if any, or interest on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.

All rights of action and of asserting claims under this Indenture, or
under any of the Securities, may be enforced by the Trustee without the
possession of any of the Securities, or the production thereof at any trial or
other proceeding relative thereto, and any such suits or proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall be for the ratable benefit of the Holders of
the Securities of the series in respect of which such judgment has been
recovered.

Section 6.04. WAIVER OF PAST DEFAULTS. Subject to the provisions of
Section 6.07 and 9.02, the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities of such series by notice to the
Trustee may, on behalf of the Holders of all the Securities of any such series,
waive any existing Default or Event of Default and its consequences, except a
Default or Event of Default specified in Section 6.01(a) or (b) or in respect of
any provision hereof which cannot be modified or amended without the consent of
the Holder so affected pursuant to Section 9.02. When a Default or Event of
Default is so waived, it shall be deemed cured and shall cease to exist.

Section 6.05. DIRECTION OF PROCEEDINGS; WAIVER OF DEFAULTS BY
MAJORITY OF SECURITYHOLDERS. The Holders of a majority in aggregate principal
amount of the Securities of any series then Outstanding shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee with respect to Securities of such series; PROVIDED, HOWEVER, that the
Trustee may refuse to follow any direction (a) that conflicts with any rule of
law or this Indenture, (b) that the Trustee determines may be unduly prejudicial
to the rights of another Noteholder, or (c) that may expose the Trustee to
personal liability unless the Trustee has been provided reasonable indemnity
against any loss or expense caused by its following such direction; and
PROVIDED, FURTHER, that the Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction. The Holders of a
majority in aggregate principal amount of the Securities of any series then
Outstanding may on behalf of the Holders of all of the Securities of such series
waive any past default or Event of Default hereunder and its consequences except
a default in the payment of interest, if any, on, or the principal of, the
Securities of such series. The provisions of Section 316(a)(1)(B) of the Trust
Indenture Act of 1939 are expressly excluded herefrom. Upon any such waiver
TLGI, the Trustee and the Holders of the Securities of such series shall be
restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other default or Event of

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Default or impair any right consequent thereon. Whenever any default or Event
or Default hereunder shall have been waived as permitted by this Section 6.05,
said default or Event of Default shall for all purposes of the Securities and
this Indenture be deemed to have been cured and to be not continuing.

Section 6.06. LIMITATION ON SUITS. No Holder of any Securities of
any series then Outstanding shall have any right by virtue of or by availing of
any provision of this Indenture to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Indenture of the
Securities or for the appointment of a receiver or trustee or similar official,
or for any other remedy hereunder or thereunder, unless: (1) the Holder gives
written notice to the Trustee of a continuing Event of Default; (2) the Holders
of at least 25% in aggregate principal amount of the Securities of such series
then Outstanding shall have made written request to the Trustee to institute
such action, suit or proceeding in its own name as Trustee hereunder; (3) such
Holder or Holders offer and, if requested, provide to the Trustee reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby; (4) the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding; and (5) during such 60-day period
the Holders of a majority in aggregate principal amount of the Securities of
such series then Outstanding do not give the Trustee a direction which is
inconsistent with the request; it being understood and intended, and being
expressly covenanted by the Holder of every Security of such series with every
other taker and Holder and the Trustee, that no one or more Holders of
Securities of such series shall have any right in any manner whatever by virtue
of or by availing of any provision of this Indenture or of the Securities to
affect, disturb or prejudice the rights of any other Holder of such Securities
of such series, or to obtain or seek to obtain priority over or preference as to
any other such Holder, or to enforce any right under this Indenture or the
Securities, except in the manner herein provided and for the equal, ratable and
common benefit of all Holders of Securities of such series.

Section 6.07. RIGHT OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding
any other provisions in this Indenture, the right of any Holder of any Security
to receive payment of the principal of and interest, if any, on such Security,
on or after the respective due dates expressed in such Security, or, if
applicable, to convert such Security as provided in Article Thirteen, or to
institute suit for the enforcement of any such payment on or after such
respective dates or for the enforcement of any such right to convert shall not
be impaired or affected without the consent of such Holder.

Section 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default
specified in clause (a) or (b) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against TLGI or any other obligor on the Securities for the whole amount of
principal of, premium, if any, and accrued interest remaining unpaid, together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate per annum borne by the Securities and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.

Section 6.09. TRUSTEE MAY FILE PROOFS OF CLAIMS. The Trustee may
file such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and the Holders allowed in any judicial
proceedings relative to TLGI (or any other obligor on the Securities of such
series), its or their creditors or its or property and shall be entitled and
empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall

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consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.08. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.

Section 6.10. APPLICATION OF MONEYS COLLECTED BY TRUSTEE. Any moneys
collected by the Trustee pursuant to Section 6.10 with respect to Securities of
any series then Outstanding shall be applied in the order following, at the date
or dates fixed by the Trustee for the distribution of such moneys, upon
presentation of the several Securities of such series, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:

FIRST: To the payment of costs and expenses of collection and
reasonable compensation to the Trustee, its agents, attorneys and counsel,
and of all other expenses and liabilities incurred, and all advances made,
by the trustee pursuant to Section 7.08 except as a result of its
negligence or bad faith;

SECOND: If the principal of the Outstanding Securities of such series
shall not have become due and be unpaid, to the payment of interest, if
any, on the Securities of such series, in the order of the maturity of the
installments of such interest, if any, with interest (to the extent that
such interest has been collected by the Trustee) upon the overdue
installments of interest, if any, at the rate borne by the Securities of
such series, such payment to be made ratably to the Persons entitled
thereto;

THIRD: If the principal of the Outstanding Securities of such series
shall have become due, by declaration or otherwise, to the payment of the
whole amount then owing and unpaid upon the Securities of such series for
principal (including any premium, if any) and interest, if any, with
interest on the overdue principal and (to the extent that such interest has
been collected by the Trustee) upon overdue installments of interest, if
any, at the rate borne by the Securities of such series; and in case such
moneys shall be insufficient to pay in full the whole amounts so due and
unpaid upon the Securities of such series, then to the payment of such
principal and interest, if any, without preference or priority of principal
over interest, or of interest over principal, or of any installment of
interest, or of any other installment of interest, or of any Security over
any other Security, ratably to the aggregate of such principal such series
for principal (including any premium, if any) and accrued and unpaid
interest; and

FOURTH: To the payment of any surplus then remaining to TLGI, its
successors or assigns, or to whomsoever may be lawfully entitled to receive
the same.

No claim for interest which in any manner at or after maturity shall
have been transferred or pledged separate or apart from the Securities to which
it relates, or which in any manner shall have been kept alive after maturity by
an extension (otherwise than pursuant to an extension made pursuant to a plan
proposed by TLGI to the Holders of all Securities of any series then
Outstanding), purchase, funding or otherwise by or on behalf or with the consent
or approval of TLGI shall be entitled, in case of a default hereunder, to any
benefit of this Indenture, except after prior payment in full of the principal
of all Securities of any series then Outstanding and of all claims for interest
not so transferred, pledged, kept alive, extended, purchased or funded.

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The Trustee, upon prior written notice to TLGI, may fix a record date
and payment date for any payment to Noteholders pursuant to this Section 6.10.

Section 6.11. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Holder of any Security by his acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the filing
by any party litigant in such suit of an undertaking to pay the cost of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section 6.11 shall not apply to
any suit instituted by the Trustee, to any suit instituted by any Securityholder
or group of Securityholders, holding in the aggregate more than ten percent in
principal amount of the Securities of any series then Outstanding, or to any
suit instituted by any Securityholders for the enforcement of the payment of the
principal of, or interest, if any, on any Security against TLGI on or after the
due date expressed in such Security or for the enforcement of the right to
convert any Security in accordance with Article Thirteen. The provisions of
Section 315(e) of the Trust Indenture Act of 1939 are expressly excluded
herefrom.

Section 6.12. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture or any Security and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case LGII, TLGI, the Trustee and the Holders
shall, subject to any determination in such proceeding, be restored severally
and respectively to their former positions hereunder, and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.

Section 6.13. REMEDIES CUMULATIVE AND CONTINUING. All powers and
remedies given by this Article Six to the Trustee or to the Securityholders
shall, to the extent permitted by law, be deemed cumulative and not exclusive of
any thereof or of any other powers and remedies available to the Trustee or the
Securityholders, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or of any Securityholder to
exercise any right or power accruing upon any default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
Provisions of Section 6.06, every power and remedy given by this Article Six or
by law to the Trustee or to the Securityholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Securityholders.

ARTICLE SEVEN

TRUSTEE

Section 7.01. DUTIES AND RESPONSIBILITIES OF THE TRUSTEE; DURING
DEFAULT; PRIOR TO DEFAULT.

(a) In case an Event of Default with respect to the Securities of a
series has occurred (which has not been cured or waived), the Trustee shall
exercise with respect to such series of Securities such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in

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their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.

(b) With respect to the Holders of any series of Securities issued
hereunder, the Trustee, prior to the occurrence of an Event of Default with
respect to the Securities of a particular series and after the curing or waiving
of all Events of Default which may have occurred with respect to such series,
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture.

(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that

(i) prior to the occurrence of an Event of Default with respect to
the Securities of any series and after the curing or waiving of all such
Events of Default with respect to such series which may have occurred;

(1) the duties and obligations of the Trustee with respect to
the Securities of any series shall be determined solely by the express
provisions of this Indenture, and the Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and

(2) in the absence of the absence of bad faith on the part of
the Trustee, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein,
upon any statements, certificates or opinions furnished to the Trustee
and conforming to the requirements of this Indenture; but in the case
of any such statements, certificates or opinions which by any
provision hereof are specifically required to be furnished by the
Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture;

(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts; and

(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders pursuant to Section 6.05 relating to the time,
method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture.

(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.

(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.

Section 7.02. CERTAIN RIGHTS OF THE TRUSTEE. Subject to Section 7.01
hereof and the provisions of TIA Section 315:

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(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture, note, coupon, security or other paper or document
reasonably believed by it to be genuine and to have been signed or presented by
the proper party or parties. The Trustee need not investigate any fact or
matter stated in the document.

(b) any request, direction, order or demand of TLGI mentioned herein
shall be sufficiently evidenced by an Officer's Certificate or Issue Order
(unless other evidence in respect thereof be herein specifically prescribed);
and any resolution of the Board of Directors may be evidenced to the Trustee by
a copy thereof certified by the secretary or an assistant secretary of TLGI, and
before the Trustee acts or refrains from acting, it may consult with counsel and
may require an Officers' Certificate or an Opinion of Counsel, which shall
conform to Sections 11.04 and 11.05. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such certificate
or opinion.

(c) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys not regularly in its employ and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed with due care by it hereunder.

(d) the Trustee shall not be liable for any action taken or omitted
by it in good faith and reasonably believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture other than any
liabilities arising out of its own negligence.

(e) the Trustee may consult with counsel of its own choosing and the
written advice or Opinion of Counsel as to matters of law shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted to be taken by it hereunder in good faith and in reliance thereon in
accordance with the advice or Opinion of Counsel.

(f) prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all Events of Default, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, approval, appraisal, bond, debenture, note,
coupon, security, or other paper or documentation requested in writing so to do
by the Holders of not less than a majority in aggregate principal amount of the
Securities of all series affected then Outstanding; provided that, if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expenses or liabilities as a condition to
proceeding; the reasonable expenses of every such investigation shall be paid by
TLGI or, if paid by the Trustee or any predecessor Trustee, shall be repaid by
TLGI upon demand, and the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.

(g) the Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders pursuant to the provisions of this
Indenture (including, without limitation, pursuant to Section 6.01), unless such
Securityholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred
therein or thereby.

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Section 7.03. TRUSTEE AND AGENTS MAY HOLD SECURITIES; COLLECTIONS,
ETC.

The Trustee, any Paying Agent, Registrar or any other agent of TLGI or
the Trustee, in its individual or any other capacity, may become the owner or
pledgee of Securities and, subject to Sections 7.11 and 7.12 and TIA Sections
310 and 311, may otherwise deal with TLGI with the same rights it would have if
it were not the Trustee, Paying Agent, Registrar or such other agent.

Section 7.04. TRUSTEE'S DISCLAIMER. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Securities or of any prospectus used to sell the Securities, it shall not be
accountable for the use or application by TLGI of any of the Securities or of
the proceeds thereof, it shall not be responsible for the use or application of
any money received by any Paying Agent other than the Trustee and it shall not
be responsible for any statement in the Securities other than the Trustee's
certificate of authentication.

Section 7.05. NOTICE OF DEFAULT. The Trustee shall, within 90 days
after the occurrence of a Default or an Event of Default , with respect to
Securities of any series then Outstanding, mail to all Holders of Securities of
such series, as the names and the addresses of such Holders appear upon the
Security register, notice of all Default or Event of Default known to the
Trustee with respect to such series, unless such defaults shall have been cured
before the giving of such notice; PROVIDED, HOWEVER, that, except in the case of
a Default in the payment of the principal of, premium, if any, or interest on
any of the Securities, or in the payment or satisfaction of any sinking fund or
other purchase obligation, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee of the
board of directors or a committee of the directors of the Trustee and/or Trust
Officers in good faith determines that the withholding of such notice is in the
interest of the Holders.

Section 7.06. MONEY HELD IN TRUST. Subject to the provisions of
Section 8.04 hereof, all moneys received by the Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated from other funds except to the extent
required herein or by law. Neither the Trustee nor any agent of TLGI or the
Trustee shall be under any liability for interest on any moneys received by it
hereunder, except as the Trustee may agree with TLGI.

Section 7.07. REPORTS BY TRUSTEE TO HOLDERS.

Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall, to the extent that any of the
events described in TIA Section 313(a) shall have occurred within the previous
twelve months, but not otherwise, mail to each Holder a brief report dated as of
such May 15 that complies with TIA Section 313(a). The Trustee also shall
comply with TIA Sections 313(b) and 313(c).

A copy of each report at the time of its mailing to Holders shall be
mailed to TLGI and filed with the Commission and each securities exchange, if
any, on which the Securities are listed.

TLGI shall notify the Trustee in writing if the Securities become
listed on any securities exchange.

Section 7.08. COMPENSATION AND INDEMNITY.

TLGI covenants and agrees to pay to the Trustee from time to time, and
the Trustee shall be entitled to, reasonable compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) and TLGI covenants and agrees to pay or reimburse the

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Trustee and each predecessor Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by or on behalf of it in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all agents and other persons not regularly in its employ) except any such
expense, disbursements or advance as may arise from its negligence or bad faith.

TLGI also covenants to indemnify the Trustee and each predecessor
Trustee for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this Indenture or the trusts
hereunder and its rights or duties hereunder, including the costs and expenses
of defending itself against or investigating any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The Trustee shall notify TLGI promptly of any claim asserted against
the Trustee for which it may seek indemnity. TLGI shall defend the claim and
the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and TLGI shall pay the reasonable fees and expenses of such counsel.
TLGI need not pay for any settlement made without its prior written consent.
TLGI need not reimburse any expense or indemnify against any loss or liability
to the extent incurred by the Trustee through its negligence, bad faith or
willful misconduct.

To secure the payment obligations of TLGI in this Section 7.08, the
Trustee shall have a Lien prior to the Securities on all assets held or
collected by the Trustee, in its capacity as Trustee, except funds held in trust
for the benefit of the Holders of particular Securities to pay principal of,
premium, if any, or interest on particular Securities, and the Securities are
hereby subordinated to such senior claim. When the Trustee incurs expenses or
renders services in connection with an Event of Default specified in Section
6.01 or in connection with Article Six hereof, the expenses (including the
reasonable fees and expenses of its counsel) and the compensation for the
services in connection therewith are intended to constitute expenses of
administration under any bankruptcy law.

When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 6.01(g) or (h), the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.

The obligations of TLGI under this Section 7.08 and any Lien arising
hereunder shall survive the resignation or removal of any trustee, the discharge
of the obligations of TLGI pursuant to Article Eight and/or the termination of
this Indenture.

Section 7.09. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR
TRUSTEE.

(a) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign with respect to one or more or all series of Securities by
giving written notice of resignation to TLGI and by mailing notice of such
resignation to the Holders of then Outstanding Securities of each series
affected at their addresses as they shall appear on the registry books. Upon
receiving such notice of resignation, TLGI shall promptly appoint a successor
trustee or trustees with respect to the applicable series by written instrument
in duplicate, executed by authority of the Board of Directors, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee or trustees. If no successor trustee shall have been so
appointed with respect to any series and have accepted appointment within 30
days after the mailing of such notice of resignation, the resigning trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee, or any Securityholder who has been bona fide Holder of a Security or
Securities of the applicable series for at least six months may, subject to the
provisions of Section 5.9, on behalf of himself and all others similarly
situated, petition any such court for

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the appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.

(b) In case at any time any of the following shall occur:

(i) the Trustee shall fail to comply with the provisions of Section
7.13 with respect to any series of Securities after written request
therefor by TLGI or by any Securityholder who has been a bona fide Holder
of a Security or Securities of such series at least six months; or

(ii) the Trustee shall cease to be eligible in accordance with the
provisions of Section 7.11 and shall fail to resign after written request
therefor by TLGI or by any such Securityholder; or

(iii) the Trustee shall become incapable of acting with respect to
any series of Securities, or shall be adjudged a bankrupt or insolvent, or
a receiver or liquidator of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation;

then, in any such case, TLGI may remove the Trustee with respect to the
applicable series of Securities and appoint a successor trustee for such series
by written instrument, in duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee, or, subject to the provisions of
Section 5.9, any Securityholder who has been a bona fide Holder of a Security or
Securities of such series for at least six months may on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor trustee with
respect to such series. Such court may thereupon, after such notice, if any, as
it may deed proper and prescribe, remove the Trustee and appoint a successor
trustee.

(c) The Holders of a majority in aggregate principal amount of the
Securities of each series then Outstanding may at any time remove the Trustee
with respect to Securities of such series and appoint a successor trustee with
respect to the Securities of such series by delivering to the Trustee so
removed, to the successor trustee so appointed and to TLGI the evidence provided
for in Section 7.1 of the action in that regard taken by the Securityholders.

(d) Any resignation or removal of the Trustee with respect to any
series and any appointment of a successor trustee with respect to such series
pursuant to any of the provisions of this Section 7.09 shall become effective
upon acceptance of appointment by the successor trustee as provided in Section
7.14.

Section 7.10. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS OF TRUSTEE. Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided that such
corporation shall be qualified under the provisions of Section 7.13 and eligible
under the provisions of Section 7.11, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.

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In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities of any series shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor Trustee and deliver
such Securities so authenticated; and, in case at that time any of the
Securities of any series shall not have been authenticated, any successor to the
Trustee may authenticate such Securities either in the name of any predecessor
hereunder or in the name of the successor Trustee; and in all such cases such
certificate shall have the full force which it is anywhere in the Securities of
such series or in this Indenture provided that the certificate of Trustee shall
have; provided that the right to adopt the certificate of authentication of any
predecessor Trustee or to authenticate Securities of any series in the name of
any predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.

Section 7.11. PERSONS ELIGIBLE FOR APPOINTMENT AS TRUSTEE. The
Trustee for each series of Securities hereunder shall at all times be a
corporation organized and doing business under the laws of the United States of
America or of any state or the District of Columbia having a combined capital
and surplus of at least $50,000,000 and which is authorized under such laws to
exercise corporate trust powers and is subject to supervision or examination by
federal, state or District of Columbia authority, or a corporation or other
Person permitted to act as trustee by the Commission. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section 7.11, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. No obligor upon the
Securities or any Affiliates of such obligor shall serve as Trustee upon the
Securities. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.11, the Trustee shall resign
immediately in the manner and with the effect specified in Section 7.09.

Section 7.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST TLGI.

The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). If the present or any
future Trustee shall resign or be removed, it shall be subject to TIA Section
311(a) to the extent provided therein.

Section 7.13 QUALIFICATION OF TRUSTEE; CONFLICTING INTERESTS.

(a) If the Trustee has or shall acquire any conflicting interest (as
defined in subsection (c)), then within 90 days after ascertaining that it has
such conflicting interest, and if the default (as defined in subsection (c)) to
which such conflicting interest relates has not been cured or duly waived or
otherwise eliminated before the end of such 90-day period, the Trustee shall
either eliminate such conflicting interest or, except as otherwise provided
below, resign, and TLGI shall take prompt steps to have a successor appointed in
the manner provided in Section 7.09.

(b) If the Trustee shall fail to comply with the provisions of
subsection (a), the Trustee shall, within 10 days after the expiration of such
90-day period, transmit notice of such failure to the Securityholders in the
manner and to the extent provided in Section 4.4 and, subject to the provisions
of Section 5.9, unless the Trustee's duty to resign is stayed as provided below,
any Securityholder who has been a bond fide holder of Securities for at least
six months may, on behalf of himself and all other similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee, and the
appointment of a successor, if the Trustee fails, after written request thereof
by such Securityholder, to comply with the provisions of subsection (a).

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Except in the case of a default in the payment of the principal of or
interest on any Security, or in the payment of any sinking or purchase fund
installment, the Trustee shall not be required to resign as provided by this
Section 7.13 if the Trustee shall have sustained the burden of proving, on
application to the Commission and after opportunity for hearing thereon, that

(i) the default under this Indenture may be cured or waived during a
reasonable period and under the procedures described in such application,
and

(ii) a stay of the Trustee's duty to resign will not be inconsistent
with the interests of Holders of the Securities.

The filing of such an application shall automatically stay the
performance of the duty to resign until the Commission orders otherwise. Any
resignation of the Trustee shall become effecting only upon the appointment of
a successor trustee in accordance with the provisions of Section 7.09 and such
successor's acceptance of such an appointment.

(c) For the purposes of this Section 7.13, the Trustee shall be
deemed to have a conflicting interest with respect to Securities of any series
if the Securities of such series are in default (as determined in accordance
with the provisions of Section 5.1, but exclusive of any period of grace or
requirement of notice) and

(i) the Trustee is trustee under this Indenture with respect to the
Outstanding Securities of any other series or is a trustee under another
indenture under which any other securities, or certificates of interest or
participation in any other securities, of TLGI are outstanding, unless such
other indenture is a collateral trust indenture under which the only
collateral consists of Securities issued under this Indenture; provided
that there shall be excluded from the operation of this paragraph, this
Indenture with respect to the Securities of any other series and there
shall also be so excluded any other indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of TLGI are outstanding if (x) this Indenture is and, if
applicable, this Indenture and any series issued pursuant to this Indenture
and such other indenture or indentures are wholly unsecured and rank
equally, and such other indenture or indentures are hereafter qualified
under the Trust Indenture Act of 1939, unless the Commission shall have
found and declared by order pursuant to Section 305(b) or Section 307(c) of
the Trust Indenture Act of 1939, that differences exist between the
provisions of this Indenture with respect to Securities of such series and
one or more other series, or the provisions of this Indenture and the
provisions of such other indenture or indentures which are so likely to
involve a material conflict of interest as to make it necessary in the
public interest or for the protection of investors to disqualify the
Trustee from acting as such under this Indenture with respect to Securities
to such series and such other series or under this Indenture or such other
indenture or indentures, or (y) TLGI shall have sustained the burden of
proving, on application to the Commission and after opportunity for hearing
thereon, that trusteeship under this Indenture with respect to Securities
of such series and such other series, or under this Indenture and such
other indenture or indentures is not so likely to involve a material
conflict of interest as to make it necessary in the public interest or for
the protection of investors to disqualify the Trustee from acting as such
under this Indenture with respect to Securities of such series and such
other series, or under this Indenture and such other indentures;

(ii) the Trustee or any of its directors or executive officers is an
underwriter for TLGI;

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(iii) the Trustee directly or indirectly controls or is directly
or indirectly controlled by or is under direct or indirect common control
with an underwriters for TLGI;

(iv) the Trustee or any of its directors or executive officers is a
director, officer, partner, employee, appointee, or representative of TLGI,
or of an underwriter (other than the Trustee itself) for TLGI who is
currently engaged in the business of underwriting, except that (x) one
individual may be a director or an executive officer, or both, of the
Trustee and a director or an executive officer, or both, of TLGI, but may
not be at the same time an executive officer or both the Trustee and TLGI;
(y) if and so long as the number of directors of the Trustee in office is
more than nine, one additional individual may be a director or an executive
officer, or both, of the Trustee and a director of TLGI, and (z) the
Trustee may be designated by TLGI or by any underwriter for TLGI to act in
the capacity of transfer agent, registrar, custodian, paying agent, fiscal
agent, escrow agent, or depositary, or in any other similar capacity, or,
subject to the provisions of subsection (c)(i) of this Section, to act as
trustee, whether under an indenture or otherwise;

(v) 10% or more of the voting securities of the Trustee is
beneficially owned either by TLGI or by any director, partner or executive
officer thereof, or 20% or of such voting securities is beneficially owned,
collectively, by any two or more of such person; or 10% or more of the
voting securities of the Trustee is beneficially owned either by an
underwriter for TLGI or by any director, partner, or executive officer
thereof, or is beneficially owned, collectively, by any two or more such
persons;

(vi) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default, (x) 5% or more of the
voting securities of 10% or more of any other class of security of TLGI,
not including the Securities issued under this Indenture and securities
issued under any other indenture under which the Trustee is also trustee,
or (y) 10% or more of any class of security of an underwriter for TLGI;

(vii) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default, 5% or more of the voting
securities of any person who, to the knowledge of the Trustee, owns 10% or
more of the voting securities of, or controls directly or indirectly or is
under direct or indirect common control with, TLGI;

(viii)the Trustee is the beneficial owner of, or holds as collateral
Security for an obligation which is in default, 10% or more of any class
of security of any person who, to the knowledge of the Trustees, owns 50%
or more of the voting securities of TLGI;

(ix) the Trustee owns on the date of default (as determined in
accordance with the provisions of Section 5.1, but exclusive of any period
of grace or requirement of notice) or on any anniversary of such default
while such default remains outstanding, in the capacity of executor,
administrator, testamentary or inter vivos trustee, guardian, committee or
conservator, or in any other similar capacity, an aggregate of 25% or more
of the voting securities, or of any class security, of any person, the
beneficial ownership of a specified percentage of which would have
constituted a conflicting interest under paragraphs (vi), (vii) or (viii)
of this subsection. As to any such securities of which the Trustee
acquired ownership through becoming executor, administrator, or
testamentary trustee of an estate which included them, the provisions of
the preceding sentence shall not apply, for a period of two years from the
date of such acquisition, to the extent that such securities included in
such estate do not exceed 25% of such voting securities of 25% of any such

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class of security. Promptly after the dates of any such default and
annually in each succeeding year that the Securities remain in default, the
Trustee shall make a check of its holdings of such securities in any of the
above-mentioned capacities as of such dates. If TLGI fails to make payment
in full of principal of or interest on any of the Securities when and as
the same becomes due and payable, and such failure continues for 30 days
thereafter, the Trustee shall make a prompt check of this holdings of such
Securities in any of the above-mentioned capacities as of the date of the
expiration of such 30-day period, and after such date, notwithstanding the
foregoing provisions of this paragraph, all such Securities so held by the
Trustee, with sole or joint control over such Securities vested in it,
shall, but only so long as such failure shall continue, be considered as
though beneficially owned by the Trustee for the purposes of paragraphs
(vi), (vii) and (viii) of this subsection; or

(x) except under the circumstances described in paragraphs (1), (3),
(4), (5) or (6) of Section 6.13(b), the Trustee shall or shall become
creditor of TLGI.

For purposes of subsection (c)(i), the term "series of securities" or
"series" means a series, class or group of securities issuable under an
indenture pursuant to whose terms holders of one such series may vote to direct
the Trustee, or otherwise take action pursuant to a vote of such holders,
separately from holders of another such series; provided, that "series of
securities" or "series" shall not include any series of securities issuable
under an indenture if all such series rank equally and are wholly unsecured.

The specification of percentages in subsections (c)(v) to (ix),
inclusive, of this Section 7.13 shall not be construed as indicating that the
ownership of such percentages of the securities of a person is or is not
necessary or sufficient to constitute direct or indirect control of the purposes
of subsections (c)(iii) or (vii) of this Section 7.13.

For the purposes of subsections (c)(vi), (vii), (viii) and (ix) of
this Section 7.13, only,

(i) the terms "security" and "securities" shall include only such
securities as are generally known as corporate securities, but shall not
include any note or other evidence of indebtedness issued to evidence an
obligation to repay moneys lent to a person by one or more banks, trust
companies, or banking firms, or any certificate of interest or
participation in any such note or evidence of indebtedness;

(ii) an obligation shall be deemed to be in default when a default in
payment of principal shall have continued for 30 days or more and shall not
have been cured; and

(iii) the Trustee shall not be deemed to be the owner or holder of
(x) any security which it holds as collateral security, as trustee or
otherwise, for an obligation which is not in default as defined in clause
(ii) above, or (y) any Security which it holds as collateral security under
this Indenture, irrespective of any default hereunder, or (z) any security
which it holds as agent for collection, or as custodian, escrow agent, or
depositary, or in any similar representative capacity.

Except as provided above, the word "security" or "securities" as used
in this Section 7.13 shall mean any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of interest or participation
in any profit-sharing agreement, collateral trust certificate, preorganization
certificate or subscription, transferable share, investment contract, voting
trust certificate, certificate of deposit for a security, fractional undivided
interest in oil, gas or other mineral rights, or, in general, any interest or

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instrument commonly known as a "security", or any certificate of interest or
participation in, temporary or interim certificate for, receipt for, guarantee
of, or warrant to right to subscribe to or purchase, any of the foregoing.

(d) For purposes of this Section 7.13:

(i) the term "underwriter" when used with reference to TLGI shall
mean every person who, within a one year period prior to the time as of
which the determination is made, was an underwriter of any security of TLGI
outstanding at the time of the determination;

(ii) the term "director" shall mean any director of a corporation or
any individual performing similar functions with respect to any
organization whether incorporated or unincorporated;

(iii) the term "person" shall mean an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, an
unincorporated organization, or a government or political subdivision
thereof; as used in this paragraph, the term "trust" shall include only a
trust where the interest or interests of the beneficiary or beneficiaries
are evidenced by a security;

(iv) the term "voting security" shall mean any security presently
entitling the owner or holder thereof to vote in the direction or
management of the affairs of a person, or any Security issued under or
pursuant to any trust, agreement or arrangement whereby a trustee or
trustee or agent or agents for the owner or holder of such security are
presently entitled to vote in the direction or management of the affairs of
a person;

(v) the term "Issuer" shall mean any obligor upon the Securities;
and

(vi) the term "executive officer" shall mean the president, every
vice president, every trust officer, the cashier, the secretary, and the
treasurer of a corporation, and any individual customarily performing
similar functions with respect to any organization whether incorporated or
unincorporated, but shall not include the chairman of the board of
directors.

(e) The percentage of voting securities and other securities
specified in this Section 7.13 shall be calculated in accordance with the
following provisions:

(i) a specified percentage of the voting securities of the Trustee,
TLGI or any other person referred to in this Section 7.13 (each of whom is
referred to in this Section 7.13 (each of whom is referred to as a "person"
in this paragraph) means such amount of the outstanding voting securities
of such person as entitled the holder or holders thereof to cast such
specified percentage of the aggregate votes which the holders of all the
outstanding voting securities of such person are entitled to cast in the
direction or management of the affairs of such person;

(ii) a specified percentage of a class of securities of a person
means such percentage amount of securities of the class outstanding;

(iii) the term "amount", when used in regard to securities, means
the principal amount if relating to evidences of indebtedness, the number
of shares if relating to capital shares, and the number of units if
relating to any other kind of Security;

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(iv) the term "outstanding" means issued and not held by or for the
account for TLGI; the following securities shall not be deemed within the
meaning of this definition;

(A) securities of an issuer held in a sinking fund relating to
securities of TLGI of the same class;

(B) securities of an issuer held in a sinking fund relating to
another class of securities of TLGI, if the obligation evidenced by
such other class of securities is not in default as to principal or
interest or otherwise;

(C) securities pledged by TLGI thereof as security for an
obligation of TLGI not in default as to principal or interest or
otherwise; and

(D) securities held in escrow if placed in escrow by TLGI
thereof; provided, that any voting securities of an issuer shall be
deemed outstanding if any person other than TLGI is entitled to
exercise the voting rights thereof; and

(v) a security shall be deemed to be of the same class as another
security if both securities confer upon the holder or holders thereof
substantially the same rights and privileges; provided that, in the case of
secured evidences of indebtedness, all of which are issued under the single
indenture, differences in the interest rates or maturity dates of various
series thereof shall not be deemed sufficient to constitute such series
different classes and provided, further, that, in the case of unsecured
evidences of indebtedness, differences in the interest rates or maturity
dates thereof shall not be deemed sufficient to constitute them securities
of different classes, whether or not they are issued under a single
indenture.

Section 7.14 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR TRUSTEE. Any
successor trustee appointed as provided in Section 6.10 shall execute and
deliver to TLGI and to its predecessor to an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee with respect to all or any applicable series shall become
effective as such successor trustee, without any further act, deed or
conveyance, shall become vested with all rights, powers, duties and obligations
with respect to such series of its predecessor hereunder, when like effect as if
originally named as trustee for such series hereunder; but, nevertheless, on the
written request of TLGI or of the successor trustee, upon payment of its charges
then unpaid, the trustee ceasing to act shall, subject to Section 8.04, pay over
to the successor trustee all moneys at time held by it hereunder and shall
execute and deliver an instrument transferring to such successor trustee all
such rights, powers, duties and obligations. Upon request of any such successor
trustee, TLGI shall execute any and all instruments in writing for more fully
and certainly vesting in and confirming to such successor trustee all rights and
powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim
upon all property or funds held or collected by such trustee to secure any
amounts then due it pursuant to the provisions of Section 7.08.

If a successor trustee is appointed with respect to the Securities of
one or more (but not all) series, TLGI, the predecessor trustee and each
successor trustee with respect to the Securities of any applicable series shall
execute and deliver an indenture supplemental hereto which shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the predecessor trustee with respect to the
Securities of any series as to which the predecessor trustee is not retiring
shall continue to be vested in the predecessor trustee, and shall add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the trusts hereunder by more than one
trustee, it being understood that nothing herein or in such supplemental

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indenture shall constitute such trustees co-trustees of the same trust and that
each such trustee shall be trustee of a trust or trusts under separate
indentures.

No successor trustee with respect to any series of Securities shall
accept appointment as provided in this Section 7.14 unless at the time of such
acceptance such successor trustee shall be qualified under the provisions of
Section 7.13 and eligible under the provisions of Section 7.11.

Upon acceptance of appointment by any successor trustee as provided in
this Section 7.14, TLGI shall give notice thereof to the Holders of Securities
of each series affected, by mailing such notice to such Holders at their
addresses as they shall appear on the registry books. If the acceptance of
appointment is substantially contemporaneous with the resignation, then the
notice called for by the preceding sentence may be combined with the notice
called for by Section 7.09. If TLGI fails to give such notice within ten days
after acceptance of appointment by the successor trustee, the successor trustees
shall cause such notice to be given at the expense of TLGI.

Section 7.15 APPOINTMENT OF AUTHENTICATING AGENT. As long as any
Securities of a series remain Outstanding, the Trustee may, by an instrument in
writing, appoint with the approval TLGI an authenticating agent (the
"AUTHENTICATING AGENT") which shall be authorized to act on behalf of the
Trustee to authenticate Securities, including Securities issued upon exchange,
registration of transfer, partial redemption or pursuant to Section 2.11.
Securities of each such series authenticated by such Authenticating Agent shall
be entitled to the benefits of this Indenture and shall be valid and obligatory
for all purposes as if authenticated by the Trustee. Whenever reference is made
in this Indenture to the authentication and delivery of Securities of any series
by the Trustee or the Trustee's certificate of authentication, such reference
shall be deemed to include authentication and delivery on behalf of the Trustee
by an Authenticating Agent for such series and a certificate of authentication
executed on behalf of the Trustee by such authenticating Agent. Such
authenticating Agent shall at all times be a corporation organized and doing
business under the laws the United States of America or of any state or the
District of Columbia, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,00,000 (determined
as provided in Section 7.11 with respect to the Trustee) and subject to
supervision or examination by federal or state authority.

Any corporation into which any Authenticating Agent may be merged or
converted, or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency business
of any Authenticating Agent, shall continue to be the authenticating Agent with
respect to all series of Securities for which it served as Authenticating Agent
without the execution or filing of any paper or any further act on the part of
the Trustee or such Authenticating Agent. Any Authenticating Agent may at any
time, and if it shall cease to be eligible shall, resign by giving written
notice of resignation to the Trustee and to TLGI. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to TLGI.

Upon receiving such notice of resignation or upon such a termination,
or in case at any time any Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section 7.15 with respect to one or more
series of Securities, the Trustee may appoint a successor Authenticating Agent
which shall be acceptable to TLGI and TLGI shall provide notice of such
appointment to all Holders of Securities of such series in the manner and to the
extent provided in Section 11.02. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all rights,
powers, duties and responsibilities of its predecessor hereunder, with like
effect as if originally named as Authenticating Agent. TLGI agrees to pay to
the Authenticating Agent for such series from time to time

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reasonable compensation. The Authenticating Agent for the Securities of any
series shall have no responsibility or liability for any action taken by it as
such at the direction of the Trustee.

Sections 7.02, 7.03, 7.04 and 10.03 shall be applicable to any
Authenticating Agent.

ARTICLE EIGHT

SATISFACTION AND DISCHARGE OF INDENTURE

Section 8.01 SATISFACTION AND DISCHARGE OF INDENTURE. (A) If at any
time (a) TLGI shall have paid or caused to be paid the principal of and
interest, if any, on all the Securities Outstanding (other than Securities which
have been destroyed, lost or stolen and which have been replaced or paid as
provided in Section 2.11) as and when the same shall have become due and
payable, or (b) TLGI shall have delivered to the Trustee for cancellation all
Securities theretofore authenticated (other than Securities which have been
destroyed, lost or stolen and which have been replaced or paid as provided in
Section 2.11); and if, in any such case, TLGI shall also pay or cause to be paid
all other sums payable hereunder by TLGI, then this Indenture shall cease to be
of further effect, and the Trustee, on demand of TLGI accompanied by an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent relating to the satisfaction and discharge contemplated by
this provision have been complied with, and at the cost and expense of TLGI,
shall execute proper instruments acknowledging such satisfaction and discharging
this Indenture. TLGI agrees to reimburse the Trustee for any costs or expenses
thereafter reasonably and properly incurred, and to compensate the Trustee for
any services thereafter reasonably and properly rendered, by the Trustee in
connection with this Indenture or the Securities.

(B) If at any time (a) TLGI shall have paid or caused to be paid the
principal of and interest, if any, on all the Securities of any series
Outstanding (other than Securities of such series which have been destroyed,
lost or stolen and which have been replaced or paid as provided in Section 2.11)
as and when the same shall have become due and payable, or (b) TLGI shall have
delivered to the Trustee for cancellation all Securities of any series
theretofore authenticated (other than any Securities of such series which have
been destroyed, lost or stolen and which have been replaced or paid as provided
in Section 2.11), or (c) in the case of any series of Securities with respect to
which the exact amount described in clause (ii) below can be determined at the
time of making the deposit referred to in such clause (ii), (i) all the
Securities of such series not theretofore delivered to the Trustee for
cancellation shall have become due and payable, or are by their terms to become
due and payable within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and (ii) TLGI shall have irrevocably deposited or caused to be
deposited with the Trustee as funds in trust, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of Securities of such
series, cash in an amount (other than moneys repaid by the Trustee or any Paying
Agent to TLGI in accordance with Section 8.04) or direct obligations of the
United States of America, backed by its full faith and credit ("U.S. GOVERNMENT
OBLIGATIONS"), maturing as to principal and interest, if any, at such times and
in such amounts as will insure the availability of cash, or a combination
thereof, sufficient in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay (A) the principal of and interest, if any, on
all Securities of such series on each date that such principal or interest, if
any, is due and payable, and (B) any mandatory sinking fund payments on the
dates on which such payments are due and payable in accordance with the terms of
this Indenture and the Securities of such series; then TLGI shall be deemed to
have paid and discharged the entire indebtedness on all the Securities of such
series on the date of the deposit referred to in clause (ii) above and the
provisions of this Indenture with respect to the Securities of such series shall

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no longer be in effect (except, in the case of clause (c) of this Section
8.01(B), as to (i) rights of registration of transfer and exchange of Securities
of such series, (ii) substitution of mutilated, defaced, destroyed, lost or
stolen Securities of such series, (iii) rights of Holders of Securities of such
series to receive payments of principal thereof and interest, if any, thereon
upon the original stated due dates therefor (but not upon acceleration), and
remaining rights of the Holders of Securities of such series to receive
mandatory sinking fund payments, if any, (iv) the rights, obligations, duties
and immunities of the Trustee hereunder, (v) the rights of the Holders of
Securities of such series as beneficiaries hereof with respect to the property
so deposited with the Trustee payable to all or any of them, (vi) the
obligations of TLGI under Section 4.02 with respect to Securities of such series
and (vii) the obligations of TLGI under Article Thirteen) and the Trustee, on
demand of TLGI accompanied by an Officer's Certificate and an Opinion of
Counsel, each stating that all conditions precedent contemplated by this
provision have been complied with, and at the cost and expense of TLGI, shall
execute proper instruments acknowledging the same.

(C) The following provisions shall apply to the Securities of each
series (other than Securities that are convertible into Common Stock) unless
specifically otherwise provided in a Board Resolution, Officer's Certificate or
indenture supplement hereto provided pursuant to Section 2.01. In addition to
discharge of this Indenture pursuant to the next preceding paragraph, in the
case of any series of Securities with respect to which the exact amount
described in subparagraph (a) below can be determined at the time of making the
deposit referred to in such subparagraph (a), TLGI shall be deemed to have paid
and discharged the entire indebtedness on all the Securities of such a series on
the 91st day after the date of the deposit referred to in subparagraph (a)
below, and the provisions of this Indenture with respect to the Securities of
such series shall no longer be in effect (except as to (i) rights of
registration of transfer and exchange of Securities of such series, (ii)
substitution of mutilated, defaced, destroyed, lost or stolen Securities of such
series, (iii) rights of Holders of Securities of such series to receive payments
of principal thereof and interest, if any, thereon upon the original stated due
dates therefor (but not upon acceleration), and remaining rights of the Holders
of Securities of such series to receive mandatory sinking fund payments, if any,
(iv) the rights, obligations, duties and immunities of the Trustee hereunder,
(v) the rights of the Holders of Securities of such series as beneficiaries
hereof with respect to the property so deposited with the Trustee payable to all
or any of them, (vi) the obligations of TLGI under Section 4.02 with respect to
Securities of such series and (vii) the obligations of TLGI under Article
Thirteen) and the Trustee, on demand of TLGI accompanied by an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent contemplated by this provision have been complied with, and at the
cost and expense of TLGI, shall execute proper instruments acknowledging the
same, if

(a) with reference to this provision TLGI has irrevocably deposited
or caused to be irrevocably deposited with the Trustee as funds in trust,
specifically pledged as security for, and dedicated solely to, the benefit
of the Holders of Securities of such series (i) cash in an amount, or (ii)
U.S. Government Obligations, maturing as to principal and interest, if
any, at such times and in such amounts as will insure the availability of
cash, or (iii) a combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay (A) the
principal of and interest, if any, on all Securities of such series on each
date that such principal or interest, if any, if due and payable, and (B)
any mandatory sinking fund payments on the dates on which such payments are
due and payable in accordance with the terms of this Indenture and the
Securities of such series;

(b) such deposit will not result in a breach or violation of, or
constitute a default under, any agreement or instrument to which TLGI is a
party or by which it is bound; and

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(c) TLGI has delivered to the Trustee an Opinion of Counsel based on
the fact that (x) TLGI has received from, or there has been published by,
the Internal Revenue Service a ruling or (y), since the date hereof, there
has been a change in the applicable United States federal income tax law,
in either case to the effect that, and such opinion shall confirm that, the
Holders of the Securities of such series will not recognize income, gain or
loss for federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to federal income tax on the
same amount and in the same manner and at the same times, as would have
been the case if such deposit, defeasance and discharge had not occurred.

Section 8.02. INDEMNITY FOR U.S. GOVERNMENT OBLIGATIONS; REPAYMENT.

TLGI shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 8.01 or the principal, premium, if any, and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Securities of such
series.

Anything in Section 8.01 to the contrary notwithstanding, the Trustee
shall deliver or pay to TLGI from time to time upon the request, in writing, by
TLGI any money or U.S. Government Obligations held by it as provided in
Section 8.01 above which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent legal defeasance or covenant
defeasance.

Section 8.03. APPLICATION BY TRUSTEE OF FUNDS DEPOSITED FOR PAYMENT
OF SECURITIES. Subject to Section 8.04, all moneys and U.S. Government
Obligations deposited with the Trustee pursuant to Sections 8.01 shall be held
in trust, and such moneys and all moneys from such U.S. Government Obligations
shall be applied by it to the payment, either directly or through any Paying
Agent (including TLGI acting as its own paying agent), to the Holders of the
particular Securities of such series for the payment or redemption of which such
moneys and U.S. Government Obligations have been deposited with the Trustee, of
all sums due and to become due thereon for principal and interest, if any, but
such moneys need not be segregated from other funds except to the extent
required by law. The Trustee and any Paying Agent shall promptly pay to TLGI,
upon the written request of TLGI, any excess moneys or U.S. Government
Obligations held by them at any time, including all moneys deposited with the
Trustee pursuant to Section 8.01(B) and held by it or any Paying Agent for the
payment of Securities subsequently converted.

Section 8.04. REPAYMENT TO TLGI.

Subject to Sections 7.08 and 8.01, the Trustee shall promptly pay to
TLGI, upon receipt by the Trustee of an Officers' Certificate, any excess money,
determined in accordance with Section 8.01 or 8.02, held by it at any time. Any
moneys deposited with or paid to the Trustee or any Paying Agent for the payment
of the principal of or interest, if any, on any Security of any series and not
applied but remaining unclaimed for two years after the date upon which such
principal or interest, if any, shall have become due and payable, shall, upon
the written request of TLGI and unless otherwise required by mandatory
provisions of applicable escheat or abandoned or unclaimed property law, be
repaid to TLGI by the Trustee for such series or such Paying Agent, and the
Holder of the Securities of such series shall, unless otherwise required by
mandatory provisions of applicable escheat or abandoned or unclaimed property
laws, thereafter look only to TLGI for any payment which such Holder may be
entitled to collect, and all liability of the Trustee or any Paying Agent with
respect to such moneys shall thereupon cease.

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In connection with the satisfaction and discharge of this Indenture
with respect to Securities of any series, all moneys then held by any Paying
Agent under the provisions of this Indenture with respect to such series of
Securities shall, upon demand of TLGI, be repaid to it or paid to the Trustee
and thereupon such Paying Agent shall be released from all further liability
with respect to such moneys.

Section 8.05. REINSTATEMENT.

If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
and only then TLGI's obligations under this Indenture and the Securities of such
series shall be revived and reinstated as though no deposit had been made
pursuant to this Indenture until such time as the Trustee is permitted to apply
all such money or U.S. Government Obligations in accordance with this Indenture;
provided, however, that if TLGI has made any payment of principal of, premium,
if any, or interest on any Securities of such series because of the
reinstatement of its obligations, TLGI shall be subrogated to the rights of the
Holders of such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.

ARTICLE NINE

AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
SECURITYHOLDERS.

TLGI, when authorized by a resolution of the Board of Directors (which
resolution may provide general terms or parameters for such action and may
provide that the specific terms of such action may be determined in accordance
with or pursuant to an Issuer Order), and the Trustee may from time to time and
at any time enter into an indenture or indentures supplemental hereto (which
shall conform to the provisions of the Trust Indenture Act of 1939 as in force
at the date of the execution thereof) for one or more of the following purposes:

(a) to cure any ambiguity, defect or inconsistency or to correct or
supplement any provision contained herein or in any supplemental indenture which
may be defective or inconsistent with any other provision contained herein or in
any supplemental indenture, or to make any other provisions as to TLGI may deem
necessary or desirable, provided that no such action shall adversely affect the
interests of the Holders of the Securities;

(b) to evidence the succession of another corporation to TLGI, or
successive successions, and the assumption by the successor corporation of the
covenants, agreements and obligations of TLGI pursuant to Article Five;

(c) to establish the form or terms of Securities of any series as
permitted by Sections 2.01 and 2.02 and to provide for adjustment of conversion
rights pursuant to Section 13.05;

(d) to comply with any requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA;

(e) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee with respect to the Securities of one or more
series and to add to or change any of the

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provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one trustee, pursuant to
the requirements of Section 7.14; and

(f) to add to the covenants of TLGI such further covenants,
restrictions, conditions or provisions as TLGI and the Trustee shall consider to
be for the protection of the Holders of all or any series of Securities (and if
such covenants, restrictions, conditions or provisions are to be for the
protection of less than all series of Securities, stating that the same are
expressly being included solely for the protection of such series), and to make
the occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions, conditions or provisions an Event of Default
permitting the enforcement of all or any of the several remedies provided, in
this Indenture as herein set forth; provided, that in respect of any such
additional covenant, restriction, condition or provision such supplemental
indenture may provide for a particular period of grace after default (which
period may be shorter or longer than that allowed in the case of other defaults)
or may provide for an immediate enforcement upon such an Event of Default or may
limit the remedies available to the Trustee upon such an Event of Default or may
limit the right of the Holders of a majority in aggregate principal amount of
the Securities of such series to waive such Event of Default.

The Trustee is hereby authorized to join with TLGI in the execution of
any such supplemental indenture, to make any further appropriate agreements and
stipulations which may be therein contained and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Trustee shall not be obligated to enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.

Any supplemental indenture authorized by the provisions of this
Section 9.01 may be executed without the consent of the Holders of any of the
Securities then Outstanding, notwithstanding any of the provisions of Section
9.02.

Notwithstanding the above, the Trustee and TLGI may not make any
change that adversely affects the rights of any Holders hereunder. TLGI shall
be required to deliver to the Trustee an Opinion of Counsel stating that any
such change made pursuant to paragraph (a) or (f) of this Section 9.01 does not
adversely affect the rights of any Holder.

Section 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF
SECURITYHOLDERS.

With the consent (evidenced as provided in Article Ten) of the Holders
of not less than a majority in aggregate principal amount of the Securities then
Outstanding of any series affected by such supplemental indenture, TLGI, when
authorized by a resolution of the Board of Directors (which resolution may
provide general terms or parameters for such action and may provide that the
specific terms of such action may be determined in accordance with or pursuant
to an Issuer Order), and the Trustee may, from time to time and at any time,
enter into an indenture or indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture act of 1939 as in force at the date of
execution thereof) for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the Holders
of the Securities of such series; provided, that no such supplemental indenture
shall (a) extend the final maturity of any Security, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest, if
any, thereon (or, in the case of an Original Issue Discount Security, reduce the
rate of accrual of original issue discount thereon), or reduce or alter the
method of computation of any amount payable on redemption, repayment or purchase
by the Company thereof (or the time at which any such redemption, repayment or
purchase may be made), or make the principal thereof (including any amount in

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respect of original issue discount), or interest, if any, thereon payable in any
coin or currency other than that provided in the Securities or in accordance
with the terms of the Securities, or reduce the portion of the principal amount
of an Original Issue Discount Security that would be due and payable upon an
acceleration of the maturity thereof pursuant to Section 6.01 or the amount
thereof provable in bankruptcy pursuant to Section 6.02, or impair or affect the
right of any Securityholder to institute suit for the payment or conversion
thereof or materially and adversely affect the right to convert the Securities
in accordance herewith or, if the Securities provide therefor, any right of
repayment or purchase at the option of the Securityholder, in each case without
the consent of the Holder of each Security so affected, or (b) reduce the
aforesaid percentage of Securities of any series, the consent of the Holders of
which is required for any such supplemental indenture, without the consent of
the Holders of each Security so affected. No consent of any Holder of any
Security shall be necessary under this Section 9.02 to permit the Trustee and
TLGI to execute supplemental indentures pursuant to Sections 5.01, 9.01 and
13.05.

A supplemental indenture which changes or eliminates any covenant,
Event of Default or other provision of this Indenture which has expressly been
included solely for the benefit of one or more particular series of Securities,
or which modifies the rights of Holders of Securities of such series, with
respect to such covenant or provision, shall be deemed not to affect the rights
under this Indenture of the Holders of Securities of any other series.

Upon the request of TLGI, accompanied by a copy of a resolution of the
Board of Directors (which resolution may provide general terms or parameters
for such action and may provide that the specific terms of such action may be
determined in accordance with or pursuant to an Issuer Order) certified by the
secretary or an assistant secretary of TLGI authorizing the execution of any
such supplemental indenture, and upon the filing with the Trustee of evidence of
the consent of the Holders of the Securities and aforesaid and other documents,
if any required by Section 10.01, the Trustee shall join with TLGI in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.

It shall not be necessary for the consent of the Securityholders under
this Section 8.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.

Promptly after the execution by TLGI and the Trustee of any
supplemental indenture pursuant to the provisions of this Section 9.02, the
Trustee shall give notice thereof to the Holders of then Outstanding Securities
of each series affected thereby, by mailing a notice thereof by first-class mail
to such Holders at their addresses as they shall appear on the Security
register. Any failure of TLGI to give such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any such supplemental
indenture.

Section 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.

Every amendment of or supplement to this Indenture, or each series of
the Securities shall comply with the TIA as then in effect.

Section 9.04. EFFECT OF SUPPLEMENTAL INDENTURE.

Upon the execution of any supplemental indenture pursuant to the
provisions hereof, this Indenture shall be and be deemed to be modified and
amended in accordance therewith and the respective

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rights, limitations of rights, obligations, duties and immunities under this
Indenture of the Trustee, TLGI and the Holders of Securities of each series
affected thereby shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments, and all
the terms and conditions of any such supplemental indenture shall be and be
deemed to be part of the terms and conditions of this Indenture for any and all
purposes and every Holder of Securities of each series affected thereby
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.

Section 9.05. NOTATION ON OR EXCHANGE OF SECURITIES.

If an amendment, supplement or waiver changes the terms of a Security
of any series, the Trustee shall (in accordance with the specific direction of
TLGI) request the Holder of the Security to deliver it to the Trustee. The
Trustee shall (in accordance with the specific direction of TLGI) in form
approved by the Trustee for such series as to any matter provided for by such
supplemental indenture or as to any action taken by Securityholders and return
it to the Holder. Alternatively, if TLGI or the Trustee so determines, new
Securities of any series so modified as to conform, in the opinion of the
Trustee and TLGI, to any modification of this Indenture contained in any such
supplemental indenture may be prepared by TLGI, authenticated by the Trustee and
delivered in exchange for the Securities of such series then Outstanding.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.

Section 9.06. TRUSTEE MAY SIGN AMENDMENTS, ETC.

The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article Nine if the amendment, supplement or waiver does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not, sign it. In signing or refusing to
sign such amendment, supplement or waiver, the Trustee shall be entitled to
receive, and shall be fully protected in relying upon, an Officers' Certificate
and an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver is authorized or permitted by this Indenture, that it is
not inconsistent herewith and that it will be valid and binding upon TLGI in
accordance with its terms.

ARTICLE TEN

CONCERNING THE SECURITYHOLDERS

Section 10.01 EVIDENCE OF ACTION TAKEN BY SECURITYHOLDERS. Any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be given or taken by a specified percentage
in principal amount of the Securityholders of any or all series may be embodied
in and evidenced by one or more instruments of substantially similar tenor
signed by such specified percentage of Securityholders in person or by agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee. Proof of execution of any instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Sections 7.01 and 7.02) conclusive in favor of the Trustee and
TLGI, if made in the manner provided in this Article Ten.

Section 10.02 PROOF OF EXECUTION OF INSTRUMENTS AND OF HOLDING OF
SECURITIES. Subject to Sections 7.01 and 7.02, the execution of any instrument
by a Securityholder or his agent or proxy may be proved in the following manner:

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(a) The fact and date of the execution by any Holder of any
instrument may be proved by the certificate of any notary public or other
officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the person executing such instruments acknowledged to
him the execution thereof, or by an affidavit of a witness to such
execution sworn to before any such notary or other such officer. Where
such execution is by or on behalf of any legal entity other than an
individual, such certificate or affidavit shall also constitute sufficient
proof of the authority of the person executing the same.

(b) The ownership of Securities shall be proved by the Security
register or by a certificate of the Security registrar.

Section 10.03 HOLDERS TO BE TREATED AS OWNERS. TLGI, the Trustee and
any agent of TLGI or the Trustee may deem and treat the Person in whose name any
Security shall be registered upon the Security register for such series as the
absolute owner of such Security (whether not such Security shall be overdue and
notwithstanding any notation of ownership or other writing thereon) for the
purpose of receiving payment of or on account of the principal of and, subject
to the provisions of this Indenture, interest, if any, on such Security and for
all other purposes; and neither TLGI nor the Trustee nor any agent of TLGI or
the Trustee shall be affected by any notice to the contrary.

Section 10.04 SECURITIES OWNED BY TLGI DEEMED NOT OUTSTANDING. In
determining whether the Holders of the requisite aggregate principal amount of
Outstanding Securities of any or all series have concurred in any direction,
consent or waiver under this Indenture, Securities which are owned by TLGI or
any other obligor on the Securities with respect to which such determination is
being made or by any Affiliate of TLGI or any other obligor on the Securities
with respect to which such determination is being made shall be disregarded and
deemed not to be Outstanding for the purpose of any such determination, except
that for the purpose of determining whether the Trustee shall be protected in
relying on any such direction, consent or waiver only Securities which the
Trustee knows are so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not TLGI or any other
obligor upon the Securities or any Affiliate of TLGI or any other obligor on the
Securities. In case of a dispute as to such right, the advice of counsel shall
be full protection in respect of any decision made by the Trustee in accordance
with such advice. Upon request of the Trustee, TLGI shall furnish to the
Trustee promptly an Officer's Certificate listing and identifying all
Securities, if any, known by TLGI to be owned or held by or for the account of
any of the above described Persons; and, subject to Sections 7.01 and 7.02, the
Trustee shall be entitled to accept such Officer's Certificate as conclusive
evidence of the facts therein set forth and of the fact that all Securities not
listed therein are Outstanding for the purposes of any such determination.

Section 10.05 RIGHT OF REVOCATION OF ACTION TAKEN. At any time prior
to (but not after) the evidencing to the Trustee, as provided in Section 10.01,
of the taking of any action by the Holders of the percentage in aggregate
principal amount of the Securities of any or all series, as the case may be,
specified in this Indenture in connection with such action, any Holder of a
Security the serial number of which is shown by the evidence to be included
among the serial numbers of the Securities the Holders of which have consented
to such action may, by filing written notice at the Corporate Trust Office and
upon proof of holding as provided in this Article Ten, revoke such action so far
as concerns such Security, provided that such revocation shall not become
effective until three business days after such filing. Except as aforesaid any
such action taken by the Holder of any Security shall be conclusive and binding
upon such Holder and upon all future Holders and owners of such Security and of
any Securities issued in exchange or substitution therefor or on registration of
transfer thereof, irrespective of whether or not any notation in

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regard thereto is made upon any such Security. Any action taken by the
Holders of the percentage in aggregate principal amount of the Securities of
any or all series, as the case may be, specified in this Indenture in
connection with such action shall be conclusively binding upon TLGI, the
Trustee and the Holders of all the Securities affected by such action.

Section 10.06 RECORD DATE FOR CONSENTS AND WAIVER. TLGI may, but
shall not be obligated to, direct the Trustee to establish a record date for
the purpose of determining the Persons entitled to (i) waive any past default
with respect to the Securities of such series in accordance with Section 6.05 of
this Indenture, (ii) consent to any supplemental indenture in accordance with
Section 9.02 of this Indenture, or (iii) waive compliance with any term,
condition or provision of any covenant hereunder. If a record date is fixed,
the Holders on such record date, or their duly designated proxies, and any such
Persons, shall be entitled to waive any such past default, consent to any such
supplemental indenture or waive compliance with any such term, condition or
provision, whether or not such Holder remains a Holder after such record date;
provided, however, that unless such waiver or consent is obtained from the
Holders, or duly designated proxies, of the requisite principal amount of
Outstanding Securities of such series prior to the date which is the 180th day
after such record date, any such waiver or consent previously given shall
automatically and without further action by any Holder be cancelled and of no
further effect.

ARTICLE ELEVEN

MISCELLANEOUS

Section 11.01. CONFLICT OF ANY PROVISION OF INDENTURE WITH TRUST
INDENTURE ACT OF 1939.

If and to the extent that any provision of this Indenture Limits,
qualifies or conflicts with another provision included in this Indenture which
is required to be included herein by any of Sections 310 to 317, inclusive, or
is deemed applicable to this Indenture by virtue of the provisions of this Trust
Indenture Act of 1939, such required provision shall control.

Section 11.02. NOTICES.

Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the Holders of
Securities to or on TLGI, or as required pursuant to the Trust Indenture Act of
1939, may be given or served by being deposited postage prepaid, first-class
mail (except as otherwise specifically provided herein) addressed (until another
address of TLGI is filed by TLGI with the Trustee) to TLGI at 50 East
RiverCenter Boulevard, Covington, Kentucky 41011, Attention: ___________, with a
copy to: The Loewen Group Inc., 4126 Norland Ave., Burnaby, British Columbia,
Canada V56358. Any notice, direction, request or demand by TLGI or any Holder
of Securities to or upon the Trustee shall be deemed to have been sufficiently
given or served by being deposited postage prepaid, first-class mail (except as
otherwise specifically provided herein) addressed (until another address of the
Trustee is filed by the Trustee with TLGI) to Fleet National Bank, 777 Main
Street, Hartford, Connecticut 06115, Attention: ____________.

Where this Indenture provides for notice to Holders of Securities,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each Holder
entitled thereto, at his last address as it appears in the Security register.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to

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receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holder shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver. In case, by reason of the
suspension of or irregularities in regular mail service, it shall be
impracticable to mail any notice when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be reasonably satisfactory to the Trustee shall be deemed to be
sufficient notice.

Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first class mail, postage prepaid,
addressed as follows:

Section 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.

Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Securities.
The obligors, the Trustee, the Registrar and any other person shall have the
protection of TIA Section 312(c).

Section 11.04. OFFICER'S CERTIFICATES AND OPINIONS OF COUNSEL;
STATEMENTS TO BE CONTAINED THEREIN.

Upon any application or demand by TLGI to the Trustee to take any
action under any of the provisions of this Indenture, or as required pursuant to
the Trust Indenture Act of 1939, TLGI shall furnish to the Trustee an Officer's
Certificate stating that all conditions precedent provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent have been complied with, except that in the case of any such
application or demand as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or demand, no additional certificate or opinion need be
furnished.

Each certificate or opinion provided for in this Indenture (other than
a certificate provided pursuant to Section 3.03(d)) and delivered to the Trustee
with respect to compliance with a condition or covenant provided for in this
Indenture shall include (a) a statement that the person making such certificate
or opinion has read such covenant or condition, (b) a brief statement as to the
nature and scope of the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are based, (c) a statement
that, in the opinion of such person, he has made such examination or
investigation as is necessary to enable him to express an opinion as to whether
or not such covenant or condition has been complied with, and (d) a statement as
to whether or not, in the opinion of such person, such condition or covenant has
been complied with.

Any certificate, statement or opinion of an officer of TLGI may be
based, insofar as it related to legal matters, upon a certificate or opinion of
or representations by counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous. Any
certificate, statement or opinion of counsel may be based, insofar as it relates
to factual matters, information with respect to which is in the possession of
TLGI, upon the certificate, statement or opinion of or representations by an
officer or officers of TLGI, unless such counsel knows that the certificate,
statement or opinion or representations with respect to the matters upon which
his certificate, statement or opinion may be based as aforesaid are erroneous,
or in the exercise of reasonable care should know that the same are erroneous.

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Any certificate, statement or opinion of an officer of TLGI or of
counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representation by an accountant or firm of
accountants in the employ of TLGI, unless such officer or counsel, as the case
may be, knows that the certificate or opinion or representations with respect to
the accounting matters upon which his certificate, statement or opinion may be
based as aforesaid are erroneous, or in the exercise of reasonable care should
know that the same are erroneous.

Any certificate or opinion of any independent firm of public
accountants filed with and directed to the Trustee shall contain a statement
that such firm in independent.

Section 11.05. PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS.

If the date of maturity of principal of or interest, if any, on the
Securities of any series or the date fixed for redemption, purchase or repayment
of any such Security or at the last date for conversion of any Security shall
not be a Business Day, then (notwithstanding any other provision of this
Indenture or the Securities) payment of interest, if any, or principal need not
be made on such date and such conversion need not be made by such date, but may
be made on the next succeeding Business Day with the same force and effect as if
made on the date of maturity or the date fixed for redemption, purchase or
repayment or the last date of such conversion, and, in the case of payment, no
interest shall accrue for the period after such date.

Section 11.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.

The Trustee may make reasonable rules for action by or at a meeting of
Noteholders. The Paying Agent or Registrar may make reasonable rules for its
functions.

Section 11.07. GOVERNING LAW.

THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE, AND THE
SECURITIES WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, AND FOR ALL
PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF APPLICABLE FEDERAL LAW. The Trustee, TLGI and the Holders agree to
submit to the jurisdiction of the courts of the State of New York in any action
or proceeding arising out of or relating to this Indenture or the Securities.

Section 11.08. CONSENT TO SERVICE OF PROCESS.

TLGI irrevocably (a) agrees that any legal suit, action or proceeding
arising out of or based upon this Indenture and the Securities issued hereunder
may be instituted in any federal or state court located in the City of New York,
(b) waives, to the fullest extent it may effectively do so, any objection which
it may now or hereafter have to the laying of venue of any such proceeding, and
(c) submits to the nonexclusive jurisdiction of such courts in any such suit,
action or proceeding. TLGI has appointed Thelen, Marrin, Johnson & Bridges LLP,
330 Madison Avenue, New York, New York 10017, Attention: David P. Graybeal,
Esq., as its authorized agent (the "AUTHORIZED AGENT") upon whom process may be
served in any suit, action or proceeding arising out of or based on this
Indenture which may be instituted in any federal or state court located in The
City of New York, expressly consents to the jurisdiction of any such court in
respect of any suit, action or proceeding, and waives any other requirements of
or objections to personal jurisdiction with respect thereto. Such appointment
shall be irrevocable. TLGI agrees to take any and all action, including the
filing of any and all documents and instruments, that may be necessary to

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continue such appointment in full force and effect as aforesaid. Service of
process upon the Authorized Agent and written notice of such service to TLGI
shall be deemed, in every respect, effective service of process upon TLGI.
Notwithstanding the foregoing, designation of an authorized agent does not
constitute submission to jurisdiction or consent to service or process in any
legal action or proceeding predicated on United States federal or state
securities laws.

Section 11.09. NO INTERPRETATION OF OTHER AGREEMENTS.

This Indenture may not be used to interpret another indenture, loan or
debt agreement of TLGI or any of its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.

Section 11.10. PARTNERS, INCORPORATORS, STOCKHOLDERS, OFFICERS AND
DIRECTORS OF TLGI EXEMPT FROM INDIVIDUAL LIABILITY.

No recourse under or upon any obligation, covenant or agreement
contained in this Indenture, or in any Security, or because of any indebtedness
evidenced thereby, shall be had against any incorporator, as such or against any
past, present or future director, officer, employee, stockholder or Affiliate,
as such, of TLGI, or any partner of TLGI or of any successor, either directly or
through TLGI or any successor, under any rule of law, statute or constitutional
provision or by the enforcement of any assessment or by any legal or equitable
proceeding or otherwise, all such liability being expressly waived and released
by the acceptance of the Securities by the Holders thereof and as part of the
consideration for the issue of the Securities.

Section 11.11. SUCCESSORS.

All agreements of TLGI in this Indenture and the Securities shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successors.

Section 11.12. DUPLICATE ORIGINALS.

The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all such executed copies together
represent the same agreement.

Section 11.13. SEVERABILITY.

In case any provision in this Indenture or the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.

Section 11.14. TABLE OF CONTENTS, HEADINGS, ETC.

The Table of Contents and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.

Section 11.15. PROVISIONS OF INDENTURE FOR THE SOLE BENEFIT OF PARTIES
AND HOLDERS OF SENIOR INDEBTEDNESS AND OF SECURITIES.

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Nothing in this Indenture or in the Securities, expressed or implied,
shall give or be construed to give to any Person, other than the parties hereto
and their successors and the Holders of the Securities, any legal or equitable
right, remedy or claim under this Indenture or under any covenant or provisions
herein contained, all such covenants and provisions being for the sole benefit
of the parties hereto and their successors, the holders of the Holders of the
Securities.

ARTICLE TWELVE

REDEMPTION OF SECURITIES AND SINKING FUNDS

Section 12.01 APPLICABILITY OF ARTICLE. The provisions of this
Article shall be applicable to the Securities of any series which are redeemable
before their maturity or to any sinking fund for the retirement of Securities of
a series except as otherwise specified, as contemplated by Section 2.01 for
Securities of such series.

Section 12.02 NOTICE OF REDEMPTION; PARTIAL REDEMPTIONS. Notice of
redemption to the Holders of Securities of any series to be redeemed as a whole
or in part at the option of TLGI shall be given by mailing notice of such
redemption by first-class mail, postage prepaid, at least 30 days and not more
than 60 days prior to the date fixed for redemption to such Holders of
Securities of such series at their last addresses as they shall appear upon the
registry books. Any notice which is mailed in the manner herein provided shall
be conclusively presumed to have been duly given, whether or not the Holder
receives the notice. Failure to give notice by mail, or any defect in the
notice to the Holder of any Security of a series designated for redemption as a
whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security of such series.

The notice of redemption to each such Holder shall specify the
principal amount of each Security of such series held by such Holder to be
redeemed, the date fixed for redemption, the redemption price, the place or
places of payment, that payment will be made upon presentation and surrender of
such Securities, that such redemption is pursuant to the mandatory or optional
sinking fund, or both, if such be the case, that interest, if any, (or, in the
case of Original Issue Discount Securities, original issue discount) accrued to
the date fixed for redemption will be paid as specified in such notice and that
on and after said date interest, if any, thereon or on the portions thereof to
be redeemed (or, in the case of Original Issue Discount Securities, original
issue discount) will cease to accrue and, if applicable, shall also specify the
Conversion Price then in effect and the date on which the right to convert such
Securities or the portions thereof to be redeemed will expire. In case any
Security of a series is to be redeemed in part only, the notice of redemption
shall state the portion of the principal amount thereof to be redeemed and shall
state that on and after the date fixed for redemption, upon surrender of such
Security, a new Security or Securities of such series in principal amount equal
to the unredeemed portion thereof will be issued.

The notice of redemption of Securities of any series to be redeemed at
the option of TLGI shall be given by TLGI or, at TLGI's request, by the Trustee
in the name and at the expense of TLGI.

On or before the redemption date specified in the notice of redemption
given as provided in this Section 12.02, TLGI will deposit with the Trustee or
with one or more Paying Agents (or, if TLGI is acting as its own paying agent,
set aside, segregate and hold in trust as provided in Section 2.09) an amount of
money sufficient to redeem on the redemption date all the Outstanding Securities
of such series so called for redemption (other than those theretofore
surrendered for conversion into Common Stock and deemed not to be Outstanding
hereunder) at the appropriate redemption price, together with accrued interest,
if any,

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to the date fixed for redemption on all the Outstanding Securities of such
series so called for redemption (other than those theretofore surrendered for
conversion into Common Stock and deemed not to be Outstanding hereunder). If
any Security called for redemption is converted pursuant hereto, any moneys
deposited with the Trustee or any Paying Agent or so segregated and held in
trust for the redemption of such Security shall be paid to TLGI upon TLGI's
request, or, if then held by TLGI, shall be discharged from such trust. TLGI
will deliver to the Trustee at least 30 days prior to the date fixed for
redemption (unless a shorter notice shall be satisfactory to the Trustee) an
Officer's Certificate stating the aggregate principal amount of Securities to be
redeemed. In case of a redemption at the election of TLGI prior to the
expiration of any restriction on such redemption, TLGI shall deliver to the
Trustee, prior to the giving of any notice of redemption to Holders pursuant to
this Section 12.02, an Officer's Certificate stating that such restriction has
been complied with.

If less than all the Securities of a series are to be redeemed, the
Trustee shall select, in such manner as it shall deem appropriate and fair,
Securities of such series to be redeemed. Securities may be redeemed in part in
multiples equal to the minimum authorized denomination for Securities of such
series or any multiple thereof. The Trustee shall promptly notify TLGI in
writing of the Securities of such series selected for redemption and, in the
case of any Securities of such series selected for partial redemption, the
principal amount thereof to be redeemed. For all purposes of this Indenture,
unless the context otherwise requires, all provisions relating to the redemption
of Securities of any series shall relate, in the case of any Security redeemed
or to be redeemed only in part, to the portion of the principal amount of such
Security which has been or is to be redeemed. If any Security selected for
partial redemption is surrendered for conversion after such selection, the
converted portion of such Security shall be deemed (so far as may be) to be the
portion selected for redemption. Upon any redemption of less than all the
Securities of a series, for purposes of selection for redemption TLGI and the
Trustee may treat as Outstanding Securities surrendered for conversion during
the period of 15 days next preceding the mailing of a notice of redemption, and
need not treat as Outstanding any Security authenticated and delivered during
such period in exchange for the unconverted portion of any Security converted in
part during such period.

Section 12.03 PAYMENTS OF SECURITIES CALLED FOR REDEMPTION. If
notice of redemption has been given as above provided, the Securities or
portions of Securities specified in such notice shall become due and payable on
the date and at the place or places stated in such notice at the applicable
redemption price, together with interest, if any, accrued to the date fixed for
redemption, and on and after said date (unless TLGI shall default in the payment
of such Securities at the redemption price, together with interest, if any,
accrued to said date) interest (or, in the case of Original Issue Discount
Securities, original issue discount) on the Securities or portions of Securities
so called for redemption shall cease to accrue, and such Securities shall cease
from and after the date fixed for redemption (unless an earlier date shall be
specified in a Board Resolution, Officer's Certificate or executed supplemental
indenture referred to in Sections 2.02 and 2.01 by or pursuant to which the form
and terms of the Securities of such series were established) to be convertible
into Common Stock, and, except as provided in Sections 7.06 and 8.04, to be
entitled to any other benefit or security under this Indenture, and the Holders
thereof shall have no right in respect of such Securities except the right to
receive the redemption price thereof and unpaid interest to the date fixed for
redemption. On presentation and surrender of such Securities at a place of
payment specified in said notice, said Securities or the specified portions
thereof shall be paid and redeemed by TLGI at the applicable redemption price,
together with interest, if any, accrued thereon on the date fixed for
redemption; provided that payment of interest, if any, becoming due on or prior
to the date fixed for redemption shall be payable to the Holders of Securities
registered as such on the relevant record date subject to the terms and
provisions of Sections 2.01 and 2.07 hereof.

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If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the redemption price shall, until paid or duly
provided for, bear interest from the date fixed for redemption at the rate of
interest or Yield to Maturity (in the case of an Original Issue Discount
Security) borne by such Security, and such Security shall remain convertible
into Common Stock until the redemption price of such Security (together with
such interest thereon) shall have been paid or duly provided for.

Upon presentation of any Security redeemed in part only, TLGI shall
execute and the Trustee shall authenticate and deliver to or on the order of the
Holder thereof, at the expenses of TLGI, a new Security or Securities of such
series and of like tenor, of authorized denominations, in principal amount equal
to the unredeemed portion of the Security so presented.

Section 12.04 EXCLUSION OF CERTAIN SECURITIES FROM ELIGIBILITY FOR
SELECTION FOR REDEMPTION. Securities shall be excluded from eligibility for
selection for redemption if they are identified by registration and
certificate number in an Officer's Certificate delivered to the Trustee at
least 45 days prior to the last date on which notice of redemption may be
given as being owned of record and beneficially by, and not pledged or
hypothecated by, either (a) TLGI or (b) a Person specifically identified in
such written statement as an Affiliate of TLGI.

Section 12.05 MANDATORY AND OPTIONAL SINKING FUNDS. The minimum
amount of any sinking fund payment provided for by the terms of the Securities
of any series is herein referred to as a "mandatory sinking fund payment", and
any payment in excess of such minimum amount provided for by the terms of the
Securities of any series is herein referred to as an "optional sinking fund
payment". The date on which a sinking fund payment is to be made is herein
referred to as the "sinking fund payment date".

In lieu of making all or any part of any mandatory sinking fund
payment with respect to any series of Securities in cash, TLGI may at its
option (a) deliver to the Trustee Securities of such series theretofore
purchased or otherwise acquired (except upon redemption pursuant to the
mandatory sinking fund) by TLGI or receive credit for Securities of such
series (not previously so credited) theretofore purchased or otherwise
acquired (except as aforesaid) by TLGI and delivered to the Trustee for
cancellation pursuant to Section 2.12, (b) receive credit for Securities (not
previously so credited) converted into Common Stock and so delivered to the
Trustee for cancellation, (c) receive credit for optional sinking fund
payments (not previously so credited) made pursuant to this Section 2.09, or
(d) receive credit for Securities of such series (not previously so credited)
redeemed by TLGI through any optional redemption provision contained in the
terms of such series. Securities so delivered or credited shall be received
or credited by the Trustee at the sinking fund redemption price specified in
such Securities.

On or before the 60th day next preceding each sinking fund payment
date for any series, TLGI will deliver to the Trustee an Officer's Certificate
(a) specifying the portion of the mandatory sinking fund payment to be satisfied
by payment of cash and the portion to be satisfied by credit of Securities of
such series and the basis for such credit, (b) stating that none of the
Securities of such series to be so credited has theretofore been so credited,
(c) stating that no defaults in the payment of interest or Events of Default
with respect to such series have occurred (which have not been waived or cured
or otherwise ceased to exist) and are continuing, and (d) stating whether or not
TLGI intends to exercise its right to make an optional sinking fund payment with
respect to such series and, if so, specifying the amount of such optional
sinking fund payment which TLGI intends to pay on or before the next succeeding
sinking fund payment date. Any Securities of such series to be credited and
required to be delivered to the Trustee in

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order for the Issue to be entitled to credit therefor as aforesaid which have
not theretofore been delivered to the Trustee shall be delivered for
cancellation pursuant to Section 2.12 to the Trustee with such Officer's
Certificate (or reasonably promptly thereafter if acceptable to the Trustee).
Such Officer's Certificate shall be irrevocable and upon its receipt by the
Trustee TLGI shall become unconditionally obligated to make all the cash
payments or payments therein referred to, if any, on or before the next
succeeding sinking fund payment date. Failure to TLGI, on or before any such
60th day, to deliver such Officer's Certificate and Securities (subject to the
parenthetical clause in the second preceding sentence) specified in this
paragraph, if any, shall not constitute a default but shall constitute, on and
as such date, the irrevocable election of TLGI (i) that the mandatory sinking
fund payment for such series due on the next succeeding sinking fund payment
date shall be paid entirely in cash without the option to deliver or credit
Securities of such series in respect thereof, and (ii) that TLGI will make no
optional sinking fund payment with respect to such series as provided in this
Section 12.05.

If the sinking fund payment or payments (mandatory or optional or
both) to be made in cash on the next succeeding sinking fund payment date plus
any unused balance of any preceding sinking fund payments made in cash shall
exceed $50,000 or a lesser sum if TLGI shall so request with respect to the
Securities of any particular series, such cash shall be applied on the next
succeeding sinking fund payment date to the redemption of Securities of such
series at the sinking fund redemption price together with accrued interest, if
any, to the date fixed for redemption. If such amount shall be $50,000 or less
and TLGI makes no such request, then it shall be carried over until a sum in
excess of $50,000 is available. The Trustee shall select, in the manner
provided in Section 12.02, for redemption on such sinking fund payment date a
sufficient principal amount of Securities of such series to absorb said cash, as
nearly as may be, and shall (if requested in writing by TLGI) inform TLGI of the
serial numbers of the Securities of such series (or portions thereof) so
selected. The Trustee, in the name and at the expense of TLGI (or TLGI, if it
shall so request the Trustee in writing) shall cause notice of redemption of the
Securities of such series to be given in substantially the manner provided in
Section 12.02 (and with the effect provided in Section 12.03) for the redemption
of Securities of such series in part at the option of TLGI. The amount of any
sinking fund payments not so applied or allocated to the redemption of
Securities of such series shall be added to the next cash sinking fund payment
for such series and, together with such payment, shall be applied in accordance
with the provisions of this Section 12.05. Any and all sinking fund moneys held
on the stated maturity date of the Securities of any particular series (or
earlier, if such maturity is accelerated), which are not held for the payment or
redemption of particular Securities of such series shall be applied, together
with other moneys, if necessary, sufficient for the purpose, to the payment of
the principal of and interest, if any, on, the Securities of such series at
maturity.

On or before each sinking fund payment date, TLGI shall pay to the
Trustee in cash or shall otherwise provide for the payment of all interest, if
any, accrued to the date fixed for redemption of Securities to be redeemed on
such sinking fund payment date.

The Trustee shall not redeem or cause to be redeemed any Securities of
a series with sinking fund moneys or give any notice of redemption of Securities
for such series by operation of the sinking fund during the continuance of a
default in payment of interest on such Securities or of any Event of Default
with respect to such series except that, where the giving of notice of
redemption of any Securities shall theretofore have been made, the Trustee shall
redeem or cause to be redeemed such Securities, provided that it shall have
received from TLGI a sum sufficient for such redemption. Except as aforesaid,
any moneys in the sinking fund for such series at the time when any such default
or Event of Default shall occur, and any moneys thereafter paid into the sinking
fund, shall, during the continuance of such default or Event of Default, be
deemed to have been collected under Article Seven and held for the payment of
all such Securities. In case such Event of Default shall have been waived as
provided in

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Section 6.05 or the default cured on or before the 60th day preceding the
sinking fund payment date in any year, such moneys shall thereafter be applied
on the next succeeding sinking fund payment date in accordance with this Section
12.05 to the redemption of such Securities.

ARTICLE THIRTEEN

CONVERSION OF SECURITIES

Section 13.01 APPLICABILITY OF ARTICLE. The provisions of this
Article shall be applicable to the Securities of any series which are
convertible into Common Stock or, if so provided in a Board Resolution,
Officer's Certificate or executed supplemental indenture referred to in Sections
2.01 and 2.02 by or pursuant to which the form and terms of the Securities of
such series were established, cash in lieu thereof, as and to the extent
provided by the terms of the Securities of such series.

Section 13.02 EXERCISE OF CONVERSION PRIVILEGE. In order to exercise
the conversion privilege, the Holder of any Security to be converted shall
surrender such Security to the Conversion Agent at any time during usual
business hours at its office or agency maintained for the purpose as provided in
this Indenture, accompanied by a fully executed written notice, in substantially
the form set forth on the reverse of the Security, that the Holder elects to
convert such Security or a stated portion thereof constituting a multiple of
$1,000 in principal amount, and, if such Security is surrendered for conversion
during the period between the close of business on any record date for such
Security and the opening of business on the related interest payment date (or on
such interest payment date), accompanied also by payment of an amount equal to
the interest payable on such interest payment date on the portion of the
principal amount of the Security being surrendered for conversion. Such notice
shall also state the name or names (and address) in which the certificate or
certificates for shares of common Stock shall be issued (or to whom payment in
cash in lieu of Common Stock shall be made). Securities surrendered for
conversion shall (if so required by TLGI or the Conversion Agent) be duly
endorsed by, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to TLGI and the Conversion Agent duly executed by,
the Holder or his attorney duly authorized in writing. As promptly as
practicable after the receipt of such notice and the surrender of such Security
as aforesaid, TLGI shall, subject to the provisions of Section 13.07, issue and
deliver at such office or agency to such Holder, or on his written order, a
certificate or certificates for the number of all shares of Common Stock
issuable on conversion of such Security in accordance with the provisions of
such Security and cash, as provided in Section 13.03, in respect of any fraction
of a share of Common Stock otherwise issuable upon such conversion or, if so
provided in a Board Resolution, Officer's Certificate or executed supplemental
indenture referred to in Sections 2.01 and 2.02 by or pursuant to which the form
and terms of the Securities of such series were established, cash in lieu of
shares of Common Stock. Such conversion shall be at the Conversion Price in
effect, and shall be deemed to have been effected, immediately prior to the
close of business on the date (herein called the "DATE OF CONVERSION") on which
such notice in proper form shall have been received by the Conversion Agent and
such Security shall have been surrendered as aforesaid, and the Person or
Persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable, if any, upon such conversion shall be deemed to
have become on the Date of Conversion the holder or holders of record of the
shares represented thereby; provided, however, that such surrender on any date
when the stock transfers books of TLGI shall be closed shall constitute the
Person or Persons in whose name or names the certificate or certificates for
such shares are to be issued, if any, as the record holder or holders thereof
for all purposes at the opening of business on the next succeeding day on which
such stock transfer books are open but such conversion shall nevertheless be at
the Conversion Price in effect at the close of business on the date when such
Security shall have been so surrendered with the conversion notice

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in proper form. In the case of conversion of a portion, but less than all, of a
Security, TLGI shall execute, and the Trustee shall authenticate and deliver to
the Holder thereof, at the expense of TLGI, a Security or Securities in the
aggregate principal amount of the unconverted portion of the Security
surrendered. Except as otherwise expressly provided in this Indenture, no
payment or adjustment shall be made for interest accrued on any Security (or
portion thereof) converted or for dividends or distributions on any Common Stock
issued upon conversion of any Security. The right, if any, of a Holder of any
Security to cause TLGI to redeem, purchase or repay such Security shall
terminate upon receipt by TLGI of any notice of conversion of such Security.

Section 13.03 FRACTIONAL INTERESTS. No fractions of shares or script
representing fractions of shares shall be issued upon conversion of Securities.
If more than one Security shall be surrendered for conversion at one time by the
same Holder, the number of full shares which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate principal amount of the
Securities so surrendered. If any fraction of a share of Common Stock would,
except for the provisions of this Section 13.03, be issuable on the conversion
of any Security or Securities, TLGI shall make payment in lieu thereof in cash
equal to the value of such fraction computed on the basis of the Last Sale Price
of one share of Common Stock on the most recent Trading Day prior to the Date of
Conversion. "LAST SALE PRICE" on any Trading Day shall mean (i) the closing
price regular way (or, if no closing price is reported the average of the bid
and asked prices) as reported on the New York Stock Exchange Composite Tape, or
(ii) if on such Trading Day the Common Stock is not listed or admitted to
trading on such exchange, the closing price regular way (or, if no closing price
is reported the average of the bid and asked prices) on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or (iii) if not listed or admitted to trading on any national securities
exchange on such Trading Day, then the average of the closing bid and asked
prices as reported through the National Association of Securities Dealers, Inc.
on its NASDAQ National Market System or NASDAQ System or a similar organization
if NASDAQ is no longer reporting information, or (iv) if the Common Stock is not
listed or admitted to trading on any national securities exchange or quoted on
such National Market System or NASDAQ System on such Trading Day, then the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from time to time
by TLGI for that purpose or (v) if not quoted by any such organization on such
Trading Day, the fair value of such Common Stock on such Trading Day, as
determined by the Board of Directors. The term "TRADING DAY" shall mean each
Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which
securities are not traded on any of the above-mentioned exchanges or in such
markets.

Section 13.04 ADJUSTMENT OF CONVERSION PRICE. The conversion price
or rate (herein called the "CONVERSION PRICE") for a series of Securities
shall be as set forth in a Board Resolution, Officer's Certificate or
executed supplemental indenture referred to in Sections 2.01 and 2.02 by or
pursuant to which the form and terms of the Securities of such series were
established, and, except as otherwise provided therein, shall be subject to
adjustment from time to time as follows:

(a) In case TLGI shall (1) pay a dividend or make a distribution in
shares of Common Stock on the Common Stock, (2) subdivide its outstanding
shares of Common Stock into a greater number of shares, (3) combine its
outstanding shares of Common Stock into a smaller number of shares,
(4) issue by reclassification of its Common Stock any shares of capital
stock of TLGI or (5) redeem any Associated Rights, the Conversion Price
in effect immediately prior to such action shall be adjusted so that the
Holder of any Security thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock or other capital
stock of TLGI which he would have owned immediately following such action
had such Security been converted immediately prior thereto. An adjustment
made pursuant to this subsection (a) shall become

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effective immediately, except as provided in subsection (e) below, after
the record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If as a result of an
adjustment made pursuant to this subsection (a), the Holder of any Security
thereafter surrendered for conversion shall become entitled to receive
shares of two or more classes of capital stock (including shares of Common
Stock and other capital stock) of TLGI, the Board of Directors (whose
determination shall be conclusive and shall be described in a statement
filed with the Trustee) shall determine the allocation of the adjusted
Conversion Price between or among shares of such classes of capital stock
or shares of Common Stock and other capital stock.

(b) In case TLGI shall issue rights or warrants to all holders of
Common Stock entitling them (for a period not exceeding 45 days from the
date of such issuance) to subscribe for or purchase shares of Common Stock
at price per share less than the current market price per share (as
determined pursuant to subsection (d) below) of the Common Stock on the
record date mentioned below, the Conversion Price shall be adjusted to a
price, computed to the nearest cent, so that the same shall equal the price
determined by multiplying:

(1) the Conversion Price in effect immediately prior to the date
of issuance of such rights or warrants by a fraction, of which

(2) the numerator shall be (A) the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants,
immediately prior to such issuance, plus (B) the number of shares
which the aggregate offering price of the total number of shares so
offered for subscription or purchase would purchase at such current
market price (determined by multiplying such total number of shares by
the exercise price of such rights or warrants and dividing the product
so obtained by such current market price), and of which

(3) the denominator shall be (A) the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants,
immediately prior to such issuance, plus (B) the number of additional
shares of Common Stock which are so offered for subscription or
purchase.

Such adjustment shall become effective immediately, except as provide
in subsection (e) below, after the record date for the determination of holders
entitled to receive such rights or warrants.

(c) In case TLGI shall distribute to substantially all holders of
Common Stock, evidences of indebtedness, equity securities (including
equity interests in TLGI's Subsidiaries) other than Common Stock, or other
assets (other than cash dividends paid out of surplus of TLGI), or shall
distribute to substantially all holders of Common Stock rights or warrants
to subscribe for securities (other than those referred to in subsection (b)
above) then in each such case the Conversion Price shall be adjusted so
that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of such
distribution by a fraction of which the numerator shall be the current
market price per share (determined as provided in subsection (d) below) of
the Common Stock on the record date mentioned below less then fair market
value (as determined by the Board of Directors, whose determination shall,
if made in good faith, be conclusive evidence of such fair market value) of
the portion of the assets so distributed or of such subscription rights or
warrants applicable to one share of Common Stock, and of which the
denominator shall be such current market price per share of the Common
Stock. Such adjustment

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<PAGE>

shall become effective immediately, except as provided in subsection (e)
below, after the record date for the determination of stockholders entitled
to receive such distribution.

(d) For the purpose of any computation under subsections (b) and (c)
above, the current market price per share of Common Stock on any date shall
be deemed to be the average of the Last Sale Prices for the 30 consecutive
Trading Days commencing 45 Trading Days before the date in question.

(e) In any case in which this Section 13.04 shall require that an
adjustment be made immediately following a record date, TLGI may elect to
defer the effectiveness of such adjustment (but in no event until a date
later than the effective time of the event giving rise to such adjustment),
in which case TLGI shall, with respect to any Security converted after such
record date and before such adjustment shall have become effective,
(i) defer paying any cash payment pursuant to Section 13.03 or issuing to
the Holder of such Security the number of shares of Common Stock and other
capital stock of TLGI issuable upon such conversion in excess of the number
of shares of Common Stock and other capital stock of TLGI issuable
thereupon only on the basis of the Conversion Price prior to adjustment,
and (ii) not later than five Business Days after such adjustment shall have
become effective, pay to such Holder the appropriate cash payment pursuant
to Section 13.03 and issue to such Holder the additional shares of Common
Stock and other capital stock of TLGI issuable on such conversion.

(f) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% of the
Conversion Price; provided, that any adjustments which by reason of this
subsection (f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment and, provided further, that
adjustment shall be required and made in accordance with the provisions of
this Article Thirteen (other than this subsection (f) not later than such
time as may be required in order to preserve the tax-free nature of a
distribution to the Holders of Securities or Common Stock. All
calculations under this Article Thirteen shall be made to the nearest cent
or to the nearest one-hundredth of a share, as the case may be.

(g) Whenever the Conversion Price is adjusted as herein provided,
TLGI shall promptly (i) file with the Trustee and each Conversion Agent an
Officer's Certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment, which certificate shall be conclusive evidence of the
correctness of such adjustment, and (ii) mail or cause to be mailed a
notice of such adjustment to each Holder of Securities in the manner
provided in Section 11.04.

Anything in this Section 13.04 to the contrary notwithstanding, TLGI
shall be entitled to make such reductions in the Conversion Price, in addition
to those required by this Section 13.04, as it in its discretion shall determine
to be advisable in order that any stock dividend, subdivision of shares,
distribution of rights or warrants to purchase stock or securities, or
distribution of other assets (other than cash dividends) hereafter made by TLGI
to its stockholders shall not be taxable.

Section 13.05 CONTINUATION OF CONVERSION PRIVILEGE IN CASE OF
MERGER, CONSOLIDATION OR SALE OF ASSETS. If any of the following shall
occur, namely: (a) any consolidation or merger of TLGI as a result of which
the holders of Common Stock shall be entitled to receive stock, other
securities or other assets (including cash) with respect to or in exchange
for Common Stock; or (b) any sale, lease, exchange or other disposition of
all or substantially all of the property and assets of TLGI as an entirety,
then TLGI,

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<PAGE>

or such successor or purchasing corporation, as the case may be, shall, as a
condition precedent to such consolidation, merger, sale, lease, exchange or
other disposition, execute and deliver to the Trustee a supplemental indenture
(which shall conform to the Trust Indenture Act of 1939 as in force at the date
of the execution thereof) providing that the Holder of each convertible Security
then Outstanding shall have the right to convert such Security into the kind and
amount of shares of stock and other securities and property (including cash)
receivable upon or in connection with such consolidation, merger, sale, lease,
exchange or other disposition by a Holder of the number of shares of Common
Stock issuable upon conversion of such Security immediately prior to such
consolidation, merger, sale, lease, exchange or other disposition. Such
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
Thirteen. If, in the case of any such consolidation, merger, sale, lease,
exchange or other disposition, the stock or other securities and property
(including cash) receivable thereupon or in connection therewith by a holder of
shares of Common Stock includes shares of stock or other securities and property
(including cash) of a corporation other than the successor or purchasing
corporation, as the case may be, in such consolidation, merger, sale, lease,
exchange or other disposition, then such supplemental indenture shall also be
executed by such other corporation and shall contain such additional provisions
to protect the interests of the Holders of the Securities as the Board of
Directors shall reasonably consider necessary by reason of the foregoing. The
provisions of this Section 13.05 shall similarly apply to successive
consolidations, mergers, sales, leases, exchanges or other dispositions.

Notice of the execution of each such supplemental indenture shall be
mailed to each Holder of Securities in the manner provided in Section 11.02.

Neither the Trustee nor any Conversion Agent shall be under any
responsibility to determine the correctness of any provisions contained in any
such supplemental indenture relating either to the kind or amount of shares of
stock or securities or property (including cash) receivable by Holders of
Securities upon the conversion of their Securities after any such consolidation,
merger, sale, lease, exchange or other disposition or to any adjustment to be
made with respect thereto, but, subject to the provisions of Sections 7.01 and
7.02, may accept as conclusive evidence of the correctness of any such
provisions, and shall be protected in relying upon, the Officer's Certificate
(which TLGI shall be obligated to file with the Trustee prior to the execution
of any such supplemental indenture) with respect thereto.

Section 13.06 NOTICE OF CERTAIN EVENTS. If:

(a) TLGI shall declare a dividend (or any other distribution) payable
to the holders of Common Stock otherwise than in cash; or

(b) TLGI shall authorize the granting to all holders of Common Stock
of rights to subscribe for or purchase any shares of stock of any class or of
any other rights; or

(c) TLGI shall authorize any reclassification or change of the Common
Stock (other than a subdivision or combination of its outstanding shares of
Common Stock), or any consolidation or merger to which TLGI is a party and for
which approval of any stockholders of TLGI is required, or the sale, lease,
exchange or other disposition of all or substantially all the property and
assets of TLGI; or

(d) there shall be authorized or ordered any voluntary or involuntary
dissolution, liquidation or winding-up of TLGI;

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<PAGE>

then, TLGI shall cause to be filed at the office or agency maintained for the
purpose of conversion of the Securities as provided in Section 4.02, and shall
cause to be mailed to each Holder of Securities, in the manner provided in
Section 11.02, at least 20 days before the date hereinafter specified (or the
earlier of the dates hereinafter specified, in the event that more than one date
is specified), a notice stating the date on which (1) a record is expected to be
taken for the purpose of such dividend, distribution or rights, or if a record
is not to be taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution or rights are to be determined, or
(2) such reclassification, change, consolidation, merger, sale, lease, exchange
or other disposition, dissolution, liquidation or winding-up is expected to
become effective and the date, if any is to be fixed, as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities or other property deliverable upon such
reclassification, change, consolidation, merger, sale, lease, exchange or other
disposition, dissolution, liquidation or wind-up.

Section 13.07 TAXES ON CONVERSION. TLGI will pay any and all
documentary, stamp or similar taxes payable to the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
the issue or delivery of shares of Common Stock on conversion of Securities
pursuant thereto; provided, however, that TLGI shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issue or
delivery of shares of Common Stock in a name other than that of the Holder of
the Securities to be converted (or payment of cash in lieu thereof to a Person
other than such Holder) and no such issue or delivery (or payment) shall be made
unless and until the Person requesting such issue or delivery (or payment) has
paid to TLGI the amount of any such tax or has established, to the satisfaction
of TLGI, that such tax has been paid. TLGI extends no protection with respect
to any other taxes imposed in connection with conversion of Securities.

Section 13.08 TLGI TO PROVIDE STOCK. TLGI shall reserve, free from
preemptive rights, out of its authorized but unissued shares, sufficient shares
to provide for the conversion of convertible Securities from time to time as
such Securities are presented for conversion; provided, however, that nothing
contained herein shall be construed to preclude TLGI from satisfying its
obligations in respect to the conversion of Securities by delivery of
repurchased shares of Common Stock which are held in the treasury of TLGI.

If any shares of Common Stock to be reserved for the purpose of
conversion of Securities hereunder require registration with or approval of
any governmental authority under any federal or state law before such shares
may be validly issued or delivered upon conversion, then TLGI covenants that
it will in good faith and as expeditiously as possible endeavor to secure
such registration or approval, as the case may be; provided, however, that
nothing in this Section 13.08 shall be deemed to affect in any way the
obligations of TLGI to convert Securities into Common Stock as provided in
this Article Thirteen.

Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the Common Stock, TLGI
will take all corporate action which may, in the opinion of counsel, be
necessary in order that TLGI may validly and legally issue fully paid and
non-assessable shares of Common Stock at such adjusted Conversion Price.

TLGI covenants that all shares of Common Stock which may be issued
upon conversion of Securities will upon issue be fully paid and non-assessable
by TLGI and free of preemptive rights.

Section 13.09 DISCLAIMER OF RESPONSIBILITY FOR CERTAIN MATTERS.
Neither the Trustee, any Conversion Agent nor any agent of either shall at any
time be under any duty or responsibility to any Holder of Securities to
determine whether any facts exist which may require any adjustment of the

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<PAGE>

Conversion Price, or with respect to the Officer's Certificate referred to in
Section 13.04(g), or with respect to the nature or extent of any such adjustment
when made, or with respect to the method employed, or herein or in any
supplemental indenture provided to be employed, in making the same. Neither the
Trustee, any Conversion Agent nor any agent of either shall be accountable with
respect to the validity or value (or the kind or amount) of any shares of Common
Stock, or of any securities or property (including cash), which may at any time
be issued or delivered upon the conversion of any Security; and neither the
Trustee, any Conversion Agent nor any agent of either makes any representation
with respect thereto. Neither the Trustee, any Conversion Agent nor any agent
of either shall be responsible for any failure of TLGI to issue, register the
transfer of or delivery any shares of Common Stock or stock certificates or
other securities or property (including cash) upon the surrender of any Security
for the purpose of conversion or, subject to Sections 7.01 and 7.02, to comply
with any of the covenants of TLGI contained in this Article Thirteen.

Section 13.10 RETURN OF FUNDS DEPOSITED FOR REDEMPTION OF CONVERTED
SECURITIES. Any funds which at any time shall have been deposited by TLGI or on
its behalf with the Trustee or any Paying Agent for the purpose of paying the
principal of and interest, if any, on any of the Securities and which shall not
be required for such purposes because of the conversion of such Securities, as
provided in this Indenture, shall forthwith after such conversion be repaid to
TLGI by the Trustee or such Paying Agent.

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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.

THE LOEWEN GROUP INC.

By:
------------------------------------------
Name:
------------------------------------------
Title:
------------------------------------------

[CORPORATE SEAL]

Attest:

By:
------------------------------------
Title:
------------------------------------

FLEET NATIONAL BANK, as Trustee

By:
------------------------------------------
Name:
------------------------------------------
Title:
------------------------------------------

[CORPORATE SEAL]

Attest:

By:
------------------------------------
Title:
------------------------------------

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<PAGE>

[LETTERHEAD OF RUSSELL & DUMOULIN]

The Loewen Group Inc. May 5, 1997
4126 Norland Avenue
Burnaby, BC V5G 3S8 Matter No.: LOE 00019

Loewen Group International, Inc.
Suite 800, 50 East RiverCenter Boulevard
Covington, KY 41011

Dear Sirs/Mesdames:

We are acting as British Columbia counsel for The Loewen Group Inc., a body
corporate organized under the laws of British Columbia ("Loewen") and Loewen
Group International, Inc., a body corporate organized under the laws of Delaware
("LGII") in connection with the possible issuance and sale from time to time by
Loewen of (i) certain debt securities of Loewen (the "Debt Securities"); (ii)
Common shares without par value of Loewen (the "Common Shares"); (iii) Preferred
Shares without par value of Loewen (the "Preferred Shares"); (iv) certain
warrants to purchase Debt Securities, Common Shares and Preferred Shares (the
"Warrants"); and (v) certain guarantees of debt securities of LGII (the
"Guarantees"), in each case as contemplated by the Registration Statement on
Form S-3 (File Nos. 333-24747 and 333-23747-01), as amended, (the
"Registration Statement"). The Debt Securities, Common Shares, Preferred
Shares, Warrants and Guarantees are collectively referred to herein as the
"Securities". Except as otherwise defined herein, capitalized terms that are
defined in the Registration Statement are used herein as so defined.

In this capacity, we have made such investigations and have reviewed such other
documents as we have deemed necessary or appropriate under the circumstances,
and have made such examinations of law as we have deemed appropriate for the
purpose of giving the opinions expressed herein.

We also have been furnished with and have examined originals or copies,
certified or otherwise identified to our satisfaction, of all such records of
Loewen, agreements and other instruments, certificates of officers and
representatives of Loewen, certificates of public officials and other documents
as we have deemed necessary to require as a basis for the opinion hereinafter
expressed.

<PAGE>

-2-

In making such examinations, we have assumed (i) the genuineness of all
signatures; (ii) the authenticity of all documents submitted to us as originals;
(iii) the conformity to original documents of all documents submitted to us as
certified copies or photocopies; (iv) the authority to all persons signing
documents examined by us except as to persons signing documents on behalf of
Loewen; and (v) the identity and capacity of all individuals acting or
purporting to act as public officials.

Based on the foregoing and on the assumptions set forth below, we are of the
opinion that:

1. The Debt Securities when (a) duly executed by Loewen and authenticated
by the applicable Trustee in accordance with the provisions of the applicable
Indenture and issued and sold in accordance with the Registration Statement and
applicable Prospectus Supplement and (b) delivered to the purchaser or
purchasers thereof upon receipt by Loewen of such lawful consideration therefor
as Loewen's Board of Directors (or duly authorized committee thereof or a duly
authorized officer of Loewen) may determine, will be valid and binding
obligations of Loewen.

2. The Common Shares when (a) duly issued and sold in accordance with the
Registration Statement and applicable Prospectus Supplement and (b) delivered to
the purchaser or purchasers thereof upon receipt by Loewen of such lawful
consideration therefor as Loewen's Board of Directors (or a duly authorized
committee thereof or a duly authorized officer of Loewen) may determine and,
assuming that Loewen at such time has a sufficient number of authorized but
unissued Common Shares remaining under its constating documents, will be validly
issued, fully paid and non-assessable.

3. The Preferred Shares when (a) duly issued and sold in accordance with
the Registration Statement and applicable Prospectus Supplement and an
applicable resolution has been duly adopted by the Board of Directors of Loewen
and duly filed in accordance with British Columbia law and (b) delivered to the
purchaser or purchasers thereof upon receipt by Loewen of such lawful
consideration thereof as Loewen's Board of Directors (or a duly authorized
committee thereof or a duly authorized officer of Loewen) may determine and,
assuming that Loewen at such time has a sufficient number of authorized but
unissued Preferred Shares remaining under its constating documents, will be
validly issued, fully paid and non-assessable.

4. The Warrants when (a) duly issued and sold in accordance with the
Registration Statement and the provisions of an applicable Warrant Agreement and
(b) delivered to the purchaser or purchasers thereof upon receipt by Loewen of
such lawful consideration therefor

<PAGE>

-3-

as Loewen's Board of Directors (or a duly authorized committee thereof or a duly
authorized officer of Loewen) may determine, will be valid and binding
obligations of Loewen.

5. The Guarantees when (a) duly executed by Loewen and authenticated by
the applicable Trustee in accordance with the provisions of the applicable
indenture and issued in accordance with the Registration Statement and
applicable Prospectus Supplement and (b) delivered to the purchaser or
purchasers of LGII's debt securities guaranteed by the Guarantees upon
receipt by LGII of such lawful consideration for LGII's debt securities as
LGII's Board of Directors (or a duly authorized committee therefor or a duly
authorized officer of LGII) may determine and, assuming Loewen is not
insolvent at the time of the issue and is otherwise entitled to provide
financial assistance to LGII, will be valid and binding obligations of Loewen.

In rendering the foregoing opinions, we have assumed that (i) the definitive
terms of each class and series of the Securities not presently provided for
in the Registration Statement or Loewen's constating documents will have been
established in accordance with all applicable provisions of law, the
Indentures, Loewen's constating documents and by-laws and the authorizing
resolutions of Loewen's Board of Directors and reflected in appropriate
documentation approved by us and, if applicable, duly executed and delivered
by Loewen and any other appropriate party; (ii) the interest rate on the Debt
Securities, LGII's debt securities and the Guarantees will not be higher than
the maximum lawful rate permitted from time to time under applicable law;
(iii) any Securities consisting of Common Shares or Preferred Shares and any
Common Shares or Preferred Shares for or into which any other Securities are
exercisable, exchangeable or convertible, will have been duly authorized, and
reserved for issuance; (iv) each Warrant Agreement will have been duly
authorized, executed and delivered by, and will constitute a valid and
binding obligation, of each party thereto; (v) the Registration Statement,
and any amendments thereto, will have become effective; (vi) a Prospectus
Supplement describing each class or series of Securities offered pursuant to
the authorizing Loewen to register, offer, sell and issue the Securities
offered pursuant to the Registration Statement will have been filed with the
Commission; (vii) the resolutions authorizing Loewen to register, offer, sell
and issue the Securities will be duly passed and will remain in effect and
unchanged at all times during which the Securities are offered, sold or
issued by Loewen; (viii) all Securities will be issued in compliance with
applicable federal and state securities laws; and (ix) the indentures will
have been duly qualified under the TRUST INDENTURE ACT of 1939.

We understand that, prior to offering for sale any securities, you will advise
us in writing of the terms of such offering and of such Securities, will afford
us an opportunity to review the operative documents (including the applicable
Prospectus Supplement and any applicable Underwriting Agreement, Indenture or
Supplemental Indenture) pursuant to which the

<PAGE>

-4-

Securities are to be offered, sold issued and will file, as an exhibit to the
Registration Statement, such supplement or amendment to this opinion (if any) as
we may reasonably consider necessary or appropriate by reason of the terms of
such Securities or any changes in Loewen's capital structure or other pertinent
circumstances.

We express no opinion as to matters of law in jurisdictions other than the
Province of British Columbia and the laws of Canada applicable therein.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the Registration Statement.

Yours truly,

/s/ Russell & DuMoulin

RUSSELL & DUMOULIN

<PAGE>

[Letterhead of Thelen, Marrin, Johnson & Bridges LLP]
May 5, 1997

The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia V5G 3S8
Canada

Loewen Group International, Inc.
50 East RiverCenter Blvd., Suite 800
Covington, KY 41011

Ladies and Gentlemen:

We have acted as United States counsel for The Loewen Group Inc., a
corporation organized under the laws of British Columbia, Canada ("Loewen"),
and Loewen Group International, Inc., a Delaware corporation ("LGII" and,
together with Loewen, the "Registrants"), in connection with the preparation
and filing of the combined Registration Statement on Form S-3 (File Nos.
333-23747 and 333-23747-01) filed by the Registrants with the Securities and
Exchange Commission (the "Commission") on March 21, 1997, as subsequently
amended (the "Registration Statement"). The Registration Statement relates
to the offer and sale by Loewen and LGII, as applicable, of (i) up to $500
million of LGII's debt securities consisting of notes, debentures and/or
other evidences of indebtedness ("LGII Debt Securities") and (ii) up to an
aggregate of $500 million of Loewen's Common shares without par value
("Common Shares"), preferred shares without par value ("Preferred Shares"),
debt securities consisting of notes, debentures and/or other evidences of
indebtedness ("Loewen Debt Securities" and, together with the LGII Debt
Securities, "Debt Securities"), warrants to purchase Common Shares, Preferred
Shares or Debt Securities ("Warrants") and guarantees by Loewen of LGII Debt
Securities ("Guarantees").

Debt Securities will be issued pursuant to one or more indentures
("Indentures") in the form filed as Exhibit 4.32 to the Registration
Statement, in the case of Loewen Debt Securities, or Exhibit 4.33 to the
Registration Statement, in the case of LGII Debt Securities and Guarantees.

In this capacity, we have made such investigations and have reviewed
such other documents as we have deemed necessary or appropriate under the
circumstances, and have made such examinations of law as we have deemed
appropriate for purpose of giving the opinions expressed herein.

We also have been furnished with and have examined originals or
copies, certified or otherwise identified to our satisfaction, of all such
records of the Registrants, agreements and other instruments, certificates of
officers and representative of Loewen and LGII, certificates

<PAGE>

The Loewen Group Inc.
Loewen Group International, Inc.
May 5, 1997
Page 2

of public officials and other documents as we have deemed necessary to
require as a basis for the opinions hereinafter expressed.

In making such examinations, we have assumed (i) the genuineness of
all signatures; (ii) the authenticity of all documents submitted to us as
originals; (iii) the conformity to original documents of all documents
submitted to us as certified copies or photocopies; (iv) the authority of all
persons signing documents examined by us except as to persons signing
documents on behalf of the Registrants; (v) the identity and capacity of all
individuals acting or purporting to act as public officials; and (vi) the
absence of evidence extrinsic to the provisions of the Indentures that the
respective parties thereto intended a meaning contrary to that expressed by
the provisions of such agreements.

Based on the foregoing, we are of the opinion that, when (a) the
Registration Statement and any post-effective amendments thereto shall have
been declared effective by the Commission under the Securities Act of 1933,
as amended (the "Securities Act"), (b) the applicable Indenture shall have
been duly executed and delivered by the parties thereto, including the trustee
under such Indenture (the "Trustee"), (c) the applicable Indenture shall have
been duly qualified under the Trust Indenture Act of 1939, as amended (the
"TIA"), and (d) the applicable Loewen Debt Securities or LGII Debt Securities
and Guarantees, as applicable, shall have been (i) duly authorized, executed,
authenticated, issued, sold and delivered against payment therefor as
contemplated by the applicable Indenture, the Registration Statement and the
applicable Prospectus Supplement, or (ii) duly authorized and issued upon the
exercise of Warrants which, by their respective terms, are exercisable for
the Loewen Debt Securities or LGII Debt Securities and Guarantees, in each
case as contemplated by the related Indenture, the Registration Statement and
the applicable Prospectus Supplement, and LGII or Loewen, as applicable, shall
have received any additional consideration which is payable upon such
exercise, and assuming that the applicable Indenture as executed and
delivered does not violate any law applicable to Loewen or LGII, as the case
may be, or result in a default under or breach of any agreement or instrument
binding upon such Registrant:

(1) LGII Debt Securities will be valid and legally binding
obligations of LGII, entitled to the benefits of the applicable LGII
Indenture, subject to (a) limitations imposed by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights generally, including, without limitation,
laws relating to fraudulent transfers or conveyances, preferences and
equitable subordination, and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law), including without limitation, an implied covenant of good faith and
fair dealing.

(2) Assuming that the Loewen Debt Securities and the form of Loewen
Indenture have been authorized by Loewen in accordance with the laws of
British Columbia, Canada, Loewen Debt Securities will be valid and legally
binding obligations of Loewen, entitled to the benefits of the applicable
Loewen Indenture, subject to (a) limitations imposed by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
affecting the enforcement of creditors' rights generally, including, without
limitation, laws relating to fraudulent transfers or conveyances, preferences
and equitable subordination, and (b) general principles of

<PAGE>

The Loewen Group Inc.
Loewen Group International, Inc.
May 5, 1997
Page 3

equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law), including without limitation, an implied
covenant of good faith and fair dealing.

(3) Assuming that the Loewen Guarantees and the form of LGII
Indenture have been authorized by Loewen in accordance with the laws of
British Columbia, Canada, the Guarantees will be valid and legally binding
obligations of Loewen, entitled to the benefits of the applicable LGII
Indenture, subject to (a) limitations imposed by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights generally, including, without limitation,
laws relating to fraudulent transfers or conveyances, preferences and
equitable subordination, and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law), including without limitation, an implied covenant of good faith and
fair dealing.

To the extent that the obligations of LGII or Loewen under any
Indenture may be dependent upon such matters, we assume for purposes of the
opinions set forth herein that the Trustee is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization; that the Trustee is duly qualified to engage in the activities
contemplated by each Indenture to which it is a party; that each Indenture
has been duly authorized, executed and delivered by the Trustee and
constitutes the legal, valid and binding obligation of such Trustee,
enforceable against such Trustee in accordance with its terms; that the
Trustee is in compliance, generally and with respect to acting as a Trustee
under each Indenture to which it is a party, with all applicable laws and
regulations; and that the Trustee has the requisite organizational and legal
power and authority to perform its obligations under each Indenture to which
it is a party.

We are authorized to engage in the practice of law only with respect
to the federal laws of the Untied States of America and the laws of the
States of California and New York and the General Corporate Law of the State
of Delaware and do not purport to be experts with respect to the laws of any
other jurisdiction, and we express no opinion as to the laws of any other
state or jurisdiction. The opinions set forth in this letter assume that the
Indentures, Debt Securities and Guarantees are governed by the laws of the
State of New York.

We hereby consent to the filing of this opinion with the Commission
as an exhibit to the Registration Statement. We further consent to the use
of our name under the heading "Legal Matters" in the prospectus filed with
the Commission as a part of the Registration Statement.

Very truly yours,

/s/Thelen, Marrin, Johnson & Bridges LLP

THELEN, MARRIN, JOHNSON & BRIDGES LLP

MLJ/WFO
SF#211556

<PAGE>

[LETTERHEAD OF RUSSELL & DUMUOLIN]

The Loewen Group Inc. May 5, 1997
4126 Norland Avenue
Burnaby, BC V5G 3S8 Matter No. LOE 00019

Dear Sirs/Mesdames:

We have acted as British Columbia counsel for The Loewen Group Inc., a body
corporate organized under the laws of British Columbia ("Loewen") in
connection with the proceedings relating in the registration under the
SECURITIES ACT of 1933, as amended, of 10,000,000 Common shares without par
value of Loewen (plus an additional 1,500,000 of such Common shares solely to
cover over-allotments, if any) (together the "Offered Shares") pursuant to
the Registration Statement on Form S-3, File Nos. 333-23747 and 333-23747-01
filed by Loewen with the Securities and Exchange Commission (the "SEC") on
March 21, 1997, as amended and supplemented (the "Registration Statement").

In this capacity, we have made such investigations and have reviewed such other
documents as we have deemed necessary or appropriate under the circumstances and
have made such examinations of law as we have deemed appropriate for the purpose
of giving the opinions expressed herein.

We have also been furnished with and have examined originals or copies,
certified or otherwise identified to our satisfaction, of all such records of
Loewen, agreements and other instruments, certificates of officers and
representatives of Loewen, certificates of public officials and other documents
as we have deemed necessary to require as a basis for the opinion hereinafter
expressed.

In making such examinations, we have assumed (i) the genuineness of all
signatures; (ii) the authenticity of all documents submitted to us as originals;
(iii) the conformity to original documents of all documents submitted to us as
certified copies or photocopies; (iv) the authority to all persons signing
documents examined by us, except as to persons signing documents on behalf of
Loewen; and (v) the identity and capacity of all individuals acting or
purporting to act as public officials.

<PAGE>

-2-

Based on the foregoing, we are of the opinion that the Offered Shares, when
issued and paid for, as contemplated by the applicable Prospectus Supplement,
will be validly issued, fully paid and non-assessable.

We express no opinion as to matters of law in jurisdictions other than the
Province of British Columbia and the laws of Canada applicable therein.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the Registration Statement and applicable Prospectus Supplement.

Yours truly,

/s/ Russell & DuMoulin

RUSSELL & DUMOULIN

<PAGE>

[LETTERHEAD OF RUSSELL & DUMOULIN]

The Loewen Group Inc. May 5, 1997
4126 Norland Avenue
Burnaby, BC V5G 3S8 Matter No. LOE 00019

Dear Sirs/Mesdames:

We have acted as British Columbia counsel for The Loewen Group Inc., a body
corporate organized under the laws of British Columbia ("Loewen") in connection
with the proceedings relating to the registration under the SECURITIES ACT of
1933, as amended, of 10,000,000 Common shares without par value of Loewen (plus
an additional 1,500,000 of such Common shares solely to cover over-allotments,
if any) (together the "Offered Shares") pursuant to the Registration Statement
of Form S-3, File Nos. 333-23747 and 333-23747-01 filed by Loewen with the
Securities and Exchange Commission (the "SEC") on March 21, 1997, as amended and
supplemented (the "Registration Statement").

You have requested our opinion with respect to the accuracy of the discussions
included in the Prospectus Supplement dated May 5, 1997 (the "Prospectus
Supplement") to the Prospectus contained in the Registration Statement under the
heading "Certain Canadian Federal Tax Considerations".

In this capacity, we have been furnished with and have examined originals or
copies, certified or otherwise identified to our satisfaction, of such records
of Loewen, agreements and other instruments, certificates of officers and
representatives of Loewen, certificates of public officials and other documents
as we have deemed necessary to require as a basis for the opinion hereinafter
expressed. In making such examinations, we have assumed (i) the genuineness of
all signatures; (ii) the authenticity of all documents submitted to us as
originals; (iii) the conformity to original documents of all documents submitted
to us as certified copies or photocopies; (iv) the identity and capacity of all
individuals acting or purporting to act as public officials; (v) that all
representations and statements set forth in the documents submitted to us are
true and correct; and (vi) that all obligations imposed by any of the documents
submitted to us are enforceable in accordance with their terms.

We have also made such investigations and have reviewed such other documents as
we have deemed necessary or appropriate under the circumstances, and have made
such examinations of law as we have deemed appropriate for the purpose of giving
the opinions expressed herein.

<PAGE>

-2-

All capitalized terms used without definitions in this letter have the same
meaning as in the Registration Statement.

Based on the foregoing, we are of the opinion that, assuming that the Offered
Shares are issued and paid for, as contemplated by the Prospectus Supplement,
the statements concerning Canadian federal taxation set forth in the Prospectus
Supplement under the heading "Certain Canadian Federal Tax Consequences", to the
extent that such statements represent matters of law or legal conclusions, will
represent an accurate description of the material Canadian federal income tax
consequences generally applicable to an individual who is not resident in Canada
and who holds the Offered Shares as capital property (other than a holder
who, either alone or together with persons with whom the holder does not deal
at arm's length, has in the last five years owned at least 25% of the issued
shares of any class of Loewen's stock and other than a corporate holder who
owns at least 10% of the issued voting shares of Loewen stock).

Our opinion is based on the current provisions of the INCOME TAX ACT of Canada,
the regulations thereunder, our understanding of the current administrative
practices of Revenue Canada Customs, Excise and Taxation, income tax treaties to
which Canada is a party, including the CANADA-U.S. INCOME TAX CONVENTION (1980),
and existing judicial decisions, any of which could be changed at any time,
possibly on a retroactive basis. Any such changes could produce tax
consequences that could be different from the consequences described in the
Prospectus Supplement. Our opinion is based on the assumptions described above,
and if any of such assumptions is incorrect, the tax consequences may be
different from the consequences described in the Prospectus Supplement.
Finally, our opinion is not binding in any way on Revenue Canada Customs, Excise
and Taxation or the courts, which could reach conclusions as to the tax
consequences that are different from those described in the Prospectus
Supplement.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the headings "Legal
Matters" and "Certain Canadian Federal Tax Considerations" in the Prospectus
Supplement.

Yours truly,

/s/ Russell & DuMoulin

RUSSELL & DUMOULIN

<PAGE>
[Letterhead of Thelen, Marrin, Johnson & Bridges LLP]
May 5, 1997

The Loewen Group Inc.
4126 Norband Avenue
Burnaby, British Columbia V5G 358
Canada

Ladies and Gentlemen:

We have acted as United States counsel for The Loewen Group Inc., a
corporation organized under the laws of British Columbia, Canada ("Loewen"),
in connection with the preparation of the Registration Statement on Form S-3
(File Nos. 333-23747 and 333-23747-01) filed by Loewen and Loewen Group
International, Inc., a Delaware corporation, with the Securities and Exchange
Commission (the "SEC") on March 21, 1997, as subsequently amended (the
"Registration Statement"), and a Prospectus Supplement relating to the
Registration Statement respecting the offer by Loewen to issue and sell
10,000,000 of Loewen's Common shares without par value ("Common Shares").

You have requested our opinion with respect to the accuracy of the
discussions included in the Registration Statement under the heading "Certain
U.S. Federal Tax Considerations."

In our capacity as United States counsel for Loewen, we have been
furnished with and have examined originals or copies, certified or otherwise
identified to our satisfaction, of such records of Loewen, agreements and
other instruments, certificates of officers and representative of Loewen,
certificates of public officials and other documents as we have deemed
necessary to require as a basis for the opinion hereinafter expressed. In
making such examinations, we have assumed (i) the genuineness of all
signatures; (ii) the authenticity of all documents submitted to us as
originals; (iii) the conformity to original documents of all documents
submitted to us as certified copies or photocopies; (iv) the identity and
capacity of all individuals acting or purporting to act as public officials;
(v) that all representations and statements set forth in the documents
submitted to us are true and correct; and (vi) that all obligations imposed
by any of the documents submitted to us are enforceable in accordance with
their terms.

<PAGE>

Loewen Group International, Inc.
May 5, 1997
Page 2

We have also made such investigations and have reviewed such other
documents as we have deemed necessary or appropriate under the circumstances,
and have made such examinations of law as we have deemed appropriate for
purpose of giving the opinions expressed herein.

All capitalized terms used without definition in this letter have the
same meanings as in the Registration Statement.

Based on the foregoing, we are of the following opinion:

The statements concerning United States taxation set forth in the
Prospectus Supplement under the heading "Certain U.S. Federal Tax
Considerations," to the extent that such statements represent matters of law
or legal conclusions, describe the material United States federal income tax
consequences expected to result from the acquisition, ownership and
disposition of Common Shares who owns, directly or constructively, less
than 10% of the voting stock of Loewen, subject, however, to the
limitation set forth in the Registration Statement that the statements apply
only to Common Shares held as capital assets and do not purport to address
all aspects of federal income taxation or all tax considerations that may be
relevant to all categories of potential purchasers.

Our opinion is based on the Internal Revenue Code of 1986, as amended;
applicable Treasury regulations thereunder; judicial decisions; administrative
pronouncements; and existing and proposed Treasury Regulations, changes to
any of which after the date of the Prospectus Supplement could apply on a
retroactive basis and affect the consequences described in the Prospectus
Supplement.

We hereby consent to the filing of this opinion with the SEC as an
exhibit to the Registration Statement. We further consent to the use of our
name under the heading "Certain United States Federal Tax Considerations" and
"Legal Matters" in the prospectus filed with the SEC as a part of the
Registration Statement.

Very truly yours,

/s/Thelen, Marrin, Johnson & Bridges LLP

THELEN, MARRIN, JOHNSON & BRIDGES LLP

JMM:rg
SF #211447 v1

<PAGE>

EXHIBIT 12.3

THE LOEWEN GROUP INC.
COMPUTATION OF EARNINGS TO FIXED CHARGES AND PREFERRED SHARE DIVIDENDS RATIO

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes. . . . . . . . . . $ 93,001 $(123,862) $ 58,232 $ 43,896 $ 31,480
--------- ---------- --------- --------- ---------
Fixed charges included in earnings (loss) before
income taxes:
Interest on long-term debt . . . . . . . . . . . . 88,932 50,913 34,203 21,801 19,083
Amortization of deferred finance costs . . . . . . 4,171 1,512 1,139 832 580
Dividends on preferred securities of subsidiary. . 7,088 7,088 2,678 -- --
--------- ---------- ---------- --------- ---------
100,191 59,513 38,020 22,633 19,663
--------- ---------- ---------- --------- ---------
Earnings (loss). . . . . . . . . . . . . . . . . . . . $ 193,192 $ (64,349) $ 96,252 $ 66,529 $ 51,143
========= ========== ========== ========= =========

Fixed charges:
Fixed charges included in earnings before income
taxes. . . . . . . . . . . . . . . . . . . . . . $ 100,191 $ 59,513 $ 38,020 $ 22,633 $ 19,663
Capitalized interest . . . . . . . . . . . . . . . 2,092 2,722 1,128 117 --
--------- ---------- --------- --------- ---------
Total fixed charges. . . . . . . . . . . . . . . . . . $ 102,283 $ 62,235 $ 39,148 $ 22,750 $ 19,663
========= ========== ========== ========= =========

Preferred share dividends

Dividends on First Preferred Shares, Series C (1) . . $ 8,874 $ -- $ -- $ -- $ --
========= ========== ========== ========= =========

Ratio of earnings to fixed charges and preferred
share dividends . . . . . . . . . . . . . . . . . . . 1.7x -- -- -- --
========= ========== ========== ========= =========
</TABLE>
- ----------------

(1) The Company did not pay any preferred share dividends from 1992-1995.

<PAGE>

EXHIBIT 12.4

THE LOEWEN GROUP INC.
COMPUTATION OF EARNINGS TO FIXED CHARGES AND PREFERRED SHARE DIVIDENDS RATIO
U.S. GAAP

<TABLE>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
Earnings (loss) before
income taxes......... $ 89,144 $(125,539) $ 57,877 $ 44,374 $ 33,964
-------- -------- -------- -------- --------
Fixed charges included
in earnings (loss)
before income taxes:
Interest on long-term
debt............... 88,932 50,913 34,203 22,337 20,874
Amortization of
deferred finance
costs............... 4,171 1,512 1,139 852 634
Dividends on preferred
securities of
subsidiary.......... 7,088 7,088 2,678 -- --
-------- --------- -------- -------- --------
100,191 59,513 38,020 23,189 21,508
-------- --------- -------- -------- --------
Earnings (loss)....... $189,335 $ (66,026) $ 95,897 $ 67,563 $ 55,472
======== ========= ======== ======== ========

Fixed charges:
Fixed charges included
in earnings before
income taxes........ $100,191 $ 59,813 $ 38,020 $ 23,189 $ 21,508
Capitalized interest. 2,092 2,722 1,128 120 --
-------- --------- -------- -------- -------
Total fixed charges... $102,283 $ 62,235 $ 39,148 $ 23,309 $ 21,508
======== ========= ======== ======== ========

Preferred share
dividends

Dividends on First
Preferred Shares,
Series C (1)....... $ 8,874 -- -- -- --
======== ========= ======== ======== ========

Ratio of earnings to
fixed charges and
preferred share
dividends............ 1.7x -- -- -- --
======== ========= ======== ======== ========
</TABLE>
- --------
(1) The Company did not pay any preferred share dividends from 1992-1995.

<PAGE>

EXHIBIT 23.3

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
The Loewen Group Inc.
Loewen Group International, Inc.

We consent to the use of our reports (i) dated March 3, 1997, relating to the
consolidated balance sheets of The Loewen Group Inc. as at December 31, 1996
and 1995, and the consolidated statements of operations, retained earnings
and changes in financial position for each of the years in the three year
period ended December 31, 1996 and related schedule, (ii) dated March 3,
1997, except as to Note 21 (b) which is as of March 27, 1997, relating to the
consolidated balance sheets of Loewen Group International, Inc. as at
December 31, 1996 and 1995, and the consolidated statements of operations and
retained earnings (deficit) and changes in financial position for each of the
years in the three year period ended December 31, 1996, and (iii) dated
March 3, 1997, except for Note 15, which is as of March 27, 1997, relating to
the consolidated balance sheets of Neweol Investments Ltd. (as defined in
Note 1 thereto) as at December 31, 1996 and 1995, and the consolidated
statements of operations and retained earnings and cash flows for each of the
years in the three year period ended December 31, 1996, which reports are
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the prospectus.

/s/ KPMG

KPMG
Chartered Accountants
Vancouver, Canada
May 2, 1997

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
The Loewen Group Inc.
Loewen Group International, Inc.

We consent to the use of our report dated March 3, 1997, relating to the
balance sheets of Loewen Finance (Wyoming) Limited Liability Company as at
December 31, 1996 and 1995 and the related statements of income and retained
earnings and cash flows for each of the years in the two year period ended
December 31, 1996 and for the eight month period ended December 31, 1994,
which report is incorporated herein by reference.

/s/ Peat Marwick

Chartered Accountants
Bridgetown, Barbados

May 2, 1997

<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

--------------------------

FORM T-1

--------------------------

STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE

[ ] CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)

FLEET NATIONAL BANK
----------------------------------------------------------
(Exact name of trustee as specified in its charter)

Not applicable 06-0850628
---------------------------- ------------------
(State of incorporation if (I.R.S. Employer
not a national bank) Identification No.)

777 Main Street, Hartford, Connecticut 06115
---------------------------------------------------
(Address of principal executive offices) (Zip Code)

Patricia Beaudry, 777 Main Street, Hartford, CT (860) 728-2065
------------------------------------------------------------------
(Name, address and telephone number of agent for service)

------------------------------------------------------------------
(Exact name of obligor as specified in its charter)

- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

------------------------------------------------------------------
(Title of the indenture securities)

<PAGE>
Item 1. General Information.

Furnish the following information as to the trustee:

(a) Name and address of each examining or supervising authority to
which it is subject:

The Comptroller of the Currency,
Washington, D.C.

Federal Reserve Bank of Boston
Boston, Massachusetts

Federal Deposit Insurance Corporation
Washington, D.C.

(b) Whether it is authorized to exercise corporate trust powers:

The trustee is so authorized.

Item 2. Affiliations with obligor. If the obligor is an affiliate of
the trustee, describe each such affiliation.

None with respect to the trustee; none with respect to Fleet
Financial Group, Inc. and its affiliates (the "affiliates").

Item 16. List of exhibits. List below all exhibits filed as a part of
this statement of eligibility and qualification.

1. A copy of the Articles of Association of the trustee as
now in effect.

2. A copy of the Certificate of Authority of the trustee
to do Business and the Certification of Fiduciary Powers.

3. A copy of the By-laws of the trustee as now in effect.

4. Consent of the trustee required by Section 321(b) of
the Act.

5. A copy of the latest Consolidated Report of Condition
and Income of the trustee, published pursuant to law or the requirements
of its supervising or examining authority.

<PAGE>
NOTES

Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base its answer to Item 2, the answer to said
Item is based upon incomplete information. Said Item may, however, be
considered correct unless amended by an amendment to this Form T-1.

<PAGE>
SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Hartford, and State of
Connecticut, on the day of , 19 .
---- --------- --

FLEET NATIONAL BANK,
Trustee

By
-------------------------------------
Name:
Title:

<PAGE>

EXHIBIT 1

ARTICLES OF ASSOCIATION
OF
FLEET NATIONAL BANK

FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Fleet National Bank."

SECOND. The main office of the Association shall be in Springfield, Hampden
County Commonwealth of Massachusetts. The general business of the Association
shall be conducted at its main office and its branches.

THIRD. The board of directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of the shareholders at any annual or special meeting thereof.
Unless otherwise provided by the laws of the United States, any vacancy in the
board of directors for any reason, including an increase in the number thereof,
may be filled by action of the board of directors.

FOURTH. The annual meeting of the shareholders for the election of directors
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office or such other place as the board of
directors may designate, on the day of each year specified therefore in the
bylaws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the board of
directors.

FIFTH. The authorized amount of capital stock of this Association shall be
eight million five hundred thousand (8,500,000) shares of which three million
five hundred thousand (3,500,000) shares shall be common stock with a
par value of six and 25/100 dollars ($6.25) each, and of which five million
(5,000,000) shares without par value shall be preferred stock. The capital
stock may be increased or decreased from time to time, in accordance with
the provisions of the laws of the United States.

No holder of shares of the capital stock of any class of the Association shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued or sold, nor
any right of subscription to any thereof other than such, if any, as the board
of directors, in its discretion, may from time to time determine and at such
price as the board of directors may from time to time fix.

<PAGE>

The board of directors of the Association is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide for the
issuance from time to time in one or more series of any number of the preferred
shares, and to establish the number of shares be included in each series, and
to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series. The authority of the board of
directors with respect to each series shall include, but not be limited to,
determination of the following:

a. The number of shares constituting that series and the distinctive
designation of that series;

b. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and whether they shall be
payable in preference to, or in another relation to, the dividends payable
to any other class or classes or series of stock;

c. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;

d. Whether that series shall have conversion or exchange privileges, and,
if so, the terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in such
events as the board of directors shall determine;

e. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed,
the date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;

f. Whether that series shall be entitled to the benefit of a sinking fund to
be applied to the purchase or redemption of shares of that series, and, if
so, the terms and amounts of such sinking fund;

g. The right of the shares of that series to the benefit of conditions and
restrictions upon the creation of indebtedness of the Association or any
subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Association or any subsidiary of
any outstanding stock of the Association;

h. The right of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Association and
whether such rights shall be in preference to, or in another relation to,
the comparable rights of any other class or classes or series of stock; and

i. Any other relative, participating, optional or other special rights,
qualifications, limitations or restrictions of that series.

Shares of any series of preferred stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of preferred stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the board of directors or as part of any other series or
preferred stock, all subject to the conditions and the restrictions adopted by
the board of directors providing for the issue of any series of preferred
stock and by the provisions of any applicable law.

Subject to the provisions of any applicable law, or except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of preferred stock, the holders of outstanding shares of common stock shall
exclusively possess voting power for the election of directors and for all
purposes, each holder of record of shares of common stock being entitled to one
vote for each share of common stock standing in his name on the books of the
Association.

Except as otherwise provided by the resolution or resolutions providing for the
issue of any series of preferred stock, after payment shall have been made to
the holders of preferred stock of the full amount of dividends to which they
shall be entitled pursuant to the resolution or resolutions providing for the
issue of any other series of preferred stock, the holders of common stock shall
be entitled, to the exclusion of the holders of preferred stock of any and all
series, to receive such dividends as from time to time may be declared by the
board of directors.

Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, in the event of any liquidation, dissolution
or winding up of the Association, whether voluntary or involuntary, after
payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of preferred stock the
holders of common stock shall be entitled, to the exclusion of the holders of
preferred stock of any and all series, to share, ratable according to the
number of shares of common stock held by them, in all remaining assets of the
Association available for distribution to its shareholders.

The number of authorized shares of any class may be increased or decreased by
the affirmative vote of the holders of a majority of the stock of the
Association entitled to vote.

<PAGE>

SIXTH. The board of directors shall appoint one of its members president of
this Association, who shall be chairman of the board, unless the board appoints
another director to be the chairman. The board of directors shall have the
power to appoint one or more vice presidents; and to appoint a secretary and
such other officers and employees as may be required to transact the business
of this Association.

The board of directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a board of
directors to do and perform.

SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.

EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.

NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first class mail, postage prepaid, mailed at
least ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.

TENTH. (a) Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the Association or is or was
serving at the request of the Association as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, limited
liability company, trust, or other enterprise, including service with respect
to an employee benefit plan, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the law of the state in which
the Association's ultimate parent company is incorporated, except as provided
in subsection (b). The aforesaid indemnity shall protect the indemnified
person against all expense, liability and loss (including attorney's fees,
judgements, fines ERISA excise taxes or penalties, and amounts paid in
settlement) reasonably incurred by such person in connection with such a
proceeding. Such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors, and administrators, but shall only cover such person's
period of service with the Association. The Association may, by action of its
Board of Directors, grant rights to indemnification to agents of the
Association and to any director, officer, employee or agent of any of its
subsidiaries with the same scope and effect as the foregoing indemnification
of directors and officers.

(b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no
person shall be indemnified hereunder by the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by a federal bank regulatory agency which proceeding or action
results in a final order assessing civil money penalties against that person,
requiring affirmative action by that person in the form of payments to the
Association, or removing or prohibiting that person from service with the
Association, and any advancement of expenses to that person in that proceeding
must be repaid; and (ii) no person shall be indemnified hereunder by the
Association and no advancement of expenses shall be made to any person
hereunder to the extent such indemnification or advancement of expenses would
violate or conflict with any applicable federal statute now or hereafter in
force or any applicable final regulation or interpretation now or hereafter
adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal
Deposit Insurance Corporation ("FDIC"). The Association shall comply with any
requirements imposed on it by any such statue or regulation in connection with
any indemnification or advancement of expenses hereunder by the Association.
With respect to proceedings to enforce a claimant's rights to indemnification,
the Association shall indemnify any such claimant in connection with such a
proceeding only as provided in subsection (d) hereof.

(c) Advancement of Expenses. The conditional right to indemnification
conferred in this section shall be a contract right and shall include the
right to be paid by the Association the reasonable expenses (including
attorney's fees) incurred in defending a proceeding in advance of its final
disposition (an "advancement of expenses"); provided, however, that an
advancement of expenses shall be made only upon (i) delivery to the Association
of a binding written undertaking by or on behalf of the person receiving the
advancement to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified in such proceeding,
including if such proceeding results in a final order assessing civil money
penalties against that person, requiring affirmative action by that person
in the form of payments to the Association, or removing or prohibiting that
person from service with the Association, and (ii) compliance with any other
actions or determinations required by applicable law, regulation or OCC or FDIC
interpretation to be taken or made by the Board of Directors of the Association

<PAGE>
or other persons prior to an advancement of expenses. The Association shall
cease advancing expenses at any time its Board of Directors believes that any
of the prerequisites for advancement of expenses are no longer being met.

(d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the
section is not paid in full by the Association within thirty (30) days after
written claim has been received by the Association, the claimant may at any time
thereafter bring suit against the Association to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Association to recover an advancement of expenses pursuant
to the terms of an undertaking, the claimant shall be entitled to be paid also
the expense of prosecuting or defending such claim. It shall be a defense to
any such action brought by the claimant to enforce a right to indemnification
hereunder (other than an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any, has been tendered to the
Association) that the claimant has not met any applicable standard for
indemnification under the law of the state in which the Association's ultimate
parent company is incorporated. In any suit brought by the Association to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Association shall be entitled to recover such expenses upon a final
adjudication that the claimant has not met any applicable standard for
indemnification standard for indemnification under the law of the state in
which the Association's ultimate parent company is incorporated.

(e) Non-Exclusivity of Rights. The rights to indemnification and the
advancement of expenses conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquired under any statute,
agreement, vote of stockholders or disinterested directors or otherwise.

(f) Insurance. The Association may purchase, maintain, and make payment or
reimbursement for reasonable premiums on, insurance to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the law of
the state in which the Association's ultimate parent company is incorporated;
provided however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.

ELEVENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. The notice of any shareholders' meeting at
which an amendment to the articles of association of this Association is to be
considered shall be given as hereinabove set forth.

I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.

Secretary/Assistant Secretary
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Dated at , as of .
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Revision of February 15, 1996

<PAGE>

EXHIBIT 2

AMENDED AND RESTATED BY-LAWS OF

FLEET NATIONAL BANK

ARTICLE I

MEETINGS OF SHAREHOLDERS

Section 1. Annual Meeting. The regular annual meeting of the shareholders for
the election of Directors and the transaction of any other business that may
properly come before the meeting shall be held at the Main Office of the
Association, or such other place as the Board of Directors may designate, on
the fourth Thursday of April in each year at 1:15 o'clock in the afternoon
unless some other hour of such day is fixed by the Board of Directors.

If, from any cause, an election of Directors is not made on such day, the Board
of Directors shall order the election to be held on some subsequent day, of
which special notice shall be given in accordance with the provisions of law,
and of these bylaws.

Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the Board of Directors, the President, or any shareholders
owning not less than twenty-five percent (25%) of the stock of the Association.

Section 3. Notice of Meetings of Shareholders. Except as otherwise provided
by law, notice of the time and place of annual or special meetings of the
shareholders shall be mailed, postage prepaid, at least ten (10) days before
the date of the meeting to each shareholder of record entitled to vote thereat
at his address as shown upon the books of the Association; but any failure to
mail such notice to any shareholder or any irregularity therein, shall not
affect the validity of such meeting or of any of the proceedings thereat.
Notice of a special meeting shall also state the purpose of the meeting.

Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a
quorum for the transaction of business at every meeting of the shareholders
shall consist of not less than two-fifths (2/5) of the outstanding capital
stock represented in person or by proxy; less than such quorum may adjourn the
meeting to a future time. No notice need be given of an adjourned annual or
special meeting of the shareholders if the adjournment be to a definite place
and time.

Section 5. Votes and Proxies. At every meeting of the shareholders, each
share of the capital stock shall be entitled to one vote except as otherwise
provided by law. A majority of the votes cast shall decide every question
or matter submitted to the shareholder at any meeting, unless otherwise
provided by law or by the Articles of Association or these By-laws. Share-
holders may vote by proxies duly authorized in writing and filed with the
Cashier, but no officer, clerk, teller or bookkeeper of the Association may act
as a proxy.

<PAGE>

Section 6. Nominations to Board of Directors. At any meeting of shareholders
held for the election of Directors, nominations for election to the Board of
Directors may be made, subject to the provisions of this section, by any share-
holder of record of any outstanding class of stock of the Association entitled
to vote for the election of Directors. No person other than those whose names
are stated as proposed nominees in the proxy statement accompanying the notice
of the meeting may be nominated as such meeting unless a shareholder shall have
given to the President of the Association and to the Comptroller of the
Currency, Washington, DC written notice of intention to nominate such other
person mailed by certified mail or delivered not less than fourteen (14) days
nor more than fifty (50) days prior to the meeting of shareholders at which
such nomination is to be made; provided, however, that if less than twenty-one
(21) days' notice of such meeting is given to shareholders, such notice of
intention to nominate shall be mailed by certified mail or delivered to said
President and said Comptroller on or before the seventh day following the day
on which the notice of such meeting was mailed. Such notice of intention to
nominate shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Association that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Association owned by the
notifying shareholder. In the event such notice is given, the proposed nominee
may be nominated either by the shareholder giving such notice or by any other
shareholder present at the meeting at which such nomination is to be made.
Such notice may contain the names of more than one proposed nominee, and if
more than one is named, any one or more of those named may be nominated.

Section 7. Action Taken Without a Shareholder Meeting. Any action requiring
shareholder approval or consent may be taken without a meeting and without
notice of such meeting by written consent of the shareholders.

ARTICLE II

DIRECTORS

Section 1. Number. The Board of Directors shall consist of such number of
shareholders, not less than five (5) nor more than twenty-five (25), as from
time to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled, or by the Board of Directors as
hereinafter provided.

Section 2. Mandatory Retirement for Directors. No person shall be elected a
director who has attained the age of 68 and no person shall continue to serve
as a director after the date of the first meeting of the stockholders of the
Association held on or after the date on which such person attains the age of
68; provided, however, that any director serving on the Board as of December
15, 1995 who has attained the age of 65 on or prior to such date shall be
permitted to continue to serve as a director until the date of the first
meeting of the stockholders of the Association held on or after the date on
which such person attains the age of 70.

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<PAGE>

Section 3. General Powers. The Board of Directors shall exercise all the
corporate powers of the Association, except as expressly limited by law, and
shall have the control, management, direction and disposition of all its
property and affairs.

Section 4. Annual Meeting. Immediately following a meeting of shareholders
held for the election of Directors, the Cashier shall notify the directors-
elect who may be present of their election and they shall then hold a meeting
at the Main Office of the Association, or such other place as the Board of
Directors may designate, for the purpose of taking their oaths, organizing the
new Board, electing officers and transacting any other business that may come
before such meeting.

Section 5. Regular Meeting. Regular meetings of the Board of Directors shall
be held without notice at the Main Office of the Association, or such other
place as the Board of Directors may designate, at such dates and times as the
Board shall determine. If the day designated for a regular meeting falls on a
legal holiday, the meeting shall be held on the next business day.

Section 6. Special Meetings. A special meeting of the Board of Directors may
be called at anytime upon the written request of the Chairman of the Board, the
President, or of two Directors, stating the purpose of the meeting. Notice of
the time and place shall be given not later than the day before the date of the
meeting, by mailing a notice to each Director at his last known address, by
delivering such notice to him personally, or by telephoning.

Section 7. Quorum; Votes. A majority of the Board of Directors at the time
holding office shall constitute a quorum for the transaction of all business,
except when otherwise provided by law, but less than a quorum may adjourn
a meeting from time to time, and the meeting may be held, as adjourned, without
further notice. If a quorum is present when a vote is taken, the affirmative
vote of a majority of Directors present is the act of the Board of Directors.

Section 8. Action by Directors Without a Meeting. Any action requiring
Director approval or consent may be taken without a meeting and without notice
of such meeting by written consent of all the Directors.

Section 9. Telephonic Participation in Directors' Meetings. A Director or
member of a Committee of the Board of Directors may participate in a meeting of
the Board or of such Committee may participate in a meeting of the Board or of
such Committee by means of a conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear one
another, and participation in such a meeting shall constitute presence in person
at such a meeting.

Section 10. Vacancies. Vacancies in the Board of Directors may be filled by
the remaining members of the Board at any regular or special meeting of the
Board.

Section 11. Interim Appointments. The Board of Directors shall, if the share-
holders at any meeting for the election of Directors have determined a number
of Directors less than twenty-five (25), have the power, by affirmative vote of
the majority of all the Directors, to increase such number of Directors to not
more than twenty-five (25) and to elect Directors to fill the resulting
vacancies and to serve until the next annual meeting of shareholders or the
next election of Directors; provided, however, that the number of Directors
shall not be so increased by more than two (2) if the number last determined
by shareholders was fifteen (15) or less, or increased by more than four (4) if
the number last determined by shareholders was sixteen (16) or more.

Section 12. Fees. The Board of Directors shall fix the amount and direct the
payment of fees which shall be paid to each Director for attendance at any
meeting of the Board of Directors or of any Committees of the Board.

ARTICLE III

COMMITTEES OF THE BOARD

Section 1. Executive Committee. The Board of Directors shall appoint from its
members an Executive Committee which shall consist of such number of persons as
the Board of Directors shall determine; the Chairman of the Board and the
President shall be members ex-officio of the Executive Committee with full
voting power. The Chairman of the Board or the President may from time to time
appoint from the Board of Directors as temporary additional members of the
Executive Committee, with full voting powers, not more than two members to serve
for such periods as the Chairman of the Board or the President may determine.
The Board of Directors shall designate a member of the Executive Committee to
serve as Chairman thereof. A meeting of the Executive Committee may be called
at any time upon the written request of the Chairman of the Board, the President
or the Chairman of the Executive Committee, stating the purpose of the meeting.
Not less than twenty four hours' notice of said meeting shall be given to each
member of the Committee personally, by telephoning, or by mail. The Chairman of
the Executive Committee or, in his absence, a member of the Committee chosen by
a majority of the members present shall preside at meetings of the Executive
Committee.

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<PAGE>
The Executive Committee shall possess and may exercise all the powers of the
Board when the Board is not in session except such as the Board, only, by law,
is authorized to exercise; it shall keep minutes of its acts and proceedings
and cause same to be presented and reported at every regular meeting and at any
special meeting of the Board including specifically, all its actions relating
to loans and discounts.

All acts done and powers and authority conferred by the Executive Committee,
from time to time, within the scope of its authority, shall be deemed to be,
and may be certified as being, the acts of and under the authority of the
Board.

Section 2. Risk Management Committee. The Board shall appoint from its
members a Risk Management Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Risk
Management Committee to serve as Chairman thereof. It shall be the duty of the
Risk Management Committee to (a) serve as the channel of communication with
management and the Board of Directors of Fleet Financial Group, Inc. to assure
that formal processes supported by management information systems are in place
for the identification, evaluation and management of significant risks inherent
in or associated with lending activities, the loan portfolio, asset-liability
management, the investment portfolio, trust and investment advisory activities,
the sale of nondeposit investment products and new products and services and
such additional activities or functions as the Board may determine from time
to time; (b) assure the formulation and adoption of policies approved by the
Risk Management Committee or Board governing lending activities, management of
the loan portfolio, the maintenance of an adequate allowance for loan and lease
losses, asset-liability management, the investment portfolio, the retail
sale of non-deposit investment products, new products and services and such
additional activities or functions as the Board may determine from time to time
(c) assure that a comprehensive independent loan review program is in place for
the early detection of problem loans and review significant reports of the loan
review department, management's responses to those reports and the risk
attributed to unresolved issues; (d) subject to control of the Board, exercise
general supervision over trust activities, the investment of trust funds, the
disposition of trust investments and the acceptance of new trusts and the terms
of such acceptance, and (e) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.

Section 3. Audit Committee. The Board shall appoint from its members and
Audit Committee which shall consist of such number as the Board shall determine
no one of whom shall be an active officer or employee of the Association or
Fleet Financial Group, Inc. or any of its affiliates. In addition, members of
the Audit Committee must not (i) have served as an officer or employee of the
Association or any of its affiliates at any time during the year prior to their
appointment; or (ii) own, control, or have owned or controlled at any time
during the year prior to appointment, ten percent (10%) or more of any
outstanding class of voting securities of the Association. At least two (2)
members of the Audit Committee must have significant executive, professional,
educational or regulatory experience in financial, auditing, accounting,
or banking matters. No member of the Audit Committee may have significant
direct or indirect credit or other relationships with the Association, the
termination of which would materially adversely affect the Association's
financial condition or results of operations.

The Board shall designate a member of the Audit Committee to serve as Chairman
thereof. It shall be the duty of the Audit Committee to (a) cause a continuous
audit and examination to be made on its behalf into the affairs of the
Association and to review the results of such examination; (b) review
significant reports of the internal auditing department, management's responses
to those reports and the risk attributed to unresolved issues; (c) review the
basis for the reports issued under Section 112 of The Federal Deposit Insurance
Corporation Improvement Act of 1991; (d) consider, in consultation with the
independent auditor and an internal auditing executive, the adequacy of the
Association's internal controls, including the resolution of identified material
weakness and reportable conditions; (e) review regulatory communications
received from any federal or state agency with supervisory jurisdiction or
other examining authority and monitor any needed corrective action by
management; (f) ensure that a formal system of internal controls is in place
for maintaining compliance with laws and regulations; (g) cause an audit of the
Trust Department at least once during each calendar year and within 15 months
of the last such audit or, in lieu thereof, adopt a continuous audit system and
report to the Board each calendar year and within 15 months of the previous
report on the performance of such audit function; and (h) perform such
additional duties and exercise such additional powers of the Board as the Board
may determine from time to time.

The Audit Committee may consult with internal counsel and retain its own
outside counsel without approval (prior or otherwise) from the Board or
management and obligate the Association to pay the fees of such counsel.

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<PAGE>

Section 4. Community Affairs Committee. The Board shall appoint from its
members a Community Affairs Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Community
Affairs Committee to serve as Chairman thereof. It shall be the duty of the
Community Affairs Committee to (a) oversee compliance by the Association with
the Community Reinvestment Act of 1977, as amended, and the regulations
promulgated thereunder; and (b) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.

Section 5. Regular Meetings. Except for the Executive Committee which shall
meet on an ad hoc basis as set forth in Section 1 of this Article, regular
meetings of the Committees of the Board of Directors shall be held, without
notice, at such time and place as the Committee or the Board of Directors may
appoint and as often as the business of the Association may require.

Section 6. Special Meetings. A Special Meeting of any of the Committees of
the Board of Directors may be called upon the written request of the Chairman
of the Board or the President, or of any two members of the respective
Committee, stating the purpose of the meeting. Not less than twenty-four
hours' notice of such special meeting shall be given to each member of the
Committee personally, by telephoning, or by mail.

Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees
of the Board of Directors may be called at the request of the Chairman of the
Board or the President, who shall state that an emergency exists, upon not
less than one hour's notice to each member of the Committee personally or by
telephoning.

Section 8. Action Taken Without a Committee Meeting. Any Committee of the
Board of Directors may take action without a meeting and without notice of such
meeting by resolution assented to in writing by all members of such Committee.

Section 9. Quorum. A majority of a Committee of the Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of such
Committee. If a quorum is not available, the Chairman of the Board or the
President shall have power to make temporary appointments to a Committee of-
members of the Board of Directors, to act in the place and stead of members who
temporarily cannot attend any such meeting; provided, however, that any
temporary appointment to the Audit Committee must meet the requirements for
members of that Committee set forth in Section 3 of this Article.

Section 10. Record. The committees of the Board of Directors shall keep a
record of their respective meetings and proceedings which shall be presented
at the regular meeting of the Board of Directors held in the calendar month
next following the meetings of the Committees. If there is no regular Board
of Directors meeting held in the calendar month next following the meeting of
a Committee, then such Committee's records shall be presented at the next
regular Board of Directors meeting held in a month subsequent to such Committee
meeting.

Section 11. Changes and Vacancies. The Board of Directors shall have power
to change the members of any Committee at any time and to fill vacancies on any
Committee; provided, however, that any newly appointed member of the Audit
Committee must meet the requirements for members of that Committee set forth in
Section 3 of this Article.

Section 12. Other Committees. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.

ARTICLE IV

WAIVER OF NOTICE OF MEETINGS

Section 1. Waiver. Whenever notice is required to be given to any shareholder,
Director, or member of a Committee of the Board of Directors, such notice may
be waived in writing either before or after such meeting by any shareholder,
Director or Committee member respectively, as the case may be, who may be
entitled to such notice; and such notice will be deemed to be waived by
attendance at any such meeting.

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<PAGE>

ARTICLE V

OFFICERS AND AGENTS

Section 1. Officers. The Board shall appoint a Chairman of the Board and a
President, and shall have the power to appoint one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Cashier, a Secretary, an Auditor, a Controller, one or more Trust Officers and-
such other officers as are deemed necessary or desirable for the proper
transaction of business of the Association. The Chairman of the Board and the
President shall be appointed from members of the Board of Directors. Any two
or more offices, except those of President and Cashier, or Secretary, may be
held by the same person. The Board may, from time to time, by resolution
passed by a majority of the entire Board, designate one or more officers of the
Association or of an affiliate or of Fleet Financial Group, Inc. with power to
appoint one or more Vice Presidents and such other officers of the Association
below the level of Vice President as the officer or officers designated in such
resolution deem necessary or desirable for the proper transaction of the
business of the Association.

Section 2. Chairman of the Board. The chairman of the Board shall preside at
all meetings of the Board of Directors. Subject to definition by the Board of
Directors, he shall have general executive powers and such specific powers and
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors.

Section 3. President. The President shall preside at all meetings of the
Board of Directors if there be no Chairman or if the Chairman be absent.
Subject to definition by the Board of Directors, he shall have general
executive powers and such specific powers and duties as from time to time may
be conferred upon or assigned to him by the Board of Directors.

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<PAGE>

Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the
Board and of the Executive Committee, and shall keep accurate minutes of their
meetings and of all meetings of the shareholders. He shall attend to the
giving of all notices required by these By-laws. He shall be custodian of the
corporate seal, records, documents and papers of the Association. He shall
have such powers and perform such duties as pertain by law or regulation to the
office of Cashier, or as are imposed by these By-laws, or as may be delegated
to him from time to time by the Board of Directors, the Chairman of the Board
or the President.

Section 5. Auditor. The Auditor shall be the chief auditing officer of the
Association. He shall continuously examine the affairs of the Association and
from time to time shall report to the Board of Directors. He shall have such
powers and perform such duties as are conferred upon, or assigned to him by
these By-laws, or as may be delegated to him from time to time by the Board
of Directors.

Section 6. Officers Seriatim. The Board of Directors shall designate from
time to time not less than two officers who shall in the absence or disability
of the Chairman or President or both, succeed seriatim to the duties and
responsibilities of the Chairman and President respectively.

Section 7. Clerks and Agents. The Board of Directors may appoint, from time
to time, such clerks, agents and employees as it may deem advisable for the
prompt and orderly transaction of the business of the Association, define
their duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the Chairman of the Board or the
President, or any other officer of the Association authorized by either of them
may appoint and dismiss all or any clerks, agents and employees and prescribe
their duties and the conditions of their employment, and from time to time
fix their compensation.

Section 8. Tenure. The Chairman of the Board of Directors and the President
shall, except in the case of death, resignation, retirement or disqualification
under these By-laws, or unless removed by the affirmative vote of at least two-
thirds of all of the members of the Board of Directors, hold office for the
term of one year or until their respective successors are appointed. Either
of such officers appointed to fill a vacancy occurring in an unexpired term
shall serve for such unexpired term of such vacancy. All other officers,
clerks, agents, attorneys-in-fact and employees of the Association shall hold
office during the pleasure of the Board of Directors or of the officer or
committee appointing them respectively.

ARTICLE VI

TRUST DEPARTMENT

Section 1. General Powers and Duties. All fiduciary powers of the Association
shall be exercised through the Trust Department, subject to such regulations as
the Comptroller of the Currency shall from time to time establish. The Trust
Department shall be to placed under the management and immediate supervision
of an officer or officers appointed by the Board of Directors. The duties of
all officers of the Trust Department shall be to cause the policies and
instructions of the Board and the Risk Management Committee with respect to the
trusts under their supervision to be carried out, and to supervise the due
performance of the trusts and agencies entrusted to the Association and under
their supervision, in accordance with law and in accordance with the terms of
such trusts and agencies.

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<PAGE>

ARTICLE VII

BRANCH OFFICES

Section 1. Establishment. The Board of Directors shall have full power to
establish, to discontinue, or, from time to time, to change the location of any
branch office, subject to such limitations as may be provided by law.

Section 2. Supervision and Control. Subject to the general supervision and
control of the Board of Directors, the affairs of branch offices shall be
under the immediate supervision and control of the President or of such other
officer or officers, employee or employees, or other individuals as the Board
of Directors may from time to time determine, with such powers and duties as
the Board of Directors may confer upon or assign to him or them.

ARTICLE VIII

SIGNATURE POWERS

Section 1. Authorization. The power of officers, employees, agents and
attorneys to sign on behalf of and to affix the seal of the Association shall
be prescribed by the Board of Directors or by the Executive Committee or by
both; provided that the President is authorized to restrict such power of any
officer, employee, agent or attorney to the business of a specific department
or departments, or to a specific branch office or branch offices. Facsimile
signatures may be authorized.

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<PAGE>

ARTICLE IX

STOCK CERTIFICATES AND TRANSFERS

Section 1. Stock Records. The Trust Department shall have custody of the
stock certificate books and stock ledgers of the Association, and shall make
all transfers of stock, issue certificates thereof and disburse dividends
declared thereon.

Section 2. Form of Certificate. Every shareholder shall be entitled to a
certificate conforming to the requirements of law and otherwise in such form
as the Board of Directors may approve. The certificates shall state on the
face thereof that the stock is transferable only on the books of the
Association and shall be signed by such officers as may be prescribed from time
to time by the Board of Directors or Executive Committee. Facsimile signatures
may be authorized.

Section 3. Transfers of Stock. Transfers of stock shall be made only on the
books of the Association by the holder in person, or by attorney duly
authorized in writing, upon surrender of the certificate therefor properly
endorsed, or upon the surrender of such certificate accompanied by a properly
executed written assignment of the same, or a written power of attorney to
sell, assign or transfer the same or the shares represented thereby.

Section 4. Lost Certificate. The Board of Directors or Executive Committee
may order a new certificate to be issued in place of a certificate lost or
destroyed, upon proof of such loss or destruction and upon tender to the
Association by the shareholder, of a bond in such amount and with or without
surety, as may be ordered, indemnifying the Association against all liability,
loss, cost and damage by reason of such loss or destruction and the issuance
of a new certificate.

Section 5. Closing Transfer Books. The Board of Directors may close the
transfer books for a period not exceeding thirty days preceding any regular
or special meeting of the shareholders, or the day designated for the payment
of a dividend or the allotment of rights. In lieu of closing the transfer
books the Board of Directors may fix a day and hour not more than thirty days
prior to the day of holding any meeting of the shareholders, or the day
designated for the payment of a dividend, or the day designated for the
allotment of rights, or the day when any change of conversion or exchange of
capital stock is to go into effect, as the day as of which shareholders
entitled to notice of and to vote at such meetings or entitled to such dividend
or to such allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, shall be determined, and
only such shareholders as shall be shareholders of record on the day and hour
so fixed shall be entitled to notice of and to vote at such meeting or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be.

ARTICLE X

THE CORPORATE SEAL

Section 1. Seal. The following is an impression of the seal of the
Association adopted by the Board of Directors.

ARTICLE XI

BUSINESS HOURS

Section 1. Business Hours. The main office of this Association and each
branch office thereof shall be open for business on such days, and for such
hours as the Chairman, or the President, or any Executive Vice President, or
such other officer as the Board of Directors shall from time to time
designate, may determine as to each office to conform to local custom and
convenience, provided that any one or more of the main and branch offices or
certain departments thereof may be open for such hours as the President, or
such other officer as the Board of Directors shall from time to time designate,
may determine as to each office or department on any legal holiday on which
work is not prohibited by law, and provided further that any one or more of
the main and branch offices or certain departments thereof may be ordered
closed or open on any day for such hours as to each office or department as
the President, or such other officer as the Board of Directors shall from time
to time designate, subject to applicable laws regulations, may determine when
such action may be required by reason of disaster or other emergency condition.

ARTICLE IX

CHANGES IN BY-LAWS

Section 1. Amendments. These By-laws may be amended upon vote of a majority
of the entire Board of Directors at any meeting of the Board, provided ten (10)
day's notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-law, as amended, is
consistent with the requirements of law and of the Articles of Association.
These By-laws may also be amended by the Association's shareholders.

A true copy

Attest:

Secretary/Assistant Secretary
- ---------------------------------------

Dated at , as of .
--------------------------------------- ----------------------

Revision of January 11, 1993

-9-

<PAGE>
[LOGO] Exhibit 3
- -------------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- -------------------------------------------------------------------------------
Washington, D.C. 20219

CERTIFICATE

I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that:

1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et
seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering of all National Banking
Associations.

2. "Fleet National Bank," (Charter No. 1338) is a National Banking
Association formed under the laws of the United States and is authorized
thereunder to transact the business of banking and exercise Fiduciary Powers on
the date of this Certificate.

IN TESTIMONY WHEREOF, I have hereunto

subscribed my name and caused my seal of office

to be affixed to these presents at the Treasury

Department in the City of Washington and
[SEAL]
District of Columbia, this 23rd day of

December, 1996.

/s/
----------------------

Comptroller of the Currency

<PAGE>
EXHIBIT 4

CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939

The undersigned, as Trustee under an Indenture to be entered into
between ______________and Fleet National Bank, Trustee, does hereby consent
that, pursuant to Section 321(b) of the Trust Indenture Act of 1939, reports of
examinations with respect to the undersigned by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.

FLEET NATIONAL BANK,
Trustee

By _____________________
Name:
Title:

Dated:

<PAGE>
[FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL LETTERHEAD]
- -------------------------------------------------------------------------------
Please refer to page i,
[LOGO] Table of Contents, for 1
the required disclosure
of estimated burden.
- -------------------------------------------------------------------------------

CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC AND
FOREIGN OFFICES - FFIEC 031
(961231)
REPORT AT THE CLOSE OF BUSINESS DECEMBER 31, 1996 -----------
(RCRI 9999)

This report is required by law: 12 U.S.C. Section 324 (State member banks); 12
U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).

This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- ------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.

I, Giro S. DeRosa, Vice President
- -----------------------------------------------------
Name and Title of Officer Authorized to Sign Report

of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with
the instructions issued by the appropriate Federal regulatory authority and are
true to the best of my knowledge and belief.

/s/ Giro DeRosa
- ----------------------------------------------
Signature of Officer Authorized to Sign Report

January 23, 1997
- -----------------
Date of Signature

The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.

We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it
has been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.

/s/
- ------------------
Director (Trustee)

/s/
- -------------------
Director (Trustee)
- -----------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:

STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.

STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.

NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- -------------------------------------------------------------------------------

FDIC Certificate Number [02499] Banks should affix the address label in
----------- this space.
(RCRI 9050)
Fleet National Bank
---------------------------------------
Legal Title of Bank (TEXT 9010)

One Monarch Place
---------------------------------------
City (TEXT 9131)

Springfield, MA 01102
---------------------------------------
State Abbrev. Zip Code
(TEXT 9200) (TEXT 9220)

<PAGE>
FFIEC 031
Consolidated Reports of Condition and Income for a Bank With Page i
Domestic and Foreign Offices 2
- -------------------------------------------------------------------------------

TABLE OF CONTENTS

SIGNATURE PAGE Cover

REPORT OF INCOME

Schedule RI--Income Statement.....................RI-1, 2, 3

Schedule RI-A--Changes in Equity Capital................RI-4

Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance For Loan and Lease Losses.............RI-4, 5

Schedule RI-C--Applicable Income Taxes by Taxing
Authority.............................................RI-5

Schedule RI-D--Income from International Operations.....RI-6

Schedule RI-E--Explanations..........................RI-7, 8

REPORT OF CONDITION

Schedule RC--Balance Sheet...........................RC-1, 2

Schedule RC-A--Cash and Balances Due from Depository
Institutions..........................................RC-3

Schedule RC-B--Securities.........................RC-3, 4, 5

Schedule RC-C--Loans and Lease Financing
Receivables:
Part I. Loans and Leases..........................RC-6, 7
Part II. Loans to Small Businesses and Small
Farms (included in the forms for June 30
only).........................................RC-7a, 7b

Schedule RC-D--Trading Assets and Liabilities (to
be completed only be selected banks)..................RC-8

Schedule RC-E--Deposit Liabilities..............RC-9, 10, 11

Schedule RC-F--Other Assets............................RC-11

Schedule RC-G--Other Liabilities.......................RC-11

Schedule RC-H--Selected Balance Sheet Items for
Domestic Offices.....................................RC-12

Schedule RC-I--Selected Assets and Liabilities of
IBFs.................................................RC-13

Schedule RC-K--Quarterly Averages......................RC-13

Schedule RC-L--Off-Balance Sheet Items.........RC-14, 15, 16

Schedule RC-M--Memoranda...........................RC-17, 18

Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets.........................RC-19, 20

Schedule RC-O--Other Data for Deposit Insurance
Assessments......................................RC-21, 22

Schedule RC-R--Regulatory Capital..................RC-23, 24

Optional Narrative Statement Concerning the
Amounts Reported in the Reports of Condition
and Income...........................................RC-25

Special Report (TO BE COMPLETED BY ALL BANKS)

Schedule RC-J--Repricing Opportunities (sent only
to and to be completed by savings banks)

DISCLOSURE OF ESTIMATED BURDEN

The estimated average burden associated with this information collection is
32.2 hours per respondent and is estimated to vary from 15 to 230 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the
required form, and completing the information collection, but exclude the time
for compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden
estimate and suggestions for reducing this burden should be directed to the
Office of Information and Regulatory Affairs, Office of Management and Budget,
Washington, D.C. 20503, and to one of the following:

Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551

Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219

Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429

For Information or assistance, National and State nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington,
D.C. 20429, toll free on (800) 688-FDIC(3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RI-1
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

CONSOLIDATED REPORT OF INCOME
FOR THE PERIOD JANUARY 1, 1996-DECEMBER 31, 1996

ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE BASIS IN THOUSANDS OF DOLLARS.

SCHEDULE RI--INCOME STATEMENT

I480 < -
-------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income: //////////////////
a. Interest and fee income on loans: //////////////////
(1) In domestic offices: //////////////////
(a) Loans secured by real estate................................................. 4011 1,092,992 1.a.(1)(a)
(b) Loans to depository institutions............................................. 4019 1,482 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers.......... 4024 501 1.a.(1)(c)
(d) Commercial and industrial loans.............................................. 4012 1,132,500 1.a.(1)(d)
(e) Acceptances of other banks................................................... 4026 264 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expeditures: //////////////////
(1) Credit cards and related plans............................................ 4054 16,485 1.a.(1)(f)(1)
(2) Other.................................................................... 4055 189,926 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions....................... 4056 0 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political //////////////////
subdivisions in the U.S.: //////////////////
(1) Taxable obligations...................................................... 4503 0 1.a.(1)(h)(1)
(2) Tax-exempt obligations................................................... 4504 10,381 1.a.(1)(h)(2)
(i) All other loans in domestic offices.......................................... 4058 147,087 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs.................... 4059 4,161 1.a.(2)
b. Income from lease financing receivables: //////////////////
(1) Taxable leases................................................................... 4505 152,848 1.b.(1)
(2) Tax-exempt leases................................................................ 4307 1,511 1.b.(2)
c. Interest income on balances due from depository instituions: (1) //////////////////
(1) In domestic offices.............................................................. 4105 1,644 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs.................... 4106 142 1.c.(2)
d. Interest and dividend income on securities: //////////////////
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations.. 4027 422,212 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: //////////////////
(a) Taxable securities........................................................... 4506 0 1.d.(2)(a)
(b) Tax-Exempt securities........................................................ 4507 6,495 1.d.(2)(b)
(3) Other domestic debt securities................................................... 3657 12,976 1.d.(3)
(4) Foreign debt securities.......................................................... 3658 6,621 1.d.(4)
(5) Equity securities (including investments in mutual funds)........................ 3659 17,504 1.d.(5)
e. Interest income from trading assets.................................................. 4069 479 1.e.
------------------
</TABLE>

- ----------
(1) Includes interest income on time certificates of deposit not held for
trading.

<PAGE>

<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RI-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RI--CONTINUED

Dollar Amounts in Thousands Year-to-date
RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income (continued)
f. Interest income on federal funds sold and securities purchased under //////////////////
agreements to resell in domestic offices of the bank and of its Edge //////////////////
and Agreement subsidiaries, and in IBFs ............................. 4020 25,839 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ 4107 3,244,050 1.g.
2. Interest expense: //////////////////
a. Interest on deposits: //////////////////
(1) Interest on deposits in domestic offices: //////////////////
(a) Transaction accounts (NOW accounts, ATS accounts, and //////////////////
telephone and preauthorized transfer accounts) .............. 4508 13,070 2.a.(1)(a)
(b) Nontransaction accounts: //////////////////
(1) Money market deposit accounts (MMDAs) ................... 4509 257,330 2.a.(1)(b)(1)
(2) Other savings deposits .................................. 4511 48,169 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ 4174 170,575 2.a.(1)(b)(3)
(4) All other time deposits ................................. 4512 403,831 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement //////////////////
subsidiaries, and IBFs .......................................... 4172 100,766 2.a.(2)
b. Expense of federal funds purchased and securities sold under //////////////////
agreements to repurchase in domestic offices of the bank and of its //////////////////
Edge and Agreement subsidiaries, and in IBFs ........................ 4180 282,599 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading //////////////////
liabilities, and other borrowed money ............................... 4185 161,582 2.c.
d. Interest on mortgage indebtedness and obligations under capitalized //////////////////
leases .............................................................. 4072 859 2.d.
e. Interest on subordinated notes and debentures ....................... 4200 69,434 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... 4073 1,508,215 2.f.
3. Net interest income (item 1.g minus 2.f) .............................. ////////////////// RIAD 4074 1,735,835 3.
4. Provisions: //////////////////
a. Provision for loan and lease losses ................................. ////////////////// RIAD 4230 (6,834) 4.a.
b. Provision for allocated transfer risk ............................... ////////////////// RIAD 4243 0 4.b.
5. Noninterest income: //////////////////
a. Income from fiduciary activities .................................... 4070 295,272 5.a.
b. Service charges on deposit accounts in domestic offices ............. 4080 222,313 5.b.
c. TRADING REVENUE (MUST EQUAL SCHEDULE RI, SUM OF MEMORANDUM //////////////////
ITEMS 8.a THROUGH 8.d) .............................................. A220 25,253 5.c.
d. Other foreign transaction gains (losses) ............................ 4076 346 5.d.
e. Not applicable //////////////////
f. Other noninterest income: //////////////////
(1) Other fee income ................................................ 5407 797,631 5.f.(1)
(2) All other noninterest income* ................................... 5408 350,869 5.f.(2)
g. Total noninterest income (sum of items 5.a through 5.f) ............. ////////////////// RIAD 4079 1,691,684 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. ////////////////// RIAD 3521 52 6.a.
b. Realized gains (losses) on available-for-sale securities ............ ////////////////// RIAD 3196 12,071 6.b.
7. Noninterest expense: //////////////////
a. Salaries and employee benefits ...................................... 4135 645,873 7.a.
b. Expenses of premises and fixed assets (net of rental income) //////////////////
(excluding salaries and employee benefits and mortgage interest ..... 4217 211,199 7.b.
c. Other noninterest expense* .......................................... 4092 1,243,839 7.c.
d. Total noninterest expense (sum of items 7.a through 7.c) ............ ////////////////// RIAD 4093 2,100,911 7.d.
8. Income (loss) before income taxes and extraordinary items and other //////////////////
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d) ////////////////// RIAD 4301 1,345,565 8.
9. Applicable income taxes (on item 8) .................................... ////////////////// RIAD 4302 548,252 9.
10. Income (loss) before extraordinary items and other adjustments (item 8 //////////////////
minus 9) ............................................................... ////////////////// RIAD 4300 797,313 10.

- ------------
*Describe on Schedule RI-E--Explanations.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RI--CONTINUED

Year-to-date
------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11. Extraordinary items and other adjustments: //////////////////
a. Extraordinary items and other adjustments, //////////////////
gross of income taxes*..................................... 4310 0 11.a.
b. Applicable income taxes (on item 11.a)*.................... 4315 0 11.b.
c. Extraordinary items and other adjustments, //////////////////
net of income taxes (item 11.a minus 11.b)................. ////////////////// RIAD 4320 0 11.c.
12. Net income (loss) (sum of items 10 and 11.c)................... ////////////////// RIAD 4340 797,313 12.
----------------------------------------------------
</TABLE>
<TABLE>

I481 < -
------------
Memoranda Year-to-date
------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after //////////////////
August 7, 1986, that is not deductible for federal income tax purposes....................... 4513 2,891 M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices //////////////////
(included in Schedule RI, item 8)............................................................ 8431 46,475 M.2.
3.-4. Not applicable //////////////////
5. Number of full-time equivalent employees on payroll at end of current period (round to //// Number
nearest whole number)........................................................................ 4150 12,425 M.5.
6. Not applicable //////////////////
7. If the reporting bank has restated its balance sheet as a result of applying push down //// MM DD YY
accounting this calendar year, report the date of the bank's acquisition..................... 9106 00/00/00 M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) //////////////////
(SUM OF MEMORANDUM ITEMS 8.a THROUGH 8.d MUST EQUAL SCHEDULE RI, ITEM 5.c): //// Bil Mil Thou
a. Interest rate exposures.................................................................. 8757 5,738 M.8.a.
b. Foreign exchange exposures............................................................... 8758 19,515 M.8.b.
c. Equity security and index exposures...................................................... 8759 0 M.8.c.
d. Commodity and other exposures............................................................ 8760 0 M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: //////////////////
a. Net increase (decrease) to interest income............................................... 8761 2,698 M.9.a.
b. Net (increase) decrease to interest expense.............................................. 8762 (4,902) M.9.b.
c. Other (noninterest) allocations.......................................................... 8763 12 M.9.c.
10. CREDIT LOSSES ON OFF-BALANCE SHEET DERIVATIVES (SEE INSTRUCTIONS)............................ A251 0 M.10.

</TABLE>
- -----------------

*Describe on Schedule RI-E--Explanations.

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RI-A--CHANGES IN EQUITY CAPITAL

Indicate decreases and losses in parentheses.
I483 < -
-----------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of Condition //////////////////
and Income............................................................................... 3215 1,342,473 1.
2. Equity capital adjustments from amended Reports of Income, net*.......................... 3216 0 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2)..................... 3217 1,342,473 3.
4. Net income (loss) (must equal Schedule RI, item 12)...................................... 4340 797,313 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net....................... 4346 0 5.
6. Changes incident to business combinations, net........................................... 4356 4,161,079 6.
7. LESS: Cash dividends declared on preferred stock......................................... 4470 11,688 7.
8. LESS: Cash dividends declared on common stock............................................ 4460 761,473 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions //////////////////
for this schedule)....................................................................... 4411 0 9.
10. Corrections of material accounting errors from prior years* (see instructions for this
schedule)................................................................................ 4412 0 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities......... 8433 (4,870) 11.
12. Foreign currency translation adjustments................................................. 4414 0 12.
13. Other transactions with parent holding company* (not included in items 5,7, or 8 above).. 4415 (1,003,722) 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal //////////////////
Schedule RC, item 28).................................................................... 3210 4,519,112 14.
-------------------
</TABLE>
- ---------------
*Describe on Schedule RI-E--Explanations.
<TABLE>
<CAPTION>
SCHEDULE RI-B--CHARGE-OFFS AND RECOVERIES AND CHANGES
IN ALLOWANCE FOR LOAN AND LEASE LOSSES

PART I. CHARGE-OFFS AND RECOVERIES ON LOANS AND LEASES

PART I EXCLUDES CHARGE-OFFS AND RECOVERIES THROUGH
THE ALLOCATED TRANSFER RISK RESERVE.
I486 < -
--------
(Column A) (Column B)
Charge-offs Recoveries
----------------------------------------
Calendar year-to-date
----------------------------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate: ////////////////// //////////////////
a. To U.S. addressees (domicile)................................... 4651 65,946 4661 16,055 1.a.
b. To non-U.S. addressees (domicile)............................... 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances of other banks: ////////////////// //////////////////
a. To U.S. banks and other U.S. depository institutions............ 4653 0 4663 0 2.a.
b. To foreign banks................................................ 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other loans to farmers. 4655 69 4665 105 3.
4. Commercial and industrial loans: ////////////////// //////////////////
a. To U.S. addressees (domicile)................................... 4645 73,869 4617 43,048 4.a.
b. To non-U.S. addressees (domicile)............................... 4646 0 4618 102 4.b.
5. Loans to individuals for household, family, and other personal ////////////////// //////////////////
expenditures: ////////////////// //////////////////
a. Credit cards and related plans.................................. 4656 2,356 4666 1,468 5.a.
b. Other (includes single payment, installment, and all student
loans).............................................................. 4657 29,089 4667 5,303 5.b.
6. Loans to foreign governments and official institutions.............. 4643 0 4627 0 6.
7. All other loans..................................................... 4644 5,253 4628 965 7.
8. Lease financing receivables: ////////////////// //////////////////
a. Of U.S. addressees (domicile)................................... 4658 12,926 4668 4,622 8.a.
b. Of non-U.S. addressees (domicile)............................... 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8).................................... 4635 189,508 4605 71,668 9.
</TABLE>

Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RI-B--CONTINUED

PART I. CONTINUED

(Column A) (Column B)
Charge-offs Recoveries
-------------------------------------
Calendar-year-to-date
-------------------------------------
Memoranda
Dollar Amounts in Thousands RIAD BIL MIL THOU RIAD BIL MIL THOU
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1-3. Not applicable ////////////////// //////////////////
4. Loans to finance commercial real estate, construction, and land ////////////////// //////////////////
development activities (NOT SECURED BY REAL ESTATE) included in ////////////////// //////////////////
Schedule RI-B, part I, items 4 and 7, above.......................... 5409 714 5410 1,374 M.4.
5. Loans secured by real estate in domestic offices (included in ////////////////// //////////////////
Schedule RI-B, part I, item 1, above): ////////////////// //////////////////
a. Construction and land development................................. 3582 266 3583 337 M.5.a.
b. Secured by farmland............................................... 3584 145 3585 304 M.5.b.
c. Secured by 1-4 family residential properties: ////////////////// //////////////////
(1) Revolving, open-end loans secured by 1-4 family residential ////////////////// //////////////////
properties and extended under lines of credit................. 5411 4,428 5412 619 M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties.. 5413 31,124 5414 3,602 M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties.......... 3588 5,579 3589 590 M.5.d.
e. Secured by nonfarm nonresidential properties...................... 3590 24,404 3591 10,603 M.5.e.
--------------------------------------
</TABLE>
<TABLE>
<CAPTION>

PART II. CHANGES IN ALLOWANCE FOR LOAN AND LEASE LOSSES

Dollar Amounts in Thousands RIAD BIL MIL THOU
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income....... 3124 266,943 1.
2. Recoveries (must equal part I, item 9, column B above)...................................... 4605 71,668 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above)................................ 4635 189,508 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)...................... 4230 (6,834) 4.
5. Adjustments* (see instructions for this schedule)........................................... 4815 634,542 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, //////////////////
item 4.b)................................................................................... 3123 776,811 6.
------------------
- ------------
*Describe on Schedule RI-E--Explanations.
</TABLE>
<TABLE>
<CAPTION>

SCHEDULE RI-C--APPLICABLE INCOME TAXES BY TAXING AUTHORITY

SCHEDULE RI-C IS TO BE REPORTED WITH THE DECEMBER REPORT OF INCOME.

I489
-----------------
Dollar Amounts in Thousands RIAD BIL MIL THOU
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Federal................................................................................... 4780 461,184 1.
2. State and local........................................................................... 4790 87,068 2.
3. Foreign................................................................................... 4795 0 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b)........ 4770 548,252 4.
5. Deferred portion of item 4............................................ RIAD 4772 274,648 ////////////////// 5.
------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RI-6
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RI-D--INCOME FROM INTERNATIONAL OPERATIONS

FOR ALL BANKS WITH FOREIGN OFFICES, EDGE OR AGREEMENT SUBSIDIARIES, OR IBFs WHERE INTERNATIONAL OPERATIONS ACCOUNT FOR MORE THAN
10 PERCENT OF TOTAL REVENUES, TOTAL ASSETS, OR NET INCOME.

PART I. ESTIMATED INCOME FROM INTERNATIONAL OPERATIONS
I492
-------------------
Year-to-date
-------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, //////////////////
and IBFs //////////////////
a. Interest income booked............................................................... 4837 N/A 1.a.
b. Interest expense booked.............................................................. 4038 N/A 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and //////////////////
IBFs (item 1.a minus 1.b)............................................................ 4839 N/A 1.c.
2. Adjustments for booking location of international operations: //////////////////
a. Net interest income attributable to international operations booked at domestic //////////////////
offices.............................................................................. 4840 N/A 2.a.
b. Net interest income attributable to domestic business booked at foreign offices...... 4841 N/A 2.b.
c. Net booking location adjustment (item 2.a minus 2.b)................................. 4842 N/A 2.c.
3. Noninterest income and expense attributable to international operations: //////////////////
a. Noninterest income attributable to international operations.......................... 4097 N/A 3.a.
b. Provision for loan and lease losses attributable to international operations......... 4235 N/A 3.b.
c. Other noninterest expense attributable to international operations................... 4239 N/A 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a //////////////////
minus 3.b and 3.c).................................................................. 4843 N/A 3.d.
4. Estimated pretax income attributable to international operations before capital //////////////////
allocation adjustment (sum of items 1.c, 2.c, and 3.d)................................. 4844 N/A 4.
5. Adjustment to pretax income for internal allocations to international operations to //////////////////
reflect the effects of equity capital on overall bank funding costs.................... 4845 N/A 5.
6. Estimated pretax income attributable to international operations after //////////////////
capital allocation adjustment (sum of items 4 and 5)................................... 4846 N/A 6.
7. Income taxes attributable to income from international operations as estimated in //////////////////
item 6................................................................................. 4797 N/A 7.
8. Estimated net income attributable to international operations (item 6 minus 7)......... 4341 N/A 8.
</TABLE>

memoranda Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Intracompany interest income included in item 1.a above................................ 4847 N/A M.1.
2. Intracompany interest expense included in item 1.b above............................... 4848 N/A M.2.
</TABLE>

PART II. SUPPLEMENTARY DETAILS ON INCOME FROM INTERNATIONAL OPERATIONS REQUIRED
BY THE DEPARTMENTS OF COMMERCE AND TREASURY FOR PURPOSES OF THE U.S.
INTERNATIONAL ACCOUNTS AND THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS

<TABLE>
<CAPTION>
Year-to-date
-------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income booked at IBFs......................................................... 4849 N/A 1.
2. Interest expense booked at IBFs........................................................ 4850 N/A 2.
3. Noninterest income attributable to international operations booked at domestic //////////////////
offices (excluding IBFs): //////////////////
a. Gains (losses) and extraordinary items.............................................. 5491 N/A 3.a.
b. Fees and other noninterest income................................................... 5492 N/A 3.b.
4. Provision for loan and lease losses attributable to international operations booked at //////////////////
domestic offices (excluding IBFs)...................................................... 4852 N/A 4.
5. Other noninterest expense attributable to international operations booked at domestic //////////////////
offices (excluding IBFs)............................................................... 4853 N/A 5.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RI-7
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RI-E--EXPLANATIONS

SCHEDULE RI-E IS TO BE COMPLETED EACH QUARTER ON A CALENDER YEAR-TO-DATE BASIS.

Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)

I495 < -
-------------------
Year-to-date
-------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) //////////////////
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): //////////////////
a. Net gains on other real estate owned................................................ 5415 0 1.a.
b. Net gains on sales of loans......................................................... 5416 0 1.b.
c. Net gains on sales of premises and fixed assets..................................... 5417 0 1.c.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, //////////////////
item 5.f.(2): //////////////////
d. TEXT 4461 INCOME ON MORTGAGES HELD FOR RESALE 4461 147,813 1.d.
e. TEXT 4462 GAIN FROM BRANCH DIVESTITURES 4462 77,976 1.e.
f. TEXT 4463 4463 1.f.
2. Other noninterest expense (from Schedule RI, item 7.c): //////////////////
a. Amortization expense of intangible assets........................................... 4531 278,276 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: //////////////////
b. Net losses on other real estate owned............................................... 5418 0 2.b.
c. Net losses on sales of loans........................................................ 5419 0 2.c.
d. Net losses on sales of premises and fixed assets.................................... 5420 0 2.d.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, //////////////////
item 7.c: //////////////////
e. TEXT 4464 INTERCOMPANY CORPORATE SUPPORT FUNCTION CHARGES 4464 296,172 2.e.
f. TEXT 4467 INTERCOMPANY DATA PROCESSING & PROGRAMMING CHARGES 4467 315,897 2.f.
g. TEXT 4468 4468 2.g.
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and applicable //////////////////
income tax effect (from Schedule RI, item 11.b) (itemize and describe all extraordinary //////////////////
items and other adjustments): //////////////////
a. (1) TEXT 4469 4469 3.a.(1)
(2) Applicable income tax effect RIAD 4486 ////////////////// 3.a.(2)
b. (1) TEXT 4487 4487 3.b.(1)
(2) Applicable income tax effect RIAD 4488 ////////////////// 3.b.(2)
c. (1) TEXT 4489 4489 3.c.(1)
(2) Applicable income tax effect RIAD 4491 ////////////////// 3.c.(2)
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, item 2) //////////////////
(itemize and describe all adjustments): //////////////////
a. TEXT 4492 4492 4.a.
b. TEXT 4493 4493 4.b.
5. Cumulative effect of changes in accounting principles from prior years (from Schedule //////////////////
RI-A, item 9) (itemize and describe all changes in accounting principles): //////////////////
a. TEXT 4494 4494 5.a.
b. TEXT 4495 4495 5.b.
6. Corrections of material accounting errors from prior years (from Schedule RI-A, item 10) //////////////////
(itemize and describe all corrections): //////////////////
a. TEXT 4496 4496 6.a.
b. TEXT 4497 4497 6.b.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RI-8
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RI-E--CONTINUED

-------------------
Year-to-date
-------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) //////////////////
(itemize and describe all such transactions): //////////////////
a. TEXT 4498 FLEET NATIONAL BANK SURPLUS DISTRIBUTION TO FFG .......................... 4498 (1,003,722) 7.a.
b. TEXT 4499 ........................................................................... 4499 7.b.
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, item 5) //////////////////
(itemize and describe all adjustments): //////////////////
a. TEXT 4521 12/31/95 ENDING BALANCE OF POOLED ENTITIES ............................... 4521 636,497 8.a.
b. TEXT 4522 DIVESTED ALLOWANCE RELATED TO SOLD LOANS ................................. 4522 (1,955) 8.b.
9. Other explanations (the space below is provided for the bank to briefly describe, at its -------------------
option, any other significant items affecting the Report of Income): I498 | I499 < -
No comment [X] (RIAD 4769) -------------------
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-1
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1996

All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.

SCHEDULE RC -- BALANCE SHEET
C400
------------------

Dollar Amounts in Thousands RCFD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS //////////////////
1. Cash and balances due from depository institutions (from Schedule RC-A): //////////////////
a. Noninterest-bearing balances and currency and coin (1) ........................... 0081 3,923,408 1.a.
b. Interest-bearing balances(2) ..................................................... 0071 68,691 1.b.
2. Securities: //////////////////
a. Held-to-maturity securities (from Schedule RC-B, column A) ....................... 1754 261,390 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ..................... 1773 4,958,338 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic //////////////////
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: //////////////////
a. Federal funds sold .............................................................. 0276 25,709 3.a.
b. Securities purchased under agreements to resell .................................. 0277 0 3.b.
4. Loans and lease financing receivables: //////////////////
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 31,260,436 ////////////////// 4.a.
b. LESS: Allowance for loan and lease losses ................... RCFD 3123 776,811 ////////////////// 4.b.
c. LESS: Allocated transfer risk reserve ....................... RCFD 3128 0 ////////////////// 4.c.
d. Loans and leases, net of unearned income, //////////////////
allowance, and reserve (item 4.a minus 4.b and 4.c) .............................. 2125 30,483,625 4.d.
5. Trading assets (from Schedule RC-D) ................................................. 3545 73,333 5.
6. Premises and fixed assets (including capitalized leases) ............................ 2145 536,686 6.
7. Other real estate owned (from Schedule RC-M) ........................................ 2145 18,911 7.
8. Investments in unconsolidated subsidiaries and associated companies //////////////////
(from Schedule RC-M) ................................................................ 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding......................... 2155 6,380 9.
10. Intangible assets (from Schedule RC-M) .............................................. 2143 2,316,633 10.
11. Other assets (from Schedule RC-F) ................................................... 2160 3,907,689 11.
12. Total assets (sum of items 1 through 11) ............................................ 2170 46,580,793 12.
------------------
</TABLE>

- ------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC--CONTINUED
-----------------------
Dollar Amounts in Thousands ///////// Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIABILITIES ///////////////////////
13. Deposits: ///////////////////////
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, ///////////////////////
part I) ........................................................................... RCON 2200 32,792,158 13.a.
(1) Noninterest-bearing(1) .............................. RCON 6631 10,359,674 /////////////////////// 13.a.(1)
(2) Interest-bearing .................................... RCON 6636 22,432,484 /////////////////////// 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from ///////////////////////
Schedule RC-E, part II ............................................................ RCFN 2200 2,414,427 13.b.
(1) Noninterest-bearing ................................. RCFN 6631 51,133 /////////////////////// 13.b.(1)
(2) Interest-bearing .................................... RCFN 6636 2,363,294 /////////////////////// 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase in domestic ///////////////////////
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: ///////////////////////
a. Federal funds purchased ........................................................... RCFD 0278 2,999,129 14.a.
b. Securities sold under agreements to repurchase .................................... RCFD 0279 119,013 14.b.
15. a. Demand notes issued to the U.S. Treasury .......................................... RCON 2840 2,393 15.a.
b. Trading liabilities (from Schedule RC-D) .......................................... RCFD 3548 60,855 15.b.
16. Other borrowed money: ///////////////////////
a. WITH A REMAINING MATURITY OF ONE YEAR OR LESS ..................................... RCFD 2332 304,551 16.a.
b. WITH A REMAINING MATURITY OF MORE THAN ONE YEAR ................................... RCFD 2333 631,435 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ....................... RCFD 2910 11,267 17.
18. Bank's liability on acceptances executed and outstanding ............................. RCFD 2920 6,380 18.
19. Subordinated notes and debentures .................................................... RCFD 3200 1,213,219 19.
20. Other liabilities (from Schedule RC-G) ............................................... RCFD 2930 1,506,854 20.
21. Total liabilities (sum of items 13 through 20) ....................................... RCFD 2948 42,061,681 21.
///////////////////////
22. Limited-life preferred stock and related surplus ..................................... RCFD 3282 0 22.
EQUITY CAPITAL ///////////////////////
23. Perpetual preferred stock and related surplus ........................................ RCFD 3838 125,000 23.
24. Common stock ......................................................................... RCFD 3230 19,487 24.
25. Surplus (exclude all surplus related to preferred stock) ............................. RCFD 3839 2,551,927 25.
26. a. Undivided profits and capital reserves ............................................ RCFD 3632 1,813,664 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ............ RCFD 8434 9,034 26.b.
27. Cumulative foreign currency translation adjustments .................................. RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27) .................................... RCFD 3210 4,519,112 28.
29. Total liabilities, limited-life preferred stock, and equity capital ///////////////////////
(sum of items 21, 22, and 28)......................................................... RCFD 3300 46,580,793 29.

Memorandum
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of the statement below that best describes the Number
most comprehensive level of auditing work performed for the bank by independent external ---------------------
auditors as of any date during 1995 .................................................. RCFD 6724 N/A M.1.
---------------------
</TABLE>

1 - Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank

2 - Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)

3 - Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)

4 - Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)

5 - Review of the bank's financial statements by external auditors

6 - Compilation of the bank's financial statements by external auditors

7 - Other audit procedures (excluding tax preparation work)

8 - No external audit work

- ------------
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.

Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address : ONE MONARCH PLACE Page RC-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-A--CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS

Exclude assets held for trading.
--------
C405 < -
--------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
--------------------------------------
Dollar Amounts in Thousands RCFD BIL MIL THOU RCFD BIL MIL THOU
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and ////////////////// //////////////////
coin ................................................................... 0022 3,548,380 ////////////////// 1.
a. Cash items in process of collection and unposted debits.............. ////////////////// 0020 2,693,954 1.a.
b. Currency and coin ................................................... ////////////////// 0080 854,426 1.b.
2. Balances due from depository institutions in the U.S.................... ////////////////// 0082 87,601 2.
a. U.S. branches and agencies of foreign banks (including their IBFs)... 0083 0 ////////////////// 2.a.
b. Other commercial banks in the U.S. and other depository ////////////////// //////////////////
institutions in the U.S. (including their IBFs)...................... 0085 87,676 ////////////////// 2.b.
3. Balances due from banks in foreign countries and foreign central banks.. ////////////////// 0070 12,440 3.
a. Foreign branches of other U.S. banks................................. 0073 208 ////////////////// 3.a.
b. Other banks in foreign countries and foreign central banks........... 0074 12,491 ////////////////// 3.b.
4. Balances due from Federal Reserve Banks................................. 0090 343,344 0090 343,344 4.
5. Total (sum of items 1 through 4) (total of column A must equal ////////////////// //////////////////
Schedule RC, sum of items 1.a and 1.b).................................. 0010 3,992,099 0010 3,991,765 5.
--------------------------------------

-----------------
Memorandum Dollar Amounts in Thousands RCON BIL MIL THOU
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Non interest-bearing balances due from commercial banks in the U.S. (included in item 2, //////////////////
column B above) ............................................................................ 0050 71,678 M.1.
------------------

SCHEDULE RC-B--SECURITIES

Exclude assets held for trading.
--------
C410 < -
------------------------------------------------------------------------------
Held-to-maturity Available-for-sale
------------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Amortized Cost Amortized Cost Amortized Cost
------------------------------------------------------------------------------
Dollar Amounts in Thousands RCFD BIL MIL THOU RCFD BIL MIL THOU RCFD BIL MIL THOU RCFD BIL MIL THOU
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. U.S. Treasury securities......... 0211 250 0213 250 1286 715,535 1287 718,580 1.
2. U.S. Government agency ////////////////// ////////////////// ////////////////// //////////////////
and corporation obligations ////////////////// ////////////////// ////////////////// //////////////////
(exclude mortgage-backed ////////////////// ////////////////// ////////////////// //////////////////
securities): ////////////////// ////////////////// ////////////////// //////////////////
a. Issued by U.S. Govern- ////////////////// ////////////////// ////////////////// //////////////////
ment agencies(2).............. 1289 0 1290 0 1291 0 1293 0 2.a.
b. Issued by U.S. ////////////////// ////////////////// ////////////////// //////////////////
Government-sponsored ////////////////// ////////////////// ////////////////// //////////////////
agencies(3)................... 1294 0 1295 0 1297 500 1298 500 2.b.
------------------------------------------------------------------------------

- ------------
(1) Includes equity securities without readily determinable fair values at historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates," U.S. Maritime Administration obligations, and
Export-Import Bank participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the Farm Credit System, the Federal Home
Loan Bank System, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Financing
Corporation, Resolution Funding Corporation, the Student Loan Marketing Association, and the Tennessee Valley Authority.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-B--Continued

Held-to-maturity Available-for-sale
--------------------------------------- ---------------------------------------
(Column A) (Column B) (Column C) (Column D)

Amortized Cost Fair Value Amortized Cost Fair Value(1)
------------------ ------------------ ------------------ ------------------
Dollar Amounts in Thousands RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3. Securities issued by states ////////////////// ////////////////// ////////////////// //////////////////
and political subdivisions in the ////////////////// ////////////////// ////////////////// //////////////////
U.S.: ////////////////// ////////////////// ////////////////// //////////////////
a. General obligations........... 1676 151,418 1677 151,394 1678 0 1679 0 3.a.
b. Revenue obligations........... 1681 12,415 1686 12,419 1690 0 1691 0 3.b.
c. Industrial development ////////////////// ////////////////// ////////////////// //////////////////
and similar obligations....... 1694 0 1695 0 1696 0 1697 0 3.c.
4. Mortage-backed ////////////////// ////////////////// ////////////////// //////////////////
securities (MBS): ////////////////// ////////////////// ////////////////// //////////////////
a. Pass-through securities ////////////////// ////////////////// ////////////////// //////////////////
(1) Guaranteed by ////////////////// ////////////////// ////////////////// //////////////////
GNMA..................... 1698 0 1699 0 1701 792,519 1702 790,901 4.a.(1)
(2) Issued by FNMA ////////////////// ////////////////// ////////////////// //////////////////
and FHLMC................ 1703 0 1705 0 1706 3,163,278 1707 3,176,341 4.a.(2)
(3) Other pass-through ////////////////// ////////////////// ////////////////// //////////////////
securities............... 1709 0 1710 0 1711 1 1713 1 4.a.(3)
b. Other mortgage-backed ////////////////// ////////////////// ////////////////// //////////////////
securities (include CMOs, ////////////////// ////////////////// ////////////////// //////////////////
REMICs, and stripped ////////////////// ////////////////// ////////////////// //////////////////
MBS): ////////////////// ////////////////// ////////////////// //////////////////
(1.) Issued or guaranteed ////////////////// ////////////////// ////////////////// //////////////////
by FNMA, FHLMC ////////////////// ////////////////// ////////////////// //////////////////
or GNMA................. 1714 0 1715 0 1716 0 1717 0 4.b.(1)
(2.) Collateralized ////////////////// ////////////////// ////////////////// //////////////////
by MBS issued or ////////////////// ////////////////// ////////////////// //////////////////
guaranteed by FNMA, ////////////////// ////////////////// ////////////////// //////////////////
FHLMC, or GNMA.......... 1718 0 1719 0 1731 0 1732 0 4.b.(2)
(3.) All other mortgage- ////////////////// ////////////////// ////////////////// //////////////////
backed securities....... 1733 0 1734 0 1735 453 1736 453 4.b.(3)
5. Other debt securities: ////////////////// ////////////////// ////////////////// //////////////////
a. Other domestic debt ////////////////// ////////////////// ////////////////// //////////////////
securities................... 1737 0 1738 0 1739 629 1741 621 5.a.
b. Foreign debt ////////////////// ////////////////// ////////////////// //////////////////
securities................... 1742 97,307 1743 87,332 1744 0 1746 0 5.b.
6. Equity securities: ////////////////// ////////////////// ////////////////// //////////////////
a. Investments in mutual ////////////////// ////////////////// ////////////////// //////////////////
funds........................ ////////////////// ////////////////// 1747 52,843 1748 52,843 6.a.
b. Other equity securities ////////////////// ////////////////// ////////////////// //////////////////
with readily determinable ////////////////// ////////////////// ////////////////// //////////////////
fair values.................. ////////////////// ////////////////// 1749 0 1751 0 6.b.
c. All other equity ////////////////// ////////////////// ////////////////// //////////////////
securities(1)................ ////////////////// ////////////////// 1752 218,098 1753 218,098 6.c.
7. Total (sum of items 1 ////////////////// ////////////////// ////////////////// //////////////////
through 6) (total of ////////////////// ////////////////// ////////////////// //////////////////
column A must equal ////////////////// ////////////////// ////////////////// //////////////////
Schedule RC, item 2.a) ////////////////// ////////////////// ////////////////// //////////////////
(total of column D must ////////////////// ////////////////// ////////////////// //////////////////
equal Schedule RC, ////////////////// ////////////////// ////////////////// //////////////////
item 2.b)....................... 1754 261,390 1771 251,395 1772 4,943,856 1773 4,958,338 7.
----------------------------------------------------------------------------------
</TABLE>

- -----------

(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.

Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address : ONE MONARCH PLACE Page RC-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-B--CONTINUED
--------
C412 < -
------------------
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Pledged securities(2).......................................................................... 0416 2,436,831 M.1.
2. Maturity and repricing data for debt securities(2), (3), (4) (excluding those in //////////////////
nonaccrual status): //////////////////
a. Fixed rate debt securities with a remaining maturity of: //////////////////
(1) Three months or less.................................................................... 0343 44,985 M.2.a.(1)
(2) Over three months through 12 months..................................................... 0344 105,214 M.2.a.(2)
(3) Over one year through five years........................................................ 0345 1,418,544 M.2.a.(3)
(4) Over five years ........................................................................ 0346 2,274,468 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a(1) through 2.a.(4)........ 0347 3,843,211 M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: //////////////////
(1) Quarterly or more frequently............................................................ 4544 302,855 M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly......................... 4545 802,642 M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually.................. 4551 79 M.2.b.(3)
(4) Less frequently than every five years................................................... 4552 0 M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4))... 4553 1,105,576 M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total //////////////////
debt securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus //////////////////
nonaccrual debt securities included in Schedule RC-N, item 9, column C)..................... 0393 4,948,787 M.2.c.
3. Not applicable //////////////////
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included //////////////////
in Schedule RC-B, items 3 through 5, column A, above).......................................... 5365 0 M.4.
5. Not applicable //////////////////
6. Floating rate debt securities with a remaining maturity of one year or less(2), (4) (included in //////////////////
Memorandum items 2.b.(1) through 2.b.(4) above)................................................. 5519 4,000 M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or //////////////////
trading securities during the calendar year-to-date (report the amortized cost at date of sale //////////////////
or transfer)................................................................................... //////////////////
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale //////////////////
accounts in Schedule RC-B, item 4.b): //////////////////
a. Amortized cost.............................................................................. 8780 0 M.8.a.
b. Fair value.................................................................................. 8781 0 M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale account in //////////////////
Schedule RC-B, items 2, 3, and 5): //////////////////
a. Amortized cost.............................................................................. 8782 0 M.9.a.
b. Fair value.................................................................................. 8783 0 M.9.b.

- ----------------
(2) Includes held-to-maturity securities at amortized cost and available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J.

</TABLE>
15

Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address : ONE MONARCH PLACE Page RC-6
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-C--LOANS AND LEASE FINANCING RECEIVABLES

PART I. LOANS AND LEASES

Do not deduct the allowance for loan and lease losses from amounts ------------
reported in this schedule. Report total loans and leases, net of unearned C415 < -
income. Exclude assets held for trading. --------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
--------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RFCD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Loans secured by real estate............................................ 1410 11,606,306 ////////////////// 1.
a. Construction and land development.................................... ////////////////// 1415 599,823 1.a.
b. Secured by farmland (including farm residential and other ////////////////// //////////////////
improvements)........................................................ ////////////////// 1420 1,990 1.b.
c. Secured by 1-4 family residential properties: ////////////////// //////////////////
(1) Revolving, open-end loans secured by 1-4 family residential ////////////////// //////////////////
properties and extended under lines of credit.................... ////////////////// 1797 1,906,776 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: ////////////////// //////////////////
(a) Secured by first liens....................................... ////////////////// 5367 4,239,378 1.c.(2)(a)
(b) Secured by junior liens...................................... ////////////////// 5368 616,562 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties............ ////////////////// 1460 473,710 1.d.
e. Secured by nonfarm nonresidential properties......................... ////////////////// 1480 3,768,067 1.e.
2. Loans to depository institutions: ////////////////// //////////////////
a. To commercial banks in the U.S. ..................................... ////////////////// 1505 76,227 2.a.
(1) To U.S. branches and agencies of foreign banks................... 1506 0 ////////////////// 2.a.(1)
(2) To other commercial banks in the U.S. ........................... 1507 76,227 ////////////////// 2.a.(2)
b. To other depository institutions in the U.S. ........................ 1517 13,345 1517 13,345 2.b.
c. To banks in foreign countries........................................ ////////////////// 1510 928 2.c.
(1) To foreign branches of other U.S. banks.......................... 1513 160 ////////////////// 2.c.(1)
(2) To other banks in foreign countries.............................. 1516 768 ////////////////// 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers..... 1590 4,351 1590 4,351 3.
4. Commercial and industrial loans: ////////////////// //////////////////
a. To U.S. addressees (domicile)........................................ 1763 12,626,132 1763 12,574,435 4.a.
b. To non-U.S. addressees (domicile).................................... 1764 78,513 1764 31,092 4.b.
5. Acceptances of other banks: ////////////////// //////////////////
a. Of U.S. banks........................................................ 1756 0 1756 0 5.a.
b. Of foreign banks..................................................... 1757 0 1757 0 5.b.
6. Loans to individuals for household, family, and other personal ////////////////// //////////////////
expenditures (i.e., consumer loans) (includes purchased paper).......... ////////////////// 1975 2,101,041 6.
a. Credit cards and related plans (includes check credit and other ////////////////// //////////////////
revolving credit plans).............................................. 2008 94,750 ////////////////// 6.a.
b. Other (includes single payment, installment, and all student loans).. 2011 2,006,291 ////////////////// 6.b.
7. Loans to foreign governments and official institutions (including ////////////////// //////////////////
foreign central banks).................................................. 2081 0 2081 0 7.
8. Obligations (other than securities and leases) of states and political ////////////////// //////////////////
subdivisions in the U.S. (includes nonrated industrial development ////////////////// //////////////////
obligations)............................................................ 2107 149,176 2107 149,176 8.
9. Other loans ............................................................ 1563 2,018,484 ////////////////// 9.
a. Loans for purchasing or carrying securities (secured and unsecured).. ////////////////// 1545 179,603 9.a.
b. All other loans (exclude consumer loans)............................. ////////////////// 1564 1,838,881 9.b.
10. Lease financing receivables (net of unearned income).................... ////////////////// 2165 2,585,933 10.
a. Of U.S. addressees (domicile) ....................................... 2182 2,585,933 ////////////////// 10.a.
b. Of non-U.S. addressees (domicile).................................... 2183 0 ////////////////// 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above......... 2123 0 2123 0 11.
12. Total loans and leases, net of unearned income (sum of items 1 ////////////////// //////////////////
through 10 minus item 11) (total of column A must equal ////////////////// //////////////////
Schedule RC, item 4.a) ................................................. 2122 31,260,436 2122 31,161,318 12.
--------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-7
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-C--CONTINUED

PART I. CONTINUED

(Column A) (Column B)
Consolidated Domestic
Bank Offices
Memoranda ------------------ ------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above........................ 1496 0 1496 0 M.1.
2. Loans and leases restructured and in compliance with modified terms ////////////////// //////////////////
(included in Schedule RC-C, part I, above and not reported as past due ////////////////// //////////////////
or nonaccrual in Schedule RC-N, Memorandum item 1): ////////////////// //////////////////
a. Loans secured by real estate: ////////////////// //////////////////
(1) To U.S. addressees (domicile)............................................. 1687 1,681 M.2.a.(1)
(2) To non-U.S. addressees (domicile)......................................... 1689 0 M.2.a.(2)
b. All other loans and lease financing receivable (exclude loans to //////////////////
individuals for household, family, and other personal expenditures)........... 8691 0 M.2.b.
c. Commercial and industrial loans to and lease financing receivables //////////////////
of non-U.S. addressees (domicile) included in Memorandum item 2.b //////////////////
above......................................................................... 8692 0 M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those in //////////////////
nonaccrual status): //////////////////
a. Fixed rate loans with a remaining maturity of: //////////////////
(1) Three months or less...................................................... 0348 690,294 M.3.a.(1)
(2) Over three months through 12 months....................................... 0349 566,523 M.3.a.(2)
(3) Over one year through five years.......................................... 0356 2,658,468 M.3.a.(3)
(4) Over five years........................................................... 0357 5,501,645 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of Memorandum //////////////////
items 3.a.(1) through 3.a.(4))............................................ 0358 9,416,930 M.3.a.(5)
b. Floating rate loans with a repricing frequency of: //////////////////
(1) Quarterly or more frequently.............................................. 4554 17,235,629 M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly........... 4555 3,186,865 M.3.b.(2)
(3) Every five years or more frequently, but less frequently than //////////////////
annually.................................................................. 4561 977,978 M.3.b.(3)
(4) Less frequently than every five years..................................... 4564 129,282 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) //////////////////
through 3.b.(4)........................................................... 4567 21,529,754 M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and //////////////////
3.b.(5)) (must equal the sum of total loans and leases, net, from //////////////////
Schedule RC-C, part I, item 12, plus unearned income from //////////////////
Schedule RC-C, part I, item 11, minus total nonaccrual loans and //////////////////
leases from Schedule RC-N, sum of items 1 through 8, column C)................ 1479 30,946,684 M.3.c.
d. FLOATING RATE LOANS WITH A REMAINING MATURITY OF ONE YEAR OR LESS //////////////////
(INCLUDED IN MEMORANDUM ITEMS 3.b.(1) THROUGH 3.b.(4) ABOVE).................. A246 0 M.3.d.
4. Loans to finance commercial real estate, construction, and land //////////////////
development activities (NOT SECURED BY REAL ESTATE) included in //////////////////
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2)..................... 2746 335,734 M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, //////////////////
above)........................................................................... 5369 0 M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family //////////////////
residential properties (included in Schedule RC-C, part I, item 1.c.(2)(a), ////////////////// RCON Bil Mil Thou
column B, page RC-6)............................................................. ////////////////// 5370 1,841,822 M.6.
</TABLE>

(1) Memorandum item 3 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in RC-C, part I,
item 1, column A.

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-8
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-D--TRADING ASSETS AND LIABILITIES

Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).

---------
C420 < -
----------------------
Dollar Amounts in Thousands //////// Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS //////////////////////
1. U.S. Treasury securities in domestic offices............................................. RCON 3531 0 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage- //////////////////////
backed securities)....................................................................... RCON 3532 0 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices... RCON 3533 0 3.
4. Mortgage-backed securities (MBS) in domestic offices: //////////////////////
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA.................. RCON 3534 0 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA //////////////////////
(include CMOs, REMICs, and stripped MBS).............................................. RCON 3535 0 4.b.
c. All other mortgage-backed securities.................................................. RCON 3536 0 4.c.
5. Other debt securities in domestic offices................................................ RCON 3537 0 5.
6. Certificates of deposit in domestic offices.............................................. RCON 3538 0 6.
7. Commercial paper in domestic offices..................................................... RCON 3539 0 7.
8. Bankers acceptances in domestic offices.................................................. RCON 3540 0 8.
9. Other trading assets in domestic offices................................................. RCON 3541 0 9.
10. Trading assets in foreign offices........................................................ RCFN 3542 0 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity //////////////////////
contracts: //////////////////////
a. In domestic offices................................................................... RCON 3543 64,043 11.a.
b. In foreign offices.................................................................... RCFN 3544 9,290 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5)........ RCFD 3545 73,333 12.
</TABLE>

<TABLE>
<CAPTION>
LIABILITIES //////// Bil Mil Thou
----------------------
<S> <C> <C> <C>
13. Liability for short positions............................................................ RFCD 3546 0 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and //////////////////////
equity contracts......................................................................... RFCD 3547 60,855 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b)... RCFD 3548 60,855 15.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-9
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-E--DEPOSIT LIABILITIES

PART I. DEPOSITS IN DOMESTIC OFFICES
--------------
C425
--------------
Nontransaction
Transactions Accounts Accounts
---------------------------------------------------------------
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
accounts (including demand deposits nontransaction
total demand (included in accounts
deposits) column A) (including MMDAs)
----------------------------------------------------------------
Dollar Amounts in Thousands RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Deposits of: ////////////////// ////////////////// //////////////////
1. Individuals, partnerships, and corporations..... 2201 8,925,633 2240 8,417,538 2346 21,118,482 1.
2. U.S. Government................................. 2202 170,644 2280 170,617 2520 5,680 2.
3. States and political subdivisions in the U.S.... 2203 531,934 2290 508,362 2530 777,806 3.
4. Commercial banks in the U.S..................... 2206 836,406 2310 836,406 2550 397 4.
5. Other depository institutions in the U.S........ 2207 223,383 2312 223,383 2349 2,868 5.
6. Banks in foreign countries...................... 2213 23,850 2320 23,850 2236 0 6.
7. Foreign governments and official institutions ////////////////// ////////////////// //////////////////
(including foreign central banks)............... 2216 0 2300 0 2377 0 7.
8. Certified and official checks................... 2330 175,075 2330 175,075 ////////////////// 8.
9. Total (sum of items 1 through 8) (sum of columns ////////////////// ////////////////// //////////////////
A and C must equal Schedule RC, item 13.a....... 2215 10,886,925 2210 10,355,231 2385 21,905,233 9.
----------------------------------------------------------------
</TABLE>

Memoranda

<TABLE>
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): //////////////////
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts.................... 6835 2,607,397 M.1.a.
b. Total brokered deposits................................................................ 2365 1,415,235 M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): //////////////////
(1) Issued in denominations of less than $100,,000.................................... 2343 2,240 M.1.c.(1)
(2) Issued EITHER in denominations of $100,000 OR in denominations greater than //////////////////
$100,000 and participated out by the broker in shares of $100,000 or less......... 2344 1,412,995 M.1.c.(2)
D. MATURITY DATA FOR BROKERED DEPOSITS: //////////////////
(1) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF LESS THAN $100,000 WITH A REMAINING //////////////////
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.C.(1) ABOVE).......... A243 20 M.1.d.(1)
(2) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF $100,000 OR MORE WITH A REMAINING //////////////////
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.B ABOVE).............. A244 584,547 M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the //////////////////
U.S. reported in item 3 above which are secured or collateralized as required under //////////////////
state law)............................................................................. 5590 346,573 M.1.e.
2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d //////////////////
must equal item 9, column C above): //////////////////
a. Savings deposits: //////////////////
(1) Money market deposit accounts (MMDAs)............................................. 6810 10,252,364 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs).......................................... 0352 2,397,861 M.2.a.(2)
b. Total time deposits of less than $100,000.............................................. 6648 6,781,917 M.2.b.
c. Time certificates of deposit of $100,000 or more....................................... 6645 2,473,091 M.2.c.
d. Open-account time deposits of $100,000 or more......................................... 6646 0 M.2.d.
3. All NOW accounts (included in column A above).............................................. 2398 531,694 M.3.
4. Not applicable
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-10
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-E--CONTINUED

PART I. CONTINUED

Memoranda (continued)

------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of //////////////////
Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) //////////////////
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: //////////////////
(1) Three months or less .............................................................. A225 1,722,551 M.5.a.(1)
(2) Over three months through 12 months ............................................... A226 3,024,143 M.5.a.(2)
(3) Over one year ..................................................................... A227 1,975,207 M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: //////////////////
(1) Quarterly or more frequently ...................................................... A228 60,016 M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ................... A229 0 M.5.b.(2)
(3) Les frequently than annually ...................................................... A230 0 M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of //////////////////
one year or less (included in Memorandum items 5.b.(1) through 5.b.(3) above) ......... A231 39,531 M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates //////////////////
of deposit of $100,000 or more and open-account time deposits of $100,000 or more) //////////////////
(sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum //////////////////
items 2.c and 2.d above): (1) //////////////////
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: //////////////////
(1) Three months or less .............................................................. A232 720,549 M.6.a.(1)
(2) Over three months through 12 months ............................................... A233 695,947 M.6.a.(2)
(3) Over one year through five years .................................................. A234 1,014,722 M.6.a.(3)
(4) Over five years ................................................................... A235 8,868 M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a repricing frequency of: //////////////////
(1) Quarterly or more frequently ...................................................... A236 33,005 M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ................... A237 0 M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ............ A238 0 M.6.b.(3)
(4) Less frequently than every five years ............................................. A239 0 M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of //////////////////
one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above).......... A240 1,896 M.6.c.
------------------
</TABLE>
- ------------

(1) Memorandum items 5 and 6 are not applicable to savings banks that
must complete supplemental Schedule RC-J.

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-11
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-E--CONTINUED

PART II. DEPOSITS IN FOREIGN OFFICES (INCLUDING EDGE AND
AGREEMENT SUBSIDIARIES AND IBFS)

------------------
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deposits of: //////////////////
1. Individuals, partnerships, and corporations.......................................... 2621 2,410,097 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks)....................... 2623 0 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including
their IBFs).......................................................................... 2625 0 3.
4. Foreign governments and official institutions (including foreign central banks)...... 2650 0 4.
5. Certified and official checks........................................................ 2330 0 5.
6. All other deposits................................................................... 2668 4,330 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b)................. 2200 2,414,427 7.
</TABLE>

<TABLE>
<CAPTION>
------------------
Memorandum Dollar Amounts in Thousands RCFN Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. TIME DEPOSITS WITH A REMAINING MATURITY OF ONE YEAR OR LESS (INCLUDED IN PART II, //////////////////
ITEM 7 ABOVE)........................................................................ A245 2,414,425 M.1.
</TABLE>

SCHEDULE RC-F--OTHER ASSETS

<TABLE>
<CAPTION>
---------
C430
-----------------------
Dollar Amounts in Thousands ////////// Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Income earned, not collected on loans................................................ RCFD 2164 243,319 1.
2. Net deferred tax assets (1).......................................................... RCFD 2148 0 2.
3. Excess residential mortgage servicing fees receivable................................ RCFD 5371 173,148 3.
4. Other (itemize and describe amounts that exceed 25% of this item).................... RCFD 2168 3,491,222 4.
--------- --------------------
a. TEXT 3549 MORTGAGE HELD FOR RESALE RCFD 3549 1,517,133 /////////////////////// 4.a.
-------------------------------------------------------------
b. TEXT 3550 RCFD 3550 /////////////////////// 4.b.
-------------------------------------------------------------
c. TEXT 3551 RCFD 3551 /////////////////////// 4.c.
-------------------------------------------------------------
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11)................... RCFD 2160 3,907,689 5.
-----------------------
</TABLE>

<TABLE>
<CAPTION>
-------------------------
Memorandum Dollar Amounts in Thousands //////////// Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes.................. RFCD 5610 0 M.1.
</TABLE>

SCHEDULE RC-G--OTHER LIABILITIES
<TABLE>
<CAPTION>
-----------
C435
------------------------
Dollar Amounts in thousands ////////// Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices (2).................... RCON 3645 50,636 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable)......... RCFD 3646 509,357 1.b.
2. Net deferred tax liabilities(1)....................................................... RCFD 3049 434,426 2.
3. Minority interest in consolidated subsidiaries........................................ RCFD 3000 0 3.
4. Other (itemize and describe amounts that exceed 25% of this item)..................... RCFD 2938 512,435 4.
---------
a. TEXT 3552 RCFD 3552 /////////////////////// 4.a.
-------------------------------------------------------------
b. TEXT 3553 RCFD 3553 /////////////////////// 4.b.
-------------------------------------------------------------
c. TEXT 3554 RCFD 3554 /////////////////////// 4.c.
-------------------------------------------------------------
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20).................... RCFD 2930 1,506,854 5.
</TABLE>

- ----------------
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-12
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
---------------

SCHEDULE RC-H--SELECTED BALANCE SHEET ITEMS FOR DOMESTIC OFFICES
C440
------------------
Domestic Offices
------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Customers' liability to this bank on acceptances outstanding......................... 2155 6,380 1.
2. Bank's liability on acceptances executed and outstanding............................. 2920 6,380 2.
3. Federal funds sold and securities purchased under agreements to resell............... 1350 25,709 3.
4. Federal funds purchased and securities sold under agreements to repurchase........... 2800 3,118,142 4.
5. Other borrowed money................................................................. 3190 935,986 5.
EITHER //////////////////
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs.......... 2163 N/A 6.
OR //////////////////
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs............ 2941 2,311,663 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, //////////////////
and IBFs)............................................................................ 2192 46,468,505 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement //////////////////
subsidiaries, and IBFs).............................................................. 3129 39,637,730 9.

ITEMS 10-17 INCLUDE HELD-TO-MATURITY AND AVAILABLE-FOR-SALE SECURITIES IN DOMESTIC OFFICES.
</TABLE>

<TABLE>
<CAPTION>
------------------
RCON Bil Mil Thou
------------------
<S> <C> <C> <C>
10. U.S. Treasury securities............................................................. 1779 718,830 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed //////////////////
securities).......................................................................... 1785 500 11.
12. Securities issued by states and political subdivisions in the U.S.................... 1786 163,833 12.
13. Mortgage-backed securities (MBS): //////////////////
a. Pass-through securities: //////////////////
(1) Issued or guaranteed by FNMA, FHLMC, OR GNMA................................ 1787 3,967,242 13.a.(1)
(2) Other pass-through securities............................................... 1869 1 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): //////////////////
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA................................ 1877 0 13.b.(1)
(2) All other mortgage-backed securities........................................ 2253 453 13.b.(2)
14. Other domestic debt securities....................................................... 3159 621 14.
15. Foreign debt securities.............................................................. 3160 97,307 15.
16. Equity securities: //////////////////
a. Investments in mutual funds...................................................... 3161 52,843 16.a.
b. Other equity securities with readily determinable fair values.................... 3162 0 16.b.
c. All other equity securities...................................................... 3169 218,098 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) 3170 5,219,728 17.
</TABLE>

Memorandum (to be completed only by banks with IBFs and other "foreign" offices)

<TABLE>
<CAPTION>
------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EITHER //////////////////
1. Net due from the IBF of the domestic offices of the reporting bank................... 3051 0 M.1.
OR //////////////////
2. Net due to the IBF of the domestic offices of the reporting bank..................... 3059 N/A M.2.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-13
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-I--SELECTED ASSETS AND LIABILITIES OF IBFs
C445
------------------
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12)........ 2133 0 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, //////////////////
item 12, column A)................................................................... 2076 0 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, //////////////////
item 4, column A).................................................................... 2077 0 3.
4. Total IBF liabilities (component of Schedule RC, item 21)............................ 2898 0 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule //////////////////
RC-E, part II, items 2 and 3)........................................................ 2379 0 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, //////////////////
items 1,4,5, and 6................................................................... 2381 0 6.
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE RC-K--QUARTERLY AVERAGES (1)
C455
------------------
Dollar Amounts in Thousands ///////// Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------
ASSETS ///////////////////////
<S> <C> <C> <C>
1. Interest-bearing balances due from depository institutions...................... RCFD 3381 28,972 1.
2. U.S. Treasury securities and U.S. Government agency and corporation
obligations (2)................................................................. RCFD 3382 5,849,801 2.
3. Securities issued by states and political subdivisions in the U.S. (2).......... RCFD 3383 171,480 3.
4. a. Other debt securities (2)................................................... RCFD 3647 98,635 4.a.
b. Equity securities (3) (includes investments in mutual funds and Federal ///////////////////////
Reserve stock).................................................................. RCFD 3648 290,211 4.b.
5. Federal funds sold and securities purchased under agreements to resell in ///////////////////////
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in ///////////////////////
IBFs............................................................................ RCFD 3365 34,073 5.
6. Loans:
a. Loans in domestic offices:
(1) Total loans............................................................ RCON 3360 28,772,871 6.a.(1)
(2) Loans secured by real estate........................................... RCON 3385 11,782,561 6.a.(2)
(3) Loans to finance agricultural production and other loans to ///////////////////////
farmers................................................................ RCON 3386 4,568 6.a.(3)
(4) Commercial and industrial loans........................................ RCON 3387 12,208,378 6.a.(4)
(5) Loans to individuals for household, family, and other personal ///////////////////////
expenditures........................................................... RCON 3388 2,106,517 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs... RCFN 3360 93,116 6.b.
7. Trading assets.................................................................. RCFD 3401 70,398 7.
8. Lease financing receivables (net of unearned income)............................ RCFD 3484 2,414,362 8.
9. Total assets(4)................................................................. RCFD 3368 47,043,625 9.
LIABILITIES
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS ///////////////////////
accounts, and telephone and preauthorized transfer accounts) (exclude demand ///////////////////////
deposits)....................................................................... RCON 3485 554,831 10.
11. Nontransaction accounts in domestic offices: ///////////////////////
a. Money market deposit accounts (MMDAs)....................................... RCON 3486 10,212,141 11.a.
b. Other savings deposits...................................................... RCON 3487 2,477,260 11.b.
c. Time certificates of deposit of $100,000 or more............................ RCON 3345 2,533,067 11.c.
d. All other time deposits..................................................... RCON 3469 6,982,619 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, ///////////////////////
and IBFs........................................................................ RCFN 3404 2,117,139 12.
13. Federal funds purchased and securities sold under agreements to repurchase in ///////////////////////
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in ///////////////////////
IBFs............................................................................ RCFD 3353 4,817,518 13.
14. Other borrowed money............................................................ RCFD 3355 985,125 14.
- ---------------
(1) For all items, banks have the option of reporting either (1) an average of daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized cost.
(3) Quarterly averages for all equity securities should be based on historical cost.
(4) The quarterly average for total assets should reflect all debt securities (not held for trading) at amortized
cost, equity securities with readily determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
</TABLE>

Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address : ONE MONARCH PLACE Page RC-14
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-L--OFF BALANCE SHEET ITEMS
Please read carefully the instructions for the preparation of Schedule RC-L.
Some of the amounts reported in Schedule RC-L are regarded as volume indicators
and not necessarily as measures of risk.

C460
Dollar Amounts in Thousands RCFD BIL MIL THOU
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Unused commitments: //////////////////
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home equity //////////////////
lines....................................................................................... 3814 2,159,101 1.a.
b. Credit card lines........................................................................... 3815 37,038 1.b.
c. Commercial real estate, construction, and land development: //////////////////
(1) Commitments to fund loans secured by real estate........................................ 3816 538,163 1.c.(1)
(2) Commitments to fund loans not secured by real estate.................................... 6550 513,346 1.c.(2)
d. Securities underwriting..................................................................... 3817 0 1.d.
e. Other unused commitments.................................................................... 3818 20,572,462 1.e.
2. Financial standby letters of credit and foreign office guarantees.............................. 3819 2,322,445 2.
--------------------
a. Amount of financial standby letters of credit conveyed to others RCFD 3820 89,650 ////////////////// 2.a.
--------------------
3. Performance standby letters of credit and foreign office guarantees............................ 3821 179,230 3.
--------------------
a. Amount of performance standby letters of credit conveyed to others RCFD 3822 6,004 ////////////////// 3.a.
--------------------
4. Commercial and similar letters of credit....................................................... 3411 137,503 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by the //////////////////
reporting bank................................................................................. 3428 112 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting //////////////////
(nonaccepting) bank............................................................................ 3429 12,837 6.
7. Securities borrowed............................................................................ 3432 0 7.
8. Securities lent (including customers' securities lent where the customer is indemnified against //////////////////
loss by the reporting bank).................................................................... 3433 965,792 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been treated as sold for //////////////////
Call Report purposes: //////////////////
a. FNMA and FHLMC residential mortgage loan pools: //////////////////
(1) Outstanding principal balance of mortgages transferred as or the report date............ 3650 298,423 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date.................... 3651 298,423 9.a.(2)
b. Private (nongovernment-issued or guaranteed) residential mortgage loan pools: //////////////////
(1) Outstanding principal balance of mortgages transferred as of the report date............ 3652 289,942 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date.................... 3653 289,942 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: //////////////////
(1) Outstanding principal balance of mortgages transferred as of the report date............ 3654 0 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date.................... 3655 0 9.c.(2)
d. Small business obligations transferred with recourse under Section 208 of the //////////////////
Riegle Community Development and Regulatory improvement Act of 1994: //////////////////
(1) Outstanding principal balance of small business obligations transferred //////////////////
as of the report date................................................................... A249 0 9.d.(1)
(2) Amount of retained recourse on these obligations as of the report date.................. A250 0 9.d.(2)
10. When-issued securities: //////////////////
a. Gross commitments to purchase............................................................... 3434 0 10.a
b. Gross commitments to sell................................................................... 3435 0 10.b.
11. Spot foreign exchange contracts................................................................ 8765 487,442 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and //////////////////
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") 3430 0 12.
------------------------------------------------------------------------------------------- //////////////////
a. TEXT 3555 ........................................................ RCFD 3555 ////////////////// 12.a.
b. TEXT 3556 ........................................................ RCFD 3556 ////////////////// 12.b.
c. TEXT 3557 ........................................................ RCFD 3557 ////////////////// 12.c.
d. TEXT 3558 ........................................................ RCFD 3558 ////////////////// 12.d.
---------------------------------------------------------------------------------------------------------------
</TABLE>
24

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-15
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-L--CONTINUED

Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and //////////////////
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") 5591 0 13.
--------- ------------------------------ //////////////////
a. TEXT 5592 RCFD 5592 ////////////////// 13.a.
b. TEXT 5593 RCFD 5593 ////////////////// 13.b.
c. TEXT 5594 RCFD 5594 ////////////////// 13.c.
d. TEXT 5595 RCFD 5595 ////////////////// 13.d.
--------------------------------------------------------------------------------------------------------------
C461 < -
----------------- ----------------- ----------------- ------------------
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
- ---------------------------------------- Contracts Contracts Contracts Other Contracts
Off-balance Sheet Derivatives ----------------- ----------------- ----------------- ------------------
Position Indicators Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou
---------------------------------------- ----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> C> <C>
14. Gross amounts (e.g., notional ///////////////// ///////////////// ///////////////// /////////////////
amounts) (for each column, sum of ///////////////// ///////////////// ///////////////// /////////////////
items 14.a through 14.e must equal ///////////////// ///////////////// ///////////////// /////////////////
sum of items 15, 16.a, and 16.b): ///////////////// ///////////////// ///////////////// /////////////////
----------------- ----------------- ----------------- -----------------
a. Futures contracts ................ 0 0 0 39,037 14.a
----------------- ----------------- ----------------- -----------------
RCFD 8693 RCFD 8694 RCFD 8695 RCFD 8696
----------------- ----------------- ----------------- -----------------
b. Forward contracts ................ 2,684,800 2,284,466 0 45,604 14.b
----------------- ----------------- ----------------- -----------------
RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700
----------------- ----------------- ----------------- -----------------
c. Exchange-traded option contracts: ///////////////// ///////////////// ///////////////// /////////////////
----------------- ----------------- ----------------- -----------------
(1) Written options .............. 225,000 0 0 0 14.c.(1)
----------------- ----------------- ----------------- -----------------
RCFD 8701 RCFD 8702 RCFD 8703 RCFD 8704
----------------- ----------------- ----------------- -----------------
(2) Purchased options ............ 1,276,400 0 0 1,245 14.c.(2)
----------------- ----------------- ----------------- -----------------
RCFD 8705 RCFD 8706 RCFD 8707 RCFD 8708
----------------- ----------------- ----------------- -----------------
d. Over-the-counter option contracts: ///////////////// ///////////////// ///////////////// /////////////////
----------------- ----------------- ----------------- -----------------
(1) Written options .............. 5,051,792 5,200 0 0 14.d.(1)
----------------- ----------------- ----------------- -----------------
RCFD 8709 RCFD 8710 RCFD 8711 RCFD 8712
----------------- ----------------- ----------------- -----------------
(2) Purchased options ............ 19,427,829 5,200 0 0 14.d.(2)
----------------- ----------------- ----------------- -----------------
RCFD 8713 RCFD 8714 RCFD 8715 RCFD 8716
----------------- ----------------- ----------------- -----------------
e. Swaps ............................ 24,549,614 0 0 0 14.e
----------------- ----------------- ----------------- -----------------
RCFD 3450 RCFD 3826 RCFD 8719 RCFD 8720
----------------- ----------------- ----------------- -----------------
15. Total gross notional amount of ///////////////// ///////////////// ///////////////// /////////////////
derivative contracts held for trading. 5,289,505 2,294,866 0 l,245 15
----------------- ----------------- ----------------- -----------------
RCFD A126 RCFD A127 RCFD 8723 RCFD 8724
----------------- ----------------- ----------------- -----------------
l6. Total gross notional amount of ///////////////// ///////////////// ///////////////// /////////////////
derivative contracts held for ///////////////// ///////////////// ///////////////// /////////////////
purposes other than trading: ///////////////// ///////////////// ///////////////// /////////////////
----------------- ----------------- ----------------- -----------------
a. Contracts marked to market ...... 4,239,800 0 0 39,037 16.a.
----------------- ----------------- ----------------- -----------------
RCFD 8725 RCFD 8726 RCFD 8727 RCFD 8728
----------------- ----------------- ----------------- -----------------
b. Contracts not marked to market .. 43,686,130 0 0 45,604 16.b.
----------------- ----------------- ----------------- -----------------
RCFD 8729 RCFD 8730 RCFD 8731 RCFD 8732
----------------- ----------------- ----------------- -----------------

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-16
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-L--CONTINUED

(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
Off-balance Sheet Derivatives Contracts Contracts Contracts Other Contracts
Position Indicators ------------------ ------------------ ------------------ ------------------
RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
17. Gross fair values of ////////////////// ////////////////// ////////////////// //////////////////
derivative contracts: ////////////////// ////////////////// ////////////////// //////////////////
a. Contracts held for ////////////////// ////////////////// ////////////////// //////////////////
trading: ////////////////// ////////////////// ////////////////// //////////////////
(1) Gross positive ////////////////// ////////////////// ////////////////// //////////////////
fair value................ 8733 31,626 8734 41,468 8736 0 8736 59 17.a.(1)
(2) Gross negative ////////////////// ////////////////// ////////////////// //////////////////
fair value................ 8737 22,099 8738 38,756 8739 0 8740 0 17.a.(2)
b. Contracts held for ////////////////// ////////////////// ////////////////// //////////////////
purposes other than ////////////////// ////////////////// ////////////////// //////////////////
trading that are marked ////////////////// ////////////////// ////////////////// //////////////////
to market: ////////////////// ////////////////// ////////////////// //////////////////
(1) Gross positive ////////////////// ////////////////// ////////////////// //////////////////
fair value................ 8741 2,258 8742 0 8743 0 8744 1,698 17.b.(1)
(2) Gross negative ////////////////// ////////////////// ////////////////// //////////////////
fair value................ 8745 1,417 8746 0 8747 0 8748 0 17.b.(2)
c. Contracts held for ////////////////// ////////////////// ////////////////// //////////////////
purposes other than ////////////////// ////////////////// ////////////////// //////////////////
trading that are not ////////////////// ////////////////// ////////////////// //////////////////
marked to market: ////////////////// ////////////////// ////////////////// //////////////////
(1) Gross positive ////////////////// ////////////////// ////////////////// //////////////////
fair value................ 8749 165,643 8750 0 8751 0 8752 169 17.c.(1)
(2) Gross negative ////////////////// ////////////////// ////////////////// //////////////////
fair value................ 8737 76,308 8754 0 8755 0 8756 0 17.c.(2)
---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands RFCD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1.-2. Not applicable //////////////////
3. Unused commitments with an original maturity exceeding one year that are reported in //////////////////
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments //////////////////
that are fee paid or otherwise legally binding).................................................. 3833 18,552,873 M.3.
a. Participations in commitments with an original maturity //////////////////
exceeding one year to be conveyed to others......................... RCFD 3834 | 1,789,549 ////////////////// M.3.a.
4. To be completed only by banks with $1 billion or more in total assets: //////////////////
Standby letters of credit and foreign office guarantees (both financial and performance) issued //////////////////
to non-U.S. addresses (domicile) included in Schedule RC-L, items 2 and 3, above................. 3377 360,019 M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that //////////////////
have been securitized and sold without recourse (with servicing retained), amounts outstanding //////////////////
by type of loan: //////////////////
a. Loans to purchase private passenger automobiles (TO BE COMPLETED FOR THE //////////////////
SEPTEMBER REPORT ONLY)........................................................................ 2741 N/A M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY).................................... 2742 0 M.5.b.
c. All other consumer installment credit (including mobile home loans)(TO BE COMPLETED FOR THE //////////////////
SEPTEMBER REPORT ONLY)........................................................................ 2743 N/A M.5.c.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-17
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-M--MEMORANDA

--------
C465 < -
------------------
Dollar Amounts in Thousands RFCD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal //////////////////
shareholders, and their related interests as of the report date: //////////////////
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal //////////////////
shareholders, and their related interests...................................................... 6164 552,349 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of //////////////////
all extensions of credit by the reporting bank (including extensions of credit to //////////////////
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number //////////////////
of total capital as defined for this purpose in agency regulations. RFCD 6165 | 20 ////////////////// 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches //////////////////
and agencies of FOREIGN BANKS(1) (included in Schedule RC, items 3.a and 3.b)..................... 3405 0 2.
3. Not applicable. //////////////////
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others //////////////////
(include both retained servicing and purchased servicing): //////////////////
a. Mortgages serviced under a GNMA contract....................................................... 5500 25,732,152 4.a.
b. Mortgages services under a FHLMC contract: //////////////////
(1) Serviced with recourse to servicer......................................................... 5501 48,720 4.b.(1)
(2) Serviced without recourse to servicer...................................................... 5502 34,857,978 4.b.(2)
c. Mortgages serviced under a FNMA contract: //////////////////
(1) Serviced under a regular option contract................................................... 5503 249,703 4.c.(1)
(2) Serviced under a special option contract................................................... 5504 41,105,444 4.c.(2)
d. Mortgages serviced under other servicing contracts............................................. 5505 11,267,486 4.d.
5. To be completed only by banks with $1 billion or more in total assets: //////////////////
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must //////////////////
equal Schedule RC, item 9): //////////////////
a. U.S. addresses (domicile)...................................................................... 2103 6,244 5.a.
b. Non-U.S. addresses (domicile).................................................................. 2104 136 5.b.
6. Intangible assets: //////////////////
a. Mortgage servicing rights...................................................................... 3164 1,563,176 6.a.
b. Other identifiable intangible assets //////////////////
(1) Purchased credit card relationships........................................................ 5506 0 6.b.(1)
(2) All other identifiable intangible assets................................................... 5507 105,984 6.b.(2)
c. Goodwill....................................................................................... 3163 647,473 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10)......................... 2143 2,316,633 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or //////////////////
are otherwise qualifying for regulatory capital purposes....................................... 6442 0 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to //////////////////
redeem the debt................................................................................... 3295 75,000 7.
</TABLE>

- -----------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this time.

Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address : ONE MONARCH PLACE Page RC-18
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-M--CONTINUED

------------------
Dollar Amounts in Thousands BIL MIL THOU
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
8. a. Other real estate owned: /////////////////////////
(1) Direct and indirect investments in real estate ventures......................... RCFD 5372 0 8.a.(1)
(2) All other real estate owned: /////////////////////////
(a) Construction and land development in domestic offices........................ RCON 5508 332 8.a.(2)(a)
(b) Farmland in domestic offices................................................. RCON 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices........................ RCON 5510 9,789 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices........... RCON 5511 347 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices........................ RCON 5512 8,443 8.a.(2)(e)
(f) In foreign offices........................................................... RCFN 5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7)........ RCFD 2150 18,911 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: /////////////////////////
(1) Direct and indirect investments in real estate ventures.......................... RCFD 5374 0 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies.... RCFD 5375 0 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8)........ RCFD 2130 0 8.b.(3)
c. TOTAL ASSETS of unconsolidated subsidiaries and associated companies................. RCFD 5376 0 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, /////////////////////////
item 23, "Perpetual preferred stock and related surplus"................................ RCFD 3778 125,000 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include /////////////////////////
proprietary, private label, and third party products): /////////////////////////
a. Money market funds................................................................... RCON 6441 204,326 10.a.
b. Equity securities funds.............................................................. RCON 8427 116,418 10.b.
c. Debt securities funds................................................................ RCON 8428 12,837 10.c.
d. Other mutual funds................................................................... RCON 8429 0 10.d.
e. Annuities............................................................................ RCON 8430 103,868 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a. through /////////////////////////
10.e. above)......................................................................... RCON 8784 302,177 10.f.
-------------------------

- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Memorandum Dollar Amounts in Thousands RCFD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Interbank holdings of capital instruments (TO BE COMPLETED FOR THE DECEMBER REPORT ONLY): //////////////////
a. Reciprocal holdings of banking organizations' capital instruments........................... 3836 0 M.1.a.
b. Nonreciprocal holdings of banking organizations' capital instruments........................ 3837 0 M.1.b.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-19
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-N--PAST DUE AND NONACCRUAL LOANS, LEASES,
AND OTHER ASSETS

The FFIEC regards the information reported in
all of Memorandum item 1, in items 1 through 10,
column A, and in Memorandum items 2 through 4,
column A, as confidential.
--------
C470
------------------------------------------------------------
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
------------------ ------------------ ------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Loans secured by real estate: ////////////////// ////////////////// //////////////////
a. To U.S. addressees (domicile) .................... 1245 1246 65,607 1247 215,496 1.a.
b. To non-U.S. addressees (domicile) ................ 1248 1249 0 1250 0 1.b.
2. Loans to depository institutions and acceptances ////////////////// ////////////////// //////////////////
of other banks: ////////////////// ////////////////// //////////////////
a. To U.S. banks and other U.S. depository ////////////////// ////////////////// //////////////////
institutions ..................................... 5377 5378 0 5379 0 2.a.
b. To foreign banks ................................. 5380 5381 0 5382 0 2.b.
3. Loans to finance agricultural production and ////////////////// ////////////////// //////////////////
other loans to farmers ............................... 1594 1597 0 1583 625 3.
4. Commercial and industrial loans: ////////////////// ////////////////// //////////////////
a. To U.S. addressees (domicile) .................... 1251 1252 12,042 1253 76,393 4.a.
b. To non-U.S. addressees (domicile) ................ 1254 1255 0 1256 0 4.b.
5. Loans to individuals for household, family, and ////////////////// ////////////////// //////////////////
other personal expenditures: ////////////////// ////////////////// //////////////////
a. Credit cards and related plans ................... 5383 5384 1,574 5385 370 5.a.
b. Other (includes single payment, installment, ////////////////// ////////////////// //////////////////
and all student loans) ........................... 5386 5387 24,812 5388 7,184 5.b.
6. Loans to foreign governments and official ////////////////// ////////////////// //////////////////
institutions ......................................... 5389 5390 0 5391 0 6.
7. All other loans ...................................... 5459 5460 11,122 5461 9,921 7.
8. Lease financing receivables: ////////////////// ////////////////// //////////////////
a. Of U.S. addressees (domicile) .................... 1257 1258 21 1259 3,763 8.a
b. Of non-U.S. addressees (domicile) ................ 1271 1272 0 1791 0 8.b.
9. Debt securities and other assets (exclude other ////////////////// ////////////////// //////////////////
real estate owned and other repossessed assets) ...... 3506 3506 0 3507 32,566 9.
- ---------------------------------------------------------------------------------------------------------------------------------
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 8.

------------------ ------------------ ------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
10. Loans and leases reported in items 1 ------------------------------------------------------------
through 8 above which are wholly or partially ////////////////// ////////////////// //////////////////
guaranteed by the U.S. Government .................... 5612 5613 17,347 5614 14,395 10.
a. Guaranteed portion of loans and leases ////////////////// ////////////////// //////////////////
included in item 10 above ........................ 5615 5616 17,056 5617 11,954 10.a.

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-20
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RI-N--CONTINUED

--------
C473
------------------------------------------------------------
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
and still and still
accruing accruing
Memoranda ------------------ ------------------ ------------------
Dollar Amounts in Thousands RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Restructured loans and leases included in ////////////////// ////////////////// //////////////////
Schedule RC-N, items 1 through 8, above (and not ////////////////// ////////////////// //////////////////
reported in Schedule RC-C, part I, Memorandum ////////////////// ////////////////// //////////////////
item 2)................................................ 1658 1659 1661 M.1.
2. Loans to finance commercial real estate, ////////////////// ////////////////// //////////////////
construction, and land development activities ////////////////// ////////////////// //////////////////
(NOT SECURED BY REAL ESTATE) included in ////////////////// ////////////////// //////////////////
Schedule RC-N, items 4 and 7 above..................... 6558 6559 105 6560 1,919 M.2.
3. Loans secured by real estate in domestic offices RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
(included in Schedule RC-N, item 1, above): ////////////////// ////////////////// //////////////////
a. Construction and land development................... 2759 2769 0 3492 19,990 M.3.a.
b. Secured by farmland................................. 3493 3494 0 3495 144 M.3.b.
c. Secured by 1-4 family residential properties: ////////////////// ////////////////// //////////////////
(1) Revolving, open-end loans secured by ////////////////// ////////////////// //////////////////
1-4 family residential properties and ////////////////// ////////////////// //////////////////
extended under lines of credit.................. 5398 5399 5,009 5400 10,700 M.3.c.(1)
(2) All other loans secured by 1-4 residential ////////////////// ////////////////// //////////////////
properties...................................... 5401 5402 49,978 5403 100,900 M.3.c.(2)
d. Secured by multifamily (5 or more) residential ////////////////// ////////////////// //////////////////
properties.......................................... 3499 3500 934 3501 9,456 M.3.d.
e. Secured by nonfarm nonresidential properties........ 3502 3503 9,886 3504 74,306 M.3.e.
</TABLE>

<TABLE>
<CAPTION>
---------------------------------------
(Column A) (Column B)
Past due 30 Past due 90
through 89 days days or more
---------------------------------------
RFCD Bil Mil Thou RFCD Bil Mil Thou
---------------------------------------
<S> <C> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other ////////////////// //////////////////
commodity and equity contracts: ////////////////// //////////////////
a. Book value of amounts carried as assets............. 3522 3528 0 M.4.a.
b. Replacement cost of contracts with a ////////////////// //////////////////
positive replacement cost........................... 3529 3530 0 M.4.b.
</TABLE>

Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address : ONE MONARCH PLACE Page RC-21
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-O--OTHER DATA FOR DEPOSIT INSURANCE ASSESSMENTS
--------
C475 < -
------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Unposted debits (see instructions): //////////////////
a. Actual amount of all unposted debits........................................................ 0030 0 1.a
OR //////////////////
b. Separate amount of unposted debits: //////////////////
(1) Actual amount of unposted debits to demand deposits..................................... 0031 N/A 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1)........................ 0032 N/A 1.b.(2)
2. Unposted credits (see instructions): //////////////////
a. Actual amount of all unposted credits....................................................... 3510 0 2.a.
OR //////////////////
b. Separate amount of unposted credits: //////////////////
(1) Actual amount of unposted credits to demand deposits.................................... 3512 N/A 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1)....................... 3514 N/A 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total //////////////////
deposits in domestic offices).................................................................. 3520 142,277 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in Puerto //////////////////
Rico and U.S. territories and possessions (not included in total deposits): //////////////////
a. Demand deposits of consolidated subsidiaries................................................ 2211 196,951 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries................................... 2351 15,807 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries........................ 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: //////////////////
a. Demand deposits in insured branches (included in Schedule RC-E, Part II).................... 2229 0 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II)....... 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured branches //////////////////
(included in Schedule RC-G, item 1.b)....................................................... 5515 0 5.c.
------------------
------------------
Item 6 is not applicable to state nonmember banks that have not been authorized by the //////////////////
Federal Reserve to act as pass-through correspondents. //////////////////
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on //////////////////
behalf of its respondent depository institutions that are also reflected as deposit liabilities //////////////////
of the reporting bank: //////////////////
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, item 4 or 5, //////////////////
column B)................................................................................... 2314 0 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, //////////////////
item 4 or 5, column A or C, but not column B)............................................... 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) //////////////////
a. Unamortized premiums........................................................................ 5516 748 7.a.
b. Unamortized discounts....................................................................... 5517 0 7.b.
------------------
- -----------------------------------------------------------------------------------------------------------------------

8. TO BE COMPLETED BY BANKS WITH "OAKAR DEPOSITS." ------------------
Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of //////////////////
the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s))....... 5518 1,395,996 8.
------------------

- -----------------------------------------------------------------------------------------------------------------------
------------------
9. Deposits in lifeline accounts.................................................................. 5596 ///////////// 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total //////////////////
deposits in domestic offices).................................................................. 8432 0 10.

- ----------------
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction accounts
and all transaction accounts other than demand deposits.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-22
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-O--CONTINUED

-------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for //////////////////
certain reciprocal demand balances: //////////////////
a. Amount by which demand deposits will be reduced if reciprocal demand balances //////////////////
between the reporting bank and savings associations were reported on a net basis //////////////////
rather than a gross basis in Schedule RC-E........................................ 8785 0 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances //////////////////
between the reporting bank and U.S. branches and agencies of foreign banks were //////////////////
reported on a gross basis rather than a net basis in Schedule RC-E................ A181 0 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of //////////////////
collection were included in the calculation of net reciprocal demand balances //////////////////
between the reporting bank and the domestic offices of U.S. banks and savings //////////////////
associations in Schedule RC-E..................................................... A182 0 11.c.
-------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and //////////////////
1.b.(1) must equal Schedule RC, item 13.a): //////////////////
a. Deposit accounts of $100,000 or less: //////////////////
(1) Amount of deposit accounts of $100,000 or less.................................. 2702 18,219,759 M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (TO BE Number //////////////////
COMPLETED FOR THE JUNE REPORT ONLY)........................... RCON 3779 N/A ////////////////// M.1.a.(2)
b. Deposit accounts of more than $100,000: //////////////////
(1) Amount of deposit accounts of more than $100,000................................ 2710 14,572,399 M.1.b.(1)
Number //////////////////
(2) Number of deposit accounts of more than $100,000 ............. RCON 2772 28,722 ////////////////// M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by multiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.

Indicate in the appropriate box at the right whether your bank has a method or
procedure for determining a better estimate of uninsured deposits than the YES NO
estimate described above.............................................................. 6861 /// X M.2.a.
b. If the box marked YES has been checked, report the estimate of uninsured deposits RCON Bil Mil Thou
determined by using your bank's method or procedure................................. 5597 N/A M.2.b.
</TABLE>

- -------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should be
directed: C477

PAMELA S. FLYNN, VICE PRESIDENT (401) 278-5194
- ------------------------------- ----------------------
Name and Title (TEXT 8901) Area code/phone number/extension (TEXT 8902)

<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-23
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-R--REGULATORY CAPITAL

This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1995, must complete items 2 through 9 and Memoranda items 1 and 2. BANKS WITH ASSETS OF LESS THAN $1 BILLION
MUST COMPLETE ITEMS 1 THROUGH 3 BELOW OR SCHEDULE RC-R IN ITS ENTIRETY, DEPENDING ON THEIR RESPONSE TO ITEM 1 BELOW.

<S> <C> <C> <C>
---------------
C480
1. TEST FOR DETERMINING THE EXTENT TO WHICH SCHEDULE RC-R MUST BE COMPLETED. TO BE --------------------------------
COMPLETED ONLY BY BANKS WITH TOTAL ASSETS OF LESS THAN $1 BILLION. Indicate in the YES NO
appropriate box at the right whether the bank has total capital greater than or --------------------------------
equal to eight percent of adjusted total assets............................................ RCFD 6056 //// 1.
--------------------------------
</TABLE>

For purposes of this test, adjusted total assets equals total assets less
cash, U.S. Treasuries, U.S. Government agency obligations, and 80 percent of
U.S. Government-sponsored agency obligations plus the allowance for loan and
lease losses and selected off-balance sheet items as reported on Schedule
RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete
items 2 and 3 below. If the box marked NO has been checked, the bank must
complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual
risk-based capital ratio is less than eight percent or that the bank is not
in compliance with the risk-based capital guidelines.

<TABLE>

- -------------------------------------------------------------------
NOTE: ALL BANKS ARE REQUIRED TO COMPLETE ITEMS 2 AND 3 BELOW.
SEE OPTIONAL WORKSHEET FOR ITEMS 3.a THROUGH 3.f. -----------------------------------------
- ----------------------------------------------------------------------------- (Column A) (Column B)
Dollar Amounts in Thousands Subordinated Debt(1) Other
- ----------------------------------------------------------------------------- and Intermediate Limited-Life
2. Subordinated debt(1) and other limited-life capital instruments (original Term Preferred Stock Capital Instruments
weighted average maturity of at least five years) with a remaining -----------------------------------------
maturity of: RCFD Bil Mil Thou RCFD Bil Mil Thou
-----------------------------------------
<S> <C> <C> <C> <C> <C>
a. One year or less....................................................... 3780 25,737 3786 0 2.a.
b. Over one year through two years........................................ 3781 737 3787 0 2.b.
c. Over two years through three years..................................... 3782 10,745 3788 0 2.c.
d. Over three years through four years.................................... 3783 0 3789 0 2.d.
e. Over four years through five years..................................... 3784 341,000 3790 0 2.e.
f. Over five years........................................................ 3785 760,000 3791 0 2.f.
3. AMOUNTS USED IN CALCULATING REGULATORY CAPITAL RATIOS (REPORT AMOUNTS //////////////////
DETERMINED BY THE BANK FOR ITS OWN INTERNAL REGULATORY CAPITAL ANALYSES //////////////////
CONSISTENT WITH APPLICABLE CAPITAL STANDARDS):
-------------------------
RCFD Bil Mil Thou
-------------------------
a. TIER 1 CAPITAL................................................................................ 8274 3,756,621 3.a.
b. TIER 2 CAPITAL................................................................................ 8275 1,688,820 3.b.
c. TOTAL RISK-BASED CAPITAL...................................................................... 3792 5,445,441 3.c.
d. EXCESS ALLOWANCE FOR LOAN AND LEASE LOSSES.................................................... A222 200,236 3.d.
e. RISK-WEIGHTED ASSETS (NET OF ALL DEDUCTIONS, INCLUDING EXCESS ALLOWANCE)...................... A223 45,925,732 3.e.
f. "AVERAGE TOTAL ASSETS" (NET OF ALL ASSETS DEDUCTED FROM TIER 1 CAPITAL)(2).................... A224 46,290,168 3.f.
------------------
</TABLE>
<TABLE>
-----------------------------------------
(Column A) (Column B)
ITEMS 4-9 AND MEMORANDA ITEMS 1 AND 2 ARE TO BE COMPLETED Assets Credit Equiv-
BY BANKS THAT ANSWERED NO TO ITEM 1 ABOVE AND Recorded alent Amount
BY BANKS WITH TOTAL ASSETS OF $1 BILLION OR MORE. on the of Off-Balance
Balance Sheet Sheet Items(3)
-----------------------------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou
-----------------------------------------
<S> <C> <C> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items
assigned to the Zero percent risk category: ////////////////// //////////////////
a. Assets recorded on the balance sheet: ////////////////// //////////////////
(1) Securities issued by, other claims on, and claims unconditionally ////////////////// //////////////////
guaranteed by, the U.S. Government and its agencies and ////////////////// //////////////////
other OECD central governments..................................... 3794 1,519,575 ////////////////// 4.a.(1)
(2) All other.......................................................... 3795 1,316,143 ////////////////// 4.a.(2)
b. Credit equivalent amount of off-balance sheet items.................... ////////////////// 3796 1,079,527 4.b
</TABLE>

- -------------
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not deduct excess allowance for loan and lease losses.
(3) Do not report in column B the risk-weighted amount of assets reported in
column A.

Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address : ONE MONARCH PLACE Page RC-24
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]

SCHEDULE RC-R--CONTINUED

Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(1)
--------------------------------------
Dollar Amounts in Thousands RCFD BIL MIL THOU RCFD BIL MIL THOU
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items ////////////////// //////////////////
assigned to the 20 percent risk category: ////////////////// //////////////////
a. Assets recorded on the balance sheet: ////////////////// //////////////////
(1) Claims conditionally guaranteed by the U.S. Government and ////////////////// //////////////////
its agencies and other OECD central governments.................... 3798 726,530 ////////////////// 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Government ////////////////// //////////////////
and its agencies and other OECD central governments; by ////////////////// //////////////////
securities issued by U.S. Government-sponsored agencies; and ////////////////// //////////////////
by cash on deposit................................................. 3799 0 ////////////////// 5.a.(2)
(3) All other.......................................................... 3800 7,055,416 ////////////////// 5.a.(3)
b. Credit equivalent amount of off-balance sheet items.................... ////////////////// 3801 1,058,252 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items ////////////////// //////////////////
assigned to the 50 percent risk category: ////////////////// //////////////////
a. Assets recorded on the balance sheet................................... 3802 5,371,795 ////////////////// 6.a.
b. Credit equivalent amount of off-balance sheet items.................... ////////////////// 3803 866,687 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items ////////////////// //////////////////
assigned to the 100 percent risk category: ////////////////// //////////////////
a. Assets recorded on the balance sheet................................... 3804 31,276,374 ////////////////// 7.a.
b. Credit equivalent amount of off-balance sheet items.................... ////////////////// 3805 10,715,771 7.b.
8. On-balance sheet asset values excluded from the calculation of the ////////////////// //////////////////
risk-based capital ratio (2).............................................. 3806 91,771 ////////////////// 8.
9. Total assets recorded on the balance sheet (sum of ////////////////// //////////////////
items 4.a, 5.a, 6.a, 7.a, and 8, column A) (must equal Schedule RC, ////////////////// //////////////////
item 12 plus items 4.b and 4.c)........................................... 3807 47,357,604 ////////////////// 9.
--------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda ------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Current credit exposure across all off-balance sheet derivative contracts covered by the //////////////////
risk-based capital standards.................................................................. 8764 236,389 M.1.
------------------

----------------------------------------------------------------------
With a remaining maturity of
----------------------------------------------------------------------
(Column A) (Column B) (Column C)
One year or less Over one year Over five years
through five years
2. Notional principal amounts of ----------------------------------------------------------------------
off-balance sheet derivative contracts(3): RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou
----------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
a. Interest rate contracts................ 3809 7,502,891 8766 33,994,382 8767 779,970 M.2.a.
b. Foreign exchange contracts............. 3812 1,366,429 8769 84,993 8770 0 M.2.b.
c. Gold contracts......................... 8771 33,478 8772 0 8773 0 M.2.c.
d. Other precious metals contracts........ 8774 13,371 8775 0 8776 0 M.2.d.
e. Other commodity contracts.............. 8777 0 8778 0 8779 0 M.2.e.
f. Equity derivative contracts............ A000 0 A001 0 A002 0 M.2.f.
----------------------------------------------------------------------

- -----------------
(1) Do not report in column B the risk-weighted amount of assets reported in column A.
(2) Include the difference between the fair value and the amortized cost of available-for-sale securities in item 8 and report
the amortized cost of these securities in items 4 through 7 above. Item 8 also includes on-balance sheet asset values (or
portions thereof) of off-balance sheet interest rate, foreign exchange rate, and commodity contracts and those contracts (e.g.,
futures contracts) not subject to risk-based capital. Exclude from item 8 margin accounts and accrued receivables not included
in the calculation of credit equivalent amounts of off-balance sheet derivatives as well as any portion of the allowance for
loan and lease losses in excess of the amount that may be included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14 days or less and all futures contracts.
</TABLE>

<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-25
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
</TABLE>
OPTIONAL NARRATIVE STATEMENT CONCERNING THE AMOUNTS
REPORTED IN THE REPORTS OF CONDITION AND INCOME
at close of business on December 31, 1996

Fleet National Bank Springfield , Massachusetts
- -----------------------------------------------------------------------------
Legal Title of Bank City State

The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public. BANKS
CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT
DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK
CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN
SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE
PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing
not to make a statement may check the "No comment" box below and should make no
entries of any kind in the space provided for the narrative statement; i.e., DO
NOT enter in this space such phrases as "No statement," "Not applicable,"
"N/A," "No comment," and "None."

The optional statement must be entered on this sheet. The statement should not
exceed 100 words. Further, regardless of the number of words, the statement
must not exceed 750 characters, including punctuation, indentation, and
standard spacing between words and sentences. If any submission should exceed
750 characters, as defined, it will be truncated at 750 characters with no
notice to the submitting bank and the truncated statement will appear as the
bank's statement both on agency computerized records and in computer-file
releases to the public.

All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.

If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.

The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
- --------------------------------------------------------------------------------
No comment [X] (RCON 6979) C471 C472
--- ------------

BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)

/s/ Jan 23, 1997
------------------------ ------------------------
Signature of Executive Date of Signature
Officer of Bank