-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GcpNgNpNAyv5sMwhe0BIiEMW6A4LjVxxz8mIO6r9F8MNIKBLbxY6ydrI7PU8Qn0U b62L6AgEhnzj0DY4LeNxMQ== 0000912057-96-022540.txt : 19961023 0000912057-96-022540.hdr.sgml : 19961023 ACCESSION NUMBER: 0000912057-96-022540 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 43 FILED AS OF DATE: 19961010 DATE AS OF CHANGE: 19961021 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: LOEWEN GROUP INC CENTRAL INDEX KEY: 0000845577 STANDARD INDUSTRIAL CLASSIFICATION: 7200 IRS NUMBER: 980121376 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: 1934 Act SEC FILE NUMBER: 005-43525 FILM NUMBER: 96642099 BUSINESS ADDRESS: STREET 1: 4126 NORLAND AVE CITY: BURNABY BC CANADA V5 STATE: A1 ZIP: V5G 3S8 BUSINESS PHONE: 6042999321 MAIL ADDRESS: STREET 1: 4126 NORLAND AVE STREET 2: BRITISH COLUMIA CITY: BURNABY V5G 3S8 STATE: A1 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LOEWEN GROUP INC CENTRAL INDEX KEY: 0000845577 STANDARD INDUSTRIAL CLASSIFICATION: 7200 IRS NUMBER: 980121376 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 4126 NORLAND AVE CITY: BURNABY BC CANADA V5 STATE: A1 ZIP: V5G 3S8 BUSINESS PHONE: 6042999321 MAIL ADDRESS: STREET 1: 4126 NORLAND AVE STREET 2: BRITISH COLUMIA CITY: BURNABY V5G 3S8 STATE: A1 SC 14D9 1 SC 14D9 - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ THE LOEWEN GROUP INC. (Name of Subject Company) THE LOEWEN GROUP INC. (Name of Person(s) Filing Statement) COMMON SHARES, WITHOUT PAR VALUE (AND ASSOCIATED SHARE PURCHASE RIGHTS) 6.00% CUMULATIVE REDEEMABLE CONVERTIBLE FIRST PREFERRED SHARES, SERIES C, WITHOUT PAR VALUE (Title of Class of Securities) 54042L100 54042L407 (CUSIP Number of Class of Securities) ------------------------------ Peter S. Hyndman Vice President, Law and Corporate Secretary The Loewen Group Inc. 4126 Norland Avenue Burnaby, British Columbia Canada V5G 3S8 (604) 299-9321 (Name, Address and Telephone Number of Person Authorized to Receive Notice and Communications on Behalf of the Person(s) Filing Statement) WITH A COPY TO: Lyle G. Ganske, Esq. Jones, Day, Reavis & Pogue North Point 901 Lakeside Avenue Cleveland, Ohio 44114 (216) 586-3939 - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND SUBJECT COMPANY. The name of the subject company is The Loewen Group Inc., a corporation incorporated under the laws of British Columbia, Canada (the "Company"). The address of the principal executive offices of the Company is 4126 Norland Avenue, Burnaby, British Columbia, Canada V5G 3S8. The titles of the classes of equity securities to which this Schedule 14D-9 relates are (i) the Common Shares, without par value, of the Company (the "Common Shares"), including the associated Rights (as defined below; except where the context otherwise requires, the Rights and the Common Shares are referred to collectively as the "Shares"), and (ii) the 6.00% Cumulative Redeemable Convertible First Preferred Shares, Series C, without par value, of the Company (the "Preferred Shares"). The Company is the parent of Loewen Group International, Inc. ("LGII"), a Delaware corporation and the principal holding company for the Company's United States assets. The address of the principal executive offices of LGII is 50 East RiverCenter Boulevard, Suite #800, Covington, Kentucky 41011. ITEM 2. TENDER OFFER OF THE BIDDER. This Schedule 14D-9 relates to the proposed exchange offers (the "Second SCI Proposal") announced on October 2, 1996, and disclosed in a Registration Statement on Form S-4 (the "Registration Statement") filed with the Securities and Exchange Commission (the "Commission") on October 3, 1996, by New Service Corporation International, a Delaware corporation ("New SCI"), and SCI Holdings Canada, Inc., a company incorporated under the laws of British Columbia, Canada ("Canadian SCI"), each a wholly owned subsidiary of Service Corporation International, a Texas corporation ("SCI"). The proposed exchange offers contemplated by the Second SCI Proposal have not yet commenced. According to information contained in the Registration Statement, the Second SCI Proposal would be an offer to exchange shares of common stock, par value $0.01 per share, of New SCI (the "New SCI Common Stock"), or, at the election of each Company shareholder, exchangeable shares, without par value, of Canadian SCI (the "Exchangeable Shares") for (i) all of the outstanding Common Shares and associated share purchase rights (the "Rights") issued pursuant to the Shareholder Protection Rights Plan Agreement, dated as of April 20, 1990, between the Company and The Royal Trust Company as Rights Agent, as amended by the Amendments thereto made as of May 24, 1990 and April 7, 1994 (the "Rights Plan"), and (ii) all of the outstanding Preferred Shares. According to information contained in the Registration Statement, each Share held by the Company's shareholders could be tendered in exchange for a number of shares of New SCI Common Stock or a number of Exchangeable Shares of Canadian SCI equal to the Share Exchange Ratio (as defined below), and each Preferred Share held by the Company's shareholders could be tendered in exchange for a number of shares of New SCI Common Stock or a number of Exchangeable Shares of Canadian SCI equal to the Preferred Share Exchange Ratio (as defined below). As used in this Schedule 14D-9, except where the context otherwise requires, references to "SCI" mean, collectively, SCI, New SCI, Canadian SCI and their respective subsidiaries. According to information contained in the Registration Statement, the "Share Exchange Ratio" is the quotient (rounded to the nearest 1/100,000) determined by dividing $45.00 by the average of the high and low sales prices as reported on the New York Stock Exchange Composite Tape (the "SCI Average Price") of the common stock of SCI, par value $1.00 per share ("SCI Common Stock"), on each of the twenty consecutive trading days ending with the third trading day immediately preceding the Expiration Date (as defined in the Registration Statement); provided, however, that the Share Exchange Ratio shall not be greater than 1.76471. According to information contained in the Registration Statement, the "Preferred Share Exchange Ratio" is the product of (i) the Share Exchange Ratio and (ii) .65574; provided, however, that the Preferred Share Exchange Ratio shall not be greater than 1.15719. The Share Exchange Ratio and the Preferred Share Exchange Ratio are referred to collectively as the "Exchange Ratios." Pursuant to the Exchange Ratios, according to information contained in the Registration Statement, if the SCI Average Price is greater than or equal to $25.50, each Share that is validly tendered and not 1 withdrawn on or prior to the Expiration Date will be exchanged for $45.00 of New SCI Common Stock and each Preferred Share that is validly tendered and not withdrawn on or prior to the Expiration Date will be exchanged for $29.51 of New SCI Common Stock. If the SCI Average Price is less than $25.50, each such Share will be exchanged for less than $45.00 of New SCI Common Stock and each such Preferred Share will be exchanged for less than $29.51 of New SCI Common Stock. According to the Registration Statement, the principal executive offices of New SCI and SCI are located at 1929 Allen Parkway, Houston, Texas 77019. According to the Registration Statement, the principal executive offices of Canadian SCI are located at 3789 Royal Oak Avenue, Burnaby, British Columbia, Canada V5G 3MI. ITEM 3. IDENTITY AND BACKGROUND. (a) The name and address of the Company, which is the person filing this Schedule 14D-9, are set forth in Item 1 above, which information is incorporated herein by reference. (b) The Company leases a funeral home owned by SCI located in each of Bellevue, Kirkland and Redmond, Washington. Pursuant to a lease agreement with respect to these properties, the Company pays to SCI annual rentals, including percentage rent, of approximately $140,000. The lease agreement expires in January 2005. SCI's Provident subsidiary provides capital financing to independent funeral home and cemetery operators. From time to time, according to information contained in the Registration Statement, Provident has had loans outstanding to certain borrowers who sold their businesses to the Company or its affiliates. In such cases, according to information contained in the Registration Statement, Provident's loans were fully repaid in connection with the sales of such businesses except for one loan which remains outstanding. At August 30, 1996, this loan had an outstanding balance of $1,319,982, an interest rate of 9.25 percent, and a maturity date of May 1, 1998. The obligor on the loan is 50 percent owned by a corporation in which the Company has an equity interest. The Company also has an equity interest in a guarantor of this loan. Certain contracts, agreements, arrangements or understandings between the Company or its affiliates and certain of the Company's Directors and executive officers are described on pages 15-20 and 32-34 of the proxy statement (the "1996 Proxy Statement"), dated April 9, 1996, sent by the Company to its shareholders in connection with the Company's Annual General Meeting of the holders of Common Shares held on May 16, 1996. A copy of these pages of the 1996 Proxy Statement is filed as Exhibit 19 to this Schedule 14D-9 and is incorporated herein by reference. Except as described in this Schedule 14D-9, to the knowledge of the Company, as of the date hereof, there are no material contracts, agreements, arrangements or understandings, or any actual or potential conflicts of interest, between the Company or its affiliates and (i) the Company, its executive officers, Directors or affiliates, or (ii) SCI or its executive officers, directors or affiliates. Effective as of October 10, 1996, in order to attract and retain key executives and managers of the Company in the context of a threatened change in control of the Company, the Board of Directors of the Company (the "Board"), upon the recommendation of the Compensation Committee thereof, approved the execution of individual change-in-control severance agreements (the "Severance Agreements") with approximately 80 of the Company's and LGII's executives (including each of the Company's executive officers other than Raymond L. Loewen, the Company's Chairman and Chief Executive Officer) and managers (each, an "Executive"). A copy of the form of Severance Agreement is filed as Exhibit 41 to this Schedule 14D-9 and is incorporated herein by reference. The following summary of the form of Severance Agreement does not purport to be complete and is qualified in its entirety by reference to the form of Severance Agreement. The Severance Agreements will become operative only upon a change in control of the Company. A "change in control" is defined in the Severance Agreements as having occurred when: (i) the Company merges with, or sells all or substantially all its assets to, another corporation, less than two-thirds of the 2 voting shares of which are owned by stockholders of the Company immediately prior to such merger or sale; (ii) a report is filed under specified provisions of the United States securities laws disclosing that any "person" (other than Raymond L. Loewen and certain related persons) has become the "beneficial owner" (as each such term is defined in the Severance Agreements) of 25% or more of the Company's voting stock; (iii) the Company reports under specified provisions of the United States securities laws that a change in control has occurred; or (iv) within any two-year period, a majority of the Directors of the Company at the beginning of such period (not including persons approved by at least two-thirds of the Directors of the Company still in office who were Directors of the Company at the beginning of such period) cease to be Directors of the Company. Under the Severance Agreement, an Executive will be entitled to severance pay if, during the period commencing upon the change in control and ending upon the earliest to occur of (i) two years after the change in control or (ii) the death of the Executive (the "Severance Period"), the Executive is terminated by the Company for any reason other than "cause" (as defined in the Severance Agreements) or if the Executive terminates his own employment for, among other reasons, (x) a material reduction in duties, responsibilities or compensation, or (y) a relocation of the Executive or the Executive's principal work location more than 25 miles from the location thereof prior to the change in control. In addition, certain of the Executives (including each of the executive officers of the Company who are parties to the Severance Agreements) may terminate their employment for any reason or without reason during the 30-day period immediately following the first anniversary of the first occurrence of a change in control and receive the severance benefits provided under the Severance Agreements. On each anniversary of the change in control, the Severance Period may be extended for an additional year. If (i) an Executive remains employed by the Company or a subsidiary thereof for 30 days after a change in control or (ii) the Executive's employment with the Company or a subsidiary thereof is terminated due to the death or permanent disability of the Executive following a change in control but prior to the 31st day following a change in control, the Executive will be entitled to receive a lump-sum retention bonus payment equal to one-third, one-half, two-thirds or one times (as specified on a case-by-case basis, depending on the Executive's position) the sum of the Executive's base salary and target annual bonus. If the Executive's employment is terminated with rights to receive severance benefits, the Executive will be entitled to receive (i) a lump-sum severance payment equal to (A) one, one and one-half, two or three times (as specified on a case-by-case basis, depending on the Executive's position) the sum of the Executive's base salary and target annual bonus minus (B) any amount actually paid to the Executive as a retention bonus, as described above, and (ii) employee health and welfare benefits for a period of 12, 18, 24 or 36 months (as specified on a case-by-case basis, depending on the Executive's position). In the case of each of the Company's executive officers, the multiples described above are either two-thirds or one for purposes of determining retention bonus payments and two or three for purposes of determining lump sum severance payments, and the continuation period for employee health and welfare benefits is either 24 or 36 months. The Severance Agreements provide that the payments and benefits available to an Executive under the Severance Agreements will be reduced if and to the extent such reduction would result in the Executive receiving greater after-tax payments and benefits. In addition, in an effort to protect all or a substantial portion of the Company's and LGII's salaried employees in the event of a change in control, effective as of October 10, 1996, the Board also authorized the adoption of a change-in-control severance compensation plan (the "Severance Plan"). A copy of the Severance Plan has been filed as Exhibit 42 to this Schedule 14D-9 and is incorporated herein by reference. This summary of the Severance Plan does not purport to be complete and is qualified in its entirety by reference to the text of the Severance Plan. Certain full-time salaried employees of the Company and LGII whose principal duties include corporate or regional management responsibilities (other than executive officers of the Company and other Executives who are parties to the Severance Agreements) are eligible to participate in the Severance 3 Plan. The Severance Plan becomes operative only upon a change in control of the Company. A "change in control" is defined in the Severance Plan as having occurred when: (i) a report is filed under specified provisions of the United States securities laws disclosing that any "person" (other than Raymond L. Loewen and certain related persons) has become the "beneficial owner" (as each such term is defined in the Severance Plan) of 25% or more of the Company's voting stock or (ii) such other event as the Board may, in its sole discretion, by majority vote determine to constitute a change in control of the Company. Once the Severance Plan becomes operative, each of the participants is entitled to a severance payment if, within 24 months after a change in control of the Company, the participant is terminated other than by reason of death, voluntary termination or retirement, or for "Just Cause" (as such term is defined in the Severance Plan). The amount of the severance payment is dependent upon the participant's length of service with the Company or its subsidiaries. Generally, participants will receive two weeks pay for each full year of service, subject to a minimum of 12 weeks and a maximum of 52 weeks pay. The amount of severance awards payable under the Severance Plan to any particular participant will be reduced by an amount equal to any other severance payment paid or payable by the Company or, if applicable, a subsidiary thereof, to such participant under any other severance agreement or arrangement or requirement of law. The Severance Plan provides that the severance payments available to a participant under the Severance Plan will be reduced to the extent necessary, if any, so that no portion of such payment will constitute an "excess parachute payment" under United States income tax laws. Effective as of October 10, 1996, the Board authorized the Company to enter into indemnification agreements (the "Indemnification Agreements") with certain of its Directors and officers whereby the Company will agree to indemnify such persons against all costs, charges and expenses incurred by reason of being a Director or officer of the Company. The Company's duty to indemnify is subject to court approval and conditioned upon the individual acting honestly and in good faith with a view to the best interests of the Company. Copies of the forms of Indemnification Agreements have been filed as Exhibits 39-40 to this Schedule 14D-9 and the foregoing description is qualified in its entirety by reference to the text of the Indemnification Agreements, which are incorporated herein by reference. As of October 9, 1996, the Company has granted stock options to purchase an aggregate of 4,367,375 Common Shares to management and employees of the Company. In 1996, the number of such options granted was 1,845,255. ITEM 4. THE SOLICITATION OR RECOMMENDATION. (a) RECOMMENDATION. AS MORE FULLY DISCUSSED BELOW, THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE SECOND SCI PROPOSAL IS INADEQUATE AND NOT IN THE BEST INTERESTS OF THE COMPANY OR THE HOLDERS OF EACH OF THE COMMON SHARES AND THE PREFERRED SHARES. ACCORDINGLY, THE BOARD RECOMMENDS THAT ALL OF THE COMPANY'S SHAREHOLDERS REJECT THE SECOND SCI PROPOSAL AND, WHEN AND IF THE PROPOSED EXCHANGE OFFERS ARE COMMENCED, NOT TENDER THEIR SHARES. On September 17, 1996, the Company received an unsolicited letter from L. William Heiligbrodt, President and Chief Operating Officer of SCI, proposing a combination of the Company and SCI (the "First SCI Proposal"). A copy of the letter is filed as Exhibit 1 to this Schedule 14D-9 and is incorporated herein by reference. The First SCI Proposal contemplated a stock for stock exchange accounted for as a pooling-of-interests, in which the Company's shareholders would receive, in exchange for their Common Shares, securities valued at $43.00 per share. The First SCI Proposal stated that it had not been approved by SCI's Board of Directors. The First SCI Proposal further stated that after conducting a due diligence review, SCI "may be in a position to increase the consideration" that the shareholders of the Company would receive in the proposed exchange. 4 On September 17, 1996, at a regularly scheduled meeting convened for other purposes at which the First SCI Proposal was communicated to the Board, the Board discussed the First SCI Proposal and conducted a preliminary discussion of its terms and conditions. At the meeting, the Board's legal advisors advised the Board members of their fiduciary duties in responding to the First SCI Proposal. The Board requested its legal advisors and Smith Barney Inc. ("Smith Barney"), who participated in the meeting, to review carefully the First SCI Proposal and to prepare a detailed analysis for discussion of such proposal at a meeting of the Board to be held on September 24, 1996. A copy of the press release relating to the Board's action is filed as Exhibit 6 to this Schedule 14D-9 and is incorporated herein by reference. On September 18, 1996, the Company received a letter from SCI stating that SCI's Board of Directors had approved the First SCI Proposal. A copy of the letter is filed as Exhibit 2 to this Schedule 14D-9 and is incorporated herein by reference. On September 20, 1996, the Board held an informational telephonic conference call, together with Smith Barney and Nesbitt Burns Inc. ("Nesbitt Burns"), the Company's financial advisors (together, the "Financial Advisors"), to discuss the First SCI Proposal. On September 24, 1996, the Board met to consider the First SCI Proposal and related matters and reviewed with management and the Company's legal and Financial Advisors, among other things, the terms and conditions of the First SCI Proposal; the financial condition, performance and future prospects of the Company as an independent, stand-alone entity; the long-term financial and strategic objectives of the Company, including the Company's long-term business and financial plan; and other related matters, including, without limitation, an oral opinion of each of the Financial Advisors to the effect that, as of such date, the consideration proposed to be offered in the First SCI Proposal was inadequate from a financial point of view. After carefully considering the First SCI Proposal, the Board decided to reject the proposal and approved the delivery of the following letter to Mr. Heiligbrodt: September 24, 1996 Mr. L. William Heiligbrodt President Service Corporation International 1929 Allen Parkway Houston, TX 77219-0548 Dear Mr. Heiligbrodt: The Board of Directors of The Loewen Group Inc. has asked me to advise you of the decision that the Loewen Board has made in response to the unsolicited takeover proposal that we received from Service Corporation International on Tuesday, September 17, 1996. The Loewen Board has unanimously rejected the SCI proposal. SCI should understand that the Loewen Board of Directors takes its fiduciary duty to act in the best interests of the Company and our shareholders very seriously. We are fully committed to maximizing the long-term value for our shareholders. After extensive review of our business and financial plans, as well as a thorough and careful study of our excellent prospects for significant continued growth in revenues and profitability in the future, the Loewen Board of Directors has unanimously concluded that the best way to maximize value for our shareholders is through the continued implementation of the Company's long-term business plan as an independent company. Sincerely, Raymond L. Loewen Chairman and Chief Executive Officer 5 A copy of the press release announcing the Board's decision with respect to the First SCI Proposal is filed as Exhibit 8 to this Schedule 14D-9 and is incorporated herein by reference. A copy of the letter to the Company's shareholders communicating the Board's decision is filed as Exhibit 3 to this Schedule 14D-9 and is incorporated herein by reference. On October 2, 1996, SCI announced its intention to make the Second SCI Proposal. A copy of the press release issued by SCI announcing the terms of the Second SCI Proposal is filed as Exhibit 11 to this Schedule 14D-9. Pursuant to the Second SCI Proposal, holders of Common Shares and holders of Preferred Shares may be offered the opportunity to exchange their shares for shares of New SCI Common Stock or Exchangeable Shares, as discussed more fully in Item 2 of this Schedule 14D-9. The description of the Second SCI Proposal set forth in the Registration Statement states that it is not conditioned on achieving pooling-of-interests accounting but that SCI may be willing to increase the consideration payable in exchange for the Shares and the Preferred Shares by an unspecified amount if SCI and the Company were to enter into a negotiated agreement providing for the combination of SCI and the Company in a transaction that would qualify for pooling treatment. The Second SCI Proposal is subject to numerous conditions, including, among other things: (i) there being validly tendered and not withdrawn prior to the expiration of the Second SCI Proposal (x) a number of Shares which, together with the Shares beneficially owned by SCI, constitutes at least 75% of the Common Shares outstanding on a fully diluted basis and (y) a number of Preferred Shares which, together with the Preferred Shares beneficially owned by SCI, constitutes at least 75% of the Preferred Shares outstanding on a fully diluted basis; (ii) approval of (x) the corporate reorganization of SCI by a vote of the holders of at least two-thirds of the outstanding SCI Common Stock eligible to vote and (y) the issuance of stock pursuant to the Second SCI Proposal and related transactions by a vote of the holders of at least a majority of the outstanding SCI Common Stock present and voting at a meeting of such holders; (iii) SCI being satisfied in its sole discretion that the Company has redeemed all outstanding Rights or that the Rights are invalid or inapplicable to the Second SCI Proposal and SCI's proposed second-step merger or that the Rights Plan does not affect the Second SCI Proposal and related transactions; (iv) the resignation of at least a majority of the incumbent members of the Board and the election or designation of persons designated by SCI to constitute a majority of the Board; (v) the satisfaction of all requirements pursuant to (x) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (y) the Competition Act of Canada and (z) the approval of the minister responsible for the Investment Canada Act, in each case with respect to the Second SCI Proposal and related transactions; and (vi) consummation of the corporate reorganization of SCI. On October 2, 1996, the Company announced that it would review the Second SCI Proposal and respond in due course. A copy of the press release relating to that announcement is filed as Exhibit 12 to this Schedule 14D-9 and is incorporated herein by reference. At such time, the Company also requested that management, together with the Company's legal advisors and Financial Advisors, carefully review the Second SCI Proposal and prepare a detailed analysis for discussion of such proposal at the next meeting of the Board. On October 3, 1996, the Company's transfer agent and registrar received a request pursuant to Canadian laws for a copy of the Company's shareholder list. On October 10, 1996, the Board met to consider the Second SCI Proposal and related matters and reviewed with management and the Company's legal advisors and Financial Advisors, among other things, the terms and conditions of the Second SCI Proposal; the financial condition, performance and future prospects of the Company as an independent, stand-alone entity and other related matters, including, without limitation, a written opinion of each of the Financial Advisors to the effect that, as of such date, the Share Exchange Ratio and the Preferred Share Exchange Ratio were inadequate from a financial point of view. At that meeting, the Board also reviewed an update on the long-term business and financial plan of the Company. 6 After taking into account these matters, the Board determined by unanimous vote (with one director not present) that the Second SCI Proposal is inadequate and not in the best interests of the Company or its shareholders. ACCORDINGLY, THE COMPANY'S BOARD HAS DETERMINED THAT THE SECOND SCI PROPOSAL IS INADEQUATE AND NOT IN THE BEST INTERESTS OF THE COMPANY OR THE HOLDERS OF EACH OF THE COMMON SHARES AND THE PREFERRED SHARES. THEREFORE, THE BOARD RECOMMENDS THAT ALL OF THE COMPANY'S SHAREHOLDERS REJECT THE SECOND SCI PROPOSAL AND, WHEN AND IF THE PROPOSED EXCHANGE OFFERS ARE COMMENCED, NOT TENDER THEIR SHARES. The Board believes that the best means of maximizing long-term value for shareholders is through continued implementation of the Company's long-term business plan as an independent company. A copy of the press release relating to the Board's recommendations is filed as Exhibit 13 to this Schedule 14D-9 and is incorporated herein by reference. (b) REASONS FOR THE RECOMMENDATION. In addition to the factors set forth above and considered by the Board in reaching its conclusions with respect to the First SCI Proposal and the Second SCI Proposal described in Item 4(a) above, the Board considered a number of factors, including, but not limited to, the following: (i) the significant growth of the Company over the past several years, its reputation as a provider of superior services to persons and families in need and its position as an industry leader, and the Company's prospects for significant continued growth in revenues and profitability in the future; (ii) the Board's familiarity with, and review of, the Company's business, financial condition, results of operations, current business strategy and future prospects, including the nature of the markets in which the Company operates and their attractive growth prospects, the Company's position in such markets and the historical and current market prices for the Shares. In this regard, the Board noted the Company's financial performance in recent years, including its 41.5% revenue increase and 36.8% earnings increase (on a compounded annual basis) over the last five years (excluding the Gulf National and Provident settlements and related costs) and that, to date in 1996, the Company has closed or signed approximately $730 million in acquisitions, not including the recent strategic investments the Company has made in Rose Hills and Prime Succession; (iii) the opportunistic timing of the Second SCI Proposal, which seeks to exploit the Company's recent stock price in relation to historic trading patterns; (iv) the Board's review, based in part on presentations by the Financial Advisors and Company management, of (a) publicly available information concerning the strategy, business, operations, earnings and financial condition of SCI both on a historical and prospective basis and (b) the historical market price of SCI Common Stock. In this regard, the Board noted that SCI's acquisition strategies and techniques are very different from those of the Company, that an integration of the strategies and techniques of the Company and SCI may be difficult, and that a combination of the two companies would create a company with significantly different characteristics from those the Company currently enjoys. Further, the Board believes that the Company has significantly expanded its acquisition program in recent years and that many acquisition targets have shown a preference for acquisition by the Company rather than by SCI; (v) a comparison, based upon recent analysts' earnings estimates for the Company and SCI for the fiscal years 1996-1998, of the earnings per share attributable to the Shares (a) if the Company remained an independent entity and (b) on a pro forma per share equivalent basis giving effect to a combination of the Company and SCI; 7 (vi) the current and prospective economic, regulatory and competitive environment facing the funeral services industry, including the Company and SCI, including, among other things, the unprecedented consolidation currently underway; (vii) the Company's past success in competing with SCI for acquisitions of funeral homes, cemeteries and related businesses during a period of rapid consolidation in the funeral services industry; (viii) the Board's commitment to protecting the best interests of the Company and its shareholders and the maximization of shareholder value; (ix) presentations by the Financial Advisors concerning the Company and the financial aspects of the Second SCI Proposal, including the written opinions, dated October 10, 1996, of each of the Financial Advisors to the effect that, as of the date of such opinions and based upon and subject to certain matters stated therein, the Share Exchange Ratio and the Preferred Share Exchange Ratio were inadequate, from a financial point of view, to the holders of Shares and Preferred Shares, respectively (other than SCI and its affiliates) (copies of the written opinions of Smith Barney and Nesbitt Burns, which set forth the assumptions made, matters considered and limitations on the review undertaken in connection with such opinions, are included as Exhibits 17 and 18, respectively, to this Schedule 14D-9 and should be read carefully in their entirety); (x) the Board's belief, based in part on the factors referred to above, that the Exchange Ratios pursuant to the Second SCI Proposal do not reflect the current value inherent in the Company or the significant value that will be created for shareholders through the continued implementation of the Company's long-term business plan as an independent entity, including the continued acquisition of funeral homes and cemeteries in the United States and in Canada; (xi) the Board's belief that while SCI disclosed that it intended to account for the transaction on a pooling-of-interests basis, it is highly unlikely that such pooling-of-interests treatment could be achieved upon consummation of the Second SCI Proposal and the second step transaction; (xii) the disruptive effect that consummation of the Second SCI Proposal would have on the Company's employees, suppliers, customers, the funeral services industry and the communities where the Company operates; (xiii) the significant conditions accompanying the Second SCI Proposal, including the following: (A) there being validly tendered and not withdrawn prior to the expiration of the Second SCI Proposal (x) a number of Shares which, together with the Shares beneficially owned by SCI, constitutes at least 75% of the Shares outstanding on a fully diluted basis and (y) a number of Preferred Shares which, together with the Preferred Shares beneficially owned by SCI, constitutes at least 75% of the Preferred Shares outstanding on a fully diluted basis; (B) approval of the corporate reorganization of SCI by a vote of the holders of at least two-thirds of the outstanding SCI Common Stock, eligible to vote at a meeting of such holders, and of the issuance of offered stock pursuant to the Second SCI Proposal and related transactions by a vote of the holders of at least a majority of the outstanding SCI Common Stock present and voting at a meeting of such holders; (C) SCI being satisfied in its sole discretion that the Company has redeemed all outstanding Rights, or that the Rights are invalid or inapplicable to the Second SCI Proposal and SCI's proposed second-step merger or that the Rights Plan does not affect the Second SCI Proposal and related transactions; (D) the resignation of at least a majority of the incumbent members of the Board and the election or designation of persons designated by SCI to constitute a majority of the Board; (E) the satisfaction of all requirements pursuant to (x) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (y) the Competition Act of Canada and (z) the approval of the minister responsible for the 8 Investment Canada Act, in each case with respect to the Second SCI Proposal and related transactions; (F) consummation of the corporate reorganization of SCI; and (G) other numerous conditions to the consummation of the exchange offers; (xiv) the Board's assessment, based in part on the advice of counsel, of the likelihood that SCI would obtain all regulatory approvals necessary to consummate the Second SCI Proposal. The Board believes that there are significant antitrust issues relating to a combination of the Company and SCI, both in Canada and in the United States, which issues create significant uncertainty as to whether the conditions of the Second SCI Proposal will be met. In that regard, the Board noted that the Second SCI Proposal is conditioned on there not being threatened, instituted or pending any action by any domestic or foreign governmental entity or by any other person seeking to impose any limitations upon the ownership or operation by SCI of any portion of the business or assets of the Company; (xv) the Board's belief that the structure of the Second SCI Proposal unfairly prejudices Canadian shareholders in that the Exchangeable Shares provide a tax deferral for a maximum of ten years to Canadian shareholders, while United States shareholders are offered an indefinite tax deferral; (xvi) the Board's view that the Second SCI Proposal is coercive in nature, because (A) Company shareholders who exchange their Shares or Preferred Shares pursuant to the Second SCI Proposal will be eligible for tax-free treatment, but U.S. shareholders who do not exchange their Shares or Preferred Shares pursuant to the Second SCI Proposal may be faced with adverse tax consequences, (B) Company shareholders who do not exchange their Shares or Preferred Shares pursuant to the Second SCI Proposal may not be afforded dissent rights in connection with a proposed second step transaction, and (C) the consummation of the Second SCI Proposal would reduce the number of holders of Shares and Preferred Shares and the number of Shares and Preferred Shares that might otherwise trade publicly and, depending on the number of Shares and Preferred Shares purchased pursuant to the Second SCI Proposal, could (x) adversely affect the liquidity and market value of the remaining Shares and Preferred Shares held by the public, (y) pose a risk that the Shares and Preferred Shares will no longer be eligible for continued listing on the New York Stock Exchange, the Toronto Stock Exchange or the Montreal Exchange, as the case may be, adversely affecting the respective markets for the Shares and Preferred Shares and (z) terminate the registration of the Shares and Preferred Shares under applicable United States and Canadian securities laws, which would reduce the information required to be furnished to holders of Shares and Preferred Shares pursuant to such securities laws. The foregoing discussion of the information and factors considered and given weight by the Board is not intended to be exhaustive. In view of the variety of factors considered in connection with its evaluation of the Second SCI Proposal, the Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual members of the Board may have given different weight to different factors. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The Company has retained Smith Barney as its financial advisor in connection with the Second SCI Proposal and related matters. Pursuant to the terms of Smith Barney's engagement, the Company has agreed to pay Smith Barney for its services (i) an advisory fee of up to $5 million, payable in cash upon withdrawal of any SCI acquisition proposal and (ii) a transaction fee (against which the advisory fee will be credited), payable upon consummation of an extraordinary corporate transaction involving the Company, equal to a percentage of transaction value (including liabilities assumed) ranging from 2% for transactions having a transaction value of $25 million or less to 0.20% for transactions having a transaction value of $10 billion or more, subject to a minimum transaction fee of $500,000. The Company has also agreed (i) to reimburse Smith Barney for travel and other out-of-pocket expenses (including the fees and expenses of its legal counsel) and (ii) to indemnify Smith Barney and 9 certain related parties against certain liabilities, including liabilities under United States and Canadian securities laws, arising out of Smith Barney's engagement. In the ordinary course of business, Smith Barney and its affiliates may actively trade or hold the securities of the Company and SCI for their own account or for the account of customers and, accordingly, may at any time hold a long or short position in such securities. The Company has retained Nesbitt Burns as its financial advisor in connection with the Second SCI Proposal and related matters. Pursuant to the terms of Nesbitt Burns' engagement, the Company has agreed to pay Nesbitt Burns for its services (i) an advisory fee of up to $3 million, payable in cash upon withdrawal of any SCI acquisition proposal and (ii) a transaction fee (against which the advisory fee will be credited), payable upon consummation of an extraordinary corporate transaction involving the Company, equal to a percentage of transaction value (including liabilities assumed) ranging from 1.25% for transactions having a transaction value of $25 million or less to 0.133% for transactions having a transaction value of $10 billion or more, subject to a minimum transaction fee of $312,500. The Company has also agreed (i) to reimburse Nesbitt Burns for travel and other reasonable out-of-pocket expenses (including the fees and expenses of its legal counsel) and (ii) to indemnify Nesbitt Burns and certain related parties against certain liabilities arising under United States and Canadian securities laws, arising out of Nesbitt Burns' engagement. In the ordinary course of business, Nesbitt Burns and its affiliates may actively trade or hold the securities of the Company and SCI for their own account or for the account of customers and, accordingly, may at any time hold a long or short position in such securities. The Company has retained Morrow & Co., Inc. ("Morrow") and D.F. King & Co., Inc. ("D.F. King") to assist the Company in connection with its communications with its shareholders with respect to, and to provide other services to the Company in connection with, the Second SCI Proposal. Both Morrow and D.F. King will receive reasonable and customary compensation for their respective services and reimbursement of their respective out-of-pocket expenses in connection therewith. The Company has agreed to indemnify each of Morrow and D.F. King against certain liabilities arising out of or in connection with their respective engagements. The Company has retained Broadgate Consultants, Inc. ("Broadgate") as the Company's public relations advisor in connection with the Second SCI Proposal. Broadgate will receive reasonable and customary compensation for its services and reimbursement of out-of-pocket expenses in connection therewith. The Company has agreed to indemnify Broadgate against certain liabilities arising out of or in connection with its engagement. Except as set forth in this schedule 14D-9, neither the Company nor any person acting on its behalf has employed, retained or compensated any other person to make any solicitations or recommendations to shareholders on its behalf concerning the Second SCI Proposal. 10 ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES. (a) Within the past 60 days, the following executive officers, Directors, affiliates or subsidiaries executed transactions in the Company's Shares as shown in the following table:
NUMBER NATURE OF PRICE DATE NAME OF OFFICER OR DIRECTOR OF SHARES TRANSACTION PER SHARE - - --------- --------------------------- --------- ------------ --------------- 8/22/96 Peter S. Hyndman 3,000 Acquired (Cdn) $16.88 8/23/96 100 Disposed 40.45 200 Disposed 40.40 1,700 Disposed 40.30 1,000 Disposed 40.50 9/3/96 1,000 Acquired 16.88 1,000 Disposed 40.00 8/21/96 Timothy A. Birch 300 Disposed (U.S.) $29.50 8/22/96 1,000 Disposed 29.50 8/23/96 5,700 Disposed 29.50 9/10/96 1,000 Disposed 31.25 9/17/96 Peter A. Wiesner 2,000 Acquired (Cdn) $34.75 200 Acquired 32.50 2,000 Disposed 54.00 200 Disposed 54.05
In addition, during the past 60 days certain executive officers also (i) purchased Shares, via periodic payroll deductions, pursuant to the Company's Employee Stock Purchase Plans and (ii) contributed, via periodic payroll deductions, to a fund that invests in Shares pursuant to either the Company's 401(k) Plan (for United States employees) or Retirement Savings Plan (for Canadian employees). In addition, during the past 60 days the Company has issued an aggregate of 88,378 Shares in connection with two acquisitions. Except as disclosed in this Schedule 14D-9, to the knowledge of the Company, no transactions in the Shares have been effected within the past 60 days by the Company or any executive officer, Director, affiliate or subsidiary of the Company. (b) To the knowledge of the Company, its executive officers, Directors, affiliates and subsidiaries do not presently intend to tender, pursuant to the Second SCI Proposal, any Shares or Preferred Shares that are held of record or are beneficially owned by such persons. The foregoing does not include any Shares or Preferred Shares over which, or with respect to which, any such executive officer, Director, or affiliate acts in a fiduciary or representative capacity or is subject to the instructions of a third party with respect to such tender. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. (a)-(b) At the meetings of the Board held on September 17, September 20, September 24, and October 10, 1996, the Board considered and reviewed the feasibility and desirability of exploring a variety of possible actions in light of the First SCI Proposal and the Second SCI Proposal. As stated in Item 4 above, the Board believes, based on the factors described therein, that the Exchange Ratios are inadequate, from a financial point of view. Accordingly, the Board believes that the Company's shareholders would be best served through continued implementation of the Company's long-term business plan as an independent entity and recommends that the Company's shareholders reject the Second SCI Proposal, when and if it is commenced. Notwithstanding the Board's firm conviction in making this recommendation, the Board may consider possible actions that could lead to, and involve, negotiations that may result in (i) an extraordinary 11 transaction, such as a merger or reorganization involving the Company or any of its subsidiaries, (ii) a purchase, sale or transfer of a material amount of the assets of the Company or any of its subsidiaries, (iii) a tender offer for or other acquisition of securities by or of the Company or (iv) a material change in the present capitalization or dividend policy of the Company. In the opinion of the Board, premature disclosure of the possible terms of any transaction of the type described above or the parties thereto might jeopardize the initiation or continuation of such discussions or negotiations. Accordingly, the Board, on October 10, 1996, adopted a resolution instructing management not to disclose the possible terms of any such transactions, or the parties thereto, unless and until an agreement in principle relating thereto has been reached or such disclosure is otherwise required under applicable law. There can be no assurance that any of the foregoing will result in any transaction, or that a transaction other than one of the types described herein will not be authorized or consummated. The initiation or continuation of any of the foregoing may also be dependent upon the future actions of SCI with respect to the Second SCI Proposal. The proposal, authorization, announcement or consummation of any transaction of the type referred to in this Item 7 could adversely affect or result in withdrawal of the Second SCI Proposal. Except as described in this Schedule 14D-9, the Company is not engaged in any negotiation in response to the Second SCI Proposal that relates to or would result in (i) an extraordinary transaction, such as a merger or reorganization involving the Company or any of its subsidiaries, (ii) a purchase, sale or transfer of a material amount of the assets of the Company or any of its subsidiaries, (iii) a tender offer for or other acquisition of securities by or of the Company or (iv) a material change in the present capitalization or dividend policy of the Company. Except as described in this Schedule 14D-9, there are no transactions, Board resolutions, agreements in principle or signed contracts in response to the Second SCI Proposal that relate to or would result in one or more of the matters referred to in this Item 7. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. (a) LITIGATION. JERRY KRIM V. BAGNELL, ET AL., No. VC022997 (Cal. Sup. Ct. L.A. Cty. - S.E. Dist.). On September 26, 1996, the Company received notice that Jerry Krim filed a purported derivative and class action against the Company's current Directors and one former director and against the Company as a nominal defendant. To the Company's knowledge, no defendant has been served as of the date of this filing. The plaintiff alleges, on behalf of himself and all of the Company's current and former shareholders, that the defendants "improperly responded to an offer by Service Corp. International . . . to combine the two companies," refused to negotiate with SCI, agreed to pay an inflated price for the Rose Hills property in Los Angeles, adopted a supposed "poison pill" supermajority voting provision requiring 75% approval of a merger, and adopted the Rights Plan, each allegedly in violation of the Directors' fiduciary duties. Plaintiff seeks preliminary and permanent injunctive relief that would, among other things, (i) require the defendants to cooperate with any person having a bona fide interest in proposing a transaction that would "maximize shareholder value," (ii) enjoin the Rights Plan in its entirety, (iii) enjoin the consummation of the Rose Hills acquisition, (iv) enjoin the supermajority voting requirement, (v) require an accounting for unspecified damages, and (vi) compensate the plaintiffs for their fees and costs. A copy of the complaint is filed as Exhibit 14 to this Schedule 14D-9 and incorporated herein by reference. The Company believes that the action is without merit and intends to contest the action vigorously. SERVICE CORPORATION INTERNATIONAL V. THE LOEWEN GROUP INC., ET AL., No. 4-96-3269 (S.D. Tex.). On October 2, 1996, SCI filed this action alleging that the Company falsely suggested to the Company's shareholders that it has standing to bring an action to block or impede the Second SCI Proposal on federal antitrust grounds. SCI seeks a declaratory judgment that the Company lacks standing to bring such an action on federal antitrust grounds. SCI asserts a claim under Texas common law, based upon its 12 allegations that the Company's actions have tortiously interfered with SCI's "prospective business relationships" with the Company's shareholders. As relief for this assertion, SCI seeks an unspecified amount of damages for claimed injuries resulting from the Company's alleged interference with these prospective relationships. In an amended complaint, SCI also alleges that the foregoing actions constitute violations of Section 14(e) of the Securities Exchange Act of 1934. As relief, SCI seeks an injunction against future similar statements. A copy of the amended complaint is filed as Exhibit 15 to this Schedule 14D-9 and incorporated herein by reference. The Company believes that the action is without merit and intends to contest the action vigorously. THE LOEWEN GROUP INC., LOEWEN GROUP INTERNATIONAL, INC. AND RIDGE CHAPELS, INC. V. SERVICE CORPORATION INTERNATIONAL, INC., NEW SERVICE CORPORATION INTERNATIONAL AND EQUITY CORPORATION INTERNATIONAL, INC. On October 10, 1996, the Company, LGII and Ridge Chapels, Inc., a subsidiary of LGII, commenced an action seeking to enjoin SCI preliminarily and permanently from completing its unsolicited takeover on the grounds that it violates Section 7 of the Clayton Act and Section 1 of the Sherman Act. According to the Company's complaint, SCI's unsolicited offer for control of the Company, if successful, may substantially lessen competition in numerous local markets for (i) the sale of funeral services, (ii) the sale of funeral services on a "pre-need" basis, (iii) the sale of cemetery services, and (iv) the purchase of funeral homes, cemeteries and crematoria. The Company also accuses SCI and Equity Corporation International, Inc., a competitor of the Company in which SCI has a 40% interest, of conspiracy to eliminate the Company as a competitive force in the funeral services industry. The Company takes the position that irreparable harm will result from SCI's further pursuit of its unsolicited takeover, and, accordingly, the Company intends to prosecute its claims zealously. A copy of the complaint is filed as Exhibit 16 to this Schedule 14D-9 and incorporated herein by reference. (b) ADMINISTRATIVE PROCEEDINGS. Certain federal and state governmental authorities are investigating whether consummation of the Second SCI Proposal would tend substantially to lessen competition or tend to create a monopoly in several segments of the funeral services industry. On October 1, 1996, the Federal Trade Commission ("FTC") requested data from the Company in connection with the FTC's investigation of the Second SCI Proposal, including information with respect to all funeral homes and cemeteries in which the Company and SCI have a financial interest. The FTC's request seeks detailed information about all regional market overlaps between the Company (and its affiliates) and SCI (and its affiliates). A copy of the Company's press release regarding the FTC investigation is included as Exhibit 10 to this Schedule 14D-9 and is incorporated hereby by reference. On September 27, 1996, the Company received a civil investigative demand ("CID") from the Attorney General's Office of the State of Florida. The CID indicates that the Antitrust Section of the Attorney General's Office is investigating the potential impact of the First SCI Proposal and the Second SCI Proposal on pricing of funeral services, cemeteries and related products, the effect on Medicare/ Medicaid, and the market concentration for cemeteries and funeral homes in the State of Florida. A copy of the Company's press release regarding this investigation is included as Exhibit 9 to this Schedule 14D-9 and is incorporated herein by reference. In the Registration Statement, SCI indicates that it has received a similar CID from the Attorney General of the State of Florida. The Company has also received numerous other requests for information from states' attorneys general. On September 27, 1996, the Office of the Attorney General of the State of New York requested data from the Company in connection with an investigation of the First SCI Proposal and the Second SCI Proposal. On October 2, 1996, the Office of the Attorney General of the State of Hawaii requested data from the Company in connection with an investigation of the Second SCI Proposal. On October 3, 1996, the Office of the Attorney General for the State of Texas requested information from the Company in connection with an investigation of the Second SCI Proposal. On October 4, 1996, the Office of the Attorney General of the State of California requested information from the Company in connection with an investigation of the Second SCI Proposal. On October 9, 1996, the Attorney General of the State of 13 Tennessee requested information from the Company in connection with an investigation of the Second SCI Proposal. Under United States antitrust law, the FTC, certain private plaintiffs, or one or more states' attorneys general may seek a preliminary or permanent injunction in federal court restraining an acquisition that has the effect of substantially lessening competition or that may tend to create a monopoly. In addition, the Company understands that the Director of Investigation and Research (the "DIR") of the Canadian Competition Bureau is investigating the effects of the Second SCI Proposal under the Competition Act of Canada and, in particular, is investigating whether consummation of the Second SCI Proposal is likely to prevent or lessen competition substantially in the funeral services industry in Canada. The Company received a request for certain information from the DIR and, based on discussions with the DIR and other representatives of the Competition Bureau, the Company expects to receive additional requests for information in the future. If the DIR finds that consummation of the Second SCI Proposal is likely to prevent or lessen competition substantially, the DIR may commence proceedings under the substantive merger provisions of the Competition Act of Canada before an administrative tribunal of the Canadian government known as the Competition Tribunal. If such proceedings were commenced, the Competition Tribunal may make an order directing SCI not to proceed with the Second SCI Proposal or a part thereof. In any such application, the DIR has the ability to seek, and the Competition Tribunal has the authority to grant, such interim order as it considers appropriate, including an injunction which would have the effect of prohibiting SCI from consummating the Second SCI Proposal pending disposition of the principal application. The Competition Tribunal could also make other remedial orders on such an application. The DIR may apply for an interim order even if a principal application has not been filed provided the prerequisites to the issuance of such an interim order under the Competition Act of Canada are satisfied. (c) SHAREHOLDER PROTECTION RIGHTS PLAN. On April 20, 1990, the Board approved the Rights Plan, which was confirmed by the Company's shareholders in accordance with the provisions of the Rights Plan at the annual meeting of Shareholders on May 24, 1990 and re-confirmed for an additional five year period at the annual meeting of Shareholders on May 17, 1995. The Rights Plan is currently set to expire on April 20, 2000. A copy of the Rights Plan has been attached as Exhibit 36 to this Schedule 14D-9. This summary of the Rights Plan does not purport to be complete and is qualified in its entirety by reference to the text of the Rights Plan, which is incorporated herein by reference. Certain capitalized terms used below without definition are used as defined in the Rights Plan. The Rights Plan is intended to discourage unfair takeover bid tactics and to give the Board time, if there is an unsolicited bid, to pursue alternatives to maximize shareholder value. To preserve the shareholders' right to consider take-over bids on a fully-informed basis, the Rights Plan provides that a bidder's position may be substantially diluted if it does not either make a "Permitted Bid" directly to all shareholders or negotiate with the Board for a waiver of the Rights Plan's provisions. Unless and until the Rights "separate", each Common Share carries one Right, which is evidenced by the share certificate and is transferable only along with the Common Share. The Rights would separate upon: (1) the tenth day after the date of first public announcement of a Take-over Bid or the intention of any person (other than the Company or a subsidiary of the Company) to make a Take-over Bid, other than a Permitted Bid; (2) the tenth day after the date of first public announcement of facts indicating that any person has become the Beneficial Owner of 20% or more of the outstanding Common Shares (unless otherwise exempt under the Rights Plan); 14 (3) a Flip-over Transaction or Event, which is generally either: a. a business combination whereby the Common Shares would be changed; or b. a sale of more than 50% of the consolidated assets of the Company; or (4) such earlier or later date as may be determined by the Board acting in good faith; provided that, if the foregoing results in the Separation Time being prior to the Record Time, the Separation Time shall be the Record Time. At its meeting on October 10, 1996, the Board determined in good faith that it is desirable in the circumstances of the Second SCI Proposal (as it may be amended from time to time) that the occurrence of the Separation Time be deferred to a date to be determined by the Board of Directors in their discretion. Accordingly, the Board resolved that, for purposes of the Second SCI Proposal (as it may be amended from time to time), the Separation Time shall be the close of business on the tenth day after the earliest of the (i) Stock Acquisition Date, (ii) the occurrence or commencement of a Flip-over Transaction or Event (as described above) and (iii) such date as may be determined in good faith by the Board upon prior written notice to the Rights Agent. In the case of a Take-over Bid (so long as a Flip-in Event has not occurred), each Right would entitle the holder (other than the bidder) to acquire one Common Share for the Exercise Price; in the other cases described above, each Right would entitle the holder (other than the bidder) to acquire for the Exercise Price, Common Shares (in the case of a Flip-in Event) or common shares of the combined entity or purchaser (in the case of a Flip-over Transaction or Event) having a Market Price of two times the Exercise Price. The Exercise Price is currently Cdn. $125 and is subject to anti-dilution provisions. Under the Rights Plan, a Flip-in Event will occur ten days after the acquisition of Beneficial Ownership of more than 20% of the Common Shares except: a. by way of a Permitted Bid; b. by an acquiror who obtains a waiver from the Board; c. as a result of the death of a Beneficial Owner of Common Shares; d. by a person who held more than 20% of the Common Shares on April 20, 1990, who is "grandfathered" subject to a number of restrictions (a "Grandfathered Person"); or e. by registered pension plans whose governing legislation does not permit them to hold more than 30% of Common Shares and who acquire shares independently for investment. A "Permitted Bid" is a take-over bid that complies with all applicable securities laws and is: (1) for all Common Shares and to all holders, wherever resident; (2) made by a bidder who (with related parties) does not own more than 5% of the Common Shares (unless the bidder owned at least that percentage on April 20, 1990); and (3) conditioned upon approval by a majority of the votes cast by "Independent Shareholders" (those other than certain shareholders who have acquired more than 20% of the Common Shares or who have made a Takeover-Bid, their Associates, Affiliates or persons acting jointly or in concert with them), and expire no earlier than five business days after the shareholders' meeting called to consider it. To the Company's knowledge, the only "Grandfathered Persons" are Raymond L. Loewen and Anne Loewen. The holdings of a Grandfathered Person can be increased by up to 2% of the Common Shares without causing a Flip-in Event to occur. Someone who acquires Common Shares as a result of the death of a Grandfathered Person or who buys all of the Common Shares Beneficially Owned by a Grandfathered 15 Person would also be a Grandfathered Person, but to make a Permitted Bid such a buyer would have to offer the other holders of Common Shares consideration at least equal to that paid to the selling Grandfathered Person. (d) RECENT DEVELOPMENTS. OFFERING OF $125,000,000 7 3/4% SERIES 3 SENIOR GUARANTEED NOTES (DUE 2001) AND $225,000,000 8 1/4% SERIES 4 SENIOR GUARANTEED NOTES (DUE 2003). On October 4, 1996, LGII successfully completed an offering of $350 million of senior guaranteed notes (the "Senior Notes"). The repayment of principal and interest on the Senior Notes is guaranteed by the Company. Approximately $301 million of the net proceeds to LGII from the sale of the Senior Notes was used to repay indebtedness under LGII's five-year $750 million revolving credit facility. The balance of the net proceeds will be used for working capital and other corporate purposes, including acquisitions and interest and principal payments on existing senior notes. The completion by LGII of this refinancing provides enhanced flexibility to the Company, contributing to the implementation of its long-term business plan. (e) CAUTIONARY STATEMENT. In addition to the historical information contained herein, this Schedule 14D-9 contains forward-looking statements with respect to the business of the Company. The actual results of the Company's business may differ significantly from those discussed in such forward-looking statements. Factors that might cause such a difference include, but are not limited to, the ability to continue the successful implementation of the Company's long-term business and financial plan, including growth by acquisitions, failure to achieve the Company's stated 1996 and 1997 earnings per share goals, the Company's ability to attract and retain key employees in the face of a possible change in control, disruptions to the Company's business caused by the pendency of the Second SCI Proposal and related legal proceedings, the continued receptiveness of the Company's customers to its services and products, as well as general business, economic and competitive conditions. 16 ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. The following Exhibits are filed herewith: Exhibit 1 -- Letter from L. William Heiligbrodt to Raymond L. Loewen, dated September 17, 1996. Exhibit 2 -- Letter from L. William Heiligbrodt to Raymond L. Loewen, dated September 18, 1996. Exhibit 3 -- Letter to Shareholders from Raymond L. Loewen, dated September 24, 1996. Exhibit 4 -- Letter to L. William Heiligbrodt from Raymond L. Loewen, dated September 24, 1996. Exhibit 5 -- [Intentionally omitted]. Exhibit 6 -- Press Release issued by Loewen, dated September 17, 1996. Exhibit 7 -- [Intentionally omitted]. Exhibit 8 -- Press Release issued by Loewen, dated September 24, 1996. Exhibit 9 -- Press Release issued by Loewen, dated September 27, 1996. Exhibit 10 -- Press Release issued by Loewen, dated October 1, 1996. Exhibit 11 -- Press Release issued by SCI, dated October 2, 1996. Exhibit 12 -- Press Release issued by Loewen, dated October 2, 1996. Exhibit 13* -- Press Release issued by Loewen, dated October 10, 1996. Exhibit 14 -- Complaint in KRIM V. BAGNELL, ET AL. (Superior Court of the State of California). Exhibit 15 -- First Amended Complaint in SERVICE CORPORATION INTERNATIONAL V. THE LOEWEN GROUP INC. (United States District Court for the Southern District of Texas). Exhibit 16 -- Complaint in THE LOEWEN GROUP INC., ET AL. V. SERVICE CORPORATION INTERNATIONAL, ET AL. (United States District Court for the Eastern District of New York). Exhibit 17* -- Opinion letter of Smith Barney Inc. to Loewen Board of Directors, dated October 10, 1996. Exhibit 18* -- Opinion letter of Nesbitt Burns Inc. to Loewen Board of Directors, dated October 10, 1996. Exhibit 19 -- Pages 15 - 20 and 32 - 34 of The Loewen Group Inc. Proxy Statement, dated April 9, 1996. Exhibit 20 -- The Loewen Group Inc. Employee Stock Option Plan (United States). Exhibit 21 -- The Loewen Group Inc. Employee Stock Option Plan (Canada). Exhibit 22 -- Form of The Loewen Group Inc. Employee Stock Option Plan Agreement (Directors of Loewen Group International, Inc.). Exhibit 23 -- Form of The Loewen Group Inc. Employee Stock Option Plan Agreement (Directors of subsidiaries). Exhibit 24 -- Form of The Loewen Group Inc. Employee Stock Option Plan Agreement (employees). Exhibit 25 -- The Loewen Group Inc. Employee Share Purchase Plan (United States). Exhibit 26 -- The Loewen Group Inc. Employee Share Purchase Plan (Canada). Exhibit 27 -- The Loewen Group Inc. 1994 Management Equity Investment Plan. Exhibit 28 -- Form of The Loewen Group Inc. 1994 Management Equity Investment Plan Investment Option Agreement. Exhibit 29 -- The Loewen Group Inc. Supplement to 1994 Management Equity Investment Plan. Exhibit 30 -- The Loewen Group Inc. Addendum to 1994 Management Equity Investment Plan. Exhibit 31 -- Form of The Loewen Group Inc. Management Equity Investment Plan Borrowing Agreement. Exhibit 32 -- Form of The Loewen Group Inc. Management Equity Investment Plan Executive Agreement. Exhibit 33 -- Form of The Loewen Group Inc. Management Equity Investment Plan 1994 Exchangeable Floating Rate Debenture due July 15, 2001. Exhibit 34 -- The Loewen Group Inc. 1994 Outside Director Compensation Plan. Exhibit 35 -- The Loewen Group Inc. Employee Stock Bonus Plan. Exhibit 36 -- The Loewen Group Inc. Shareholder Protection Rights Plan Agreement and Amendments. Exhibit 37 -- Employment Agreement with Timothy R. Hogenkamp. Exhibit 38 -- [Intentionally omitted]. Exhibit 39 -- Form of Indemnification Agreement with Outside Directors. Exhibit 40 -- Form of Indemnification Agreement with Officers. Exhibit 41 -- Form of The Loewen Group Inc. Severance Agreement. Exhibit 42 -- The Loewen Group Inc. Severance Pay Plan.
- - ------------------------ * Exhibits distributed to Shareholders. 17 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule 14D-9 is true, complete and correct. THE LOEWEN GROUP INC. By: /s/ Peter S. Hyndman______________ Name: Peter S. Hyndman Title: Vice President, Law and Corporate Secretary Dated: October 10, 1996 18 EX-99.1 2 EXHIBIT 99.1 EXHIBIT 1 [SCI Letterhead] September 17, 1996 L. William Heiligbrodt President Mr. Raymond L. Loewen Chairman of the Board and Chief Executive Officer The Loewen Group Inc. 4126 Norland Avenue Burnaby, British Columbia, Canada Dear Mr. Loewen: As you know, I have tried to reach you several times since September 11. While your office has assured me that you received my messages, my calls have not been returned. In view of that, and in view of the importance of this matter, I am sending this letter. I would like to discuss with you a combination of our two companies. The combination would involve a stock-for-stock exchange accounted for as a pooling which values Loewen Group at US$43 per share. We believe that this transaction can be structured in a manner that is tax-free to both companies and (except for a relatively nominal amount in the case of U.S. stockholders) to the U.S. and Canadian stockholders of Loewen Group. I think you and your Board and stockholders would agree that our proposal is a generous one, resulting in the following premiums for Loewen Group stockholders: - 45.9% above the price at which Loewen Group stock traded 30 days ago; - 39.3% above the price at which Loewen Group stock traded one week ago; and - 27.4% above the price at which Loewen Group stock is currently trading. This represents an opportunity for your stockholders to collect excellent value, by any measure, for their shares. In addition, and importantly, since your stockholders would be receiving stock, they would continue to participate in Loewen Group's business as well as share in the upside of our business. Thus, in essence, your stockholders would: - continue their investment in our industry; - get an immediate, and very significant, increase in the market value of their investment; - get that immediate and substantial increase on an essentially tax free basis; and - diversify their risk by participating in a much larger number of properties. This is a "win-win" situation for you and your stockholders. Finally, with respect to consideration, I would note also that our proposal is based on public information. After a due diligence review, we may be in a position to increase the consideration that your stockholders would receive. We, of course, recognize that our businesses overlap in various locations. We have carefully reviewed this matter and are convinced that competition issues can be cured by selected divestitures without impairment of the value that a combination would achieve for the stockholders of our two companies. I would very much like to discuss any and all aspects of our proposal directly with you and your Board of Directors. We believe you and they will recognize the tremendous benefit to your stockholders of our proposal. Our proposal is conditioned upon approval of our Board and upon negotiation of mutually satisfactory agreements providing for a combination on a pooling basis. We hope that after you meet with us, you will similarly determine that the transaction should be pursued. We look forward to hearing from you. In view of the importance of this matter, we are simultaneously releasing this letter to the press. Sincerely, /s/ William Heiligbrodt cc: Board of Directors of The Loewen Group, Inc. EX-99.2 3 EXHIBIT 99.2 EXHIBIT 2 [SCI Letterhead] September 18, 1996 Mr. Raymond L. Loewen Chairman and Chief Executive Officer The Loewen Group Inc. 4126 Norland Avenue Burnaby, British Columbia CANADA Dear Ray: We are pleased to confirm to you that the Board of Directors of Service Corporation International today approved the proposal that we made to you yesterday. Our Board is enthusiastic about this transaction, and firmly believes that a combination of our two businesses in the manner that we proposed is in the best interests of your and our stockholders. We believe that after consideration, you and your Board will reach the same conclusion. In this regard, we note the enthusiastic reaction of your stockholders to our proposal, reflected in both the post-announcement price of your stock and the comments of stockholders and analysts. We agree with Greg Capelli of Chicago Corp.: "This is a real winner for both companies' shareholders." In the words of Todd Richter of Dean Witter Reynolds: "It's a perfect strategic fit." Ray, we at SCI would strongly prefer to communicate with you and your team in person, rather than by letter. We believe that much more can be accomplished through forthright dialogue. We remind you that our valuation is based on public information, and we may be able to increase our offer after a review of non-public information. Please give me a call. I look forward to hearing from you. Sincerely, L. William Heiligbrodt cc: Board of Directors of The Loewen Group Inc. EX-99.3 4 EXHIBIT 99.3 EXHIBIT 3 [Loewen Letterhead] September 24, 1996 To Our Shareholders: The Board of Directors of The Loewen Group Inc. has asked me to report to you on the decisions that it has made in response to the proposal announced by Service Corporation International on Tuesday, September 17, 1996. After extensive deliberations, through discussion, and careful analysis by the Board, in consultation with its financial and legal advisors, the Board has unanimously rejected SCI's proposal and determined that it is not in the best interests of shareholders. In rejecting the proposal, the Board considered many factors and unanimously concluded that the best way to maximize value for our shareholders is through the continued implementation of the Company's long-term business plan as an independent company. The Board firmly believes: -- As the emerging leader in the funeral home and cemetery industry, Loewen has a very bright future for continued growth. During the past five years, Loewen's revenues and earnings have experienced the highest growth rates of public companies in our industry, 41.5% and 36.8%, respectively, on a compound annual basis, excluding extraordinary items. This record growth has been accomplished through both our internal management practices and external growth through acquisitions. -- Loewen is the preferred acquiror in our rapidly consolidating industry. Year-to-date, Loewen has signed or completed approximately 196 acquisitions aggregating over approximately US$715 million in transaction value, excluding our significant, and innovative, investments with Blackstone Capital Partners in Prime Succession Inc. and in Rose Hills Memorial Park, which have transaction values of approximately US$295 million and US$240 million, respectively. It is also important to emphasize that our growing number of acquisitions continue to meet or exceed our acquisition targets. Please note that Prime Succession, the fourth-largest funeral home and cemetery business in North America, and Rose Hills, the number one single location funeral home and cemetery in the U.S., as well as Blackstone, one of the premier merchant banking firms in the world, had their choice of industry partners for these major acquisitions, and they all chose Loewen. -- We are not surprised that SCI is attempting to acquire Loewen and eliminate your Company as its most formidable competitor in the North American markets. SCI has become frustrated by its inability to compete effectively for the most significant and highly attractive growth opportunities in our industry. Furthermore, the Loewen Board of Directors believes that the SCI proposal, and the manner in which it was presented, raises serious questions about SCI's motives in presenting its proposal at this time. -- Our great success in growing Loewen's revenues and profits is clearly attributable to the outstanding corporate culture that we have created. The superior quality of our people, our management and employees at all levels of our Company, has been the major driver of our success. Our demonstrated record of caring for our employees, our customers and the communities that we serve, distinguishes Loewen admirably from our competition. Loewen enjoys the best reputation in our industry, and we know the takeover proposed by SCI will enhance our position, relative to SCI, and further motivate potential sellers within our industry to deal increasingly with Loewen. You should understand that the Board takes its fiduciary duty to act in the best interests of shareholders very seriously and is committed to maximizing long-term shareholder value. With regard to the SCI proposal, the Board received advice from our financial advisors, Smith Barney Inc. and Nesbitt Burns Inc., that in their opinion the proposal for a stock-for-stock exchange which values Loewen's common stock at US$43 per share is inadequate from a financial point of view. When I founded this company 11 years ago, I knew then that if our Company stayed on the right track, long-term investors would be richly rewarded. Our goals and objectives are ambitious, but realistic and achievable. In the first half of 1996 alone, revenues increased 45% and earnings increased 39%. Loewen's rapid growth in earnings per share has been long recognized in the capital markets and has been rewarded by a substantial increase in our stock market valuation over the years. We believe our prospects for significant continued growth in 2 revenues and profitability in the future will continue, as we implement our business plans as an independent company. Very truly yours, Raymond L. Loewen Chairman and Chief Executive Officer 3 EX-99.4 5 EXHIBIT 99.4 EXHIBIT 4 [Loewen Letterhead] September 24, 1996 Mr. L. William Heiligbrodt President Service Corporation International 1929 Allen Parkway Houston, TX 77219-0548 Dear Mr. Heiligbrodt: The Board of Directors of The Loewen Group Inc. has asked me to advise you of the decision that the Loewen Board has made in response to the unsolicited takeover proposal that we received from Service Corporation International on Tuesday, September 17, 1996. The Loewen Board has unanimously rejected the SCI proposal. SCI should understand that the Loewen Board of Directors takes its fiduciary duty to act in the best interests of the Company and our shareholders very seriously. We are fully committed to maximizing the long-term value for our shareholders. After extensive review of our business and financial plans, as well as a thorough and careful study of our excellent prospects for significant continued growth in revenues and profitability in the future, the Loewen Board of Directors has unanimously concluded that the best way to maximize value for our shareholders is through the continued implementation of the Company's long-term business plan as an independent company. Sincerely, Raymond L. Loewen Chairman and Chief Executive Officer EX-99.5 6 EXHIBIT 99.5 EXHIBIT 5 [INTENTIONALLY OMITTED] EX-99.6 7 EXHIBIT 99.6 (PRESS RELEASE 9/17) EXHIBIT 6 Loewen Group To Review Unsolicited Proposal ------------------------------------------- in Due Course ------------- VANCOUVER, British Columbia, Sept. 17 -- The Loewen Group Inc. (Nasdaq: LWNG) announced that the Loewen Board of Directors will review the proposal received today from Service Corporation International and response in due course. SOURCE: The Loewen Group Inc. CONTACT: Thomas C. Franco or Rohit J. Menezes of Broadgate Consultants, 212-229-2222 EX-99.7 8 EXHIBIT 99.7 (PRESS RELEASE 9/20) EXHIBIT 7 [INTENTIONALLY OMITTED] EX-99.8 9 EXHIBIT 99.8 (PRESS RELEASE 9/24) EXHIBIT 8 Loewen Group Board Unanimously Rejects Service Corporation Proposal ------------------------------------------------------------------- Company's Financial Advisors Find Proposal Inadequate; ------------------------------------------------------ Board Finds Proposal Unacceptable --------------------------------- and an Attempt to Eliminate Competition in North America -------------------------------------------------------- CINCINNATI, Ohio, Sept. 24 -- The Loewen Group Inc. (Nasdaq: LWNG) announced today that its Board of Directors has unanimously rejected the unsolicited takeover proposal from Service Corporation International (SCI) that was issued on September 17, 1996. The announcement was made by Raymond L. Loewen, chairman of the Board and chief executive officer of The Loewen Group, in a letter to shareholders and a letter to L. William Heiligbrodt of SCI. Copies of both letters are attached. "The Loewen Board of Directors has unanimously concluded that the best way to maximize value for our shareholders is through the continued implementation of the Company's long-term business plan as an independent company," Mr. Loewen stated in his letter to shareholders. Mr. Loewen stated that the Board firmly believes: -- As the emerging leader in the funeral home and cemetery industry, Loewen has a very bright future for continued growth. -- Loewen is clearly the preferred acquirer in its industry -- as indicated by its recent partnerships with Blackstone Group to acquire two of the industry's premier assets, Prime Succession and Rose Hills Memorial Park. -- SCI clearly intends to eliminate its most formidable competitor in the North American marketplace, diminishing the opportunities for independent funeral home and cemetery operators to effectively address their succession planning needs. -- Loewen's record of success in growing revenues and profits is primarily attributable to the outstanding corporate culture that Loewen has created. Citing Loewen's 41.5% revenue increase and 36.8% earnings increase over the last five years (on a compounded annual basis excluding extraordinary items), Mr. Loewen stated, "I am very optimistic about our ability to build shareholder value in the future as we execute Loewen's growth plans." Mr. Loewen emphasized that Loewen's Board takes its fiduciary duty to act in the best interests of the Company and its shareholders very seriously and is committed to maximizing long-term shareholder value. He also pointed out in his letter to shareholders that the Company's financial advisors, Smith Barney Inc. and Nesbitt Burns Inc., have advised the Board that in their opinion SCI's proposal for a stock-for-stock exchange, which values Loewen's common stock at US$43, is inadequate from a financial point of view. Mr. Loewen also stated: "Our demonstrated record of caring for our employees, our customers and the communities we serve distinguishes Loewen admirably from our competition." He reminded shareholders that the Loewen reputation continues to enhance the Company's ability to attract potential sellers within the industry, as well as outside partners such as the Blackstone Group. "The Loewen Board of Directors believes that the SCI proposal, and the manner in which it was presented, raises serious questions about SCI's motives in presenting its proposal at this time. Moreover, this bid has reaffirmed throughout the industry the clear-cut longstanding distinctions between Loewen and SCI," Mr. Loewen added. With offices in Vancouver, Cincinnati, and Philadelphia. The Loewen Group employs over 13,000 people. Since the first of the year, the Company has closed or signed approximately US$715 million in acquisitions not including the Rose Hills and Prime Succession transactions valued at over US$535 million. More than 90 percent of the Company's revenue is generated in the United States. The Company recently announced its intention to list its shares on the New York Stock Exchange. Statements contained in this press release and attached shareholders' letter that are not historical in nature may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Reference is made to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 which includes certain important factors that should be considered in connection with an evaluation of forward-looking statements. EX-99.9 10 EXHIBIT 99.9 (PRESS RELEASE 9/27) EXHIBIT 9 VANCOUVER, British Columbia, Sept. 27 -- The Loewen Group Inc. (Nasdaq: LWNG) announced today that it has received a civil subpoena from the State of Florida Attorney General's Office for documents in connection with the Antitrust Section's investigation of the proposed acquisition of Loewen by Service Corporation International. Raymond L. Loewen, chairman of the board and chief executive officer of The Loewen Group said, "We welcome the scrutiny of the Florida attorney general's office and other state regulators as well, since SCI clearly intends to eliminate its most formidable competitor in the North American marketplace." The subpoena suggests a wide ranging investigation into the potential impact of the proposed acquisition on pricing, Medicare/Medicaid issues and market concentration for cemeteries and funeral homes in the State of Florida. SOURCE The Loewen Group CONTACT: David A. Laundy of The Loewen Group Inc., 604-293-7857; or Thomas C. Franco or Christopher G. Tofalli of Broadgate Consultants, Inc., 212-229-2222 EX-99.10 11 EXHIBIT 99.10 (PRESS RELEASE 10/1) EXHIBIT 10 FTC Seeks Information From Loewen Group --------------------------------------- In Connection With Probe of Service Corporation Proposal -------------------------------------------------------- October 1, 1996 -- The Loewen Group Inc. (Nasdaq: LWNG) announced today that its attorneys have been contacted by the Federal Trade Commission (FTC) in connection with an investigation of the proposed acquisition of Loewen Group by Service Corporation International (NYSE: SRV) (SCI). VANCOUVER, B.C., Oct. 1 According to the Company, the FTC has requested data on all of the Loewen Group's funeral homes and cemeteries, including all properties in which the Company has a financial interest. The Company also noted that the FTC's request includes detailed information about regional market overlap between Loewen Group and SCI properties, including any properties in which either company has a financial interest. CONTACT: David A. Laundy of The Loewen Group Inc., 604-293-7857; or Thomas C. Franco of Broadgate Consultants, Inc., 212-229-2222. EX-99.11 12 EXHIBIT 99.11 (PRESS RELEASE 10/2) EXHIBIT 11 Service Corp. Offers to Acquire Loewen Group for $45-Share ---------------------------------------------------------- (The following is a reformatted version of a press release issued by Service Corporation.) Service Corporation International Announces Exchange Offer to Acquire --------------------------------------------------------------------- All Outstanding Shares of The Loewen Group Inc. ----------------------------------------------- HOUSTON, TEXAS, October 2, 1996 -- Service Corporation International (SCI) today announced that it intends to take its offer to acquire The Loewen Group Inc. (Loewen) directly to Loewen shareholders through an exchange offer. Holders of Loewen common stock will be offered the opportunity to exchange their shares for U.S. $45.00 worth of common stock of New Service Corporation International (New SCI), or, at the election of each Loewen shareholder, U.S. $45.00 worth of exchangeable stock of a Canadian subsidiary of New SCI. The exchangeable shares will be convertible into, and are intended to be the economic and voting equivalent of, shares of New SCI common stock. Holders of Loewen Series C preferred stock will be offered the opportunity to exchange their shares for U.S. $29.51 worth of New SCI common stock of such exchangeable shares. Prior to the exchange of Loewen stock in the offer, SCI intends to reorganize so that New SCI, a newly organized Delaware holding company, will become the publicly held company instead of SCI, and SCI will become a wholly- owned subsidiary of New SCI. Accordingly, as a result of the reorganization, the stockholders of SCI will become stockholders of New SCI on a one share for one share basis, and the New SCI common stock will be listed on the NYSE. The Board of Directors of SCI has unanimously authorized the exchange offer. The exchange offer will not be conditioned on achieving pooling-of- interests accounting. SCI would be willing to increase the consideration payable in exchange for Loewen common and preferred stock if SCI and Loewen were to enter into a negotiated agreement providing for the combination of SCI and Loewen on the basis of pooling-of-interests accounting. The amount of any such increase would depend upon the discussions among the parties. The exact number of New SCI shares and exchangeable shares that may be exchanged for Loewen common and preferred shares will be determined based on the trading price of SCI's stock on the 20 consecutive trading days ending three days prior to the expiration of the offer, provided that not more than 1,76471 shares will be issued in exchange for each share of Loewen's common stock and not more than 1,15719 shares will be issued in exchange for each share of Loewen's Series C preferred stock. The exchange offer is intended to be tax free to Loewen's U.S. holders who elect New SCI common stock and to Loewen's Canadian holders who elect exchangeable shares. 2 The terms and conditions of the offer are to be set forth in a registration statement that will be filed promptly with the Securities and Exchange Commission. The exchange offer will commence after the registration statement is declared effective by the SEC. The exchange offer will be conditioned upon, among other things, the tendering for exchange of at least 75% of the outstanding shares of Loewen common and 75% of the Loewen preferred stock, each on a fully diluted basis, the redemption or inapplicability of Loewen's "poison pill", the resignation of at least a majority of Loewen's incumbent directors and their replacement with SCI nominees, receipt of all necessary governmental and regulatory approvals and consents, and approval by SCI stockholders of SCI's reorganization and the issuance of shares in the exchange offer. In addition, SCI announced that it filed an action in the U.S. District Court for the Southern District of Texas, located in Houston, seeking a declaration that Loewen does not have standing to seek to block the exchange offer under the antitrust laws. The complaint also alleges that Loewen has tortiously interfered with SCI's prospective business relationship with Loewen shareholders by making misleading statements about SCI's business and by failing to make full disclosure of the terms of Loewen's recently announced transactions with Rose Hills Memorial Park and Mortuary and with Prime Succession Inc. This news release is neither an offer to exchange nor a solicitation of an offer to exchange shares of capital stock of New SCI, SCI or any of its subsidiaries. Such securities may not be sold or exchanged nor may offers to buy or exchange be accepted prior to the time the registration statement becomes effective. Service Corporation International is the largest funeral home and cemetery organization in the world, with 2,832 funeral service locations, 331 cemeteries and 146 crematoria as of June 30, 1996. SCI provides funeral and cemetery services in North America, Europe and the Pacific Rim. SCI's stock is traded on the New York Stock Exchange. The company's ticker symbol is SRV. Contact: George R. Champagne (713) 525-5546 Todd A. Matherne (713) 525-5243 Abernathy MacGregor Group (212) 371-5999 Josle Frank/Dan Katcher (Mgs) EX-99.12 13 EXHIBIT 99.12 (PRESS RELEASE 10/2) EXHIBIT 12 Loewen Group Board to Review Service Corporation ------------------------------------------------ Announcement ------------ VANCOUVER, British Columbia, Oct. 2 -- The Loewen Group Inc. (NYSE: LWN) announced today that the Loewen Board of Directors will review Service Corporation International's (SCI) October 2 announcement concerning an exchange offer and will respond in due course. The Company also said that it has asked its legal and financial advisors to review SCI's announcement in light of the regulatory, industry and financial issues posed by SCI's bid. "The Company will advise its shareholders of our position as to the offer following the Board meeting," stated Raymond L. Loewen, chairman and chief executive officer. "We ask our shareholders to take no action with respect to their shares until the Company's position has been announced." SOURCE The Loewen Group Inc. CONTACT: David A. Laundy of The Loewen Group Inc., 604-293-7857; or Thomas C. Franco of Broadgate Consultants, Inc., 212-229-2222 LANGUAGE: ENGLISH LOAD-DATE: October 3, 1996 EX-99.13 14 EXHIBIT 99.13 EHIBIT 13 LOEWEN BOARD UNANIMOUSLY REJECTS SERVICE CORPORATION EXCHANGE OFFER PROPOSAL * SCI'S Second Proposal Termed Inadequate * Loewen Holders Urged Not To Tender If and When Bid Is Made * Federal Antitrust Lawsuit Filed Against SCI and Equity Corporation International VANCOUVER, October 10, 1996 -- The Loewen Group Inc. (NYSE, TSE, ME: LWN) today announced that following a thorough and careful analysis and discussions with its financial and legal advisors, its Board of Directors has unanimously determined that the exchange offer proposed by Service Corporation International (SCI) is inadequate and not in the best interests of the Company or its shareholders. The Board recommended that the Company's shareholders not tender their shares, if and when the proposed offer is commenced. The Company also announced that today it filed an antitrust lawsuit in the United States District Court for the Eastern District of New York against SCI and Equity Corporation International, Inc., of which SCI owns approximately 40%. The Board determined by unanimous vote of the directors present that the best way to maximize value for shareholders is through continued implementation of the Company's long-term business plan as an independent company. The Board believes the Company will continue to build shareholder value through growth, especially growth through acquisitions, and through enhanced profitability. In rejecting SCI's proposed exchange offer, the Board relied, in part, on written inadequacy opinions from Smith Barney Inc. and Nesbitt Burns Inc., the Company's financial advisors. In a letter to shareholders, Raymond L. Loewen, chairman and chief executive officer, noted that the Company would continue to execute its business plan. "We have the right strategy, and it's working. We have the right team and a reputation as a provider of superior services. We're in the right industry at the right time. And we have built a strong foundation for significant growth in revenues and profitability in the future." Mr. Loewen also told shareholders that "SCI's proposal is subject to significant conditions, including: the tendering of 75% each of Loewen's outstanding common and preferred shares; SCI shareholder approval of the corporate reorganization of SCI and the issuance of shares in connection with the proposal; and the elimination of Loewen's Shareholder Protection Rights Plan. These conditions are in addition to the satisfaction of all U.S. and Canadian regulatory concerns, including antitrust issues." In reviewing SCI's proposal, Mr. Loewen noted that the Board considered the regulatory, industry and financial issues it raises, including these factors: - - - SCI CLEARLY WANTS TO BUY LOEWEN ON THE CHEAP, FOLLOWING AN UNFORTUNATE AND UNJUSTIFIED JURY VERDICT IN MISSISSIPPI. This one-time event, which depressed Loewen's share price but not its ability to grow, provided SCI with an opportunity to grab Loewen at a price that the Board has again determined is simply not in the best interests of the Company or its shareholders. - - - SCI CLEARLY WANTS TO BE 'THE PREFERRED BUYER' IN THE INDUSTRY... BUT CAN'T, BECAUSE LOEWEN ALREADY IS. SCI's acquisition strategies and techniques are very different than those of Loewen, and an integration of the strategies and techniques of the Company and SCI may be difficult, resulting in an entity with significantly different characteristics than Loewen currently enjoys. Since the first of the year, Loewen has closed or signed approximately $730 million in acquisitions. That is on top of the Company's investments with The Blackstone Group, one of the premier merchant banking firms in the world, to acquire Prime Succession Inc. and Rose Hills Memorial Park Association, two of the most prized assets in the industry, for an aggregate of $535 million. Loewen has in recent years significantly expanded its acquisition program, and acquisition targets have shown a preference for acquisition by Loewen rather than SCI. - - - SCI CLEARLY INTENDS TO ELIMINATE COMPETITION IN A RAPIDLY CONSOLIDATING INDUSTRY. The anti-competitive effects of the proposal have already prompted regulatory scrutiny in several states, including New York, Florida, Hawaii, Texas, California and Tennessee and from the Federal Trade Commission. In addition, the Canadian Competition Bureau is investigating the effects of the proposal under the Canadian Competition Act, and in that respect has made a request for information from the Company. As a result of the significant antitrust issues relating to the combination of the Company and SCI, both in Canada and in the U.S., there is significant uncertainty as to whether the conditions of the SCI proposal will be met. Separately, the Company said that to retain and attract key executives and managers in the context of a threatened takeover of Loewen, the Board authorized the adoption of retention and severance plans to be applicable in the event of a change in control of the Company. Mr. Loewen noted that this precaution is a prudent and appropriate step given the anxieties and uncertainties resulting from the threat of a hostile takeover. With respect to the Federal court antitrust action against SCI and Equity Corporation International, the Company said that its lawsuit alleges SCI's proposed acquisition would, if successful, substantially lessen competition in the markets for locally-offered funeral and cemetery services, "pre-need" funeral services, and the funeral home and cemetery acquisition markets. The complaint alleges that SCI and Equity Corporation International are "co-conspirators" in actions that are designed to eliminate Loewen as a competitive factor. The complaint also alleges that if SCI were to acquire Loewen, SCI would own or have investment in all but one of the companies that currently are competing as consolidators in numerous local markets throughout the United States. "Unfortunately, the hostile takeover bid by SCI for Loewen will reduce competition. We hope that regulatory agencies will carefully scrutinize this proposed transaction; we think they will reach the same conclusion we have," said R.W. Breece, Sr. a well-known independent industry figure and former President of the North Carolina Funeral Directors Association. Mr. Breece is owner of Rogers and Breece Funeral Home of Fayetville, North Carolina. With corporate offices in Vancouver, The Loewen Group employs over 13,000 people, and operates 931 funeral homes and 271 cemeteries across the United States and Canada. More than 90 percent of the Company's revenue is generated in the United States . Over the past five years, Loewen has generated compounded annual revenue and earnings growth, excluding the Gulf National and Provident legal settlements, of 41.5% and 36.8% respectively. ### Contacts: David A. Laundy The Loewen Group Inc. (604) 293-7857 Thomas C. Franco Broadgate Consultants, Inc. (212) 229-2222 EX-99.14 15 EXHIBIT 99.14 EXHIBIT 14 Kevin J. Yourman (147159) WEISS & YOURMAN 10940 Wilshire Blvd. 24th Floor Los Angeles, California Tel: 310/208-2800 Joseph H. Weiss WEISS & YOURMAN 319 Fifth Avenue New York, New York Tel: 212/532-4171 Jules Brody STULL, STULL & BRODY 6 East 45th Street New York, New York 10017 Tel: 212/687-7230 Harvey Greenfield LAW FIRM OF HARVEY GREENFIELD 10 East 40th Street New York, New York 10016 Tel: 212/679-0600 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF LOS ANGELES SOUTHEAST DISTRICT JERRY KRIM, on behalf of himself ) Civil Action No. and all others similarly situated, ) ) Plaintiff, ) ) -against- ) ) KENNETH S. BAGNELL, JOHN C. ) BEESE, JR., EARL A. GROLLMAN, ) Class and Derivative TIMOTHY R. HOGENKAMP, HAROLD E. ) Action HUGHES, PETER S. HYNDMAN, ALBERT ) S. LINEBERRY, SR., CHARLES E. ) LOEWEN, RAYMOND L. LOEWEN, ) ROBERT B. LUNDGREN, JAMES D. ) MCLENNAN, ERNEST G. PENNER, JOHN N.) TURNER, PAUL WAGLER, ALEXANDER M. ) WATSON, ) JURY TRIAL DEMANDED ) Defendants, ) ) -and- ) ) THE LOEWEN GROUP, INC., ) ) Nominal Defendant. ) ___________________________________) 2 Plaintiff, by his attorneys, alleges on information and belief, except those allegations which pertain to the named plaintiff or to his attorneys (which are alleged on personal knowledge), as follows: SUMMARY OF ACTION 1. Plaintiff brings this action as a class action on behalf of all persons and entities, other than the defendants, who are, and at relevant times have been, holders of the common stock of The Loewen Group Inc. ("Loewen Group," or the "Company"). Plaintiff also brings this action as a derivative action on behalf of Loewen Group. This action is brought against the directors and officers of Loewen to enjoin breaches of fiduciary duty, including the purchase of properties in Los Angeles, which are intended to thwart any takeover of the Company, as more fully described below. 2. In particular, defendants have improperly responded to an offer by Service Corp. International ("Service Corp.") to combine the two companies, involving a stock-for-stock exchange which values Loewen Group at $43 per share, or $2.8 billion, a substantial premium above its trading price, by rejecting the Service Corp. offer, refusing to negotiate with Service Corp., and agreeing to pay an inflated price of $240 million for property in Los Angeles. Indeed, by the admission of the Company's own Chairman and Chief Executive Officer, the Board of Loewen Group has acted "passionately" and would not feel any pressure to even consider selling the Company at even an offer as high as $52 a share. 3 3. Such action and inaction represent an effort by the Individual Defendants to entrench themselves in office so that they may continue to receive the substantial salaries, compensation and other benefits and perquisites of their offices. 4. The Individual Defendants are abusing their fiduciary positions of control over Loewen Group to thwart legitimate attempts to acquire the Company and are seeking to entrench themselves in the management of the Company. The actions of the Individual Defendants constitute a breach of their fiduciary duties to: maximize shareholder value, consider the interests of the public shareholders over their own interests, respond reasonably and on informed basis to BONA FIDE offers for Loewen Group, and not waste corporate assets. PARTIES 5. Plaintiff Jerry Krim is and at all relevant times has been the owner of common stock of defendant Loewen Group. 6. Defendant Loewen Group is a corporation organized and existing under the laws of British Columbia with its principal executive offices at 4126 Norland Avenue, Burnaby, British Columbia, V5G 3S8 Canada. The Company currently maintains offices in Whittier, California. The Company operates the second-largest number of funeral homes and cemeteries in North America and the largest number of funeral homes in Canada. In addition to providing services at the time of need, the company also makes funeral, cemetery and cremation arrangements on a pre-need basis. As of March 15, 1996, the Company operated 847 funeral homes throughout the United States. This included 738 funeral homes in 4 the United States and 109 funeral homes in Canada. In addition, as of such date, the Company operated 197 cemeteries in the United States and 6 cemeteries in Canada. As of the close of business on March 15, 1996, the Company had negotiated agreements for the acquisition of a further 75 funeral homes and 70 cemeteries in the United States and three funeral homes in Canada. 7. Defendant Kenneth S. Bagnell ("Bagnell") is and at all relevant times has been a director of the Company. 8. Defendant John C. Beese, Jr. ("Beese") is and at all relevant times has been a director of the Company. Beese is a member of the Audit Committee and the Corporate Governance Committee of Loewen Group. 9. Defendant Earl A. Grollman ("Grollman") is and at all relevant times has been a director of the Company. 10. Defendant Timothy R. Hogenkamp ("Hogenkamp") is and at all relevant times has been a director of the Company. Hogenkamp is and at all relevant times has been the President and Chief Operating Officer of the Company. 11. Defendant Harold E. Hughes ("Hughes") is and at all relevant times has been a director of the Company. 12. Defendant Peter S. Hyndman ("Hyndman") is and at all relevant times has been a director of the Company. Hyndman is and at all relevant times has been Vice-President, Law and Corporate Secretary of the Company. 13. Defendant Albert S. Lineberry, Sr. ("Lineberry") is and at all relevant times has been a director of the company. 5 14. Defendant Charles B. Loewen ("C. Loewen") is and at all relevant times has been a director of the Company. In July 1994, the Company entered into a consulting agreement with C. Loewen and a corporation of which C. Loewen is an employee, officer and director. Under the terms of the Agreement, C. Loewen agreed to provide, from time to time, advice on financial planning, financial presentation, audit and other matters relating to compensation, corporate governance and policy, in exchange for a lump-sum payment to be made for such services in each of 1994 and 1995 which lump-sum payment is, in each case, in lieu of certain Directors' fees. C. Loewen is Chairman of the Company's Audit Committee, Chairman of the Company's Compensation Committee and a member of the Corporate Governance Committee of Loewen Group. 15. Defendant Raymond L. Loewen ("R. Loewen") is and at all relevant times has been a director of the Company. R. Loewen is and at all relevant times has been Chairman of the Board and Chief Executive Officer of the Company. R. Loewen is the beneficial holder of 15.15% of the common stock of Loewen Group. 16. Defendant Robert B. Lundgren ("Lundgren") is and at all relevant times has been a director of the Company. Lundgren is also a member of the Audit Committee of Loewen Group. 17. Defendant James D. McLennan ("McLennan") is and at all relevant times has been a director of the Company. McLennan is a member of the Corporate Governance Committee and a member of the Compensation Committee of Loewen Group. 6 18. Defendant Ernest G. Penner ("Penner") is and at all relevant times has been a director of the Company. Penner is also a member of the Compensation Committee of Loewen Group. 19. Defendant John N. Turner ("Turner") is and at all relevant times has been a director of the Company. Turner is also a member of the Audit Committee, a member of the Compensation Committee and Chairman of the Corporate Governance Committee of Loewen Group. 20. Defendant Paul Wagler ("Wagler") is and at all relevant times has been a director of the Company. Wagler is also and at all relevant times has been Senior Vice-President, Finance and Chief Financial Officer of the Company. 21. Defendant Alexander M. Watson ("Watson") is and at all relevant times has been a director of the Company. Watson is and at all relevant times has been Executive Vice-President of the Company. 22. The persons named in paragraphs 7 through 21 above shall be collectively referred to herein as the "Individual Defendants." 23. Defendants, Bagnell, Beese, Grollman, Hughes, Lundgren, Penner, Loewen, Turner, Lineberry and McLennan ("outside directors") were entitled to an annual retainer of $18,500 for 1995. In addition, each of these outside Directors was entitled to $1,500 for attendance in person at a meeting (Board or committee of the Board), $250 for attendance by telephone at a meeting (Board or committee of the Board), $5,000 per annum for being a member of a committee of the Board, and $1,500 per annum 7 for chairing a committee of the Board. Pursuant to the 1994 Outside Director Compensation Plan, outside Directors may elect to have some or all of their fees paid in Common shares and in, certain circumstances, options to purchase Common shares of the Company. Outside Directors also receive a grant of 2,000 options upon initially being elected or appointed to the Board of Directors. Directors are reimbursed their travel expenses for attending meetings of the Board and its committees. 24. The Individual Defendants, by reason of their corporate directorships (and in the case of defendants Hogenkamp, Hyndman, R. Loewen, Wagler and Watson, their executive positions), stand in a fiduciary position relative to the Company and the Company's shareholders, which fiduciary relationship, at all times relevant herein, required the Individual Defendants to exercise their best judgment, and to act in a prudent manner, and in the best interests of the Company and the Company's shareholders. They were and are required to use their ability to control and manage the Company in a fair, just and equitable manner; to act in furtherance of the best interests of the Company and the Company's shareholders; to refrain from abusing their positions of control; and not to favor their own interests at the expense of the Company and the Company's shareholders. 25. Each Individual Defendant herein is sued individually as a conspirator and as an aider and abettor, as well as in his capacity as an officer and/or director of the Company, and the liability of each arises from the fact that he has engaged 8 in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. CLASS ACTION ALLEGATIONS 26. Plaintiff brings this action on his own behalf and as a class action, pursuant to California Code of Civil Procedure Section 382, on behalf of all stockholders of the Company (except the defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants) and their successors in interest, who are or will be threatened with injury arising from defendants' actions as more fully described herein. This suit seeks, INTER ALIA, preliminary and permanent injunctive relief, as well as damages. 27. This action is properly maintained as a class action. 28. The Class is so numerous that joinder of all members is impracticable. There were 50,046,035 shares of Loewen Group common stock outstanding as of March 15, 1996, which shares are traded on NASDAQ. The record holders of Loewen Group common stock can be easily determined from the stock transfer journals maintained by Loewen Group or its agents. 29. A class action is superior to other methods for the fair and efficient adjudication of the claims herein asserted and no unusual difficulties are likely to be encountered in the management of this class action. The likelihood of individual Class members prosecuting separate claims is remote. 30. There are questions of law and fact which are common to the Class and which predominate over questions affecting 9 any individual Class member. The common questions include, INTER ALIA, the following: (a) whether defendants have breached their fiduciary duties by engaging in concerted and continual action to entrench themselves in their lucrative positions at the expense of Loewen Group's public stockholders; (b) whether defendants are unlawfully impeding takeover attempts at the expense of Loewen Group's public stockholders, including, but not limited to, the failure of defendants to seriously consider and negotiate the transaction proposed by Service Corp. as more fully described below; (c) whether defendants have failed and will fail to negotiate in good faith with prospective purchasers of the Company; (d) whether defendants are preventing plaintiff and the other members of the Class from receiving the maximum value per share that could be received from a BONA FIDE offer for the Company; and (e) whether the plaintiff and other members of the Class would be irreparably damaged were the defendants not enjoined from the conduct described hereinbelow. 31. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of the plaintiff are typical of the claims of other members of the Class, and plaintiff has the same 10 interests as the other members of the Class. Plaintiff is an adequate representative of the Class. 32. The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications and might establish incompatible standards of conduct for defendants. Further, such individual prosecution might create adjudications with respect to individual members of the Class that would, as a practical matter, be dispositive of the interests of the other members not parties to the adjudications or which might substantially impair or impede their ability to protect their interests. 33. Defendants have acted or refused to act on grounds generally applicable to the Class, and have caused injury to the Class, and preliminary and final injunctive relief on behalf of the Class as a whole is thus appropriate. DERIVATIVE ACTION ALLEGATIONS 34. Plaintiff brings this action derivatively in the right and for the benefit of Loewen Group. Plaintiff will fairly and adequately represent and protect the interests of Loewen Group and its other shareholders. 35. Plaintiff has not made a demand upon the Board of Directors of Loewen Group to institute this action, or an action asserting claims asserted in this action, because, under the circumstances, demand is not required, is unnecessary and would be futile for the following reasons: (a) This action names as defendants the entire Board of Directors of Loewen Group which agreed to pay an inflated price 11 for property in Los Angeles in an effort to thwart a possible takeover of the Company; (b) This action names as defendants the entire Board of Directors of Loewen Group which voted to reject Service Corp's offer, refused to negotiate with Service Corp., acted "passionately" in response to the offer, and has openly represented that it would not feel any pressure to even consider selling the Company at even an offer as high as $52 a share; (c) This action names as defendants the entire Board of Directors which voted to institute a Shareholders' Rights Plan in an effort to thwart a possible takeover of the Company; (d) This action names as defendants the entire Board of Directors which voted to adopt a "poison pill" that stipulates that any sale of the Company must be approved by investors representing 75% of the outstanding shares; (e) Thus, it is apparent that defendants have been aware of the wrongs forming the basis of the claims alleged herein, but have chosen not to protect Loewen Group and have acquiesced and/or failed to take action with respect to these claims because any such action would require them to sue themselves, their friends, and their business associates; (f) Because of their participation in the wrongs alleged herein, the defendants are in no position to prosecute this action. Each of them is in an irreconcilable conflict of interest regarding the prosecution of this action, and cannot exercise the requisite independence necessary to make good faith business judgments; and 12 (g) All the members of the Board of Directors have a conflict of interest because of the financial compensation received from the Company in their capacity as officers and/or directors. SUBSTANTIVE ALLEGATIONS 36. On or about September 17, 1996, Service Corp. announced that it sent a letter to Raymond L. Loewen, Chairman of the Board and Chief Executive Officer of Loewen Group proposing a business combination between the two companies. The letter read as follows: September 17, 1996 Mr. Raymond L. Loewen Chairman of the Board and Chief Executive Officer The Loewen Group Inc. 4126 Norland Avenue Burnaby, British Columbia, Canada Dear Dr. Loewen: As you know, I have tried to reach you several times since September 11. While your office has assured me that you received my messages, my calls have not been returned. In view of that, and in view of the importance of this matter, I am sending this letter. I would like to discus with you a combination of our two companies. The combination would involve a stock-for-stock exchange accounted for as a pooling which values Loewen Group at US$43 per share. We believe that this transaction can be structured in a manner that is tax-free to both companies and (except for a relatively nominal amount in the case of U.S. stockholders) to the U.S. an Canadian stockholders of Loewen Group. I think you and your Board and stockholders would agree that our proposal is a generous one, resulting in the following premiums for Loewen Group stockholders: -- 48.9% above the price at which Loewen Group stock traded 30 days ago; -- 39.3% above the price at which Loewen Group stock traded one week ago; and 13 -- 27.4% above the price at which Loewen Group stock is currently trading. This represents an opportunity for your stockholders to realize excellent value, by any measure, for their shares. In addition, and importantly, since your stockholders would be receiving stock, they would continue to participate in Loewen Group's business as well as share in the upside of our business. Thus, in essence, your stockholders would: -- continue their investment in our industry; -- get an immediate, and very significant, increase in the market value of their investment; -- get that immediate and substantial increase on an essentially tax free basis; and -- diversify their risk by participating in a much larger number of properties. This is a "win-win" situation for you and your stockholders. Finally, with respect to consideration, I would note also that our proposal is based on public information. After a due diligence review, we may be in a position to increase the consideration that your stockholders would receive. We, of course, recognize that our businesses overlap in various locations. We have carefully reviewed this matter and are convinced that competition issues can be cured by selected divestures without impairment of the values that a combination would achieve for the stockholders of our two companies. I would very much like to discuss any and all aspects of our proposal directly with you and your Board of Directors. We believe you and they will recognize the tremendous benefit to your stockholders of our proposal. Our proposal is conditioned upon approval of our Board and upon negotiation of mutually satisfactory agreements providing for a combination on a pooling basis. We hope that after you meet with us, you will similarly determine that the transaction should be pursued. We look forward to hearing from you. 14 In view of the importance of this matter, we are simultaneously releasing this letter to the press. Sincerely, William Heiligbrodt cc: Board of Directors of The Loewen Group Inc. 37. In explaining the transaction, Robert L. Waltrip, Chairman of the Board and Chief Executive Officer of Service Corp., said, "This proposal will create a combined company with unparalleled resources and management depth, benefitting the client families, employees and shareholders of both institutions." If completed, the transaction would result in an entity comprised of approximately 3,750 funeral homes, and 600 cemeteries worldwide. L. William Heiligbrodt, President and Chief Operating Officer of Service Corp., noted, "The edition of Loewen's properties will open Service Corp. to new markets and further enhance the company's long term growth potential. Due to significant opportunities, the combination represents an exciting opportunity for both companies' shareholders to benefit." 38. On September 20, 1996, Loewen Group announced that a new company formed in partnership with Blackstone Capital Partners II Merchant Banking Fund L.P. has entered into a definitive agreement to acquire the cemetery, mortuary operations and assets of The Rose Hill Memorial Park Association and The Rose Hills Company, Inc., of Los Angeles ("Rose Hill") for $240 million. Among Rose Hills' operations and assets are Rose Hills Memorial Park, and its mortuary. As part of the transaction, 14 funeral homes and two combination funeral home/cemetery operations 15 currently owned by Loewen Group in Los Angeles and Orange Counties will be integrated into the new company. 39. The $240 million which the defendants agreed to pay for Rose Hill is an inflated price designed to thwart any proposed takeover by making any takeover of Loewen Group less attractive and too costly for a potential acquiror. 40. On September 24, 1996, the Board of Directors of Loewen Group rejected the Service Corp. offer, without any attempt at negotiation. As reported by THE WALL STREET JOURNAL on September 25, 1996, Raymond Loewen, the Chairman and Chief Executive of the Company, said "The board does not have an appetite to sell the company." Indeed, as reported by THE WALL STREET JOURNAL on September 26, 1996, "Loewen Group Inc.'s chairman and chief executive officer vowed to fight a proposed takeover by Service Corp. International, even if the Houston funeral-services concern substantially sweetens its offer of $2.8 billion in stock." The article stated that Mr. Loewen said in a conference call with analysts and major investors that even an offer as high as $52 a share, 21% higher than Service Corp.'s current $43 a share offer, would not place him or Loewen Group's Board under any pressure to consider selling. It quoted Mr. Loewen as stating that the Company's Board had "passionately" rejected Service Corp.'s offer. 41. On September 25, 1996, Service Corp. announced that, although the Board of Directors of Loewen Group has rejected Service Corp.'s offer, Service Corp. remains committed to pursuing 16 a combination of the two companies and will actively explore ways to complete the transaction. 42. Robert L. Waltrip, Chairman of the Board and Chief Executive Officer of Service Corp. said, "We are disappointed that the Loewen Board of Directors rejected our proposal without ever returning our calls or seeking more information from us. The actions of the Loewen Board simply deprive its stockholders of the opportunity to receive prompt value for their shares." 43. L. William Heiligbrodt, President and Chief Operating Officer of Service Corp. said, "We believe our $43 per share proposal provides superior value for Loewen shareholders. Our proposal provides Loewen shareholders with a 48.9% premium above the price at which Loewen stock traded 30 days prior to the date of our proposal. In addition, since Loewen stockholders would be receiving stock, they would continue to participate in Loewen's business as well as share in the upside of our business." 44. Mr. Heiligbrodt continued, "In light of the Loewen Board's apparent disregard for the financial welfare of its independent stockholders, we have scheduled a Board meeting for Tuesday, October 1, to review all options available to enable us to consummate this transaction." 45. In 1990, the Company instituted a Shareholders' Rights Plan (the "Rights Plan"), which is triggered by the acquisition of 20% or more of the Company's outstanding stock. The provisions of the Rights Plan seek to make any unfriendly takeover of the Company too costly for a potential acquiror. Under terms of the Rights Plan, any hostile suitor that acquires 17 20 percent of Loewen Group's shares could trigger a shareholder rights plan, allowing Loewen Group's holders to acquire stock at a 50 percent discount to market prices. In other words, the acquiror would cause the issuance of millions of new Loewen Group shares, causing massive dilution and a financial debacle for the would-be purchaser. 46. The Rights Plan was enacted by the Individual Defendants in order to deter competitive bidding for Loewen Group and to entrench themselves in office. The Rights Plan has the effect of restraining and impairing the ability of Loewen Group's shareholders to affect corporate policy and to freely structure the makeup of the Board. The Rights Plan, among other things, impedes shareholder ability to accumulate shares and to associate together to replace incumbent management, oppose management decisions, or otherwise affect corporate policy through stockholder resolutions. The Rights an thus effectively shifts control of the destiny of the Company from its shareholders to its directors. Such a burden imposes upon the directors an even more heightened responsibility to discharge their fiduciary responsibilities fairly and impartially in order to maximize shareholder value. Defendants have, however, breached such fiduciary duty, as more particularly described herein. 47. Another Loewen Group "poison pill" stipulates that any sale of the Company must be approved by investors representing 75% of the outstanding shares ("Supermajority Voting Requirement"). Although Canadian courts have been willing to 18 override such "Supermajority" voting rules, Service Corp. faces an uphill battle. 48. This Supermajority Voting Requirement was enacted by the Individual Defendants in order to deter competitive bidding for Loewen Group and to entrench themselves in office. This Supermajority Voting Requirement has the effect of restraining and impairing the ability of Loewen Group's public shareholders to affect corporate policy and to freely structure the makeup of the Board. The Supermajority Voting Requirement, among other things, impedes shareholder ability to accumulate shares and to associate together to replace incumbent management, oppose management decisions, or otherwise affect corporate policy through stockholder resolutions. The Supermajority Voting Requirement thus effectively shifts control of the destiny of the Company from its shareholders to its directors. Such a burden imposes upon the directors an even more heightened responsibility to discharge their fiduciary responsibilities fairly and impartially in order to maximize shareholder value. Defendants have, however, breached such fiduciary duty, as more particularly described herein. 49. The Individual Defendants have at all times been fiduciaries of Loewen Group shareholders. As set forth herein, they have breached and continue to breach their fiduciary duties to Loewen Group's shareholders to maximize the value of their shares, in order to entrench themselves in office and to continue receiving their compensation, fees and emoluments of their respective positions. The Individual Defendants have failed to act independently to protect the interests of Loewen Group's 19 public shareholders, to consider seriously all BONA FIDE offers for the Company, to inform themselves fully about such BONA FIDE offers, and to conduct fair and active bidding procedures or other mechanisms for checking the market and ensuring that the highest possible price is achieved. 50. The Individual Defendants have breached their fiduciary duties by, among other things, failing and refusing to meet with representatives of Service Corp. to negotiate in good faith, undertaking steps to thwart and discourage the Service Corp. offer, refusing to take those steps necessary to ensure that Loewen Group's shareholders will receive the maximum value for their shares of Loewen Group stock, refusing to consider seriously the pending offer, agreeing to acquire Rose Hill at an exorbitant price and failing to announce any true auction or open bidding procedures best calculated to maximize shareholder value. 51. Plaintiff and the other members of the Class have been and will be damaged in that they have not and will not receive their fair proportion of the value of Loewen Group's assets and businesses, and have been and will be prevented from obtaining a fair price for their shares of the Company's common stock. 52. Unless enjoined by this Court, the Individual Defendants will continue to breach their fiduciary duties owed to plaintiff, the other members of the Class and to the Company, and will entrench themselves in their corporate offices, all to the irreparable harm of the Class and the Company, as aforesaid. 20 53. Only through the exercise of this Court's equitable powers can plaintiff, the Class and the Company be fully protected from the immediate and irreparable injury which defendants' actions threaten to inflict. Defendants are precluding the shareholders' enjoyment of the full economic value of their investments by failing to proceed expeditiously and in good faith to evaluate and pursue a premium acquisition offer which would provide consideration for all shares at a very attractive price. 54. Unless enjoined by this Court, defendants will continue to breach their fiduciary duties owed to plaintiff and the other members of the Class, and will prevent the sale of Loewen Group at a substantial premium, all to the irreparable harm of plaintiff and the other members of the Class. 55. Plaintiff, the Class and the Company have no adequate remedy at law. WHEREFORE, plaintiff demands judgment, as follows: A. Declaring this to be a proper class action and certifying plaintiff as a Class representative; B. Ordering the Individual Defendants to carry out their fiduciary duties to plaintiff and the other members of the Class by announcing their intention to: 1. cooperate fully and negotiate with any person or entity, including Service Corp., having a BONA FIDE interest in proposing any transaction which would maximize shareholder value, including, but not limited to, a buyout or takeover of the Company; 21 2. undertake an appropriate evaluation of Loewen Group's worth as a merger/acquisition candidate; 3. take all appropriate steps to enhance Loewen Group's value and attractiveness as a merger/acquisition candidate; 4. take all appropriate steps to effectively expose Loewen Group to the marketplace in an effort to create an active auction for Loewen Group; 5. act independently so that the interests of Loewen Group's public stockholders will be protected; and 6. adequately ensure that no conflicts of interest exist between Individual Defendants' own interests and their fiduciary obligation to maximize stockholder value or, if such conflicts exist, to ensure that all conflicts are resolved in the best interests of Loewen Group's public stockholders; C. Declaring this to be a proper derivative action; D. Preliminarily and permanently enjoining the implementation of the Company's Rights Plan and the delivery of Rights thereunder; E. Preliminarily and permanently enjoining the implementation of the Company's Supermajority Voting Requirement; F. Preliminary and permanently enjoining the consummation of the Ross Hill acquisition and any other extraordinary corporate transactions pending the Individual Defendant's compliance with their fiduciary obligations as set forth in paragraph "B" herein: 22 G. Ordering the Individual Defendants, jointly and severally, to account to plaintiff, the other members of the Class and the Company for all damages suffered and to be suffered by them as a result of the act and transactions alleged herein; H. Awarding plaintiff the costs and disbursements of the action, including a reasonable allowance for plaintiff's attorneys' and experts' fees; and I. Granting such other and further relief as may be just and proper. Dated: September 26, 1996 WEISS & YOURMAN By: ___________________________ Kevin J. Yourman (147159) 10940 Wilshire Blvd. 24th Floor Los Angeles, California Tel: 310/205-2800 Joseph H. Weiss WEISS & YOURMAN 319 Fifth Avenue New York, New York Tel: 212/532-4171 Jules Brody STULL, STULL & BRODY 6 East 45th Street New York, New York 10017 Tel: 212/687-7230 Harvey Greenfield LAW FIRM OF HARVEY GREENFIELD 10 East 40th Street New York, New York 10016 Tel: 212/679-0600 Attorneys for Plaintiff 23 EX-99.15 16 EXHIBIT 99.15 EXHIBIT 15 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION SERVICE CORPORATION ) INTERNATIONAL, ) ) Plaintiff, ) ) V. ) CIVIL ACTION NO. H-96-3269 ) THE LOEWEN GROUP INC., ) LOEWEN GROUP, INC., AND ) LOEWEN GROUP INTERNATIONAL, INC., ) ) Defendants. FIRST AMENDED COMPLAINT Plaintiff Service Corporation International ("SCI"), by its attorneys, alleges upon knowledge with respect to itself and its own acts, and upon information and belief as to all other matters, as follows: NATURE OF ACTION 1. This action for declaratory relief, injunctive relief and damages is brought to forestall efforts by Defendants The Loewen Group Inc., Loewen Group, Inc. and Loewen Group International, Inc., (collectively "the Loewen Defendants") to injure SCI by disseminating false and misleading information to The Loewen Group Inc. ("Loewen") shareholders, who are considering whether to accept a tender offer SCI has announced it intends to make to Loewen's shareholders (the "Tender Offer"). 2. Further, as alleged in detail below, since SCI initially proposed a business combination with Loewen, the Loewen Defendants have embarked on an ongoing campaign to create the impression that they can block or impede any such business combination under the federal antitrust laws. The purpose of this campaign is to thwart or hamper, through prohibited or illegal means, SCI's consummation of a business combination with Loewen by causing Loewen shareholders to make ill-informed decisions with respect to the Tender Offer and influence them not to participate in such an offer. Accordingly, SCI seeks a declaratory judgment pursuant to the Declaratory Judgment Act, 28 U.S.C. Sections 2201 ET SEQ., that the Loewen Defendants in fact have no standing to institute any federal antitrust action seeking to block or impede SCI's offer. 3. In addition, the Loewen Defendants' actions constitute tortious interference with SCI's prospective business relationships with Loewen's shareholders. Accordingly, SCI seeks monetary relief for the damages it has suffered as a result of the Loewen Defendants' tortious interference with SCI's prospective business relationships. 4. SCI seeks injunctive relief to prevent the Loewen Defendants from continuing to publish or otherwise disseminate false, misleading, deceptive, or manipulative material statements regarding SCI, the proposed Tender Offer, or any other matter in connection with the proposed Tender Offer. SCI also seeks injunctive relief to prevent the Loewen Defendants from omitting any material facts regarding SCI, the proposed Tender Offer, or any business transaction that is in any way connected with the proposed Tender Offer. PARTIES AND SERVICE 5. Plaintiff SCI is a Texas corporation with its principal place of business in Houston, Texas. SCI is an owner and operator of funeral homes, cemeteries, and crematoria. 2 6. Defendant The Loewen Group Inc. is a British Columbia (Canada) corporation with its principal executive offices in Burnaby, British Columbia. Loewen is also an owner and operator of funeral homes and cemeteries, some 27 of which are located in this District. Service may be made on Loewen by international registered mail and under the terms of the Hague Convention for Service Abroad of Extrajudicial Documents. The recipient central authority for such service request is: Ministry of the Attorney General for British Columbia, Office of the Deputy Minister, Fifth Floor, 910 Government Street, Victoria, British Columbia, Canada, V8V 1X4. The address for The Loewen Group Inc. is: 4126 Norland Avenue, Burnaby, British Columbia, Canada V5G 3S8. The appropriate fees for affecting such service have been tendered by SCI, and SCI requests that return of service be implemented on SCI at its address: 1929 Allen Parkway, Houston, Texas, 77019, U.S.A. 7. Defendant Loewen Group, Inc. is a Kentucky corporation doing business in the State of Texas. It does not maintain a registered officer or agent and it can be served with process by serving the Secretary of State for the State of Texas at the Capitol Building, 1019 Brazos, Room 105, Austin, Texas 78701. 8. Defendant Loewen Group International, Inc. is a Delaware corporation doing business in the State of Texas. It does not maintain a registered office or agent and it can be served with process by serving the Secretary of State for the State of Texas at the Capitol Building, 1019 Brazos, Room 105, Austin, Texas 78701. 3 JURISDICTION AND VENUE 9. This Court has jurisdiction over this action pursuant to 15 U.S.C. Section 4, 15 U.S.C. Section 25, 15 U.S.C. Section 78aa (Section 27 of the Securities Exchange Act of 1934), 28 U.S.C. Section 1331, and 28 U.S.C. Section 1332. 10. Venue is proper in this District under 15 U.S.C. Section 15, 15 U.S.C. Section 22, 15 U.S.C. Section 78aa, and 28 U.S.C. Section 1391(b). 11. The amount in controversy exceeds the jurisdictional minimum amount for this Court. 12. This District is a particularly appropriate forum for this action. Among other things: SCI is a Texas corporation with its corporate headquarters and significant business operations in this District; the Loewen Defendants conduct business in this District; SCI's proposed business combination with Loewen was conceived and planned in this District; a majority of the books, records, and documents that are relevant to any antitrust objections to the SCI offer that the Loewen Defendants might attempt to raise are located in this District; and a majority of the likely witnesses with respect to any such objections are likewise located in this District. SCI'S OFFER TO ACQUIRE LOEWEN STOCK 13. On September 17, 1996, SCI proposed to Loewen a combination of the two companies by means of a stock-for-stock exchange that would value Loewen's stock at $43 per share -- a value approximately 49% above the price of Loewen stock the month before the offer was announced. 14. On September 24, 1996, Loewen's Chairman, Raymond L. Loewen wrote to SCI, stating that the Loewen board had rejected SCI's officer and contending 4 that Loewen shareholders would receive "maximize[d]" value for their investment through implementation of Loewen's "long-term business plan as an independent company" rather than through acceptance of SCI's offer. 15. Following the rejection of its proposal, on October 1, 1996, the SCI Board of Directors authorized the commencement of an exchange offer for all outstanding shares of Loewen at an exchange ratio that would value Loewen stock at $45.00 per share. 16. On October 3, 1996, SCI is filing its registration statement with respect to the proposed Tender Offer. The registration statement sets forth the terms of the proposed Tender Offer, the price offered, the duration of the offer and the percentage sought. 17. The proposed Tender Offer was anticipated by the Loewen Defendants and Loewen shareholders as a result of the letter to Loewen dated September 17, 1996 and sent from SCI to Loewen, and the concomitant public announcement. LOEWEN'S ACTIONS FORMING THE BASIS OF THE SUIT 18. Not content to allow its shareholders to decide for themselves whether to participate in SCI's Tender Offer for Loewen stock, Loewen has embarked upon a concerted effort to thwart, through prohibited and illegal means, SCI's consummation of a business combination with Loewen. As set forth below, Loewen has repeatedly stated that there are federal antitrust objections to a combination between SCI and Loewen, and insinuated that Loewen could take action to block or impede SCI's offer on the basis of those purported objections. 5 19. In addition, Loewen has attempted to discredit SCI and its business practices through dissemination of misleading, false and malicious remarks regarding SCI's business practices. As set forth below, these remarks have been published or released intentionally, with the sole purpose of thwarting SCI's Tender Offer. 20. Loewen also has purposefully and intentionally omitted material information about certain recently announced transactions in order to artificially inflate the price of its stock in an effort to block the proposed Tender Offer. LOEWEN'S CAMPAIGN TO MISLEAD ITS SHAREHOLDERS AS TO THE VALIDITY AND ADEQUACY OF SCI'S TENDER OFFER 21. On September 24, 1996, in announcing the Loewen board's rejection of SCI's offer, Mr. Loewen was quoted on the PR Newswire as stating that "SCI clearly intends to eliminate its most formidable competitor in the North American marketplace, diminishing the opportunities for independent funeral home and cemetery operators." 22. That same day, Loewen sent a letter to its shareholders, characterizing SCI's offer as an "attempt[] to . . . eliminate [Loewen] as its most formidable competitor in the North American markets" and stating that the Loewen board has "serious questions about SCI's motives." 23. On September 25, 1996, in a conference call on the Dow Jones Investor Network, Mr. Loewen continued, asserting that "I honestly can't believe that our Federal Trade Commission . . . would allow this kind of a transaction to take place, to take a major competitor out of the business. I can't believe it." Mr. Loewen then concluded the call by stating that "[i]f they were to eliminate us, clearly the price of acquisitions would go down significantly; I am sure the regulators would take that into 6 consideration" and that "I'm sure the industry . . . would rise up in arms before it would ever get to that point." 24. Mr. Loewen reiterated these insinuations in the September 26, 1996 edition of the FINANCIAL POST, claiming yet again that "SCI is trying to eliminate a competitor" and asserting that, "if the U.S. Federal Trade Commission has any teeth at all, it will not allow SCI to gobble up its major competitor." 25. Loewen's campaign has since become even more transparent: on September 27, 1996, Reuters reported Loewen as stating that "it believes antitrust concerns would be a major obstacle to the takeover"; and THE NEW YORK TIMES quoted Mr. Loewen to the effect that "[i]t is clear that our competitors out of Texas do not like competition." 26. Two days later, on September 29, 1996, both Reuters and the PR Newswire published references by Mr. Loewen to the purported "anticompetitive effects of the proposed acquisition," and a spokesman for Loewen was quoted by Bloomberg as saying that "a combination of the two companies would limit the number of acquirers" of cemeteries and funeral homes. 27. Mr. Loewen also has stated that the Loewen board did not merely reject the SCI offer, but "passionately rejected" the offer, indicating that Loewen intends to engage in a vigorous effort to block or impede the proposed business combination. 28. Among other things, these statements were intended to create the impression among Loewen shareholders and the public that the Loewen Defendants have the ability to institute an action to block or impede SCI's offer as a claimed violation of the federal antitrust laws under any number of potential theories, including 7 the theory that the acquisition would eliminate competition in a "market" for control of independently owned funeral homes and cemeteries. In fact, the statements have had this effect: at least one financial analyst has expressed the view that "he would not be surprised to see Loewen attempt . . . legal road blocks" (First Call Research Network, September 30, 1996). 29. In fact, however, the Loewen Defendants cannot institute an action seeking to block or impede SCI's offer as a claimed violation of the federal antitrust laws. Relying on the Supreme Court's decision in CARGILL V. MONFORT OF COLORADO, INC., 479 U.S. 104 (1986), a number of courts, including the United States Court of Appeal for the Fifth Circuit, have held expressly that a target company does not suffer "antitrust injury" sufficient to confer standing to sue under the federal antitrust laws, because the target company will suffer a loss of independent whether or not the takeover violates antitrust principles. Moreover, the principal antitrust theory that Loewen has advanced is entirely without merit because, among other things, "the death care industry acquisition market is extremely competitive" (Loewen 10-Q, for quarter ending June 30, 1996), there are no barriers to entry to any such "market," and the "market" for the acquisition of funeral homes and cemeteries is not a relevant market for purposes of antitrust law. 30. Further, Loewen intentionally has misrepresented the business practices of SCI. Mr. Loewen was quoted: "It would be very hard for me to sell to a company that has a history of slashing and burning." He has referred to SCI in a manner designed to depict SCI as a cold, mirthless scavenger. These comments have been made with the express intent of vilifying SCI in the eyes of Loewen's shareholders and the market in general in the hopes of rallying shareholders to reject the Tender Offer. 8 LOEWEN HAS FAILED TO DISCLOSE MATERIAL INFORMATION REGARDING ITS MOST RECENT BUSINESS DEALINGS IN AN EFFORT TO ARTIFICIALLY INFLATE THE VALUE OF ITS STOCK 31. In its press releases and other public statements, Loewen consistently has touted its recent acquisitions of funeral homes and cemeteries, indicating that such acquisitions will substantially enhance its earnings per share and long-term value to Loewen shareholders. Loewen's press releases and other public statements have contained glowing descriptions of the acquisition of Prime Succession Inc. ("Prime Succession") by ajoint venture between Loewen and Blackstone Capital Partner II Merchant Banking Fund L.P. ("Blackstone"), which was completed on August 29,1 996. Loewen's descriptions of the Prime Succession acquisition contain material misstatements and omissions, and were made knowingly and intentionally by Loewen to inflate artificially the price of its stock in connection with the proposed SCI Tender Offer. 32. On August 29, 1996, Loewen issued a joint press release with Blackstone disclosing certain terms of the acquisition of Prime Succession. The press release disclosed that Loewen received a call option to purchase Blackstone's interest in Prime Succession after four and six years. The exercise price of this call option has never been disclosed. More importantly, the press release discloses that Blackstone received a put option which entitles Blackstone to force Loewen to purchase its interest in Prime Succession at a formula price. The method of determining the exercise price of Blackstone's put option and the exercise date of such option have never been disclosed. 33. By failing to disclose (i) the exercise price of its call option, and (ii) the exercise date and the method of determining the exercise price of Blackstone's put option, Loewen's recent statements regarding the acquisition of Prime Succession are materially misleading. Such information is necessary for Loewen shareholders to assess 9 whether the acquisition of Prime Succession actually will increase Loewen's value. Loewen knowingly has made such material misstatements and omissions in order to inflate artificially the price of its stock in connection with the proposed Tender Offer and to rally the support of its shareholders in opposition to such offer. 34. On September 20, 1996, three days after receiving notice that SCI desired to acquire Loewen, Loewen and Blackstone issued a press release stating that the parties had begun a new venture and had entered into a definitive agreement to acquire the cemetery and mortuary operations and assets of The Rose Hills Memorial Park Association and Roses, Inc. ("Rose Hills") for $240 million. The press release states that Loewen has a call option to purchase Blackstone's equity interest in Rose Hills after four years. The exercise price for this call option has never been disclosed. Furthermore, the press release does not disclose whether Blackstone has a put option to force Loewen to purchase its interest in Rose Hills. On information and belief based upon an analysis conducted by the First Call Research Network and upon a Loewen source quoted in newspaper descriptions of the transaction, SCI believes that a put option exists, but the terms and conditions of such option have not been disclosed to Loewen's shareholders. 35. In the September 20 press release and in other statements to the press, Loewen consistently has touted its acquisition of Rose Hills, indicating that such acquisition will enhance substantially its earnings per share and long-term value to Loewen shareholders. Loewen, however, has never disclosed (i) the exercise price of its call option to purchase Blackstone's interest to Rose Hills, or (ii) whether Blackstone has a put option to force Loewen to purchase its interest in Rose Hills. Such information is 10 necessary for Loewen shareholders to assess whether the acquisition of Rose Hills actually will increase Loewen's value. Consequently, such descriptions of the Rose Hills acquisition contain material misstatements and omissions, and were made knowingly by Loewen to inflate artificially the price of its stock in connection with the proposed Tender Offer and to rally the support of its share holders in opposition to the offer. 36. Loewen also has consistently referred to both the Rose Hills and Prime Succession acquisitions as examples of Loewen's value and financial strength and has indicated that the promise of these acquisitions should lead Loewen shareholders to reject the proposed Tender Offer. Such statements include statements made by Mr. Loewen to the Dow Jones News Service and on a national broadcast of CNBC on October 2, 1996, in response to and in connection with SCI's announcement that it intends to commence the Tender Offer. The press releases and other public statements regarding these transactions are intentionally misleading as to the value of these transactions to Loewen and do not contain material information regarding important aspects of these transactions. These misstatements and omissions are purposeful, and have been committed with the express manipulative intent of artificially inflating the value of Loewen's stock in connection with the proposed Tender Offer and thwarting the proposed Tender Offer. INJURY TO SCI CAUSED BY LOEWEN'S CAMPAIGN 37. SCI does not know whether -- notwithstanding their lack of standing to sue -- the Loewen Defendants in fact intend to attempt to institute an action to block or impede SCI's offer under the federal antitrust laws. Loewen's efforts to create the impression that the Loewen Defendants can do so, however, have injured and continue 11 to threaten to injure SCI even apart from any actual attempt by the Loewen Defendants to institute such an action: (a) In order to be successful, SCI's offer will have to be accepted by a substantial majority of the holders of Loewen's stock. Loewen's efforts to call into question the ability of SCI to consummate a business combination with Loewen by creating the impression that the Loewen Defendants have the capacity to block it under the federal antitrust laws have created, and threaten to continue to create, confusion, cause Loewen shareholders to make ill-informed decisions, and influence them not to participate in SCI's offer, thereby preventing SCI from gaining the necessary acceptances. (b) Loewen's shareholders moreover, are especially susceptible to Loewen's misinformation campaign. Loewen -- as a Canadian company -- has many shareholders who are not located in the United States and who are consequently particularly unfamiliar with the intricacies of American antitrust laws. (c) Indeed, the press has already reported that "some concern" has been raised "on Wall Street about potential antitrust issues" regarding an SCI-Loewen combination (Reuters, September 20, 1996) and that "[t]raders" have "cited potential antitrust issues" as grounds for uncertainty about the SCI offer (Reuters, September 17, 1996). (d) Loewen is aware of the foregoing, and Loewen's desire to create confusion and spread misinformation, thereby influencing its shareholders to decline to participate in SCI's offer, has been its principal motivation for engaging in the conduct described above. 12 (e) Loewen's misstatements and omissions as to the value of the Prime Succession and Rose Hills acquisitions were made in connection with the proposed Tender Offer and are also damaging because they artificially inflate the value of Loewen's stock and give Loewen's shareholders a false belief that their stock is worth more than it actually is. As a result, they may reject SCI's proposed Tender Offer based on such misstatements and omissions. FIRST CLAIM FOR RELIEF 38. Plaintiff repeats and realleges paragraphs 1 through 37 as if set forth herein. 39. Loewen has undertaken, and is continuing to undertake, efforts to create the impression among Loewen shareholders that the Loewen Defendants have standing to bring an action to block or impeded SCI's exchange offer under the federal antitrust laws. 40. Contrary to the impression Loewen seeks to create, the Loewen Defendants do not have standing to institute any action seeking to block or impede a business combination of SCI and Loewen under any antitrust theory. 41. Whether the Loewen Defendants actually intend to attempt to institute such action, their efforts to create the impression that they have the ability to do so threatens SCI with immediate irreparable injury by misleading Loewen shareholders about the validity and legality of the SCI offer, thereby causing them to make ill-informed decisions with respect to that offer and discouraging them from participating in it. 13 42. By reason of the foregoing, an actual controversy exists between SCI and the Loewen Defendants regarding the conduct set forth above. 43. Pursuant to 28 U.S.C. Section 2201, SCI is therefore entitled to declaratory relief from this Court. SECOND CLAIM FOR RELIEF 44. ASCI repeats and realleges paragraphs 1 through 43 as if set forth herein. 45. Loewen's actions and efforts have been designed to thwart or hamper, through prohibited and illegal means, SCI's consummation of reasonably probable stock purchases from individual Loewen stockholders. These actions have not been taken for the purpose of enhancing the real value of Loewen's stock; but rather to inflate artificially the value of Loewen's stock, and thus entrench the position and prestige of Mr. Loewen and Loewen management. 46. Loewen's actions and statements were made knowingly and with the intent to interfere with the prospective business relations between SCI and individual Loewen stockholders. 47. Loewen can offer no legal justification for its actions. 48. SCI has been damaged by the Loewen Defendants' tortious interference with SCI's prospective business relations with individual Loewen stockholders. 14 THIRD CLAIM FOR RELIEF 49. SCI repeats and realleges allegations in paragraphs 1 through 48 as if fully set forth herein. 50. Loewen's actions from September 17, 1996 constitute willful, intentional and knowing violations of Section 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78n(e). The relevant portion of Section 14(e) states: It shall be unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices in connection with any tender offer or request or invitation for tenders, or any solicitation of security holders in opposition to or in favor of any such offer, request, or invitation. The purpose of this section is to guarantee full information and full disclosure to the market and more specifically to the shareholders in connection with a tender offer. Section 14(e) mandates a level playing field between the target and the offeror so that the shareholders can make informed decisions regarding their investments. 51. Loewen has violated Section 14(e) by its misleading and deceptive statements regarding the possible antitrust violations SCI's offer might raise, and that the Loewen Defendants have standing to block or impede the proposed Tender Offer under the antitrust laws. 52. The Loewen Defendants have violated Section 14(e) by making material misstatements and omissions, with respect to, among other things, the Rose Hills and Prime Succession transactions, thereby preventing the market and the shareholders from obtaining the information necessary to make a full and informed decision regarding SCI's proposed Tender Offer. 15 53. The Loewen Defendants have violated Section 14(e) by making statements to the press regarding the joint purchases of Rose Hills and Prime Succession that are misleading and contain material omissions. 54. Loewen also has violated Section 14(e) as a result of its negative comments regarding the business practices of SCI. Loewen's president has made repeated comments to the press that SCI "has a history of slashing and burning," and that SCI is perceived within the death care industry as a heavy-handed, authoritarian company. These comments are unfounded, deceptive, malicious and materially misleading. 55. These statements were all made in anticipation of and in connection with the SCI Tender Offer, and such statements are deceptive, materially misleading, and manipulative. Such statements were made with the intent to confuse Loewen shareholders and the market in general by making the Tender Offer appear less attractive and to injure SCI. Accordingly, such statements violate Section 14(e) of the Securities Exchange Act of 1934, and Loewen should be prohibited from making any further deceptive and malicious statements. 56. Accordingly, SCI requests this Court to preliminarily and permanently enjoin the Loewen Defendants from any further violations of Section 14(e) in connection with SCI's ongoing Tender Offer, to order the Loewen Defendants to correct any previous misleading and manipulative statements, and to fully disclose all material matters in any communications to its shareholders or the investing public in connection with the proposed Tender Offer. 16 WHEREFORE, Plaintiff SCI seeks judgment as follows: A. Declaring that the Loewen Defendants lack stating to institute, and accordingly may not institute, any action seeking to block or impede any SCI exchange offer for Loewen stock under any theory of federal antitrust law; B. Awarding SCI damages for the Loewen Defendants' tortious interference with SCI prospective business relations; C. Preliminarily and permanently enjoining the Loewen Defendants from violating Section 14(e) of the Securities Exchange Act of 1934; D. Awarding plaintiff its costs of suit, including reasonable attorneys' fees; and E. Granting plaintiff such other and further relief as the Court may deem just and proper. DATED: October __, 1996 Respectfully submitted, ---------------------------------------- John L. Hill, Jr. State Bar No. 00000027 3400 Texas Commerce Tower Houston, Texas 77002 (713) 226-1200 (713) 223-3717 (Fax) ATTORNEY-IN-CHARGE FOR PLAINTIFF SERVICE CORPORATION INTERNATIONAL 17 OF COUNSEL: LIDDELL, SAPP, ZIVLEY, HILL & LaBOON, L.L.P. Jess H. Hall, Jr. State Bar No 08783000 D. Mitchell McFarland State Bar No. 13597700 Harold K. Watson State Bar No. 20938500 Jeff Weems State Bar No. 21072600 James E. Essig State Bar No. 06671900 3400 Texas Commerce Tower Houston, Texas 77002 (713) 226-1200 (713) 223-3717 Facsimile 18 EX-99.16 17 EXHIBIT 99.16 EXHBIT 16 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK THE LOEWEN GROUP INC. ) 4126 Norland Avenue ) Burnaby British Columbia ) V5G 3S8, ) Civil Action No.: ) and ) ) LOEWEN GROUP INTERNATIONAL, INC. ) 50 East River Center Boulevard ) Covington, Kentucky 41011, ) ) and ) VERIFIED COMPLAINT ) RIDGE CHAPELS, INC. ) 405 91st Street ) Brooklyn, New York 11209 ) ) Plaintiffs, ) ) v. ) ) SERVICE CORPORATION INTERNATIONAL, INC. ) 1929 Allen Parkway ) Houston, Texas 77019, ) ) and ) ) EQUITY CORPORATION INTERNATIONAL, INC. ) 415 South First Street ) Suite 210 ) Lufkin, Texas 75901 ) ) and ) ) NEW SERVICE CORPORATION INTERNATIONAL, INC., ) c/o its Statutory Agent ) Corporation Trust Company ) 1209 Orange Street ) Wilmington, DE 19801 ) ) Defendants. ) Plaintiffs The Loewen Group Inc. ("TLGI"), Loewen Group International, Inc. ("LGII") and Ridge Chapels, Inc. ("Ridge") complain against defendants Service Corporation International, Inc. ("SCI") and Equity Corporation International, Inc. ("ECI"), as follows: JURISDICTION 1. This action is brought to enjoin violations of, and obtain relief under, Sections 4, 12 and 16 of the Clayton Act, 15 U.S.C. Sections 15, 22 and 26, to prevent and restrain violations by SCI of Section 7 of that Act, 15 U.S.C. Section 18, and to prevent and restrain violations by SCI and ECI of Section 1 of the Sherman Act, 15 U.S.C. Section 1. Jurisdiction is based upon 28 U.S.C. Section 1331 and 28 U.S.C. Section 1337(a). Venue is proper in this district under 15 U.S.C. Section 22 and 28 U.S.C. Section 1391(b). THE PLAINTIFFS 2. Plaintiff TLGI is a corporation that is incorporated under the laws of the province of British Columbia, Canada, with its principal place of business located at 4126 Norland Avenue, Burnaby, British Columbia. 3. Plaintiff LGII is a corporation that is incorporated under the laws of the State of Delaware, with its principal place of business located at 50 East River Center Boulevard, Covington, Kentucky 41011. TLGI owns 90% of the stock of LGII. 4. TLGI, through entities owned directly or indirectly by its subsidiary LGII (together, "TLGI/LGII"), as of September 20, 1996, owned and operated more than 814 funeral homes, and 265 cemeteries in the United States. TLGI/LGII is the second largest owner and operator of funeral homes, cemeteries and crematoria in the United States. LGII also owns approximately 23% of the voting securities of Prime Succession, Inc. ("Prime"), which, as of September 30, 1996, owned 146 funeral homes and 16 cemeteries in 2 the United States. LGII has the contractual right to acquire the remainder of Prime's outstanding voting securities in approximately four years. 5. LGII, through subsidiary corporations, owns and operates 12 funeral homes and one cemetery in this judicial district. 6. Plaintiff Ridge is a corporation that is incorporated under the laws of the State of New York, with its principal place of business located at 405 91st Street, Brooklyn, New York 11209. LGII owns all of the stock of Ridge. Ridge owns and operates a funeral home at that location. DEFENDANTS SERVICE CORPORATION INTERNATIONAL, INC. AND NEW SERVICE CORPORATION INTERNATIONAL, INC. 7. Defendant SCI is a corporation that is incorporated under the laws of the State of Texas, with its principal place of business located at 1929 Allen Parkway, Houston, Texas 77019. 8. Defendant New Service Corporation International, Inc. ("New SCI") is a wholly owned subsidiary of SCI, incorporated under the laws of the State of Delaware. SCI incorporated New SCI on September 30, 1996. No principal place of business has yet been established for New SCI. 9. On information and belief, SCI, or its subsidiaries as of July 30, 1996, owned and operated 2,832 funeral homes, 331 cemeteries and 146 crematoria throughout the world. SCI is the largest owner and operator of funeral homes, cemeteries and crematoria in the United States, owning and operating approximately 920 funeral homes and 300 cemeteries in this country. SCI described itself in its 1995 Annual Report as "the world's largest death care provider" and "the acknowledged leader" of the industry, indicating that it 3 "expands by acquiring existing funeral homes and cemeteries" and that fiscal 1995 marked "the most dramatic expansion . . . in its history." 10. SCI operates a global network of funeral homes, cemeteries and crematoria, including approximately 20 funeral homes in this judicial district. SCI directs all relevant activities of its death care subsidiaries and operates its death care subsidiaries, including those in this district, as part of an overall enterprise. As SCI states in its 1995 Annual Report, SCI supplements the local efforts of its operating companies "by maintaining a support staff of specialists at its Houston headquarters . . . in the areas of demographics, marketing and advertising; legal matters, including regulatory compliance and governmental affairs; plus training, construction and public relations." SCI is transacting business in this district and is found in this district through the direction and operation of its death care subsidiaries located in this district. SCI is also directing its exchange offer, as described below, to residents of this district. 11. SCI is currently subject to at least three Federal Trade Commission ("FTC") consent orders, pursuant to which SCI is prohibited for periods of time extending into the next century from acquiring funeral home operations in specified markets in at least Georgia, Tennessee, Arkansas and California. DEFENDANT EQUITY CORPORATION INTERNATIONAL, INC. 12. Defendant ECI is a corporation that is organized under the laws of the State of Delaware, with its principal place of business located at 415 South First Street, Suite 210, Lufkin, Texas 75901. According to published reports, ECI owns and operates 163 funeral homes and 62 cemeteries in 23 states. ECI is the fourth largest publicly-traded death care company in this country. 4 13. Although holding themselves out as independent competitors, SCI and ECI have very close relationships, and have engaged in conduct from which joint rather than independent action may be inferred. This conduct includes, INTER ALIA, the following: a. SCI, in cooperation with an individual named James P. Hunter, III, organized ECI in 1990, by spinning off the assets of an SCI division that consisted at the time of 71 funeral homes and three cemeteries. b. Hunter was an employee of SCI at the time of the spin-off, and headed the division that held the assets that were spun off to ECI. c. On information and belief, SCI currently owns approximately 40% of the voting securities of SCI. d. On information and belief, a director of SCI, T. Craig Benson, is also a director of ECI. e. Thomas R. McDade, who, on information and belief, is a director of ECI, has appeared as counsel of record for SCI in the lawsuit filed in the U.S District Court for the Southern District of Texas by SCI against TLGI and LGII relating to the takeover attempt that is the subject of this lawsuit, and, on information and belief, is regular counsel to SCI. f. Many of the other officers and directors of ECI have prior employment relationships, or other strong ties with ECI. g. SCI has used ECI as a repository for many of the funeral homes and cemeteries that the FTC has required SCI to divest under the consent orders described above, and now operates those funeral homes and cemeteries in markets in which SCI also operates funeral homes and/or cemeteries. 5 h. SCI and ECI have teamed together to compete against LGII for the acquisition of funeral homes and cemeteries. LGII recently outbid SCI and ECI to acquire CMS West, a Pennsylvania-based operator of seven funeral homes and 28 cemeteries. i. In situations in which SCI and ECI appeared to have both been interested in bidding to acquire funeral homes or cemeteries, one but not the other has actually submitted proposals. j. On September 21, 1996, it was reported in the NEW YORK TIMES that SCI was upset at TLGI/LGII in the aftermath of being outbid by LGII for Rose Hills, one of the largest cemeteries and mortuaries in the country, for "overpaying for funeral home operations and cemeteries". L. William Herligbrodt, SCI's President stated: "this [activity] was one of the things that spurred us forward--what other kinds of transactions this company [LGII] might do." ECI's chief executive officer told BUSINESS WEEK that "[i]f Loewen's out of the picture, we can bring a little more rationale to the acquisition table for all of us." 14. The actions of New SCI, and SCI on its own and in combination with its co-conspirator ECI, are designed to eliminate TLGI/LGII as a competitive factor in numerous markets across the United States. 15. Defendant ECI, as a co-conspirator of SCI as alleged below, is subject to personal jurisdiction in this district. THE PROPOSED TAKEOVER 16. On October 1, 1996, SCI announced its intention to launch a stock-for-stock exchange offer, pursuant to which SCI intends to offer to acquire all of the voting securities of TLGI. Under the plan, New SCI would issue the stock to be exchanged for the TLGI shares. By this lawsuit, plaintiffs seek to enjoin that proposed acquisition on the 6 grounds that SCI's proposed acquisition of TLGI may lessen competition or tend to create a monopoly in several lines of commerce in the United States in violation of the anti-merger provisions of Section 7 of the Clayton Act, 15 U.S.C. Section 18. Further, by this lawsuit, plaintiffs seek to enjoin SCI and its co-conspirator, ECI, from conspiring to eliminate TLGI/LGII as a competitor in various markets across the United States in violation of Section 1 of the Sherman Act. 17. In the wake of SCI's announcement of its proposed acquisition, a state antitrust enforcement agency, the Attorney General's Office for the State of Florida, has issued civil document subpoenas to investigate the antitrust issues raised by SCI's proposed acquisition. In addition, antitrust enforcement agencies in California, Hawaii, New York Tennessee and Texas have asked LGII for information as they investigate the antitrust issues raised by the proposed acquisition and, upon information and belief, the FTC is investigating the proposed transaction as well. RELEVANT MARKETS 18. "Funeral services" are a group of services provided at the death of an individual, including the provision of a ceremony commemorating the life of the deceased, at which ceremony the body of the deceased is usually present; this group of services may include, but is not limited to: the removal of the body from the place of death; its embalming or other preparation; making available a place for visitation and viewing and for the conduct of a funeral service; and the arrangement for and conveyance of the body to a cemetery or crematory for final disposition. Funeral service providers are regulated by federal and state agencies. There are no substitutes to the consumer for the group of services that are known as funeral services. 7 19. There are numerous lines of commerce within which SCI, ECI and plaintiffs compete and/or potentially compete, for purposes of the antitrust claims in this action: a. One of the relevant lines of commerce within which to analyze the effects of SCI's proposed acquisition of TLGI is the provision of funeral services on an "at-need" basis. "At-need" funeral services, as more fully described below, are those that are purchased just before or just after the death of the person to be interred or cremated. b. A second relevant line of commerce within which to analyze the effects of SCI's proposed acquisition of TLGI is the provision of "pre-need" funeral services. "Pre-need" funeral services, as more fully described below, are those that are purchased significantly in advance of the time that they are required to be provided. c. A third relevant line of commerce within which to analyze the effects of SCI's proposed acquisition of TLGI is the operation of cemeteries, or places for the permanent interment of an individual's body after the completion of funeral services. d. A fourth relevant line of commerce within which to analyze the effects of SCI's proposed acquisition of TLGI is the market for the purchase of funeral homes, cemeteries and crematoria (i.e., "death care providers"). 20. The above-described product lines are sold or purchased in local geographic markets, consisting of all or parts of various cities, towns, counties and metropolitan areas, as well as smaller political subunits and local areas, across the United States, as more particularly described below. These local markets are the relevant geographic markets for purposes of this lawsuit. 8 21. The violations of law alleged herein occurred in, and have direct, substantial and foreseeable effects on, interstate commerce. Among other things, purchasers of funeral and cemetery services are solicited and procured from across state lines; bodies are shipped in interstate commerce; goods and services used in funeral and cemetery services are procured and shipped across state lines; acquisitions of funeral homes and cemeteries are made from across state lines; telephones, mail and other instrumentalities of interstate commerce are used in the conduct of the death care business; and financing for funeral services and for the acquisition of funeral homes and cemeteries is provided from across state lines. DESCRIPTION OF THE INDUSTRY A. THE NATURE OF FUNERAL AND CEMETERY SERVICES. 22. Funerals are among the most costly purchases made by Americans. In 1995, Americans spent over $7 billion on funeral service purchases. The average adult funeral today costs approximately $4,000, excluding cemetery charges. 23. Funeral homes traditionally have been owned and operated as sole proprietorships or family businesses, or otherwise by small groups of individuals, who may own one or a few funeral homes or cemeteries in a single community. Funeral homes and cemeteries typically market and provide their services to individuals who reside in a local area proximate to the property. B. THE PRODUCT MARKET FOR THE SALE OF "AT-NEED" FUNERAL SERVICES. 24. Funeral services are purchased either just before or just after a person's death ("at-need"), or well in advance of a person's death ("pre-need"). 9 25. Funeral services are typically purchased on an "at-need" basis by family members or relatives of the deceased. Purchasers of "at-need" services ordinarily must find a provider on relatively short notice, at a time of personal sorrow and stress, and when there is often a need to remove the body from the place of death and prepare it for burial. 26. The consumer of "at-need" funeral services initiates the sales transaction when the need arises, rather than in response to direct solicitations by funeral service providers. In many states, solicitation of sales of "at-need" services is prohibited by law. 27. The "at-need" purchaser provides immediate revenue to the provider by paying in cash, either from insurance proceeds, available funds or funds advanced on credit. C. THE PRODUCT MARKET FOR THE SALE OF "PRE-NEED" FUNERAL SERVICES. 28. Consumers are becoming more aware of the benefits of planning for funeral services in advance. By making purchases on a "pre-need" basis, consumers are able to achieve the peace of mind of knowing that their funeral has been provided for; they are also able to eliminate the emotional strain of requiring their loved ones to make death care plans at the time of need. 29. Funeral services are typically purchased on a "pre-need" basis by the person whose death later will be involved. "Pre-need" purchases do not involve the same time pressures as "at-need" purchases because the services do not actually have to be delivered until some unknown future date. By purchasing funeral services on a "pre-need" basis, a consumer is able to select the desired service and merchandise in advance at prices taht are established at the time of selection and do not increase. 10 30. The "pre-need" purchase is often made in response to sales solicitation by providers, rather than at the initiation of the purchaser. Essentially, firms sell "pre-need" services as a way of financing the purchase of funeral services. The purchase is funded by the creation of a trust account or the purchase of an insurance policy or annuity. The "pre-need" marketer does not receive the funds from either the trust or the insurance policies until the death of the consumer. 31. The primary marketers of "pre-need" services today are the large funeral home consolidators such as SCI and LGII. Concentration is higher in markets for the sale of "pre-need" funeral services than for "at-need" services because independent funeral home operators that are competing in the markets for "at-need" funeral services usually do not compete in "pre-need" markets. There are costs, such as the cost of assembling and then paying a dedicated commissioned sales force, that limit the ability of independent funeral home operators to market funeral services on a "pre-need" basis. 32. SCI has reported that, at the end of 1995, the combined face value of all prearranged funeral commitments represented over $2.3 billion in future revenues to the company. During 1995, as a result of its "pre-need" sales efforts, SCI generated sales commitments for more than $371 million worth of merchandise and services which SCI will supply in coming years. 33. LGII generated sales commitments for more than $100 million worth of merchanduse and services which LGII will supply in coming years. LGII has expanded its "pre-need" sales efforts as it has increased its presence in large urban areas. 34. LGII and SCI currently compete in the sale of "pre-need" funeral services in numerous concentrated local geographic markets. Competition between SCI and LGII in 11 the Los Angeles area, in particular, is intense and is likely to increase (in the absence of the proposed SCI transaction) now that LGII has announced its proposed investment in Rose Hills, which may be the largest single combination funeral home and cemetery operation in the country. This acquisition increases LGII's market potential in the Los Angeles area as LGII expands its "pre-need" marketing there. 35. Marketing of "pre-need" services is particularly heavy in Los Angeles County, California; Houston, Texas; and Southeastern Florida, all areas of significant overlap between SCI and LGII operations. 36. "Pre-need" sales of funerals have increased substantially over the past several years. The sale of "pre-need" funerals is expected to increase still more in the future, and indeed is expected to be the focus of future growth in the funeral services industry. D. GEOGRAPHIC MARKETS FOR DEATH CARE SERVICES AND PROVIDERS. 37. Competition for the sale of funeral and cemetery services and for the purchase of death care providers, typically occurs in local markets across the United States, generally consisting of towns or small-to-medium sized cities, metropolitan areas or counties, as well as in sections of larger cities or counties, or even groups of smaller cities or communities. These local geographic markets reflect the reality that purchasers do not usually seek to purchase funeral and cemetery services from sellers that are located far from the residence or home community of the deceased. 38. There are several reasons for the local nature of competition in these lines of commerce. Relationships with funeral directors and funeral homes are often long-standing ones. Consumers routinely purchase funeral services from a funeral home that 12 previously had provided those services to a family member or friend, typically in the same community. Further, in the case of "at-need" services, family members often must find a provider while under personal stress and on very short notice. Generally, there is a desire to have funeral services conducted at a location that is convenient to the family and friends of the deceased. Consumers also seek cemetery lots at locations that are typically near the place of residence of the deceased. 39. The fact that large consolidators such as SCI and LGII market their services under the names of the local companies that they have acquired, rather than under their own names, confirms the local nature of the geographic markets that are involved. 40. Competition in the purchase of funeral homes and cemeteries also takes place in local markets. The identity of potential interested purchasers will vary from location to location. Local market factors significantly affect purchase prices. Those factors include real estate prices in the area, sales prices of other local market businesses in the area, economic conditions in the area and sales prices of other funeral homes or cemeteries in the area. The fact that each funeral home or cemetery is a unique property also makes competition for the purchase of such properties inherently local. E. BARRIERS TO ENTRY. 41. There are significant barriers to entry into the funeral services and cemetery businesses. It takes many years for a funeral home to establish the reputation within a community that is necessary to compete effectively in the local area within which the funeral home conducts business. As SCI explained in its 1995 annual report, the funeral services industry has "high entry costs" and requires "a lengthy period of time . . . to build a local clientele." ECI has stated in its 1995 Form 10-K that "[t]he death care industry is 13 characterized by significant barriers to the establishment of a new funeral home or cemetery." 42. There are large capital costs associated with the building of new funeral homes and the establishment of cemeteries. Entry on a small scale is particularly difficult because small competitors are unable to realize the substantial efficiencies and economies of scale available to large consolidators such as SCI and TLGI/LGII. Further, local regulations and zoning requirements make it difficult to build new funeral homes or cemeteries or crematoria in local communities, and thus inhibit timely entry into local markets. A vast majority of jurisdictions require the licensing and supervision of individuals who provide funeral-related services. F. SCI AND TLGI/LGII ARE THE MAJOR COMPETITORS IN NUMEROUS LOCAL MARKETS FOR THE AFFECTED LINES OF COMMERCE. 43. In most local areas, funeral services providers and cemetery operators face competition from only a few competitors. Many local markets across the country are highly concentrated. 44. SCI and TLGI/LGII are major competitors in the provision of "at-need" funeral services in numerous markets throughout the United States. Those local geographic markets include, but are not limited to: Brooklyn, New York; Pinellas County, Florida, and Clearwater, Florida and surrounding area; the areas surrounding Cocoa, Titusville and Merritt Island, Florida; eastern Dade County, Florida; northeast Broward County and Ft. Lauderdale, Florida; southeast Palm Beach County, Florida; the areas surrounding Naples and Marco Island, Florida; Tallahassee, Florida; Escambia County, Florida; Fulton County, Georgia; Chatham County, Georgia; Glynn and Camden Counties, Georgia; Augusta, Georgia; Bartow County, Georgia; Portland, Oregon metropolitan area; Salem, Oregon; the 14 areas surrounding San Bernardino, Colton and Ontario, California; southwestern San Diego County and the Chula Vista/Imperial Beach/ San Diego areas and Lemon Grove/El Cajone, California areas; Los Angeles County, California; Covina, California; Dimond, California; southeastern Cameron County, Texas; western Cameron County, Texas; Houston, Texas and the southwestern, southeastern and northwestern sections of the Houston, Texas metropolitan areas; the Raleigh, North Carolina metropolitan area; the Charlotte, North Carolina metropolitan area; Granite Falls, North Carolina; Greensboro, North Carolina; Kernersville, North Carolina; Anchorage Borough, Alaska; Oahu, Hawaii; Chicago, Illinois; the Knoxville, Tennessee metropolitan area; and Lynchburg, Virginia. 45. SCI and TLGI/LGII are the major competitors in "pre-need" funeral services in numerous markets throughout the United States. Those local geographic markets include those set forth in the preceding Paragraph. 46. SCI and TLGI/LGII are the major competitors in the provision of cemetery services in numerous markets throughout the United States. Those local geographic markets include: Denver, Colorado; Pueblo, Colorado; Portland, Oregon; North King County, Washington; Orange County, California; Paducah, Kentucky and Ashland, Kentucky. 47. An acquisition of TLGI/LGII by SCI would significantly increase the already high concentration in these and numerous other local markets in the sale of funeral and cemetery services. Any such increase in local market concentration would enhance the likelihood that competition would diminish. 15 G. THE GROWTH OF CONSOLIDATORS. 48. The funeral services and cemeteries businesses are undergoing rapid and dramatic consolidation. A small number of large, multinational firms, known as "consolidators," are competing for the purchase of independent and small chains of funeral homes and cemeteries. The two largest consolidators today are SCI and TLGI/LGII. 49. There are efficiencies that can be achieved when a consolidator owns more than one funeral home in a local area. Certain elements are necessary for a funeral home operation, including hearses and limousines; preparation facilities and administration; and purchasing and personnel. By organizing funeral homes in an area into a "cluster," the consolidator is able to lower the overall costs of each of the funeral homes in the cluster. 50. Cluster operations allow a funeral home operator to reduce staff and resources that, when operated by independent operators, are underutilized. For example, a chain funeral home operator with multiple facilities in a particular area may consolidate all embalming operations into a single facility for the entire area, eliminating those that had existed in individual homes. Similarly, a chain operator may be able to use a smaller number of hearses, dispatched throughout a region, to serve the function previously filled by one or more individual vehicles at each home. There are also purchasing efficiencies that can be achieved, for example, for caskets and vehicle fleets, and substantial savings that can be realized from the consolidation of administratiave and support functions. 51. There are only a limited number of firms that engage in large-scale consolidation in the funeral home industry. SCI and LGII are the two largest consolidators, actively competing with one another for properties as they become available. 16 52. On information and belief, SCI, in 1995, acquired 1,263 funeral homes, 99 cemeteries, and 30 crematoria throughout the world including approximately 234 funeral homes and cemeteries in the United States. As SCI has publicly stated, SCI is engaged in "an aggressive expansion program." On information and belief, SCI has acquired over 400 funeral homes and cemeteries since 1992. 53. TLGI/LGII, in 1995, acquired 177 funeral homes, 64 cemeteries in North America. TLGI/LGII has acquired about 600 funeral homes and over 200 cemeteries in North America since the early 1990s. 54. TLGI/LGII has focused in particular upon consolidation opportunities in the United States. TLGI/LGII is one of the industry's more efficient firms, focusing not only on acquisitions, but on controlling its operating expenses. Thus, TLGI/LGII plays a vital role as a low-cost domestic operator of funeral homes and cemeteries. 55. The third largest consolidator in the United States is Stewart Corporation International ("Stewart"), which, on information and belief, has only approximately 275 properties in the United States, and is thus far smaller than either SCI or LGII. Stewart is less than one-sixth the size of SCI, and less than one-fifth the size of LGII in terms of numbers of facilities. 56. ECI, a defendant in this action, is the fourth largest consolidator with approximately 150 properties in the United States. As alleged herein, ECI is 40% owned by SCI, and acts in concert with SCI in the funeral homes and cemeteries business. 57. Carriage Funeral Services is the fifth largest consolidator, with approximately 50 funeral homes in the United States. SCI, at a minimum, has debt investments in Carriage. 17 58. In 1995, SCI acquired Gibraltar Mausoleum Corporation, which was one of the major consolidators in the country. 59. If SCI were to acquire TLGI, SCI would own or have investments in all but one of the companies that currently are competing as consolidators in numerous local markets throughout the United States. The remaining consolidator, Stewart, would be approximately one-eighth the size of the combined SCI/TLGI operator. SCI would also inherit an approximately 23% investment in Prime, and an option to purchase the rest of Prime, another consolidator in which LGII currently has an investment. 60. SCI and TLGI/LGII have competed and are now competing aggressively against each other for the acquisition of funeral homes and cemeteries throughout the United States. LGII has outbid SCI for the acquisition of funeral homes on a number of occasions. 61. Competition between SCI and LGII in the purchase of funeral homes and cemeteries is graphically illustrated by the two firms' attempts to purchase Rose Hills Memorial Park and Rose Hills Mortuary in Whittier, California. SCI opened the bidding for the properties with an indication of interest in the $180-210 million range. LGII entered the competition with an indication of interest below that of SCI's. When Rose Hills engaged investment bankers to assist in the sale, SCI made a firm bid of $220 million and indicated that it could increase. LGII bid a range of $220-250 million. LGII ultimately prevailed, purchasing the properties for $240 million through its investment in its acquisition corporation, Tudor Acquisition Corporation. No other firms competed against SCI and TLGI for the Rose Hills properties once the indications of interest exceeded $200 million. Rose Hills' prior owners plainly benefited from the competition between SCI and LGII to acquire those properties. 18 62. The intense competition between the two firms is no secret to the industry or outside observers: "industry analysts said the [proposed] acquisition [by SCI of TLGI] could have a secondary favorable impact for Service Corp. [I.E., SCI] by absorbing another thirsty acquirer." (WALL ST. JOURNAL, September 18, 1996, at A-3.) 63. Competition between SCI and TLGI/LGII for the acquisition of funeral homes and cemeteries has benefited the independent owners of those homes and cemeteries, because the bidding between SCI and TLGI/LGII has increased the prices that independent owners have received for their properties. TLGI/LGII has been instrumental in setting market prices for the acquisition of funeral homes and cemeteries in local areas. In the absence of the actual and threatened competition that SCI has faced from TLGI/LGII, independent funeral home owners likely would have been forced to accept lower bids for their properties. Other funeral home operators would have determined not to sell their properties. 64. SCI understands that competition for TLGI/LGII has benefited independent funeral home operators. As noted above, SCI criticized TLGI/LGII for "overpaying for funeral home operations and cemeteries," and was "spurred...forward [by] what other kinds of transactions this company [TLGI/LHII] might do." As also noted above, ECI observed that TLGI/LGII's being "out of the picture" would bring "more rationale to the acquisition table for all of us." 65. In the wake of SCI's proposed acquisition of TLGI, LGII has received numerous requests from independent funeral home operators who are seeking bids from LGII to acquire their properties, prior to any SCI acquisition of TLGI. Those owners plainly fear that any acquisition of TLGI by SCI would depress the value of their funeral homes. 19 66. SCI's proposed acquisition of TLGI/LGII will eliminate TLGI/LGII as a direct competitor in the market for the acquisition of funeral homes and cemeteries. If SCI is permitted to restrain the competitiveness of TLGI/LGII by acquiring TLGI, consumers of funeral and cemetery services will suffer. When no longer faced with the threat that the only other major competing purchaser might acquire an attractive property, SCI is likely to be less aggressive in pursuing the acquisition of those properties that it wants for itself, and will not be pursuing at all the acquisition of those properties that LGII alone might have targeted for purchase. At a minimum, the rate of consolidation is very likely to decrease. The spread of efficient and low-cost operations will be impeded, and consumers will be denied the benefits that flow from modernization and clustering. In many local markets, SCI will no longer have to concern itself with the presence of a competitor capable of achieving the same efficiencies by acquiring and consolidating death care providers. In the absence of such a competitor, consumers of funeral and cemetery services are not as likely to benefit from efficiency-driven price competition as soon as or to the extent that they would benefit if TLGI/LGII were not eliminated as an alternative purchaser of funeral homes and cemeteries. Owners of funeral homes and cemeteries will also be injured by the withdrawal of TLGI/LGII as an independent competitor in the purchase of their businesses in that they will not receive as much consideration for their businesses as they would have received if SCI had not acquired TLGI. 67. If SCI is permitted to acquire TLGI, SCI will eliminate a potential competitor in those local markets where SCI is enjoined by FTC consent order from acquiring funeral homes and cemeteries. Thus, by acquiring TLGI, SCI would be able to 20 protect its market power in those markets where the FTC has determined that SCI is enjoined from further acquisitions. 68. If SCI is permitted to acquire TLGI, SCI will cause TLGI/LGII to restrain their own competitiveness, and thereby reduce competition in all of the relevant markets described above. COUNT ONE -- SECTION 7 OF THE CLAYTON ACT VIOLATION ALLEGED 69. TLGI/LGII repeat and reallege each of the foregoing allegations, as if fully rewritten herein. 70. The effect of the acquisition of TLGI by SCI may be substantially to lessen competition or tend to create a monopoly, in violation of Section 7 of the Clayton Act, in each of the following lines of commerce: a. the sale of "at-need" funeral services in at least the local geographic markets specified in paragraph 44, above; b. the sale of "pre-need" funeral services in at least the local geographic markets specified in paragraph 45, above; c. the sale of cemetery services in at least the local geographic markets specified in paragraph 46, above; d. the purchase of funeral homes and cemeteries in, at a minimum, each of the local geographic markets specified above, and additionally, in local geographic markets into which LGII would have expanded in competition against SCI. 21 COUNT TWO -- SECTION 1 OF THE SHERMAN ACT 71. TLGI/LGII repeat and reallege each of the foregoing allegations, as if fully rewritten herein. 72. SCI and ECI have conspired to restrain trade in violation of Section 1 of the Sherman Act, by assisting SCI in its efforts to acquire TLGI and thus endeavoring to eliminate TLGI/LGII as a competitive factor in at least the numerous markets alleged in paragraphs 44-46, above. PUBLIC INTEREST 73. The acquisition of TLGI by SCI, if not preliminarily and permanently enjoined, will injure the public interest and result in irreparable harm to that interest as follows: a. Competition may be immediately and substantially lessened and a monopoly may tend to be created in violation of Section 7 of the Clayton Act, in the multitude of lines of commerce set forth above; b. Concentration in those lines of commerce will be increased and the tendency toward concentration will be accelerated; c. Barriers to entry in those lines of commerce will be increased; and d. Competition will be adversely affected by the conspiracy between SCI and ECI in violation of Section 1 of the Sherman Act. 74. In addition, members of the public will be injured in the event immediate injunctive relief is not granted for the reason that the investing public will be required to make decisions with respect to the purchase, sale and tender of TLGI stock in a 22 volatile market without full appreciation of the antitrust implications of the transaction contemplated by the SCI offer. IRREPARABLE HARM 75. If TLGI and LGII are not provided with the preliminary injunction requested, TLGI and its shareholders will also be injured and suffer irreparable harm, as follows: a. SCI's activities have caused and will continue to cause serious dislocation in the conduct of TLGI's normal business in that, as a result of the uncertainty regarding the future management of TLGI, the conduct of TLGI's business and the management of its investments have been and will be impaired; b. TLGI's relationship with its customers and suppliers have been and will continue to be damaged by the uncertainties generated by SCI's activities; c. TLGI's working relationship with its employees and the morale of said employees have been and will continue to be impaired by the uncertainties generated by SCI's activities; d. TLGI has already been and will continue to be subjected to litigation arising by reason of SCI's tender offer, and may be subjected to potential treble damage liability because of the illegality of the proposed acquisition; e. The assets and operations of TLGI and SCI will become commingled, and its personnel will be dispersed or discharged, thus making it impossible to restore TLGI fully to its present independent status if the proposed acquisition is eventually held to be illegal; and 23 f. SCI will acquire a "listening line" to TLGI's trade secrets, business strategies and confidential business operations, thereby affording SCI an unfair and significant competitive advantage over TLGI even if SCI is able to divest TLGI if the proposed merger is later held to be illegal. 76. TLGI and LGII have no adequate remedy at law. PRAYER WHEREFORE, plaintiffs pray: 1. That defendants SCI's and New SCI's above-described acquisitions and proposed acquisitions of TLGI stock be adjudged violations of Section 7 of the Clayton Act and Section 1 of the Sherman Act. 2. That it be adjudged that SCI and ECI have participated in a conspiracy to restrain trade in violation of Section 1 of the Sherman Act. 3. That it be determined that TLGI and its stockholders will be irreparably harmed by any further acquisition of TLGI stock by SCI or New SCI prior to adjudication of this action on the merits. 4. That, pending final adjudication of the merits of this action, defendants, SCI and New SCI, and their directors, officers and employees and their subsidiaries, and all other persons acting in concert with or on behalf of said defendant, be temporarily restrained and preliminarily enjoined, jointly and severally, from directly or indirectly: a. acquiring or attempting to acquire any shares of TLGI stock; b. making or attempting to make any tender offer or request or invitation for tenders of any shares of TLGI stock; c. voting in person or by proxy any shares of TLGI stock; 24 d. exercising or attempting to exercise, directly or indirectly, any influence upon the management of TLGI; and e. taking any other steps in furtherance of their unlawful plan to purchase the stock or acquire control of TLGI. 5. That SCI and New SCI be required to divest itself of any and all TLGI stock it may own beneficially or of record. 6. That it be declared and decreed that TLGI is entitled to refuse to transfer on its books any TLGI stock purchased by the defendants or their affiliates or any of them and to refuse to recognize the vote with respect to any security purchased by defendants or their affiliates or any of them. 7. The TLGI be granted such other and further relief as this Court may deem just and proper. 8. That TLGI recover from defendant the cost of this suit and reasonable attorney's fees incurred by it. Respectfully submitted, ---------------------------------------- George T. Manning Michael Templeton Jones Day Reavis & Pogue 599 Lexington Avenue New York, New York 10022 (212) 326-3939 Attorneys for Plaintiff 25 OF COUNSEL: John W. Edwards II Thomas Demitrack John M. Majoras Jones Day Reavis & Pogue North Point 901 Lakeside Avenue Cleveland, Ohio 44114 (216) 586-3939 J. Kevin Cogan Jones Day Reavis & Pogue 1900 Huntington Center Columbus, Ohio 43215 (614) 469-3939 26 VERIFICATION STATE OF NEW YORK ) ) COUNTY OF NEW YORK ) Now personally comes the undersigned, on this 10th day of October, 1996 and says that he is President of the Northeast Division of Loewen Group International, Inc., one of the Plaintiffs in the above-entitled and numbered cause; that he has read the above and foregoing Complaint, that he is authorized and qualified in all respects to make this verification and to act on behalf of Plaintiff corporations; and that every statement of fact contained herein is the best of his personal knowledge and belief true and correct, or is based on information provided by others that he believes to be reliable. ----------------------------------- George Amato Sworn to before me and subscribed in my presence this _____ day of October, 1996. ----------------------------------- Notary Public EX-99.17 18 EXHIBIT 99.17 EXHIBIT 17 [Smith Barney Letterhead] October 10, 1996 The Board of Directors The Loewen Group Inc. 4126 Norland Avenue Burnaby, B.C. VSG 3S8 CANADA Members of the Board: You have requested our opinion with respect to the adequacy, from a financial point of view, of the consideration proposed to be offered by Service Corporation International ("SCI") to the holders of the common shares and the preferred shares of The Loewen Group Inc. ("LWN") as set forth in a Registration Statement on Form S-4 filed with the Securities and Exchange Commission on October 3, 1996 (the "SCI Registration Statement") by New Service Corporation International ("New SCI") and SCI Holdings Canada, Inc. ("Canadian SCI"), each wholly owned subsidiaries of SCI, pursuant to which SCI has proposed to offer to exchange (i) for each outstanding Common Share, without par value, of LWN (the "LWN Common Shares"), including associated common share purchase rights, that number of shares of the common stock, par value $0.01 per share, of New SCI (the "New SCI Common Stock") or, at the election of the holder thereof, that number of exchangeable shares, without par value, of Canadian SCI (the "Canadian SCI Exchangeable Shares"), equal to the quotient determined by dividing U.S. $45.00 by the average of the high and low sales prices of the common stock, par value $1.00 per share, of SCI (the "SCI Common Stock"), as reported on the New York Stock Exchange Composite Tape, on each of the 20 consecutive trading days ending with the third trading day immediately preceding the expiration date of the proposed exchange offer (the "Share Exchange Ratio"); provided that the Share Exchange Ratio will not be greater than 1.76471 and (ii) for each outstanding 6.00% Cumulative Redeemable Convertible First Preferred Share, Series C, without par value, of LWN (the "LWN Preferred Shares"), that number of shares of New SCI Common Stock or, at the election of the holder thereof, that number of Canadian SCI Exchangeable Shares, equal to the product of (i) the Share Exchange Ratio and (ii) 0.65574 (the "Preferred Share Exchange Ratio"); provided that the Preferred Share Exchange Ratio will not be greater than 1.15719 (such proposed exchange offer, the "SCI Proposed Exchange Offer"). In arriving at our opinion, we reviewed the SCI Registration Statement and held discussions with certain senior officers, directors and other representatives and advisors of LWN concerning the business, operations and prospects of LWN. We examined certain publicly available business and financial information relating to LWN as well as certain financial forecasts and other data for LWN which were provided to or otherwise discussed with us by the management of LWN. We reviewed the financial terms of the SCI Proposed Exchange Offer in relation to, among other things: current and historical market prices and trading volumes of the LWN Common Shares and the LWN Preferred Shares; the historical and projected earnings and other operating data of LWN; and the capitalization and financial condition of LWN. We also considered, to the extent publicly available, the financial terms of certain other similar transactions recently effected which we considered relevant in evaluating the SCI Proposed Exchange Offer and analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations we considered relevant in evaluating those of LWN. In addition to the foregoing, The Board of Directors The Loewen Group Inc. October 10, 1996 Page 2 we conducted such other analyses and examinations and considered such other financial, economic and market criteria as we deemed appropriate in arriving at our opinion. In rendering our opinion, we have assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or furnished to or otherwise reviewed by or discussed with us. With respect to financial forecasts and other information and data provided to or otherwise reviewed by or discussed with us, we have discussed with the management of LWN, and with your consent have relied on, various operational and financial assumptions as to the future financial performance of LWN. We have not made or been provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of LWN nor have we made any physical inspection of the properties or assets of LWN. In connection with our engagement, we have not been requested to approach, and have not approached or held discussions with, third parties to solicit indications of interest in the acquisition of all or a part of LWN. Our opinion is necessarily based upon information available to us, and financial, stock market and other conditions and circumstances existing and disclosed to us, as of the date hereof. Smith Barney has been engaged to render financial advisory services to LWN in connection with the SCI Proposed Exchange Offer and certain related matters and will receive a fee for our services. In the ordinary course of our business, we and our affiliates may actively trade or hold the securities of LWN and SCI for our own account or for the account of our customers and, accordingly, may at any time hold a long or short position in such securities. We have in the past provided and are currently providing financial advisory and investment banking services to LWN unrelated to the SCI Proposed Exchange Offer, and have received and will receive compensation for such services. Our advisory services and the opinion expressed herein are provided for the information of the Board of Directors of LWN in its evaluation of the SCI Proposed Exchange Offer, and our opinion is not intended to be and does not constitute a recommendation to any shareholder with respect to the SCI Proposed Exchange Offer. Our opinion may not be published or otherwise used or referred to, nor shall any public reference to Smith Barney be made, without our prior written consent. Based upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, we are of the opinion that, as of the date hereof, the Share Exchange Ratio and the Preferred Share Exchange Ratio are inadequate, from a financial point of view, to the holders of LWN Common Shares and to the holders of LWN Preferred Shares, respectively (other than SCI and its affiliates). Very truly yours, /s/ Smith Barney Inc. SMITH BARNEY INC. EX-99.18 19 EXHIBIT 99.18 EXHIBIT 18 [Nesbitt Burns Letterhead] October 10, 1996 The Board of Directors The Loewen Group Inc. 4126 Norland Avenue Burnaby, British Columbia V5G 3S8 Members of the Board: You have requested our opinion (our "Opinion") with respect to the adequacy, from a financial point of view, of the consideration to be received by holders of common shares and preferred shares of The Loewen Group Inc. ("LWN") pursuant to a proposed stock-for-stock exchange offer (the "Second SCI Proposal"), as disclosed in a Registration Statement on Form S-4 (the "Registration Statement") filed with the Securities and Exchange Commission on October 3, 1996 by New Service Corporation International ("New SCI") and SCI Holdings Canada, Inc. ("SCI Canada"), each wholly-owned subsidiaries of Service Corporation International ("SCI"), which exchange offer SCI represents values the outstanding common shares of LWN (the "LWN Common Shares") at U.S. $45.00 per share and the outstanding 6.00% Cumulative Redeemable Convertible First Preferred Shares, Series C (the "LWN Preferred Shares") at U.S. $29.51 per share, subject to adjustment in certain circumstances described below. We have utilized these represented values in arriving at our Opinion. According to the Registration Statement, SCI proposes to offer to exchange (i) for each outstanding LWN Common Share, including associated common share purchase rights, that number of shares of the common stock, par value U.S. $0.01 per share, of New SCI (the "New SCI Common Stock") or, at the election of the holder thereof, that number of exchangeable shares, without par value, of SCI Canada (the "Canadian SCI Exchangeable Shares"), equal to the quotient determined by dividing U.S. $45.00 by the average of the high and low sales prices of the common stock, par value U.S. $1.00 per share, of SCI (the "SCI Common Stock"), as reported on the New York Stock Exchange Composite Tape, on each of the 20 consecutive trading days ending with the third trading day immediately preceding the expiration date of the proposed exchange offer (the "Share Exchange Ratio"); provided that the Share Exchange Ratio will not be greater than 1.76471 and (ii) for each outstanding LWN Preferred Share, that number of shares of New SCI Common Stock or, at the election of the holder thereof, that number of Canadian SCI Exchangeable Shares, equal to the product of (i) the Share Exchange Ratio and (ii) 0.65574 (the "Preferred Share Exchange Ratio"); provided that the Preferred Share Exchange Ratio will not be greater than 1.15719. In arriving at our Opinion, we reviewed the Registration Statement and held discussions with certain senior officers, directors and other representatives and advisors of LWN concerning the businesses, operations and prospects of LWN. We examined certain publicly available business and financial information relating to LWN as well as certain financial forecasts and other historical and forecast data for LWN which were provided to or otherwise discussed with us by the management of LWN. We reviewed the financial terms of the Second SCI Proposal in relation to, among other things: current and historical market prices and trading volumes of the LWN Common Shares and the LWN Preferred Shares; the historical and projected earnings of LWN and other operating data of LWN; and the capitalization and financial condition of LWN. We also considered, to the extent publicly available, the financial terms of certain other 1 FIRST CANADIAN PLACE, 4TH FLOOR, P.O. BOX 150, TORONTO, ONTARIO MSX 1H3 (416) 359-4000 THE BOARD OF DIRECTORS THE LOEWEN GROUP INC. OCTOBER 10, 1996 PAGE 2 similar transactions recently effected which we considered relevant in evaluating the transaction contemplated by the Second SCI Proposal and analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations we considered relevant in evaluating those of LWN. In addition to the foregoing, we conducted such other analyses and examinations and considered such other financial, economic and market criteria as we deemed appropriate in arriving at our Opinion. In rendering our Opinion, we have assumed and relied, without independent verification, upon the accuracy, fair representation and completeness of all financial and other information, data, advice, opinions and representations publicly available or furnished to or otherwise reviewed by or discussed with us and our Opinion is conditional upon such accuracy, fairness and completeness. With respect to financial forecasts and other information provided to or otherwise reviewed by or discussed with us by management of LWN, we have discussed with the management of LWN, and with your consent have relied on, various operational and financial assumptions as to the future financial performance of LWN. Subject to the exercise of professional judgment and except as expressly described herein, we have not attempted to verify independently the accuracy or completeness of any such information, data, advice, opinions and representations. We have not made or been provided with an independent evaluation of the assets or liabilities (contingent or otherwise) of LWN nor have we made any physical inspection of the properties or assets of LWN. In connection with our engagement, we have not been requested to approach, and have not approached or held discussions with, third parties to solicit indications of interest in the acquisition of all or a part of LWN. Our Opinion is necessarily rendered on the basis of information available to us including financial and securities markets, economic and general business and financial conditions and other conditions and circumstances existing and disclosed to us, as at the date hereof. Our Opinion is also based upon the condition and prospects, financial and otherwise, of LWN as they were reflected in the information and documents reviewed by us and as they were represented to us in our discussions with management of LWN. In our analyses and in connection with the preparation of our Opinion, we made numerous assumptions with respect to industry performance, general business, market and economic conditions and other matters, many of which are beyond the control of any party involved. Nesbitt Burns is one of Canada's largest investment banking firms, with operations in all facets of corporate and government finance, mergers and acquisitions, equity and fixed income sales and trading, investment research and investment management. The Opinion expressed herein is the opinion of Nesbitt Burns and the form and content herein have been approved for release by a committee of its directors, each of whom is experienced in merger, acquisition, divestiture and valuation matters. Nesbitt Burns has been engaged to render financial advisory services to LWN in connection with the Second SCI Proposal and certain related matters and will receive a fee for our services. We have not been engaged to prepare, and have not prepared, a valuation of LWN or any of its material assets and our Opinion should not be construed as such. In the ordinary course of our business, we and certain of our affiliates may actively trade the securities of LWN or SCI for our own account or for the account of our customers and, accordingly, may at any time hold a long or short position in such securities. We have in the past provided certain financial advisory and investment banking services to LWN, unrelated to the Second SCI Proposal, including acting as lead manager on recent equity financing transactions, and have received and THE BOARD OF DIRECTORS THE LOEWEN GROUP INC. OCTOBER 10, 1996 PAGE 3 will receive compensation for such services. The Bank of Montreal is Nesbitt Burns' controlling shareholder and is the lead bank on certain of LWN's various credit facilities. Our advisory services and the Opinion expressed herein are provided for the information of the Board of Directors of LWN in its evaluation of the Second SCI Proposal and our Opinion is not intended to be and does not constitute a recommendation to any shareholder with respect to the Second SCI Proposal. Our Opinion may not be published or otherwise used or referred to, nor shall any public reference to Nesbitt Burns be made, without our prior written consent. Based upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, we are of the opinion that, as of the date hereof, the Share Exchange Ratio and the Preferred Share Exchange Ratio are inadequate, from a financial point of view, to the holders of LWN Common Shares and to the holders of LWN Preferred Shares, respectively (other than SCI and its affiliates). Yours truly, /s/ Nesbitt Burns Inc. NESBITT BURNS INC. EX-99.19 20 EXHIBIT 99.19 EXHIBIT 19 EXECUTIVE COMPENSATION The following table sets forth compensation earned during the last three fiscal years by the Chief Executive Officer and the Company's four most highly compensated executive officers other than the Chief Executive Officer who served as executive officers at the end of 1995 (such five officers are collectively called "Named Executive Officers"): SUMMARY COMPENSATION TABLE
- - -------------------------------------------------------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------------------------------------------------------- Long-Term Annual Compensation Compensation (1) ------------------------------------------------------------ Awards ---------------- Other Annual Securities Under All Other Salary Bonus* Compensation Options Granted Compensation Name and Principal Position Year ($) ($) ($)(2) (#)(3) (3) - - -------------------------------------------------------------------------------------------------------------------------------- Raymond L. Loewen 1995 546,528 nil --- nil 5,283(4) Chairman of the Board of Chief 1994 466,794 439,335 --- 2,000,000 5,309 Executive Officer 1993 424,485 227,052 --- 250,000 11,408 - - -------------------------------------------------------------------------------------------------------------------------------- Timothy R. Hogenkamp 1995 269,230 nil --- nil 59,678(5) President and Chief 1994 258,750 187,500 --- 300,000 59,379 Operating Officer 1993 192,112 75,730 --- 25,000 9,661 - - -------------------------------------------------------------------------------------------------------------------------------- A.M. Bruce Watson 1995 240,385 nil --- nil 5,499(6) Executive 1994 214,583 120,000 --- 260,000 5,020 Vice-President(7) 1993 103,905 34,161 38,577(8) 58,500 6,878 - - -------------------------------------------------------------------------------------------------------------------------------- Robert O. Wienke 1995 288,461 nil 136,000(9) 150,000 2,119(10) Senior Vice-President, Law and 1994 nil nil nil 100,000 nil General Counsel(11) 1993 n/a n/a n/a n/a n/a - - -------------------------------------------------------------------------------------------------------------------------------- Peter S. Hyndman 1995 236,462 --- --- nil 131(4) Vice-President, Law and 1994 198,688 --- --- 25,000 2,361 Corporate Secretary 1993 188,772 37,901 --- nil 5,107 - - -------------------------------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------------------------------
* See Report on Executive Compensation below. Notes: (1) The Company has not granted any Restricted Shares or Restricted Share Units, Stock Appreciation Rights or Long-Term Incentive Plan Payouts to the Named Executive Officers. (2) In accordance with SEC rules, the value of perquisites and other personal benefits, securities or property for each Named Executive Officer that does not exceed the lesser of $50,000 and 10% of the total of the annual salary and bonus is not reported herein. (3) For the year 1994 in the case of Messrs. Loewen, Hogenkamp, Watson and Hyndman and for the year 1995 in the case of Mr. Wienke, the securities are Common Shares of the Company underlying the options and certain purchase rights granted under the 1994 Management Equity Investment Plan, which is described in the Report on Executive Compensation below. Absent extraordinary circumstances, such options and purchase rights do not begin to become exercisable until June 1999. All other grants were made under the Company's stock option plans. (4) Company contribution to the Company's pension plan and group registered retirement savings plan applicable to Canadian-based senior officers. (5) Consists of $42,500 (forgiveness of indebtedness), $10,840 (imputed interest on non-interest-bearing loan), $5,762 (matching contribution to 401(k) Plan) and $576 (life insurance premiums paid by the Company). (6) Consists of $4,923 (matching contributions to 401(k) Plan) and $576 (life insurance premiums paid by the Company). (7) Mr. Watson commenced employment with the Company on June 1, 1993. (8) Consists of $33,123 (moving expenses paid by or on behalf of Mr. Watson) and $5,454 (income tax return preparation). (9) Pre-approved real estate brokerage and other moving and relocation expenses incurred in connection with Mr. Wienke's relocation to the Cincinnati area. (10) Consists of $1,543 (imputed interest on non-interest-bearing loan) and $576 (life insurance premiums paid by the Company). (11) Mr. Weinke became Senior Vice-President, Law and General Counsel effective March 22, 1995. From December 13, 1994 to March 22, 1995, Mr. Wienke served as Executive Vice-President, Corporate Development & Law. Prior to January 1, 1995, Mr. Wienke was a partner in the law firm Ross & Hardies in Chicago, Illinois. The following table sets forth individual grants of stock options by the Company during the last fiscal year to the Named Executive Officers. OPTION GRANTS DURING THE YEAR ENDED DECEMBER 31, 1995
- - ----------------------------------------------------------------------------------------------------------------------------------- - - ----------------------------------------------------------------------------------------------------------------------------------- Number of % of Total Market Value Potential Marketable Securities Options of Securities Value of Assumed Underlying Counted to Underlying Annual Rates of Share Options Employees Exercise or Base Options on the Price Appreciated for Granted in Fiscal Price Date of Grant Expiration Option Time Name ($) Year ($/Security) ($/Security) Date ------------------------------ 3% ($) 17% ($) - - ----------------------------------------------------------------------------------------------------------------------------------- Raymond L. Loewen nil n/a n/a n/a n/a n/a n/a - - ----------------------------------------------------------------------------------------------------------------------------------- Timothy R. Hogenkamp nil n/a n/a n/a n/a n/a n/a - - ----------------------------------------------------------------------------------------------------------------------------------- A.M. Bruce Watson nil n/a n/a n/a n/a n/a n/a - - ----------------------------------------------------------------------------------------------------------------------------------- Robert O. Wienke 150,000 (1) 13.83 U.S. $30.040(2) U.S.$27.250(2) July 15, 2001 U.S.$1,047,799 U.S.$2,933,230 - - ----------------------------------------------------------------------------------------------------------------------------------- Peter S. Hyndman nil n/a n/a n/a n/a n/a n/a - - ----------------------------------------------------------------------------------------------------------------------------------- - - -----------------------------------------------------------------------------------------------------------------------------------
(1) The securities are Common shares underlying options granted under the 1994 Management Equity Investment Plan, which is described in the Report on Executive Compensation below. Absent extraordinary circumstances, such options do not begin to become exercisable until June 1999. (2) The exercise price is 125% of the weighted average trading price of the Common shares for the five consecutive trading days ending April 8, 1994. Such weighted average trading price was U.S. $74.032. The date of grant was April 3, 1995. The following table sets forth certain information regarding options held by the Named Executive Officers as of December 31, 1995. AGGREGATED OPTION EXERCISES DURING THE YEAR ENDED DECEMBER 31, 1995 AND FISCAL YEAR-END OPTION VALUES
- - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ Number of Securities Underlying Unexercised Options at Value of Unexercised in-the-Money December 31, 1995($) Options at December 31, 1995 ($)(1) ---------------------------------------------------------------------- Securities Acquired Aggregate Name at Value Exercise($) Exercised($) Exercisable Unexercisable(2) Exercisable Unexercisable - - ------------------------------------------------------------------------------------------------------------------------------------ Raymond L. Loewen nil nil 480,000 2,370,000 Cdn. $8,123,100 Cdn. $5,108,900 - - ------------------------------------------------------------------------------------------------------------------------------------ Timothy R. Hogenkamp nil nil 34,000 331,000 U.S. $299,392 U.S. $230,328 - - ------------------------------------------------------------------------------------------------------------------------------------ A.M. Bruce Watson nil nil 23,400 295,100 U.S. $134,424 U.S. $201,636 - - ------------------------------------------------------------------------------------------------------------------------------------ Robert O. Weinke nil nil 20,000 230,000 U.S. $38,760 U.S. $155,040 - - ------------------------------------------------------------------------------------------------------------------------------------ Peter S. Hyndman 2,000 Cdn. $60,300 11,000 12,000 Cdn. $192,445 Cdn. $209,940 2,000 Cdn. $62,240 5,000 Cdn. $175,600 - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------
(1) The closing price of the Common shares on December 29, 1995 on The Toronto Stock Exchange was Cdn. $34.375 and on the Nasdaq National Market was U.S. $25.313. These columns set forth the market value less the exercise price. (2) Includes the Common shares underlying options and certain purchase rights granted pursuant to the 1994 Management Equity Investment Plan, which is described in the Report on Executive Compensation below. These options and purchase rights were not in-the-money as of December 31, 1995. 2 PENSION BENEFITS The Company does not have any defined benefit or actuarial pension plans. The Company does have defined contribution pension plans and in Canada, a group registered retirement savings plan. The estimated aggregate cost to the Company for the year ended December 31, 1995 of pension benefits under the Company's pension plan applicable to Canadian-based senior officers of the Company and the Company's group registered retirement savings plan for senior officers was $17,666. The estimated aggregate cost to the Company for the year ended December 31, 1995 of pension benefits under the Company's pension plan applicable to United States-based senior officers of the Company was $59,553. Annual discrimination testing (that is to say, the testing of the entitlement of higher compensated employees against the entitlement of lower compensated employees) did not give rise to any adjustments for 1995. Accordingly, no sums were refunded to United States-based senior officers as a result of such testing for 1995. Refunded sums with respect to 1994 and 1993 represent compensation to such officers and were included in the amounts set out above in the Summary Compensation Table (as to the portions paid to Named Executive Officers). EMPLOYMENT CONTRACTS The following Named Executive Officers have written employment agreements with the Company: Timothy R. Hogenkamp, A.M. Bruce Watson and Robert O. Weinke. The agreements outline duties and responsibilities, initial compensation and related benefits, including bonuses and initial stock option grants. The agreements for Messrs. Hogenkamp, Watson and Weinke do not specify a term of years. Mr. Hogenkamp's agreement is terminable by the Company upon six months' notice. Each of Messrs. Watson's and Weinke's agreements are terminable by the Company, in which case the Company would provide such person with normal salary and related benefits for a further six months; however, if Mr. Wienke's agreement is terminated by the Company without cause within the first two years of his employment, the Company will provide Mr. Wienke with normal salary and related benefits for a further twelve months. Except as set forth above, the Company does not have any compensatory plans or arrangements with any of the Named Executive Officers that relate to or would result from such person's termination of employment or from a change in control of the Company or a change in such person's responsibilities following a change in control. Each of the participants in the 1994 Management Equity Investment Plan, including Messrs. Loewen, Hogenkamp, Watson, Wienke and Hyndman, has entered into an Executive Agreement with the Company or a Subsidiary (the "Executive Agreement"). The Executive Agreement includes certain obligations of a participant with respect to his conduct during the term of employment, and includes a confidentiality agreement and a covenant not to compete that is effective for two years immediately following the date of termination of employment. The Executive Agreement does not include any compensatory provisions. COMPOSITION OF THE COMPENSATION COMMITTEE The Chairman of the Compensation Committee is Charles B. Loewen, an outside Director of the Company. Charles B. Loewen is not related to Raymond L. Loewen or Anne Loewen. Reference is made to CERTAIN TRANSACTIONS for a description of the former relationship of Charles B. Loewen to Loewen, Ondestje, McCutcheon Limited, an investment dealer. The other members of the Compensation Committee for the fiscal year ended December 31, 1995 were James D. McLennan, Ernest G. Penner and The Right Honourable John N. Turner, P.C., C.C., Q.C. The Compensation Committee met four times in 1995. All members are outside Directors of the Company. REPORT ON EXECUTIVE COMPENSATION The Company's executive compensation program is administered by the Compensation Committee. The Compensation Committee reviews and recommends, for approval by the Board of Directors, the Company's executive compensation policies and the compensation to be paid to the executive officers, with the following exception. Any awards made to executive officers pursuant to the Company's stock plans are made by the Compensation Committee 3 (and approval of the full Board of Directors will not be sought) in order to qualify such awards for an exemption from certain "short-swing" profits liability rules under United States securities laws. COMPENSATION PHILOSOPHY The Company's executive compensation program is designed to provide incentives for the enhancement of shareholder value, for the successful implementation of the Company's business plan and for continuous improvement in corporate and personal performance. The program is based on a pay-for- performance philosophy and consists of three components: base salary, an annual incentive (bonus) paid in cash and long-term equity based incentives. The program's overall objectives are: 1. to align the interests of management with those of shareholders; 2. to integrate compensation with the Company's business objectives; 3. to attract and retain qualified executives critical to the success of the Company; 4. to provide fair and competitive compensation; and 5. to reward both corporate and individual performance. Annual and long-term incentives are designed to give executives incentives to increase shareholder value. Annual incentives are tied to earnings per share growth and long-term incentives are tied to share price increases. These criteria link a significant portion of executive officer compensation to the long-term performance of the Company. The Compensation Committee also considers the relationship between aggregate executive remuneration and revenues. The Compensation Committee expects that, as the Company continues to grow, aggregate remuneration for executive officers will increase. However, the Compensation Committee believes that it is appropriate to set levels of executive remuneration such that aggregate executive remuneration, as a percentage of revenues, is stable or decreases as the Company grows. BASE SALARY In general, an executive's base salary is determined by a subjective assessment of his or her responsibilities and sustained performance. In 1993, the Company hired an independent consultant to review the Company's existing compensation structure and to make recommendations on a long-term compensation philosophy for the Company. The consultant provided an extensive report that included compensation information from the Company's principal competitors (Service Corporation International and Stewart Enterprises, Inc.), as well as sixteen public companies that had similar growth objectives. The report also included recommendations for cash compensation levels and for incentives appropriate to a growth company. After considering the recommendations made by the consultant, the Compensation Committee proposed a significant restructuring of the Company's compensation structure for executive officers. The components of the restructuring were implemented in 1993. Generally, the Compensation Committee intends to set base salaries between the 50th and 75th percentile of salaries paid by comparable companies to similarly-positioned executives, and to pay generous annual cash bonuses when earnings per share targets are met or exceeded. In setting base salaries for 1995, the Compensation Committee reviewed compensation information for 18 United States-based, public, growth-oriented companies identified in an independent consultant's report ("Comparable Companies"). The Compensation Committee gave particular weight to compensation information relating to Service Corporation International and Stewart Enterprises, Inc., both of which are large, publicly- held funeral service companies with significant United States operations. In 1995, the Compensation Committee obtained research data from Frederick W. Cook & Co., Inc. and Smith Barney Inc. with respect to compensation levels for the Chief Executive Officer and for the top five executives in 4 relation to the compensation of the Chief Executive Officer, based on surveys of approximately 68 reasonably comparable companies. The studies provided analyses of compensation based on a series of different factors, including growth in equity, revenue and income and number of employees. Such information will be used to set 1996 base salary levels for the Company's executive officers. The Company intends to continue to set base salaries at between the 50th to 75th percentile of salaries paid by the surveyed companies. ANNUAL INCENTIVES The Company's executive officers are eligible for annual cash bonuses. Annual bonus awards are generally based on attainment of specified performance levels related to the Company's achievement of targeted net earnings per share. This establishes a strong link between executive compensation and the Company's operating performance. In general, annual incentive goals have been established in the following manner. An individual executive's annual incentive opportunity expressed as a percentage of base salary, is established at the beginning of a fiscal year. Usually two earnings per share targets are posted. Failure to reach the lower of the targets results in no annual incentive payment. A higher incentive is earned if the higher target is reached. In accordance with this policy in early 1995, the Compensation Committee determined that no bonus would be paid if the increase in fully-diluted earnings per share from 1994 to 1995 were less than 20%, that a bonus would be paid if the increase in fully-diluted earnings per share from 1994 to 1995 were between 20% and 25%, and that a significant bonus would be paid if a higher fully-diluted earnings per share target, namely a more than a 25% increase from 1994 to 1995 were achieved. Notwithstanding an extraordinary commitment of time and effort for the benefit of the Company by executive officers in 1995, the 1995 earnings per share targets were not met because of the costs of legal settlements, litigation related finance costs and related general and administrative costs, and thus the 1995 bonuses for certain executive officers were not awarded. In January 1996, the Compensation Committee determined that later in 1996 it would consider whether it would be appropriate, in light of the extraordinary commitment of time and effort by executive officers, to provide such executives with an opportunity to be awarded a bonus based on a subsequent increase in shareholder value. LONG-TERM INCENTIVES An important objective of long-term incentives is to encourage executive officers to acquire a meaningful ownership interest in the Company over a period of time and as a result focus executive officers' attention on the long-term interests of the Company and its shareholders. Certain executive officers participate in the 1994 Management Equity Investment Plan ("MEIP"), which was approved by the Shareholders at the annual general meeting of the Company held on May 16, 1994. The purpose of the MEIP is two-fold: first, to provide a cost-effective financing program for the Company's U.S. Subsidiaries and second, to provide an opportunity for designated key employees to participate in the long-term growth of the Company. The MEIP requires participants (including executive officers) to pay an aggregate of $6.4 million to a U.S. Subsidiary of the Company in exchange for the right (in either the form of an option or a purchase agreement) to ultimately acquire, upon a further aggregate payment of $121.3 million, an aggregate of 4.25 million Common shares beginning in 1999. This right is exercisable as to 50% in 1999, 25% in 2000 and 25% in 2001. The effective purchase price for the Common shares was set at $30.040, which is 25% higher than the weighted average trading price of the Common shares for the five consecutive trading days ended April 8, 1994. If a participant does not exercise his right to acquire the Common shares, then his portion of the sum of $6.4 million paid is refundable to him. Through December 31, 1995, rights relating to an aggregate of 4,065,000 Common shares were outstanding under the MEIP. Executive officers also are eligible to participate in the Company's Employee Stock Option Plans. In light of the grants made to executive officers under the MEIP, options granted under the Employee Stock Option Plans during 1995 to executive officers who also participate in the MEIP were minimal. 5 CHIEF EXECUTIVE OFFICER'S COMPENSATION The Chief Executive Officer's base salary for 1995 was determined after reviewing the available base salary information for the chief executive officers of the Comparable Companies. The Compensation Committee determined that, in light of the level of compensation paid to the chief executive officers of the Comparable Companies and, considering the Compensation Committee's subjective evaluation of the Chief Executive Officer's performance, the Chief Executive Officer's salary for 1995 should be increased to $546,528. For the reasons discussed above, under the caption "Annual Incentives", no bonus for 1995 was awarded to the Chief Executive Officer. The Chief Executive Officer participates in the MEIP pursuant to which, in June 1994 he received options to ultimately acquire 500,000 Common shares and purchase agreement rights by which he has the option to ultimately acquire 1.5 million Common shares. The Chief Executive Officer did not receive any option grants in 1995. POLICY WITH RESPECT TO DEDUCTIBILITY OF COMPENSATION Section 162(m) of the United States Internal Revenue Code of 1986, as amended (the "Code"), governs the deductibility of discretionary, incentive- based compensation in excess of $1 million paid annually to the Chief Executive Officer and certain other highly-paid executive officers. The Company believes that the MEIP and the Company's employee stock option plans qualify for an exception from the $1 million limitation. The Company's incentive cash bonus program currently does not so qualify, but the Company does not anticipate that this will result in any significant cost. The Compensation Committee will continue to monitor the impact of Section 162(m) and will recommend modification to the Company's compensation program in the future if appropriate. Submitted by the Compensation Committee: Charles B. Loewen, Chairman James D. McLennan Ernest G. Penner The Rt. Hon. John N. Turner, P.C., C.C., Q.C. 6 AMENDMENT OF EMPLOYEE STOCK OPTION PLANS BACKGROUND Because of the Company's continued significant growth and expansion in North America, the Board of Directors has determined that it would be prudent to increase the number of Common shares reserved for option grants under its Employee Stock Option Plan (United States) (the "U.S. Plan") and under its Employee Stock Option Plan (Canada) (the "Canadian Plan" and, together with the U.S. Plan, the "Plans"). On April 2, 1996 the Board of Directors unanimously approved amendments to the Plans to increase the number of Common shares issuable under the U.S. Plan by 650,000 (from 2,750,000 to 3,400,000) and under the Canadian Plan by 350,000 (from 1,350,000 to 1,700,000) which amendments have been conditionally approved by The Toronto Stock Exchange and the Montreal Exchange under the policies of such exchanges. Under such policies, each of the amendments must be approved by a simple majority vote of disinterested Shareholders. INCREASE IN COMMON SHARES Management believes that providing employees with an opportunity to acquire an equity interest in the Company effectively aligns the interest of those employees and the Shareholders. Historically, the Company has granted options under the Plans for two important purposes: (i) to selected employees as an incentive component of compensation, and (ii) to certain new employees, who typically join the Company in connection with an acquisition, in order to provide them with an immediate incentive to develop and promote the business and financial success of the Company. During 1995, the Company acquired 170 funeral homes and 61 cemeteries in the United States and 7 funeral homes and 3 cemeteries in Canada. The Company believes that acquisitions in 1996 and 1997 will be at or above the level of 1995 acquisitions (although no assurances in this regard can be given). The Board of Directors believes it would be prudent to increase the number of Common shares available under the Plans to ensure that the Company is in a position to grant options to selected employees (including certain employees of newly- acquired locations). APPROVAL The amendment to increase the number of Common shares available under each of the Plans require the approval of a majority of the votes cast by disinterested Shareholders. To the best of the Company's knowledge, the number of votes attaching to the Common shares that will not be counted for the purposes of determining whether the required level of Shareholder approval of the U.S. Plan has been obtained is 209,502, and the number of votes attaching to the Common shares that will not be counted for the purposes of determining whether the required level of shareholder approval of the Canadian Plan has been obtained is 8,313,626. The Board of Directors believes the Plans are a key component of incentive- based compensation for selected employees and are an important feature of the Company's acquisition program. THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED, AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR, THE AMENDMENT TO INCREASE THE NUMBER OF COMMON SHARES AVAILABLE UNDER THE U.S. PLAN BY 650,000 SHARES. THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED, AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR, THE AMENDMENT TO INCREASE THE NUMBER OF COMMON SHARES AVAILABLE UNDER THE CANADIAN PLAN BY 350,000 SHARES. The full text of the Plans can be obtained from the Corporate Secretary of the Company at the Company's principal executive office at 4126 Norland Avenue, Burnaby, British Columbia, Canada V5G 3S8. 7 CERTAIN ADDITIONAL INFORMATION REGARDING THE PLANS GENERAL Under the Plans, employees of the Company are eligible to be granted options to purchase Common shares. As of December 31, 1995 approximately 4,422 persons were eligible to participate in the U.S. Plan (employees who are residents of the United States and its territories) and approximately 598 persons were eligible to participate in the Canadian Plan. The Plans are administered by the Compensation Committee of the Board of Directors. The number of options granted to selected employees is determined by the Compensation Committee. The Compensation Committee also determines certain terms and conditions of options granted. OPTION AGREEMENT Each optionee under the Plans is required to enter into a separate option agreement, which sets forth, among other things, the number of options granted, the specific exercise price and the vesting conditions, within the following parameters: (i) the exercise price of an option may not be less than the closing price of the Common shares on the trading day immediately prior to the grant date, as quoted on the Nasdaq National Market (for options granted under the U.S. Plan) or on The Toronto Exchange (for options granted under the Canadian Plan); and (ii) in no event may an option terminate later than 10 years after the grant date. EXERCISE OF OPTION An optionee may exercise an option by delivering to the Company a duly completed Notice of Exercise together with full payment, by cash or check, for the Common shares being purchased under the option and any taxes required to be withheld and collected from the optionee. ALLOCATION OF OPTIONS IN 1995 The potential benefit to be received by an optionee is dependent on increases in the price of the Common shares prior to the exercise of the option. Accordingly, the ultimate dollar value of options is not currently ascertainable. At April 1, 1996, the closing price of the Common shares on the Nasdaq National Market was U.S. $29.500 and on The Toronto Stock Exchange was Cdn. $40.000. The following table sets forth certain information with respect to options granted in 1995 under each of the Plans to the current executive officers of the Company as a group and to all employees of the Company as a group, including officers who are not executive officers of the Company. Directors who are not employees are not eligible to receive options under the Plans. EMPLOYEE STOCK OPTION PLANS
COMMON SHARES GROUP RANGE OF EXERCISE PRICES UNDERLYING OPTIONS - - ----- ------------------------ ------------------ Employee Stock Option Plan (United States) Executive Officer Group . . . . . . . . . . . . . . . . . . . U.S. $ 28.500 360,000 Non-Executive Officer Employee Group . . . . . . . . . . . . U.S. $ 24.875 -- U.S. $ 41.250 420,779 Employee Stock Option Plan (Canada) 40,000 Executive Officer Group . . . . . . . . . . . . . . . . . . . Cdn. $ 37.375 114,070 Non-Executive Officer Employee Group . . . . . . . . . . . . Cdn. $ 35.375 -- Cdn. $ 53.500
The options granted in 1995 generally become exercisable in five equal annual increments beginning one year after the grant date. 8 UNITES STATES FEDERAL INCOME TAX CONSEQUENCES The following is a summary of the principal anticipated United States federal income tax consequences of the grant and exercise of an option to and by an optionee who is resident in the United States. It is based on the current provisions of the U.S. Internal Revenue Code of 1986, as amended, and the rules and regulations thereunder. This discussion is general only and is not a substitute for independent advice from an individual's own tax advisor. An optionee will not recognize any taxable income at the time an option is granted. Upon exercise of an option, an optionee generally will recognize ordinary income, for United States income tax purposes, equal to the excess, if any, of the then fair market value of the Common shares acquired over the exercise price of the option. Any taxable income recognized in connection with the exercise of an option will be subject to tax withholding by the optionee's employer. The employer of the optionee generally will be entitled to United States income tax deductions to the extent and in the year that ordinary income is recognized by the optionee in the circumstances described above. When an optionee sells Common shares acquired pursuant to the exercise of an option, any difference between the sale price and the Optionee's tax basis in the Common shares will be treated as capital gain or loss. Dividends payable on Common shares out of earnings and profits are ordinary income taxable at ordinary income rates. An optionee may be permitted to credit Canadian withholding taxes against the portion of United States income tax liability attributable to such dividends. 9 EX-99.20 21 EXHIBIT 99.20 EXHIBIT 20 THE LOEWEN GROUP INC. EMPLOYEE STOCK OPTION PLAN (UNITED STATES) (RESTATED AND AMENDED AS AT APRIL 7, 1994 AND FURTHER AMENDED AS AT APRIL 7, 1995, SEPTEMBER 19, 1995 AND APRIL 2, 1996) SECTION 1 - GENERAL (a) The purpose of the Employee Stock Option Plan (United States) (the "Plan") is to promote the interests of The Loewen Group Inc. (the "Company") by: (i) furnishing Eligible Employees (as defined below) with greater incentive to develop and promote the business and financial success of the Company; and (ii) further associate the interests of Eligible Employees with those of the shareholders of the Company by encouraging such employees to acquire share ownership in the Company. (b) The Plan is not qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code") and is not subject to any of the provisions of the Employment Retirement Income Security Act of 1974. (c) Any questions concerning the Plan should be directed to the Corporate Secretary of the Company, at the Company's principal executive office located at 4126 Norland Avenue, Burnaby, British Columbia, Canada V5G 3S8, telephone number (604) 299-9321. (d) The Plan shall be governed by, and construed in accordance with, the laws of the province of British Columbia. SECTION 2 - ELIGIBILITY (a) Under the Plan, employees of the Company or any of its direct or indirect subsidiaries ("Subsidiaries") who are residents of the United States or its territories (the "Eligible Employees") are eligible to be granted options ("Options") to purchase Common shares without par value of the Company ("Shares"). (b) The Compensation Committee of the Company (the "Committee") or such officer as the Committee may designate shall determine from time to time those Eligible Employees to be granted Options under the Plan, and the number of Shares subject to each such Option. Each grant of an Option pursuant to the Plan shall be evidenced by a stock option agreement ("Option Agreement") executed by the employee to whom the Option is granted (the "Optionee") and the Company. Each Option Agreement shall incorporate such terms and conditions as the Committee, in its discretion, deems consistent with the terms of the Plan. (c) Each Option Agreement shall specify the dates upon which all or any installment of the Option will be exercisable. An Option may be exercised when installments vest at any time and from time to time thereafter with respect to all or a portion of the Shares covered by such vested installments. In addition, if an Offer (as hereinafter defined) is made, the Board of Directors, or Committee, may while the Offer remains outstanding: (i) determine that each Option granted by the Company to purchase Shares shall, notwithstanding any vesting period or deferral of the right to exercise otherwise applicable, be immediately exercisable effective on and after a date declared by the Board of Directors, or Committee, to be an advanced exercise date ("Advanced Exercise Date"); and (ii) rescind any declaration of an Advanced Exercise Date but no such rescission shall affect the validity of the exercise of such Option if validly exercised on or after a particular Advanced Exercise Date and before the date of rescission of the declaration of the particular Advanced Exercise Date. For the purposes hereof, "Offer" means an offer to acquire the Shares made to the holders of the Company's Shares where the Shares which are the subject of the offer to purchase, together with the offeror's then presently owned Shares, will in the aggregate exceed twenty percent (20%) of the outstanding Shares of the Company and where two or more persons or companies make offers jointly or in concert or intending to exercise jointly or in concert any voting rights attaching to the Shares to be acquired, then the Shares owned by each of them shall be included in the calculation of the percentage of the Shares of the Company owned by each of them. Paragraphs (i) and (ii) shall apply to each Option granted or to be granted by the Company, which is outstanding at the time of any such declaration regardless of the date of grant thereof, provided that all other terms and conditions of the Option shall continue to apply and nothing herein shall operate to extend, enlarge or revise any Option which has expired, has been exercised, has been cancelled or otherwise has ceased to exist. SECTION 3 - NUMBER OF SHARES SUBJECT TO PLAN (a) The number of Shares issuable pursuant to the exercise of Options after the effective date of the restatement and amendment of the Plan is limited as follows: (i) subject to adjustment pursuant to Section 9, the aggregate number of Shares issuable pursuant to Options under the Plan shall not exceed 3,400,000 Shares (including 1,178,457 Shares under Options previously granted but not exercised as of April 7, 1994); and (ii) the number of Shares reserved for issuance to any one person pursuant to options (whether granted under this Plan or otherwise) shall not exceed 5% of the total issued and outstanding Shares on a non-diluted basis. (b) The maximum number of Shares for which Options are granted after the effective date of restatement and amendment of the Plan in any one calendar year under the Plan to any one Eligible Employee shall not exceed 300,000 Shares, subject to adjustment pursuant to Section 9. (c) If an Option granted under the Plan expires for any reason without being exercised in full, the number of Shares that would have been issuable upon the exercise of such Option shall continue to be available under the Plan. (d) Subject to the maximum limits described in subsections (a) and (b) above, the Board of Directors of the Company (the "Board") shall reserve the number of Shares required to honor Options granted from time to time to Optionees pursuant to the Plan, and shall reserve from time to time additional Shares, if any, to ensure that a sufficient number of Shares are available for purchase under Options granted in the future. SECTION 4 - ADMINISTRATION OF THE PLAN (a) The Plan shall be administered by the Committee which shall be comprised of two or more members of the Board who are "outside directors" within the meaning of Section 162(m) of the United States Internal Revenue Code of 1986, as amended; provided, however, that, with respect to Options that may be granted to Eligible Employees who are not subject to Section 16 of the United States Securities Exchange Act of 1934, as amended, the Committee may delegate its responsibilities to a subcommittee consisting of one or more executive officers of the Company. The address of the Committee is care of the Company's principal executive office at 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8. (b) The Committee shall have all powers and discretion necessary or appropriate to administer the Plan, consistent with and subject to the parameters set forth in the Plan, including but not limited to the power (1) to determine from time to time the Eligible Employees to be granted Options under the Plan, (2) to determine the number of Shares subject to each Option granted under the Plan, (3) to set or amend the terms of each Option Agreement, (4) to interpret the Plan, (5) to adopt such rules or guidelines as it deems appropriate to administer the Plan, and (6) to make all other decisions, and take or cause to be taken all other actions, relating to the operation of the Plan. The Committee's determinations under the Plan shall be final and binding on all persons. No member of the Committee shall be liable to any person for any action or decision made in good faith in connection with the performance of the Committee's duties or the exercise of its powers under the Plan. 3 SECTION 5 - OPTION PRICE AND EXERCISABILITY (a) The exercise price of an Option shall not be less than the closing price of a Share on the trading day immediately prior to the date of grant, as quoted on The Toronto Stock Exchange (with respect to Options denominated in Canadian currency) and on the Nasdaq National Market or a United States national securities exchange or quotation system on which the Shares are then traded (with respect to Options denominated in United States currency). (b) Except as otherwise provided in an Option Agreement, no Options shall be exercised by an Optionee until at least 6 months after the date of the grant. An Optionee may exercise an Option by delivering to the Company a duly completed form of notice of such exercise together with full payment for the Shares being purchased under the Option. The form of notice must identify the Option being exercised, state the exercise price, be signed by the Optionee and be dated the date of exercise. The Company shall promptly notify the Optionee as to any taxes required to be withheld and collected from the Optionee. Unless otherwise provided in the Option Agreement or consented to by the Company, payment for the Shares must be made in the currency in which the Option is denominated. (c) The sale of the Shares to the Optionee shall be deemed to have occurred, and the Optionee shall be deemed to be the holder of such Shares, on the date that both the form of notice and the payment in a manner acceptable to the Company of the exercise price and any applicable taxes have been received by the Company. A certificate representing the Shares acquired by the Optionee shall be issued and delivered to the Optionee by the Company as soon is reasonably possible after the sale. SECTION 6 - TERMINATION OF OPTIONS (a) Any Option granted pursuant to the Plan shall terminate upon the earlier of: (i) ten years after the date of grant; and (ii) such event(s) of termination as are provided in the Option Agreement or as are determined from time to time by the Committee. (b) A change in the duties or position of the Optionee, or the transfer of the Optionee from one position with the Company to another, or the transfer of an Optionee from one employer to another employer shall not trigger the termination of such Optionee's Option so long as such Optionee remains a bona fide employee of the Company or any Subsidiary. SECTION 7 - NON-TRANSFERABILITY OF OPTIONS Except as hereafter provided, an Option granted under the Plan may not be transferred, pledged or assigned otherwise than by will or the laws of descent and distribution and may be exercised only by the Optionee during his or her lifetime. Options 4 that are exercisable at the date of an Optionee's death may be exercised by the Optionee's heirs entitled thereto or by the administrator or the executor or trustee of his or her last will and testament. Any such exercise may not take place after the earlier of: (i) the expiration of the Option in accordance with Section 6(a)(i) above; and (ii) two years after the date of the Optionee's death without the prior written consent of the Company. SECTION 8 - TERMINATION OR AMENDMENT Subject to regulatory approval and, where required, approval of the shareholders of the Company, the Committee may, at any time and for any reason, amend or terminate the Plan, subject to ratification by the Board. The Plan shall remain in effect until it is terminated by the Committee, subject to ratification by the Board. No Options may be granted under the Plan after its termination, but no termination or amendment of the Plan shall affect any previously granted Option. SECTION 9 - PROTECTION AGAINST DILUTION The Committee shall adjust the number of Shares covered by the Plan and any Option in a manner it considers equitable to reflect any change in the capitalization of the Company including, but not limited to, such changes as stock dividends, consolidations and subdivisions of shares or changes resulting from an amalgamation of the Company with one or more corporations. No fractional shares or rights to acquire a fractional share will be created as a result of an adjustment made pursuant to this section. The Committee shall also adjust the exercise price under any Option in a manner it considers equitable if the number of Shares covered by the Option is adjusted pursuant to this section. SECTION 10 - RIGHTS AS SHAREHOLDERS An Optionee shall have no rights as a shareholder (including the right to vote and to receive dividends) of the Company with respect to Shares covered by Options until such participant becomes the holder of record of such Shares. SECTION 11 - COMPLIANCE WITH CERTAIN U.S. SECURITIES LAWS With respect to persons subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "1934 Act"), transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. If any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 5 SECTION 12 - RESTRICTIONS ON RESALE Under United States federal law, Shares purchased pursuant to Options granted under the Plan by Optionees who are not "affiliates" of the Company within the meaning of the Securities Act of 1933, as amended (the "Act"), generally may be resold without registration or other restriction under the Act. Generally, Shares purchased by "affiliates" pursuant to Options granted under the Plan may not be resold to the public in the United States without registration under the Act, except pursuant to an exemption from such registration. One such exemption from registration is Rule 144 under the Act, which permits resales by affiliates so long as certain volume, manner of sale and other requirements have been satisfied. An "affiliate" is a person who directly or indirectly controls, or is controlled by, or is under common control with, the Company. SECTION 13 - GENERAL LIMITATIONS Neither the Plan nor any Option granted hereunder is to be interpreted as giving any person a right to remain an employee of the Company or any of its Subsidiaries. The Company and its Subsidiaries reserve the right to terminate anyone's service at any time, with or without cause, and neither the Plan nor any Option granted hereunder affects that right. THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE SHARES. 6 EX-99.21 22 EXHIBIT 99.21 EXHIBIT 21 THE LOEWEN GROUP INC. EMPLOYEE STOCK OPTION PLAN (CANADA) (RESTATED AND AMENDED AS AT APRIL 7, 1994 AND FURTHER AMENDED AS AT APRIL 7, 1995, SEPTEMBER 19, 1995 AND APRIL 2, 1996) SECTION 1 - GENERAL (a) The purpose of the Employee Stock Option Plan (Canada) (the "Plan") is to promote the interests of The Loewen Group Inc. (the "Company") by: (i) furnishing Eligible Employees (as defined below) with greater incentive to develop and promote the business and financial success of the Company; and (ii) further associate the interests of Eligible Employees with those of the shareholders of the Company by encouraging such employees to acquire share ownership in the Company. (b) Any questions concerning the Plan should be directed to the Corporate Secretary of the Company, at the Company's principal executive office located at 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8, telephone number (604) 299-9321. (c) The Plan shall be governed by, and construed in accordance with, the laws of the province of British Columbia. SECTION 2 - ELIGIBILITY (a) Under the Plan, employees of the Company or any of its direct or indirect subsidiaries ("Subsidiaries") who are residents of Canada ("Eligible Employees") are eligible to be granted options ("Options") to purchase Common shares without par value of the Company ("Shares"). (b) The Compensation Committee of the Company (the "Committee") or such officer as the Committee may designate shall determine from time to time those Eligible Employees to be granted Options under the Plan, and the number of Shares subject to each such Option. Each grant of an Option pursuant to the Plan shall be evidenced by a stock option agreement ("Option Agreement") executed by the employee to whom the Option is granted (the "Optionee") and the Company. Each Option Agreement shall incorporate such terms and conditions as the Committee, in its discretion, deems consistent with the terms of the Plan. (c) Each Option Agreement shall specify the dates upon which all or any instalment of the Option will be exercisable. An Option may be exercised when instalments vest at any time and from time to time thereafter with respect to all or a portion of the Shares covered by such vested installments. In addition, if an Offer (as hereinafter defined) is made, the Board of Directors, or Committee, may while the Offer remains outstanding: (i) determine that each Option granted by the Company to purchase Shares shall, notwithstanding any vesting period or deferral of the right to exercise otherwise applicable, be immediately exercisable effective on and after a date declared by the Board of Directors, or Committee, to be an advanced exercise date ("Advanced Exercise Date"); and (ii) rescind any declaration of an Advanced Exercise Date but no such rescission shall affect the validity of the exercise of such Option if validly exercised on or after a particular Advanced Exercise Date and before the date of rescission of the declaration of the particular Advanced Exercise Date. For the purposes hereof, "Offer" means an offer to acquire the Shares made to the holders of the Company's Shares where the Shares which are the subject of the offer to purchase, together with the offeror's then presently owned Shares, will in the aggregate exceed twenty percent (20%) of the outstanding Shares of the Company and where two or more persons or companies make offers jointly or in concert or intending to exercise jointly or in concert any voting rights attaching to the Shares to be acquired, then the Shares owned by each of them shall be included in the calculation of the percentage of the Shares of the Company owned by each of them. Paragraphs (i) and (ii) shall apply to each Option granted or to be granted by the Company, which is outstanding at the time of any such declaration regardless of the date of grant thereof, provided that all other terms and conditions of the Option shall continue to apply and nothing herein shall operate to extend, enlarge or revise any Option which has expired, has been exercised, has been cancelled or otherwise has ceased to exist. SECTION 3 - NUMBER OF SHARES SUBJECT TO PLAN (a) The number of Shares issuable pursuant to the exercise of Options after the effective date of restatement and amendment of the Plan is limited as follows: (i) subject to adjustment pursuant to Section 9, the aggregate number of Shares issuable pursuant to Options under the Plan shall not exceed 1,700,000 Shares (including 1,051,025 Shares under Options previously granted but not exercised as of April 7, 1994); and (ii) the number of Shares reserved for issuance to any one person pursuant to options (whether granted under this Plan or otherwise) shall not exceed 5% of the total issued and outstanding Shares on a non-diluted basis. (b) The maximum number of Shares for which Options are granted after the effective date of restatement and amendment of the Plan in any one calendar year under the Plan to any one Eligible Employee shall not exceed 300,000 Shares, subject to adjustment pursuant to Section 9. (c) If an Option granted under the Plan expires for any reason without being exercised in full, the number of Shares that would have been issuable upon the exercise of such Option shall continue to be available under the Plan. (d) Subject to the maximum limits described in subsections (a) and (b) above, the Board of Directors of the Company (the "Board") shall reserve the number of Shares required to honour Options granted from time to time to Optionees pursuant to the Plan, and shall reserve from time to time additional Shares, if any, to ensure that a sufficient number of Shares are available for purchase under Options granted in the future. SECTION 4 - ADMINISTRATION OF THE PLAN (a) The Plan shall be administered by the Committee which shall be comprised of two or more members of the Board who are "outside directors" within the meaning of Section 162(m) of the United States Internal Revenue Code of 1986, as amended; provided, however, that, with respect to Options that may be granted to Eligible Employees who are not subject to Section 16 of the United States Securities Exchange Act of 1934, as amended, the Committee may delegate its responsibilities to a subcommittee consisting of one or more executive officers of the Company. The address of the Committee is care of the Company's principal executive office at 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8. (b) The Committee shall have all powers and discretion necessary or appropriate to administer the Plan, consistent with and subject to the parameters set forth in the Plan, including but not limited to the power (1) to determine from time to time the Eligible Employees to be granted Options under the Plan, (2) to determine the number of Shares subject to each Option granted under the Plan, (3) to set or amend the terms of each Option Agreement, (4) to interpret the Plan, (5) to adopt such rules or guidelines as it deems appropriate to administer the Plan, and (6) to make all other decisions, and take or cause to be taken all other actions, relating to the operation of the Plan. The Committee's determinations under the Plan shall be final and binding on all persons. No member of the Committee shall be liable to any person for any action or decision made in good faith in connection with the performance of the Committee's duties or the exercise of its powers under the Plan. SECTION 5 - OPTION PRICE AND EXERCISABILITY (a) The exercise price of an Option shall not be less than the closing price of the Shares as quoted on The Toronto Stock Exchange on the trading day immediately prior to the date of the grant. (b) Except as otherwise provided in an Option Agreement, no Options shall be exercised by an Optionee for at least 6 months after the date of the grant. An Optionee may exercise an Option by delivering to the Company a duly completed form of notice of such exercise together with full payment for the Shares being purchased under the Option. The form of notice must identify the Option being exercised, state the exercise price, be signed by the Optionee and be dated the date of exercise. The Company shall promptly notify the Optionee as to any taxes required to be collected from the Optionee. Unless otherwise provided in the Option Agreement or consented to by the Company, payment for the Shares must be made in the currency in which the Option is denominated. (c) The sale of the Shares to the Optionee shall be deemed to have occurred, and the Optionee shall be deemed to be the holder of such Shares, on the date that both the form of notice and the payment in a manner acceptable to the Company of the exercise 3 price and any applicable taxes have been received by the Company. A certificate representing the Shares acquired by the Optionee shall be issued and delivered to the Optionee by the Company as soon as is reasonably possible after the sale. SECTION 6 - TERMINATION OF OPTIONS (a) Any Option granted pursuant to the Plan shall terminate upon the earlier of: (i) ten years after the date of grant; and (ii) such event(s) of termination as are provided in the Option Agreement or as are determined from time to time by the Committee. (b) A change in the duties or position of the Optionee, or the transfer of the Optionee from one position with the Company to another, or the transfer of an Optionee from one employer to another employer shall not trigger the termination of such Optionee's Option so long as such Optionee remains a bona fide employee of the Company or any Subsidiary. SECTION 7 - NON-TRANSFERABILITY OF OPTIONS Except as hereafter provided, an Option granted under the Plan may not be transferred, pledged or assigned otherwise than by will or the laws of descent and distribution and may be exercised only by the Optionee during the Optionee's lifetime. Options that are exercisable at the date of an Optionee's death may be exercised by the Optionee's heirs entitled thereto or by the administrator or the executor or trustee of his or her last will and testament. Any such exercise may not take place after the earlier of: (i) the expiration of the Option in accordance with Section 6(a)(i) above; and (ii) two years after the date of the Optionee's death without the prior written consent of the Company. SECTION 8 - TERMINATION OR AMENDMENT Subject to regulatory approval and, where required, approval of the shareholders of the Company, the Committee may, at any time and for any reason, amend or terminate the Plan, subject to ratification by the Board. The Plan shall remain in effect until it is terminated by the Committee, subject to ratification by the Board. No Options may be granted under the Plan after its termination, but no termination or amendment of the Plan shall affect any previously granted Option. 4 SECTION 9 - PROTECTION AGAINST DILUTION The Committee shall adjust the number of Shares covered by the Plan and any Option in a manner which it considers equitable to reflect any change in the capitalization of the Company including, but not limited to, such changes as stock dividends, consolidations and subdivisions of shares or changes resulting from an amalgamation of the Company with one or more corporations. No fractional shares or rights to acquire a fractional share will be created as a result of an adjustment made pursuant to this section. The Committee shall also adjust the exercise price under any Option in a manner it considers equitable if the number of Shares covered by the Option is adjusted pursuant to this section. SECTION 10 - RIGHTS AS SHAREHOLDERS An Optionee shall have no rights as a shareholder (including the right to vote and to receive dividends) of the Company with respect to Shares covered by Options until such participant becomes the holder of record of such Shares. SECTION 11 - SECURITIES REGULATION Where necessary to effect an exemption from the registration or distribution requirements applicable to the Options or the Shares under applicable securities laws or policies, the Committee may take such action or require such action or agreement by any Optionee as may from time to time be necessary to comply with such applicable securities laws and policies. The directors may decline to grant some or all of the Options or to issue some or all of the Shares pursuant to the Plan unless the grant of such Options or the issuance of such Shares is exempt from such requirements, upon the advice of counsel to the Company. SECTION 12 - GENERAL LIMITATIONS Neither the Plan nor any Option granted hereunder is to be interpreted as giving any person a right to remain an employee of the Company or any of its Subsidiaries. The Company and its Subsidiaries reserve the right to terminate anyone's service at any time, with or without cause, and neither the Plan nor any Option granted hereunder affects that right. THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE SHARES. 5 EX-99.22 23 EXHIBIT 99.22 EXHIBIT 22 THIS OPTION AGREEMENT is made as of the day of ,199 . BETWEEN: THE LOEWEN GROUP INC., a body corporate duly incorporated and existing under the laws of the Province of British Columbia and having its principal place of business at 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8, or nominee, (the "Company") OF THE FIRST PART AND: , a director of Loewen Group International, Inc. the wholly owned United States subsidiary of the Company ("LGII"), residing in Houston. (the "Optionee") OF THE SECOND PART WHEREAS: A. The Company has adopted an Employee Stock Option Plan (the "Option Plan") for the purpose of promoting the interests of the Company by furnishing certain of its employees and directors (whether directors of Company or LGII), as designated from time to time by the Company, with greater incentive to develop and promote the business and financial success of the Company and by furthering the identity of interest of such -2- employees or directors with those of the shareholders generally of the Company, through share ownership in the Company; B. The Optionee is a bona fide director of LGII; and C. The Company considers that the grant to the Optionee of options pursuant to the Option Plan will serve the purposes and assist in achieving the objectives of the Option Plan. NOW THEREFORE, in consideration of the premises and the mutual covenants set out below and for other good and valuable consideration, the parties agree as follows: SECTION 1 - DEFINITIONS In this Agreement: (a) "directors" means the Board of Directors of the Company, as constituted from time to time; (b) "Option" means any option to acquire Shares granted hereby; (c) "Option Period" means, with respect to any Option, the period within which the Option may be exercised; (d) "Personal Representative" of an Optionee means any trustee in bankruptcy of such Optionee, any receiver or receiver-manager of the property of such Optionee, any assignee for the benefit of the creditors of such Optionee, any execution creditor of such Optionee, the heir, executor, administrator, successor, legal representative, assign or committee of such Optionee, or any other person who stands in a like relationship to such Optionee; (e) "Option Plan" means the Employee Stock Option Plan adopted by the Company as of November 21, 1986, as amended or modified from time to time pursuant to the terms thereof; (f) "Shares" means the Common Shares in the capital stock of the Company. -3- SECTION 2 - GRANT, PRICE (a) Subject to the provisions of this Agreement, the Company hereby grants to the Optionee the Options listed below, which Options are exercisable in the manner and on the terms set out in this Agreement: (i) an option to acquire 1,000 Shares exercisable at any time commencing after the date that is 12 months after the date of this Agreement and terminating as provided in Section 3; and (ii) an option to acquire 1,000 Shares exercisable at any time commencing after the date that is 24 months after the date of this Agreement and terminating as provided in Section 3; (b) The exercise price for the Options will be $ per share, dollars. SECTION 3 - TERMINATION OF OPTION Each Option will expire and terminate at 11:59 p.m. (Pacific Standard time) upon the earliest to occur of the following: (a) the day which is ten years after the date of this Agreement; (b) forty-five (45) days after the day the Optionee ceases to be a director of LGII; (c) the day that the Optionee is declared bankrupt or makes any assignment for the benefit of his creditors, or the day of the appointment of a receiver or receiver-manager of the property of the Optionee; or (d) the day after a court appoints a committee of the estate of the Optionee on the grounds that he is incapable, by reason of physical or mental infirmity, of managing his affairs. -4- SECTION 4 - NON-TRANSFERABILITY OF OPTION Options are not transferable. Options that, at the date of Optionee's death, are exercisable in accordance with the terms of Section 2 of this Agreement, may be exercised by the Optionee's heirs or administrator or the executor or Trustee of his last will and testament as soon as is legally possible after the Optionee's death. Any such exercise may not take place more than two years after the date of the Optionee's death without the prior written consent of the Company, such consent not to be unreasonably withheld. SECTION 5 - EXERCISE (a) Subject to the terms and conditions of this Agreement, an Option may be exercised only by delivering to the Company, on any day within the Option Period in respect of that Option, written notice of such exercise. The notice will be signed by the Optionee and dated the date of exercise, will identify the Option being exercised, and state the exercise price pursuant to clause 2(b) preceding. (b) Each notice referred to in this section will be accompanied by full payment for the Shares being acquired under the Option, which payment will be made in lawful money of Canada or the United States as the case may be. (c) The delivery of notice and the required payment in respect of a validly exercisable Option will, provided they are in compliance with this section, constitute a sale on the date of delivery of the notice, and the Company so declares and agrees. (d) A certificate representing the Shares acquired by the Optionee will be issued and delivered to the Optionee by the Company as soon as practicable after receipt of the notice and payment. SECTION 6 - ADJUSTMENT OF THE NUMBER OF SHARES The directors will adjust the number of Shares covered by any Option in a manner which is equitable to reflect any change in the capitalization of Company including, but not limited to, such changes as stock dividends, consolidations and subdivisions of shares or changes resulting from an amalgamation of the Company with one or more corporations. If any adjustment under this section would create a fractional share or a right to acquire a -5- fractional share, such fractional share will be disregarded and the number of Shares covered by any Option will be the next lower whole number of Shares, rounding all fractions downward. The directors will adjust the exercise price under any Option in an equitable manner if the number of Shares covered by the Option is adjusted pursuant to this section. Each adjustment made by the directors pursuant to this section will be conclusive and binding on the Company and the Optionee. SECTION 7 - COVENANTS AND AGREEMENTS OF THE COMPANY The Company will reserve or cause to be reserved for allotment from time to time out of the authorized but unissued Shares of the Company sufficient Shares for issue to the Optionee under all Options. SECTION 8 - ADMINISTRATION OF THE OPTION PLAN The Options have been granted pursuant to the Option Plan administered by the Board of Directors of the Company. SECTION 9 - SPOUSES OF OPTIONEES If, upon the occurrence of one or more of the following events: (a) the execution of a separation agreement between the Optionee and his spouse (as defined in any applicable legislation); (b) the making of a declaratory judgement that the Optionee and his spouse have no reasonable prospect of reconciliation with each other; (c) the making of an order for dissolution of the marriage of the Optionee or the judicial separation of the Optionee from his spouse; or (d) the making of an order declaring the marriage of the Optionee null and void, or any similar event, there ensues any legal action to which the spouse of the Optionee seeks an order of the court declaring that such spouse is entitled to an interest in any -6- Option granted hereby, then the Optionee will do all things reasonably necessary in order to ensure that his spouse will not obtain such an order, including indicating to the court his willingness to compensate his spouse for not obtaining such interest by offering to allow to such spouse a greater share of other family assets of equivalent value. SECTION 10 - NOTICES Any notice relating to this Agreement will be in writing and will be deemed to have been delivered if mailed by prepaid registered mail or certified mail: (a) if to the Optionee, to his address as shown above, or upon notice of another address for the purposes of this Agreement, then to such other address as the Optionee will have most recently advised the Company by notice in writing given hereunder, and (b) if to the Company, to the Company's address as shown above, or to such other address as the Company will have most recently advised the Optionee by notice in writing given hereunder. Any notice will be deemed to have been delivered to the party to whom it is addressed, if delivered, when delivered, and if mailed, on the third business day (exclusive of Saturdays, Sundays and statutory holidays) after the same is mailed as aforesaid provided that if, due to a disruption in mail service because of a labour dispute or for any other reason at the place of mailing or at its addressed destination or any intermediate point through which the mail is shipped, the mail is not picked up, dealt with, transmitted or delivered in its ordinary course, then a notice mailed as aforesaid will not be deemed to be delivered as aforesaid but will be deemed to be delivered when actually received. SECTION 11 - SEVERABILITY OF INVALID PROVISIONS If all or any part of any provision of this Agreement should be found and determined to be invalid, illegal or unenforceable, the remainder of this Agreement will continue to be binding on the parties as if the provision or part thereof had been deleted from this Agreement. -7- SECTION 12 - ASSIGNMENT This Agreement may not be assigned in whole or in part by the Optionee. SECTION 13 - BURDEN AND BENEFIT This Agreement will be binding upon the parties hereto and will enure to the benefit of and be binding upon the successors and assigns of the Company and will be binding upon the heirs, successors, legal representatives, executors, administrators and assigns of the Optionee. The Optionee acknowledges that all covenants of the Optionee hereunder will bind his Personal Representative, and any notices required or permitted to be delivered hereunder to the Optionee will be deemed to be delivered if delivered to or by the Personal Representative of the Optionee in accordance with the Provisions of this Agreement. SECTION 14 - SECURITIES LAWS Upon exercise of the rights granted under this Agreement, the Optionee agrees that he will acquire Shares for investment only and will not transfer any Shares acquired pursuant to this Agreement so as to result in a distribution in violation of any applicable federal and state securities laws. The Optionee understands and agrees that any shares which may be issued pursuant to this Agreement may have such legends and restrictions on them and be subject to such stop-transfer instructions as the Company determines to be necessary or appropriate, and further agrees to execute such agreements regarding transfer of such Shares as the Company or its counsel may deem advisable. The Optionee agrees that the Company shall not be required to register any Shares acquired by the Optionee and that the Optionee may be required to hold such Shares indefinitely in the absence of registration or an exemption from registration under applicable securities laws. SECTION 15 - TIME Time will be of the essence in this Agreement. -8- SECTION 16 - LAW GOVERNING This Agreement will be governed by, and construed in accordance with, the laws of the Province of British Columbia, Canada. SECTION 17 - INTERPRETATION OF AGREEMENT Unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing gender include all genders. IN WITNESS WHEREOF, the Company has affixed its corporate seal in the presence of its authorized officers and the Optionee has hereunto set his hand and seal, all as of the year and day first above written. BY THE COMPANY: THE COMMON SEAL OF THE ) COMPANY was hereunto ) affixed in the presence of: ) C/S ) ) - - -----------------------------) Director ) BY THE OPTIONEE: SIGNED AND DELIVERED ) by ) in the presence of: ) ) ) - - -----------------------------) ---------------------------------------------- Signature ) ) - - -----------------------------) Name ) ) - - -----------------------------) Address ) ) -9- - - -----------------------------) Occupation ) EX-99.23 24 EXHIBIT 99.23 EXHIBIT 23 THIS OPTION AGREEMENT is made as of the day of , 199 . BETWEEN: THE LOEWEN GROUP INC., a body corporate duly incorporated and existing under the laws of the Province of British Columbia and having its principal place of business at 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8, or nominee, (the "Company") OF THE FIRST PART AND: , a director of a subsidiary of the Company, residing in . (the "Optionee") OF THE SECOND PART WHEREAS: A. The Company has adopted a Stock Option Plan (the "Option Plan") for the purpose of promoting the interests of the Company by furnishing certain of its directors or directors of a subsidiary, as designated from time to time by the Company, with greater incentive to develop and promote the business and financial success of the Company and by furthering the identity of interest of such directors with those of the shareholders generally of the Company, through share ownership in the Company; -2- B. The Optionee is a bona fide director of the Company or one of its subsidiaries; and C. The Company considers that the grant to the Optionee of options pursuant to the Option Plan will serve the purposes and assist in achieving the objectives of the Option Plan. NOW THEREFORE, in consideration of the premises and the mutual covenants set out below and for other good and valuable consideration, the parties agree as follows: SECTION 1 - DEFINITIONS In this Agreement: (a) "directors" means the Board of Directors of the Company, as constituted from time to time; (b) "Option" means any option to acquire Shares granted hereby; (c) "Option Period" means, with respect to any Option, the period within which the Option may be exercised; (d) "Personal Representative" of an Optionee means any trustee in bankruptcy of such Optionee, any receiver or receiver-manager of the property of such Optionee, any assignee for the benefit of the creditors of such Optionee, any execution creditor of such Optionee, the heir, executor, administrator, successor, legal representative, assign or committee of such Optionee, or any other person who stands in a like relationship to such Optionee; (e) "Option Plan" means the Employee Stock Option Plan adopted by the Company as of November 21, 1986, as amended or modified from time to time pursuant to the terms thereof; (f) "Shares" means the Common Shares in the capital stock of the Company. -3- SECTION 2 - GRANT, PRICE (a) Subject to the provisions of this Agreement, the Company hereby grants to the Optionee the Options listed below, which Options are exercisable in the manner and on the terms set out in this Agreement: (i) an option to acquire Shares exercisable at any time commencing after the date that is months after the date of this Agreement and terminating as provided in Section 3; and (ii) an option to acquire Shares exercisable at any time commencing after the date that is months after the date of this Agreement and terminating as provided in Section 3; (b) The exercise price for the Options will be $ per share, dollars. SECTION 3 - TERMINATION OF OPTION Each Option will expire and terminate at 11:59 p.m. (Pacific Standard time) upon the earliest to occur of the following: (a) the day which is ten years after the date of this Agreement; (b) forty-five (45) days after the day the Optionee ceases to be a director of the Company; (c) the day that the Optionee is declared bankrupt or makes any assignment for the benefit of his creditors, or the day of the appointment of a receiver or receiver-manager of the property of the Optionee; or (d) the day after a court appoints a committee of the estate of the Optionee on the grounds that he is incapable, by reason of physical or mental infirmity, of managing his affairs. -4- SECTION 4 - NON-TRANSFERABILITY OF OPTION Options are not transferable. Options that, at the date of Optionee's death, are exercisable in accordance with the terms of Section 2 of this Agreement, may be exercised by the Optionee's heirs or administrator or the executor or Trustee of his last will and testament as soon as is legally possible after the Optionee's death. Any such exercise may not take place more than two years after the date of the Optionee's death without the prior written consent of the Company, such consent not to be unreasonably withheld. SECTION 5 - EXERCISE (a) Subject to the terms and conditions of this Agreement, an Option may be exercised only by delivering to the Company, on any day within the Option Period in respect of that Option, written notice of such exercise. The notice will be signed by the Optionee and dated the date of exercise, will identify the Option being exercised, and state the exercise price pursuant to clause 2(b) preceding. (b) Each notice referred to in this section will be accompanied by full payment for the Shares being acquired under the Option, which payment will be made in lawful money of Canada or the United States as the case may be. (c) The delivery of notice and the required payment in respect of a validly exercisable Option will, provided they are in compliance with this section, constitute a sale on the date of delivery of the notice, and the Company so declares and agrees. (d) A certificate representing the Shares acquired by the Optionee will be issued and delivered to the Optionee by the Company as soon as practicable after receipt of the notice and payment. SECTION 6 - ADJUSTMENT OF THE NUMBER OF SHARES The directors will adjust the number of Shares covered by any Option in a manner which is equitable to reflect any change in the capitalization of Company including, but not limited to, such changes as stock dividends, consolidations and subdivisions of shares or changes resulting from an amalgamation of the Company with one or more corporations. If any adjustment under this section would create a fractional share or a right to acquire a -5- fractional share, such fractional share will be disregarded and the number of Shares covered by any Option will be the next lower whole number of Shares, rounding all fractions downward. The directors will adjust the exercise price under any Option in an equitable manner if the number of Shares covered by the Option is adjusted pursuant to this section. Each adjustment made by the directors pursuant to this section will be conclusive and binding on the Company and the Optionee. SECTION 7 - COVENANTS AND AGREEMENTS OF THE COMPANY The Company will reserve or cause to be reserved for allotment from time to time out of the authorized but unissued Shares of the Company sufficient Shares for issue to the Optionee under all Options. SECTION 8 - ADMINISTRATION OF THE OPTION PLAN The Options have been granted pursuant to the Option Plan administered by the Board of Directors of the Company. SECTION 9 - SPOUSES OF OPTIONEES If, upon the occurrence of one or more of the following events: (a) the execution of a separation agreement between the Optionee and his spouse (as defined in any applicable legislation); (b) the making of a declaratory judgement that the Optionee and his spouse have no reasonable prospect of reconciliation with each other; (c) the making of an order for dissolution of the marriage of the Optionee or the judicial separation of the Optionee from his spouse; or (d) the making of an order declaring the marriage of the Optionee null and void, or any similar event, there ensues any legal action to which the spouse of the Optionee seeks an order of the court declaring that such spouse is entitled to an interest in any -6- Option granted hereby, then the Optionee will do all things reasonably necessary in order to ensure that his spouse will not obtain such an order, including indicating to the court his willingness to compensate his spouse for not obtaining such interest by offering to allow to such spouse a greater share of other family assets of equivalent value. SECTION 10 - NOTICES Any notice relating to this Agreement will be in writing and will be deemed to have been delivered if mailed by prepaid registered mail or certified mail: (a) if to the Optionee, to his address as shown above, or upon notice of another address for the purposes of this Agreement, then to such other address as the Optionee will have most recently advised the Company by notice in writing given hereunder, and (b) if to the Company, to the Company's address as shown above, or to such other address as the Company will have most recently advised the Optionee by notice in writing given hereunder. Any notice will be deemed to have been delivered to the party to whom it is addressed, if delivered, when delivered, and if mailed, on the third business day (exclusive of Saturdays, Sundays and statutory holidays) after the same is mailed as aforesaid provided that if, due to a disruption in mail service because of a labour dispute or for any other reason at the place of mailing or at its addressed destination or any intermediate point through which the mail is shipped, the mail is not picked up, dealt with, transmitted or delivered in its ordinary course, then a notice mailed as aforesaid will not be deemed to be delivered as aforesaid but will be deemed to be delivered when actually received. SECTION 11 - SEVERABILITY OF INVALID PROVISIONS If all or any part of any provision of this Agreement should be found and determined to be invalid, illegal or unenforceable, the remainder of this Agreement will continue to be binding on the parties as if the provision or part thereof had been deleted from this Agreement. -7- SECTION 12 - ASSIGNMENT This Agreement may not be assigned in whole or in part by the Optionee. SECTION 13 - BURDEN AND BENEFIT This Agreement will be binding upon the parties hereto and will enure to the benefit of and be binding upon the successors and assigns of the Company and will be binding upon the heirs, successors, legal representatives, executors, administrators and assigns of the Optionee. The Optionee acknowledges that all covenants of the Optionee hereunder will bind his Personal Representative, and any notices required or permitted to be delivered hereunder to the Optionee will be deemed to be delivered if delivered to or by the Personal Representative of the Optionee in accordance with the Provisions of this Agreement. SECTION 14 - SECURITIES LAWS Upon exercise of the rights granted under this Agreement, the Optionee agrees that he will acquire Shares for investment only and will not transfer any Shares acquired pursuant to this Agreement so as to result in a distribution in violation of any applicable federal and state securities laws. The Optionee understands and agrees that any shares which may be issued pursuant to this Agreement may have such legends and restrictions on them and be subject to such stop-transfer instructions as the Company determines to be necessary or appropriate, and further agrees to execute such agreements regarding transfer of such Shares as the Company or its counsel may deem advisable. The Optionee agrees that the Company shall not be required to register any Shares acquired by the Optionee and that the Optionee may be required to hold such Shares indefinitely in the absence of registration or an exemption from registration under applicable securities laws. SECTION 15 - TIME Time will be of the essence in this Agreement. -8- SECTION 16 - LAW GOVERNING This Agreement will be governed by, and construed in accordance with, the laws of the Province of British Columbia, Canada. SECTION 17 - INTERPRETATION OF AGREEMENT Unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing gender include all genders. IN WITNESS WHEREOF, the Company has affixed its corporate seal in the presence of its authorized officers and the Optionee has hereunto set his hand and seal, all as of the year and day first above written. BY THE COMPANY: THE COMMON SEAL OF THE ) COMPANY was hereunto ) affixed in the presence of: ) C/S ) - - ----------------------------- ) Director ) BY THE OPTIONEE: SIGNED AND DELIVERED ) by ) in the presence of: ) ) - - ----------------------------- ) ------------------------------------------ Signature ) ) - - ----------------------------- ) Name ) ) - - ----------------------------- ) Address ) -9- ) - - ----------------------------- ) Occupation ) EX-99.24 25 EXHIBIT 99.24 EXHIBIT 24 THIS OPTION AGREEMENT is made as of the day of , 199 . BETWEEN: THE LOEWEN GROUP INC., a body corporate duly incorporated and existing under the laws of the Province of British Columbia and having its principal place of business at 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8, or nominee, (the "Company") OF THE FIRST PART AND: , an employee of the Company or LGII (as hereinafter defined), residing in (the "Optionee") OF THE SECOND PART WHEREAS: A. The Optionee is a bona fide employee of the Company or its wholly owned United States subsidiary Loewen Group International, Inc. ("LGII"); B. The Company has adopted an Employee Stock Option Plan (the "Option Plan") for the purpose of promoting the interests of the Company by furnishing certain of its employees (or employees of LGII), as designated from time to time by the Company, with greater incentive to develop and promote the business and financial success of the Company and by furthering the identity of interest of such employees or directors with those -2- of the shareholders generally of the Company, through share ownership in the Company; and C. The Company considers that the grant to the Optionee of options pursuant to the Option Plan will serve the purposes and assist in achieving the objectives of the Option Plan. NOW THEREFORE, in consideration of the premises and the mutual covenants set out below and for other good and valuable consideration, the parties agree as follows: SECTION 1 - DEFINITIONS In this Agreement: (a) "directors" means the Board of Directors of the Company, as constituted from time to time; (b) "Option" means any option to acquire Shares granted hereby; (c) "Option Period" means, with respect to any Option, the period within which the Option may be exercised; (d) "Personal Representative" of an Optionee means any trustee in bankruptcy of such Optionee, any receiver or receiver-manager of the property of such Optionee, any assignee for the benefit of the creditors of such Optionee, any execution creditor of such Optionee, the heir, executor, administrator, successor, legal representative, assign or committee of such Optionee, or any other person who stands in a like relationship to such Optionee; (e) "Option Plan" means the Employee Stock Option Plan adopted by the Company as of November 21, 1986, as amended or modified from time to time pursuant to the terms thereof; (f) "Shares" means the Common Shares in the capital stock of the Company. -3- SECTION 2 - GRANT, PRICE (a) Subject to the provisions of this Agreement, the Company hereby grants to the Optionee the Options listed below, which Options are exercisable in the manner and on the terms set out in this Agreement: (i) an option to acquire Shares exercisable at any time commencing after the date that is months after the date of this Agreement and terminating as provided in Section 3; (ii) an option to acquire Shares exercisable at any time commencing after the date that is months after the date of this Agreement and terminating as provided in Section 3; (iii) an option to acquire Shares exercisable at any time commencing after the date that is months after the date of this Agreement and terminating as provided in Section 3; (iv) an option to acquire Shares exercisable at any time commencing after the date that is months after the date of this Agreement and terminating as provided in Section 3; and (v) an option to acquire Shares exercisable at any time commencing after the date that is months after the date of this Agreement and terminating as provided in Section 3. (b) The exercise price for the Options will be $ per share, dollars. SECTION 3 - TERMINATION OF OPTION Each Option will expire and terminate at 11:59 p.m. (Pacific Standard time) upon the earliest to occur of the following: (a) the day which is ten years after the date of this Agreement; (b) forty-five (45) days after the day the Optionee ceases to be an employee of the Company or LGII; -4- (c) the day that the Optionee is declared bankrupt or makes any assignment for the benefit of his creditors, or the day of the appointment of a receiver or receiver-manager of the property of the Optionee; or (d) the day after a court appoints a committee of the estate of the Optionee on the grounds that he is incapable, by reason of physical or mental infirmity, of managing his affairs. SECTION 4 - NON-TRANSFERABILITY OF OPTION Options are not transferable. Options that, at the date of Optionee's death, are exercisable in accordance with the terms of Section 2 of this Agreement, may be exercised by the Optionee's heirs or administrator or the executor or Trustee of his last will and testament as soon as is legally possible after the Optionee's death. Any such exercise may not take place more than two years after the date of the Optionee's death without the prior written consent of the Company, such consent not to be unreasonably withheld. SECTION 5 - EXERCISE (a) Subject to the terms and conditions of this Agreement, an Option may be exercised only by delivering to the Company, on any day within the Option Period in respect of that Option, written notice of such exercise. The notice will be signed by the Optionee and dated the date of exercise, will identify the Option being exercised, and state the exercise price pursuant to clause 2(b) preceding. (b) Each notice referred to in this section will be accompanied by full payment for the Shares being acquired under the Option, which payment will be made in lawful money of Canada or the United States as the case may be. (c) The delivery of notice and the required payment in respect of a validly exercisable Option will, provided they are in compliance with this section, constitute a sale on the date of delivery of the notice, and the Company so declares and agrees. -5- (d) A certificate representing the Shares acquired by the Optionee will be issued and delivered to the Optionee by the Company as soon as practicable after receipt of the notice and payment. SECTION 6 - ADJUSTMENT OF THE NUMBER OF SHARES The directors will adjust the number of Shares covered by any Option in a manner which is equitable to reflect any change in the capitalization of Company including, but not limited to, such changes as stock dividends, consolidations and subdivisions of shares or changes resulting from an amalgamation of the Company with one or more corporations. If any adjustment under this section would create a fractional share or a right to acquire a fractional share, such fractional share will be disregarded and the number of Shares covered by any Option will be the next lower whole number of Shares, rounding all fractions downward. The directors will adjust the exercise price under any Option in an equitable manner if the number of Shares covered by the Option is adjusted pursuant to this section. Each adjustment made by the directors pursuant to this section will be conclusive and binding on the Company and the Optionee. SECTION 7 - COVENANTS AND AGREEMENTS OF THE COMPANY The Company will reserve or cause to be reserved for allotment from time to time out of the authorized but unissued Shares of the Company sufficient Shares for issue to the Optionee under all Options. SECTION 8 - ADMINISTRATION OF THE OPTION PLAN The Options have been granted pursuant to the Option Plan administered by the Compensation Committee of the Board of Directors of the Company. SECTION 9 - SPOUSES OF OPTIONEES If, upon the occurrence of one or more of the following events: -6- (a) the execution of a separation agreement between the Optionee and his spouse (as defined in any applicable legislation); (b) the making of a declaratory judgement that the Optionee and his spouse have no reasonable prospect of reconciliation with each other; (c) the making of an order for dissolution of the marriage of the Optionee or the judicial separation of the Optionee from his spouse; or (d) the making of an order declaring the marriage of the Optionee null and void, or any similar event, there ensues any legal action to which the spouse of the Optionee seeks an order of the court declaring that such spouse is entitled to an interest in any Option granted hereby, then the Optionee will do all things reasonably necessary in order to ensure that his spouse will not obtain such an order, including indicating to the court his willingness to compensate his spouse for not obtaining such interest by offering to allow to such spouse a greater share of other family assets of equivalent value. SECTION 10 - NOTICES Any notice relating to this Agreement will be in writing and will be deemed to have been delivered if mailed by prepaid registered mail or certified mail: (a) if to the Optionee, to his address as shown above, or upon notice of another address for the purposes of this Agreement, then to such other address as the Optionee will have most recently advised the Company by notice in writing given hereunder, and (b) if to the Company, to the Company's address as shown above, or to such other address as the Company will have most recently advised the Optionee by notice in writing given hereunder. Any notice will be deemed to have been delivered to the party to whom it is addressed, if delivered, when delivered, and if mailed, on the third business day (exclusive of Saturdays, Sundays and statutory holidays) after the same is mailed as aforesaid provided that if, due to a disruption in mail service because of a labour dispute or for any other reason at the place of mailing or at its addressed destination or any intermediate point through which the -7- mail is shipped, the mail is not picked up, dealt with, transmitted or delivered in its ordinary course, then a notice mailed as aforesaid will not be deemed to be delivered as aforesaid but will be deemed to be delivered when actually received. SECTION 11 - SEVERABILITY OF INVALID PROVISIONS If all or any part of any provision of this Agreement should be found and determined to be invalid, illegal or unenforceable, the remainder of this Agreement will continue to be binding on the parties as if the provision or part thereof had been deleted from this Agreement. SECTION 12 - ASSIGNMENT This Agreement may not be assigned in whole or in part by the Optionee. SECTION 13 - BURDEN AND BENEFIT This Agreement will be binding upon the parties hereto and will enure to the benefit of and be binding upon the successors and assigns of the Company and will be binding upon the heirs, successors, legal representatives, executors, administrators and assigns of the Optionee. The Optionee acknowledges that all covenants of the Optionee hereunder will bind his Personal Representative, and any notices required or permitted to be delivered hereunder to the Optionee will be deemed to be delivered if delivered to or by the Personal Representative of the Optionee in accordance with the Provisions of this Agreement. SECTION 14 - SECURITIES LAWS Upon exercise of the rights granted under this Agreement, the Optionee agrees that he will acquire Shares for investment only and will not transfer any Shares acquired pursuant to this Agreement so as to result in a distribution in violation of any applicable federal and state securities laws. The Optionee understands and agrees that any shares which may be issued pursuant to this Agreement may have such legends and restrictions on them and be subject to such stop-transfer instructions as the Company -8- determines to be necessary or appropriate, and further agrees to execute such agreements regarding transfer of such Shares as the Company or its counsel may deem advisable. The Optionee agrees that the Company shall not be required to register any Shares acquired by the Optionee and that the Optionee may be required to hold such Shares indefinitely in the absence of registration or an exemption from registration under applicable securities laws. SECTION 15 - TIME Time will be of the essence in this Agreement. SECTION 16 - LAW GOVERNING This Agreement will be governed by, and construed in accordance with, the laws of the Province of British Columbia, Canada. SECTION 17 - INTERPRETATION OF AGREEMENT Unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing gender include all genders. IN WITNESS WHEREOF, the Company has affixed its corporate seal in the presence of its authorized officers and the Optionee has hereunto set his hand and seal, all as of the year and day first above written. BY THE COMPANY: THE COMMON SEAL OF THE ) COMPANY was hereunto ) affixed in the presence of: ) C/S ) ) Director ) -9- BY THE OPTIONEE: SIGNED AND DELIVERED ) by ) in the presence of: ) ) ) Signature ) ) ) Name ) ) ) Address ) ) ) Occupation ) EX-99.25 26 EXHIBIT 99.25 EXHIBIT 25 THE LOEWEN GROUP INC. EMPLOYEE SHARE PURCHASE PLAN (UNITED STATES) (RESTATED AND AMENDED AS AT APRIL 7, 1994 AND FURTHER AMENDED AS AT APRIL 7, 1995) SECTION 1 - GENERAL (a) The purpose of the Employee Share Purchase Plan (United States) (the "Plan") is to provide a convenient method for employees of The Loewen Group Inc. (the "Company") and its direct or indirect subsidiaries ("Subsidiaries") who are residents of the United States or its territories to participate in the share ownership of the Company, or to increase their share ownership in the Company. Under the Plan, as of such dates as the Board of Directors of the Company (the "Board") may fix during each calendar year ("Commencement Dates"), the Company will offer to Eligible Employees (as defined below) an opportunity to purchase Common shares of the Company ("Shares") via payroll deductions over the subsequent 12 months. The amendments and restatements described herein shall take effect on the first Commencement Date following the date hereof. (b) The Plan is not qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code") and is not subject to any of the provisions of the Employment Retirement Income Security Act of 1974. (c) Any questions concerning the Plan should be directed to the Corporate Secretary of the Company, at the Company's principal executive offices located at 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8, telephone number (604) 299-9321. (d) All dollar amounts are in United States dollars. The Plan will be governed by, and construed in accordance with, the laws of the Province of British Columbia. SECTION 2 - ELIGIBILITY (a) An employee of the Company or its Subsidiaries who is a resident of the United States or its territories is eligible to participate in the Plan if he or she is a regularly scheduled full-time employee who: (i) works at least 20 hours per week on a regular basis, (ii) has completed the three month probationary period of service with the Company or any of its Subsidiaries, and (iii) has reached the age of majority in the place of his or her residence (an "Eligible Employee"). Any employee who either (a) beneficially owns more than 10% of the Shares of the Company or (b) beneficially owns the right to vote more than 10% of such Shares, is not eligible to participate in the Plan. In addition, a director of the Company or its Subsidiaries who is not otherwise an Eligible Employee is not eligible to participate in the Plan. (b) The number of Shares an Eligible Employee elects to purchase at any Commencement Date will reduce the maximum number of Shares he or she may purchase at any subsequent Commencement Dates during the same calendar year. (c) An Eligible Employee may elect to begin participation in the Plan on a Commencement Date by providing the Company or the Eligible Employee's employer with a duly completed Payroll Deduction Authorization Form on or before a date fixed by the Board (the "Application Date") following the applicable Commencement Date. An employee's participation ends on the earlier of the date the Plan is terminated by the Company and the date the employee discontinues payroll deductions as outlined under Section 5 below. (d) The Plan is intended to provide for broad-based employee participation as contemplated by the U.S. Internal Revenue Code section 410(b). SECTION 3 - PURCHASE PRICE The purchase price per Share is the Current Market Price (as hereinafter defined) for the Shares. "Current Market Price" means the weighted average closing price per Share for the Shares for the five consecutive trading days immediately preceding the applicable Commencement Date, as reported by the Nasdaq National Market or any United States national securities exchange or quotation system on which the Shares are traded. SECTION 4 - LIMITATIONS (a) The aggregate number of Shares that may be issued under the Plan shall not exceed 800,000 Shares. Subject to the foregoing, Eligible Employees will be entitled make elections to purchase such number of Shares in a calendar year that the Board determines from time to time. Currently, the maximum number of Shares that an Eligible Employee may elect to purchase in each calendar year is: (i) 500, if such Eligible Employee earns an annual base salary of $25,000 or more as of the applicable Commencement Date, or (ii) 350, if such Eligible Employee earns an annual base salary of less than $25,000 as of the applicable Commencement Date. The current minimum number of Shares that an Eligible Employee may elect to purchase in any calendar year is 25, and each Eligible Employee may only elect to purchase Shares in multiples of 25. (b) So long as all other conditions described herein have been satisfied, each participant in the Plan will receive a share certificate evidencing the Shares purchased pursuant to the Plan as soon as is reasonably possible after the day the last payroll deduction is made in respect of the purchase of such Shares. (c) If during the period between the day an election is made by a participant to purchase Shares and the day a share certificate for such Shares is to be issued in such participant's name there is an amalgamation or other reorganization of the Company or a stock dividend is paid on the Shares, the number of Shares issued to the participant will be adjusted to take into account such amalgamation or other reorganization or stock dividend, as the case may be. SECTION 5 - PAYROLL DEDUCTIONS (a) At the time a participant files his or her Payroll Deduction Authorization Form, the Company will determine the fixed dollar amount to be deducted and withheld from the participant's paycheck (the "Deducted Amount") on each pay day during the time the employee is a participant in the Plan. This amount will be determined by multiplying the number of Shares elected to be purchased by the participant at a Commencement Date by the Current Market Price, and dividing such amount by the number 24 for participants having 24 pay periods per year, or by the number of pay periods per year for participants having a different number of pay periods per year. The Deducted Amount for each Commencement Date that an employee chooses to participate will then be added to determine the participant's total payroll deduction amount. (b) A participant may at any time discontinue payroll deductions. Any discontinuance of payroll deductions must be made by delivering written notice of such discontinuance to the Company at least two weeks before the effective date of such discontinuance. (c) Where a participant elects to discontinue payroll deductions, or where his or her employment with the Company or any of its Subsidiaries ceases for any reason before the last of the applicable payroll deductions has been made, the participant may elect to either (i) pay the remaining amount owing at the time of discontinuance or cessation of employment and receive a share certificate issued in his or her name, or (ii) have all payroll deductions made to that time returned to him or her without interest. If discontinuance of payroll deductions occurs and the participant continues to be an employee of the Company or any of its direct or indirect Subsidiaries, the participant may not re-enter the Plan prior to the next Commencement Date; provided, however that if the participant is an "executive officer" within the meaning of Rule 16a-1(f) under the Exchange Act of 1934, as amended, such participant may not re-enter the Plan until at least six months after the effective date of such discontinuance. (d) At any time after a participant's first payroll deduction is made, such participant may elect to pay the remaining portion of the aggregate purchase price payable for the Shares being purchased as of the relevant Commencement Date. SECTION 6 - COSTS The Company will pay all costs of establishing and maintaining the Plan. All brokers' commissions on the sale of Shares by a participant will be paid by the participant. The participant also must pay all taxes associated with the purchase and sale of the Shares. 3 SECTION 7 - ADMINISTRATION The Plan will be administered by the Board. The Board will be vested with full authority to make, administer, and interpret such rules and regulations as it deems necessary to administer the Plan, and any determination, decision, or action of the Board in connection with the construction, interpretation, administration, or application of the Plan will be final, conclusive, and binding upon all participants and any and all persons claiming under or through any participant. The Board may delegate any or all of its authority hereunder to such committee as it may designate. A committee appointed by the Board in accordance with the provisions of this Section may consist of both Board and non-Board members. The address of the Board is in care of the Company's principal executive office, 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8. SECTION 8 - AMENDMENT OR DISCONTINUANCE OF THE PLAN Subject to regulatory approval and, where required, approval of the shareholders of the Company, the Board will have the right to amend, modify, or terminate the Plan at any time on 30 days written notice to all participants, delivered to each participant in care of the place of business where such participant reports to work, PROVIDED HOWEVER that no such termination or amendment will adversely affect the current participation by the participant in the Plan. SECTION 9 - NOTICES All notices or other communications by a participant to the Company under or in connection with the Plan will be deemed to have been duly given when received by the Company at its principal executive office, 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8, Attention: Corporate Secretary. All notices or other communications by the Company to a participant under or in connection with the Plan will be deemed to have been duly given when delivered by the Company to the participant care of the place of business where such participant reports to work. SECTION 10 - RISK EACH EMPLOYEE ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE SHARES. SECTION 11 - SECURITIES REGULATION AND TAX WITHHOLDING (a) Under United States federal law, Shares purchased pursuant to the Plan by participants who are not "affiliates" of the Company within the meaning of the Securities Act of 1933, as amended (the "Act"), generally may be resold without registration or other restriction under the Act. Generally Shares purchased by "affiliates" pursuant to the Plan may not be resold to the public in the United States without registration under the Act, except pursuant to an exemption from such registration. One such exemption from 4 registration is Rule 144 under the Act, which permits resales by affiliates so long as certain volume, manner of sale and other requirements have been satisfied. An "affiliate" is a person who directly or indirectly controls, or is controlled by, or is under common control with, the Company. (b) No Shares will be issued pursuant to the Plan unless the Shares are registered or qualified under appropriate securities laws, or the issuance of the Shares is exempt therefrom in the opinion of the Board upon the advice of counsel to the Company. (c) The Board may take all such measures as it deems appropriate to ensure that the Company's obligations under the withholding provisions under tax laws applicable to the Company and other provisions of applicable laws are satisfied with respect to the issuance of Shares pursuant to the Plan. (d) Issuance, transfer or delivery of certificates for Shares purchased pursuant to the Plan may be delayed, at the discretion of the Board, until it is satisfied that the applicable requirements of securities and tax laws have been met. If for any reason the Company is unable to deliver certificates for Shares, its only obligation will be to return without interest all payroll deductions made. (e) With respect to persons subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "1934 Act"), transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. If any provision of the Plan or action by the Board fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Board. SECTION 12 - RIGHTS AS SHAREHOLDERS A participant shall have no rights as a shareholder (including the right to vote and to receive dividends) of the Company with respect to Shares elected to be purchased under the Plan until such participant has completed the last payroll deduction in respect of such Shares. SECTION 13 - ASSIGNMENT/SUCCESSORS The rights of a participant under the Plan may not be transferred other than by will or as a result of the laws of descent and distribution. Except as so provided, the rights and obligations of the Company and participants pursuant to the Plan will be binding upon and inure to the benefit of such parties and their successors and assigns. 5 EX-99.26 27 EXHIBIT 99.26 EXHIBIT 26 THE LOEWEN GROUP INC. EMPLOYEE SHARE PURCHASE PLAN (CANADA) (RESTATED AND AMENDED AS AT APRIL 7, 1994 AND FURTHER AMENDED AS AT APRIL 7, 1995) SECTION 1 - PURPOSE OF THE PLAN The purpose of the Employee Share Purchase Plan (Canada) (the "Plan") of The Loewen Group Inc. (the "Company") is to provide a convenient method for employees of the Company or any of its direct or indirect subsidiaries (the "Subsidiaries") who are residents of Canada to participate in the share ownership of the Company, or to increase their share ownership in the Company. Under the Plan, as of such dates as the Board of Directors of the Company (the "Board") may fix during each calendar year (the "Commencement Dates"), the Company will offer to Eligible Employees (as defined below) an opportunity to purchase Common shares of the Company ("Shares") via payroll deduction over the subsequent 12 months. All dollar amounts referred to in the Plan are in Canadian funds. SECTION 2 - PARTICIPATION (a) An employee of the Company or its Subsidiaries who is a resident of Canada is eligible to participate in the Plan if he or she is a regularly scheduled full-time employee who (i) works at least 20 hours per week on a regular basis, (ii) has completed the three month probationary period of service with the Company or any of its Subsidiaries, and (iii) has reached the age of majority in the place of his or her residence (an "Eligible Employee"). Any employee who beneficially owns more than 10% of the issued and outstanding Shares or exercises control or direction over more than 10% of the Shares is not eligible to participate under the Plan. In addition, a director of the Company or its Subsidiaries who is not otherwise an Eligible Employee is not eligible to participate in the Plan. Participation in the Plan will in no way constitute any form of agreement or understanding binding on the Company, express or implied, that the Company or its Subsidiaries will employ a participant for any length of time. (b) An Eligible Employee may elect to begin participation in the Plan on a Commencement Date by providing the Company with a duly completed Payroll Deduction Authorization Form on or before a date fixed by the Board (the "Application Date") following the applicable Commencement Date. (c) An Eligible Employee becomes a participant when he or she completes, signs, and files with the Company on or before the Application Date following the applicable Commencement Date, a Payroll Deduction Authorization Form authorizing the Company to deduct and withhold funds from his or her pay cheques to purchase Shares under the Plan. An employee's participation ends on the earlier of the date the Plan is terminated by the Company and the date the employee discontinues payroll deductions. (d) The Plan is intended to provide for broad-based employee participation as contemplated by United States Internal Revenue Code section 410(b). SECTION 3 - LIMITATIONS (a) The aggregate number of Shares that may be issued under the Plan shall not exceed 800,000 Shares. Subject to the foregoing, Eligible Employees will be entitled to make elections to purchase such number of Shares in a calendar year that the Board determines from time to time. Currently, Eligible Employees earning an annual salary of $25,000 or more are entitled to make elections to purchase no more than 500 Shares in each calendar year, and Eligible Employees earning an annual salary that is less than $25,000 are entitled to make elections to purchase no more than 350 Shares in each calendar year. The current minimum amount of Shares an Eligible Employee may elect to purchase in any calendar year is 25 Shares, and each Eligible Employee may only elect to purchase Shares in multiples of 25 Shares. (b) If during the period between the day an election is made by a participant to purchase Shares and the day a share certificate for such Shares is to be issued in such participant's name there is an amalgamation or other reorganization of the Company or a stock dividend is paid on the Shares, the number of Shares issued to the participant will be adjusted to take into account such amalgamation or other reorganization or stock dividend, as the case may be. SECTION 4 - PURCHASE PRICE The purchase price per Share is the Current Market Price (as hereinafter defined) for the Shares. "Current Market Price" means the weighted average closing price per Share on The Toronto Stock Exchange for the Shares for the five consecutive trading days immediately preceding the applicable Commencement Date. SECTION 5 - PAYROLL DEDUCTIONS (a) At the time a participant files his or her Payroll Deduction Authorization Form, the Company shall determine the fixed dollar amount to be deducted and withheld from his or her pay cheque (the "Deducted Amount") on each pay day during the time he or she is a participant in the Plan. This amount will be determined by multiplying the number of Shares elected to be purchased by the participant at a Commencement Date by the Current Market Price, and dividing such amount by the number 24 for participants having 24 pay periods per year, or by the number of pay periods per year for participants having a different number of pay periods per year. The Deducted Amount for each Commencement Date that an employee chooses to participate will then be added to determine the participant's total payroll deduction amount. (b) Each participant in the Plan will receive a share certificate evidencing the Shares purchased pursuant to the Plan as soon as is reasonably possible after the day the last payroll deduction is made in respect of the purchase of such Shares. (c) A participant may at any time discontinue his or her payroll deductions. A participant may re-enter the Plan on any subsequent Commencement Date, provided, however, that if the participant is an "executive officer" within the meaning of Rule 16a-1(f) of the United States Securities Exchange Act of 1934, as amended, such participant may not re-enter the Plan until at least six months after the effective date of such discontinuance. Any change in or discontinuance of a payroll deduction must be made by delivering written notice of such change or discontinuance to the Company at least 2 weeks before the effective date of such change or discontinuance. (d) Where a participant discontinues payroll deductions or his or her employment with the Company or any of its Subsidiaries ceases for any reason before the last payroll deduction for a 12 month period has been made, the participant may elect to either (i) pay the remaining amount owing at the time of discontinuance or cessation of employment and receive a share certificate issued in his or her name; or (ii) have all payroll deductions made to that time returned to him or her without interest. (e) At any time after a participant's first payroll deduction is made, such participant may elect to pay the remaining portion of the aggregate purchase price payable for the Shares being purchased as of the relevant Commencement Date. SECTION 6 - COSTS The Company shall pay all costs of establishing and maintaining the Plan. All brokers' commissions on the sale of Shares delivered to a participant in accordance with the provisions of the Plan shall be paid by the participant. The participant also must pay all taxes associated with the purchase and sale of the Shares. SECTION 7 - AMENDMENT OR DISCONTINUANCE OF THE PLAN (a) Subject to obtaining the necessary regulatory approvals and, where required, the approval of the shareholders of the Company, the Board shall have the right to amend, modify, or terminate the Plan at any time on 30 days written notice to all participants delivered to each participant in care of the place of business where such participant reports to work, PROVIDED HOWEVER that no such termination or amendment will adversely affect the current participation by the participant in the Plan. (b) In the event of termination of the Plan, each participant will have the option to pay the remainder owing at that time and to receive a share certificate evidencing the Shares 3 purchased as soon as is reasonably possible thereafter, or to have his or her payments returned to him or her, without interest. SECTION 8 - ADMINISTRATION The Plan shall be administered by the Board. The Board shall be vested with full authority to make, administer, and interpret such rules and regulations as it deems necessary to administer the Plan, and any determination, decision, or action of the Board in connection with the construction, interpretation, administration, or application of the Plan will be final, conclusive, and binding upon all participants and any and all persons claiming under or through any participant. The Board may delegate any or all of its authority hereunder to such committee as it may designate. A committee appointed by the Board may consist of both Board and non-Board members. SECTION 9 - NOTICES All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received by the Company at its principal executive office, 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8, Attention: Corporate Secretary. All notices or other communications by the Company to a participant under or in connection with the Plan shall be deemed to have been duly given when delivered by the Company to the participant care of the place of business where such participant reports to work. SECTION 10 - LIMITATIONS ON SALE OF SHARES PURCHASED UNDER THE PLAN The Plan is intended to provide Shares for investment and not for resale. The Company does not, however, intend to restrict or influence any employee in the conduct of his or her own affairs. After all payroll deductions have been made and a share certificate has been issued, an employee, therefore, may sell Shares purchased under the Plan at any time he or she chooses, subject to compliance with any applicable securities laws. THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE SHARES. SECTION 11 - RIGHTS AS SHAREHOLDERS A participant shall have no rights as a shareholder (including the right to vote and to receive dividends) of the Company with respect to Shares elected to be purchased under the Plan until such participant has completed the last payroll deduction in respect of such Shares. 4 SECTION 12 - SECURITIES REGULATION (a) No Shares shall be issued pursuant to the Plan unless the Shares are issued in compliance with the registration and prospectus requirements of applicable securities laws, or the issuance of the Shares is exempt from such requirements in the opinion of counsel to the Company. (b) Issuance, transfer or delivery of certificates for Shares purchased pursuant to the Plan may be delayed, at the discretion of the Board until it is satisfied that the applicable requirements of securities and income tax laws have been met. If for any reason the Company is unable to deliver certificates for Shares, its only obligation will be to return without interest all payroll deductions made. (c) With respect to persons subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "1934 Act"), transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. If any provision of the Plan or action by the Board fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Board. SECTION 13 - APPLICABLE LAW The Plan shall be governed by, and construed in accordance with, the laws of the province of British Columbia. SECTION 14 - ASSIGNMENT/SUCCESSORS The rights of a participant under the Plan may not be transferred other than by will or as a result of the laws of descent and distribution. Except as so provided, the rights and obligations of the Company and participants pursuant to the Plan will be binding upon and inure to the benefit of such parties and their successors and assigns. 5 EX-99.27 28 EXHIBIT 99.27 EXHIBIT 27 THE LOEWEN GROUP INC. 1994 MANAGEMENT EQUITY INVESTMENT PLAN ARTICLE I. PURPOSE The purpose of the 1994 Management Equity Investment Plan of The Loewen Group Inc. (the "Company") is primarily to provide the Company's wholly owned U.S. subsidiary, Loewen Group International, Inc. ("LGII"), with a cost- effective financing program through the issuance of senior exchangeable debt and secondarily to provide an incentive opportunity for selected key employees of LGII's direct and indirect U.S. subsidiaries to participate in any long-term appreciation in the Company's shares, thereby enhancing incentives to work in the shareholders' best interests and encouraging such employees to focus on long-term returns for the Company. Under the Plan, a new issue of senior exchangeable debentures of LGII will be issued to a wholly owned special purpose subsidiary of LGII. The special purpose subsidiary, acting as the agent of LGII, will finance approximately 95% of the purchase price of the debentures through third-party financing, including without limitation the issuance of senior bank debt. The remaining purchase price of the debentures (approximately 5%) will be financed through the sale to certain key employees of LGII's direct and indirect U.S. subsidiaries of rights (and in some instances obligations) to purchase the debentures. The third-party debt will be guaranteed by the Company and LGII. Proceeds from the sale of debentures to key employees will be used to retire the third-party debt. The debentures will be exchangeable for a new series of convertible preferred shares of the Company which, in turn, will be convertible into common shares of the Company. ARTICLE II. DEFINITIONS As used herein, the following terms have the meanings set forth below unless the context clearly indicates to the contrary: (a) "Board" means the Board of Directors of the Company. (b) "Committee" means a committee of two or more members of the Board who are not employees of the Company or any of its subsidiaries and who are appointed by the Board to administer the Plan. (c) "Common Shares" means the Common Shares, without par value, of the Company. (d) "Company" means The Loewen Group Inc. (e) "Convertible Preferred Shares" means the Convertible First Preferred Shares, Series B, of the Company. (f) "Debentures" means the 1994 Exchangeable Floating Rate Debentures due [June 1, 2001] of LGII. (g) "Exchange Notice" means (i) an exercise and exchange notice pursuant to which a Participant exercises a right to purchase Debentures under an Investment Option Agreement and instructs that Debentures held on behalf of the Participant be exchanged for Convertible Preferred Shares or (ii) an exchange notice whereby a holder of Debentures acquired under a Purchase Agreement instructs that such Debentures be exchanged, in whole or in part, for Convertible Preferred Shares. (h) "Funding Agent" means Loewen Management Investment Corporation, a wholly owned special purpose subsidiary of LGII. (i) "Investment Option Agreement" means an agreement pursuant to which an Option is issued to a Participant. (j) "Investment Option Amount" means $50 per $1,000 principal amount of the Debentures specified in the related Investment Option Agreement. (k) "LGII" means Loewen Group International Inc., a wholly owned U.S. subsidiary of the Company. (l) "Option" means the Participant's option to purchase the principal amount of Debentures specified in the related Investment Option Agreement. (m) "Participant" means any employee of any direct or indirect U.S. subsidiary of LGII designated as a "Participant" pursuant to Article V of this Plan. (n) "Plan" means the 1994 Management Equity Investment Plan. (o) "Purchase Agreement" means the agreement of Funding Agent to sell, and of a Participant to purchase, the principal amount of Debentures specified therein. A Participant shall pay an amount equal to $50 per $1,000 principal amount of Debentures upon execution of the Purchase Agreement, and shall be obligated to deliver an additional amount equal to the Purchase Price of the Debentures on the date or dates specified in the Purchase Agreement upon which the purchase of Debentures thereunder is to occur. 2 (p) "Purchase Price" means an amount equal to $950 per $1,000 principal amount of the Debentures purchased by a Participant upon the exercise of all or part of such Participant's Option or performance of all or part of any Purchase Agreement. ARTICLE III. DEBENTURES, CONVERTIBLE PREFERRED SHARES AND COMMON SHARES SUBJECT TO THE PLAN (a) The aggregate principal amount of Debentures which may be sold to Participants pursuant to the Plan is limited to $_____ million. In addition, the maximum aggregate principal amount of Debentures which may be sold to any single Participant pursuant to an Investment Option Agreement is limited to $______ million and the maximum aggregate principal amount of Debentures which may be sold to any single Participant pursuant to a Purchase Agreement is $___ million. The maximum number of Common Shares which may be issued under the Plan is limited to _____ shares. (b) At the same time that Debentures are sold to the Funding Agent, the Funding Agent and LGII will enter into an Investment Option Agreement and/or Purchase Agreement with each Participant. (c) The Company has initially reserved for issuance, upon exchange of the Debentures, an aggregate of _____ authorized Convertible Preferred Shares and has initially reserved for issuance, upon conversion of the Convertible Preferred Shares, an aggregate of _______ authorized Common Shares. The Company will provide the Participants with an acknowledgment of its agreement to issue Convertible Preferred Shares in exchange for Debentures. (d) The Common Shares to be delivered upon conversion of the Convertible Preferred Shares will be made available at the direction of the Committee either from authorized but unissued Common Shares or from previously issued Common Shares held by the Company in its treasury. ARTICLE IV. ADMINISTRATION OF THE PLAN (a) The Plan will be administered by the Committee in its sole discretion. The Committee has and may exercise, in its sole discretion, such powers and authority of the Board as may, in the Committee's sole discretion, be necessary or appropriate for the Committee to carry out its functions as described in the Plan and/or in any document or documents authorized by the Board to be entered into by the Company in order to implement the Plan. The Committee is authorized to interpret the 3 Plan and to determine, in its sole discretion, the forms and the terms and provisions of the respective Investment Option Agreements, Purchase Agreements, Debentures and Exchange Notices (including, without limitation, determining the period or periods of continuous employment of the Participant with LGII or any direct or indirect U.S. subsidiary of LGII necessary before the Option or installments thereof shall become exercisable). In addition, the Committee in its sole discretion, is authorized to make all other determinations and approve all other documents, instruments and forms necessary or advisable for Plan administration. It shall not be necessary that the forms and the terms and conditions of any of the aforesaid be identical with respect to each Participant, and the Committee shall have the power and authority to approve, in its sole discretion, changes in each of such documents, instruments and forms as they relate to any one or more Participants. The Committee, in its sole discretion, may accelerate the vesting and/or exercisability of all or a part of a Participant's Option prior to the Expiration Date. The Committee is also authorized, in its sole discretion, to prescribe, amend, and rescind rules and regulations relating to the Plan. Notwithstanding the foregoing, the Committee may not change the minimum exchange price with respect to the Debentures or the privileges and rights attached to the Convertible Preferred Shares, any such change requiring approval by the Board. All interpretations, determinations, and actions by the Committee will be final, conclusive and binding upon all parties. (b) the Committee, in its sole discretion, may authorize guarantees of third-party loans to Participants in connection with the acquisition of Options (but not Purchase Agreements) by such Participants on such terms as the Committee shall, in its sole discretion, determine. (c) Notwithstanding the foregoing provisions of this Article IV or any provision of this Plan to the contrary, any agreement to which LGII or Funding Agent is a party, any modification or amendment of any such agreement, and any action required to be taken by LGII or Funding Agent, shall be effective only pursuant to the authority of the Board of Directors of LGII of Funding Agent or pursuant to other valid corporate action of such corporation. (d) No member of the Board or the Committee will be liable for any action taken, any failure to act or any determination made by such member, the Board or the Committee with respect to the Plan, any Debenture or Convertible Preferred Shares or Common Shares or any Investment Option Agreement or Purchase Agreement executed pursuant to the Plan, except for bad faith or wilful misconduct. ARTICLE V. ELIGIBILITY The Committee shall in its sole discretion select the employees of LGII's direct and indirect U.S. subsidiaries who may participate in the Plan and determine the aggregate principal amount of Debentures which may be purchased by each Participant. 4 Participants shall be selected from among the key employees of such subsidiaries taking into consideration position, performance, compensation level and such other factors as the Committee deems relevant. Each Investment Option Agreement and Purchase Agreement may include such terms and conditions not inconsistent with the Plan as the Committee may determine. ARTICLE VI. TERMS AND CONDITIONS OF AGREEMENTS The terms and conditions of the Investment Option Agreements and Purchase Agreements shall be as set forth in the form approved by the Committee. The Investment Option Agreements and Purchase Agreements will be issued upon payment by the Participants of the amounts specified therein. ARTICLE VII. TERMS AND CONDITIONS AND DELIVERY OF DEBENTURES The terms and conditions of the Debentures shall be approved by the Committee. Debentures will be sold to a Participant upon receipt of the relevant Exchange Notice and upon payment of the specified Purchase Price on the Debentures. ARTICLE VIII. TERMS AND CONDITIONS AND DELIVERY OF CONVERTIBLE PREFERRED SHARES The terms and conditions of the Convertible Preferred Shares are as set forth in the form of Special Rights and Restrictions Attached to the Convertible Preferred Shares on file at the office of the Company. Convertible Preferred Shares shall be issued to a Participant upon execution and delivery of the relevant Exchange Notice. ARTICLE IX. GENERAL PROVISIONS (a) Nothing in the Plan or in any instrument executed pursuant to the Plan will (i) confer upon any Participant any right to continue in the employ of the Company or its subsidiaries or affect the right of the Company or its subsidiaries to terminate the employment of any Participant at any time with or without cause or 5 (ii) affect the rights of a Participant under any employment contract or benefit plan of the Company or its subsidiaries. Neither the employment status nor the salary or compensation of an employee will be impaired by a decision by an employee not to participate in the Plan. (b) No Investment Option Agreement, Purchase Agreement, Debenture, Convertible Preferred Shares or Common Shares will be issued pursuant to this Plan unless and until all then applicable requirements imposed by U.S., Canadian, state and provincial securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any stock exchanges upon which the Common Shares may be listed, have been fully met. As a condition precedent to the issuance of shares of Common Shares or Convertible Preferred Shares, as appropriate, pursuant to an Exchange Notice, the Company may require the Participant to take any reasonable action to meet such requirements. The Company shall not be obligated to undertake the registration or qualification of any Debentures, Common Shares or Convertible Preferred Shares under any applicable securities laws. (c) The Company or any of its direct and indirect U.S. subsidiaries may make such provisions as it deems appropriate to withhold any taxes that the Company or such subsidiary determines it is required to withhold in connection with any transaction contemplated by the Plan. (d) All references to dollars in this Plan shall be deemed to refer to U.S. dollars. ARTICLE X. FUNDING AGENT Funding Agent will act solely as agent on behalf of LGII with respect to the offer and sale of the Investment Option Agreements and Purchase Agreements and the third-party financing, including evidences of indebtedness issued for the purpose of financing, in part, the initial purchase of the Debentures and with respect to the acquisition, holding and transfer of Debentures pursuant to the Plan. ARTICLE XI. AMENDMENT AND TERMINATION (a) The Board will have the power, in its sole discretion, to amend, suspend or terminate the Plan at any time. (b) No amendment, suspension or termination of the Plan will, without the consent of the Participant affected, impair or adversely affect any right of a 6 Participant under outstanding Investment Option Agreements or Purchase Agreements previously issued under the Plan; provided, however, that if the Plan is not approved by the shareholders of the Company pursuant to Article XII hereof, the rights of any Participant under an Investment Option Agreement or Purchase Agreement shall terminate and all amounts paid by such Participant in respect of such agreement shall be promptly refunded without interest. ARTICLE XII. EFFECTIVE DATE OF PLAN AND DURATION OF PLAN This Plan will become effective upon adoption by the Committee, approval by The Toronto Stock Exchange and The Montreal Exchange and approval by a "disinterested shareholder vote" (in accordance with the requirements of The Toronto Stock Exchange and The Montreal Exchange) at a meeting of the shareholders of the Company. Unless previously terminated or extended, the Plan will terminate when no Debentures or Convertible Preferred Shares remain outstanding. 7 EX-99.28 29 EXHIBIT 99.28 EXHIBIT 28 ______________ principal amount _____________________________ of Debentures the "Participant" INVESTMENT OPTION AGREEMENT, made as of this 15th day of June, 1994, among LOEWEN GROUP INTERNATIONAL, INC. (the "Company"), LOEWEN MANAGEMENT INVESTMENT CORPORATION, a wholly owned subsidiary of the Company acting as agent for the Company ("LMIC"), and the above-named Participant. WHEREAS, the Compensation Committee of the Board of Directors of the Company's parent corporation, The Loewen Group Inc. ("TLGI") has adopted The Loewen Group Inc. 1994 Management Equity Investment Plan (the "Plan") to provide an incentive to designated employees of the Company's direct and indirect U.S. subsidiaries to continue employment and to work in the best interests of the TLGI's shareholders by offering the employees the opportunity to make an investment that will increase the employees' participation in the potential appreciation of TLGI's Common Shares (the "Common Shares"); WHEREAS, the Participant is employed by a direct or indirect U.S. subsidiary of the Company in a key capacity and the committee designated by TLGI's Board of Directors to administer the Plan (the "Committee") has designated the Participant as an eligible employee under the Plan; WHEREAS, in connection with the Plan, the Company is issuing and selling to LMIC an issue of 1994 Exchangeable Floating Rate Debentures due July 15, 2001 (the "Debentures"), which will be exchangeable for Convertible First Preferred Shares, Series B, of TLGI (the "Convertible Preferred Shares"), which in turn will be convertible into Common Shares; and WHEREAS, LMIC, in its capacity as agent for the Company, has agreed to sell to the Participant an investment option to purchase from LMIC a specified principal amount of the Debentures and the Participant has agreed to purchase such option from LMIC. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows: 1. SALE AND PURCHASE OF OPTION. LMIC hereby sells, and the Participant hereby purchases, an investment option (the "Option") evidenced by this Investment Option Agreement entitling the Participant to purchase from LMIC the principal amount of Debentures indicated above (the "Option Debentures"), at a purchase price equal to $95,000 per $100,000 principal amount of Option Debentures (the "Purchase Price"). The Option is not intended to be an incentive stock option. 2. INVESTMENT OPTION AMOUNT FOR THE OPTION. Simultaneously with the Participant's execution and delivery of this Investment Option Agreement, the Participant has delivered to LMIC $5,000 per $100,000 principal amount of the Option Debentures, representing the purchase price of the Option (the "Investment Option Amount"). 3. RESTRICTIONS ON EXERCISE OF THE OPTION. (a) EXERCISABILITY. Except as otherwise provided herein, the Option may not be exercised, in whole or in part, at any time prior to the fifth anniversary of the date of this Investment Option Agreement. Thereafter, the Option may be exercised beginning on the fifth anniversary of the date hereof with respect to 50% of the principal amount of the Option Debentures, and beginning on each of the sixth and seventh anniversaries of the date hereof with respect to an additional 25% of the principal amount of the Option Debentures. (b) ACCELERATED EXERCISABILITY. Notwithstanding Section 3(a), but subject to Sections 3(c) and 3(d), the Option shall vest in full and may be exercised immediately upon the occurrence of any Accelerated Vesting Event as defined in Exhibit A hereto. (c) EXPIRATION. The Option may not be exercised on or after, and shall expire on, June 15, 2001 or such earlier date as is provided herein (the "Expiration Date"). (d) SECURITIES LAWS. The Participant confirms that the Participant will not make any distribution of Option Debentures purchased pursuant to any exercise of the Option, the Convertible Preferred Shares into which such Option Debentures are exchangeable or the Common Shares into which such Convertible Preferred Shares are convertible, in violation of applicable securities laws. 4. REPURCHASE OF THE OPTION. (a) DISCRETIONARY REPURCHASE. In the event the weighted average trading price of the Common Shares for any five consecutive days on which such shares are traded on NASDAQ/NMS exceeds $75.00 per share (as adjusted to reflect any stock split, stock dividend or similar event) during the term hereof, LMIC may repurchase the Option (and all other options outstanding under investment option agreements entered into pursuant to the Plan), in whole, 20 business days after notice to the Participant specifying LMIC's determination to repurchase the Option and the date of repurchase. The repurchase shall be effected by paying the Participant an amount equal to the Investment Option Amount applicable to the unexercised portion of the Option; PROVIDED, HOWEVER, that in such event the Option shall become exercisable in full (except to the extent that any portion of the Option has been forfeited pursuant to Section 5) and the Participant shall have the right to exercise the unexercised portion of the Option 2 within 18 business days after the date of such notice. Upon repurchase, the then unexercised portion of the Option shall expire. (b) REPURCHASE UPON REDEMPTION OF DEBENTURES. In the event the Debentures are redeemed by the Company pursuant to Section 3(a) of the Debentures, LMIC shall repurchase the unexercised portion of the Option on the date of such redemption by paying the Participant an amount equal to the Investment Option Amount applicable to the unexercised portion of the Option. (c) REPURCHASE FOLLOWING EXPIRATION. Unless sooner repurchased pursuant to Section 4(a) or 4(b), LMIC shall repurchase the Option, in whole, on the Expiration Date by paying the Participant an amount equal to the Investment Option Amount applicable to the unexercised portion of the Option. 5. TERMINATION OF EMPLOYMENT. If the Participant is no longer employed with the Company or any of its direct or indirect U.S. subsidiaries for any reason whatsoever, including death or disability, the unexercised portion of the Option shall be forfeited except to the extent that the Option has become nonforfeitable as follows: the Option shall become nonforfeitable with respect to 14% of the Option Debentures on each of the first five anniversaries of the date hereof and with respect to an additional 15% of the Option Debentures on the sixth and seventh anniversaries of the date hereof, provided that the Participant is employed by the Company or any of its subsidiaries on such date. The Participant (or the Participant's estate in the event of Participant's death) shall be entitled (until the Expiration Date and subject to Sections 3 and 4) to exercise the nonforfeited portion of the Option to the extent not previously exercised. The Investment Option Amount with respect to any portion of the Option Debenture forfeited pursuant to this Section 5 shall be refunded to the Participant, without interest, within 20 business days after the date on which the Participant terminates employment. 6. EXERCISE. (a) GENERAL. The Option may be exercised by the Participant as a whole or from time to time in part by completion and delivery to LMIC of a notice (together with any documents specified therein) in one of several forms to be prescribed by LMIC depending on whether the Participant proposes to pay the Purchase Price for the Debentures being purchased in cash or with the prior consent of LMIC, by application of the proceeds from a simultaneous conversion of Debentures into Convertible Preferred Shares and then into Common Shares and the sale of all or a portion of such Common Shares (provided such sale is permitted under applicable securities laws). Upon exercise of the Option the Participant will be required to pay to LMIC an amount equal to the Purchase Price (I.E., $95,000 for each $100,000 principal amount of Option Debentures being purchased). Each exercise of the Option shall be made with respect to no less than $50,000 principal amount of Option Debentures unless 3 the remaining principal amount of Debentures purchasable under the Option is less than such amount. (b) COMPLIANCE WITH LAWS. Notwithstanding anything herein to the contrary, no Debentures, Convertible Preferred Shares or Common Shares will be issued hereunder unless and until all the applicable requirements imposed by U.S., Canadian, state and provincial securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction have been met. Neither the Company, LMIC nor TLGI shall be obligated to undertake the registration or qualification of Debentures, Convertible Preferred Shares or Common Shares under any applicable securities laws. (c) SCHEDULE. Upon each exercise of the Option, the Participant will be required to submit to LMIC the Participant's copy of this Investment Option Agreement for notation by LMIC on the schedule annexed hereto of the principal amount of Option Debentures purchased, the date of exercise and the remaining principal amount of Option Debentures for which the Option may be exercised. When the Option has been fully exercised, the Participant's copy of this Investment Option Agreement will be marked cancelled. Upon any repurchase of the Option, the Participant will be required to deliver the Participant's copy of this Investment Option Agreement to LMIC for similar marking. 7. EXCHANGE. Exchange of Debentures acquired by a Participant upon exercise of the Option shall be effected by completion and delivery to the Company of an exchange notice (together with the documents specified therein) in the form prescribed by the Company. Participant shall be required to exchange any Debentures acquired pursuant to this Agreement for Convertible Preferred Shares, and each notice relating to the exercise of the Option hereunder shall include a statement that Participant elects to exchange the Debentures acquired pursuant to the Option for Convertible Preferred Shares. Each such exchange shall be effected immediately upon the purchase or the Debenture by Participant. Participant shall not be required to convert Convertible Preferred Shares acquired pursuant to such exchange into Common Shares. To the extent that the exchange of Debentures would result in the issuance of fractional shares, the Participant shall be entitled only to receive cash equal to the market value of such fractional shares. 8. MISCELLANEOUS. (a) NO RIGHT TO CONTINUED EMPLOYMENT. Neither this Investment Option Agreement nor the Plan shall be construed as giving the Participant any right to be retained in the employ of TLGI, the Company or any of their direct or indirect subsidiaries. (b) NON-TRANSFERABILITY. Except as provided in Section 5, the Option is exercisable only by the Participant during his or her lifetime and neither this Investment 4 Option Agreement nor the Option may be sold, pledged, assigned, hypothecated or transferred in any manner. (c) TAX WITHHOLDING. The Company and its subsidiaries shall have the right to require the Participant to remit to the Company, prior to the delivery of any certificate or certificates for Debentures, Convertible Preferred Shares or Common Shares or the payment of any money or other property, an amount sufficient to satisfy any tax withholding requirements. (d) AMENDMENT. This Investment Option Agreement may not be modified, amended or waived in any manner except by an instrument in writing signed by each of the parties hereto. The waiver by any party of compliance with any provision of this Investment Option Agreement by any other party shall not operate or be construed as a waiver of any other provision of this Investment Option Agreement, or of any subsequent breach by such party of a provision of this Investment Option Agreement. (e) NOTICE OF CERTAIN EVENTS. The Company shall provide the Participant with a copy of any notice required to be given to holders of Debentures pursuant to the terms of the Debentures. Any such notice shall be provided to the Participant at the same time such notice is required to be provided to holders of Debentures. (f) MAINTENANCE OF AN OFFICE. This Investment Option Agreement may be submitted for exercise of the Option and notices or demands to or upon LMIC in respect hereof may be served at the offices of Loewen Group Inc. in Covington, Kentucky. LMIC will advise the Participant of any change in the location of such office. (g) NOTICES. Except as otherwise provided herein, every notice or other communication relating to this Investment Option Agreement shall be in writing, and shall be mailed or delivered to the party for whom it is intended at such address as may from time to time be designated by such party in a notice mailed or delivered to the other party as herein provided; PROVIDED, HOWEVER, that unless and until some other address shall be so designated, all notices or communications by the Company to the Participant may be given to the Participant personally or may be mailed to the address noted under the Participant's signature below. Any notice or other communication given by personal delivery shall be conclusively deemed to have been delivered on the day of actual delivery thereof and, if given by registered mail, on the third business day following the deposit thereof in the mail and, if given by electronic communication, on the day of transmittal thereof if given during the normal business hours of the recipient and on the business day during which such normal business hours next occur if not given during such hours on any day. Any notice given by electronic communication shall be confirmed by mail or personal delivery as noted above. 5 (h) HEADINGS. The headings of paragraphs herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any of the provisions of this Investment Option Agreement. (i) GOVERNING LAW. This Investment Option Agreement is to be governed by and interpreted in accordance with the laws of New York. (j) ACKNOWLEDGMENT OF AGENCY. The parties hereto acknowledge that LMIC is acting as agent on behalf of the Company and is issuing and selling the Option and is acquiring, holding and transferring the Debentures, in its capacity as such pursuant to the terms of this Investment Option Agreement and the Plan. Accordingly, the rights and obligations of LMIC hereunder shall be regarded as direct rights and obligations of the Company for all purposes hereunder. IN WITNESS WHEREOF, the parties hereto have executed this Investment Option Agreement as of the day and year first above written. LOEWEN GROUP INTERNATIONAL, INC. By: ---------------------------------------------- Title: ---------------------------------------- Address: -------------------------------------- -------------------------------------- -------------------------------------- LOEWEN MANAGEMENT INVESTMENT CORPORATION By: ---------------------------------------------- Title: ---------------------------------------- Address: -------------------------------------- -------------------------------------- -------------------------------------- -------------------------------------------------- Participant Address: -------------------------------------- -------------------------------------- -------------------------------------- -------------------------------------------------- Social Security or Tax I.D. Number 6 SCHEDULE RECORD OF OPTION EXERCISES -------------------------- Principal Amount of Remaining Principal Debentures Purchased Amount of Debentures DATE PURSUANT TO OPTION SUBJECT TO OPTION - - ---- -------------------- -------------------- NOTATION MADE BY - - ---------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- 7 EXHIBIT A Accelerated Vesting Events An "Accelerated Vesting Event" shall be deemed to have occurred upon (i) an Event of Default under the Debentures, (ii) either Section 3.1 or Section 3.2 of the Shareholder Rights Plan dated April 20, 1990 of TLGI, as amended, becoming applicable, or (iii) the acquisition of 25% or more of the Common Shares by any person other than Raymond L. Loewen. EX-99.29 30 EXHIBIT 99.29 EXHIBIT 29 THE LOEWEN GROUP INC. SUPPLEMENT TO THE 1994 MANAGEMENT EQUITY INVESTMENT PLAN INCOME TAX CONSEQUENCES UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The discussion under this heading summarizes the principal United States federal income tax consequences to a Participant who is an employee of a subsidiary of LGII and who is resident in the United States and is not resident in Canada of the (i) grant and exercise of an Option, (ii) the exchange of Debentures acquired by the exercise of an Option for Convertible Preferred Shares, (iii) the conversion of Convertible Preferred Shares into Common Shares and (iv) the holding and disposition of Common Shares. It is based on the current provisions of the Internal Revenue Code of 1986 and the regulations thereunder and on counsel's understanding of the current administrative practices of the Internal Revenue Service. This discussion is general only and is not a substitute for independent advice from an individual's own tax advisor. In addition, the income tax consequences may differ for a Participant who enters into a Purchase Agreement. A Participant will not recognize any taxable income at the time an Option is granted. TLGI believes that the transfer of Convertible Preferred Shares to a Participant upon the exercise of an Option should be treated as a transfer of a single item of property subject to Section 83 of the Internal Revenue Code, which governs the taxation of property transferred in connection with the performance of services. If this is the case, upon the exercise of an Option and the simultaneous exchange of the Debentures for Convertible Preferred Shares, a Participant should recognize ordinary income equal to the excess of the fair market value of the Convertible Preferred Shares over the amount paid for the Convertible Preferred Shares, including the price paid to acquire the Option and the amount paid upon exercise of the Option. A Participant who exercises an Option is generally subject to (i) income tax and the Medicare portion of FICA taxes on the ordinary income recognized by the Optionee, and (ii) the Old Age, Survivors and Disability portion of FICA taxes to the extent that such Optionee's total compensation (including income from the exercise of the Option) does not exceed the FICA wage base. Other employment taxes may also apply. The Participant must pay to the Participant's employer the amount of all taxes which must be withheld in connection with exercise of the Option. Assuming that Section 83 applies only at the time of exercise of the Option as described above, a Participant generally should not recognize income upon the conversion of Convertible Preferred Shares into Common Shares. The Participant's tax basis in the Common Shares will be identical to his basis in the Convertible Preferred Shares, I.E., the fair market value of the Convertible Preferred Shares at the time the Option was exercised. Upon a disposition of the Common Shares, any difference between the sale price and the Participant's tax basis in the Common Shares generally should be treated as capital gain or loss, and will qualify for long-term capital gain or loss treatment if the Common Shares have been held for more than one year following the exercise of the Option. Capital losses may generally be used to offset capital gains and are available to offset up to $3,000 of ordinary income in a given taxable year. Individuals may carry forward unused capital losses indefinitely. If a Participant disposes of Convertible Preferred Shares prior to the conversion of such Shares into Common Shares, the Participant generally should recognize capital gain or loss equal to the difference between the net proceeds of the sale and the Participant's tax basis in the Convertible Preferred Shares. The Internal Revenue Service could take the position that the exercise of an Option represents the transfer of two separate items of property--a debt instrument and a separate option to acquire Common Shares--subject to separate tax treatment under Section 83. In such case, any gain recognized at the time of exercise of the Option would be limited to the excess, if any, of the fair market value of the Debenture (without regard to the value of the option element) over the amount paid. The subsequent conversion of the Convertible Preferred Shares into Common Shares also would be subject to Section 83, and at that time the Participant would recognize ordinary income equal to the excess of the fair market value of the Common Shares over the fair market value of the Debenture at the time the Option was exercised. Although there can be no assurances in this regard, TLGI does not believe that such position, if asserted by the Internal Revenue Service, would be sustained by the courts. The Participant's employer generally should be entitled to a tax deduction corresponding in amount and time to the Participant's recognition of ordinary income in the circumstances described above, provided, among other things, that such deduction meets the test of reasonableness, is an ordinary and necessary business expense and is not an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code and that any applicable withholding requirements are satisfied. CANADIAN TAX CONSEQUENCES The discussion under this heading summarizes the probable principal Canadian federal income tax consequences of participation in the Investment Option Agreement under the MEIP, including the purchase of an Option, the acquisition of Debentures on the exercise of the Option the exchange of Debentures for Convertible Preferred Shares and the exchange of Convertible Preferred Shares into Common shares of the Company. This summary does not discuss the Canadian tax consequences of participation in the MEIP under the Purchase Agreement, which are applicable only to Raymond L. Loewen. This summary applies to a Participant who is resident in the U.S. and is not resident in Canada, or who is resident in Canada and is not resident in the U.S. It is based on the current provisions of the INCOME TAX ACT of Canada (the "Tax Act"), the regulations thereunder and on counsels' understanding to the current administrative practices of Revenue Canada Customs, Excise and Taxation. The provisions of the Tax Act are subject to income tax treaties to which Canada is a party including the CANADA-U.S. INCOME TAX CONVENTION (1980) (the "Tax Treaty"). This summary assumes that the Company will continue to be a public corporation for purposes of the Tax Act, and that any Convertible Preferred Shares or Common shares of the Company acquired by a Participant who is resident in Canada (collectively, the "Shares") constitute capital property to the Participant. Shares so acquired will generally be considered to constitute capital property unless the Participant either holds the Shares in the course of carrying on a business or has acquired the Shares in a transaction or transaction considered to be an adventure in the nature of trade. This discussion is general only and is not a substitute for independent advice from a Participant's own tax advisor. U.S. RESIDENT PARTICIPANTS A Participant who is resident in the U.S. and is not resident in Canada will not be subject to Canadian income tax on either the acquiring or exercising of an Option or on the acquiring, holding or disposing of Debentures or Shares acquired pursuant to the MEIP. Under the Tax Act and the Tax Treaty, Canadian withholding tax will apply on any dividends on Shares paid by the Company to a Participant who is the beneficial owner of the dividends and resident in the U.S. for U.S. tax purposes. CANADIAN RESIDENT PARTICIPANTS A Participant who is resident in Canada will not recognize income at the time of acquiring an Option. Neither the Company nor any of its Subsidiaries will be entitled to a deduction for Canadian tax purposes at any time in respect of the grant or exercise of an Option by a Participant. 2 A Participant who exercises an Option and acquires Debentures and is required immediately to exchange the Debentures for Convertible Preferred Shares will likely have to recognize income for Canadian tax purposes equal to the amount by which the fair market value of the Convertible Preferred Shares acquired (determined as at the time of their acquisition) exceed the aggregate principal amount of the Debentures to which the Option relates. The cost to the Participant of the Convertible Preferred Shares received on the exchange will be the fair market value of the Convertible Preferred Shares acquired. Where possible, the Company will be required to withhold tax in respect of such income. Although the matter is not entirely free from doubt, a Participant may be entitled to deduct, in computing taxable income for the year in which the Option is exercised, one-quarter of the amount required to be included in income, if the following conditions are met: (a) the Participant deals at arm's length with the Company, and (b) pursuant to an undertaking entered into at the time of becoming a Participant under the MEIP, the Participant is required immediately to convert into Common shares any Convertible Preferred Shares acquired upon an exchange of Debentures. A Participant will not realize income or a capital gain or capital loss on the conversion of Convertible Preferred Shares into Common shares. The cost to the Participant of the Common shares so acquired will be the amount that was the cost to that participant of the Convertible Preferred Shares which were so converted. Upon a disposition of Shares acquired by a Participant who is resident in Canada to a purchaser other than the Company, the Participant will recognize a capital gain (or capital loss) equal to the amount by which the proceeds of disposition exceed (or are exceeded by) the adjusted cost based to the Participant of the Shares so disposed of. The adjusted cost base of such Shares will equal the cost to the Participant of the Shares averaged with the cost of all such Shares of the same class already owned by the Participant. Three- quarters of any capital gains realized by a Participant will be required to be included in income for Canadian tax purposes. If an Option expires unexercised, a Participant who receives a refund of the amount paid to acquire the Option will not realize income or a capital gain or capital loss for Canadian tax purposes. MEIP ADMINISTRATOR The following persons are the present members of the MEIP Administrator: Charles Barnard Loewen Ernest Glenn Penner James Dudley McLennan 3 ARCHIVE HISTORY OF DC1L0924 Document Date Draft - - -------- ---- ----- DC1LS230 6/8/94 4 EX-99.30 31 EXHIBIT 99.30 EXHIBIT 30 THE LOEWEN GROUP INC. ADDENDUM TO 1994 MANAGEMENT EQUITY INVESTMENT PLAN This Addendum describes the investment options (the "Options") offered for sale to certain key employees of subsidiaries of Loewen Group International, Inc. ("LGII") under the 1994 Management Equity Investment Plan (the "MEIP"). The MEIP was approved by the Board of Directors of The Loewen Group Inc. ("TLGI") in March 1994, and by the shareholders of TLGI in May 1994. The complete terms and conditions of the MEIP are set forth in the 1994 Management Equity Investment Plan and the forms of Investment Option Agreement and Exchangeable Floating Rate Debenture Due 2001 that have been delivered to each Participant. Additional copies of such documents are available upon request at the office of the committee that administers the MEIP (the "MEIP Administrator"). The MEIP also provides for the execution of a Purchase Agreement by Raymond L. Loewen, LGII and Loewen Management Investment Corporation ("LMIC"), a wholly- owned subsidiary of LGII (the "Purchase Agreement"). This Addendum does not provide information regarding the Purchase Agreement. The term "Company" refers to TLGI and its subsidiaries. All dollars amounts herein are in Untied States dollars, unless otherwise indicated. OVERVIEW Under the MEIP, LGII will sell $127.7 million of Exchangeable Floating Rate Debentures due July 15, 2001 ("Debentures") to LMIC. LMIC will finance 95% of the acquisition amount of the Debentures, approximately $121.3 million, through a syndicate of third-party lenders. The remaining 5% of the acquisition amount of the Debentures, approximately $6.4 million, will be financed as follows: (i) LMIC will sell to the eligible employers who have elected to participate in the MEIP ("Participants") approximately $4.15 million of Options; and (ii) Raymond L. Loewen will pay LMIC $2.25 million as a down payment under the Purchase Agreement. The consideration paid by a Participant for an Option will be equal to 5% of the aggregate principal amount of the Debentures to which the Option relates. Absent certain extraordinary circumstances, beginning in 1999 the Participants will have the right to exercise Options to purchase Debentures. When acquired by a Participant, each $300.40 of Debentures must be exchanged immediately for one Convertible First Preferred Share, Series B, of TLGI (the "Convertible Preferred Shares"). Convertible Preferred Shares obtained by Participants resident in the United States ("U.S. Participants") will be convertible at any time, in the discretion of such holder, into TLGI Common shares without par value ("Common Shares") on a 1:10 basis. For certain tax reasons applicable only to Canadian residents, Convertible Preferred Shares obtained by Participants resident in Canada ("Canadian Participants") will be converted immediately into Common Shares on a 1:10 basis. The discussion in this Addendum assumes that Convertible Preferred Shares obtained by each United States and Canadian Participant will be converted immediately into Common Shares. QUESTIONS AND ANSWERS ABOUT THE MEIP 1. WHAT IS THE PURPOSE OF THE MEIP? The MEIP gives you an opportunity to share in increases in the market value of the Common Shares above the amount paid to exercise your Options. This benefits the Company because it gives selected key employees incentive to work for the Company's long-term financial success and in the shareholders' best interest. In addition, the MEIP is a cost-effective way for the Company to raise money for LGII's capital needs. 2. HOW DOES THE MEIP WORK? An Option gives you the right to acquire Common Shares during the next seven years. In order to acquire the Common Shares, you first must exercise your Option, as described below. Upon exercise of your Option, you receive Debentures that are immediately exchanged for Convertible Preferred Shares. If you are a U.S. Participant, you Convertible Preferred Shares may be converted from time to time, at your discretion, into Common Shares. If you are a Canadian Participant, your Convertible Preferred Shares will be converted immediately into Common Shares. The amount you pay to acquire Common Shares under the MEIP is set when you buy your Option. You pay only 5% of this amount when you purchase your Option and the balance when you exercise your Option. The MEIP has been designed, however, so that you may simultaneously exercise your Option, sell the Common Shares and pay the remaining 95% to the Company, along with any selling expenses and tax withholdings, out of the proceeds of the sale of the Common Shares. You will receive the difference between the market value of the Common Shares on the date of sale and the amount you paid to acquire the Common Shares under the MEIP, less any related selling and tax withholding expenses. The following is an example of how the MEIP would operate, using the conversion price of $30.04 per share of Common Shares, a future market value per share of $35.00, $36.00 and $37.00 at the date of exercise of the Option in each of 1999, 2000 and 2001, respectively, and an Option to acquire 50,000 Common Shares. 2 Amounts you Pay - - --------------- $ 75,100 = Amount you pay in June 1994 to acquire Option $ 713,450 = Amount you pay in June 1999 to exercise 50% of Option ($751,000 less $37,550) $ 356,725 = Amount you pay in June 2000 to exercise 25% of Option ($375,500 less $18,775) $ 356,725 = Amount you pay in June 2001 to exercise 25% of Option ($375,500 less $18,775) $ 1,502,000 = Total amount you pay ----------- Amounts you Receive - - ------------------- $ 875,000 = Amount you receive in June 1999 upon sale of 25,000 Common Shares $ 450,000 = Amount you receive in June 2000 upon sale of 12,500 Common Shares $ 462,500 = Amount you receive in June 2001 upon sale of 12,500 Common Shares $ 1,787,500 = Total amount you receive ----------- Profit - - ------ $285,500 = Amounts you pay less amounts you receive (does not account for selling expenses or taxes) NOTE: YOUR PROFIT INCREASES SIGNIFICANTLY AS THE MARKET VALUE OF THE COMMON SHARES INCREASES. FOR EXAMPLE, IF THE MARKET PRICES IN THE ABOVE EXAMPLES WERE $50 IN 1999, $51 IN 2000 AND $52 IN 2001, THE PROFIT WOULD BE $1,035,500. IF THE MARKET PRICES WERE $60 IN 1999, $61 IN 2000 AND $62 IN 2001, THE PROFIT WOULD BE $1,535,500. IF THE MARKET PRICES WERE $70 IN 1999, $71 IN 2000 AND $72 IN 2001, THE PROFIT WOULD BE $2,035,500. 3. WHAT ARE THE ADVANTAGES OF THE MEIP? 3 The MEIP allows you to share in long-term increases in the market value of the Common Shares with a relatively small initial investment. The MEIP allows you to pay only 5% of your initial cost to acquire the Common Shares under the MEIP a the time you purchase your Option. If the market value of the Common Shares increases above your cost to acquire the Common Shares under the MEIP, you then have the right to pay the remaining 95% out of the proceeds when you sell the Common Shares at a profit. If the market value of the Common Shares does not increase above your cost to acquire it, the Company will refund your initial investment in June 2001, without interest. 4. WHO IS ELIGIBLE TO PARTICIPATE IN THE MEIP? The MEIP Administrator has selected 28 key employees who are eligible to participate. 5. HOW DO I BECOME A PARTICIPANT? To become a Participant, you enter into an investment option agreement (the "Investment Option Agreement"), which describes the terms of your Option. You also pay the "Investment Option Amount" (the 5% "down payment") of $50 per $1,000 principal amount of Debentures specified in your Investment Option Agreement (which is equal to $1.50 per Common Share) when you acquire an Option. 6. WHAT IS THE MAXIMUM NUMBER OF COMMON SHARES A PARTICIPANT CAN ACQUIRE UNDER THE MEIP? Each Participant may acquire Options that ultimately will provide for the number of Common Shares allocated to such Participant by the MEIP Administrator. No Participant may acquire an Option that ultimately will provide for more than 500,000 Common Shares. The total number of Common Shares subject to the MEIP is 4,250,000. 2,750,000 Common Shares are designated for issuance pursuant to Options, and 1,500,000 Common Shares are designated for issuance pursuant to the Purchase Agreement. 6. WHEN WILL I BE ABLE TO EXERCISE MY OPTION? You may not exercise your Option until June 1999 unless there is an Accelerated Vesting Event. SEE QUESTION 15. Beginning on June 15, 1999, you may exercise your Option for 50% of the shares of Common Shares related to your Option. You may exercise your Option for an additional 25% beginning on June 15, 2000, and for the remaining 25% beginning on June 15, 2001. 7. WHAT IS THE EXERCISE PRICE I PAY? When you exercise your Option, you will pay a minimum exercise price of $285.38 per Debenture ($300.40 less $15.02 previously paid), which is exchanged immediately for one Convertible Preferred Share. Each Convertible Preferred Share is immediately 4 convertible into 10 Common Shares. In essence, upon exercise you will pay $28.54 ($30.04 less $1.50 previously paid) per Common Share. 8. HOW DO I EXERCISE MY OPTION AND ACQUIRE COMMON SHARES? To exercise your Option and acquire Common Shares, you deliver the documents required under the MEIP to the Company, giving the Company notice of your intent to exercise and specifying the number of Common Shares you wish to purchase. The office of the Senior Vice President, Law and Corporate Secretary will provide you with the proper forms. You may exercise all or any portion of your Option that is exercisable, but you must purchase a minimum of $50,000 face amount of Debentures, or all the remaining Debentures if fewer than $50,000. 9. HOW MAY I PAY FOR MY STOCK WHEN I EXERCISE MY COMPANY OPTION? Although you may pay the Option exercise amount in cash, you may also simultaneously exercise your Option and sell the Common Shares. In these circumstances, your exercise price will be paid from a portion of the proceeds you receive upon sale of the Common Shares. To use this payment method, you deliver your exercise and conversion notices to the Company with instructions to (a) sell the Common Shares you receive upon exercise and conversion and (b) give the Company a sufficient amount from the sale proceeds to pay the exercise price plus any federal, state and local withholding tax obligations and other fees and expenses. You also may pay the exercise price in cash or with a bank certified or cashier's check in the amount of the exercise price. 10. ARE THERE LIMITATIONS ON THE SALE OF THE COMMON SHARES PURCHASED UNDER THE MEIP? Generally, you may sell the Common Shares received upon exercise of your Option at any time you choose. If you are an affiliate of TLGI, your resale may be subject to certain limitations. SEE QUESTION 22. At the time of resale of the Common Shares, certain provisions of Section 16 of the United States Securities Exchange Act of 1934 ("Exchange Act") may apply to you. SEE QUESTION 23. 11. WHAT ABOUT TAXES? The Company is required to withhold certain taxes when you exercise your Option. For Participants who are U.S. residents, this amount generally ranges from 28% to 34%, depending on the Participant's state of residence. This percentage is applied to the amount of ordinary income realized when the Option is exercised (generally, the fair market value of the Common Shares on the exercise date less your basis in the Common Shares). You must pay this amount to the Company before any share certificates will be delivered to you. Because of this withholding requirement, you may want to sell at least enough Common Shares to cover your tax withholding obligation. 5 12. HOW DOES MY OPTION VEST? Your Option will vest (I.E. become nonforfeitable) if you are no longer employed by the Company in accordance with the following schedule: June 15, 1995 14% June 15, 1996 14% June 15, 1997 14% June 15, 1998 14% June 15, 1999 14% June 15, 2000 15% June 15, 2001 15% If your employment with the Company terminates before your Option is fully vested, TLGI will refund the price you paid with respect to the unvested portion of your Option. SEE QUESTION 14. If an "Accelerated Vesting Event" occurs, your Option will fully vest at that time. SEE QUESTION 15. 13. WHAT HAPPENS TO MY OPTION IF MY EMPLOYMENT TERMINATES? If your employment terminates before June 15, 2001 for any reason, including retirement, death or permanent disability, your Option will be repurchased by the Company upon termination at the price you paid for it to the extent it has not vested (I.E. become nonforfeitable) in accordance with the schedule in Question 13. You (or your estate or beneficiary) will continue to participate in the MEIP and will be able to exercise your Option (to the extent vested) in accordance with the exercise schedule described in Question 7 and the terms of the MEIP. The MEIP and the Investment Option Agreement do not confer any right to continued employment with the Company. 14. WHAT HAPPENS IF THERE IS AN "ACCELERATED VESTING EVENT"? Under the MEIP, an "Accelerated Vesting Event" occurs if there is: (i) an event of default under the Debentures, (ii) a change of control that causes certain provisions of the Shareholder Protection Rights Plan to become applicable or (iii) someone other than Raymond L. Loewen acquires 25% or more of the Common Shares. If an Accelerated Vesting Event occurs, then your Options immediately vest in full and become fully exercisable. 6 15. IF THERE IS A STOCK SPLIT, A REVERSE STOCK SPLIT, A STOCK DIVIDEND OR EXCHANGE OF THE COMMON SHARES, WHAT IS THE EFFECT ON THE MEIP AND THE COMMON SHARES I RECEIVE UPON EXERCISE? The amount of Common Shares you ultimately are entitled to receive when you exercise your Option will be adjusted proportionately to account for these events. 16. MAY THE COMPANY REPURCHASE MY INVESTMENT OPTION? Under the MEIP, if the weighted average trading price of the Common Shares for any five consecutive days on which such shares are traded on Nasdaq National Market exceeds $75.00 per shares (as adjusted to reflect any stock split, stock dividend or similar event) then LMIC may repurchase your Option (and all other Options) upon giving you 20 business days' notice. However, upon giving such notice, the Options would immediately vest in full and become fully exercisable (except to the extent part of an Option has been forfeited because of a termination of employment), and you would be entitled to exercise your Option and to receive Common Shares. LMIC is required to refund the amount you paid for your Option, without interest or premium, if you have not exercised your Option by June 15, 2001, or if there is a default under the Debentures. 17. MAY I WITHDRAW FROM THE MEIP? No. The MEIP is designed to give you an opportunity to take advantage of the long-term appreciation of the Common Shares with a minimum initial investment. If you choose not to exercise your Option, it will be repurchased from you on June 15, 2001. You should consider this a long-term investment and, therefore, you should consider carefully the economic risk related to this investment. 18. MAY I ASSIGN OR TRANSFER MY RIGHTS UNDER THE MEIP? No. The rights granted to you under the MEIP are yours alone and your Investment Option is not transferable. You may designate a person who can exercise your rights if you die before your Option has been exercised. To designate a person, or to change your designation, you must give the MEIP Administrator written notice of the designation. 19. WHEN DOES MY OPTION EXPIRE? Your Option expires on June 15, 2001. 20. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES TO PARTICIPANTS? Please see "Income Tax Consequences" contained in the Supplement for a description of the general tax rules relating to the MEIP. 7 21. ARE THERE ANY OTHER RESTRICTIONS ON RESELLING COMMON SHARES? Common Shares acquired pursuant to the MEIP may be resold through a broker in Canada without restriction. If a Participant resells Common Shares through a broker in the United States, certain restrictions may apply if the Participant is an "affiliate" of TLGI. Generally, the Securities and Exchange Commission ("SEC") presumes that an executive officer of TLGI is an "affiliate." Under SEC Rule 144, "affiliates" of TLGI are subject to the following limitations when they resell Common Shares through a United States broker: 1. Sales must be made in unsolicited brokerage transactions or to market makers. 2. Sales volume is limited during any three month period to the greater of 1% of the outstanding shares or the weekly average trading volume for the last four weeks on the Nasdaq National Market. 3. If sales in any three month period exceed 500 shares or result in proceeds in excess of $10,000, a Form 144 must be filed with the SEC and Nasdaq National Market at or before the time the sell order is placed with a broker or the sale is made to a market maker. Typically, a United States broker will be familiar with Rule 144 and will take care of filing the Form 144 for you. 22. IF I AM AN OFFICER SUBJECT TO SECTION 16 OF THE EXCHANGE ACT, HOW AM I TREATED DIFFERENTLY? Section 16 of the Exchange Act requires insiders (executive officers, directors and more than 10% holders) of certain public companies to report purchases and sales of company securities to the SEC. In addition, Section 16 requires those insiders to disgorge profits made on non-exempt purchases and sales made within a six month period. TLGI CURRENTLY IS NOT SUBJECT TO SECTION 16. HOWEVER, TLGI MAY BECOME SUBJECT TO SECTION 16 AT SOME POINT IN THE FUTURE. IN THIS EVENT, THE "INSIDERS" OF TLGI WOULD BE SUBJECT TO SECTION 16. If TLGI becomes subject to Section 16 in the future, any person who is deemed to be an "executive officer" should consult with the Senior Vice President, Law, General Counsel and Corporate Secretary of TLGI and/or his legal advisor prior to exercising an Option and disposing of Common Shares. Under Section 16, there is no exemption for disposition of Common Shares acquired pursuant to the exercise of an Option. Accordingly, if Section 16 applies, 8 dispositions of Common Shares will be matched with any acquisitions of Common Shares made within six months, and any resulting profit would be required to be disgorged to TLGI. 23. WHO ADMINISTERS THE MEIP? The MEIP Administrator is a committee of TLGI's Board of Directors that has been appointed by the Board to administer the MEIP. The MEIP Administrator has the authority to interpret the MEIP and establish or amend rules and regulations for administering the MEIP. It also has the authority to determine all matters relating to the Options. The present members of the MEIP Administrator are listed in the Supplement. The address of the MEIP Administrator and each member is c/o TLGI's principal executive offices located at 4126 Norland Avenue, Burnaby, British Columbia, Canada V5G 3S8, telephone number (604) 299-9321. 24. MAY THE MEIP BE CHANGED OR DISCONTINUED? TLGI's Board of Directors expects that the MEIP will continue as described until no Debentures or Convertible Preferred Shares remain outstanding. However, the Board of Directors may amend, suspend or terminate the MEIP at any time. If the MEIP is amended, suspended or terminated, your rights under an outstanding Option may not be adversely affected without your consent. 25. WILL TLGI BUY BACK COMMON SHARES PURCHASED UNDER THE MEIP? TLGI has no obligation to buy Common Shares purchased under the MEIP. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, filed with the SEC by TLGI, are hereby incorporated by reference herein: (i) TLGI's latest annual report, filed pursuant to Section 13(a) or 15(d) of the United States Securities Exchange Act of 1934, as amended (the "Exchange Act"); (ii) All other reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by TLGI document referred to in (i) above; and (iii) The description of TLGI's Common Shares contained in a registration statement filed under the Exchange Act, including any amendment or report filed for the purpose of updating such description. All documents subsequently filed by TLGI with the SEC pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act shall be deemed to be incorporated by 9 reference herein and to be a part hereof from the date of filing (except that no document shall be deemed to be incorporated by reference if filed with the SEC after the filing of a post-effective amendment which deregisters securities subject to the MEIP then remaining unsold). Upon written or oral request, TLGI shall provide without charge to each person to whom a copy of the MEIP has been delivered a copy of any or all of the documents referred to above (other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into the information that the MEIP incorporates) and any other documents required to be delivered pursuant to SEC Rule 428(b) under the Act. Requests should be directed to the Corporate Secretary of TLGI, at TLGI's principal executive offices located at 4126 Norland Avenue, Burnaby, British Columbia, Canada V5G 3S8, telephone number (604) 299- 9321. 10 EX-99.31 32 EXHIBIT 99.31 EXHIBIT 31 Wachovia Bank Maturity Master Note WACHOVIA of Georgia, N.A. Non Revolving FOR VALUE RECEIVED, _______________________________________ (hereinafter called the "Borrower"), hereby promises to pay on _______________, 19__ to the order of WACHOVIA BANK OF GEORGIA, N.A., (hereinafter called the "Lender"), the principal sum of $________________ or so much thereof as may be outstanding under the Line of Credit as hereinafter defined, to be opened pursuant to the terms of this Note, at the principal office of Lender in Atlanta, Georgia, or such other place as Lender may direct in writing, in legal tender of the United States, with interest thereon from the date of advance until paid at the rate hereinafter set forth: [COMPLETE APPLICABLE PARAGRAPH] Interest shall accrue at the rate of _____% per annum. or Interest shall accrue at the rate per annum of ____% in excess of the Prime Rate. For purposes of this Note the term "Prime Rate" refers to that interest rate so denominated and set by the Lender from time to time as an interest rate basis for borrowings. The Prime Rate is one of several interest rate bases used by the Lender. The Lender lends at interest rates above and below the Prime Rate. The rate of interest on this Note shall change each time the Prime Rate changes, on the date on which the change in the Prime Rate is effective. On the date hereof, the rate of interest on this Note, expressed in simple interest terms, is ____% per annum. Interest shall be due and payable ____________________, in arrears, commencing on ____________, 19__ and continuing on the ______ day of each ________________ consecutive calendar month thereafter. Notwithstanding the foregoing, after final maturity or earlier acceleration of this Note, interest on the unpaid balance of this Note shall accrue and be payable on demand at the rate per annum equal to 150% of the interest rate that would have been otherwise applicable to this Note if it had not so matured or been accelerated. Interest shall be computed daily on the outstanding principal amount of this Note on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first but excluding the last). At Borrower's election, Borrower may prepay this Note in whole or in part at any time. All partial prepayments will be applied first to accrued but unpaid interest and any excess shall be applied to the unpaid principal. Borrower has paid Lender a non-refundable fully earned fee of __________________. Upon execution of this Note, a line of credit (the "Line of Credit") shall be opened by Lender so that so long as an event of default (as hereinafter defined) does not exist, Borrower may borrow from time to time up to the maximum aggregate principal amount outstanding of ______________ Dollars ($___________). In the event Borrower shall prepay or repay any amounts borrowed hereunder such amounts cannot be reborrowed. Advances to Borrower under the Line of Credit shall be evidenced by this Note. Lender, at its sole discretion, is hereby authorized to make advances under this Note upon telephonic communication of the borrowing request from any person representing himself or herself to be Borrower or in the event Borrower is a partnership or corporation, a duly authorized officer or representative of Borrower. Each such telephonic request for borrowing shall be confirmed by Borrower in a writing delivered to Lender no later than five (5) days after such telephonic request; provided, however, that the absence of such written confirmation shall in no way diminish Borrower's liability to repay such advance. Each advance hereunder shall be made by means of a credit to Borrower's account with Lender. Borrower understand and agrees that the commitment of Lender hereunder shall be subject to review by Lender from time to time and Lender may, with or without cause and without notice to Borrower, terminate the Line of Credit and refuse any request of Borrower for further advances pursuant thereto. To secure the indebtedness evidenced by this Note, together with any extensions or renewals thereof, in whole or in part, as well as all other indebtedness, obligations and liabilities of Borrower to Lender, now existing or hereafter incurred or arising (hereinafter sometimes referred to collectively as the "Obligations"), Borrower does hereby grant to Lender a security interest in and security title to, the following described property: - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- now owned or hereafter acquired or arising, together with any and all additions and accessions thereto or replacements thereof, returned or unearned premiums from any insurance written in connection with this Note and any products and/or proceeds of any of the foregoing. However, Lender does not have a security interest in any goods acquired by Borrower for personal, family or household purposes more than 10 days after the date of this Note, unless such goods are added to or attached to the Collateral (as hereinafter defined). In addition, Borrower hereby grants to Lender a security interest in and security title to (i) all other property of Borrower of every kind or description now or hereafter in the possession or control of Lender for any reason, including, without limitation, all cash, stock or other dividends and all proceeds thereof, and all rights to subscribe for securities incident thereto and any substitutions or replacements for, or other rights in connection with, any of the Collateral and (ii) any balance or deposit accounts of Borrower, whether such accounts be general or special, or individual or multiple party, and upon all drafts, notes, or other items deposited for collection by Borrower with Lender, and Lender may at any time, without demand or notice appropriate and apply any of such to the payment of any of the Obligations, whether or not due. All property described in this paragraph and the one above in which Borrower has granted to Lender a security interest or security title hereunder is hereinafter collectively referred to as the "Collateral". If at any time the Collateral described above or hereafter pledged as security for any of the Obligations, shall be or become unsatisfactory to Lender or should Lender deem itself insecure, Borrower will immediately furnish such further Collateral to be held by Lender as if originally pledged hereunder or make such payment on account as will be satisfactory to Lender. Upon (i) any failure of any Obligor (which term shall include each Borrower, endorser, surety or guarantor of this Note) to perform any agreement or promise hereunder or to pay any Obligation whatsoever to Lender when due; (ii) any warranty, representation or statement made or furnished to Lender by or on behalf of Borrower in connection with the extension of credit evidenced by this Note proving to have been false in any material respect when made or furnished; (iii) any loss, theft, substantial damage, destruction, sale, foreclosure or encumbrance to or of any of the Collateral, or the making of any levy, seizure or attachment thereof or thereon or the rendering of any judgment or lien or garnishment or attachment against any Obligor or his property, whether actual or threatened; (iv) the death, dissolution, termination of existence, insolvency, business failure, appointment of a receiver of any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding under any bankruptcy or insolvency laws, state or federal, by or against Borrower or any other Obligor; (v) any discontinuance or termination of any guaranty of any of the Obligations by a guarantor; or (vi) Lender deeming itself insecure or the Collateral in danger of misuse, misappropriation or confiscation (the events described in (i) through (vi) may be referred to herein as event(s) of default; Lender's obligation to extend financing under the Line of Credit shall immediately cease and upon the occurrence of any event of default, or at any time thereafter (such event of default not having been previously cured), Lender at its option may declare all of the Obligations to be immediately due and payable, all without notice or demand. Upon the occurrence of any event of default, or at any time thereafter (such event of default not having been previously cured), in addition to and independent of the right to accelerate the maturity of this Note and any other rights of Lender under this Note or any other agreement with Borrower, Lender shall have the remedies of a secured party under the 2 Uniform Commercial Code of Georgia, as amended from time to time (the "Code"), including without limitation thereto, the right to take possession of the Collateral, or the proceeds thereof and to sell or otherwise dispose thereof, and for this purpose, to sign in the name of Borrower any transfer, conveyance or instrument necessary or appropriate in order for Lender to sell or dispose of any of the Collateral, and Lender may, so far as Borrower can give authority therefor, enter upon the premises on which the Collateral or any part thereof may be situated and remove the same therefrom, without being liable in any way to Borrower on account of entering any premises. Lender may require Borrower to assemble the Collateral and make the Collateral available to Lender at a place to be designated by Lender which is reasonably convenient to both parties. The right is expressly granted to Lender to transfer at any time to itself or its nominee any Collateral held hereunder and to receive the income therefrom and hold the same as security herefor, or to apply it to any of the Obligations. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender shall give Borrower written notice of the time and place of any public sale thereof or of the time after which any private sale or other intended disposition thereof is to be made. The requirement of sending reasonable notice shall be met if such notice is mailed, postage prepaid, or otherwise given, to Borrower at the last address shown on Lender's records at least five days before such disposition. If Lender endeavors to collect all or any portion of the indebtedness evidenced by this Note by or through an attorney-at-law, Borrower shall pay to Lender (i) attorneys' fees in an amount equal to 15% of the principal and interest unpaid on this Note and (ii) all costs of collection. The rights of Lender specified herein shall be in addition to, and not in limitation of Lender's rights under the Code, or any other statute or rules of law conferring rights similar to those conferred by the Code, and under the provisions of any other instrument executed by Borrower to Lender, and any rights or remedies of Lender may be exercised or taken in any order or sequence whatsoever, at the sole option of Lender. The security agreement set forth herein and the security interest in the Collateral created hereby shall only terminate when all of the Obligations have been paid in full. No waiver by Lender of any default shall be effective unless in writing nor operate as a waiver of any other default or of the same default on a future occasion. All rights of Lender hereunder shall inure to the benefit of its successors and assigns, and all Obligations of Borrower shall bind the heirs, legal representatives, successors and assigns of Borrower. Each Obligor hereby severally waives presentment, demand, protest and notice of demand and dishonor, protect and non-payment, and any other notice required by law relative hereto which may be so waived and any and all rights Borrower may have to notice prior to seizure of personal property by the Lender having an interest in such property of Borrower. Each Obligor agrees that (i) this Note may be renewed or extended, (ii) any other Obligor may be released by Lender from liability, (iii) any Collateral may be released or substituted or reduced, (iv) Lender may compromise or receive less than the amount due on any Collateral, (v) Lender may grant any other indulgence to any other Obligor without notice to Obligor, and (vi) Lender may proceed against any Obligor without first proceeding against Borrower or any other Obligor, or against any Collateral, all without affecting Obligor's liability to Lender. This Note, and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Georgia. As used herein, the term "Borrower" shall mean each of the undersigned, jointly and severally. 3 IN WITNESS WHEREOF, Borrower has caused this Note to be signed and sealed this day of , 19 . - - ------ ----------- -- If Borrower is a corporation: -------------------------------------------------- Name of Corporation By: -------------------------------------------------- Title: [CORPORATE SEAL] Attest: ----------------------------------------------- Sec./Asst. Sec. If Borrower is a partnership: -------------------------------------------------- Name of Partnership [SEAL] By: -------------------------------------------------- General Partner By: -------------------------------------------------- General Partner If Borrower is an individual/sole proprietor: [SEAL] - - ----------------------------------- -------------------------------------- Borrower's Social Security Number Signature [SEAL] - - ----------------------------------- -------------------------------------- Borrower's Social Security Number Signature EX-99.32 33 EXHIBIT 99.32 EXHIBIT 32 EXECUTIVE AGREEMENT THIS EXECUTIVE AGREEMENT is made as of the _____ day of _______, 1995. BETWEEN: THE LOEWEN GROUP INC. and its subsidiaries, bodies corporate and having an office at 4126 Norland Avenue, Burnaby, British Columbia, Canada V5G 3S8 or at Suite 800, 50 East River Center Boulevard, Covington, Kentucky 41011 (together the "COMPANY") OF THE FIRST PART: AND: ------------------------------------------ of --------------------------------------- ------------------------------------------ (the "EXECUTIVE") OF THE SECOND PART. WHEREAS: A. Executive is employed by Company in a senior executive or management capacity; B. Executive has senior duties and responsibilities in connection with the conduct of Company's business which places Executive in a special and uncommon classification of employees; C. Executive, by virtue of his/her position, has extraordinary access to Company's confidential and proprietary business information; D. Company has developed a new equity incentive program for executives described generally as the management equity investment program ("MEIP"); the MEIP will be in addition to existing employment benefits provided to Executive; E. Executive, by virtue of his/her position and of his/her level of performance, is eligible to be considered for participation in the MEIP; F. A condition of Executive's continuing participation in the MEIP is the continuance by Executive of his/her level of performance as at the date hereof. - 2 - G. A condition of Executive being able to participate in the MEIP is the Executive entering into this Executive Agreement, it being the mutual wish of Executive and Company that there be a clear understanding between the parties upon the matters following; NOW THEREFORE this Agreement witnesses that in consideration of the premises and of the mutual benefits and obligations hereinafter expressed and of other good and valuable consideration (the benefit and sufficiency of which being hereby acknowledged) the parties agree, each with the other, as follows: 1. The parties hereby acknowledge and confirm their agreement with the content of Recitals A through G preceding. 2. Executive hereby confirms his/her request to participate in the MEIP and Company hereby confirms acceptance of Executive's participation in the MEIP. Particulars of such participation shall be as confirmed from time to time between Company and Executive. 3. As part of Executive's fiduciary duties to Company, Executive agrees that during his/her employment by Company, Executive shall promptly disclose in writing to Company all information, ideas, concepts, improvements, or discoveries whether or not reduced to practise, which are conceived, developed, made or acquired by Executive, either individually or jointly with others, and which relate to the business, products or services of Company. 4. As part of Executive's fiduciary duties to Company, Executive agrees to protect and safeguard Company's proprietary or confidential information, ideas, concepts, improvements, discoveries and inventions and shall not, either during his/her employment by Company or thereafter, directly or indirectly, use for his/her own benefit or for the benefit of another or disclose to another any of such proprietary or confidential information, ideas, concepts, improvements, discoveries or inventions of Company. 5. In addition to the other obligations agreed to by Executive in this Agreement, Executive agrees that during his/her employment by Company and for the two years following the termination of his/her employment for any reason he/she shall not at any time, directly or indirectly, induce, entice, or solicit any employee of Company to leave his/her employment. 6. (a) Executive acknowledges and agrees that he/she serves in a special capacity for Company and, as such, is not engaged in a common calling. - 3 - (b) Executive hereby covenants with Company that from the date hereof until two years immediately following the date of termination of employment of Executive for any reason, Executive shall not in any of the business territories in which Company or any of its subsidiaries is presently or at the time of termination conducting business, directly or indirectly, for his/her own account, or as a partner, member, employee, consultant, advisor or agent of any partnership or joint venture, or as a trustee, officer, director, shareholder, employee, consultant, advisor or agent of any corporation, trust, or other business organization or entity, own, manage, join, participate in, encourage, support, finance, be engaged in, have an interest in, give financial assistance or advice to, permit his/her name to be used in connection with or be concerned in any way in the ownership, management, operation or control of, or be connected in any manner with any business which is or may be in the funeral, mortuary, crematory, cemetery, ambulance, burial or funeral or cemetery insurance business (including pre-arrangement or pre-need), or any business related to any of the foregoing. (c) Executive acknowledges and agrees that this covenant not to compete is necessary and fundamental to the business of Company, is not contrary to the public interest, and that covenants not to compete are an important and recognized part of the funeral and cemetery businesses. (d) Executive agrees that the remedy of Company in law for damages for any actual or threatened breach of this Agreement by Executive would be inadequate and that accordingly Company in the event of actual or threatened breach shall be entitled to specific performance hereof, injunctive relief, or both, by temporary or permanent injunction or other appropriate judicial remedy, writ or order. 7. This Agreement is in addition to and does not replace, preempt or affect any other agreements between Executive and Company. Nothing in the MEIP or in this Agreement shall confer upon Executive the right to continued employment with the Company or the right to participate in any other present or future benefit plan that the Company presently offers or may offer to certain of its employees. 8. This Agreement shall survive and remain in effect despite any future modifications or termination of the MEIP. 9. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision hereof is held by a court of competent jurisdiction to be prohibited or invalid, such prohibition or invalidity shall not affect the remaining provisions of this Agreement. In the event, a court of competent jurisdiction shall determine in whole that the - 4 - covenants contained in Section 6 above are invalid or unenforceable for any reason, Executive and Company hereby request that such court reform the provisions hereof in a manner to cause such covenants herein to be enforceable as closely as possible to the way in which they were originally written. 10. The provisions of this Agreement shall be construed in accordance with ______________ law and _____________ shall be the venue for adjudication of any dispute relating to this Agreement. 11. This Agreement may be amended only by written instrument signed by both parties. EXECUTED by the parties hereto as of the day and year first above written. THE LOEWEN GROUP INC. BY: --------------------------- SIGNED by the Executive ) in the presence of: ) ) ) - - ---------------------------- ) Signature ) ) - - ---------------------------- ) Name ) ) - - ---------------------------- ) ----------------------- Address ) ) - - ---------------------------- ) ) ) - - ---------------------------- ) Occupation ) EX-99.33 34 EXHIBIT 99.33 EXHIBIT 33 LOEWEN GROUP INTERNATIONAL, INC. 1994 Exchangeable Floating Rate Debenture due July 15, 2001 $__________ No. _______ Dated: ___________ LOEWEN GROUP INTERNATIONAL, INC., a Delaware corporation (the "Company"), for value received hereby promises to pay to the holder of this debenture named on the signature page hereof, or its registered assigns, the principal sum specified above, on July 15, 2001, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, and to pay interest thereon, computed on the principal balance outstanding from the date hereof until paid in full, on the dates and in the amounts specified in Section 2 below. 1. THE DEBENTURES. This Debenture is one of a duly authorized issue of securities of the Company designated as its Exchangeable Floating Rate Debentures due July 15, 2001, and limited in authorized aggregate principal amount to $127,670,000 (the "Debentures"). The entire authorized amount of Debentures is being issued and sold in the first instance to Loewen Management Investment Corporation, a Delaware corporation ("LMIC"). In acquiring, holding and transferring the Debentures, LMIC is acting as agent on behalf of the Company and is acquiring, holding and transferring the Debentures in its capacity as such pursuant to the terms of the 1994 Management Equity Investment Plan (the "Plan") of the Company's parent corporation, The Loewen Group Inc. ("Parent"), a body corporate pursuant to the laws of British Columbia. LMIC is acquiring, holding and transferring the Debentures subject to the right of employees of the Company's direct and indirect U.S. subsidiaries designated as participants under the Plan (the "Participants"), to purchase the Debentures from LMIC, upon the terms and subject to the satisfaction of certain conditions specified in the separate Investment Option Agreements dated as of June 15, 1994 among the Company, LMIC and the Participants named therein (the "Investment Option Agreements") and the Purchase Agreement dated as of June 15, 1994, among the Company, LMIC and the Participant named therein (the "Purchase Agreement"). Unless otherwise indicated herein, capitalized terms used in this Debenture shall have the meanings assigned to them in the Plan. 2. INTEREST. Interest on this Debenture shall be payable quarterly in arrears on the last day of March, June, September and December, at a rate of interest which is equal to the "Prime Rate" for U.S. dollar loans as announced from time to time by Wachovia Bank of Georgia, N.A. Notwithstanding the foregoing, so long as this Debenture is held by LMIC, such interest rate shall be adjusted upwards or downwards, as appropriate, from time to time, so that the interest payments received by LMIC are equal to the interest payments then payable by LMIC with respect to the third-party debt incurred by LMIC in connection with the acquisition of the Debentures. 3. REDEMPTION. (a) MANDATORY REDEMPTION. So long as this Debenture is held by LMIC, upon the occurrence of an Event of Default (as defined in Section 12 hereof), the Company shall redeem this and all other Debentures held by LMIC twenty (20) business days after the occurrence of such Event of Default. (b) REDEMPTION UPON FORFEITURE. In the event a Participant's rights under an Investment Option Agreement or Purchase Agreement are forfeited in whole or in part as a result of the Participant's termination of employment with the Company and its subsidiaries, the Company may at any time thereafter redeem the portion of the Debentures with respect to which the Participant's rights are forfeited. (c) REDEMPTION OF DEBENTURE HELD BY A PARTICIPANT. So long as this Debenture is held by a Participant (i) at any time upon any determination by the Company to redeem the principal amount of this Debenture or (ii) upon the occurrence of an Event of Default, the Company shall (A) by first class mail, or by hand delivery, give written notice (within 5 business days after the occurrence of an Event of Default in the case of a redemption pursuant to clause (ii)) to the Participant specifying the principal amount of this Debenture to be redeemed and the date fixed for such redemption, which date shall be 15 business days following the date of such notice; and (B) redeem the principal amount of this Debenture at par, together with any accrued and unpaid interest. 4. EXCHANGE. All or any portion of the principal amount of this Debenture may be exchanged by or on behalf of a Participant, and only a Participant (except as provided in Section 16 of this Debenture), upon the terms and subject to the conditions specified herein, in the Exchange Acknowledgment of Parent dated June 15, 1994 (the "Exchange Acknowledgment"), and in the Investment Option Agreement or Purchase Agreement to which such Participant is a party into Convertible Preferred Shares of Parent, at an initial exchange price for Convertible Preferred Shares equal to $300.40 principal amount of Debentures per Convertible Preferred Share. The exchange price for Convertible Preferred Shares will be subject to adjustment in order to prevent any dilution or enlargement of the exchange privilege and exchange applicable to this Debenture. No adjustments shall be made for accrued interest on the exchange of any principal amount of Debentures or for dividends or distributions on the issuance of any Convertible 2 Preferred Shares upon conversion. In order to exchange any principal amount of Debentures for Convertible Preferred Shares of Parent: (a) a Participant must deliver (i) an exercise notice specifying such Participant's intention to purchase the principal amount of Debenture specified therein pursuant to the exercise of an Option and have the Debenture so purchased immediately exchanged on such Participant's behalf into Convertible Preferred Shares in accordance with the terms hereof and thereof, or (ii) an exchange notice specifying such Participant's intention to exchange a principal amount of Debenture previously purchased by the Participant pursuant to a Purchase Agreement and specified therein for Convertible Preferred Shares of Parent in accordance with the terms hereof and thereof; (b) the Debentures shall be surrendered to the Company at its designated office set forth in Section 9; and (c) if required by the Company, appropriate endorsements or transfer documents shall be furnished to the Company. In the event of exchange of this Debenture in part only, a new Debenture for the unexchanged portion hereof will be issued in the name of the holder of this Debenture upon the cancellation hereof. 5. RECLASSIFICATIONS, MERGERS, SALE OF ASSETS, ETC. In case of any reclassification or change of outstanding Convertible Preferred Shares of Parent (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any consolidation or merger of the Parent with or into another corporation (other than a consolidation or merger in which the Parent is the continuing corporation and which does not result in any reclassification or change of outstanding Convertible Preferred Shares), or in case of any sale, lease or conveyance of the property of the Parent as an entirety or substantially as a entirety, the holders of the Debentures then outstanding shall have the right thereafter to convert such Debentures into the kind and amount of shares and other securities and property receivable upon such reclassification, change, consolidation, merger, sale, lease or conveyance by a holder of the number of Convertible Preferred Shares of the Parent for which such Debentures could have been exchanged immediately prior to such reclassification, change, consolidation, merger, sale, lease or conveyance (assuming such holder of Convertible Preferred Shares failed to exercise any rights of election and received per share the kind and amount of shares and other securities and property received per share by a plurality of non-electing shares). Thereafter the kind and amount of shares and other securities and property receivable upon exchange of any Debentures shall be subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 5. The provisions of this Section 5 shall similarly apply to successive reclassification, changes, consolidation, mergers, sales, leases or conveyances. The provisions of this Section 5 shall not apply if waived by the affirmative vote at a meeting called for that purpose, or by the written consent with or without a meeting, of the holders of at least two-thirds of the principal amount of Debentures then outstanding. 3 6. PRIOR NOTICE OF CERTAIN EVENTS. In case: (a) the Parent shall declare a dividend (or any other distribution) on its Convertible Preferred Shares (other than cash dividends and dividends payable in Convertible Preferred Shares); or (b) the Parent shall authorize the granting to the holders of its Convertible Preferred Shares of rights or warrants to subscribe for or purchase any shares of any class or of any other rights or warrants; or (c) of any reclassification of the Convertible Preferred Shares of the Parent (other than a subdivision or combination of the outstanding Convertible Preferred Shares, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Parent is a party for which approval of any shareholders of the Parent is required, or of the sale, lease or conveyance of all or substantially all of the assets of the Parent; or (d) of the voluntary or involuntary dissolution, liquidation or winding-up of the Parent; then the Company shall mail or cause to be mailed to each holder of Debentures at such holder's last address appearing on the registration books of the Company, as promptly as possible but in any event at least 15 days prior to the applicable date hereinafter specified (or the last date upon which a holder of Debentures may retroactively exchange such Debentures with effect at or prior to such other date, if the Company shall make effective provision for and notify holders of such retroactive exchange), a notice stating (i) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants or, if a record is not to be taken, the date as of which the holders of Convertible Preferred Shares of record to be entitled to such dividend, distribution, rights or warrants are to be determined, or (ii) the date on which such reclassification, consolidation, merger, sale, lease, conveyance, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Convertible Preferred Shares of record shall be entitled to exchange their Convertible Preferred Shares for securities or other property deliverable upon such reclassification, consolidation, merger, sale, lease, conveyance, dissolution, liquidation or winding up. 7. LIMITED REPRESENTATIONS AND WARRANTIES OF THE COMPANY. (a) COMMON SHARES AND CONVERTIBLE PREFERRED SHARES RESERVED FOR ISSUANCE. A total of 425,000 Convertible Preferred Shares of the Parent have been duly authorized and reserved solely for issuance upon the exercise by the Participants of their rights to convert Debentures into Convertible Preferred Shares of Parent and, a total of 4 4,250,000 Common Shares of Parent have been duly authorized and reserved, including treasury shares, solely for issuance upon the exercise by the Participants of their rights to convert Convertible Preferred Shares into Common Shares all in accordance with the terms of the Plan. (b) DEBENTURES. The Debentures, when issued and sold by the Company to LMIC, will be duly authorized, issued and delivered, and will be the legal, valid and binding obligations of the Company, free and clear of any lien, security interest, or option (except for any Option evidenced by an Investment Option Agreement and the purchase obligation evidenced by the Purchase Agreement) with respect thereto or any other charge or encumbrance. 8. NO SUBORDINATION. The obligations of the Company under this Debenture shall rank PARI PASSU with the other obligations of the Company except for obligations which are expressly subordinated to the obligations of the Company under this Debenture. 9. MAINTENANCE OF OFFICE. Loewen Group Inc., as agent for the Company, will maintain an office in the United States of America, where Debentures may be presented or surrendered for payment or exchanged, registration of transfer or exchange, and where notices or demands to or upon the Company in respect of Debentures may be served. The initial office of such agent shall be located at Suite 800, 50 East River Center Boulevard, Covington, Kentucky 41001. The Company or such agent will give prompt written notice to the registered holders of the Debentures of any change in the location of such office or agency. The Company or its agent will maintain a register at such office or agency in which the Company shall provide for the registration of the Debentures and of transfers of the Debentures. Prior to due presentment of any Debentures for registration of transfer, the Company and any agent of the Company may treat the person in whose name such Debenture is registered as the owner of such Debenture for the purpose of receiving payment of principal and interest on such Debenture and for all other purposes whatsoever. At the option of the holder, Debentures may be exchanged for other Debentures of any authorized denominations and of a like aggregate principal amount, upon surrender of the Debentures at such office or agency. Whenever any Debentures are so surrendered for exchange, the Company shall execute and deliver the Debentures which the holder making the exchange is entitled to receive. 5 If this Debenture has been mutilated, lost, destroyed or wrongfully taken, the Company will issue a replacement Debenture, provided that the requirements of Section 8 of the Uniform Commercial Code are met. If required by the Company, the holder of this Debenture will deliver an indemnity bond sufficient in the judgment of the Company to protect the Company or any agent from any loss which any of them may incur if this Debenture is replaced. The Company will charge the holder for any expense incurred by it in replacing this Debenture. All Debentures issued upon any replacement or upon any registration of transfer or exchange of the Debentures shall be the valid obligations of the Company, evidencing the same debt and entitled to the same benefits as the Debentures surrendered upon such replacement or registration of transfer or exchange as the case may be. 10. MERGERS AND CONSOLIDATION. The Company shall not consolidate with or merge into, or transfer all or substantially all of its assets to another corporation unless (a) the transaction is approved by the Board of Directors of the Company, and (b) the successor corporation assumes, by written agreement, all the obligations of the Company under the Debentures, the Investment Option Agreements and the Purchase Agreement. Thereafter all such obligations of the predecessor corporation shall terminate. 11. AMENDMENT AND WAIVER. The provisions of the Debentures may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it (including acts or omissions which otherwise would give the holders of the Debentures the right to accelerate the maturity thereof), only if the Company has obtained the written consent of the holders of a majority of the aggregate principal amount of all of the Debentures at the time outstanding; PROVIDED, HOWEVER, that no such action or omission shall change (a) the exchange price for Convertible Preferred Shares, other than to prevent dilution or enlargement of the exchange privilege, (b) the rate at which interest accrues on any Debentures or the times at which such interest becomes payable (in the absence of acceleration of the maturity thereof), or (c) any provision relating to the scheduled payments of principal of the amount of principal to be paid on any Debenture (in the absence of acceleration of the maturity thereof), without the unanimous written consent of the holders of 100% in principal amount of all of the Debentures then outstanding; PROVIDED, FURTHER, that no consent of any person other than the Participants shall be required to be obtained in order to amend any provision relating to the exchange of any Debenture. Without the consent of any holder of a Debenture, the Company may amend the provisions of the Debentures to cure any ambiguity, omission, defect of inconsistency or to make any change that does not materially adversely affect the rights of such holder. 6 12. EVENTS OF DEFAULT; ACCELERATION. If any of the following events shall occur and be continuing (each an "Event of Default"): (a) The Company defaults in the payment of any installments of interest on any Debenture when the same becomes due and payable, and such default shall remain unremedied for a period of five days; or (b) The Company defaults in the payment of any installment of principal on any Debenture when the same becomes due and payable at maturity, upon redemption, or otherwise; or (c) The Company fails to perform or observe any other term, covenant or agreement contained in the Debentures on its part to be performed or observed, and any such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Company by the holders of a majority of the aggregate principal amount of the Debentures then outstanding; or (d) The Company pursuant to or within the meaning of any Bankruptcy Law (as defined below); (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian (as defined below) of it or for all or substantially all of its property, or (iv) makes a general assignment for the benefit of its creditors; or (e) A court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company in an involuntary case, and such order or decree shall continue for a period of 60 days undismissed, discharged or unbonded. (ii) appoints a Custodian of the Company or for all or substantially all of the Company's property and such order or decrees shall continue for a period of 60 days undismissed, undischarged or unbonded, or 7 (iii) orders the liquidation of the Company, and such order remains unstayed and in effect for a period of 60 days undismissed, undischarged or unbonded; then the holders of a majority of the aggregate principal amount of the Debentures then outstanding may, by a notice in writing to the Company, declare the unpaid principal of, and accrued interest on, the Debentures to be immediately due and payable and thereupon the unpaid principal of, and accrued interest on, the Debentures shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived by the Company, and the holders of the Debentures may exercise all other remedies available to them hereunder, or under applicable law; PROVIDED, HOWEVER, in the case of an Event of Default arising under Section 12(d) or 12(e) above, acceleration of the Debentures shall occur automatically and all amounts owing under the Debentures shall be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are expressly waived by the Company. For the purposes of this Section 12, the term "Bankruptcy Law" shall mean Title 11 U.S. Code or any similar Federal or state law for the relief of debtors, and the term "Custodian" shall mean any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Notwithstanding any of the foregoing provisions of this Section 12, the holders of a majority of the aggregate principal amount of the Debentures then outstanding, may waive an existing default or Event of Default and its consequences, except for any Event of Default pursuant to Sections 12(d) or 12(e) hereof the waiver of which requires the consent of the holders of 100% of the outstanding Debentures, at any time prior to the commencement of any remedy. When a default or an Event of Default is waived, it is cured and stops continuing. 13. NO WAIVER; REMEDIES. No failure on the part of the holder of this Debenture to exercise, and no delay in exercising, any right under this Debenture, shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 14. NO RECOURSE AGAINST OTHERS. No director, officer, employee or shareholder, as such, of the Company or the Parent shall have any liability for any obligations of the Company under the Debentures, the Investment Option Agreements or the Purchase Agreements. 8 15. GOVERNING LAW. This Debenture shall be construed in accordance with and be governed by the laws of the State of New York. 16. RESTRICTIONS ON TRANSFER. This Debenture shall not be sold, pledged, assigned, hypothecated or otherwise transferred by the holder of this Debenture except in accordance with the next sentence. The Debenture may be pledged or assigned by LMIC and, upon purchase of this Debenture by a Participant pursuant to the Purchase Agreement, this Debenture may be pledged as security to a lending institution for the purpose of financing the purchase price of such Debenture, subject to compliance with applicable securities laws and delivery to the Company of a legal opinion satisfactory to the Company with respect to such compliance. LOEWEN GROUP INTERNATIONAL, INC. By: ---------------------------------------------- Title: ---------------------------------------- LOEWEN MANAGEMENT INVESTMENT CORPORATION The "holder" 9 EX-99.34 35 EXHIBIT 99.34 EXHIBIT 34 THE LOEWEN GROUP INC. 1994 OUTSIDE DIRECTOR COMPENSATION PLAN (AS AMENDED ON APRIL 7, 1995) SECTION 1. PURPOSE The purpose of the 1994 Outside Director Compensation Plan (the "Plan") is to promote the interests of The Loewen Group Inc. (the "Company") by attracting and retaining qualified individuals who are neither employees nor officers of the Company or a Subsidiary (as defined below) to serve as directors of the Company or a Subsidiary. The Plan is intended to further align the interests of outside directors with the shareholders of the Company, thereby promoting long-term growth and performance of the Company. SECTION 2. DEFINITIONS "ANNUAL FEES" means (i) the annual retainer, (ii) fees for serving on a Committee and (iii) fees for serving as Chairman of a Committee, to be paid by the Company to a Company Participant during the 1994 Period or any Service Period, at the rates determined by the Board of Directors in advance of such period. "BOARD OF DIRECTORS" means the Board of Directors of the Company. "COMMITTEE" means a committee of the Board of Directors. "COMMON SHARES" means the Common shares of the Company. "COMPANY" means The Loewen Group Inc., a body corporate under the laws of British Columbia, Canada. "COMPANY PARTICIPANT" means an individual duly elected or appointed as a director of the Company who is not also an officer or employee of the Company or any Subsidiary. "DETERMINATION DATE" means (i) with respect to Common Shares issued and Options granted pursuant to Section 5, the first day of the Service Period to which the Election with respect to Annual Fees relates; provided, however, that with respect to the Service Period beginning January 1, 1995, the Determination Date shall be December 29, 1994; (ii) with respect to Common Shares issued and Options granted pursuant to Section 6(b), July 1, 1994; and (iii) with respect to Options granted pursuant to Section 7, the first day of the first full calendar month that a Participant first serves as a director; provided, however, that if the Determination Date is not a day on which the TSE is open for trading, the Determination Date shall be the next day on which such trading occurs. "DIRECTORS' SHARES" means Common Shares issued in accordance with Section 5(b). "ELECTION" means an election made in accordance with Section 5(a). "GRANT DATE" means the date that an Option is granted. "MEETING FEES" means the aggregate fee compensation actually earned by a Company Participant (but not yet paid) for attending in person Board of Directors and Committee meetings during a Service Period. "OPTION" means an option to acquire Common Shares granted pursuant to Section 5(c), Section 6(c) or Section 7. "PARTICIPANT" means a Company Participant or a Subsidiary Participant. "PLAN" means the 1994 Outside Director Compensation Plan. "SECURITIES LAWS" means the securities laws of the United States, Canada, the states and territories of the United States, the provinces and territories of Canada, the securities laws of the jurisdiction of residence of any Subsidiary Participant, and applicable laws, rules and regulations promulgated thereunder. "SERVICE PERIOD" means an annual period determined by the Board of Directors, which annual period shall be January 1 through December 31 until such time as the Board of Directors designates a different annual period. "SHARE PRICE" means (i) with respect to Common Shares, the weighted average of the closing prices of the Common Shares on the five trading days immediately preceding the Determination Date (the "Weighted Average Closing Price") or (ii) with respect to Options, the greater of (A) the weighted average of the trading prices of the Common Shares on the Determination Date and (B) the Weighted Average Closing Price. The Share Price with respect to Common Shares issued or Options granted to a Participant who is a resident of any country other than the United States shall be determined with reference to the closing prices or trading prices, as the case may be, on the TSE. The Share Price with respect to Common Shares issued or Options granted to a Participant who is a resident of the United States shall be determined with reference to the closing prices or trading prices, as the case may be, on The Nasdaq National Market (or, if the Common Shares are not traded on The Nasdaq National Market, any United States national securities exchange on which the Common Shares are traded). "SPECIAL 1994 ELECTION" means an election made pursuant to Section 6(a). "SUBSIDIARY" means a direct or indirect subsidiary of the Company. -2- "SUBSIDIARY PARTICIPANT" means an individual duly elected or appointed as a director of a Subsidiary who is (i) not an officer or employee of the Company or any Subsidiary or (ii) not a resident of the United States or Canada. "TSE" means The Toronto Stock Exchange. "1994 PERIOD" means the service period commencing January 1, 1994 and ending December 31, 1994. "1994 MEETING FEES" means the aggregate fee compensation actually earned by a Company Participant (but not yet paid) for attending in person Board of Directors and Committee meetings during the 1994 Period. SECTION 3. ADMINISTRATION The Plan shall be administered by the Board of Directors or a Committee. SECTION 4. COMMON SHARES SUBJECT TO THE PLAN The total number of Common Shares that may be issued under the Plan shall not exceed 250,000. The number of Common Shares reserved for issuance to any one person pursuant to options (whether granted under this Plan or otherwise) shall not exceed 5% of the total issued and outstanding Common Shares on a non-diluted basis. If any Options granted under this Plan are surrendered before exercise or lapse without exercise, in whole or in part, then the Common Shares reserved therefor shall continue to be available under the Plan. SECTION 5. ELECTION; DIRECTORS' SHARES; TANDEM GRANT (a) ELECTION. Not later than six months prior to the first day of a Service Period (or such longer or shorter period of time as may be permitted by Rule 16b-3 under the Securities Exchange Act of 1934 (the "1934 Act")), each Company Participant may, by filing a written election with the Company, direct the Company to pay to such Company Participant, in the form of Common Shares and Options, some or all of the Annual Fees payable to such Company Participant for the related Service Period. Once an Election is filed with the Company, it shall be effective, shall be irrevocable, and shall remain in effect until the end of the Service Period to which it relates. In such election the Company Participant may, but shall not be required to, direct the Company to pay to such Company Participant, in the form of Common Shares and Options, some or all of the Meeting Fees for the immediately preceding Service Period (or, in the case of the first Service Period following the 1994 Period, the 1994 Meeting Fees). The sum of the Annual -3- Fees and the Meeting Fees as to which an Election has been made shall be referred to together as the "Numerator." (b) DIRECTORS' SHARES. The number of Common Shares to be issued shall be equal to the Numerator to which the Election relates, divided by the Share Price as at the Determination Date. Such Directors' Shares shall be issued as soon as is reasonably possible after last day of the Service Period. Cash shall be paid in lieu of fractional shares. (c) TANDEM GRANT OF OPTIONS. Any Company Participant who makes an Election also shall receive a grant of Options to acquire that number of Common Shares equal to the number of Directors' Shares or such lesser number as shall be required in order to permit the recipient to qualify as a disinterested person as provided under Rule 16b-3(c)(2)(i) under the 1934 Act. SECTION 6. SPECIAL 1994 ELECTION; SHARES; OPTIONS (a) SPECIAL 1994 ELECTION. Not later than June 15, 1994, each Company Participant may, by filing a written election with the Company, direct the Company to pay Annual Fees payable (but not yet paid) to such Company Participant with respect to the 1994 Period in the form of Common Shares and Options. Such election shall be irrevocable and shall remain in effect until December 31, 1994. (b) 1994 SHARES. The number of Common Shares to be issued shall be equal to the Annual Fees payable (but not yet paid) with respect to the 1994 Period to which the election in section 6(a) relates divided by the Share Price as at the Determination Date. A certificate representing such Common Shares shall be issued as soon as is reasonably possible after the 1994 Period. Cash shall be paid in lieu of fractional shares. (c) 1994 OPTIONS. Any Company Participant who makes an election pursuant to Section 6(a) with respect to the 1994 Period shall also receive a grant of Options to acquire that number of Common Shares equal to the number of Common Shares determined in accordance with Section 6(b) above. SECTION 7. INITIAL ONE-TIME GRANT On the first day of the first full calendar month after the date on which a Company Participant is initially elected or appointed to the Board of Directors, such Company Participant shall receive an initial grant of 2,000 Options. In addition, the Board of Directors or the Committee, as the case may be, shall have the discretion to make an initial grant of up to 2,000 Options to a Subsidiary Participant, as of the first day of the first -4- full calendar month after the date on which a Subsidiary Participant is initially elected or appointed to a Subsidiary board of directors. SECTION 8. OPTION AGREEMENT Each Option granted under the provisions of this Plan shall be evidenced by an option agreement ("Option Agreement") in such form as may be approved by the Board of Directors, which agreement shall be duly executed and delivered on behalf of the Company and by the Participant to whom such Option is granted. The Option Agreement shall contain such terms, provisions and conditions not inconsistent with the Plan as may be determined by the Board of Directors. SECTION 9. TERMS OF OPTIONS (a) EXERCISE PRICE. The Option exercise price shall be the Share Price. (b) TERM. Each Option shall expire ten years after the Grant Date. (c) VESTING; EXERCISE. Each Option Agreement shall specify the dates upon which all or any installment of the Option will be exercisable. An Option may be exercised when installments vest and at any time and from time to time thereafter with respect to all or a portion of the Common Shares covered by such vested installments. In addition, if an Offer (as hereinafter defined) is made, the Board of Directors may while the Offer remains outstanding: (i) determine that each Option granted by the Company to purchase Common Shares shall, notwithstanding any vesting period or deferral of the right to exercise otherwise applicable, be immediately exercisable effective on and after a date declared by the Board of Directors, or Committee, to be an advanced exercise date ("Advanced Exercise Date"); and (ii) rescind any declaration of an Advanced Exercise Date but no such rescission shall affect the validity of the exercise of such Option if validly exercised on or after a particular Advanced Exercise Date and before the date of rescission of the declaration of the particular Advanced Exercise Date. For the purposes hereof, "Offer" means an offer to acquire the Shares made to the holders of the Company's Shares where the Shares which are the subject of the offer to purchase, together with the offeror's then presently owned Shares, will in the aggregate exceed twenty percent (20%) of the outstanding Shares of the Company and where two or more persons or companies make offers jointly or in concert or intending to exercise -5- jointly or in concert any voting rights attaching to the Shares to be acquired, then the Shares owned by each of them shall be included in the calculation of the percentage of the Shares of the Company owned by each of them. Paragraphs (i) and (ii) shall apply to each Option granted or to be granted by the Company, which is outstanding at the time of any such declaration regardless of the date of grant thereof, provided that all other terms and conditions of the Option shall continue to apply and nothing herein shall operate to extend, enlarge or revise any Option which has expired, has been exercised, has been cancelled or otherwise has ceased to exist. (d) PAYMENT. An Option shall be exercised by delivery of a written notice of such exercise to the Company at its principal executive office, together with full payment of the aggregate exercise price for the Common Shares with respect to which the Option is exercised. (e) SHARE ISSUANCE. Upon payment of the aggregate exercise price, the Company shall issue the Common Shares so acquired as soon as is reasonably possible. SECTION 10. OPTIONS NOT TRANSFERABLE Except as hereafter provided, an Option granted under the Plan may not be transferred, pledged or assigned otherwise than by will or the laws of descent and distribution and may be exercised only by the Participant during the Participant's lifetime. SECTION 11. PROTECTION AGAINST DILUTION The Board of Directors shall adjust the number of Common Shares covered by the Plan and any Option in a manner which it considers equitable to reflect any change in the capitalization of the Company including, but not limited to, such changes as stock dividends, consolidations and subdivisions of shares or changes resulting from an amalgamation of the Company with one or more corporations. No fractional shares or rights to acquire a fractional share will be created as a result of an adjustment made pursuant to this section. The Board of Directors shall also adjust the exercise price under any Option in a manner which it considers equitable if the number of Common Shares covered by the Option is adjusted pursuant to this section. SECTION 12. EFFECT OF TERMINATION OF DIRECTORSHIP (a) DEATH. In the event of the death of a Participant, the Participant's personal legal representatives (the "Successors") may exercise any Options previously issued to the Participant, to the extent that such Options are exercisable at the date of death, but no further vesting shall occur. Absent the prior written consent of the Board of Directors, the Successors must exercise any such Option prior to the earlier to occur of (i) two -6- years after the date of death and (ii) the expiration date of the Option. With respect to Common Shares issuable pursuant to Section 5(b), 6(b) or 9(e), a certificate representing such Common Shares shall be issued as soon as is reasonably possible after the last day of the Service Period or 1994 Period, as the case may be, to which such Common Shares relate. No Options shall be issued with respect to the 1994 Period or Service Period during which the Company Participant's death occurs. (b) TERMINATION BY BOARD RESOLUTION. If a Participant's directorship is terminated by resolution of the Board of Directors or the board of directors of a Subsidiary, all Options previously issued to such person shall expire as determined by the Board of Directors. The Board of Directors shall also determine the extent, if at all, that such Company Participant shall receive any Common Shares or Options with respect to the 1994 Period or Service Period, as the case may be, during which such termination occurs. (c) OTHER TERMINATION. In the event a Participant's directorship is terminated for any reason other than by death or by resolution, the Participant may exercise any Options previously issued to the Participant, to the extent that such Options are exercisable on the termination date, but no further vesting shall occur. The Participant must exercise any such Options prior to the earlier to occur of (i) forty-five days after the date of termination and (ii) the expiration date of the Option. With respect to Common Shares issuable pursuant to Section 5(b), 6(b) or 9(e), a certificate representing such Common Shares shall be issued as soon as is reasonably possible after the last day of the Service Period or 1994 Period, as the case may be, to which such Common Shares relate. No additional Options shall be issued with respect to the 1994 Period or Service Period during which such termination occurs. SECTION 13. RESTRICTIONS ON ISSUANCE OF SHARES The Company shall have no obligation to issue any Common Shares or deliver any certificate representing Common Shares until the following conditions shall be satisfied: (i) At the time of the issue, (A) such shares effectively shall have been registered or qualified by prospectus, as the case may be, under applicable Securities Laws as now in force or hereafter amended or (B) counsel for the Company shall have given an opinion that such shares are exempt from registration or qualification by prospectus, as the case may be, under Securities Laws as now in force or hereafter amended; and (ii) the Company shall have complied with all regulations imposed by the Nasdaq National Market and any stock exchange upon which the Common Shares are then listed. -7- In addition, any such certificate shall bear such restrictive legends as the Company determines are necessary or desirable, from time to time, in order to comply with applicable Securities Laws and all regulations imposed by the Nasdaq National Market and any stock exchange upon which the Common Shares are then listed. SECTION 14. TERMINATION OR AMENDMENT Subject to regulatory approval and, where required, approval of the shareholders of the Company, the Board of Directors may, at any time and for any reason, amend or terminate the Plan; provided, however, that Section 7 of this Plan shall not be amended more than once during any six month period, except any amendments which may be required by the Internal Revenue Code of 1986, the Employee Retirement Income Security Act, or the rules thereunder. The Plan shall remain in effect until it is so terminated by the Board of Directors. No Options may be granted under this Plan after its termination, but no termination or amendment of the Plan shall affect any previously granted Option. SECTION 15. GENERAL LIMITATIONS Neither the Participant nor the Participant's Successors shall have rights as a shareholder of the Company with respect to Common Shares covered by Options until the Participant or Participant's Successors become the holder of record of such shares. SECTION 16. RISK EACH PARTICIPANT ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE COMMON SHARES. SECTION 17. APPLICABLE LAW All questions concerning the interpretation, validity and construction of this Plan and the instruments evidencing Options shall be governed by the internal law, and not the law of conflicts, of the Province of British Columbia. SECTION 18. COMPLIANCE WITH CERTAIN U.S. LAWS The Company intends that, with respect to persons subject to Section 16 of the 1934 Act, this Plan will qualify under Rule 16b-3 promulgated thereunder. So long as the Company is subject to Section 16, any equity security, as defined in the 1934 Act or the rules and regulations thereunder, offered pursuant to the Plan may not be sold for at least six months after the date of grant thereof, and any derivative security, as defined in the rules and regulations promulgated under Section 16, offered pursuant to the Plan may not be sold for at least six months after the acquisition thereof, except in the event of the death or disability of the holder thereof. In addition, (i) the date by which an Election must be -8- made and (ii) the number of Options granted pursuant to Section 5(c) of this Plan, may be modified to the extent necessary to reflect prospective changes to Rule 16b-3. Should any provision of this paragraph require modification or be unnecessary to comply with the requirements of Section 16 and the rules thereunder, the Board of Directors may waive such provisions and/or amend this Plan or modify such provision accordingly. To the extent that any provision of this Plan or action by the Board of Directors fails to comply with the Section 16 rules, it shall be null and void to the extent permitted by law and deemed advisable by the Board of Directors. SECTION 19. EFFECTIVE DATE; APPROVAL This Plan shall become effective upon approval of the Plan by the Board of Directors. Common Shares shall not be issued under this Plan unless and until the Plan is approved by the shareholders of the Company. -9- EX-99.35 36 EXHIBIT 99.35 EXHIBIT 35 THE LOEWEN GROUP INC. EMPLOYEE STOCK BONUS PLAN (AS AMENDED AS AT APRIL 7, 1995) 1. PURPOSE AND EFFECTIVE DATE 1.1 PURPOSE. The purpose of the Plan is to enhance the sense of commitment and community among the Employees of the Company and to foster the interest of such Employees in the growth and development of the Company by providing such Employees, through the grant of Common shares in TLGI, with a proprietary interest in the Company and a real sense of ownership and by means of the foregoing to advance the interests of the Company. 1.2 EFFECTIVE DATE. The Plan shall be effective as of September 1, 1993. 2. DEFINITION AND INTERPRETATION 2.1 DEFINITIONS. In the Plan, unless the context otherwise requires, the following terms shall have the following meanings: "Board of Directors" means the Board of Directors of TLGI; "Committee" means the committee appointed by the Board of Directors pursuant to Section 3.1 of the Plan; "Company" means TLGI and its Subsidiaries; "Employee" means, at a relevant date: (a) a regular full time employee (including officer) of TLGI or a Subsidiary who has been so employed for at least 90 consecutive days as at that date; (b) a regular part time employee (including officer) of TLGI or a Subsidiary who has been so employed for at least 90 consecutive days as at that date, is not employed by any company or person other than TLGI or a Subsidiary, works an average of 20 hours per week and is entitled to substantially all of the benefits of a regular full time employee; (c) a part time or on-call employee of TLGI or a Subsidiary who as at that date has been so employed for at least 5 years, works an average of 5 hours per week or 260 hours per year and who the Committee determines has made a contribution to the Company; and 1 (d) an employee of TLGI or a Subsidiary who as at that date is paid on a commission basis, is meeting his or her sales and income requirements and is entitled to substantially all of the benefits of a regular full time employee; and for the purpose of the Plan: (e) the average of 5 hours per week or 20 hours per week shall be determined as follows: (i) if the employee has been employed for 12 months or more, then averaged over a period of 12 months preceding the relevant date; (ii) if the employee has been employed less than 12 months preceding the relevant date, then averaged over such period of employment; or (iii) on such other basis as the Committee may determine; (f) employed for consecutive days shall mean employment without any termination or leave of absence, except for a leave of absence approved by the employer which is less than 6 consecutive months in duration; (g) there shall be taken into account employment with a company or person before that company became a Subsidiary or before that company's or person's funeral service or related assets were acquired by TLGI or a Subsidiary; and (h) "Employee" shall not include an employee of another company or person who is on temporary loan to TLGI or a Subsidiary, a short term temporary employee, a probationary employee, a director of TLGI or a Subsidiary unless such director is otherwise eligible as an Employee and such other persons or class of persons as may be excluded from participation from time to time by the Committee; "Participant" means an Employee who has delivered an acknowledgment in accordance with Section 4.3 of the Plan; "Plan" means the employee stock bonus plan described herein; "Plan Administrator" means the person or persons designated from time to time by the Committee pursuant to Section 3.2 of the Plan as being responsible for maintaining records in connection with the Plan; 2 "Plan Agent" means the person or persons from time to time appointed by the Board of Directors to act as plan agent for the Plan; "Shares" means Common shares of TLGI; "Subsidiaries" means any corporations which are direct or indirect subsidiaries of TLGI; and "TLGI" means The Loewen Group Inc., a company incorporated under the laws of the Province of British Columbia and any successor company. 2.2 ARTICLES, SECTIONS AND HEADINGS. The division of the Plan into Articles and Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of the Plan. 2.3 EXTENDED MEANINGS. Where the context so requires, words importing the singular include the plural and vice versa, and words importing the masculine gender include the feminine and neuter genders. 2.4 APPLICABLE LAW. The Plan shall be governed by and construed in accordance with the laws of the Province of British Columbia. 3. ADMINISTRATION OF THE PLAN 3.1 COMMITTEE. The Plan will be administered by a specifically designated Committee of the Board of Directors. The Committee shall consist of such two or more directors of TLGI as the Board of Directors may designate from time to time. The Committee is authorized to interpret and construe the Plan, including but not limited to adjudicating as to and rectifying inconsistencies and omissions, and may from time to time make, amend and rescind rules and regulations for carrying out the Plan. The Committee may in its absolute discretion, if it determines that there is hardship or other good cause, grant relief from the literal provisions of the Plan, but no such grant of relief shall constitute a precedent in any other circumstance. Any such interpretation or construction of any provision of the Plan or grant of relief shall be final and conclusive. All administrative costs of the Plan shall be paid by TLGI. No member of the Committee shall be liable for any action or inaction or determination made in good faith with respect to the Plan or any Shares granted under it. 3.2 PLAN ADMINISTRATOR. The Committee may appoint a person or persons from time to time, called a Plan Administrator, to maintain records in connection with the Plan. 3 4. PARTICIPATION 4.1 INITIAL ISSUANCE. TLGI will, subject to Section 4.3, issue on the date determined by the Committee (the "Initial Issuance Date"), 5 Shares for each person who is an Employee as of June 30, 1993 and has not ceased to be an Employee as of the Initial Issuance Date, for services performed by that person. The 5 Shares may be issued either (a) directly to and in the name of each Employee or (b) in the name of the Plan Agent and held by the Plan Agent as nominee for each such person, as the Committee may determine in its sole discretion. 4.2 FUTURE ISSUANCES. TLGI will, subject to Section 4.3, issue, on dates from time to time determined by the Committee (each such date being at approximately three month intervals or such other intervals as the Committee may select) 5 Shares for each person (other than a person who has, in the past, received 5 Shares pursuant to Section 4.1 or this Section 4.2), who qualifies as an Employee after June 30, 1993 and has not ceased to be an Employee as of the relevant issuance date, for services performed by that person. The 5 Shares may be issued either (a) directly to and in the name of each Employee or (b) in the name of the Plan Agent and held by the Plan Agent as nominee for each such person as the Committee may determine in its sole discretion. 4.3 ACKNOWLEDGMENT. An Employee who has qualified pursuant to Section 4.1 or 4.2 must, as a condition to the issuance of the 5 Shares relating to such person, deliver to the Plan Administrator prior to the date of issue of that Employee's 5 Shares a completed form of acknowledgment substantially in the form attached hereto as Schedule A or in such other form as the Committee may approve, expressing the agreement of such Employee to the terms and conditions of the Plan as it may be amended from time to time. An Employee delivering such acknowledgment shall be a Participant in the Plan. 4.4 ONE TIME ENTITLEMENT. Unless the Committee otherwise determines, any one person's entitlement under the Plan is limited to one grant of 5 Shares. 5. SPECIFIC PROVISIONS AFFECTING SHARES 5.1 HOLD PERIOD. A Participant may not sell, assign, mortgage, pledge or otherwise dispose of that Participant's 5 Shares while that Participant is an Employee. If that Participant ceases to be an Employee for any reason (including death) then that Participant or that Participant's personal representative may not sell, assign, mortgage, pledge or otherwise dispose of that Participant's 5 Shares unless and until 3 years have elapsed since the date of issuance of such 5 Shares. 5.2 PLAN AGENT AS HOLDER. At the sole discretion of the Committee, a certificate representing the 5 Shares awarded to a Participant may be issued directly to and in the name of such Participant or may be issued in the name of the Plan Agent and held by the Plan Agent as nominee for such Employee. If the Plan Agent so acts, the Plan Agent will continue to be the 4 registered holder of 5 Shares on behalf of a Participant during the relevant hold period described in Section 5.1 and thereafter until that Participant makes a written request to the Plan Administrator that a share certificate for that Participant's 5 Shares be issued to that Participant or that Participant's order, and TLGI has issued such share certificate. A Participant shall be solely responsible for the sale or other disposition of that Participant's 5 Shares including compliance with all relevant securities laws and conditions imposed by relevant stock exchanges and quotation systems, provided that nothing herein contained shall preclude a Participant from participating, if eligible, in any plan that TLGI may establish for the purchase of Shares from shareholders. 5.3 DIVIDENDS AND DISTRIBUTIONS. Any dividends (cash, stock or in specie) declared on each Participant's 5 Shares and any other distributions (including any warrants, options or rights) with respect to such Shares shall be paid or delivered by TLGI to either (a) the respective Participants entitled thereto or (b) the Plan Agent, as the Committee may determine in its sole discretion. If such dividends or other distributions are paid or delivered to the Plan Agent, then the Plan Agent shall hold such dividends or other distributions for the benefit of the Participants entitled thereto, without interest or other return to such Participants on such dividends or other distributions held, during the relevant hold period described in Section 5.1 and thereafter, subject to the following sentence. If a Participant requests a certificate for that Participant's 5 Shares pursuant to Section 5.2, the Plan Agent shall pay or deliver the aggregate dividends or other distributions held for that Participant to that Participant or that Participant's order, less any withholding taxes. TLGI shall be entitled to earn interest, commissions, fees or other returns on all dividends or other distributions held by the Plan Agent. Nothing herein contained shall preclude a Participant from participating, if eligible, in a plan that TLGI may establish for dividend reinvestment and/or share purchases. Any warrants, options or rights with respect to the Shares may in the sole discretion of the Committee be delivered to the Participants for exercise or be allowed to lapse (if the Committee determines that there is negligible value to the warrants, options or rights) or be sold by the Plan Agent on behalf of the Participants, and the proceeds of any such sale shall be proportionately credited to each Participant. 5.4 VOTING. Shares held directly by a Participant will be voted by such Participant. Shares held by the Plan Agent under the Plan will be voted by the Plan Agent in accordance with the directions, if any, of the respective Participants and in the absence of a direction will be voted for any proposals or resolutions proposed by management of TLGI. 5.5 REPRESENTATIVE CERTIFICATE. In the event that the Plan Agent holds Shares on behalf of a Participant, the Plan Administrator may, but shall not be obligated to, issue or cause to be issued to a Participant a representative certificate confirming the entitlement of that Participant to the beneficial interest in that Participant's 5 Shares held in the name of the Plan Agent. 5.6 PROTECTION AGAINST DILUTION. The Committee will adjust the number of Shares covered by the Plan in a manner which it considers equitable to reflect any change in the capitalization of TLGI including, but not limited to, such changes as stock dividends, consolidations and subdivisions of shares or changes resulting from an amalgamation of 5 TLGI with one or more corporations. No fractional shares or rights to acquire a fractional share will be created as a result of an adjustment made pursuant to this section. 6. MAXIMUM NUMBER OF SHARES 6.1 LIMITATIONS. The number of Shares that may be issued under the Plan is limited as follows: (a) the aggregate number of Shares to be issued pursuant to the Plan shall not exceed 50,000 Shares; (b) the aggregate number of Shares issued shall not exceed 1% of the total issued and outstanding Shares on an annual basis; and (c) Shares issued to insiders of TLGI (as defined in the Securities Act (British Columbia)) shall not exceed 0.5% of the total issued and outstanding Shares on an annual basis; subject to any change to such limitations as determined by the Committee and as required and approved by relevant regulatory authorities, stock exchanges, quotation systems and, where required, the shareholders of TLGI. 7. EMPLOYMENT 7.1 NO ENTITLEMENT. The Plan is a voluntary plan on the part of the Company and shall not constitute consideration for or an inducement to or condition of the employment of any Employee. Nothing contained in the Plan shall confer upon any Employee any right with respect to employment or continuance of employment with TLGI or any Subsidiary or interfere in any way with the right of TLGI or any Subsidiary to terminate an Employee's employment at any time. The Plan does not give any Employee or any beneficiary of an Employee any right or claim to any benefit except to the extent provided for in the Plan. 8. SECURITIES REGULATION AND TAX COMPLIANCE 8.1 SECURITIES COMPLIANCE. Where necessary to effect exemption from registration or distribution or to effect qualification of the Shares under securities laws or policies applicable to the Shares, the Board of Directors or the Committee may take such action or require such action or agreement by any Employee as may from time to time be necessary to comply with such applicable securities laws and policies. Such action may include but is not limited to (a) requiring a Participant to acquire Shares with investment intent and not with a view to their distribution, and to present to the Board of Directors or the Committee an undertaking to that effect in a form acceptable to the Board of Directors or the Committee, as the case may be, (b) the legending of certificates issued pursuant to the Plan, (c) requiring of an opinion of counsel for a transferor or transferee with respect to the 6 legality of the transfer of Shares issued pursuant to the Plan and (d) the establishment of other or different custody arrangements whereby Shares issued pursuant to the Plan will be held by a custodian designated by the Board of Directors or the Committee pursuant to a custodian arrangement for the benefit of Participants. This Section 8.1 shall in no way obligate the Company to undertake the registration or qualification of any Shares under any securities laws applicable to the securities of the Company. The Committee may decline to issue some or all of the Shares pursuant to the Plan unless the Shares to be issued hereunder are qualified under appropriate securities laws, or the issuance of the Shares hereunder is exempt therefrom in the opinion of the Committee, upon advice of counsel to the Company. 8.2 SECTION 16 COMPLIANCE. With respect to persons subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "1934 Act"), transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. If any provision of the Plan or action by the Plan Administrator fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Plan Administrator. 8.3 TAX AND OTHER COMPLIANCE. The Participant shall be solely responsible for reporting and paying all taxes, duties and imposts relating to the Shares including but not limited to reporting on such Participant's income tax return and paying tax on the value of the Shares on issuance, tax on dividends and other distributions and tax on the sale or other disposition of the Shares. The Company may make withholdings from salary or other sums payable to Participants on account of taxes, duties and imposts relating to the Shares, dividends or other distributions. 8.4 DELAYING CERTIFICATES. Issuance, transfer or delivery of certificates for Shares issued or to be issued pursuant to the Plan may be delayed, at the discretion of the Committee, until the Committee is satisfied that the applicable requirements of securities, income tax and other laws and the rules, regulations and policies of stock exchanges and quotation systems have been met. 9. AMENDMENT, SUSPENSION AND TERMINATION OF THE PLAN 9.1 BOARD OR COMMITTEE MAY AMEND, SUSPEND OR TERMINATE. The Board of Directors or the Committee may amend, suspend or terminate the Plan, in whole or in part, if and when it is advisable in the absolute discretion of the Board of Directors or the Committee (including but not limited to amendment, suspension or termination of the Plan due to regulatory requirements) and to provide for the consequences thereof (including but not limited to the consequences that Employees will have no entitlement or further entitlement under this Plan upon amendment, suspension or termination); provided, however, that the Plan may not be amended more than once every six months, except to comply with changes to the U.S. Internal Revenue Code or the U.S. Employee Retirement Income Security Act of 1974. In particular and without limitation, the Board of Directors or the Committee may determine that share certificates for the Shares shall be issued to Participants or that 7 dividends or other distributions will be paid or delivered to Participants before the expiration of the relevant hold period in Section 5.1 or without a written request pursuant to Section 8.1. The provisions of the Plan are subject to and shall be read as incorporating all laws, rules, regulations and policies as may from time to time be applicable thereto, including but not limited to rules, regulations and policies of any stock exchange or quotation system. Any amendment of the Plan is subject to regulatory approval in accordance with such laws, rules, regulations and policies and, where required thereunder, the approval of the shareholders of TLGI. 10. FUTURE VALUE 10.1 NO REPRESENTATION. The Participants by participating in the Plan shall be deemed to have accepted all risks associated with acquiring Shares pursuant to the Plan. The Company, the Board of Directors, the Committee, the Plan Administrator(s) and the Plan Agent make no representation, warranty or guarantee as to the future value of the Shares and shall not be liable to any Employee for any loss resulting from a decline, or failure to increase, in the market value of the Shares issued with respect to that Employee under the Plan or as a result of the amendment, suspension or termination of the Plan. 11. NON-ASSIGNABILITY OF RIGHTS 11.1 NO ASSIGNMENT. No right of an Employee under the Plan is capable of being sold, assigned, mortgaged, pledged or otherwise disposed of, in whole or in part. 12. NECESSARY APPROVALS 12.1 CESSATION OF PLAN. The obligation of TLGI to issue and deliver any Shares in accordance with the Plan is subject to any necessary approval of any regulatory authority having jurisdiction over the securities of TLGI. If any Shares cannot be issued to or for the benefit of a Participant for any reason whatsoever, the obligation of TLGI, if any, to issue such Shares shall terminate without further liability. 13. SEVERABILITY 13.1 SEVERABILITY. Each provision of the Plan shall be severable, and the invalidity, illegality or unenforceability of any provision will not affect or impair the validity, legality and enforceability of any other provisions of the Plan. 8 14. NOTICE AND DELIVERY 14.1 ADDRESS OF PARTICIPANT. Any notice, document, certificate or other form of communication may be delivered to a Participant to the address for such Participant shown from time to time in the Plan Administrator's records. 9 SCHEDULE A to the Employee Stock Bonus Plan of The Loewen Group Inc. TO: The Loewen Group Inc. 4126 Norland Avenue Burnaby, British Columbia V5G 3S8 Attention: Plan Administrator Employee Stock Bonus Plan The undersigned hereby elects to participate in The Loewen Group Inc. Employee Stock Bonus Plan (the "Plan") and agrees to all of the terms and conditions of the Plan as it may be amended from time to time. The undersigned accordingly hereby subscribes for 5 Common shares (the "Shares") of The Loewen Group Inc. (" TLGI"). The undersigned will be the owner of the Shares. The undersigned acknowledges that for administrative purposes, his or her Shares may be held by the Plan Agent under the Plan and issued in the name of the Plan Agent as the representative of the undersigned. THE FOLLOWING IS A SUMMARY OF SOME OF THE TERMS AND CONDITIONS OF THE PLAN BUT THE UNDERSIGNED AGREES THAT THE FULL TEXT OF ALL OF THE TERMS AND CONDITIONS OF THE PLAN, AS IT MAY BE AMENDED FROM TIME TO TIME, SHALL GOVERN. 1. The undersigned will not sell, pledge or otherwise dispose of the Shares during the undersigned's employment with TLGI or a Subsidiary of TLGI (as defined in the Plan). If such employment ceases for any reason, the undersigned will not sell, pledge or otherwise dispose of the Shares unless and until 3 years have elapsed from the date the Shares were issued to the undersigned. When the undersigned is permitted to sell the Shares, the sale or other disposition of the Shares will be the sole responsibility of the undersigned. 2. The undersigned agrees that all dividends and distributions on the Shares may, if the Committee appointed under the Plan so decides, be held by the Plan Agent without interest or other income payable to the undersigned and that TLGI may earn interest, commission, fees or other income on such dividends and distributions. 3. The undersigned acknowledges and agrees that the value of the Shares on issuance, the dividends and other distributions and the proceeds of the sale of the Shares are taxable to the undersigned, that the undersigned will be responsible for all reporting and payment of taxes and that TLGI or the undersigned's employer may make withholdings from salary or other amounts payable to the undersigned on account of taxes. 4. The undersigned accepts all risks associated with acquiring the Shares and agrees that there is no guarantee as to the future value of the Shares and that TLGI and its directors, the undersigned's employer, and the Committee, the Plan Administrator(s) and the Plan Agent under the Plan are not liable for any loss. The undersigned's full name and address are as follows: Name Number and Street City etc. ------------------------------------------- Signature ------------------------------------------- Date 10 EX-99.36 37 EXHIBIT 99.36 EXHIBIT 36 SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT dated as of April 20, 1990 between THE LOEWEN GROUP INC. and THE ROYAL TRUST COMPANY as Rights Agent Borden & Elliot TABLE OF CONTENTS Section Description Page - - ------- ----------- ---- ARTICLE 1. -- INTERPRETATION........................ 1 1.1 Certain Definitions..................................................... 1 "Acquiring Person"................................................. 2 "Affiliate"........................................................ 3 "Associate"........................................................ 3 "Beneficial Owner"................................................. 3 "Beneficial Ownership"............................................. 3 "Beneficially Own"................................................. 3 "British Columbia Company Act"..................................... 4 "Business Day"..................................................... 4 "Canadian-U.S. Exchange Rate"...................................... 4 "Canadian Dollar Equivalent"....................................... 4 "close of business"................................................ 4 "Common Shares".................................................... 4 "Exempt Acquisitions".............................................. 4 "Exercise Price"................................................... 5 "Expiration Time".................................................. 5 "Flip-in Event".................................................... 5 "Flip-over Transaction or Event"................................... 5 "Grandfathered Person"............................................. 5 "Grandfathered Person Transferee".................................. 5 "Grandfathered Bidder"............................................. 5 "Independent Shareholders"......................................... 5 "Market Price"..................................................... 6 "Offer to Acquire"................................................. 7 "Offeror's Securities"............................................. 7 "Permitted Bid".................................................... 7 "Permitted Bid Acquisition"........................................ 8 "Person"........................................................... 8 "Pro Rata Acquisition"............................................. 8 "Record Time"...................................................... 8 "regular periodic cash dividend"................................... 8 "Securities Act (Ontario)"......................................... 9 "Separation Time".................................................. 9 "Stock Acquisition Date"........................................... 9 "Subsidiary"....................................................... 9 "Take-over-Bid".................................................... 9 "Termination Time"................................................. 9 "Trading Day"...................................................... 9 "U.S.-Canadian Exchange Rate"...................................... 9 "U.S. Dollar Equivalent"........................................... 10 "Voting Shares".................................................... 10 "1933 Securities Act".............................................. 10 "1934 Exchange Act"................................................ 10 1.2 Currency................................................................ 10 1.3 Grandfather Provisions.................................................. 10 i Section Description Page - - ------- ----------- ---- ARTICLE 2. -- THE RIGHTS 2.1 Legend on Common Share Certificates..................................... 12 2.2 Initial Exercise Price; Exercise of Rights; Detachment of Rights........ 12 2.3 Adjustments to Exercise Price, Number of Rights......................... 14 2.4 Date on Which Exercise is Effective..................................... 17 2.5 Execution, Authentication, Delivery and Dating of Rights Certificates... 17 2.6 Registration, Registration of Transfer and Exchange..................... 17 2.7 Mutilated, Destroyed, Lost and Stolen Rights Certificates............... 18 2.8 Persons Deemed Owners................................................... 18 2.9 Delivery and Cancellation of Certificates............................... 18 2.10 Agreement of Rights Holders............................................. 19 ARTICLE 3. -- ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS 3.1 Flip-over Transaction or Event.......................................... 19 3.2 Flip-in Event........................................................... 20 3.3 Obligations of the Company.............................................. 21 3.4 Exchange Option......................................................... 21 3.5 Special Meeting of Shareholders to Consider Permitted Bids.............. 22 ARTICLE 4. -- THE RIGHTS AGENT 4.1 General................................................................. 23 4.2 Merger, Amalgamation or Consolidation or Change of Name of Rights Agent. 24 4.3 Duties of Rights Agent.................................................. 24 4.4 Change of Rights Agent.................................................. 26 ARTICLE 5. - MISCELLANEOUS 5.1 Redemption, Waiver and Termination...................................... 26 5.2 Expiration.............................................................. 27 5.3 Issuance of New Rights Certificates..................................... 27 5.4 Supplements and Amendments.............................................. 27 5.5 Fractional Rights and Fractional Shares................................. 29 5.6 Rights of Action........................................................ 29 5.7 Holder of Rights Not Deemed a Shareholder............................... 29 5.8 Notice of Proposed Actions.............................................. 30 5.9 Notices................................................................. 30 5.10 Costs of Enforcement.................................................... 30 5.11 Successors.............................................................. 31 5.12 Benefits of this Agreement.............................................. 31 5.13 Descriptive Headings.................................................... 31 5.14 Governing Law........................................................... 31 5.15 Language................................................................ 31 5.16 Counterparts............................................................ 31 5.17 Severability............................................................ 31 5.18 Effective Date.......................................................... 31 5.19 Determinations and Actions by the Board of Directors.................... 32 ii SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT AGREEMENT made as of April 20, 1990 B E T W E E N: THE LOEWEN GROUP INC., a corporation incorporated under the laws of British Columbia (hereinafter referred to as the "Company"), OF THE FIRST PART, -- and -- THE ROYAL TRUST COMPANY, a trust company incorporated under the laws of Quebec (hereinafter referred to as the "Rights Agent"), OF THE SECOND PART. WHEREAS the Board of Directors of the Company has determined that it is advisable to adopt a shareholder protection rights plan (the "Rights Plan"); AND WHEREAS, in order to implement the Rights Plan, the Board of Directors of the Company has (a) authorized and declared a distribution of one right (a "Right") effective at the close of business on May 9, 1990 in respect of each Common Shares (as hereinafter defined) outstanding at the close of business on May 9, 1990 (the "Record Time"), (b) authorized the issuance of one Right in respect of each Common Share issued after the Record Time and prior to the earlier of the Separation Time (as hereinafter defined) and the Expiration Time (as hereinafter defined), (c) authorized the issuance of Rights Certificates (as hereinafter defined) to holders of Rights pursuant to the terms and subject to the conditions set forth herein; WHEREAS each Right entitles the holder thereof, after the Separation Time, to purchase securities of the Company (or, in certain cases, of certain other entities) pursuant to the terms and subject to the conditions set forth herein; and WHEREAS the Company desires to appoint the Rights Agent to act on behalf of the Company and the holders of Rights, and the Rights Agent is willing to so act, in connection with the issuance, transfer, exchange, cancellation and replacement of Rights Certificates, the exercise of Rights and other matters referred to herein; NOW THEREFORE in consideration of the premises and respective agreements set forth herein, the parties hereby agree as follows: ARTICLE 1. -- INTERPRETATION 1.1 CERTAIN DEFINITIONS For the purposes of this Agreement, the following terms have the meanings indicated: (a) "ACQUIRING PERSON" shall mean, subject to subsections 1.3(a) and (b), any Person who is the Beneficial Owner of 20% or more of the outstanding Common Shares or Voting Shares of the Company; provided, however, that the term "Acquiring Person" shall not include (i) the Company or any Subsidiary of the Company, any employee benefit plan, or trust for the benefit of employees, of the Company or any Subsidiary of the Company, or any Person organized, appointed or established by the Company for or pursuant to the terms of any such plan or trust; (ii) any Person who becomes the Beneficial Owner of 20% or more of the outstanding Common Shares or Voting Shares of the Company as a result of (A) an acquisition or redemption by the Company of Voting Shares of the Company which, by reducing the number of Voting Shares outstanding, increases the proportionate number of Voting Shares Beneficially Owned by such Person to 20% or more of the Common Shares or Voting Shares of the Company then outstanding, or (B) share acquisitions made pursuant to a Permitted Bid and approved in accordance with the provision of Section 3.5 and made after the date of such approval ("PERMITTED BID ACQUISITIONS") or (C) share acquisitions in respect of which the Board of Directors of the Company has waived the application of Section 3.2 pursuant to subsection 5.1(b) or which were made on or prior to the date of this Agreement ("EXEMPT ACQUISITIONS"); provided, however, that if a Person shall become the Beneficial Owner of 20% or more of the Common Shares or Voting Shares of the Company then outstanding by reason of (i) share acquisitions or redemptions by the Company or (ii) Permitted Bid Acquisitions or (iii) Exempt Acquisitions and, after such share acquisitions or redemptions by the Company or Permitted Bid Acquisitions or Exempt Acquisitions, becomes the Beneficial Owner of any additional Voting Shares of the Company other than pursuant to Permitted Bid Acquisitions, Exempt Acquisitions, acquisitions as a result of a stock dividend, a stock split or other event pursuant to which such Person receives or acquires Voting Shares on the same pro rata basis as all other holders of Voting Shares of the same class ("PRO RATA ACQUISITIONS") or acquisitions pursuant to a dividend reinvestment plan of the Company, then as of the date of becoming the Beneficial Owner of any additional Voting Shares, such Person shall become an "Acquiring Person"; and (iii) for the period of 10 days after the Disqualification Date (as hereinafter defined), any Person who becomes the Beneficial Owner of 10% or more of the outstanding Common Shares or Voting Shares of the Company as a result of such Person becoming disqualified from relying on clause 1.1(d)(vii) hereof where such disqualification results solely because such Person has made or proposed to make a tender or exchange offer or a Take- over Bid in respect of securities of the Company alone or by acting jointly or in concert with any other Person (the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 100 of the Securities Act (Ontario) or Section 13(d) of the 1934 Exchange Act) by such Person or the Company of the intent to commence such a tender or exchange offer or Take-over Bid being herein referred to as the "DISQUALIFICATION DATE"). 2 (b) "AFFILIATE" has the meaning ascribed to such term in the Securities Act (Ontario). (c) "ASSOCIATE" has the meaning ascribed to such term in the Securities Act (Ontario). (d) A Person shall be deemed the "BENEFICIAL OWNER", and to have "BENEFICIAL OWNERSHIP" of, and to "BENEFICIALLY OWN" (i) any securities as to which such Person or any of such Person's Affiliates or Associates is or may be deemed to be the direct or indirect beneficial owner pursuant to the Securities Act (Ontario) for the purposes of insider trading or take-over bids or pursuant to Rule 13d-3 or 13d-5 under the 1934 Exchange Act (or pursuant to any comparable or successor laws, Rules or regulations or, if such laws, Rules or regulations shall be rescinded and there shall be no comparable or successor laws, Rules or regulations, pursuant to Rule 13d-3 or 13d-5 as in effect on the date of this Agreement) whether or not such laws or regulations apply to such Person; (ii) any securities as to which such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or after the lapse or passage of time or otherwise) pursuant to any agreement, arrangement, pledge or understanding (other than customary agreements with and between underwriters and banking group or selling group members with respect to a bona fide public offering of securities and other than pledges of securities in the ordinary course of business that meet all of the conditions specified in Rule 13d-3(d)(3) under the 1934 Exchange Act), or upon the exercise of any conversion right, exchange right, right (other than the Rights), warrant or option, or otherwise, or (B) the right to vote such security (whether such right is exercisable immediately or after the lapse or passage of time or otherwise), pursuant to any agreement, arrangement, understanding or otherwise; (iii) any securities that are Beneficially Owned within the meaning of paragraph (i) or (ii) by any other Person with which such Person or any such Person's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) with respect to or for the purpose of acquiring, holding, voting or disposing of any Voting Shares of the Company (other than customary agreements with and between underwriters and banking group or selling group members with respect to a bona fide public offering of securities) or acquiring, holding or disposing of a significant portion of the property or assets of the Company or any Subsidiary of the Company; A person shall be deemed not to be the "Beneficial Owner", or to have "Beneficial Ownership", of or to "Beneficially Own", any security (iv) solely because such security has been deposited or tendered pursuant to a tender or exchange offer or Take-over Bid made by such Person or any of such Person's Affiliates or Associates until the earliest of such tendered security being accepted unconditionally for payment or exchange or being taken up and paid for; (v) solely because such Person or any of such Person's Affiliates or Associates has or shares the power to vote or direct the voting of such security pursuant to a revocable proxy given in response to a public proxy solicitation made pursuant to, and in accordance with, the applicable rules and regulations under (A) the Securities Act (Ontario) or (B) the 1934 Exchange Act, except if such power (or the arrangements relating thereto) is then reportable under Item 6 of Schedule 13D under the 1934 Exchange Act (or any similar provision of a comparable or successor report); 3 (vi) solely because such Person or any of such Person's Affiliates or Associates has or shares the power to vote or direct the voting of such security in connection with or in order to participate in a public proxy solicitation made or to be made pursuant to and in accordance with the applicable rules and regulations referred to in (v) above; (vii) solely because such Person is principally engaged in the business of managing investment funds for unaffiliated securities investors and as part of such Person's duties as agent for fully managed accounts, holds or exercises voting or dispositive power over such security provided, however, that (A) such Person does not individually Beneficially Own in excess of 10% of the outstanding Common Shares or Voting Shares of the Company; and (B) such Person has not made or proposed to make a tender or exchange offer or a Take-over Bid in respect of securities of the Company alone or by acting jointly or in concert with any other Person; or (viii) solely because such Person is a party to an agreement made May 28, 1986 between the Company, The Canada Trust Company, the initial holders of the Company's subordinated debentures, Raymond L. Loewen and Anne Loewen, as amended, or an agreement dated as of May 28, 1986 between the Company, Raymond L. Loewen, Anne Loewen and the initial holders of the Company's subordinated debentures. For purposes of this Agreement, in determining the percentage of the outstanding Common Shares or Voting Shares with respect to which a Person is or is deemed to be the Beneficial Owner, all Voting Shares as to which such Person is deemed to be the Beneficial Owner shall be deemed outstanding. (e) "BRITISH COLUMBIA COMPANY ACT" shall mean the Company Act, R.S.B.C. 1979, c.59, as amended and the regulations thereunder, and any comparable or successor laws or regulations thereto. (f) "BUSINESS DAY" shall mean any day, other than a Saturday or Sunday or a day on which banking institutions in the City of Toronto are authorized or obligated by law to close. (g) "CANADIAN-U.S. EXCHANGE RATE" shall mean on any date the inverse of the U.S.-Canadian Exchange Rate. (h) "CANADIAN DOLLAR EQUIVALENT" of any amount which is expressed in United States dollars shall mean on any day the Canadian dollar equivalent of such amount determined by reference to the Canadian-U.S. Exchange Rate on such date. (i) "CLOSE OF BUSINESS" on any given date shall mean the time on such date (or, if such date is not a Business Day, the time on the next succeeding Business Day) at which the office of the transfer agent for the Common Shares (or, after the Separation Time, the offices of the Rights Agent) in the City of Toronto becomes closed to the public. (j) "COMMON SHARES" shall mean the Common shares of the Company; provided, however, that "Common Shares", when used with reference to any Person other than the Company, shall mean the class or classes of shares (or similar equity interest) with the greatest per share voting power entitled to vote generally in the election of all directors of such other Person or the equity securities or other equity interest having power (whether or not exercised) to control or direct the management of such other Person; if such other Person is a Subsidiary of another Person, "SUCH OTHER PERSON" as used herein shall mean the Person or Persons which ultimately control such first-mentioned Person. (k) "EXEMPT ACQUISITIONS" shall have the meaning ascribed thereto by subclause 1.1(a)(ii)(C). 4 (l) "EXERCISE PRICE" shall mean, as of any date, the price at which a holder may purchase the securities issuable upon exercise of one whole Right and, until adjustment thereof in accordance with the terms hereof, the Exercise Price shall equal $90. (m) "EXPIRATION TIME" shall mean the earlier of the Termination Time or the close of business on the tenth-year anniversary of the date hereof. (n) "FLIP-IN EVENT" shall mean the close of business on the tenth day (or such earlier or later day as the Board of Directors of the Company may determine) after the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 100 of the Securities Act (Ontario) or Section 13(d) under the 1934 Exchange Act) by the Company or an Acquiring Person of facts indicating that a Person has become an Acquiring Person in a transaction occurring subsequent to the date of this Agreement (disregarding, for such purpose only, that such Person may previously have been an Acquiring Person apart from such transaction) provided, however, that the term "Flip-in Event" shall not include any transaction or event that constitutes a Flip-over Transaction or Event. (o) "FLIP-OVER TRANSACTION OR EVENT" shall mean (i) a transaction or series of transactions in which, directly or indirectly, the Company shall consolidate or merge with or into, amalgamate with or into or enter into a statutory arrangement with any other Person (other than one or more wholly-owned Subsidiaries of the Company), or any other Person (other than one or more wholly-owned Subsidiaries of the Company) shall consolidate or merge with or into, amalgamate with or into or enter into a statutory arrangement with, the Company, and in connection therewith, all or part of the outstanding Common Shares shall be changed in any way, reclassified or converted into or exchanged, redeemed or otherwise acquired for shares or other securities of the Company or any other Person or cash or any other property, or (ii) a transaction or series of transactions in which, directly or indirectly, the Company shall sell or otherwise assign or transfer, including by way of leasehold interest, (or one or more of its Subsidiaries shall sell or otherwise assign or transfer) assets (A) aggregating more than 50% of the assets (measured by either book value or fair market value); or (B) that generated during the Company's last completed fiscal year or are expected to generate in the Company's then current fiscal year more than 50% of the operating income or cash flow, of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company or one or more of its wholly-owned Subsidiaries). (p) "GRANDFATHERED PERSON", "GRANDFATHERED PERSON TRANSFEREE" AND "GRANDFATHERED BIDDER" shall have the respective meanings ascribed thereto in subsections 1.3(a), (b) and (c). (q) "INDEPENDENT SHAREHOLDERS" shall mean holders of Voting Shares of the Company, but shall not include (i) any Acquiring Person or 5 (ii) any Person that has made a tender or exchange offer or a Take- over Bid for Voting Shares of the Company (including a Permitted Bid) or (iii) any Person acting jointly or in concert with such Acquiring Person or Person or (iv) any Associate or Affiliate of such Acquiring Person or Persons. (r) "MARKET PRICE" per share of any securities on any date of determination shall mean the average of the daily Closing Prices Per Share of such securities (determined as described below) on each of the 20 consecutive Trading Days through and including the Trading Day immediately preceding such date; provided, however, that if an event of a type analogous to any of the events described in Section 2.3 hereof shall have caused the closing prices used to determine the Market Price on any Trading Days not to be fully comparable with the closing price on such date of determination or, if the date of determination is not a Trading Day, on the immediately preceding Trading Day, each such closing price so used shall be appropriately adjusted in a manner analogous to the applicable adjustment provided for in Section 2.3 hereof in order to make it fully comparable with the closing price on such date of determination or, if the date of determination is not a Trading Day, on the immediately preceding Trading Day. The "CLOSING PRICE PER SHARE" of any securities on any date shall be (i) the closing board lot sale price or, if such price is not available, the average of the closing bid and asked prices, for each share as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the Toronto Stock Exchange, or if not so listed or admitted to trading, the principal stock exchange in Canada on which such securities are listed or admitted to trading; (ii) if the securities are not listed or admitted to trading on a stock exchange in Canada, the last sale price, regular way, or, in case no such sale takes place on such date, the average of the closing bid and asked prices, regular way, for each share of such securities as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the principal stock exchange in the United States on which such securities are listed or admitted to trading; (iii) if for any reason none of such prices is available on such day or the securities are not listed or admitted to trading on any stock exchange in Canada or the United States, the last quoted price, or if not so quoted, the average of the high bid and low asked prices for each share of such securities as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or, if the securities are not quoted on NASDAQ as reported by the Canadian Over-The-Counter Automated Trading System or another such system then in use; (iv) if on any such date the securities are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the securities selected in good faith by the Board of Directors of the Company; or (v) if on any such date the securities are not traded in the over- the-counter market, the fair value per share of securities on such date as determined in good faith by the Board of Directors of the Company, after consultation with an internationally recognized Canadian investment dealer or investment banker with respect to the fair value per share of such securities. The Market Price shall be expressed in Canadian dollars and if initially determined in respect of any day forming part of the 20 consecutive trading day period in question in United States 6 dollars, such amount shall be translated into Canadian dollars at the Canadian Dollar Equivalent thereof on the relevant Trading Day. (s) "OFFER TO ACQUIRE" shall include: (i) an offer to purchase, or a solicitation of an offer to sell, Voting Shares; and (ii) an acceptance of an offer to sell Voting Shares, whether or not such offer to sell has been solicited; or any combination thereof, and the Person accepting an offer to sell shall be deemed to be making an offer to acquire to the Person that made the offer to sell. (t) "OFFEROR'S SECURITIES" means Voting Shares Beneficially Owned on the date of an Offer to Acquire by any Person who makes a Take-over Bid or by any Person acting jointly or in concert with such Person. (u) "PERMITTED BID" means a Take-over Bid made in compliance with, and not on a basis which is exempt from or otherwise not subject to, the provisions of Part XIX of the Securities Act (Ontario) and, if applicable, Sections 10, 13(d) and 14 of the 1934 Exchange Act and the regulations thereunder (or such comparable or successor laws or regulations, or if such provisions shall be repealed and there shall be no comparable or successor laws or regulations, pursuant to Part XIX and, if applicable, Sections 10, 13(d) and 14 both as in effect on the date of this Agreement) and in compliance with all other applicable laws (including the securities laws and regulations of all other relevant jurisdictions) and which also complies with the following additional provisions: (i) the Take-over Bid is made for all Common Shares to all holders of record of Common Shares wherever resident as registered on the books of the Company; (ii) subject to subsection 1.3(c), the Person making the Take-over Bid together with any other Person acting jointly or in concert with such Person does not, and during the pendency of such Person's Take-over Bid does not, Beneficially Own more than 5% of the outstanding Common Shares and agrees that none of him, any Person acting jointly or in concert with him and any Affiliate or Associate of any of them will acquire any Common Shares during the pendency of such Take-over Bid; (iii) the Person making the Take-over Bid shall provide the Rights Agent, within two Business Days of the announcement of the Take-over Bid, with a list certified true and correct of all securities of the Company Beneficially Owned by each of such Person, such Person's Associates and Affiliates and any Person acting jointly or in concert with such Person or any Associate or Affiliate of such Person together with the particulars of the registration and holding of all such securities and an undertaking to update such list on a daily basis prior to the termination or expiration of the Take-over Bid to reflect any changes occurring or to occur in such Beneficial Ownership; (iv) the Take-over Bid shall contain and the take up and payment for securities tendered or deposited thereunder shall be subject to an irrevocable and unqualified condition that no Common Shares shall be taken up or paid for pursuant to the Take-over Bid unless a resolution is passed to approve the Take-over Bid at a special meeting of holders of Common Shares by a majority of the votes cast by Independent Shareholders represented at the meeting in person or by proxy, which special meeting shall be called and held for that purpose in accordance with the provisions of Section 3.5; 7 (v) the Take-over Bid is made on terms and conditions that comply with, and which do not and will not, upon consummation of the bid, result in a default under, or a contravention of, any other applicable laws, including laws, regulations, rules, policy statements, cabinet directions or conditions of license or franchise, relating to an acquisition of an interest or an increased interest in, or a change of ownership or effective control of, the Company or any Subsidiary of the Company or any undertaking carried on by the Company or any Subsidiary of the Company; (vi) the Take-over Bid shall not expire earlier than five clear Business Days following the conclusion of the special meeting of Independent Shareholders referred to in clause 1.1(u)(iv); (vii) if the Take-over Bid is made by a Grandfathered Person Transferee or any Person acting jointly or in concert with a Grandfathered Person Transferee or any Person who, as regards the Grandfathered Person Transferee, is a person or company or a member of a combination of persons or companies referred to in subparagraph (iii) of paragraph 11 of subsection 1(1) of the Securities Act (Ontario) or any Affiliate or Associate of any of the foregoing within 12 months from the date upon which the Grandfathered Person Transferee became such, the Offeror shall offer consideration for Common Shares deposited under the Take- over Bid at least equal to the consideration that was paid on a per Common Share basis to the Transferor (as defined in subsection 1.3(b)) from whom such Grandfathered Person Transferee acquired Voting Shares or the Offeror shall offer at least the cash equivalent of such consideration; and the Board of Directors of the Company acting in good faith within the period contemplated by subsection 3.5(a) determines that the Take-over Bid complies with the provisions of this subsection 1.1(u). (v) "PERMITTED BID ACQUISITION" shall have the meaning ascribed thereto by subclause 1.1(a)(ii)(B). (w) "PERSON" shall mean any individual, firm, partnership, association, trust, trustee, executor, administrator, legal personal representative, group (as such term is used in Rule 13d-5 under the 1934 Exchange Act, as in effect on the date of this Agreement), body corporate, corporation, unincorporated organization, syndicate or other entity. (x) "PRO RATA ACQUISITION" shall have the meaning ascribed thereto by clause 1.1(a)(ii). (y) "RECORD TIME" shall have the meaning ascribed to it in paragraph (a) of the second recital hereto. (z) "REGULAR PERIODIC CASH DIVIDEND" shall mean cash dividends paid at regular intervals in any fiscal year of the Company to the extent that such cash dividends do not exceed, in the aggregate, the greatest of: (i) 200% of the aggregate amount of cash dividends declared payable by the Company on its Common Shares in its immediately preceding fiscal year; (ii) 300% of the arithmetic mean of the aggregate amounts of cash dividends declared payable by the Company on its Common Shares in its three immediately preceding fiscal years; and (iii) 100% of the aggregate consolidated net income of the Company, before extraordinary items, for its immediately preceding fiscal year. 8 (aa) "SECURITIES ACT (ONTARIO)" shall mean the Securities Act, R.S.O. 1980, c.466, as amended and the regulations thereunder, and any comparable or successor laws or regulations thereto. (bb) "SEPARATION TIME" shall mean, subject to subsection 5.1(b) and (c), the earliest of (i) the close of business on the tenth day after the Stock Acquisition Date; (ii) the close of business on the tenth day after the date of the commencement of, or first public announcement of the intent of any Person (other than the Company or any Subsidiary of the Company) to commence, a Take-over Bid (other than a Permitted Bid so long as such Take-over Bid continues to satisfy the requirements of a Permitted Bid, but not subsequent to an unfavorable vote of Independent Shareholders in respect of such Take-over Bid pursuant to Section 3.5), provided that, if any Take-over Bid referred to in clause (ii) of this subsection 1.1(bb) expires, is cancelled, terminated or otherwise withdrawn prior to the Separation Time, such offer shall be deemed, for purposes of this subsection 1.1(bb), never to have been made; and (iii) the occurrence or consummation of a Flip-over Transaction or Event or such earlier or later date as may be determined by the Board of Directors of the Company acting in good faith provided that, if the foregoing results in the Separation Time being prior to the Record Time, the Separation Time shall be the Record Time. (cc) "STOCK ACQUISITION DATE" shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 100 of the Securities Act (Ontario) or Section 13(d) under the 1934 Exchange Act) by the Company or an Acquiring Person of facts indicating that a Person has become an Acquiring Person. (dd) "SUBSIDIARY" of any specified Person has the meaning ascribed to such term in the Securities Act (Ontario). (ee) "TAKE-OVER-BID" means an Offer to Acquire Voting Shares or securities convertible into Voting Shares, where the Voting Shares subject to the Offer to Acquire, together with the Voting Shares into which the securities subject to the Offer to Acquire are convertible, and the Offeror's Securities, constitute in the aggregate 20% or more of the outstanding Common Shares or Voting Shares at the date of the Offer to Acquire. (ff) "TERMINATION TIME" shall mean the time at which the right to exercise Rights shall terminate pursuant to Sections 3.4, 5.1 or 5.18 hereof. (gg) "TRADING DAY" when used with respect to any securities, shall mean a day on which the principal Canadian or United States securities exchange on which such securities are listed or admitted to trading is open for the transaction of business or, if the securities are not listed or admitted to trading on any Canadian or United States securities exchange, a Business Day. (hh) "U.S.-CANADIAN EXCHANGE RATE" shall mean on any date: (iv) if on such date the Bank of Canada sets an average noon spot rate of exchange for the conversion of the United States dollar into Canadian dollars, such rate; and (v) in any other case, the rate for such date for the conversion of one United Sates dollar into Canadian dollars which is calculated in the manner which shall be determined by the Board of Directors of the Company from time to time acting in good faith. 9 (ii) "U.S. DOLLAR EQUIVALENT" of any amount which is expressed in Canadian dollars shall mean on any day the United States dollar equivalent of such amount determined by reference to the Canadian-U.S. Exchange Rate on such date. (jj) "VOTING SHARES" shall mean the Common Shares of the Company and any other shares of capital stock of the Company entitled to vote generally in the election of directors; and the percentage of Voting Shares Beneficially Owned by any Person, shall for the purposes of this Agreement, be and be deemed to be the product determined by the formula: A 100 X --- B where A = the number of votes for the election of all directors generally attaching to the Voting Shares Beneficially Owned by such Person. B = the number of votes for the election of all directors generally attaching to all outstanding Voting Shares. Where any person is deemed to Beneficially Own unissued Voting Shares, such Voting Shares shall be deemed to be outstanding for the purpose of calculating the percentage of Voting Shares Beneficially Owned by such Person. (kk) "1933 SECURITIES ACT" shall mean the Securities Act of 1933 of the United States, as amended and the rules and regulations thereunder, and any comparable or successor laws or regulations thereto. (ll) "1934 EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 of the United States, as amended and the rules and regulations thereunder, and any comparable or successor laws or regulations thereto. 1.2 CURRENCY All sums of money which are referred to in this Agreement are expressed in lawful money of Canada unless otherwise specified. 1.3 GRANDFATHER PROVISIONS (a) A Person shall not be and shall not be deemed to be an Acquiring Person if such Person (a "GRANDFATHERED PERSON"): (i) is the Beneficial Owner of 20% or more of the outstanding Voting Shares of the Company as at the date of this Agreement; or (ii) becomes the Beneficial Owner of 20% or more of the outstanding Common Shares or Voting Shares of the Company after the date of this Agreement and such Person's Beneficial Ownership of Common Shares or Voting Shares of the Company at such time does not exceed the number of Common Shares or Voting Shares of the Company Beneficially Owned by such Person immediately prior to the date of this Agreement by more than 2% of the then issued and outstanding Common Shares or Voting Shares of the Company; provided, however, that the exceptions in clauses 13(a)(i) and (ii) shall cease to be applicable to a Grandfathered Person who shall after the date of this Agreement become, pursuant to one or more 10 transactions or events, the Beneficial Owner of additional Common Shares or Voting Shares of the Company such that the number of Common Shares or Voting Shares of the Company Beneficially Owned at such time exceeds the number of Common Shares or Voting Shares of the Company Beneficially Owned by such Person immediately prior to the date of this Agreement by more than 2% of the Common Shares or Voting Shares of the Company then outstanding, other than those acquired pursuant to Permitted Bid Acquisitions, Exempt Acquisitions or Pro Rata Acquisitions. (b) A Person shall not be and shall not be deemed to be an Acquiring Person if such Person (a "GRANDFATHERED PERSON TRANSFEREE") becomes the Beneficial Owner of 20% or more of the outstanding Common Shares or Voting Shares of the Company solely as a result of the acquisition of all but not less than all of the Common Shares or Voting Shares of the Company Beneficially Owned immediately prior thereto by a Grandfathered Person or a Grandfathered Person Transferee (the "TRANSFEROR") and such Person's Beneficial Ownership of Common Shares or Voting Shares of the Company after giving effect to such acquisitions does not exceed the number of Common Shares or Voting Shares of the Company Beneficially Owned by the Transferor immediately prior to such acquisition by more than 2% of the then issued and outstanding Common Shares or Voting Shares of the Company; provided, however, that the exception in this subsection 13(b) shall cease to be applicable to a Grandfathered Person Transferee who shall after the time at which he becomes a Grandfathered Person Transferee (the "Transfer Time") become, pursuant to one or more transactions or events, the Beneficial Owner of additional Common Shares or Voting Shares of the Company constituting, together with the number of Common Shares to Voting Shares Beneficially Owned by such Grandfathered Person Transferee immediately prior to the Transfer Time, in the aggregate more than 2% of the Common Shares or Voting Shares of the Company then outstanding, other than pursuant to Permitted Bid Acquisitions, Exempt Actions or Pro Rata Acquisitions. (c) For the purpose of determining whether a Person is entitled to make a Permitted Bid, the provisions of clause 1.1(u)(ii) shall not apply to a Person (a "Grandfathered Bidder") who is either: (i) a Grandfathered Person or a Grandfathered Person Transferee at the time of commencement of and at all times while such Person's Take-over Bid remains outstanding; or (ii) the Beneficial Owner of more than 5% but less than 20% of the outstanding Common Shares or Voting Shares of the Company as at the date of this Agreement; provided that the exception in this clause 1.3(c)(ii) shall cease to be applicable to a Grandfathered Bidder if such Grandfathered Bidder shall after the date of this Agreement become, pursuant to one or more transactions or events, the Beneficial Owner of additional Common Shares or Voting Shares of the Company such that the number of Common Shares or Voting Shares of the Company Beneficially Owned at such time exceeds the number of Common Shares or Voting Shares of the Company Beneficially Owned by such Person immediately prior to the date of this Agreement by more than 2% of the Common Shares or Voting Shares of the Company then outstanding, other than those acquired pursuant to Permitted Bid Acquisitions, Exempt Acquisitions or Pro Rata Acquisitions. (d) For greater certainty, for the purposes of this Section 1.3, a Person shall be deemed to have become the Beneficial Owner of additional Common Shares or Voting Shares of the Company if the Person becomes the Beneficial Owner of such Common Shares or Voting Shares pursuant to a transaction or event and, as a result, such Person is the Beneficial Owner of a greater number of Common Shares or Voting Shares than the number of Common Shares or Voting Shares that he Beneficially Owned immediately prior to such transaction or event. 11 ARTICLE 2. -- THE RIGHTS 2.1 LEGEND ON COMMON SHARE CERTIFICATES Certificates for the Common Shares issued after the Record Time but prior to the close of business on the earlier of the Separation Time and the Expiration Time shall evidence one Right for each Common Share represented thereby and shall have impressed on, printed on, written on or otherwise affixed to them the following legend: Until the Separation Time (as defined in the Rights Agreement referred to below), this certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement, dated as of April 20, 1990 (the "Rights Agreement"), between The Loewen Group Inc. (the "Company") and The Royal Trust Company, as Rights Agent, the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights may be amended or redeemed, may expire, may become void (if, in certain cases, they are "Beneficially Owned" by an "Acquiring Person", as such terms are defined in the Rights Agreement, or a transferee thereof) or may be evidenced by separate certificates and may no longer be evidenced by this Certificate. The Company will mail or arrange for the mailing of a copy of the Rights Agreement to the holder of this certificate without charge within five days after the receipt of a written request therefor. Certificates representing Common Shares that are issued and outstanding at the Record Time shall evidence one Right for each Common Share evidenced thereby notwithstanding the absence of the foregoing legend until the earlier of the Separation Time and the Expiration Time. 2.2 INITIAL EXERCISE PRICE; EXERCISE OF RIGHTS; DETACHMENT OF RIGHTS (a) Subject to adjustment as herein set forth, each Right will entitle the holder thereof, after the Separation Time and prior to the Expiration Time, to purchase, for the Exercise Price, or its U.S. Dollar Equivalent as at the Business Day immediately preceding the date of exercise of the Right, one Common Share. (b) Until the Separation Time, (i) no Right may be exercised; and (ii) each Right will be evidenced by the certificate for the associated Common Share and will be transferable only together with, and will be transferred by a transfer of, such associated share. (c) After the Separation Time and prior to the Expiration Time, the Rights (i) may be exercised; and (ii) will be transferable independently of Common Shares. Promptly following the Separation Time the Rights Agent will mail to each holder of record Voting Shares as of the Separation Time (other than an Acquiring Person and, in respect of any Rights Beneficially Owned by such Acquiring Person which are not held of record by such Acquiring Person, the holder of record of such rights (a "Nominee")) at such holder's address as shown by the records of the Company (the Company hereby agreeing to furnish copies of such records to the Rights Agent for this purpose), (x) a certificate (a "Rights Certificate") in substantially the form of Exhibit A hereto appropriately completed, representing the number of Rights held by such holder at the Separation Time and having such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or quotation system on which the Rights may from time to 12 time be listed or traded, or to conform usage, and (y) a disclosure statement describing the Rights provided that a Nominee shall be sent the materials provided for in (x) and (y) only in respect of all Common Shares held of record by him which are not Beneficially Owned by an Acquiring Person. (d) Rights may be exercised in whole or in part on any Business Day after the Separation Time and prior to the Expiration Time by submitting to the Rights Agent the Rights Certificate evidencing such Rights with an Election to Exercise (an "Election to Exercise") substantially in the form attached to the Rights Certificate duly completed, accompanied by payment in cash, or by certified cheque, banker's draft or money order payable to the order of the Company, of a sum equal to the Exercise Price multiplied by the number of Rights being exercised and a sum sufficient to cover any transfer tax or charge which may be payable in respect of any transfer involved in the transfer or delivery of Rights Certificates or the issuance or delivery of certificates for Common Shares in a name other than that of the holder of the Rights being exercised. (e) Upon receipt of a Rights Certificate, which is accompanied by (x) a completed Election to Exercise that does not indicate that such Right is null and void as provided by subsection 3.2(b) and (y) payment as set forth in subsection 2.2(d) above, the Rights Agent will thereupon promptly (i) requisition from a transfer agent of the Common Shares certificates for the number of Common Shares to be purchased (the Company hereby irrevocably authorizing its transfer agents to comply with all such requisitions), (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuing fractional Common Shares, (iii) after receipt of such certificates, deliver the same to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, and (iv) when appropriate, after receipt, deliver such cash to or to the order of the registered holder of the Rights Certificate. (f) In case the holder of any Rights shall exercise less than all the Rights evidenced by such holder's Rights Certificate, a new Rights Certificate evidencing the Rights remaining unexercised will be issued by the Rights Agent to such holder or to such holder's duly authorized assigns. (g) The Company covenants and agrees that it will (i) take all such action as may be necessary and within its power to ensure that all shares delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Exercise Price), be duly and validly authorized, executed, issued and delivered and fully paid and nonassessable; (ii) take all such action as may be necessary and within its power to comply with any applicable requirements of the British Columbia Company Act and the Securities Acts or comparable legislation of each of the provinces of Canada and the 1933 Securities Act or the 1934 Exchange Act, or the rules and regulations thereunder or any other applicable law, rule or regulation, in connection with the issuance and delivery of the Rights Certificates and the issuance of any shares upon exercise of Rights; 13 (iii) use reasonable efforts to cause all shares issued upon exercise of Rights to be listed on the principal exchanges on which the shares were traded prior to the Stock Acquisition Date; and (iv) pay when due and payable any and all Canadian and United States federal, provincial and state transfer taxes (for greater certainty not including any income taxes of the holder or exercising holder or any liability of the Company to withhold tax) and charges which may be payable in respect of the original issuance or delivery of the Rights Certificates or certificates for shares, provided that the Company shall not be required to pay any transfer tax or charge which may be payable in respect of any transfer involved in the transfer or delivery of Rights Certificates or the issuance or delivery of certificates for shares in a name other than that of the holder of the Rights being transferred or exercised. 2.3 ADJUSTMENTS TO EXERCISE PRICE, NUMBER OF RIGHTS The Exercise Price, the number and kind of shares subject to purchase upon exercise of each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 2.3. (a) If the Company shall at any time after the Record Time and prior to the Expiration Time (i) declare or pay a dividend on the Common Shares payable in Common Shares (or other capital stock or securities exchangeable for or convertible into or giving a right to acquire Common Shares or other capital stock) other than pursuant to any optional stock dividend program, (ii) subdivide or change the then outstanding Common Shares into a greater number of Common Shares, (iii) combine or change the then outstanding Common Shares into a smaller number of Common Shares, or (iv) issue any Common Shares (or other capital stock or securities exchangeable for or convertible into or giving a right to acquire Common Shares or other capital stock) in respect of, in lieu of or in exchange for existing Common Shares in a reclassification, amalgamation, statutory arrangement or consolidation, the Exercise Price and the number of Rights outstanding, or, if the payment or effective date therefor shall occur after the Separation Time, the securities purchasable upon exercise of Rights shall be adjusted in the manner set forth below. If the Exercise Price and number of Rights outstanding are to be adjusted, (x) the Exercise Price in effect after such adjustment will be equal to the Exercise Price in effect immediately prior to such adjustment divided by the number of Common Shares (or other capital stock) (the "Expansion Factor") that a holder of one Common Share immediately prior to such dividend, subdivision, change, combination or issuance would hold thereafter as a result thereof and (y) each Right held prior to such adjustment will become that number of rights equal to the Expansion Factor, and the adjusted number of Rights will be deemed to be allocated among the Common Shares with respect to which the original Rights were associated (if they remain outstanding) and the shares issued in respect of such dividend, subdivision, change, combination or issuance, so that each such Common Share (or other capital stock) will have exactly one Right associated with it. If the securities purchasable upon exercise of Rights are to be adjusted, the securities purchasable upon exercise of each Right after such adjustment will be the securities that a holder of the securities purchasable upon exercise of one Right immediately prior to such dividend, subdivision, change, combination or issuance would hold thereafter as a result thereof. If after 14 the Record Time and prior to the Expiration Time the Company shall issue any shares of capital stock other than Common Shares in a transaction of a type described in this subsection 2.3(a), shares of such capital stock shall be treated herein as nearly equivalent to Common Shares as may be practicable and appropriate under the circumstances and the Company and the Rights Agent agree to amend this Agreement in order to effect such treatment, and the Company will not consolidate with, amalgamate with or into or enter into a statutory arrangement with, any other Person unless such Person agrees to be bound by the terms of an amendment effecting such treatment. If an event occurs which would require an adjustment under both this Section 2.3 and Section 3.2 hereof, the adjustment provided for in this Section 2.3 shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 3.2 hereof. If the Company shall at any time after the Record Time and prior to the Separation Time issue any Common Shares otherwise than in a transaction referred to in the preceding paragraph, each such Common Share so issued shall automatically have one new Right associated with it, which Right shall be evidenced by the certificate representing such share. (b) If the Company shall at any time after the Record Time and prior to the Expiration Time fix a record date for the making of a distribution to all holders of Common Shares of rights or warrants entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Common Shares (or securities convertible into or exchangeable for or carrying a right to purchase or subscribe for Common Shares) at a price per Common Share (or, if a security convertible into or exchangeable for or carrying a right to purchase or subscribe for Common Shares, having a conversion, exchange or exercise price (including the price required to be paid to purchase such convertible or exchangeable security or right per share)) less than the Market Price per Common Share on such record date, the Exercise Price shall be adjusted in the manner provided in this subsection 2.3(b). The Exercise Price in effect after such record date will equal the Exercise Price in effect immediately prior to such record date multiplied by a fraction, of which the numerator shall be the number of Common Shares outstanding on such record date plus the number of Common Shares which the aggregate offering price of the total number of Common Shares so to be offered (and/or the aggregate initial conversion, exchange or exercise price of the convertible or exchangeable securities or rights so to be offered (including the price required to be paid to the purchase such convertible or exchangeable securities or rights)) would purchase at such Market Price and of which the denominator shall be the number of Common Shares outstanding on such record date plus the number of additional Common Shares to be offered for subscription or purchase (or into which the convertible or exchangeable securities or rights so to be offered are initially convertible, exchangeable or exercisable). In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company whose determination shall be described in a statement filed with the Rights Agent and shall be bidding on the Rights Agent and the holders of the Rights. Such adjustment shall be made successively whenever such a record date is fixed. For purposes of this subsection (b) the granting of the right to purchase Common Shares (whether from treasury shares or otherwise) pursuant to any dividend or interest reinvestment plan and/or any Common Share purchase plan providing for the reinvestment of dividends or interest payable on securities of the Company and/or the investment of periodic optional payments and/or employee share purchase or employee share option or similar plans (so long as such right to purchase is in no case evidenced by the delivery of rights or warrants) shall not be deemed to constitute an issue of rights or warrants by the Company, provided that in the case of any dividend or interest reinvestment plan, the right to purchase Common Shares is at a price per share of not less than 90 percent of the current market price per share (determined as provided in such plans) of the Common Shares. 15 (c) If the Company shall at any time after the Record Time and prior to the Expiration Time fix a record date for the making of a distribution to all holders of Common Shares of evidences of indebtedness or assets (other than a regular periodic cash dividend or a dividend paid in Common Shares) or rights or warrants (excluding those referred to in subsection 2.3(b)), the Exercise Price shall be adjusted in the manner provided for in this subsection 2.3(c). The Exercise Price in effect after such record date will equal the Exercise Price in effect immediately prior to such record date less the fair market value (as determined in good faith by the Board of Directors of the Company) of the portion of the assets, evidences of indebtedness, rights or warrants so to be distributed applicable to each of the securities purchasable upon exercise of one Right (such determination to be described in a statement filed with the Rights Agent and to be binding on the Rights Agent and the holders of the Rights). Such adjustment shall be made successively whenever such a record date is fixed. (d) Each adjustment made pursuant to this Section 2.3 shall be made as of (i) the payment or effective date for the applicable dividend, subdivision, change, combination or issuance, in the case of an adjustment made pursuant to subsection (a) above; and (ii) the record date for the applicable distribution, in the case of an adjustment made pursuant to subsection (b) or (c) above, subject to readjustment to reverse the same if such distribution shall not be made. (e) If the Company shall at any time after the Record Time and prior to the Separation Time issue any shares (other than Common Shares), or rights or warrants to subscribe for or purchase any such capital stock, or securities convertible into or exchangeable for any such capital stock, in a transaction referred to in clause (a)(i) or (a)(iv) of this Section 2.3, or if the Company shall take any other action (other than the issue of Common Shares) which might have a negative effect on the holders of Rights, and, in either case, if the Board of Directors acting in good faith determines that the adjustments contemplated by subsections (a), (b) and (c) of this Section 2.3 in connection with such transaction will not appropriately protect the interests of the holders of Rights, the Company may determine what other adjustments, rather than the adjustments contemplated by subsections (a), (b) and (c) of this Section 2.3, shall be made. The Company and the Rights Agent shall amend this Agreement as appropriate to provide for such adjustments. (f) Each adjustment to the Exercise Price made pursuant to this Section 2.3 shall be calculated to the nearest cent. Whenever an adjustment to the Exercise Price is made pursuant to this Section 2.3, the Company shall (i) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, and (ii) promptly file with the Rights Agent and with each transfer agent for the Common Shares a copy of such certificate and mail a brief summary thereof to each bolder of Rights. (g) Irrespective of any adjustment or change in the securities purchasable upon exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to represent the securities so purchasable which were represented in the initial Rights Certificates issued hereunder. 16 2.4 DATE ON WHICH EXERCISE IS EFFECTIVE Each Person in whose name any certificate for Common Shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Common Shares represented thereby on, and such certificate shall be dated the date upon which the Rights Certificate evidencing such Rights was duly surrendered (together with a duly completed Election to Exercise) and payment of the Exercise Price for such Rights (and any applicable transfer taxes and other governmental charges payable by the exercising holder hereunder) was made; provided, however, that if the date of such surrender and payment is a date upon which the Common Share transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the Common Share transfer books of the Company are open. 2.5 EXECUTION, AUTHENTICATION, DELIVERY AND DATING OF RIGHTS CERTIFICATES (a) The Rights Certificates shall be executed on behalf of the Company by its Chairman, President or one of its Senior Vice-Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries or any other one of the foregoing. The signature of any of these officers on the Rights Certificates may be manual or facsimile. (b) Rights Certificates bearing the manual or facsimile signatures of Individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the countersignature and delivery of such Rights Certificates. (c) Promptly after the Company learns of the Separation Time, the Company will notify the Rights Agent of such Separation Time and will deliver Rights Certificates executed by the Company to the Rights Agent for countersignature, and the Rights Agent shall countersign and deliver such Right Certificates to the holders of the Rights pursuant to subsection 2.2(c) hereof. No Rights Certificate shall be valid for any purpose until countersigned by the Rights Agent as aforesaid. (d) Each Rights Certificate shall be dated the date of countersignature thereof. 2.6 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE (a) The Company will cause to be kept a register (the "Rights Register") in which, subject to such reasonable regulations as it may prescribe, the Company will provide for the registration and transfer of Rights. The Rights Agent is hereby appointed "Rights Registrar" for the purpose of maintaining the Rights Register for the Company and registering Rights and transfers of Rights as herein provided. In the event that the Rights Agent shall cease to be the Rights Registrar, the Rights Agent win have the right to examine the Rights Register at all reasonable times. After the Separation Time and prior to the Expiration Time, upon surrender for registration of transfer or exchange of any Rights Certificate, and subject to the provisions of subsection 2.6(c), the Company will execute, and the Rights Agent will countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder's instructions, one or more new Rights Certificates evidencing the same aggregate number of Rights as did the Rights Certificates so surrendered. (b) All Rights issued upon any registration of transfer or exchange of Rights Certificates shall be valid obligations of the Company, and such Rights shall be entitled to the same benefits under this Agreement as the Rights surrendered upon such registration or transfer or exchange. 17 (c) Every Rights Certificate surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company or the Rights Agent, as the case may be, duly executed by the holder thereof or such holder's attorney duly authorized in writing. As a condition to the issuance of any new Rights Certificate under this Section 2.6, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. 2.7 MUTILATED, DESTROYED, LOST AND STOLEN RIGHTS CERTIFICATES (a) If any mutilated Rights Certificate is surrendered to the Rights Agent prior to the Expiration Time, the Company shall execute and the Rights Agent shall countersign and deliver in exchange therefor a new Rights Certificate evidencing the same number of Rights as did the Rights Certificate so surrendered. (b) If there shall be delivered to the Company and the Rights Agent prior to the Expiration Time (i) evidence to their satisfaction of the destruction, loss or theft of any Rights Certificate and (ii) such security or indemnity as may be required by them to save each of them and any of their agents harmless, then, in the absence of notice to the Company or the Rights Agent that such Rights Certificate has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Rights Agent shall countersign and deliver, in lieu of any such destroyed, lost or stolen Rights Certificate, a new Rights Certificate evidencing the same number of Rights as did the Rights Certificate so destroyed, lost or stolen. (c) As a condition to the issuance of any new Rights Certificate under this Section 2.7, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Rights Agent) connected therewith. (d) Every new Rights Certificate issued pursuant to this Section 2.7 in lieu of any destroyed, lost or stolen Rights Certificate shall evidence the contractual obligation of the Company, whether or not the destroyed, lost or stolen Rights Certificate shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other Rights duly issued hereunder. 2.8 PERSONS DEEMED OWNERS The Company, the Rights Agent and any agent of the Company or the Rights Agent may deem and treat the person in whose name a Rights Certificate (or, prior to the Separation Time, a Common Share certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby for all purposes whatsoever. As used in this Agreement, unless the context otherwise requires, the term "holder" of any Rights shall mean the registered holder of such Rights (or prior to the Separation Time, the associated Common Shares). 2.9 DELIVERY AND CANCELLATION OF CERTIFICATES All Rights Certificates surrendered upon exercise or for redemption or registration of transfer or exchange shall, if surrendered to any person other than the Rights Agent, be delivered to the Rights Agent and, in any case, shall be promptly cancelled by the Rights Agent. The Company may at any time deliver to the Rights Agent for cancellation any Rights Certificates previously countersigned and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Rights Certificates so delivered shall be promptly cancelled by the Rights Agent. No Rights Certificate shall be countersigned in lieu of or in exchange for any Rights Certificates cancelled as provided in this Section 2.9 except as expressly permitted by this Agreement. The Rights Agent shall destroy all cancelled Rights Certificates and deliver a certificate of destruction to the Company. 18 2.10 AGREEMENT OF RIGHTS HOLDERS Every holder of Rights by accepting the same consents and agrees with the Company and the Rights Agent and every other holder of Rights that (a) he will be bound by and subject to the provisions of this Agreement, as amended from time to time in accordance with the terms hereof, in respect of all Rights held; (b) prior to the Separation Time, each Right will be transferable only together with, and will be transferred by a transfer of, the associated Common Share; (c) after the Separation Time, the Rights Certificates will be transferable only on the Rights Register as provided herein; (d) prior to due presentment of a Rights Certificate (or, prior to the Separation Time, the associated Common Share certificate) for registration of transfer, the Company, the Rights Agent and any agent of the Company or the Rights Agent may deem and treat the person in whose name the Rights Certificate (or, prior to the Separation Time, the associated Common Share certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on such Rights Certificate or the associated Common Share certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary; (e) such holder of Rights has waived his right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as provided herein); and (f) without the approval of any holder of Rights and upon the sole authority of the Board of Directors of the Company acting in good faith this Agreement may be supplemented or amended from time to time as provided herein. ARTICLE 3. -- ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS 3.1 FLIP-OVER TRANSACTION OR EVENT (a) Subject to Sections 3.3 and 3.4 and subsection 5.1(b), if prior to the Expiration Time the Company enters into, consummates or permits to occur any Flip-over Transaction or Event, the Company must take such action as is necessary to ensure, and shall not enter into, consummate or permit to occur such Flip-over Transaction or Event until it shall have entered into a supplement agreement with the Person engaging in such Flip-over Transaction or Event, for the benefit of the holders of the Rights, providing, that upon consummation of the Flip-over Transaction or Event: (i) each Right, from and after the date upon which any Flip-over Transaction or Event becomes effective, constitutes the right to purchase from the Person into which or with which the Company will be consolidated, merged or amalgamated or with which the Company shall enter into a statutory arrangement or to which the Company will sell assets (the "Flip-over Entity"), upon exercise thereof in accordance with the terms hereof, that number of Common Shares of such Flip-over Entity having an aggregate Market Price on the date of consummation or occurrence of such Flip-over Transaction or Event equal to twice the Exercise Price for an amount in cash equal to the Exercise Price (such right to be appropriately adjusted in a manner analogous to 19 the applicable adjustment to the Rights provided for in Section 2.3 if after such date of consummation or occurrence an event of a type analogous to any of the events described in Section 2.3 shall have occurred with respect to such Common Shares); and (ii) the Flip-over Entity is to be liable for, and shall assume, by virtue of such Flip-over Transaction or Event and such supplemental agreement, all the obligations and duties of the Company pursuant to this Agreement. (b) The Company shall do all such acts and things and shall take all steps within its control to ensure that the Flip-Over Entity does all such acts and things as shall be necessary to ensure compliance with the provisions of subsection 3.1(a) of this Agreement. 3.2 FLIP-IN EVENT (a) Subject to Sections 3.3 and 3.4 and subsections 5.1(b) and (c), if prior to the Expiration Time a Flip-in Event occurs, the Company shall take such action as shall be necessary to ensure and provide, within five Business Days of such occurrence or such longer period as may be required to satisfy the requirements of the Securities Act (Ontario) or comparable legislation of each of the provinces of Canada or the 1933 Securities Act, so that, except as provided below, each Right shall thereafter constitute the right to purchase from the Company, upon exercise thereof in accordance with the terms hereof, that number of Common Shares of the Company having an aggregate Market Price on the date of occurrence of such Flip-in Event equal to twice the Exercise Price for an amount in cash equal to the Exercise Price (such right to be appropriately adjusted in a manner analogous to the applicable adjustment provided for in Section 2.3 if after such date of occurrence an event of a type analogous to any of the events described in Section 2.3 shall have occurred with respect to such Common Shares). (b) Notwithstanding the foregoing, upon the occurrence of any Flip-in Event any Rights that are or were Beneficially Owned on or after the earlier of the Separation Time or the Stock Acquisition Date by (i) an Acquiring Person (or any Affiliate or Associate of an Acquiring Person or any Person Acting jointly or in concert with an Acquiring Person or any Associate or Affiliate of an Acquiring Person); or (ii) a transferee, direct or indirect, of an Acquiring Person (or any Affiliate or Associate of an Acquiring Person or any Person acting jointly or in concert with an Acquiring Person or any Associate or Affiliate of an Acquiring Person) in a transfer, whether or not for consideration, that the Board of Directors of the Company acting in good faith has determined is part of a plan, arrangement or scheme of an Acquiring Person (or any Affiliate or Associate of an Acquiring Person) that has the purpose or affect of avoiding clause (i) of this subsection 3.2(b), become null and void and any holder of such Rights (including transferees) shall thereafter have no right to exercise such Rights under any provision of this Agreement. (c) Any Rights Certificate that represents Rights Beneficially Owned by a Person described in either clauses (i) or (ii) of subsection 3.2(b) or transferred to any nominee of any such Person, and any Rights Certificate issued upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain or will be deemed to contain the following legend: The Rights represented by this Rights Certificate were issued to a Person who was an Acquiring Person or an Affiliate or an Associate of an Acquiring Person (as such 20 terms are defined in the Rights Agreement) or acting jointly or in concert with any of them. This Rights Certificate and the Rights represented hereby shall be void in the circumstances specified in subsection 3.2(b) of the Rights Agreement. provided that the Rights Agent is not to be under any responsibility to ascertain the existence of facts that would require the imposition of such legend but is required to impose such legend only if instructed to do so by the Company or if a holder fails to certify upon transfer or exchange in the space provided on the Rights Certificate that such holder is not an Acquiring Person or an Affiliate or Associate thereof. 3.3 OBLIGATIONS OF THE COMPANY The Company shall not enter into or engage in any transaction of the kind referred to in this Article 3 if at the time of such transaction there are any rights, warrants or securities outstanding or any other arrangements, agreements or instruments which would eliminate or otherwise diminish in any respect the benefits intended to be afforded by this Rights Agreement to the holders of Rights upon consummation of such transaction. The provisions of this Article 3 shall apply to successive amalgamation, arrangements or consolidations or sales or other transfers. 3.4 EXCHANGE OPTION (a) If the Board of Directors acting in good faith shall determine that conditions exist which would eliminate or otherwise materially diminish in any respect the benefits intended to be afforded to the holders of Rights pursuant to this Agreement, the Board of Directors may, at its option, at any time after a Flip-in Event, issue or deliver in respect of each Right which is not void pursuant to subsection 3.2(b), either (i) in return for the Exercise Price and the Right, debt or equity securities or other assets (or a combination thereof) having a value equal to twice the Exercise Price; or (ii) in return for the Right and without further charge, subject to any amounts that may be required to be paid under applicable law, debt or equity securities or other assets (or a combination thereof) having a value equal to the Exercise Price, where in either case the value of such debt or equity securities shall be determined by an internationally recognized Canadian investment dealer or investment banker selected by the Board of Directors of the Company. To the extent that the Board of Directors determines in good faith that some action need be taken pursuant to this Section 3.4, the Board of Directors may suspend the exercisability of the Rights for a period of up to 90 days following the date of the occurrence of the relevant Flip-in Event in order to decide the appropriate form of distribution to be made and to determine the value thereof. In the event of any such suspension, the Company shall notify the Rights Agent and issue as promptly as practicable a public announcement stating that the exercisability of the Rights has been temporarily suspended. (b) If the Board of Directors of the Company authorizes the exchange of debt or equity securities or other assets (or a combination thereof) for Rights pursuant to subsection 3.4(a), without any further action or notice the right to exercise the Rights will terminate and the only right thereafter of a holder of Rights shall be to receive such debt or equity securities or other assets (or combination thereof) in accordance with the exchange formula authorized by the Board of Directors. Within 10 Business Days after the Board of Directors has authorized the exchange of such debt or equity securities or other assets (or combination thereof) for rights pursuant to subsection 3.4(a), the Company shall give notice of such exchange to the holders of such Rights by mailing such notice to all such holders at their last addresses as they appear upon the 21 register of Rights holders maintained by the Rights Agent. Each such notice of exchange will state the method by which the exchange of such debt or equity securities or other assets (or a combination thereof) for Rights will be effected. 3.5 SPECIAL MEETING OF SHAREHOLDERS TO CONSIDER PERMITTED BIDS (a) If a Person (the "Offeror") makes a Take-over Bid which would be a Permitted Bid within the meaning of subsection 1.1(u) but for obtaining the shareholder approval mentioned in clause 1.1(u)(iv) and the Board of Directors of the Company acting in good faith concludes that upon receipt of the approval of the Independent Shareholders referred to in subsection 1.1(u) acquisitions of shares pursuant to such Take-over Bid shall be Permitted Bid Acquisitions, the Board of Directors of the Company shall, as soon as practicable after the date (the "Offer Date") on which all of the documents referred to in subsection 1.1(u) and which have otherwise been sent to the holders of Common Shares by the Offeror in connection with such Take-over Bid have been delivered to the Company, call a special meeting (the "Special Meeting") of holders of Common Shares who are Independent Shareholders in order for them to consider and if thought fit to approve a resolution (the "Referendum") on the question of whether such Take-over Bid (as such Take-over Bid may be amended or revised by the Offeror from time to time either (a) to waive a condition thereof of (b) to increase the price per share to be paid to holders of Common Shares, without reduction in amount or change in terms of any security or reduction in amount of cash that are components thereof) should be approved. The Special Meeting shall be held on a date fixed by the Board of Directors, which date shall be as soon as practicable after the mailing of the Take-over Bid, taking into account (i) the time required to prepare a management proxy statement or information circular and to comply with applicable securities laws and other regulatory requirements relating to the holding of meetings of shareholders, record dates and the distribution of proxy related materials to shareholders and intermediaries; (ii) other actual or pending Take-over Bids including Permitted Bids, if any; and (iii) other factors considered relevant by the Board of Directors of the Company, but not less than 90 nor more than 120 days after the Offer Date; provided further that if the Board of Directors receives a competing Take-over Bid which is a Permitted Bid after a special meeting has been called for another Take-over Bid, the Board in its discretion may delay the date on which the meeting is to be held, or adjourn the meeting, to a date not more than 45 days after the originally scheduled meeting date, so that shareholders may consider the merits of the competing Take-over Bid and the other Take-over Bid at such other special meeting. The Board of Directors of the Company shall fix a record date for determining the Independent Shareholders entitled to receive notice of the Special Meeting in accordance with the procedures set forth in National Policy No. 41 of the Canadian Securities Administrators and the rules of any stock exchange on which the Common Shares are then listed, and the Articles and By-laws of the Company. The Special Meeting shall be conducted in accordance with the rules for holding meetings of shareholders set forth in this Articles and By-Laws of the Company. At the Offeror's request, the Company shall include with its proxy statement or information circular prepared in connection with the Special Meeting, proxy solicitation materials submitted by the Offeror provided that the Offeror by written agreement with the Company in form and substance satisfactory to the Company shall indemnify and hold the Company harmless from and against all costs, damages, expenses, fees and liabilities whatsoever, directly or indirectly, resulting from or arising out of any misstatements, misrepresentations, misleading statements or untrue statements contained in or omissions to state any fact in the Offeror's proxy solicitation materials necessary to make any statement contained therein not misleading in light of the circumstances in which it was made and shall 22 have agreed to pay the Company's incremental costs incurred as a result of including such materials with the Company's proxy statement or information circular. Notwithstanding the foregoing, no Special Meeting shall be held from and after such time as any Person becomes an Acquiring Person, and any Special Meeting scheduled prior to such time and not theretofore held shall be cancelled. (b) If at the Special Meeting the Referendum receives the affirmative vote of a majority of the votes cast by Independent Shareholders represented at the meeting in person or by proxy and such vote has been confirmed by independent election inspectors retained by the Company then acquisitions of Common Shares made under the Permitted Bid referred to in the Referendum shall be deemed to be Permitted Bid Acquisitions. (c) For clarification it is understood that nothing contained in this Section 3.5 shall be considered to affect the obligations of the Board of Directors to exercise its fiduciary duties. Without limiting the generality of the foregoing, nothing contained herein shall be construed to suggest or imply that the Board of Directors shall not be entitled to recommend that holders of Common Shares reject or accept any Take-over Bid or take any other action (including, without limitation, the commencement, prosecution, defence or settlement of any litigation and the submission of additional or alternative Take- over Bids or other proposals to the Special Meeting) with respect to any Take-over Bid or otherwise that the Board of Directors believes is necessary or appropriate in the exercise of its fiduciary duties. (d) Nothing contained in this Section 3.5 shall be construed as limiting or prohibiting the Company or any Offeror from proposing or engaging in any acquisition, disposition or other transfer of any securities of the Company, any merger, amalgamation, arrangement, recapitalization or business combination or transaction involving the Company, any sale or other transfer of assets of the Company, any liquidation, dissolution or winding-up of the Company or any other business combination or other transaction, or any other action by the Company or such Offeror, provided that the holders of Rights shall have the rights set forth in this Agreement with respect to any such acquisition, disposition, transfer, merger, amalgamation, arrangement, recapitalization, sale, liquidation, dissolution, winding-up, business combination or transaction or action. ARTICLE 4. -- THE RIGHTS AGENT 4.1 GENERAL (a) The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of Rights in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable. In the event the Company appoints one or more Co-Rights Agents, the respective duties of the Rights Agent and Co-Rights Agents shall be as the Company may determine. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or wilful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability, which right to indemnification will survive the termination of this Agreement. 23 (b) The Rights Agent will be protected and will incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any certificate for Common Shares, Rights Certificate, certificate for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to the genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons. 4.2 MERGER, AMALGAMATION OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or amalgamated or with which it may be consolidated, or any corporation resulting form any merger, amalgamation or consolidation to which the Rights Agent or any successor Rights Agent is a party, or any corporation succeeding to the shareholder or stockholder services business of the Rights Agent or any successor Rights Agent, will be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 4.4 hereof. In case at the time such successor Rights Agent succeeds to the agency created by this Agreement any of the Rights Certificates have been countersigned by not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates have not been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates will have the full force provided in the Rights Certificates and in this Agreement. (b) In case at any time the name of the Rights Agent is changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. 4.3 DUTIES OF RIGHTS AGENT The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by which the Company, the holders of Rights Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel will be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent deems it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by a person believed by the Rights Agent to be the Chairman, the President or any Senior Vice-President and by any other of the foregoing or the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate will be full authorization to the Rights Agent 24 for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent will be liable hereunder only for its own negligence, bad faith or wilful misconduct. (d) The Rights Agent will not be liable for or by reason of any of the statements of fact or recitals contained in this agreement or in the certificate for Common Shares or the Rights Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and will be deemed to have been made by the Company only. (e) The Rights Agent will not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due authorization, execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any Common Share certificate or Rights Certificates (except it countersignature thereof); nor will it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor will it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to subsection 3.2(b) hereof) or any adjustment required under the provisions of Section 2.3 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights after receipt of the certificate contemplated by Section 2.3 describing any such adjustment); nor will it by any act hereunder be deemed to make any representation or warranty as to the authorization of any Common Shares to be issued pursuant to this Agreement or any Rights or as to whether any Common Shares will, when issued, be duly and validly authorized, executed, issued and delivered and fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any person believed by the Rights Agent to be the Chairman, the President, any Senior Vice-President or the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer of the Company, and to apply to such persons for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such person. (h) The Rights Agent and any shareholder or stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in Common Shares, Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent will not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. 25 4.4 CHANGE OF RIGHTS AGENT The Rights Agent may resign and be discharged from its duties under this Agreement upon 90 days notice (or such lesser notice as is acceptable to the Company) in writing mailed to the Company and to each transfer agent of Common Shares by registered or certified mail, and to the holders of the Rights in accordance with Section 5.9. The Company may remove the Rights Agent upon 30 days notice in writing, mailed to the Rights Agent and to each transfer agent of the Common Shares by registered or certified mail, and to the holders of the Rights in accordance with Section 5.9. If the Rights Agent should resign or be removed or otherwise become incapable of acting, the Company will appoint a successor to the Rights Agent. If the Company fails to make such appointment within a period 30 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of any Rights (which holder shall, with such notice, submit such holder's Rights Certificate for inspection by the Company), then the holder of any Rights may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, must be a corporation incorporated under the laws of Canada or a province thereof and authorized to carry on the business of a trust company in the Province of British Columbia. After appointment, the successor Rights Agent will be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company will file notice thereof in writing with the predecessor Rights Agent and each transfer agent of any class of Voting Shares and mail a notice thereof in writing to the holders of the Rights. Failure to give any notice provided for in this Section 4.4, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. ARTICLE 5. - MISCELLANEOUS 5.1 REDEMPTION, WAIVER AND TERMINATION (a) The Board of Directors of the Company acting in good faith may, at its option, at any time prior to the provisions of Section 3.1 or 3.2 becoming applicable as a result of the occurrence of a Flip-in Event or a Flip-over Transaction or Event, elect to redeem all but not less than all of the then outstanding Rights at a redemption price of $0.01 per Right appropriately adjusted in a manner analogous to the applicable adjustment provided for in Section 2.3 if an event of the type analogous to any of the events described in Section 2.3 shall have occurred (such redemption price being herein referred to as the "Redemption Price"). The redemption of the Rights by the Board of Directors may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. (b) The Board of Directors of the Company may, until the first to occur of a Flip-in Event or a Flip-over Transaction or Event, upon prior written notice delivered to the Rights Agent, determine to waive the application of subsection 1.1(bb) and Section 3.1 or 3.2 to any particular Flip-over Transaction or Event or Flip-in Event. (c) The Board of Directors of the Company may waive the application of subsection 1.1(bb) and Section 3.2 to any Flip-in Event, provided that both of the following conditions are satisfied: (i) the Board of Directors has determined that the Acquiring Person became an Acquiring Person by inadvertence and without any intent or knowledge that he would become an Acquiring Person; and 26 (ii) such Acquiring Person has reduced his Beneficial Ownership of Voting Shares such that at the time of waiver pursuant to this subsection 5.1(c) he is no longer an Acquiring Person. (d) If the Board of Directors of the Company elects to redeem the Rights, the right to exercise the Rights will thereupon, without further action and without notice, terminate and each Right will after redemption be null and void. (e) If a Person makes a Permitted Bid and, within 120 days after the making of the Permitted Bid, has taken up and paid for not less than 90 per cent of the Common Shares pursuant to a Permitted Bid Acquisition, other than Common Shares already held at the date of the Permitted Bid by, or by a nominee for, such Person or any of its Affiliates, then the Board of Directors of the Company shall without further formality be deemed to have elected to redeem the rights at the Redemption Price. (f) If the Board of Directors of the Company elects or is deemed to have elected to redeem the Rights, the right to exercise the Rights will thereupon, without further action and without notice, terminate and the only right thereafter of the holders of Rights will be to receive the Redemption Price. (g) Within 10 days after the Board of Directors electing or having been deemed to have elected to redeem the Rights, the Company must give notice of redemption to the holders of the then outstanding Rights by mailing such notice to each such holder at its last address as it appears upon the registry books of the Rights Agent or, prior to the Separation Time, on the registry books of the Transfer Agent for the Common Shares. Any notice which is mailed in the manner herein provided will be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. The Company may not redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 5.1 and other than in connection with the purchase of Common Shares prior to the Separation Time. 5.2 EXPIRATION No person will have any rights pursuant to this Agreement or in respect of any Right after the Expiration Time, except the Rights Agent as specified in subsection 4.1(a) of this Agreement. 5.3 ISSUANCE OF NEW RIGHTS CERTIFICATES Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the number or kind or class of shares purchasable upon exercise of rights made in accordance with the provisions of this Agreement. 5.4 SUPPLEMENTS AND AMENDMENTS (a) The Company may from time to time supplement or amend this Agreement: (i) to make any changes which the Board of Directors acting in good faith may deem necessary or desirable, provided that no such supplement or amendment which would change the Expiration Time or increase the Exercise Price or change the percentage referred to in subsection 1.1(a) hereof shall be effective until confirmed by the holders of the Rights as hereinafter set forth and no such supplement or amendment made on or after the Stock Acquisition Date shall materially adversely affect the interests of the holders of Rights generally and provided further that no such supplement or 27 amendment shall be made to the provisions of Article 4 except with the written concurrence of the Rights Agent to such supplement or amendment, or (ii) in order to cure any ambiguity or to correct or supplement any provision contained herein which may be inconsistent with any other provisions herein or otherwise defective. (b) The confirmation of a supplement or amendment to this Agreement required by clause 5.4(a)(i) hereof may be given by a resolution proposed at a meeting of Rights holders duly convened for that purpose and held in accordance with the provisions of this Section or, prior to the Separation Time, at a meeting of shareholders of the Company duly convened for any purpose, and passed by a majority of the votes cast by the Rights holders or shareholders, as the case may be, who voted in respect of that resolution. (c) The Right Agent shall on receipt of a written request of the Company and upon being indemnified to its reasonable satisfaction by the Company against the cost which may be incurred in connection with the calling and holding of such meeting, convene a meeting of the Rights holders. In the event of the Rights Agent failing so to convene a meeting within 15 days after receipt of such request and indemnity, the Company may convene such meeting. (d) At least 21 days' prior notice of any meeting of Rights holders shall be given to the Rights holders and a copy of such notice shall be sent by mail to the Company (unless the meeting has been called by the Company, in which case the copy shall be sent to the Rights Agent). Such notice shall state the time and place of the meeting and the general nature of the business to be transacted thereat and shall contain such information as is reasonably necessary to enable the Rights holders to make a reasoned decision on the matter, but it shall not be necessary for any such notice to set out the terms of any resolution to be proposed or any of the provisions of this Section. (e) An individual (who need not be a Rights holder) designated in writing by the Rights Agent shall be chairman of the meeting and if no individual is so designated, or if the individual so designated is not present within 15 minutes from the time fixed for the holding of the meeting, the Rights holders present in present or by proxy shall choose some individual present to be chairman. (f) At any meeting of the Rights holders a quorum shall consist of holders present in person or by proxy of at least 20% of the Rights, provided that at least two Persons entitled to vote thereat are personally present. If a quorum of the Rights holders shall not be present within 30 minutes from the time fixed for holding any meeting, the meeting shall be adjourned to the same day in the next week (unless such day is not a Business Day, in which case it shall be adjourned to the next Business Day) at the same time and place and no notice of the adjournment need be given. Any business may be brought before or dealt with at an adjourned meeting which might have been dealt with at the original meeting in accordance with the notice calling the same. No business shall be transacted at any meeting unless a quorum is present at the commencement of business. At the adjourned meeting the Rights holders present in person or by proxy shall form a quorum and may transact the business for which the meeting was originally convened, notwithstanding that they may not hold 20% of the Rights. The chairman of any meeting at which a quorum of the Rights holders is present may, with the consent of the meeting, adjourn any such meeting, and no notice of such adjournment need be given except such notice, if any, as the meeting may prescribe. (g) Votes of Rights holders on any matter may be given on a show of hands, unless a poll is duly demanded. On a show of hands, every person who is present and entitled to vote, whether as a Rights holder or as proxy for one or more absent Rights holders, or both, shall have one vote. 28 On a poll, each Rights holder present in person or represented by a proxy duly appointed by instrument in writing shall be entitled to one vote in respect of each whole Right then held or represented by him. A proxy need not be Rights holder. The chairman of any meeting shall be entitled, both on a show of bands and on a poll, to vote in respect of the Rights, if any, held or represented by him, but shall not have a second or deciding vote. The Rights Agent or the Company with the approval of the Rights holders may from time to time make and vary such regulations as it shall think fit for the form of the required instrument of proxy and generally for the calling of meetings of Rights holders and the conduct of business thereat. The Company and the Rights Agent, by their respective directors and officers, and the counsel for the Company and for the Rights Agent and for any Rights holder may attend any meeting of the Rights holders, but shall have no vote as such. 5.5 FRACTIONAL RIGHTS AND FRACTIONAL SHARES (a) The Company will not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights. Subject to Section 5.2, after the Separation Time there shall be paid in lieu of such fractional Rights to the registered holders of the Rights Certificates with regard to which fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the Market Price of a whole Right. (b) The Company will not be required to issue fractional Common Shares upon exercise of the Rights or to distribute certificates that evidence fractional Common Shares. In lieu of issuing fractional Common Shares, the Company shall pay to the registered holder of Rights Certificates at the time such Rights are exercised as herein provided, an amount in cash equal to the same fraction of the Market Price of one Common Share at the date of such exercise. 5.6 RIGHTS OF ACTION Subject to the terms of this Agreement, rights of action in respect of this Agreement, other than rights of action vested solely in the Rights Agent, are vested in the respective holders of the Rights and any holder of any Rights, without the consent of the Rights Agent or of the holder of any other Rights, may, on such holder's own behalf and for such holder's own benefit and the benefit of other holders of Rights, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder's right to exercise such holder's Rights, or Rights to which he is entitled, in the manner provided in this Agreement and in such holder's Rights Certificate. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement. 5.7 HOLDER OF RIGHTS NOT DEEMED A SHAREHOLDER No holder, as such, of any Rights shall be entitled to vote, receive dividends or be deemed for any purpose the holder of Common Shares or any other securities which may at any time be issuable on the exercise of Rights, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 5.8 hereof) or to receive dividends or subscription rights or otherwise, until such Rights, or Rights to which such holder is entitled, shall have been exercised in accordance with the provisions hereof. 29 5.8 NOTICE OF PROPOSED ACTIONS If the Company proposes after the Separation Time and prior to the Expiration Time (i) to effect or permit (in cases where the Company's permission is required) any Flip-in Event or Flip-over Transaction or Event; or (ii) to effect the liquidation, dissolution or winding up of the Company or the sale of all or substantially all of the Company's assets, then, in each such case, the Company shall give to each holder of a Right, in accordance with Section 5.9 hereof, a notice of such proposed action, which shall specify the date on which such Flip-in Event or Flip-over Transaction or Event, liquidation, dissolution, or winding up is to take place, and such notice shall be so given at least 20 Business Days prior to the date of taking of such proposed action by the Company. 5.9 NOTICES Notices or demands authorized or required by this Agreement to be given or made by the Rights Agent or by the holder of any Rights to or on the Company will be sufficiently given or made if delivered or sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: The Loewen Group Inc. Suite 506 4940 Canada Way Burnaby, British Columbia V5G 4K6 Attention: Senior Vice President, Law and General Counsel Facsimile No.: (604) 299-1237 Any notice or demand authorized or required by this Agreement to be given or made by the Company or by the holder of any Rights to or on the Rights Agent shall be sufficiently given or made if delivered or sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: The Royal Trust Company Concourse Level 1177 West Hastings Street Vancouver, British Columbia V6E 2K3 Attention: Manager, Corporate Trust Services Facsimile No.: (604) 662-2019 Notices or demands authorized or required by this Agreement to be given or made by the Company or the Rights Agent to or on the holder of any Rights shall be sufficiently given or made if delivered or sent by first-class mail, postage prepaid addressed to such holder at the address of such holder as it appears upon the registry books of the Rights Agent or, prior to the Separation Time, on the registry books of the Company for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. 5.10 COSTS OF ENFORCEMENT If the Company or any other Person the securities of which are purchasable upon exercise of Rights fails to fulfill any of its obligations pursuant to this Agreement, then the Company or such Person will reimburse the 30 holder of any Rights for the costs and expenses (including legal fees) incurred by such holder in actions to enforce his rights pursuant to any Rights of this agreement. 5.11 SUCCESSORS All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and ensure to the benefit of their respective successors and assigns hereunder. 5.12 BENEFITS OF THIS AGREEMENT Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the holders of the Rights any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the holders of the Rights. 5.13 DESCRIPTIVE HEADINGS Descriptive headings appear herein for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 5.14 GOVERNING LAW This Agreement and the Rights issued hereunder shall be deemed to be a contract made under the laws of the Province of Ontario and for all purposes will be governed by and construed in accordance with the laws of such province applicable to contracts to be made and performed entirely within such province. 5.15 LANGUAGE Les parties aux presentes ont exige que la presente convention ainsi que tous les documents et avis qui s'y rattachent et/ou qui en decoulent soient rediges en langue anglaise. The parties hereto have required that this Agreement and all documents and notices related thereto and/or resulting therefrom be drawn up in English. 5.16 COUNTERPARTS This Agreement may be executed in any number of counterparts and each of such counterparts will for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 5.17 SEVERABILITY If any term or provision hereof or the application thereof to any circumstance is, in any jurisdiction and to any extent, invalid or unenforceable, such term or provision will be ineffective only to the extent of such invalidity or application of such term or provision to circumstances other than those as to which it is held invalid or unenforceable. 5.18 EFFECTIVE DATE This Agreement is effective from the date hereof. If this Agreement is not confirmed by resolution passed by a majority of the votes cast by Independent Shareholders, and by a majority of the votes cast by Independent Shareholders other than Raymond Loewen and Anne Loewen and their respective Associates, in each case who vote in respect of confirmation of this Agreement at a meeting of shareholders to be held not later than the date of the 1990 Annual Meeting of Shareholders of the Company, then this Agreement and any then outstanding Rights shall be of no further force and effect, and such Rights shall terminate, from the date 31 which is the earlier of (a) the date of such meeting and (b) the date of the 1990 Annul Meeting of Shareholders of the Company. If neither a Flip-in Event nor a Flip-over Transaction or Event to which Section 3.1 or 3.2 is applicable has occurred prior to the 1995 Annual Meeting of Shareholders of the Company and this Agreement is not re-confirmed by resolution passed by a majority of the votes cast by Independent Shareholders who vote in respect of confirmation of this Agreement at the 1995 Annual Meeting of Shareholders of the Company, then this Agreement and any then outstanding Rights shall be of no further force and effect, and such Rights shall terminate from the date of the 1995 Annual Meeting of Shareholders of the Company. 5.19 DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS The Board of Directors of the Company will have the exclusive power and authority to administer and amend this Agreement and to exercise all rights and powers specifically grant to the Board or the Company, or as may be necessary or advisable in the administration of this Agreement, including without limitation, the rights and power to (i) interpret the provisions of this Agreement; and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not to redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (b) below, all omissions with respect to the foregoing) which are done or made by the Board, in good faith, shall (a) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (b) not subject the Board to any liability to the holders of the Rights. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. THE LOEWEN GROUP INC. By: ----------------------------------------------- Peter Hyndman, Senior Vice President, Law and General Counsel THE ROYAL TRUST COMPANY By: ----------------------------------------------- Brent Cheal, Senior Corporate Trust Officer and: ---------------------------------------------- Frances Ipsen, Senior Corporate Trust Officer 32 EXHIBIT A [Form of Rights Certificate] Certificate No. Rights ------------------------ ------------------------ THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN SUBSECTION 3.2(b) OF THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR TRANSFEREES OF AN ACQUIRING PERSON OR ITS AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR ANY PERSON ACTING JOINTLY OR IN CONCERT WITH ANY OF THEM MAY BECOME VOID. RIGHTS CERTIFICATE This certifies that ________________________________________________, or registered assigns, is the registered holder of the number of Rights set forth above, each of which entitles the registered holder thereof, subject to the terms, provisions and conditions of the Rights Agreement dated as of April 20, 1990 (the "Rights Agreement") between The Loewen Group Inc., a corporation incorporated under the British Columbia Company Act (the "Company") and The Royal Trust Company, a trust company incorporated under the laws of Quebec, as Rights Agent (the "Rights Agent", which term shall include any successor Rights Agent under the Rights Agreement), to purchase from the Company at any time after the Separation Time (as such term is defined in the Rights Agreement) and prior to the close of business on April 20, 2000, one fully paid Common Share of the Company (a "Common Share") at the Exercise Price referred to below, upon presentation and surrender of this Rights Certificate with the Form of Election to Exercise duly executed and submitted to the Rights Agent at its principal office in any of the Cities of Vancouver, Toronto or Montreal. The Exercise Price will initially be $90 (Canadian) per Right and shall be subject to adjustment in certain events as provided in the Rights Agreement. In certain circumstances described in the Rights Agreement, each Right evidenced hereby may entitle the registered holder thereof to receive Common Shares in exchange for the Right or to purchase or receive securities of an entity other than the Company or other securities or assets of the Company other than Common Shares all as provided in the Right Agreement. This Rights Certificate is subject to all the terms, provisions and conditions of the Rights Agreement which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Rights Agent, the Company and the holders or the Rights Certificates. Copies of the Rights Agreement are on file at the registered office of the Company and are available upon written request. This Rights Certificate, with or without other Rights Certificates, upon surrender at any of the offices of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing an aggregate number of Rights equal to the aggregate number of Rights evidenced by the Rights Certificate or Rights Certificates surrendered. If this Rights Certificate shall be exercised in part, the registered holder shall be entitled to receive, upon surrender hereof, another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be, and under certain circumstances are required to be, redeemed by the Company at a redemption price of $0.01 per Right, subject to adjustment in certain events, under certain circumstances. No fractional Common Shares will be issued upon the exercise of any Right or Rights evidenced hereby, but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Common Shares or of any other securities that may at any time be issuable upon the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders of the Company at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Rights evidenced by the Rights Certificate shall have been exercised as provided in the Rights Agreement. This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Date: ------------------------- THE LOEWEN GROUP INC. Per: By: -------------------------- ------------------------------------ Countersigned: THE ROYAL TRUST COMPANY By: --------------------------- Authorized Signature 2 FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to assign or transfer the Rights Certificates.) FOR VALUE RECEIVED --------------------------------------------------------- hereby sells, assigns and transfers to ------------------------------------------ (Please print name and address of transferee) the Rights represented by the Rights Certificate, together with all right, title and interest therein, and hereby irrevocably constitutes and appoints ------------------------------------------------------------------------ an attorney, to transfer the within Rights on the books of the Company, with full power of substitution. Dated: -------------------------- Signature Guaranteed: ---------------------------------------- Signature (Signature must correspond to name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever) Signature must be guaranteed by a member firm of a recognized stock exchange in Canada, a registered national securities exchange in the United States, a member of the Investment Dealers Association of Canada or National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in Canada or the United States. - - -------------------------------------------------------------------------------- (To be completed if true) The undersigned hereby represents, for the benefit of all holders of Rights and Common Shares, that the Rights evidenced by this Rights Certificate are not, and, to the knowledge of the undersigned, have never been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof or by any Person acting jointly or in concert with any of the foregoing (all as defined in the Rights Agreement). ---------------------------------------- Signature NOTICE If the certification set forth above in the Form of Assignment is not completed upon the assignment of the Right(s) evidenced by this Rights Certificate, the Company will deem the Beneficial Owner of such Rights to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and will affix a legend to that effect on any Right Certificates issued in exchange for this Rights Certificate. 3 [To be attached to each Rights Certificate] FORM OF ELECTION TO EXERCISE TO: THE LOEWEN GROUP INC. The undersigned hereby irrevocably elects to exercise __________________________________ whole Rights represented by the attached Rights Certificate to purchase the Common Shares issuable upon the exercise of such Rights and requests that certificates for such shares by issued in the name of: --------------------------------------------------------------------------- (Name) --------------------------------------------------------------------------- (Street) --------------------------------------------------------------------------- (City and State or Province) (Postal Code) --------------------------------------------------------------------------- SOCIAL INSURANCE, SOCIAL SECURITY OR OTHER TAXPAYER IDENTIFICATION NUMBER If such number of Rights shall not be all the Rights evidenced by this Rights Certificate a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to: --------------------------------------------------------------------------- (Name) --------------------------------------------------------------------------- (Street) --------------------------------------------------------------------------- (City and State or Province) (Postal Code) --------------------------------------------------------------------------- SOCIAL INSURANCE, SOCIAL SECURITY OR OTHER TAXPAYER IDENTIFICATION NUMBER Dated: ------------------------ Signature Guaranteed: ---------------------------------------- Signature (Signature must correspond to name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever) Signature must be guaranteed by a member firm of a recognized stock exchange in Canada, a registered national securities exchange in the United States, a member of the Investment Dealers Association of Canada or National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in Canada or the United States. - - -------------------------------------------------------------------------------- (To be completed if true) The undersigned hereby represents, for the benefit of all holders of Rights and Common Shares, that the Rights evidenced by this Rights Certificate are not, and, to the knowledge of the undersigned, have never been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof or by any Person acting jointly or in concert with any of the foregoing (all as defined in the Rights Agreement). ---------------------------------------- Signature NOTICE If the certification set forth above in the Form of Election to Exercise is not completed upon the exercise of the Right(s) evidenced by this Rights Certificate, the Company will deem the Beneficial Owner of such Right(s) to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). 4 SHAREHOLDER PROTECTION RIGHTS AGREEMENT AMENDMENTS made as of the 24th day May, 1990 to Agreement made as of April 20, 1990. BETWEEN: THE LOEWEN GROUP INC., a corporation incorporated under the laws of British Columbia (hereinafter referred to as the "Company") OF THE FIRST PART, - and - THE ROYAL TRUST COMPANY, a trust company incorporated under the laws of Quebec (hereinafter referred to as the "Rights Agent") OF THE SECOND PART. WHEREAS at the meeting of shareholders of the Company, held on the 24th day of May, 1990, called to consider, among other things, the resolution to confirm the Shareholder Protection Rights Plan Agreement made as of April 20, 1990 (the "Rights Plan") (the "Main Resolution") a resolution (the "Amending Resolution") was made to amend the Main Resolution so as to authorize and direct the Company to amend the definition of "Acquiring Person" in the Rights Plan in the manner herein set out; AND WHEREAS the Amending Resolution and the Main Resolution were passed by a majority of the votes cast by Independent Shareholders (as defined in the Rights Plan) and by a majority of the votes cast by Independent Shareholders, other than Raymond Loewen and Anne Loewen and their respective Associates (as defined in the Rights Plan), at such meeting; NOW THEREFORE in consideration of the premises the parties hereby agree that: 1. The definition of "Acquiring Person" in subsection 1.1(a) of the Rights Plan shall be amended: (a) by deleting the word "and" at the end of clause (ii) thereof; (b) by replacing the period at the end of clause (iii) thereof with a semi-colon and by adding the word "and" at the end thereof; and (c) by adding the following after clause (iii) thereof: "(iv) any pension plan or fund registered under the Pension Benefits Standards Act, 1985 (Canada), the Employment Pension Plans Act (Alberta), an Act respecting supplemental pension plans (Quebec) or the Pension Benefits Act, 1987 (Ontario) or any comparable or successor laws thereto so long as (A) such legislation prohibits such pension plan or fund from owning more than 30% of the Common Shares or Voting Shares and (B) such pension plan or fund - 2 - holds its Common Shares or Voting Shares for investment purposes only and is not acting jointly or in concert with any other Person." IN WITNESS WHEREOF, these amendments have been duly executed as of the date first above written. THE LOEWEN GROUP INC. By: /s/ Peter Hyndman ---------------------------------------------- Peter Hyndman, Senior Vice-President, Law and General Counsel THE ROYAL TRUST COMPANY By: /s/ Brent Cheal ---------------------------------------------- Brent Cheal, Senior Corporate Trust Officer By: /s/ Francis Ipsen ---------------------------------------------- Francis Ipsen, Senior Corporate Trust Officer - 3 - CERTIFICATE RE: SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT made as of April 20, 1990 between THE LOEWEN GROUP INC. and THE ROYAL TRUST COMPANY, as amended ("Rights Plan Agreement") -------------------------------------------- The undersigned, Robert B. Lundgren, Senior Vice-President, Finance and Corporate Development of The Loewen Group Inc. (the "Company") hereby certifies on behalf of the Company that there has been an adjustment to the Exercise Price (as defined in the Rights Plan Agreement). Effective as at the close of business on June 18, 1991 at each of the respective locations of The Royal Trust Company, registrar and transfer agent for the Common shares of the Company the Exercise Price shall equal $45. The adjustment has been made because of the subdivision of the issued and unissued Common shares of the Company on a 2 for 1 basis. The record date for such subdivision is the close of business on June 18, 1991, as described in the preceding paragraph. The effect of the subdivision is to double the number of Common shares and therefore to halve the Exercise Price, which was equal to $90 prior to such subdivision. Dated this ______ day of June, 1991 at Burnaby, British Columbia, Canada. /s/ Robert B. Lundgren -------------------------------------------------- Robert B. Lundgren Senior Vice-President, Finance and Corporate Development CERTIFIED COPY OF RESOLUTION I, PETER STEWART HYNDMAN, Senior Vice-President, Law and General Counsel of The Loewen Group Inc., hereby certify that the attached Schedule "A" is a true and correct copy of a duly passed resolution of the Directors of The Loewen Group Inc. on April 7, 1994 and that the said resolution has not been rescinded, amended or modified and is in full force and effect as at May 27, 1994. "Peter S. Hyndman" ---------------------------------------------- PETER S. HYNDMAN, Senior Vice-President, Law and General Counsel SCHEDULE "A" 4. SHAREHOLDER PROTECTION RIGHTS PLAN The Directors then considered three suggested amendments to the Shareholder Protection Rights Plan, outlined in the memo to Directors of April 5, 1994 from Borden & Elliot and previously circulated to Directors. UPON MOTION duly proposed and unanimously carried (Hyndman, Garnett), it was resolved that: (a) SUCCESSION PLANNING WHEREAS The Loewen Group Inc. (the "Company") and The Royal Trust Company (the "Rights Agent") entered into a Shareholder Protection Rights Plan Agreement made as of April 20, 1990 (the "Rights Plan"); AND WHEREAS the Rights Plan was amended as evidenced by an amendment thereto made as of the 24th day of May, 1990; AND WHEREAS the Rights Plan provides, pursuant to section 5.4 thereof, that the Company may from time to time supplement or amend the Rights Plan to make any changes which the Board of Directors acting in good faith may deem necessary or desirable; AND WHEREAS the Board of Directors acting in good faith has determined that the amendments set out in the following resolution are necessary or desirable; (i) the Rights Plan be amended as follows: (A) Clause (ii) of subsection 1.1(a) is hereby amended to read as follows: "(ii) any Person who becomes the Beneficial Owner of 20% or more of the outstanding Common Shares or Voting Shares of the Company as a result of (A) an acquisition or redemption by the Company of Voting Shares of the Company which, by reducing the number of Voting Shares outstanding, increases the proportionate number of Voting Shares Beneficially Owned by such Person to 20% or more of the Common Shares or Voting Shares of the Company then outstanding, or (B) share acquisitions made pursuant to a Permitted Bid and approved in accordance with the provision of Section 3.5 and made after the date of such approval ("PERMITTED BID ACQUISITIONS") or (C) share acquisitions in respect of which the Board of Directors of the Company has waived the application of Section 3.2 pursuant to subsection 5.1(b) or which were made on or prior to the date of this Agreement ("EXEMPT ACQUISITIONS"); or (D) acquisitions of Common Shares or Voting Shares made as a result of the death of the Beneficial Owner of such Common Shares or Voting Shares of the Company ("INHERITED ACQUISITIONS"). provided, however, that if a Person shall become the Beneficial Owner of 20% or more of the Common Shares or Voting Shares of the Company then outstanding by reason of (i) share acquisitions or redemptions by the Company or (ii) Permitted Bid Acquisitions or (iii) Exempt Acquisitions or (iv) Inherited Acquisitions and, after such share acquisitions or redemptions by the Company or Permitted Bid Acquisitions or Exempt Acquisitions or Inherited Acquisitions, becomes the Beneficial Owner of any additional Voting Shares of the Company other than pursuant to Permitted Bid Acquisitions, Exempt Acquisitions, Inherited Acquisitions, acquisitions as a result of a stock dividend, a stock split or other event pursuant to which such Person receives or acquires Voting Shares in the same pro rata basis as all other holders of Voting Shares of the same class ("PRO RATA ACQUISITIONS") or acquisitions pursuant to a dividend reinvestment plan of the Company, then as of the date of becoming the Beneficial Owner of any additional - 2 - Voting Shares, such Person shall become an "Acquiring Person"; and" (ii) Subsection 1.1(q.l) shall be added immediately after subsection 1.1(q) to read as follows: "(q.l) "INHERITED ACQUISITION" shall have the meaning ascribed thereto by subclause 1.1(a)(ii)(D)." (iii) Section 1.3(a) is amended by replacing the words "or Pro Rata Acquisitions" at the end thereof with the following: ", Pro Rata Acquisitions or Inherited Acquisitions". (iv) Subsection 1.3(b) is amended to read as follows: " (b) A Person shall not be and shall not be deemed to be an Acquiring Person if such Person (a "GRANDFATHERED PERSON TRANSFEREE") becomes the Beneficial Owner of 20% or more of the outstanding Common Shares or Voting Shares of the Company solely as a result of (i) the acquisition of all but not less than all of the Common Shares or Voting Shares of the Company Beneficially Owned immediately prior thereto by a Grandfathered Person or a Grandfathered Person Transferee (the "TRANSFEROR") and such Person's Beneficial Ownership of Common Shares or Voting Shares of the Company after giving effect to such acquisition does not exceed the number of Common Shares or Voting Shares of the Company Beneficially Owned by the Transferor immediately prior to such acquisition by more than 2% of the then issued and outstanding Common Shares or Voting Shares of the Company or (ii) as a result of the death of a Grandfathered Person or a Grandfathered Person Transferee; provided, however, that the exception in this subsection 1.3(b) shall cease to be applicable to a Grandfathered Person Transferee who shall after the time at which he becomes a Grandfathered Person - 3 - Transferee (the "Transfer Time") become, pursuant to one or more transactions or events, the Beneficial Owner of additional Common Shares or Voting Shares of the Company constituting, together with the number of Common Shares or Voting Shares Beneficially Owned by such Grandfathered Person Transferee immediately prior to the Transfer Time, in the aggregate more than 2% of the Common Shares or Voting Shares of the Company then outstanding, other than pursuant to Permitted Bid Acquisitions, Exempt Acquisitions, Pro Rata Acquisitions or Inherited Acquisitions." (v) Section 1.3(c) is amended by replacing the words "or Pro Rata Acquisitions" at the end thereof with the following: ", Pro Rata Acquisitions or Inherited Acquisitions'. (b) EXERCISE PRICE WHEREAS The Loewen Group Inc. (the "Company") and The Royal Trust Company (the "Rights Agent") entered into a Shareholder Protection Rights Plan Agreement made as of April 20, 1990 (the "Rights Plan"); AND WHEREAS the Rights Plan was amended as evidenced by an amendment thereto made as of the 24th day of May, 1990; AND WHEREAS the Rights Plan provides, pursuant to section 5.4 thereof, that the Company may from time to time supplement or amend the Rights Plan to make any changes which the Board of Directors acting in good faith may deem necessary or desirable, provided that no such supplement or amendments which would increase the Exercise Price (as defined therein) shall be effective until confirmed by the holders of the Rights; AND WHEREAS the Board of Directors acting in good faith has determined that the amendments set out in the following resolution are necessary or desirable; (i) the Rights Plan be amended so that subsection 1.1(l) shall read as follows: "EXERCISE PRICE" shall mean, as of any date, the price at which a holder may purchase the securities issuable upon exercise of one whole Right and, until adjustment thereof in accordance with the terms hereof, the Exercise Price shall equal $125."; - 4 - (ii) such amendment be placed before the shareholders of the Company at the annual general meeting to be held on May 16, 1994. (c) WAIVER WHEREAS The Loewen Group Inc. (the "Company") and The Royal Trust Company (the "Rights Agent") entered into a Shareholder Protection Rights Plan Agreement made as of April 20, 1990 (the "Rights Plan"); AND WHEREAS pursuant to the terms of the Rights Plan, Raymond L. Loewen is a Grandfathered Person, as defined therein; AND WHEREAS it is proposed that Mr. Loewen participate in the Company's Management Equity Investment Plan (the "MEIP"); AND WHEREAS if Mr. Loewen participates in the MEIP, pursuant to the terms of the Rights Plan, he would be deemed to Beneficially Own an additional 2,000,000 Common Shares of the Company and would, therefore, become an Acquiring Person under the terms of the Rights Plan such that, at the close of business on the tenth day after his agreeing to participate in the MEIP a Separation Time (as defined in subsection 1.1(bb) of the Rights Plan) would occur and the terms of the Rights would change pursuant to section 3.2 of the Rights Plan; AND WHEREAS pursuant to subsection 5.1(b) of the Rights Plan, the Board of Directors may, until the first to occur of a Flip-in Event (as defined in the Rights Plan) or a Flip-over Transaction or Event (as defined in the Rights Plan) upon prior written notice delivered to the Rights Agent (as defined in the Rights Plan) determine to waive the application of subsection 1.1(bb) and Section 3.1 or 3.2 to any particular Flip-over Transaction or Event or Flip-in Event. (i) the Board of Directors of the Company hereby determine to waive the application of subsection 1.1(bb) and section 3.2 of the Rights Plan to the Flip-in Event that would arise as a result of Mr. Loewen's acquisition of Beneficial Ownership of 2,000,000 Common Shares pursuant to the MEIP; (ii) the proper officers of the Company be hereby directed to give notice of this waiver to the Rights Agent under the Rights Plan. - 5 - EX-99.37 38 EXHIBIT 99.37 EXHIBIT 37 [Loewen Letterhead] August 19, 1988 VIA FEDERAL EXPRESS Mr. Tim Hogenkamp 5161 Scarsdale Cove Cincinnati, Ohio 45248 U.S.A. Dear Tim: We thoroughly enjoyed our dinner meeting and discussions in Toronto. Please be advised that The Loewen Group Inc. (the "Company") hereby makes an offer of employment in accordance with the following terms and conditions: (a) You will be employed as Vice President, Operations of the Company with employment to commence on September 19, 1988. (b) Your responsibilities will be those described in the attached job description (Schedule "A"). (c) Your compensation will be made up of the following: (i) a base management salary of $130,000 per annum payable on a twice monthly basis. (ii) reimbursement of your $18,500 (U.S. funds) bonus from your current employer which will be lost as a result of your acceptance of employment with us (payable on November 30, 1988). (iii) $400 per month automobile expense allowance. (iv) the provision of an executive stock option plan whereby you will be able to purchase 7500 common shares of the company per year for 4 years at a per share price which is 10% below the market value price of the stock on the day we enter into the stock option agreement. This will provide options on 30,000 common shares in total over the 4 year period. Your rights to purchase will take place at 12 month intervals commencing September 30, 1989. 2 (v) Reimbursement of mutually agreeable relocation expenses including temporary housing for 90 days following commencement of employment. (d) The employment engagement can be terminated on 6 months notice by either party. We look forward to your acceptance and will do whatever possible to work with you in expediting your acceptance for employment by Canadian Immigration authorities on both a temporary and permanent basis. Please sign both copies of the enclosed offer by Wednesday, August 24, 1988 and return one copy to our office. Yours very truly, /s/ Raymond L. Loewen - - ------------------------- Raymond L. Loewen President RLL/lbh Accepted this ___ day of August, 1988. /s/ Tim Hogenkamp -------------------------- Tim Hogenkamp EX-99.38 39 EXHIBIT 99.38 EXHIBIT 38 [INTENTIONALLY OMITTED]. EX-99.39 40 EXHIBIT 99.39 EXHIBIT 39 An Indemnification Letter in the following form has been executed between the Company and the following individuals: Kenneth S. Bagnell J. Carter Beese, Jr. Earl A. Grollman Harold E. Hughes Albert S. Lineberry, Sr. Charles B. Loewen Robert B. Lundgren James D. McLennan Ernest G. Penner John N. Turner Raymond L. Loewen Paul Wagler Lawrence Miller Peter Hyndman Timothy R. Hogenkamp INDEMNIFICATION LETTER FOR DIRECTORS October 10, 1996 Dear ___________________: Pursuant to Section 152 of the COMPANY ACT, R.S.B.C. 1979, c. 59, as amended, The Loewen Group Inc. (the "Company") may provide certain indemnities in favour of directors and former directors of the Company and in favour of directors or former directors of corporations of which the Company is or was a shareholder. Article 19.1 of the Articles of the Company provides for directors and former directors to be indemnified accordingly. In consideration of one dollar ($1.00) and other valuable consideration, the receipt and sufficiency whereof is hereby acknowledged, the Company hereby undertakes to indemnify you and your heirs and personal representatives against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by you or any of such persons by reason of, arising from or in connection with your being a director of the Company or corporation of which the Company is or was a shareholder, including a judgment in any civil, criminal or administrative action or proceeding to which you or any of such persons is made a party by reason of your being or having been an director of the Company or corporation of which the Company is or was a shareholder, including an action brought by the Company or any corporation of which the Company is or was a shareholder. The Company (i) will, so long as you shall be an director of the Company or corporation of which the Company is or was a shareholder, as the case may be, use its best efforts to ensure that none of the provisions in the articles of the Company relating to the indemnity of the directors is altered, (ii) will not prevent or seek to prevent you from obtaining the protection of any such provisions and (iii) will do all acts which may be required to secure such protection including without limitation make application to court for approval of the indemnity herein. The foregoing indemnities are subject to the approval of the court, as provided in the COMPANY ACT and to the conditions that you have acted honestly and in good faith with a view to the best interests of the Company or corporation of which the Company is or was a shareholder, as the case may be, and, in case of a criminal or administrative action or proceeding, you had reasonable grounds for believing your conduct was lawful. You will be presumed to have acted honestly and -2- in good faith with a view to the best interests of the Company or corporation of which the Company is or was a shareholder, as the case may be, in the absence of a determination by the court that you acted in bad faith or with criminal intent. This letter also confirms the terms on which the Company will assume conduct of the defence of any action to which the indemnity relates. Promptly upon your receiving notice of any claim for which you are entitled to indemnity under this letter, you will give notice thereof to the Company, together with all information in your possession related to the subject matter of the claim, and together with copies of any writs, petitions or other legal process served upon you. The Company will at its expense assume the defence of the claim, through counsel of its choice to whom you do not, on reasonable grounds, object. In addition, if you wish, you may retain legal counsel of your choice at the cost of the Company. Failure to give notice of a claim in a timely fashion will not disentitle you or your heirs or personal representatives to your rights hereunder unless the Company suffers material prejudice because of the delay. Thereafter the Company will have carriage of the defence of the claim, but you will make yourself available at the times and (at the expense of the Company) places from time to time requested by the Company or its counsel for the purpose of examinations for discovery, preparation of answer to any claim, and for any other purposes related to the claim. The Company may at its expense, settle or compromise any claim made against you, but not without the consent of you or your heirs or personal representatives, which will not be unreasonably withheld. The Company will pay all costs of investigating any claim and all costs associated with conducting the defence. All amounts advanced by the Company in respect of costs, charges and expenses of defending the claim will be treated as a non-interest bearing loan and will be repayable forthwith on demand in the event that the court fails to approve your entitlement to indemnity hereunder. The provisions of this letter shall survive your resignation or other cessation of holding office as director and shall be in addition to and not in derogation of any rights at law or in equity that you or your heirs and personal representatives may have. The Company will be subrogated to all rights which you or your heirs and personal representatives may have under policies of insurance. The Company and you and your heirs and personal representatives will execute all further documents and take all further actions as shall be necessary or desirable to give effect to the provisions hereof. If any provision of this agreement is illegal, void, unenforceable or otherwise ineffective, such provision shall be severed and the remaining provisions shall remain in full force and effect. -3- The provisions hereof shall be binding upon the Company and its successors and shall survive any amalgamation, merger, combination or other reorganization of the Company. Yours very truly THE LOEWEN GROUP INC. Per: Agreed upon this _________ day of October, 1996. EX-99.40 41 EXHIBIT 99.40 EXHIBIT 40 An Indemnification Letter in the following form has been executed between the Company and the following individuals: Grant Ballantyne Timothy A. Birch Dwight K. Hawes David Laundy J.C. Ogier Mathewes Douglas J. McKinnon Peter W. Roberts Andrew Scott William R. Shane Thomas E. Stilgenbauer Randall M. Walters Timothy R. Hogankamp Peter Hyndman Raymond L. Loewen Lawrence Miller Paul Wagler INDEMNIFICATION LETTER FOR OFFICERS October 10, 1996 Dear ___________________: Pursuant to Section 152 of the COMPANY ACT, R.S.B.C. 1979, c. 59, as amended, The Loewen Group Inc. (the "Company") may provide certain indemnities in favour of officers and former officers of the Company and in favour of officers or former officers of corporations of which the Company is or was a shareholder. Article 19.2 of the Articles of the Company provides for officers and former officers to be indemnified accordingly. In consideration of one dollar ($1.00) and other valuable consideration, the receipt and sufficiency whereof is hereby acknowledged, the Company hereby undertakes to indemnify you and your heirs and personal representatives against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by you or any of such persons by reason of, arising from or in connection with your being an officer of the Company or corporation of which the Company is or was a shareholder, including a judgment in any civil, criminal or administrative action or proceeding to which you or any of such persons is made a party by reason of your being or having been an officer of the Company or corporation of which the Company is or was a shareholder, including an action brought by the Company or any corporation of which the Company is or was a shareholder. The Company (i) will, so long as you shall be an officer of the Company or corporation of which the Company is or was a shareholder, as the case may be, use its best efforts to ensure that none of the provisions in the articles of the Company relating to the indemnity of the officers is altered, (ii) will not prevent or seek to prevent you from obtaining the protection of any such provisions and (iii) will do all acts which may be required to secure such protection including without limitation make application to court for approval of the indemnity herein. The foregoing indemnities are subject to the approval of the court, as provided in the COMPANY ACT and to the conditions that you have acted honestly and in good faith with a view to the best interests of the Company or corporation of which the Company is or was a shareholder, as the case may be, and, in case of a criminal or administrative action or proceeding, you had reasonable grounds for believing your conduct was lawful. You will be presumed to have acted honestly and -2- in good faith with a view to the best interests of the Company or corporation of which the Company is or was a shareholder, as the case may be, in the absence of a determination by the court that you acted in bad faith or with criminal intent. This letter also confirms the terms on which the Company will assume conduct of the defence of any action to which the indemnity relates. Promptly upon your receiving notice of any claim for which you are entitled to indemnity under this letter, you will give notice thereof to the Company, together with all information in your possession related to the subject matter of the claim, and together with copies of any writs, petitions or other legal process served upon you. The Company will at its expense assume the defence of the claim, through counsel of its choice to whom you do not, on reasonable grounds, object. In addition, if you wish, you may retain legal counsel of your choice at the cost of the Company. Failure to give notice of a claim in a timely fashion will not disentitle you or your heirs or personal representatives to your rights hereunder unless the Company suffers material prejudice because of the delay. Thereafter the Company will have carriage of the defence of the claim, but you will make yourself available at the times and (at the expense of the Company) places from time to time requested by the Company or its counsel for the purpose of examinations for discovery, preparation of answer to any claim, and for any other purposes related to the claim. The Company may at its expense, settle or compromise any claim made against you, but not without the consent of you or your heirs or personal representatives, which will not be unreasonably withheld. The Company will pay all costs of investigating any claim and all costs associated with conducting the defence. All amounts advanced by the Company in respect of costs, charges and expenses of defending the claim will be treated as a non-interest bearing loan and will be repayable forthwith on demand in the event that the court fails to approve your entitlement to indemnity hereunder. The provisions of this letter shall survive your resignation or other cessation of holding office as officer and shall be in addition to and not in derogation of any rights at law or in equity that you or your heirs and personal representatives may have. The Company will be subrogated to all rights which you or your heirs and personal representatives may have under policies of insurance. The Company and you and your heirs and personal representatives will execute all further documents and take all further actions as shall be necessary or desirable to give effect to the provisions hereof. If any provision of this agreement is illegal, void, unenforceable or otherwise ineffective, such provision shall be severed and the remaining provisions shall remain in full force and effect. -3- The provisions hereof shall be binding upon the Company and its successors and shall survive any amalgamation, merger, combination or other reorganization of the Company. Yours very truly THE LOEWEN GROUP INC. Per: Agreed upon this _________ day of October, 1996. EX-99.41 42 EXHIBIT 99.41 EXHIBIT 41 The attached form of Severance Agreement has been authorized for each of the following five key executives of the Company, among others: 1. Timothy R. Hogenkamp 2. Lawrence Miller 3. Douglas McKinnon 4. Paul Wagler 5. Peter S. Hyndman Section 3(c) will be included in the Severance Agreement for each of the foregoing individuals. The multiples to be reflected in Items I and II of Annex A to the Severance Agreement for each of the foregoing individuals are One and Three, respectively, and the number of months to be reflected in Item III of Annex A to the Severance Agreement for each of the foregoing individuals is 36. SEVERANCE AGREEMENT This Severance Agreement (this "Agreement"), is made and entered into as of October ___, 1996, by and between [THE LOEWEN GROUP INC., A BRITISH COLUMBIA CORPORATION] [LOEWEN GROUP INTERNATIONAL, INC., A DELAWARE CORPORATION] (the "Company"), and ______________________ (the "Executive"). WITNESSETH: [WHEREAS, THE COMPANY IS A WHOLLY OWNED SUBSIDIARY OF THE LOEWEN GROUP INC., A BRITISH COLUMBIA CORPORATION ("PARENT"), AND PARENT, BY EXECUTING THE SIGNATURE PAGE HERETO, HEREBY REQUESTS THAT THE COMPANY ENTER INTO THIS AGREEMENT;] WHEREAS, the Executive is a senior executive of the Company and has made and is expected to continue to make major contributions to the short- and long-term profitability, growth and financial strength of the Company; WHEREAS, [THE COMPANY DESIRES] [PARENT DESIRES THAT THE COMPANY TAKE ACTION] to assure itself of both present and future continuity of management and to establish certain retention bonus and severance benefits for certain of its senior executives, including the Executive, applicable in the event of a Change in Control; WHEREAS, [THE COMPANY DESIRES] [PARENT DESIRES THAT THE COMPANY TAKE ACTION] to ensure that its senior executives are not practically disabled from discharging their duties in respect of a proposed or actual transaction involving a Change in Control; and WHEREAS, [THE COMPANY DESIRES] [PARENT DESIRES THAT THE COMPANY TAKE ACTION] to provide additional inducement for the Executive to continue to remain in the ongoing employ of the Company. NOW, THEREFORE, the Company and the Executive agree as follows: ____________ NOTE: In the actual agreements for Executives employed by The Loewen Group Inc., the bracketed references regarding "Parent" will be deleted. In the actual agreements for Executives employed by Loewen Group International, Inc., the bracketed references to "the Company" will be deleted. In the actual agreements for certain Executives, Section 3(c) and all references thereto will be deleted. 1. CERTAIN DEFINED TERMS: In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement with initial capital letters: (a) "Base Pay" means the Executive's annual base salary at a rate not less than the Executive's annual fixed or base compensation as in effect for Executive immediately prior to the occurrence of a Change in Control or such higher rate as may be determined from time to time by the Board of Directors of the Company (the "Board") or a committee thereof. (b) "Cause" means that, prior to any termination pursuant to Section 3(b) or Section 3(c), the Executive shall have committed: (i) an intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Company or any Subsidiary; (ii) intentional wrongful damage to property of the Company or any Subsidiary; (iii) intentional wrongful disclosure of secret processes or confidential information of the Company or any Subsidiary; or (iv) intentional wrongful engagement in any Competitive Activity; and any such act shall have been materially harmful to the Company. For purposes of this Agreement, no act or failure to act on the part of the Executive shall be deemed "intentional" if it was due primarily to an error in judgment or negligence, but shall be deemed "intentional" only if done or omitted to be done by the Executive not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for "Cause" hereunder unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds of the Board then in office at a meeting of the Board called and held for such purpose, after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel (if the Executive chooses to have counsel present at such meeting), to be heard before the Board, finding that, in the good faith opinion of the Board, the Executive had committed an act constituting "Cause" as herein defined and specifying the particulars thereof in detail. Nothing herein will limit the right of the Executive or his beneficiaries to contest the validity or propriety of any such determination. -3- (c) "Change in Control" means the occurrence during the Term of any of the following events: (i) [THE COMPANY] [PARENT] is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than two-thirds of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors ("Voting Stock") of such corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock of [THE COMPANY] [PARENT] immediately prior to such transaction; (ii) [THE COMPANY] [PARENT] sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, and as a result of such sale or transfer less than two-thirds of the combined voting power of the then-outstanding Voting Stock of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock of [THE COMPANY] [PARENT] immediately prior to such sale or transfer; (iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), other than Raymond L. Loewen, a person including Raymond L. Loewen, or a person whose beneficial ownership of Voting Stock of [THE COMPANY] [PARENT] is shared with Raymond L. Loewen, has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 25% or more of the combined voting power of the then-outstanding Voting Stock of [THE COMPANY] [PARENT]; (iv) [THE COMPANY] [PARENT] files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of [THE COMPANY] [PARENT] has occurred or will occur in the future pursuant to any then-existing contract or transaction; or (v) If, during any period of two consecutive years, individuals who at the beginning of any such period constitute the directors of [THE COMPANY] [PARENT] cease for any reason to constitute at least a -4- majority thereof; PROVIDED, HOWEVER, that for purposes of this clause (v) each director who is first elected, or first nominated for election by [THE COMPANY'S] [PARENT'S] stockholders, by a vote of at least two-thirds of the directors of [THE COMPANY] [PARENT] (or a committee thereof) then still in office who were directors of [THE COMPANY] [PARENT] at the beginning of any such period will be deemed to have been a director of [THE COMPANY] [PARENT] at the beginning of such period. Notwithstanding the foregoing provisions of Sections 1(c)(iii) or 1(c)(iv), unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of Section 1(c)(iii) or 1(c)(iv) solely because (A) [THE COMPANY] [PARENT], (B) an entity in which [THE COMPANY] [PARENT] directly or indirectly beneficially owns 50% or more of the outstanding Voting Stock (a "Subsidiary"), or (C) any [COMPANY] [PARENT]-sponsored employee stock ownership plan or any other employee benefit plan of [THE COMPANY] [PARENT] or any Subsidiary either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 25% or otherwise, or because [THE COMPANY] [PARENT] reports that a change in control of [THE COMPANY] [PARENT] has occurred or will occur in the future by reason of such beneficial ownership. (d) "Employee Benefits" means the perquisites, benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which Executive is entitled to participate, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital or other insurance (whether funded by actual insurance or self-insured by the Company), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter by the Company, providing perquisites, benefits and service credit for benefits at least as great in the aggregate as are payable thereunder prior to a Change in Control. (e) "Incentive Pay" means an annual amount equal to not less than the greatest aggregate annual bonus, incentive or other payments of cash compensation, in addition to Base -5- Pay, made or to be made in regard to services rendered in any calendar year during the three calendar years immediately preceding the year in which the Change in Control occurred pursuant to any bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement (whether or not funded) of the Company, or any successor thereto providing benefits at least as great as the benefits payable thereunder prior to a Change in Control. (f) "Severance Period" means the period of time commencing on the date of the first occurrence of a Change in Control and continuing until the earliest of (i) the second anniversary of the occurrence of the Change in Control or (ii) the Executive's death; PROVIDED, HOWEVER, that commencing on each anniversary of the occurrence of the Change in Control, the Severance Period will automatically be extended for an additional year unless, not later than 90 calendar days prior to such anniversary date, either the Company or the Executive shall have given written notice to the other that the Severance Period is not to be so extended. (g) "Target Annual Bonus" means the aggregate amount of all payments in the nature of annual cash bonus to which the Executive would be entitled in respect of any particular year if (i) the Executive were employed throughout the entirety of such year and (ii) with respect to any such payment that is contingent in whole or in part upon the achievement of one or more specified performance targets, a performance level equal to the minimum performance target established to determine whether any bonus would be payable (in the event that only one performance target applicable thereto shall have been established) or a performance level equal to the midpoint of the minimum and maximum performance targets established to determine the amount of any bonus that would be payable (in the event that two or more performance targets applicable thereto shall have been established) were achieved in respect of that year. (h) "Term" means the period commencing as of the date hereof and expiring as of the later of (i) the close of business on December 31, 1998, or (ii) the expiration of the Severance Period; PROVIDED, HOWEVER, that (A) commencing on January 1, 1998 and each January 1 thereafter, the term of this Agreement will automatically be extended for an additional year unless, not later than September 30 of the immediately preceding year, the Company or the Executive shall have given notice that it or the Executive, as the case may be, does not wish to have the Term extended and (B) subject to the last sentence of Section 9, if, prior to a Change in Control, the Executive ceases for any reason to be an employee of the Company and any Subsidiary, thereupon without further action the Term shall be deemed to have expired and this Agreement will immediately terminate and be -6- of no further effect. For purposes of this Section 1(h), the Executive shall not be deemed to have ceased to be an employee of the Company and any Subsidiary by reason of the transfer of Executive's employment between the Company and any Subsidiary, or among any Subsidiaries. 2. OPERATION OF AGREEMENT: This Agreement will be effective and binding immediately upon its execution, but, anything in this Agreement to the contrary notwithstanding, this Agreement will not be operative unless and until a Change in Control occurs. Upon the occurrence of a Change in Control at any time during the Term, without further action, this Agreement shall become immediately operative. 3. TERMINATION FOLLOWING A CHANGE IN CONTROL: (a) In the event of the occurrence of a Change in Control, the Executive's employment may be terminated by the Company during the Severance Period and the Executive shall be entitled to the benefits provided by Section 4(b) unless such termination is the result of the occurrence of one or more of the following events: (i) The Executive's death; (ii) If the Executive becomes permanently disabled within the meaning of, and begins actually to receive disability benefits pursuant to, the long-term disability plan in effect for, or applicable to, Executive immediately prior to the Change in Control; or (iii) Cause. If, during the Severance Period, the Executive's employment is terminated by the Company or any Subsidiary otherwise than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii), the Executive will be entitled to the benefits provided by Section 4(b) hereof. (b) In the event of the occurrence of a Change in Control, the Executive may terminate employment with the Company and any Subsidiary during the Severance Period with the right to severance compensation as provided in Section 4(b) upon the occurrence of one or more of the following events (regardless of whether any other reason, other than Cause as hereinabove provided, for such termination exists or has occurred, including without limitation other employment): (i) Failure to elect or reelect or otherwise to maintain the Executive in the office or the position, or a substantially equivalent office or position, of or with the Company and/or a Subsidiary, as the case may be, which the Executive held immediately prior to a Change in Control, or the removal of the Executive as a director of the Company (or any successor thereto) if -7- the Executive shall have been a director of the Company immediately prior to the Change in Control; (ii) (A) A significant adverse change in the nature or scope of the authorities, powers, functions, responsibilities or duties attached to the position with the Company and any Subsidiary which the Executive held immediately prior to the Change in Control, (B) a reduction in the aggregate of the Executive's Base Pay and Incentive Pay received from the Company and any Subsidiary, or (C) the termination or denial of the Executive's rights to Employee Benefits or a reduction in the scope or value thereof, any of which is not remedied by the Company within 10 calendar days after receipt by the Company of written notice from the Executive of such change, reduction or termination, as the case may be; (iii) A determination by the Executive (which determination will be conclusive and binding upon the parties hereto provided it has been made in good faith and in all events will be presumed to have been made in good faith unless otherwise shown by the Company by clear and convincing evidence) that a change in circumstances has occurred following a Change in Control, including, without limitation, a change in the scope of the business or other activities for which the Executive was responsible immediately prior to the Change in Control, which has caused Executive to suffer a substantial reduction in any of the authorities, powers, functions, responsibilities or duties attached to the position held by the Executive immediately prior to the Change in Control, which situation is not remedied within 10 calendar days after written notice to the Company from the Executive of such determination; (iv) The liquidation, dissolution, merger, consolidation or reorganization of the Company or transfer of all or substantially all of its business and/or assets, unless the successor or successors (by liquidation, merger, consolidation, reorganization, transfer or otherwise) to which all or substantially all of its business and/or assets have been transferred (directly or by operation of law) assumed all duties and obligations of the Company under this Agreement pursuant to Section 11(a); (v) The Company relocates its principal executive offices, or requires the Executive to have his principal location of work changed, to any location which is in excess of 25 miles from the location thereof immediately prior to the Change of Control, or requires the Executive to travel away from his office in the course of discharging his responsibilities or -8- duties hereunder at least 20% more (in terms of aggregate days in any calendar year or in any calendar quarter when annualized for purposes of comparison to any prior year) than was required of Executive in any of the three full years immediately prior to the Change of Control without, in either case, his prior written consent; or (vi) Without limiting the generality or effect of the foregoing, any material breach of this Agreement by the Company or any successor thereto. (c) Notwithstanding anything contained in this Agreement to the contrary, in the event of a Change in Control, the Executive may terminate employment with the Company and any Subsidiary for any reason, or without reason, during the 30-day period immediately following the first anniversary of the first occurrence of a Change in Control with the right to severance compensation as provided in Section 4(b). (d) A termination by the Company pursuant to Section 3(a) or by the Executive pursuant to Section 3(b) or Section 3(c) will not affect any rights which the Executive may have pursuant to any agreement, policy, plan, program or arrangement of the Company providing Employee Benefits, which rights shall be governed by the terms thereof (subject in all events to the provisions of Section 6). 4. RETENTION BONUS AND SEVERANCE COMPENSATION: (a) If (i) the Executive remains employed by the Company or any Subsidiary for 30 days after the first occurrence of a Change in Control (the "Bonus Date") or (ii) the Executive's employment with the Company or any Subsidiary is terminated pursuant to Section 3(a)(i) or 3(a)(ii) following the first occurrence of a Change in Control but prior to the 31st day after the first occurrence of a Change in Control, the Company will pay to the Executive, within 10 business days after the Bonus Date, a lump sum payment (the "Retention Bonus Payment") in an amount equal to the multiple set forth under Item I on Annex A hereto times the sum of Base Pay and Target Annual Bonus (at the highest combined rate in effect for any period prior to the Bonus Date). (b) If, following the occurrence of a Change in Control, the Company terminates the Executive's employment during the Severance Period other than pursuant to Section 3(a), or if the Executive terminates his employment pursuant to Section 3(b) or Section 3(c), the Company will pay to the Executive the following amounts within 10 business days after the date (the "Termination Date") that the Executive's employment is terminated (the effective date of which shall be the date of termination, or such other date that may be specified by the Executive if the -9- termination is pursuant to Section 3(b) or Section 3(c)) and continue to provide to the Executive the following benefits: (i) A lump sum payment (the "Severance Payment") in an amount equal to (A) the multiple set forth under Item II on Annex A hereto times the sum of Base Pay and Target Annual Bonus (at the highest combined rate in effect for any period prior to the Termination Date) minus (B) the amount of any Retention Bonus Payment actually paid to the Executive pursuant to Section 4(a). (ii) (A) for the number of months set forth under Item III on Annex A hereto (the "Continuation Period") following the Termination Date, the Company will arrange to provide the Executive with Employee Benefits that are health or welfare benefits (but not stock option, stock purchase, stock appreciation or similar compensatory benefits) substantially similar to those which the Executive was receiving or entitled to receive immediately prior to the Termination Date, and (B) such Continuation Period will be considered service with the Company for the purpose of determining service credits and benefits due and payable to the Executive under any retirement income, supplemental executive retirement and other benefit plans of the Company applicable to the Executive, his dependents or his beneficiaries immediately prior to the Termination Date. If and to the extent that any benefit described in subsection (A) or (B) of this Section 4(b)(ii) is not or cannot be paid or provided under any policy, plan, program or arrangement of the Company or any Subsidiary, as the case may be, then the Company will itself pay or provide for the payment to the Executive, his dependents and beneficiaries, of such Employee Benefits. Notwithstanding the foregoing, Employee Benefits otherwise receivable by the Executive pursuant to subsection (A) of this Section 4(b)(ii) will be reduced to the extent comparable health or welfare benefits are actually received by the Executive from another employer during the Continuation Period following the Executive's Termination Date, and any such benefits actually received by the Executive shall be reported by the Executive to the Company. (c) Without limiting the rights of the Executive at law or in equity, if the Company fails to make any payment or provide any benefit required to be made or provided hereunder on a timely basis, the Company will pay interest on the amount or value thereof at an annualized rate of interest equal to the so-called composite "prime rate" as quoted from time to time during the relevant period in the Northeast Edition of THE WALL STREET JOURNAL. Such interest will be payable as it accrues on demand. Any change in such -10- prime rate will be effective on and as of the date of such change. (d) Promptly following the date hereof, [THE COMPANY] [PARENT] will (if it has not already done so) establish a trust (the "Trust") for the purpose of assuring the payment of amounts that may become payable to the Executive under Sections 4(a) and (b) together, at [THE COMPANY'S] [PARENT'S] election, with amounts that may become payable under other retention bonus or change-in-control severance agreements or plans to which [THE COMPANY] [PARENT] is a party or under which [THE COMPANY] [PARENT] is an obligor. A reputable commercial bank or trust company selected by [THE COMPANY] [PARENT] shall serve as trustee of the Trust (the "Trustee") pursuant to a written trust agreement between [THE COMPANY] [PARENT] and the Trustee. Prior to the occurrence of a Change in Control, [THE COMPANY] [PARENT] shall deposit with the Trustee cash and/or a letter of credit in an amount sufficient to fund all amounts which may become payable to the Executive under Sections 4(a) and (b), together with all amounts that may become payable under all other retention bonus or change-in-control severance agreements or plans that are intended to be secured by the Trust, and shall thereafter make such additional deposits, if any, as may be necessary to result in the Trust holding at all times a combination of cash and/or letters of credit sufficient for the payment of all such amounts. Any letter of credit deposited with the Trustee pursuant to this Section 4(d) shall be issued by a reputable commercial bank having combined capital and surplus of at least $500 million, shall be irrevocable and shall entitle the Trustee to draw all amounts payable thereunder immediately upon the occurrence of a Change in Control. Without limiting [THE COMPANY'S] [PARENT'S] obligations under the preceding provisions of this Section 4(d), in the event that [THE COMPANY] [PARENT] shall have failed to fully fund the Trust as provided herein prior to the occurrence of a Change in Control, [THE COMPANY] [PARENT] shall do so as promptly as practicable thereafter. All amounts required to be deposited with the Trustee pursuant to this Section 4(d) that are so deposited after the occurrence of a Change in Control shall be deposited solely in the form of cash. No failure by [THE COMPANY] [PARENT] to satisfy any of its obligations under this Section 4(d) shall limit the rights of the Executive hereunder. Notwithstanding the foregoing provisions of this Section 4(d), with respect to any and all amounts which may become payable to the Executive under this Agreement, the Executive shall have the status of a general unsecured creditor of the Company and shall have no right to, or security interest in, any assets of the Company. (e) Notwithstanding any other provision of this Agreement to the contrary, the parties' respective rights and obligations under this Section 4 and under Sections 5 and 8 will survive any termination or expiration of this -11- Agreement or the termination of the Executive's employment following a Change in Control for any reason whatsoever. 5. LIMITATION ON PAYMENTS AND BENEFITS. Notwithstanding any provision of this Agreement to the contrary, if any amount or benefit to be paid or provided under this Agreement (taking into account all other amounts and benefits to be paid or provided to or for the benefit of the Executive by the Company or any affiliate thereof under this Agreement or otherwise as though all such other amounts and benefits had already been so paid or provided) would be an "Excess Parachute Payment," within the meaning of Section 280G of the United States Internal Revenue Code of 1986, as amended (the "Code"), or any successor provision thereto, but for the application of this sentence, then the payments and benefits to be paid or provided under this Agreement shall be reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of any such payment or benefit, as so reduced, constitutes an Excess Parachute Payment; provided, however, that the foregoing reduction shall be made only if and to the extent that such reduction would result in an increase in the aggregate payment and benefits to be provided, determined on an after-tax basis (taking into account the excise tax imposed pursuant to Section 4999 of the Code, or any successor provision thereto, any tax imposed by any comparable provision of United States state law, and any applicable United States federal, state and local income taxes). The determination of whether any reduction in such payments or benefits to be provided under this Agreement is required pursuant to the preceding sentence shall be made at the expense of the Company, if requested by the Executive or the Company, by the Company's independent accountants. The fact that the Executive's right to payments or benefits may be reduced by reason of the limitations contained in this Section 5 shall not of itself limit or otherwise affect any other rights of the Executive other than pursuant to this Agreement. In the event that any payment or benefit intended to be provided under this Agreement is required to be reduced pursuant to this Section 5, the Executive shall be entitled to designate the payments and/or benefits to be so reduced in order to give effect to this Section 5. The Company shall provide the Executive with all information reasonably requested by the Executive to permit the Executive to make such designation. In the event that the Executive fails to make such designation within 5 business days of the Bonus Date or the Termination Date, as applicable, the Company may effect such reduction in any manner it deems appropriate. 6. WAIVER BY EXECUTIVE OF CERTAIN RIGHTS: The Executive hereby irrevocably waives any and all rights that the Executive may have pursuant to any agreement (other than this Agreement), policy, plan, program or arrangement of the Company or any affiliate (as the term "affiliate" is defined under Rule 12b-2 promulgated under the Exchange Act) of the Company in effect as of the date hereof to receive payments and/or benefits in the nature of severance payments or benefits. -12- 7. NO MITIGATION OBLIGATION: The Company hereby acknowledges that it will be difficult and may be impossible for the Executive to find reasonably comparable employment following the Termination Date. Accordingly, the payment of the severance compensation by the Company to the Executive in accordance with the terms of this Agreement is hereby acknowledged by the Company to be reasonable, and the Executive will not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive hereunder or otherwise, except as expressly provided in the last sentence of Section 4(a)(ii). 8. LEGAL FEES AND EXPENSES: It is the intent of the Company that the Executive not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if it should appear to the Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, the Executive the benefits provided or intended to be provided to the Executive hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of Executive's choice, at the expense of the Company as hereafter provided, to advise and represent the Executive in connection with any such interpretation, enforcement or defense, including without limitation the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to the Executive's entering into an attorney-client relationship with such counsel, and in that connection the Company and the Executive agree that a confidential relationship shall exist between the Executive and such counsel. Without respect to whether the Executive prevails, in whole or in part, in connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all attorneys' and related fees and expenses incurred by the Executive in connection with any of the foregoing. 9. EMPLOYMENT RIGHTS: Nothing expressed or implied in this Agreement will create any right or duty on the part of the Company or the Executive to have the Executive remain in the employment of the Company or any Subsidiary prior to or following any Change in Control. Any termination of employment of the Executive or the removal of the Executive from the office or position in the Company or any Subsidiary following the -13- commencement of any discussion with a third person that ultimately results in a Change in Control shall be deemed to be a termination or removal of the Executive after a Change in Control for purposes of this Agreement. 10. WITHHOLDING OF TAXES: The Company may withhold from any amounts payable under this Agreement all federal, provincial, state, city or other taxes as the Company is required to withhold pursuant to any law or government regulation or ruling. 11. SUCCESSORS AND BINDING AGREEMENT: (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the "Company" for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company. (b) This Agreement will inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees. (c) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 11(a) and 11(b). Without limiting the generality or effect of the foregoing, the Executive's right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by Executive's will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 11(c), the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated. 12. NOTICES: For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five -14- business days after having been mailed by registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as Federal Express, UPS, or Purolator, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive office and to the Executive at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 13. GOVERNING LAW: The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of [BRITISH COLUMBIA] [THE STATE OF DELAWARE], without giving effect to the principles of conflict of laws thereof. 14. VALIDITY: If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances will not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal will be reformed to the extent (and only to the extent) necessary to make it enforceable, valid or legal. 15. MISCELLANEOUS: No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. References to Sections are to references to Sections of this Agreement. 16. COUNTERPARTS: This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement. -15- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written. [THE LOEWEN GROUP INC.] [LOEWEN GROUP INTERNATIONAL, INC.] By ------------------------------------ [Name and Title] ____________________________________ [Executive] [BY SIGNING THIS AGREEMENT BELOW, PARENT (I) IN ITS CAPACITY AS THE SOLE STOCKHOLDER OF THE COMPANY, HEREBY REQUESTS THAT THE COMPANY ENTER INTO THIS AGREEMENT AND HEREBY AUTHORIZES THE COMPANY TO EXECUTE AND DELIVER THIS AGREEMENT AND TO PERFORM ITS OBLIGATIONS HEREUNDER AND (II) AGREES WITH EACH OF THE COMPANY AND THE EXECUTIVE THAT IT WILL TIMELY PERFORM ALL OBLIGATIONS TO BE PERFORMED BY PARENT UNDER SECTION 4(D). THE LOEWEN GROUP INC. BY ------------------------------------ [NAME AND TITLE]] -16- ANNEX A I. MULTIPLE OF BASE PAY AND TARGET ANNUAL BONUS. [ONE-THIRD] [ONE-HALF] [TWO-THIRDS] [ONE] times. II. MULTIPLE OF BASE PAY AND TARGET ANNUAL BONUS. [ONE] [ONE AND ONE-HALF] [TWO] [THREE] times. III. MONTHS OF HEALTH AND WELFARE BENEFIT CONTINUATION AND ADDITIONAL RETIREMENT INCOME SERVICE CREDIT. [12] [18] [24] [36] months. EX-99.42 43 EXHIBIT 99.42 EXHIBIT 42 CHANGE-IN-CONTROL SEVERANCE COMPENSATION PLAN INTRODUCTION The Board of Directors (the "Board") of The Loewen Group Inc. (the "Company") has considered the effect a Change in Control of the Company may have on certain employees of the Company and its subsidiaries. Given the level of hostile takeover activity over the past several years, the Board recognizes and understands the concern such employees have for their careers and their personal financial security. As a result, absent appropriate assurances, such employees are likely to seek more secure career opportunities elsewhere if a Change in Control of the Company is perceived to be a real possibility, or if a Change-in-Control transaction is proposed or threatened. This Plan is designed to enable such employees to make career decisions without the time pressure and financial uncertainty which may result from a proposed or threatened Change-in-Control transaction, to encourage such employees to remain employees of the Company and its subsidiaries notwithstanding the outcome of any such proposed transaction and to assure fair treatment of such employees in the event of a Change in Control of the Company. As a result, the Board believes that this Plan will assist the Company in attracting and retaining qualified employees. Accordingly, the following Plan is hereby adopted. I. ESTABLISHMENT OF THE PLAN 1.1 ESTABLISHMENT OF PLAN: As of the Effective Date, the Company establishes a severance compensation plan known as the "Change-in-Control Severance Compensation Plan" as set forth herein and as amended as hereafter provided (this "Plan"). The purposes of this Plan are as set forth in the Introduction. 1.2. APPLICABILITY OF PLAN: The benefits provided by this Plan shall be available to all Employees who, at or after the Effective Date, meet the eligibility requirements of Article III hereof. 1.3. CONTRACTUAL RIGHT TO BENEFITS: This Plan establishes and vests in each Participant a contractual right to the benefits to which he or she is entitled hereunder, enforceable by the Participant against the Company or his Employer, or both, on the terms and subject to the conditions hereof. II. DEFINITIONS AND CONSTRUCTION 2.1. DEFINITIONS: The following terms shall have the following meanings when used in this Plan with initial capital letters: (a) "CHANGE IN CONTROL" of the Company means and includes the following: (i) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), other than Raymond L. Loewen, a person including Raymond L. Loewen, or a person whose beneficial ownership of voting securities of the Company is shared with Raymond L. Loewen, has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 25% or more of the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors of the Company and such acquisition has not been authorized, approved or recommended by a majority vote of the Board, in its sole discretion, prior to the date of the filing of such report; or (ii) Such other event relating to the control of the Company (rather than a subsidiary as such) as the Board may, in its sole discretion, by a majority vote determine to constitute a change in control of the Company as to which this Plan should apply. (b) "COMPANY" means The Loewen Group Inc., a British Columbia corporation, and any successor thereto as provided in Section 6.2 hereof. (c) "EFFECTIVE DATE" as to Employees of the Company means October 10, 1996, and, as to Employees of an Employer other than the Company, means the date this Plan is approved by the board of directors of that Employer, or such other date as the Board shall designate. (d) "EMPLOYEE" means a salaried employee of an Employer who is employed by an Employer on a full-time basis. (e) "EMPLOYER" means the Company or a Subsidiary which has adopted this Plan pursuant to Section 6.1 hereof. -2- (f) "JUST CAUSE" means the termination of employment of an Employee shall have taken place as a result of (i) criminal activity, willful violation of an Employer policy or willful misconduct or gross negligence in the performance of duties, as determined by the Company or an Employer in good faith consistently, if applicable, with its existing personnel practices or (ii) the sale of the stock of the Subsidiary of which the Participant was an Employee or substantially all of the assets comprising the business unit which constituted the Employee's primary business unit in a transaction in which the purchaser of such stock or assets, as the case may be, is (A) unaffiliated with the Company, has a net worth computed in accordance with generally accepted accounting principles (as of its most recent balance sheet date) of at least $25,000,000 and (B) has agreed in connection with such transaction to adopt or continue this Plan substantially in accordance with its terms or a substantially equivalent plan, in either case as applicable to such Employee, or agrees to or does continue the employment of the Employee following such transaction directly or through one or more affiliates (including without limitation one or more Employers acquired in such transactions), subject to termination after such transaction by such purchaser or its affiliates in accordance with the terms of such agreement or, if none, applicable law. (g) "PARTICIPANT" means an Employee whose principal duties consist of corporate or regional management functions and who meets the eligibility requirements of Article III hereof, other than an elected officer of the Company or any other Employee who has entered into an employment, severance or other similar agreement with the Company which becomes operative upon the occurrence of a change in control of the Company (as defined in such agreement) and actually receives the payments to which such officer or other Employee is entitled under such agreement. (h) "PLAN" means this Change-in-Control Severance Compensation Plan. (i) "SEVERANCE PAYMENT" means the payment of severance compensation as provided in Article IV hereof. (j) "SUBSIDIARY" means any corporation or other legal entity a majority of the securities entitled to vote generally in the election of directors of which are owned by the Company or another Subsidiary of the Company. (k) "WEEKLY BASE PAY" of a Participant means the quotient that results from dividing (i) the aggregate amount of cash compensation consisting of wages or salary paid by an Employer as consideration for the Participant's service during -3- the 12-month period ended on the last day of the calendar month immediately prior to the date as of which Weekly Base Pay is to be determined (annualized if the Participant has not been employed by an Employer continuously during such 12-month period) by (ii) 52. 2.2. APPLICABLE LAW: The laws of British Columbia shall be the controlling law in all matters relating to this Plan as applicable to Employees of the Company, and the laws of the jurisdiction of incorporation or organization of any other Employer shall be the controlling law in all matters relating to this Plan as applicable to Employees of such other Employer. 2.3. SEVERABILITY: If a provision of this Plan shall be held illegal or invalid, the illegality or invalidity shall not affect the remaining parts of this Plan and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 2.4. GENDER: As used herein, words of the masculine gender shall include the feminine and neuter, and the singular shall include the plural, and vice versa. III. ELIGIBILITY 3.1. PARTICIPATION: Each Employee who, as of the Effective Date, shall have first become an Employee prior to a Change in Control shall be a Participant, provided that this Plan has become or thereafter becomes effective for his Employer. Thereafter, each Employee who shall first become an Employee prior to a Change in Control shall become a Participant on the day on which such Employee's employment with an Employer commences. 3.2. DURATION OF PARTICIPATION: A Participant shall cease to be a Participant and shall have no rights hereunder, without further action, when he ceases to be an Employee, unless such Participant is then entitled to payment of a Severance Payment as provided in Section 4.1 hereof. A Participant entitled to a Severance Payment shall remain a Participant in this Plan until the full amount of the Severance Payment has been paid to the Participant. IV. SEVERANCE PAYMENTS 4.1. RIGHT TO SEVERANCE PAYMENT: (a) A Participant shall be entitled to receive from the Company or, if applicable, the other Employer of which he is an Employee, a Severance Payment in the amount provided in Section 4.2 hereof if there has been a Change in Control of the Company and if, within 24 months thereafter, -4- the Participant's employment by an Employer shall be terminated by the Employer and Just Cause shall not exist; provided, however, that the Participant shall not be entitled to a Severance Payment if termination occurs by reason of his death, voluntary retirement or total and permanent disability, provided that the Participant actually begins to receive retirement or disability benefits, as the case may be, under the retirement or disability plan, if any, applicable to the Participant immediately prior to a Change in Control, as amended (other than an amendment which materially decreases aggregate benefits payable to the Employee thereunder). (b) Promptly following the date hereof, the Company will establish a trust (the "Trust") for the purpose of assuring the payment of amounts that may become payable to Participants under Section 4.1(a) together, at the Company's election, with amounts that may become payable under other change-in-control severance agreements or plans to which the Company or another Employer is a party or under which the Company or another Employer is an obligor. A reputable commercial bank or trust company selected by the Company shall serve as trustee of the Trust (the "Trustee") pursuant to a written trust agreement between the Company and the Trustee. Prior to the occurrence of a Change in Control, the Company shall deposit with the Trustee cash and/or a letter of credit in an amount sufficient to fund all amounts which may become payable to Participants under Section 4.1(a), together with all amounts that may become payable under all other change-in-control severance agreements or plans that are intended to be secured by the Trust, and shall thereafter make such additional deposits, if any, as may be necessary to result in the Trust holding at all times a combination of cash and/or letters of credit sufficient for the payment of all such amounts. Any letter of credit deposited with the Trustee pursuant to this Section 4.1(b) shall be issued by a reputable commercial bank having combined capital and surplus of at least $500 million, shall be irrevocable and shall entitle the Trustee to draw all amounts payable thereunder immediately upon the occurrence of a Change in Control. Without limiting the Company's obligations under the preceding provisions of this Section 4.1(b), in the event that the Company shall have failed to fully fund the Trust as provided herein prior to the occurrence of a Change in Control, the Company shall do so as promptly as practicable thereafter. All amounts required to be deposited with the Trustee pursuant to this Section 4.1(b) that are so deposited after the occurrence of a Change in Control shall be deposited solely in the form of cash. No failure by the Company to satisfy any of its obligations under this Section 4.1(c) shall limit the rights of any Participant hereunder. Notwithstanding the foregoing provisions of this Section 4.1(b), with respect to any and all amounts which may become payable to Participants under this Plan, Participants shall have the status -5- of general unsecured creditors of the Company and shall have no right to, or security interest in, any assets of the Company. 4.2 AMOUNT OF SEVERANCE PAYMENT: (a) Each Participant entitled to a Severance Payment under this Plan shall receive from the Company or the Employer, as the case may be, a lump sum cash payment in an amount, based upon his length of continuous employment by the Company or one or more Employers, equal to the product of (i) two, (ii) Participant's Weekly Base Pay, and (iii) the number of full years of the Participant's continuous service with one or more Employers; provided, however, that in no event shall the amount of such cash payment be less than the product of 12 and the Participant's Weekly Base Pay or more than the product of 52 and the Participant's Weekly Base Pay; and provided further that the amount of such cash payment determined pursuant to the preceding provisions of this Section 4.2(a) shall be reduced by an amount equal to the aggregate amount of any other cash payments in the nature of severance payments paid or payable by the Company or the Employer or any affiliate (as the term "affiliate" is defined under Rule 12b-2 promulgated under the Exchange Act) of the Company or the Employer pursuant to any agreement, policy, plan (other than this Plan), program, arrangement or requirement of statutory or common law. (b) Notwithstanding the foregoing provisions of this Section 4.2, if any portion of a Severance Payment to a Participant would be an Excess Parachute Payment but for the application of this Section 4.2(b), then such Severance Payment shall be reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of the Severance Payment, as so reduced, constitutes an Excess Parachute Payment. As used herein, the terms "Disqualified Individual" and "Excess Parachute Payment" shall have the same meanings given such terms in Section 280G of the Internal Revenue Code of 1986, as amended, or any successor provision thereto. (c) The Participant shall not be required to mitigate damages or the amount of his Severance Payment by seeking other employment or otherwise, nor shall the amount of such payment be reduced by any compensation earned by the Participant as a result of employment after the termination of his employment by an Employer. 4.3. TIME OF SEVERANCE PAYMENT: The Severance Payment to which a Participant is entitled shall be paid to the Participant by the Company or, if applicable, by the other Employer of which he was an Employee, in cash and in full, not later than five business days after the termination of the Participant's employment. If such a Participant should die before all amounts payable to him have been paid, such unpaid amounts shall be paid to the Participant's spouse, if living, otherwise to the personal representative of the Participant's estate. -6- V. OTHER RIGHTS AND BENEFITS NOT AFFECTED 5.1. OTHER BENEFITS: Neither the provisions of this Plan nor the Severance Payment provided for hereunder shall reduce or increase any amounts otherwise payable, or in any other way affect a Participant's rights as an Employee of an Employer, whether existing now or hereafter, under any benefit, incentive, retirement, stock option, stock bonus, stock purchase or employment agreement, plan (other than this Plan), program or arrangement. 5.2. CERTAIN LIMITATIONS: This Plan does not constitute a contract of employment or impose on any Participant, the Company or any other Employer any obligation to retain any Participant as an employee or in any other capacity, to change or not change the status, terms or conditions of any Participant's employment, or to change or not change the Company's policies regarding termination of employment. Notwithstanding any other provisions of this Plan or applicable law, neither the Company nor any Director, officer, employee or agent of the Company or any of its affiliates shall have any liability to any other person, including without limitation any Employee or his estate, heirs, successors, assigns or spouse or relatives, in the event of the failure or refusal of the Board to determine that any event constitutes or should constitute a "Change in Control" under this Plan, and in no event shall any Participant have any rights hereunder unless and until a Change in Control (as herein expressly defined) shall have occurred. VI. PARTICIPATING EMPLOYERS AND SUCCESSORS 6.1. PARTICIPATING EMPLOYERS: Upon approval by the Board, this Plan may be adopted by any Subsidiary by action of the board of directors of such Subsidiary, it being acknowledged that the Board has approved the adoption of this Plan by Loewen Group International, Inc. Upon such adoption, the Subsidiary shall become an Employer hereunder and the provisions of this Plan shall be fully applicable to the Employees of that Subsidiary. 6.2. SUCCESSORS TO THE COMPANY: Without limiting the obligations of any person or entity under applicable law, the Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Company, expressly and unconditionally to assume and agree to perform the Company's obligations under this Plan, in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place. In such event, the term "Company," as used in this Plan, shall mean the Company as hereinbefore defined and any successor assignee to the -7- business or assets which by reason hereof becomes bound by the terms and provisions of this Plan. VII. DURATION, AMENDMENT AND TERMINATION 7.1. DURATION: (a) If a Change in Control has not occurred, this Plan shall expire on October 10, 2001, unless sooner terminated as provided in Section 7.2 hereof, or unless extended for an additional period or periods by resolution adopted by the Board at any time. (b) If a Change in Control occurs, this Plan shall continue in full force and effect, and shall not terminate or expire until after all Participants who were Participants on the date of the Change in Control and become entitled to a Severance Payment hereunder shall have received such payment in full. 7.2. AMENDMENT AND TERMINATION: This Plan may be terminated or amended in any respect by resolution adopted by a majority of the members of the Board, unless a Change in Control has previously occurred. If a Change in Control occurs, this Plan no longer shall be subject to amendment, change, substitution, deletion, revocation or termination in any respect. 7.3. FORM OF AMENDMENT: The form of any proper amendment or termination of this Plan shall be a written instrument signed by a duly authorized officer or officers of the Company, certifying that the amendment or termination has been approved by the Board as provided in Section 7.2 hereof. A proper amendment of this Plan automatically shall effect a corresponding amendment to all Participants' rights hereunder. A proper termination of this Plan automatically shall effect a termination of all Participants' rights and benefits hereunder without further action. VIII. MISCELLANEOUS 8.1. LEGAL FEES AND EXPENSES: (a) It is the intent of the Company that Participants not be required to incur all of the expenses associated with the enforcement of rights under this Plan by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Participants hereunder. Accordingly, if the Company or any Employer, as the case may be, has failed to comply with any of its obligations under this Plan or in the event that the Company or any Employer, as the case may be, or any other person takes any action to declare this Plan void or unenforceable, or institutes any litigation designed to deny, or to recover from, a Participant the benefits intended to be provided to the Participant hereunder, the Company and each -8- Employer irrevocably authorizes the Participant from time to time to retain counsel of his or her choice, at the expense of the Company or any Employer, as the case may be, as hereafter provided, to represent the Participant in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any Employer, as the case may be, in any jurisdiction. The Company or any Employer, as the case may be, shall pay or cause to be paid and shall be solely responsible for any and all reasonable attorneys' fees and expenses incurred by the Participant in enforcing his rights hereunder individually (but not as a representative of any class) as a result of the Company's or any Employer's, as the case may be, failure to perform this Plan or any provision hereof or as a result of the Company or any Employer, as the case may be, or any person contesting the validity or enforceability of this Plan or any provision hereof as aforesaid; provided, however, that in no event will the Company or any Employer be obligated hereunder or otherwise to pay or reimburse more than $50,000.00 of such fees or expenses to any Participant. (b) Each Participant shall have the right and option to elect (in lieu of litigation) to have any dispute or controversy arising under or in connection with this Plan settled by arbitration, conducted before a panel of three arbitrators sitting in a location selected by the Participant within 50 miles from the location of his job with his Employer, in accordance with rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrator in any court having jurisdiction. All expenses of such arbitration, including the fees and expenses of the counsel for the Participant, shall be borne by the Employer, subject to the limitations contained in Section 8.1(a) hereof. 8.2. WITHHOLDING OF TAXES: The Employer may withhold from any amounts payable under this Plan all federal, provincial, state, city or other taxes as shall be required pursuant to any law or government regulation or ruling. 8.3. SUCCESSORS: (a) This Plan shall inure to the benefit of and be enforceable by the Participant's personal or legal representatives, executors, administrators, successors, heirs, distributees and/or legatees. (b) The rights under this Plan are personal in nature and neither of the Company or any other Employer, as the case may be, nor any Participant shall, without the consent of the other, assign, transfer or delegate any rights or obligations hereunder except as expressly provided in Section 6.2 hereof. Without limiting the generality of the foregoing, the Participant's right to receive a Severance Payment hereunder shall not be assignable, transferable or delegable, whether by pledge, creation of a security interest or otherwise, other than by a transfer by his -9- will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 8.3(b), the Company or any other Employer, as the case may be, shall have no liability to pay any amount so attempted to be assigned, transferred or delegated. (c) The Company or any other Employer, as the case may be, and each Participant recognizes that each party will have no adequate remedy at law for breach by the other of any of the agreements contained herein and, in the event of any such breach, the Company or any other Employer, as the case may be, and each Participant hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus or other appropriate remedy to enforce performance of this Plan. 8.4. NOTICES: For all purposes of this Plan, all communications, including without limitation notices, consents, requests or approvals provided for herein shall be in writing and shall be deemed to have been duly given when delivered or five business days after having been mailed by registered or certified mail, return receipt requested, postage prepaid, addressed to the Company or any other Employer, as the case may be (to the attention of the Secretary of the Company or any other Employer, as the case may be), at its principal executive office and to any Participant at his or her principal residence as shown in the relevant records of the Company or other Employer, as the case may be, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of change of address shall be effective only upon receipt. Having been adopted by the Board on October 10, 1996, this Plan has been duly executed as of such date. THE LOEWEN GROUP INC. By ____________________________ Raymond L. Loewen, Chairman -10- -----END PRIVACY-ENHANCED MESSAGE-----