<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1998
REGISTRATION NOS. 333-62239 AND
333-62239-01
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
LOEWEN GROUP INTERNATIONAL, INC. THE LOEWEN GROUP INC.
(EXACT NAME OF EACH REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE BRITISH COLUMBIA
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
7261 7261
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBERS)
61-1264590 98-0121376
(IRS EMPLOYER IDENTIFICATION NUMBER)
<TABLE>
<CAPTION>
<S> <C>
3190 TREMONT AVENUE 4126 NORLAND AVENUE
TREVOSE, PENNSYLVANIA 19053 BURNABY, BRITISH COLUMBIA,
(215) 364-7770 CANADA V5G 3S8
(604) 299-9321
</TABLE>
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
PRINCIPAL EXECUTIVE OFFICES)
TIMOTHY R. HOGENKAMP
CHAIRMAN
LOEWEN GROUP INTERNATIONAL, INC.
50 EAST RIVERCENTER BOULEVARD, SUITE 800
COVINGTON, KENTUCKY 41011
(606) 431-6663
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
----------------
COPIES TO:
DWIGHT K. HAWES MICHELLE L. JOHNSON
SENIOR VICE-PRESIDENT, CORPORATE THELEN REID & PRIEST LLP
CONTROLLER TWO EMBARCADERO CENTER, SUITE 2100
THE LOEWEN GROUP INC. SAN FRANCISCO, CALIFORNIA 94111-3995
4126 NORLAND AVENUE (415) 392-6320
BURNABY, BRITISH COLUMBIA
CANADA V5G 3S8
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
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. [_]
----------------
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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT ISSUE THE SECURITIES DESCRIBED IN THIS PROSPECTUS UNTIL THE REGISTRATION +
+STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. +
+THIS PROSPECTUS IS NOT AN OFFER TO SELL SECURITIES AND IT IS NOT SOLICITING +
+AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE +
+IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1998
PROSPECTUS
EXCHANGE OFFER
BY
LOEWEN GROUP INTERNATIONAL, INC.
[LOGO OF THE LOEWEN GROUP INTERNATIONAL, INC.]
-------
Loewen Group International, Inc. is offering
to exchange:
.your outstanding 7.20% Series 6 Senior
Guaranteed Notes (Unregistered) due 2003
for 7.20% Series 6 Senior Guaranteed Notes
(Registered) due 2003, and
.your outstanding 7.60% Series 7 Senior
Guaranteed Notes (Unregistered) due 2008
for 7.60% Series 7 Senior Guaranteed Notes
(Registered) due 2008.
Following are certain terms and conditions
relating to the registered notes:
.The terms of the registered notes will be
identical to those of your unregistered
notes, except for certain transfer
restrictions, registration rights and
interest provisions.
.The registered notes will be issued under
the same indenture as your unregistered
notes.
.The registered notes will be fully and
unconditionally guaranteed on a senior
basis by The Loewen Group Inc.
.You will be able to resell them without
compliance with the prospectus delivery
requirements of the Securities Act,
subject to certain conditions.
.The exchange of notes will not be a
taxable event for U.S. or Canadian federal
income tax purposes.
To exchange your unregistered notes for
registered notes, you must complete and send the
letter of transmittal that accompanies this
Prospectus to the exchange agent by 3:00 p.m.,
New York time, on . , 1998. If your
unregistered notes are held in book-entry form at
The Depository Trust Company, you must instruct
DTC through your signed letter of transmittal
that you wish to exchange your unregistered notes
for registered notes. When the exchange offer
closes, your DTC account will be changed to
reflect your exchange of unregistered notes for
registered notes.
This Prospectus gives you detailed information
about the exchange offer. We recommend that you
read this entire Prospectus, along with the
additional information described under the
heading "Where You Can Find More Information."
PAY PARTICULAR ATTENTION TO THE MATTERS REFERRED
TO UNDER "RISK FACTORS" STARTING ON PAGE 13.
The information contained in this Prospectus is
not complete and may be amended. These securities
may not be sold until the related registration
statement filed with the Securities and Exchange
Commission or any applicable state securities
commission becomes effective. This Prospectus is
not an offer to sell nor is it seeking an offer
to buy these securities in any state where the
offer or sale is not permitted. These securities
have not been and will not be qualified for sale
under the securities laws of Canada and, subject
to certain exceptions, may not be offered or sold
in Canada.
These securities have not been approved by the
Securities and Exchange Commission, any state
securities commission or any securities
commission or similar authority in Canada, nor
have these organizations determined that this
Prospectus is accurate or complete. Any
representation to the contrary is a criminal
offense.
This Prospectus is dated . , 1998.
<PAGE>
ABOUT THIS PROSPECTUS
In this Prospectus, we use the term "Loewen" to refer to The Loewen Group
Inc.; we use the term "the Company" to refer to Loewen and its subsidiaries
and associated companies; and we use the term "LGII" to refer to Loewen Group
International, Inc. LGII is Loewen's principal subsidiary and the holding
company for all of the Company's United States operations.
All dollar amounts in this Prospectus are in United States dollars ("U.S.$"
or "$") unless otherwise indicated. References to "Cdn.$" are to Canadian
dollars.
The Company prepares its consolidated financial statements included in its
reports filed pursuant to the Exchange Act in accordance with accounting
principles generally accepted in Canada ("Canadian GAAP"). Differences between
Canadian GAAP and accounting principles generally accepted in the United
States ("U.S. GAAP"), as applicable to the Company, are explained in Note 23
to the consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended 1997 (the "1997 Consolidated Financial
Statements"), and in Note 8 to the interim consolidated financial statements
included in the Company's Quarterly Report on Form 10-Q/A for the quarter
ended June 30, 1998 (the "June 1998 Interim Consolidated Financial
Statements"), filed August 18, 1998. The Company's selected consolidated
financial data included in this Prospectus is presented on a Canadian GAAP and
U.S. GAAP basis.
Financial statements with respect to LGII also are prepared in accordance
with Canadian GAAP. The LGII selected consolidated financial data included in
this Prospectus are presented on a Canadian GAAP basis.
Effective January 1, 1994, the Company adopted the United States dollar as
its reporting currency. 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.
CERTAIN IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT LOEWEN THAT IS
NOT INCLUDED IN THIS PROSPECTUS IS CONSIDERED TO BE A PART OF THIS PROSPECTUS
BECAUSE IT IS INCLUDED IN OTHER DOCUMENTS THAT ARE INCORPORATED BY REFERENCE
IN THIS PROSPECTUS. AMONG SUCH DOCUMENTS ARE LOEWEN'S ANNUAL REPORT ON FORM
10-K FOR THE LAST FISCAL YEAR AND ITS QUARTERLY REPORTS ON FORM 10-Q FILED
SINCE THE END OF SUCH FISCAL YEAR. FOR A COMPLETE LIST OF THE DOCUMENTS
INCORPORATED BY REFERENCE, SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE
55.
AT YOUR REQUEST, LOEWEN WILL PROVIDE TO YOU, WITHOUT CHARGE, A COPY OF ANY
OR ALL OF THE DOCUMENTS THAT ARE INCORPORATED BY REFERENCE IN THIS PROSPECTUS
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS). REQUESTS FOR DOCUMENTS SHOULD BE
DIRECTED TO LOEWEN, 4126 NORLAND AVENUE, BURNABY, BRITISH COLUMBIA, CANADA V5G
3S8, ATTENTION: CORPORATE SECRETARY; TELEPHONE NO.: (604) 299-9321.
IN ORDER TO ENSURE TIMELY DELIVERY OF REQUESTED DOCUMENTS, REQUESTS SHOULD
BE MADE BY , 1998.
2
<PAGE>
PROSPECTUS SUMMARY
This summary is not complete and only highlights certain information in this
Prospectus. As a result, this summary may not contain all of the information
that is important to you. To understand the Exchange Offer, you should read
this entire Prospectus, the documents incorporated by reference and the
exhibits to the registration statement.
THE EXCHANGE OFFER
When we initially sold the unregistered Series 6 and 7 notes, we agreed to
register similar notes with the SEC and conduct this exchange offer. If we do
not complete the exchange offer by December 24, 1998, we will be required to
pay additional interest on the outstanding unregistered notes. You should read
the discussion under the heading "Summary of Terms of the Exchange Notes" and
"Description of the Exchange Notes" for further information regarding the
registered notes.
You will be able to resell the registered notes without compliance with the
prospectus delivery provisions of the Securities Act, subject to certain
conditions. You should read the discussion under the headings "Summary of Terms
of the Exchange Offer" and "The Exchange Offer" for further information
regarding the exchange offer and resale of the registered notes.
THE COMPANY
Loewen operates the second-largest number of funeral homes and cemeteries in
North America and provides funeral, cemetery and cremation services at the time
of need and on a pre-need basis. Loewen beneficially owns all of the
outstanding common stock of LGII.
As at July 31, 1998, the Company operated 1,123 funeral homes and 546
cemeteries throughout North America. During 1997, the Company expanded into the
United Kingdom and now operates 26 funeral homes there. The Company also
operates several insurance subsidiaries that principally sell life insurance
products to fund funeral services purchased through a pre-need arrangement.
The funeral service industry has a number of attractive characteristics.
Historically, the funeral service industry has had a low business risk compared
with most other businesses and has not been significantly affected by economic
or market cycles. According to the preliminary 1996 Business Failure Record
published by The Dun & Bradstreet Corporation, the average business failure
rate in the United States in 1996 was 80 per 10,000. The 1996 business failure
rate of the funeral service and crematoria industry was 12 per 10,000, among
the lowest of all industries.
Future demographic trends also are expected to contribute to the continued
stability of the funeral service industry. Reflecting the well-publicized
"graying of America" as the baby boom generation reaches old age, the U.S.
Department of Commerce, Bureau of the Census, projects that the number of
deaths in the United States will grow at approximately 0.9% annually through
2010.
In addition, 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 13% of the 23,500
funeral homes and approximately 10% of the 10,500 cemeteries in North America
are currently owned or operated by the five largest publicly traded North
American funeral service companies.
3
<PAGE>
Historically, the Company has capitalized on these favorable industry
fundamentals through a growth strategy that emphasized four key elements:
(1) improving revenue and profitability of newly-acquired operations by
implementing merchandising, marketing and pre-need sales programs, and
realizing cost savings through bulk purchasing programs and other
economies of scale,
(2) continuing to increase the revenue and profitability of established
locations through inflation-based pricing, further expansion of pre-
need sales programs and additional merchandising and cost control
programs,
(3) acquiring large, multi-location urban properties that provide
opportunities to consolidate economically smaller properties in a
particular region, and
(4) acquiring smaller funeral homes and cemeteries that offer significant
synergies with existing properties.
Although the Company has grown rapidly, the Company's recent operating
results have been disappointing. Beginning in August 1997, the Company began
implementing a number of management improvements and cost control measures
including the closure of the Cincinnati office, field staff reductions
aggregating approximately 550 employees and, in June 1998, the consolidation of
management functions currently in the Company's Philadelphia office to the
Vancouver head office. These measures have not yet had all of the desired
impact and the Company's operating results for the three months ended June 30,
1998 were significantly below management's expectations. Although the Company
will continue to implement its plans for improvements, on July 27, 1998 the
Company secured the services of the investment banking firm Salomon Smith
Barney to identify and evaluate opportunities to maximize shareholder value.
Such opportunities may include strategic partnerships, combinations,
dispositions and capital investments in the Company. In addition, the Company
is reviewing its acquisition program with a goal of reducing substantially the
level of acquisitions for the balance of 1998 and for 1999.
Loewen was incorporated in 1985 under the laws of the Province of British
Columbia, Canada. The principal executive offices of Loewen are located at 4126
Norland Avenue, Burnaby, British Columbia, Canada V5G 3S8; telephone no. (604)
299-9321.
LGII was incorporated in 1987 under the laws of the State of Delaware. The
principal executive offices of LGII are located at 3190 Tremont Avenue,
Trevose, Pennsylvania, 19053; telephone no. (215) 364-7770.
4
<PAGE>
SUMMARY OF TERMS OF THE EXCHANGE OFFER
The Exchange Offer........ LGII is offering to exchange:
. your outstanding 7.20% Series 6 Senior
Guaranteed Notes (Unregistered) due 2003 for
7.20% Series 6 Senior Guaranteed Notes
(Registered) due 2003, and
. your outstanding 7.60% Series 7 Senior
Guaranteed Notes (Unregistered) due 2008 for
7.60% Series 7 Senior Guaranteed Notes
(Registered) due 2008.
The registered notes will be identical to the
unregistered notes, except for certain transfer
restrictions, registration rights and interest
provisions. You may exchange unregistered notes
only in multiples of $1,000.
Once this exchange offer is complete, we will not
conduct another exchange offer or register your
unregistered notes at any time.
Expiration Date;
Withdrawal of Tender..... The exchange offer will expire at 3:00 p.m., New
York time, on . , 1998 unless we extend it.
After you send your letter of transmittal to the
exchange agent, if you decide not to exchange your
unregistered notes, you can withdraw your letter of
transmittal at any time before the exchange offer
expires. Any unregistered notes not accepted for
exchange for any reason will be returned to you as
promptly as practicable after the expiration or
termination of the exchange offer.
Procedures for Tendering
Outstanding Notes........ If you wish to exchange your unregistered notes,
you must complete, sign and date the letter of
transmittal and deliver it to State Street Bank and
Trust Company. The letter of transmittal contains
detailed instructions and also requires you to
agree to comply with the registration and
prospectus delivery requirements of the Securities
Act.
Guaranteed Delivery
Procedures............... You may be required to deliver certain documents
with your letter of transmittal. If any of those
documents are not available or deliverable before
the exchange offer expires, you should follow the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
Registration Rights
Agreement................ If we are unable to complete the exchange offer
because of a change in the SEC's position or a
violation of applicable law, we will file a shelf
registration statement covering resales of your
outstanding notes. We will then use our best
efforts to enable you to use the shelf registration
statement for 180 days to resell your notes.
Resales................... We believe you will be able to resell the
registered notes without compliance with the
registration and prospectus delivery provisions of
the Securities Act provided that:
. you acquire the notes in the ordinary course of
your business;
5
<PAGE>
. you are not participating and do not intend to
participate in a distribution of the notes; and
. you are not an "affiliate" of ours.
If you do not meet these requirements, you may only
transfer registered notes if you comply with the
prospectus delivery and registration requirements
of the Securities Act. Otherwise, you may incur
liability under the Securities Act. We will not
assume or indemnify you against such liability.
Certain U.S. and Canadian
Federal Tax
Considerations........... For a discussion of certain U.S. and Canadian tax
considerations relating to the exchange of
unregistered notes for registered notes, see
"Certain U.S. Federal Income Tax Considerations"
and "Certain Canadian Federal Tax Considerations."
Certain Conditions to the
Exchange Offer........... The exchange offer is subject to certain customary
conditions, which may be waived by LGII.
Use of Proceeds........... There will be no proceeds to LGII or Loewen from
the exchange of unregistered notes pursuant to the
exchange offer.
Exchange Agent............ State Street Bank and Trust Company is the exchange
agent. You can contact State Street Bank and Trust
Company at State Street's Corporate Trust
Department, Two International Place, 4th Floor,
Boston, MA 02110, Attention: Kellie Mullen,
telephone no. (617) 664-5290; and facsimile no.
(617) 664-5587.
6
<PAGE>
SUMMARY OF TERMS OF THE EXCHANGE NOTES
Issuer.................... Loewen Group International, Inc.
Exchange Notes............ In this Prospectus, the registered notes that will
be issued in the exchange offer are called
"Exchange Notes." We will issue up to:
.$200 million principal amount of Series 6
Exchange Notes, and
.$250 million principal amount of Series 7
Exchange Notes.
Maturity Dates............ The Series 6 Exchange Notes will mature on June 1,
2003.
The Series 7 Exchange Notes will mature on June 1,
2008.
Interest Payment Dates.... June 1 and December 1, commencing December 1, 1998.
Interest on your outstanding unregistered notes
will cease to accrue as soon as interest begins to
accrue on the Exchange Notes.
Ranking................... The Exchange Notes will be a senior obligation of
LGII and will rank equally as to the right of
payment with all other senior indebtedness of LGII.
Loewen's guarantees of the Exchange Notes will be
senior obligations of Loewen and will rank equally
as to the right of payment with all other senior
indebtedness of Loewen.
When issued, the Exchange Notes and the guarantees
will be secured by:
. a pledge of 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,
. a guarantee by substantially all of the
Company's subsidiaries, and
. all of the financial assets of LGII (including
shares of capital stock held by LGII of
various subsidiaries).
The Exchange Notes will be subject to a covenant
included in the Indenture that limits liens. In
order to satisfy the lien limitation covenant, the
collateral that secures the Exchange Notes has to
be shared equally and ratably among you and all of
our other senior creditors. You will not have any
independent right to require a lien secured by the
collateral to remain in place or unchanged or to
require any other security for the Exchange Notes.
Consequently, if a lien secured by the collateral
is released and no other security is provided for
the Exchange Notes, the Exchange Notes will become
unsecured senior obligations of LGII and Loewen and
will rank junior in right of payment to secured
indebtedness of LGII and Loewen. As at June 30,
1998, the aggregate amount of senior indebtedness,
including the indebtedness evidenced by the
outstanding unregistered notes, was approximately
$2 billion.
Creditors of LGII's and Loewen's subsidiaries will
have a right to be paid before money is made
available to LGII to make payments on the Exchange
Notes. As at June 30, 1998, the aggregate amount of
indebtedness of LGII's subsidiaries (excluding
intercompany indebtedness)
7
<PAGE>
was approximately $73 million, and the aggregate
amount of indebtedness of Loewen's subsidiaries
other than LGII and its subsidiaries (excluding
intercompany indebtedness) was approximately $3
million.
Guarantees................ Loewen will fully and unconditionally guarantee the
Exchange Notes on a senior basis.
Optional Redemption....... LGII has the option to redeem the Exchange Notes,
in whole or in part, at any time. The redemption
price will be the greater of (1) 100% of the
principal amount of the Exchange Notes and (2) the
sum of the present values of the remaining
scheduled principal and interest payments,
discounted to the date of redemption on a semi-
annual basis, at the applicable Treasury Yield plus
37.5 basis points (in the case of the Series 6
Exchange Notes) and 50 basis points (in the case of
the Series 7 Exchange Notes), plus any accrued and
unpaid interest to the redemption date.
Effect of Change of
Control.................. In the event of a Change of Control, LGII must
offer to purchase the outstanding Exchange Notes at
a purchase price equal to 101% of the principal
amount, plus any accrued and unpaid interest to the
purchase date. In addition, LGII must offer to
purchase the Exchange Notes at a purchase price
equal to 100% of the principal amount, plus any
accrued and unpaid interest to the purchase date,
with the net cash proceeds of certain sales or
other dispositions of assets. To the extent LGII
does not have available funds to meet its purchase
obligations, LGII or Loewen (as the guarantor of
the Exchange Notes) may be required to seek third-
party financing to purchase the Exchange Notes.
There can be no assurance that LGII or Loewen will
be able to obtain third-party financing in these
circumstances. The term "Change of Control" is
limited to certain specified transactions and may
not include other events that might adversely
affect the financial condition of LGII or result in
a downgrade of the credit rating of the Exchange
Notes.
Certain Covenants......... The Indenture contains certain covenants for your
benefit which, among other things, and subject to
certain exceptions, restrict our ability to:
. incur additional indebtedness*
. make certain payments, including dividends and
investments*
. create liens
. enter into agreements for a sale of assets*
. issue preferred stock*
. enter into transactions with interested
persons*
. make payments to subsidiaries*
. enter into sale-leaseback transactions
. enter into mergers and consolidations
The covenants marked by an asterisk will be
suspended if the ratings assigned to the Exchange
Notes by the Rating Agencies are no less than BBB-
and Baa3, respectively. See "Description of
Exchange Notes--Certain Covenants."
8
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
THE LOEWEN GROUP INC.
(IN THOUSANDS OF U.S.$, EXCEPT OPERATING DATA AND RATIOS)
Set forth below are certain selected consolidated financial and other data of
the Company for the periods indicated. This information should be read in
conjunction with the Company's 1997 Consolidated Financial Statements and other
information included or incorporated by reference herein. The selected
consolidated financial data for each of the years in the five-year period ended
December 31, 1997 are derived from the Company's audited consolidated financial
statements and notes thereto, which have been prepared in accordance with
Canadian GAAP. The selected consolidated financial data for the six months
ended June 30, 1998 and 1997 are derived from the unaudited June 1998 Interim
Consolidated Financial Statements, which in management's opinion include all
adjustments, consisting only of normal, recurring adjustments, necessary for a
fair presentation of the financial results for the interim periods. Interim
results are not necessarily indicative of results that may be expected for any
other interim period or for a full year.
The Company recorded pre-tax charges of $89.2 million ($58 million after tax)
during 1997, representing $33.4 million of restructuring costs, $28.5 million
of costs associated with strategic initiatives, and $27.3 million of other
charges. The majority of the anticipated future savings from the restructuring
and strategic initiatives are associated with the Company's efforts to more
fully integrate its field and administrative operations, including its funeral
homes and cemetery locations, and are expected to favorably influence gross
margins in the Company's funeral and cemetery divisions. These initiatives are
also expected to produce long-term savings, as a percentage of revenue, in
general and administrative expenses and interest costs.
The financial results for the year ended December 31, 1996 include $18.7
million (pre-tax) of finance and other costs related to an unsuccessful hostile
takeover proposal for the Company. The financial results for the year ended
December 31, 1995 include an aggregate of $195.7 million (pre-tax) for legal
settlements and litigation related finance costs and certain general and
administrative costs related to the legal settlements.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------------------------------------
1998 1997 1997 1996(1) 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................. $ 612,997 $ 550,345 $1,114,099 $ 908,385 $ 598,493 $ 417,328 $ 303,011
Gross margin............ 209,213 199,625 366,573 332,059 225,362 158,854 115,118
Earnings from
operations............. 119,746 125,980 148,119 204,105 117,607 95,113 65,697
Net earnings (loss)..... 42,047 49,968 42,728 63,906 (76,684) 38,494 28,182
OTHER FINANCIAL DATA:
Depreciation and
amortization........... 40,383 33,400 $ 71,383 $ 56,763 $ 40,103 $ 28,990 $ 21,196
EBITDA (2).............. 166,669 166,255 249,306 245,784 (25,758) 124,103 86,893
EBITDA, as adjusted .... -- -- 287,106(3) 264,462(4) 169,928(5) -- --
Ratio of earnings to
fixed charges (6)...... 1.6x 1.9x 1.3x 1.9x --(7) 2.5x 2.9x
Ratio of earnings to
fixed charges, as
adjusted............... -- -- 1.6x(8) 2.1x(9) 2.1x(10) -- --
<CAPTION>
AS AT JUNE 30, AS AT DECEMBER 31,
--------------------- ----------------------------------------------------------------
1998 1997 1997 1996(1) 1995(1) 1994(1) 1993(1)
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............ $4,822,292 $4,023,027 $4,503,160 $3,496,939 $2,262,980 $1,326,275 $ 913,661
Total long-term debt
(11)................... 2,113,284 1,470,660 1,793,934 1,495,925 932,296 515,703 341,184
Preferred securities of
subsidiary............. 75,000 75,000 75,000 75,000 75,000 75,000 --
Shareholders' equity.... 1,572,178 1,535,779 1,540,238 1,048,200 614,682 411,139 325,890
OPERATING DATA:
Number of funeral home
locations (12)......... 1,131 988 1,070 956 815 641 533
Number of funeral
services............... 83,000 77,000 153,000 142,000 114,000 94,000 79,000
Number of cemeteries
(12)................... 535 398 483 313 179 116 70
</TABLE>
- -------
(1) Certain of the comparative figures have been reclassified to conform to
the presentation adopted in 1997.
9
<PAGE>
(2) EBITDA represents net earnings (loss) before interest, dividends on
preferred securities of subsidiary, income taxes, depreciation and
amortization. EBITDA has been included solely to facilitate the
consideration of the covenants of the Indenture that are based, in part,
on EBITDA. In addition, the Company understands that EBITDA is used by
certain investors as one measure of the Company's historical ability to
service its debt. EBITDA data are not a measure of financial performance,
do not represent cash flow from operations under generally accepted
accounting principles, and should not be considered as a substitute for
net earnings as an indicator of the Company's operating performance or for
cash flow as a measure of liquidity. Please refer to the Consolidated
Statements of Changes in Financial Position, which include information
regarding cash provided by and applied to operations, investing and
financing, and Management's Discussion and Analysis of Financial Condition
and Results of Operations, which discusses liquidity and capital resources
(including sources and uses of capital) in greater detail, both of which
appear in the 1997 Form 10-K.
(3) EBITDA, as adjusted, represents EBITDA before the effect of restructuring
costs ($33.4 million), costs associated with strategic initiatives ($28.5
million), and the gain on sale of investment ($24.1 million).
(4) EBITDA, as adjusted, represents EBITDA before the effect of finance and
other costs ($18.7 million) related to the unsuccessful hostile takeover
proposal for the Company.
(5) EBITDA, as adjusted, represents EBITDA before the effect of legal
settlements ($165 million), litigation related finance costs
($19.9 million), and professional fees and other costs related to certain
litigation and settlements included in general and administrative expenses
($10.7 million).
(6) The ratio of earnings to fixed charges represents, on a pre-tax basis, the
number of times earnings cover fixed charges. Earnings consist of net
income to which has been added interest on long-term debt (excluding
capitalized interest), dividends on preferred securities of subsidiary,
amortization of deferred finance costs and taxes based on income of the
Company. Fixed charges consist of interest on long-term debt, amortization
of deferred finance costs and dividends on preferred securities of
subsidiary.
(7) 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. Reference is made to the Statement re
Computation of Earnings to Fixed Charges Ratio (Canadian GAAP), which is
Exhibit 12.1 to the 1997 Form 10-K.
(8) The ratio of earnings to fixed charges, as adjusted, represents, on a pre-
tax basis, the number of times earnings cover fixed charges. Earnings
consist of net income to which has been added interest on long-term debt
(excluding capitalized interest), dividends on preferred securities of
subsidiary, amortization of deferred finance costs, taxes based on income
of the Company and the costs associated with the restructuring and
strategic initiatives. The gain on the sale of investment has been
deducted from net earnings.
(9) The ratio of earnings to fixed charges, as adjusted, represents, on a pre-
tax basis, the number of times earnings cover fixed charges. Earnings
consist of net income to which has been added interest on long-term debt
(excluding capitalized interest), dividends on preferred securities of
subsidiary, amortization of deferred finance costs, taxes based on income
of the Company and finance and other costs related to the unsuccessful
hostile takeover proposal for the Company.
(10) The ratio of earnings to fixed charges, as adjusted, represents, on a pre-
tax basis, the number of times earnings cover fixed charges. Earnings
consist of net income to which has been added interest on long-term debt
(excluding capitalized interest), dividends on preferred securities of
subsidiaries, amortization of deferred finance costs, taxes based on
income of the Company and the effect of legal settlements, litigation
related finance costs and other costs related to certain litigation and
settlements.
(11) Total long-term debt comprises long-term debt, including current portion.
(12) The numbers of locations for 1994 and 1993 include adjustments and
consolidations related to prior periods.
10
<PAGE>
Had the Company prepared its consolidated financial statements in accordance
with U.S. GAAP (see Note 23 to the 1997 Consolidated Financial Statements),
selected consolidated financial data would have been as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
--------------------- -----------------------------------------------------------------
1998 1997 1997 1996(1) 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................. $ 614,116 $ 550,298 $1,115,400 $ 909,137 $ 598,493 $ 417,479 $ 308,402
Earnings from
operations............. 126,216 130,408 147,933 198,869 117,376 94,758 66,711
Earnings (loss) before
cumulative effect of
change in accounting
principles............. 41,827 51,403 42,231 64,559 (75,800) 39,652 28,912
OTHER FINANCIAL DATA:
EBITDA (2).............. 166,996 164,190 250,833 244,344 (26,967) 123,748 88,428
EBITDA, as adjusted..... -- -- 288,633(3) 263,022(4) 168,719 (5) -- --
Ratio of earnings to
fixed charges (6)...... 1.6x 1.9x 1.3x 1.8x -- (7) 2.4x 2.9x
Ratio of earnings to
fixed charges, as
adjusted............... -- -- 1.6x(8) 2.0x(9) 2.1x (10) -- --
<CAPTION>
AS AT JUNE 30, AS AT DECEMBER 31,
--------------------- -----------------------------------------------------------------
1998 1997 1997 1996 (1) 1995 (1) 1994 (1) 1993 (1)
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets............ $5,152,648 $4,293,959 $4,776,535 $3,699,950 $2,345,874 $1,329,928 $ 921,342
Total long-term debt
(11)................... 2,113,284 1,470,660 1,793,934 1,495,925 892,296(12) 515,703 341,184
Preferred securities of
subsidiary............. 75,000 75,000 75,000 75,000 75,000 75,000 --
Shareholders' equity ... 1,557,147 1,517,256 1,524,195 1,026,110 519,006(12) 385,950 299,059
</TABLE>
- --------
(1) Certain of the comparative figures have been reclassified to conform to
the presentation adopted in 1997.
(2) EBITDA represents net earnings (loss) before interest, dividends on
preferred securities of subsidiary, income taxes, depreciation and
amortization. EBITDA has been included solely to facilitate the
consideration of the covenants of the Indenture that are based, in part,
on EBITDA. In addition, the Company understands that EBITDA is used by
certain investors as one measure of the Company's historical ability to
service its debt. EBITDA data are not a measure of financial performance,
do not represent cash flow from operations under generally accepted
accounting principles, and should not be considered as a substitute for
net earnings as an indicator of the Company's operating performance or for
cash flow as a measure of liquidity. Please refer to the Consolidated
Statements of Changes in Financial Position, which include information
regarding cash provided by and applied to operations, investing and
financing, and Management's Discussion and Analysis of Financial Condition
and Results of Operations, which discusses liquidity and capital resources
(including sources and uses of capital) in greater detail, both of which
appear in the 1997 Form 10-K.
(3) EBITDA, as adjusted, represents EBITDA before the effect of restructuring
costs ($33.4 million), costs associated with strategic initiatives ($28.5
million), and the gain on sale of investment ($24.1 million).
(4) EBITDA, as adjusted, represents EBITDA before the effect of finance and
other costs ($18.7 million) related to the unsuccessful hostile takeover
proposal for the Company.
(5) EBITDA, as adjusted, represents EBITDA before the effect of legal
settlements ($165 million), litigation related finance costs
($19.9 million), and professional fees and other costs related to certain
litigation and settlements included in general and administrative expenses
($10.7 million).
(6) The ratio of earnings to fixed charges represents, on a pre-tax basis, the
number of times earnings cover fixed charges. Earnings consist of net
income to which has been added interest on long-term debt (excluding
capitalized interest), dividends on preferred securities of subsidiary,
amortization of deferred finance costs and taxes based on income of the
Company. Fixed charges consist of interest on long-term debt, amortization
of deferred finance costs and dividends on preferred securities of
subsidiary.
(7) 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. Reference is made to the Statement re
Computation of Earnings to Fixed Charges Ratio (U.S. GAAP), which is
Exhibit 12.2 to the 1997 Form 10-K.
(8) The ratio of earnings to fixed charges, as adjusted, represents, on a pre-
tax basis, the number of times earnings cover fixed charges. Earnings
consist of net income to which has been added interest on long-term debt
(excluding capitalized interest), dividends on preferred securities of
subsidiary, amortization of deferred finance costs, taxes based on income
of the Company and the costs associated with the restructuring and
strategic initiatives. The gain on the sale of investment has been
deducted from net earnings.
(9) The ratio of earnings to fixed charges, as adjusted, represents, on a pre-
tax basis, the number of times earnings cover fixed charges. Earnings
consist of net income to which has been added interest on long-term debt
(excluding capitalized interest), dividends on preferred securities of
subsidiary, amortization of deferred finance costs, taxes based on income
of the Company and finance and other costs related to the unsuccessful
hostile takeover proposal for the Company.
(10) The ratio of earnings to fixed charges, as adjusted, represents, on a pre-
tax basis, the number of times earnings cover fixed charges. Earnings
consist of net income to which has been added interest on long-term debt
(excluding capitalized interest), dividends on preferred securities of
subsidiaries, amortization of deferred finance costs, taxes based on
income of the Company and the effect of legal settlements, litigation
related finance costs and other costs related to certain litigation and
settlements.
(11) Total long-term debt comprises long-term debt, including current portion.
(12) In accordance with U.S. GAAP, the non-current portion of the provision for
legal settlements was classified as a non-current accrued liability of
$112.0 million rather than as long-term debt ($40.0 million) and share
capital issuable under legal settlements ($72.0 million).
11
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
(IN THOUSANDS OF U.S.$)
Loewen Group International, Inc. serves as the holding company for the United
States assets and operations of the Company (other than assets and operations
in Puerto Rico). At July 31, 1998, LGII's operations consisted of 970 funeral
homes, 529 cemeteries and all of the Company's insurance companies. Loewen
beneficially owns, directly or indirectly, all of the outstanding common stock
of LGII.
Set forth below are certain selected consolidated financial data relating to
LGII. The selected consolidated financial data for each of the years in the
five-year period ended December 31, 1997 are derived from audited consolidated
financial statements of LGII, which have been prepared in accordance with
Canadian GAAP. The selected consolidated financial data for the six months
ended June 30, 1998 and 1997 are derived from the unaudited consolidated
financial statements of LGII, which in management's opinion include all
adjustments, consisting only of normal, recurring adjustments, necessary for a
fair presentation of the financial results for the interim periods. Interim
results are not necessarily indicative of results that may be expected for any
other interim period or for a full year.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
---------------------- --------------------------------------------------------
1998 1997 1997 1996(1) 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue....................... $ 567,018 $ 511,047 $1,035,099 $ 839,352 $ 540,825 $ 365,458 $ 263,493
Gross margin.................. 192,071 177,126 308,697 296,566 198,867 136,639 97,328
Earnings from operations (2).. 111,860 110,910 116,774 179,185 75,715 84,390 59,462
Net earnings (loss) (3)....... (11,415) 2,699 (77,746) (4,868) (127,353) 7,491 10,671
<CAPTION>
AS AT JUNE 30, AS AT DECEMBER 31,
---------------------- --------------------------------------------------------
1998 1997 1997 1996(1) 1995(1) 1994(1) 1993(1)
---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets................ $ 276,761 $ 279,794 $ 244,552 $ 223,388 $ 184,289 $ 96,943 $ 81,028
Non-current assets............ 4,041,045 3,114,416 3,688,148 2,865,005 1,776,425 998,753 686,260
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total assets.................. 4,317,806 3,394,210 3,932,700 3,088,393 1,960,714 1,095,696 767,288
Current liabilities........... 155,891 139,926 172,371 156,290 221,555 81,472 36,722
Long-term debt, excluding
current portion.............. 1,852,394 1,278,456 1,531,586 1,296,542 730,355 372,887 243,290
Other non-current
liabilities.................. 1,925,782 1,560,299 1,833,589 1,347,911 891,354 396,534 324,964
Preferred securities of
subsidiary .................. 75,000 75,000 75,000 75,000 75,000 75,000 --
Shareholders' equity ......... 308,739 340,529 320,154 212,650 42,450 169,803 162,312
</TABLE>
- --------
(1) Certain of the comparative figures have been reclassified to conform to the
presentation adopted in 1997.
(2) Earnings from operations incurred during the year ended December 31, 1995
include additional intercompany charges payable to Loewen. These
intercompany charges are eliminated in the consolidated financial
statements of the Company.
(3) 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.
12
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, you should consider
the following risk factors. Capitalized terms are defined in the section
entitled "Description of Exchange Notes--Certain Definitions" on page 38.
RISKS RELATING TO THE EXCHANGE OFFER
Consequences of Failure to Exchange; Possible Adverse Effect On Trading
Market for Unregistered Notes
If you do not exchange your unregistered notes for registered notes in the
exchange offer, the transfer restrictions printed on your unregistered notes
will continue to apply. These restrictions arise because your unregistered
notes were not registered under the Securities Act and applicable state
securities laws. In general, your unregistered notes may not be offered or
sold until they are registered under the Securities Act and applicable state
laws, unless the sale qualifies for an exemption. If you do not participate in
the exchange offer, you may be required to hold the unregistered notes
indefinitely, unless a registration statement with respect to the unregistered
notes is filed and becomes effective. After the exchange offer is completed,
LGII and Loewen will have no obligation, and do not intend, to register your
unregistered notes under the Securities Act. In addition, if you tender your
unregistered notes in the exchange offer for the purpose of participating in a
distribution of the registered notes, you may be deemed to have received
restricted securities. If you are deemed to have received restricted
securities, you will be required to comply with the registration and
prospectus delivery requirements of the Securities Act if you resell your
registered notes. Further, we expect that the outstanding aggregate principal
amount of the unregistered notes will decrease because of the exchange offer.
As a result, it is unlikely that a liquid trading market will exist for the
unregistered notes at any time. This lack of liquidity will make transactions
more difficult and may reduce the trading price of the unregistered notes. See
"The Exchange Offer" and "Description of Exchange Notes--Registration Rights
Agreement."
Absence of Public Market For the Unregistered Notes
There is no existing public market for the unregistered notes, and a public
market might not ever develop. Certain of the initial purchasers of the
unregistered notes have advised LGII that they intend to make a market in the
registered notes; however, they are not obligated to do so and they could
discontinue any market-making at any time without notice.
RISKS RELATING TO LOEWEN AND LGII
Holding Company Structure; Effective Subordination of the Exchange Notes
LGII and Loewen are holding companies with no significant independent
business operations. As a result, their primary sources of cash to pay their
creditors (including holders of the Series 6 and 7 notes) are dividends and
other payments from their respective subsidiaries. Consequently, obligations
of LGII and Loewen to their creditors are junior in right of payment and
junior to all liabilities (including trade payables) of their respective
subsidiaries. As at June 30, 1998, the aggregate amount of Indebtedness of
LGII's subsidiaries (excluding intercompany Indebtedness) was approximately
$73 million, and the aggregate amount of Indebtedness of Loewen's subsidiaries
other than LGII and its subsidiaries (excluding intercompany Indebtedness) was
approximately $3 million.
Potential Insufficiency of Collateral; No Independent Right to Security for
the Exchange Notes
The collateral that secures the Series 6 and 7 notes is shared equally and
ratably among you and all other holders of Pari Passu Indebtedness. See
"Description of Certain Other Indebtedness." The collateral may be
insufficient to cover any payments due on the Exchange Notes. In addition, the
collateral secures the Pari Passu Indebtedness, including the Exchange Notes,
only so long as certain holders of Pari Passu Indebtedness require it. The
collateral can be released by certain holders of the Pari Passu Indebtedness,
in certain circumstances, without the approval of all the other holders of
Pari Passu Indebtedness, including the holders of the Exchange
13
<PAGE>
Notes. You have no independent right to require the Lien secured by the
collateral to remain in place or to require any other security for the
Exchange Notes.
FINANCIAL RISKS
Risks of Acquisitions
The Company's future growth will come primarily through the acquisition of
additional funeral homes, cemeteries and crematoria. The Company might not be
able to identify, negotiate and consummate acquisitions. Further, the funeral
service industry acquisition market is extremely competitive. The Company's
competition for acquisitions includes several publicly-traded companies with
significant United States operations. If the Company's competitors price
aggressively, particularly for strategic operations, acquisition costs may
increase. The timing and certainty of completion of potential acquisitions are
based on many factors, including the availability of financing. The Company
might not be able to obtain sufficient funds to complete all future
acquisitions. The Company cannot guarantee that it will complete any specific
number or dollar amount of acquisitions in a particular year. The Company is
reviewing its current acquisition program with a goal of reducing
substantially the level of acquisitions for the balance of 1998 and for 1999.
In addition, the Company might not be able to operate acquired businesses
profitably or successfully integrate those businesses into the Company's
operations without substantial costs, delays or other operational or financial
problems.
Risks of Managing Growth
Although the Company has grown rapidly, the Company's recent operating
results have been disappointing. Beginning in August 1997, the Company began
implementing a number of management improvements and cost control measures
including the closure of the Cincinnati office, field staff reductions
aggregating approximately 550 employees and in June 1998, the consolidation of
management functions currently in the Company's Philadelphia office to the
Vancouver head office. These measures have not yet had all of the desired
impact and the Company's operating results for the three months ended June 30,
1998 were significantly below management's expectations. Although the Company
will continue to implement its plans for improvements, on July 27, 1998 the
Company secured the services of the investment banking firm Salomon Smith
Barney to identify and evaluate opportunities to maximize shareholder value.
Such opportunities may include strategic partnerships, combinations,
dispositions and capital investments in the Company.
The Company recorded pre-tax charges of $89.2 million ($58 million after
tax) during 1997, representing $33.4 million of restructuring costs, $28.5
million of costs associated with strategic initiatives, and $27.3 million of
other charges.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
FORWARD-LOOKING STATEMENTS
Management believes that the aggregate purchase price for acquisitions in
1998 will approximate $350 million. In 1998, funeral gross margin is expected
to be approximately 40% and cemetery gross margin is expected to be
approximately 30%.
The foregoing statements and certain other statements made in this
Prospectus, and certain documents incorporated by reference in this
Prospectus, are "forward-looking statements" within the meaning of Section 27A
of the Securities Act, and Section 21E of the Exchange Act. Forward-looking
statements are based on the knowledge and judgment of the Company's management
as of the date that such statements are made. Examples of forward-looking
statements include:
. statements containing the words "intends," "believes," "expects,"
"anticipates," or a similar word;
. projections of revenue, earnings, capital structure and other financial
items;
14
<PAGE>
. statements of the plans and objectives of the Company or its management;
. statement of future economic performance; and
. assumptions underlying statements regarding the Company or its business.
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
Important factors, risks and uncertainties that could cause actual results
to differ materially from any forward-looking statements ("Cautionary
Statements") are identified below. You also are urged to consider, among other
things, the information in "Risk Factors" as some of the factors which could
impact the forward-looking statements and, in hindsight, could prove such
statements to be overly optimistic or unachievable.
1. Acquisition Levels. The funeral services industry acquisition market is
extremely competitive. The Company's competition for acquisitions includes
several publicly-traded companies with significant United States operations.
Aggressive pricing by the Company's competitors, particularly for strategic
operations, may result in increased acquisition costs. The timing and
certainty of completion of potential acquisitions are based on many factors,
including the availability of financing. In light of the Company's first-half
1998 operating results and recently announced initiative to evaluate
opportunities to maximize shareholder value, the Company has reduced its
estimate of 1998 acquisitions from $500 million to $350 million. There can be
no assurance that funds will be available to complete all future acquisitions,
and there can be no assurance that the Company will complete any specific
number or dollar amount of acquisitions in a particular year.
2. Revenue and Margins. The most significant component of increases in
revenue is the level of acquisitions, discussed above. Revenue is also
affected by the volume of services rendered and the mix and pricing of
services and products sold. Margins are affected by the volume of services
rendered, the mix and pricing of services and products sold and related costs.
Further, revenue and margins may be affected by fluctuations in competitive
pricing strategies, pre-need sales and other sales programs implemented by the
Company. In addition, revenue and margins may be affected by fluctuations in
the mortality rate which, in any period, may be greater or less than that
suggested by long-term trends.
3. Other. Consolidated financial results also may be affected by (i) the
ability of the Company to manage its growth by implementing appropriate
management and administrative support structures, (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, (viii) changes in applicable accounting
principles and governmental regulations, (ix) the outcome of legal
proceedings, and (x) the ability of the Company and third parties to achieve
Year 2000 Issue compliance on a timely basis.
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.
15
<PAGE>
USE OF PROCEEDS
There will be no proceeds to LGII or Loewen from the exchange of outstanding
unregistered notes pursuant to the Exchange Offer.
CONSOLIDATED CAPITALIZATION
The following table sets forth the total capitalization of the Company as at
June 30, 1998, and as adjusted to reflect the exchange of all of the
Outstanding Notes for Exchange Notes pursuant to the Exchange Offer. Because
the Outstanding Notes surrendered in exchange for the Exchange Notes will be
retired and cancelled and cannot be reissued, whether none, some or all of the
Exchange Notes are issued pursuant to the Exchange Offer will not change the
outstanding long-term debt of LGII or Loewen.
<TABLE>
<CAPTION>
AS AT JUNE 30, 1998
---------------------------
ACTUAL AS ADJUSTED
----------- --------------
(IN THOUSANDS OF U.S.$)
<S> <C> <C>
Short-term debt, consisting of current portion of
long-term debt..................................... $ 47,542 $ 47,542
----------- -----------
Long-term debt
Outstanding Notes................................. 450,000 --
Exchange Notes.................................... -- 450,000
Senior Guaranteed Notes, Series 1-5............... 835,906 835,906
Senior Amortizing Notes, Series D and E........... 94,286 94,286
Bank revolving credit agreements.................. 151,449 151,449
PATS Senior Notes................................. 300,000 300,000
MEIP term credit facility......................... 105,140 105,140
Other long-term debt.............................. 176,503 176,503
Less current portion.............................. (47,542) (47,542)
----------- -----------
Total long-term debt............................ 2,065,742 2,065,742
Preferred securities of subsidiary (1).............. 75,000 75,000
Total shareholders' equity.......................... 1,572,178 1,572,178
----------- -----------
Total capitalization................................ $ 3,760,462 $ 3,760,462
=========== ===========
</TABLE>
- --------
(1) Reference is made to Note 5 to the June 1998 Interim Consolidated
Financial Statements for particulars of the preferred securities of
subsidiary.
16
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Outstanding Notes were sold by the Company on May 28, 1998 to the
Initial Purchasers, who then sold the Outstanding Notes to certain
institutional investors. In connection with the sale of the Outstanding Notes,
LGII and Loewen and the Initial Purchasers entered into the Registration
Rights Agreement, pursuant to which LGII and Loewen agreed (i) to file a
registration statement with respect to an offer to exchange the Outstanding
Notes for senior guaranteed notes of LGII with terms substantially identical
to the Outstanding Notes (except that the Exchange Notes would not contain
terms with respect to transfer restrictions, registration rights and penalty
interest) within 90 days after the date of original issuance of the
Outstanding Notes and (ii) to use their best efforts to cause such
registration statement to become effective under the Securities Act within 180
days after such issue date. If applicable law or interpretations of the staff
of the SEC do not permit the Company to effect the Exchange Offer, or if
certain holders of the Outstanding Notes notify the Company that they are not
permitted to participate in, or would not receive freely tradeable Exchange
Notes pursuant to, the Exchange Offer, the Company will use its best efforts
to cause to become effective a shelf registration statement with respect to
the resale of the Outstanding Notes (the "Shelf Registration Statement") and
to keep the Shelf Registration Statement effective until 180 days after the
effective date thereof. The interest rate on the Outstanding Notes is subject
to increase under certain circumstances if the Company is not in compliance
with its obligations under the Registration Rights Agreements. See
"Description of the Exchange Notes--Registration Rights Agreement." Unless the
context requires otherwise, the term "holder" with respect to the Exchange
Offer means the registered holder of Notes or any other person who has
obtained a properly completed bond power from a registered holder.
RESALE OF EXCHANGE NOTES
Based on interpretations by the staff of the SEC set forth in no action
letters issued to third-parties, LGII and Loewen believe that, except as
described below, the Exchange Notes issued pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by respective holders
thereof without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that (i) such Exchange
Notes are acquired in the ordinary course of such holder's business and (ii)
such holder does not intend to participate in, has no arrangement or
understanding with any person to participate in, and is not engaged in and
does not intend to engage in, a distribution of the Exchange Notes. A holder
of Outstanding Notes that is an "affiliate" of LGII or Loewen within the
meaning of Rule 405 under the Securities Act or that is a broker-dealer that
purchased Outstanding Notes from the Company to resell pursuant to an
exemption from registration (a) cannot rely on such interpretations by the
staff of the SEC, (b) will not be permitted or entitled to tender such
Outstanding Notes in the Exchange Offer and (c) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of such Outstanding Notes. Any holder who
tenders in the Exchange Offer with the intention or for the purpose of
participating in a distribution of the Exchange Notes cannot rely on such
interpretation by the staff of the SEC and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
a secondary resale transaction. Unless an exemption from registration is
otherwise available, any such resale transaction should be covered by an
effective registration statement containing the selling security holders
information required by Item 507 of Regulation S-K under the Securities Act.
This Prospectus may be used for an offer to resell, resale or other
retransfer of Exchange Notes only as specifically set forth herein. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Outstanding Notes, where such Outstanding Notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. See "Plan of Distribution."
17
<PAGE>
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, LGII will accept for exchange any and all
Outstanding Notes properly tendered and not withdrawn prior to 3:00 p.m., New
York time, on the Expiration Date. LGII will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of Outstanding
Notes surrendered pursuant to the Exchange Offer. Outstanding Notes may be
tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes will be the same as the form and
terms of the Outstanding Notes, except that the Exchange Notes will be
registered under the Securities Act and hence will not bear legends
restricting the transfer thereof. The Exchange Notes will evidence the same
debt as the Outstanding Notes. The Exchange Notes will be issued under and
entitled to the benefits of the Indenture, which also authorized the issuance
of the Outstanding Notes, such that the Series 6 Outstanding Notes and the
Series 6 Exchange Notes will be treated as a single series of senior notes
under the Indenture, and the Series 7 Outstanding Notes and the Series 7
Exchange Notes will be treated as a single series of senior notes under the
Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Outstanding Notes being tendered for exchange. Holders of
Outstanding Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer.
As of the date of this Prospectus, $450,000,000 aggregate principal amount
of the Outstanding Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is being sent to all registered holders of Outstanding
Notes. There will be no fixed record date for determining registered holders
of Outstanding Notes entitled to participate in the Exchange Offer.
LGII intends to conduct the Exchange Offer in accordance with the provisions
of the Registration Rights Agreement and the applicable requirements of the
Securities Act, and the rules and regulations of the SEC thereunder.
Outstanding Notes which are not tendered for exchange in the Exchange Offer
will remain outstanding and continue to accrue interest but will not retain
any rights under the Registration Rights Agreement.
LGII shall be deemed to have accepted for exchange properly tendered
Outstanding Notes when, as and if LGII shall have given oral or written notice
thereof to the Exchange Agent and complied with the applicable provisions of
the Registration Rights Agreement. The Exchange Agent will act as agent for
the tendering holders for the purposes of receiving the Exchange Notes from
LGII. LGII expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Outstanding Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions specified
below under "--Certain Conditions to the Exchange Offer."
Holders who tender Outstanding Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of
Outstanding Notes pursuant to the Exchange Offer. LGII will pay all charges
and expenses, other than certain applicable taxes described below, in
connection with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 3:00 p.m., New York time on ,
1998, unless LGII, in its sole discretion, extends the Exchange Offer, in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended.
In order to extend the Exchange Offer, LGII will notify the Exchange Agent
of any extension by oral or written notice and will mail to the registered
holders of Outstanding Notes an announcement thereof, each prior to 9:00 a.m.,
New York time, on the next business day after the Expiration Date.
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LGII reserves the right, in its sole discretion, (i) to delay accepting for
exchange any Outstanding Notes, to extend the Exchange Offer or to terminate
the Exchange Offer if any of the conditions set forth below under "--Certain
Conditions to the Exchange Offer" shall have occurred, shall exist or shall
not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders of Outstanding Notes. If
the Exchange Offer is amended in a manner determined by LGII to constitute a
material change, LGII and Loewen will promptly disclose such amendment by
means of a prospectus supplement that will be distributed to the registered
holders, and LGII will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the amendment and the manner
of disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
INTEREST ON THE EXCHANGE NOTES
The Series 6 Exchange Notes will bear interest at the rate of 7.20% per
annum and the Series 7 Exchange Notes will bear interest at the rate of 7.60%
per annum, payable semi-annually on June 1 and December 1 of each year,
commencing December 1, 1998, to holders of record on the immediately preceding
May 15, and November 15, respectively. On December 1, 1998, holders of the
Exchange Notes will receive interest from the date of initial issuance of the
Outstanding Notes. Interest on the Outstanding Notes accepted for exchange
will cease to accrue upon issuance of the respective Exchange Notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, LGII will not be
required to accept for exchange, or exchange any Exchange Notes for, any
Outstanding Notes, and may terminate the Exchange Offer as provided herein
before the acceptance of any Outstanding Notes for exchange, if LGII
determines, in its reasonable discretion, that:
(a) an action or proceeding that might materially impair the ability of
LGII to proceed with the Exchange Offer is instituted or threatened in any
court or by or before any governmental agency with respect to the Exchange
Offer; or
(b) a law, statute, rule or regulation that might materially impair the
ability of LGII to proceed with the Exchange Offer is proposed, adopted or
enacted or an existing law, statute, rule or regulation is interpreted in a
manner that might materially impair the ability of LGII to proceed with the
Exchange Offer; or
(c) a governmental approval that LGII deems necessary for the
consummation of the Exchange Offer as contemplated hereby has not been
obtained.
LGII expressly reserves the right to amend or terminate the Exchange Offer,
and not to accept for exchange any Outstanding Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions of the Exchange
Offer specified above. LGII will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the Outstanding
Notes as promptly as practicable, such notice in the case of any extension to
be issued no later than 9:00 a.m., New York time, on the next business day
after the previously scheduled Expiration Date.
The foregoing conditions are for the sole benefit of LGII and may be
asserted by LGII regardless of the circumstances giving rise to any such
condition or may be waived by LGII in whole or in part at any time and from
time to time in its reasonable judgment. The failure by LGII at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, LGII will not accept for exchange any Outstanding Notes
tendered, and no Exchange Notes will be issued in exchange for any such
Outstanding Notes, if at such time any stop order shall be threatened or
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in effect with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended.
PROCEDURES FOR TENDERING
Only a holder of Outstanding Notes may tender such Outstanding Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or facsimile thereof, have the signature
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile to the Exchange
Agent. In addition, either (i) Outstanding Notes must be received by the
Exchange Agent along with the Letter of Transmittal, or (ii) a timely
confirmation of book-entry transfer (a "Book-Entry Confirmation") of such
Outstanding Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below must be
received by the Exchange Agent prior to the Expiration Date, or (iii) the
holder must comply with the guaranteed delivery procedures described below. To
be tendered effectively, the Letter of Transmittal and other required
documents must be received by the Exchange Agent at the address set forth
below under "The Exchange Offer--Exchange Agent" prior to 3:00 p.m., New York
time, on the Expiration Date.
The tender by a holder which is not properly withdrawn will constitute an
agreement between such holder and LGII in accordance with the terms and
subject to the conditions set forth herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO LGII OR
LOEWEN. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR
SUCH HOLDERS.
Each holder of Outstanding Notes who wishes to exchange Outstanding Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii)
it is not engaged in and does not intend to engage in a distribution of the
Exchange Notes and (iii) it is not an "affiliate" of LGII or Loewen, within
the meaning of Rule 405 under the Securities Act, or, if it is an affiliate of
LGII or Loewen, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case may be, must be guaranteed by an Eligible Institution (as
defined below) unless the Outstanding Notes tendered pursuant thereto are
tendered (i) by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. If
signatures on a Letter Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantor must be a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act which is a member of
one of the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Outstanding Notes listed therein, such Outstanding Notes must be
endorsed or accompanied by a properly completed bond power,
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signed by such registered holder as such registered holder's name appears on
such Outstanding Notes with the signature thereon guaranteed by an Eligible
Institution.
If the Letter of Transmittal or any Outstanding Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
LGII, evidence satisfactory to LGII of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Outstanding Notes and withdrawal of tendered
Outstanding Notes will be determined by LGII in its sole discretion, which
determination will be final and binding. LGII reserves the absolute right to
reject any and all Outstanding Notes not properly tendered or any Outstanding
Notes if acceptance would, in the opinion of counsel for LGII, be unlawful.
LGII also reserves the right to waive any defects, irregularities or
conditions of tender as to particular Outstanding Notes. LGII's interpretation
of the terms and conditions of the Exchange Offer (including the instructions
in the Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of
Outstanding Notes must be cured within such time as LGII shall determine.
Although LGII intends to notify holders of defects or irregularities with
respect to tenders of Outstanding Notes, neither LGII, the Exchange Agent nor
any other person shall incur any liability for failure to give such
notification. Tenders of Outstanding Notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any
Outstanding Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In all cases, issuance of Exchange Notes for Outstanding Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of Outstanding Notes or a timely Book-
Entry Confirmation of such Outstanding Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility, a properly completed and duly executed
Letter of Transmittal and all other required documents. If any tendered
Outstanding Notes are not accepted for exchange for any reason set forth in
the terms and conditions of the Exchange Offer or if Outstanding Notes are
submitted for a greater principal amount than the holder desires to exchange,
such unaccepted or non-exchanged Outstanding Notes will be returned without
expense to the tendering holder thereof (or, in the case of Outstanding Notes
tendered by book-entry transfer into the Exchange Agent's account at the Book
Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such non-exchanged Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Outstanding Notes at the Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Outstanding Notes by causing
the Book-Entry Transfer Facility to transfer such Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance
with such Book-Entry Transfer Facility's procedures for transfer. However,
although delivery of Outstanding Notes may be effected through book-entry
transfer at the Book-Entry Transfer Facility, the Letter of Transmittal or
facsimile thereof, with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received by the
Exchange Agent at the address set forth below under "--Exchange Agent" on or
prior to the Expiration Date or, if the guaranteed delivery procedures
described below are to be complied with, within the time period provided under
such procedures. Delivery of documents to the Book-Entry Transfer Facility
does not constitute delivery to the Exchange Agent.
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GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Outstanding Notes and (i) whose Outstanding
Notes are not immediately available or (ii) who cannot deliver their
Outstanding Notes, the Letter of Transmittal or any other required documents
to the Exchange Agent prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the registered number(s)
of such Outstanding Notes and the principal amount of Outstanding Notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within three (3) New York Stock Exchange trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof) and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Notes in proper form for
transfer or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within three (3) New York Stock Exchange trading days after
the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Outstanding Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 3:00 p.m., New York time, on the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
timely received by the Exchange Agent at one of the addresses set forth below
under "--Exchange Agent." Any such notice of withdrawal must specify the name
of the person having tendered the Outstanding Notes to be withdrawn, identify
the Outstanding Notes to be withdrawn (including the principal amount of such
Outstanding Notes), and (where certificates for Outstanding Notes have been
transmitted) specify the name in which such Outstanding Notes were registered,
if different from that of the withdrawing holder. If certificates for
Outstanding Notes have been delivered or otherwise identified to the Exchange
Agent, then, prior to the release of such certificates, the withdrawing holder
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If
Outstanding Notes have been tendered pursuant to the procedures for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Outstanding Notes and otherwise comply with the procedures of
such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by LGII, whose
determination shall be final and binding on all parties. Any Outstanding Notes
so withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Outstanding Notes which have been tendered
for exchange but which are not exchanged for any reason will be returned to
the holder thereof without cost to such holder (or, in the case of Outstanding
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Outstanding Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Outstanding Notes)
as soon as practicable after withdrawal, rejection of tender or termination of
the Exchange Offer. Properly withdrawn Outstanding Notes may be retendered by
following one of the procedures described under "--Procedures for Tendering"
above at any time on or prior to the Expiration Date.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent of
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or the Letter of
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Transmittal, and requests for Notice of Guaranteed Delivery should be directed
to the Exchange Agent addressed as follows:
<TABLE>
<S> <C> <C>
By Hand or Overnight Courier: By Registered or Certified Mail: By Facsimile:
State Street Bank and Trust Company State Street Bank and Trust Company (617) 664-5290
Corporate Trust Department Corporate Trust Department (For Eligible Institutions Only)
Two International Place, 4th Floor P.O. Box 778
Boston, MA 02110 Boston, MA 02102-0078 Confirm by Telephone:
Attn: Kellie Mullen Attn: Kellie Mullen (617) 664-5587
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by LGII. The principal
solicitation is being made by mail; however, additional solicitation may be
made by telegraph, telephone or in person by officers and regular employees of
the Company.
LGII has not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to broker-dealers or others soliciting
acceptances of the Exchange Offer. LGII, however, will pay the Exchange Agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by LGII and are estimated in the aggregate to be approximately
$500,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, and
related fees and expenses.
TRANSFER TAXES
LGII will pay all transfer taxes, if any, applicable to the exchange of
Notes pursuant to the Exchange Offer. If, however, certificates representing
Outstanding Notes for principal amounts not tendered or accepted for exchange
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of Notes tendered, or if tendered Notes are
registered in the name of any person other than the person signing the Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Notes pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment
of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Outstanding Notes who do not exchange their Outstanding Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer, as set forth in the legend thereon, as a
consequence of the issuance of the Outstanding Notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Outstanding Notes may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. LGII does not currently anticipate that it will register the Outstanding
Notes under the Securities Act. See "Risk Factors--Risks Related to the
Exchange Offer--Consequences of Failure to Exchange; Possible Adverse Effect
on Trading Market for Outstanding Notes."
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DESCRIPTION OF EXCHANGE NOTES
The Exchange Notes will be issued in two separate series under an indenture
dated as of May 28, 1998 (the "Indenture") between LGII, Loewen, as guarantor
of the obligations of LGII under the Indenture, and State Street Bank and
Trust Company, as trustee (the "Trustee"). The following summary of the
material provisions of the Indenture does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the provisions of
the Indenture (a copy of the form of which may be obtained from LGII or any of
the Initial Purchasers, upon request), including the definitions of certain
terms contained therein and those terms made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "TIA"), as in
effect on the date of the Indenture. The definitions of certain capitalized
terms used in the following summary are set forth below under "--Certain
Definitions."
GENERAL
The Exchange Notes and the Guarantees will be senior obligations of LGII and
Loewen, respectively, and will rank pari passu in right of payment with all
other senior indebtedness of LGII and Loewen, respectively. Because other
senior indebtedness is secured, the Exchange Notes, when issued, will be
secured as described herein. The Exchange Notes are subject to a Lien
Limitation that limits Liens to certain categories of Liens described in the
Indenture. The Collateral for the holders of the Pari Passu Indebtedness
includes a pledge for the benefit of such lenders of the shares held by Loewen
of substantially all of the subsidiaries in which Loewen directly or
indirectly holds more than a 50% voting or economic interest and all of the
financial assets of LGII (LGII does not have material assets other than
financial assets). In order to satisfy the Lien Limitation, the Lien secured
by the Collateral has to be shared equally and ratably with the holders of the
Indebtedness evidenced by the Exchange Notes. However, the holders of the
Exchange Notes will not have an independent right to require the Lien secured
by the Collateral to remain in place or unchanged or to require any other
security for the Exchange Notes. As at June 30, 1998, the aggregate amount of
Pari Passu Indebtedness was approximately $2 billion. The Exchange Notes and
Guarantees are effectively subordinated in right of payment to all existing
and future liabilities, including trade payables, of LGII's and Loewen's
subsidiaries, respectively. As at June 30, 1998, the aggregate amount of
Indebtedness of LGII's subsidiaries (excluding intercompany Indebtedness) was
approximately $73 million, and the aggregate amount of Indebtedness of
Loewen's subsidiaries other than LGII and its subsidiaries (excluding
intercompany Indebtedness) was approximately $3 million.
MATURITY, INTEREST AND PRINCIPAL
The Series 6 Exchange Notes will mature on June 1, 2003, and the Series 7
Exchange Notes will mature on June 1, 2008. Interest on the Series 6 Exchange
Notes will accrue at the rate of 7.20% per annum, and interest on the Series 7
Exchange Notes will accrue at the rate of 7.60% per annum. Interest will be
payable semi-annually on each June 1 and December 1, commencing December 1,
1998, to the holders of record of Exchange Notes at the close of business on
the May 15 and November 15 immediately preceding such interest payment date.
Interest on the Exchange Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the original
date of issuance (the "Issue Date"). Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months.
The Exchange Notes will not be entitled to the benefit of any mandatory
sinking fund.
OPTIONAL REDEMPTION
The Exchange Notes will be redeemable as a whole or in part, at the option
of LGII, at any time at a redemption price equal to the greater of (i) 100% of
their principal amount and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to the date of
redemption on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the applicable Treasury Yield plus 37.5 basis points
(in the case of the Series 6 Exchange Notes) and 50 basis points (in the case
of the Series 7 Exchange Notes), plus, in each case, accrued interest to the
date of redemption.
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"Treasury Yield" means, with respect to any redemption date, the rate per
annum equal to the semi-annual equivalent yield to maturity of the applicable
Comparable Treasury Issue, assuming a price for the applicable Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to
the applicable Comparable Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable
to the remaining term of the Exchange Notes due 2003 or 2008, as applicable,
that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to the remaining term of the Series 6
Exchange Notes or Series 7 Exchange Notes, as applicable. "Independent
Investment Banker" means Salomon Brothers Inc and its successor or, if such
firm is unwilling or unable to select the applicable Comparable Treasury
Issue, an independent investment banking institution of national standing
appointed by the Trustee.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the applicable Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for
U.S. Government Securities" or (ii) if such release (or any successor release)
is not published or does not contain such prices on such business day, (A) the
average of the applicable Reference Treasury Dealer Quotations for such
redemption date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Trustee, of the bid and asked prices of the applicable Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted
in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on
the third business day preceding such redemption date.
"Reference Treasury Dealer" means each of Salomon Brothers Inc, Goldman,
Sachs & Co., Nesbitt Burns Securities Inc., BT Alex. Brown Incorporated, and
Deutsche Morgan Grenfell Inc., and their respective successors; provided
however, that if any of the foregoing shall cease to be a primary U.S.
Government Securities dealer in New York City (a "Primary Treasury Dealer"),
LGII shall substitute therefor another Primary Treasury Dealer.
Holders of Exchange Notes to be redeemed will receive notice thereof by
first-class mail at least 10 and not more than 60 days prior to the date fixed
for redemption.
CERTAIN COVENANTS
LGII and Loewen, in its capacity as Guarantor, have made jointly and
severally the following covenants, among others, in the Indenture.
Limitation on Indebtedness. The Guarantor will not, and will not permit any
of its Restricted Subsidiaries (including, without limitation, LGII) to,
directly or indirectly, create, incur, issue, assume, guarantee or in any
manner become directly or indirectly liable, contingently or otherwise, for
the payment of (collectively, to "incur") any Indebtedness (including, without
limitation, any Acquired Indebtedness) other than Permitted Indebtedness.
Notwithstanding the foregoing limitations, the Guarantor and LGII (and any
Wholly-Owned Subsidiary with respect to Seller Financing Indebtedness) will be
permitted to incur Indebtedness (including, without limitation, Acquired
Indebtedness) if at the time of such incurrence, and after giving pro forma
effect thereto, the Consolidated Fixed Charge Coverage Ratio of the Guarantor
is at least equal to 2.25:1.
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Limitation on Restricted Payments. The Guarantor will not, and will not
permit any of its Restricted Subsidiaries (including, without limitation,
LGII) to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution or payment
on or in respect of Capital Stock of the Guarantor or any of its Restricted
Subsidiaries or any payment made to the direct or indirect holders (in
their capacities as such) of Capital Stock of the Guarantor or any of its
Restricted Subsidiaries (other than (x) dividends or distributions payable
solely in Capital Stock of the Guarantor (other than Redeemable Capital
Stock) or in options, warrants or other rights to purchase Capital Stock of
the Guarantor (other than Redeemable Capital Stock) and (y) dividends or
other distributions to the extent declared or paid to the Guarantor or any
Wholly-Owned Subsidiary of the Guarantor),
(b) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of the Guarantor or any of its Restricted Subsidiaries
(other than any such Capital Stock of a Wholly-Owned Subsidiary of the
Guarantor),
(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 Exchange Notes or Pari Passu Indebtedness (other than any
such subordinated or Pari Passu Indebtedness owned by the Guarantor or a
Wholly-Owned Subsidiary of the Guarantor) or
(d) make any Investment (other than any Permitted Investment) in any
person,
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as "Restricted Payments"), unless, at the
time of and after giving effect to the proposed Restricted Payment (the amount
of any such Restricted Payment, if other than cash, shall be the Fair Market
Value on the date of such Restricted Payment of the asset(s) proposed to be
transferred by the Guarantor or such Restricted Subsidiary, as the case may
be, pursuant to such Restricted Payment), (A) no Default or Event of Default
shall have occurred and be continuing, (B) immediately prior to and after
giving effect to such Restricted Payment, the Guarantor would be able to incur
$1.00 of additional Indebtedness pursuant to the covenant described under "--
Limitation on Indebtedness" above (assuming a market rate of interest with
respect to such additional Indebtedness) and (C) the aggregate amount of all
Restricted Payments declared or made from and after the Measurement Date would
not exceed the sum of (1) 50% of the aggregate Consolidated Net Income of the
Guarantor accrued on a cumulative basis during the period beginning on the
first day of the fiscal quarter of the Guarantor during which the Measurement
Date occurs and ending on the last day of the fiscal quarter of the Guarantor
immediately preceding the date of such proposed Restricted Payment, which
period shall be treated as a single accounting period (or, if such aggregate
cumulative Consolidated Net Income of the Guarantor for such period shall be a
deficit, minus 100% of such deficit) plus (2) the aggregate net cash proceeds
received by the Guarantor or LGII (without duplication) either (x) as capital
contributions to the Guarantor or LGII (without duplication) after the
Measurement Date from any person (other than the Guarantor, LGII or a
Restricted Subsidiary of the Guarantor or LGII, as the case may be) or (y)
from the issuance or sale of Capital Stock (excluding Redeemable Capital
Stock, but including Capital Stock issued upon the conversion of convertible
Indebtedness or from the exercise of options, warrants or rights to purchase
Capital Stock (other than Redeemable Capital Stock)) of the Guarantor or LGII
(without duplication) to any person (other than to the Guarantor, LGII or a
Restricted Subsidiary of the Guarantor or LGII, as the case may be) after the
Measurement Date plus (3) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the Measurement Date
(excluding any Investment described in clause (v) of the following paragraph),
an amount equal to the lesser of the return of capital with respect to such
Investment and the cost of such Investment less, in either case, the cost of
the disposition of such Investment plus (4) the sum of $15,000,000. For
purposes of the preceding clause (C)(2), the value of the aggregate net
proceeds received by the Guarantor or LGII (without duplication) upon the
issuance of Capital Stock upon the conversion of convertible Indebtedness or
upon the exercise of options, warrants or rights will be the net cash proceeds
received upon the issuance of such Indebtedness, options, warrants or rights
plus the incremental cash amount received by the Guarantor or LGII (without
duplication) upon the conversion or exercise thereof.
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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 the Guarantor, LGII or any
Restricted Subsidiary of the Guarantor or LGII in exchange for, or out of the
net cash proceeds of, a substantially concurrent (x) capital contribution to
the Guarantor or LGII from any person (other than a Related Obligor, as
described in the last sentence of this paragraph) or (y) issue and sale of
other shares of Capital Stock (other than Redeemable Capital Stock) of the
Guarantor or LGII to any person (other than to a Related Obligor); (iii) so
long as no Default or Event of Default shall have occurred and be continuing,
any redemption, repurchase or
other acquisition or retirement of Indebtedness that is subordinate or junior
in right of payment to the Exchange Notes and the Guarantee by exchange for,
or out of the net cash proceeds of, a substantially concurrent (x) capital
contribution to the Guarantor or LGII from any person (other than a Related
Obligor) or (y) issue and sale of (1) Capital Stock (other than Redeemable
Capital Stock) of the Guarantor or LGII to any person (other than a Related
Obligor); provided, however, that the amount of any such net proceeds that are
utilized for any such redemption, repurchase or other acquisition or
retirement shall be excluded from clause (C)(2) of the preceding paragraph; or
(2) Indebtedness of the Guarantor or LGII issued to any person (other than a
Related Obligor), so long as such Indebtedness is Pari Passu Indebtedness or
Indebtedness that is subordinate or junior in right of payment to the Exchange
Notes and the Guarantee in the same manner and at least to the same extent as
the Indebtedness so purchased, exchanged, redeemed, acquired or retired; (iv)
so long as no Default or Event of Default shall have occurred and be
continuing, any redemption, repurchase or other acquisition or retirement of
Pari Passu Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to the Guarantor or LGII
from any person (other than a Related Obligor) or (y) issue and sale of
(1) Capital Stock (other than Redeemable Capital Stock) of the Guarantor or
LGII to any person (other than a Related Obligor); provided, however, that the
amount of any such net proceeds that are utilized for any such redemption,
repurchase or other acquisition or retirement shall be excluded from clause
(C)(2) of the preceding paragraph; or (2) Indebtedness of the Guarantor or
LGII issued to any person (other than a Related Obligor), so long as such
Indebtedness is Pari Passu Indebtedness or Indebtedness that is subordinate or
junior in right of payment to the Exchange Notes and the Guarantee in the same
manner and at least to the same extent as the Indebtedness so purchased,
exchanged, redeemed, acquired or retired; (v) Investments constituting
Restricted Payments made as a result of the receipt of consideration that
consists of cash or Cash Equivalents from any Asset Sale made pursuant to and
in compliance with the covenant described under "--Disposition of Proceeds of
Asset Sales" below; (vi) so long as no Default or Event of Default has
occurred and is continuing, repurchases by the Guarantor of Common Stock of
the Guarantor from employees of the Guarantor or their authorized
representatives upon the death, disability or termination of employment of
such employees, in an aggregate amount not exceeding $10,000,000 in any
calendar year; (vii) Investments constituting Restricted Payments that are
permitted by subparagraphs (iv) and (v) of the proviso to the section entitled
"Limitation on Transactions with Interested Persons;" and (viii) the
declaration or the payment of dividends on, or the scheduled purchase or
redemption of, the Preferred Securities of a Special Finance Subsidiary or the
Series C Preferred Shares of the Guarantor. In computing the amount of
Restricted Payments previously made for purposes of clause (C) of the
preceding paragraph, Restricted Payments made under the preceding clauses (v),
(vi) and (vii) shall be included and those under clauses (i), (ii), (iii),
(iv) and (viii) shall not be so included. For purposes of this covenant only,
the term "Related Obligor" shall mean the Guarantor, LGII or a Restricted
Subsidiary of the Guarantor or LGII.
Limitation on Liens. The Guarantor will not, and will not permit any of its
Restricted Subsidiaries (including without limitation LGII) to, create, incur,
assume or suffer to exist any Liens of any kind against or upon any of its
property or assets, or any proceeds therefrom where the aggregate amount of
Indebtedness secured by any such Liens, together with the aggregate amount of
property subject to any Sale-Leaseback Transactions of the Guarantor and its
Restricted Subsidiaries (other than Permitted Sale-Leaseback Transactions),
exceeds 10% of the Guarantor's Consolidated Net Worth unless (x) in the case
of Liens securing Indebtedness that is subordinate or junior in right of
payment to the Exchange Notes, the Exchange Notes are secured by a Lien on
such property, assets or proceeds that is senior in priority to such Liens and
(y) in all other cases, the Exchange Notes are equally and ratably secured
except for (a) Liens existing as at the Measurement Date; (b) Liens securing
the
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Exchange Notes or the Guarantees; (c) Liens in favor of the Guarantor, LGII or
any Wholly-Owned Subsidiary; (d) Liens securing Indebtedness which is incurred
to refinance Indebtedness which has been secured by a Lien permitted under the
Indenture and which has been incurred in accordance with the provisions of the
Indenture; provided, however, that such Liens do not extend to or cover any
property or assets of the Guarantor or any of its Restricted Subsidiaries not
securing the Indebtedness so refinanced; and (e) Permitted Liens.
Change of Control. Upon the occurrence of a Change of Control, LGII will be,
and the Guarantor will ensure that LGII will be, obligated to make an offer to
purchase (a "Change of Control Offer"), and shall purchase, on a Business Day
(the "Change of Control Purchase Date") not more than 60 nor less than 30 days
following the occurrence of the Change of Control, all of the then outstanding
Exchange Notes properly tendered and not withdrawn at a purchase price (the
"Change of Control Purchase Price") equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date. The Change of Control Offer is required to remain open for at
least 20 Business Days and until the close of business on the Change of
Control Purchase Date.
If a Change of Control occurs and LGII fails to pay the Purchase Price for
all Exchange Notes properly tendered and not withdrawn, the Guarantor will be
obligated to purchase all such Exchange Notes at the Change of Control
Purchase Price on the Change of Control Purchase Date.
In order to effect such Change of Control Offer, LGII or the Guarantor, as
the case may be, shall, not later than the 30th day after the occurrence of
the Change of Control, mail to each holder of Exchange Notes notice of the
Change of Control Offer, which notice shall govern the terms of the Change of
Control Offer and shall state, among other things, the procedures that holders
of Exchange Notes must follow to accept the Change of Control Offer.
If a Change of Control were to occur, there can be no assurance that LGII or
the Guarantor would have sufficient funds to pay the purchase price for all
Exchange Notes that LGII or the Guarantor might be required to purchase. In
the event that LGII or the Guarantor were required to purchase Exchange Notes
pursuant to a Change of Control Offer, each of LGII and the Guarantor expect
that they would need to seek third-party financing to the extent they may not
have available funds to meet their purchase obligations. However, there can be
no assurance that LGII or the Guarantor would be able to obtain such financing
on favorable terms, if at all.
Neither LGII nor the Guarantor shall be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements applicable to a Change of Control Offer made by LGII and
purchases all Exchange Notes validly tendered and not withdrawn under such
Change of Control Offer.
In the event that a Change of Control occurs and LGII or the Guarantor is
required to purchase Exchange Notes as described above, LGII and the Guarantor
will comply with Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations thereunder.
With respect to the sale of assets referred to in the definition of Change
of Control, the phrase "all or substantially all" as used in such definition
varies according to the facts and circumstances of the subject transaction,
has no clearly established meaning under relevant law and is subject to
judicial interpretation. Accordingly, in certain circumstances there may be a
degree of uncertainty in ascertaining whether a particular transaction would
involve a disposition of "all or substantially all" of the assets of a person
and, therefore, it may be unclear whether a Change of Control has occurred and
whether the Exchange Notes are subject to a Change of Control Offer.
Disposition of Proceeds of Asset Sales. The Guarantor will not, and will not
permit any of its Restricted Subsidiaries (including, without limitation,
LGII) or First Capital Life Insurance Company of Louisiana, National Capital
Life Insurance Company, Security Industrial Insurance Company, Security
Industrial Fire Insurance Company or any successor to such Subsidiaries to,
make any Asset Sale unless (a) the Guarantor or such Restricted Subsidiary, as
the case may be, receives consideration at the time of such Asset Sale at
least equal to
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the Fair Market Value of the shares or assets sold or otherwise disposed of
and (b) at least 75% of such consideration consists of cash or Cash
Equivalents. To the extent the Net Cash Proceeds of any Asset Sale are not
required to be applied to repay, and permanently reduce the commitments under,
the Credit Agreements (as required by the terms thereof) or any other Pari
Passu Indebtedness, or are not so applied, the Guarantor or such Restricted
Subsidiary, as the case may be, may, within 180 days of such Asset Sale, apply
such Net Cash Proceeds to an investment in properties and assets that replace
the properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in the business of the Guarantor and
its Restricted Subsidiaries existing on the Issue Date or in businesses
reasonably related thereto ("Replacement Assets"). Any Net Cash Proceeds from
any Asset Sale that are neither used to repay, and permanently reduce the
commitments under, the Credit Agreements nor invested in Replacement Assets
within the 180-day period described above constitute "Excess Proceeds" subject
to disposition as provided below.
When the aggregate amount of Excess Proceeds equals or exceeds $10,000,000,
the Guarantor shall cause LGII to make an offer to purchase (an "Asset Sale
Offer"), from all holders of the Exchange Notes, not more than 40 Business
Days thereafter, an aggregate principal amount of Exchange Notes equal to such
Excess Proceeds, at a price in cash equal to 100% of the outstanding principal
amount thereof plus accrued and unpaid interest, if any, to the purchase date.
To the extent that the aggregate principal amount of Exchange Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, LGII may use
such deficiency for general corporate purposes. If the aggregate principal
amount of Exchange Notes validly tendered and not withdrawn by holders thereof
exceeds the Excess Proceeds, Exchange Notes to be purchased will be selected
on a pro rata basis. Upon completion of such Asset Sale Offer, the amount of
Excess Proceeds shall be reset to zero.
In the event that an Asset Sale occurs and LGII or the Guarantor is required
to purchase Exchange Notes as described above, LGII and the Guarantor will
comply with Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations thereunder.
Limitation on Issuances and Sale of Preferred Stock by Restricted
Subsidiaries. The Guarantor (a) will not permit any of its Restricted
Subsidiaries (including, without limitation, LGII) to issue any Preferred
Stock (other than (i) Preferred Stock issued to the Guarantor or a Wholly-
Owned Subsidiary of the Guarantor and (ii) Preferred Securities of a Special
Finance Subsidiary); and (b) will not permit any person to own any Preferred
Stock of any Restricted Subsidiary of the Guarantor (other than (i) Preferred
Stock owned by the Guarantor or a Wholly-Owned Subsidiary of the Guarantor and
(ii) Preferred Securities of a Special Finance Subsidiary); provided, however,
that this covenant shall not prohibit the issuance and sale of (x) all, but
not less than all, of the issued and outstanding Capital Stock of any
Restricted Subsidiary of the Guarantor owned by the Guarantor or any of its
Restricted Subsidiaries in compliance with the other provisions of the
Indenture or (y) directors' qualifying shares or investments by foreign
nationals mandated by applicable law.
Limitation on Transactions with Interested Persons. The Guarantor will not,
and will not permit any of its Restricted Subsidiaries (including, without
limitation, LGII) to, directly or indirectly, enter into or suffer to exist
any transaction or series of related transactions (including, without
limitation, the sale, transfer, disposition, purchase, exchange or lease of
assets, property or services) with, or for the benefit of, any Affiliate of
the Guarantor or any beneficial owner (determined in accordance with the
Indenture) of 5% or more of the Common Shares of the Guarantor at any time
outstanding ("Interested Persons"), unless (a) such transaction or series of
related transactions are on terms that are no less favorable to the Guarantor
or such Restricted Subsidiary, as the case may be, than those which could have
been obtained in a comparable transaction at such time from persons who are
not Affiliates of the Guarantor or Interested Persons, (b) with respect to a
transaction or series of transactions involving aggregate payments or value
equal to or greater than $10,000,000, the Guarantor has obtained a written
opinion from an Independent Financial Advisor stating that the terms of such
transaction or series of transactions are fair to the Guarantor or its
Restricted Subsidiary, as the case may be, from a financial point of view and
(c) with respect to a transaction or series of transactions involving
aggregate payments or value equal to or greater than $2,500,000, the Guarantor
shall have delivered an officers' certificate to the Trustee certifying that
such transaction or series of transactions comply with the preceding clause
(a) and, if applicable, certifying that the opinion referred to in the
preceding clause (b) has been delivered and that such transaction or
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series of transactions have been approved by a majority of the Board of
Directors of the Guarantor (including a majority of the disinterested
directors); provided, however, that this covenant will not restrict the
Guarantor from (i) paying dividends in respect of its Capital Stock permitted
under the covenant described under "--Limitation on Restricted Payments"
above, (ii) paying reasonable and customary fees to directors of the Guarantor
or any Restricted Subsidiary who are not employees of the Guarantor or any
Restricted Subsidiary, (iii) entering into transactions with its Wholly-Owned
Subsidiaries or permitting its Wholly-Owned Subsidiaries from entering into
transactions with other Wholly-Owned Subsidiaries of the Guarantor, (iv)
making loans or advances to senior officers and directors of the Guarantor or
any Restricted Subsidiary not in excess of $6,000,000 in the aggregate at any
one time outstanding, (v) guaranteeing loans made to officers and other
employees of the Guarantor and its Restricted Subsidiaries in connection with
the Guarantor's 1994 Management Equity Investment Plan not in excess of
$6,000,000 in the aggregate at any one time outstanding, (vi) making loans or
advances to officers, employees or consultants of the Guarantor and its
Restricted Subsidiaries for travel and moving expenses in the ordinary course
of business for bona fide business purposes of the Guarantor and its
Restricted Subsidiaries, (vii) making other loans or advances to officers,
employees or consultants of the Guarantor and its Restricted Subsidiaries in
the ordinary course of business for bona fide business purposes of the
Guarantor and its Restricted Subsidiaries not in excess of $10,000,000 in the
aggregate at any one time outstanding, (viii) making payments to officers or
employees of the Guarantor or its Restricted Subsidiaries pursuant to
obligations undertaken, at a time when such persons were not officers or
employees of the Guarantor or its Restricted Subsidiaries, in connection with
arms' length Asset Acquisitions or (ix) declaring or paying dividends on, or
purchasing or redeeming, the Preferred Securities of a Special Finance
Subsidiary.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Guarantor will not, and will not permit any of its
Restricted Subsidiaries (including, without limitation, LGII) to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any Restricted Subsidiary of
the Guarantor to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock or any other interest or
participation in, or measured by, its profits, (b) pay any Indebtedness owed
to the Guarantor or any other Restricted Subsidiary of the Guarantor, (c) make
loans or advances to, or any Investment in, the Guarantor or any other
Restricted Subsidiary of the Guarantor, (d) transfer any of its properties or
assets to the Guarantor or any other Restricted Subsidiary of the Guarantor or
(e) guarantee any Indebtedness of the Guarantor or any other Restricted
Subsidiary of the Guarantor, except for such encumbrances or restrictions
existing under or by reason of (i) applicable law, (ii) customary non-
assignment provisions of any contract or any lease governing a leasehold
interest of the Guarantor or any Restricted Subsidiary of the Guarantor, (iii)
customary restrictions on transfers of property subject to a Lien permitted
under the Indenture which could not materially adversely affect the
Guarantor's ability to satisfy its obligations under the Indenture and the
Exchange Notes, (iv) any agreement or other instrument of a person acquired by
the Guarantor or any Restricted Subsidiary of the Guarantor (or a Restricted
Subsidiary of such person) in existence at the time of such acquisition (but
not created in contemplation thereof), which encumbrance or restriction is not
applicable to any person, or the properties or assets of any person, other
than the person, or the properties or assets of the person, so acquired, (v)
provisions contained in any agreement or instrument relating to Indebtedness
which prohibit the transfer of all or substantially all of the assets of the
obligor thereunder unless the transferee shall assume the obligations of the
obligor under such agreement or instrument and (vi) encumbrances and
restrictions under Indebtedness in effect on the Issue Date (including under
the Exchange Notes) and encumbrances and restrictions in permitted
refinancings or replacements thereof which are no less favorable to the
holders of the Exchange Notes than those contained in the Indebtedness so
refinanced or replaced.
Limitation on Sale-Leaseback Transactions. The Guarantor will not, and will
not permit any of its Restricted Subsidiaries (including, without limitation,
LGII) to, enter into any Sale-Leaseback Transaction with respect to any
property of the Guarantor or any of its Restricted Subsidiaries where the
aggregate amount of property subject to such Sale-Leaseback Transactions,
together with the aggregate amount of Liens securing Indebtedness of the
Guarantor and its Restricted Subsidiaries (other than Permitted Liens),
exceeds 10% of the Guarantor's Consolidated Net Worth. Notwithstanding the
foregoing, the Guarantor and its Restricted Subsidiaries may enter
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into Sale-Leaseback Transactions ("Permitted Sale-Leaseback Transactions")
with respect to property acquired or constructed after the Issue Date;
provided that (a) the Attributable Value of such Sale-Leaseback Transaction
shall be deemed to be Indebtedness of the Guarantor or such Restricted
Subsidiary, as the case may be, and (b) after giving pro forma effect to any
such Sale-Leaseback Transaction and the foregoing clause (a), the Guarantor
would be able to incur $1.00 of additional Indebtedness pursuant to the
covenant described under "--Limitation on Indebtedness" above (assuming a
market rate of interest with respect to such additional Indebtedness).
Limitation on Applicability of Certain Covenants. During any period of time
that (i) the ratings assigned to the Exchange Notes by each of S&P and Moody's
(collectively, the "Rating Agencies") are no less than BBB- and Baa3,
respectively (the "Investment Grade Ratings"), and (ii) no Default or Event of
Default has occurred and is continuing, the Guarantor and its Restricted
Subsidiaries (including, without limitation, LGII) will not be subject to the
covenants entitled "Limitation on Indebtedness," "Limitation on Restricted
Payments," "Disposition of Proceeds of Asset Sales," "Limitation on Issuances
and Sale of Preferred Stock by Restricted Subsidiaries," "Limitations on
Transactions with Interested Persons" and "Limitation on Dividends and Other
Payment Restrictions Affecting Restricted Subsidiaries" (collectively, the
"Suspended Covenants"). If one or both Rating Agencies withdraws its rating or
downgrades its Investment Grade Rating, then thereafter the Guarantor and its
Restricted Subsidiaries will be subject, on a prospective basis, to the
Suspended Covenants (until the Rating Agencies have again assigned Investment
Grade Ratings to the Exchange Notes) and compliance with the Suspended
Covenants with respect to Restricted Payments made after the time of such
withdrawal or downgrade will be calculated in accordance with the covenant
entitled "Limitation on Restricted Payments" as if such covenant had been in
effect at all times after the Measurement Date.
Reporting Requirements. The Guarantor will file with the Commission, or if
not permitted or required to so file will deliver to the Trustee, the annual
reports, quarterly reports and other documents required to be filed with the
Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or not
the Guarantor has a class of securities registered under the Exchange Act. The
Guarantor will be required to file with the Trustee and provide to each Holder
within 15 days after it files them with the Commission (or if any such filing
is not permitted under the Exchange Act, 15 days after the Guarantor would
have been required to make such filing) copies of such reports and documents.
Rule 144A Information Requirement. If at any time the Guarantor is no longer
subject to the reporting requirements of the Exchange Act, it will furnish to
the Holders or beneficial holders of the Exchange Notes and prospective
purchasers of the Exchange Notes designated by the holders of the Exchange
Notes, upon their request, any information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
MERGER, SALE OF ASSETS, ETC.
The Guarantor will not, and will not permit LGII to, in any transaction or
series of transactions, merge or consolidate with or into, or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of
its properties and assets as an entirety to, any person or persons, and the
Guarantor will not permit any of its Restricted Subsidiaries (including
without limitation LGII) to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the properties and assets of the
Guarantor or LGII or the Guarantor and its Restricted Subsidiaries, taken as a
whole, or LGII and its Restricted Subsidiaries, taken as a whole, to any other
person or persons, unless at the time of and after giving effect thereto (a)
either (i) if the transaction or series of transactions is a merger or
consolidation, the Guarantor or LGII or the Restricted Subsidiary, as the case
may be, shall be the surviving person of such merger or consolidation, or
(ii) the person formed by such consolidation or into which the Guarantor, LGII
or such Restricted Subsidiary, as the case may be, is merged or to which the
properties and assets of the Guarantor, LGII or such Restricted Subsidiary, as
the case may be, are transferred (any such surviving person or transferee
person being the "Surviving Entity") shall be a corporation organized and
existing under the laws of the United States of America, any state thereof,
the District of Columbia, Canada or any province or territory thereof and
shall
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expressly assume by a supplemental indenture executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, all the obligations
of the Guarantor or LGII, as the case may be, under the Exchange Notes and the
Indenture, and in each case, the Indenture shall remain in full force and
effect; (b) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions),
no Default or Event of Default shall have occurred and be continuing and the
Guarantor, LGII or the Surviving Entity, as the case may be, after giving
effect to such transaction or series of transactions on a pro forma basis
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), could incur $1.00 of additional Indebtedness pursuant to the
covenant described under "--Certain Covenants; Limitation on Indebtedness"
above (assuming a market rate of interest with respect to such additional
Indebtedness); and (c) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without limitation,
any Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction or series of transactions), the Consolidated
Net Worth of the Guarantor, LGII or the Surviving Entity, as the case may be,
is at least equal to the Consolidated Net Worth of the Guarantor or LGII, as
the case may be, immediately before such transaction or series of
transactions.
In connection with any consolidation, merger, transfer, lease, assignment or
other disposition contemplated hereby, the Guarantor or LGII, as the case may
be, shall deliver, or cause to be delivered, to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an officers' certificate and
an opinion of counsel, each stating that such consolidation, merger, transfer,
lease, assignment or other disposition and the supplemental indenture in
respect thereof comply with the requirements under the Indenture; provided,
however, that, solely for purposes of computing amounts described in subclause
(C) of the covenant described under "--Certain Covenants; Limitation on
Restricted Payments" above, any such successor person shall only be deemed to
have succeeded to and be substituted for the Guarantor or LGII, as the case
may be, with respect to periods subsequent to the effective time of such
merger, consolidation or transfer of assets.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Guarantor or LGII in accordance with the foregoing, in
which the Guarantor or LGII is not the continuing corporation, the successor
corporation formed by such a consolidation or into which the Guarantor or LGII
is merged or to which such transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Guarantor or
LGII, as the case may be, under the Indenture with the same effect as if such
successor corporation had been named as the Guarantor or LGII therein.
EVENTS OF DEFAULT
The following will be "Events of Default" with respect to each series of
Exchange Notes:
(i) default in the payment of the principal of or premium, if any, on any
Senior Note of such series when the same becomes due and payable (upon
Stated Maturity, acceleration, optional redemption, required purchase,
scheduled principal payment or otherwise); or
(ii) default in the payment of an installment of interest on any of the
Exchange Notes of such series, when the same becomes due and payable, which
default continues for a period of 30 days; or
(iii) failure to perform or observe any other term, covenant or agreement
contained in the Exchange Notes of such series or the Indenture or the
Guarantee with respect to Exchange Notes of such series (other than a
default specified in clause (i) or (ii) above) and such default continues
for a period of 30 days after written notice of such default requiring the
Guarantor and LGII to remedy the same shall have been given (x) to the
Guarantor and LGII by the Trustee or (y) to the Guarantor, LGII and the
Trustee by holders of 25% in aggregate principal amount of the Exchange
Notes of such series then outstanding; or
(iv) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the Guarantor or any Restricted Subsidiary of the Guarantor
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(including without limitation LGII) then has outstanding Indebtedness in
excess of $20,000,000 (including Exchange Notes of another series),
individually or in the aggregate, and either (a) such Indebtedness is
already due and payable in full or (b) such default or defaults have
resulted in the acceleration of the maturity of such Indebtedness; or
(v) one or more judgments, orders or decrees of any court or regulatory
or administrative agency of competent jurisdiction for the payment of money
in excess of $20,000,000, either individually or in the aggregate, shall be
entered against the Guarantor or any Restricted Subsidiary of the Guarantor
(including without limitation LGII) or any of their respective properties
and shall not be discharged or bonded against or stayed and there shall
have been a period of 60 days after the date on which any period for appeal
has expired and during which a stay of enforcement of such judgment, order
or decree shall not be in effect; or
(vi) either (i) the collateral agent under the Collateral Agreement or
(ii) any holder of at least $20,000,000 in aggregate principal amount of
Indebtedness of the Guarantor or any of its Restricted Subsidiaries
(including without limitation LGII) shall commence judicial proceedings to
foreclose upon assets of the Guarantor or any of its Restricted
Subsidiaries having an aggregate Fair Market Value, individually or in the
aggregate, in excess of $20,000,000 or shall have exercised any right under
applicable law or applicable security documents to take ownership of any
such assets in lieu of foreclosure; or
(vii) the Guarantee with respect to such series ceases to be in full
force and effect or is declared null and void, or the Guarantor denies that
it has any further liability under the Guarantee with respect to such
series or gives notice to such effect (other than by reason of the
termination of the Indenture or the release of the Guarantee with respect
to such series in accordance with the Indenture) and such condition shall
have continued for a period of 60 days after written notice of such failure
(which notice shall specify the Default, demand that it be remedied and
state that it is a "Notice of Default") requiring the Guarantor and LGII to
remedy the same shall have been given (x) to the Guarantor and LGII by the
Trustee or (y) to the Guarantor, LGII and the Trustee by holders of at
least 25% in aggregate principal amount of the Exchange Notes of either
series then outstanding; or
(viii) certain events of bankruptcy, insolvency or reorganization with
respect to the Guarantor or any Significant Subsidiary of the Guarantor
(including without limitation LGII) shall have occurred.
If an Event of Default (other than as specified in clause (viii) above)
shall occur and be continuing with respect to the Exchange Notes of either
series, the Trustee, by notice to the Guarantor and LGII, or the holders of at
least 25% in aggregate principal amount of the Exchange Notes of such series
then outstanding, by notice to the Trustee, the Guarantor and LGII, may
declare the principal of, premium, if any, and accrued and unpaid interest, if
any, on all of the outstanding Exchange Notes of such series due and payable
immediately, upon which declaration, all amounts payable in respect of the
Exchange Notes of such series shall be immediately due and payable. If an
Event of Default specified in clause (viii) above occurs and is continuing,
then the principal of, premium, if any, and accrued and unpaid interest, if
any, on all of the outstanding Exchange Notes of such series shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holder of Exchange Notes.
After a declaration of acceleration under the Indenture with respect to the
Exchange Notes of either series, but before a judgment or decree for payment
of the money due has been obtained by the Trustee, the holders of a majority
in aggregate principal amount of the outstanding Exchange Notes of such
series, by written notice to the Guarantor, LGII and the Trustee, may rescind
such declaration if (a) the Guarantor or LGII has paid or deposited with the
Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee
under the Indenture and the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, (ii) all overdue interest
on all Exchange Notes of such series, (iii) the principal of and premium, if
any, on any Exchange Notes of such series which have become due otherwise than
by such declaration of acceleration and interest thereon at the rate borne by
the Exchange Notes of such series, and (iv) to the extent that payment of such
interest is lawful, interest upon overdue interest and overdue principal at
the rate borne by the Exchange Notes of such series which has become due
otherwise than by such declaration of acceleration; (b) the rescission
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would not conflict with any judgment or decree of a court of competent
jurisdiction; and (c) all Events of Default, other than the non-payment of
principal of, premium, if any, and interest on the Exchange Notes of such
series that have become due solely by such declaration of acceleration, have
been cured or waived.
Prior to the declaration of acceleration of the Exchange Notes of any
series, the holders of not less than a majority in aggregate principal amount
of the outstanding Exchange Notes of such series may on behalf of the holders
of all the Exchange Notes of such series waive any past defaults under the
Indenture, except a default in the payment of the principal of, premium, if
any, or interest on any Senior Note of such series, or in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Senior Note of such series
outstanding.
No holder of any of the Exchange Notes of any series has any right to
institute any proceeding with respect to the Indenture or the Exchange Notes
of such series or any remedy thereunder, unless the holders of at least 25% in
aggregate principal amount of the outstanding Exchange Notes of such series
have made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as Trustee under the Exchange Notes of such series
and the Indenture, the Trustee has failed to institute such proceeding within
30 days after receipt of such notice and the Trustee, within such 30-day
period, has not received directions inconsistent with such written request by
holders of a majority in aggregate principal amount of the outstanding
Exchange Notes of such series. Such limitations do not apply, however, to a
suit instituted by a holder of a Senior Note of such series for the
enforcement of the payment of the principal of, premium, if any, or interest
on such Senior Note on or after the respective due dates expressed in such
Senior Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. Subject to the provisions of the Indenture relating to the duties of
the Trustee, whether or not an Event of Default shall occur and be continuing,
the Trustee under the Indenture is not under any obligation to exercise any of
its rights or powers under the Indenture at the request or direction of any of
the holders unless such holders shall have offered to the Trustee reasonable
security or indemnity. Subject to certain provisions concerning the rights of
the Trustee, the holders of not less than a majority in aggregate principal
amount of the outstanding Exchange Notes of any series have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee under the Indenture with respect to the Exchange Notes of such series.
If an Event of Default occurs and is continuing and is known to the Trustee,
the Trustee shall mail to each holder of the Exchange Notes notice of the
Event of Default within 30 days after obtaining knowledge thereof. Except in
the case of an Event of Default in payment of principal of, premium, if any,
or interest on any Exchange Notes, the Trustee may withhold the notice to the
holders of such Exchange Notes if a committee of its trust officers in good
faith determines that withholding the notice is in the interest of the holders
of the Exchange Notes.
LGII is required to furnish to the Trustee annual and quarterly statements
as to the performance by LGII of its obligations under the Indenture and as to
any default in such performance. LGII is also required to notify the Trustee
within ten days of any event which is, or after notice or lapse of time or
both would become, an Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
Each of the Guarantor and LGII may, at its option and at any time, terminate
the obligations of the Guarantor and LGII with respect to the outstanding
Exchange Notes of any series ("defeasance"). Such defeasance means that the
Guarantor and LGII shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Exchange Notes of such series,
except for (i) the rights of holders of outstanding Exchange Notes of such
series to receive payment in respect of the principal of, premium, if any,
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and interest on such Exchange Notes when such payments are due, (ii) LGII's
obligations to issue temporary Exchange Notes of such series, register the
transfer or exchange of any Exchange Notes of such series, replace mutilated,
destroyed, lost or stolen Exchange Notes of such series and maintain an office
or agency for payments in respect of the Exchange Notes of such series, (iii)
the rights, powers, trusts, duties and immunities of the Trustee, and (iv) the
defeasance provisions of the Indenture. In addition, each of the Guarantor and
LGII may, at its option and at any time, elect to terminate the obligations of
the Guarantor and LGII with respect to certain covenants that are set forth in
the Indenture, some of which are described under "--Certain Covenants" above
(including the covenant described under "--Certain Covenants; Change of
Control" above) and any subsequent failure to comply with such obligations
shall not constitute a Default or Event of Default with respect to the
Exchange Notes of such series ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (i) LGII must
irrevocably deposit with the Trustee, in trust, for the benefit of the holders
of the Exchange Notes of such series, cash in United States dollars, U.S.
Government Obligations (as defined in the Indenture), or a combination
thereof, in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of,
premium, if any, and interest on the outstanding Exchange Notes of such series
to maturity (except lost, stolen or destroyed Exchange Notes of such series
which have been replaced or paid); (ii) the Guarantor or LGII shall have
delivered to the Trustee an opinion of counsel to the effect that the holders
of the outstanding Exchange Notes of such series will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such defeasance or covenant defeasance had not occurred (in the case of
defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax laws);
(iii) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit; (iv) such defeasance or covenant defeasance shall
not cause the Trustee to have a conflicting interest with respect to any
securities of LGII; (v) such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under, any
material agreement or instrument to which the Guarantor or LGII is a party or
by which it is bound; (vi) the Guarantor or LGII shall have delivered to the
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and (vii) the Guarantor or LGII shall have
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent under the Indenture to either
defeasance or covenant defeasance, as the case may be, have been complied
with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Exchange Notes, as expressly provided for in the Indenture) as to all
outstanding Exchange Notes of either series when (i) either (a) all the
Exchange Notes of such series theretofore authenticated and delivered (except
lost, stolen or destroyed Exchange Notes of such series which have been
replaced or repaid and Exchange Notes of such series for whose payment money
has theretofore been deposited in trust or segregated and held in trust by
LGII and thereafter repaid to LGII or discharged from such trust) have been
delivered to the Trustee for cancellation or (b) all Exchange Notes of such
series have been called for redemption or otherwise become due and payable and
the Guarantor or LGII has irrevocably deposited or caused to be deposited with
the Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Exchange Notes of such series not theretofore delivered to
the Trustee for cancellation, for principal of, premium, if any, and interest
on the Exchange Notes of such series to the date of deposit together with
irrevocable instructions from the Guarantor or LGII directing the Trustee to
apply such funds to the payment thereof at maturity; (ii) the Guarantor and
LGII have paid all other sums payable under the Indenture by LGII; (iii) there
exists no Default or Event of Default under the Indenture; and (iv) the
Guarantor or LGII has delivered to the Trustee an officers' certificate and an
opinion of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
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AMENDMENTS AND WAIVERS
The Indenture provides that the Guarantor and LGII, when authorized by a
Board Resolution, and the Trustee may amend, waive or supplement the Indenture
or the Exchange Notes without notice to or consent of any Holder: (a) to cure
any ambiguity, defect or inconsistency; (b) to comply with the provisions
described under "Merger, Sale of Assets, Etc." above; (c) to provide for
uncertificated Exchange Notes in addition to certificated Exchange Notes;
(d) to comply with any requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the TIA; or (e) to make any
change that would provide any additional benefit or rights to the Holders or
that does not adversely affect the rights of any Holder. Notwithstanding the
foregoing, the Guarantor, the Trustee and LGII may not make any change that
adversely affects the rights of any Holder under the Indenture. Other
modifications and amendments of the Indenture may be made with the consent of
the holders of not less than a majority in aggregate principal amount of each
series of the then outstanding Exchange Notes, except that, without the
consent of each holder of the Exchange Notes affected thereby, no amendment
may, directly or indirectly: (i) reduce the amount of Exchange Notes whose
holders must consent to any amendment; (ii) reduce the rate of or change the
time for payment of interest, including defaulted interest, on any Exchange
Notes; (iii) change the currency in which the Exchange Notes are payable; (iv)
reduce the principal of or change the fixed maturity of any Exchange Notes, or
change the date on which any Exchange Notes may be subject to repurchase, or
reduce the repurchase price therefor; (v) make any Exchange Notes payable in
money other than that stated in the Exchange Notes; (vi) make any change in
provisions of the Indenture protecting the right of each holder of a Senior
Note to receive payment of principal of and interest on such Senior Note on or
after the date thereof or to bring suit to enforce such payment or permitting
holders of a majority in principal amount of the Exchange Notes of such series
to waive Defaults or Events of Default; (vii) subordinate in right of payment,
or otherwise subordinate, the Exchange Notes of such series to any other
Indebtedness or obligation of the Guarantor or LGII; or (viii) amend, alter,
change or modify the obligation of LGII to make and consummate a Change of
Control Offer in the event of a Change of Control or make and consummate an
Asset Sale Offer or waive any Default in the performance of any such offers or
modify any of the provisions or definitions with respect to any such offers.
REGISTRATION RIGHTS AGREEMENT
In the event that (i) due to a change in current interpretations by the SEC,
LGII determines that consummation of the Exchange Offer as contemplated by the
Registration Rights Agreement would violate applicable law or applicable
interpretations by the SEC, (ii) the Exchange Offer is not for any other
reason consummated by December 24, 1998 (the "Closing Date") or (iii) any
holder or holders of $5,000,000 aggregate principal amount of Exchange Notes,
within 30 days after consummation of the Exchange Offer, notify LGII that such
holders (x) are prohibited by applicable law or SEC policy from participating
in the Exchange Offer, (y) may not resell Exchange Notes acquired by them in
the Exchange Offer to the public without delivering a prospectus and that the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such holders or (z) are broker-
dealers and hold Exchange Notes acquired directly from LGII or an Affiliate of
LGII it is contemplated that the Guarantor and LGII will file a Shelf
Registration Statement covering resales (a) by all holders of Exchange Notes
in the event LGII determines that the consummation of the Exchange Offer would
violate applicable law or interpretations by the SEC pursuant to the foregoing
clause (i) or the Exchange Offer is not consummated within 210 days after the
Closing Date pursuant to the foregoing clause (ii), or (b) by the Initial
Purchasers after consummation of the Exchange Offer, if the Shelf Registration
Statement is required solely pursuant to the foregoing clause (iii), and will
use their best efforts to cause the Shelf Registration Statement to become
effective and to keep the Shelf Registration Statement effective for 180 days
from the effective date thereof. The Guarantor and LGII shall, if they file
the Shelf Registration Statement, provide to each holder of Exchange Notes
covered by the Shelf Registration Statement copies of the prospectus included
therein and notify each such holder when the Shelf Registration Statement has
become effective. A holder that sells Exchange Notes pursuant to a Shelf
Registration Statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a current prospectus
to purchasers, and will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales.
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Under the Registration Rights Agreement, the Guarantor and LGII have agreed
to use their best efforts to: (i) file the Exchange Offer Registration
Statement or a Shelf Registration Statement with the SEC within 90 days after
the Closing Date, (ii) have such Exchange Offer Registration Statement or
Shelf Registration Statement declared effective by the SEC within 180 days
after the Closing Date, and (iii) commence the Exchange Offer and issue the
Exchange Notes in exchange for all Exchange Notes validly tendered in
accordance with the terms of the Exchange Offer prior to the close of the
Exchange Offer, or, in the alternative, cause the Shelf Registration Statement
to remain effective for 180 days from the effective date thereof. Although the
Guarantor and LGII intend to file the Exchange Offer Registration Statement
and, if required, a Shelf Registration Statement, there can be no assurance
that such registration statements will be filed or, if filed, that either will
become effective. Each holder of Exchange Notes, by virtue of being or
becoming so, will be bound by the provisions of the Registration Rights
Agreement that may require the holder to furnish notice or other information
to the Guarantor and LGII as a condition to certain obligations of the
Guarantor and LGII to file a Shelf Registration Statement by a particular date
or to maintain its effectiveness for the prescribed 180-day period.
PENALTY INTEREST
Additional interest ("Penalty Interest") shall be assessed on the
Outstanding Notes as follows:
(i) (A) if the Exchange Offer Registration Statement or, in the event
that due to a change in current interpretations by the SEC the Guarantor
and LGII are not permitted to effect the Exchange Offer, a Shelf
Registration Statement, is not filed within 90 days following the Closing
Date or (B) in the event that within 30 days after the consummation of the
Exchange Offer (the "prescribed time period"), any holder or holders of
$5,000,000 aggregate principal amount of Outstanding Notes shall notify
LGII that such holders (x) are prohibited by applicable law or SEC policy
from participating in the Exchange Offer, (y) may not resell Exchange Notes
acquired by them in the Exchange Offer to the public without delivering a
prospectus and that the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by
such holders or (z) are broker-dealers and hold Outstanding Notes acquired
directly from LGII or an Affiliate of LGII or Loewen, if the Shelf
Registration Statement is not filed within 90 days after expiration of the
prescribed time period, then commencing on the 91st day after either the
Closing Date or the expiration of the prescribed time period, as the case
may be, Penalty Interest shall be accrued on the Outstanding Notes over and
above the accrued interest at a rate of .50% per annum for the first 90
days immediately following the 46th day after either the Closing Date or
the expiration of the prescribed time period, as the case may be, such
Penalty Interest rate increasing by an additional .25% per annum at the
beginning of each subsequent 90-day period;
(ii) if the Exchange Offer Registration Statement or a Shelf Registration
Statement is filed pursuant to clause (i) of the preceding paragraph and is
not declared effective within 180 days following either the Closing Date or
the expiration of the prescribed time period, as the case may be, then
commencing on the 181st day after either the Closing Date or the expiration
of the prescribed time period, as the case may be, Penalty Interest shall
be accrued on the Outstanding Notes over and above the accrued interest at
a rate of .50% per annum for the first 90 days immediately following the
181st day after either the Closing Date or the expiration of the prescribed
time period, as the case may be, such Penalty Interest rate increasing by
an additional .25% per annum at the beginning of each subsequent 90-day
period; and
(iii) if either (A) the Guarantor and LGII have not exchanged Exchange
Notes for all Outstanding Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to 30 days after the date on which
the Exchange Offer Registration Statement was declared effective, or (B) if
applicable, a Shelf Registration Statement has been declared effective and
such Shelf Registration Statement ceases to be effective prior to 180 days
from its original effective date, then, subject to certain exceptions,
Penalty Interest shall be accrued on the Exchange Notes over and above the
accrued interest at a rate of .50% per annum for the first 60 days
immediately following the (x) 31st day after such effective date, in the
case of (A) above, or (y) the day such Shelf Registration Statement ceases
to be effective in the case of (B) above, such Penalty Interest rate
increasing by an additional .25% per annum at the beginning of each
subsequent 60-day period; provided, however, that the Penalty Interest rate
on the Outstanding Notes may not exceed
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1.50% per annum; and provided further that Penalty Interest on the
Outstanding Notes shall cease to accrue (1) upon the filing of the Exchange
Offer Registration Statement or a Shelf Registration Statement (in the case
of (i) above), (2) upon the effectiveness of the Exchange Offer
Registration Statement or a Shelf Registration Statement (in the case of
(ii) above), or (3) upon the exchange of Exchange Notes for all Outstanding
Notes validly tendered in the Exchange Offer or upon the effectiveness of
the Shelf Registration Statement which had ceased to remain effective prior
to 180 days from its original effective date (in the case of (iii) above).
Any amounts of Penalty Interest due pursuant to clause (i), (ii) or (iii)
above will be payable in cash on the interest payment dates of the Outstanding
Notes. The amount of Penalty Interest will be determined by multiplying the
applicable Penalty Interest rate by the principal amount of the Outstanding
Notes, multiplied by a fraction, the numerator of which is the number of days
such Penalty Interest rate was applicable during such period (determined on
the basis of a 360-day year composed of twelve 30-day months), and the
denominator of which is 360.
The foregoing summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the provisions of the Registration Rights
Agreement. A copy of the Registration Rights Agreement may be obtained from
LGII, the Guarantor or any of the Initial Purchasers, upon request.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred
and is continuing, the Trustee will exercise such rights and powers vested in
it under the Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the TIA incorporated by reference therein
contain limitations on the rights of the Trustee thereunder, should it become
a creditor of the Guarantor or LGII, to obtain payment of claims in certain
cases or to realize on certain property received by it in respect of any such
claims, as security or otherwise. The Trustee is permitted to engage in other
transactions; provided, however, that if it acquires any conflicting interest
(as defined in the TIA) it must eliminate such conflict or resign.
GOVERNING LAW
The Indenture and the Exchange Notes will be governed by the laws of the
State of New York, without regard to the principles of conflicts of law.
CONSENT TO SERVICE AND JURISDICTION
Each of LGII and Loewen has appointed Thelen Reid & Priest LLP, 40 West 57th
Street, 26th Floor, New York, New York 10019-4097, Attention: David P.
Graybeal, Esq., as its authorized agent upon whom process may be served in any
suit, action or proceeding arising out of or based on the Indenture which may
be instituted in any federal or state court located in The City of New York,
expressly consents to the jurisdiction of any such court in respect of any
such suit, action or proceeding, and waives other requirements of or
objections to personal jurisdiction with respect thereto.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a person (a) assumed or
created in connection with an Asset Acquisition from such person or (b)
existing at the time such person becomes a Restricted Subsidiary of any other
person.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person.
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"Asset Acquisition" means (a) an Investment by the Guarantor or any
Restricted Subsidiary of the Guarantor (including without limitation LGII) in
any other person pursuant to which such person shall become a Restricted
Subsidiary of the Guarantor, or shall be merged with or into the Guarantor or
any Restricted Subsidiary of the Guarantor, (b) the acquisition by the
Guarantor or any Restricted Subsidiary of the Guarantor of the assets of any
person (other than a Restricted Subsidiary of the Guarantor) which constitute
all or substantially all of the assets of such person or (c) the acquisition
by the Guarantor or any Restricted Subsidiary of the Guarantor of any division
or line of business of any person (other than a Restricted Subsidiary of the
Guarantor).
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any person other than the Guarantor or
a Restricted Subsidiary of the Guarantor (including without limitation LGII),
in one or a series of related transactions, of (a) any Capital Stock of any
Restricted Subsidiary of the Guarantor (other than in respect of director's
qualifying shares or investments by foreign nationals mandated by applicable
law) or of First Capital Life Insurance Company of Louisiana, National Capital
Life Insurance Company, Security Industrial Insurance Company, Security
Industrial Fire Insurance Company or any successor to such Subsidiaries; (b)
all or substantially all of the properties and assets of any division or line
of business of the Guarantor or any Restricted Subsidiary of the Guarantor; or
(c) any other properties or assets of the Guarantor or any Restricted
Subsidiary of the Guarantor other than properties or assets acquired in the
ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include (i) any sale, transfer or other disposition of
equipment, tools or other assets (including Capital Stock of any Restricted
Subsidiary of the Guarantor) by the Guarantor or any of its Restricted
Subsidiaries in one or a series of related transactions in respect of which
the Guarantor or such Restricted Subsidiary receives cash or property with an
aggregate Fair Market Value of $2,000,000 or less; and (ii) any sale,
issuance, conveyance, transfer, lease or other disposition of properties or
assets that is governed by the provisions described under "--Merger, Sale of
Assets, Etc." above.
"Attributable Value" means, as to any particular lease under which any
person is at the time liable other than a Capitalized Lease Obligation, and at
any date as at which the amount thereof is to be determined, the total net
amount of rent required to be paid by such person under such lease during the
initial term thereof as determined in accordance with GAAP, discounted from
the last date of such initial term to the date of determination at a rate per
annum equal to the discount rate which would be applicable to a Capitalized
Lease Obligation with a like term in accordance with GAAP. The net amount of
rent required to be paid under any such lease for any such period shall be the
aggregate amount of rent payable by the lessee with respect to such period
after excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges. In the
case of any lease which is terminable by the lessee upon the payment of a
penalty, such net amount shall also include the amount of such penalty, but no
rent shall be considered as required to be paid under such lease subsequent to
the first date upon which it may be so terminated. "Attributable Value" means,
as to a Capitalized Lease Obligation under which any person is at the time
liable and at any date as at which the amount thereof is to be determined, the
capitalized amount thereof that would appear on the face of a balance sheet of
such person in accordance with GAAP.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The City of New York,
State of New York or the city in which the Corporate Trust Office is located,
are authorized or obligated by law, regulation or executive order to close.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of the Indenture,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
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"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness with
a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the Untied States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii)
certificates of deposit with a maturity of 180 days or less of any financial
institution that is not organized under the laws of the United States, any
state thereof or the District of Columbia that are rated at least A-1 by S&P
or at least P-1 by Moody's or at least an equivalent rating category of
another nationally recognized securities rating agency; (iv) repurchase
agreements and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the government of the
United States of America or issued by any agency thereof and backed by the
full faith and credit of the United States of America, in each case maturing
within 180 days from the date of acquisition; provided that the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions With Securities Dealers and Others, as
adopted by the Comptroller of the Currency on October 31, 1985; and (v) notes
held by the Guarantor or any Restricted Subsidiary (including without
limitation LGII) which were obtained by the Guarantor or such Restricted
Subsidiary in connection with Asset Sales (x) in the ordinary course of its
funeral home, cemetery or cremation businesses or (y) which were required to
be made pursuant to applicable federal or state law.
"Change of Control" means the occurrence on or after the Measurement Date of
any of the following events: (a) any "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted
Holders, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time, upon the happening of an event or otherwise), directly or
indirectly, of more than 35% of the total Voting Stock of the Guarantor or
LGII, under circumstances where the Permitted Holders (i) "beneficially own"
(as so defined) a lower percentage of the Voting Stock than such other
"person" or "group" and (ii) do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
Board of Directors of the Guarantor or LGII; (b) the Guarantor or LGII
consolidates with, or merges with or into, another person or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all
of its assets to another person, or another person consolidates with, or
merges with or into, the Guarantor or LGII, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Guarantor or LGII is
converted into or exchanged for cash, securities or other property, other than
any such transaction where (i) the outstanding Voting Stock of the Guarantor
or LGII is converted into or exchanged for (1) Voting Stock (other than
Redeemable Capital Stock) of the surviving or transferee corporation or (2)
cash, securities and other property in an amount which could then be paid by
the Guarantor or LGII as a Restricted Payment under the Indenture, and (ii)
immediately after such transaction no "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted
Holders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time, upon the happening of an event or otherwise), directly or indirectly, of
more than 50% of the total Voting Stock of the surviving or transferee
corporation; (c) at any time during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Guarantor or LGII (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders or stockholders of the Guarantor or LGII was approved by a vote
of 66 2/3% of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason
(including the failure of such individuals to be elected in a proxy contest
involving a solicitation of proxies) to constitute a majority of the Board of
Directors of the Guarantor or LGII then in office; or (d) the Guarantor or
LGII is liquidated or dissolved or adopts a plan of liquidation other than a
liquidation of LGII into the Guarantor.
"Collateral Agreement" means the Collateral Trust Agreement dated as of May
15, 1996, among Bankers Trust Company, as trustee, Loewen, LGII and various
other Subsidiaries, as amended or supplemented from time to time.
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"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) depreciation, depletion, amortization and other non-cash charges
for such period (c) Consolidated Interest Expense and (d) Consolidated Income
Tax Expense less (B) any non-cash items increasing Consolidated Net Income for
such period.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
person, the ratio of the aggregate amount of Consolidated Cash Flow Available
for Fixed Charges of such person for the full fiscal quarter immediately
preceding the date of the transaction (the "Transaction Date") giving rise to
the need to calculate the Consolidated Fixed Charge Coverage Ratio (such full
fiscal quarter being referred to herein as the "Prior Quarter") to the
aggregate amount of Consolidated Fixed Charges of such person for the Prior
Quarter. In addition to and without limitation of the foregoing, for purposes
of this definition, "Consolidated Cash Flow Available for Fixed Charges" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to, without duplication, (a)
the incurrence of any Indebtedness of such person or any of its Restricted
Subsidiaries (and the application of the net proceeds thereof) during the
period commencing on the first day of the Prior Quarter to and including the
Transaction Date (the "Reference Period"), including, without limitation, the
incurrence of the Indebtedness giving rise to the need to make such
calculation (and the application of the net proceeds thereof), as if such
incurrence (and application) occurred on the first day of the Reference
Period, and (b) any Material Asset Sales or Material Asset Acquisitions
(including, without limitation, any Material Asset Acquisition giving rise to
the need to make such calculation as a result of such person or one of its
Restricted Subsidiaries (including any person who becomes a Restricted
Subsidiary as a result of the Material Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness) occurring during the
Reference Period, as if such Material Asset Sale or Material Asset Acquisition
occurred on the first day of the Reference Period. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (i)
interest on outstanding Indebtedness determined on a fluctuating basis as at
the Transaction Date and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; and (ii) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Reference Period. If such person or any of its Restricted
Subsidiaries directly or indirectly guarantees Indebtedness of a third person,
the above clause shall give effect to the incurrence of such guaranteed
Indebtedness as if such person or such Restricted Subsidiary had directly
incurred or otherwise assumed such guaranteed Indebtedness. For purposes of
this calculation, a Material Asset Acquisition is an Asset Acquisition which
is deemed by such person to be material for such purposes or which has a
purchase price of $30,000,000 or more and a Material Asset Sale is one or more
Asset Sales which relate to assets with an aggregate value of more than
$30,000,000.
"Consolidated Fixed Charges" means, with respect to any person for any
period, the sum of, without duplication, the amounts for such period of (i)
Consolidated Interest Expense and (ii) the product of (a) the aggregate amount
of dividends and other distributions paid or accrued during such period in
respect of Preferred Stock and Redeemable Capital Stock of such person and its
Restricted Subsidiaries on a consolidated basis and (b) a multiplier, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such person,
expressed as a decimal; provided, however, that the multiplier in clause (b)
shall be one if such dividend or other distribution is fully tax deductible.
"Consolidated Income Tax Expense" means, with respect to any person for any
period, the provision for federal, state, local and foreign income taxes of
such person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, the sum of (i) the interest expense of such
person and its Restricted Subsidiaries for such period as determined on a
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consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount, (b) the net cost under Interest Rate
Protection Obligations, (c) the interest portion of any deferred payment
obligation, (d) all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing and (e)
all accrued interest and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such
person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any person, for any period,
the consolidated net income (or loss) of such person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted,
to the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses, (ii) the portion of net
income (but not losses) of such person and its Restricted Subsidiaries
allocable to minority interests in unconsolidated persons to the extent that
cash dividends or distributions have not actually been received by such person
or one of its Restricted Subsidiaries, (iii) net income (or loss) of any
person combined with such person or one of its Restricted Subsidiaries on a
"pooling of interests" basis attributable to any period prior to the date of
combination, (iv) any gain or loss realized upon the termination of any
employee pension benefit plan, on an after-tax basis, (v) gains or losses in
respect of any Asset Sales by such person or one of its Restricted
Subsidiaries, 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 the Guarantor as at any date means the
total amount of assets of the Guarantor and its Restricted Subsidiaries, less
applicable reserves, on a consolidated basis as at the end of the fiscal
quarter immediately preceding such date, as determined in accordance with
GAAP, less: (i) Intangible Assets and (ii) appropriate adjustments on account
of minority interests of other persons holding equity investments in
Restricted Subsidiaries, in the case of each of clauses (i) and (ii) above as
reflected on the consolidated balance sheet of the Guarantor and its
Restricted Subsidiaries as at the end of the fiscal quarter immediately
preceding such date.
"Consolidated Net Worth" means, with respect to any person at any date, the
consolidated stockholders' equity of such person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock of such person
and its Subsidiaries, as determined in accordance with GAAP.
"Credit Agreements" means the Revolving Credit Facility, the Canadian
Revolving Credit Facility (as defined herein) and the MEIP Loan (as defined
herein); in each case as any such instrument may be amended, supplemented or
otherwise modified from time to time, and any successor or replacement
facility. For a description of each of the Credit Agreements, see "Description
of Certain Indebtedness."
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Guarantor or any of its Restricted Subsidiaries against fluctuations in
currency values.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Event of Default" has the meaning set forth under "Events of Default"
herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction; provided, however, that, with respect
to any transaction which involves an asset or assets in excess of $5,000,000,
such determination shall be evidenced by resolutions of the Board of Directors
of the Guarantor delivered to the Trustee.
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"Final Maturity Date" means June 1, 2003, with respect to the Series 6
Exchange Notes, and June 1, 2008, with respect to the Series 7 Exchange Notes.
"GAAP" means Canadian GAAP consistently applied until such time as the
Guarantor or LGII shall prepare their respective books of record in accordance
with U.S. GAAP at which time and all times thereafter GAAP shall mean U.S.
GAAP consistently applied.
"Guarantees" means the guarantees of the Exchange Notes created pursuant to
the Indenture.
"guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantor" means The Loewen Group Inc. and shall include any successor
replacing such Guarantor pursuant to the Indenture, and thereafter means such
successor.
"Holder" means the person in whose name a Senior Note is registered on the
Registrar's books.
"Indebtedness" means, with respect to any person, without duplication, (a)
all liabilities of such person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business and which are
not overdue by more than 90 days, but excluding, without limitation, all
obligations, contingent or otherwise, of such person in connection with any
undrawn letters of credit, banker's acceptance or other similar credit
transaction, (b) all obligations of such person evidenced by bonds, notes,
debentures or other similar instruments, (c) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such person (even if the rights and remedies
of the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), but excluding trade
accounts payable arising in the ordinary course of business, (d) all
Capitalized Lease Obligations of such person, (e) all Indebtedness referred to
in the preceding clauses of other persons and all dividends of other persons,
the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon property (including, without limitation, accounts and contract
rights) owned by such person, even though such person has not assumed or
become liable for the payment of such Indebtedness (the amount of such
obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (f) all guarantees of
Indebtedness referred to in this definition by such person, (g) all Redeemable
Capital Stock of such person valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued dividends, (h) all
obligations under or in respect of Currency Agreements and Interest Rate
Protection Obligations of such person, (i) any Preferred Stock of any
Restricted Subsidiary of such person valued at the sum of (without
duplication) (A) the liquidation preference thereof, (B) any mandatory
redemption payment obligations in respect thereof and (C) accrued dividends
thereon, and (j) any amendment, supplement, modification, deferral, renewal,
extension or refunding of any liability of the types referred to in clauses
(a) through (i) above. For purposes hereof, the "maximum fixed repurchase
price" of any Redeemable Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Redeemable
Capital Stock as if such Redeemable Capital Stock were purchased on any date
on which Indebtedness shall be required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the fair market
value of such Redeemable Capital Stock, such fair market value shall be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock. For purposes of this definition, the term
"Indebtedness" shall not include (i) Indebtedness of a Wholly-Owned Subsidiary
owed to and held by the Guarantor, LGII or another Wholly-Owned Subsidiary, in
each case which is not subordinate in right of payment to any Indebtedness of
such Subsidiary, except that (a) any transfer of such Indebtedness by the
Guarantor, LGII or a Wholly-Owned Subsidiary (other than to the Guarantor,
LGII or
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to a Wholly-Owned Subsidiary) and (b) the sale, transfer or other disposition
by the Guarantor, LGII or any Restricted Subsidiary of the Guarantor or LGII
of Capital Stock of a Wholly-Owned Subsidiary which is owed Indebtedness of
another Wholly-Owned Subsidiary such that it ceases to be a Wholly-Owned
Subsidiary of the Guarantor or LGII shall, in each case, be an incurrence of
Indebtedness by such Restricted Subsidiary subject to the other provisions of
the Indenture; and (ii) Indebtedness of the Guarantor or LGII owed to and held
by a Wholly-Owned Subsidiary of the Guarantor or LGII which is unsecured and
subordinate in right of payment to the payment and performance of the
Guarantor's or LGII's obligations under the Indenture and the Exchange Notes
except that (a) any transfer of such Indebtedness by a Wholly-Owned Subsidiary
of the Guarantor or LGII (other than to another Wholly-Owned Subsidiary of the
Guarantor or LGII) and (b) the sale, transfer or other disposition by the
Guarantor or LGII or any Restricted Subsidiary of the Guarantor or LGII of
Capital Stock of a Wholly-Owned Subsidiary which holds Indebtedness of the
Guarantor or LGII such that it ceases to be a Wholly-Owned Subsidiary shall,
in each case, be an incurrence of Indebtedness by the Guarantor or LGII, as
the case may be, subject to the other provisions of the Indenture.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Guarantor or LGII and (ii) which, in the
judgment of the Board of Directors of the Guarantor, is otherwise independent
and qualified to perform the task for which it is to be engaged.
"Interest Rate Protection Agreement" means any arrangement with any other
person whereby, directly or indirectly, such person is entitled to receive
from time to time periodic payments calculated by applying either a floating
or a fixed rate of interest on a stated notional amount in exchange for
periodic payments made by such person calculated by applying a fixed or a
floating rate of interest on the same notional amount and shall include,
without limitation, interest rate swaps, caps, floors, collars and similar
agreements.
"Interest Rate Protection Obligations" means the obligations of any person
under any Interest Rate Protection Agreement.
"Investment" means, with respect to any person, any direct or indirect loan
or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other person. "Investments" shall
exclude extensions of trade credit by the Guarantor and its Restricted
Subsidiaries (including without limitation LGII) in the ordinary course of
business in accordance with normal trade practices of the Guarantor or such
Restricted Subsidiary, as the case may be.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any
property of any kind. A person shall be deemed to own subject to a Lien any
property which such person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Maturity Date" means, with respect to any Senior Note, the date on which
any principal of such Senior Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
"Measurement Date" means March 20, 1996.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of
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cash or Cash Equivalents (except to the extent that such obligations are
financed or sold with recourse to the Guarantor or any Restricted Subsidiary
of the Guarantor (including without limitation LGII) net of (i) brokerage
commissions and other fees and expenses (including, without limitation, fees
and expenses of legal counsel and investment bankers) related to such Asset
Sale, (ii) provisions for all taxes payable as a result of such Asset Sale,
(iii) amounts required to be paid to any person (other than the Guarantor or
any Restricted Subsidiary of the Guarantor) owning a beneficial interest in
the assets subject to the Asset Sale and (iv) appropriate amounts to be
provided by the Guarantor or any Restricted Subsidiary of the Guarantor, as
the case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale and retained by the Guarantor or
any Restricted Subsidiary of the Guarantor, as the case may be, after such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale, all as reflected in an officers' certificate delivered to the Trustee.
"Pari Passu Indebtedness" means Indebtedness of LGII or the Guarantor which
ranks pari passu in right of payment with the Exchange Notes or the
Guarantees, as the case may be.
"Permitted Holders" mean (i) Raymond Loewen and Anne Loewen, taken together
and (ii) in the case of LGII, the Guarantor.
"Permitted Indebtedness" means, without duplication, each of the following:
(a) The Exchange Notes and Indebtedness of the Guarantor evidenced by the
Guarantees;
(b) Indebtedness of the Guarantor and its Restricted Subsidiaries
(including without limitation LGII) outstanding on the Issue Date (other
than Indebtedness under the Credit Agreements);
(c) Indebtedness of LGII or the Guarantor, as the case may be, under the
Credit Agreements in an aggregate principal amount at any one time
outstanding not to exceed $750,000,000 less the Net Proceeds of any Asset
Sale that are applied to repay, and permanently reduce the commitments
under, the Credit Agreements (as required by the terms thereof);
(d) (i) Interest Rate Protection Obligations of the Guarantor covering
Indebtedness of the Guarantor and its Restricted Subsidiaries (including
without limitation LGII); (ii) Interest Rate Protection Obligations of any
Restricted Subsidiary of the Guarantor covering Indebtedness of such
Restricted Subsidiary; provided, however, that, in the case of either
clause (i) or (ii), (x) any Indebtedness to which any such Interest Rate
Protection Obligations relate bears interest at fluctuating interest rates
and is otherwise permitted to be incurred under this covenant and (y) the
notional principal amount of any such Interest Rate Protection Obligations
does not exceed the principal amount of the Indebtedness to which such
Interest Rate Protection Obligations relate;
(e) Indebtedness under Currency Agreements; provided, however, that in
the case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Guarantor and its
Restricted Subsidiaries (including without limitation LGII) outstanding
other than as a result of fluctuations in foreign currency exchange rates
or by reason of fees, indemnities and compensation payable thereunder;
(f) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within two business days of incurrence;
(g) Indebtedness incurred in respect of performance bonds or letters of
credit in lieu thereof provided in the ordinary course of business;
(h) Indebtedness of the Guarantor and its Restricted Subsidiaries
(including without limitation LGII) represented by letters of credit for
the account of the Guarantor and its Restricted Subsidiaries in order to
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provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;
(i) Indebtedness of the Guarantor and its Restricted Subsidiaries
(including without limitation LGII) in addition to that described in
clauses (a) through (h) above, in an aggregate principal amount outstanding
at any time not exceeding $5,000,000; and
(j) (i) Indebtedness of the Guarantor the proceeds of which are used
solely to refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of the Guarantor and its Restricted Subsidiaries (including
without limitation LGII) and (ii) Indebtedness of any Restricted Subsidiary
of the Guarantor the proceeds of which are used solely to refinance
(whether by amendment, renewal, extension or refunding) Indebtedness of
such Restricted Subsidiary, in each case other than the Indebtedness
refinanced, redeemed or retired as described under "Use of Proceeds" herein
or incurred under clause (c), (d), (e), (f), (g), (h), or (i) of this
covenant; provided, however, that (x) the principal amount of Indebtedness
incurred pursuant to this clause (j) (or, if such Indebtedness provides for
an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the maturity thereof, the original issue
price of such Indebtedness) shall not exceed the sum of the principal
amount of Indebtedness so refinanced, plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of such Indebtedness or the amount of any premium reasonably
determined by the Board of Directors of the Guarantor as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated purchase, plus the amount of expenses in connection therewith,
(y) in the case of Indebtedness incurred by the Guarantor pursuant to this
clause (j) to refinance Pari Passu Indebtedness, such Indebtedness
constitutes Pari Passu Indebtedness.
"Permitted Investments" means any of the following: (i) Investments in any
Wholly-Owned Subsidiary of the Guarantor (including (a) LGII and (b) any
person that pursuant to such Investment becomes a Wholly-Owned Subsidiary of
the Guarantor) and any person that is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to, the Guarantor
or any Wholly-Owned Subsidiary of the Guarantor at the time such Investment is
made; (ii) Investments in Cash Equivalents; (iii) Investments in Currency
Agreements on commercially reasonable terms entered into by the Guarantor or
any of its Restricted Subsidiaries in the ordinary course of business in
connection with the operations of the business of the Guarantor or its
Restricted Subsidiaries to hedge against fluctuations in foreign exchange
rates; (iv) loans or advances to officers, employees or consultants of the
Guarantor and its Restricted Subsidiaries for travel and moving expenses in
the ordinary course of business for bona fide business purposes of the
Guarantor and its Restricted Subsidiaries; (v) other loans or advances to
officers, employees or consultants of the Guarantor and its Restricted
Subsidiaries in the ordinary course of business for bona fide business
purposes of the Guarantor and its Restricted Subsidiaries not in excess of
$10,000,000 in the aggregate at any one time outstanding; (vi) Investments in
evidences of Indebtedness, securities or other property received from another
person by the Guarantor or any of its Restricted Subsidiaries in connection
with any bankruptcy proceeding or by reason of a composition or readjustment
of debt or a reorganization of such person or as a result of foreclosure,
perfection or enforcement of any Lien in exchange for evidences of
Indebtedness, securities or other property of such person held by the
Guarantor or any of its Restricted Subsidiaries, or for other liabilities or
obligations of such other person to the Guarantor or any of its Restricted
Subsidiaries that were created, in accordance with the terms of the Indenture;
(vii) Investments in Interest Rate Protection Agreements on commercially
reasonable terms entered into by the Guarantor or any of its Restricted
Subsidiaries in the ordinary course of business in connection with the
operations of the Guarantor and its Restricted Subsidiaries to hedge against
fluctuations in interest rates; (viii) Investments of funds received by the
Guarantor or its Restricted Subsidiaries (including without limitation LGII)
in the ordinary course of business, which funds are required to be held in
trust for the benefit of others by the Guarantor or such Restricted
Subsidiary, as the case may be, and which funds do not constitute assets or
liabilities of the Guarantor or such Restricted Subsidiary; (ix) Investments
not in excess of $50,000,000 in the aggregate in other Unrestricted
Subsidiaries which are engaged in the insurance business; and (x) Investments
not in excess of $50,000,000 in persons (other than Wholly-Owned Subsidiaries)
engaged in businesses incidental to the funeral home, cemetery and cremation
businesses of the Guarantor and its Restricted Subsidiaries.
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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 the Guarantor or any of its Restricted
Subsidiaries (including without limitation LGII) shall have set aside on
its books such reserves as may be required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, governmental
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default so long as such
Lien is adequately bonded and any appropriate legal proceedings which may
have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Guarantor
or any of its Restricted Subsidiaries (including without limitation LGII);
(f) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
(g) any Lien existing on any asset of any corporation at the time such
corporation becomes a Restricted Subsidiary and not created in
contemplation of such event;
(h) any Lien on any asset securing Indebtedness incurred or assumed for
the purpose of financing all or any part of the cost of acquiring or
constructing such asset; provided, that such Lien attaches to such asset
concurrently with or within 18 months after the acquisition or completion
thereof;
(i) any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Guarantor or a
Restricted Subsidiary and not created in contemplation of such event;
(j) any Lien existing on any asset prior to the acquisition thereof by
the Guarantor or a Restricted Subsidiary and not created in contemplation
of such acquisition; and
(k) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of customs duties in connection with the
importation of goods; and
(l) any extension, renewal or replacement of any Lien permitted by the
preceding clauses (g), (h), (i) or (j) hereof in respect of the same
property or assets theretofore subject to such Lien in connection with the
extension, renewal or refunding of the Indebtedness secured thereby;
provided that (1) such Lien shall attach solely to the same property or
assets and (2) such extension, renewal or refunding of such Indebtedness
shall be without increase in the principal remaining unpaid as at the date
of such extension, renewal or refunding.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
charitable foundation, unincorporated organization, government or any agency
or political subdivision thereof.
"Preferred Securities" means, with respect to a Special Finance Subsidiary,
any securities of such Subsidiary treated for accounting purposes as an equity
security that has preferential rights to any other security of such person
with respect to dividends or redemptions or upon liquidation.
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"Preferred Stock" means, with respect to any person, any Capital Stock of
such person that has preferential rights to any other Capital Stock of such
person with respect to dividends or redemptions or upon liquidation and any
Preferred Securities.
"Redeemable Capital Stock" means any shares of any class or series of
Capital Stock, that, either by the terms thereof, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise, is
or upon the happening of an event or passage of time would be, required to be
redeemed prior to the Stated Maturity with respect to the principal of any
Senior Note or is redeemable at the option of the holder thereof at any time
prior to any such Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to any such Stated Maturity.
"Restricted Subsidiary" means any Subsidiary of the Guarantor other than an
Unrestricted Subsidiary.
"Sale-Leaseback Transaction" of any person means an arrangement with any
lender or investor or to which such lender or investor is a party providing
for the leasing by such person of any property or asset of such person which
has been or is being sold or transferred by such person after the acquisition
thereof or the completion of construction or commencement of operation thereof
to such lender or investor or to any person to whom funds have been or are to
be advanced by such lender or investor on the security of such property or
asset. The stated maturity of such arrangement shall be the date of the last
payment of rent or any other amount due under such arrangement prior to the
first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"S&P" means Standard & Poor's Corporation, and its successors.
"SEC" means the Securities and Exchange Commission, as from time to time
constituted.
"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.
"Significant Subsidiary" shall mean a Restricted Subsidiary which is a
"Significant Subsidiary" as defined in Rule 1.02(w) of Regulation S-X under
the Securities Act.
"Special Finance Subsidiary" means a Restricted Subsidiary whose sole assets
are debt obligations of LGII or the Guarantor and whose sole liabilities are
Preferred Securities the proceeds from the sale of which are or have been
advanced to LGII or the Guarantor.
"Stated Maturity" means, when used with respect to any Senior Note or any
installment of interest thereon, the date specified in such Senior Note as the
fixed date on which the principal of such Senior Note or such installment of
interest is due and payable, and when used with respect to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due and payable.
"Subsidiary" means, with respect to any person, (i) a corporation a majority
of whose Voting Stock is at the time, directly or indirectly, owned by such
person, by one or more Subsidiaries of such person or by such person and one
or more Subsidiaries thereof and (ii) any other person (other than a
corporation), including, without limitation, a joint venture, in which such
person, one or more Subsidiaries thereof or such person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other person
performing similar functions). For purposes of this definition, any directors'
qualifying shares or investments by foreign nationals mandated by applicable
law shall be disregarded in determining the ownership of a Subsidiary.
"Unrestricted Subsidiary" means (i) First Capital Life Insurance Company of
Louisiana, National Capital Life Insurance Company, Security Industrial
Insurance Company, Security Industrial Fire Insurance Company or any successor
to such Subsidiaries or (ii) a Subsidiary of the Guarantor declared by the
Board of Directors of the Guarantor to be an Unrestricted Subsidiary;
provided, that no such Subsidiary shall be declared to be an Unrestricted
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Subsidiary unless (x) none of its properties or assets were owned by the
Guarantor or any of its Subsidiaries prior to the Issue Date, other than any
such assets as are transferred to such Unrestricted Subsidiary in accordance
with the covenant described under "--Certain Covenants; Limitation on
Restricted Payments" above, (y) its properties and assets, to the extent that
they secure Indebtedness, secure only Non-Recourse Indebtedness and (z) it has
no Indebtedness other than Non-Recourse Indebtedness. As used above, "Non-
Recourse Indebtedness" means Indebtedness as to which (i) neither the
Guarantor nor any of its Subsidiaries (other than the relevant Unrestricted
Subsidiary or another Unrestricted Subsidiary) (1) provides credit support
(including any undertaking, agreement or instrument which would constitute
Indebtedness), (2) guarantees or is otherwise directly or indirectly liable or
(3) constitutes the lender (in each case, other than pursuant to and in
compliance with the covenant described under "--Certain Covenants; Limitation
on Restricted Payments") and (ii) no default with respect to such Indebtedness
(including any rights which the holders thereof may have to take enforcement
action against the relevant Unrestricted Subsidiary or its assets) would
permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Guarantor or its Subsidiaries (other than Unrestricted
Subsidiaries) to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect a least a majority of the board of directors, managers or trustees of
any person (irrespective of whether or not, at the time, Capital Stock of any
other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Wholly-Owned Subsidiary" means (i) any Restricted Subsidiary of the
Guarantor of which 100% of the outstanding Capital Stock is owned by the
Guarantor or one or more Wholly-Owned Subsidiaries of the Guarantor or by the
Guarantor and one or more Wholly-Owned Subsidiaries of the Guarantor,
including LGII, or (ii) any Subsidiary, at least 66 2/3% of the outstanding
voting securities of which, and all of the outstanding shares entitled to
receive dividends or other distributions of which, shall at the time be owned
or controlled, directly or indirectly, by the Guarantor or one or more Wholly-
Owned Subsidiaries of the Guarantor or by the Guarantor and one or more
Wholly-Owned Subsidiaries of the Guarantor, including LGII. For purposes of
this definition, any directors' qualifying shares or investments by foreign
nationals mandated by applicable law shall be disregarded in determining the
ownership of a Subsidiary.
DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS
All of the following indebtedness of LGII and Loewen is secured in the
manner described below under "Collateral Trust Agreement." The dollar amounts
reflected below are as at June 30, 1998, unless otherwise indicated.
CREDIT FACILITIES
LGII has a $600 million revolving credit facility that matures in March 2001
(the "Revolving Credit Facility"). The Revolving Credit Facility bears
interest at alternative market rates selected by LGII. As at July 31, 1998,
the amount outstanding under the Revolving Credit Facility was $208 million,
and such amount bore interest at 7.53% per annum. In addition, as at July 31,
1998, letters of credit in an aggregate amount of approximately $18 million
had been issued under the Revolving Credit Facility.
Loewen has a Cdn.$50 million revolving credit facility that matures in July
1999, which will be reduced to Cdn.$5 million in September 1998 (the "Canadian
Revolving Credit Facility"), and a subsidiary of Loewen has a $105 million
secured term loan implemented in connection with the 1994 Management Equity
Investment Plan that will terminate in July 2000 (the "MEIP Loan").
SENIOR NOTES
In addition to the Outstanding Series 6 and Series 7 Notes, LGII has
outstanding four series of senior guaranteed notes aggregating $700 million
(the "Series 1-4 Senior Notes") issued in March and October of
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1996. The Series 1-4 Senior Notes are guaranteed by Loewen and bear interest
rates ranging from 7.50% to 8.25% and have initial terms of five to seven
years. LGII also has outstanding one series of senior amortizing notes (the
"Series E Amortizing Notes") in the amount of $43 million. The Series E
Amortizing Notes are guaranteed by Loewen, bear interest at a rate of 6.49%
and have an initial term of ten years.
LGII also has outstanding $300 million in pass-through asset trust senior
guaranteed notes, due 2009 (the "PATS Senior Notes"). The PATS Senior Notes
bear interest at a rate of 6.70% until October 1, 1999, at which time the
interest rate will be reset at a fixed annual rate of 6.05% plus an adjustment
equal to LGII's then-current credit spread to the ten-year United States
Treasury rate. The PATS Senior Notes are redeemable at the election of the
holder, in whole but not in part, at 100% of the principal amount of October
1, 1999. The PATS Senior Notes are guaranteed by Loewen.
Loewen has outstanding Cdn.$200 million of 6.10% Series 5 Senior Guaranteed
Notes due 2002 (the "Series 5 Senior Notes"). The Series 5 Senior Notes are
guaranteed by LGII. Loewen also has outstanding one series of senior
amortizing notes (the "Series D Amortizing Notes") in the amount of $51
million. The Series D Amortizing Notes are guaranteed by LGII and bear an
interest rate of 9.62% and have an initial term of ten years.
COLLATERAL TRUST AGREEMENT
In May 1996, Loewen, LGII and their senior lenders entered into a collateral
trust arrangement pursuant to which the senior lenders share certain
collateral on a pari passu basis (the "Collateral Trust Agreement"). The
Collateral includes (i) a pledge for the benefit of the senior lenders of the
shares of capital stock held by Loewen of substantially all of its
subsidiaries, (ii) a guarantee by substantially all of the Company's
subsidiaries and (iii) all of the financial assets of LGII (including the
shares of the 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 pari passu indebtedness, which group currently consists
principally of the lenders under the Revolving Credit Facility, the Canadian
Revolving Credit Facility, the MEIP Loan, the PATS Senior Notes, the Series 1-
4 Senior Notes, the Series 5 Senior Notes, the Outstanding Notes, and the
Series D and E Amortizing Notes, as well as the holders of certain letters of
credit. The Exchange Notes offered hereby will be secured by the Collateral to
the extent described in this Prospectus.
RESTRICTIONS
Certain of the Company's debt instruments and credit facilities contain
restrictions, including change of control provisions, provisions requiring the
Company to maintain specified financial ratios and provisions limiting the
payment of dividends on Common Shares and preferred shares, the encumbrance of
assets, payments to subsidiaries, the redemption or repurchase of shares,
dispositions of assets, additional debt, transactions with interested persons,
sales of preferred stock, sale-leaseback transactions and merger and
acquisitions. At June 30, 1998, none of the Company's retained earnings were
restricted or unavailable for payment of dividends under the most restrictive
agreement.
In connection with the issuance of the MIPS by LGC in August 1994, Loewen is
the 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
obligation 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 5 to the June 1998
Interim 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 that restrict distributions, loans and
advances from such subsidiaries to the Company.
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PLAN OF DISTRIBUTION
Based on interpretations by the staff of the SEC set forth in no action
letters issued to third parties, LGII and Loewen believe that, except as
described below, the Exchange Notes issued pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by respective holders
thereof without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that (i) such Exchange
Notes are acquired in the ordinary course of such holder's business and (ii)
such holder does not intend to participate in, has no arrangement or
understanding with any person to participate in, and is not engaged in and
does not intend to engage in, a distribution of the Exchange Notes. A holder
of Outstanding Notes that is an "affiliate" of LGII or Loewen within the
meaning of Rule 405 under the Securities Act or that is a broker-dealer that
purchased Outstanding Notes from LGII to resell pursuant to an exemption from
registration (a) cannot rely on such interpretations by the staff of the SEC,
(b) will not be permitted or entitled to tender such Outstanding Notes in the
Exchange Offer and (c) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of such Outstanding Notes. Any holder who tenders Outstanding Notes
in the Exchange Offer with the intention or for the purpose of participating
in a distribution of the Exchange Notes cannot rely on such interpretation by
the staff of the SEC and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. Unless an exemption from registration is otherwise
available, any such resale transaction should be covered by an effective
registration statement containing the selling security holders information
required by Item 507 of Regulation S-K under the Securities Act.
To date, the staff of the SEC has taken the position that a broker-dealer
that has acquired securities in exchange for securities that were acquired by
such broker-dealer as a result of market-making activities or other trading
activities (a "Participating Broker-Dealer") may fulfill its prospectus
delivery requirements with the prospectus contained in an exchange offer
registration statement. Pursuant to the Registration Rights Agreement, LGII
has agreed to permit Participating Broker-Dealers and other persons, if any,
subject to similar prospectus delivery requirements to use this Prospectus in
connection with the resale of such Exchange Notes. LGII and Loewen have agreed
that, for a period of 180 days after the Expiration Date, they will make this
Prospectus, and any amendment or supplement to this Prospectus, available to
any broker-dealer that requests such documents in the Letter of Transmittal.
Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make
certain representations to LGII as set forth in "The Exchange Offer--
Procedures for Tendering." In addition, each holder who is a broker-dealer and
who receives Exchange Notes for its own account in exchange for Outstanding
Notes that were acquired by it as a result of market-making activities or
other trading activities, will be required to acknowledge that it will deliver
a prospectus in connection with any resale by its of such Exchange Notes.
Neither LGII nor Loewen will receive any proceeds from the issuance of the
Exchange Notes. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange
Notes that were received by it for its own account in connection with the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act, and any profit on any such resale of Exchange Notes and
any commissions or concessions received by any such persons may be deemed to
be "underwriting compensation" under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
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LGII has agreed to pay all expenses incidental to the Exchange Offer other
than commissions and concessions of any brokers or dealers and will indemnify
holders of the Outstanding Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Registration Rights Agreement.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is the opinion of Thelen Reid & Priest LLP, United States
counsel to LGII and Loewen, as to the material United States federal income
tax consequences generally applicable to a U.S. Holder (as defined below) that
exchanges Outstanding Notes for Exchange Notes in the Exchange Offer and that
holds the Outstanding Notes, and will hold the Exchange Notes, as capital
assets. The opinion also describes the principal United States federal income
tax consequences expected to result from the holding of Exchange Notes by
certain Non-U.S. Holders (as defined below).
The opinion reflects counsel's interpretation of the provisions of the
United States Internal Revenue Code of 1986, as amended (the "Tax Code"),
applicable Treasury regulations thereunder, judicial authority and
administrative rulings and practices now in effect, as applied to the proposed
transactions. There can be no assurance that the Internal Revenue Service will
not take a different position concerning the consequences of the Exchange
Offer or the ownership or disposition of Exchange Notes or that any such
position would not be sustained. Thus, future legislative, judicial or
administrative changes or interpretations, which may or may not be
retroactive, could produce United States tax consequences different from those
expressed in counsel's opinion. The opinion does not discuss all aspects of
federal income taxation that may be relevant to a particular holder in light
of the holder's particular investment circumstances, or to certain types of
holders subject to special treatment under the federal income tax laws (for
example, life insurance companies, tax-exempt entities and dealers in
securities) and does not discuss any aspect of state, local or foreign tax
laws.
As used in this opinion, the term "U.S. Holder" means a beneficial owner of
Notes that, for United States federal income tax purposes, is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, or (iii) an estate or trust the income of which
is subject to United States federal income taxation regardless of the source
of its income or a trust whose administration is subject to the primary
operation of a United States court and which has one or more fiduciaries who
are United States persons and who have the authority to control all
substantial decisions of the trust.
The term "Non-U.S. Holder" means a beneficial owner of Notes that, for
United States federal income tax purposes, is not a U.S. Holder.
TAX CONSEQUENCES TO U.S. HOLDERS
Exchange Offer
The exchange of the Outstanding Notes for Exchange Notes pursuant to the
Exchange Offer will not be treated as an "exchange" for federal income tax
purposes because the exchange will not result in a significant modification of
LGII's and Loewen's obligations to the holders. Rather, the Exchange Notes
received by a holder of the Outstanding Notes will be treated as a
continuation of the Outstanding Notes in the hands of such holder. As a
result, there will be no federal income tax consequences to holders exchanging
the Outstanding Notes for the Exchange Notes pursuant to the Exchange Offer.
Interest
Except as provided below in respect of certain Additional Interest (as
described below), a holder of a Note will be required to report stated
interest on the Note as interest income in accordance with the holder's method
of accounting for tax purposes.
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Under the tax rules relating to original issue discount ("OID"), holders of
debt instruments issued at a discount that exceeds a nominal amount may be
required to recognize taxable interest income prior to the receipt of cash.
The Outstanding Notes were issued without taxable OID. In the case of an
instrument with alternative payment schedules, the Treasury Regulations
relating to OID permit the accrual of OID to be determined under the payment
schedule that is significantly more likely than not to occur, as determined by
the issuer, so long as the timing and amount of the payments under each
possible payment schedule are known as of the issue date. Under certain
circumstances, including failure of the Company to register the Exchange Notes
on a timely basis pursuant to an effective registration statement, additional
interest (the "Additional Interest") will accrue on the Notes as described in
"Description of Exchange Notes--Registration Rights Agreement." The
possibility that Additional Interest may accrue on the Notes may be considered
to result in one or more alternative payment schedules. The Company determined
that it was significantly more likely than not that the Notes would be paid
according to their stated schedule. Accordingly the Company did not take
Additional Interest into account in concluding that the original Notes were
issued without OID. In the event that Additional Interest becomes payable on
the Notes, the Company will be required to redetermine the OID, if any, on
such Notes by treating the Notes as if they were newly issued on the date that
the right to Additional Interest first accrues.
Tax Basis in Outstanding Notes and Exchange Notes
A holder's tax basis in a Note will be the holder's purchase price for the
Note, increased for OID, if any, previously included in income by the holder
with respect to the Notes and not yet paid. If a holder of an Outstanding Note
exchanges the Outstanding Note for an Exchange Note pursuant to the Exchange
Offer, the tax basis of the Exchange Note immediately after such exchange
should equal the holder's tax basis in the Outstanding Note immediately prior
to the Exchange.
Disposition of Outstanding Notes or Exchange Notes
The sale, exchange, redemption or other disposition of a Note will be a
taxable event, except in the case of an exchange pursuant to the Exchange
Offer (see the above discussion), or certain exchanges in which gain or loss
is not recognized under the Code. A holder will recognize gain or loss equal
to the difference between (i) the amount of cash (plus the fair market value
of any property) received upon such sale, exchange, redemption or other
taxable disposition of the Outstanding Note or the Exchange Note (except to
the extent attributable to accrued interest) and (ii) the holder's adjusted
tax basis in such Outstanding Note or Exchange Note. Such gain or loss will be
capital gain or loss. Under recently enacted legislation, gain on a Note held
for more than one year at the time of the sale or other disposition
constitutes long-term capital gain. The holding period of an Exchange Note
will include the holding period of the Outstanding Note surrendered in
exchange therefor.
Purchasers of Notes at Other than Original Issuance Price
The foregoing does not discuss special rules that may affect the treatment
of purchasers that acquire Notes other than at par, including those provisions
of the Internal Revenue Code relating to the treatment of "market discount,"
"bond premium" and "amortizable bond premium." Any such purchaser should
consult its tax advisor as to the consequences to it of the acquisition,
ownership, and disposition of Notes.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
In the case of a Non-U.S. Holder, such Non-U.S. Holder will not be subject
to U.S. federal income tax, including U.S. withholding tax, on interest paid
or OID (if any) on the Notes under the "portfolio interest" exception,
provided that (i) the Non-U.S. Holder does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of the
Company entitled to vote, (ii) the Non-U.S. Holder is
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not (a) a bank receiving interest or OID pursuant to a loan agreement entered
into in the ordinary course of its trade or business or (b) a controlled
foreign corporation that is related to the Company through stock ownership,
(iii) such interest or OID is not effectively connected with a United States
trade or business, and (iv) either (a) the beneficial owner of the Notes
certifies to the Company or its agent, under penalties of perjury, that the
beneficial owner is a foreign person and provides a completed IRS Form W-8
("Certificate of Foreign Status") or (b) a securities clearing organization,
bank or other financial institution which holds customers' securities in the
ordinary course of its trade or business (a "financial institution") and holds
the Notes, certifies to the Company or its agency, under penalties of perjury,
that it has received Form W-8 from the beneficial owner or that it has
received from another financial institution a Form W-8 and furnishes the payor
with a copy thereof. If any of the situations described in proviso (i), (ii)
or (iv) of the preceding sentence do not exist, then, except as described
below for effectively connected income, interest paid and OID, if any, on the
Notes would be subject to U.S. withholding tax at a 30% rate (or lower tax
treaty rate as evidenced by an IRS Form 1001 (Ownership Exemption or Reduced
Rate Certificate)). If the income on the Notes is effectively connected with a
Non-U.S. Holder's conduct of a trade or business within the United States,
then, absent tax treaty protection, the Non-U.S. Holder will be subject to
U.S. federal income tax on such income in essentially the same manner as a
United States person and, in the case of a foreign corporation, may also be
subject to the U.S. branch profits tax.
In October 1997, the Internal Revenue Service adopted final Treasury
regulations ("Final Regulations") setting forth revised procedures for
claiming the benefit of the portfolio interest exemption and treaty
withholding rate reductions. These rules will be effective for payments made
after December 31, 1999. Until then, the rules discussed in the immediately
preceding paragraph apply. Under the Final Regulations, Non-U.S. Holders of
the Notes can continue to claim the benefit of the portfolio debt exemption by
filing a Form W-8 with the issuer. After December 31, 1999, Form W-8 will also
be used to claim the benefit of applicable tax treaty provisions. In addition,
the existing procedures under which financial institutions are permitted to
provide certifications of foreign status on behalf of their non-U.S. customers
have been continued and expanded. The IRS is currently in the process of
revising Form W-8. A Non-U.S. Holder must file a revised Form W-8, expected to
become available in late 1998, with the issuer prior to the earlier of the
expiration date of its existing Form W-8 or December 31, 2000, in order to
claim the benefit of the portfolio interest exemption or a treaty withholding
rate reduction under the Final Regulations.
BACKUP WITHHOLDING
Generally, unless a holder provides its correct taxpayer identification
number (employer identification number or social security number) to the
Company and certifies that such number is correct, under the federal income
tax backup withholding rules, 31% of (i) the interest paid on the Notes, and
(ii) proceeds of sale of the Notes, must be withheld and remitted to the
United States Treasury. However, certain holders (including, among others,
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. For a foreign individual to qualify as an exempt
foreign recipient, that holder must submit a statement, signed under penalties
of perjury, attesting to that individual's exempt foreign status. A Form W-8
filed to claim the benefit of the portfolio interest exception is generally
sufficient to prevent backup withholding in the case of an exempt foreign
recipient.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to withholding will be
reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained from the IRS.
CERTAIN CANADIAN FEDERAL TAX CONSIDERATIONS
The following is the opinion of Russell & DuMoulin, Canadian counsel to LGII
and Loewen, as to the material Canadian federal income tax consequences
generally applicable to an individual who is resident in the United States and
not in Canada who exchanges Outstanding Notes for Exchange Notes pursuant to
the Exchange Offer.
54
<PAGE>
This opinion is based upon the current provisions of the Income Tax Act of
Canada (the "Tax Act"), the regulations thereunder and on counsel's
understanding of the current administrative practices of Revenue Canada
Customs, Excise and Taxation. The provisions of the Tax Act are subject to
income tax treaties to which Canada is a party, including the Canada-U.S.
Income Tax Convention (1980) (the "Tax Treaty"). This discussion is general
only and is not a substitute for independent advice from each Note holder's
own tax advisor.
There will be no Canadian income tax consequences to a holder of Outstanding
Notes in connection with the exchange of the Outstanding Notes for Exchange
Notes pursuant to the Exchange Offer.
Interest income paid by LGII will not subject holders of Exchange Notes to
any Canadian income taxes or withholding taxes. However, any payments made by
Loewen to or for the benefit of the holders of Exchange Notes pursuant to the
Guarantees will be subject to Canadian withholding tax to the extent such
payments represent payments made as, on account or in lieu of payment of
interest. Under the Tax Act and the Tax Treaty, the rate of such Canadian
withholding tax would be 15%.
WHERE YOU CAN FIND MORE INFORMATION
LGII and Loewen have filed with the SEC a Registration Statement on Form S-4
under the Securities Act covering the registered notes and Loewen's guarantee
of the notes to be issued in the exchange offer. This Prospectus serves as the
Prospectus of LGII and Loewen that is filed as part of the registration
statement. Other parts of the registration statement are omitted from this
Prospectus. Statements made in this Prospectus concerning the contents of any
agreement or other document are not necessarily complete. For a more complete
description of the matter involved, you should read the entire agreement or
other document, which has been filed as an exhibit to the registration
statement.
Loewen files annual, quarterly and special reports, proxy statements and
other information with the SEC. Loewen's SEC filings are available to the
public over the Internet at the SEC's web site at http://www.sec.gov. You may
also read and copy any document Loewen files at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms.
The SEC allows public companies like Loewen to "incorporate by reference"
the information Loewen filed with the SEC, which means that Loewen can
disclose important information to you by referring you to those documents. The
information incorporated by reference is an important part of this Prospectus.
Information that Loewen files later with the SEC will automatically update and
supersede information in this Prospectus and information incorporated by
reference. Loewen incorporates by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of
the Securities Exchange Act of 1934 until Loewen completes the Exchange Offer.
. Annual Report on Form 10-K for the year ended December 31, 1997, filed
March 30, 1998;
. Quarterly Reports on Form 10-Q for the quarter ended March 31, 1998,
filed May 12, 1998 and for the quarter ended June 30, 1998, filed August
12, 1998, amended by Forms 10-Q/A, filed August 13, 1998 and August 18,
1998;
. Current Reports on Form 8-K dated March 2, March 5, March 16, May 7,
May 14, May 28, June 22, July 21, July 27, July 31, August 6, and
September 11, 1998; and
. the description of the Common Shares contained in Loewen's Current
Report on Form 8-K dated May 2, 1997.
You may request a copy of these filings (excluding exhibits) at no cost, by
writing or telephoning the Corporate Secretary of Loewen at the following
address:
4126 Norland Avenue
Burnaby, British Columbia
CANADA V5G 3S8
(604) 299-9321
55
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE ELSE TO PROVIDE YOU
WITH DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN
ANY STATE WHERE THE OFFER IS NOT PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THOSE DOCUMENTS.
LEGAL MATTERS
The validity of the Exchange Notes and certain matters of New York law
relating to the validity of the Guarantees will be passed upon for LGII and
Loewen by Thelen Reid & Priest LLP, San Francisco, California. Certain legal
matters relating to the Guarantees will be passed upon for Loewen by Russell &
DuMoulin, Vancouver, Canada.
EXPERTS
The 1997 Consolidated Financial Statements of the Company incorporated by
reference in this Prospectus have been audited by KPMG, Chartered Accountants,
for the periods indicated in their report thereon, which is incorporated in by
reference. Such annual consolidated financial statements have been so
incorporated in reliance on the report of KPMG.
56
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LOEWEN GROUP INTERNATIONAL, INC.
Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997... F-2
Consolidated Statements of Operations and Retained Earnings (Deficit)
for the Three Months Ended June 30, 1998 and 1997 and the Six Months
Ended June 30, 1998 and 1997........................................... F-3
Consolidated Statements of Changes in Financial Position for the Six
Months Ended June 30, 1998 and 1997.................................... F-4
Notes to Interim Consolidated Financial Statements...................... F-5
TLGI MANAGEMENT CORP. (1)
Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997... F-18
Consolidated Statements of Operations for the Three Months Ended June
30, 1998 and 1997 and the
Six Months Ended June 30, 1998 and 1997................................ F-19
Consolidated Statements of Retained Earnings (Deficit) for the Three
Months Ended June 30, 1998 and 1997 and the Six Months Ended June 30,
1998 and 1997.......................................................... F-20
Consolidated Statements of Changes in Financial Position for the Six
Months Ended June 30, 1998 and 1997.................................... F-21
Notes to Interim Consolidated Financial Statements...................... F-22
4103 INVESTMENTS LTD. (1)
Balance Sheets as of June 30, 1998 and December 31, 1997................ F-24
Statements of Operations and Retained Earnings for the Three Months
Ended June 30, 1998 and 1997, the Six Months Ended June 30, 1998 and
the Period from March 24 to June 30, 1997.............................. F-25
Notes to Interim Financial Statements................................... F-26
NEWEOL INVESTMENTS LTD. (1)
Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997... F-27
Consolidated Statements of Operations and Retained Earnings for the
Three Months Ended June 30, 1998 and 1997 and the Six Months Ended June
30, 1998 and 1997...................................................... F-28
Consolidated Statements of Cash Flows for the Six Months Ended June 30,
1998 and 1997.......................................................... F-29
Notes to Interim Consolidated Financial Statements...................... F-30
LOEWEN LUXEMBOURG (NO. 1) S.A. (1)
Report of Independent Auditors.......................................... F-36
Consolidated Balance Sheets as of June 30, 1998, December 31, 1997 and
1996................................................................... F-37
Consolidated Statements of Operations and Retained Earnings for the
Three Months Ended June 30, 1998 and 1997, Six Months Ended June 30,
1998 and 1997 and the Years Ended December 31, 1997, 1996 and 1995..... F-38
Consolidated Statements of Cash Flows for the Six Months Ended June 30,
1998 and 1997 and the Years Ended December 31, 1997, 1996 and 1995..... F-39
Notes to Consolidated Financial Statements.............................. F-40
LOEWEN LUXEMBOURG (NO. 2) S.A. (1)
Report of Independent Auditors.......................................... F-46
Consolidated Balance Sheets as of June 30, 1998, December 31, 1997 and
1996................................................................... F-47
Consolidated Statements of Operations and Retained Earnings for the
Three Months Ended June 30, 1998 and 1997, Six Months Ended June 30,
1998 and 1997 and the Years Ended December 31, 1997, 1996 and 1995..... F-48
Consolidated Statements of Cash Flows for the Six Months Ended June 30,
1998 and 1997 and the
Years Ended December 31, 1997, 1996 and 1995........................... F-49
Notes to Consolidated Financial Statements.............................. F-50
</TABLE>
- --------
(1) Financial statements of TLGI Management Corp., 4103 Investments Ltd.,
Neweol Investments Ltd., Loewen Luxembourg (No. 1) S.A., and Loewen
Luxembourg (No. 2) S.A. are included in this Prospectus because the
outstanding shares of each of such companies constitute a "substantial
portion" of the collateral (within the meaning of Securities and Exchange
Commission Rule 3-10 under Regulation S-X) that secures the Series 1
through 4 Notes and Series 6 and 7 Notes that were issued by LGII and
guaranteed by Loewen.
F-1
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
ASSETS
------
<S> <C> <C>
Current assets
Cash and term deposits.............................. $ 29,611 $ 35,563
Receivables, net of allowances...................... 204,087 169,758
Inventories......................................... 32,253 30,391
Prepaid expenses.................................... 10,810 8,840
---------- ----------
276,761 244,552
Prearranged funeral services.......................... 366,314 345,795
Long-term receivables, net of allowances.............. 475,649 387,282
Investments........................................... 190,308 184,723
Insurance invested assets............................. 324,326 305,610
Cemetery property, at cost............................ 1,029,987 935,453
Property and equipment................................ 715,541 679,219
Names and reputations................................. 639,107 569,063
Deferred income taxes................................. 127,441 124,654
Other assets.......................................... 172,372 156,349
---------- ----------
$4,317,806 $3,932,700
========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities
Accounts payable and accrued liabilities............ $ 118,305 $ 138,963
Long-term debt, current portion..................... 37,586 33,408
---------- ----------
155,891 172,371
Loans and advances from affiliates.................... 1,071,064 1,013,914
Long-term debt........................................ 1,852,394 1,531,586
Other liabilities..................................... 272,854 259,388
Insurance policy liabilities.......................... 215,550 214,492
Deferred prearranged funeral services revenue......... 366,314 345,795
Preferred securities of subsidiary.................... 75,000 75,000
Shareholders' equity
Share capital....................................... 487,514 487,514
Deficit............................................. (178,775) (167,360)
---------- ----------
308,739 320,154
---------- ----------
$4,317,806 $3,932,700
========== ==========
</TABLE>
Commitments and contingencies (Notes 3, 6 and 7)
See accompanying notes to interim consolidated financial statements
F-2
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1998 1997 1998 1997
--------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue
Funeral........................... $ 134,948 $130,995 $ 287,431 $269,952
Cemetery.......................... 118,123 103,020 230,509 197,275
Insurance......................... 26,210 22,101 49,078 43,820
--------- -------- --------- --------
279,281 256,116 567,018 511,047
Costs and expenses
Funeral........................... 83,925 79,759 171,935 161,931
Cemetery.......................... 83,358 69,404 161,080 136,900
Insurance......................... 22,311 17,101 41,932 35,090
--------- -------- --------- --------
189,594 166,264 374,947 333,921
--------- -------- --------- --------
89,687 89,852 192,071 177,126
Expenses
General and administrative........ 22,787 15,758 44,847 36,539
Depreciation and amortization..... 18,237 14,645 35,364 29,677
--------- -------- --------- --------
41,024 30,403 80,211 66,216
--------- -------- --------- --------
Earnings from operations............ 48,663 59,449 111,860 110,910
Interest and financing fees paid to
affiliates, net.................... 29,706 22,159 59,116 41,985
Interest on long-term debt.......... 34,025 30,409 63,444 58,202
--------- -------- --------- --------
Earnings (loss) before undernoted
items.............................. (15,068) 6,881 (10,700) 10,723
Dividends on preferred securities of
subsidiary......................... 1,772 1,772 3,544 3,544
--------- -------- --------- --------
Earnings (loss) before income taxes
and undernoted items............... (16,840) 5,109 (14,244) 7,179
Income taxes........................ (1,020) 4,935 4,120 8,736
--------- -------- --------- --------
(15,820) 174 (18,364) (1,557)
Equity and other earnings of associ-
ated companies..................... 4,283 1,522 6,949 4,256
--------- -------- --------- --------
Net earnings (loss) for the period.. (11,537) 1,696 (11,415) 2,699
Deficit, beginning of period........ (167,238) (88,611) (167,360) (89,614)
--------- -------- --------- --------
Deficit, end of period.............. $(178,775) $(86,915) $(178,775) $(86,915)
========= ======== ========= ========
</TABLE>
See accompanying notes to interim consolidated financial statements
F-3
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1998 1997
--------- ---------
(UNAUDITED)
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings (loss).................................... $ (11,415) $ 2,699
Items not affecting cash
Depreciation and amortization........................ 35,364 29,677
Equity and other earnings of associated companies.... (6,949) (4,256)
Other, including net changes in other non-cash
balances.............................................. (165,572) (152,680)
--------- ---------
(148,572) (124,560)
--------- ---------
Investing
Business acquisitions.................................. (208,042) (264,126)
Construction of new facilities......................... (7,795) (1,683)
Investments, net....................................... (56) (92)
Purchase of insurance invested assets.................. (104,533) (136,373)
Proceeds on disposition and maturities of insurance
invested assets....................................... 85,816 132,094
Purchase of property and equipment..................... (17,594) (26,974)
Proceeds on disposition of assets...................... 4,672 20,738
Other.................................................. 19,603 (19,883)
--------- ---------
(227,929) (296,299)
--------- ---------
Financing
Issue of share capital................................. -- 125,180
Increase in long-term debt............................. 835,101 433,019
Reduction in long-term debt............................ (508,697) (454,167)
Loans and advances from affiliates..................... 57,148 310,228
Proceeds of factoring accounts receivable.............. -- 18,985
Other.................................................. (13,003) (1,599)
--------- ---------
370,549 431,646
--------- ---------
Increase (decrease) in cash and cash equivalents during
the period.............................................. (5,952) 10,787
Cash and cash equivalents, beginning of period........... 35,563 17,510
--------- ---------
Cash and cash equivalents, end of period................. $ 29,611 $ 28,297
========= =========
</TABLE>
Cash and cash equivalents include cash and term deposits.
See accompanying notes to interim consolidated financial statements
F-4
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
NOTE 1. BASIS OF PRESENTATION
Loewen Group International, Inc. (the "Company") was incorporated on
February 25, 1987 under the laws of the State of Delaware and is directly and
indirectly a wholly owned subsidiary of The Loewen Group Inc. (the "Parent
Company"). The United States dollar is the principal currency of the Company's
business and accordingly the interim consolidated financial statements are
expressed in United States dollars. The interim consolidated financial
statements have been prepared in accordance with accounting principles
generally accepted in Canada.
The interim consolidated financial statements (unaudited) include the
accounts of all subsidiary companies and all adjustments, including normal
recurring adjustments, which in management's opinion are necessary for a fair
presentation of the financial results for the interim periods. The financial
statements have been prepared consistent with the accounting policies
described in the Parent Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission for the year ended December 31, 1997 and
should be read in conjunction therewith. Certain of the comparative figures
have been reclassified to conform to the presentation adopted in the current
period.
Use of estimates
The preparation of interim consolidated financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the interim consolidated financial statements and the reported amounts of
revenue and expenses during the reporting period. As a result, actual results
could differ from those estimates.
NOTE 2. ACQUISITIONS
During the six months ended June 30, 1998, the Company acquired 58 funeral
homes and 49 cemeteries. During the six months ended June 30, 1997, the
Company acquired 47 funeral homes and 85 cemeteries.
F-5
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
All of the Company's acquisitions have been accounted for by the purchase
method. The preliminary purchase price allocation for certain of these
acquisitions has been estimated based on available information at the time and
is subject to revision. The effect of acquisitions at dates of purchase on the
Consolidated Balance Sheet is shown below.
<TABLE>
<CAPTION>
JUNE 30,
------------------
1998 1997
-------- --------
<S> <C> <C>
Current assets.......................................... $ 3,998 $ 4,815
Prearranged funeral services............................ 12,074 12,593
Long-term receivables, net of allowances................ 6,167 54,553
Cemetery property, at cost.............................. 75,623 177,329
Property and equipment.................................. 34,432 36,280
Names and reputations................................... 75,556 22,630
Other assets............................................ 13,916 63
-------- --------
221,766 308,263
Current liabilities..................................... -- (1,265)
Long-term debt.......................................... (1,431) (289)
Other liabilities....................................... (219) (29,990)
Deferred prearranged funeral services revenue........... (12,074) (12,593)
-------- --------
$208,042 $264,126
======== ========
Consideration
Cash, including assumed debt repaid at closing........ $188,741 $257,426
Debt.................................................. 19,301 4,804
Share capital of Parent Company....................... -- 1,896
-------- --------
Purchase Price.......................................... $208,042 $264,126
======== ========
</TABLE>
The following table reflects, on an unaudited pro-forma basis, the combined
results of the Company's operations acquired during the period ended June 30,
1998 as if all such acquisitions had taken place at the beginning of the
respective years presented. Appropriate adjustments have been made to reflect
the accounting basis used in recording these acquisitions. This pro-forma
information does not purport to be indicative of the results of operations
that would have resulted had the acquisitions been in effect for the entire
periods presented, and is not intended to be a projection of future results or
trends.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1998 1997
-------- --------
<S> <C> <C>
Revenues.................................................. $577,778 $536,126
Net earnings (loss)....................................... $(11,881) $ 1,913
</TABLE>
NOTE 3. INVESTMENTS
(a) 4103 Investments Ltd. ("4103 Investments")
The Company owns 189,475,132 Class B non-voting common shares of 4103
Investments, an entity under common control, which represents 48.68% of 4103
Investments common shares. 4103 Investments cannot declare dividends on the
Class A voting common shares without first paying an equal dividend on the
Class B common shares.
F-6
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
4103 Investments has a 10.23% common share investment and a 100% preferred
share investment in Prime Succession Holdings, Inc. ("Prime"), a 10% common
share investment and 73.3% preferred share investment in Rose Hills Holdings
Corp. ("RH Holdings") and an 82.86% preferred share investment in TLGI
Management Corp.
The Company accounts for its investment in 4103 Investments common shares by
the equity method. For the six months ended June 30, 1998, income of $6,600
(1997--$3,400) was recorded representing the Company's proportionate share of
the income attributable to 4103 Investments common shares.
Summarized financial data for 4103 Investments are presented as follows:
<TABLE>
<CAPTION>
SIX
MONTHS
THREE MONTHS ENDED PERIOD FROM
ENDED JUNE 30, JUNE MARCH 24 TO
-------------- 30, JUNE 30,
1998 1997 1998 1997
------- ------ ------- -----------
<S> <C> <C> <C> <C>
Income statement information:
Earnings before income taxes and equity
loss of associated company............... $11,349 $6,854 $16,085 $7,621
Net earnings.............................. 8,822 6,395 13,556 6,900
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- ------------
<S> <C> <C>
Balance sheet information:
Current assets.......................................... $ 14,107 $ 9,032
Non-current assets...................................... 298,794 292,634
-------- --------
Total assets............................................ 312,901 301,666
Current liabilities..................................... 927 579
Non-current liabilities................................. 3,367 1,984
-------- --------
Total liabilities....................................... 4,294 2,563
Shareholders' equity.................................... 308,607 299,103
</TABLE>
(b) Prime
In 1996, the Company and Blackstone Capital Partners II Merchant Banking
Fund L.P. and certain affiliates (together, "Blackstone") acquired Prime,
which holds all of the outstanding common shares of Prime Succession, Inc., an
operator of funeral homes and cemeteries in the United States. The excess of
the purchase price over the fair value of net assets of approximately
$230,000,000 was established as goodwill in Prime Succession, Inc. and is
being amortized over 40 years. The Company owns 11.57% of Prime common stock.
The Company accounted for its investment in Prime preferred stock by the
cost method. For the six months ended June 30, 1997, $1,588,000 was recorded
representing the 10% cumulative annual payment-in-kind dividend.
The Company accounts for its investment in Prime common stock by the equity
method. Under this method, the Company records its proportionate share of the
net earnings (loss) of Prime after deducting the payment-in-kind dividend. For
the six months ended June 30, 1998, a loss of $585,000 (1997--loss of
$823,000) was recorded representing the Company's proportionate share of the
loss attributable to the Prime common stock.
F-7
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
Under a Put/Call Agreement entered into with Blackstone, the Company has the
option to acquire ("Call") Blackstone's Prime common stock commencing on the
fourth anniversary of the acquisition, and for a period of two years
thereafter, at a price determined pursuant to the Put/Call Agreement.
Blackstone has the option to sell ("Put") its Prime common stock to the
Company commencing on the sixth anniversary of the acquisition, and for a
period of two years thereafter, at a price determined pursuant to the Put/Call
Agreement.
Any payment to Blackstone is subject to Blackstone or the Company exercising
their respective rights under the Put or the Call. It is not currently
possible to determine whether Blackstone or the Company will exercise such
rights. Furthermore, any amount to be paid pursuant to the Put or Call is
dependent on calculated equity value which is based on EBITDA of future
periods. Accordingly, it is not possible at this date to estimate the future
amount that may be payable to Blackstone on the exercise of the Put or the
Call.
Summarized financial data for Prime are presented as follows:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
---------------- ----------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Income statement information:
Revenue.................................. $25,113 $24,364 $51,698 $48,559
Gross margin............................. 8,330 8,572 18,204 17,253
Earnings from operations................. 4,690 5,047 10,995 10,118
Payment-in-kind dividend................. 1,746 1,588 3,493 3,175
Net loss attributable to common
shareholders............................ (3,245) (2,309) (4,894) (4,846)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- ------------
<S> <C> <C>
Balance sheet information:
Current assets.......................................... $ 20,709 $ 25,694
Non-current assets...................................... 370,107 369,412
-------- --------
Total assets............................................ 390,816 395,106
Current liabilities..................................... 13,092 14,964
Non-current liabilities................................. 252,717 253,734
-------- --------
Total liabilities....................................... 265,809 268,698
Shareholders' equity.................................... 125,007 126,408
</TABLE>
(c) RH Holdings
In 1996, the Company and Blackstone acquired RH Holdings, which holds all of
the outstanding common stock of Rose Hills Company ("RHC") and the cemetery
related assets of Rose Hills Memorial Park Association, representing the
largest single location cemetery in the United States. The excess purchase
price over the fair value of net assets of approximately $130,000,000 was
established as goodwill in RH Holdings and is being amortized over 40 years.
The Company owns 10.45% of RH Holdings' voting common stock and 26.7% of RH
Holdings' non-voting preferred stock.
The Company accounts for its investment in RH Holdings preferred stock by
the cost method. For the six months ended June 30, 1998, income of $1,264,000
(1997--$1,150,000) was recorded representing the 10% cumulative annual
payment-in-kind dividend.
F-8
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
The Company accounts for its investment in RH Holdings common stock by the
equity method. Under the equity method, the Company records its proportionate
share of the net earnings (loss) of RH Holdings after deducting the payment-
in-kind dividend. For the six months ended June 30, 1998, a loss of $330,000
(1997--loss of $622,000) was recorded representing the Company's proportionate
share of the loss attributable to the common stock of RH Holdings. The
properties contributed by the Company had a net carrying value of $20,382,000.
The Company has deferred a gain of $2,618,000 on the disposition of these
properties and will recognize the gain if and when the properties are sold.
The deferred gain is recorded in other liabilities on the consolidated balance
sheet.
Under a Put/Call Agreement entered into with Blackstone, the Company has the
option to acquire ("Call") Blackstone's RH Holdings common stock commencing on
the fourth anniversary of the acquisition, and for a period of two years
thereafter, at a price to be determined pursuant to the Put/Call Agreement.
Blackstone has the option to sell ("Put") its RH Holdings common stock to the
Company commencing on the sixth anniversary of the acquisition, and for a
period of two years thereafter, at a price determined pursuant to the Put/Call
Agreement.
Any payment to Blackstone will be subject to Blackstone or the Company
exercising their respective rights under the Put or the Call. It is not
currently possible to determine whether Blackstone or the Company will
exercise such rights. Furthermore, any amount to be paid pursuant to the Put
or Call is dependent on calculated equity value which is based on EBITDA of
future periods. Accordingly, it is not possible at this date to estimate the
future amount that may be payable to Blackstone on the exercise of the Put or
the Call.
Summarized financial data for RH Holdings are presented as follows:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
---------------- ----------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Income statement information:
Revenue.................................. $19,638 $18,246 $42,248 $36,096
Gross margin............................. 16,735 15,452 35,604 30,823
Earnings from operations................. 4,424 4,262 11,276 9,168
Payment-in-kind dividend................. 2,365 2,150 4,730 4,300
Net loss attributable to common share-
holders................................. (2,179) (2,053) (3,161) (3,693)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- ------------
<S> <C> <C>
Balance sheet information:
Current assets.......................................... $ 20,083 $ 17,117
Non-current assets...................................... 297,474 294,934
-------- --------
Total assets............................................ 317,557 312,051
Current liabilities..................................... 19,904 15,780
Non-current liabilities................................. 168,826 169,013
-------- --------
Total liabilities....................................... 188,730 184,793
Shareholders' equity.................................... 128,827 127,258
</TABLE>
F-9
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
NOTE 4. LONG-TERM DEBT
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
Bank revolving credit agreements...................... $ 121,000 $ 234,500
Management Equity Investment Plan ("MEIP") bank term
credit agreement due in 2000......................... 105,140 105,140
6.49% Series E senior amortizing notes due in 2004.... 42,857 50,000
7.50% Series 1 senior notes due in 2001............... 225,000 225,000
7.75% Series 3 senior notes due in 2001............... 125,000 125,000
8.25% Series 2 and 4 senior notes due in 2003......... 350,000 350,000
7.20% Series 6 senior notes due in 2003............... 200,000 --
7.60% Series 7 senior notes due in 2008............... 250,000 --
6.70% PATS senior notes............................... 300,000 300,000
Present value of notes issued for legal settlements
discounted at an effective interest rate of 7.75%.... 38,147 39,115
Present value of contingent consideration payable on
acquisitions discounted at an effective interest rate
of 8.0%.............................................. 19,785 24,515
Other, principally arising from vendor financing of
acquired operations or long-term debt assumed on
acquisitions, bearing interest at fixed and floating
rates varying from 4.8% to 14.0%, certain of which
are secured by assets of certain subsidiaries........ 113,051 111,724
---------- ----------
1,889,980 1,564,994
Less current portion.................................. 37,586 33,408
---------- ----------
$1,852,394 $1,531,586
========== ==========
</TABLE>
(a) In 1996, the Company, the Parent Company and their senior lenders
entered into a collateral trust arrangement pursuant to which the senior
lenders share certain collateral on a pari passu basis. The collateral
includes (i) a pledge for the benefit of the senior lenders of the shares of
capital stock held by the Parent Company of substantially all of its
subsidiaries and a guarantee by substantially all of the Parent Company's
subsidiaries and (ii) all of the financial assets of the Company (including
the shares of the capital stock held by the Company of various subsidiaries)
(collectively, the "Collateral"). The Collateral and guarantees are held by a
trustee for the equal and ratable benefit of the various holders of pari passu
indebtedness. The senior lenders consist principally of the lenders under the
senior amortizing notes, senior notes and bank revolving and term credit
agreements and certain loans and advances from affiliates as well as the
holders of certain letters of credit. At June 30, 1998, the Company's
indebtedness owed to the senior lending group subject to the collateral trust
arrangement, including holders of certain letters of credit, aggregated
$2,887,000,000.
(b) Certain of the above loan agreements contain various restrictive
provisions, including change of control provisions and provisions restricting
payment by the Parent Company of dividends on Common and Preferred shares,
restricting encumbrance of assets, limiting redemption or repurchase by the
Parent Company of its shares, limiting disposition of assets, limiting the
amount of additional debt and requiring the Parent Company and its
subsidiaries to maintain specified financial ratios.
(c) In May 1998, the Company completed a private placement in the United
States of $200,000,000 of 7.20% Series 6 Senior Guaranteed Notes due 2003 (the
"Series 6 senior notes") and $250,000,000 of 7.60%
F-10
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
Series 7 Senior Guaranteed Notes due 2008 (the "Series 7 senior notes"). The
net proceeds from the Series 6 and 7 senior notes were used to repay
indebtedness outstanding under the revolving credit facility. The Series 6 and
7 senior notes are guaranteed by the Parent Company.
(d) In March 1998, the Company amended its $1,000,000,000 revolving credit
agreement to provide greater flexibility for the timing of equity and other
financing alternatives. As part of the amendment, the 364-day tranche was
terminated and the $750,000,000 tranche was reduced to a $600,000,000
revolving credit agreement with a three-year term.
(e) Repayment of the Series E senior amortizing notes commenced February
1998 in equal annual amounts.
NOTE 5. PREFERRED SECURITIES OF SUBSIDIARY
On August 15, 1994, 3,000,000 9.45% Cumulative Monthly Income Preferred
Securities, Series A ("MIPS") were issued by Loewen Group Capital, L.P.
("LGC") in a public offering for an aggregate amount of $75,000,000. LGC is a
limited partnership and the Company as its general partner manages its
business and affairs.
The MIPS are due August 31, 2024 and are subject to redemption at par at the
option of LGC, in whole or in part, from time to time, on or after August 31,
2004.
Holders of the MIPS are entitled to receive cumulative dividends at an
annual rate of 9.45% of the liquidation preference of $25 per MIPS. The
dividends accrue from the date of original issuance and are payable monthly in
arrears.
The Company has the right to defer payment of dividends on the MIPS for one
or more periods, each not to exceed 60 consecutive months. In this event the
Parent Company may not declare or pay dividends on, or redeem, purchase or
acquire or make a liquidation payment with respect to any class of its capital
stock.
The Parent Company has guaranteed certain payment obligations of the Company
to LGC and of LGC to the MIPS holders. The guarantees are subordinated to all
liabilities of the Parent Company and are unsecured.
NOTE 6. 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 Parent Company
securities against the Parent Company and five individuals who were officers
of the Parent Company (four of whom were also directors) in the United States
District Court for the Eastern District of Pennsylvania. The Company, Loewen
Group Capital, L.P., ("LGC") and the lead underwriters (the "MIPS
Underwriters") of LGC's 1994 offering of the Monthly Income Preferred
Securities ("MIPS"), were subsequently added as defendants. On November 7,
1995, a class action lawsuit was filed on behalf of a class of purchasers of
Common Shares against the Parent Company and the same individual defendants in
the United States District Court for the Southern District of Mississippi
alleging Federal securities law violations and related common law claims. On
December 1, 1995, a class action lawsuit was filed on behalf of a class of
purchasers of the Parent Company's securities against the Parent Company, the
Company, LGC and the same individual defendants in the United States District
Court for the Eastern District of Pennsylvania. On June 11, 1996 all claims
against the MIPS Underwriters were dismissed without prejudice, by agreement
of the parties. The cases were consolidated before the District Court of the
Eastern District of Pennsylvania. A Consolidated and Amended Class Action
Complaint was filed on September 16, 1996.
F-11
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
The parties have agreed to a settlement of all claims in the action. The
District Court entered an order approving the settlement on April 21, 1998,
which became effective May 21, 1998. No objections to the settlement were
filed, and no appeal was filed from the order of approval. The settlement
provides for the payment by the Parent Company on behalf of all defendants of
$5,000,000, plus up to $100,000 for costs of notice and 50% of the costs of
administration of the settlement.
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 of Bucks County, Pennsylvania against
Osiris Holding Corporation ("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 are employees
of the Parent Company and the Company. Mr. Miller is currently a director of
the Parent Company and the Company.
The complaint alleged that Osiris breached the terms of a Second Amended and
Restated Shareholders' Agreement among Messrs. Esner, Miller and Shane (the
"Shareholders' Agreement") by attempting to repurchase shares of Osiris held
by the Esner Estate (the "Esner Shares") without complying with the terms of
the Shareholders' Agreement, and that the Law Firm breached its fiduciary duty
and committed malpractice in connection with the drafting of the Shareholders'
Agreement and its representation of Esner and Osiris. The Executors asked the
Court (i) to have the value of Osiris reappraised pursuant to the terms of the
Shareholders' Agreement and (ii) to require Osiris to repurchase the Esner
Shares pursuant to a new appraisal and the alleged terms of the Shareholders'
Agreement or, alternatively, to pay the Esner Estate the fair value of the
Esner Shares as determined by the new appraisal.
In March 1995, the Company purchased all of the issued and outstanding
shares of Osiris, including the Esner Shares. In connection with the purchase,
the Company entered into an indemnification agreement whereby Messrs. Miller
and Shane agreed to indemnify and hold the Company harmless with respect to
any claims, liabilities, losses and expenses, including reasonable attorney's
fees, in connection with or arising from the Esner Estate litigation.
On April 9, 1996, the Executors filed a second complaint, which names
Messrs. Miller and Shane and the Company as defendants. The second complaint
alleges breach of contract, fraud and related claims against Messrs. Miller
and Shane, and that the Company joined a civil conspiracy by acquiring Osiris.
The Executors request compensatory damages of $24,300,000 against the various
defendants, and seek punitive damages from Messrs. Miller and Shane. The two
cases 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
filed, and the Court granted, preliminary challenges to the Third Amended
Complaint. The Court also dismissed the claims against the Company for failure
to state a claim upon which relief can be granted, although the Third Amended
Complaint does continue on unaffected counts.
F-12
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
The Parent Company has determined that it is not possible at this time to
predict the final outcome of these legal proceedings and that it is not
possible to establish a reasonable estimate of possible damages, if any, or
reasonably to estimate the range of possible damages that may be awarded to
the plaintiffs. Accordingly, no provision with respect to this lawsuit has
been made in the Parent Company's or the Company's interim consolidated
financial statements.
ROJAS ET AL.
On February 22, 1995, Juan Riveras Rojas, Leyda Rivera Vega, the Conjugal
Partnership constituted between them, and Carlos Rivera Bustamente instituted
a legal action against the Parent Company, the Company and a subsidiary in the
United States District Court for the District of Puerto Rico. The complaint
alleges that the defendants breached a contract and ancillary agreements with
the plaintiffs relating to the purchase of funeral homes and cemeteries, and
committed related torts. The plaintiffs seek compensatory damages of
$12,500,000, and unspecified punitive damages (although the Parent Company is
advised by counsel that there is no entitlement to punitive damages under
Puerto Rican law). The Parent Company filed a motion to dismiss the complaint
for failure to join an indispensable party. That motion was granted on March
30, 1998. Plaintiffs filed a notice of appeal to the U.S. Circuit Court of
Appeals for the First Circuit but later withdrew it. It is foreseeable that
plaintiffs will reassert their claims as counterclaims to the complaint filed
by the Parent Company, described below.
The Parent Company claims it has suffered damages far in excess of the
amount claimed by the plaintiffs as a result of breach of contract and related
torts on the part of the plaintiffs. A subsidiary of the Parent Company has
filed a complaint seeking damages in excess of $19,000,000 from the plaintiffs
in the General Court of Justice of the Commonwealth of Puerto Rico. The Parent
Company has determined that it is not possible at this time to predict the
final outcome of these legal proceedings and that it is not possible to
establish a reasonable estimate of possible damages, if any, or reasonably to
estimate the range of possible damages that may be awarded to the plaintiffs.
Accordingly, no provision with respect to this lawsuit has been made in the
Parent Company's or the Company's interim consolidated financial statements.
FELDHEIM ET AL. V. SI-SIFH CORP. ET AL. AND DUFFY ET AL. V. SI-SIFH CORP. ET
AL.
Two complaints were filed in 1997 on behalf of individuals who claim damages
in connection with funeral insurance policies allegedly issued to them by
insurance companies owned, directly or indirectly, by S.I. Acquisition
Associates, L.P. ("S.I."). The Company acquired the assets but not the stock
of S.I. in March 1996. 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 the Company in the Parish
of Jefferson, State of Louisiana. Plaintiffs seek a class action. SI-SIFH
Corp. and SI-SI Insurance Company, Inc. are affiliates of S.I.
In June 1997, Lloyd Duffy, Sr. 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 the Company in the Parish of Orleans, State of
Louisiana. Plaintiffs seek a class action. The Duffy complaint was filed by
the same lawyers who filed the complaint in the Feldheim case, and is a
virtually identical copy of the Feldheim complaint. The Duffy case is pending
in the trial court and, as of the date hereof, no discovery has taken place.
The Feldheim and Duffy plaintiffs allegedly 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
F-13
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
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 alleged unfair trade practices in violation of Louisiana's
trade practices laws.
Plaintiffs' petitions 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.
On June 13, 1997, the district court in Jefferson Parish dismissed the
Feldheim plaintiffs' claim to a class action, and plaintiffs appealed.
Briefing of the appeal was completed in December 1997, and oral argument was
held in January 1998. On June 30, 1998, the Louisiana Fifth Circuit Court of
Appeal affirmed the dismissal of the Feldheim plaintiffs' class-action claims
except as to plaintiffs' "Sub Class B's" plaintiffs (the proposed class of
current policyholders who are seeking a declaratory judgment). The appellate
court found that the trial court's opinion did not consider the validity of
class treatment for "Sub Class B's" claim for a declaratory judgment when it
dismissed plaintiffs' class-action claims, and it remanded the case to the
trial court for a hearing on that issue. As of the date hereof, no discovery
has taken place.
On April 17, 1998 the trial court in the Duffy lawsuit declined to grant the
defendants' exception seeking to dismiss the plaintiffs' class action
allegations on the face of the pleadings. Instead, the court deferred ruling
on those issues until the previously set October 7, 1998 hearing on the class
action issues, and the court indicated it would permit some discovery. On
April 23, 1998 the defendants filed a Notice of Intent to Seek Supervisory
Writs with the Court of Appeal from the trial court's April 17, 1998 judgment,
and the trial court granted the defendants' motion for a stay of all
proceedings pending a ruling by the Court of Appeal on the supervisory writ
application. The defendants filed their Application for Supervisory Writs with
the Louisiana Fourth Circuit Court of Appeal on June 5, 1998, but a decision
has not yet been rendered. On July 16, 1998, the trial court lifted its
previously entered stay of all proceedings in this case; defendants have filed
a motion requesting that the trial court reinstitute its stay.
The Parent Company has determined that it is not possible at this time to
predict the final outcome of these legal proceedings, 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 Parent Company's or the
Company's interim consolidated financial statements.
LUENING, ET AL. V. SI-SIFH CORP., ET AL.
In June 1998, Warren S. Luening 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 the Company in the Parish of St. Bernard, State
of Louisiana. Plaintiffs seek a class action. Defendants in this case are the
same entities against whom complaints were filed in Jefferson Parish,
Louisiana (the Feldheim case) and in Orleans Parish, Louisiana (the Duffy
case), and, aside from the addition of local counsel in St. Bernard Parish,
the same lawyers who filed the Feldheim and Duffy complaints filed the Luening
complaint.
Plaintiffs allegedly hold and held funeral insurance policies issued by
insurance companies owned, directly or indirectly, by the defendants.
Plaintiffs allege that (i) the defendants charged them for certain funeral
services, including the services of a funeral director and staff, a funeral
ceremony, care of the deceased, automotive services and a casket, even though
these services were allegedly covered by their policies, and (ii) the
defendants
F-14
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
have been unjustly enriched through the payment of services allegedly covered
under the plaintiffs' policies, and the plaintiffs are therefore entitled to
restitution of those payments. Plaintiffs' complaint seeks compensatory and
nonpecuniary damages and attorneys' fees. Louisiana law prohibits plaintiffs
from alleging specific amounts of damages in their complaint. As of the date
hereof, no discovery has taken place, it is not possible to predict the final
outcome of this legal proceeding, and 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.
OTHER
No material developments occurred in connection with any other previously
reported legal proceedings against the Company during the last fiscal quarter.
The Company is a party to other legal proceedings in the ordinary course of
its business but does not expect the outcome of any other proceedings,
individually or in the aggregate, to have a material adverse effect on the
Company's financial position, results of operation or liquidity.
ENVIRONMENTAL CONTINGENCIES AND LIABILITIES
The Company's operations are subject to numerous environmental laws,
regulations and guidelines adopted by various governmental authorities in the
jurisdictions in which the Company operates. Liabilities are recorded when
environmental liabilities are either known or considered probable and can be
reasonably estimated. The Company's policies are designed to control
environmental risk upon acquisition through extensive due diligence and
corrective measures taken prior to acquisition. The Company believes
environmental liabilities to be immaterial individually and in the aggregate.
NOTE 7. SUBSEQUENT EVENTS
(a) Acquisitions
During the period from July 1, 1998 to July 31, 1998, the Company acquired
two funeral homes and 10 cemeteries. The aggregate cost of these transactions
was approximately $27,000,000.
As of July 31, 1998, the Company has committed to acquire certain funeral
homes, cemeteries and related operations, subject in most instances to certain
conditions including approval by the Company's Board of Directors. The
aggregate cost of these transactions, if completed, will be approximately
$126,100,000.
(b) Sale of First Capital Life Insurance Company of Louisiana
In July 1998, the Company announced that it has entered into an agreement to
sell First Capital Life Insurance Company of Louisiana for gross proceeds to
the Company of approximately $24,000,000 and a pre-tax gain of approximately
$5,000,000. The sale, which is subject to certain conditions including
insurance regulatory approvals, is expected to close in the second half of
1998.
F-15
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
NOTE 8. UNITED STATES ACCOUNTING PRINCIPLES
The interim consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") in Canada.
These principles differ in the following material respects from those in the
United States as summarized below:
(a) Earnings (loss)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS ENDED
ENDED JUNE 30, JUNE 30,
----------------- -----------------
1998 1997 1998 1997
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Earnings (loss)
Net earnings (loss) in accordance with
Canadian GAAP........................... $(11,537) $ 1,696 $(11,415) $ 2,699
Less effects of differences in accounting
for:
Factoring transactions................. (1,893) (298) (3,943) 2,364
Income taxes........................... (1,492) 867 (1,876) 1,310
Insurance operations................... 881 (278) 1,582 245
-------- ------- -------- -------
Net earnings (loss) in accordance with
United States GAAP...................... $(14,041) $ 1,987 $(15,652) $ 6,618
Other comprehensive income (loss):
Unrealized gains (losses) on
securities, net of tax:
Unrealized holding gains (losses)
arising during the period........... 3,358 6,402 8,094 2,945
Less: reclassification adjustment for
gains included in net income........ (5,947) (1,109) (6,923) (1,169)
-------- ------- -------- -------
Comprehensive income (loss) in accordance
with United States GAAP................. $(16,630) $ 7,280 $(14,481) $ 8,394
======== ======= ======== =======
</TABLE>
F-16
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
(b) Balance Sheet
The amounts in the interim consolidated balance sheet that differ from those
reported under Canadian GAAP are as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
------------------------- -------------------------
CANADIAN UNITED STATES CANADIAN UNITED STATES
GAAP GAAP GAAP GAAP
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Assets
Receivables, net of
allowances............... $ 204,087 $ 251,136 $ 169,758 $ 229,314
Long-term receivables, net
of allowances............ 475,649 588,014 387,282 528,015
Insurance invested
assets................... 324,326 332,227 305,610 312,073
Cemetery property......... 1,029,987 1,419,147 935,453 1,308,128
Names and reputations..... 639,107 670,305 569,063 598,688
Other assets.............. 172,372 200,120 156,349 181,556
Liabilities and
Shareholders' Equity
Loans and advances from
affiliates, current
portion.................. -- 43,058 -- 53,399
Loans and advances from
affiliates............... 1,071,064 1,171,534 1,013,914 1,138,511
Insurance policy
liabilities.............. 215,550 243,025 214,492 240,750
Other liabilities......... 272,854 268,986 259,388 257,128
Deferred income taxes..... (127,441) 326,025 (124,654) 309,725
Share capital............. 487,514 489,188 487,514 489,188
Deficit................... (178,775) (192,011) (167,360) (176,359)
Unrealized gains (losses)
on securities available
for sale, net of tax..... -- 6,382 -- 5,211
</TABLE>
(c) Statement of Cash Flows
The statement of cash flows under United States GAAP would differ from the
statement of changes in financial position under Canadian GAAP as the
following non-cash transactions would not be reflected as cash flows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
---------------
1998 1997
------- -------
<S> <C> <C>
Debt and shares issued on acquisitions...................... $19,301 $ 6,700
Note receivable from sale of subsidiaries................... -- 15,725
</TABLE>
(d) Recent Accounting Standards
Statement of Financial Accounting Standards No. 133 ("FAS 133") "Accounting
for Derivative Instruments and Hedging Activities" is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. FAS 133 requires that
an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
Statement of Position 98-5 ("SOP 98-5") "Reporting on the Costs of Start-Up
Activities" is effective for fiscal years beginning after December 15, 1998.
SOP 98-5 states that costs of start-up activities, including organization
costs, should be expensed as incurred.
Management has not determined the impact of these recent accounting
standards on its consolidated financial statements.
F-17
<PAGE>
TLGI MANAGEMENT CORP.
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
Current assets
Cash and term deposits............................... $ -- $ 278
Receivables, net of allowances....................... 6,905 7,951
Inventories.......................................... 3,229 2,614
-------- --------
10,134 10,843
Prearranged funeral services........................... 74,732 72,996
Investments in affiliate............................... 98,475 98,475
Notes receivable from Parent Company................... 95,151 95,151
Cemetery property, at cost............................. 2,566 3,055
Property and equipment................................. 73,546 72,505
Names and reputations.................................. 37,237 37,794
Deferred income taxes.................................. 3,082 612
Other assets........................................... 4,511 3,871
-------- --------
$399,434 $395,302
======== ========
LIABILITIES AND SHAREHOLDER EQUITY
----------------------------------
Current liabilities
Accounts payable and accrued liabilities............. $ 23,198 $ 15,610
Long-term debt and other liabilities................... 4,248 4,571
Loans and advances from affiliates..................... 22,292 25,265
Loans and advances from Parent Company................. 14,572 14,572
Deferred prearranged funeral services revenue.......... 74,732 72,996
Redeemable preferred shares............................ 257,530 250,092
Shareholder equity
Share capital........................................ 28,598 28,598
Contributed surplus.................................. 4,621 4,621
Deficit.............................................. (30,357) (21,023)
-------- --------
2,862 12,196
-------- --------
$399,434 $395,302
======== ========
</TABLE>
See accompanying notes to interim consolidated financial statements
F-18
<PAGE>
TLGI MANAGEMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
----------------- ----------------
1998 1997 1998 1997
-------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue.................................. $ 13,267 $14,202 $28,859 $29,611
Costs and expenses....................... 8,677 8,846 17,248 17,781
-------- ------- ------- -------
4,590 5,356 11,611 11,830
Expenses
General and administrative............. 1,839 1,733 3,715 3,605
Depreciation and amortization.......... 993 905 1,973 1,816
-------- ------- ------- -------
2,832 2,638 5,688 5,421
-------- ------- ------- -------
Earnings from operations................. 1,758 2,718 5,923 6,409
Interest on loans and advances from
affiliates and Parent Company........... (466) (1,406) (844) (3,932)
Dividend income on redeemable preferred
shares of affiliate..................... -- 841 -- 2,523
Interest income on note receivable from
Parent Company.......................... 1,663 -- 3,325 --
Foreign exchange gain (loss)............. (9,065) 683 (7,437) (525)
Other income............................. 214 228 294 403
-------- ------- ------- -------
Earnings (loss) before undernoted items.. (5,896) 3,064 1,261 4,878
Dividend paid on redeemable preferred
shares.................................. (4,430) (4,245) (8,801) (4,245)
-------- ------- ------- -------
Earnings (loss) before income taxes and
undernoted items........................ (10,326) (1,181) (7,540) 633
Income taxes............................. (1,464) 667 1,794 1,041
-------- ------- ------- -------
(8,862) (1,848) (9,334) (408)
Equity in earnings of associated
company................................. -- 953 -- 953
-------- ------- ------- -------
Net earnings (loss) for the period....... $ (8,862) $ (895) $(9,334) $ 545
======== ======= ======= =======
</TABLE>
See accompanying notes to interim consolidated financial statements
F-19
<PAGE>
TLGI MANAGEMENT CORP.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Retained earnings (deficit), beginning
of period............................ $(21,495) $(41,284) $(21,023) $ 48,020
Net earnings (loss)................... (8,862) (895) (9,334) 545
Excess on acquisition of investment
from related party................... -- -- -- (32,384)
Excess on issue of preferred shares... -- -- -- (58,360)
-------- -------- -------- --------
Deficit, end of period................ $(30,357) $(42,179) $(30,357) $(42,179)
======== ======== ======== ========
</TABLE>
See accompanying notes to interim consolidated financial statements
F-20
<PAGE>
TLGI MANAGEMENT CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1998 1997
------- ---------
(UNAUDITED)
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings (loss)...................................... $(9,334) $ 545
Items not affecting cash
Depreciation and amortization.......................... 1,973 1,816
Equity in earnings of associated company............... -- (953)
Foreign exchange loss.................................. 7,437 525
Net changes in other non-cash balances................... 5,442 (9,443)
------- ---------
5,518 (7,510)
------- ---------
Investing
Construction of new facilities........................... (525) (1,570)
Investments in affiliates................................ -- (172,775)
Purchase of property and equipment....................... (1,975) (722)
Proceeds on disposition of affiliates and subsidiary..... -- 68,250
------- ---------
(2,500) (106,817)
------- ---------
Financing
Issue of common shares................................... -- 185,568
Issue of redeemable preferred shares..................... -- 241,062
Repurchase of common shares.............................. -- (241,062)
Increase (decrease) in loans and advances from affiliates
and Parent Company...................................... (2,973) (68,275)
Increase in notes receivable from affiliates and Parent
Company................................................. -- (2,523)
Increase (decrease) in long-term debt and other
liabilities............................................. (323) 1
------- ---------
(3,296) 114,771
------- ---------
Increase (decrease) in cash and term deposits, during the
period.................................................... (278) 444
Cash and term deposits, beginning of period................ 278 --
------- ---------
Cash and term deposits, end of period...................... $ -- $ 444
======= =========
</TABLE>
See accompanying notes to interim consolidated financial statements
F-21
<PAGE>
TLGI MANAGEMENT CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS
NOTE 1. BASIS OF PRESENTATION
TLGI Management Corp. (the "Company", formerly Loewen Management Corp.) was
incorporated on November 24, 1970, under the B.C. Companies Act, and is a
wholly owned subsidiary of The Loewen Group Inc. (the "Parent Company"). The
Company serves as the holding company for certain of the Parent Company's
Canadian funeral and cemetery operations.
The interim consolidated financial statements (unaudited) include the
accounts of all subsidiary companies and all adjustments, including normal
recurring adjustments, which in management's opinion are necessary for a fair
presentation of the financial results for the interim periods. The interim
financial statements have been prepared consistent with the accounting
policies described in the Parent Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
1997, and should be read in conjunction therewith.
The Canadian dollar is the principal currency of the Company's business and,
accordingly, the interim consolidated financial statements have been prepared
in Canadian dollars in accordance with the accounting principles generally
accepted in Canada.
Basis of consolidation
The interim consolidated financial statements have been prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and for inclusion in the registration statement on Form S-
4 of Loewen Group International, Inc. and the Parent Company.
The accounts of all subsidiary companies acquired from third parties have
been included in the interim consolidated financial statements from their
respective dates of acquisition of control or formation. All subsidiaries are
wholly owned at June 30, 1998, except for a few companies with small minority
interests.
All significant intercompany balances and transactions have been eliminated
in the interim consolidated financial statements.
NOTE 2. UNITED STATES ACCOUNTING PRINCIPLES
The interim consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") in Canada.
These principles differ in the following material respects from those in the
United States as summarized below:
(a) Earnings (loss)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
-------------- -------------
1998 1997 1998 1997
------- ----- ------- ----
<S> <C> <C> <C> <C>
EARNINGS (LOSS)
Net earnings (loss) in accordance with Canadian
GAAP............................................ $(8,862) $(895) $(9,334) $545
Less difference in accounting for income taxes... 29 28 49 48
------- ----- ------- ----
Net earnings (loss) and comprehensive income in
accordance with
United States GAAP.............................. $(8,833) $(867) $(9,285) $593
======= ===== ======= ====
</TABLE>
F-22
<PAGE>
TLGI MANAGEMENT CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS
(b) Balance Sheet
The amounts in the interim consolidated balance sheet that differ from those
reported under Canadian GAAP are as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -----------------------
CANADIAN UNITED STATES CANADIAN UNITED STATES
GAAP GAAP GAAP GAAP
-------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Assets
Names and reputations....... $ 37,237 $ 37,495 $ 37,794 $ 38,060
Liabilities and Shareholder
Equity
Deferred income taxes....... (3,082) 213 (612) 2,740
Retained earnings
(deficit).................. (30,357) (33,394) (21,023) (24,109)
</TABLE>
Under the rules and regulations of the Securities and Exchange Commission,
notes receivable from Parent Company of $95,151,000 would be shown as a
reduction of shareholder equity.
(c) Statement of Cash Flows
The statement of cash flows under United States GAAP would differ from the
statement of changes in financial position under Canadian GAAP as the
following non-cash transactions would not be reflected as cash flows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
--------------
1998 1997
----- --------
<S> <C> <C>
Investment in Neweol Investments Ltd. ("Neweol") and 1096952
Ontario Ltd. common shares financed through issuance of
common shares .............................................. $ -- $172,775
Note received upon redemption of Neweol preferred shares and
subsequently applied against certain notes payable to the
same party.................................................. -- 68,250
Issuance of common shares in exchange for a receivable....... -- 12,793
Issuance of redeemable preferred shares upon cancellation of
common shares............................................... -- 241,062
</TABLE>
NOTE 3. TRANSFER OF TAX LIABILITY
During the six months ended June 30, 1998, the Company paid $1,815,000 of
tax liabilities transferred from the Parent Company. These amounts will be
recovered through deductions against the Company's taxable income.
F-23
<PAGE>
4103 INVESTMENTS LTD.
BALANCE SHEETS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
Current assets
Dividends receivable from affiliate companies........ $ 14,107 $ 9,032
Investments in affiliates.............................. 298,794 292,634
-------- --------
$312,901 $301,666
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities
Due to Parent Company, non-interest bearing, payable
on demand........................................... $ 579 $ 49
Income taxes payable................................. 348 530
-------- --------
927 579
Deferred income taxes.................................. 3,367 1,984
Shareholders' equity
Share capital........................................ 283,255 283,255
Retained earnings.................................... 35,011 21,455
Accumulated other comprehensive income
Foreign currency translation adjustment............ (9,659) (5,607)
-------- --------
308,607 299,103
-------- --------
$312,901 $301,666
======== ========
</TABLE>
See accompanying notes to interim financial statements
F-24
<PAGE>
4103 INVESTMENTS LTD.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS PERIOD FROM
JUNE 30, ENDED MARCH 24
-------------------- JUNE 30, TO JUNE 30,
1998 1997 1998 1997
--------- --------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue
Dividends on preferred shares of
affiliate companies............ $ 6,016 $ 7,276 $12,033 $7,276
Foreign exchange gain (loss).... 5,333 (422) 4,052 345
--------- -------- ------- ------
Earnings before income taxes and
equity loss of affiliate
companies........................ 11,349 6,854 16,085 7,621
Income taxes...................... 1,994 93 1,731 355
--------- -------- ------- ------
9,355 6,761 14,354 7,266
Equity loss of associated
companies........................ 533 366 798 366
--------- -------- ------- ------
Net earnings...................... $ 8,822 $ 6,395 $13,556 $6,900
========= ======== ======= ======
Net earnings...................... $ 8,822 $ 6,395 $13,556 $6,900
Other comprehensive income, net of
tax
Foreign currency translation
adjustment..................... (5,333) 422 (4,052) (345)
--------- -------- ------- ------
Comprehensive income.............. $ 3,489 $ 6,817 $ 9,504 $6,555
========= ======== ======= ======
Retained earnings, beginning of
period........................... $ 26,189 $ 505 $21,455 $ --
Net earnings...................... 8,822 6,395 13,556 6,900
--------- -------- ------- ------
Retained earnings, end of period.. $ 35,011 $ 6,900 $35,011 $6,900
========= ======== ======= ======
</TABLE>
See accompanying notes to interim financial statements
F-25
<PAGE>
4103 INVESTMENTS LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
NOTE 1. BASIS OF PRESENTATION
4103 Investments Ltd. (the "Company") was incorporated on March 24, 1997,
under the laws of the Province of British Columbia and is directly and
indirectly a wholly owned subsidiary of The Loewen Group Inc., (the "Parent
Company").
The interim financial statements (unaudited) reflect all adjustments,
including normal recurring adjustments, which in management's opinion are
necessary for a fair presentation of the financial results for the interim
periods. The interim financial statements have been prepared consistent with
the accounting policies described in the Company's financial statements as of
and for the period ended December 31, 1997, included in the Parent Company's
Annual Report on Form 10-K for the year ended December 31, 1997, and should be
read in conjunction therewith.
The interim financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States.
The interim financial statements have been prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission and for inclusion in the registration statement on Form S-4 of
Loewen Group International, Inc. and the Parent Company.
NOTE 2. INVESTMENTS
(a) Prime Succession Holdings, Inc. ("Prime")
The Company accounts for its investment in Prime preferred stock by the cost
method. For the six months ended June 30, 1998, income of $3,493,000 (1997--
$1,588,000) was recorded representing the cumulative payment-in-kind dividend.
The Company accounts for its investment in Prime common stock by the equity
method. Under this method, the Company records its proportionate share of the
net earnings (loss) of Prime after deducting the payment-in-kind dividend. For
the six months ended June 30, 1998 a loss of $482,000 (1997--loss of $233,000)
was recorded representing the Company's proportionate share of the loss
attributable to the Prime common stock.
(b) Rose Hills Holdings Corp. ("RH Holdings")
The Company accounts for its investment in RH Holdings preferred stock by
the cost method. For the six months ended June 30, 1998, income of $3,466,000
(1997--$3,150,000) was recorded representing the cumulative payment-in-kind
dividend.
The Company accounts for its investment in RH Holdings common stock by the
equity method. Under this method, the Company records its proportionate share
of the net earnings (loss) of RH Holdings after deducting the payment-in-kind
dividend. For the six months ended June 30, 1998, a loss of $316,000 (1997--
loss of $133,000) was recorded representing the Company's proportionate share
of the loss attributable to the common stock of RH Holdings.
NOTE 3. STATEMENT OF CASH FLOWS
The Company had no cash flows during the six months ended June 30, 1998 or
1997. The increases in the Company's assets represent non-cash income from its
investments in affiliates. In addition, the Parent Company paid income taxes
of $530,000 on behalf of the Company, which amounts have been recorded as an
increase to Due to Parent Company.
F-26
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT NUMBER OF SHARES
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
ASSETS
------
<S> <C> <C>
Current assets
Cash................................................. $ 1,744 $ 181
Installment contract receivables, net of allowances.. 48,483 61,549
---------- ----------
50,227 61,730
Long-term installment contract receivables, net of
allowances............................................ 112,862 143,420
Investments............................................ -- 13,358
Investment in affiliate................................ 45,068 47,441
Notes receivable from affiliate........................ 1,117,314 1,032,516
Due from Parent Company................................ 23,166 --
Other assets........................................... 1,033 1,631
---------- ----------
$1,349,670 $1,300,096
---------- ----------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities
Accounts payable and accrued liabilities............. $ 6,886 $ 3,444
Due to affiliates.................................... 2,174 7,868
---------- ----------
9,060 11,312
Notes payable.......................................... -- 2,517
Due to Parent Company.................................. -- 3,701
Minority interest and redeemable shares of subsidiary.. 9,423 21,999
Shareholders' equity
Capital stock, no par value, 1,000,000,000 shares
authorized, 267,706 shares issued and outstanding... 1,190,576 1,177,787
Retained earnings.................................... 140,733 82,660
Accumulated other comprehensive income:
Foreign currency translation adjustment............ (122) 120
---------- ----------
1,331,187 1,260,567
---------- ----------
$1,349,670 $1,300,096
========== ==========
</TABLE>
Commitments and contingencies (Notes 2 and 3)
See accompanying notes to interim consolidated financial statements
F-27
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------- ------------------
1998 1997 1998 1997
-------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue from affiliates
Interest income...................... $ 34,488 $23,863 $ 70,879 $ 44,274
Other revenue........................ -- 292 -- 807
-------- ------- -------- --------
34,488 24,155 70,879 45,081
Expenses
General and administrative........... 3,247 884 3,779 1,277
-------- ------- -------- --------
Earnings before income tax expense and
undernoted items...................... 31,241 23,271 67,100 43,804
Current income tax expense............. 2,713 1,473 6,441 3,594
-------- ------- -------- --------
28,528 21,798 60,659 40,210
Equity in (losses) earnings of
associated companies.................. (2,116) 338 (2,373) 1,602
Minority interest...................... 1 (1,879) (213) (4,641)
-------- ------- -------- --------
Net earnings........................... $ 26,413 $20,257 $ 58,073 $ 37,171
======== ======= ======== ========
Net earnings........................... $ 26,413 $20,257 $ 58,073 $ 37,171
Other comprehensive income, net of tax:
Foreign currency translation
adjustment.......................... (255) (9,436) (242) (5,573)
-------- ------- -------- --------
Comprehensive income................... $ 26,158 $10,821 $ 57,831 $ 31,598
======== ======= ======== ========
Retained earnings, beginning of
period................................ $114,320 $17,408 $ 82,660 $ 54,163
Net earnings........................... 26,413 20,257 58,073 37,171
Dividends on common shares............. -- -- -- (53,669)
Dividends on redeemable preferred
shares................................ -- (2,060) -- (2,060)
-------- ------- -------- --------
Retained earnings, end of period....... $140,733 $35,605 $140,733 $ 35,605
======== ======= ======== ========
</TABLE>
See accompanying notes to interim consolidated financial statements
F-28
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
CONSOLIDATED STATEMENTS OF CASH FLOWS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1998 1997
-------- ---------
(UNAUDITED)
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings............................................ $ 58,073 $ 37,171
Items not affecting cash
Minority interest..................................... 213 4,641
Equity in losses (earnings) of associated companies... 2,373 (1,602)
Net changes in other non-cash balances.................. 852 (4,193)
-------- ---------
61,511 36,017
-------- ---------
Investing
Loans to affiliate...................................... (94,335) (267,977)
Repayments of notes receivable from affiliate........... 44,000 --
Purchase of accounts receivable from affiliate.......... -- (18,985)
Collections of accounts receivable, net of deferred
revenue, and allowance for doubtful accounts........... 6,585 --
Other................................................... 387 --
Investment in affiliate................................. -- (15,473)
-------- ---------
(43,363) (302,435)
-------- ---------
Financing
Capital contributions from Parent Company............... -- 247,073
Advances from Parent Company............................ -- 16,267
Repayment of advances from and advances to Parent
Company................................................ (16,585) --
Increase in minority interest........................... -- 3,126
-------- ---------
(16,585) 266,466
-------- ---------
Increase in cash and cash equivalents during the period... 1,563 48
Cash, beginning of period................................. 181 83
-------- ---------
Cash, end of period....................................... $ 1,744 $ 131
======== =========
</TABLE>
See accompanying notes to interim consolidated financial statements
F-29
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
NOTE 1. BASIS OF PRESENTATION
Neweol Investments Ltd. (the "Company") was incorporated on November 6, 1992
under the federal laws of Canada and continued on June 3, 1993 under the laws
of the Province of British Columbia as a wholly owned subsidiary of The Loewen
Group Inc. ("Parent Company"). The principal activities of the Company are to
provide financing to other subsidiaries of the Parent Company ("affiliates")
and to hold investments in associated companies. The interim consolidated
financial statements include the accounts of all subsidiaries and reflect all
adjustments including normal recurring adjustments necessary for a fair
presentation of the financial results for the interim periods. The interim
consolidated financial statements have been prepared consistent with the
accounting policies described in TLGI's Annual Report on Form 10-K filed with
the Securities and Exchange Commission for the year ended December 31, 1997,
and should be read in conjunction therewith.
The interim consolidated financial statements have been prepared in United
States dollars in accordance with accounting principles generally accepted in
the United States. The interim consolidated financial statements require the
use of management estimates. Actual results could differ from those estimates.
Certain of the comparative figures have been reclassified to conform to the
presentation adopted in the current period.
Basis of consolidation
These interim consolidated financial statements have been prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and for inclusion in the registration statement on Form S-
4 of the Loewen Group International, Inc. ("LGII") and the Parent Company.
These interim consolidated financial statements exclude the effects of certain
subsidiaries of Neweol which were transferred to an affiliate in a
reorganization that was effective July 19 and August 13, 1996. Accordingly,
these interim consolidated financial statements are not intended to be a
complete presentation of the historical consolidated financial position of
Neweol.
All significant intercompany balances and transactions have been eliminated
from the interim consolidated financial statements.
NOTE 2. INVESTMENT IN AFFILIATE
The Company has a 15% interest in LGII. LGII serves as the holding company
for the Parent Company's United States funeral, cemetery and insurance
operations. The Company follows the equity method of accounting for this
investment because it has significant influence over LGII as a result of its
affiliate relationship and related party transactions. The Company's equity in
the loss of LGII amounted to $2,373,000 for the six months ended June 30, 1998
(year ended December 31, 1997 ($9,627,000)). The total investment in LGII at
June 30, 1998 was $45,068,000 (December 31, 1997--$47,441,000).
LGII is subject to material contingencies, as disclosed below:
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 Parent Company
securities against the Parent Company and five individuals who were officers
of the Parent Company (four of whom were also directors) in the United States
District Court for the Eastern District of Pennsylvania. LGII, Loewen Group
Capital, L.P., ("LGC") and the lead underwriters (the "MIPS Underwriters") of
LGC's 1994 offering of the Monthly Income Preferred Securities ("MIPS"), were
subsequently added as defendants. On November 7, 1995, a class action lawsuit
was filed on behalf of a class of
F-30
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
purchasers of Common Shares against the Parent Company and the same individual
defendants in the United States District Court for the Southern District of
Mississippi alleging Federal securities law violations and related common law
claims. On December 1, 1995, a class action lawsuit was filed on behalf of a
class of purchasers of the Parent Company's securities against the Parent
Company, LGII, LGC and the same individual defendants in the United States
District Court for the Eastern District of Pennsylvania. On June 11, 1996 all
claims against the MIPS Underwriters were dismissed without prejudice, by
agreement of the parties. The cases were consolidated before the District
Court of the Eastern District of Pennsylvania. A Consolidated and Amended
Class Action Complaint was filed on September 16, 1996.
The parties have agreed to a settlement of all claims in the action. The
District Court entered an order approving the settlement on April 21, 1998,
which became effective May 21, 1998. No objections to the settlement were
filed, and no appeal was filed from the order of approval. The settlement
provides for the payment by the Parent Company on behalf of all defendants of
$5,000,000, plus up to $100,000 for costs of notice and 50% of the costs of
administration of the settlement.
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 of Bucks County, Pennsylvania against
Osiris Holding Corporation ("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 are employees
of the Parent Company and LGII. Mr. Miller is currently a director of the
Parent Company and LGII.
The complaint alleged that Osiris breached the terms of a Second Amended and
Restated Shareholders' Agreement among Messrs. Esner, Miller and Shane (the
"Shareholders' Agreement") by attempting to repurchase shares of Osiris held
by the Esner Estate (the "Esner Shares") without complying with the terms of
the Shareholders' Agreement, and that the Law Firm breached its fiduciary duty
and committed malpractice in connection with the drafting of the Shareholders'
Agreement and its representation of Esner and Osiris. The Executors asked the
Court (i) to have the value of Osiris reappraised pursuant to the terms of the
Shareholders' Agreement and (ii) to require Osiris to repurchase the Esner
Shares pursuant to a new appraisal and the alleged terms of the Shareholders'
Agreement or, alternatively, to pay the Esner Estate the fair value of the
Esner Shares as determined by the new appraisal.
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
F-31
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
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 filed, and the Court granted, preliminary
challenges to the Third Amended Complaint. The Court also dismissed the claims
against LGII for failure to state a claim upon which relief can be granted,
although the Third Amended Complaint does continue on unaffected counts.
The Parent Company has determined that it is not possible at this time to
predict the final outcome of these legal proceedings and that it is not
possible to establish a reasonable estimate of possible damages, if any, or
reasonably to estimate the range of possible damages that may be awarded to
the plaintiffs. Accordingly, no provision with respect to this lawsuit has
been made in the Parent Company's or LGII's interim consolidated financial
statements.
ROJAS ET AL.
On February 22, 1995, Juan Riveras Rojas, Leyda Rivera Vega, the Conjugal
Partnership constituted between them, and Carlos Rivera Bustamente instituted
a legal action against the Parent Company, LGII and a subsidiary in the United
States District Court for the District of Puerto Rico. The complaint alleges
that the defendants breached a contract and ancillary agreements with the
plaintiffs relating to the purchase of funeral homes and cemeteries, and
committed related torts. The plaintiffs seek compensatory damages of
$12,500,000, and unspecified punitive damages (although the Parent Company is
advised by counsel that there is no entitlement to punitive damages under
Puerto Rican law). The Parent Company filed a motion to dismiss the complaint
for failure to join an indispensable party. That motion was granted on March
30, 1998. Plaintiffs filed a notice of appeal to the U.S. Circuit Court of
Appeals for the First Circuit but later withdrew it. It is foreseeable that
plaintiffs will reassert their claims as counterclaims to the complaint filed
by the Parent Company, described below.
The Parent Company claims it has suffered damages far in excess of the
amount claimed by the plaintiffs as a result of breach of contract and related
torts on the part of the plaintiffs. A subsidiary of the Parent Company has
filed a complaint seeking damages in excess of $19,000,000 from the plaintiffs
in the General Court of Justice of the Commonwealth of Puerto Rico. The Parent
Company has determined that it is not possible at this time to predict the
final outcome of these legal proceedings and that it is not possible to
establish a reasonable estimate of possible damages, if any, or reasonably to
estimate the range of possible damages that may be awarded to the plaintiffs.
Accordingly, no provision with respect to this lawsuit has been made in the
Parent Company's or LGII's interim consolidated financial statements.
FELDHEIM ET AL. V. SI-SIFH CORP. ET AL. AND DUFFY ET AL. V. SI-SIFH CORP. ET
AL.
Two complaints were filed in 1997 on behalf of individuals who claim damages
in connection with funeral insurance policies allegedly issued to them by
insurance companies owned, directly or indirectly, by S.I. Acquisition
Associates, L.P. ("S.I."). LGII acquired the assets but not the stock of S.I.
in March 1996. 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. are affiliates of S.I.
In June 1997, Lloyd Duffy, Sr. 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 Orleans, State of
Louisiana. Plaintiffs seek a class
F-32
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
action. The Duffy complaint was filed by the same lawyers who filed the
complaint in the Feldheim case, and is a virtually identical copy of the
Feldheim complaint. The Duffy case is pending in the trial court and, as of
the date hereof, no discovery has taken place.
The Feldheim and Duffy plaintiffs allegedly 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 alleged unfair trade practices in
violation of Louisiana's trade practices laws.
Plaintiffs' petitions 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.
On June 13, 1997, the district court in Jefferson Parish dismissed the
Feldheim plaintiffs' claim to a class action, and plaintiffs appealed.
Briefing of the appeal was completed in December 1997, and oral argument was
held in January 1998. On June 30, 1998, the Louisiana Fifth Circuit Court of
Appeal affirmed the dismissal of the Feldheim plaintiffs' class-action claims
except as to plaintiffs' "Sub Class B's" plaintiffs (the proposed class of
current policyholders who are seeking a declaratory judgment). The appellate
court found that the trial court's opinion did not consider the validity of
class treatment for "Sub Class B's" claim for a declaratory judgment when it
dismissed plaintiffs' class-action claims, and it remanded the case to the
trial court for a hearing on that issue. As of the date hereof, no discovery
has taken place.
On April 17, 1998 the trial court in the Duffy lawsuit declined to grant the
defendants' exception seeking to dismiss the plaintiffs' class action
allegations on the face of the pleadings. Instead, the court deferred ruling
on those issues until the previously set October 7, 1998 hearing on the class
action issues, and the court indicated it would permit some discovery. On
April 23, 1998 the defendants filed a Notice of Intent to Seek Supervisory
Writs with the Court of Appeal from the trial court's April 17, 1998 judgment,
and the trial court granted the defendants' motion for a stay of all
proceedings pending a ruling by the Court of Appeal on the supervisory writ
application. The defendants filed their Application for Supervisory Writs with
the Louisiana Fourth Circuit Court of Appeal on June 5, 1998, but a decision
has not yet been rendered. On July 16, 1998, the trial court lifted its
previously entered stay of all proceedings in this case; defendants have filed
a motion requesting that the trial court reinstitute its stay.
The Parent Company has determined that it is not possible at this time to
predict the final outcome of these legal proceedings, 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 Parent Company's or LGII's
interim consolidated financial statements.
LUENING, ET AL. V. SI-SIFH CORP., ET AL.
In June 1998, Warren S. Luening 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 St. Bernard, State of
Louisiana. Plaintiffs seek a class action. Defendants in this case are the
same entities against whom complaints were filed in Jefferson Parish,
Louisiana (the
F-33
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
Feldheim case) and in Orleans Parish, Louisiana (the Duffy case), and, aside
from the addition of local counsel in St. Bernard Parish, the same lawyers who
filed the Feldheim and Duffy complaints filed the Luening complaint.
Plaintiffs allegedly hold and held funeral insurance policies issued by
insurance companies owned, directly or indirectly, by the defendants.
Plaintiffs allege that (i) the defendants charged them for certain funeral
services, including the services of a funeral director and staff, a funeral
ceremony, care of the deceased, automotive services and a casket, even though
these services were allegedly covered by their policies, and (ii) the
defendants have been unjustly enriched through the payment of services
allegedly covered under the plaintiffs' policies, and the plaintiffs are
therefore entitled to restitution of those payments. Plaintiffs' complaint
seeks compensatory and nonpecuniary damages and attorneys' fees. Louisiana law
prohibits plaintiffs from alleging specific amounts of damages in their
complaint. As of the date hereof, no discovery has taken place, it is not
possible to predict the final outcome of this legal proceeding, and 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.
OTHER
No material developments occurred in connection with any other previously
reported legal proceedings against LGII during the last fiscal quarter.
LGII is a party to other legal proceedings in the ordinary course of its
business but does not expect the outcome of any other proceedings,
individually or in the aggregate, to have a material adverse effect on LGII's
financial position, results of operation or liquidity.
ENVIRONMENTAL CONTINGENCIES AND LIABILITIES
LGII's operations are subject to numerous environmental laws, regulations
and guidelines adopted by various governmental authorities in the
jurisdictions in which LGII operates. Liabilities are recorded when
environmental liabilities are either known or considered probable and can be
reasonably estimated. LGII's policies are designed to control environmental
risk upon acquisition through extensive due diligence and corrective measures
taken prior to acquisition. LGII believes environmental liabilities to be
immaterial individually and in the aggregate.
NOTE 3. COMMITMENTS AND CONTINGENCIES
The shares held by the Company are pledged under a collateral trust
arrangement whereby the senior lenders of the Parent Company and an affiliate
under common control would share certain collateral and guarantees on a pari
passu basis. The collateral and guarantees are held by a trustee for equal and
ratable benefit of the various holders of senior indebtedness. At June 30,
1998, the indebtedness owed to the senior lending group subject to the
collateral trust arrangement, including holders of certain letters of credit
and excluding debt owed to affiliated companies aggregated $1,988,000,000.
F-34
<PAGE>
NEWEOL INVESTMENTS LTD. (SEE NOTE 1)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
NOTE 4. NON-CASH TRANSACTIONS
The Company entered into the following non-cash transactions:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------
1998 1997
------- --------
<S> <C> <C>
Issuance of 2,867 common shares upon acquisition of minority
interest in subsidiary from Parent Company.................. $12,789 $ --
Increase in amounts due from Parent Company and decrease in
notes payable resulting from the sale of a subsidiary....... 15,488 --
Issuance of 21,346 common shares upon acquisition of minority
interest in subsidiary from Parent Company.................. -- 100,911
Sale of subsidiary in exchange for redeemable preferred
shares of affiliate, the subsequent redemption of the
preferred shares for a note receivable, and distribution of
the note receivable to Parent Company....................... -- 53,669
Increase in amounts due to Parent Company for payments made
by Parent Company on the Company's behalf................... -- 2,877
Dividends declared on preferred shares and settled by
issuance of notes payable to affiliate...................... -- 2,060
Issuance of notes payable upon redemption of redeemable
preferred shares............................................ -- 55,174
Reduction of amount due to Parent Company and assumption of
liabilities by Parent Company, net of notes receivable from
Parent Company and unrealized foreign exchange gain thereon
upon issuance of common shares.............................. -- 340,173
Increase in receivables advanced to affiliate resulting from
collections and repurchases of installment contract
receivables................................................. 34,463 18,457
</TABLE>
NOTE 5. RECENT ACCOUNTING STANDARD
Statement of Position 98-5 ("SOP 98-5") "Reporting on the Costs of Start-Up
Activities" is effective for fiscal years beginning after December 15, 1998.
SOP 98-5 states that costs of start-up activities, including organization
costs, should be expensed as incurred. Pursuant to SOP 98-5 the Company will
write-off the unamortized organization costs, which are contained in other
assets, in its 1999 fiscal year.
F-35
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Loewen Luxembourg (No. 1) S.A.
We have audited the accompanying consolidated balance sheets of Loewen
Luxembourg (No. 1) S.A. and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of operations and retained earnings, and
cash flows for each of the years in the three-year period ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
supplemental consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
These consolidated financial statements give retroactive effect to the
acquisition by a subsidiary of the Company of Eagle Financial Associates, LLC,
on March 10, 1998, which has been accounted for in a manner similar to a
pooling of interests as described in Note 1 to the consolidated financial
statements.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Loewen
Luxembourg (No. 1) S.A. and subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1997, in conformity with generally
accepted accounting principles of the United States.
Luxembourg, March 20, 1998 KPMG Audit
Reviseurs d'Entreprises
/s/ D.G. Robertson
F-36
<PAGE>
LOEWEN LUXEMBOURG (NO. 1) S.A.
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT NUMBER OF SHARES
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
----------- ------------ ------------
(UNAUDITED) (RESTATED, SEE NOTE 1)
<S> <C> <C> <C>
ASSETS
------
Current assets
Cash.................................. $ 254 $ 120 $ 72
Installment contract receivables, net
of allowances........................ 8,772 11,607 15,869
Notes receivable from affiliate....... 91,786 142,763 56,061
---------- ---------- --------
100,812 154,490 72,002
Long-term installment contract
receivables, net of allowances......... 20,468 27,084 37,028
Notes receivable from affiliate......... 1,117,314 1,032,516 594,788
Due from affiliated company............. 627 417 904
Investments............................. -- 387 8,285
Other assets............................ 1,049 1,206 810
---------- ---------- --------
$1,240,270 $1,216,100 $713,817
========== ========== ========
LIABILITIES AND SHAREHOLDER EQUITY
----------------------------------
Current liabilities
Accounts payable and accrued
liabilities.......................... $ 4,918 $ 3,796 $ 4,346
Redeemable shares of subsidiary......... 9,433 9,433 9,373
Shareholder equity
Capital stock, $285 par value, 156
shares authorized,
issued and outstanding (December 31,
1997--156,
December 31, 1996--11)............... 44 44 3
Additional paid-in capital............ 1,050,044 1,050,044 646,104
Retained earnings..................... 175,831 152,783 53,991
---------- ---------- --------
1,225,919 1,202,871 700,098
---------- ---------- --------
$1,240,270 $1,216,100 $713,817
========== ========== ========
</TABLE>
Commitments and contingencies (Note 2)
See accompanying notes to consolidated financial statements
F-37
<PAGE>
LOEWEN LUXEMBOURG (NO. 1) S.A.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, YEAR ENDED DECEMBER 31,
---------------------- ---------------------- --------------------------
1998 1997 1998 1997 1997 1996 1995
----------- ---------- ---------- ---------- -------- -------- -------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (RESTATED, SEE NOTE 1)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue from affiliates:
Interest on notes
receivable from
affiliates........... $ 33,897 $21,436 $ 65,479 $40,208 $ 98,787 $ 59,419 $34,065
Financial and other
services............. 1,305 2,491 2,632 4,849 8,192 2,886 1,372
-------- ------- -------- ------- -------- -------- -------
35,202 23,927 68,111 45,057 106,979 62,305 35,437
Expenses:
General and
administrative....... 266 680 705 1,091 2,518 1,554 1,043
-------- ------- -------- ------- -------- -------- -------
Earnings before income
tax expense and
minority interest...... 34,936 23,247 67,406 43,966 104,461 60,751 34,394
Income tax expense...... 2,977 1,462 4,358 3,597 5,609 6,623 5,627
-------- ------- -------- ------- -------- -------- -------
31,959 21,785 63,048 40,369 98,852 54,128 28,767
Minority interest....... -- 30 -- 60 60 130 548
-------- ------- -------- ------- -------- -------- -------
Net earnings and
comprehensive income... $ 31,959 $21,755 $ 63,048 $40,309 $ 98,792 $ 53,998 $28,219
======== ======= ======== ======= ======== ======== =======
Retained earnings,
beginning of period.... $183,872 $72,545 $152,783 $53,991 $ 53,991 $ 28,219 $ 6,501
Net earnings............ 31,959 21,755 63,048 40,309 98,792 53,998 28,219
Dividends............... (40,000) -- (40,000) -- -- (28,226) (6,501)
-------- ------- -------- ------- -------- -------- -------
Retained earnings, end
of period.............. $175,831 $94,300 $175,831 $94,300 $152,783 $ 53,991 $28,219
======== ======= ======== ======= ======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements
F-38
<PAGE>
LOEWEN LUXEMBOURG (NO. 1) S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------------------- -------------------------------
1998 1997 1997 1996 1995
----------- ---------- --------- --------- ---------
(UNAUDITED) (UNAUDITED) (RESTATED, SEE NOTE 1)
<S> <C> <C> <C> <C> <C>
CASH PROVIDED BY
(APPLIED TO)
Operations
Net earnings.......... $ 63,048 $ 40,309 $ 98,792 $ 53,998 $ 28,219
Items not affecting
cash:
Minority interest... -- 60 60 130 548
Net changes in other
non-cash balances.... 1,069 (3,754) 2,857 (3,268) 2,864
--------- --------- --------- --------- ---------
64,117 36,615 101,709 50,860 31,631
--------- --------- --------- --------- ---------
Investing
Advances on notes
receivable from
affiliate............ (128,904) (287,216) (626,002) (251,406) (262,999)
Repayments of notes
receivable from
affiliate............ 104,534 -- 142,763 36,091 64,295
Investment in
affiliate............ 387 -- -- -- (8,000)
--------- --------- --------- --------- ---------
(23,983) (287,216) (483,239) (215,315) (206,704)
--------- --------- --------- --------- ---------
Financing
Issue of share
capital.............. -- 250,657 381,578 192,590 191,200
Redemption of
redeemable shares of
subsidiary........... -- -- -- -- (9,659)
Dividends paid........ (40,000) -- -- (28,226) (6,501)
--------- --------- --------- --------- ---------
(40,000) 250,657 381,578 164,364 175,040
--------- --------- --------- --------- ---------
Increase (decrease) in
cash during the
period................. 134 56 48 (91) (33)
Cash, beginning of
period................. 120 72 72 163 196
--------- --------- --------- --------- ---------
Cash, end of period..... $ 254 $ 128 $ 120 $ 72 $ 163
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements
F-39
<PAGE>
LOEWEN LUXEMBOURG (NO. 1) S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT NUMBER OF SHARES
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Loewen Luxembourg (No. 1) S.A. (the "Company") was incorporated on April 23,
1997 under the laws in the Grand-Duchy of Luxembourg as a wholly owned
subsidiary of Neweol Investments Ltd. ("Parent Company") and a wholly owned
indirect subsidiary of The Loewen Group Inc. ("TLGI"). The principal business
activity of the Company is to provide financing to other subsidiaries of The
Loewen Group Inc. ("affiliates").
The interim consolidated financial statements (unaudited) include the
accounts of all subsidiary companies and all adjustments including normal
recurring adjustments, which in management's opinion are necessary for a fair
presentation of the financial results for the interim periods.
The consolidated financial statements have been prepared in United States
dollars in accordance with generally accepted accounting principles in the
United States. The consolidated financial statements require the use of
management estimates. Actual results could differ from those estimates.
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements have been prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission.
The accounts of all subsidiary companies have been included in the
consolidated financial statements. All subsidiaries are wholly owned at June
30, 1998, except for redeemable shares of a subsidiary, which are held by an
affiliate and have been reflected in the consolidated financial statements as
redeemable shares of subsidiary.
On March 10, 1998, the Company through a subsidiary acquired the Parent
Company's 100% interest in Eagle Financial Associates, LLC ("Eagle") and
issued one common share. The Company recorded Eagle's assets and liabilities
at their carrying value of approximately $85,000,000. Eagle's principal
business activity was the purchase of cemetery long-term receivables from
affiliates and the subsequent collection of such receivables. This transaction
is a reorganization of entities under common control of TLGI and has been
accounted for in a manner similar to a pooling of interests.
Accordingly, the Company's consolidated financial statements have been
restated as follows:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------- --------------- ------------------------
1997 1998 1997 1997 1996 1995
-------------- ------- ------- -------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenue: The Company.... $21,279 $66,303 $40,375 $ 97,072 $61,254 $35,437
Eagle................. 2,648 1,808 4,682 9,907 1,051 --
------- ------- ------- -------- ------- -------
$23,927 $68,111 $45,057 $106,979 $62,305 $35,437
======= ======= ======= ======== ======= =======
Net earnings: The
Company................ $19,624 $61,441 $36,301 $ 90,844 $53,269 $28,226
Eagle................. 2,131 1,607 4,008 7,948 729 (7)
------- ------- ------- -------- ------- -------
$21,755 $63,048 $40,309 $ 98,792 $53,998 $28,219
======= ======= ======= ======== ======= =======
</TABLE>
On May 21, 1997, the Company acquired a 100% interest in Loewen Finance
(Delaware) Limited Liability Company ("LFD") in exchange for 10 common shares
of the Company. LFD's principal asset consisted of $596,021,000 of notes
receivable due from an affiliate.
F-40
<PAGE>
LOEWEN LUXEMBOURG (NO. 1) S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT NUMBER OF SHARES
On May 21, 1997, a subsidiary of the Company acquired a 100% interest in an
affiliate, Neweol Finance B.V. ("NFBV"), in exchange for 40 redeemable shares
with a redemption value of $9,433,000. NFBV's principal assets were preferred
shares of an affiliate and an investment in a partnership. Earnings
attributable to the redeemable shares have been reflected as minority
interest.
These transactions constitute a reorganization of entities under the common
control of TLGI and, accordingly, have been reflected in the accompanying
consolidated financial statements in a manner similar to a pooling of
interests. Consequently, the historical results of LFD and NFBV prior to May
21, 1997, have been reflected in the Company's consolidated financial
statements as follows:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE ENDED JUNE
30, 30, YEAR ENDED DECEMBER 31,
-------------- ------------- -----------------------
1998 1997 1998 1997 1997 1996 1995
----- ------- ----- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
LFD...................... $ -- $10,427 $ -- $29,166 $29,166 $61,070 $34,330
NFBV..................... -- 29 190 57 77 184 1,107
----- ------- ----- ------- ------- ------- -------
$ -- $10,456 $ 190 $29,223 $29,243 $61,254 $35,437
===== ======= ===== ======= ======= ======= =======
Minority interest.......... $ -- $30 $ -- $ 60 $ 60 $ 130 $ 548
Net earnings............... $ (9) $ 9,679 $ 117 $26,351 $26,351 $53,269 $28,226
</TABLE>
Investments over which the Company has significant influence are accounted
for using the equity method.
All significant intercompany balances and transactions have been eliminated
in the consolidated financial statements. The Company receives administrative
support from TLGI at no charge to the Company. Direct costs of the Company's
operations are recorded as expenses.
Foreign Currency Translation
Transactions denominated in foreign currencies are translated into U.S.
dollars at the rate of exchange in effect on the transaction dates, and
monetary items are translated at the rate of exchange in effect at the balance
sheet date. Exchange gains and losses are included in income in the current
year.
Other assets
Other assets include organization costs and deferred finance costs, which
are amortized over the estimated useful lives of one and one-half to five
years.
F-41
<PAGE>
LOEWEN LUXEMBOURG (NO. 1) S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT NUMBER OF SHARES
NOTE 2. NOTES RECEIVABLE FROM AFFILIATES
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
----------- ------------ ------------
(UNAUDITED) (RESTATED, SEE NOTE 1)
<S> <C> <C> <C>
Current:
Unsecured promissory notes at 7.25%,
due July 31, 1998 (unaudited--amended
to December 31, 1998)................. $ 91,786 $ 142,763 $ --
Secured revolving credit agreement at
11.5%................................. -- -- 56,061
---------- ---------- --------
$ 91,786 $ 142,763 $ 56,061
========== ========== ========
Long-term:
Unsecured revolving credit agreement
due in 1999........................... $ 51,940 $ 45,233 $ 3,656
Unsecured revolving credit agreement
due in 1999........................... 10,291 9,557 1,092
Secured revolving credit agreements due
in 2002............................... 165,178 87,821 --
Secured term credit agreement due in
1999.................................. 206,000 206,000 206,000
Secured term credit agreement due in
2000.................................. 199,650 199,650 199,650
Secured term credit agreement due in
2001.................................. 184,390 184,390 184,390
Secured term credit agreement due in
2002.................................. 299,865 299,865 --
---------- ---------- --------
$1,117,314 $1,032,516 $594,788
========== ========== ========
</TABLE>
The current promissory notes at December 31, 1997 are from an affiliate
whose principal assets are long-term cemetery installment contract
receivables. The long-term notes receivable are from Loewen Group
International, Inc. ("LGII"), an affiliate with funeral and cemetery
operations in the United States.
The unsecured revolving credit agreement due in 1999 bears interest at 5.36%
plus the U.S. Treasury rate adjusted to a constant maturity corresponding to
the repayment date (Unaudited 10.52% at June 30, 1998). The second unsecured
revolving credit agreement due in 1999 bears interest at the prime commercial
interest rate charged by the 30 largest banks in the United States plus 2%
(Unaudited 10.5% at June 30, 1998) (10.5% at December 31, 1997 and 10.25% at
December 31, 1996). The secured revolving credit agreements due in 2002 bear
interest at a floating rate based on U.S. Treasury rates adjusted to a
constant maturity of three months plus 5% (Unaudited--9.96% at June 30, 1998)
(9.93% at December 31, 1997). The secured term credit agreements bear interest
at a fixed rate of 11.5% per annum. The maximum credit available under the
unsecured revolving credit agreements and the secured revolving credit
agreements is $315,000,000 and $300,000,000, respectively.
The secured revolving and term credit agreements are secured under a
collateral trust arrangement pursuant to which senior lenders to TLGI and LGII
would share certain collateral and guarantees on a pari passu basis. The
collateral includes (i) a pledge and guarantee for the benefit of the senior
lenders of the shares of capital stock held by TLGI of substantially all of
its subsidiaries (including the Company and its subsidiaries), and (ii) all of
the financial assets of LGII (including the shares of the capital stock held
by LGII of various subsidiaries) (collectively, the "Collateral"). The
Collateral and guarantees are held by a trustee for the equal and ratable
benefit of the various holders of pari passu indebtedness. (Unaudited) At June
30, 1998, the indebtedness owed to the senior lending group subject to the
collateral trust arrangement, including holders of certain letters of credit
and excluding debt owed to affiliated companies aggregated $1,988,000,000.
F-42
<PAGE>
LOEWEN LUXEMBOURG (NO. 1) S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT NUMBER OF SHARES
NOTE 3. INVESTMENTS
On November 15, 1994, a subsidiary of the Company made an investment of
$99,600 representing a 24.9% interest in a partnership. The investment is
carried under the equity method. The partnership's profits were $411,000 for
the year ended December 31, 1997 (1996--$373,000). The partnership's principal
asset is credit card receivables. At December 31, 1997, the partnership had
assets of $161,159,000 and liabilities of $159,604,000 (1996--$149,516,000 and
$148,372,000, respectively). Equity income of approximately $102,000 (1996--
$93,000; 1995--$93,000) has been netted into general and administrative
expense.
(Unaudited) The partnership had no profits for the six months ended June 30,
1998 (approximately $200,000 for the six months ended June 30, 1997).
Beginning January 1998, the partnership commenced the process of winding up
the partnership's affairs in anticipation of liquidating the partnership's
assets. For the six months ended June 30, 1998, no equity income (six months
ended June 30, 1997 $62,000) has been netted into general and administrative
expense.
On November 14, 1997, 80 preferred shares of an affiliate were redeemed at
their carrying value of $8,000,000 in exchange for a note receivable.
NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts payable and accrued liabilities
approximate fair value due to the short-term maturities of these instruments.
It is not practicable to determine the fair value of due from affiliated
company, notes receivable from affiliate, or redeemable preferred shares due
to their related party nature. It is not practicable to estimate the fair
value of installment contract receivables, which comprise installment
receivables on cemetery sales, which generally have terms of three to five
years and bear interest ranging from 8% to 15%.
NOTE 5. REDEEMABLE SHARES OF SUBSIDIARY
A subsidiary of the Company has issued 40 Class B Ordinary non-voting
redeemable shares ("Class B shares") to an affiliate. The Class B shares are
redeemable upon demand at their carrying amount of $9,433,000. The Class B
shares have no right to earnings of the Company, in excess of the redemption
value, in the ordinary course or in connection with the winding up of the
Company, unless such dividend or other distribution shall be specifically
resolved and declared payable to the Class B shareholders.
NOTE 6. CAPITAL STOCK
<TABLE>
<CAPTION>
NUMBER CAPITAL ADDITIONAL
OF STOCK, PAID-IN
SHARES AT PAR CAPITAL
------ ------- ----------
<S> <C> <C> <C>
Outstanding December 31, 1995....................... 10 $ 3 $ 397,197
Issued in exchange for installment contract
receivables........................................ 1 -- 56,317
Capital contribution................................ -- -- 192,590
--- ----- ----------
Outstanding December 31, 1996....................... 11 3 646,104
Issued in exchange for installment contract
receivables........................................ -- -- 18,985
Issued for cash..................................... 145 41 381,537
Capital contribution for amounts paid by Parent on
the Company's behalf............................... -- -- 3,418
--- ----- ----------
Outstanding December 31, 1997....................... 156 $ 44 $1,050,044
=== ===== ==========
</TABLE>
(Unaudited) For the six months ended June 30, 1998, there has been no
activity in the Company's capital stock.
F-43
<PAGE>
LOEWEN LUXEMBOURG (NO. 1) S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT NUMBER OF SHARES
NOTE 7. INCOME TAXES
Substantially all the Company's income is earned outside of Luxembourg.
Income tax differed from amounts computed by applying the Luxembourg income
tax rate of 37% on earnings before income taxes and minority interest as a
result of the following:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ------------------ ---------------------------
1998 1997 1998 1997 1997 1996 1995
------- ------- -------- -------- -------- -------- -------
(UNAUDITED) (UNAUDITED) (RESTATED, SEE NOTE 1)
<S> <C> <C> <C> <C> <C> <C> <C>
Expected income tax
expense................ $12,926 $ 8,601 $ 24,940 $ 16,267 $ 38,650 $ 22,478 $12,726
Foreign income taxed at
lower rates............ (9,949) (7,139) (20,582) (12,670) (33,041) (15,855) (7,099)
------- ------- -------- -------- -------- -------- -------
$ 2,977 $ 1,462 $ 4,358 $ 3,597 $ 5,609 $ 6,623 $ 5,627
======= ======= ======== ======== ======== ======== =======
</TABLE>
NOTE 8. INSTALLMENT CONTRACT RECEIVABLES
During 1996 and 1997, the Company purchased cemetery installment contract
receivables from affiliates. The Company has recorded installment contract
receivables at the gross amount of the installment contract receivables net of
the allowance for doubtful accounts, unearned finance income and purchase
discount. At June 30, 1998, the total unearned finance income is approximately
(unaudited) $5,439,000 (December 31, 1997--$7,590,000) and the total
unamortized purchase discount is approximately (unaudited) $4,427,000
(December 31, 1997--$5,623,000). At June 30, 1998, the allowance for contract
cancellation doubtful accounts is approximately (unaudited) $4,816,000
(December 31, 1997--$7,031,000). The purchase discount and unearned finance
income are recognized as interest income in earnings over the collection
period of the contract receivables. During 1998, the Company has recognized
interest income of (unaudited) $2,631,000 (year ended December 31, 1997--
$7,384,000) related to purchased receivables.
(Unaudited) The Company has entered into management and receivables
servicing agreements with an affiliate, whereby the affiliate performs
specified collection services on the receivables for management and servicing
fees calculated at 108.2% of their cost of servicing the receivables.
Proceeds received from the collection of installment contract receivables
are, from time to time, advanced to LGII pursuant to a revolving credit
facility. Revolving credit loans may be made up to a maximum of $100,000,000
and bear interest at a floating rate based on U.S. Treasury rates adjusted to
a constant maturity of three months plus 5%. (Unaudited) Amounts outstanding
under the revolving credit facility are due June 5, 2002. As at June 30, 1998,
the Company has advanced $8,277,000 (June 30, 1997--$22,136,000) to LGII
pursuant to the revolving credit facility.
NOTE 9. NON-CASH TRANSACTIONS
The Company entered into the following non-cash transactions:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER
JUNE 30, 31,
---------------- ---------------------
1998 1997 1996 1995
---------------- ------- ------- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Increase in receivables advanced to
affiliate resulting from collections
and repurchases of installment
contract receivables.................. $9,451 $33,191 $ 3,421 $ --
Purchase of installment contract
receivables in exchange for capital
stock................................. -- 18,985 56,317 --
</TABLE>
F-44
<PAGE>
LOEWEN LUXEMBOURG (NO. 1) S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT NUMBER OF SHARES
NOTE 10. RECENT ACCOUNTING STANDARD
(Unaudited) Statement of Position 98-5 ("SOP 98-5") "Reporting on the Costs
of Start-Up Activities" is effective for fiscal years beginning after December
15, 1998. SOP 98-5 states that costs of start-up activities, including
organization costs, should be expensed as incurred. Pursuant to SOP 98-5 the
Company will write-off the unamortized organization costs, which are contained
in other assets, in its 1999 fiscal year.
F-45
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Loewen Luxembourg (No. 2) S.A.
We have audited the accompanying consolidated balance sheets of Loewen
Luxembourg (No. 2) S.A. and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of operations and retained earnings, and
cash flows for each of the years in the three-year period ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
supplemental consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
These consolidated financial statements give retroactive effect to the
acquisition by a subsidiary of the Company of Eagle Financial Associates, LLC,
on March 10, 1998, which has been accounted for in a manner similar to a
pooling of interests as described in Note 1 to the consolidated financial
statements.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Loewen
Luxembourg (No. 2) S.A. and subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1997, in conformity with generally
accepted accounting principles of the United States.
Luxembourg, March 20, 1998 KPMG Audit
Reviseurs d'Entreprises
/s/ D.G. Robertson
F-46
<PAGE>
LOEWEN LUXEMBOURG (NO. 2) S.A.
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT NUMBER OF SHARES
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
----------- ------------ ------------
(UNAUDITED) (RESTATED, SEE NOTE 1)
<S> <C> <C> <C>
ASSETS
------
Current assets
Cash.................................. $ 99 $ 81 $ 71
Installment contract receivables, net
of allowances........................ 8,772 11,607 15,869
Note receivable from affiliate........ 79,161 80,000 --
-------- -------- -------
88,032 91,688 15,940
Long-term installment contract receiv-
ables, net of allowances............... 20,468 27,084 37,028
Notes receivable from affiliate......... 18,569 57,600 4,748
Investments............................. -- 387 8,285
Other assets............................ 1,221 1,288 835
-------- -------- -------
$128,290 $178,047 $66,836
======== ======== =======
LIABILITIES AND SHAREHOLDER EQUITY
----------------------------------
Current liabilities
Accounts payable and accrued
liabilities.......................... $ 773 $ 1,140 $ 374
Redeemable shares of subsidiary......... 9,433 9,433 9,373
Shareholder equity
Capital stock, $285 par value, 165
shares authorized,
issued and outstanding (December 31,
1997--165,
December 31, 1996--7)................ 47 47 2
Additional paid-in capital............ 102,273 153,953 56,365
Retained earnings..................... 15,764 13,474 722
-------- -------- -------
118,084 167,474 57,089
-------- -------- -------
$128,290 $178,047 $66,836
======== ======== =======
</TABLE>
Commitments and contingencies (Note 2)
See accompanying notes to consolidated financial statements
F-47
<PAGE>
LOEWEN LUXEMBOURG (NO. 2) S.A.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, JUNE 30, DECEMBER 31,
---------------------- ---------------------- -------------------------
1998 1997 1998 1997 1997 1996 1995
----------- ---------- ---------- ---------- -------- ------- -------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (RESTATED, SEE NOTE 1)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue from affiliates
Interest and other
income from
affiliates........... $ 4,406 $3,263 $ 8,485 $5,325 $ 14,669 $ 1,235 $ 1,107
Expenses
General and
administrative....... 119 447 400 528 1,191 337 316
------- ------ ------- ------ -------- ------- -------
Earnings before income
tax expense and
minority interest...... 4,287 2,816 8,085 4,797 13,478 898 791
Income tax expense...... 1,346 100 1,795 174 666 39 250
------- ------ ------- ------ -------- ------- -------
2,941 2,716 6,290 4,623 12,812 859 541
Minority interest....... -- 30 -- 60 60 130 548
------- ------ ------- ------ -------- ------- -------
Net earnings (loss) and
comprehensive income... $ 2,941 $2,686 $ 6,290 $4,563 $ 12,752 $ 729 $ (7)
======= ====== ======= ====== ======== ======= =======
Retained earnings,
beginning of period.... $16,823 $2,599 $13,474 $ 722 $ 722 $ (7) $ --
Net earnings (loss) and
comprehensive income... 2,941 2,686 6,290 4,563 12,752 729 (7)
Dividends............... (4,000) -- (4,000) -- -- -- --
------- ------ ------- ------ -------- ------- -------
Retained earnings, end
of period.............. $15,764 $5,285 $15,764 $5,285 $ 13,474 $ 722 $ (7)
======= ====== ======= ====== ======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements
F-48
<PAGE>
LOEWEN LUXEMBOURG (NO. 2) S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------------- --------------------------
1998 1997 1997 1996 1995
------------- ------------- --------- ------ -------
(UNAUDITED) (UNAUDITED) (RESTATED, SEE NOTE 1)
<S> <C> <C> <C> <C> <C>
CASH PROVIDED BY (AP-
PLIED TO)
Operations
Net earnings.......... $ 6,290 $ 4,563 $ 12,752 $ 729 $ (7)
Items not affecting
cash:
Minority interest... -- 60 60 130 548
Net changes in other
non-cash balances.... (300) (4,548) 211 (1,255) (1,119)
------------ ------------- --------- ------ -------
5,990 75 13,023 (396) (578)
------------ ------------- --------- ------ -------
Investing
Advances on notes
receivable from
affiliate............ (16,755) (97,701) (171,660) (236) --
Repayments of notes
receivable from
affiliate and
Parent............... 14,396 78,606 158,606 540 18,182
Investment in
affiliate............ 387 -- -- -- (8,000)
------------ ------------- --------- ------ -------
(1,972) (19,095) (13,054) 304 10,182
------------ ------------- --------- ------ -------
Financing
Issue of share
capital.............. -- 250,624 381,578 -- 50
Return of capital to
Parent............... -- (231,600) (381,537) -- --
Redemption of
redeemable preferred
shares of
subsidiary........... -- -- -- -- (9,659)
Dividends paid........ (4,000) -- -- -- --
------------ ------------- --------- ------ -------
(4,000) 19,024 41 -- (9,609)
------------ ------------- --------- ------ -------
Increase (decrease) in
cash during the
period................. 18 4 10 (92) (5)
Cash, beginning of
period................. 81 71 71 163 168
------------ ------------- --------- ------ -------
Cash, end of period..... $ 99 $ 75 $ 81 $ 71 $ 163
============ ============= ========= ====== =======
</TABLE>
See accompanying notes to consolidated financial statements
F-49
<PAGE>
LOEWEN LUXEMBOURG (NO. 2) S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT NUMBER OF SHARES
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Loewen Luxembourg (No. 2) S.A. (the "Company") was incorporated on April 23,
1997 under the laws in the Grand-Duchy of Luxembourg as a wholly owned
subsidiary of Loewen Luxembourg (No. 1) S.A. ("Parent Company") and a wholly
owned indirect subsidiary of The Loewen Group Inc. ("TLGI"). The principal
business activity of the Company is to provide financing to other subsidiaries
of The Loewen Group Inc. ("affiliates").
The interim consolidated financial statements (unaudited) include the
accounts of all subsidiary companies and all adjustments including normal
recurring adjustments, which in management's opinion are necessary for a fair
presentation of the financial results for the interim periods.
The consolidated financial statements have been prepared in United States
dollars in accordance with generally accepted accounting principles in the
United States. The consolidated financial statements require the use of
management estimates. Actual results could differ from those estimates.
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements have been prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission.
The accounts of all subsidiary companies have been included in the
consolidated financial statements. All subsidiaries are wholly owned at June
30, 1998, except for redeemable shares of a subsidiary, which are held by an
affiliate and have been reflected in the consolidated financial statements as
redeemable shares of subsidiary.
On March 10, 1998, the Company acquired Neweol Investments Ltd.'s ("Neweol")
100% interest in Eagle Financial Associates, LLC ("Eagle") in exchange for 10
common shares of the Company. The Company recorded Eagle's assets and
liabilities at their carrying value of approximately $85,000,000. Eagle's
principal business activity was the purchase of cemetery long-term receivables
from affiliates and the subsequent collection of such receivables. This
transaction is a reorganization of entities under common control of TLGI and
has been accounted for in a manner similar to a pooling of interests.
Accordingly, the Company's consolidated financial statements have been
restated as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED ------------- ------------------------
JUNE 30, 1997 1998 1997 1997 1996 1995
------------------ ------ ------ -------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenue: The Company.... $ 615 $6,677 $ 643 $ 4,762 $ 184 $ 1,107
Eagle................. 2,648 1,808 4,682 9,907 1,051 --
------ ------ ------ -------- ------- -------
$3,263 $8,485 $5,325 $ 14,669 $ 1,235 $ 1,107
====== ====== ====== ======== ======= =======
Net earnings: The
Company................ $ 555 $4,683 $ 555 $ 4,804 $ -- $ --
Eagle................. 2,131 1,607 4,008 7,948 729 (7)
------ ------ ------ -------- ------- -------
$2,686 $6,290 $4,563 $ 12,752 $ 729 $ (7)
====== ====== ====== ======== ======= =======
</TABLE>
On May 21, 1997, a subsidiary of the Company acquired a 100% interest in an
affiliate Neweol Finance B.V. ("NFBV"), in exchange for 40 redeemable shares
with a redemption value of $9,433,000. NFBV's principal assets were preferred
shares of an affiliate and an investment in a partnership. This transaction
F-50
<PAGE>
LOEWEN LUXEMBOURG (NO. 2) S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT NUMBER OF SHARES
constitutes a reorganization of entities under the common control of TLGI and,
accordingly, has been reflected in the accompanying consolidated financial
statements in a manner similar to a pooling of interests. Earnings
attributable to the redeemable shares have been reflected as minority
interest. Consequently, the Company's consolidated financial statements for
the years ended December 31, 1996 and 1995 represent the operations of NFBV.
The Company's consolidated statement of operations for the year ended December
31, 1997 includes revenue of $77,000 and minority interest expense of $60,000
representing NFBV's results of operations for the period January 1 through May
20, 1997.
Investments over which the Company has significant influence are accounted
for using the equity method.
All significant intercompany balances and transactions have been eliminated
in the consolidated financial statements. The Company receives administrative
support from TLGI at no charge to the Company. Direct costs of the Company's
operations are recorded as expenses.
FOREIGN CURRENCY TRANSLATION
Transactions denominated in foreign currencies are translated into U.S.
dollars at the rate of exchange in effect on the transaction dates, and
monetary items are translated at the rate of exchange in effect at the balance
sheet date. Exchange gains and losses are included in income in the current
year.
OTHER ASSETS
Other assets include organization costs and deferred finance costs, which
are amortized over the estimated useful lives of one and one-half to five
years.
NOTE 2. NOTES RECEIVABLE FROM AFFILIATES
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
----------- ------------ ------------
(UNAUDITED) (RESTATED, SEE NOTE 1)
<S> <C> <C> <C>
Current
Unsecured promissory note at 7.25%, due
July 31, 1998 (unaudited--amended to
December 31, 1998).................... $79,161 $80,000 $ --
Long-term Unsecured revolving credit
agreement due in 1999................... $10,292 $ 9,557 $1,092
Unsecured revolving credit agreement
due in 1999........................... -- 45,233 3,656
Secured revolving credit agreement due
in 2002............................... 8,277 2,810 --
------- ------- ------
$18,569 $57,600 $4,748
======= ======= ======
</TABLE>
The current promissory note is from an affiliate whose principal assets
include long-term cemetery installment contracts receivable. The long-term
notes receivable are from Loewen Group International, Inc. ("LGII"), an
affiliate with funeral and cemetery operations in the United States.
The unsecured revolving credit agreement bears interest at the prime
commercial interest rate charged by the 30 largest banks in the United States
plus 2% (Unaudited--10.5% at June 30, 1998) (10.5% at December 31, 1997 and
10.25% at December 31, 1996). The second unsecured revolving credit agreement
due in 1999 bears interest at 5.36% plus the U.S. Treasury rate adjusted to a
constant maturity corresponding to the repayment date. The secured revolving
credit agreement bears interest at a floating rate based on U.S. Treasury
rates adjusted to a constant maturity of three months plus 5% (Unaudited--
9.96% at June 30, 1998) (9.93% at December 31, 1997). The maximum credit
available under the first unsecured revolving credit agreement and the secured
revolving credit agreement is $15,000,000, and $100,000,000, respectively.
F-51
<PAGE>
LOEWEN LUXEMBOURG (NO. 2) S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT NUMBER OF SHARES
The secured revolving and term credit agreements are secured under a
collateral trust arrangement pursuant to which senior lenders to TLGI and LGII
would share certain collateral and guarantees on a pari passu basis. The
collateral includes (i) a pledge and guarantee for the benefit of the senior
lenders of the shares of capital stock held by TLGI of substantially all of
its subsidiaries (including the Company and its subsidiaries), and (ii) all of
the financial assets of LGII (including the shares of the capital stock held
by LGII of various subsidiaries) (collectively, the "Collateral"). The
Collateral and guarantees are held by a trustee for the equal and ratable
benefit of the various holders of pari passu indebtedness. (Unaudited) At June
30, 1998, the indebtedness owed to the senior lending group subject to the
collateral trust arrangement, including holders of certain letters of credit
and excluding debt owed to affiliated companies aggregated $1,988,000,000.
NOTE 3. INVESTMENTS
On November 15, 1994, a subsidiary of the Company made an investment of
$99,600 representing a 24.9% interest in a partnership. The investment is
carried under the equity method. The partnership's profits were $411,000 for
the year ended December 31, 1997 (1996--$373,000). The partnership's principal
asset is credit card receivables. At December 31, 1997, the partnership had
assets of $161,159,000 and liabilities of $159,604,000 (1996--$149,516,000 and
$148,372,000, respectively). Equity income of approximately $102,000 (1996--
$93,000; 1995--$93,000) has been netted into general and administrative
expense.
(Unaudited) The partnership had no profits for the six months ended June 30,
1998 (approximately $200,000 for the six months ended June 30, 1997).
Beginning January 1998, the partnership commenced the process of winding up
the partnership's affairs in anticipation of liquidating the partnership's
assets. For the six months ended June 30, 1998, no equity income (six months
ended June 30, 1997--$62,000) has been netted into general and administrative
expense.
On November 14, 1997, 80 preferred shares of an affiliate were redeemed at
their carrying value of $8,000,000 in exchange for a note receivable.
NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts payable and accrued liabilities
approximate fair value due to the short-term maturities of these instruments.
It is not practicable to determine the fair value of notes receivable from
affiliate, or redeemable preferred shares due to their related party nature.
It is not practicable to estimate the fair value of installment contract
receivables, which comprise installment receivables on cemetery sales, which
generally have terms of three to five years and bear interest ranging from 8%
to 15%.
NOTE 5. REDEEMABLE SHARES OF SUBSIDIARY
A subsidiary of the Company has issued 40 Class B Ordinary non-voting
redeemable shares ("Class B shares") to an affiliate. The Class B shares are
redeemable upon demand at their carrying amount of $9,433,000. The Class B
shares have no right to earnings of the Company, in excess of the redemption
value, in the ordinary course or in connection with the winding up of the
Company, unless such dividend or other distribution shall be specifically
resolved and declared payable to the Class B shareholders.
F-52
<PAGE>
LOEWEN LUXEMBOURG (NO. 2) S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT NUMBER OF SHARES
NOTE 6. CAPITAL STOCK
<TABLE>
<CAPTION>
NUMBER CAPITAL STOCK, ADDITIONAL
OF SHARES AT PAR PAID-IN CAPITAL
--------- -------------- ---------------
<S> <C> <C> <C>
Outstanding December 31, 1995........ -- $ -- $ 50
Issued in exchange for installment
contract receivables................ 7 2 56,315
--- ----- ---------
Outstanding December 31, 1996........ 7 2 56,365
Issued in exchange for installment
contract receivables................ 3 1 18,984
Issued for cash...................... 145 41 381,537
Issued in exchange for assets con-
tributed by affiliate............... 10 3 674,625
Return of capital for cash........... -- -- (381,537)
Return of capital by distributing as-
set to Parent....................... -- -- (596,021)
--- ----- ---------
Outstanding December 31, 1997........ 165 $ 47 $ 153,953
Return of capital by distributing as-
set to Parent (unaudited)........... -- -- (51,680)
--- ----- ---------
Outstanding June 30, 1998 (unau-
dited).............................. 165 $ 47 $ 102,273
=== ===== =========
</TABLE>
NOTE 7. INCOME TAXES
Substantially all the Company's income is earned outside of Luxembourg.
Income tax differed from amounts computed by applying the Luxembourg income
tax rate of 37% on earnings before income taxes and minority interest as a
result of the following:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ---------------- ---------------------------
1998 1997 1998 1997 1997 1996 1995
------- ------- ------- ------- --------- ------- -------
(UNAUDITED) (UNAUDITED) (RESTATED, SEE NOTE 1)
<S> <C> <C> <C> <C> <C> <C> <C>
Expected income tax ex-
pense.................. $ 1,586 $ 1,042 $ 2,991 $ 1,775 $ 4,987 $ 332 $ 293
Foreign income taxed at
lower rates............ (240) (942) (1,196) (1,601) (4,321) (293) (43)
------- ------- ------- ------- --------- ------- ------
$1,346 $ 100 $ 1,795 $ 174 $ 666 $ 39 $ 250
======= ======= ======= ======= ========= ======= ======
</TABLE>
NOTE 8. OTHER RELATED PARTY TRANSACTIONS
On May 21, 1997, a subsidiary of the Company acquired a 100% interest in
Loewen Finance (Delaware) Limited Liability Company ("LFD") from Neweol in
exchange for a note payable of $596,021,000. Neweol subsequently contributed
the note payable to the Company as additional paid-in capital. The assets and
liabilities of LFD were recorded at the transferor's carrying value, and the
Company recorded capital stock of $3 and additional paid-in capital of
$78,604,000 for the difference between the net assets recorded and the note
payable. On May 21, 1997, substantially all the net assets of LFD, amounting
to $674,625,000, were distributed to the Parent Company, and the Company
received a note receivable from the Parent Company of $78,604,000.
NOTE 9. INSTALLMENT CONTRACT RECEIVABLES
The Company has recorded installment contract receivables at the gross
amount of the installment contract receivables net of the allowance for
doubtful accounts, unearned finance income and purchase discount. At June 30,
1998, the total unearned finance income is approximately (unaudited)
$5,439,000 (December 31, 1997--$7,590,000) and the total unamortized purchase
discount is approximately (unaudited) $4,427,000 (December 31, 1997--
$5,623,000). At June 30, 1998, the allowance for contract cancellation
doubtful accounts
F-53
<PAGE>
LOEWEN LUXEMBOURG (NO. 2) S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT NUMBER OF SHARES
is approximately (unaudited) $4,816,000 (December 31, 1997--$7,031,000). The
purchase discount and unearned finance income are recognized as interest
income in earnings over the collection period of the contract receivables.
During 1998, the Company has recognized interest income of (unaudited)
$2,631,000 (year ended December 31, 1997--$7,384,000) related to purchased
receivables.
(Unaudited) The Company has entered into management and receivables
servicing agreements with an affiliate, whereby the affiliate performs
specified collection services on the receivables for management and servicing
fees calculated at 108.2% of their cost of servicing the receivables.
(Unaudited) Proceeds received from the collection of installment contract
receivables are, from time to time, advanced to LGII pursuant to a revolving
credit facility. Revolving credit loans may be made up to a maximum of
$100,000,000 and bear interest at a floating rate based on U.S. Treasury rates
adjusted to a constant maturity of three months plus 5%. Amounts outstanding
under the revolving credit facility are due June 5, 2002. As at June 30, 1998,
the Company has advanced $8,277,000 (June 30, 1997--$22,136,000) to LGII
pursuant to the revolving credit facility.
NOTE 10. NON-CASH TRANSACTIONS
The Company entered into the following non-cash transactions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -------------------------
JUNE 30, 1998 1997 1996 1995
---------------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Increase in receivables advanced to
affiliate resulting from collections
and repurchases of installment
contract receivables................ $ 9,451 $ 33,191 $ 3,421 $ --
Purchase of installment contract
receivables in exchange for capital
stock............................... -- 18,985 56,317 --
Transfer of assets to Parent Company
as return of capital................ 51,680 596,021 -- --
Issuance of capital stock in exchange
for assets contributed by
affiliate........................... -- 674,628 -- --
</TABLE>
NOTE 11. RECENT ACCOUNTING STANDARD
(Unaudited) Statement of Position 98-5 ("SOP 98-5") "Reporting on the Costs
of Start-Up Activities" is effective for fiscal years beginning after December
15, 1998. SOP 98-5 states that costs of start-up activities, including
organization costs, should be expensed as incurred. Pursuant to SOP 98-5 the
Company will write-off the unamortized organization costs, which are contained
in other assets, in its 1999 fiscal year.
F-54
<PAGE>
================================================================================
UNTIL , ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About This Prospectus...................................................... 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 13
Forward-Looking and Cautionary Statements.................................. 14
Use of Proceeds............................................................ 16
Consolidated Capitalization................................................ 16
The Exchange Offer......................................................... 17
Description of Exchange Notes.............................................. 24
Description of Certain Other Indebtedness.................................. 49
Plan of Distribution....................................................... 51
Certain U.S. Federal Income Tax Considerations............................. 52
Certain Canadian Federal Tax Considerations................................ 54
Where You Can Find More Information........................................ 55
Legal Matters.............................................................. 56
Experts.................................................................... 56
Index to Financial Statements.............................................. F-1
</TABLE>
================================================================================
================================================================================
LOEWEN GROUP
INTERNATIONAL, INC.
EXCHANGE OFFER FOR:
$200,000,000 7.20% SERIES 6
SENIOR GUARANTEED NOTES DUE 2003
$250,000,000 7.60% SERIES 7
SENIOR GUARANTEED NOTES DUE 2008
---------------
PAYMENT OF PRINCIPAL AND
INTEREST UNCONDITIONALLY
GUARANTEED BY
THE LOEWEN GROUP INC.
[LOGO OF THE LOEWEN GROUP]
---------------
PROSPECTUS
---------------
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
LGII
Section 145 of the Delaware General Corporation Law ("Delaware Law")
permits, subject to certain conditions, a corporation to indemnify its
directors, officers, employees and agents against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such director, officer, employee or agent in connection
with threatened, pending or completed actions, suits and proceedings (other
than actions by or in the right of the corporation) in or to which any of such
persons is a party or is threatened to be made a party.
Section 5.01 of the By-laws of LGII provides that LGII may indemnify its
directors, officers, employees and agents to the fullest extent permitted by
Delaware Law, including the advancement of funds, provided that such person
acted in good faith and in a manner such person reasonably believed to be in
or not opposed to the best interests of LGII and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such person's conduct
was unlawful.
The Board of Directors of LGII has determined that the expenses of the
officers named in the Shareholder Suits incurred in defending the Shareholder
Suits should be paid by LGII from time to time in advance of the final
disposition of such proceedings, subject to each such individual entering into
an undertaking to repay all amounts paid by LGII if it is ultimately
determined that such individual is not entitled to be indemnified by LGII
under the Delaware General Corporation Law.
Loewen
Section 128 of the Company Act of British Columbia provides in part that:
A company may, with the approval of the court, indemnify a person who is a
director or officer or former director or officer of the company or a director
or officer or former director or officer of a corporation of which it is or
was a shareholder, and the person's 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 the
person, including an amount paid to settle an action or satisfy a judgment in
a civil, criminal or administrative action or proceeding to which the person
is made a party because of being or having been a director or officer,
including an action brought by the company or corporation, if
(a) the person acted honestly and in good faith with a view to the best
interests of the corporation of which the person is or was a director or
officer; and
(b) in the case of a criminal or administrative action or proceeding, the
person had reasonable grounds for believing that the person's conduct was
lawful.
Part 19 of Loewen's Articles provides that Loewen shall indemnify its
directors generally in accordance with the provisions of Section 128 and that
Loewen shall indemnify its Secretary and any Assistant Secretary against all
costs, charges and expenses incurred that have arisen as a result of serving
Loewen in such capacity. The Articles further provide that Loewen may
indemnify any of its officers, employees or agents against all costs, charges
and expenses incurred as a result of acting as an officer, employee and agent
of Loewen.
Pursuant to indemnification agreements, Loewen has agreed to indemnify its
directors and certain officers against all costs, charges and expenses
incurred by reason of being a director or officer of Loewen. Loewen's duty to
indemnify is subject to court approval and conditioned upon the individual
acting honestly and in good faith with a view to the best interests of Loewen.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3 CHARTER DOCUMENTS
3.1 Certificate of Incorporation of The Loewen Group Inc. ("Loewen")
issued by the British Columbia Registrar of Companies (the
"Registrar") on October 30, 1985 (1)
3.2 Altered Memorandum of Loewen, filed with the Registrar on June 21,
1996 (2)
3.3 Articles of Loewen, restated, filed with the Registrar on March 1,
1988, as amended on March 30, 1988, April 21, 1988, May 19, 1989,
May 28, 1992, May 20, 1993, June 29, 1994, December 21, 1995 and
February 7, 1996 (3)
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
4.1.1 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)
4.1.2 Second Amendment, dated for reference May 15, 1996, to Note
Agreement, dated for reference September 1, 1993, among Loewen,
LGII and institutions named therein, re Series D Notes (4)
4.2 Guaranty Agreement by LGII re Series D Notes, dated for reference
April 1, 1993 (1)
4.3.1 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)
4.3.2 Second Amendment, dated for reference May 15, 1996, to Note
Agreement, dated for reference February 1, 1994, among Loewen,
LGII and Teachers Insurance and Annuity Association of America, re
Series E Notes (4)
4.4 Guaranty Agreement by Loewen re Series E Notes, dated for
reference February 1, 1994 (1)
4.5.1 Amended and Restated 1994 MEIP Credit Agreement, dated as of June
14, 1994, amended and restated as of May 15, 1996 (the "MEIP
Credit Agreement"), by and between Loewen Management Investment
Corporation, in its capacity as agent for LGII ("LMIC"), Loewen
and the banks listed therein (the "MEIP Banks") and Wachovia Bank
of Georgia, N.A., as agent for the MEIP Banks ("MEIP Agent") (5)
4.5.2 First Amendment to the MEIP Credit Agreement, dated as of December
2, 1996 (6)
4.5.3 Second Amendment to the MEIP Credit Agreement, dated as of April
30, 1997 (6)
4.5.4 Third Amendment to the MEIP Credit Agreement, dated as of May 21,
1997 (7)
4.5.5 Fourth Amendment to the MEIP Credit Agreement, dated as of
September 29, 1997 (7)
4.6 Security Agreement, dated as of June 14, 1994, by and between LMIC
and the MEIP Agent (1)
4.7 Guaranty dated as of June 14, 1994, by LGII in favor of the MEIP
Agent for the ratable benefit of the MEIP Banks (1)
4.8 Guaranty dated as of June 14, 1994, by Loewen in favor of the MEIP
Agent for the ratable benefit of the MEIP Banks (1)
4.9 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)
4.10 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 (8)
4.11 MIPS Guarantee Agreement, dated August 15, 1994 (8)
4.12 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)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
4.13 Indenture, dated as of March 20, 1996, by and between LGII, as
issuer, Loewen, as guarantor of the obligations of LGII under the
Indenture, and Fleet National Bank as Trustee, with respect to
Senior Guaranteed Notes of LGII (3)
4.14 Form of Senior Guarantee of LGII's Series 1 and 2 Notes (included
in Exhibit 4.13)
4.15 Form of Global Series 1 and 2 Outstanding Note of LGII (included in
Exhibit 4.13)
4.16 Form of Physical Series 1 and 2 Outstanding Note of LGII (included
in Exhibit 4.13)
4.17 Form of Global Series 1 and 2 Exchange Note of LGII (4)
4.18 Form of Physical Series 1 and 2 Exchange Note of LGII (4)
4.19 Amended and Restated Credit Agreement, dated as of March 27, 1998
("BMO Credit Agreement"), among LGII, as borrower, Loewen, as a
guarantor, the lenders named therein, as the lenders, Goldman,
Sachs & Co., as the documentation agent, and Bank of Montreal, as
issuer, swingline lender and administrative and syndication agent
(7)
4.20 Collateral Trust Agreement, dated as of May 15, 1996, among Bankers
Trust Company, as trustee, Loewen, LGII and various other pledgers
(4)
4.21.1 Amended and Restated Operating Credit Agreement, dated for
reference July 15, 1996, between Loewen and Royal Bank of Canada
(5)
4.21.2 Third Amendment to Operating Credit Agreement, dated for reference
July 15, 1996, among Loewen, LGII and Royal Bank of Canada (5)
4.22 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)
4.23 Form of Senior Guarantee of LGII's Series 3 and 4 Notes (included
in Exhibit 4.22)
4.24 Form of Global Series 3 and 4 Outstanding Note of LGII (included in
Exhibit 4.22)
4.25 Form of Physical Series 3 and 4 Outstanding Note of LGII (included
in Exhibit 4.22)
4.26 Form of Global Series 3 and 4 Exchange Note of LGII (9)
4.27 Form of Physical Series 3 and 4 Exchange Note of LGII (9)
4.28 Indenture, dated as of September 26, 1997, between Loewen, as
issuer, LGII, as guarantor, and The Trust Company of Bank of
Montreal, as trustee, with respect to the Series 5 Notes (10)
4.29 Form of Series 5 Guaranteed Note of LGII (10)
4.30 Form of Senior Guarantee of Loewen's Series 5 Note (10)
4.31 Indenture, dated as of September 30, 1997, between LGII, as issuer,
Loewen, as guarantor, and State Street Bank and Trust Company, as
trustee, with respect to the Senior Guaranteed Notes due 2009 (10)
4.32 Form of Global "PATS" Senior Guaranteed Note due 2009 of LGII (10)
4.33 Form of Physical "PATS" Senior Guaranteed Note due 2009 of LGII
(10)
4.34 Form of Senior Guarantee of LGII's "PATS" Senior Guaranteed Notes
due 2009 (10)
4.35 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)
4.36 Form of Indenture by and between LGII, as issuer, Loewen, as
guarantor, and Fleet National Bank, as trustee, relating to the
Debt Securities that may be issued pursuant to Registration
Statement No. 333-29443 (11)
4.37 Indenture dated as of May 28, 1998, between LGII, as issuer,
Loewen, as guarantor, and State Street Bank and Trust Company, as
trustee, with respect to the Series 6 and 7 Notes (12)
4.38 Form of Senior Guarantee of Series 6 and 7 Notes (included in
Exhibit 4.37)
4.39 Form of Global Series 6 and 7 Notes (included in Exhibit 4.37)
4.40 Form of Physical Series 6 and 7 Notes (included in Exhibit 4.37)
4.41 Form of Global Series 6 and 7 Exchange Note of LGII**
4.42 Form of Physical Series 6 and 7 Exchange Note of LGII**
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
4.43 Loewen and LGII hereby agree to furnish to the Commission, upon
request, a copy of the instruments which define the rights of
holders of long-term debt of Loewen and LGII. None of such
instruments not included as exhibits herein collectively
represents long-term debt in excess of 10% of the consolidated
total assets of Loewen or LGII.
5 OPINIONS RE LEGALITY
5.1 Opinion of Thelen Reid & Priest LLP as to the legality of the
Exchange Notes
5.2 Opinion of Russell & DuMoulin as to the legality of the
Guarantees with respect to the Exchange Notes
8 OPINIONS AS TO TAX MATTERS
8.1 Opinion of Thelen Reid & Priest LLP as to U.S. federal tax
matters
8.2 Opinion of Russell & DuMoulin as to Canadian federal tax matters
10 MATERIAL CONTRACTS
10.1 Stock Purchase Agreement, dated as of March 16, 1995, by and
between Osiris Holding Corporation and LGII (13)
10.2 Receipt Agreement, dated as of January 3, 1996, for the
Cumulative Redeemable Convertible First Preferred Shares, Series
C, of Loewen ("Series C Shares") (3)
10.3 Undertaking by Raymond L. Loewen and Anne Loewen, dated as of
January 3, 1996, to vote in favor of the motion to subdivide the
Series C Shares (3)
10.4 Registration Rights Agreement, dated as of March 20, 1996, by and
between LGII, Loewen and the Initial Purchasers named therein (3)
10.5 Letter Agreement, dated August 8, 1997, by and between Loewen and
Service Corporation International (7)
*10.6 Form of Indemnification Agreement with Outside Directors (14)
*10.7 Form of Indemnification Agreement with Officers (14)
*10.8 Form of Loewen Severance Agreement (14)
*10.9 Loewen Severance Pay Plan (14)
*10.10 1994 Management Equity Investment Plan (the "MEIP") (14)
*10.11 Form of Executive Agreement executed by participants in the MEIP
(8)
*10.12 1994 Outside Director Compensation Plan, as restated and amended
as at January 9, 1997, and further amended as at August 15, 1997
(7)
*10.13 Employee Stock Option Plan (International), as restated and
amended as at March 11, 1998 (7)
*10.14 Employee Stock Option Plan (Canada), as restated and amended as
at March 11, 1998 (7)
*10.15 Employment Agreement, dated August 19, 1988, by and between
Loewen and Tim Hogenkamp (1)
*10.16 Employment Agreement, and Covenant Not to Compete, dated November
14, 1990, by and between LGII and Albert S. Lineberry, Sr. (1)
*10.17 Employment Agreement, dated April 12, 1991, by and between Loewen
and Dwight Hawes (1)
*10.18 Consulting Agreement, dated July 18, 1994, by and between Loewen
and Charles B. Loewen, LGII, and Corporate Services International
Inc. (1)
*10.19 Employment Letter, dated March 10, 1995, by Raymond L. Loewen to
Paul Wagler (5)
*10.20 Employment Agreement, dated March 17, 1995, by and between
Loewen, LGII and Lawrence Miller (1)
*10.21.1 Employment Agreement, dated March 17, 1995, by and between Loewen
and William R. Shane ("Shane Employment Agreement") (1)
*10.21.2 Amendment No. 1 to Shane Employment Agreement, dated February 23,
1998, by and between Loewen and William R. Shane (7)
*10.22 Employment Agreement, dated April 30, 1996, by and between Loewen
and Grant Ballantyne (5)
*10.23 Resignation and Release Agreement, effective June 10, 1996, by
and between Loewen, LGII and Robert O. Wienke (5)
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
*10.24 Employment Agreement, dated October 3, 1997, by and between Loewen
and F. Andrew Scott (7)
*10.25 Employment Agreement, dated October 31, 1997, by and between Loewen
and Michael G. Weedon (7)
*10.26 Severance Agreement, dated November 4, 1997, by and between Loewen
and Douglas J. McKinnon (7)
*10.27 Employment Agreement, dated January 30, 1998, by and between Loewen
and Brad Stam (7)
12 STATEMENT RE COMPUTATION OF RATIOS
12.1 Statement re Computation of Earnings to Fixed Charges Ratio
(Canadian GAAP)**
12.2 Statement re Computation of Earnings to Fixed Charges Ratio (U.S.
GAAP)**
23 CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Thelen Reid & Priest LLP (included in Exhibits 5.1 and
8.1)
23.2 Consent of Russell & DuMoulin (included in Exhibits 5.2 and 8.2)
23.3 Consent of KPMG**
23.4 Consent of KPMG Audit**
24 POWERS OF ATTORNEY
24.1 Loewen Group International, Inc. Powers of Attorney**
24.2 The Loewen Group Inc. Powers of Attorney**
25 STATEMENT OF ELIGIBILITY OF TRUSTEE
99 ADDITIONAL EXHIBITS
99.1 Stock Purchase Agreement, dated as of June 14, 1996, by and among
Prime Succession, Inc., the other individuals or entities listed on
the signature pages thereof, Loewen and Blackhawk Acquisition Corp.
(15)
99.2 Put/Call Agreement, dated as of August 26, 1996, by and among
Blackstone, Blackstone Offshore Capital Partners II L.P.
("Blackstone Offshore"), Blackstone Family Investment Partnership
II L.P. ("Blackstone Family"), PSI Management Direct L.P. ("PSI"),
LGII and Loewen (16)
99.3 Stockholders' Agreement, dated as of August 26, 1996, by and among
Prime Succession, Inc. (to be renamed Prime Succession Holdings,
Inc.), Blackstone, Blackstone Offshore, Blackstone Family, PSI and
LGII (15)
99.4 Subscription Agreement, dated as of November 19, 1996, by and among
Rose Hills Holdings Corp. ("Rose Hills"), Blackstone, Blackstone
Rose Hills Offshore Capital Partners L.P. ("Blackstone Rose
Hills"), Blackstone Family, Roses Delaware, Inc. ("RDI"), Loewen,
LGII and RHI Management Direct, L.P. ("RHI") (17)
99.5 Put/Call Agreement, dated as of November 19, 1996, by and among
Blackstone, Blackstone Offshore, Blackstone Family, Blackstone Rose
Hills, LGII, RDI, Loewen and RHI (17)
99.6 Stockholders' Agreement, dated as of November 19, 1996, by and
among Rose Hills, Blackstone, Blackstone Rose Hills, Blackstone
Family, RDI, LGII and RHI (17)
99.7 Form of Letter of Transmittal
99.8 Form of Notice of Guaranteed Delivery
</TABLE>
- --------
* Compensatory plan or management contract
** 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 Loewen's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed on August 14, 1996 (File No. 0-
18429)
(3) Incorporated by reference from Loewen's Annual Report on Form 10-K for
the year ended December 31, 1995, filed on March 28, 1996, as amended
(File No. 0-18429)
(4) Incorporated by reference from the Registration Statement on Form S-4
filed by Loewen on May 3, 1996, as amended (File No. 333-03135)
II-5
<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 Loewen's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, filed on May 13, 1997 (File No. 1-
12163)
(7) Incorporated by reference from Loewen's Annual Report on Form 10-K for
the year ended December 31, 1997, filed on March 30, 1998 (File No. 1-
12163)
(8) 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)
(9) 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)
(10) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997, filed on November 14, 1997 (File
No. 1-12163)
(11) Incorporated by reference from the Registration Statement on Form S-3
filed by Loewen and LGII on March 21, 1997, as amended (File Nos. 333-
23747 and 333-23747-01)
(12) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q/A
for the quarter ended June 30, 1998, filed on August 13, 1998 (File No.
1-12163)
(13) Incorporated by reference from Loewen's Periodic Report on Form 8-K/A No.
1, dated April 18, 1995, filed May 3, 1995 (File No. 0-18429)
(14) Incorporated by reference from Loewen's Solicitation/Recommendation
Statement on Schedule 14D-9, filed on October 10, 1996, as amended
(15) Incorporated by reference from Loewen's Periodic Report on Form 8-K,
dated August 26, 1996, filed October 11, 1996, as amended October 29,
1996 (File No. 1-12163)
(16) Incorporated by reference from Loewen's Periodic Report on Form 8-K/A No.
1, dated August 26, 1996, filed October 29, 1996 (File No. 1-12163)
(17) Incorporated by reference from Loewen's Periodic Report on Form 8-K,
dated November 19, 1996, filed December 27, 1996 (File No. 1-12163)
(b) FINANCIAL STATEMENT SCHEDULES
None.
ITEM 22. UNDERTAKINGS
(a) Undertakings required by Item 512 of Regulation S-K
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 the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
II-6
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) Loewen hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of Loewen's annual
report pursuant to Section 13(a) or 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 may be permitted to directors, officers and controlling
persons of the registrants pursuant to the foregoing provisions, or
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 registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrants will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, EACH OF THE
REGISTRANTS HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT ON
FORM S-4 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF BURNABY, PROVINCE OF BRITISH COLUMBIA, ON THIS 18TH
DAY OF SEPTEMBER, 1998.
Loewen Group International, Inc.,
a Delaware corporation
By: /s/ Raymond L. Loewen
------------------------------------
Raymond L. Loewen
Chief Executive Officer
The Loewen Group Inc., a corporation
under the laws of British Columbia
By: /s/ Raymond L. Loewen
------------------------------------
Raymond L. Loewen
Chairman of the Board, President
and Chief Executive Officer
II-8
<PAGE>
LOEWEN GROUP INTERNATIONAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Act, this Amendment to the
Registration Statement on Form S-4 has been signed by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
<S> <C>
/s/ Raymond L. Loewen
Date: September 18, 1998 _____________________________________
Raymond L. Loewen
Chief Executive Officer and Director
(Principal Executive Officer)
Date: September 18, 1998 /s/ Paul Wagler*
_____________________________________
Paul Wagler
Executive Vice-President, Finance,
Chief Financial Officer and Director
(Principal Financial Officer)
Date: September 18, 1998 /s/ Dwight K. Hawes*
_____________________________________
Dwight K. Hawes
Senior Vice-President, Corporate
Controller
(Principal Accounting Officer)
Date: September 18, 1998 /s/ Timothy R. Hogenkamp*
_____________________________________
Timothy R. Hogenkamp
Chairman of the Board and Director
Date: September 18, 1998 /s/ George M. Amato*
_____________________________________
George M. Amato
Director
Date: September 18, 1998 /s/ J.C. Carothers, Jr.*
_____________________________________
J.C. Carothers, Jr.
Director
Date: September 18, 1998 /s/ H. Steven Childress*
_____________________________________
H. Steven Childress
Director
Date: September 18, 1998 /s/ Edward J. Fitzgerald*
_____________________________________
Edward J. Fitzgerald
Director
</TABLE>
II-9
<PAGE>
Date: September 18, 1998 /s/ Honorine T. Flanagan*
_____________________________________
Honorine T. Flanagan
Director
Date: September 18, 1998 /s/ Thomas F. Glodek*
_____________________________________
Thomas F. Glodek
Director
Date: September 18, 1998 /s/ Earl A. Grollman*
_____________________________________
Earl A. Grollman
Director
Date: September 18, 1998 /s/ Mary M. Howard*
_____________________________________
Mary M. Howard
Director
Date: September 18, 1998 /s/ Peter S. Hyndman*
_____________________________________
Peter S. Hyndman
Director
Date: September 18, 1998 /s/ Albert S. Lineberry, Jr.*
_____________________________________
Albert S. Lineberry, Jr.
Director
Date: September 18, 1998 /s/ John E. Malletta, Sr.*
_____________________________________
John E. Malletta, Sr.
Director
Date: September 18, 1998 /s/ Lawrence Miller*
_____________________________________
Lawrence Miller
Director
Date: September 18, 1998 /s/ David F. Riemann*
_____________________________________
David F. Riemann
Director
Date:
_____________________________________
Robert D. Russell
Director
II-10
<PAGE>
Date: September 18, 1998 /s/ Michael L. Schweer*
_____________________________________
Michael L. Schweer
Director
Date: September 18, 1998 /s/ Bill Seale*
_____________________________________
Bill Seale
Director
Date: September 18, 1998 /s/ F. Andrew Scott*
_____________________________________
F. Andrew Scott
Director
Date: September 18, 1998 /s/ David J. Shipper*
_____________________________________
David J. Shipper
Director
Date: September 18, 1998 /s/ Sandra C. Strong-Fitzgerald*
_____________________________________
Sandra C. Strong-Fitzgerald
Director
Date: September 18, 1998 /s/ Robert L. Studley*
_____________________________________
Robert L. Studley
Director
Date: September 18, 1998 /s/ Michael G. Weedon*
_____________________________________
Michael G. Weedon
Director
Date: September 18, 1998 /s/ Robert A. Weinstein*
_____________________________________
Robert A. Weinstein
Director
Date: September 18, 1998 /s/ John R. Wright*
_____________________________________
John R. Wright
Director
*By: /s/ Raymond L. Loewen
- ------------------------------
Raymond L. Loewen
Attorney-in-fact
II-11
<PAGE>
THE LOEWEN GROUP INC.
SIGNATURES
Pursuant to the requirements of the Securities Act, this Amendment to the
Registration Statement on Form S-4 has been signed by the following persons in
the capacities and on the date indicated.
/s/ Raymond L. Loewen
Date: September 18, 1998 _____________________________________
Raymond L. Loewen
Chairman of the Board, Chief
Executive Officer, President and
Director
(Principal Executive Officer)
Date: September 18, 1998 /s/ Paul Wagler*
_____________________________________
Paul Wagler
Executive Vice-President, Finance and
Chief Financial Officer and Director
(Principal Financial Officer)
Date: September 18, 1998 /s/ Dwight K. Hawes*
_____________________________________
Dwight K. Hawes
Senior Vice-President, Corporate
Controller
(Principal Accounting Officer)
Date: September 18, 1998 /s/ Kenneth S. Bagnell*
_____________________________________
Kenneth S. Bagnell
Director
Date: September 18, 1998 /s/ The Honorable J. Carter Beese,
Jr.*
_____________________________________
The Honorable J. Carter Beese, Jr.
Director
Date: September 18, 1998 /s/ Earl A. Grollman*
_____________________________________
Earl A. Grollman
Director
Date: September 18, 1998 /s/ Timothy R. Hogenkamp*
_____________________________________
Timothy R. Hogenkamp
Director
Date: September 18, 1998 /s/ Albert S. Lineberry, Sr.*
_____________________________________
Albert S. Lineberry, Sr.
Director
II-12
<PAGE>
Date: September 18, 1998 /s/ Charles B. Loewen*
_____________________________________
Charles B. Loewen
Director
Date: September 18, 1998 /s/ Robert B. Lundgren*
_____________________________________
Robert B. Lundgren
Director
Date: September 18, 1998 /s/ James D. McLennan*
_____________________________________
James D. McLennan
Director
Date: September 18, 1998 /s/ Lawrence Miller*
_____________________________________
Lawrence Miller
Director
Date: September 18, 1998 /s/ Ernest G. Penner*
_____________________________________
Ernest G. Penner
Director
Date: September 18, 1998 /s/ Kenneth T. Stevenson*
_____________________________________
Kenneth T. Stevenson
Director
Date: September 18, 1998 /s/ The Right Honourable John N.
Turner*
_____________________________________
The Right Honourable John N. Turner,
P.C., C.C., Q.C.
Director
*By: /s/ Raymond L. Loewen
-------------------------------
Raymond L. Loewen
Attorney-in-fact
II-13
<PAGE>
AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
The undersigned is Loewen's authorized representative in the United States.
/s/ Timothy R. Hogankamp
_____________________________________
Timothy R. Hogenkamp
Date: September 18, 1998
II-14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3 CHARTER DOCUMENTS
3.1 Certificate of Incorporation of The Loewen Group Inc. ("Loewen")
issued by the British Columbia Registrar of Companies (the
"Registrar") on October 30, 1985 (1)
3.2 Altered Memorandum of Loewen, filed with the Registrar on June 21,
1996 (2)
3.3 Articles of Loewen, restated, filed with the Registrar on March 1,
1988, as amended on March 30, 1988, April 21, 1988, May 19, 1989, May
28, 1992, May 20, 1993, June 29, 1994, December 21, 1995 and February
7, 1996 (3)
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
4.1.1 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)
4.1.2 Second Amendment, dated for reference May 15, 1996, to Note Agreement,
dated for reference September 1, 1993, among Loewen, LGII and
institutions named therein, re Series D Notes (4)
4.2 Guaranty Agreement by LGII re Series D Notes, dated for reference
April 1, 1993 (1)
4.3.1 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)
4.3.2 Second Amendment, dated for reference May 15, 1996, to Note Agreement,
dated for reference February 1, 1994, among Loewen, LGII and Teachers
Insurance and Annuity Association of America, re Series E Notes (4)
4.4 Guaranty Agreement by Loewen re Series E Notes, dated for reference
February 1, 1994 (1)
4.5.1 Amended and Restated 1994 MEIP Credit Agreement, dated as of June 14,
1994, amended and restated as of May 15, 1996 (the "MEIP Credit
Agreement"), by and between Loewen Management Investment Corporation,
in its capacity as agent for LGII ("LMIC"), Loewen and the banks
listed therein (the "MEIP Banks") and Wachovia Bank of Georgia, N.A.,
as agent for the MEIP Banks ("MEIP Agent") (5)
4.5.2 First Amendment to the MEIP Credit Agreement, dated as of December 2,
1996 (6)
4.5.3 Second Amendment to the MEIP Credit Agreement, dated as of April 30,
1997 (6)
4.5.4 Third Amendment to the MEIP Credit Agreement, dated as of May 21, 1997
(7)
4.5.5 Fourth Amendment to the MEIP Credit Agreement, dated as of September
29, 1997 (7)
4.6 Security Agreement, dated as of June 14, 1994, by and between LMIC and
the MEIP Agent (1)
4.7 Guaranty dated as of June 14, 1994, by LGII in favor of the MEIP Agent
for the ratable benefit of the MEIP Banks (1)
4.8 Guaranty dated as of June 14, 1994, by Loewen in favor of the MEIP
Agent for the ratable benefit of the MEIP Banks (1)
4.9 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)
4.10 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 (8)
4.11 MIPS Guarantee Agreement, dated August 15, 1994 (8)
4.12 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)
</TABLE>
<PAGE>
<TABLE>
<C> <S>
4.13 Indenture, dated as of March 20, 1996, by and between LGII, as issuer,
Loewen, as guarantor of the obligations of LGII under the Indenture,
and Fleet National Bank as Trustee, with respect to Senior Guaranteed
Notes of LGII (3)
4.14 Form of Senior Guarantee of LGII's Series 1 and 2 Notes (included in
Exhibit 4.13)
4.15 Form of Global Series 1 and 2 Outstanding Note of LGII (included in
Exhibit 4.13)
4.16 Form of Physical Series 1 and 2 Outstanding Note of LGII (included in
Exhibit 4.13)
4.17 Form of Global Series 1 and 2 Exchange Note of LGII (4)
4.18 Form of Physical Series 1 and 2 Exchange Note of LGII (4)
4.19 Amended and Restated Credit Agreement, dated as of March 27, 1998 ("BMO
Credit Agreement"), among LGII, as borrower, Loewen, as a guarantor,
the lenders named therein, as the lenders, Goldman, Sachs & Co., as the
documentation agent, and Bank of Montreal, as issuer, swingline lender
and administrative and syndication agent (7)
4.20 Collateral Trust Agreement, dated as of May 15, 1996, among Bankers
Trust Company, as trustee, Loewen, LGII and various other pledgers (4)
4.21.1 Amended and Restated Operating Credit Agreement, dated for reference
July 15, 1996, between Loewen and Royal Bank of Canada (5)
4.21.2 Third Amendment to Operating Credit Agreement, dated for reference July
15, 1996, among Loewen, LGII and Royal Bank of Canada (5)
4.22 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)
4.23 Form of Senior Guarantee of LGII's Series 3 and 4 Notes (included in
Exhibit 4.22)
4.24 Form of Global Series 3 and 4 Outstanding Note of LGII (included in
Exhibit 4.22)
4.25 Form of Physical Series 3 and 4 Outstanding Note of LGII (included in
Exhibit 4.22)
4.26 Form of Global Series 3 and 4 Exchange Note of LGII (9)
4.27 Form of Physical Series 3 and 4 Exchange Note of LGII (9)
4.28 Indenture, dated as of September 26, 1997, between Loewen, as issuer,
LGII, as guarantor, and The Trust Company of Bank of Montreal, as
trustee, with respect to the Series 5 Notes (10)
4.29 Form of Series 5 Guaranteed Note of LGII (10)
4.30 Form of Senior Guarantee of Loewen's Series 5 Note (10)
4.31 Indenture, dated as of September 30, 1997, between LGII, as issuer,
Loewen, as guarantor, and State Street Bank and Trust Company, as
trustee, with respect to the Senior Guaranteed Notes due 2009 (10)
4.32 Form of Global "PATS" Senior Guaranteed Note due 2009 of LGII (10)
4.33 Form of Physical "PATS" Senior Guaranteed Note due 2009 of LGII (10)
4.34 Form of Senior Guarantee of LGII's "PATS" Senior Guaranteed Notes due
2009 (10)
4.35 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)
4.36 Form of Indenture by and between LGII, as issuer, Loewen, as guarantor,
and Fleet National Bank, as trustee, relating to the Debt Securities
that may be issued pursuant to Registration Statement No. 333-29443
(11)
4.37 Indenture dated as of May 28, 1998, between LGII, as issuer, Loewen, as
guarantor, and State Street Bank and Trust Company, as trustee, with
respect to the Series 6 and 7 Notes (12)
4.38 Form of Senior Guarantee of Series 6 and 7 Notes (included in Exhibit
4.37)
4.39 Form of Global Series 6 and 7 Notes (included in Exhibit 4.37)
4.40 Form of Physical Series 6 and 7 Notes (included in Exhibit 4.37)
4.41 Form of Global Series 6 and 7 Exchange Note of LGII**
4.42 Form of Physical Series 6 and 7 Exchange Note of LGII**
</TABLE>
<PAGE>
<TABLE>
<C> <S>
4.43 Loewen and LGII hereby agree to furnish to the Commission, upon
request, a copy of the instruments which define the rights of holders
of long-term debt of Loewen and LGII. None of such instruments not
included as exhibits herein collectively represents long-term debt in
excess of 10% of the consolidated total assets of Loewen or LGII.
5 OPINIONS RE LEGALITY
5.1 Opinion of Thelen Reid & Priest LLP as to the legality of the
Exchange Notes
5.2 Opinion of Russell & DuMoulin as to the legality of the Guarantees
with respect to the Exchange Notes
8 OPINIONS AS TO TAX MATTERS
8.1 Opinion of Thelen Reid & Priest LLP as to U.S. federal tax matters
8.2 Opinion of Russell & DuMoulin as to Canadian federal tax matters
10 MATERIAL CONTRACTS
10.1 Stock Purchase Agreement, dated as of March 16, 1995, by and between
Osiris Holding Corporation and LGII (13)
10.2 Receipt Agreement, dated as of January 3, 1996, for the Cumulative
Redeemable Convertible First Preferred Shares, Series C, of Loewen
("Series C Shares") (3)
10.3 Undertaking by Raymond L. Loewen and Anne Loewen, dated as of January
3, 1996, to vote in favor of the motion to subdivide the Series C
Shares (3)
10.4 Registration Rights Agreement, dated as of March 20, 1996, by and
between LGII, Loewen and the Initial Purchasers named therein (3)
10.5 Letter Agreement, dated August 8, 1997, by and between Loewen and
Service Corporation International (7)
*10.6 Form of Indemnification Agreement with Outside Directors (14)
*10.7 Form of Indemnification Agreement with Officers (14)
*10.8 Form of Loewen Severance Agreement (14)
*10.9 Loewen Severance Pay Plan (14)
*10.10 1994 Management Equity Investment Plan (the "MEIP") (14)
*10.11 Form of Executive Agreement executed by participants in the MEIP (8)
*10.12 1994 Outside Director Compensation Plan, as restated and amended as
at January 9, 1997, and further amended as at August 15, 1997 (7)
*10.13 Employee Stock Option Plan (International), as restated and amended
as at March 11, 1998 (7)
*10.14 Employee Stock Option Plan (Canada), as restated and amended as at
March 11, 1998 (7)
*10.15 Employment Agreement, dated August 19, 1988, by and between Loewen
and Tim Hogenkamp (1)
*10.16 Employment Agreement, and Covenant Not to Compete, dated November 14,
1990, by and between LGII and Albert S. Lineberry, Sr. (1)
*10.17 Employment Agreement, dated April 12, 1991, by and between Loewen and
Dwight Hawes (1)
*10.18 Consulting Agreement, dated July 18, 1994, by and between Loewen and
Charles B. Loewen, LGII, and Corporate Services International Inc.
(1)
*10.19 Employment Letter, dated March 10, 1995, by Raymond L. Loewen to Paul
Wagler (5)
*10.20 Employment Agreement, dated March 17, 1995, by and between Loewen,
LGII and Lawrence Miller (1)
*10.21.1 Employment Agreement, dated March 17, 1995, by and between Loewen and
William R. Shane ("Shane Employment Agreement") (1)
*10.21.2 Amendment No. 1 to Shane Employment Agreement, dated February 23,
1998, by and between Loewen and William R. Shane (7)
*10.22 Employment Agreement, dated April 30, 1996, by and between Loewen and
Grant Ballantyne (5)
*10.23 Resignation and Release Agreement, effective June 10, 1996, by and
between Loewen, LGII and Robert O. Wienke (5)
</TABLE>
<PAGE>
<TABLE>
<C> <S>
*10.24 Employment Agreement, dated October 3, 1997, by and between Loewen and
F. Andrew Scott (7)
*10.25 Employment Agreement, dated October 31, 1997, by and between Loewen and
Michael G. Weedon (7)
*10.26 Severance Agreement, dated November 4, 1997, by and between Loewen and
Douglas J. McKinnon (7)
*10.27 Employment Agreement, dated January 30, 1998, by and between Loewen and
Brad Stam (7)
12 STATEMENT RE COMPUTATION OF RATIOS
12.1 Statement re Computation of Earnings to Fixed Charges Ratio (Canadian
GAAP)
12.2 Statement re Computation of Earnings to Fixed Charges Ratio (U.S. GAAP)
23 CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Thelen Reid & Priest LLP (included in Exhibits 5.1 and 8.1)
23.2 Consent of Russell & DuMoulin (included in Exhibits 5.2 and 8.2)
23.3 Consent of KPMG**
23.4 Consent of KPMG Audit**
24 POWERS OF ATTORNEY
24.1 Loewen Group International, Inc. Powers of Attorney**
24.2 The Loewen Group Inc. Powers of Attorney**
25 STATEMENT OF ELIGIBILITY OF TRUSTEE
99 ADDITIONAL EXHIBITS
99.1 Stock Purchase Agreement, dated as of June 14, 1996, by and among Prime
Succession, Inc., the other individuals or entities listed on the
signature pages thereof, Loewen and Blackhawk Acquisition Corp. (15)
99.2 Put/Call Agreement, dated as of August 26, 1996, by and among
Blackstone, Blackstone Offshore Capital Partners II L.P. ("Blackstone
Offshore"), Blackstone Family Investment Partnership II L.P.
("Blackstone Family"), PSI Management Direct L.P. ("PSI"), LGII and
Loewen (16)
99.3 Stockholders' Agreement, dated as of August 26, 1996, by and among
Prime Succession, Inc. (to be renamed Prime Succession Holdings, Inc.),
Blackstone, Blackstone Offshore, Blackstone Family, PSI and LGII (15)
99.4 Subscription Agreement, dated as of November 19, 1996, by and among
Rose Hills Holdings Corp. ("Rose Hills"), Blackstone, Blackstone Rose
Hills Offshore Capital Partners L.P. ("Blackstone Rose Hills"),
Blackstone Family, Roses Delaware, Inc. ("RDI"), Loewen, LGII and RHI
Management Direct, L.P. ("RHI") (17)
99.5 Put/Call Agreement, dated as of November 19, 1996, by and among
Blackstone, Blackstone Offshore, Blackstone Family, Blackstone Rose
Hills, LGII, RDI, Loewen and RHI (17)
99.6 Stockholders' Agreement, dated as of November 19, 1996, by and among
Rose Hills, Blackstone, Blackstone Rose Hills, Blackstone Family, RDI,
LGII and RHI (17)
99.7 Form of Letter of Transmittal
99.8 Form of Notice of Guaranteed Delivery
</TABLE>
- --------
* Compensatory plan or management contract
** 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 Loewen's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed on August 14, 1996 (File No. 0-
18429)
(3) Incorporated by reference from Loewen's Annual Report on Form 10-K for
the year ended December 31, 1995, filed on March 28, 1996, as amended
(File No. 0-18429)
(4) Incorporated by reference from the Registration Statement on Form S-4
filed by Loewen on May 3, 1996, as amended (File No. 333-03135)
(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 Loewen's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, filed on May 13, 1997 (File No. 1-
12163)
<PAGE>
(7) Incorporated by reference from Loewen's Annual Report on Form 10-K for
the year ended December 31, 1997, filed on March 30, 1998 (File No. 1-
12163)
(8) 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)
(9) 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)
(10) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997, filed on November 14, 1997 (File
No. 1-12163)
(11) Incorporated by reference from the Registration Statement on Form S-3
filed by Loewen and LGII on March 21, 1997, as amended (File Nos. 333-
23747 and 333-23747-01)
(12) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q/A
for the quarter ended June 30, 1998, filed on August 13, 1998 (File No.
1-12163)
(13) Incorporated by reference from Loewen's Periodic Report on Form 8-K/A No.
1, dated April 18, 1995, filed May 3, 1995 (File No. 0-18429)
(14) Incorporated by reference from Loewen's Solicitation/Recommendation
Statement on Schedule 14D-9, filed on October 10, 1996, as amended
(15) Incorporated by reference from Loewen's Periodic Report on Form 8-K,
dated August 26, 1996, filed October 11, 1996, as amended October 29,
1996 (File No. 1-12163)
(16) Incorporated by reference from Loewen's Periodic Report on Form 8-K/A No.
1, dated August 26, 1996, filed October 29, 1996 (File No. 1-12163)
(17) Incorporated by reference from Loewen's Periodic Report on Form 8-K,
dated November 19, 1996, filed December 27, 1996 (File No. 1-12163)
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF THELEN REID & PRIEST LLP]
September 18, 1998
Loewen Group International, Inc.
50 East RiverCenter Boulevard, Suite 800
Covington, Kentucky 41011
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, British Columbia
Canada V5G 3S8
Ladies and Gentlemen:
We have acted as United States counsel for The Loewen Group Inc., a
corporation organized under the laws of British Columbia ("Loewen") and Loewen
Group International, Inc., a Delaware corporation ("LGII"), in connection with
the preparation and filing of the combined Registration Statement on Form S-4,
File No. 333-62239-01 and 333-62239, filed by Loewen and LGII with the
Securities and Exchange Commission (the "SEC") on August 26, 1998, as
subsequently amended (the "Registration Statement"). The Registration Statement
relates to (i) the issuance by LGII of up to an aggregate principal amount of
$200,000,000 7.20% Series 6 Senior Guaranteed Notes (Unregistered) due 2003 (the
"Series 6 Notes") in exchange for a like principal amount of its issued and
outstanding 7.20% Series 6 Senior Guaranteed Notes (Registered) due 2003 (the
"Series 6 Exchange Notes"), (ii) the issuance by LGII of up to an aggregate
principal amount of $250,000,000 7.60% Series 7 Senior Guaranteed Notes
(Unregistered) due 2008 (the "Series 7 Notes") in exchange for a like principal
amount of its issued and outstanding 7.60% Series 7 Senior Guaranteed Notes
(Registered) due 2008 (the "Series 7 Exchange Notes") and (iii) the guarantee by
Loewen of the Series 6 Notes and the Series 7 Notes (the "Series 7 Guarantee,"
together with the Series 6 Guarantee, the "Guarantees"). The Series 6 Notes,
the Series 7 Notes, the Series 6 Exchange Notes, the Series 7 Exchange Notes and
the Guarantees are included in an Indenture dated May 28, 1998 (the "Indenture")
by and between Loewen, LGII and State Street Bank and Trust Company, as Trustee.
In this capacity, we have made such investigations and have reviewed such
other documents as we have deemed necessary or appropriate under the
circumstances, and have made such examinations of law as we have deemed
appropriate for the purpose of giving the opinions expressed herein.
We also have been furnished with and have examined originals or copies,
certified or otherwise identified to our satisfaction, of all such records of
Loewen and LGII, agreements and
<PAGE>
Loewen Group International, Inc.
The Loewen Group Inc.
September 18, 1998
Page 2
other instruments, certificates of officers and representative of Loewen and
LGII, certificates of public officials and other documents as we have deemed
necessary to require as a basis for the opinions hereinafter expressed.
In making such examinations, we have assumed (i) the genuineness of all
signatures, (ii) the authenticity of all documents submitted to us as originals;
(iii) the conformity to original documents of all documents submitted to us as
certified copies or photocopies; (iv) the authority of all persons signing
documents examined by us except as to persons signing documents on behalf of
Loewen and LGII; (v) the identity and capacity of all individuals acting or
purporting to act as public officials; and (vi) the absence of evidence
extrinsic to the provisions of the Indenture that the respective parties thereto
intended a meaning contrary to that expressed by the provisions of such
agreements.
Based on the foregoing, we are of the opinion that:
(1) When the Series 6 Exchange Notes and the Series 7 Exchange Notes
(collectively, the "Exchange Notes") have been duly executed and authenticated
as provided in the Indenture, and delivered in exchange for the Series 6 Notes
and Series 7 Notes as described in the Registration Statement, the Exchange
Notes will be valid and legally binding obligations of LGII and will be
enforceable in accordance with their terms, 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 considered in a proceeding in equity or at law),
including without limitation, an implied covenant of good faith and fair
dealing.
(2) Assuming that the Guarantees and the Indenture have been authorized by
Loewen in accordance with the laws of British Columbia, when the Guarantees are
duly executed and delivered by Loewen in the manner contemplated in the
Registration Statement, the Guarantees will be valid and legally binding
obligations of Loewen and will be enforceable in accordance with their terms,
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 considered in a
proceeding in equity or at law), including without limitation, an implied
covenant of good faith and fair dealing.
We are members of the Bar of the State of New York. Our opinions expressed
above are limited to the law of the State of New York, the corporate laws of the
State of Delaware and the federal securities laws of the United States of
America; and we do not express any opinion herein concerning any other law.
<PAGE>
Loewen Group International, Inc.
The Loewen Group Inc.
September 18, 1998
Page 3
We hereby consent to the filing of this opinion with the SEC as an exhibit
to the Registration Statement. We further consent to the use of our name under
the heading "Legal Matters" in the prospectus filed with the SEC as a part of
the Registration Statement.
Very truly yours,
/s/ Thelen Reid & Priest LLP
THELEN REID & PRIEST LLP
MLJ/WFO
<PAGE>
EXHIBIT 5.2
[RUSSELL & DuMOULIN LETTERHEAD]
Loewen Group International, Inc. September 18, 1998
3190 Tremont Avenue Matter No. LOE00055
Trevose, Pennsylvania
USA 19053-6693
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, BC V5G 3S8
Canada
Dear Sirs/Mesdames:
We have acted as British Columbia counsel for The Loewen Group Inc., a body
corporate organized under the laws of British Columbia ("Loewen") and Loewen
Group International, Inc., a Delaware corporation ("LGII") in connection with
the preparation of the combined Registration Statement on Form S-4 filed by LGII
and Loewen with the Securities and Exchange Commission (the "SEC") on August 25,
1998, (the "Registration Statement"), respecting (i) the guarantee (the "Series
6 Guarantee") by Loewen of 7.20% Series 6 Senior Guaranteed Notes (Registered)
due 2003 to be offered by LGII and (ii) the guarantee (the "Series 7 Guarantee")
by Loewen of 7.60% Series 7 Senior Guaranteed Notes (Registered) due 2008 to be
offered by LGII (the Series 6 Guarantee together with the Series 7 Guarantee,
the "Guarantees") pursuant to the Indenture dated as of May 28, 1998, (the
"Indenture") made by and among LGII, Loewen and State Street Bank and Trust
Company, as Trustee.
In this capacity, we have made such investigations and have reviewed such other
documents as we have deemed necessary or appropriate under the circumstances,
and have made such examinations of law as we have deemed appropriate for the
purpose of giving the opinion expressed herein.
We also have been furnished with and have examined originals or copies,
certified or otherwise identified to our satisfaction, of all such records of
Loewen and LGII, agreements and other instruments, certificates of officers and
representatives of Loewen and LGII, certificates of public officials and other
documents as we have deemed necessary to require as a basis for the opinion
hereinafter expressed.
In making such examinations, we have assumed (i) the genuineness of all
signatures; (ii) the authenticity of all documents submitted to us as originals;
(iii) the conformity to original documents of all documents submitted to us as
certified copies or photocopies; (iv) the authority of all persons signing
documents examined by us except as to persons signing documents on behalf of
Loewen and LGII; (v) the identity and capacity of all individuals acting or
purporting to act as public officials; (vi) the absence of evidence extrinsic to
the provisions of the Guarantees or
<PAGE>
the Indenture that the respective parties thereto intended a meaning contrary to
that expressed by the provisions of such agreements; and (vii) that each of the
Guarantees and the Indenture, when executed and delivered, will be executed and
delivered in substantially the form in which such document was filed with the
SEC as part of the Registration Statement.
Based on the foregoing, we are of the opinion that the Guarantees and the
Indenture have been authorized by Loewen in accordance with the laws of British
Columbia.
We express no opinions as to the 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. We further consent to the use of our name under the
heading "Legal Matters" in the prospectus filed with the SEC as a part of the
Registration Statement.
Yours truly,
/s/ Russell & DuMoulin
RUSSELL & DuMOULIN
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF THELEN REID & PRIEST LLP]
September 18, 1998
Loewen Group International, Inc.
3190 Tremont Avenue
Trevose, Pennsylvania 19053
Ladies and Gentlemen:
We have acted as United States counsel for Loewen Group International,
Inc., a Delaware corporation (the "Company"), in connection with the preparation
of the Registration Statement on Form S-4, File No. 333-62239, filed August 26,
1998, as amended (the "Registration Statement"), in respect to the offer by the
Company to exchange Series 6 Exchange Notes for the Company's outstanding Series
6 Notes and to exchange Series 7 Exchange Notes for the Company's outstanding
Series 7 Notes. All capitalized terms used without definition in this letter
have the same meaning as in the Registration Statement.
You have requested our opinion with respect to the accuracy of the
discussions included in the Registration Statement under the heading "Certain
U.S. Federal Income Tax Considerations."
In our capacity as United States counsel for the Company, we have been
furnished with and have examined originals or copies, certified or otherwise
identified to our satisfaction, of such records of the Company, agreements and
other instruments, certificates of officers and representative of the Company,
certificates of public officials and other documents as we have deemed necessary
to require as a basis for the opinion hereinafter expressed. In making such
examinations, we have assumed (i) the genuineness of all signatures; (ii) the
authenticity of all documents submitted to us as originals; (iii) the conformity
to original documents of all documents submitted to us as certified copies or
photocopies; (iv) the identity and capacity of all individuals acting or
purporting to act as public officials; (v) that all representations and
statements set forth in the documents submitted to us are true 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.
September 18, 1998
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.
Based on the foregoing, we are of the following opinion:
The statements concerning United States taxation set forth in the
Registration Statement under the heading "Certain U.S. Federal Income Tax
Considerations," to the extent that such statements represent matters of law or
legal conclusions, describe the material United States federal income tax
consequences expected to result to a holder of Series 6 Notes who exchanges such
notes for Series 6 Exchange Notes and to a holder of Series 7 Notes who
exchanges such notes for Series 7 Exchange Notes, subject, however, to the
limitation set forth in the Registration Statement that the statements apply
only to Series 6 and Series 7 Notes held as capital assets and do not purport to
address all aspects of federal income taxation or all tax considerations that
may be relevant to all categories of potential purchasers.
Our opinion is based on the Internal Revenue Code of 1986, as amended,
applicable Treasury regulations thereunder, and judicial authority and
administrative rulings and practices now in effect. Changes to any of the
foregoing authorities after the date of the Registration Statement could apply
on a retroactive basis and affect the consequences described in the Registration
Statement.
We hereby consent to the filing of this opinion with the SEC as an exhibit
to the Registration Statement. We further consent to the use of our name under
the heading "Legal Matters" in the prospectus filed with the SEC as a part of
the Registration Statement.
Very truly yours,
/s/ Thelen Reid & Priest LLP
THELEN REID & PRIEST LLP
JP/JMM
<PAGE>
EXHIBIT 8.2
[RUSSELL & DuMOULIN LETTERHEAD]
Loewen Group International, Inc. September 18, 1998
3190 Tremont Avenue
Trevose, Pennsylvania Matter No. LOE00055
USA 19053-6693 Direct Line:
(604) 631-3142
The Loewen Group Inc.
4126 Norland Avenue
Burnaby, BC V5G 3S8
Canada
Ladies and Gentlemen:
We have acted as Canadian counsel for Loewen Group International, Inc., a
Delaware corporation (the "Company"), and The Loewen Group Inc., a corporation
organized under the laws of British Columbia (the "Guarantor"), in connection
with the preparation of the Registration Statement on Form S-4 filed by the
Company with the Securities and Exchange Commission (the "SEC") on August 25,
1998 (the "Registration Statement"), respecting the offer by the Company to
exchange registered Series 6 and 7 Exchange Notes for the Company's outstanding
Series 6 and 7 Notes, respectively.
You have requested our opinion with respect to the accuracy of the discussions
included in the Registration Statement under the heading "Certain Canadian
Federal Income Tax Considerations."
In our capacity as Canadian counsel for the Company, we have been furnished with
and have examined originals or copies, certified or otherwise identified to our
satisfaction, of such records of the Company, agreements and other instruments,
certificates of officers and representatives of the Company, certificates of
public officials and other documents as we have deemed necessary to require as a
basis for the opinion hereinafter expressed. In making such examinations, we
have assumed (i) the genuineness of all signatures; (ii) the authenticity of all
documents submitted to us as originals; (iii) the conformity to original
documents of all documents submitted to us as certified copies or photocopies;
(iv) the identity and capacity of all individuals acting or purporting to act as
public officials; (v) that all representations and statements set forth in the
documents submitted to us are true and correct; and (vi) that all obligations
imposed by any of the documents submitted to us are enforceable in accordance
with their terms.
We have also made such investigations and have received 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 opinion expressed herein.
<PAGE>
All capitalized terms used without definitions in this letter have the same
meaning as in the Registration Statement.
Based on the foregoing, we are of the opinion that, assuming the share exchanges
are made in accordance with the Exchange Offer and in the manner contemplated in
the Registration Statement, the statements concerning Canadian federal taxation
set forth in the Registration Statement under the heading "Certain Canadian
Federal Income Tax Considerations", to the extent that such statements represent
matters of law or legal conclusions, will represent an accurate description of
the material Canadian federal income tax consequences generally applicable to an
individual who is resident in the United States and not in Canada and who
exchanges Outstanding Notes for Exchange Notes pursuant to the Exchange Offer.
Our opinion is based on the current provisions of the Income Tax Act of Canada,
the regulations thereunder, our understanding of the current administrative
practices of Revenue Canada Customs, Excise and Taxation, income tax treaties to
which Canada is a party, including the Canada-U.S. Income Tax Convention, and
existing judicial decisions, any of which could be changed at any time, possibly
on a retroactive basis. Any such changes could produce tax consequences that
could be different from the consequences described in the Registration
Statement. Our opinion is based on the assumptions described above, and if any
of such assumptions is incorrect, the tax consequences may be different from the
consequences described in the Registration Statement. Finally, our opinion is
not binding in any way on Revenue Canada Customs, Excise and Taxation or the
courts, which could reach conclusions as to the tax consequences that are
different form those described in the Registration Statement.
We hereby consent to the filing of this opinion with the SEC as an exhibit to
the Registration Statement. We further consent to the use of our name under the
heading "Legal Matters" in the prospectus filed with the SEC as a part of the
Registration Statement.
Yours truly,
/s/ Russell & DuMoulin
RUSSELL & DuMOULIN
<PAGE>
EXHIBIT 99.7
LOEWEN GROUP INTERNATIONAL, INC.
FORM OF
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
7.20% SERIES 6 SENIOR GUARANTEED NOTES (REGISTERED) DUE 2003
FOR ANY AND ALL OUTSTANDING
7.20% SERIES 6 SENIOR GUARANTEED NOTES DUE 2003
AND
7.60% SERIES 7 SENIOR GUARANTEED NOTES (REGISTERED) DUE 2008
FOR ANY AND ALL OUTSTANDING
7.60% SERIES 7 SENIOR GUARANTEED NOTES DUE 2008
GUARANTEED BY
THE LOEWEN GROUP INC.
THE EXCHANGE OFFER WILL EXPIRE AT 3:00 P.M.,
NEW YORK TIME ON _________________ , 1998
(THE "EXPIRATION DATE")
UNLESS EXTENDED BY LOEWEN GROUP INTERNATIONAL, INC.
EXCHANGE AGENT:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<CAPTION>
<S> <C> <C>
BY HAND, OR OVERNIGHT COURIER: BY REGISTERED OR CERTIFIED MAIL: BY FACSIMILE:
State Street Bank and Trust Company State Street Bank and Trust Company (617) 664 - 5290
Corporate Trust Department Corporate Trust Department (For Eligible Institutions Only)
Two International Place, P.O. Box 778 Confirm by Telephone:
4th Floor Boston, MA 02102-0078 (617) 664 - 5587
Boston, MA 02110 Attn: Kellie Mullen
Attn: Kellie Mullen
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
-----------------
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
-----------------
<PAGE>
A. ACKNOWLEDGMENTS, REPRESENTATIONS AND GENERAL INFORMATION
The undersigned acknowledges receipt of the Prospectus dated
_________, 1998 (the "Prospectus") of Loewen Group International, Inc. ("LGII")
and The Loewen Group Inc. ("Loewen") which, together with this Letter of
Transmittal (the "Letter of Transmittal"), describes LGII's offer (the "Exchange
Offer") to exchange its (i) $200,000,000 7.20% Series 6 Senior Guaranteed Notes
(Registered) due 2003 (the "Series 6 Exchange Notes") for a like principal
amount of its issued and outstanding 7.20% Series 6 Senior Guaranteed Notes due
2003 (the "Series 6 Outstanding Notes"), and (ii) $250,000,000 7.60% Series 7
Senior Guaranteed Notes (Registered) due 2008 (the "Series 7 Exchange Notes")
for a like principal amount of its issued and outstanding 7.60% Series 7 Senior
Guaranteed Notes due 2008 (the "Series 7 Outstanding Notes"). The terms of the
Series 6 Exchange Notes and the Series 7 Exchange Notes (collectively, the
"Exchange Notes") are identical in all material respects (including principal
amount, interest rate and maturity) to the terms of the Series 6 Outstanding
Notes and the Series 7 Outstanding Notes (collectively, the "Outstanding Notes")
for which they may be exchanged pursuant to the Exchange Offer, except that the
offering of the Exchange Notes will have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), and, therefore, the Exchange
Notes will not bear legends restricting the transfer thereof and will not
provide for certain registration rights.
The undersigned has checked the appropriate boxes below and signed
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Exchange Offer.
Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned hereby tenders to LGII the principal amount of Outstanding Notes
as set forth in Section B below. Subject to, and effective upon, the acceptance
for exchange of the Outstanding Notes tendered herewith, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, LGII all right(s),
title and interest in and to such Outstanding Notes. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent as the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the undersigned in connection with the
Exchange Offer) to cause the Outstanding Notes to be assigned, transferred and
exchanged. The undersigned represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Outstanding Notes and to
acquire Exchange Notes issuable upon the exchange of such tendered Outstanding
Notes, and that, when the same are accepted for exchange, LGII will acquire good
and unencumbered title to the tendered Outstanding Notes, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or LGII to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Outstanding Notes or transfer ownership of such Outstanding Notes on
the account books maintained by the Depository Trust Company ("DTC").
The Exchange Offer is subject to certain conditions as set forth in
the Prospectus under the caption "The Exchange Offer -- Certain Conditions to
the Exchange Offer." The undersigned recognizes that as a result of these
conditions (which may be waived, in whole or in
-2-
<PAGE>
part, by LGII), as more particularly set forth in the Prospectus, LGII may not
be required to exchange any of the Outstanding Notes tendered hereby and, in
such event, the Outstanding Notes not exchanged will be returned to the
undersigned at the address shown below the signature of the undersigned.
The offer is not conditioned upon any minimum number of Outstanding
Notes being tendered.
Pursuant to this Letter of Transmittal, each holder of Outstanding
Notes will represent to LGII that (i) the Exchange Notes to be acquired in the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is such holder,
(ii) neither the holder of the Outstanding Notes nor any such other person is
engaged in, intends to participate in or has an arrangement or understanding
with any person to participate in, the distribution of such Exchange Notes and
(iii) neither the holder nor any such other person is an "affiliate" of LGII or
Loewen within the meaning of Rule 405 under the Securities Act. A tendering
holder that is a broker-dealer may participate in the Exchange Offer provided
that (i) such broker-dealer will receive Exchange Notes for its own account in
exchange for Outstanding Notes as a result of market-making activities or other
trading activities and (ii) such broker-dealer will acknowledge that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes received in respect of such
Outstanding Notes pursuant to the Exchange Offer. Additionally, by
acknowledging that such broker-dealer will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes, the undersigned is not deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The enclosed Instruction by Owner to Registered Holder and/or Book-
Entry Transfer Participant contains an authorization by the beneficial owners of
the Outstanding Notes for you to make the foregoing representations.
LGII will not pay any fee or commission to any broker or dealer or to
any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Outstanding Notes pursuant to the Offer. LGII will
pay or cause to be paid any transfer taxes payable on the transfer of
Outstanding Notes to it, except as otherwise provided in Instruction 5 of the
enclosed Letter of Transmittal.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE
YOU, THE AGENT OF LOEWEN GROUP INTERNATIONAL, INC. OR STATE STREET BANK AND
TRUST COMPANY OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THE
BEHALF OF LGII IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED
HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
Additional copies of the enclosed material may be obtained from the
Exchange Agent.
-3-
<PAGE>
All authority herein conferred or agreed to be conferred shall survive
the death, bankruptcy or incapacity of the undersigned and every obligation of
the undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned. Tendered
Outstanding Notes may be withdrawn at any time prior to the Expiration Date.
Certificates for all Exchange Notes delivered in exchange for tendered
Outstanding Notes and any Outstanding Notes delivered herewith but not
exchanged, in each case registered in the name of the undersigned, shall be
delivered to the undersigned at the address shown below the signature of the
undersigned.
This Letter of Transmittal is to be used if either the certificates
for Outstanding Notes are to be forwarded herewith or the delivery of
Outstanding Notes is to be made by book-entry transfer to an account maintained
by the Exchange Agent at DTC pursuant to the procedures set forth in "The
Exchange Offer -- Procedures for Tendering" in the Prospectus. Delivery of
documents to a book-entry transfer facility does not constitute delivery to the
Exchange Agent.
Unless the context requires otherwise, the term "holder" for purposes
of this Letter of Transmittal means any person in whose name Outstanding Notes
are registered on the books of LGII or any other person who has obtained a
properly completed bond power from the registered holder or any person whose
Outstanding Notes are held of record by DTC who desires to deliver such
Outstanding Notes by book-entry transfer at DTC.
Holders whose Outstanding Notes are not immediately available or who
cannot deliver their Outstanding Notes and all other documents required hereby
to the Exchange Agent on or prior to the Expiration Date may tender their
Outstanding Notes according to the guaranteed delivery procedure set forth in
the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures"
-4-
<PAGE>
B. OUTSTANDING NOTES TO BE TENDERED
List below the Outstanding Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the Certificate Numbers and
Principal Amounts should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
DESCRIPTION OF OUTSTANDING NOTES TENDERED HEREWITH
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate
Principal
Amount Principal
Names(s) and Address(es) of Registered Certificate Represented Amount
Holder (s) (Please fill in) Number(s)* by Notes* Tendered**
$ $
- ------------------------------------------------------------- ---------------- ----------------
---------------- ---------------- ----------------
---------------- ---------------- ----------------
---------------- ---------------- ----------------
---------------- ---------------- ----------------
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Total $ $
=============== ===============
- ----------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate
principal amount represented by Outstanding Notes. See Instruction 2.
===================================================================================================
</TABLE>
-5-
<PAGE>
C. METHOD OF DELIVERY
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH THE DEPOSITORY TRUST COMPANY AND COMPLETE THE FOLLOWING:
[ ] Name of Tendering Institution:
--------------------------------------------
The Depository Trust Company
Account Number:
--------------------------------------------
Transaction Code Number:
--------------------------------------------
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):
--------------------------------------------
Name of Eligible Institution that
Guaranteed Delivery:
--------------------------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER:
Account Number:
-----------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
------------------------------------------------------------------
Address:
------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED NOTES ARE ENCLOSED HEREWITH.
-6-
<PAGE>
D. SIGNATURES
TENDERING HOLDER(S) SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Holder(s)
Dated: , 199_
------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) for Outstanding Notes or by any person(s) authorized to become
registered holder(s) by endorsements and documents transmitted herewith or, if
the Outstanding Notes are held of record by DTC, the person in whose name such
Outstanding Notes are registered on the books of DTC. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please set forth the full title of such person.) See Instruction 3.
Name(s):
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity (full title):
---------------------------------------------------------
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
Area Code and Telephone No.:
---------------------------------------------------
Tax Identification No.:
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GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 3)
Authorized Signature:
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Name:
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Title:
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Address:
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Name of Firm:
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Area Code and Telephone No.:
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Dated: , 199_
-7-
<PAGE>
E. INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates
for all physically delivered Outstanding Notes or confirmation of any book-entry
transfer to the Exchange Agent's account at the Depository Trust Company ("DTC")
of Outstanding Notes tendered by book-entry transfer, as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
thereof, and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent at any of its addresses set forth herein on or
prior to the Expiration Date.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OUTSTANDING
NOTES AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER
AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT
IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES
SHOULD BE SENT TO LGII OR LOEWEN. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR SUCH HOLDERS.
Holders whose Outstanding Notes are not immediately available or who
cannot deliver their Outstanding Notes and all other required documents to the
Exchange Agent on or prior to the Expiration Date or comply with book-entry
transfer procedures on a timely basis may tender their Outstanding Notes
pursuant to the guaranteed delivery procedure set forth in the Prospectus under
"The Exchange Offer -- Guaranteed Delivery Procedures." Pursuant to such
procedure: (i) such tender must be made through an Eligible Institution (as
defined therein); (ii) prior to the Expiration Date, the Exchange Agent must
have received from such Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the tendering holder, the
registered number(s) of such Outstanding Notes and the principal amount of
Outstanding Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within (3) three New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof) and any
other documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) all tendered Outstanding
Notes (or a confirmation of any book-entry transfer of such Outstanding Notes
into the Exchange Agent's account at DTC) as well as this Letter of Transmittal
and all other documents required by this Letter of Transmittal must be received
by the Exchange Agent within three (3) New York Stock Exchange trading days
after the date of execution of such letter, telegram or facsimile transmission,
all as provided in the Prospectus under the caption "The Exchange Offer --
Guaranteed Delivery Procedures."
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<PAGE>
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to holders who wish to tender their outstanding Notes according to
the guaranteed delivery procedures set forth above.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Outstanding Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS. Tenders of Outstanding Notes will be
accepted in all denominations of $1,000 and integral multiples in excess
thereof. If less than the entire principal amount of Outstanding Notes
evidenced by a submitted certificate is tendered, the tendering holder must fill
in the principal amount tendered in the box entitled "Principal Amount
Tendered." A newly issued certificate for the principal amount of Outstanding
Notes submitted but not tendered will be sent to such holder as soon as
practicable after the Expiration Date. All Outstanding Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
Tenders of Outstanding Notes pursuant to the Exchange Offer are
irrevocable, except that Outstanding Notes tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to 3:00 p.m., New York Time, on the
Expiration Date. To be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Exchange Agent.
Any such notice of withdrawal must specify the name of the person having
tendered the Outstanding Notes to be withdrawn, identify the Outstanding Notes
to be withdrawn (including the principal amount of such Outstanding Notes), and
(where certificates for Outstanding Notes have been transmitted) specify the
name in which such Outstanding Notes were registered, if different from that of
the withdrawing holder. If certificates for Outstanding Notes have been
delivered or otherwise identified to the Exchange Agent, then, prior to the
release of such certificates, the withdrawing holder must also submit the serial
numbers of the particular certificates to be withdrawn and a signed notice of
withdrawal with signatures guaranteed by an Eligible Institution unless such
holder is an Eligible Institution. If Outstanding Notes have been tendered
pursuant to the procedures for book-entry transfer described above, any notice
of withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Outstanding Notes and
otherwise comply with the procedures of such facility. Any Outstanding Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Outstanding Notes that have been tendered
for exchange but that are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Outstanding Notes
tendered by book-entry transfer into the Exchange Agent's account at the Book-
Entry Transfer Facility pursuant to the book-entry transfer procedures described
above, such Outstanding Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Outstanding Notes) as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Outstanding Notes may be retendered by following one
of the procedures described in the Prospectus under the caption "The Exchange
Offer -- Procedures for Tendering" at any time on or prior to the Expiration
Date.
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<PAGE>
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered holder(s) of the Outstanding Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of
certificates without alteration, enlargement or any change whatsoever.
If any of the Outstanding Notes tendered hereby are owned of record by
two or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Outstanding Notes registered in different names are
tendered, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
Outstanding Notes.
When this Letter of Transmittal is signed by the registered holder or
holders of Outstanding Notes listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Outstanding Notes listed, such Notes must be
endorsed or accompanied by separate written instruments of transfer or exchange
in form satisfactory to LGII and duly executed by the registered holder, exactly
as the name or names of the registered holder or holders appear(s) on the
Outstanding Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by LGII, proper evidence satisfactory
to LGII of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution unless the Outstanding Notes are tendered: (i) by a
registered holder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on this Letter of Transmittal;
or (ii) for the account of any Eligible Institution. See Instruction 4 below.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable spaces, the name and address to which the Exchange
Notes or substitute Outstanding Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal (or in the case of
tender of the Outstanding Notes through DTC, if different from DTC). In the case
of issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
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<PAGE>
5. TRANSFER TAXES. LGII will pay all transfer taxes, if any, applicable
to the transfer and exchange of Outstanding Notes pursuant to the Exchange
Offer. If, however, certificates representing Outstanding Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be registered or issued in the name of, any person other than the registered
holder of the Outstanding Notes tendered hereby, or if tendered Outstanding
Notes are registered in the name of any person other than the person signing the
Letter of Transmittal, or if a transfer tax is imposed for any reason other than
the transfer of Outstanding Notes to LGII pursuant to the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered holder
or any other person) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exception therefrom is not submitted
herewith with the Letter of Transmittal the amount of such transfer taxes will
be billed directly to such tendering holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Outstanding Notes listed in this Letter
of Transmittal.
6. WAIVER OF CONDITIONS. LGII reserves the absolute right to waive, in
whole or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
7. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any holder whose
Outstanding Notes have been mutilated, lost, stolen, or destroyed should contact
the Exchange Agent at the address indicated below for further instructions.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent
at the address and telephone number set forth on the front page of this Letter
of Transmittal. In addition, all questions relating to the Exchange Offer, as
well as requests for assistance or additional copies of the Prospectus and this
Letter of Transmittal, may be directed to Martin Carsky at The Loewen Group
Inc., 4126 Norland Avenue, Burnaby, British Columbia, Canada V5G 3S8; telephone
604-299-9321; facsimile: 604-473-7330.
9. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of Letters of Transmittal or
Outstanding Notes will be resolved by LGII, whose determination will be final
and binding. LGII reserves the absolute right to reject any or all Letters of
Transmittal or tenders that are not in proper form or the acceptance of which
would, in the opinion of LGII's counsel, be unlawful. LGII also reserves the
right to waive any irregularities or conditions of tender as to the particular
Outstanding Notes covered by any Letter of Transmittal or tendered pursuant to
such letter. None of LGII, the Exchange Agent or any other person will be under
any duty to give notification of any defects or irregularities in tenders or
incur any liability for failure to give any such notification. LGII's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in this Letter of Transmittal) shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Outstanding Notes must be cured within such time as LGII shall
determine. Although LGII intends to notify holders of defects or irregularities
with respect to tenders of Outstanding Notes, neither LGII, the Exchange Agent
nor any other person shall incur any liability for failure to give such
notification. Tenders of Outstanding Notes will not be deemed to have been made
until such
-11-
<PAGE>
defects or irregularities have been cured or waived. Any Outstanding Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned by
the Exchange Agent to the tendering holders, unless otherwise provided in this
Letter of Transmittal, as soon as practicable following the Expiration Date.
10. DEFINITIONS. Capitalized terms used in this Letter of Transmittal and
not otherwise defined have the meanings given in the Prospectus.
<TABLE>
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 1, 3, and 4 herein) (See Instruction 1, 3, and 4 herein)
To be completed ONLY if certificates for To be completed ONLY if certificates for
Outstanding Notes in a principal amount Outstanding Notes in a principal amount
not tendered are to be issued in the not tendered are not accepted for purchase
name of, or the Exchange Notes issued or the Exchange Notes issued pursuant to
pursuant to the Exchange Offer are to be the Exchange Offer are to be sent to
issued to the order of, someone other someone other than the person or persons
than the person or persons whose whose signature(s) appear(s) within this
signature(s) appear(s) within this Letter of Transmittal or issued to an
Letter of Transmittal or issued to an address different from that shown in the
address different from that shown in the box entitled "Description of Outstanding
box entitled "Description of Outstanding Notes Tendered Herewith" within this
Notes Tendered Herewith" within this Letter of Transmittal.
Letter of Transmittal, or if Outstanding
Notes tendered by book-entry transfer
that are not accepted for purchase are
to be credited to an account maintained
at DTC.
Name Name
-------------------------------------------- ----------------------------------------------
(Please Print) (Please Print)
Address Address
------------------------------------------ -------------------------------------------
(Please Print) (Please Print)
- ------------------------------------------------- ---------------------------------------------------
(Zip Code) (Zip Code)
- ------------------------------------------------- ---------------------------------------------------
Taxpayer Identification or Social Security Number Taxpayer Identification or Social Security Number
</TABLE>
-----------------------
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF
(TOGETHER WITH CERTIFICATES FOR OUTSTANDING NOTES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY
MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 3:00 P.M., NEW YORK TIME, ON THE
EXPIRATION DATE.
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<PAGE>
EXHIBIT 99.8
LOEWEN GROUP INTERNATIONAL, INC.
FORM OF
NOTICE OF GUARANTEED DELIVERY
OFFER TO EXCHANGE
7.20% SERIES 6 SENIOR GUARANTEED NOTES (REGISTERED) DUE 2003
for Any and All Outstanding
7.20% SERIES 6 SENIOR GUARANTEED NOTES DUE 2003
AND
7.60% SERIES 7 SENIOR GUARANTEED NOTES (REGISTERED) DUE 2008
FOR ANY AND ALL OUTSTANDING
7.60% SERIES 7 SENIOR GUARANTEED NOTES DUE 2008
GUARANTEED BY
THE LOEWEN GROUP, INC.
Registered holders of (i) outstanding 7.20% Series 6 Senior Guaranteed
Notes due 2003 ("Series 6 Outstanding Notes") who wish to tender their Series 6
Outstanding Notes in exchange for a like principal amount of 7.20% Series 6
Senior Guaranteed Notes (Registered) due 2003 and/or (ii) outstanding 7.60%
Series 7 Senior Guaranteed Notes due 2008 ("Series 7 Outstanding Notes" and,
together with the Series 6 Outstanding Notes, the "Outstanding Notes") who wish
to tender their Series 7 Outstanding Notes for a like principal amount of 7.60%
Series 7 Senior Guaranteed Notes (Registered) due 2008, in each case whose
Outstanding Notes are not immediately available or who cannot deliver their
Outstanding Notes and Letter of Transmittal (and any other documents required by
the Letter of Transmittal) to State Street Bank and Trust Company (the "Exchange
Agent") prior to 3:00 p.m., New York time, on _______________, 1998, may use
this Notice of Guaranteed Delivery or one substantially equivalent hereto. This
Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight delivery) or mail to the Exchange Agent. See "The Exchange
Offer" in the Prospectus.
The Exchange Agent for the Exchange Offer is:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<S> <C> <C>
BY HAND OR OVERNIGHT COURIER: BY REGISTERED OR CERTIFIED MAIL: BY FACSIMILE:
State Street Bank and Trust Company State Street Bank and Trust Company (617) 664 - 5290
Corporate Trust Department Corporate Trust Department (For Eligible Institutions Only)
Two International Place, P.O. Box 778 Confirm by Telephone:
4th Floor Boston, MA 02102-0078 (617) 664 - 5587
Boston, MA 02110 Attn: Kellie Mullen
Attn: Kellie Mullen
</TABLE>
<PAGE>
Delivery of this Notice of Guaranteed Delivery to an address other
than as set forth above or transmission of instructions via a facsimile
transmission to a number other than as set forth above will not constitute a
valid delivery.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution, such signature guarantee must appear in
the applicable space provided on the Letter of Transmittal for Guarantee of
Signatures.
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, hereby guarantees to deliver to
the Exchange Agent at one of its addresses set forth above, the certificates
representing the Outstanding Notes, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal within three (3) New York Stock Exchange, Inc. trading days after
the date of execution of this Notice of Guaranteed Delivery.
<TABLE>
<CAPTION>
<S> <C>
Name of Firm:
----------------------------------- -----------------------------------
(Authorized Signature)
Address: Title:
----------------------------------- -----------------------------
Name:
- ------------------------------------------------ -----------------------------
(Including Zip Code) (Please type or print)
Telephone Number: Date:
------------------------------- ------------------------------
(Including Area Code)
</TABLE>
NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED
DELIVERY. NOTES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL
-2-
